Tin-Tagel Majikk Pty Limited v Hockey

Medium Neutral Citation: Tin-Tagel Majikk Pty Limited v Hockey [2025] NSWSC 578

Hearing dates: 12 – 15 August and 12 September 2024

Date of orders: 10 June 2025

Decision date: 10 June 2025

Jurisdiction: Common Law

Before: Walton J

Decision: The Court makes the following orders and directions:
(1) Subject to orders 2 to 5, the defendants shall file and serve Short Minutes of Order reflecting this judgment within 21 days of the delivery of the judgment.
(2) In the event that the parties agree as to the calculation of interest with respect to the vendor finance and/or in accordance with the Court’s preliminary view as to interest on the retention amount, then interest shall be calculated on the basis of that agreement and encompassed within the Short Minutes of Order.
(3) In the event that the parties are in dispute as to the calculation of interest with respect to either the vendor finance or the retention amount, then the Short Minutes of Order shall not deal with the disputed question of interest, other than to provide for a timetable for the filing of submissions, in that respect, consistent with the timetable fixed for the receipt of submissions as to costs (if costs are in dispute) or as agreed.
(4) If there is no dispute as to costs, the Short Minutes of Order shall reflect the agreement of the parties as to costs.
(5) If there is a dispute as to costs, the Short Minutes of Order shall incorporate a timetable for the resolution of any issue as to costs which shall include provision for the filing and service of submissions and evidence as to costs and a statement as to whether the question of costs may be determined on the papers.
(6) Subject to orders 4 and 5, costs are reserved.

Catchwords: CONTRACTS – Breach of contract – Sale of business contract – Whether vendors in breach of contract for failing to adjust the purchase price for tax liabilities and employee entitlements – Where clause did not impose an obligation on the vendors – Where two inconsistent clauses – Application of generalia specialibus non derogant maxim – No breach established
CONTRACTS – Restraint of trade – Sale of business contract – Whether vendor in breach of restraint of trade – Where vendor loaned real estate licence to a competing business during the restraint period – Construction of restraint of trade clause – Meaning of ‘capacity to exercise control’ – Where vendor found to have capacity to exercise control of competing business pursuant to Property and Stock Agents Act 2002 (NSW) – Breach established
CONTRACTS – Breach of contract – Sale of business contract – Where vendor did not discharge registered security interest – Whether vendor failed to comply with conditions precedent – Where vendor failed to satisfy conditions precedent – Classification of a contingency versus a promise – Whether purchaser waived the requirement to satisfy conditions precedent by proceeding with completion of the sale – Waiver of condition precedent established
CONTRACTS – Breach of contract – Sale of business contract – Whether vendor breached warranty – Whether shares were sold free of any security interests – Whether a security interest over the assets of a company is different from a security interest over the shares in a company – Where a company does not own its own shares – Where shares were sold free of any security interests – No breach of warranty established
CONTRACTS – Construction and interpretation – Principles of construction of commercial contracts – Application of principles set out in Electricity Generation
CONSUMER LAW – Misleading or deceptive conduct – Where certain pleaded representations not established on the evidence –Representation made as to intention to retire – Representation made as to future employment – Representation made as to predicted sales figures – Whether representations were misleading or deceptive or likely to mislead or deceive – Where representations as to future matters – Whether reasonable grounds for making representations as to future matters – Where reasonable grounds established – No misleading or deceptive conduct established
CONTRACTS – Remedies – Damages for breach of restraint of trade – Whether loss suffered as a result of relevant breach – Where failure to establish causation – Where failure to quantify damages – Where failure to demonstrate any loss – No entitlement to damages
EQUITY – Equitable remedies – Rescission – Whether restitutio in integrum possible – Where substantial time elapsed and substantially altered circumstances – Rescission not available – Whether partial rescission an available remedy –Partial rescission not available
CONSUMER LAW – Remedies – Remedies for misleading or deceptive conduct – Declaring whole or part of contract void – Whether court’s discretion informed and guided by principles at common law and equity – Where partial rescission not possible – Where no loss established – Partial rescission not available
EVIDENCE – Credibility of witnesses – Where similarities in affidavit evidence calls into question credibility of that evidence – Where no contemporaneous record – Where denial of the account by another witness – Evidence with striking similarity found not to be credible

Legislation Cited: Civil Procedure Act 2005 (NSW)
Competition and Consumer Act 2010 (Cth)
Corporations Act 2001 (Cth)
Evidence Act 1995 (NSW)
Property and Stock Agents Act 2002 (NSW)

Cases Cited: AH McDonald & Co Pty Ltd v Wells (1931) 45 CLR 506; [1931] HCA 24
Akron Securities Ltd v Iliffe (1997) 41 NSWLR 353
Alati v Kruger (1955) 94 CLR 216; [1955] HCA 64
Aldi Stores (A Limited Partnership) v EFTPOS Payments Australia Limited [2011] FCA 1114
Allianz Australia Insurance Ltd v Delor Vue Apartments CTS 39788 (2022) 277 CLR 445; [2022] HCA 38
Amante v R [2020] NSWCCA 34
Andrews Advertising Pty Ltd v Andrews [2014] NSWSC 318; (2014) 99 ACSR 164
Angelina Spina v Permanent Custodians Ltd [2008] NSWSC 561
Australian Breeders Co-operative Society Ltd v Jones (1997) 150 ALR 488
Australian Broadcasting Commission v Australasian Performing Rights Association Ltd (1973) 129 CLR 99; [1973] HCA 36
Australian Competition and Consumer Commission v Dateline Imports Pty Ltd [2015] FCAFC 114
Australian Competition and Consumer Commission v Telstra Corporation Ltd [2007] FCA 1904; (2007) 244 ALR 470
Australian Competition and Consumer Commission v Top Snack Foods Pty Ltd [1999] FCA 752
Australian Competition and Consumer Commission v We Buy Houses Pty Ltd [2017] FCA 915
Australian Competition and Consumer Commission v Woolworths Group Ltd (2020) 281 FCR 108; [2020] FCAFC 162
Awad v Twin Creeks Properties Pty Ltd [2012] NSWCA 200
Azzi v Volvo Car Australia Pty Ltd [2007] NSWSC 319
Barescape Pty Limited as trustee for The V's Family Trust & Anor v Bacchus Holdings Pty Limited as trustee for The Bacchus Holdings Trust & Anor (No 9) [2012] NSWSC 984
Bill Acceptance Corporation Ltd v GWA Ltd (1983) 50 ALR 242
Blatch v Archer (1774) 98 ER 969
Bottomley's Case (1880) 16 Ch D 681
Campbell v BackOffice Investments Pty Ltd [2008] NSWCA 95
Ceccon Transport Pty Ltd v Tomazos Group Pty Ltd [2017] NTSC 25
Chint Australasia v Cosmoluce [2008] NSWSC 635
Clarke v Newland [1991] 1 All ER 397
Commsupport Pty Ltd v Mirow [2018] QDC 134
Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd (2022) 275 CLR 165; [2022] HCA 1
Cummings v Lewis (1993) 41 FCR 559
Dawnay, Day & Co Ltd v D’Alphen [1998] ICR 1068
De Poi Consulting Pty Ltd v Dutton (No 2) [2015] SADC 111
Developments Pty Ltd [2014] NSWCA 158
Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd [2014] NSWCA 158
Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12
Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7
Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82; [1984] FCA 167
Gould v Vaggelas (1984) 157 CLR 215; [1984] HCA 68 Harvard Nominees Pty Ltd v Tiller (No 4) [2022] FCA 105; (2022) 403 ALR 498 Haugesund Kommune v Depfa ACS Bank [2010] EWCA Civ 579; [2011] 1 All ER 190 Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26; [1993] HCA 27 Johnston Fear & Kingham & the Offset Printing Co Pty Ltd v The Commonwealth (1943) 67 CLR 314 Just Group Limited v Peck [2016] VSCA 334; (2016) 344 ALR 162 Lake Koala Pty Ltd v Walker [1991] 2 Qd R 49; (1990) ASC 55-990 Liu v Lam [2024] NSWSC 1306 Locke v Dunlop (1888) 39 Ch D 387 McGrath v Aust Naturalcare Products Pty Ltd (2008) 165 FCR 230; [2008] FCAFC 2 McPhillips v Ampol Petroleum (Victoria) Pty Ltd (1990) ATPR 41-014 Mills v Dunham [1891] 1 Ch 576 Minister for Immigration and Border Protection v CQW17 (2018) 264 FCR 249; (2018) 162 ALD 427; [2018] FCAFC 110 MK & JA Roche Pty Ltd v Metro Edgley Pty Ltd [2005] NSWCA 39 Mobil Oil Australia Ltd v Wellcome International Pty Ltd (1998) 81 FCR 475 Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 Nadinic v Drinkwater (2017) 94 NSWLR 518; [2017] NSWCA 114 Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co (1894) 11 R 1; [1894] AC 535 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191; [1982] HCA 44 Pavlis v Pavlis [2021] NSWSC 1117 Potts v Miller [1940] 64 CLR 282; [1940] HCA 43 Price v Spoor (2021) 270 CLR 450; [2021] HCA 20 Properties Northside Pty Ltd (t/as Raine and Horne Manly/Freshwater) v Pickering [2015] NSWSC 310 PSG Franchising Ltd v Lydia Darby Ltd [2012] EWHC 3707 (QB) Rakic v Johns Lyng Insurance Building Solutions (Victoria) Pty Ltd (Trustee) (2016) 259 IR 47; [2016] FCA 430 Rinehart v Hancock Prospecting Pty Ltd (2019) 267 CLR 514; [2019] HCA 13 Samsung Electronics Australia Pty Ltd v LG Electronics Australia Pty Ltd [2015] FCA 227; (2015) 113 IPR 11 Sargent v ASL Developments Ltd (1974) 131 CLR 634; [1974] HCA 40 Self Care IP Holdings Pty Ltd v Allergan Australia Pty Ltd (2023) 277 CLR 186; [2023] HCA 8 Simic v NSW Land and Housing Corporation (2016) 260 CLR 85; [2016] HCA 47 SPAR Licensing Pty Ltd v MIS QLD Pty Ltd [2014] FCAFC 50; (2014) 314 ALR 35 Suttor v Gundowda Pty Ltd (1950) 81 CLR 418; [1950] HCA 35 Sykes v Reserve Bank of Australia (1998) 88 FCR 511; [1998] FCA 1405 Ting v Blanche (1993) 118 ALR 543 Tin-Tagel Majikk Pty Ltd v Hockey [2024] NSWSC 1330 Tobin v Melrose [1951] SASR 13 Tomasetti v Brailey [2012] NSWCA 399 Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102; [1995] HCA 14 Watson v Foxman (1995) 49 NSWLR 315 Western Sydney Wanderers FC Pty Ltd v Football Australia Limited [2024] NSWSC 426 Wilkie v Gordian Runoff Limited (2005) 221 CLR 522; [2005] HCA 17 Yorke v Lucas (1985) 158 CLR 661; [1985] HCA 65 Young v Chief Executive Officer (Housing) (2023) 278 CLR 208; [2023] HCA 31

Texts Cited: Alexandra Kamerling and Chris Goodwill, Restrictive Covenants under Common and Competition Law (6th ed, 2010, Sweet & Maxwell)
Colin Lockhart, The Law of Misleading or Deceptive Conduct (6th ed, 2023, Lexis Nexis)
J D Heydon, The Restraint of Trade Doctrine (4th ed, 2018, Lexis Nexis Buttersworth)
J W Carter, Elisabeth Peden, G J Tolhurst, Contract Law in Australia (5th ed, 2007, Lexis Nexis Buttersworth)
Oxford English Dictionary (online ed, accessed February 2025)
Wayne Covell, Keith Lupton and Louise Parsons, Covell & Lupton Principles of Remedies (8th ed, 2022, Lexis Nexis)

Category: Principal judgment

Parties: Tin-Tagel Majikk Pty Limited ACN 130 947 009 (First Plaintiff)
Danc Pty Limited ACN 079 357 869 (Second Plaintiff)
Kenneth Roy Folley (Third Plaintiff)
Kathryn Mary Folley (Fourth Plaintiff)
Majikk Pty Limited ACN 115 170 100 (Fifth Plaintiff)
Wayne Craig Hockey (First Defendant)
Susan Noelene Eastway (Second Defendant)
Ashleigh Jane Eastway (Third Defendant)
David Richard Eastway (Fourth Defendant)
Courtney Louise Eastway (Fifth Defendant)

Representation: Counsel:
S Philips (First, Third, Fourth and Fifth Plaintiffs)
BF Katekar SC with E Hall (First, Second, Third, Fourth, Fifth Defendants)
Solicitors:
PBL Legal (First, Third, Fourth and Fifth Plaintiffs)
Aubrey Brown Lawyers (First, Second, Third, Fourth, Fifth Defendants)

File Number(s): 2020/159228

Publication restriction: nil

JUDGMENT

1. This proceeding relates to a dispute arising from a transaction pursuant to which the first plaintiff, Tin-Tagel Majikk Pty Limited ACN 130 947 009 (“Tin-Tagel”), purchased from the first to fifth defendants, (“the vendors” or “the Hockey Family” or “the defendants”), the shares in the second plaintiff, Danc Pty Limited ACN 079 357 869 (“Danc”). Danc operated the real estate business known as Ray White Bateau Bay (“Ray White BB”). The first to fifth plaintiffs respectively are Tin-Tagel, Danc, Mr Kenneth Roy Folley (“Mr Folley”), Kathryn Mary Folley (“Mrs Folley”) and Majikk Pty Limited ACN 115 170 100 (“Majikk”), and shall be referred to collectively in this judgment as “the plaintiffs”.

2. Danc was put into receivership by Macquarie Bank Ltd (“Macquarie Bank”) on 2 April 2024, and is no longer actively participating in these proceedings nor seeking any relief.

3. In the period prior to 1 June 2018, the first defendant, Mr Wayne Craig Hockey (“Mr Hockey”), was the sole director and secretary of Danc. Both Mr Hockey and his wife, the second defendant, Mrs Susan Hockey (“Mrs Hockey”) [1] , were shareholders of Danc (collectively, “the Hockeys”). The other shareholders of Danc were Mr and Mrs Hockey’s children, Ms Ashleigh Jane Eastway, Mr David Richard Eastway, and Ms Courtney Louise Eastway; they are the third to fifth defendants in these proceedings, although they have not taken an active role on the basis that their interests are represented by the Hockeys. I will further discuss the status of the 6th to 9th defendants.

4. In February 2000, Mr Hockey, as Sole Director and Secretary of Danc, executed a Deed of Charge by which Danc granted a charge in favour of Macquarie Bank over all of Danc's assets (“the Charge”).

5. On 17 May 2018, a Share Sale Agreement (“the Agreement”) was entered into under which the Hockey family agreed [2] to sell their shares in Danc to Tin-Tagel as trustee for the “KR & KM FOLLEY FAMILY TRUST”. The obligations of Tin-Tagel were guaranteed by the third plaintiff, Mr Folley and Mrs Folley (collectively, “the Folleys”).

6. The fifth plaintiff, Majikk, was not a party to the Agreement. However, under the Agreement, there were obligations resting upon Majikk to grant certain security interests to the vendors.

7. The sale of the shares in Danc, by the vendors to Tin-Tagel, completed on 1 June 2018 (“Completion”).

8. The purchase price under the Agreement was $2.3 million. A deposit of $230,000 was paid on exchange, leaving a balance to be paid of $2,070,000. On Completion, this amount was made up of:

9. $690,000 in vendor finance provided by the Hockeys as set out in cl 6.6(e) of the Agreement (“the vendor finance”). This was payable 2 years after Completion, after which interest of 5% per annum was payable on any unpaid amount, accruing from the date of Completion;

OVERVIEW OF THE AGREEMENT

Sale of Shares in Danc and Purchase Price

14. The relevant definitions under the Agreement, set out in cl 1.1, are as follows:

**“**MAAs means a management agency agreement signed by an owner for each of the properties listed in the rent roll as set out in schedule 8.

…

Security Interest means any third party interest or encumbrance of any nature whatsoever including (without limitation):

(a) a security interest as defined in Section 12 of the Personal Property Securities Act 2009 (Cth);

(b) a mortgage, charge, pledge, lien, hypothecation or title retention arrangement;

(c) a right of set-off or right to withhold payment of a deposit or other money;

(d) a right of any person to purchase, occupy or use an asset (including under an option, agreement to purchase, licence, lease, or hire purchase);

(e) a trust or other third party interest; and

(f) an agreement to create any of the above or to allow any of them to exist.

…

Warranties means the warranties provided by the Vendors set out in Schedule 4.”

15. Clause 2.1(a) of the Agreement states:

“The Vendors agree to sell to the Purchaser and the Purchaser agrees to purchase from the Vendors the Shares for the Purchase Price with any and all accrued or attached rights free from any Security Interest, subject to the satisfaction of the Conditions Precedent and otherwise on the terms of this Agreement.”

16. Clause 4.1 states:

“The Purchase Price shall be $2,300,000.00 less any amounts payable by the Vendors under this Agreement, plus or minus other Adjustments under this Agreement.”

17. Clause 6.4 relevantly states:

“...the Vendors must on Completion:

(a) give the Purchaser absolute ownership of and title to and in all the Shares, free from any Security Interest…”

18. Clause 6.5 relevantly states:

“On Completion the Vendors must:

...

(b) Deliver to the Purchaser;

...

(x) all releases in relation [to] any Security Interest recorded on the Personal Property Securities Register (‘PPSR’) in relation to the Company , duly executed by the grantee to fully release the Security Interest and evidence of recording of that release on the PPSR;

(xi) evidence that all loans to the Company have been satisfied and discharged;

…”

19. Clause 6.6 relevantly states:

“The Purchaser agrees to pay the Purchase Price in the following manner:

(a) Deposit to be paid to the Vendors’ Lawyers trust account on the date of this Agreement. The Deposit will be held by the [Vendors’] lawyers and released on Completion.

(b) Balance of the Purchase Price at Completion: the balance of the Purchase Price paid in accordance with clause 6.6 plus or minus the following adjustments as set out in the Completion Balance Sheet:

(i) Minus Company Liabilities as at the date of Completion (including present and future Liabilities for Taxes in respect of the period up to the date of Completion;

(iii) Minus Employee Entitlements accrued as at the date of Completion in accordance with Schedule 2;

…

shall be paid on Completion.”

20. Clause 6.8 and Sch 2 set out the basis for the adjustment to the Purchase Price for employee entitlements. Clause 6.8(f) states:

“Notwithstanding anything else herein contained the parties acknowledge that the adjustments in accordance with this clause shall be set off against the amount of the Vendors’ finance being provided by Wayne Craig Hockey and Susan Noelene Eastway pursuant to clause 6.6(e), thereby reducing the total amount payable to Wayne Craig Hockey and Susan Noelene Eastway at the end of the 2 year period.”

Conditions Precedent

21. Clause 3.1 states:

“The obligations of the Vendors and the Purchaser to complete the sale and purchase of the Shares are not binding unless the Conditions Precedent set out in clause 3.2 below are satisfied or waived under clause 3.3.”

22. Clause 3.2 provides:

“Completion is subject to and conditional upon:

(a) all loans to the Company being fully satisfied and discharged; and

(b) all loans from the Company to any third party being fully satisfied and discharged; and

(c) the removal of the Company as trustee for any trust which the Company is a trustee; and

(d) the transfer from the Company to the new trustee of any trust which the Company may have been trustee prior to its removal under clause 3.2(c) above, of any property held by the Company as trustee for such trust; and

(e) the consent of the Lessor being obtained to any deemed assignment of the Property Lease; and

(f) the Purchaser entering into a valid and enforceable Franchise Agreement with the Franchisor;

(g) the delivery of an executed release or undertaking that any relevant registration on the PPS Register will be removed or transferred to the Vendors on or after Completion; and

(h) the discharge of any inter-company or shareholder's loan; and

(i) no material adverse change having occurred in relation to the Business and the Company; and

(j) the Vendors have confirmed in writing that all amounts due to Terminating Employees, including any wages, salary, allowances, commissions, remuneration, superannuation contributions, accrued annual leave entitlements or other benefits in respect of their employment up to the Completion Date, and any termination payment in lieu of notice, severance or redundancy payment required to be made by law as a result of such termination, have been paid; and

(k) establishing to the reasonable satisfaction of the Purchaser that any and all loans owing by the Company or the Vendors to any of the Vendors or Associates have been repaid.”

23. Clause 3.3 states:

“The Conditions Precedent are for the benefit of the Purchaser and may only be waived if the Purchaser agrees to waive them in writing or proceeds to Completion. Such waiver is not a waiver of any warranty, indemnity or other obligation under this Agreement and may be conditional if such conditions are stated expressly in writing.”

24. Clause 3.4(a) states:

“The Vendors must:

(a) use their best endeavours to ensure that the Conditions Precedent are satisfied including procuring performance by a third party; and

(b) promptly notify the Purchaser of any circumstances which may result in a Condition Precedent not being satisfied in accordance with its terms.”

25. Clause 3.5 relevantly states:

“If the Conditions Precedent are not satisfied or waived under clause 3.3 on the Completion Date, then all rights and obligations under this Agreement other than clause 1 (Definitions and Interpretation), clause 11 (Costs and Stamp Duty), clause 15 (General), Clause 16 (Notices) and clause 17 (Confidentiality), shall terminate but without limiting, releasing, negating or terminating the liability of a party due to any antecedent breach.”

Vendor finance

26. Under cl 6.6(e) of the Agreement, the Hockeys agreed to advance to the Folleys $690,000 in vendor finance. This was repayable 2 years from Completion, with interest of 5% per annum accruing on any unpaid balance after that time

27. The vendor finance was secured under the terms of cl 6.6(e)(ii), including:

28. a Personal Property Security Interest (“PPSI”) over all present and after acquired interests and undertaking (including the rent roll) of Danc, in favour of the Hockeys, after Macquarie Bank;

29. a PPSI over all present and after acquired interests and undertaking of Tin-Tagel in favour of the Hockeys;

30. guarantees from the Folleys; and

31. a second registered mortgage over the property at 75 Bobbin Head Road, Turramurra, granted by Majikk in favour of the Hockeys, after Macquarie Bank.

Warranties and indemnities

28. Clause 9.1 provides that the vendors warrant that the Warranties contained in Sch 4 are true and correct and not misleading both at the date of execution and Completion of the Agreement.

29. Relevantly, cl 2.2 of Sch 4 warrants that the vendors were the legal and beneficial owners of the Shares which were free of any Security Interest. Clause 2.2 of Sch 4 is in the following terms:

“The Vendors are the legal and beneficial owners of the Shares which are free of any Security Interests and the Vendors have complete and unrestricted power and right to sell, assign and transfer the same to the Purchaser.”

30. Clause 9.2 relevantly states that the vendors indemnify Tin-Tagel and Danc against liabilities and claims by or brought against them arising from any breach of the Warranties.

31. Clause 9.3 requires that any claim for indemnity under cl 9.2 must be notified to the defendants within 30 days of Tin-Tagel becoming aware of such liability, failing which the vendors “shall not be liable to indemnify” Tin-Tagel.

32. Clause 12(a) provides that the vendors indemnify Tin-Tagel and Danc in respect of any taxation liability of Danc arising in breach of the Warranties. Clause 12(b) states that if Tin-Tagel “fails to notify the Vendors of such taxation liability within 30 days of the Purchaser becoming aware of that taxation liability then the Vendors shall not be liable to indemnify the Purchaser for such liability”.

Retention amount

33. One of the assets of Danc at the time of the Agreement was its rent roll, comprised of the properties of those landlords with whom Danc had a MAA and, therefore, for whom Danc was the managing agent.

34. The Agreement contained a mechanism whereby $320,000 of the purchase price (being the retention amount) would be held on trust by the vendors’ solicitors for a period of six months from Completion, ie until 1 December 2018 (being the “Retention Period”).

35. The retention amount was held on trust to allow for an adjustment to be made between the parties in the event that any of the MAAs on the rent roll which Tin-Tagel purchased from the Hockey family were lost – that is, the landlord’s business was taken away from Danc – within the Retention Period (thereby reducing the value of the rent roll on an ongoing basis). Clauses 7.1(e), (f) and (g) qualify what may amounts to a lost MAA. The amount for any such lost MAAs were to be offset by any gained MAAs over the Retention Period, as allowed for under cl 7.1(h).

36. The procedure for the payment of the retention amount stipulated by cl 7.1(d) was that, within 21 business days of the expiry of the Retention Period, Tin-Tagel was required to provide the vendors with a list of the MAAs which had been terminated during the Retention Period. The Retention Period was 6 months which concluded on 1 December 2018, hence the 21-day period expired on 22 December 2018. The defendants were then to check that list, and the parties to reach agreement regarding the disbursement of the retention amount.

37. Under cl 7.1(d), the value of any given MAA was the annualised management income for the property multiplied by 2.9 (the Agreement erroneously refers to 2.90).

Restraint of trade

38. Clause 8 provided that Mr Hockey would enter into an employment agreement with Danc after Completion in the form contained in Sch 10. Clause 14.4 provided that Mr Hockey would remain in employ with Danc for at least 2 years on and from the completion date.

39. Clause 14 provided for certain restraints on the vendors in respect of real estate business within a minimum of 5 kilometres from Ray White BB for a minimum period of 6 months. In the case of Mr Hockey, that restriction was to commence from the date his employment with Danc ceased: cl 14.4. Relevantly, the restraints provided for under cl 14.2, inter alia, state that the vendors must not (during the restrain period in the restraint area):

40. “be involved in, promote, participate in, finance, operate or engage in (whether on its own account or in partnership or by joint-venture) any Restrained Business” (cl 14.2(a)). The parties substituted “Restrained Business” for: a real estate business or operation which is the same as or similar to, or competitive with, or any component of, the businesses carried on by Danc (per the parties Joint Summary of Factual Background and definition in cl 14.1(e) of the Agreement); or

41. “be concerned or interested (directly or indirectly, or through any interposed body corporate, trust, principal, agent, shareholder, beneficiary, or as an independent contractor, consultant, employee, director or in any other capacity) in any Restrained Business” (cl 14.2(b)). The parties substituted “Restrained Business” for: in a real estate business which is the same as or similar to, or competitive with, or any component of, the businesses carried on by Danc (per the parties Joint Summary of Factual Background and definition in cl 14.1(e) of the Agreement)

42. Clause 14.1(a) relevantly defined “be involved” as “being involved as a sole trader, partner, joint venturer, manager, agent, appointor, assistant, clerk, director, shareholder, employee, consultant or contractor or person with the capacity to exercise control of a corporation directly or indirectly”.

FACTUAL FINDINGS

Facts arising from Joint Summary of Factual Background

41. The parties reached an agreement as to the facts contained in a Joint Summary of Factual Background (“JSFB”). Those were agreed facts for the purposes of s 191 of the Evidence Act 1995 (NSW). What appears below derives from part of the JSFB.

Events prior to Completion

42. In or around May 2017, the Hockeys were considering selling Danc, and they spoke to Ms Mindy Powell-Hodges (of the Ray White corporate team) as to whether she knew of anyone who might be interested in purchasing the business.

43. In or around August 2017, Ms Powell-Hodges advised the Hockeys that she had some interested purchasers and would set up a meeting between them and the Hockeys.

44. Those purchasers were the Folleys. Two meetings were held between the Folleys and the Hockeys, with Ms Powell-Hodges in attendance, at the Hockeys’ home. Those meetings took place on 25 August and 17 October 2017.

45. The parties agree that during one or both of those initial meetings, the Hockeys said to the Folleys that they were intending to retire from real estate.

46. On or shortly before 11 December 2017, the Hockeys’ solicitors provided the Folleys’ solicitors with a draft share sale agreement. That draft agreement contained cl 19 titled “Disclosure of Litigation”, which stated that “[t]he purchaser acknowledges that the vendors have disclosed that the [c]ompany has commenced legal proceedings against a former employee Karen Wardle for breach of her employment agreement”.

47. On 11 December 2017, the Folleys’ solicitors sent the Folleys an email providing comments on the draft. Among other things, the email noted that “the [c]ompany has disclosed that they are currently involved in litigation with Karen Wardle for breaching her employment agreement”.

48. Ms Wardle was a former sales agent employed by Danc. She resigned from her employment with Danc on or about 3 July 2017, and she commenced employment with a competitor Ray White franchise at Terrigal on 4 July 2017. Danc commenced proceedings against Ms Wardle on 13 October 2017.

49. Shortly after, on 15 December 2017, the Folleys’ solicitors sent an email to the Hockeys’ solicitors regarding the draft share sale agreement. It noted, among other things:

“We require further information on the pending litigation with Karen Wardle, such as:

○ What was her position;

○ What is the nature of the litigation;

○ Has it commenced? If so, what actions have been taken thus far?;

○ Is she still a risk to the Company?”

50. On 18 December 2017, the Hockeys’ solicitors sent a letter to the Folleys’ solicitors which, among other things, responded to the queries that had been raised on 15 December 2017 regarding the litigation against Karen Wardle as follows:

“In relation to Karen Wardell [sic] we advise:

(a) Fulltime sales person.

(b) In regards to restriction on post-employment activities.

(c) Proceedings have been commenced in the Local Court and the matter has been referred to Arbitration in Sydney some time in February 2018.

(d) Our clients do not believe so other than any costs issues which may arise out of the proceedings.”

51. On 5 January 2018, Mr Folley sent an email to Mr Hockey which stated, among other things (emphasis in original):

“● Loss of your main sales person “Karen Wardle” to a local competitor “Property Central – Long Jetty”:

○ Impossible to quantify impact on cash flow and staff moral – but I have to presume it will be negative.

■ Karen has sold 9 properties in the Bateau Bay local area for “Property Central” since Oct.

● Presume she left Ray White in Aug / Sep.

■ Karen sold 25 properties pa for Ray White over last 3 years.

■ Even if you win your court case her loss will likely have an impact on the business for some time.

○This is a problem I would have preferred not to have before taking over but is not, in itself, a deal breaker for me.”

(the “5 January 2018 email”)

52. The 5 January 2018 email also referred to Danc’s sales. Mr Folley noted that “the valuation was based on you consistently selling 100-110 properties pa”, but that “sales for year ending Dec have dropped to 76”. He also said that “we have re-worked our cash flows based on 75 sales pa”.

53. On 6 January 2018, Mr Hockey sent an email in response to the 5 January 2018 email. Among other things, Mr Hockey stated:

“Karen Wardle:

- The reason this issue was a late edition [sic] to the contract is because we were hoping to have the matter resolved before exchange. However the legal process is taking longer than anticipated. We’ll certainly bring you up to speed when we catch up. It will have no impact on you.

- Staff morale has not been affected by Karen leaving.

- Regarding cash flow, there was minimal profit from Karen’s earnings due to her high commission package. All current sales staff are on the new commission structure, that you have sighted. This new structure offers more profitability to the business.

Number of sales:

We have a strategy in place to regain the lost sales from Karen.”

54. In order to fund the purchase of the shares in Danc, the Folleys obtained financing from Macquarie Bank. On or around 15 March 2018, the Folleys received from Macquarie Bank a suite of documentation in respect of that financing, including a Finance Agreement (“the Finance Agreement”). The suite of documentation did not disclose that Danc and the Hockeys were existing customers of Macquarie Bank or disclose the existence of, or make any reference to, the Charge.

55. Under the Finance Agreement, Macquarie Bank agreed to loan $1,610,000 to Danc. The loan was guaranteed by Tin-Tagel, Majikk, and the Folleys. Clause 5 provided that the loan was to be secured by:

56. guarantees from Tin-Tagel, Majikk, and the Folleys;

57. a registered first ranking security over the present and future assets and undertakings of Danc, including all MAAs under which management fees are received in the course of its business;

58. a registered mortgage granted by Majikk over the property at 75 Bobbin Head Road, Turramurra NSW 2074; and

59. Deeds of Priority.

60. The Finance Agreement also contained an acknowledgment by the client and guarantors, on the execution page under the heading “Acceptance”, that, among other things, they each “agree to grant the Securities and perform the obligations required of a Client or Guarantor under this Finance Agreement”.

61. The Finance Agreement was signed by the Folleys in March 2018, although it was not dated until Completion (at which time the Folleys became directors of Danc).

62. On 4 April 2018, Mr Hockey sent an email to the Folleys regarding Danc’s predicted sales for the next 12 months. That email stated that Mr Hockey’s predicted sales were 55 (and that another three sales agents’ predicted sales were collectively 46).

63. On 6 April 2018, the Folleys received independent legal advice from Jemmeson Fisher in respect of the Macquarie Bank loan documents. Among other things, that legal advice stated that:

(a) the Finance Agreement required Danc to grant Macquarie Bank “[a] registered first ranking security over the assets and undertakings (present and future) of Danc Pty Ltd including all Management Agreements under which management fees are received in the course of its business”; (b) in the event of a default under the Finance Agreement, “any security granted in [Macquarie Bank’s] favour is enforceable”, and that Macquarie Bank might “take possession of the Property and/or the assets of Danc”, or “sell the Property and/or the assets of Danc”. (“Property” referred to the Folleys’ residential home at 75 Bobbin Head Road, Turramurra, over which a mortgage was required to be granted as security for the loan); and (c) there was a priority deed, which was required as both Macquarie Bank and Mr Hockey would have “a security interest in the current and any future property of Danc”.

60. The legal advice received by the Folleys from Jemmeson Fisher did not make any reference to the Charge or any other security held by Macquarie Bank with respect to Danc.

61. On 9 April 2018, Mr Folley sent an email to Mr Hockey regarding Danc’s sales figures. The email noted:

“We have spent the week end comparing your office sales performance with other offices in Bateau Bay and the surrounding area. It looks like you have dropped from second place to third place and it has been in a continual decline since July/August last year which coincides with Karen Wardle’s departure.

Will the sales figures you have given us rectify the decline? If not what do we need to do to improve sales?

Karen Wardle is still selling in the area, what was the result of your court case?”

62. On 10 May 2018, Macquarie Bank (via Ms Clark) sent an email to the Hockeys which asked them to sign a Disclosure Authority to enable Macquarie Bank to arrange the release of the Charge over Danc.

63. On 11 May 2018, the Hockeys executed and provided to Macquarie Bank an executed “Discharge Authority”, which authorised Macquarie Bank to discharge a General Security Agreement involving Danc.

64. On 14 May 2018, Macquarie Bank (via Ms Clark) sent an email to the Folleys' solicitor which stated that "[t]he discharging party is a Macquarie client as well so we will handle to [sic] PPSR Release internally".

65. On 17 May 2018, the Agreement was executed.

66. On 23 May 2018, Macquarie Bank (via Ms Clark) sent an email to the Hockeys’ solicitor which stated that “[w]e have received a discharge request to release the charge over the Company [Danc] but nothing in regards to the house”.

67. On 31 May 2018, the Folleys’ solicitors wrote to the Hockeys’ solicitors. Among other things, that email noted the results of a PPSR search conducted by the Folleys’ solicitors that morning, which noted that five interests were still registered against Danc. The Folleys’ solicitors wrote “I note that per our discussion, the Macquarie Bank interests will be discharged on settlement”.

68. On 1 June 2018, Completion of the sale of the shares in Danc pursuant to the Agreement occurred, and the vendors paid out the Macquarie Bank loan facility.

69. On or around Completion, the Folleys executed the following agreements in order to give effect to the security required for the vendor finance:

70. a general security agreement between Danc and the Hockeys;

71. a general security agreement between Tin-Tagel and the Hockeys; and

72. a deed of guarantee between the Folleys and the Hockeys.

73. Additionally, in connection with the vendor finance, on or around Completion the Hockeys executed a deed of priority with Macquarie Bank.

Events subsequent to Completion

Mr Hockey’s employment by Danc

71. On 4 June 2018, the solicitor for the Hockeys forwarded to Macquarie Bank the email dated 31 May 2018 from the solicitors for the Folleys and noted that the debt (owed by Danc to Macquarie Bank) was repaid on settlement and asked Macquarie Bank to arrange for the removal of the security interest (being the Charge) and provide a statement of verification.

72. On 5 June 2018, Danc’s proceedings against its former employee, Ms Wardle, were determined by an arbitrator in Danc’s favour. Danc was awarded damages of $56,170.38 plus $2,199.70 in costs.

73. Also on 5 June 2018, the Folleys’ solicitors wrote to the Folleys in respect of the settlement of the Agreement. That letter confirmed that, on settlement, $800,899.78 of the purchase price paid by the Folleys had been disbursed to Macquarie Bank (described as “Vendors’ Payout Amount”). It also noted that interest at the rate of 5% per annum would accrue if the vendor finance was not repaid by the due date, and that the vendor finance was secured by:

“- After Macquarie Bank, a Personal Property Security (PPS) interest over all present and after acquired interests and undertaking, including the rent roll of Danc Pty Ltd in favour of Wayne Hockey and Susan Eastway;

- After Macquarie Bank, a Personal Property Security (PPS) interest over all present and after acquired interests and undertaking of Tin-Tagel Majikk Pty Ltd in favour of Wayne Hockey and Susan Eastway;

- A Deed of Guarantee for the outstanding debt Interest signed by the both of you; and

- A second registered mortgage over 75 Bobbin Head Road, Turramurra.”

74. On 6 June 2018, the Folleys’ solicitors wrote to the Hockeys’ solicitors regarding a security interest registered against Danc in favour of Macquarie Bank. The email stated “[p]er our recent PPSR search on Danc Pty Limited, I note that the following security is still registered against Danc Pty Ltd. As you are aware, this security was due to be discharged on settlement, please let us have your comments”.

75. Later, on 6 June 2018, the Hockeys’ solicitor sent an email to Macquarie Bank, copying in the Folleys’ solicitors, regarding the removal of a security interest (being the Charge). The email stated, “[w]e note that the debt was repaid on settlement and should be pleased [sic] if you would arrange for removal of the security interest and provide us with a Statement of Verification”.

76. On 15 June 2018, Mrs Hockey’s employment with Danc ceased.

77. On or around 16 August 2018, the Folleys signed a variation to the Finance Agreement which had the effect of the Folleys taking out a bank guarantee in the sum of $46,068, and an overdraft of $25,000. The other relevant operative clauses of the Finance Agreement remained the same as described in paragraphs above.

78. On 1 August 2018, Mr Hockey was injured in a car accident at the Ray White BB office.

79. In December 2018, Mrs Hockey was approached by Mr Ian Boyle (who operated the business known as Ray White Berkeley Vale). Mr Boyle asked if he could use Mrs Hockey’s real estate licence for a short period as there was a temporary issue with the use of his. Mrs Hockey agreed. From 19 December 2018 until 26 July 2019, Mrs Hockey was registered as the licensee in charge of Boyle Partners.

80. On 19 December 2018, Mr Hockey returned to work full time after the car accident. Shortly thereafter, on 21 December 2018, Mr Hockey’s access to Danc’s database was removed. The following day, on 22 December 2018, Mr Hockey went on approved annual leave and did not return from leave until 29 January 2019.

81. On 27 December 2018, Mr Folley sent to Mr Hockey a letter which informed Mr Hockey that Mr Folley was undertaking an investigation into allegations relating to Mr Hockey's conduct relating to his employment by Danc and inviting him to attend a meeting on 29 January 2019.

82. On 30 January 2019, Mr Hockey was stood down from his employment. Mr Hockey’s employment was terminated on 4 February 2019.

Payment of retention amount

83. Under cl 7.1(d) of the Agreement, as explained above, Tin-Tagel was required to deliver to the defendants a list of the lost MAAs by 22 December 2018.

84. On 7 February 2019, the Folleys’ solicitors sent a letter to the Hockeys’ solicitors providing a list of lost MAAs. That list identified lost MAAs totalling $183,965.33 and gained MAAs totalling $12,384.51 (after the application of the $2.9 multiplier), resulting in a net balance claimed, payable to Tin-Tagel, of $171,580.82.

85. On 19 February 2019, the Hockeys’ solicitors sent an email to the Folleys’ solicitors and, among other things, attached an annotated list of the lost MAAs and a list of the gained MAAs. That list identified lost MAAs totalling $68,211.40 and gained MAAs totalling $80,537.03 (after the application of the $2.9 multiplier), resulting in (the Hockeys claimed) nil payable to Tin-Tagel.

86. On 9 April 2019, the Folleys’ solicitors sent an email to the Hockeys’ solicitors, attaching revised lists of lost MAAs and gained MAAs. The email stated, “you will see that on my clients’ calculations there is an amount of net $54,915.36 which needs to be refunded to my clients”. Those revised lists identified lost MAAs totalling $135,452.39 and gained MAAs totalling $80,537.03 (after the application of the $2.9 multiplier).

87. On 10 April 2019, the Hockeys’ solicitors sent an email to the Folleys’ solicitors outlining the basis on which the Folleys’ calculations of 9 April 2019 were disputed by the Hockeys. The email asserted that the true value of the lost MAAs was $94,698.65 and the gained MAAs was $137,928.10. The email continued: “in the event of your client not agreeing with the attached information we would suggest that the sum claimed by your client of $54,915.36 be retained and the balance of $265,084.64 plus interest be released to our clients immediately”.

88. On 18 April 2019, the Folleys agreed to release $265,084.64 of the retention amount to the Hockeys. A further $54,915.36 of the retention amount remained in the Hockeys’ solicitor’s trust account.

89. Furthermore, on or around 18 June 2019, the Folleys signed a further finance agreement which included clauses as described in the paragraphs above.

90. On 1 June 2020, the vendor finance was due to be paid, but the Folleys refused to pay it.

Commencement of these proceedings

91. On 26 May 2020, the Hockeys’ solicitors issued a letter to the Folleys’ solicitors requesting repayment of the vendor finance.

92. On 28 May 2020, these proceedings were commenced by the Folleys by the filing of a Summons and Statement of Claim.

93. The Hockeys filed a cross-claim seeking repayment of the vendor finance and the balance of the retention amount, being $54,915.36.

94. The Folleys were granted leave to file a Second Further Amended Statement of Claim shortly before the hearing, on 18 July 2024. As earlier mentioned, the 2FASOC advanced six claims against the defendants and sought damages and, in effect, rescission of the Agreement.

95. Claims were also made by the plaintiffs against:

96. Mr Ian Boyle and Boyle Partners Pty Limited, formerly the sixth and seventh defendants. Mr Boyle was the licensee of Boyle Partners, which operated the business known as Ray White Berkeley Vale. Those claims were discontinued prior to the filing of the 2FASOC; and

97. Mr Christian Purdue and Ms Mandy King, formerly the eighth and ninth defendant, who were former employees of Danc and subsequently became employed by Ray White Berkeley Vale. Those claims were abandoned at the time the 2FASOC was filed, although those parties then remained joined to the proceeding given there are extant issues as to costs. The proceeding as to costs concerning the eighth and ninth defendants was heard by Davies J. His Honour delivered a judgment in this respect on 12 December 2024: Tin-Tagel Majikk Pty Ltd v Hockey [2024] NSWSC 1330. No order for costs was made with respect to the nineth defendant as no order for costs was sought by that defendant and she did not appear in the proceeding before Davies J. His Honour ordered the plaintiffs to pay the eighth defendant’s costs in the sum of $31,000.

Appointment of receivers and managers to Danc

96. On 11 October 2023, Macquarie Bank issued a notice of reservation of rights to Danc in connection with Danc’s default under the Finance Agreement.

97. On 24 October 2023, Macquarie Bank issued a notice of demand for payment to Danc for the amount of $1,701,834.42, in connection with Danc’s default under the Finance Agreement.

98. On 5 January 2024, Macquarie Bank issued letters to Tin-Tagel, Majikk, and the Folleys noting that Danc continued to be in default under the Finance Agreement.

99. On 2 April 2024, Macquarie Bank appointed receivers to Danc under the Charge.

Credit findings

100. In relation to credibility, I rely upon the statement of principles in Liu v Lam [2024] NSWSC 1306 at [58] – [60] (per Walton J) as follows:

“[58] At the opening of these findings, it is appropriate to deal with some issues of credibility of the witnesses but not exhaustively as the topic will be revisited at the end of the general narrative of facts and in light of further findings made therein. Some issues of principle might be firstly mentioned.

[59] The assessment of credibility of a witness may be based upon whether the accounts of a witness is inherently probable or given against interest. It does not follow that a witness who has been found not to be honest or unreliable about one matter should necessarily be disbelieved about everything else: Cubillo v Commonwealth (No 2) (2000) 103 FCR 1; [2000] FCA 1084 at [118] (O’Loughlin J). Nor does the disbelieving of a witness as to a particular proposition necessarily mean that the proposition has been proven: Steinberg v Commissioner of Taxation *(*Cth) (1975) 134 CLR 640; [1975] HCA 63 at 694.

[60] Further, as Basten JA observed in Sangha v Baxter [2009] NSWCA 78 (with whom Handley AJA agreed), considerable caution should be exercised in making global credibility findings. His Honour observed:

“[155] There are risks in making global findings about credibility of any particular witness. Because a witness has not told the truth with respect to a particular matter does not mean that other parts of his or her evidence are untruthful. Where possible, an assessment should be made of the reasons for the untruthfulness in order to see if other aspects of the evidence are likely to be infected by the same concern. Further, evidence may be rejected because it is apparently unreliable, possibly mistaken or deliberately untruthful or capable of being categorised in a variety of ways which are unlikely to be capable of clear delineation in some cases.

[156] Further, findings of credibility are not usually findings with respect to factual issues in the case, but are rather subsidiary findings on the way to determination of issues. Like many aspects of the evidence in a trial, the evidence of a witness who is believed to have lied in a particular respect, will nevertheless be able to bear some weight and should be placed into a balance, with other material evidence, before a conclusion is reached in relation to a critical fact. The rejection of a witness in total, absent corroboration is likely to mean that, even where corroborated, little attention will be paid to the evidence of the witness and less to the possible consequences which might flow from the fact that particular evidence is shown to be truthful: see generally, King v Collins [2007] NSWCA 122 at [44].”

101. I have also taken into account the observations of Kunc J in Pavlis v Pavlis [2021] NSWSC 1117 at [158]-[167] with which I broadly agree.

102. In relation to credibility, the plaintiffs made the following submissions:

103. In the broad, each of the four witnesses who gave oral evidence (that is Mr and Mrs Folley and Mr and Mrs Hockey) gave their evidence in a candid and forthright fashion. To the extent that there were any differences between the recollections and respective evidence (both affidavit and oral) of the witnesses (which differences were limited), such that the Court needs to reconcile any such differences or make any credit findings, then the Court should prefer the evidence of Mr and Mrs Folley over that of Mr and Mrs Hockey. It should do so for the following reasons.

104. First, Mr Hockey’s oral evidence was, to some extent, disingenuous and involved a denial by him of propositions which could not reasonably or sensibly be denied. This is demonstrated by the following examples:

(a) Mr Hockey initially denied that it was possible that in June 2019 he made a referral for a sale of a property to Ray White Berkeley Vale because (as Mr Hockey volunteered) he was aware that he was under restriction of trade for three years after his employment with Danc ceased (in early 2019). Having then been shown a document and accepted that he had made such a referral and expected to be, and was actually paid, for this referral, Mr Hockey then “repeatedly” refused to accept “the patently obvious propositions” that by making this referral he was working in real estate, and that, in receiving commissions for this referral, he was working with a business which competed with Ray White BB, or was involved in the Ray White Berkeley Vale business; and (b) Mr Hockey went further and explained that he did not class making a referral of a property to be sold by an agency (for which referral he was paid) as working in real estate or involved him working in that agency’s business. He then “disingenuously” likened receiving a commission (possibly involving several hundred or thousands of dollars) for a referral of a property to an agency to receiving a gift from a tradesperson for referring a contact to a tradesperson. This “fanciful and unrealistic” evidence should be rejected by the Court.

3. Secondly, Mrs Hockey’s oral evidence was also, to some extent, evasive, disingenuous, and involved her refusing to accept propositions which were obviously true in the light of contemporaneous documents put to her. This is demonstrated by the following examples:

(a) Mrs Hockey refused to accept that by lending her real estate licence to Mr Boyle (in circumstances where Mrs Hockey was aware that if he had not been able to use her licence, Mr Boyle may not have been able to keep his agency going) she was involving herself in Mr Boyle’s business, and instead asserted that she “merely lent my licence to enable him to trade”; (b) in circumstances where Mrs Hockey had accepted that on about 1 April 2019 she had sent an email to Mr Christian Purdue (a former sales agent at Ray White BB who in 2019 was working for Ray White Berkeley Vale) asking him to sign off on a market appraisal of a property, and that it was at least possible that a potential vendor client had contacted her from overseas and asked her to arrange a market appraisal, Mrs Hockey denied that she was involved (in any capacity) in the business of Ray White Berkeley Vale. Mrs Hockey went further and asked the Court to accept that undertaking a market appraisal, and asking Mr Christian Purdue to sign off on that appraisal, would not involve her being involved in the business of Ray White Berkeley Vale. (This fanciful and unrealistic evidence should be rejected by the Court); and (c) having accepted that on 11 July 2019, Mrs Hockey had provided the principal at Ray White Budgewoi (Luke Thompson) with bank details for herself and her husband, and that she had done so in the context of receiving an email from Mr Thompson thanking her for the “opportunity” and offering to take her out for lunch, Mrs Hockey refused to concede that Mr Thompson was referring to a sales opportunity that she had provided him. Instead, Mrs Hockey suggested that she had provided her bank details to him because he put money into her account on a regular basis (quarterly) for marketing over time and that there were occasional deposits from him (as reimbursements). Again, Mrs Hockey went further, and notwithstanding the evidence she had volunteered (to the effect that she and Mr Hockey were being reimbursed for marketing done for Ray White Budgewoi on a regular basis), she refused to concede that, as at 2019 she was involved in the business of Ray White Budgewoi.

4. There is a good reason why Mrs Hockey refused to concede that she was involved in the business of either Ray White Berkeley Vale or Ray White Budgewoi in 2019 (despite clear evidence that she was involved with both agencies at that time). The reason is that accepting this proposition would have undermined her earlier (clear and unequivocal) evidence (both in her affidavit and under cross examination) that she had fully retired from the real estate industry by December 2019, as well as being inconsistent with the vendors’ case, in the proceedings, that they denied breaching the restraint provisions in the Agreement.

5. Thirdly, Mr and Mrs Folley gave their oral evidence in a candid and straightforward fashion, willingly made concessions and accepted reasonable propositions put to them in cross-examination, even where that may have undercut aspects of their case as a whole.

6. In relation to credibility, the defendants made the following submissions:

7. Each of Mr Folley, Mr Hockey and Mrs Hockey presented as candid witnesses. The Court would accept that each of those witnesses gave truthful evidence.

8. Mrs Folley, on the other hand, presented as evasive and obfuscating, even in the face of questions with clear answers based on the contemporaneous documentation. The best example of that is when Mrs Folley was asked if she agreed, having been taken to the Finance Agreement, that it contained an obligation to provide a general security; she said, “I don’t know”. Subsequently, when asked the same question, she said “I borrowed the money but I didn't, I thought that borrowing the money and paying off the loan, that was what the security was”.

9. Further, when pressed on the obligations under the Finance Agreement to provide a general security, Mrs Folley gave unresponsive answers. Mr BF Katekar SC, with whom Ms E Hall appeared, gave the following illustrations, which I accept, in support of that proposition:

(a) When Mrs Folley was asked “Did you understand that by signing those documents that you were thereby giving Macquarie that security?”, she responded “They were the loan documents. That's what we were signing. And that was the security that was given to them”. (b) When Mrs Folley was asked “What my question is, that you understood before you entered into these loan agreements in 2018, that if you breached the loan agreements, that Macquarie Bank would be able to enforce its security”, she responded “They told us that if we paid, if we, that we could get a loan again in two years' time. That was the idea”.

4. The Court should treat Mrs Folley’s evidence with caution. In particular, the Court should not accept any evidence of Mrs Folley’s which is not already the subject of agreement between the parties or otherwise which is not corroborated by contemporaneous documents.

Consideration: credit

104. My close observations of Mrs Folley giving evidence, combined with the illustrations provided by Mr Katekar SC, warrant the Court accepting the contentions advanced by senior counsel. Mrs Folley was plainly evasive in her evidence, often non-responsive and, in my view, was intent on advancing her own case rather than giving candid evidence. I will discuss the basis for these conclusions later in this judgment and immediately below. I do not consider that her evidence may be accepted, except to the extent that it is against her interests or is corroborated by contemporaneous documentary evidence.

105. This is in contrast to Mr Folley’s evidence. He was generally an honest and reliable witness who gave answers in a responsive, candid and frank manner, making concessions where properly required. I do, however, have considerable concerns regarding Mr Folley’s evidence as to an alleged conversation between Mrs Folley and Mr Hockey said to have occurred on 19 January 2018 and 4 April 2018 which are set out in his affidavit. An account of the same conversation was given by Mrs Folley in her affidavit and both the Folleys were the subject of cross examination on their evidence in that respect. Mr Hockey denied that the conversation ever took place.

106. Mr Folley’s affidavit of 28 April 2021, was as follows:

“[20] On or about 19 January 2018, Kate and I had a meeting with Hockey and Eastway concerning the decline in sales of the Business. We had a conversation in words to the following effect:

Kate: ‘Sales are dropping. I have done my cash flows based on 75 properties per annum. This is the minimum sales to meet our commitments to you and the bank and I'm concerned they will drop further.’

Hockey: ‘I have no concerns that you will meet your obligations. With my sales, Keryn, Christian, Clayton and Ken, we will easily achieve above 75 sales per annum.’

[21] On 4 April 2018, Kate and I again spoke to Hockey and Eastway about future sales for the Business. We had a conversation in words to the following effect:

Kate: ‘It is important that the business make at least 75 sales a year in order to pay our commitments including to you and the bank.’

Hockey: ‘As I have said before, I have no concerns that you will meet your obligations.’”

107. Mrs Folley’s affidavit evidence of 28 April 2021, was as follows:

“[23] On or about 19 January 2018, Ken and I had a meeting with Hockey and Eastway to further discuss the concerns regarding sales of the Business. We had a conversation in words to the following effect:

Kate: ‘Sales are dropping. I have made a cash flow budget based upon sales of 75 properties per annum*. If that's not the case you better tell us now because it looks like your sales are not where they used to be. Look, we are getting $690,000 from you and we have a substantial loan from the bank. Without at least 75 sales per year we will not be able to pay you or the bank.’*

Hockey: ‘Look Kate, I have no concerns that you will meet your obligations with my sales with Keryn and Christian and Clayton and Ken.’

[24] On 4 April 2018, Ken and I again spoke to Hockey and Eastway about future sales for the Business. This issue was very important to us because I had prepared a cash flow that required as a minimum, 75 sales per year to enable us to pay back the $690,000 from Hockey and Eastway and to meet our loan commitment to the bank. We had a conversation in words to the following effect:

Kate: ‘As we have said before it is important that the business makes at least 75 sales a year in order to pay our commitments including to you and the bank.’

Hockey: ‘I have no concerns that you will meet your obligations.’”

108. For emphasis, I have bolded those parts of the evidence which are the same or substantially the same between the affidavits of the Folleys. These parts of evidence are particularly significant because they are the passages which are critical to the Folleys making up the representation which they rely on in issue 17(d).

109. Mr Folley was cross-examined on the similarities between the respective pieces of evidence. He gave the following responses:

“Q. My question is whether or not you sat down with Mrs Folley and agreed on the evidence you would give to this Court on those two conversations.

A. Yes. No, and again, no, we didn't. My only explanation may be that - and I'm sorry, I'd have to - we, we had basically diaries or whatever, or notebooks, and notes have been made down after we've had the meetings. We would have used both, that, that information we would have used in making our affidavits. I, it may be that we've, we've, we - we deliberately did not sit down together to prepare our affidavits.

Q. Do you have your notebook?

A. No, I'm afraid not.

Q. Did you use Mrs Foley's notebook?

A. No, it was a - when we went to the meeting it was just a, notes made down right at the end of the meeting. That was it.

Q. Do you say to his Honour that you may have used the notes that you made in that meeting to prepare this affidavit?

A. That is what I’m saying, yes, but, no, for the similarity, yes.

Q. Do you say to his Honour that you don’t have those notes any more?

A. Yes.”

110. In my view, Mr Folley was squarely challenged as to his account of the content of an alleged conversations between Mrs Folley and Mr Hockey on 19 January 2018 and 4 April 2018, which were denied by Mr Hockey.

111. Central to that cross-examination was that the wording used in the respective affidavits of Mr and Mrs Folley concerning those conversations was, with respect to the critical components relating to the representation relied upon by the plaintiffs with respect to issue 17(d) [4] , the same or very similar. The proposition put by Mr Katekar SC to Mr Folley in cross-examination was that Mr Folley’s account of the conversations was reached after collusion between himself and Mrs Folley.

112. Mr Folley’s responses to those challenges in cross-examination were disjointed and, on one view, contradictory. However, I have made allowance for the potential nervousness of Mr Folley, who was otherwise a reliable witness, to conclude that, in substance, he was denying the propositions amounting to a suggestion of collusion that were put to him in cross examination.

113. However, that allowance does not properly result in a conclusion, in my view, that the evidence given by Mr Folley, in this respect, was credible or should, when considering the entirety of the evidence on the question, be accepted.

114. Mr Folley was anxious to provide an explanation for the apparent similarities between his and his wife’s account of the conversations of 19 January 2018 and 4 April 2018, in their respective affidavits.

115. In giving that explanation, Mr Folley did not suggest that the similarities arose as a result of the drafting of the affidavits by a third party, such as his solicitor. This may have provided a relatively straightforward explanation for the form of the affidavits, but no such suggestion was made by Mr Folley or his counsel in submissions.

116. Rather, Mr Folley attempted to explain the similarities between the affidavits by reference to the fact that he and Mrs Folley both had notebooks in which a record of conversations were kept. He acknowledged that those notes were made by both himself and Mrs Folley after the meeting, and it may be inferred that this occurred at the same time when they were together. However, Mr Folley denied that he and Mrs Folley compared notes, prepared them in unison, or that he based his account on the notes prepared by Mrs Folley in preparing his affidavit.

117. In those circumstances, the account given by Mr Folley as to how the similarities between the affidavits occurred strained credulity. In substance, what he wishes the Court to accept was that he and Mrs Folley independently prepared notes of the meetings, and without any comparison of the notes made, prepared the affidavits from those notes in a way that produced identical, or very similar, accounts of the critical aspects of the conversations. In other words, he wished the Court to accept that the notes of the conversations were made independently but nonetheless produced an identical, or a very similar, record of the conversations which had occurred in critical respects.

Particular findings of fact sought by the plaintiffs outside of JSFB

133. Notwithstanding the JSFB, the plaintiffs sought that the Court should make additional findings of fact which are mentioned below. The resolution of those factual issues is addressed in the preceding credit findings, later in this judgment and partly below.

134. It was contended by the plaintiffs that, on or about 19 January 2019, during a meeting attended by the Folleys and the Hockeys, the following occurred:

135. Mrs Folley expressed concerns about sales dropping in the business, explained that she had made a cash flow budget based upon sales of 75 properties per annum, referred to the vendor finance and bank loans, and stated that, without at least 75 sales per year the Folleys would not be able to pay the Hockeys or the bank;

136. Mr Hockey said that he had no concerns that the Folleys would meet their obligations with the sales of the five Danc sales agents (including himself).

137. As discussed above, the evidence relied upon in support of the Court making those findings, derived from the affidavits of Mr and Mrs Folley of 28 April 2021. I have rejected that evidence in the previous section of this judgment dealing with credit findings, and again in this judgment.

138. The plaintiffs further submitted that, as at 30 May 2018, the vendors had not provided any completion balance sheet to Tin-Tagel contrary to cl 6.3 of the Agreement.

139. Clause 6.3 provided that two business days before Completion, the vendors must provide to Tin-Tagel the completion balance sheet for the purpose of assessing any adjustments to be made at Completion (with adjustment, as far as practical, to be calculated as at the completion date);

140. Mr Katekar SC was correct to submit that this proposition was not pleaded. The issue concerning the breach of cl 6.3 of the Agreement was raised by the plaintiffs in the context of submissions made with respect to claims 1A and 1B but was not the subject of any issue in the ASOI. In this context, the significance of this issue for those claims remained ill defined.

141. Nonetheless, I will briefly address that contention, advanced by the plaintiffs, albeit later in this judgment. My assessment will be that the plaintiffs’ contention should be rejected because the plaintiffs did not establish the factual premise for the contention that cl 6.3 had been breached by the defendants, namely, that the vendors had not provided the completion balance sheet within the requisite time specified in cl 6.3 of the Agreement.

142. Counsel for the plaintiffs also submitted that the Court should make the following four further findings of fact:

143. Following Completion of the Agreement, Macquarie Bank continued as lender to Danc pursuant to the Finance Agreement dated 1 June 2018 between Macquarie Bank and Danc. There was no reference in the Finance Agreement to the Charge given by Danc to Macquarie Bank in February 2000 or to any pre-existing security interest in place between Danc and Macquarie Bank.

“In order to fund the purchase of the shares in Danc, the Folleys obtained financing from Macquarie. On or around 15 March 2018, the Folleys received from Macquarie a suite of documentation in respect of that financing, including a Finance Agreement. The suite of documentation did not disclose that Danc and the Hockeys were existing customers of Macquarie or disclose the existence of, or make any reference to, the Charge.” (footnotes omitted)

2. It is apparent that this finding of fact has some potential connection to issue 1 of claim 1A. However, that connection is not at all clear, and the factual finding, if made, in and of itself, does not necessarily assist in the determination of claim 1A, having regard to my later conclusions as to issue 1. That said, for completeness, I will deal with the factual finding sought by the plaintiffs, which I will resolve partly in their favour and partly by way of rejection, as follows:

(a) Ms Sorenson’s affidavit evidence sustains the finding of fact, that on 30 July 2018, she sent some working papers to Mr Hockey under the cover of an email headed “Work papers 2018”. That email stated that Ms Sorenson was attaching “everything the new owners need form your side of the company tax, up to 31.5.18”. (b) However, Ms Sorenson’s affidavit evidence does not appear to sustain the finding of fact sought by the plaintiffs, namely, that there was included, in the work papers attached to this email, a calculation of the balance of (income) tax payable by Danc as at 31 May 2018 which was $9,172.15. There would appear to be some difficulties with the factual conclusion sought to be drawn by the plaintiffs from Mrs Sorenson’s affidavit, or more particularly, the attachment that appears to be relied upon. The plaintiffs wish to rely on this document as to Danc’s tax payable as at 31 May 2018, however, what is not evident, is what the significance of the words “Wayne & Susan component” on this document is. (c) Further, the plaintiffs sought a finding of fact, namely, that while that calculation (undertaken as at 30 July 2018) represented the tax obligations for the Hockeys as at 31 May 2018, the incoming accountant for Danc (Mr Rhys Taylor) needed to reconcile the calculations and make any necessary adjustments. However, there does not appear to be any support for this statement in Mr Taylor’s evidence.

3. I make the finding of fact in the terms sought by the plaintiffs. The 21 May 2019 letter was part of the chronological bundle tendered by the plaintiffs. However, I note that this finding of fact is largely insignificant in the resolution of issue 9 (which this fact appears to relate to), which I have resolved adversely to the plaintiffs.
4. The factual funding sought by the plaintiffs here, has a relationship to issue 2, which concerned claim 1A. The first observation that may be made, in that respect, is that the issue only arises in the event that the plaintiffs established an affirmative answer to issue 1. I will later find that issue 1 should be answered in the negative. A further difficulty with the finding sought, in this respect, is that it exists more or less in a vacuum. The conclusion which I will reach, with respect to issue 1, has, as a central consideration, the terms of exhibit 3. My reasons, in that respect, will follow later. Lastly, and strictly speaking, Mr Taylor’s evidence does not conform with the findings sought by the plaintiffs, in the following respects:

(a) The plaintiffs contended that the income tax return was prepared and lodged on about 30 September 2019. Mr Taylor’s evidence was that this occurred on or about 10 September 2019. (b) The plaintiffs contended that the income tax return was prepared and lodged for the financial year ending 30 June 2018. Mr Taylor’s evidence was that the income tax return lodged was for the period 1 June 2017 to 30 June 2018, which is not the same period (although I note, in this respect, that this may be simply a drafting error).

ISSUES

143. The parties produced a useful digest of the issues in the proceedings. Those issues corresponded to the claims which I have earlier identified at [12(1)– (5)] of this judgment.

144. The first claim expressed in [12(1)] of this judgment corresponds to claim 1A and 1B in the ASOI, [12(2)] corresponds to claim 2 in the ASOI, [12(3)] corresponds to claim 3 in the ASOI, [12(4)] corresponds to claim 4 in the ASOI and [12(5)] corresponds to claim 5 in the ASOI.

145. The issues, as set out in the ASOI are extracted under the appropriate claim headings below. As the parties numbered the issues consecutively through all the claims (irrespective of the claim number), I will adopt the same approach in this judgment.

146. I will address my considerations to each of the claims, cross-claims and the corresponding issues seriatim. As the considerations take that form, it is convenient to encompass the submissions of the parties as part of the consideration of each issue (and claim) although the summary will be adjusted having regard to the way in which a particular claim is addressed.

STATEMENT OF CLAIM

General principles of construction of contracts

147. The discussion of claims 1 to 4 below, and corresponding issues 1 to 16, variously involve the construction of the Agreement and other instruments, such as the Charge. It is appropriate, therefore, before coming to those topics, to deal, albeit at a level of generality, with the applicable principles of construction, in that respect.

148. The plaintiff placed reliance upon the judgment of Richmond J in Western Sydney Wanderers FC Pty Ltd v Football Australia Limited [2024] NSWSC 426 (“Western Sydney Wanderers”) which appears to succinctly state some of the relevant principles. However, given the way the plaintiff approached those principles, in the context of some of the issues arising in this matter, I propose to briefly revisit, at a broad level, the relevant principles.

149. An authoritative statement of the principles for the construction of a commercial contract were provided by the High Court in Electricity Generation Corporation *(*t/as Verve Energy) v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 (“Electricity Generation”) at [35] (per French CJ, Hayne, Crennan and Kiefel JJ) as follows:

“[35] Both Verve and the Sellers recognised that this Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating". As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption "that the parties … intended to produce a commercial result". A commercial contract is to be construed so as to avoid it "making commercial nonsense or working commercial inconvenience".” (footnotes omitted)

150. The judgment in Electricity Generation has been more recently been applied, albeit in a variety of contexts involving the construction of a contract or an instrument, in Young v Chief Executive Officer *(*Housing) (2023) 278 CLR 208; [2023] HCA 31 (“Young”) at [27] (per Kiefel CJ, Gageler and Gleeson JJ); Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd (2022) 275 CLR 165; [2022] HCA 1 (“CFMEU”) at [173] (per Gordon J); Price v Spoor (2021) 270 CLR 450; [2020] HCA 20 (“Price”) at [60] (per Steward J); Rinehart v Hancock Prospecting Pty Ltd (2019) 267 CLR 514; [2019] HCA 13 at [44] (per Kiefel CJ, Gageler, Nettle and Gordon JJ); Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12 (“Ecosse Property Holdings”) at [16]-[17] (per Kiefel, Bell and Gordon JJ), [73] (per Nettle J); Simic v NSW Land and Housing Corporation (2016) 260 CLR 85; [2016] HCA 47 at [78] (per Gageler, Nettle and Gordon JJ); Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 at [46]–[52] (per French CJ, Nettle And Gordon JJ).

151. From those authorities, the following statements of principle may be derived:

152. The meaning of the term of a commercial contract is to be determined objectively by what a reasonable businessperson would have understood those terms to mean: Electricity Generation at [35]; Price at [60].

153. That analysis is not to be undertaken by reference to the subjectively stated intentions of the parties to the contract: Ecosse Property Holdings at [16], citing Electricity Generation at [35].

154. An objective factor will require consideration of at least three factors which are discussed below.

155. One such assessment is that there must be a consideration of the language used by the parties in the contract. What is required, in that respect, is a consideration of the totality of the legal requirements and obligations provided for in the contract: CFMEU at [173]. The court must strive to give meaning and effect to the contract by consideration of the whole of the instrument: Australian Broadcasting Commission v Australasian Performing Rights Association Ltd (1973) 129 CLR 99; [1973] HCA 36 (“ABC”) at 109 (per Gibbs J), and thereby giving effect to all of the clauses of the contract such that the words of every clause must, “if possible be construed so as to render them all harmonious one with another”: at 109.

“If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, "even though the construction adopted is not the most obvious, or the most grammatically accurate", to use the words from earlier authority cited in Locke v. Dunlop, which, although spoken in relation to a will, are applicable to the construction of written instruments generally; see also Bottomley's Case” (emphasis added)

7. Secondly, it is necessary to consider the surrounding circumstances known to the parties: Electricity Generation at [35].

8. Thirdly, consideration should be given to the commercial purpose or objects to be secured by the contract: Electricity Generation at [35].

9. The parties also discussed the applicable principles with respect to, misleading and deceptive conduct and rescission, under the Australian Consumer Law (“ACL”) (which appears in Sch 2 of the Competition and Consumer Act 2010 (Cth)), and in equity. Those principles relate primarily to claim 5, although, in the later respect, have some applicability to issue 16. I will set out the relevant principles, in that respect, at the commencement of claim 5, although in doing so, I have had regard to the principles relating to rescission under the ACL and in equity in dealing with issue 16.

Claim 1A: Adjustment of purchase price for tax liabilities

153. The issues relevant to the resolution of claim 1A, as set out in the ASOI, were as follows:

154. Did the Hockeys breach cl 6.6(b)(i) by the non-adjustment of the purchase price on Completion for tax liabilities? (“Issue 1”)

155. If so, then:

(a) Is the First Plaintiff entitled to damages and if so what is the relevant amount? (“Issue 2(a)”) (b) Which of cll 9.2 or 12 applies? (“Issue 2(b)”) (c) If cl 12 applies, is it engaged? (“Issue 2(c)”) (d) In either case, was 30 days’ notice given and if not, are the Hockeys liable? (“Issue 2(d)”) (e) Is only Danc entitled to a tax indemnity under either clause? (“Issue 2(e)”) (f) What is the relevant amount? (“Issue 2(f)”),

(issues 2(a) to issue 2(f) will collectively be referred to as “Issue 2”).

Issue 1

Submissions: Issue 1

154. In relation to issue 1, in summary, the plaintiff made the following submissions:

155. Clause 6.6(b)(i) provides that the purchase price (to be paid by the Folleys) was to be adjusted at Completion by deducting present and future liabilities of Danc for taxes for the period up to 31 May 2018. No such deduction or adjustment was made from the purchase price before or at Completion. The plaintiff relied upon the evidence of Mrs Folley which was said to be uncontested.

156. To the extent that Danc had any present or future liabilities for tax for the period up to 31 May 2018, the Hockeys were in breach of cl 6.6(b)(i). The fact that Danc had outstanding tax liabilities as at 31 May 2018 is established by the evidence of Mr Taylor which was unchallenged.

157. The Hockeys were also in breach of cl 6.3 of the Agreement in that, on the evidence before the Court, they had not provided to Tin-Tagel, either 2 days prior to Completion or at all, a completion balance sheet (required for the purpose of assessing adjustments to be made at Completion).

158. The submission made, in the defendant’s opening submissions, that the evidence shows that, prior to Completion, the Folleys had received the necessary financial documents from the Hockeys to enable the calculation of any adjustment to the purchase price is wrong. To the contrary, the evidence confirms that it was only on 30 July 2018, some two months after Completion, that the Hockeys’ accountant (Ms Sorensen) sent the work papers which were necessary to calculate Danc’s outstanding tax liabilities as at 31 May 2018 to Mr Hockey.

159. There is no evidence as to whether, and if so when, Mr Hockey passed on Ms Sorensen’s work papers to the Folleys or Mr Taylor. Consequently, there is no basis for any finding that the Folleys had received the necessary financial documents from the Hockeys to enable the calculation of any adjustment to the purchase price at any date, let alone as at 31 May 2018.

160. The reliance by the Hockeys on the email from the Folleys’ solicitor to the Folleys, dated 31 May 2018 (the “31 May 2018 email”), is misplaced. That is because that email dealt with the liabilities and assets of Danc generally, and said nothing in relation to calculating outstanding current or future tax liabilities. In any event, that email made it plain that the Folleys were not in any position to be able to calculate necessary adjustments to be made to the purchase price.

161. The gist of the 31 May 2018 email was that the Folleys’ solicitor had (the day before Completion was scheduled to occur) just received some financial documents from the defendants and was in no position to interpret them in order to calculate any deductions or adjustments. Input from a qualified accountant would be required for this exercise. The contents of that email only confirm that there is no basis for the Court to find that the Folleys had received the necessary financial documents from the Hockeys to enable the calculation of any adjustment to the purchase price.

“In any event, please note that as I am not a qualified accountant I am not in a position to interpret the attached financial documents provided by the vendor to ascertain the final amount that needs to be deducted or added to the purchase price for the liabilities and assets of the company. Therefore, please let us know the final figure so it can be inserted in the settlement adjustment sheet, you may require the input of a qualified accountant for this exercise.”

3. The Hockeys provided the financial information necessary to calculate the adjustment to the purchase price. Mr Folley gave evidence that he recalled receiving some financial information from the Hockeys at that time but could not recall the details of it.

Consideration: Issue 1

156. It is true that no deduction or adjustment was made to the purchase price before or at Completion in relation to tax liabilities. The plaintiffs were also correct to submit that Danc had outstanding tax liabilities as at 31 May 2018.

157. It was submitted by the plaintiffs that, in this light, it was axiomatic that the defendants were in breach of cl 6.6(b)(i) of the Agreement. I do not agree.

158. The plaintiffs have not established a breach of the subject clause by the defendants in this respect because, as the defendants correctly submitted, cl 6.6(b) does not impose an obligation upon the defendants.

159. The provision is titled “Payment by the Purchaser”. The chapeau of the clause refers to the obligation of the purchaser to make payment. Clause 6.6(b) refers to the payment by the purchaser of the balance of the purchase price at Completion (after payment of a deposit). Clause 6.6(b)(i) provides for an adjustment to the “balance” paid by the deduction of “Company Liabilities” but it is at least implicit in that provision that the adjustment is one made by the purchaser in the course of making the payment provided for under cl 6.6(b).

160. Furthermore, I agree with the submission advanced by the defendants that the Folleys were on notice, prior to Completion, as to the obligation on them to identify the amount of any adjustment required to the purchase price. In this respect, reference may be made to the communication by the solicitors for the plaintiffs to the Hockeys, with respect to two options for the adjustment of liability on settlement, during which the solicitor, Savina Yang, referred to financial documents provided by the vendor “to ascertain the final amount that needs to be deducted or added to the purchase price for the liabilities and assets of the company”. Those documents were said to be attached but were not put in evidence by the Folleys. However, it was evident from the communication, which extracted cl 6.6(b) of the Agreement, that the financial information being provided was that which was necessary to calculate any adjustment to the purchase price. I will return to that document in the context of submissions made by the plaintiffs which fell outside the scope of this issue, or for that matter their pleadings.

161. Before turning to those issues, I note that Mr Folley gave evidence that he could not remember what instructions he gave with respect to the financial information that had been acquired but he did recall receiving the financial information.

162. I turn then to the additional issue raised by the plaintiffs, that the Hockeys were in breach of cl 6.3 of the Agreement because they had failed to provide to the Folleys a completion balance sheet two business days before Completion for the purpose of assessing any adjustments.

163. Before moving to that consideration, I note that cl 1.1 of the Agreement defines a completion balance sheet as a balance sheet in which, inter alia, adjustments are made for matters contemplated under the Agreement as at 30 April 2018 including liabilities of the company such as present and future liabilities for taxes.

Issue 2

Submissions: Issue 2

174. In relation to issue 2(a), in summary, the plaintiffs made the following submissions:

175. In the particulars to [6] of the ‘pleadings and particulars’ of the 2FASOC, Tin-Tagel claimed damages for breach of cl 6.6(b)(i) (and cl 9.2) in two amounts comprised of $29,168, for the goods and services tax (“GST") and the fringe benefits tax (“FBT”), and $32,051.31, for company taxes. Tin-Tagel accepts that, on the evidence, the first of these two amounts (being for GST) should be reduced to $13,879.

176. The evidence relied upon by the Folleys to quantify the damages claimed was contained in the affidavit of Mr Taylor of 15 November 2022. The gravamen of Mr Taylor’s (unchallenged) evidence can be summarised as follows:

(a) Mr Taylor prepared and lodged an income tax return for Danc for the financial year ending 30 June 2018 which confirmed that Danc had a liability for income tax for that financial year of $32,051.32; (b) as at 31 May 2018, Danc had an outstanding liability for GST in the amount of $13,879.

3. It is that (unchallenged) evidence which is relied upon by Tin-Tagel as establishing the entitlement of Tin-Tagel to damages in these two amounts. As there is no dispute as to the quantum of the additional liabilities for income tax and GST, if the Court finds that the Hockeys breached cl 6.6(b)(i) as alleged, there should be judgment for Tin-Tagel in the amounts of $32,051.32 and $13,879 (plus interest) with respect to this aspect of the claim.

4. Specifically in relation to issue 2(b) and issue 2(c), the plaintiff submitted the following:

5. The plaintiffs have not sought to, and do not rely on cl 12 of the Agreement, which provides that the defendants indemnify them (and Danc) in respect of any taxation liability of Danc arising in breach of the warranties contained in the Agreement.

6. To the extent that the plaintiffs have sought to rely on cl 9.2 of the Agreement with respect to the claim for damages for breach of cl 6.6(b)(i), they no longer press that reliance. Consequently, the issue of which of cl 9.2 and 12 applies, and whether cl 12 is engaged, does not require determination by the Court.

7. The plaintiff submitted that given the matters set out above, issues 2(d), 2(e) and 2(f) do not require determination of the Court.

8. In summary, in relation to Issue 2(b) and Issue 2(c), the defendants submitted the following:

9. On the proper construction of the Agreement, any claim by the Folleys’ for a tax indemnity cannot be brought under cl 9.2 when cl 12 contains an indemnity specifically for tax liabilities. The Folleys have not sought to rely on cl 12 in either their 2FASOC or submissions.

10. The parties objective intention was for the specific taxation indemnity to apply in cl 12 in respect of any tax liabilities rather than the general indemnity in cl 9.2. To read the Agreement otherwise would render cl 12 with no work to do, which would offend the presumption against surplusage.

11. Even if the plaintiff sought to rely on cl 12 of the Agreement, cl 12(a) is an engagement provision that only activates where there has been a breach of the warranties. The plaintiffs have not pleaded a breach of warranty.

12. The indemnity in cl 12(a) is plainly intended to cover taxation liabilities which came as a surprise to the Folleys after the time of the Completion. That there were taxation liabilities as at the date of Completion – which cl 6.6(b) envisioned would result in an adjustment to the purchase price – is plainly not a surprise for which the parties intended the Hockeys would indemnify the Folleys.

13. Furthermore, cl 12(b) is a notice clause that required the Folleys to have notified the Hockeys of any claim for indemnity within 30 days of them becoming aware of the taxation liability. The tax liabilities go back to 2018, and there is no suggestion the 30-day notice requirement was met.

Consideration: Issue 2

178. The Court has found that the plaintiffs have not established a breach of cl 6.6(b)(i) and, hence, strictly speaking, issue 2(a) does not require an answer. However, I will briefly address that subsidiary issue as well as, to the extent that the issues remain active, the balance of the issues under issue 2.

179. The basis for the plaintiffs claim for damages is set out above, but, in substance, claim 1A is for the amounts of $32,051.32 and $13,879 respectively.

180. The first mentioned amount concerned a claim with respect to income tax liability for the financial year ending 30 June 2018. The full amount of that claim cannot be sustained in the light of the tax returns and tax records in Exhibit 3, because those records make it clear the Hockeys made a contribution in the relevant period to PAYG instalments. If damages were awarded (although I note I have found against this claim) the amount of damages, after taking into account the Hockeys’ contribution to PAYG instalments, would be $18,242.31.

181. The second amount claimed concerned GST and FBT (noting that the amount claimed was reduced from $29,168). I accept the submission advanced by the defendants that the plaintiffs have not established, on the evidence, they had sustained a loss with respect to GST and FBT with respect to this claim.

182. As to GST, the GST liability which Danc incurred for the period 1 May to 31 May 2018 was $27,681. However, the bank statements for the Hockeys’ personal ING account show that the amount of $27,681 was paid to the ATO by the Hockeys on 14 June 2018.

183. The Folleys are not entitled to damages for amounts which were in fact paid by the Hockeys.

184. The remaining aspects of the issues under issue 2 fell away during the course of argument. However, two matters, in that respect, may be mentioned. First, the submissions of the defendants with respect to issues 2(b) and (c) are of considerable force and I accept them.

185. Secondly, as to indemnity, the liability was that of Danc, and the plaintiffs did not provide the 30-day notice under the Agreement after finding out the existence of any claimed liability.

Claim 1B: Adjustment of purchase price for employee entitlements

186. The issues relevant to the resolution of claim 1B, as set out in the ASOI, were as follows:

(a) Whether cl 6.8(f) applies over cl 6.6(b)(iii) (“Issue 3”). (b) Did the Hockeys breach cl 6.6(b)(iii)? (“Issue 4”) (c) If so, is the first plaintiff entitled to damages and, if so, what is the relevant amount? (“Issue 5”) (d) Have the Hockeys, by their CC, admitted liability for damages for breach of cl 6.6(b)(iii)? (“Issue 6”)

Issue 3

Submissions: Issue 3

187. In relation to Issue 3, in summary, the plaintiffs made the following submissions:

188. On any view, there is a degree of tension at play as between the terms of cl 6.6(b)(iii) and 6.8(f). The former provides that the purchase price to be paid (at Completion) was to be adjusted by deducting the employee entitlements accrued as at the date of Completion (in accordance with Sch 2) while the latter provides that the adjustments to be made in accordance with cl 6.8 (with respect to employee entitlements) was to be set off against the amount of the vendor finance being provided by the Hockeys.

189. The plaintiffs accept that, given that cl 6.8(f) includes the introductory words “[n]otwithstanding anything else herein”, cl 6.8(f) may apply (over cl 6.6(b)(iii)) to the extent that it might be said to be inconsistent with cl 6.6(b)(iii). However, there is no inconsistency between cl 6.6(b)(iii) and cl 6.8(f), for the following reasons.

190. The terms of cl 6.8(f) do not have the effect of removing the obligations on the parties (and in particular the defendants) to undertake a calculation of the employee entitlements by which the purchase price was to be reduced pursuant to cl 6.6(b)(iii). To the contrary, cl 6.8(a)-(e) fleshed out, in considerable detail, the method by which the employees entitlements (for which the Hockeys were liable) were to be calculated. Those provisions were not inconsistent with cl 6.6(b)(iii). All that cl 6.8(f) did was to defer the time for the Hockeys to reimburse the Folleys for taking on the obligation to pay the employee entitlements (for which the Hockeys would otherwise have been liable) until the time that the vendor finance was to be paid (by the Folleys) rather than on Completion.

191. True it is, by cl 6.8(f) [7] of the Agreement, that the parties agreed that the adjustments to be made pursuant to cl 6.8 with respect to employee entitlements were to be set off against the amount of the vendor finance being provided by the Hockeys. However, that provision is silent as to what would occur if, as the Folleys contend should happen, the vendor finance provisions were to be terminated or set aside, with the result that the Folleys had no obligation to pay to the Hockeys the amount of the vendor finance (.

192. If the Court determines that the Folleys are not obliged to pay the vendor finance amount to the Hockeys, then it would follow that the Hockeys would be obliged to pay the amount of employee entitlements (namely $58,342.71 plus interest on that amount) with respect to which the parties have agreed (on the pleadings) that the Hockeys were liable to account to Tin-Tagel. Otherwise, the Hockeys would escape having to account to the Folleys with respect to a liability which the parties have agreed lies with the Hockeys, not the Folleys.

193. Consequently, it can only be said that cl 6.8(f) may apply “over” cl 6.6(b)(iii) to the extent that any obligations of the Folleys under the vendor finance provisions remain extant.

Consideration: Issue 3

189. By the plain words used at the introduction of cl 6.8(f), namely, “[n]otwithstanding anything else herein contained”, the provision of cl 6.8(f) has the effect of overriding or taking precedent over any other provisions within cl 6.

190. That conclusion may be reached by reference to the principles set out at [151] of this judgment and the following further principles:

191. The Court will have regard to the whole of a contract, in order to ensure the congruent operation of all of its parts: Wilkie v Gordian Runoff Limited (2005) 221 CLR 522; [2005] HCA 17 at 529 (per Gleeson CJ, McHugh, Gummow and Kirby JJ).

192. Specific provisions will prevail over general provisions to the extent of any inconsistency (generalia specialibus non derogant, ‘general provisions do not override specific ones’, and generalibus specialia derogant, ‘specific provisions override general ones’) (see Commissioner of Police v Eaton (2013) 252 CLR 1; HCA 2 at [46], [92] (per Crennan, Kiefel and Bell JJ)).

193. The balance of the submissions made by the plaintiffs which seek to carve out or limit the scope of cl 6.8(f) only to areas of inconsistency between cl 6.6(b)(iii) and cl 6.8(f) need to be understood in the light of the overall context in which the plaintiffs make that submission.

194. The plaintiffs accept that cl 6.8(f) provides for employee entitlements to be set off against the amount of vendor finance provided by the Hockeys but seek to qualify the operation of the provisions of cl 6.8(f) by submitting that the provision does not contemplate circumstances in which the vendor finance provisions were terminated or set aside as was sought by the plaintiffs as one of their claims.

195. This in turn led to a submission that, if the Folleys were not obliged to pay the vendor finance then it would follow that the Hockeys would be obliged to pay the amount of employee entitlements (which was agreed to be $58,342.71 plus interest on that amount).

196. When exposed in that fashion the fallacy in the plaintiffs’ argument becomes readily apparent, not least because the last mentioned propositions by the plaintiffs created attention with later submissions made by the plaintiffs that employee entitlements may not be payable if the Court determined to set aside obligations to pay vendor finance. However, the core difficulty for the plaintiffs, in this respect, is that they argued that if there was a partial rescission of the Agreement, with respect to vendor finance, the defendants are, nonetheless, required to pay the full amount with respect to employee entitlements. The defendants are correct to submit that the overall effect would be to reprobate with respect to vendor finance component of the Agreement, but then approbate with respect to the remainder of the Agreement. The real effect is to exclude the operation of cl 6.6(e) of the Agreement.

Issues 4 and 5

Submissions: Issues 4 and 5

199. In relation to Issues 4 and 5, in summary, the plaintiffs made the following submissions:

200. The defendants breached cl 6.6(b)(iii) because they failed, at Completion, to proffer a completion balance sheet which included adjustments for employee entitlements (as envisaged by cl 6.6(b)(iii)). There is no evidence that the vendors proffered any completion balance sheet.

201. The failure, by the vendors, to provide a completion balance sheet, which included adjustments for employee entitlements accrued (even though there was agreement in relation to the quantum of those adjustments), meant that the Hockeys were also in breach of their obligation pursuant to cl 6.6(b)(iii) to ensure that the purchase price had been adjusted to deduct the employee entitlements.

202. In response to the defendants’ submission that a breach of cl 6.3 of the Agreement had not been pleaded, it was contended that implicit in the allegation of the breach of cl 6.6 of the Agreement was an assertion that cl 6.3, being a clause imposing an obligation on the vendors to prepare a balance sheet two business days prior to Completion, was not complied with. Clause 6.6 of the Agreement assumes the existence of a completion balance sheet but a balance sheet was never produced. The non-compliance with cl 6.3 informs the background to the breach of cl 6.6 that the plaintiffs have pleaded.

Consideration: Issues 4 and 5

200. I reject the plaintiffs’ submissions in this respect. In substance, that rejection is based upon the conclusions reached with respect to claim 1A, but, in any event, I accept the following submissions advanced on behalf of the defendants:

201. Clause 6.8(f) of the Agreement applies over cl 6.6(b)(iii). It follows that the Agreement did not require the employee entitlements to be deducted on Completion. Hence, cl 6.6(b)(iii) was not breached.

202. Clause 6.6(b)(iii) imposed no obligations on the Hockeys and, accordingly, they could not have breached that clause. If the Folleys did overpay on Completion that cannot be said to have been a breach of the Agreement.

203. Whilst there is an agreement that the correct amount of employee entitlements is $58,342.71, that amount is not reflective of any damage suffered by the Folleys, as it has been offset from the vendor finance repayment.

204. The Court finds that the defendants did not breach cl 6.6(b)(iii) of the Agreement. I answer the question raised by Issue 4 in the negative.

205. I note that in other claims I have gone onto deal with damages in the event that a different view was formed as to this judgment on appeal. However, given that issues 4 and 5 were argued together, it is not necessary to deal with the question of damages in this instance. As a result, given the answer to issue 4, it is unnecessary to answer the question raised by Issue 5 in relation to damages.

206. Accordingly, I find it unnecessary to answer the question raised by issue 5.

Issue 6

Submissions: Issue 6

204. In relation to the Issue 6, in summary, the plaintiffs made the following submissions:

205. In [13] of their CC, the Hockeys alleged that under the Agreement, $58,342.71 was to be taken into account by way of employee entitlements. That allegation was admitted by the Folleys in [14] of their Amended Defence to the CC dated 18 July 2024. As such, there has been an acceptance by the parties on the pleadings that under the Agreement, an amount of $58,342.71 was to be taken into account by way of employee entitlements. The effect of this is that the Hockeys accept, on the pleadings, that they had an obligation to account to Tin-Tagel for a liability for an amount of $58,342.71 for employee entitlements.

206. In these circumstances the Hockeys have, by their CC, in effect, admitted liability (to the extent of $58,342.71) for the necessary adjustment for employee entitlements envisaged by cl 6.6(b)(iii). Additionally, the Hockeys have, in effect, admitted liability for damages for breach of cl 6.6(b)(iii), although it was accepted that the Hockeys contended that the way that such liability has been accounted for is by way of a reduction in the total amount of vendor finance to be paid by the Folleys.

207. In relation to Issue 6, in summary, the defendants made the following submissions:

208. Clause 6.8(f) requires the relevant amount ($58,342.71) to be offset against the Folleys' liability to repay the vendor finance amount. This is what the Hockeys claim in the CC.

209. This does not amount to any admission of a breach of cl 6.6(b)(iii). Quite to the contrary, cl 6.8(f) applies instead.

Consideration: Issue 6

206. I agree with the submissions of the defendants in answer to the plaintiffs’ contentions with respect to Issue 6.

207. The Hockeys have not, by their CC, admitted liability for damages for breach of cl 6.6(b)(iii).

208. I answer the question raised by Issue 6 in the negative.

Claim 2: Entitlement to the retention amount

209. The issues relevant to the resolution of claim 2, as set out in the ASOI, were as follows:

(a) Are the Folleys bound by their release of $265,084.64 of the retention amount to the Hockeys on 18 April 2019? (“Issue 7”) (b) If not, what amount (if any) are the Folleys entitled to out of the retention amount? (“Issue 8”) (c) Are the Folleys or the Hockeys entitled to the balance of the retention amount of $54,915.36 plus accrued interest, and if not, how should this balance be distributed? (“Issue 9”)

Issue 7

Submissions: Issue 7

210. In relation to the Issue 7, in summary, the plaintiffs made the following submissions:

211. Mrs Folley gave evidence that, on her calculations, the amount of lost MAAs was $183,965.33, which formed the basis for the claim by the Folleys made on 7 February 2019 that the net balance due to them from the retention amount (of $320,000) was $171,580.82.

212. Mrs Folley also gave evidence that she had made a mistake, as a result of being misinformed by Mr Hockey, in giving instructions to her solicitor approving the sending of the email dated 9 April 2019 which claimed a net amount of $54,915.36 was owing from the retention amount to the Folleys. She also did not accept the proposition that the calculations contained in the email from the Hockeys’ solicitors dated 10 April 2019 (which set out the basis on which the Hockeys’ claimed to be entitled to the whole of the retention amount) was correct.

213. The plaintiffs contended that, based on Mrs Folley’s evidence, the Court should accept that she had been misled by the Hockeys into signing the Authority to Release dated 18 April 2019 (“the Authority”) releasing the bulk of the retention amount to the Hockeys.

214. Mr Folley’s oral evidence was to the effect that he relied upon Mrs Folley in making the calculations and decisions with respect to the lost and gained MAAs.

215. In the circumstances, the plaintiffs should not be bound by the Authority.

216. In any event, the Authority did not comply with the requirements of cl 7.1(d)(i)-(iii) of the Agreement. Those clauses envisaged and provided that there would be a refund to the plaintiffs of the value of the lost MAAs (as agreed by the parties), with the balance (if any) to be paid to the vendors, and that the refund to the plaintiffs and return of any balance to the defendants would only be released after a written authority to account had been received from both parties which reflected the agreement having been reached between them concerning the disbursement of the retention amount.

217. The Authority did not satisfy or comply with these provisions in at least the following respects:

(a) the Authority did not involve any refund of any aspect of the retention amount to Tin-Tagel; (b) the Authority did not amount to an authority to account and, most significantly, was not signed by both the vendors and the purchaser; and (c) as at the date the Authority was signed, no agreement had been reached as between the parties, either with respect to the (total) value of the lost MAA’s or concerning the disbursement of the (whole of) the retention amount. This is readily apparent from the communications between the respective solicitors for the parties dated 10 April and 21 May 2019.

8. The context in which the Authority was signed by the Folleys is important. In the email from the solicitors for the Hockeys dated 10 April 2019 (headed “Without Prejudice”), the Hockeys asserted that as the amount of MAAs gained exceeded the amount of the losses, the full retention amount should be paid to them and requested that the Folleys provide an authority to pay the full amount of the retention amount to the Hockeys as a matter of urgency. The email also suggested that, in the event that the Folleys did not agree with the Hockeys’ calculations of the value of the lost MAAs, then the sum claimed by the Folleys ($54,915.36) should be retained and the balance (plus interest) released to the Hockeys immediately.

9. As at 10 and 18 April 2019, there remained a dispute between the parties as to the calculation of the value of the lost MAAs for the purposes of cl 7 of the Agreement. In these circumstances, and given the evidence of Mrs Folley, the Court should find, or at least infer, that the Folleys signed the Authority, in effect, ‘under protest’ and subject to their right to continue to dispute the calculation of the value of the lost MAA’s in due course.

10. In substance, the Authority represented a practical way of addressing the disputed claims and counter claims by both the Hockeys and the Folleys with respect to the calculation of the lost MAAs, and the inability of the parties to reach an agreement in relation to these matters.

11. The Authority was executed in the context of ‘without prejudice’ communications between the parties, trying to reach resolution of the disputes. However, it did not amount to an Authority which satisfied the (contractual) requirements set out in cl 7.1(d)(i)-(iii) of the Agreement. As such it had no contractual force and was not binding on either of Mr or Mrs Folley for the purposes of the Agreement.

12. In response to the defendants’ submission that Mr Hockey was not challenged in cross examination on the calculation of these figures, Mr Philips submitted that that was not explored because the figures were challenged in an email of 21 May 2019 to the Hockeys’ solicitors. Mr Philips submitted that the email of 21 May 2019 showed there was not an agreement reached regarding the retention amount. There was still a dispute and the remaining retention amount should not be given to the Hockeys.

13. The plaintiffs submitted that one way to resolve this dispute was to split the remaining retention amount equally between the parties.

14. In relation to Issue 7, in summary, the defendants made the following submissions:

15. Between February and April 2019, the Folleys and the Hockeys had discussions regarding the value of lost and gained MAAs respectively. In April 2019, the Folleys agreed to release $265,084.64 of the retention amount to the Hockeys.

16. Mr Folley accepted that he carefully considered Danc’s records when preparing the calculations provided by his solicitor on 9 April 2019 and that he accepted and signed the Authority for the proposed release of $265,084.64 on 18 April 2019.

Consideration: Issue 7

212. The provisions of the Agreement relevant to “Retention” appear in cl 7.

213. Clause 7.1(a) provides that, on Completion, the retention amount is to be held by the defendants’ solicitor on behalf of the vendor and the purchaser. The retention amount is defined in cl 1.1 of the Agreement as “an amount of $320,000.00”. It follows that the retention amount was part of the purchase price.

214. Clause 7.1(a) also provided that the retention amount was to be held for the Retention Period and then paid out.

215. Those contractual arrangements were, inter alia, governed by the provisions of cl 7.1(d). That provision refers to MAAs lost. The clause provides a definition of that expression as being:

216. MAAs in relation to which the purchase price was paid but which prior to the end of the Retention Period had been terminated by the relevant landlord; or

217. MAAs in relation to which the purchase price was paid but which prior to the end of the Retention Period were listed for sale by another agent other than “the company” (being Danc) “the Purchaser” (being Tin-Tagel) or “an associate of the purchaser”

and following such sale were terminated with the purchaser.

216. Clause 7.1(d) also sets out the mechanism to calculate the value of MAAs lost on the basis of “the projected annualised management income for the particular property(ies) multiplied by [2.9]” and steps to be taken after those calculations.

217. Clause 7.1(f)(i) provides as follows:

“The Vendors shall not be obliged under this clause to indemnify the Purchaser against any loss arising from:

(i) negligence on the part of the Purchaser, their servants, agents or employees;”

218. Clause 7.1(h) provides as follows:

“(h) The Purchaser will allow as an offset against the value of any MAAs Lost during the Retention Period against any new MAAs introduced to the Company, the Purchaser or an Associate of the Purchaser by the Vendors and entered into by the Company during the Retention Period. Such offset to be calculated by multiplying the annualised income by $2.90.”

219. The plaintiffs claimed damages in the amount of $213,844.86 for failure by the defendants to pay the first plaintiff the value of the MAAs lost during the Retention Period pursuant to cl 7 of the Agreement.

220. I have earlier made findings of fact which, save for some additional findings sought by the plaintiffs, were predicated, in substance, upon the JSFB. For convenience, in the present context, I will refer to some of those findings as follows:

221. On 7 February 2019, the Folleys’ solicitors sent a letter to the Hockeys’ solicitors providing a list of lost MAAs (the “7 February 2019 letter”). That list was provided by Mrs Folley to the Folleys’ solicitor on 6 February 2019. That list identified lost MAAs totalling $183,965.33 and gained MAAs totalling $12,384.51 (after the application of the 2.9 multiplier), resulting in a net balance claimed to payable to the Folleys of $171,580.82.

222. On 19 February 2019, the Hockeys’ solicitors sent an email to the Folleys’ solicitors and, among other things, attached an annotated list of the lost MAAs and a list of the gained MAAs (the “19 February 2019 email”). That list identified lost MAAs totalling $68,211.40 and gained MAAs totalling $80,537.03 (after the application of the 2.9 multiplier), resulting in (the Hockeys claimed) nil payable to the Folleys.

223. On 9 April 2019, the Folleys’ solicitors sent an email to the Hockeys’ solicitors, attaching revised lists of lost MAAs and gained MAAs (the “9 April 2019 email”). The email stated, “you will see that on my clients’ calculations there is an amount of net $54,915.36 which needs to be refunded to my clients”. Those revised lists identified lost MAAs totalling $135,452.39 and gained MAAs totalling $80,537.03 (after the application of the 2.9 multiplier).

224. The 10 April 2019 email asserted that the true value of the lost MAAs was $94,698.65 and the gained MAAs was $137,829.10. The email continued: “in the event of your client not agreeing with the attached information we would suggest that the sum claimed by your client of $54,915.36 be retained and the balance of $265,084.64 plus interest be released to our clients immediately”.

225. On 18 April 2019, the Folleys agreed to release the “part of the Retention Fund referred to in Clause 7 of the Share Sale Agreement that is not in dispute”, being $265,084.64 of the retention amount to the Hockeys. A further $54,915.36 of the retention amount remained in the Hockeys’ solicitor’s trust account.

226. The 10 April 2019 email was sent from Richardson Legal, the Hockeys then solicitors, to Mr David Prior, the Folleys then solicitor. The 10 April 2019 email responded to the 9 April 2019 email disputing aspects of that email.

227. The 10 April 2019 email firstly dealt with MAAs lost and alluded to, in particular, properties which were lost prior to Completion and were not included in the updated list of MAAs supplied by the Folleys (the properties were identified in red text on the list attached to the 10 April 2019 email).

“Q. Do you agree with me that if you didn’t buy those management agency agreements you couldn’t claim that they’d been lost?

A. Yep, from my, my, my recollection of, of this where the, the dispute comes out, came along was when we offered to pay the 2.3 million we’re given a list. So shall we say, there’s, you know, a hundred properties, pay $2.3 million. When we get to settlement only 90 properties are delivered but we still paid 2.3 million, and we were arguing that we should only be paying on that day, you know, from the original list which had more properties on it than the one we actually settled for. That’s vaguely where I’ve got my, my recollection of that. So while they’re not--

Q. So you’re--

A. Yeah, so whilst they weren’t lost during the period of retention, we were effectively paying for something - yeah, it, it, you know, you, you, as I say, you, you go to a shop, you buy ten items, you only get eight and you say, “Well, okay, I’ll pay you for the eight.” You’re not still paying for the ten on the day. I don’t know if that’s a good analogy but that is where I remember the, we started to see that things had, it hadn’t been done properly.

Q. Then you’ll see on page 749 at the top of the page at paragraphs (b) to (g) there are some arguments that were raised that they didn’t accept that certain things had been lost as at 1 December 2018; do you see that?

A. Yes.

Q. Did you agree with those things in that letter?

A. I would've. Whatever this letter that Mr Prior's done at the time I would have agreed to.

Q. No. No, it's not. It's from my client's solicitors.

A. My apologies.

Q. So, perhaps not. Perhaps not. There's just been on response to it. That's all.

A. I, I, then I, I, I, I'm afraid I can't comment.”

226. Mr Folley also gave evidence as to the gained MAAs as follows:

“Q. What this letter says is that what's under the heading "2. Gained Management Agency Agreements" were properties that were being managed by Danc but were not on the list of properties purchased. That's the first leg.

A. Yes.

Q. The second leg is that it says, if you look at paragraph B, "A photocopy of the printout from the agency's computer system on 31 May, showing the vacant properties at the date of settlement". Do you see that?

A. Yes.

Q. That's the pages that follow, that start at page - sorry, in the court book it starts at page 770. The proposition is that they were properties that were vacant and not purchased at the time of the contract, but which then became leased and managed by Danc after settlement.

A. Yes.

Q. So, the proposition to you is, do you agree with that?

A. (No verbal reply)

Q. Perhaps that's an unfair question.

A. Yeah, I‑‑

Q. Because, I don't wish to go through each of the properties with you.

A. I understood that. No, like, I‑‑

Q. What I need to do is set up for final submission to his Honour that if these properties that are on page 749 were not on the list of properties that were purchased‑‑

A. Yes.

Q. --and they were also properties that appear in the list starting at page 770 as being vacant‑‑

A. Yes.

Q. --at the time of purchase then the Hockeys are entitled to claim them as gains.

A. Yes.”

227. Mr Folley also accepted in cross examination that he carefully considered Danc’s records when preparing the calculations provided by his solicitor on 9 April 2019. He also agreed that he accepted the Hockeys’ solicitors’ proposal that $265,084.64 be released to the Hockeys and signed the release on 18 April 2019.

228. In Mrs Folley’s affidavit of 28 April 2021, she gave the following evidence, in this respect:

“[49] I did not accept most of the annotations made by Hockey/Eastway but I did accept the list of gained properties prepared by Hockey/Eastway and attached to the Richardson Legal email dated 19 February 2019. I accepted the list of gained properties prepared by Hockey/Eastway because they appeared to correspond with the list of gained properties listed on the REST Database maintained by Danc Pty Limited. I did not know at that time however that the gained property list in the REST Database included both:

(a) new management agreements; and

(b) an existing managing agreement with a new lease on the property.

[50] On the basis of some of the annotations to my list of property managements lost and on the basis of the list of managements gained prepared by Hockey/Eastway I prepared an amended list of property managements lost during the retention period and giving credit for the list of property managements gained. I forwarded that revised list to Priority Business Lawyers.

[51] On 9 April 2019 Priority Business Lawyers sent an email to Richardson Legal. That email stated in part:

"Further to our discussions last week / attach two documents being:

1. MAAs Lost;

2. MAAs Gained.

[Retention Fund Calculations)

The calculations have been undertaken in accordance with clause 7 of the Share Sale Agreement and in particular at the $2.90 multiplier.

You will see that on my clients' calculations there is an amount of net $54,915.36 which needs to be refunded to my clients.

Can you please seek instructions from your clients and revert to me?"

Exhibited and marked "KMF-29" is a copy of the email from Priority Business Lawyers to Richardson Legal dated 9 April 2019 attaching the revised list of property managements lost giving credit for managements gained and a list of gained managements from 1 June 2018 to 30 November 2018 as prepared by Hockey/Eastway and forwarded to Priority Business Lawyers on 19 February 2019 by Richardson Legal.

[52] The revised management properties lost prepared by me giving credit for properties gained was prepared on the representations made by Hockey/Eastway through their solicitor Richardson Legal, namely that:

(a) the property managements lost from the owner Bakis were "handed back"; (b) there were properties gained that required to be set off against property managements lost.

(Retention Representations)

[53] The Retention Representations were false because:

(a) the property managements owned by Bakis were not "handed back". They were lost. Exhibited and marked "KMF-30" is a copy of a note made by Hockey on MyDesktop dated 24 July 2018 in relation to John Bakis stating:

"John has given us 30 notice to move all his properties to the Property Market.";

(b) the list of properties gained as prepared by Hockey/Eastway and forwarded to Priority Business Lawyers on 19 February 2019 by Richardson Legal were not new Management Agency Agreements. They were existing Management Agency Agreements and therefore no credit should have been given to Hockey/Eastway. Exhibited and marked "KMF-31" is a bundle of copied Management Agency Agreements for all of the properties listed by Hockey/Eastway in Richardson Legal email dated 19 February 2019.

[54] Taking into account that:

(a) the Bakis properties were not "handed back"; and

(b) Hockey/Eastway were not entitled to any credit for gained properties,

then the amount of property management lost is $183,965.33. This is the amount of my initial list of properties lost that was sent by Priority Business Lawyers to Richardson Legal on 7 February 2019.

[55] Before I had realised that the Retention Representations made by Hockey/Eastway were false, Priority Business Lawyers received a letter from Richardson Legal which was headed "Without prejudice". That letter made further representations that there were further properties that were gained properties and that the purchaser was not entitled to any amount for lost management. That letter stated in part:

"As the amount of the gains exceeds the amount of the losses the full retention fund should be paid to our clients. Please provide us with an authority to do so as a matter of urgency. In the event of your client not agreeing with the attached information we would suggest that the sum claimed by your client of $54,915.36 be retained and the balance of $265,084.64 plus interest be released to our clients immediately."

Exhibited and marked "KMF-32" is a copy of the without prejudice letter from Richardson Lawyers to Priority Business Lawyers dated 10 April 2019.

[56] On 18 April 2019 I signed a document entitled AUTHORITY TO RELEASE PART RETENTION FUND. Exhibited and marked "KMF-33" is a copy of that document. I would never have signed that authority but for the Retention Representations made by Hockey/Eastway through their solicitor Richardson Legal.”

229. It should be observed that the second half of [49] and [54] of Mrs Folley’s affidavit of 28 April 2021 were admitted under s 136 of the Evidence Act. It follows that they are not proof of the facts asserted in those passages. In the case of that part of [49], marked in that fashion, I agree with the submission of the defendants that no allegation as to misleading conduct was pressed in this aspect of the plaintiffs’ claims and, as I have mentioned, Mrs Folley agreed to the release of a portion of the retention amount.

230. As Mrs Folley identified in her affidavit, and as mentioned above, her solicitors stated in the 9 April 2019 email that “there [was] an amount of net $54915.36 that [needed]to be refunded to [the Folleys]”.

231. Mrs Folley was cross-examined as to that communication and gave evidence which was demonstrative of the evasive and argumentative way in which she gave her evidence. That evidence was as follows:

“Q. Can I just take you forward to 744 of the bundle, please? That’s an email that Mr Prior sent to Warren Richardson on 9 April 2019?

A. Right.

Q. You instructed Mr Prior to send that email?

A. Yes.

Q. You’ll see that it says, “Further to discussions last week, I attach two documents being, one, MAAs lost and, two, MAAs gained;” do you see that?

A. Yes.

Q. Then on the calculation in the second last paragraph is, “You will see that on my clients’ calculations there’s an amount of 54,915.36 that needs to be refunded;” do you see that?

A. Yes.

Q. Where Mr Prior is referring to his clients’ calculations they were your calculations, weren’t they?

A. So who was referring to the, my calculations?

Q. I’ll take you through it. The second last paragraph says, “You will see that on my clients’ calculation;” do you see that?

A. Yes.

Q. You were Mr Prior’s client?

A. Yes.

Q. So this was your calculation?

A. After I had changed it because I had taken on board what Wayne had emailed me but it was incorrect. Afterwards, I realised afterwards.

Q. But at the time you sent this email--

A. Yes, at that time I believe it was correct but it was incorrect.

Q. At the time that was your calculation, correct?

A. After I adjusted what Wayne said, yes.

Q. Before reaching that point, isn’t this right, you had originally claimed about 170,000 from the retention amount; isn’t that right?

A. This - yes, but this was, this was properties that had been lost. There had to be a notice in, in the 30 day period, had been then lost in June. They should have been taken off and they were not taken off and that’s what I found after this.

Q. That’s not my question.

A. I know but it, it’s, it’s not a single answer.

Q. My question was confined. Do you remember I took you to an email that you sent on 6 February 2019 with a schedule attached; do you remember that‑‑

A. Yes.

Q. --which had $183,000 less $12,000 to about $170,000?

A. Yes.

Q. That was the original claim that was made, correct?

A. Yeah, but emails are going back and forth so things were changing.

Q. That’s the original claim that was made; isn’t that right?

A. Yes, it is.”

232. In any event, it is clear from that evidence that, by 9 April 2019, the Folleys had departed from their original claim with respect to the retention amount. Furthermore, Mrs Folley accepted that the calculations provided by her solicitor on 9 April 2019 were her calculations. She believed them to be correct at the time and instructed her solicitor to send that email.

233. It may also be observed that the various passages of Mrs Folleys affidavit of 28 April 2021, that I have extracted, do not expressly engage with the 10 April email 2019.

234. Mrs Folley was cross-examined as to the contents of the 10 April 2019 email as follows:

“Q. Then over the page - I’m going to back to this - at the foot of page 749 it says in that final paragraph, do you see that, that as far as the Hockeys were concerned the gains exceed the losses so they should get the full retention, but on your case, as put forward the previous day, you’re claiming 54,915, so how about as an interim basis that $54,000 be retained but the 265 be released; do you see that?

A. Yes.

Q. You agreed to that?

A. Unfortunately, yes.

Q. What is contained in this letter at 748 and 749 and 750 and following, what the Hockeys say in that letter is correct, isn’t it?

A. No.”

235. I agree with Mr Katekar SC that that cross examination was sufficient to challenge the witness to the correctness or otherwise of the calculations of gains and losses.

236. In [102] of his affidavit of 6 August 2021, Mr Hockey disputed the content of [54] of Mrs Folley’s affidavit of 28 April 2021 (extracted above) as to her assessment of the quantum of gains and losses. In support of his position, Mr Hockey relied upon a spreadsheet. That spreadsheet was prepared by him and attached to the 10 April 2019 email. [8]

237. Mr Hockey was not challenged as to those calculations; even though he was challenged, in other respects, as to the release of funds from the retention amount and the operation of cl 7 of the Agreement. I do not consider that that lacuna is overcome by the fact of the existence of evidence in a documentary form that, after 10 April 2019, and after the release of monies on 18 April 2019, the Folleys challenged Mr Hockeys calculations, namely, the email of 21 May 2019 sent by the Folleys’ solicitors.

238. I consider that Mr Hockey’s calculations, contained in the 10 April 2019 email, remain unchallenged on the evidence.

239. Given my assessments of Mrs Folley’s evidence and, in particular, her evidence specifically in relation to the retention amount, I do not consider that any evidence to the contrary, given by her as to calculations for the purposes of cl 7 of the Agreement, may be accepted and certainly are not accepted in preference to Mr Hockeys calculations.

240. Given that the plaintiffs’ case, in this respect, does not proceed upon the basis of misleading and deceptive conduct, this conclusion alone undermines any proposition that the Folleys have established their entitlement to the amount they claimed under Issue 7 in claim 2. I will further deal with this question and, in particular, the statements made by Mrs Folley in pars 53 and 54 of her affidavit of 28 April 2021 in the following section of this judgment dealing with issues 8 and 9.

241. The aforementioned conclusions also establish a foundation for the operation of the doctrine of election relied upon by the defendants.

242. I accept the submission of Mr Katekar SC for the defendants that the doctrine is enlivened where a party exercises a choice between two competing and inconsistent set of rights. I also agree that, in that situation, the party will be irrevocably bound by their choice and not be permitted to later step away from their choice or lay claim to the alternative right that had previously been available to them.

243. The doctrine of election was summarised by the High Court in Sargent v ASL Developments Ltd (1974) 131 CLR 634; [1974] HCA 40 (“Sargent”) at 645-646 (per Stephen J, with whom McTiernan ACJ agreed); as follows (citations omitted):

“… all that need be established in order for the doctrine of election to apply is knowledge by the vendors of the facts giving rise to inconsistent legal rights; the appellants are to be taken to know of their rights of rescission conferred by cl 16 and, of course, of their right to enforce the contracts according to their terms. If they then knew of the relevant facts giving rise to the rights of rescission, that is, the existence of a planning scheme affecting the lands sold, that is enough to invoke the doctrine. Their own interpretation or understanding of the nature or extent of their contractual rights will be irrelevant, so that it matters not at all whether they were aware of the existence of cl 16 or of its effect… It is enough that they knew of facts which have brought cl 16, as so interpreted, into operation.

The words or conduct ordinarily required to constitute an election must be unequivocal in the sense that it is consistent only with the exercise of one of the two sets of rights and inconsistent with the exercise of the other; thus for a lessor to continue to receive rent under a lease will be consistent only with his rights as lessor and inconsistent with the exercise of a right to determine the lease.”

244. Similarly, in Allianz Australia Insurance Ltd v Delor Vue Apartments CTS 39788 (2022) 406 ALR 632; [2022] HCA 38 at [38]–[39] and [60] (per Kiefel CJ, Edelman J, Steward J and Gleeson J), the High Court said:

“[38] In the law of contract, a party can act in a manner that affirms the existence of a contractual right or rights, by exercising what is commonly described as an election between inconsistent sets of rights. The usual reference to the sets of rights includes all claim rights, privileges, powers, and immunities.

[39] Although many of the older cases of election by affirmation (including in this Court) described the principle as one of “waiver”, and although it might be possible to express modern cases involving affirmation of a contract in terms of irrevocable waiver of a power to terminate the contract, the language of “waiver” can distract in this area. As three members of this Court observed in Gardiner, the “[c]ircumstances in which there is an election between inconsistent rights are radically different from some others in which there is said to be a waiver of rights”. In the law of contract, the better description of this doctrine is election by affirmation.

…

[60] One category is where a person completes the exercise of a legal power to extinguish a right or set of rights, such as a power to terminate a contract for the future or to rescind a contract from the beginning. Lord Goff described this as the “abandonment of a right”, contrasting it with “forbearance from exercising a right”. The second category is where a person takes a course of action that is inconsistent with the continued existence of the right or set of rights and the person pursues that course of action until all alternative rights arising from the course of action are wholly satisfied. An accurate description of both of these categories is extinguishment of rights.”

245. In my view, the Folleys are bound by their election in April 2019. The Folleys did not elect to continue negotiating the matter and, absent agreement between the parties, have the matter determined. They had a choice between that right and the inconsistent right, namely, to agree to the release of part of the retention amount.

246. Having made that election, the Folleys cannot seek to re-open that question, at least not within the auspices of a claim for breach of the Agreement.

247. There remains for consideration, the contention that the Authority did not comply with the requirements of cl 7.1(d)(i)-(iii) of the Agreement in the various respects that I have identified above in the summary of the plaintiffs’ submissions.

248. In my view, the defendants were correct to submit that, even though the release of monies required authority under cl 7.1 of the Agreement, the payment of the monies, in this case, represented a separate agreement which was caught by the doctrine of election. In any event, I do not accept the plaintiffs’ submissions that the Authority was defective, in the sense of it being invalid, having regard to the considerations which follow below.

249. There is a preliminary observation which might be made in this respect. Clause 7.1(d) has as its primary purpose, not the erection of formal requirements for an authority, but, rather, a provision governing the calculations of the value of MAAs lost and steps taken in that respect.

250. Dealing with the particular matters raised by the plaintiffs:

251. There was no formal requirement that the Authority may only be signed by the “Vendors and the Purchasers”. Clause 7.1(d)(iii) is permissive of the execution of the Authority by the solicitors or the vendors and the purchaser, which appears to be the case on the face of the Authority.

252. The Authority registered the Agreement between the parties as at the date of its execution, irrespective of any implicit dispute identified by the 10 April 2019 email sent by the defendants’ solicitor. A later advice of a disagreement on 21 May 2019 is irrelevant as it post-dates the date of the Authority.

253. It is implicit in cl 7.1(d)(i) that the refund to the purchaser shall be the agreed amount as calculated. An amount was identified as potentially refundable to the purchaser. That position remained extant as at the date of the execution of the Authority as expressly recognised by the Authority.

254. Lastly, I agree with the submission by the defendants that it cannot properly be contended that the Authority was signed under protest as, demonstrated in the discussion above, the Authority was signed and the amount of $54,915 represented the amount claimed by the Folleys at that time, even though issues were raised in the email.

Issues 8 and 9

Submissions: Issues 8 and 9

254. In relation to Issues 8 and 9, in summary, the plaintiffs submitted the following:

255. The Folleys are entitled to the balance of the retention amount of $54,915.36 plus accrued interest. They have been claiming this amount since at least 9 April 2019, and payment of it would be consistent with the terms of the Agreement (notably cl 7.1(d)(i) which envisaged that there would be a refund from the retention amount to the purchasers).

256. No substantive response was or has been provided by the Hockeys to the letter from the Folleys’ solicitors dated 21 May 2019 which articulated a sound basis for at least the whole of the balance of the retention amount of $54,915.36 to be released to the Folleys. No response to this letter can be found in the evidence.

257. In [21] of the CC, the Hockeys alleged that they demanded the release of the balance of the retention sum to the Hockeys, but the Folleys, in breach of the Agreement, refused to authorise that release. This allegation is denied by the Folleys. No evidence has been adduced by the Hockeys of any demand for the release of the balance of the retention sum. There cannot be any basis for the Court to find that the Folleys were in any way in breach of the Agreement by failing to authorise the release of the remaining balance of the retention amount.

258. The only basis upon which the Hockeys can claim to have any entitlement to the remaining retention amount of $54,915.36, is if the conditions set out in cl 7.1(d) had been satisfied. The absence of agreement by the parties as to the value of the MAA’s lost, means that the conditions in cl 7.1(d) were not and have not been satisfied.

259. The Court should not embark on an exercise which involves resolving the dispute in relation to the proper calculation of lost MAA’s for the purposes of cl 7 of the Agreement. This is particularly so where the Agreement itself contains an express dispute resolution provision (cl 23) which envisaged that any dispute as to the calculation of the adjustment of the retention amount is to be referred to the President of the Real Institute of New South Wales for final and binding determination.

Consideration: Issues 8 and 9

255. I have not separately summarised the defendants’ submission in this respect as, in my view, they are wholly correct in answering the plaintiffs’ contentions upon the basis that there was a lack of sufficient evidence and inherent uncertainties in the Folleys’ articulation of their claims, such that the Folleys have not established the value of the lost MAAs to which they claimed entitlement.

256. Having regard to my earlier conclusions, and the further observations below, the Folleys have not established, to the necessary standard, that they are, in fact, entitled to any amount in respect of lost MAAs.

257. As to the aspects of Mrs Folleys’ affidavit, which I had indicated would be returned to, my observations, consistently with the defendants’ submissions, are as follows:

258. Mrs Folley asserted that the property managements owned by Mr Bakis were lost. This was supported only by a one-sentence note made, on Mrs Folleys’ evidence, by Mr Hockey in MyDesktop on 24 July 2018 regarding Danc's relationship with Mr Bakis. Mr Hockey was not cross-examined in relation to that matter;

259. Mrs Folley stated that the list of gained MAAs, provided by the Hockeys on 19 February 2019, were existing, rather than new, MAAs. I am not prepared to accept Mrs Folleys’ bare assertion, in that respect, in the absence of contemporaneous evidence. Beyond that consideration lies significant questions as to quantification to which I shall now turn.

260. The defendants made the following contentions in their written submissions as to the opaqueness of the Folleys’ quantification of their claim, which I accept. It is in the following terms:

“first, it impossible to fathom how the Folleys first quantified their claim at $213,844.86, and now how they assess it at $183,965.33;

second, it appears that the Folleys have not accounted for any offset for gained MAAs in their calculation of lost MAAs. Mrs Folley accepted that she had accounted for lost MAAs only; and

third, to the extent that the Folleys only assert an entitlement to $213,844.86 of the total $265,084.64 released on 18 April 2019, it appears that (i) they accept that the balance of $51,239.78 released in April 2019 was properly payable to the Hockeys, and (ii) implicitly, if no greater entitlement in respect of lost MAAs is claimed, then the balance of $54,915.36 (in respect of which the Folleys’ 2FASOC says nothing) should also be payable to the Hockeys.” (footnotes omitted)

259. I note that, in the 2FASOC, the plaintiffs pleaded that the value of the lost MAAs was $213,844.86. In opening submissions, the Folleys’ contended that the true calculation of the lost MAAs was $183,965.33. To this was connected the proposition that the Authority to release the funds on 18 April 2019 was not valid. (The amount of $183,965.33 is the lost MAAs first identified by the Folleys in the list provided by their solicitors to the Hockeys’ solicitors on 7 February 2019).

260. The second issue raised by the defendants is of equivalent force.

261. There are two difficulties with the Folleys’ claim for damages with respect to a breach of cl 7 of the Agreement:

262. The release of the retention amount was done by both the Folleys and the Hockeys. There is no pleaded claim in relation to the sum of $54,915.36.

263. The only obligations on the Hockeys, under cl 7, were:

(a) to check the list of lost MAAs prepared by the Folleys, which was to be provided by the Folleys within 21 days of the expiry of the Retention Period (cl 7.1(d)); and (b) to provide a written authority to the vendors’ solicitors authorising the release of the retention amount within 7 days of the parties reaching an agreement as to the disbursement of the retention amount (cl 7.1(d)(iii)).

3. The difficulty with the plaintiffs’ contentions, in this respect, namely, that the Hockeys failed to pay the Folleys any amount, is that it was not the Hockeys who held or controlled the retention amount. Rather, the retention amount was held on trust by the Hockeys’ solicitors. It was only with the written authorisation of both the Hockeys and the Folleys that the solicitor could distribute any part of the retention amount. As earlier mentioned, the Folleys signed an authority on 18 April 2019 in respect of the disbursement of $265,084.64 of the retention amount to the Hockeys.

4. The Court finds that the Hockeys did not breach cl 7 and that the defendants are entitled to the balance of the Retention Amount of $54,915.36 plus accrued interest. I note that issue 21 was expressed in the same terms as issue 9 in the ASOI and the consideration of how interest will be calculated is discussed later in the judgment in the context of considering the CC.

5. It follows that the answer to the first question in Issue 9 is that the Hockeys are entitled to the balance of the retention amount of $54,915.36 plus accrued interest. It is unnecessary to answer Issue 8 having regard to my conclusions for Issues 7 and 9. Similarly, it is unnecessary to answer the second part of the question in Issue 9 because of the answer to the first part.

Claim 3: Restraint of trade

264. The issues relevant to the resolution of claim 3, as set out in the ASOI, were as follows:

265. Did Mrs Hockey breach cl 14.2? (“Issue 10”)

266. If so, have the Folleys (as opposed to Danc) suffered any loss? If so, how much? (“Issue 11”)

Issue 10

Submissions: Issue 10

265. In relation to issue 10, in summary, the plaintiffs made the following submissions:

266. In opening submissions, the defendants, in effect, admitted that they breached the restraint provisions of the Agreement (cl 14.2) which restrained the Hockeys from, amongst other things, being involved or promoting or participating in a real estate business which was competitive with Danc’s business.

267. Mrs Hockey breached cl 14.2 by being involved or promoting or participating in a real estate business which was competitive with Danc’s business. Reliance was placed upon the following evidence given, and admissions made, by Mrs Hockey and Mr Hockey in their oral evidence:

(a) Ian Boyle of Ray White Berkeley Vale (located about 5 kilometres from Bateau Bay where Danc’s Business was based) used Mrs Hockey’s real estate licence for a period of about 7 months, up until July 2019, in circumstances where Mrs Hockey was aware that if he had not been able to use her licence, Mr Boyle may not have been able to keep his agency going; (b) On 8 June 2019, Mr Hockey sent an email to Ian Boyle, Principal of Ray White Berkeley Vale, providing him with bank details for himself and Mrs Hockey; (c) on about 1 April 2019, Mrs Hockey sent an email to Mr Purdue (a former sales agent at Ray White BB who, in 2019, was working for Ray White Berkeley Vale) asking him to sign off on a market appraisal of a property; (d) on 11 July 2019, Mrs Hockey provided the Principal at Ray White Budgewoi (Luke Thompson) with bank details for herself and her husband, and Mr Thompson thanked her for the “opportunity” and offered to take her out for lunch; (e) Mrs Hockey could not deny that Mr Thompson had asked her for the bank details because she had made a sales referral for a property to him; and (f) Mrs Hockey gave evidence that she had provided her bank details to Mr Thompson because he put money into her account on a regular basis (quarterly) for marketing over time and that there were occasional deposits from him (as reimbursements).

3. Having regard to credit issues, with respect to Mrs Hockey, objective contemporaneous documents and admissions made by Mrs Hockey, the Court should neither accept Mrs Hockey’s oral evidence, that she had fully retired from the real estate industry by late 2018, nor her denials that she was, in 2019, involved in the businesses of Ray White Berkeley Vale or Budgewoi.

4. The two Ray White franchises, located at Berkeley Vale and Budgewoi (both locations close to Bateau Bay), with which Mrs Hockey was, on the above evidence, involved in, were similar to or competitive with Danc’s business.

5. On the whole of the evidence, Mrs Hockey breached cl 14.2 of the Agreement.

6. In relation to issue 10, in summary, the defendants made the following submissions:

7. While it is admitted that Mrs Hockey was the licensee in charge of Boyle Partners from December 2018 to July 2019, that conduct did not amount to a breach of cl 14.2(a) or (b) of the Agreement. It was not alleged that Mrs Hockey breached any other sub-clauses of cl 14.2 of the Agreement.

8. It is accepted that Boyle Partners would constitute a “Restrained Business” for the purpose of cl 14.2(a) and (b). However, the nature and extent of Mrs Hockey's involvement in the business of Boyle Partners was so limited that she cannot be characterised as having been involved in, promoting, participating in, financing, operating, engaging in, or having been concerned or interested in, any “Restrained Business”.

9. Mrs Hockey’s evidence is that during the period in which she was the licensee in charge of Boyle Partners, Mrs Hockey did not actually do anything. That is, she had no input into the Boyle business, did not provide any confidential information to it, and did not receive any payment from it.

10. The only evidence of Mrs Hockey’s breach of the restraint of trade clause is an email dated 1 April 2019 from Mrs Hockey to Mr Purdue, a former employee of Danc who was, at the time of the email, an agent for Ray White Berkeley Vale, regarding a market opinion for a property at Blue Bay. Mrs Hockey's evidence was that she did not recall the email, although she knew that one of the recipients referred to in the market opinion was a relative of her next-door neighbour.

Consideration: Issue 10

267. In the relief claimed in the 2FASOC, the plaintiffs claim damages for breach by Mrs Hockey of the “Restriction on Competition” cl “14.1” of the Agreement. [9]

268. The pleadings and particulars of the 2FASOC pleaded breaches by Mrs Hockey of cl 14.2(a) and 14.2(b) of the Agreement. The particulars of the breach, in this respect, were that Mrs Hockey was registered as licensee in charge of Boyle Partners, trading as Ray White Berkley Vale during the period 19 December 2018 to 26 July 2019, “and continues as an associate of Boyle Partners”.

269. There was no claim in relation to the business Ray White Budgewoi in the 2FASOC. Rather, the particulars relating to Mrs Hockey’s dealings with Ray White Budgewoi came to light over the course of the proceedings, including oral evidence.

270. Clause 14.2 of the Agreement was relevantly as follows:

“14.2 Restraint Obligations

The Vendors must not during the Restraint Period in the Restraint Area:

(a) be involved in, promote, participate in, finance, operate or engage in (whether on its own account or in partnership or by joint-venture) any Restrained Business; or

(b) be concerned or interested (directly or indirectly, or through any interposed body corporate, trust, principal, agent, shareholder, beneficiary, or as an independent contractor, consultant, employee, director or in any other capacity) in any Restrained Business; or…”

271. In written submissions, the plaintiffs placed reliance upon the following words in cl 14.2(a): “involved in, promote, participate in”.

272. ‘Being involved’ is defined in cl 14.1(a) as including:

“… being involved as a sole trader, partner, joint venturer, manager, agent, appointor, assistant, clerk, director, shareholder, employee, consultant or contractor or person with the capacity to exercise control of a corporation directly or indirectly.”

273. Clauses 14.1(c) to (f) define relevant person, restraint area, restrained business and restraint period as follows:

“c. Relevant Person means the Vendors.

d. Restraint Area means each of the areas described below separately:

Twelve (12) kilometres from the Premises;

Ten (10) kilometres from the Premises; and

Five (5) kilometres from the Premises.

e. Restrained Business means the business or operation the same as, similar to, or competitive with, the Businesses or any component of the Businesses.

f. Restraint Period means the periods described below commencing on the date of leaving the employment of the Company:

36 months;

30 months;

24 months;

18 months;

12 months;

6 months.”

274. It was common ground that:

275. Boyle Partners was a “Restrained Business” as defined in cl 14.1(e); and

276. Mrs Hockey was a licensee in charge of Boyle Partners from December 2018 to July 2019;

277. There would not seem to be any dispute that Mrs Hockey was a relevant person as defined in cl 14.1(c), or that Ray White Berkley Vale fell within the restraint area (and in any event, Mrs Hockey conceded that Berkley Vale was about 5 kilometres from Bateau Bay). The conduct complained of fell within the “Restraint Period” for the purposes of cl 14.1(f) of the Agreement.

278. However, there was a submission by the defendant as to whether Ray White Budgewoi fell within the restraint area (if, in fact, this issue was relevant to the claim).

279. I make the following findings on the evidence, in this respect, in addition to those matters which are admitted or not disputed.

280. First, Mrs Hockey permitted Mr Ian Boyle to utilize her real estate agency license. She accepted that she was aware that, if Mr Boyle had not been able to use her license, he would not have been able to continue with his real estate agency in the absence of obtaining someone else’s license.

281. Nonetheless, Mrs Hockey stated in her affidavit of 6 August 2021, and I accept, that she had no “input” into Mr Boyles business, did not provide any confidential information to him and received no payment from Mr Boyle or anyone else for permitting her real estate license to be used so that Ray White Berkeley Vale may operate.

282. Mrs Hockey no longer has her real estate license which expired in the period 2022-2023 but was current until 2022. It was a three-year licence. She ceased to act as a licensee in charge at Ray White Berkeley Vale on 26 July 2019.

283. Counsel for the plaintiffs’ put a question to Mrs Hockey as to whether her loaning the license to Mr Boyle constituted a breach of cl 14 of the Agreement. That question was withdrawn after objection and an alternative question put to her that she had involved herself in Mr Boyle’s real estate business by the loan of that license. Mrs Hockey disagreed, stating that she was not involved in his business but merely lent him a license to enable him to trade.

284. It was suggested that this evidence demonstrated Mrs Hockey’s lack of credit because she had refused to accept a proposition that was obviously true. That proposition needs to be tested not against Mrs Hockey’s understanding of the legal effect of cl 14 of the Agreement (to which I will return), as was initially put to her in cross examination, but as to her understanding of her general involvement in the business.

285. In this respect, I do not consider her evidence to be, in any way, evasive or disingenuous, but merely reflected her understanding of the question posed concerning her involvement in the business. The question may well be understood, as was my impression, as being whether she had any input in the operations of the business as such. Her evidence was that she did not. Mrs Hockey was not asked of her understanding of the significance of her providing her license to Mr Boyle other than that act having the effect of allowing Mr Boyle to continue to run his real estate business in circumstances where it would have been, otherwise, impossible to do so.

“Q. I want to suggest to you that as at April 2019 you were involved in the business of Ray White Berkeley Vale; do you agree with that?

A. No, I don’t.

Q. Why do you say that?

A. I was not involved in the business in any capacity.

Q. So is this your evidence to his Honour that undertaking a market appraisal for a contact or friend from overseas and asking Mr Purdue of Berkeley Vale to sign off on that market appraisal, that would not involve you being involved in the Ray White Berkeley Vale business; is that you’re evidence to his Honour?

A. Yes, it is correct.”

288. Senior Counsel for the defendants submitted that the Court should accept Mrs Hockey’s evidence in the above extract. Counsel for the plaintiffs submitted that her evidence was “fanciful and unrealistic” and should be rejected by the Court.

289. I consider the challenge to Mrs Hockey’s credit, in this respect, to be reasonable. Her evidence was that she was not involved in the business “in any capacity”, yet she had plainly prepared, at least, a draft market appraisal, which would then be issued, albeit under the cloak of Mr Purdue’s signature. It was not put to Mrs Hockey that she had intentionally sought to evade the effect of cl 14 of the Agreement but that was the effect of her actions.

290. Thirdly, the plaintiffs relied upon an email sent by Mr Hockey to Mr Boyle on 8 June 2019 providing Mr Boyle with bank details for himself and Mrs Hockey. There is no evidence that any payments were made to the Hockeys arising from the provision of that information and there would not seem to be any basis upon which that act by Mr Hockey would, in and of itself, attract the operation of cl 14 of the Agreement.

291. Fourthly, on 11 July 2019, Mrs Hockey provided Mr Thomson, the Principal of Ray White Budgewoi with bank details for herself and her husband. Mr Thompson thanked her for the “opportunity” and offered to take her out for lunch.

292. It was put to Mrs Hockey that she had been asked for the bank details because she had made a sales referral for a property to Mr Thompson but indicated she could not confirm “that’s true” and had no recollection “of this at all”, even though she did remember being asked for the bank details.

293. Mrs Hockey gave evidence that she had provided her bank details to Mr Thompson because he put money into her account on a regular basis (quarterly) for marketing over time and there had been occasional deposits from him as reimbursements.

294. I accept that the evidence reveals that Mrs Hockey provided Mr Thompson with bank details, that he had thanked her for an opportunity and offered to take her out to lunch. In the absence of evidence to the contrary, I accept the reason provided by Mrs Hockey for providing her bank details.

295. I will deal with each of these factual scenarios in turn for the purposes of evaluating whether there has been any breach of cl 14 of the Agreement, commencing with the evidence as to Mrs Hockey “loaning” her license to Mr Boyle, even though the notion of “a loan”, in the context of Mrs Hockey being a licensee in charge, is a misnomer, as I will discuss below.

296. Neither party paid close attention to the construction of the provisions of cl 14.2(a) and 14.2(b) of the Agreement.

297. I shall, nonetheless, briefly discuss the construction of those provisions.

298. This is not a matter where the validity of provisions of cl 14.2(a) and (b) are in issue. Nor is not a case where the covenant for the restraint of trade, in cl 14 of the Agreement, should be more narrowly or strictly construed such as in cases of employee covenants, where issues of reasonableness arise or there are issues as to ambiguity: see from (1894) 11 R 1; [1894] AC 535 at 559-574 (per Lord Macnaghten) and [1891] 1 Ch 576 at 589 – 590 (per Kay LJ), and the more recent authority [2012] EWHC 3707 (QB) at 31 (per Males J).

“In this clause:

a. be involved includes being involved as a sole trader, partner, joint venturer, manager, agent, appointor, assistant, clerk, director, shareholder, employee, consultant or contractor or person with the capacity to exercise control of a corporation directly or indirectly;”

306. The word “or” immediately following the “contractor” included in cl 14.1(a) is disjunctive. The definition plainly distinguishes between involvement in various specified capacities such as a ‘sole trader’ or ‘director’, and a more generic function and power exercised by a person (which must, at least, include a natural person). The use of “or” twice within the definition (first immediately following the word “consultant”, and second immediately following the word “contractor”) clearly draws a distinction between this list of various specified capacities and the more generic function and power exercised by a person, such that the word “or” immediately following the word “contractor” is clearly disjunctive. Hence, if a person has the capacity to exercise control of a corporation directly or indirectly (regardless of the fact that they are not otherwise involved in a specified capacity), they will still be caught by the definition in cl 14.1(a) of the Agreement.

307. The expression ‘capacity to exercise’ should receive the meaning ascribed to capacity in Haugesund Kommune v Depfa ACS Bank [2010] EWCA Civ 579; [2011] 1 All ER 190 at [27], [43–47] (per Aikens LJ), namely, the legal ability to exercise specific rights.

308. The expression does not require that the power (when conceived in that way) to be actually exercised.

309. The word control is an expression of wide and ambiguous import: Johnston Fear & Kingham & the Offset Printing Co Pty Ltd v The Commonwealth (1943) 67 CLR 314 at 324 (Rich J).

310. When seen in the contexts in which the word ‘control’ appears in cl 14.1(a), the word should be understood as having its ordinary English meaning. The Oxford English Dictionary (online ed, accessed February 2025) defines control to mean “To exercise power or authority over; to determine the behaviour or action of, to direct or command; to regulate or govern.”

311. The expression ‘directly or indirectly’ gives the definition the broadest operation which is consistent with the language adopted in the definition when read in context.

312. In my view, it is plain that Mrs Hockey was involved in the business of Ray White Berkley Vale as she was the licensee in charge of that real estate agency.

313. Neither party went to the provisions of the Property and Stock Agents Act 2002 (NSW) (“the PSA Act”), but a simple review of the provisions of that act identify why such a conclusion may be reached.

314. Section 3 of the PSA Act defines a license as meaning a license under the act. The class of license is defined as meaning a class 1 or a class 2 license.

315. Clause 8 of the PSA Act prohibits an individual from acting or carrying out the business of a real estate agent, unless the individual is a holder of a real estate agents license (s 8(1)(a), ).

31 Holder of class 1 licence to be in charge of business

(1) An individual who carries on business under a licence other than a class 1 licence must employ an individual (who holds a class 1 licence of a kind that would authorise the employed individual to carry on that business) to be in charge of that business.

(2) A corporation that holds a corporation licence must employ an individual (who holds a class 1 licence of a kind that would authorise the individual to carry on that business) to be in charge of that business.

(3) An individual or corporation that employs the holder of a class 1 licence in accordance with this section must notify the Secretary of the following within 5 business days—

(a) the name and licence number of the holder,

(b) the address of each place of business at which the holder will discharge the holder’s duties as a licensee in charge of the business.

(4) The holder of a class 1 licence who is employed in accordance with this section to be in charge of a business must not exercise functions or provide services on behalf of 2 or more licensees (whether corporations or individuals) unless those licensees are in partnership.

319. Section 32(1) – (3) of the PSA Act provides:

32 Duty of licensee and person in charge to properly supervise business

(1) A licensee must properly supervise the business carried on by the licensee.

(2) A licensee employed by another licensee (the principal licensee) as the person in charge of business at a place of business of the principal licensee must properly supervise the business of the principal licensee carried on at that place.

(3) The requirement to properly supervise the conduct of business includes the following requirements—

(a) a requirement to properly supervise persons engaged in the business,

(b) a requirement to establish procedures designed to ensure that the provisions of this Act and any other laws relevant to the conduct of that business are complied with,

(c) a requirement to monitor the conduct of business in a manner that will ensure as far as practicable that those procedures are complied with.

320. It is of some interest that the holder of a license may not let out or lend a license. Clause 13 of the PSA Act provides:

13 Transfer or lending of licence or certificate of registration prohibited

(1) The holder of a licence or certificate of registration must not transfer, let out, hire or lend the licence or certificate of registration to any other person or permit any other person to use the licence or certificate of registration.

Maximum penalty—100 penalty units.

(2) A court that convicts a person for an offence under this section is to order the cancellation of the licence or certificate of registration concerned. The licence or certificate of registration is cancelled on the making of the order.

321. Hence, as licensee in charge of Ray White Berkley Vale, Mrs Hockey was the person “in charge of that business” and was required to “properly supervise the business” in accordance with the requirements of the PSA Act. In my view, these provisions make it indisputable that Mrs Hockey had the legal capacity to exercise specific rights of control over Ray White Berkley Vale for the period in which she was licensee in charge.

322. Accordingly, I find that Mrs Hockey’s involvement as licensee in charge of Ray White Berkley Vale was in breach of cl 14.2 of the Agreement, because, by virtue of the PSA Act, as the licensee in charge of Ray White Berkley Vale for the period from December 2018 to July 2019 (which was accepted as being within the “Restraint Period” for the purposes of the Agreement), Mrs Hockey was a person with the capacity to exercise control of Ray White Berkley Vale (which was accepted as being a “Restrained Business” operating within the “restraint area” for the purposes of the Agreement).

323. As earlier mentioned, while there was no claim in relation to Ray White Budgewoi in the 2FASOC, evidence was adduced by the plaintiff which revealed that Mrs Hockey provided Mr Thompson with her bank details, that he thanked her for an opportunity and offered to take her out to lunch. In the absence of evidence to the contrary, I have accepted that Mrs Hockey provided her bank details to Mr Thompson because he put money into her account on a regular basis (quarterly) for marketing over time.

324. However, the plaintiffs’ here face an evidentiary hurdle. Regardless of my acceptance of Mrs Hockey’s reason for providing her bank details to Mr Thompson, no evidence was adduced by the plaintiffs’ regarding the distance between Ray White Budgewoi and Ray White BB, for the purpose of proving whether Ray White Budgewoi fell within the definition of the restraint area under the Agreement.

325. An issue which needs to be considered in this context, is the extent to which this Court can take judicial notice of matters of common knowledge. Section 144 of the Evidence Act provides:

144 Matters of common knowledge

(1) Proof is not required about knowledge that is not reasonably open to question and is-

(a) common knowledge in the locality in which the proceeding is being held or generally, or

(b) capable of verification by reference to a document the authority of which cannot reasonably be questioned.

(2) The judge may acquire knowledge of that kind in any way the judge thinks fit.

(3) The court (including, if there is a jury, the jury) is to take knowledge of that kind into account.

(4) The judge is to give a party such opportunity to make submissions, and to refer to relevant information, relating to the acquiring or taking into account of knowledge of that kind as is necessary to ensure that the party is not unfairly prejudiced.

326. In Amante v R [2020] NSWCCA 34 at [66]-[69] (per N Adam J, with whom Payne JA and Beech-Jones J (as he then was) agreed), discussed the concept of judicial notice as follows:

“[66] Courts are permitted to take notice of facts that “every ordinary person” would know, as held by Isaacs J in Holland v Jones (1917) 23 CLR 149 at 153; [1917] HCA 26:

The only guiding principle — apart from Statute — as to judicial notice which emerges from the various recorded cases, appears to be that wherever a fact is so generally known that every ordinary person may be reasonably presumed to be aware of it, the Court notices it, either simpliciter if it is at once satisfied of the fact without more, or after such information or investigation as it considers reliable and necessary in order to eliminate any reasonable doubt.

[67] No exhaustive list can be compiled of facts that are open to judicial notice: Holland v Jones at 154 per Isaacs J. In Woods v Multi-Sport Holdings, McHugh J listed the following facts which could be subject to judicial notice (at 479):

“Facts that have been judicially noticed without inquiry include: that cancer is a major health problem in the community and, despite research, little progress has been made in controlling it; that HIV is a life-endangering disease; that a child victim of sexual assault may be reluctant to resist, protest or complain about the sexual assault, due to fear of punishment or rejection; and that many lawyers now charge hundreds of dollars an hour for their services, that legal aid is often unavailable to litigants in tort cases and that the cost of those services is substantially increased when lawyers cannot give advice to their clients because the law is unpredictable.” (footnotes omitted)

[68] Although his Honour was there discussing s 144 of the Evidence Act 1995 (NSW), s 144 was intended to “reflect, and simplify” the common law: Australian Law Reform Commission, Uniform Evidence Law, Final Report, 8 February 2006. Thus, little turns on the fact that the sentencing judge did not direct that the Evidence Act applied to the applicant’s sentencing proceedings for the purpose of identifying the relevant principles: s 4(2) of the Evidence Act.

[69] Other examples of facts that have been judicially noticed include that in Canberra on a very cold winter mornings the water in areas open to the elements can freeze over (see Sadler v Leda Commercial Properties Pty Ltd [2004] ACTSC at [28]). In *Crown Glass & Aluminium P/L v Ibrahim [*2005] NSWCA 195, it was permissible to notice “the fact that those operators in the building industry conduct a not insubstantial part of their business for cash”. In University of Wollongong v Mitchell (2003) Aust Torts Reports 81-708; [2003] NSWCA 94, Meagher JA commented at [4] that “retractable seats are such a feature of normal life in New South Wales that one can, I think, take judicial notice of their existence” (Gzell JA disagreed).”

327. In my view, the distance in kilometres between Ray White BB and Ray White Budgewoi is not a fact so generally known that every ordinary educated person may be reasonably presumed to be aware of it, whether in Sydney (where the proceedings were held) or, for that matter, the wider Central Coast area. This is not a matter in respect of which I can take judicial notice.

328. Rather, the question as to the distance between Ray White BB and Ray White Budgewoi, and, therefore, whether Ray White Budgewoi fell within the restraint area, for the purposes of the Agreement, is a fact which needed to be proved. The plaintiffs’ bore the onus in that regard.

329. Accordingly, with no evidence having been adduced as to this fact, there is no evidentiary basis to find a breach of cl 14.2 of the Agreement by reason of Mrs Hockey’s dealings with Mr Thompson and Ray White Budgewoi.

330. In the answer to issue 10, I find that Mrs Hockey did breach cl 14.2 of the Agreement, only with respect to her involvement as licensee in charge of Ray White Berkley Vale from the period December 2018 to July 2019, but not otherwise.

Issue 11

Submissions: Issue 11

331. In relation to Issue 11, in summary, the plaintiffs made the following submissions:

332. By breaching cl 14.2 of the Agreement, and participating in the business of competing Ray White Agencies, Mrs Hockey caused loss and damage, not only to Danc, but also to the Folleys (and the other plaintiffs). This loss and damage would include: liability under the vendor finance provisions, which Mr and Mrs Folley, as personal guarantors, and the Majjikk, as the mortgagor of the Folleys’ residential property in Turramurra, have exposed themselves to under that provision, as well as paying the costs of the proceedings, including the costs of retaining experts to give evidence with respect to quantifying the loss and damage suffered by the plaintiffs, as a result of the breaches of cl 14.2 (which evidence was not able to be adduced at hearing because of the appointment of receivers to Danc).

333. As to the quantification of this loss and damage, this is not necessary if the principal form of relief sought by the Folleys with respect to the Hockeys’ breaches of the Agreement, namely, rescission of the vendor finance provisions is granted. This is because the Folleys do not seek relief, in addition to such partial rescission, by way of an additional order for damages for breach of the vendor warranties by the Hockeys.

334. In relation to Issue 11, in summary, the defendants made the following submissions:

335. Even if Mrs Hockey's conduct did constitute a breach of the restraint, it did not cause the Folleys any loss. The business was owned by Danc. Any loss could only have been suffered by Danc, but Danc is not participating in these proceedings.

336. The Folleys have not pointed to any profits made by Boyle Partners which they say they are entitled to. The financial report for Boyle Partners for the year ended 30 June 2019, in which the large part of Mrs Hockey’s period as licensee in charge fell, showed it made a net loss (before tax) of $19,438.10. [11]

337. Danc, therefore, have not suffered any loss and the claim must fail.

Consideration: Issue 11

333. In accordance with the general principles of contract, before damages will be awarded, the plaintiffs must be able to demonstrate that they have suffered loss as a result of the breach of cl 14.2 of the Agreement by Mrs Hockey (“the restraint breach”). Hence, there necessarily needs to be evidence of some loss, and evidence that the loss was in fact caused by the restraint breach.

334. It is at this juncture that the plaintiffs claim for damages, in relation to the restraint breach, must fail, because, as I will turn to below, the loss claimed by the plaintiffs’ (being exposure to liability under the vendor finance provisions) could not have been caused by the restraint breach. Nonetheless, I will set out below some brief commentary in relation to damages in the context of restraint of trade breaches generally.

335. While injunctive relief is typically sought in relation to a breach of a restraint clause, the court can award damages where a plaintiff is able to prove that it has suffered loss as a result of the breach of restraint. As discussed at [333], where a plaintiff is unable to demonstrate this element of causation, the claim for damages must fail. For example, in De Poi Consulting Pty Ltd v Dutton *(*No 2) [2015] SADC 111 (per Tilmouth J), although it was clear that the employee committed a “brazen” breach of her non-compete restraint, the employer’s claim for damages in the amount of $185,000, being the loss of 37 client files, was dismissed due to a lack of evidence to suggest that the loss was attributable to the employee’s breach of the restraint. As a result, the employer was awarded only $1 in nominal damages.

336. Where a plaintiff does satisfy the Court that the loss suffered was in fact a result of the breach of restraint, then the Court will seek to calculate damages in accordance with the overarching principle that an award of damages is intended to put the plaintiff in the position they would have been in had the breach not occurred. However, the difficulty quantifying damages in cases of a breach of restraint was described by Alexandra Kamerling and Chris Goodwill in Restrictive Covenants under Common and Competition Law (6th ed, 2010, Sweet & Maxwell) at [27.1] as follows:

“In both restraint of trade and business secrets cases, damages can only provide a very approximate remedy as it is usually impossible to determine precisely what the claimant has lost and therefore what his compensation should be. However, the court will not be deterred by this obstacle and will do its best to achieve justice between the parties (Sanders v Parry [1967] 1 W.L.R. 753).”

337. In contract law, there are various heads of damage under which a plaintiff may recover, depending on the type of contract and the breach in issue. These include, for example: expectation damages (often referred to as damage for loss of profits or loss of a bargain), reliance damages, restitution damages, loss of an opportunity or chance, gratuitous benefits, feelings, disappointment and mental distress and loss of reputation. [12]

338. In a breach of restraint matter, such as this, the damages in question may include the loss of commercial opportunity, including the loss of an important client (see Andrews Advertising Pty Ltd v Andrews [2014] NSWSC 318; (2014) 99 ACSR 164 at [149], [172] – [175] (per Darke J)), or loss of profits, including commission earned on the sale of property (see Properties Northside Pty Ltd *(*t/as Raine and Horne Manly/Freshwater) v Pickering [2015] NSWSC 310 (per Ball J)). Nonetheless, these were not arguments advanced by the plaintiffs.

339. The argument advanced by the plaintiffs was that the loss suffered, as a result of the restraint breach, included:

340. exposure to liability under the vendor finance provisions; and

341. costs of the proceedings (including the costs of retaining experts).

342. The case put by the plaintiffs defies logic. In arguing that the loss suffered as a result of the restraint breach is the exposure to liability under the vendor finance provisions, the plaintiffs are asking this Court to accept the proposition that they would not have been required to repay the vendor finance pursuant to cl 6.6(e) of the Agreement but for the restraint breach by Mrs Hockey. It is, at the very least, unclear how the restraint breach could be said to have caused the exposure (of the Folleys and Majjikk) to liability under the vendor finance provisions, when those provisions were entered into 7 months prior to the relevant breach. Clearly, the Folleys and Majjikk would have been exposed to liability under cl 6.6(e) of the Agreement regardless of whether Mrs Hockey were to breach the restraints in cl 14. If there is a nexus between the restraint breach and the exposure of liability under cl 6.6(e) of the Agreement, this has not been proven by the plaintiffs on the basis of any evidence.

343. Further, the costs of the proceedings are a separate question all together, and not a loss that is included in the calculation of damages for breach of contract. There is no basis in law whatsoever for this submission by the plaintiffs.

344. Accordingly, the plaintiffs have not demonstrated any loss suffered as a result of the restraint breach – certainly not any loss suffered by an actual party to these proceedings. The plaintiffs could have attempted to prove a loss of commercial opportunity or loss of profits arising as a result of the restraint breach, however, such losses necessarily would have been suffered by Danc (as opposed to the Folleys). It is likely that such arguments were not advanced by the plaintiffs on the basis that Danc is no longer a party to these proceedings.

Claim 4: the Charge – failure to satisfy conditions precedent and breach of the vendor warranties

347. The issues relevant to the resolution of claim 4, as set out in the ASOI, were as follows:

348. Did the Hockeys fail to comply with cll 3.2(a) and 3.2(g)? (“Issue 12”)

349. Did the Folleys waive compliance under cl 3.3? (“Issue 13”)

350. Did the Agreement automatically terminate on 1 June 2018 (or at some later date) by operation of cl 3.5? (“Issue 14”)

351. Did the Hockeys breach the warranties in cll 9.1 and 2.2 of Sch 4? (“Issue 15”)

352. If liability is established:

(a) Are the Folleys entitled to rescission and/or in the alternative, damages and an indemnity pursuant to cl 9.2? (“Issue 16(a)”) (b) what is the quantum of the Folleys’ loss? (“Issue 16(b)”),

(Issue 16(a) and Issue 16(b) are collectively referred to as “Issue 16”).

General submissions of the plaintiffs regarding claim 4

348. During closing submissions, it was suggested by counsel for the plaintiff that recourse be had to opening submissions. When challenged as to the appropriateness of that course, counsel for the plaintiffs abandoned his reliance on the written opening submissions in that way and instead relied upon his written and oral closing submissions. That exchange was as follows:

“HIS HONOUR: … Now, to take your invitation, Mr Philips, about matters I might wish to mention at the outset, there are only two. The first is, in terms of your written submissions, I think they proceed upon the basis that there is a reliance upon them and opening submissions. If you intend to take me to any part of the opening submissions or rely upon them--

PHILIPS: I was not intending to do that, your Honour.

HIS HONOUR: I'll proceed on the basis that I don't need to look at them unless you tell me otherwise.

PHILIPS: May it please.”

349. Nonetheless, in the course of written closing submissions, counsel for the plaintiffs did return to respond, for reasons which are not entirely clear, to the supplementary opening submissions of the defendants dated 9 August 2024.

350. I indicated that it was not entirely clear, because, similar to the observations the Court made to recourse to opening submissions, the preferable course would be for counsel to assist the Court by incorporating his response to the defendants as part of a coherent set of submissions, making clear the plaintiffs’ closing contentions as to their claim.

351. It was unsurprising, in these circumstances, that these aspects of the plaintiffs’ reply submissions contained substantial repetition with the plaintiffs’ submissions as to particular issues. However, for completeness, I will briefly set out the plaintiffs’ nine general propositions in reply (and where applicable to a particular issue, unlike the plaintiffs, I will cross reference it to the particular issue to be addressed).

352. First, the defendants’ submission that the Folleys knew about the Charge prior to the date of Completion, is wrong and inconsistent with the evidence, because:

“[79] … The email from Jemmeson Fisher to the Hockeys’ solicitor dated 31 May 2018 notes that, consistent with discussions between the respective solicitors, the Macquarie Bank interests would be discharged on settlement and then makes reference to five different PPSR interests still registered against Danc, one which was an unspecified interest with respect to which Macquarie Bank was the secured party. This email does not establish that the Folleys’ solicitor (let alone the Folleys themselves) was aware of the existence of the Charge and there is no evidence that the solicitor otherwise had any knowledge of the existence, details or nature of the Charge, or had any communications with the Folleys in relation to the contents of her 31 May 2018 email.

[80] In any event, Mr Folley’s unchallenged evidence (which should be accepted without any reservation) was that he had not seen and was not aware of the contents of the Charge before 2 April 2024, and that he first saw, and became aware of the contents of the Jemmeson Fisher email of 31 May 2018 in June 2024, and was not aware before this time that Jemmeson Fisher were aware that there were still some PPSR interests registered against Danc as at 31 May 2018 and had discussions with the Folleys’ solicitor that the Macquarie Bank interests would be discharged on settlement.” (Footnotes omitted)

353. This submission is clearly connected to Issue 13.

354. Secondly, the Hockeys breached cl 3.2(g) of the Agreement, which required them (as a condition precedent to Completion) to deliver an executed release or undertaking that any relevant registration on the Personal Properties and Securities Register (“PPSR”) would be removed or transferred to the vendors on or after Completion. The plaintiffs submitted:

“[t]he obligation was absolute – there was no element of best endeavours involved (contrary to the submission in VSS [15]) – and the Hockeys simply did not discharge that obligation. They did not deliver any such executed release or undertaking. That the Hockeys may have authorised Macquarie [Bank] to discharge the Charge (which authority apparently was not acted upon by Macquarie [Bank]) does not change the fact that they did not deliver an executed release or undertaking as required by clause 3.2(g).” [13]

355. This submission is clearly connected to Issue 12.

356. Thirdly, the defendants’ submission that the Hockeys took all steps open to them to cause the Charge to be removed by Macquarie Bank is not supported by the evidence. Rather, the plaintiffs submitted:

“there is no evidence of any steps being taken by the Hockeys or their solicitor to have the Charge removed (after their solicitor was reminded on both 31 May and 6 June 2018 that a PPSR security in favour of Macquarie Bank was still registered against Danc) apart from the email sent on 6 June 2018. There is no evidence of any follow up to this email or further request from the Hockeys to Macquarie Bank to remove the Charge or provide a Statement of Verification as requested.”

357. This submission is clearly connected to Issue 12.

358. Fourthly, the defendants’ submission with respect to the construction of cl 3.3 of the Agreement, being the clause concerning waiver of the conditions precedent, is at odds with the plain and clear words of that clause. The plaintiffs submitted:

“[83] … The first sentence of the clause provides that “the Conditions Precedent may only be waived if the Purchaser agrees to waive them in writing or proceeds to Completion”. This means that there are only two methods by which the Conditions may be waived, namely if the Purchaser agrees in writing to waive them or proceeds to Completion or, in other words, if neither of those things occur then a waiver cannot occur. However, these words do not mean that if the Purchaser proceeds to Completion then the Purchaser has necessarily and automatically waived (all of) the Conditions Precedent. This would involve an uncommercial and capricious construction of the clause, contrary to the principles of construction of commercial contracts summarised above, because it would mean that, by proceeding to Completion, the Purchaser would automatically be waiving all of the Conditions Precedent.

[84] That this result cannot have been the intention of the parties, and would be likely to lead to a capricious outcome can be demonstrated by the following matters. The various Conditions Precedent set out in clause 3.2 include several which are only capable of being satisfied by, or relate to matters which are solely within the knowledge of, the Vendors. One of these is the condition in clause 3.2(i) that no material adverse change has occurred in relation to the Business and Danc. Another is clause 3.2(a) itself requiring all loans to the Company to be fully satisfied.

[85] If a Vendor had, contrary to cl 3.2(a) and (3.4(a), not ensured that a loan to Danc (not disclosed to the Purchaser) was paid out by Completion, and had not notified the Purchaser of this circumstance pursuant to cl 3.4(b), then it cannot have been the intention of the parties that, merely by proceeding to Completion, the Purchaser must be taken to have waived insistence on compliance by the Vendor with its obligation to fully discharge all loans to Danc. In the absence of knowledge that a loan to Danc had not been discharged, and therefore being ignorant of the risks involved, no rational purchaser would assume that merely by proceeding to Completion, it was waiving its right to insist that all loans to Danc had been fully satisfied and discharged.” [14]

359. This submission is clearly connected to Issue 13.

360. Fifthly, again with respect to the construction of cl 3.3 of the Agreement, the plaintiffs submitted:

“… post-Completion conduct can be relevant to the question of waiver, as it can go to the issue of whether the Purchaser had elected or intended to waive compliance with a particular Condition Precedent. In any event, the post Completion conduct of the Folleys and their solicitor is inconsistent with any waiver. Having been assured that Macquarie [Bank] would be discharged on settlement, and drawn to the attention of the Vendors’ solicitor that a PPSR registration in favour of Macquarie Bank had not been discharged, the Folleys (through their solicitor) were entitled to assume that the registration had been withdrawn. Their conduct in this regard did not amount to any waiver.”

361. Again, this submission is clearly connected to Issue 13.

362. Sixthly, it cannot be said (as was submitted by the defendants) that a breach of warranty under cl 2.2 of the Agreement [15] by the Hockeys (by failing to ensure that the Charge had been removed) could only be a “technical” one which resulted in no loss at all to the Folleys. The plaintiffs submitted that the counterfactual scenario provided by the defendants (that is, what would have happened had the Charge, in fact, been removed on or around the time of Completion), was flawed for the following reason:

“[87] … it assumes (without any proper basis) that if the Charge had been removed at Completion then Macquarie [Bank] would have automatically fixed the “gap” in its security position (presumably by insisting that the Folleys provide a fresh charge over the assets of Danc). There is no basis for this assumption because it involves speculation as to what would have occurred in a hypothetical scenario (without any evidence from Macquarie as to what it would have done) and, tellingly, is contrary to what actually occurred in reality.

[88] Under the Folleys’ Finance Agreement, Macquarie [Bank] required the Folleys to provide various personal guarantees and a registered mortgage over their residential property in Turramurra and could have, but did not, insist on them providing a registered first ranking security over the assets of Danc: T89.20-35; 93.45-48; 148.28-32. Therefore it cannot simply be assumed or inferred that if the Charge had been removed at Completion then it is certain that Macquarie would have insisted that Danc and the Folleys provide a substitute charge over the assets in Danc in its place”

363. This submission is clearly connected to Issue 16(b).

364. Seventhly, in response to the defendants’ submission that, to the extent that the Folleys claim that Macquarie Bank should have done something different, including by discharging the Charge and registering a new one, that cannot be sheeted home to the Hockeys. Nor can the appointment of receivers truly be attributed to the Hockeys. The plaintiffs submitted:

“[89] … the Folleys contend that it was the Hockeys (not necessarily Macquarie) which should have done something different, namely to comply with their obligations under clause 3.2 and the Vendor Warranties by insisting and demanding that Macquarie [Bank] discharge the Charge prior to Completion, and thereby perfect their Warranty that the shares in Danc being sold were free from any security interest. Further, it cannot be argued that the appointment of receivers to Danc cannot be attributed to the Hockeys, in circumstances where that appointment was made in reliance on a Charge which had not been removed (contrary to the warranty by the Hockeys that it had been removed) and the existence of which, and failure to have it removed, had not been disclosed to the Folleys.” [16]

365. This submission is clearly connected to Issue 16.

366. Eighthly, contrary to the defendants’ submission, although it is not pleaded, that the Folleys effectively seek rescission of the Agreement pursuant to cl 3.5 of the Agreement, the plaintiffs submitted that:

“… the submission at FOS [52] was not that the Folleys were entitled to rescission, but rather that, given the failure to satisfy the Conditions Precedent, the SSA terminated (not rescinded) in accordance with its own terms.”

367. Lastly, contrary to the defendants’ submission that the right to rescind will be lost when restitutio in integrum is impossible (citing Chint Australasia Pty Ltd v Cosmoluce Pty Ltd [2008] NSWSC 635 (“Chint”) at [132] (per Einstein J)) and that it is impossible for the Court to achieve restitutio in integrum between the parties now, the plaintiffs submitted that:

“[91] … contrary to VSS [29], Chint does not stand for the proposition that the right to rescind (in equity) will be lost when restitutio in integrum is impossible. Rather, it articulates the principle summarised above that, in equity, the availability of rescission depends on the ability of the Court to make orders for restitution which effect practical justice between the parties (where it may not be possible to achieve complete restitutio in integrum).

[92] In any event, contrary to VSS [30], it would not be impossible for the Court, in equity, to achieve restitutio in integrum now. This is because, contrary to VVS [26], the Folleys do not seek rescission of the entirety of the SSA. Instead, the Folleys only seek rescission of part of the SSA, namely the Vendor Finance Provisions (being cl 6.6(e) of the SSA). Rescission of the whole of (but only) cl 6.6(e) of the SSA would effect practical justice between the parties because it would relieve the Folleys of their obligations to pay the Vendor Finance to the Hockeys but would not otherwise interfere with the status quo. This would be consistent with the principle that, in equity, the availability of rescission depends on the ability of the Court to make orders which effect practical justice between the parties.” (Footnotes omitted) [17]

368. This submission is clearly connected to Issue 16(a).

Issue 12

Submissions: Issue 12

369. In relation to Issue 12, in summary, the plaintiffs made the following particular submissions:

370. The Hockeys failed to comply with cll 3.2(a) and 3.2(g) of the Agreement. There was no dispute that the Charge held by Macquarie Bank over the assets of Danc (given by Danc to Macquarie Bank as security for a loan made by Macquarie Bank to Danc) was not discharged before or at Completion. While the loan amount may have been paid out on Completion, this did not comply with the condition precedent at cl 3.2(a) that required all loans to be fully satisfied and discharged, as where there was a Charge over the assets of Danc, the loan cannot be said to have been fully discharged.

371. The Hockeys did not, prior to or at Completion, deliver “an executed release or undertaking” as required by cl 3.2(g). The plaintiffs submitted that the word ‘or’ in cl 3.2(g) was disjunctive, and the condition in that clause could have been satisfied in either of two ways:

(a) by providing a release, or (b) by providing an undertaking that any relevant registration on the PPSR would be removed on or after Completion.

3. The executed discharge that the vendors provided to Macquarie Bank in respect of the Charge was not an executed release, and the provision of a discharge request by the vendors to Macquarie Bank did not amount to an undertaking to the plaintiffs that the vendors would ensure that any registration on the PPSR register would be removed on or after Completion. If the plaintiffs had received an undertaking in those terms, the follow up communication to the vendors solicitors would have expressly referred to the undertaking.

4. In relation to Issue 12, in summary, the defendants made the following submissions:

5. There is no factual basis on which to find that the Hockeys breached the conditions precedent under cl 3.2 of the Agreement. In this respect:

(a) the Macquarie Bank loan facility was paid out in full upon settlement; and (b) on 11 May 2018, the Hockeys provided to Macquarie Bank an executed discharge authority in respect of the Charge.

2. Furthermore, Macquarie Bank acknowledged receipt of the discharge authority and failed to identify that anything else was required to facilitate the removal of the Charge.
3. The Hockeys took all steps open to them to facilitate that removal such that any failure of Macquarie Bank cannot be sheeted home to the Hockeys.

Consideration: Issue 12

371. In considering whether the Hockeys failed to comply with cll 3.2(a) and 3.2(g) of the Agreement, it is important to keep in mind the actual obligations imparted on the Hockeys pursuant to those specific clauses, as well as cl 3 more broadly.

372. I have earlier referred to those provisions of cl 3 but return to them briefly now, by way of emphasis.

373. Clause 3.1 of the Agreement reads as follows:

“3.1 Conditions Precedent to Completion

The obligations of the Vendors and the Purchaser to complete the sale and purchase of the Shares are not binding unless the Conditions Precedent set out in clause 3.2 below are satisfied or waived under clause 3.3.”

374. Clauses 3.2(a) and 3.2(g) of the Agreement reads as follows:

“3.2. Conditions Precedent

Completion is subject to and conditional upon:

(a) all loans to the Company being fully satisfied and discharged; and

…

(g) the delivery of an executed release or undertaking that any relevant registration on the PPS Register will be removed or transferred to the Vendors on or after Completion; and …”

375. It was submitted by counsel for the plaintiffs, that cl 3.2(g) of the Agreement should read “the Purchasers” rather than “the Vendors”, otherwise the clause would not make any sense. I accept that submission.

376. The defined terms which appear in cll 3.2(a) and 3.2(g) are defined in cl 1.1 of the Agreement, as follows:

“Completion means completion of the Vendors’ sale and Purchaser’s purchase of the Shares in accordance with clause 6 and the terms of this Agreement.

Company means Danc Pty Limited ACN 079 357 869.

Conditions Precedent means the condition precedent to Completion as specified in clause 3.

PPSA means the Personal Property Securities Act 2009 (Cth).

PPS Register means the “register” as defined in the PPSA.”

377. Noting that I will come to the issue of waiver (and whether the Folleys waived compliance with cll 3.2(a) and 3.2(g) of the Agreement) in answer to Issue 13, the only relevant question for the purpose of Issue 12 is whether the Hockeys satisfied the conditions precedent set out at cll 3.2(a) and 3.2(g) of the Agreement.

378. Also relevant to this question is cl 3.4 of the Agreement, which reads as follows:

“3.4. Obligation to satisfy Conditions Precedent

The Vendors must:

(a) use their best endeavours to ensure that the Conditions Precedent are satisfied including procuring performance by a third party; and

(b) promptly notify the Purchaser of any circumstances which may result in a Condition Precedent not being satisfied in accordance with its terms.”

Clause 3.2(a) – satisfaction and discharge of all loans

379. Clause 3.2(a) of the Agreement notes that Completion is subject to and conditional upon all loans to the Company being fully satisfied and discharged.

380. On the defendants' evidence, upon settlement, a portion of the purchase price paid by the Folleys to the Hockeys was disbursed to Macquarie Bank in order to discharge the business loan which was taken out in or around February 2000 ("the Business Loan").

381. The solicitor for the Hockeys also referred to the fact of the Business Loan having been satisfied in an email to Macquarie Bank dated 6 June 2018. In this email, Mr Richardson noted:

“We note that the debt was repaid on settlement and should be pleased if you would arrange for removal of the security interest and provide us with a Statement of Verification.”

382. The plaintiffs did not dispute this evidence that the Business Loan was, in fact, repaid, and in the absence of any evidence to the contrary, I accept that the Business Loan was paid out in full on Completion. I also note, in this respect, that the Business Loan was the only loan which the plaintiffs contended was not fully satisfied and discharged pursuant to cl 3.2(a) of the Agreement.

383. I do not agree with the plaintiffs’ submission which was to the effect that the Hockeys breached cl 3.2(a) of the Agreement by reason of the fact that the Charge was not discharged on Completion. As submitted by the defendants, cl 3.2(a) refers to loans, not the security for loans. In this sense, the plaintiffs erroneously regarded the Charge as a loan, when it is merely the security provided pursuant to a loan.

384. This construction, that cl 3.2(a) of the Agreement relates only to the satisfaction and discharge of a loan rather than the satisfaction and discharge of the security provided pursuant to a loan, is supported by the language used in cl 3.2(a). The clause specifically refers to “all loans to the Company being fully satisfied and discharged”. The clause does not refer to the security provided pursuant to a loan being satisfied and discharged, and, in any event, such an obligation would be nonsensical, given that a security interest is not something which can be “fully satisfied”. Rather, the words “fully satisfied and discharged” have a clear and well understood meaning when in reference to a loan, as such language is often used in reference to the elimination of a debt.

385. This construction is also supported by the fact that cl 3.2(g) of the Agreement already contains an obligation relating to the release or removal of registered security interests. As such, it does not make sense to construe cl 3.2(a) in a way that would repeat those obligations with respect to discharging security interests. Clearly, the subject matter of security interests was intended to be dealt with separately, by cl 3.2(g).

386. Furthermore, the terms “Encumbrance” and “Security Interest” were defined terms within the Agreement, and are defined as follows:

“Encumbrance means in respect of the Sale Shares and the Company, any mortgage, charge (whether fixed, floating or both fixed and floating), pledge, lien, title retention or conditional sale agreement, hire or hire purchase agreement, lease or agreement to lease, option, right or pre-emption or total restriction as to sale or disposition, restriction as to transfer, use or possession, easement adverse equity, subordination to any right of any other person and any other encumbrance or Security Interest of any kind.

Security Interest means any third party interest or encumbrance of any nature whatsoever including (without limitation):

(a) a security interest as defined in Section 12 of the Personal Property Securities Act 2009 (Cth);

(b) a mortgage, charge, pledge, lien, hypothecation or title retention arrangement;

(c) a right of set-off or right to withhold payment of a deposit or other money;

(d) a right of any person to purchase, occupy or use an asset (including under an option, agreement to purchase, licence, lease, or hire purchase);

(e) a trust or other third party interest; and

(f) an agreement to create any of the above or to allow any of them to exist”.

387. Evidently, both definitions refer to a “charge”, being the type of security interest which the plaintiffs contend ought to have been “satisfied and discharged” pursuant to cl 3.2(a). Hence, if cl 3.2(a) was intended to relate to the satisfaction and discharge of certain encumbrances or other security interests (noting, as I have mentioned, that the “satisfaction” of an encumbrance or security interest is nonsensical), then cl 3.2(a) would have referred specifically to those terms as defined, as is the case elsewhere in the Agreement where an obligation relates to an “Encumbrance” or “Security Interest”.

388. Hence, in my view, the proper construction of cl 3.2(a) is that contended for by the defendants; that cl 3.2(a) simply required that any loans to the Company be paid off in full. This construction is supported by the ordinary words of that clause, which refers only to “loans”, as well as the context of the Agreement as a whole, which supports the conclusion that the parties could not have intended cl 3.2(a) to cover the discharge of encumbrances or security interests given how those terms are defined and used elsewhere in the Agreement.

389. In the event, I find that the Hockeys did satisfy cl 3.2(a) of the Agreement, as they repaid the Business Loan in full on Completion, in accordance with their obligation to do so pursuant to that clause.

Clause 3.2(g) – release or undertaking relating to PPSR registrations

390. Clause 3.2(g) of the Agreement notes that Completion is subject to and conditional upon the delivery of an executed release or undertaking that any relevant registration on the PPSR will be removed or transferred to the vendors on or after Completion.

391. There was no dispute between the parties that following Completion, there remained a registered security interest in favour of Macquarie Bank against Danc on the PPSR (registration no. 20111213157), which was the security interest provided for the Business Loan (“the Registered Security Interest”). [18]

392. Given there is no dispute that the Registered Security Interest was not removed from the PPSR on Completion, the dispute between the parties as to whether cl 3.2(g) of the Agreement was satisfied, is a dispute as to the substance of the obligations conferred by that clause.

393. The plaintiffs submitted that the Hockeys were required to actually deliver an executed release or undertaking to the Folleys, whereas the defendants submitted that the obligation was satisfied by reason of the Hockeys having taken all steps open to them to facilitate the removal of the PPSR registration. However, I note that in oral submissions the defendants also submitted that the delivery by them of the executed discharge authority satisfied the requirement to deliver an “executed release”.

394. I agree with the submission of the plaintiffs, that cl 3.2(g) of the Agreement, while poorly drafted, should be taken to mean that the condition in this clause could be satisfied by one of two ways, namely:

395. by “the delivery of an executed release”; or

396. by an “undertaking that any relevant registration on the PPS Register will be removed or transferred to the Vendors on or after Completion”.

397. While it is not entirely clear, the meaning of “the delivery of an executed release” can, in part, be ascertained by reference to cl 6.5(b)(x) of the Agreement, which is as follows:

“6.5 Documents the Vendors must deliver to Purchaser

On Completion the Vendors must:

…

(b) Deliver to the Purchaser;

…

(x) all releases in relation any Security Interest recorded on the Personal Property Securities Register ('PPSR') in relation to the Company, duly executed by the grantee to fully release the Security Interest and evidence of recording of that release on the PPSR;”

396. This clause helps to clarify that the release required to be delivered, under cl 3.2(g) of the Agreement, was a release in relation to any “Security Interest” recorded on the PPSR, which needed to be duly executed by the grantee (in this case, Macquarie Bank).

397. Hence, I do not accept the defendants’ submission that the Hockeys satisfied cl 3.2(g) of the Agreement by the delivery of the executed discharge authority. The discharge authority was a form which was signed by the Hockeys and Danc, authorising Macquarie Bank to fully discharge certain loan facilities. It was not a release (signed by Macquarie Bank) in relation to the Registered Security Interest.

398. I will now turn to the question of whether the obligation at cl 3.2(g) of the Agreement was satisfied by the Hockeys having taken all steps open to them to facilitate the removal of the Registered Security Interest.

399. While neither party focused on this aspect of the Agreement, in my view, cl 3.4 is integral to the determination of this issue. Pursuant to cl 3.4(a) of the Agreement, the Hockeys were required to use their best endeavours to ensure the condition precedent in cl 3.2(g) was satisfied, which included procuring performance by a third party.

400. Hence, the Hockeys had an obligation to procure that Macquarie Bank (as a third party) delivered an executed release in relation to the Registered Security Interest.

401. It was not enough that the Hockeys executed a discharge authority and gave this to Macquarie Bank, with no further follow up to obtain the executed release from Macquarie Bank. The obligation conferred on the Hockeys by cl 3.2(g) of the Agreement was to deliver to the Folleys either an executed release, or an undertaking (not an executed discharge authority).

402. In any event, nowhere on the executed discharge authority, that was relied upon by the defendants, was there any reference to the Charge or the Registered Security Interest. In fact, at section 2 of that form there was a question which stated:

“Other security to be discharged (Company Charge, Shares, Business Assets, etc)”.

The form does not list any security to be discharged, and the only reference under the heading “Details of security to be discharged” is to a “General Security Agreement – Danc Pty Ltd t/as Ray White Bateau Bay”. As such, I cannot be satisfied on the basis of this evidence that the executed discharge authority was, in any way, connected or related to the discharge of the Charge or release of the Registered Security Interest. This document, on its face, is not an authority for Macquarie Bank to discharge the Charge or release the Registered Security Interest.

403. In the event, I find that the Hockeys did not satisfy cl 3.2(g) of the Agreement.

404. Hence, in the answer to Issue 12, I find that the Hockeys did not fail to comply with cl 3.2(a) of the Agreement, but did fail to comply with cl 3.2(g) of the Agreement.

Issue 13

Submissions: Issue 13

405. In relation to Issue 13, in summary, the plaintiffs made the following submissions:

406. There is no evidence, nor do the Hockeys contend, that the Folleys agreed to waive any of the conditions precedent in writing. As a result, given the binary terms of cl 3.3, the only method remaining by which the Folleys could have waived the conditions precedent could have been by proceeding to Completion, and only then if the construction of that clause, as contended for by the Hockeys, was accepted.

407. The unreality and impracticality from a commercial and commonsense perspective of the construction of cl 3.3 contended for by the Hockeys, namely, that the mere act of proceeding to Completion had the effect of relieving the Hockeys from any (further) compliance with any of the conditions precedent given by the following example. If it be assumed that both before and after Completion, the purchaser under the Agreement, Tin-Tagel, had expressly requested and insisted upon compliance by the vendors with a particular condition precedent (say cl 3.2(c), which involved the removal of Danc as a trustee of a trust), but the vendors had not complied with that condition or request then, if the construction of cl 3.3 propounded by the Hockeys was accepted, the purchaser, in this example, would be found to have waived compliance with that particular condition precedent merely by proceeding to Completion (notwithstanding an express insistence both before and after Completion that the condition be satisfied). Similarly, contrary to cl 3.2(a) of the Agreement, if the vendors did not disclose to Tin-Tagel that a loan to Danc was not paid out on Completion, it could not have been the intention of the parties that by merely proceeding to Completion, Tin-Tagel must be taken to have waived insistence on compliance by the vendors with its obligations to fully discharge all loans to Danc.

408. That approach would involve rendering otiose the rights granted to Tin-Tagel under cl 3.5 of the Agreement to terminate the Agreement and lead to capricious outcomes. This cannot have been the intention of the parties to the Agreement as it lacks commercial commonsense and is inconsistent with a sensible and practical construction of the Agreement as a whole.

409. If the construction of cl 3.3, propounded by the Folleys, namely, that merely by proceeding to Completion, and nothing more, did not involve or amount to a complete waiver of all conditions precedent by Tin-Tagel is accepted, then there would be no basis to find that the Folleys waived compliance under cl 3.3.

410. The conduct by the Folleys (through their solicitor) just before and immediately after Completion (ie sending emails requesting the PPSR registered interests be removed) was completely inconsistent with any waiver of the conditions precedent contained in cl 3.2(a) and 3.2(g).

411. The Folleys did not have any knowledge of the existence of the Charge or the failure of the Hockeys to ensure that the Charge had been removed until April 2024 when the receivers were appointed to Danc. The evidence also does not demonstrate that the solicitor for the Folleys was aware of the existence of the Charge or that it had not been removed as at Completion. All the Folleys solicitor knew was that the Hockeys had indicated all relevant PPSR registrations would be removed prior to Completion, and as at the day before Completion, some PPSR registrations had not been removed.

Consideration: Issue 13

407. In my view, the proper construction of cl 3.3 is that contended for by the defendants, for reasons which I will turn to below.

408. I do not agree with the submission of the plaintiffs, that this construction leads to capricious, unreasonable, inconvenient or unjust consequences. Rather, as correctly submitted by the defendants, the contrary is true.

409. First, the plaintiffs’ contention that cl 3.3 provided the purchaser with the option to waive the conditions precedent on the basis that the word “may” in that clause is permissive (and not mandatory), ignores the full phrasing and context in which the word “may” appears within that clause. As submitted by the defendants, in cl 3.3 the word “may” appears directly before the word “only”, and when appreciated in that context, the words “may only” are restrictive (not permissive), indicating that it is only in the circumstances specified (in what follows in cl 3.3) that the conditions precedent can be waived.

410. Secondly, on the plaintiffs’ construction of cl 3.3, what is essentially contended is that the word “or” in cl 3.3 should have a conjunctive effect, so as to require that a waiver is only valid where the purchaser agrees to the waiver in writing and proceeds to completion. The plaintiffs contend that the act of the purchaser in proceeding to Completion is not, in and of itself, enough to waive compliance with the conditions set out at cl 3.2 of the Agreement.

411. I do not agree with this submission of the plaintiffs in this respect. The starting point in any consideration of the effect of “and” and “or” is that they are to be given their usual meaning: Minister for Immigration and Border Protection v CQW17 (2018) 264 FCR 249; (2018) 162 ALD 427; [2018] FCAFC 110 at [27], [36] (per McKerracher, Murphy and Davies JJ). While the courts have been minded to displace this general principle, where the context supports the conclusion that the cumulative or disjunctive effect of the provision should not be dictated by the presence of the word in question, for the reasons which follow, that is not an approach which should be adopted in this matter. Rather, the word “or”, within cl 3.3, should be given its usual meaning and interpreted disjunctively in order to differentiate between two ways in which the Folleys could have waived compliance with the conditions set out at cl 3.2 of the Agreement:

412. by agreeing to waive them in writing; or

413. by proceeding to completion.

414. Thirdly, I agree with the submission of the defendants, that the Court should strive to give cl 3.3 an interpretation in which all parts of the clause are given some meaning and effect. If proceeding to completion would only waive the conditions precedent where a purchaser opted to so waive them (as the plaintiffs contend), there would be no need for the second option, “or proceeds to Completion”, to be included in cl 3.3. A deliberate choice was made to include the words “or proceeds to Completion”, and the Court should, therefore, strive to give those words some meaning and effect.

“A term which expresses a promise that an event will occur (or will not occur) or an undertaking as to the truth of a present (or past) fact is treated as embodying a contractual obligation, the breach of which gives rise to a claim for damages. Such a term is distinguishable from one which qualifies the obligation of a party by providing for a contingency. For example, if a contract for the sale of goods provides that the obligation of the parties to perform is subject to the issue of an export licence, but neither party undertakes to obtain the licence, the issue of a licence is merely a contingency on which the obligation of the parties to perform depends. The obvious distinction between a term stating an undertaking and a term which merely provides for a contingency is that the latter does not provide a basis for a damages claim if the contingency is not fulfilled.

…

Where the occurrence of an event is a condition precedent, the existence of the contract, or the obligation of one party (or both parties) to perform is subject to the prior occurrence of a specified event.” (footnotes omitted).

415. While neither party expressly gave much attention to the classification of a promise versus a contingency, the words of cl 3.2 of the Agreement that “Completion is subject to and conditional upon” each of the items listed at cll 3.2(a) to (k), makes it clear that these items are contingencies rather than promises. That is, events which are not certain to occur, but which must occur before performance under the Agreement becomes due. Hence, by their very nature, the conditions precedent within cl 3.2 do not provide a basis for damages if not fulfilled. Rather, the only ‘remedy’ available in the event of non-fulfillment, is that the purchaser is not obligated to perform the contract (or in other words, may validly terminate the contract).

416. Hence, the purpose of clause 3 was clearly to give the Folleys the option to terminate the Agreement and, therefore, not proceed with the purchase of Danc if any of the conditions precedent, listed at cl 3.2, were not satisfied by the relevant completion date. This purpose supports the construction contended for by the defendants, as by the very fact of proceeding with the purchase of Danc rather than choosing to terminate the Agreement, the only logical explanation is that the Folleys must have been waiving the requirement to satisfy any unfulfilled conditions.

417. On this point, I note that counsel for the plaintiffs made the following oral submission:

“We accept that cl 3.3 provides that there are only two ways that the conditions precedent can be waived. Firstly, by the purchaser agreeing to waive them; that didn't happen in this case. Secondly, by proceeding to completion. But we do not accept that simply by proceeding to completion, the purchaser can be taken to have automatically waived compliance with all of the conditions precedents.

So, if I can ask your Honour to look at the clause to explain what I mean by that. What in effect my learned friend is - his construction would have your Honour find that the sentence should be read in this way, "The conditions precedent are for the benefit of the purchaser and may only be waived if the purchaser agrees to waive them in writing or proceeds to completion". The Hockeys' construction would have your Honour read that sentence so that it reads, "The conditions precedent will automatically be waived if the purchaser proceeds to completion", so that if you go to complete completion, you're waiving all of your rights and discharging the vendor's obligations to comply with those conditions.”

418. This submission suggests that the Folleys had no other option but to proceed to Completion on 1 June 2018, and by virtue of proceeding to Completion, the Folleys were forced to automatically waive their rights in relation to cl 3.2.

419. However, the notion that the Folleys had no other option but to proceed to Completion on 1 June 2018 is plainly incorrect. By virtue of cl 3.2, the Folleys were not obligated to complete the purchase of Danc until all of the conditions listed in cl 3.2 were satisfied. Therefore, the Folleys were not obligated to proceed to Completion on 1 June 2018, by reason of the fact that cl 3.2(g) had not been satisfied. The Folleys had a number of other options available to them; they could have agreed with the Hockeys on another “Completion Date” to allow time for the unsatisfied conditions to be fulfilled, [20] or they could have terminated the Agreement in accordance with cl 3.5. However, in the face of these options, the Folleys chose to proceed to Completion, and in doing so, waived compliance with any unsatisfied conditions precedent.

420. Hence, on a proper construction of cl 3.3, the conditions precedent were waived by Tin-Tagel as a matter of course arising from the Agreement, and not at the optional election of Tin-Tagel. Importantly, this is not to say that the Folleys have no recourse whatsoever in the event that they proceeded to Completion and the Hockeys had failed to disclose or had actively concealed the fact of a condition precedent not being satisfied. However, the recourse available to the Folleys would simply be pursuant to some other breach of contract claim, such as breach of cl 3.4(b) or breach of a sch 4 warranty. In this sense, the capricious outcomes which the plaintiffs vehemently relied on, did not come to pass.

421. Lastly, on the point of construction, it is important to keep in mind the wider context, and market, in which cl 3.2 appears. It may be inferred that cl 3.2 was the subject of commercial negotiations following a process of due diligence completed by the Folleys. [21] In the context of the sale of a business, the “conditions precedent” in a share sale or business sale agreement are often heavily negotiated. This is because the more conditions that exist, the less certainty a vendor has that the transaction will complete. Further, the conditions precedent generally come about as a result of due diligence findings. For example, as part of due diligence the buyer completes a PPSR search; the search identifies that a registered security interest over the target company exists; as a result of that due diligence finding, the purchaser requires that the registered security interest be removed as a condition to proceeding with the purchase of the business. An understanding of these circumstances further underscores that the proper construction of cl 3.3 of the Agreement is that which was contended by the defendants, as the construction contended for by the plaintiffs is at odds with the purpose and operation of a ‘condition precedent’ within a share sale or business sale agreement.

“Q. You’ve answered yes to my earlier questions about what your understanding of the position of the company you were buying was, that it was financed by Macquarie and it had a charge, but did somebody tell you in March 2018 the reason why you weren’t being asked to sign a new charge is because Macquarie already had a charge over the assets of that company?

A. No.

Q. Did it occur to you at the time you signed these transactions that Macquarie hadn’t asked you for a charge?

A. No.

Q. On the priority agreement, that is, item number 3, do you remember what that priority agreement was for?

A. No.

Q. I’ll just see if this reminds you.

A. Sure.

Q. Mr and Mrs Hockey obtained a charge over the assets of Danc--

A. I remember that, yes.

Q. --as security for their vendor finance?

A. Yes.

Q. They had to sit as second in priority to Macquarie Bank?

A. Yes.

Q. So by the priority agreement that you were being asked to sign recorded that Mr and Mrs Hockey had a charge over the assets of Danc behind Macquarie?

A. Yes.

Q. Do you understood when you were being asked to sign the priority agreement that Macquarie had a charge over the assets of Danc ahead of the Hockeys?

A. Yes.”

427. The last two answers given by Mr Folley in the above extracted exchange can only be taken as an admission by Mr Folley, that when he signed the priority agreement prior to 1 June 2018, [22] he was aware that Macquarie Bank had a charge over the assets of Danc.

428. However, so that there can be no doubt as to the Folleys knowledge or awareness of the PPSR registration, I also accept the defendants’ submission that, as a matter of law, the Folleys are fixed with the knowledge of their solicitors, being their agents.

429. There is a presumption at law that the knowledge of an agent (for example, a solicitor) is imputed or attributed to the principal (for example, the client). As Hammerschlag J in Angelina Spina v Permanent Custodians Ltd [2008] NSWSC 561 at [106] notes:

"The law may impute to a principal knowledge relating to the subject matter of the agency which the agent acquires while acting within the scope of his authority: Reynolds, Bowstead and Reynolds on Agency, 18th ed (2006) Sweet & Maxwell at [8-207]. Where the agent is authorised to commit the principal to a transaction, and the agent's state of mind is relevant to that transaction, the principal will be bound by the agent's knowledge: Permanent Trustee Australia Co Ltd v FAI General Insurance Co Ltd (2001) 50 NSWLR 679 at 697 (reversed on other grounds: see Permanent Trustee Australia Ltd v FAI General Insurance Co Ltd (in liq) (2003) 214 CLR 514 at 548). There may be circumstances where facts received by an agent otherwise than as agent may nevertheless be imputed to the principal, such as where the principal had a duty to make further investigation, but where the principal had no such duty this will not be the case: Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at [127]; Bowstead and Reynolds at [8-207]".

430. This presumption serves a purpose in protecting third parties who bona fide deal with an agent. Hence, the Hockeys were able to presume that the Folleys’ solicitor (as the Folleys’ agent) would fulfill their duty and report all facts that affected the Folleys’ interests. Where the presumption operates, a principal cannot deny liability to a third party on the basis that the agent did not disclose relevant and material information pertaining to the dealing, and that had that disclosure been made, the principal would not have effected the dealing or at least would have done so on different terms: Tobin v Melrose [1951] SASR 139 at 146 (per Ligertwood J).

431. While there are limits on the operation of this presumption (for example, where the agent is under no legal duty to disclose the information, or where the third party knows that the agent will not disclose the information), I note that the plaintiffs did not point to any reason or evidence as to why the presumption should not apply.

432. The Folleys’ solicitor emailed the Hockeys’ solicitor on 31 May 2018 with a screenshot of their PPSR search result (which included PPSR registration no. 20111213157 held by Macquarie Bank) and noted that “Per our search of the PPS register this morning, we note the following interests are still registered against the company”.

433. Accordingly, as a result of the presumption that the Folleys are fixed with this knowledge, this evidence clearly demonstrates that the Folleys must have been aware of the PPSR registration when they decided to proceed to Completion on the following day, being 1 June 2018.

434. In the event, by virtue of proceeding with the purchase of the shares in Danc on 1 June 2018, I find that the Folleys did waive compliance with the conditions precedent in cl 3.2 which had not otherwise been fulfilled, namely, cl 3.2(g) of the Agreement.

435. I answer the question raised by issue 13 in the affirmative.

436. Before I turn to issue 14, for completeness, I will briefly address cl 3.4(b) of the Agreement, noting that a breach of this clause was pleaded within the 2FASOC. However, the question of whether or not the Hockeys properly complied with their obligations under cl 3.4(b) of the Agreement was not the subject of any further submissions by the plaintiffs and was not an issue set out in the ASOI prepared by the parties. Given the level of detail and specificity with which the parties prepared the ASOI and addressed each of the agreed issues at trial, the only logical conclusion is that the plaintiffs must have abandoned their claim in relation to cl 3.4(b).

437. In any event, the Court cannot now, in fairness, deal with this pleading given that the defendants have not had a chance to be heard in relation to it. In circumstances where the pleading was not pursued in submissions or evidence by the plaintiffs or attention being directed to it in the ASOI, the defendants were not on notice of and, therefore, made no submissions on the question of whether the defendants were in breach of cl 3.4(b) of the Agreement.

Issue 14

Submissions: Issue 14

440. In relation to issue 14, in summary, the plaintiffs made the following submissions:

441. The Folleys did not contend that the Agreement terminated on 1 June 2018 or on any date earlier than when the Folleys became aware of the breach of the conditions precedent by the Hockeys. As the Folleys only became aware of the breach of the conditions precedent in 2024, when they became aware of the existence of the Charge and that it had not been removed in 2018, the Folleys contended that the termination which followed by reason of the terms of cl 3.5 only came into effect in 2024.

442. The relevant words of cl 3.5 in this context are that “If the Conditions Precedent are not satisfied or waived under cl 3.3 on the Completion Date, then all rights and obligations ... shall terminate.” These words fix the time by which the conditions precedent were to be satisfied as the completion date, but they do not fix the date for termination as that date.

443. The plaintiffs agree with the defendants that the Agreement was voidable rather than void and that the Agreement was not terminated at or around the time of Completion. However, there can be no basis for the contention that the Folleys made an election to affirm the Agreement because they did not become aware of the continued existence of the Charge until 2024 and, therefore, were not aware of the breach of the conditions precedent and the breach of the warranties given by the vendors, as set out in sch 4 of the Agreement (“the vendor warranties”).

444. The principles in the case of Immer *(*No 145) Pty Ltd v Uniting Church in Australia Property Trust *(*NSW) (1993) 182 CLR 26; [1993] HCA 27 (per Brennan, Deane, Toohey, Gaudron and McHugh JJ) (“Immer”) are of substantial relevance here and the facts are analogous. In Immer it was held that there could not have been an election to exercise its right of rescission because Immer Pty Ltd lacked the requisite knowledge of the relevant circumstances. Similarly, in this proceeding the Folleys did not have knowledge of the relevant circumstances, namely, the breaches of the conditions precedent and the vendor warranties, until 2024, which would have enabled them to have made an election. On being made aware, in 2024, of the Hockeys breaches, the Folleys sought to invoke their right to terminate extant obligations under cl 3.5 of the Agreement.

445. In relation to issue 14, in summary, the defendants made the following submissions:

446. This issue only arises if the Court finds, firstly that the Hockeys failed to comply with the conditions precedent; and secondly, that the Folleys did not waive compliance with those conditions precedent under cl 3.3.

447. On a proper construction of cl 3.5, the Agreement did not terminate automatically. The Folleys are bound by their subsequent conduct which is only consistent with them having elected to affirm the contract.

Consideration: Issue 14

442. I agree with the submission of the defendants that issue 14 only arises if the Court finds, firstly that the Hockeys failed to comply with the conditions precedent, and secondly, that the Folleys did not waive compliance with those conditions precedent under cl 3.3 of the Agreement.

443. Hence, given the Court’s determination of Issues 12 and 13, Issue 14 does not require an answer beyond stating that the premise of the question, namely that the Agreement terminated, is incorrect.

444. If required to do so, I would accept the defendants’ contentions in this respect, and in particular:

445. Clause 3.5 made the Agreement voidable, rather than void. This was common ground.

446. The Agreement did not, by its terms, automatically terminate, but required the election of the Folleys. The Folleys did not elect to terminate the Agreement around the time of Completion.

447. For the reasons given by the defendants, the Folleys affirmed the Agreement.

Issue 15

Submissions: Issue 15

445. In relation to issue 15, in summary, the plaintiffs made the following submissions:

446. The Hockeys breached cl 9.1 of the Agreement, because the warranty given in cl 2.2 of Sch 4, that the shares in Danc were free of any “Security Interest” (as defined by the Agreement), was not true or correct and/or was misleading.

447. “Security Interest” was defined in cl 1.1 to include a “charge”, and as such, the Charge falls within this definition. Therefore, the warranty given at cl 2.2 of Sch 4 of the Agreement was not true or correct and/or was misleading because at all material times, between 2000 and 2024, the shares in Danc were subject to the Charge (being a “Security Interest”).

448. Counsel for the plaintiffs accepted that a company cannot own its own shares but submitted that the shares in Danc were, nonetheless, encumbered by the Charge, pursuant to the broad and inclusive definition of “mortgaged property” in the Charge. Hence, the submission of the plaintiffs was that, notwithstanding the common law, the Charge could extend to cover the shares in Danc because of the terms of that contract.

449. The effect of those broad terms of the Charge were such that the shares of Danc fell within the definition of “mortgaged property”, and therefore, cl 2.2 of Sch 4 of the Agreement was breached because the shares were encumbered by the Charge.

450. Furthermore, in closing oral submissions, counsel for the plaintiffs also advanced the submission that there was a breach of cl 2.1(a) of the Agreement. While that closing submission did not make it clear, it is apparent that the premise for that submission was the same as those advanced in relation to cl 9.1 and cl 2.2 of Sch 4 of the Agreement. Whilst attention was not given to the words “accrued or attached rights”, in that respect, it is tolerably clear that what counsel was contending was that the rights in the shares had been encumbered by the security interests in the Charge, and, accordingly, the clause had been breached. It follows that the resolution of the issues raised by cl 9.1 (and cl 2.2 of Sch 4) conclusively impact upon the resolution of this issue.

451. I have used the expression ‘tolerably clear’ because the plaintiffs’ pleadings, in this respect, are somewhat ambiguous, and no issue was formulated in the ASOI regarding this claim or contention. I, nonetheless, deal with the matter because, as I have observed above, the argument seems to be wholly coextensive with the primary argument in relation to cl 9.1 (and cl 2.2 of Sch 4).

452. In relation to Issue 15, in summary, the defendants made the following submissions:

453. The Folleys’ argument that the warranty in cl 2.2 of Sch 4 of the Agreement was breached, in circumstances where, at the time of Completion, Danc was not free of any security interests, by virtue of the Charge, was misdirected.

Consideration: Issue 15

449. The crux of the plaintiffs’ submission, in relation to issue 15, is that the warranty in cl 2.2 of Sch 4 was not true or correct and/or was misleading (in breach of cl 9.1 of the Agreement), because at all material times, between 2000 and 2024, the shares in Danc were the subject of the Charge, which, in the plaintiffs’ submission, falls within the definition of “security interest” under the Agreement. As I have earlier observed, the argument regarding cl 2.1 of the Agreement is more or less coextensive, at least so far as the central issue is concerned regarding Issue 15, which I will deal with below.

450. The defendants’ response to this argument in closing oral submissions was as follows:

“My friend submits it is beyond argument that there was a breach of 9.1 and the warranty in cl 2.2 of sch 4. This is where my friend's argument does fail for this reason; a company doesn't own its own shares, the shares are owned by somebody else. So if a company issues a charge over its assets it doesn't include its own shares. The shares are sold free of any encumbrance and no one had a charge over the shares. There's no breach of warranty. That's all I need to say about breach of warranty.”

451. Hence, the issue for determination, by this Court, is whether the Charge did in fact and in law, create a security interest over the shares in Danc. If the answer to that question is negative, then the plaintiffs claim for breach of cl 9.1 of the Agreement must fail, as there is no other evidence to suggest that the shares in Danc were, as at the date of the Agreement and as at Completion, other than free of any “Security Interests” (as that term is defined by the Agreement).

452. By way of emphasis, I will briefly return to the relevant provisions which form the ‘warranty regime’ within the Agreement and which are the subject of Issue 15.

453. Clauses 9.1 and 9.2 of the Agreement is as follows: [23]

**“**9.1 Warranties Generally

The Vendors warrants that as at the date of this Agreement and as at Completion the Vendors’ Warranties are true and correct and not misleading. Those documents disclosed to the Purchaser as referred to in Schedule 5 shall be deemed to have been fully disclosed to the Purchaser for the purpose of the Warranties and generally.

9.2 General Indemnity

The Vendors indemnify and shall keep indemnified the Purchaser and the Company against all Liabilities, Losses, Claims, Damages, costs and expenses of any kind and however arising:

a) which may be suffered by or brought against the Purchaser or the Company arising from any breach of the Warranties; and

b) arising from any fact, matter or event related to the Businesses or the Company, occurring prior to the date of Completion,

c) arising from any liabilities present, contingent or prospective (whether or not known by the Company at the date of this Agreement however excluding the amount of any such liability deducted from the Retention Amount pursuant to clause 7) of the Company arising from facts, matters or events occurring on or prior to the Completion Date including, without limitation; legal costs on a full indemnity basis;

to the extent that such Losses, Claims, Damages, costs and expenses do not exceed the Purchase Price.”

454. The only document referred to (and annexed to the Agreement) within cll 9.1 and 9.2, is Sch 5 (titled “Disclosure Materials”) of the Agreement, which is an Australian Securities and Investment Commission (“ASIC”) ‘current organisation extract’.

455. Clause 2.2 of Sch 4 of the Agreement is as follows: [24]

“The Vendors are the legal and beneficial owners of the Shares which are free of any Security Interests, and the Vendors have complete and unrestricted power and right to sell, assign and transfer the same to the Purchaser.”

456. Hence, the ‘warranty regime’ within the Agreement provides that, if any of the vendor warranties (being the warranties provided in Sch 4 of the Agreement) are not true and correct or are misleading, as at the date of the Agreement and Completion, then the vendors will be in breach of cl 9.1 of the Agreement. Pursuant to cl 9.2, if there is a breach of the vendor warranties, the vendors must indemnify Tin-Tagel for all “Liabilities, Losses, Claims, Damages, costs and expenses of any kind” (as those capitalised terms are defined in the Agreement), however arising from that breach.

457. The Charge provides that Danc grants, in favour of Macquarie Bank, a first “Charge” over the “Mortgaged Property”. Clauses 1, 2 and 3 of the Charge are as follows:

“1. Charge

The Company charges the Mortgaged Property with the payment of the Secured Moneys, in consideration of the bank:

(a) lending, advancing, paying or making available, or agreeing to lend, advance, pay or make available, moneys or financial accommodation which will form part of the Secured Moneys; or

(b) refraining from demanding or suing for payment of moneys which fall within the description of the Secured Moneys and are presently owing or payable by the Company to the Bank.

2. Mortgaged Property

The Mortgaged Property is the whole of the undertaking of the Company and all of its property, rights and other assets, whether owned at present or acquired in the future, including without limitation:

(a) its uncalled and called but unpaid capital and premiums on share capital including instalments thereon;

(b) the whole of the Company’s right title and interest in any Marketable Securities;

(c) the assets undertaking and goodwill of the Business;

(d) the Licence;

(e) the Intellectual Property;

(f) the right title and interest of the Company in any partnership or joint venture in which the Company is a partner or joint venturer and the Company’s right title and interest in the assets thereof and all profits and distributions arising therefrom.

References in this Charge to the Mortgaged Property include references to any part of that property.

3. Nature of Charge

(1) This Charge operates, subject to clauses 3(2) and 3(3) and 10(3) and 10(4) as:

(a) a fixed charge on all present and future:

(I) freehold and leasehold property, plant and machinery;

(ii) uncalled and called but unpaid capital;

(iii) goodwill;

(iv) all Marketable Securities, other securities, instruments (negotiable or otherwise) and documents of title at any time deposited with the Bank by the Company for any purpose;

(v) all book debts together with all books of account and other documents relating to the business transactions of the Company including without limitation, all records held by the Company in respect of management agreements under which the Company receives management fees in the course of the Company’s business;

(vi) all other personal property, including without limitation Intellectual Property, that is not disposed of in the ordinary course of the Company’s business;

(vii) all computer and word processing software and hardware;

(viii) all Licences:

(ix) (A) Book debts being debts due or to become due to the Company on account of or in connection with the business of the company whether entered in a book or not;

(B) the interest (if any) due or to become due in respect thereof;

(C) any chose in action or other rights comprised in or evidenced by (A) or (B) above, and

(b) subject to clauses 3(2), 10(3) and 10(4), a floating charge on the rest of the Mortgaged Property.

(2) The Bank may at any time, by notice in writing to the Company, convert the floating charge referred to in clause 3(1)(b) to a fixed charge in relation to any asset specified in the notice. This sub-clause shall not prevent the floating charge from becoming fixed as to any asset under any other provision of this Charge or by operation of law.

(3) Re-Conversion from Fixed into Floating Charge

The Bank may at any time by notice in writing to the Company convert the charge herein created from a fixed charge into a floating charge as regards any asset or assets specified in such notice and upon such notice being received by the Company this Charge as regards such specified asset or assets shall immediately become and operate as a floating charge subject to the provisions hereof and shall cease to be a fixed charge over such specified asset or assets”.

458. “Mortgaged Property” is defined in cl 38 of the Charge as having the meaning attributed to it in cl 2 of the Charge.

459. It is important to note from the outset, that I agree with the submission of the defendants that a company does not own its own shares. In fact, a company is prohibited from acquiring shares in itself pursuant to s 259A of the Corporations Act 2001 (Cth), subject to various limited exceptions.

460. I also find that the evidence before this Court proves that the shares in Danc were not owned by Danc. Rather, the shares in Danc were owned by the shareholders of Danc, being the first to fifth defendants. [25]

461. The words in cl 2 of the Charge, “whether owned at present or acquired in the future”, make it clear that the definition of “Mortgaged Property” in the Charge was intended to capture any property, rights or assets which are owned by Danc. While the clause does, as correctly submitted by the plaintiffs, include the words “including without limitation”, it can only be interpreted as including (without limitation) any property, rights and other assets which are owned at present or acquired in the future by Danc.

462. To construe this clause otherwise would mean that the definition of “Mortgaged Property” would be so wide as to include any property whatsoever, regardless of whether or not that property was actually owned by Danc. It would defy logic if a company could grant a charge over property which it does not own. A company would have no power or authority to do so. However, the proposition which the plaintiffs are asking this Court to accept, is that Danc was able to grant a Charge over property it did not own, being the shares in Danc, which were owned (both legally and beneficially) by the first to fifth defendants.

463. Furthermore, the plaintiffs relied on the following words in cl 2(a) of the Charge, “uncalled and called but unpaid capital and premiums on share capital including instalments thereon” and submitted that these words must be a reference to Danc’s own shares.

464. I do not agree with that submission. The terms “uncalled capital”, “called but unpaid capital” and “premiums on share capital” should be given their natural and ordinary meaning, in light of the Charge as a whole. None of these terms refer to the issued shares of Danc, and the submission by the plaintiffs, that they do, is rather perplexing. The argument advanced by the plaintiffs attempts to give the terms in cl 2(a) of the Charge a meaning which is completely at odds with the natural and ordinary meaning of those terms, although it is, no doubt, expressed in such florid terms because of the considerable difficulty facing the plaintiffs, in the light of the position that Danc did not, or could not, own its own shares.

465. Giving the terms their natural and ordinary meaning, clause 2(a) of the Charge refers to the capital (ie money or other assets) which Danc is entitled to, where it has issued shares at a premium or issued shares which, have not been paid for upfront but for which payment may be called upon by Danc.

“13. Powers of the Receiver

(1) In addition to all other powers conferred on him by law the Receiver may exercise any or all of the following powers, unless they are specifically excluded by the terms of his appointment:

…

(i) to call and get in uncalled or called but unpaid capital of the Company;”

467. In this context, the meaning of “uncalled or called but unpaid capital” is clearly a reference to money or other assets which Danc is entitled to call upon. Hence, those words should be given an analogous meaning when used in cl 2(a) of the Charge.

468. In the event, I find that Danc did not grant a security interest over its shares pursuant to the Charge, as the shares were never owned or acquired by Danc.

469. It must, therefore, follow that the Hockeys were not in breach of cl 9.1 of the Agreement as the warranty provided at cl 2.2 of Sch 4 was true and correct and not misleading.

470. I answer the question raised by Issue 15 in the negative.

Issue 16

471. The relief sought by the plaintiffs in relation to claim 4 was rescission of the Agreement, in the form of voiding or terminating the vendor finance provisions of the Agreement, or (in the alternative) damages for breach of the Agreement, in the form of breach of warranty, and an indemnity pursuant to cl 9.2 of the Agreement. Accordingly, the plaintiffs’ sought partial recession of the Agreement.

472. On the basis of the findings made in relation to Issues 12 to 15, there is no basis to grant the remedies sought by the plaintiffs. The plaintiffs have failed to establish a breach of the Agreement, and as such, there is no basis to award damages, or any other form of relief sought.

473. While it is, therefore, unnecessary to traverse the issue of remedies, often a court will pass upon the question even where the plaintiff has been unsuccessful in establishing a basis for damages, or, as in this case, any remedy.

474. However, this exercise is particularly difficult in this case, as a result of two inherent problems with the plaintiffs claim:

475. As discussed at [414] to [415], the items listed at cll 3.2(a) to (k) of the Agreement are contingencies rather than promises, and there is no basis for damages where a contingency is not satisfied. The only ‘remedy’ in the event of nonfulfillment is that the purchaser is not obligated to perform the contract.

476. The plaintiffs’ claim, with respect to a breach of warranty, rests on the proposition that a company may, by virtue of contract law, agree to encumber the shares in their company, regardless of the fact that those shares are not (and cannot) be owned by the company. This argument is so flawed, that to traverse the question of damages seems futile.

477. However, for completeness, I set out below the plaintiffs’ submissions in relation to Issue 16, and propose to deal with these submissions briefly, having regard to the limitations I set out above.

478. In relation to issue 16, in summary, the plaintiffs made the following submissions:

479. In equity, even though complete restutio in integrum may not be possible, if it is possible that, by the exercise of its powers, the Court can do what is practically just between the parties, and by so doing restore them substantially to the status quo, the Court will exercise those powers and order partial rescission if that will achieve the effect of practical justice between the parties.

480. If the Court were to set aside the vendor finance provisions of the Agreement, this would achieve practical justice between the parties for the following reasons:

(a) The primary loss and damage suffered by the Folleys (as opposed to Danc itself) as a result of the breaches of the Agreement by the Hockeys is the liability of the Folleys to comply with their obligations to the Hockeys under the vendor finance provisions of the Agreement and, in particular, their obligation to pay the remaining amount of the vendor finance sum claimed by the Hockeys in their CC. Rescission of the vendor finance provisions of the Agreement would have the practical effect of eliminating the extant liability of the Folleys to the Hockeys under those provisions, and thereby ensuring that the Hockeys compensate the Folleys for their loss and damage caused by their breaches of the Agreement. (b) Practical injustice would not be visited upon the Hockeys because the partial order for rescission would amount to an award of damages against the Hockeys, in that they would be required to forego recovery of the outstanding amount of vendor finance owed to them under the vendor finance provisions of the Agreement. In circumstances where the breaches of the Agreement by the Hockeys caused the Folleys to enter into the Agreement (and thereby commit themselves to re-paying the vendor finance) which otherwise they would not have done, such an outcome would involve the Hockeys compensating the Folleys for the exposure to loss and damage which their conduct caused. (c) If an order for partial rescission were to be made, then there would be no need for any award of damages (for breach of contract) to be made in favour of the Folleys because the Folleys (as opposed to Danc) would be compensated for their loss and damage suffered as a result of the Hockeys’ breaches of the Agreement. This is because they would not have any liability to the Hockeys to re-pay the vendor finance amount, thus cauterising their principal exposure to loss and damage.

3. In the alternative to an order for partial rescission, the Folleys should be entitled to an order that the Hockeys indemnify them in relation to any loss and damage suffered as a result of the Hockeys’ breaches of the Agreement, and, in particular, of the vendor warranties. This entitlement arises from the terms of cl 9.2 of the Agreement which provides that the Hockeys indemnify, and keep indemnified, the Folleys (and Danc) against all liabilities, losses, claims and damages, of any kind, however arising, from any breach of the vendor warranties, which would include their liability under the vendor finance provisions.
4. The Folleys should be entitled to an indemnity pursuant to cl 9.2 of the Agreement, with respect to, at least, their liability to the Hockeys under the vendor finance provisions of the Agreement (and, therefore, the whole of the CC).
5. The Hockeys cannot seek to rely on cl 9.3 of the Agreement (which provides that the purchaser, Tin-Tagel, must notify the vendors within 30 days after they become aware of a liability), because the Folleys did not become aware, of the existence of the Charge and the Hockeys’ failure to have it removed, until about June 2024.
6. In the alternative, if the Court is not minded to grant either rescission or an indemnity as claimed, the quantum of the Folleys’ loss caused by the Hockeys’ breaches of the Agreement is the same as the quantum of the amount claimed by the Hockeys’ [26] in their CC. This is because the liability the Folleys may have to the Hockeys, under the vendor finance provisions of the Agreement, represents the minimum amount of their loss flowing from the Hockeys’ breaches of the Agreement. On this analysis, the Folleys would be entitled to judgment against the Hockeys for damages for breach of contract by the Hockeys in the same amount as any judgment awarded to the Hockeys against the Folleys, on the CC. The respective judgments would, once set off against each other, result in no amounts payable by either the Folleys or the Hockeys.
7. In relation to the defendants’ submission that, in any event, the breach would not have amounted to a loss, given that Macquarie Bank would have insisted that the Folleys provide a new charge over the assets of Danc, the Court should not readily infer that Macquarie Bank would have inevitably insisted on there being a fresh charge registered against Danc in the event that the Charge was removed prior to Completion, as this proposition is entirely hypothetical, which has no basis in evidence. In any event, the Court should not make that inference because Macquarie Bank’s security position was already very sound, in the way of personal guarantees from the Folleys and a registered first mortgage over their residential property.
8. In relation to the defendants’ submission that there was an election to affirm the contract by the plaintiffs, regardless of any breach, the plaintiffs submitted that in order for the doctrine of election to operate there must be knowledge on the part of the elector. However, there was insufficient knowledge of the breaches so as to constitute any election by the Folleys.

Consideration: Issue 16

477. In my view, the plaintiffs’ claim for partial rescission, or, in the alternative, for damages pursuant to either the indemnity contained in cl 9.2 of the Agreement or breach of contract, namely, breach of the warranties under the Agreement, would fail for two main reasons.

478. First, I agree with the defendants’ submission that, in this case, it is not possible for the Court to achieve restitutio in integrum as it is not practically possible to put the parties back in the positions they were in prior to the Agreement. As was submitted by the defendants:

“After the sale of the Hockeys’ shares in Danc to the Folleys, the Folleys operated Danc for some six years. That there have been material changes to the situation of Danc in that time is self-evident from the fact that receivers have been appointed… the Folleys cannot hand back to the Hockeys the successful real estate business which they owned and operated prior to the sale.”

479. In relation to rescission, it is a necessary precondition of rescission that restitutio in integrum can be achieved: AH McDonald & Co Pty Ltd v Wells (1931) 45 CLR 506; [1931] HCA 24 at 512 (per Rich J, Starke J and Dixon J). Restitutio in integrum requires the restoration of parties to the positions they were in prior to the agreement. At common law, perfect restoration is required, whereas in equity substantial restoration is sufficient: Alati v Kruger (1955) 94 CLR 216; [1955] HCA 64 at 224 (“Alati”) (per Dixon CJ, Webb J, Kitto J and Taylor J).

480. The right to rescind will be lost when restitutio in integrum is impossible: Chint at [132], and this is consistent with the fact that the central tenant of rescission is to achieve practical justice as between the parties: Alati at 223–224.

481. As such, it is not possible for this Court to rescind the Agreement in the manner sought by the plaintiffs. Nor would it, in my view, be appropriate, given the time that has elapsed since the Agreement was entered into and the substantially altered circumstances of the business which was bought and sold by the parties. In my view, there is no way in which the parties could be completely restored (or even substantially restored) to the position they were in prior to the Agreement.

482. While the plaintiffs submitted that the Court has the power and capacity, as a matter of law, to partially rescind the Agreement, in my view, the Court should be cautious in accepting a submission in such wide terms.

483. Contrary to the defendants’ submission that there is no such thing as partial rescission either at law or in equity, I accept that a decree of partial rescission may be made in equity, following the decision of Vadasz v Pioneer Concrete *(*SA) Pty Ltd (1995) 184 CLR 102; [1995] HCA 14 (“Vadasz”) at 115 (per Deane, Dawson, Toohey, Gaudron and McHugh JJ). Indeed, this is certainly the position that has been adopted by the NSW Court of Appeal: Nadinic v Drinkwater (2017) 94 NSWLR 518; [2017] NSWCA 114 (“Nadinic”) at [143] (per Lemming JA, with whom Beazley P and Sackville AJA agreed).

484. Partial rescission occurs where a court rescinds only part of a contract, while the balance of the contractual obligations remain on foot. The court may order partial rescission in order to do what is practically just between the parties: Wayne Covell, Keith Lupton and Louise Parsons, Covell & Lupton Principles of Remedies (8th ed, 2022, Lexis Nexis) at [5.63] – [5.65].

485. However, an analysis of the authorities on partial rescission and in particular Vadasz and Nadinic, reveals the danger in accepting the plaintiffs’ broad submission that practical rescission is properly available to set aside the vendor finance provisions of the Agreement as this would achieve practical justice between the parties. In my view, this is not a case where the court should exercise its discretion to grant partial rescission.

“[34] Fifthly, rescission in equity for fraud in the sense of dishonesty or reckless indifference to the truth differs from cases of rescission where such fraud had not been made out. For one thing, in cases of fraud, equity is more open to making orders effecting restitutio in integrum so as to enable rescission. In Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102 at 114, a unanimous High Court endorsed what Lord Wright had said in Spence v Crawford [1939] 3 All ER 271 at 288:

‘The court will be less ready to pull a transaction to pieces where the defendant is innocent, whereas in the case of fraud the court will exercise its jurisdiction to the full in order, if possible, to prevent the defendant from enjoying the benefit of his fraud at the expense of the innocent plaintiff.’”

488. However, in Nadinic at [138]-[142], the NSW Court of Appeal also warned of the danger in liberally and literally applying the aphorism that “fraud unravels everything”, noting that the central tenet of partial rescission is still to restore the parties to their original positions:

“[138] A finding of fraud does not without more entitle a party to relief by way of rescission in equity. As is clear from Spence v Crawford, Alati v Kruger and Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd, relief may be denied on discretionary grounds, even in the case of fraudulent misrepresentation or fraudulent non-disclosure. Further, the passages upon which his Honour repeatedly relied, especially in Spence v Crawford, do not confer an unfettered discretion to vary parties’ bargains. They reflect the more generous approach in equity to framing other orders so as to achieve restitutio in integrum, which may or may not be possible, so as to satisfy the prerequisite to rescission. On one reading of his Honour’s reasons, rather than considering what ancillary orders were required so as to enable restitutio in integrum, his Honour instead identified the clauses of the Deed of Settlement which he considered operated unjustly in the circumstances. This seems to be the natural meaning of the language used by his Honour at the end of his judgment:

‘I have moulded what I consider to be appropriate orders in accordance with the exigencies of this particular case. As Lord Wright said in Spence v Crawford at 77: ‘... in the case of fraud, the court will exercise its jurisdiction to the full in order, if possible, to prevent the defendant from enjoying the benefit of his fraud at the expense of the innocent plaintiff’.’

[139] If that is how the reasons are to be read, they represent, with respect, a misunderstanding of Lord Blackburn’s reference to achieving “practical justice” and the way in which Lord Wright referred to the exercise of the equitable jurisdiction. It would not be the first time such an error has been committed. In O’Sullivan v Management Agency and Music Ltd [1985] QB 428 at 466 it was said that ‘[t]he question is not whether the parties can be restored to their original positions; it is what does the justice of the case require?’

[140] That is not how equitable principle is to be applied. I agree with what is said in D O’Sullivan, S Elliott and R Zakrzewski, The Law of Rescission (2nd ed 2014, Oxford University Press) at p 277 on this issue:

‘This idea is inconsistent with the way in which the principles governing the relief given upon rescission have conventionally been understood, the central tenet of which is that the restoration of the parties to their original positions is the criterion on practical justice. From this conventional viewpoint the idea that practical justice should be done at the expense of restoring the parties to their original positions is difficult to understand. It is not clear what alternative criterion of justice is being proposed. The proposal may simply be that justice should be done according to the judge’s personal conception of what seems fair in all of the circumstances.’

[141] There is no broad discretion in equity to rewrite a contract, even if it has been entered into as a result of fraudulent misrepresentation, by reference to what seems just. Instead, the question is whether, by the orders available to a court of equity, “practical justice” can be achieved so as to authorise the rescission of the contract and restore the parties to the position they previously enjoyed. Notwithstanding the breadth of orders available to achieve restitutio in integrum, there will be times when that cannot occur. In such cases, rescission is not available, and the plaintiff will be left to other remedies (including damages, if the misrepresentation was negligent or fraudulent).

[142] That accords with what was said in this Court by Giles JA in Kirwan v Cresvale Far East Ltd (in liq) [2002] NSWCA 395; 44 ACSR 21 at [140]:

‘Where equitable relief is granted by setting aside a transaction which has been wholly or partly performed, restitution is required. The transaction is set aside ab initio, and the parties are to be returned to their positions prior to the transaction. Equity allows greater flexibility than common law, and if complete restitution is not possible may use its powers so as to ‘do what is practically just between the parties, and by so doing restore them substantially to the status quo’: Alati v Kruger (1955) 94 CLR 216 at 224. The notion of doing what is practically just is concerned with practicality. It does not deny that there must be restitution.’”

489. Clearly, the remedy of partial rescission should only be granted where that relief would assist to practically restore the parties to their original position in order to achieve practical justice. For example, in Vadasz, the appellant gave a personal guarantee against the past and future debts of a company. He was induced to give the guarantee by a misrepresentation that his liability was confined to the company’s future debts. The High Court granted rescission, but only in respect of the company's past debts. The court held that “to enforce the guarantee to the extent of future indebtedness is to do no more than hold the appellant to what he was prepared to undertake independently of any misrepresentation”: Vadasz at 115.

490. As set out in the summary of the plaintiffs’ submissions, the plaintiffs advanced four propositions as to why, if a breach of contract were established, the appropriate remedy should be partial rescission. Whilst these propositions were not entirely clear, I understand them to be, in summary, as follows:

491. Where restitutio in integrum is not possible, the court should exercise its powers to order partial rescission if that would achieve the effect of practical justice between the parties.

492. Setting aside the vendor finance provisions would achieve practical justice between the parties, because:

(a) The warranties which were breached by the Hockeys caused the Folleys to enter into the Agreement (in particular the vendor finance provisions) and therefore caused the Folleys to suffer liability under those provisions. (b) Partial rescission would have the same outcome as an award of damages against the Hockeys. (c) Partial rescission would circumvent the need for an award of damages in favour of the Folleys.

491. The problem with these propositions, is that they proceed on the basis of the following, flawed assumptions:

492. That partial rescission should be granted as a substitute for damages.

493. That there is a logical connection between the alleged breach of warranties by the Hockeys and the Folleys entering into the vendor finance provisions.

494. That setting aside the vendor finance provision would go a way to achieving restitutio in integrum or substantially restoring the parties to their original positions akin to a grant of damages.

495. In my view, these propositions and the assumptions which underpin them are fundamentally flawed for the following reasons (which I will address seriatim):

496. Rescission is not granted as a substitute for damages. Rather, where rescission is not available, a plaintiff will be left to other remedies (including damages): Nadinic at [141].

497. The relevant question, in examining causation, is to ask: in the absence of the breach, would the plaintiffs have agreed to the obligations under the vendor finance provisions of the Agreement? When the question is framed in those terms, it is clear that there is no causal link between the breach of warranties and the obligations of the plaintiffs under the vendor finance provisions. This is especially so given that the vendor finance provisions were not disadvantageous to the plaintiffs, but, in fact, were designed to assist the Folleys to purchase Danc by providing a loan from the Hockeys.

498. The vendor finance provisions go to the root of the Agreement, such that dismembering the transaction in the manner sought by the plaintiffs, would rob the Agreement of its efficacy. By way of illustration, the vendor finance provisions set out at cl 6.6(e) of the Agreement comprise part of the purchase price under the Agreement. The purchase price is so fundamental to the bargain that was struck between the parties, that to carve out of the purchase price the vendor finance component would have the effect of fundamentally altering the transaction between the parties. The practical effect of setting aside the vendor finance provisions, is, essentially, that the Folleys pay a lesser purchase price for Danc.

499. Secondly, I accept the defendants’ submission that the Folleys lost their right to rescind the Agreement or, any other relief sought, by electing, as I have earlier found, to affirm the contract.

500. At common law or in equity, the right to rescind may be lost where a party elects not to exercise that right and instead affirms the contract. An election will occur where there is unequivocal “words or conduct…that is consistent only with the exercise of one of the two sets of rights and inconsistent with the exercise of the other”: Sargent at 646. As the Court in at 646 observed:

“The words or conduct ordinarily required to constitute an election must be unequivocal in the sense that it is consistent only with the exercise of one of the two sets of rights and inconsistent with the exercise of the other; thus for a lessor to continue to receive rent under a lease will be consistent only with his rights as lessor and inconsistent with the exercise of a right to determine the lease… There need be no expressed intention to elect, nor will an express disclaimer of such an intention be of any avail in preserving one right if in fact there be an exercise of another inconsistent right. For an election there need be no actual, subjective intention to elect; an election is the effect which the law attributes to conduct justifiable only if such an election had been made.” (Footnotes omitted).

495. While the plaintiffs are correct that there must be an element of knowledge on the part of the elector, I reject the contention, by the plaintiffs, that the Folleys had insufficient knowledge of the breach to constitute any election by them.

496. I rely on my findings at [425] to [427], that the Folleys were aware of the Charge and PPSR registration against Danc when they decided to proceed to Completion on 1 June 2018. As such, the relief sought by the Folleys is not available pursuant to the fact that the Folleys elected to affirm the contract (by proceeding to Completion), regardless of the Charge and PPSR registration.

497. It is unnecessary, in the circumstances, to answer the questions raised by Issue 16 as the prerequisite to the answering of Issue 16 is that the Court had found that liability of the defendants was established, which it has not. In any event, as discussed above, the remedies sought by the plaintiffs were, nevertheless, not available.

Claim 5: Misleading and deceptive conduct

498. The issues relevant to the resolution of claim 5, as set out in the ASOI, were as follows:

499. Did the Hockeys represent to the Folleys that:

(a) they were retiring and would not return to the real estate industry (“Issue 17(a)”); (b) Mr Hockey would work for Danc for a further 2 years (“Issue 17(b)”); (c) Mr Hockey would make 55 sales from 1 June 2018 to 1 June 2019 (“Issue 17(c)”); (d) Danc would make sufficient profits to repay the vendor finance (“Issue 17(d)”); (e) Mr Hockey would introduce the Folleys to his contacts and inform customers of the change of ownership of the business (“Issue 17(e)”); and (f) a former employee of Danc, Ms Karen Wardle, did not retain a copy of Danc’s confidential information (“Issue 17(d)”),

(Issues 17(a) to issue 17(f) are collectively referred to as “Issue 17”).

2. Were those representations (if made) misleading? (“Issue 18”)
3. If liability is established:

(a) Are the Folleys entitled to rescission? (“Issue 19(a)”) (b) If not, what is the quantum of the Folleys’ loss? (“Issue 19(b)”),

(“Issue 19(a) and Issue 19(b) are collectively referred to as “Issue 19”).

499. After setting out the general submissions made by the parties and the principles relevant to claim 5, I will address each of the six pleaded representations set out in Issue 17 separately. I note that the parties made submissions as to each pleaded representation, by addressing both the question of whether the representation was made, and, if so, whether the representation was misleading. However, I intend to deal with the questions raised by Issue 17 and Issue 18 separately.

500. After dealing with whether each of the pleaded representations, or representations averted to in the ASOI in issues 17(a) to 17(f), were, in fact, made, I will then turn to consider Issue 18 but only in relation to those representations which were, in fact, conveyed by the Hockeys. I set out the judgment in this way given that the authorities, which I will turn to below, draw a clear distinction between those issues although, I am mindful of the fact that, in the recent judgment of the High Court in Self Care IP Holdings Pty Ltd v Allergan Australia Pty Ltd (2023) 277 CLR 186; [2023] HCA 8 (“Self Care”) (per Keifel CJ, Gageler, Gordon, Edelman and Gleeson JJ), the Court delineates four steps in the analysis. I shall refer to those four steps further below.

General submissions

501. The plaintiffs submitted that all but the last of the six pleaded representations relied upon by the Folleys (ie Issue 17(a) to 17e), were representations as to future matters. Consequently, as a result of s 4 of the ACL, each of the representations made as to a future matter will be deemed to be misleading unless the Hockeys have adduced evidence that they had reasonable grounds for making the representation.

502. The defendants agreed that all the representations alleged by the Folleys save for the last – in respect of Ms Wardle – were representations as to future matters.

Relevant principles

503. The parties made submissions as to the relevant principles to be applied in relation to the resolution of claim 5. These principles form the basis of what appears below.

504. While the plaintiffs relied on the judgement of Gordon J (as her Honour then was) in Australian Competition and Consumer Commission v Telstra Corporation Ltd [2007] FCA 1904; (2007) 244 ALR 470 at [14]-[15] to set out the analysis which the Court is required to undertake with respect to a claim for misleading and deceptive conduct (which involved a two-step analysis), I note that the High Court in Self Care at [80]-[82] (per Keifel CJ, Gageler, Gordon, Edelman and Gleeson JJ) recently summarised the applicable principles for determining a breach of s 18 of the ACL as follows:

“[80] The principles are well established. Determining whether a person has breached s 18 of the ACL involves four steps: first, identifying with precision the "conduct" said to contravene s 18; second, considering whether the identified conduct was conduct "in trade or commerce"; third, considering what meaning that conduct conveyed; and fourth, determining whether that conduct in light of that meaning was "misleading or deceptive or ... likely to mislead or deceive".

[81] The first step requires asking: "what is the alleged conduct?" and "does the evidence establish that the person engaged in the conduct?". The third step considers what meaning that conduct conveyed to its intended audience. As in this case, where the pleaded conduct is said to amount to a representation, it is necessary to determine whether the alleged representation is established by the evidence. The fourth step is to ask whether the conduct in light of that meaning meets the statutory description of "misleading or deceptive or ... likely to mislead or deceive"; that is, whether it has the tendency to lead into error. Each of those steps involves "quintessential question[s] of fact".

[82] The third and fourth steps require the court to characterise, as an objective matter, the conduct viewed as a whole and its notional effects, judged by reference to its context, on the state of mind of the relevant person or class of persons. That context includes the immediate context – relevantly, all the words in the document or other communication and the manner in which those words are conveyed, not just a word or phrase in isolation – and the broader context of the relevant surrounding facts and circumstances. It has been said that "[m]uch more often than not, the simpler the description of the conduct that is said to be misleading or deceptive or likely to be so, the easier it will be to focus upon whether that conduct has the requisite character". That said, the description of the conduct alleged and identified at the first step should be sufficiently comprehensive to expose the complaint, because it is that conduct that will ultimately, as a whole, be determined to be or not to be misleading or deceptive.” (footnotes omitted)

505. The first question identified by the Court in Self Care*,* namely, to identify, with precision, the "conduct" said to contravene s 18 of the ACL, was not often identified by the plaintiffs with the precision contemplated by the High Court, in this matter. There was seldom any reference to the pleadings, or, on occasions, the representations averted to in each of the issues (Issue17(a) to (f)), and the conduct complained of was, at times, conveyed in fairly general terms or even differently in closing submissions.

506. To that broad assessment, and perhaps as a result of that deficiency, the third step, namely, to consider what meaning that conduct conveyed, did not always receive consideration.

507. I also note that no party addressed the second step in Self Care, namely, a consideration of whether the identified conduct was conduct “in trade or commerce”. Hence, I will proceed on the basis that no issue arose in that respect.

508. The question of whether the impugned conduct was, as a matter of fact, misleading is to be determined objectively by the Court and it is not necessary for an intention to mislead or deceive to be established: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191; [1982] HCA 44 at 197-198 (per Gibbs CJ) and Yorke v Lucas (1985) 158 CLR 661; [1985] HCA 65 at 666 (per Mason ACJ, Wilson, Deane and Dawson JJ).

509. Pursuant to s 4 of the ACL, representations with respect to future matters are deemed to be misleading, unless the representation is made on reasonable grounds. The person uttering the representation are deemed not to have reasonable grounds for making the statement unless they adduce evidence to the contrary.

510. From the authorities relied on by the parties, the following principles may be stated with respect to s 4 of the ACL:

511. Section 4 of the ACL is limited to representations with respect to a “future matter”. The defendants relied on the description of “future matters” propounded by Nicholas J in Samsung Electronics Aust**ralia Pty Ltd v LG Electronics Aust**ralia Pty Ltd [2015] FCA 227; (2015) 113 IPR 11 at [84], which has since been applied by the Full Court of the Federal Court in Australian Competition and Consumer Commission v Woolworths Group Ltd (2020) 281 FCR 108; [2020] FCAFC 162 (“Woolworths”) at [132] (per Foster, Wigney and Jackson JJ), where the Full Court held:

“We do not think that, generally speaking, a representation about the nature, quality, character or capability of a product based upon its inherent characteristics is a representation with respect to a future matter. A representation will only be with respect to a future matter if it is in the nature of a promise, forecast, prediction or other like statement about something that will only transpire in the future—that is, a representation which is not capable of being proven to be true or false when made. This interpretation of “… a representation with respect to a future matter” in s 4(1) is the interpretation propounded by Nicholas J in Samsung at 27 [83]–[86], by Rares J in Ackers v Austcorp International Ltd [2009] FCA 432 at [359] and by Gleeson J in Kimberly-Clark at [276]–[286] esp at [285]… In our judgment, the above three authorities correctly state the law on this point.”

2. The requirement at s 4(2) of the ACL, operates to place an evidentiary burden on the representor, to adduce evidence which tend to establish or permit an inference that there were reasonable grounds for making the representation: Awad v Twin Creeks Properties Pty Ltd [2012] NSWCA 200 (“Awad”) at [34] (per Allsop P).
3. The Full Court of the Federal Court in SPAR Licensing Pty Ltd v MIS QLD Pty Ltd [2014] FCAFC 50; (2014) 314 ALR 35 (“SPAR”) at [18]-[21] (per Buchanan J) summarised the following principles to be applied in matters concerning representations as to “future matters”:

“[18] In Bill Acceptance Corp Ltd v GWA Ltd (1983) 50 ALR 242; 1 IPR 496; 78 FLR 171, Lockhart J recorded (at ALR 243; IPR 497; FLR 172):

The applicant’s case rests upon the correctness of the proposition that a contravention of s 52 may occur merely if a representation by the respondent as to future conduct does not come to pass, notwithstanding that, at the time it made that representation, the respondent may have believed that it would come to pass or that it was not recklessly indifferent as to what it said.

Lockhart J rejected the proposition, saying (at ALR 250; IPR 504; FLR 179):

The mere fact that representations as to future conduct or events do not come to pass does not make them misleading or deceptive, notwithstanding that the applicant has relied on them and has altered his position on the faith of them …

[19] The following year, in Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 (“Global Sportsman”), a Full Court of this Court stated (at 88):

The non-fulfilment of a promise when the time for performance arrives does not of itself establish that the promisor did not intend to perform it when it was made or that the promisor’s intention lacked any, or any adequate, foundation. Similarly, that a prediction proves inaccurate does not of itself establish that the maker of the prediction did not believe that it would eventuate or that the belief lacked any, or any adequate, foundation. Likewise, the incorrectness of an opinion (assuming that can be established) does not of itself establish that the opinion was not held by the person who expressed it or that it lacked any, or any adequate, foundation.

The applicants argued that, nevertheless, the statement of an incorrect opinion is misleading or deceptive or likely to mislead or deceive merely because it misinforms or is likely to misinform. An expression of opinion which is identifiable as such conveys no more than that the opinion expressed is held and perhaps that there is basis for the opinion. At least if those conditions are met, an expression of opinion, however erroneous, misrepresents nothing.

[20] The legal principle stated in Global Sportsman has been applied many times in this Court. For example, in Mobil Oil Australia Ltd v Wellcome International Pty Ltd *(*1998) 81 FCR 475, the Full Court said (at 521):

It is, of course, not sufficient to establish that a representation was made as to a future event and that a contrary decision was made some time afterwards. If it is established by the respondents that at the time a representation was made there were reasonable grounds for making it, it cannot be described as “misleading” or “deceptive”.

[21] More recently, in Fubilan Catering Services Limited *(*Incorporated in PNG) v Compass Group (Australia) Pty Ltd [2008] FCAFC 53, the Full Court said (at [91]):

It is clear that to make a promise which is not performed or a prediction which is not fulfilled is not, without more, misleading or deceptive: Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 1 FCR 82, at 88, per curium; Bill Acceptance Corporation Pty Ltd v GWA Ltd (1983) 50 ALR 242.”

4. Whether a representation was made on reasonable grounds is to be assessed as at the date of the representation, and by reference to the information that was available at the time the statement was made and actually relied upon by the representor: Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd [2014] NSWCA 158 (“Doppstadt”) at [190] (per Gleeson JA, with whom Ward and Emmett JJA agreed); McGrath v Aust Naturalcare Products Pty Ltd (2008) 165 FCR 230; [2008] FCAFC 2 (“McGrath”) at [198] (per Allsop J, with whom Stone J agreed); Sykes v Reserve Bank of Aust**ralia (1998) 88 FCR 511; [1998] FCA 1405 (“Sykes”) at 513 (per Heerey J).
5. Where the representation as to a future matter concerns future conduct, intention and capacity to perform will generally be sufficient to establish that a promise or representation as to future conduct was made on reasonable grounds. See, for example, the following extract from Azzi v Volvo Car Aust**ralia Pty Ltd [2007] NSWSC 319 (“Azzi”) at [87] (per Brereton J):

“[87] Section 51A(2) places an evidentiary onus on a defendant to adduce evidence of reasonable grounds. That evidence need not come from the persons who made the representation, and need not be testimonial: the existence of factors which would establish reasonable grounds may more often more reliably be ascertained from the overall probabilities to which the circumstances of the case give rise, the background and the conduct of the parties prior to the relevant communications [Cummings v Lewis (1993) AZTPR (Digest) 46-103]. The tender bundle contains extensive documentary material, tendered by both parties, from which the plain inference is that when the representations were made, Volvo had every intention of granting TAA a one plus-five-year dealership in the SSE AOR, and had the capacity to do so. It was part of Volvo’s “master plan” for Sydney to do so; and its capacity to do so is self-evident. To the extent that any such documents are to be regarded as having been tendered only by the plaintiffs, it would be artificial in the extreme to require that Volvo tender them a second time to comply with s 51A(2). Accordingly, on the documentary evidence tendered by Volvo as well as by the plaintiffs, I find that Volvo had reasonable grounds for making the representations when they were made.”

6. The defendants placed reliance on the principle that, in relation to representations made as to future profitability of a business, past performance of the business can provide a reasonable basis for predicting future performance: Rakic v Johns Lyng Insurance Building Solutions *(*Vic) Pty Ltd (2016) 259 IR 47; [2016] FCA 430 (“Rakic”) at [96] (per Bromberg J). However, I also note that this prima facie basis for predicting future profitability can be displaced by other considerations, such as whether conditions that led to the previous profitable results continue in existence at the date of the profitability prediction. As the Court in Rakic at [96] and [124] went on to note:

“[96] Moving to Johns Lyng's substantive argument, I accept that past performance can provide a reasonable basis for predicting future performance. All else being equal, that Johns Lyng had been profitable in the months and years preceding March 2013 tends in favour of a conclusion that reasonable grounds existed for predicting future profitability. However, as I explain below at [124] and subsequently, past profitability creates (in my view) a prima facie basis for predicting future profitability and can be displaced by other considerations. And it does not provide a basis for inferring, as I was asked to do, that earlier forecasting must have been accurate. Here, as I will come to explain, the diminished figures in regard to the winning of new work displace the prima facie effect of past profitability.

…

[124] It is true that Johns Lyng had historically been a profitable business. Between July 2008 and January 2013 it had recorded 55 consecutive profitable months. As at January 2013 it was ahead of its profit budget for FY13 by around $250,000 and behind its sales budget for FY13 but only by around $900,000. I accept that past performance of a business is a basis for predicting future performance. It is, however, only a prima facie basis. Any reasonable valuer of a business would examine whether conditions that led to previous profitable results continued in existence as at the date of valuing and were likely to continue into the future. For example, it would not be reasonable for a widget manufacturer to blithely rely on past performance as predictive of future performance if it knew that the cost of widget raw material had just tripled.”

511. I also note the following further principles, which may be of some relevance to this matter:

512. Section 18 of the ACL will be contravened by a statement as to the future if the speaker “did not believe that the conduct or event [to which it referred] would come to pass or … there was no basis for [such a] belief”: Ting v Blanche (1993) 118 ALR 543 at 552 (per Hill J), citing Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82; [1984] FCA 167 at 88 (per Bowen CJ, Lockhart and Fitzgerald JJ).

513. There “will not be reasonable ground for making a representation if, at the time of making it, the representor did not have facts sufficient to induce, in the mind of a reasonable person, a basis for making the representation”: Australian Competition and Consumer Commission v Dateline Imports Pty Ltd [2015] FCAFC 114 at [100] (per Gilmour, McKerracher and Gleeson JJ).

514. In ascertaining whether reasonable grounds have been shown, the overall circumstances of the case will often provide more reliable guidance than the oral evidence of interested parties: Cummings v Lewis (1993) 41 FCR 559 (“Cummings”) at 565 (per Sheppard and Neaves JJ).

515. An honest belief in a future representation’s accuracy does not necessarily mean that the representor had reasonable grounds for the belief that the statement made was correct: Cummings at 565, except perhaps where the statement was concerned only with the speaker’s intention: Mobil Oil Australia Ltd v Wellcome International Pty Ltd (1998) 81 FCR 475 (“Mobil Oil”) at 521 (per Lockhart, Lindgren and Tamberlin JJ); Ceccon Transport Pty Ltd v Tomazos Group Pty Ltd [2017] NTSC 25 (“Ceccon Transport”) at [366]–[367] (per Hiley J).

516. On the other hand, future statements made without such a belief will generally not be made on reasonable grounds: McPhillips v Ampol Petroleum (Victoria*) Pty Ltd* (1990) ATPR 41-014 at 51,257 (per Woodward J). It is also unlikely that a prediction made with knowledge of contradictory information will be made on reasonable grounds: Aldi Stores *(*A Limited Partnership) v EFTPOS Payments Aust**ralia L**imited [2011] FCA 1114 at [83], [92], [100] and [103] (per Jacobson J).

517. Where a representation is made as to the future profitability of a business, proof that the speaker “had retained leading professionals to make the assessment and had no reason to doubt their competence” (Lake Koala Pty Ltd v Walker [1991] 2 Qd R 49 at 58 (per Connolly J)) may establish reasonable grounds for the prediction, although a different conclusion may be reached where the future statement is not a fair reflection of the data available to the speaker: [1999] FCA 752 at [52]–[55] (per Tamberlin J).

Issue 17(a): Did the Hockeys represent to the Folleys that they were retiring and would not return to the real estate industry?

Submissions: Issue 17(a)

512. In relation to Issue 17(a), in summary, the plaintiffs submitted that the Hockeys made the representation that they were retiring and would not return to the real estate industry during a meeting between the Hockeys and the Folleys on 25 August 2017. The fact that this representation was made is clear on the affidavit evidence of all four attendees at this meeting (Mr Hockey, Mrs Hockey, Mr Folley and Mrs Folley), which included the following:

“(a) according to Mr Hockey, the following was said:

Wayne Hockey: “We have been in the business for a number of years and we’re ready to retire and spend more time with our grandchildren. I can do more surfing.”

Susan Hockey: “I am looking to spend more time helping my mother and am currently busy with my golf and committee duties.”

(b) according to Mrs Hockey, the following was said:

Wayne Hockey: “We would love to retire. We’ve run a successful business for 23 years and it feels like the right time.”

Susan Hockey: “I agree with Wayne. I have lots on other interests now, which I look forward to pursuing.”

(c) both Ken and Kate Folley gave affidavit evidence that at the 25 August 2017 meeting either both or at least one of the Hockeys told the Hockeys that it was time to retire or that they would love to retire or that they were retiring, and that each of them had lots of other interests that they wanted to spend time pursuing.” (Footnotes omitted)

513. In relation to Issue 17(a), in summary, the defendants submitted that the Hockeys accept that they represented to the Folleys that they intended to retire from the real estate industry, and insofar as the representation concerned Mr Hockey, it was always intended that he would retire after his two-year period of employment with Danc, as required under the Agreement.

Consideration: Issue 17(a)

514. The plaintiffs pleading, in relation to Issue 17(a), in the 2FASOC was that, prior to entering into the Agreement, the Hockeys represented to Tin-Tagel and the Folleys that “[Mr Hockey] and [Mrs Hockey] were retiring and will never come back into real estate”.

515. The issue as formulated in the ASOI was, in substance, the same as the pleading: “Did the Hockeys represent to the Folleys that they were retiring and would not return to the real estate industry”.

516. In closing written submissions, the Hockeys conceded making the following representations:

517. that Mrs Hockey intended to retire from the real estate industry; and

518. that Mr Hockey intended to retire from the real estate industry after completion of his 2-year period of continued employment with Danc, as required by the Agreement.

519. In closing oral submissions, counsel for the plaintiffs submitted:

“Your Honour might recall that one of the representations that we rely upon is that there was a representation pre-contract that both the Hockeys would retire. They were intending to retire. It's not disputed in the submissions that that representation was made and it's accepted that was a representation as to a future matter. What is disputed is to whether it was misleading.”

518. While it is true that the Hockeys made a concession, with respect to this Issue 17(a), the pleaded representation differs slightly from what has been conceded by the Hockeys, in that the defendants submit that the representation, with respect to Mr Hockey (that he would retire), only related to the period after his 2-year period of employment with Danc.

519. While the plaintiffs’ pleaded representation, with respect to Mr Hockey, was not in those specific terms, it is evident that this is what the plaintiffs must have intended. In this respect, I note that the Agreement contained a clause requiring Mr Hockey to remain employed for a period of 2 years following completion, and the plaintiffs have, in fact, alleged that Mr Hockey represented to them that he would work for Danc for a further 2 years following the execution of the Agreement (see Issue 17(b)).

520. In the ASOI, the representation said to be made by the Hockeys included that they “would not return to the real estate industry”. That expression differed from the pleading by the plaintiffs, which stated that the Hockeys would “never return to the real estate industry”. I propose to deal with this matter on the basis of the representation being that contained in the ASOI because that is the issue this Court has been asked to address, it conforms with the representation relied upon in the plaintiffs closing submissions, and corresponds with the concession made by the Hockeys. The expression used in the ASOI would seem to be the equivalent to the concession made by Mr Katekar SC that the Hockeys “intended to retire” from the real estate industry (noting how I have resolved the concession concerning Mr Hockey above). Indeed, the resolution of this issue proceeded upon the basis of the concession made by the defendants.

521. Given the concessions by the defendants, I find that the Hockeys did represent to the Folleys that they intended to retire. I have found that that is the equivalent of them indicating that it was their intention not to return to the real estate industry. However, insofar as the representation concerned Mr Hockey, the representation related only to the period after his 2-year employment with Danc following completion.

522. With that caveat in mind, I answer the question raised by issue 17(a) in those terms.

Issue 17(b): Did the Hockeys represent to the Folleys that Mr Hockey would work for Danc for a further 2 years?

Submissions: Issue 17(b)

523. In relation to Issue 17(b), in summary, the plaintiffs made the following submissions:

524. There is scant affidavit and documentary evidence of any pre-contractual representation that Mr Hockey would work for Danc for a further period of 2 years. However, there can be no doubt that this representation was made because cll 8.1 and 14.4 of the Agreement together provide that, at Completion, Mr Hockey was required to enter into an employment agreement with Danc, and that Mr Hockey would be employed by Danc for a period of at least 2 years on and from the completion date.

525. It was common ground between the parties that the arrangement at Completion was that Mr Hockey would be employed by Danc for a further 2 years, and it should be found that there was a representation by the Hockeys that Mr Hockey would work for Danc for a further period of 2 years after Completion.

526. In relation to Issue 17(b), in summary, the defendants submitted that the Hockeys accept that they represented that Mr Hockey would work for Danc for a further 2 years after the execution of the Agreement.

Consideration: Issue 17(b)

525. The plaintiffs pleading, in relation to Issue 17(b), in the 2FASOC, was that the Hockeys represented to Tin-Tagel and the Folleys that Mr Hockey would work for Danc for a further two years after entering into the Agreement as a salesman.

526. The defendants conceded this issue, as it was pleaded, as they accepted that the Hockeys did represent to the Folleys that Mr Hockey would work for Danc for a further 2 years after execution of the Agreement.

527. Hence, there was no dispute between the parties in relation to Issue 17(b), as it was pleaded by the plaintiffs in the 2FASOC. I, therefore, answer the question raised by issue 17(b) in the affirmative, noting that the 2-year period referred to was from the execution of the Agreement.

528. I emphasise this point, that the representation was a representation as to the 2 years following execution of the Agreement, because, in closing written submissions, the plaintiffs submitted that the representation made by Mr Hockey was that Mr Hockey would work for Danc for a further 2 years after Completion (rather than after execution of the Agreement).

529. As I will go on to find in my consideration of each of the representations alleged by the plaintiffs, there was a common theme with the plaintiffs’ case vis-à-vis claim 5, in that the plaintiffs’ case, as pleaded in the 2FASOC, differed from the case that was put to the Court in oral submissions, or closing written submissions.

530. In any event, I note that both formulations of the plaintiffs’ case must fail at Issue 18, for the reason which I will turn to below, namely, that the only reason Mr Hockey did not work for Danc for the full 2 years after Completion was because the Folleys dismissed Mr Hockey on 4 February 2019.

531. It follows that the issue of whether Mr Hockey made the representation, with respect to the period following the execution of the Agreement, or the period following Completion, has no material impact upon the resolution of this Issue 17(b) (to which I will turn in considering issue 18).

Issue 17(c): Did the Hockeys represent to the Folleys that Mr Hockey would make 55 sales from 1 June 2018 to 1 June 2019?

Submissions: Issue 17(c)

532. In relation to Issue 17(c), in summary, the plaintiffs made the following submissions:

533. First, on 4 April 2018, Mr Hockey represented to the Folleys that he would make 55 sales over the next 12 months, by reason of the fact that Mr Hockey sent an email to the Folleys on 4 April 2018 stating that he would do precisely that.

534. Secondly, the Court should find that the representation made by Mr Hockey in his email of 4 April 2018, that he would make 55 sales for the next 12 months, related to the period after settlement of the Agreement (that is from 1 June 2018 to 1 June 2019), not some other period. In this respect, the plaintiffs submitted the following:

“[126] The only doubt with respect to the making of this representation is whether the 12 month period to which the representation (prediction) related was the period from April 2018 to March 2019 or June 2018 to May 2019. In their affidavits, Mr and Mrs Hockey gave evidence that they understood that the reference to the “next 12 months” in Mr Hockey’s email of 4 April 2018 was from when settlement of the SSA took place. That evidence was not challenged, either by Mr Hockey in his affidavit or in cross examination.

[127] The context in which this email was sent is important. In their affidavits, both Mr and Mrs Folley gave (unchallenged) evidence that in early April 2018 they were considering, in the context of making a decision about whether to proceed to buy the Ray White Bateau Business, whether they would be able to repay the bank and vendor finance and what the minimum sales necessary to achieve that outcome. In her email of 9 April 2019 (which responded to Mr Hockey’s email of 4 April 2019), Mrs Folley thanked Mr Hockey for his quick response in supplying the sales figures of Bateau Bay office and noted that she (and presumably Mr Folley) had spent the weekend comparing Mr Hockey’s office sales performance with other offices, and expressed concerns about a drop in sales and what could be done to rectify that decline.

[128] In this context, it is understandable that Mr and Mrs Folley considered that the 12 month period referred to in Mr Hockey’s email related to the period after settlement of the SSA.”

533. In relation to Issue 17(c), in summary, the defendants submitted that Mr Hockey did not say in his email, sent on 4 April 2018, that he would make 55 sales, only that he predicted that that would occur (during the 12-month period from April 2018 to April 2019).

Consideration: Issue 17(c)

534. As stated by the High Court in Self Care at [81], the first step in determining whether a person has breached s 18 of the ACL, is identifying with precision, the “conduct” said to contravene that section. This involves asking “what is the alleged conduct?” and “does the evidence establish that the person engaged in the conduct?”. I note that this approach will apply equally to the questions raised by issues 17(b) to (f), however, I do not propose to repeat these principles at each issue.

535. In following the approach of the High Court, it is, therefore, necessary to identify, with precision, the “conduct” which the plaintiffs allege was in breach of s 18 of the ACL. The description of the conduct alleged must be sufficiently comprehensive to expose the complaint: Self Care at [82].

536. Those considerations must require the plaintiffs to give a clear articulation of the representation said to be made by the defendants. The related question is, if a representation was made, what precisely was its terms and how did that conduct, involving the representation, constitute a breach of s 18 of the ACL*.* There is then required an examination as to whether the evidence in the proceeding sustained that the representation, relied upon by the plaintiffs, was, in fact, made.

537. The plaintiffs’ approach to this issue, once again, attracts the criticism that there was a failure to identify the conduct said to contravene s 18 of the ACL with sufficient precision, because there was a failure to clearly articulate the representation that was said to be made by the defendants which, in turn, was said to constitute a breach of s 18 of the ACL. Obviously, this creates a further difficulty in determining whether the evidence did or did not sustain that the representation was made.

538. However, this issue, in some respects, represents a more egregious departure from the approach required in Self Care because the plaintiffs, in dealing with this issue, stated inconsistent positions as to the representations made including, in my view, one position which is inconsistent with their pleading.

539. In the 2FASOC, the plaintiffs pleaded that:

“Prior to entering into the Agreement, [the Hockeys] represented to Tin-Tagel and [the Folleys] that:

…

(b) Wayne Hockey … predicted that he would make 55 sales during the 12 month period 1 June 2018 to 1 June 2019;”

540. In the ASOI, a different proposition emerged from the pleadings because the relevant question posed for determination by the Court was: did the Hockeys represent to the Folleys that Mr Hockey would make 55 sales from 1 June 2018 to 1 June 2019? In the statement of the issue in the ASOI, the notion of a prediction being made has simply disappeared. The formulation of the issue in this way, was emblematic of the way the counsel for the plaintiffs put his closing submissions, where the closing submissions materially differed from his opening submissions.

541. In opening submissions, counsel for the plaintiffs made the following submission in relation to Issue 17(c):

“In essence, your Honour, one of the allegations and claims it (sic) that that email and the context in which it was sent amounts to a prediction as to a future matter amounting to a representation as to the likely level of sales to be generated by the business, including for the period after the transfer of ownership and, in a nutshell, the plaintiffs contend that they relied on that representation and that ultimately in the events that happened it's ended up being a lot less sales were generated during the period covered by this prediction than the prediction.”

542. On this point, in closing written submissions, the plaintiffs submitted that “[t]here can be no doubt that on 4 April 2018, Mr Hockey represented to the Hockeys that he would make 55 sales over the next 12 months. That is because on that date Mr Hockey sent an email in which he stated (indeed predicted) that he would do precisely that”.

543. In my view, a significant issue with the plaintiffs’ case vis-à-vis Issue 17(c), exemplified by the above extracts, is that the plaintiffs’ description of the conduct, said to be engaged in by Mr Hockey, vacillated between being described as a prediction as to a future matter in the nature of an estimate (as stated in opening, “prediction as to a future matter… as to the likely level of sales to be generated…”), which was said to be misleading, to something in the nature of a promise or warranty as to a future matter, namely, the particular level of sales within a specified period (which was also said to be misleading). In both cases, the period specified by the plaintiffs was 1 June 2018 to 1 June 2019.

544. Thus, as is evident from the above extract from the plaintiffs’ closing written submissions, at times, the plaintiffs conflated the concept of a prediction with the concept of a promise or warranty as to an actual level of sales for the specified period.

545. This is an issue for two reasons. First, there is an inherent difference between a promise or warranty as to a future matter, when seen in the above light, versus a prediction as to a future matter. A representation in the nature of the former, would have more scope, in the context of s 4 and 18 of the ACL, to be found to be misleading and deceptive or likely to mislead or deceive, given that it would be harder for the representor to demonstrate reasonable grounds for making the representation in such definite terms(whether or not the promise or warranty did not come to pass). Here, it is clear on the evidence that the representation consisted of no more than a prediction in the nature of an estimate.

546. A prediction is a species of representation as to a future matter (Woolworths at [132]), having a specific characteristic, namely, the representation is an estimate for a given period. That does not involve mere speculation or a guess, at least not in the present case (having regard to Mr Hockeys email of 4 April 2018), but it is a far cry from a promise that an actual level of sales will be achieved for a specified period. In these circumstances, there may well be the basis for a reasonable estimate, having regard to, for example, research as to past performance.

547. Secondly, without sufficiently defining the parameters of what was said to be represented by Mr Hockey, the task of determining whether that conduct was misleading or deceptive, or likely to mislead or deceive is distinctly undermined. This is exactly the issue about which the High Court cautioned of in .

“Hi Ken and Kate

As discussed today here are the predicted sales for the next 12 months.

Wayne -55

Keryn - 20

Christian - 18

Clayton - 8 (Clayton is going into sales 1/7/18 so this is for his first 9 months)

Plus what Ken will do and any other sales person that is employed during this time.

Regards Wayne Hockey”

552. On the basis of this evidence alone, the representation given by Mr Hockey is clearly not in the nature of a promise or warranty. This is evident from the qualifying words used by Mr Hockey, “predicted sales” and the context in which that communication was made.

553. The context in which the representation was given by Mr Hockey adds further support to the conclusion that Mr Hockey could not have intended for the statement in his email of 4 April 2018 to represent a promise or warranty as to future sales.

554. Mr Hockey only provided the sales figures to Mrs Folley, at her request to “provide predicted sales for the next 12 months for you and the sales team”. The evidence of Mr Hockey, in cross-examination, was as follows:

“Q. You sent an email to Mr and Mrs Folley on 4 April 2018 in which you predicted that you would make 55 sales over the next 12 months. Correct?

A. Correct.

…

Q. That email was sent in the context of discussions you were having with the Folleys in which they were asking for information about predicted sales figures. Correct?

A. Yes.

Q. That's clear from the first sentence of this email, which refers to discussions had on 4 April 2018. Correct?

A. Correct.

Q. In those discussions Mr and Mrs Folley had asked you to provide predicted sales for the next 12 months for you and the sales team at Ray White Bateau Bay. Correct?

A. Correct.”

555. Mrs Folley also accepted, in cross-examination, that the figure provided by Mr Hockey was a prediction based on his understanding of what he had done in the past:

“Q. You understood that what Mr Hockey was doing there was predicting the next 12 months based on his understanding of what he had done in the past. Correct?

A. Yes.”

556. Hence, on the evidence of both Mr Hockey and Mrs Folley, the representation given by Mr Hockey in his email of 4 April 2018 was clearly a prediction in the nature of an estimate based on past experience at the time the representation was made, and not in the nature of a promise or warranty by Mr Hockey that an actual number of sales would be reached in the specified period.

557. I turn then to a separate issue, being the relevant time period to which the representation made by Mr Hockey related. The plaintiffs submitted that the Court should find that the representation made by Mr Hockey related to the period from 1 June 2018 to 1 June 2019. As mentioned, these were the dates which were set out in the 2FASOC.

558. I do not agree that the representation of Mr Hockey related to the period from 1 June 2018 to 1 June 2019. Rather, the following words of Mr Hockey’s email very clearly demonstrates that this could not have been the case: “Clayton is going into sales 1/7/18 so this is for his first 9 months”.

559. If the predictions with regard to Clayton were for a 9-month period, and Clayton was going into sales on the 1 July 2018, then the 12-month period that Mr Hockey referred to when he said “the next 12 months” was clearly a reference to the period commencing from April 2018 (being 3 months prior to 1 July 2018). It needs to be also noted that Mr Hockey says in his evidence that the relevant discussions occurred in April, and plainly at a time preceding the making of the Agreement when the date for the execution of the Agreement was not known.

560. Hence, I find that Mr Hockey did not represent to the Folleys that he would “make” 55 sales from 1 June 2018 to 1 June 2019. While the case contended for by the plaintiffs in closing submissions has not been established, in that respect, I, nonetheless, find that Mr Hockey did make a representation in his email of 4 April 2018, which was a prediction of 55 sales by him in the 12-month period from 1 April 2018 to 1 April 2019.

561. It might be noted that my emphasis above, is to underline that Mr Hockey did not use the expression “make 55 sales” in the subject period, in the email of 4 April 2018.

562. For the reasons I will turn to at Issue 18 below, I note that the plaintiffs’ claim in relation to this representation must fail as I do not accept that the representation was misleading or deceptive, or likely to mislead or deceive pursuant to s 18 of the ACL.

Issue 17(d): Did the Hockeys represent to the Folleys that Danc would make sufficient profits to repay the vendor finance?

Submissions: Issue 17(d)

563. Many parts of the submissions of the parties, in this respect, have been earlier summarised, but, for convenience, I propose to provide a full summary at this juncture to introduce my consideration of this issue. In relation to Issue 17(d), in summary, the plaintiffs made the following submissions:

564. In their respective affidavits, the Folleys gave evidence, which Mr Philips submitted was not challenged by the Hockeys, that during a meeting on about 19 January 2018, the following occurred:

(a) Mrs Folley expressed concerns about sales dropping, explained that she had made a cash flow budget based upon sales of 75 properties per annum, referred to the vendor finance and bank loans, and stated that without at least 75 sales per year the Folleys would not be able to pay the Hockeys or the bank; (b) Mr Hockey said: “I have no concerns that you will meet your obligations with my sales with Keryn and Christian and Clayton and Ken.”

2. The gravamen of this evidence was that Mr Hockey had represented to the Folleys that, the Hockeys had confidence that the sales budget of 75 sales per year would be met. The Hockeys had no concerns (or in other words were confident) that the Folleys would meet their financial obligations to re-pay the bank and the vendor finance owed to the Hockeys.
3. Given that this evidence was not challenged, the Court should accept this evidence and find that the Hockeys represented to the Folleys that, based on Danc’s current and likely future sales, they had no concerns about the Folleys ability to meet their obligations to repay the vendor finance (based on an expectation of making at least 75 sales per year).
4. In their affidavits, the Folleys both gave evidence that on 4 April 2018 they had another conversation with Mr Hockey in which they discussed future sales for the business and stressed the importance of the business making at least 75 sales per year in order to meet their commitments to the Hockeys and the bank, and that Mr Hockey replied that he had no concerns that the Folleys would meet their obligations. The substance of this conversation was a representation made by Mr Hockey that Danc would make sufficient sales (and therefore profits) to enable the Folleys to meet their (financial) obligations, including to repay the vendor finance.
5. The Court should not accept Mr Hockey’s denial of this conversation, but rather should prefer and accept the evidence of the Folleys that the conversation did take place, for the following reasons:

“(a) that it occurred in such terms is consistent both with the contemporaneous documents (especially the emails from Mr Hockey of 4 April 2018 and both Mrs Folley and Mr Hockey of 9 April 2019) and the unchallenged evidence of the Folleys that a conversation to similar effect had taken place in January 2018;

(b) in particular, the tone and substance of Mr Hockey’s email of 9 April 2018 (considered further below) was reassuring and expressed confidence as to the prospects of the Business rectifying the downward trend in sales performance, and was therefore consistent with Mr Hockey having had a reassuring conversation with the Folleys only a few days earlier in which he expressed confidence in the projected sales figures leading to sufficient profit to meet their financial obligations”

6. The email which Mr Hockey sent to the Folleys on 9 April 2018 (responding to Mrs Folley’s email of the same date) started by assuring the Folleys that the sales figures he supplied (being those in his email of 4 April 2018) would rectify the position. Mr Hockey then went onto give reasons as to why the sales figures of the business were going to improve. The email also referred to chances for Mr Folley to make sales (as an avenue for income) from the rent roll and indicated that the drain from Ms Wardle’s departure had stopped.

7. This email expressly sought to re-assure the Folleys that the decline in sales numbers of the business would be reversed, and supplemented the impression and representation made by the Hockeys in their two conversations of 19 January 2018 and 4 April 2018, that they had no concerns (and the Folleys should likewise have no concerns) about their ability to meet their financial obligations.

8. In relation to Issue 17(d), in summary, the defendants made the following submissions:

9. The Hockeys deny representing that Danc would make sufficient profits to repay part of the vendor finance.

10. There is no contemporaneous record of the Hockeys making such a representation to the Folleys. The only evidence of any such representation is the Folleys’ testimony. The Court would be hesitant in accepting that testimony, particularly without corroboration from a contemporaneous record: Watson v Foxman (1995) 49 NSWLR 315 at 319 (per McLelland CJ). In particular, the Court would be wary of accepting that testimony as genuine given the striking similarity of the affidavit evidence of Mr and Mrs Folley. That similarity was put to both Mr and Mrs Folley. While they both denied discussing their evidence with the other, the similarity points to collusion between witnesses or, at the very least, there being some third person who held the pen on both affidavits.

Consideration: Issues 17(d)

565. As I have already set out in the above consideration of issues 17(a) to (c), the first step in considering a breach of s 18 of the ACL is to determine, with precision, the conduct said to have been engaged in, or, in other words, the representation which was alleged to have been made by the defendants.

566. In the 2FASOC, the plaintiffs pleaded that the Hockeys represented to Tin-Tagel and the Folleys that Danc would make sufficient profits to repay part of the purchase price of $690,000 advanced by the Hockeys pursuant to cl 6.6(e) of the Agreement.

567. I note that the sum of $690,000, which was advanced by the Hockeys pursuant to cl 6.6(e) of the Agreement, was referred to by the parties in this judgment as the vendor finance.

568. The only evidence relied on by the plaintiffs, in this respect, is the affidavit evidence of both Mr and Mrs Folley as to conversations which occurred between the Hockeys and the Folleys on 19 January and 4 April 2018. The content of those alleged conversations, as recorded in the affidavits of the Folleys, is not in the same terms as either the pleading or the words used in Issue 17(d). Nonetheless, the parties approached this issue upon the basis of that affidavit evidence as being, to some extent, coincident with the subject matter of the pleading and the issue.

569. There is no contemporaneous record of the Hockeys making such a representation to the Folleys. For the reasons I have given in the credit section of this judgment, I do not accept the accounts given by the Folleys, as to the conversations which allegedly occurred on 19 January and 4 April 2018, over the denial which is given by Mr Hockey.

570. That conclusion must result in this aspect of the plaintiffs claim 5 to fail. Nonetheless, there is a further basis to reject Issue 17(d) in claim 5. That is because, even if the accounts given by the Folleys as to subject conversations were accepted, the content of those conversations is not sufficient to establish that a representation was made in the form pleaded, or as enunciated in Issue 17(d).

571. The representation in the alleged conversations, if made, is virtually meaningless. It is hard to see how the Folleys could have placed much importance on it when deciding to buy the Shares in Danc. The alleged statement was made as early as January 2018, six months prior to Completion of the Agreement, in circumstances where Mr Hockey could not know how the Folleys intended to run the business after Completion. Mr Folley even accepted this in cross-examination, which evidence was as follows:

“Q. Where you've said at paragraph 20 that, "Mr Hockey said, 'I've no concerns that you will meet your obligations'."

A. Yes, yes, I recall that, yes.

Q. He didn't say that to you, did he?

A. No, he definitely did.

Q. At this stage, this was six months before the transaction settled, correct?

A. Yes. Yes.

Q. Mr Hockey did not know how you proposed to run this business?

A. Yes.”

572. It may also be noted that Mr Hockey emphasised, in his affidavit of 6 August 2021, why the assurances alleged to have been given in the conversations of 19 January and 4 April 2018 would not have been given by him. The reasons advanced, in that respect, appear to me to be credible. He said he was aware the market was variable and was unaware of the leadership style and management abilities of the Folleys. Hence, he emphasised that the limit of the communications by him was the estimate of 55 sales projected to be made by him, which “was merely a projection, based on the methodology described in paragraph [22] [of his affidavit of 6 August 2021]”.

573. Further, the only representation alleged to have been made by Mr Hockey on 19 January and 4 April 2018, was a statement that “I have no concerns that you will meet your obligations”.

574. This statement, said to have been made by Mr Hockey, is extremely broad. There was no reference made by Mr Hockey to either the vendor finance or, importantly, the profits of Danc. While the Folleys may have interpreted that by “obligations”, Mr Hockey in fact meant that Danc would make sufficient profits in order to repay the vendor finance, in my view, such an interpretation is a substantial leap from the statement which was allegedly actually made by Mr Hockey.

575. I do not find that the Hockeys represented to the Folleys that Danc would make sufficient profits to repay the vendor finance upon the basis of the conversations said to have occurred on 19 January and 4 April 2018. I answer the question raised by Issue 17(d) in the negative. This aspect of claim 5 must fail.

Issue 17(e): Did the Hockeys represent to the Folleys that Mr Hockey would introduce the Folleys to their contacts and inform customers of the change of ownership of the business?

576. In relation to Issue 17(e), the plaintiffs submitted that:

“As the evidence which might establish that this representation was made and relied upon, the Folleys do not press for a finding that the representation was made.”

577. Given the plaintiffs did not press a finding in relation to Issue 17(e), I make no finding in respect of it. I shall note, with respect to Issue 17(e), that it was not pressed.

Issue 17(f): Did the Hockeys represent to the Folleys that a former employee of Danc, Ms Karen Wardle, did not retain a copy of Danc’s confidential information?

Submissions: Issue 17(f)

578. In relation to Issue 17(f), in summary, the plaintiffs made the following submissions:

579. The gravamen of the complaint by the Folleys, with respect to the Hockeys in relation to their representations as to the status of the claim by Danc against its former employee, Ms Wardle, is that the Hockeys did not disclose, before the exchange and Completion of the Agreement, or prior to March 2020, that the proceedings against Ms Wardle involved allegations that she had taken (and used) confidential client information from Danc’s database before, or, on and after, her departure from the business. Mr and Mrs Folley both gave affidavit evidence to that effect, and that they would not have agreed to purchase the business if they had been made aware that the litigation against Ms Wardle involved the taking and use of Danc’s confidential information.

580. While the pleaded representation is to a slightly different effect (namely, that the Hockeys represented that Ms Wardle did not retain Danc’s confidential information), the substance of the pleaded allegation is the same as, or very similar to, the evidence of the Folleys. Both involve the substantive allegation that the Hockeys misled the Folleys by not informing the Folleys as to the nature of the allegations made by Danc in relation to Ms Wardle’s misuse of Danc’s confidential information.

581. Both Mr and Mrs Folley gave affidavit evidence that they were not informed by the Hockeys that the litigation against Ms Wardle included allegations that she had misused Danc’s confidential information, and that if they had been informed of this, they would not have agreed to purchase the business or enter into the Agreement. That evidence was not contradicted by the Hockeys and the Folleys were not cross-examined about those aspects of their affidavit evidence.

582. In their affidavits, Mr and Mrs Hockey both gave evidence that when discussing the potential sale of Danc with the Folleys they did not disclose the litigation with Ms Wardle because they believed the proceedings would be finished before Completion of the Agreement. Thus, while the Hockeys deny making the pleaded representation, they did not deny the substance of the Folleys’ alleged misrepresentation.

583. The context of this allegation is also important. In their email of 5 January 2018, the Folleys had expressed concerns that the loss of Ms Wardle to a competing business would have a negative impact on cash flow and staff morale, noted that Ms Wardle had sold 25 properties per year for Danc for the last 3 years, noted that Mr Wardle had sold 9 properties since leaving Danc, and that, even if the Hockeys won their court case against Ms Wardle, her loss would likely have an impact on the business for some time.

584. In his response to this email, in an email of 6 January 2018, Mr Hockey referred to the litigation against Ms Wardle and said that the reason for the late addition to the contract was because they were hoping to have the matter resolved before exchange, but the legal process was taking longer than anticipated. In this email, Mr Hockey also undertook to bring the Folleys up to speed about the issue and indicated it would have no impact on the Folleys. This email does not make any disclosure as to the nature of the allegations made against Ms Wardle, and seeks to downplay the significance of the case against Ms Wardle

“The fact that the confidential information was in the memory of the defendant as opposed to being written down in a list is of no consequence, The Arbitrator finds that the defendant used her retained knowledge of the business’s customers in order to solicit business for her new employer in the form of the five Property owners in breach of the confidentiality covenant.”

3. Therefore, the essence of the claim against Ms Wardle was that she used her own knowledge of Danc’s clients and business to solicit the business of those clients, in breach of her restraint of trade. Mr Folley accepted that the Statement of Claim in the proceedings against Ms Wardle contained no allegation that Ms Wardle took information from Danc’s database.

Consideration: Issue 17(f)

580. The plaintiffs pleading in relation to Issue 17(f) in the 2FASOC, was as follows:

“…[the Hockeys] represented to Tin-Tagel and [the Folleys] that… a former employee of [Danc], Karen Wardell (sic), did not retain a copy of the computer database maintained or retain information on the computer database maintained by [Danc] detailing, inter alia, the names, contact details, property addresses and notations in relation to current and prospective sellers falling within the definition of Business Confidential Information under cl 14.2(d) of the Agreement.”

581. Clause 14.2(d) of the Agreement provides as follows:

“The Vendors must not during the Restraint period in the Restraint Area:

d. use or divulge or reveal to any person, firm or corporation any confidential information concerning or in any way relating to the Businesses or the Company ("Business Confidential Information") (which Business Confidential Information shall include but shall not be limited to confidential information of every kind concerning or relating to the customers, business transactions, business methods, records, forms, charges, financial affairs, trade secrets and know-how or use directly relating to the Company) or attempt to use any Business Confidential Information for his own purposes or for the purposes of any person, firm or corporation other than the Company or the Purchaser;…”

582. At the outset, I note that the plaintiffs face the same issue which has arisen in relation to a number of the other representations alleged in Issue 17, being that the plaintiffs’ case, as pleaded in the 2FASOC, differs from the case that was put to the Court in submissions. As I have previously explained, this approach adopted by counsel for the plaintiffs is fraught with danger, for a variety of reasons.

583. The case that was put to the Court in closing submissions, was that the Hockeys did not disclose, before the exchange and Completion of the Agreement (or prior to March 2020), that the proceedings against Ms Wardle involved allegations that she had taken (and used) confidential client information from Danc’s database, whether before, on or after her departure from the business. This is clearly very different from the pleaded representation when read with Issue 17(f), being that the Hockeys represented that Ms Wardle did not retain Danc’s confidential information.

584. The most glaringly obvious difference between the two representations, is that one involves conduct in the nature of an act, whereas one involves conduct in the nature of an omission.

585. In other words, the pleading in relation to Issue 17(f) was that there was a representation that was actually made by the Hockeys (ie that Ms Wardle did not retain Danc’s confidential database), whereas the representation which the plaintiffs now seek to rely upon, involves the omission of certain information by the Hockeys.

586. Hence, it is simply unsustainable that the plaintiffs seek to argue that the two representations (one being an act, one being an omission) are, in substance, the same. I also note that, while counsel for the plaintiffs acknowledged that the pleaded representation differed from the actual complaint by the Folleys, he did not seek leave to amend the pleadings in relation to this issue.

587. I also note that that the representation set out at Issue 17(f) of the ASOI also differs from both the pleading and the closing submissions of the plaintiffs, in the sense that the pleading referred to the retention of “a copy of the computer database… maintained by [Danc]…” or “retain information on the computer database” whereas the ASOI referred to the retention of “Danc’s confidential information”. In my view, these two actions are very different.

588. The difficulty faced by the Court is that the conduct said to be engaged in by the Hockeys has not been defined with any specificity. In fact, three very different descriptions of the conduct said to be in breach of s 18 of the ACL have been advanced. As I have previously explained, it is necessary to define, with specificity, the conduct which was said to be engaged in, in breach of s 18 of the ACL. This is of significance in order for the Court to then be able to determine whether the conduct was, in fact, engaged in.

“Q. I'm going to be absolutely clear as I can.

A. Certainly, yeah.

Q. What I'm getting at is this: Your allegation is that the Hockeys said to you, "Mrs Wardle didn't take the database."

A. Correct.

Q. My first proposition to you is to make it absolutely clear that here they're not saying there that, "Don't worry, she didn't take the database."

A. Understood, yes.

Q. Then paragraph 15 of your affidavit.

A. Yes.

Q. You've referred to an email that your solicitors sent?

A. Yes.

Q. Asking questions. Then paragraph 16 is the response.

A. Yes.

Q. There's nothing that you've said to his Honour in your evidence that says that the Hockeys told you she didn't take the database.

A. Yes.

Q. Do you agree with that?

A. Yes.

…

Q. So you were never told that she didn’t take the Danc database?

A. That she didn’t take - I was never told that she didn’t take, no.”

595. In relation to the second part of the evidence, the email from Mr Hockey to Mrs Folley dated 9 April 2018, was as follows:

“Hi Kate

The sales figures I supplied will rectify our position.

As Stephen Nell has always said "sales people equals market share". As mentioned Clayton is going into sales 1/7/18, Keryn and Christians numbers are continually improving and with Ken's involvement we should be back to number one of (sic) two by December. Also we have a new Sales Associate starting soon and will be in sales early next year,

So far this financial year I have only sold 13 from the rent roll. As mentioned to Ken I currently do not canvas the Landlords to sell. So there is another avenue for Income.

Karen's sale numbers have dropped considerable (sic) since leaving our office. Her past 3 listings were not in her data base, so It appears the drain has stopped. We have a court hearing 28/5/18 and based on the facts and evidences our solicitor (who also consults with REEF) is very confident we will win the case.

Regards

Wayne Hockey” (emphasis added).

596. Mr Folley’s evidence in relation to this email was as follows:

“Q. But then can I remind you of this? Can you go forward in your - sorry. My cross-reference in my notes is bad, but I will fix it up in a moment. Can you go please to paragraph 25 of your affidavit? That is page 88 of the court book. The foot of the page.

A. Yes

Q. Paragraph 25, "On the same day, 9 April, we received a response email from Mr Hockey, a copy to Eastway. That email stated," and you can go over the page. It's in response to a separate question about sales figures. Then it 35 refers to - you can read that for yourself, and I'll just take you to the fourth quoted paragraph. "Karen's sales numbers have dropped considerably since leaving her office." Then it says, "Her past three listings were not in her database so it appears the drain has stopped." So what you were being told in that email was that after Karen had left, she was selling properties that were in her database.

A. Yes.

Q. You knew in April 2018 that the risk to Danc's business included that Karen Wardle had been selling properties from her database, isn't that right?

A. I, I'm reading her that her last three were not in her database.

Q. Yes. But you knew in April 2019--

A. Last--

Q. --that prior to that—

A. Sorry, and, you, I've seen that, yes. Yes.

Q. Yes.

A. Yeah.

Q. Up until that point, you understood that they had been?

A. Now I'm reading that, yes.”

597. When Mr Hockey stated that “Karen’s sale numbers have dropped considerable since leaving our office. Her past 3 listings were not in her data base”, it was, at least, implicit in his statement, that Ms Wardle’s listings, prior to this, must have come from her database. In his cross-examination, Mr Folley accepted that, despite the fact he may not have read the email in detail in April 2018, Mr Hockey did convey (in that email) that Ms Wardle had been using confidential information from Danc’s database to sell properties.

598. If the pleading or issue suggested that Ms Wardle did, in fact, retain a copy of Danc’s computer database, the evidence was to the contrary (per Mr Folley’s evidence). Further, there is an absence of proof that she did, in fact, retain a copy of Danc’s computer database.

599. Mr Folley’s evidence was as follows:

“Q. As far as you know, it hasn’t been shown that she did take the Danc database?

45 A. That is correct, yes. Yeah.”

600. Issue 17(f) was framed in terms of the representation that the Hockeys engaged in an act, as opposed to engaged in an omission, (as counsel for the plaintiffs had wished to argue in his further formulation of the case in closing submissions). In that respect, it is on all fours with the pleadings except that it referred to confidential information, as opposed to a computer database.

601. There is, in my view, no proper basis demonstrated for the Court to entertain the change in the plaintiffs’ case in closing submissions which neither corresponds to the pleaded case nor the issue raised for the Court’s attention in the ASOI. However, if I were to pass upon that case, then in any event, the answer would still remain in the negative.

602. In a nutshell, the plaintiffs’ further case as to an omission was to the effect that the Hockeys did not inform the Folleys, prior to execution of the Agreement, that the proceedings against Ms Wardle involved allegations that she had taken and used confidential client information from Danc’s database.

603. The evidence discloses that the plaintiffs claim, formulated in that way, cannot succeed because of Mr Folley’s evidence where he accepted that Mr Hockey did, in fact, tell the Folleys via email on 9 April 2018 (before execution of the Agreement) that after Ms Wardle left Danc, she was selling properties that were from her records within Danc’s database.

604. As to this aspect of the plaintiffs’ case under claim 5, irrespective of its formulation, it must fail, by the answer given with respect to Issue 17(f), which is given in the negative.

Issue 18

605. I will now turn to consider Issue 18, being the question of whether the representations (if made) were misleading. Given how the parties have framed this issue, I will only address the question posed by issue 18 in respect of the representations which have, in fact, been made out.

606. In addressing Issue 18, the relevant approach is to consider what meaning the conduct engaged in conveyed and whether that conduct (in light of that meaning) was misleading or deceptive or likely to mislead or deceive: Self Care at [80]-[82].

607. I note that each representation which has been established on the evidence, being Issue 17(a), (b) and (c), are representations as to future matters. Hence, s 4 of the ACL provides that each representation will be deemed to be misleading unless the Hockeys adduce evidence which tends to establish or permit an inference that they had reasonable grounds for making the representation: Awad at [34]. The principles enunciated above, with respect to s 4 of the ACL, will also apply to the consideration of each of the below issues.

Was the representation that the Hockeys were retiring and would not return to the real estate industry misleading? (The issue corresponding to Issue 17(a))

Submissions

608. In relation to this issue, in summary, the plaintiffs made the following submissions:

609. As this representation was made with respect to a future matter, it is deemed by s 4 of the ACL to be misleading unless the Hockeys have adduced evidence that they had a reasonable basis for making the representation. As the Hockeys have adduced no such evidence, the representation is deemed to be misleading.

610. In any event, there is sufficient evidence (in the form of contemporaneous documentary evidence and the Hockeys’ own affidavit and oral evidence) to warrant a positive finding that, at the time the representations were made, the Hockeys did not intend to “permanently” retire from the real estate industry, and that this representation was, to the knowledge of the Hockeys, misleading at the time that it was made. The plaintiffs submitted that the evidence which supports a finding that this representation was misleading to the knowledge of the Hockeys, included the following matters:

“(a) the affidavit evidence from Mrs Hockey to the effect that she loaned her real estate licence to Mr Boyle, the principal of Ray White Berkeley Vale, from December 2018 to July 2019, coupled with her oral evidence that she was aware that unless Mr Boyle was able to use someone’s licence he would not have been able to keep his agency going;

(b) Mrs Hockey’s (fanciful) oral evidence that, even though she had maintained her real estate licence, and notwithstanding other matters put to her subsequently, she had nevertheless fully retired from the real estate industry, and her (fanciful) denial that by lending her licence to Mr Boyle she was not involving herself in Mr Boyle’s real estate business;

(c) the emails dated 1 April 2019 and 11 July 2019 passing between Mrs Hockey and a former employee of Danc (Christian Purdue) and the principal of Ray White Budgewoi, and her oral evidence in relation to those emails, which (strongly) indicated that not only had Mrs Hockey not retired from the real estate industry but that, as at April and July 2019, she remained actively involved in the industry to the extent of making sales referrals and, together with Mr Hockey, was receiving payment (or reimbursement) for marketing expenses (or, more likely, for referrals);

(d) Mrs Hockey’s refusal to accept the obvious reality that, given the terms of the email communications which had been put to her, it was clear that she had been involved in the real estate industry and in particular the business of Ray White Berkely Vale and Ray White Budgewoi in April and July 2019 bespeaks a consciousness of wrongdoing on her part. This is because accepting these uncontroversial propositions would amount to her admitting that she had not adhered to the representation she had made to the Folleys that she would retire from the industry;

(d) Mr Hockey gave evidence in his affidavit (affirmed on 6 August 2021) that since the termination of his employment by Danc (in late January 2019) he had retired. However, after giving that evidence, Mr Hockey rejoined the real estate industry, and began working for a competing Ray White real estate agency in Budgewoi in April 2022. Even though Mr Hockey gave a further affidavit in the proceedings on 2 August 2024, he did not take any steps in giving that second affidavit, or at the commencement of his oral evidence, to correct the evidence given in his first affidavit that he had retired;

(e) in re-examination, Mr Hockey gave the telling evidence that one of the reasons that he had restarted employment from April 2022 was because that date was after his three year restraint period. This evidence is telling because it indicates that Mr Hockey had every intention of re-joining the real estate industry once his restraint period had finished, which intention is (completely) inconsistent with the representation that he made to the Folleys that he intended to retire from the industry. This evidence is also consistent with the terms of the letter from his solicitors of April 2022 which noted that Mr Hockey had no obligation to advise of his fresh employment with Ray White Budgewoi because he was no longer the subject of a restraint of trade, but overlooked the fact that he had represented to the Folleys that he intended to retire from the industry following completion of his employment with Danc;

(f) the email exchange between Mr Hockey and Mr Boyle of 8 June 2019 in which Mr Hockey provided bank details to Mr Boyle and Mr Boyle forwarded those details on to facilitate payment of a referral fee for Mr Hockey, as well as Mr Hockey’s oral evidence where, having initially denied the possibility, but then having accepted that he had made a sales referral for a friend (to Ray White Budgewoi) and that he expected to be and was actually paid (a not insignificant fee) for making that referral, he refused to accept that in making this referral he was working in real estate or in the business of a competing agency. This evidence, like that of Mrs Hockey, also bespeaks a consciousness of wrongdoing on the part of Mr Hockey.” (Footnotes omitted)

609. In relation to this issue, in summary, the defendants made the following submissions:

610. The Hockeys had reasonable grounds for making the representation at the time it was made, and it was the intention of both Mr and Mrs Hockey to retire at the time they made the relevant representation. The Hockeys were not challenged during cross-examination as to their intentions at the time the representation was made.

611. A genuinely held intention alone is sufficient to find that the representations were not misleading or deceptive, regardless of any subsequent conduct by the Hockeys. In any event, Mrs Hockey has not worked in the real estate industry since Completion (lending her real estate license to Boyle Partners did not constitute working the real estate industry, as Mrs Hockey did not work and did not get paid), and Mr Hockey returned to work at another Ray White franchise on a part-time basis from 26 April 2022 to in or around June 2023, as a direct result of the Folleys’ failure to pay the vendor finance and the incurrence of legal fees in the course of these proceedings.

Consideration

610. The authorities are clear that the mere fact that representations as to future conduct or events do not come to pass, does not make them misleading or deceptive: Bill Acceptance Corp**oration Ltd v GWA Ltd (1983) 50 ALR 242 (“Bill Acceptance”) at 250 (per Lockhart J). Similarly, it is not sufficient to establish a breach of s 18 of the ACL by demonstrating that a representation was made as to a future event and that a contrary decision was made some time afterwards: Mobil Oil at 521.

611. Hence, the mere fact that the Hockeys ended up returning to the real estate industry and did not remain in retirement (in Mr Hockey’s case after his designated period of employment), does not (without more) make the representations made by the Hockeys misleading or deceptive.

612. Rather, it is necessary to carefully consider the intention of the Hockey’s at the time the representation was made, which was (as per the pleading) prior to 17 May 2018, and whether, at that time, there were reasonable grounds for the making of the representation: Doppstadt at [190]; McGrath at [198]; Sykes at 513.

613. The defendants relied on the principle that an honest belief in a future representation’s accuracy may constitute reasonable grounds where the statement is concerned only with the speaker’s intention: Mobil Oil at 521; Ceccon Transport at [366] – [367]. I accept, with respect, that that is the correct statement of principle.

614. Many of the factual premises upon which the respective parties submissions were based, as summarised above, have been dealt with earlier in this judgment, in a number of significant respects, by the rejection of the factual propositions advanced based on the evidence. I do not repeat those findings here but will apply them to the extent required in the discussion of this issue below.

615. I shall first attend to the plaintiffs’ submissions regarding Mrs Hockey.

616. The evidence relied on by the plaintiffs to prove that Mrs Hockey did not intend to retire from the real estate industry, has been the subject of affirmative findings made earlier in this judgment. Those findings were, in summary, as follows:

617. Mrs Hockey’s oral evidence, that by loaning her real estate licence to Mr Boyle she was not involving herself in Mr Boyle’s business, was not evasive or disingenuous. Rather, her responses reflected her understanding of the questions posed as to her involvement in that business.

618. Mrs Hockey’s oral evidence, where she denied being involved in the business of Ray White Berkeley Vale in any capacity, was fanciful and unrealistic. Mrs Hockey had plainly prepared a draft market appraisal for Mr Purdue.

“Q. And you go to paragraph 74. You see there, in paragraph 74 of your affidavit, you say that your employment was terminated "and since this time I have retired". Do you see that?

A. Yes.

Q. When you were talking about your employment being terminated you were talking about your employment with Ray White Bateau Bay. Correct?

A. Yes.

Q. That happened in about February 2019 that your employment was terminated. Correct?

A. Yes.

Q. I want to suggest to you that the evidence that you gave in paragraph 74 of your affidavit, that since the termination of your employment with Ray White Bateau Bay in 2019 you have retired - do you agree that that evidence there is not entirely accurate?

A. Yes.

Q. The reason you agree with that is because in April 2022 you started employment at Ray White at The Entrance. Correct?

A. No. I'll say, yeah, I, I, I rephrase that, "Yes, it was known as Ray White The Entrance, but it was, the main company was Ray White Thompson Partners at Gorokan.

Q. Can I just hand to you a document, which is not in the court book, and just ask you to have regard to that?

PHILIPS: I can hand up a copy to your Honour if that assists.

HIS HONOUR: Thank you.

PHILIPS

Q. Do you see that letter that I just - one page letter--

A. Yes.

Q. --that I just handed to you?

A. Yes.

Q. Do you recognise that as a letter that your solicitors, Aubrey Brown, sent to, amongst others, Mr Adams, who was the 5 lawyer for the purchasers in April 2022?

A. Yes.

Q. You see that? That letter records that you were to commence employment on 26 April 2022 with Ray White Thompson Partners and Ray White The Entrance. Correct?

A. That's correct.

Q. The date of this letter, it's dated 21 April 2021. Do you see that?

A. Yes.

Q. But, it should have been actually correctly dated about 21 April 2022. Correct?

A. Yes.

Q. So, the last sentence in that letter, that you commenced employment with Ray White at Budgewoi on 26 April 2022 is correct?

A. Yes.”

627. Mr Hockey’s re-examination on this point, was as follows:

“Q. Mr Hockey, yesterday you'll remember being asked about your first affidavit in paragraph 74. You said that after the business was sold you were – after your employment was terminated in February 2019 that since this time you had retired. Do you remember that question?

A. Yes.

Q. And that then you were asked other questions about from April 2022 where you restarted employment?

A. Yes.

Q. Why did you do that?

A. It was after my, my three year restraint period, and due to the vendor finance not being paid it put us into financial difficulties, because we were relying on our - that money, plus our normal super to actually live.”

628. I do not consider that Mr Hockey’s response in re-examination does demonstrate that it was always his intention to re-join the real estate industry following his three-year restraint period. In my view, this submission by the plaintiffs fails to take account of the other reasons, given by Mr Hockey, in his response.

629. Mr Hockey expressed the view that he only returned to employment in April 2022, because he was in financial difficulty and his restraint period had ended. What is clear from his response is that if the Hockeys had not been in financial difficulties then Mr Hockey would not have returned to the real estate industry.

630. Mr Hockey’s response cannot lead to the conclusion that it was always his intention to return to the real estate industry following his restraint period. Rather, the more likely reason that Mr Hockey referenced his restraint period at all, during this exchange, was because he was cognisant that the breach of the restraint was a highly contested topic in these proceedings and was, therefore, eager to demonstrate his compliance with that restraint. In fact, it is also likely that Mr Hockey did not re-enter employment until after his restraint period ended (despite being in financial difficulty), given his desire to comply with those terms of the Agreement.

631. I accept that Mr Hockey had reasonable grounds for making the representation to the Folleys that he would retire and not return to the real estate industry at the time of making that representation. This was Mr Hockey’s genuinely held belief at the time and Mr Hockey could not have known that in April 2022, almost 4 years following Completion, he would be in financial difficulty and need to re-enter the workforce.

632. While the plaintiffs also pointed to the email exchange between Mr Hockey and Mr Boyle, of 8 June 2019 (in which Mr Hockey provided Mr Boyle with bank details for himself and Mrs Hockey), as evidence that the Hockeys did not intend to retire from the real estate industry, I note my prior findings, in this respect, that there was no evidence that any payments were made to the Hockeys arising from the provision of that information and, therefore, no basis upon which that act by Mr Hockey would, in and of itself, attract the operation of cl 14 of the Agreement.

633. In the event, I find that the representation, in so far as it related to Mr Hockey, was not misleading or deceptive. However, I find that the representation, in so far as it related to Mrs Hockey, was misleading or deceptive, given that Mrs Hockey did not have reasonable grounds for making the representation at the time it was made: s 4 of the ACL.

634. I answer the question raised by issue 18, with respect to Issue 17(a) in those terms.

Was the representation that Mr Hockey would work for Danc for a further 2 years misleading? (The issue corresponding to Issue 17(b))

Submissions

635. In relation to this issue, in summary, the plaintiffs submitted that as this representation was made in relation to a future matter, and the Hockeys have not adduced any evidence that they had a reasonable basis for making it, the representation is deemed to be misleading.

636. In relation to this issue, in summary, the defendants made the following submissions:

637. First, the representation was not misleading – it was a statement as to Mr Hockey’s future conduct which accorded with his genuine intention at the time. The defendants referenced the following par of Mr Hockey’s affidavit of 6 August 2021 in this regard:

“[73] I had every intention to work the 2 years within the Business pursuant to my employment agreement dated 1 June 2018. I wanted to assist the staff with the transition to new owners and build a further financial buffer with wages and commission for my retirement as the sale price was less than I expected and the vendor finance meant that there was a delay in receiving a significant portion of the price.”

2. Secondly, the only reason Mr Hockey did not work for Danc for the full 2 years after Completion was because the Folleys dismissed Mr Hockey on 4 February 2019.

Consideration

637. It was common ground between the parties, as stated in the JSFB, that Mr Hockey’s employment with Danc was terminated on 4 February 2019. This was approximately 9 months after the execution of the Agreement on 17 May 2018.

638. Importantly, I note that whether this representation was made on reasonable grounds is to be assessed as at the date of the representation, and by reference to the information that was available at the time the statement was made and actually relied upon by Mr Hockey: Doppstadt at [190]; McGrath at [198]; Syke**s at 513.

639. Pursuant to the plaintiffs’ pleading, the representation was made prior to entering into the Agreement. Mr Hockey could not have been aware, at this time, that the Folleys would terminate his employment in February 2019.

640. Further, the fact that Mr Hockey signed up to a new employment agreement with Danc and entered into the Agreement, which itself had a clause which stated that “[t]he parties acknowledge and agree that Wayne Hockey will be employed by the Company for a period of at least two (2) years on and from the Completion date”, is, in my view, evidence, in and of itself, that Mr Hockey had every intention, at the time the representation was made, to work for Danc up until, at least, 17 May 2020 (being 2 years from the date of execution of the Agreement). I also accept the affidavit evidence of Mr Hockey, that this was, in fact, his intention.

641. In this regard, I note that intention and capacity to perform will generally be sufficient to establish that a promise or representation as to future conduct was made on reasonable grounds. Azzi at [87].

642. Further, while the mere fact that representations as to future conduct do not come to pass, that does not make them misleading or deceptive: SPAR at [18]-[21], citing Bill Acceptance at 250. I also note that, clearly, the reason Mr Hockey did not make good on this representation was by no fault of his own. It is likely that Mr Hockey intended to continue working for Danc right up until his employment was terminated in February 2019.

643. In the result, I accept that Mr Hockey had reasonable grounds, in or around May 2018, to make the representation that he would work for Danc for a further 2 years following execution of the Agreement.

644. If I was required to separately make a finding under s 18 of the ACL, I would find it was not misleading based on the above conclusions.

645. I answer the question raised by Issue 18, with respect to Issue 17(b), in the negative, and, so far as the plaintiffs have relied upon this representation to sustain claim 5, it must fail.

Was the representation that Mr Hockey predicted he would make 55 sales in the 12-month period from April 2018 to April 2019 misleading? (The issue corresponding to Issue 17(c))

646. I note, at the outset, that the representation which I have found was made by Mr Hockey on 4 April 2018, is different from the representation pleaded by the plaintiffs (so far as the pleadings specified a period 1 June 2018 to 1 June 2019) and closing submissions. However, I will nonetheless address why, in my view, the actual representation made by Mr Hockey, as found in the discussion of Issue 17(c), did not breach s 18 of the ACL.

Submissions

647. In relation to this issue, in summary, the plaintiffs made the following submissions:

648. Mr Hockey gave evidence that he used his business plan and previous year’s sales to set a target for the following year. This does not establish that there was a reasonable basis for Mr Hockey to predict that he would make 55 sales, as Mr Hockey did not adduce evidence as to what the previous year’s averages were. The only evidence Mr Hockey sought to adduce (which was ultimately not tendered) related to targets for the 2018/2019 year. Thus, Mr Hockey relied solely on evidence of his targets for the 2018/2019 year (not past actual sales figures) when making predictions about his likely sales figures for that same (future) period. This evidence does not establish that there was a reasonable basis for making the prediction of annual sales of 55.

649. These predictions as to future sales were misleading at the time they were made. Mr Hockey fell short of achieving this prediction by a substantial variance.

650. In relation to this issue, in summary, the defendants made the following submissions:

651. This was a representation as to a future matter. Mr Hockey had a reasonable basis for making that representation which was based on his past performance at Ray White BB. Mrs Folley accepted in cross-examination that she understood that Mr Hockey’s prediction of 55 sales was based on his past performance.

652. Although the question of whether Mr Hockey did or did not make the 55 sales is irrelevant to the question of whether the representation, when made, was misleading, there were a number of intervening circumstances outside Mr Hockey’s control which prevented him from achieving the projected 55 sales in the relevant 12-month period. These included:

(a) Mr Hockey being badly injured when a car drove into him at Ray White BB on 1 August 2018, which meant he could not walk for a month, had to work part time on his return to work until 1 December 2018, and, during that period, sometimes had to work from home; (b) Mr Hockey’s clients were reassigned to other staff; (c) Mr Hockey’s dedicated sales assistant was removed from him; (d) there was a downturn in the property market (acknowledged by Mr Folley); and (e) Mr Hockey’s access to ‘MyDesktop’ was removed on 21 December 2018, prior to his termination in February the following year.

Consideration

649. In relation to this issue, the plaintiffs disputed that Mr Hockey’s prediction (of 55 sales in the next 12 months) was based on an estimate of his actual past performance, or alternatively, at least so far as Mr Hockey’s estimate was predicated on his actual past performance, that there lacked an actual attestment of past data that would have properly laid the foundation for the prediction given by Mr Hockey.

650. In making this submission, the plaintiffs were correct to accept, at least implicitly, that past performance of a business can provide a reasonable basis for predicting future performance: Rakic at [96], [124].

651. The basis for the plaintiffs’ argument appears to be twofold. First, Mr Hockey could not have given a proper estimate for the period 1 June 2018 to 1 June 2019 because Mr Hockey only relied on mere target figures for the 2018/2019 year (and not actual or historical past sales figures).

652. In advancing that proposition, the plaintiffs held on to the argument that the period which Mr Hockey referred to in his email of 4 April 2018 was 1 June 2018 to 1 June 2019. Those dates, if found, would have created a narrative in which the plaintiffs could argue that the estimate provided by Mr Hockey was no more than a target, or in other words, an aspiration, and, therefore, the prediction provided by Mr Hockey could not be considered reasonable.

653. However, the focus on this argument was misguided, given that, as I have already established, the period of time in question for which Mr Hockey provided the predicted sales figures was 1 April 2018 to 1 April 2019. With this in mind, the argument that Mr Hockey merely relied on target figures does not stack up. In fact, Mr Hockey could not have used or relied on his 2018/2019 target figures, given that this is not even the period for which he was providing a prediction.

654. It is also unlikely that Mr Hockey would have even prepared his 2018/2019 targets as at 4 April 2018, given that, pursuant to his affidavit evidence, this was usually something which he prepared “[i]n or about April/May each year”.

655. Secondly, the plaintiffs disputed that Mr Hockey had based his prediction on his prior sales figures. However, the evidence, in my view, supports a conclusion that Mr Hockey did so. In his affidavit of 6 August 2021, Mr Hockey stated that “[m]y estimate of 55 sales was merely a projection, based on the methodology described…above”, which was to “look at my previous year's results to work out my averages so I can set my following years targets” and “[t]o attain the status of “Elite” within the Ray White franchise you had to settle a minimum of $600,000 in commission” which “equated to approximately 45 to 55 sales”. There was no cross examination upon this evidence.

656. While the plaintiffs are correct to submit that Mr Hockey did not adduce any documentary evidence which would verify his ‘previous year’s results’, I accept Mr Hockey’s testimony, the substance of which is, that the figure of 55 was not something which Mr Hockey made up. In fact, Mr Hockey’s evidence is that the figure of 55 sales was predicated on an average of his previous year’s results as well as the fact that he had attained the status of “Elite” within the Ray White franchise. This suggests there was an objective basis for the calculation and prediction.

Issue 19

Submissions: Issue 19

664. In relation to Issue 19, in summary, the plaintiffs made the following submissions:

665. Section 243 of the ACL provides that the orders which the Court may make consequent upon a finding that misleading and deceptive conduct has caused a claimant to suffer loss and damage includes an order for rescission of a contract in whole or in part. The Court has a wide discretion with respect to the nature of the relief it can and should grant.

666. In this case, it would be appropriate for the Court, in exercising its discretion, to make an order rescinding the vendor finance provisions of the Agreement. The reasons for this include the matters relied upon with respect to Issue 16, as well as the following further matters.

(a) First, the primary loss, and damage suffered by the Folleys (as opposed to Danc itself) as a result of the misleading and deceptive conduct of the Hockeys, is their liability to comply with their obligations to the Hockeys under the vendor finance provisions of the Agreement. Rescission of the vendor finance provisions of the Agreement would have the practical effect of eliminating the extant liability of the Folleys to the Hockeys under those provisions and, thereby, ensure that the Hockeys compensate the Folleys for their loss and damage caused by the misleading conduct. (b) Secondly, such an order would be consonant with the Folleys’ evidence that, absent the misrepresentations, they would not have entered into the Agreement, as well as the Folleys’ claim that this ws a “no transaction” case. This is because rescission of the remaining unsatisfied aspects of the Agreement vis-a-vis the vendor finance provisions would, as much as possible, put the Folleys back in the position they would have been in if they had not exchanged or completed the Agreement, that is, having no obligation to pay the vendor finance. (c) Thirdly, in circumstances where the misleading and deceptive conduct of the Hockeys caused the Folleys to enter into the Agreement (and thereby committing to re-paying the vendor finance), which otherwise they would not have done, such an outcome would involve the Hockeys compensating the Folleys for the exposure to loss and damage which their conduct caused. (d) Fourthly, such an order would be entirely consistent and consonant with the relief sought by the Folleys with respect to claim 4. In other words, if the Folleys’ claims for breach of contract are upheld, then there would be no need for the Court to have any concerns that there might be overcompensation for the Folleys as the relief sought (and granted) in relation to both major aspects of their claims would be the same. I interpose to note that I have rejected claim 4.

3. The width of discretion under s 243 of the ACL means that there does not have to be a link between the misleading and deceptive conduct and exposure under the vendor finance provisions. If this submission is directed to causation, then I reject it for the reasons discussed below.

4. In the alternative, if the Court is not minded to grant rescission as claimed, the quantum of the Folleys’ loss is (at least) the same as the quantum of the amount claimed by the Hockeys’ in their CC. This is because whatever liability the Folleys may have to the Hockeys, under the vendor finance provisions of the Agreement, represents the minimum amount of their loss flowing from the Hockeys’ misleading conduct.

5. In relation to Issue 19, in summary, the defendants made the following submissions as to why the Folleys have not established any entitlement to relief of the kind sought:

6. Even if the Folleys could establish that the Hockeys engaged in misleading and deceptive conduct, they have not proved causation or loss. Despite the Folleys’ submission that they are running a “no transaction” case, there is no evidence that they would not have entered the Agreement but for the alleged misleading and deceptive representations. Damage is an essential element of this cause of action which the Folleys have not attempted to establish.

7. Further, there has been no attempt to quantify the Folleys’ claimed loss. In a “no transaction” case, damages are assessed by reference to the difference between the purchase price paid by the Folleys and the actual value of Danc at the time of Completion (see Potts v Miller [1940] 64 CLR 282; [1940] HCA 43; Gould v Vaggelas (1984) 157 CLR 215; [1984] HCA 68 (“Gould”) at 220). That customarily involves expert valuation evidence, and no such evidence has been proffered by the Folleys.

8. Reliance is placed on the defendants’ submissions under Issue 16, which conclude that it is impossible for the Court to now achieve restitutio in integrum between the parties

9. While orders for rescission under s 243 of the ACL are a form of statutory relief, distinct from the grant of rescission either at common law or in equity, the courts have held that the exercise of the discretion to order rescission under the ACL will be informed and guided by the principles regarding rescission at common law and in equity (see Chint at [130]; Harvard Nominees Pty Ltd v Tiller *(*No 4) [2022] FCA 105; (2022) 403 ALR 498 at [76]).

Consideration: Issue 19

666. The relief sought by the plaintiffs in relation to claim 5, Issue 19, was a partial rescission of the Agreement pursuant to s 243 of the ACL, or, in the alternative, damages in the same amount as is claimed by the Hockeys in their CC.

667. The only conduct which the plaintiffs have successfully established as misleading and deceptive, in breach of s 18 of the ACL, is the representation by Mrs Hockey to the Folleys and Tin-Tagel that she intended to retire from the real estate industry (“the misrepresentation”).

668. The consideration of relief and the questions raised by Issue 19, will only be considered to the extent that they relate to the misrepresentation, although, I will make some broad observations about the other representations at the end of my consideration as to this issue.

669. The plaintiffs claim for relief under Issue 19, must fail for the following three reasons (which I will turn to, in sequence, below):

670. the plaintiffs are not entitled to rescission or partial rescission of the Agreement pursuant to s 243 of the ACL;

671. the plaintiffs have not proven any loss suffered by them as a result of the misrepresentation; and

672. the plaintiffs have not adduced evidence of the difference between the purchase price paid by the plaintiffs and the actual value of Danc as at the time of Completion, which is generally the measure of loss in a ‘no transaction’ case.

Are the Folleys entitled to rescission or partial rescission?

670. I accept the defendants’ submission that, while orders for rescission under s 243 of the ACL are a form of statutory relief, distinct from the grant of rescission either at common law or in equity, the courts have nonetheless held that the exercise of the court’s discretion will be informed and guided by the principles regarding rescission at common law and in equity: Chint at [130]; Akron Securities Ltd v Ilife (1997) 41 NSWLR 353 at 367 (per Mason P); Campbell v BackOffice Investments Pty Ltd [2008] NSWCA 95 at [105] (per Giles J).

671. Hence, the same considerations that affect the availability of rescission in equity, including the requirement to achieve practical justice between the parties and the non-availability of resitutito in integrum, will be matters that I take into account in deciding whether to grant the relief sought by the plaintiffs.

672. The statement of the law, in this regard, is clearly set out by Colin Lockhart in The Law of Misleading or Deceptive Conduct: [27]

“The principles applicable to rescission provide ‘safe, if not necessarily exclusive, guidance’ as to whether contracts induced by misleading conduct are to be declared void. Both remedies are directed at the ‘rehabilitation and restoration of the parties … to the position they occupied before the contract was made’, and, hence, a ‘central consideration is that of restitutio in integrum’. If the claimant is unable to return anything of value acquired under the contract in exchange for a refund of the purchase price, avoidance may exceed the compensatory boundaries of the statutory remedy and, on that basis, be refused.” (footnotes omitted)

673. Hence, for the same reasons which I set out in the discussion of Issue 16 with respect to partial rescission, and the further reasoning under this issue, the plaintiffs’ claim for partial rescission of the Agreement pursuant to s 243 of the ACL, must fail with respect to the misrepresentation under claim 5.

674. Without repeating my previous findings, I note that the relevant considerations as to why restitutio in integrum is not possible, include the Folleys’ delay in pursuing relief, and the irretrievably altered circumstances surrounding the transaction and the business of Danc.

675. In addition to the reasons set out at Issue 16, with respect to the conclusion that the orders for partial rescission sought by the plaintiffs would not achieve practical justice between the parties, I also note, in the context of this claim, that there is no nexus between the misrepresentation made by Mrs Hockey (that she intended to retire), and the provisions sought to be set aside. In fact, the vendor finance provisions benefitted the Folleys by deferring payment of the vendor finance amount for 2 years, so as to lower the Folleys’ upfront cost.

What is quantum of the Folleys’ loss? (Issues 2 and 3 in [669] above)

676. A plaintiff who suffers loss or damage by reason of conduct which is in breach of s 18 of the ACL, may bring an action for damages and recover the amount of the loss or damage suffered from the person whose conduct constituted the contravention. The object of damages is to compensate the plaintiffs for the loss suffered as a result of misleading or deceptive conduct, and to put the plaintiffs in the position they would have been, had that conduct not been committed.

677. In considering damages, the normal rules on causation and remoteness, including the commonsense test for causation, apply. Hence, it is sufficient if the misleading or deceptive conduct was a cause of the loss or damage suffered. For example, a causal link between the misleading or deceptive conduct and the loss or damage suffered may be established by proof of inducement to enter into a disadvantageous contract: Australian Breeders Co-op**erative Society Ltd v Jones (1997) 150 ALR 488 at 530 (per Wilcox and Lindgren JJ, with whom Lee J agreed).

678. The plaintiffs submitted that the loss and damage suffered by the plaintiffs was the liability to comply with the obligations under the vendor finance provisions of the Agreement, in particular, the obligation to pay the remaining amount of vendor finance (being the amount claimed by the Hockeys in their CC).

679. The first issue with this submission, is the characterisation of the vendor finance provisions as a “loss”. The vendor finance provisions of the Agreement were not disadvantageous to the plaintiffs, but, in fact, were designed to assist the Folleys to purchase Danc by providing a loan from the Hockeys. To characterise this obligation as a “loss” suffered by the plaintiffs is erroneous.

680. Secondly, the relevant question, in examining causation, is to ask: in the absence of the misrepresentation, would the plaintiffs have agreed to the obligations under the vendor finance provisions of the Agreement? When the question is framed in those terms, it is clear that the plaintiffs’ claim, in respect to damages, must fail. There is no causal link between the misrepresentation and the obligations of the plaintiffs under the vendor finance provisions, especially noting that the provisions were in fact designed to assist the plaintiffs. Their evidence does not address, let alone sustain, that causal link.

681. While the evidence of the Folleys was, in summary, that they would not have entered into the Agreement if the Hockeys had not represented that they were retiring, the plaintiffs have not attempted to explain how that position was linked to the vendor finance provisions, or to quantify their loss by reference to the difference between the purchase price paid by the plaintiffs and the actual value of Danc at the time of Completion. This is usually the measure of damages in a no transaction case: Gould at 220 (per Gibbs CJ).

CROSS CLAIM

685. The issues relevant to the resolution of the CC, as set out in the ASOI were as follows:

686. Are the Folleys are liable to pay the Hockeys $631,657.29 (plus interest at 5% per annum from 1 June 2020 onwards)? (“Issue 20”)

687. Are the Hockeys or the Folleys entitled to the balance of the Retention Amount of $54,915.36 plus accrued interest, and if not, how should this balance be distributed? (“Issue 21”)

688. The ASOI records the first issue with the date 1 June 2020, however, I note that the defendants submitted that it should have read 1 June 2018.

Issue 20

Submissions: Issue 20

687. In relation to Issue 20, in summary, the plaintiffs made the following submissions:

688. The Folleys should not be found liable to pay the amount of unpaid vendor finance claimed by the Hockeys in their CC, or any amount.

689. As such, the Hockeys’ CC should be dismissed (with costs).

690. In relation to Issue 20, in summary, the defendants made the following submissions:

691. This agreed issue identified 1 June 2020 as the start date for interest, but the correct date is 1 June 2018 pursuant to cl 6.6(e) of the Agreement.

692. Under cl 6.6(e) of the Agreement, the vendor finance was repayable on 1 June 2020. Under cl 6.6(e)(i) of the Agreement, in the event of non-payment on that date, the Hockeys are entitled to repayment of the vendor finance plus interest at 5% per annum since the completion date (1 June 2018).

693. The only arguments by the Folleys, put against the Hockeys’ entitlement to payment of the vendor finance and balance of the retention amount, were the assertions made by the 2FASOC. As such, if the Folleys fail to establish their claims under the 2FASOC, then the Hockeys are entitled to the relief sought in their CC.

694. The Hockeys accept that, under cl 6.8(f) of the Agreement, the vendor finance must be adjusted to allow for a set off of employee entitlements. The amount of employee entitlements is $58,342.71 and is not in dispute. The net amount of vendor finance that is, therefore, due and payable to the Hockeys is $631,657.29 (plus interest on that amount from 1 June 2018 at 5% per annum).

Consideration: Issue 20

689. While the plaintiffs submitted that the Folleys should not be found liable to pay the amount of unpaid vendor finance, they did not substantiate their reasons or provide any evidence in support of this submission, other than to say “[f]or all the reasons set out above”.

690. The plaintiffs have approached the CC with a level of generality which is of minimal assistance to this Court. However, I agree with the submission of the defendants, that what may be inferred from the plaintiffs’ submission, is that if the claims set out in the 2FASOC are not made out (to which the plaintiffs must refer when they reference “all the reasons set out above”), then the Hockeys must be entitled to the relief sought in the CC.

691. In this regard, I note that the plaintiffs have failed to establish each of the claims set in the 2FASOC (in the case of claim 5, by failing to establish a basis for the grant of relief) and have not otherwise sought to adduce any other evidence as to why they should not be liable to pay the outstanding vendor finance amount, pursuant to cl 6.6(e) of the Agreement.

692. Clause 6.6(e) of the Agreement, as earlier extracted, reads as follows:

“6.6. Payment by the Purchaser

The Purchaser agrees to pay the Purchase Price in the following manner:

…

e) The sum of $690,000.00 as part of the balance of the Purchase Price shall be advanced by Wayne Craig Hockey and Susan Noelene Eastway to the purchaser for a period of two (2) years on the following conditions:

(i) In the event that the Purchaser fails to repay the total sum of $690,000 on the due date, interest at the rate of five per cent per annum will accrue on the sum of $690,000 from the date of completion up to but excluding the date of payment. It will be computed on a daily basis for actual days elapsed.

…”

693. I agree with the defendants that the correct start date for the accumulation of interest is from 1 June 2018. This is evident from the words of cl 6.6(e)(i), “from the date of completion”, as well as the JSFB, which reads as follows:

“Under clause 6.6(e) of the Share Sale Agreement, the Hockeys agreed to advance to the Folleys $690,000 in Vendor Finance. This was to be repayable 2 years from completion, with interest of 5% per annum payable on any unpaid balance after, accruing from the date of Completion.” (emphasis added)

694. While Issue 20, as set out in the ASOI, frames the question for this Court in terms of whether the Folleys are liable to pay the Hockeys the unpaid vendor finance amount, I note that pursuant to cl 6.6(e) of the Agreement, it is, in fact, Tin-Tagel, as the purchaser under the Agreement, who has the obligation to repay the vendor finance. I do note, however, that the purchaser is nominated in the Agreement as Tin-Tagel “as trustee for the KR & KM Folley Family Trust” and the Folleys are guarantors.

695. I also note, as was submitted by the defendants, that under cl 6.8(f) of the Agreement, the total sum of $690,000 must be adjusted to allow for a set off of employee entitlements. In answer to Issue 3, earlier in this judgment, I have accepted that cl 6.8(f) applies over cl 6.6(b)(iii) and, therefore, the employee entitlements were a set off against the amount of vendor finance, when that became payable two years after Completion.

696. The defendants submitted that the amount of employee entitlements is not in dispute and is an amount of $58,342.71. In addressing Issue 6, the plaintiffs submitted that “there has been an acceptance by the parties on the pleadings that under the Agreement, an amount of $58,342.71 was to be taken into account by way of employee entitlements.”

697. Hence, I accept that this amount is not in dispute and, therefore, accept that the net amount of vendor finance due to be paid to the Hockeys, pursuant to cl 6.6(e) of the Agreement (after the set off has been applied pursuant to cl 6.8(f) of the Agreement), is $631,657.29 (being $690,000 minus $58,342.71).

698. In the result, I find that that pursuant to cl 6.6(e) of the Agreement, Tin-Tagel is liable to pay the Hockeys the total sum of $631,657.29 plus interest, at a rate of 5% per annum on that amount, accrued on a daily basis from 1 June 2018. Clause 6.6(e)(i) of the Agreement provides that the interest will continue to accrue up to but excluding the date of payment. The CC seeks a relief that the interest would be payable in the amount of $73,808.72 as at 1 October 2020. No party made any submissions about the end date for the calculation of interest. The directions the Court shall make in this matter shall provide for the resolution of that issue.

699. I answer the question raised by Issue 20 in those terms and note that the defendants’ CC, in this respect, must succeed.

Issue 21

Submissions: Issue 21

700. I have referred to the submissions of the parties earlier as to the retention amount with respect to claim 2. I do not repeat that earlier discussion of the parties’ submissions, but for convenience will summarise below the matters that they have brought forward in submissions under this issue for particular attention. These appear below.

701. In relation to Issue 21, in summary, the plaintiffs submitted that the Folleys are entitled to (at least) the balance of the retention amount of $54,915.36 plus accrued interest, and there should be an order made for that amount to be released to the Folleys.

702. In relation to Issue 21, in summary, the defendants made the following submissions:

703. Under cl 7 of the Agreement, the Hockeys were entitled to payment of the retention amount, less any deductions for lost MAAs (as offset by gained MAAs). No basis has been shown on which the Hockeys are not entitled to the balance of $54,915.36.

704. The grounds on which the Hockeys are entitled to the retention amount were set out in a letter from their solicitors to the Folleys’ solicitors dated 10 April 2019 and fell into three categories:

(a) first, there were 7 properties which the Folleys had asserted were lost MAAs when in fact they had been lost prior to Completion and were, therefore, not included in the rent roll which the Folleys purchased as part of the Agreement; (b) secondly, there were 6 properties which the Folleys had asserted were lost MAAs which the Hockeys disagreed with, in 5 instances because the property was, in fact, still managed by Danc as at the expiry of the Retention Period (being 1 December 2018), and in one instance, because the property was allegedly lost due to the Folleys’ mismanagement; and (c) thirdly, there were 8 properties which the Hockeys had asserted were gained MAAs which the Folleys did not accept.

3. The list of MAAs, as at the date of Completion (the list was attached as Sch 5 to the Agreement which was generated as at 9 May 2018, prior to Completion, and was superseded by the list generated as at 31 May 2018) showed the following:

(a) The 7 properties which the Folleys asserted were lost MAAs do not appear on the list of MAAs as at Completion which indicates that those should not have been counted as lost MAAs. (b) In respect of the 6 properties which the Folleys asserted were lost MAAs but which the Hockeys disagreed with for various reasons, there is no evidence before the Court to make good the Folleys’ assertion that they were lost MAAs. In this respect, the Court would have regard to the principle in Blatch v Archer (1774) 98 ER 969 that evidence is to be weighed according to the capacity of a party to adduce it. The Hockeys do not have access to Danc’s records. (c) The 8 properties which the Hockeys had asserted were gained MAAs do not appear on the list of MAAs as at Completion and appear on the list of vacant properties on Completion which indicates that they were not existing business, as at Completion, and were introduced to Danc by the Hockeys (by virtue of having been listed for rent prior to Completion), and, therefore, should have been counted as gained MAAs.

4. The Court should find that the Hockeys are entitled to the balance of the retention amount of $54,915.36, plus interest as calculated under s 100 of the Civil Procedure Act 2005 (NSW) (there being no contractually specified rate of interest that applies).

Consideration: Issue 21

703. At the outset, I note that Issue 9 and Issue 21 were expressed, in substance, in the same terms, being are the Folleys or the Hockeys entitled to the balance of the retention amount of $54,915.36 plus accrued interest, and if not, how should this balance be distributed?

704. It is therefore understandable, in these circumstances, that the plaintiffs sought to address Issue 21 by reference to “the reasons set out above”.

705. I do not propose to repeat my reasoning as to the determination of this issue but simply note that, for the reasons I have set out in my consideration of issue 9, and to the extent relevant, the ancillary issues in claim 2, the Hockeys are entitled to the balance of the retention amount of $54,915.36 plus accrued interest.

706. In the event, I answer the question raised by Issue 21 in those terms and note that the defendants’ CC, in this respect, must succeed.

707. I note that the defendants’ submission as to Issue 21 raises the question of interest. The defendants submitted that the Hockeys are entitled to interest, to be calculated in accordance with s 100 of the Civil Procedure Act. The plaintiffs did not make any submissions in relation to this matter.

708. In the absence of submissions from the plaintiffs, I propose to express a preliminary view in relation to this issue but will make provision for supplementary submissions in the orders and directions below. In my view, the “accrued interest” referred to in Issue 9 and Issue 21 refers to the interest being earned on the retention amount by virtue of being held in a controlled monies account with the National Australia Bank. In this regard, I refer to cl 7.1(b) of the Agreement:

“The retention amount shall be invested by the Vendors' Solicitor in a controlled monies account with the National Australia Bank and all interest earned on such investment shall be paid to the Vendors.”

709. For completeness, I note that it is common ground that the balance of the retention amount, being the $54,915.36 (plus accrued interest) remains in the Hockeys’ solicitor’s trust account.

CONCLUSION

710. The 2FASOC is based upon 6 claims. The resolution of each claim was predicated upon the disposition of the issues relevant to that claim listed on the ASOI.

711. The Court has determined the issues relevant to claims 1A, 1B, 2, 3 and 4, adversely to the plaintiffs and accordingly has decided to reject those claims. [28]

712. With respect to claim 5, the Court resolved issues 17(d) and 17(f) adversely to the plaintiffs. Issue 17(e) was not pressed by the plaintiffs.

713. The plaintiffs did not establish that the representation referred to in Issue 17(c) was made but nonetheless the Court found that Mr Hockey did make a representation in his email of 4 April 2018 which was a prediction of 55 sales by him in the 12-month period from 1 April 2018 to 1 April 2019.

714. The representation referred to in Issue 17(b) was made, and accordingly, the question raised by Issue 17(b) has been answered in the affirmative although the 2 year period, referred to in the issue, operated from the execution of the Agreement.

715. In answering the questions raised under Issue 18, which corresponded to Issue 17(b) and Issue 17(c), the Court has answered the question adversely to the plaintiff.

716. The plaintiffs obtained a favourable answer with respect to the question raised by Issue 17(a) and the counterpart consideration to Issue 17(a) under Issue 18. In that respect, the Court found that Mrs Hockey had made the representation articulated in Issue 17(a) and that, for the purposes of Issue 18, the representation was misleading or deceptive, or likely to mislead or deceive.

717. However, in the answer to the questions raised by issues 19(a) and 19(b), with respect to the Court’s findings under Issue 17(a) and counterpart findings under Issue 18, the Court has determined that the Folleys are not entitled to an order for rescission of the Agreement (partial or otherwise) or damages by way of relief.

718. In the result, the plaintiffs have failed to establish claim 5.

719. In the circumstances, 2FASOC should be dismissed.

720. As to the CC bought by the Hockeys, the Court has determined as follows:

721. Tin-Tagel is liable to pay the Hockeys the sum of $631,657.29 plus interest at the rate of 5% per annum of the amount accrued on a daily basis from 1 June 2018 to a date to be determined by the Court after receipt of further submissions by the parties.

722. The balance of the retention amount shall be paid by the Folleys to the Hockeys in the amount of $54,915.36 plus accrued interest. The monies shall be paid to the Hockeys out of the Hockeys’ solicitors trust account. My preliminary view is that interest shall be the interest arising under the controlled monies account held in the National Australia Bank, but I shall make provision for further submissions in that respect.

ORDERS AND DIRECTIONS

722. The Court makes the following orders and directions:

723. Subject to orders 2 to 5, the defendants shall file and serve Short Minutes of Order reflecting this judgment within 21 days of the delivery of the judgment.

724. In the event that the parties agree as to the calculation of interest with respect to the vendor finance and/or in accordance with the Court’s preliminary view as to interest on the retention amount, then interest shall be calculated on the basis of that agreement and encompassed within the Short Minutes of Order.

725. In the event that the parties are in dispute as to the calculation of interest with respect to either the vendor finance or the retention amount, then the Short Minutes of Order shall not deal with the disputed question of interest, other than to provide for a timetable for the filing of submissions, in that respect, consistent with the timetable fixed for the receipt of submissions as to costs (if costs are in dispute) or as agreed.

726. If there is no dispute as to costs, the Short Minutes of Order shall reflect the agreement of the parties as to costs.

727. If there is a dispute as to costs, the Short Minutes of Order shall incorporate a timetable for the resolution of any issue as to costs, which shall include provision for the filing and service of submissions and evidence as to costs, and a statement as to whether the question of costs may be determined on the papers.

728. Subject to orders 4 and 5, costs are reserved.

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Endnotes

I note that the second defendant was recorded as “Susan-Noelene Eastway” on the originating documents, which was the second defendant’s maiden name. At the time of the hearing the parties referred to the second defendant as Mrs Hockey and, accordingly, this judgment will refer to the second defendant as Mrs Hockey.

Mrs Hockey was also referred to within the Agreement by her maiden name, Susan Noelene Eastway.

I note that there appears to be an administrative error on the First Cross-Claim as Mr and Mrs Hockey’s children appear under the heading cross-defendants. I will treat Ashleigh Jane Eastway, David Richard Eastway, and Courtney Louise Eastway as cross claimants and give leave for any application to rectify that matter if required.

See the discussion of issues under the heading ‘Issues’ below.

See the discussion of issue 17(c) under the heading ‘Issue 17(c)’ below.

The section of this extract in italics was not referred to in the plaintiffs’ submissions. The citation for the cases referred to in the extract is as follows: Locke v Dunlop (1888) 39 Ch. D 387 at 393 and Bottomley's Case (1880) 16 Ch D 681 at 686.

I note that there appeared to be an error in the plaintiffs’ submissions referencing cl 6.8(f)(iii). There is no such clause and as such I have assumed the intended clause to refer to was 6.8(f).

Another version of the spreadsheet is found at p 578 – 582 of Exhibit 2.

The reference to cl 14.1, in this respect, is erroneous as this is the definitions clause within cl 14 of the Agreement dealing with restriction on competition.

J D Heydon, The Restraint of Trade Doctrine (4th ed, 2018, Lexis Nexis Buttersworth) at 216.

Exhibit 2 (Chronological Bundle), pp 802–813.

Wayne Covell, Keith Lupton and Louise Parsons, Covell & Lupton Principles of Remedies (8th ed, 2022, Lexis Nexis) at [3.43] to [3.52].

Reference to “VSS” in the plaintiffs’ closing submissions was a reference to “the Supplementary Opening Submissions of the Hockeys/Vendors dated 9 August 2024”.

In these submissions, the term “Purchasers” was defined as the first, third, fourth and fifth plaintiffs. While the submissions did not define the following terms: “Conditions Precedent”, “Vendors”. “Company” and “Completion”, it is clear that the plaintiffs were referring to those terms as defined in the Agreement. The Agreement defines “Conditions Precedent” as “the conditions precedent to Completion as specified in clause 3.” Clauses 3.1 to 3.5 are discussed earlier in this judgment at [21] to [25]. The Agreement defines “Vendors” as the first to fifth defendants, “Company” as Danc, and “Completion” as “Completion of the Vendors’ sale and Purchaser’s purchase of the Shares in accordance with clause 6 and the terms of this Agreement”.

While the submissions refer to a breach of warranty under clause 2.2 of the Agreement, it is likely that the plaintiffs are referring to the breach of warranty under clause 2.2 of Sch 4 of the Agreement.

While the submissions do not define the terms “Vendor Warranties” or “Warranty”, it is clear that the plaintiff is referring to the warranties provided by the Vendors under the Agreement, which are set out in Sch4 of the Agreement.

In these submissions, the term “SSA” was defined as the Agreement. While the submissions do not define the term “Vendor Finance”, it is clear that the plaintiffs are referring to that term as defined by the Agreement. The expression when used in this judgment, is as discussed earlier at [8(1)].

It is evident from the documentary evidence that PPSR registration no. 20111213157 is the security interest the subject of the Charge, as: (a) the PPSR search certificate states that “[t]his registration is migrated from Register of Company Charges with the registration start date 02/02/2000”, and (b) the Charge was registered with ASIC on that date, 2 February 2000.

J W Carter, Elisabeth Peden, G J Tolhurst, Contract Law in Australia (5th ed, 2007, LexisNexis Buttersworth) at [13-16] and [13-18].

The Folleys were clearly aware that this was an option which was available to them, as the evidence demonstrates that the completion date had previously changed from an earlier date in 2018 to 1 June 2018.

The evidence tendered by the parties included emails between the solicitors in which they negotiated various aspects of the Agreement, as well as emails between the parties in which it is evident that the Folleys had been conducting due diligence on the business of Danc.

A letter from Macquarie Bank dated 15 March 2018 attached the priority agreement (and various other loan documents) and noted that the executed documents were to be returned 2 business days prior to settlement. It may, therefore, be inferred that the Folleys signed the priority agreement sometime between 15 March 2018 and 1 June 2018.

The term “Warranties” was defined at cl 1.1 of the Agreement as “the warranties provided by the Vendors set out in Schedule 4”.

The term “Security Interest” is defined at cl 1.1 of the Agreement and includes a “charge”.

Pursuant to the ASIC company extract at Sch 5 of the Agreement, the first to fifth defendants were the legal and beneficial owners of the shares in Danc.

I note that the plaintiffs’ closing written submissions referred to “the amount claimed by the ‘Folleys’ in their Cross Claim”, however, this cannot be correct as the Folleys did not file any cross-claim in the proceedings. I have assumed the use of the word Folleys’, in this respect, was an errata and the submission intended to refer to the Hockeys CC.

Colin Lockhart, The Law of Misleading or Deceptive Conduct (6th ed, 2023, LexisNexis) at [11.56].

The Court has determined that it was unnecessary, on some occasions, to answer the questions raised by the issues, but, in each such case, the Court has reached that position having determined earlier issues adversely to the plaintiffs.