IN THE MAGISTRATES’ COURT OF VICTORIA THE MAGISTRATES’ COURT OF VICTORIA . AT MELBOURNE: ......
-
Upload
truongthien -
Category
Documents
-
view
372 -
download
3
Transcript of IN THE MAGISTRATES’ COURT OF VICTORIA THE MAGISTRATES’ COURT OF VICTORIA . AT MELBOURNE: ......
IN THE MAGISTRATES’ COURT OF VICTORIA AT MELBOURNE: No: E10432979 BETWEEN: GREEN ADVANTAGE PTY LTD Plaintiff -and- MARINO SUSSICH First Defendant -and- 2UP HOLDINGS PTY LTD Second Defendant
MAGISTRATE: GINNANE DATE OF DECISION: 13 APRIL 2015 WHERE HEARD: MELBOURNE APPEARANCES COUNSEL SOLICITORS For the Plaintiff D C Harrison Seoud Solicitors For the Defendants D J Hancock Comlaw Solicitors
Catchwords: misleading and deceptive conduct – breach of agreement -application of Australian Consumer Law – date of commencement - whether law applicable to “persons” - representations for the purchase of shares by first defendant in second defendant where first defendant director of second defendant - whether any agreement made – identity of parties -plaintiff company controlled by sole director and shareholder – whether proposed amended pleading extended beyond grant of leave at conclusion of hearing – amendments disallowed - application of the rule in Jones v Dunkel – plaintiff’s claim dismissed
REASONS FOR DECSION
HIS HONOUR Introduction
1. The plaintiff has commenced a proceeding by way of Complaint and
Statement of Claim dated 31 January 2014 seeking relief against the
defendants by way of damages in the amount of $52,000 together
2
with interest in relation to an alleged purchase by it of shares in a
company called 2Up Gaming PLC. The plaintiff brings two claims, the
first of which alleges misleading or deceptive conduct by the first
defendant Marino Sussich. The second claim is for breach of contract
brought against the second defendant 2Up Holdings Pty Ltd. The
plaintiff’s claim is against the defendants jointly and severally in the
sum of $52,000 together with interest and costs.
The parties 2. The first defendant Sussich is a director of the second defendant, 2Up
Holdings Pty Ltd. The second defendant 2Up Holdings Pty Ltd is a
wholly owned subsidiary of a British company named 2Up Gaming
PLC whose shares the plaintiff claims it agreed to purchase from 2Up
Holdings Pty Ltd. Sussich is the sole director and secretary of 2Up
Holdings Pty Ltd and is also a director of its British holding company
2Up Gaming PLC.
3. Rabi Mohammad is an Australian lawyer. He was admitted to practice
on 23 August 2011. He is the sole director and shareholder of the
plaintiff. He is not a party to the proceeding although he is a central
player in this litigation.
The pleadings
4. The plaintiff alleges that the certain matters pleaded in paragraph 5 of
its Statement of Claim amounted to representations that were made
by Sussich to Mohammad in September 2011 in trade or commerce
and that the plaintiff relied upon the representations and agreed to
purchase shares in 2Up Gaming PLC and paid 2Up Holdings $52,000
for the share purchase but in fact the representations were misleading
or deceptive and the shares were not issued to it. Therefore, as
against Sussich, the plaintiff seeks damages for misleading and
deceptive conduct and as against 2Up Holdings Pty Ltd damages for
3
breach of contract on account of the money paid to it by the plaintiff
for the purchase of shares in 2Up Gaming PLC.
5. The claim advanced by the plaintiff is one for breach of an oral
agreement for the purchase of shares entered into by it with 2Up
Holdings Pty Ltd on the basis of oral representations made to it by
Sussich that were misleading or deceptive.
6. The defendants advance a number of matters in opposition to the
claims made and relief sought by the plaintiff, among them being to
deny the occurrence of the statements pleaded in paragraph 5 of the
Complaint, to deny that any such statements amounted to actionable
representations, and further that if they did, they were not made by
Sussich to the plaintiff but instead to Mohammad. As pleaded, the
success of the plaintiff’s proceeding rested upon the conclusion I was
asked to reach about a number of statements attributed to Sussich by
Mohammad in September 2011 concerning the purchase of shares in
2Up Gaming PLC. The allegations are expressed as follows1:
5. That in September 2011, Sussich in trade or commerce, told
Rabee Mohammad a director of the Plaintiff (Mohammad), that:
5.1. shares in 2Up Gaming P L C were trading on the Frankfurt
stock exchange at 0.30;
5.2. the plaintiff could purchase shares in 2Up Gaming PLC from
Sussich or 2Up Holdings Pty Ltd;
5.3. that Sussich and or 2Up Holdings would sell shares to the
Plaintiff in 2Up Gaming PLC for $ 0.15, and
1 Para 5 Statement of Claim
4
5.4. that Sussich and or 2Up Holdings would deliver to the
Plaintiff 346,667 fully paid shares in 2Up Gaming PLC on the
payment by the Plaintiff of $52,000.
7. It was conceded by the defendants that 2Up Holdings received a
cheque for $52,000, and furthermore there is no dispute that the
cheque was banked into its account. They say the shares were not
delivered up to the plaintiff but instead were delivered to a man called
Chabal Kanati and as will become apparent, they say that they were
entitled to do so.
The claim against Sussich under statute - a question of jurisdiction
8. A contest arose at the conclusion of the hearing in the course of oral
submissions and subsequently in written submissions filed and
exchanged between the parties after the reservation of decision about
the reach of the Australian Consumer Law2 (ACL) to natural persons
engaged in misleading and deceptive conduct. It was argued for
Sussich that the ACL applies to corporations and not persons and
therefore paragraph 11 of the plaintiff’s Statement of Claim was
defective in pleading that:
11 Further and in the premises, Sussich has engaged in conduct
in trade or commerce that is misleading or deceptive contrary to
section 18 of the Australian Consumer Law.
9. Section 18 (1) of the ACL is expressed in these terms:
A person must not, in trade or commerce, engage in conduct
that is misleading or deceptive or is likely to mislead or deceive.
10. Furthermore in Victoria the ACL was adopted into law by operation of
ss 7 and 8 of the Australian Consumer Law and Fair Trading Act 2012
(Vic) which was given Royal Assent on 8 May 2012 with the
2 The ACL is contained in Schedule 2 to the Australian Competition and Consumer Law
5
commencement date for relevantly s 183 of that Act being 1 July 2012
and it provided that in its application the ACL may be referred to as
the Australian Consumer Law (Victoria) (ACLV). The ACLV had no
operative effect in regard to the conduct alleged against Sussich to
have occurred in September 2011.
11. The plaintiff cried foul of reliance by the defendants on such matters
so late in the proceeding. It is true that the issue was not raised at any
stage before the commencement of the proceeding and there were
opportunities to do in the course of interlocutory applications heard
before different Magistrates of the Court and by the Court as presently
constituted.
12. In any event the plaintiff argued that whilst it accepted that s 18 of the
ACL could not apply to the matters alleged to have occurred in
September 2011 nonetheless the Fair Trading Act 1999 (Vic) (FTA)
was in force at the relevant time and s 9 of the FTA was expressed in
sufficiently similar terms to s 18 of the ACLV which it submitted
applied to “persons”.
13. I do not accept as a matter of law that the effect of the ACLV applies
generally to “persons” as opposed to the ACL which applies to
corporations engaged in trade or commerce. There is no basis in the
Australian Consumer Law text to support this submission by the
plaintiff as a matter of general application.
14. On the final day of the hearing I granted the plaintiff leave to amend
its Statement of Claim by permitting the inclusion of “Vic” after the
words, “Section 18 of the Australian Consumer Law” as they
appeared in paragraph 11 of the Statement of Claim. The plaintiff
provided an “Amended Complaint” and “Amended Statement of
Claim” together with its written “Outline of Submissions”. The
amendments went beyond the specific and limited amendment
allowed. The defendants in the course of their own written
3 S 18 of the Act
6
submissions objected to the grant of leave for the enlarged
amendments.
15. It was not appropriate for the plaintiff to plead and then rely in
submissions on amendments that went beyond the amendment that
was sought and allowed by the Court. The defendants submitted that
to permit the plaintiff to do so would be prejudicial to it coming as it
does after the evidence had concluded and the parties had closed
their cases. The defendants submitted that the further amendments
are not merely consequential on the limited leave that was allowed. I
agree. The amendments other than the amendment permitted to
paragraph 11 are disallowed. Whilst I have disallowed the enlarged
amendments made without leave, in the event that my decision to
disallow the further amendments is wrong, I am satisfied that their
allowance would not have altered the outcome of my decision.
16. I am also satisfied that the claim against the first defendant for
statutory misleading and deceptive conduct under the ACLV must fail
as there is no basis to claim that Sussich is caught by the statutory
prohibitions on misleading and deceptive conduct. However, in the
event that I am wrong in law in relation to this conclusion, and
conscious that the case occupied a number of days of hearing and
much oral and documentary evidence was produced together with
submissions, and that the real nature of the dispute between the
parties was well explored, I intend to proceed to state my reasons for
my decision on this part of the plaintiff’s claim because even had the
plaintiff’s claim alleging misleading or deceptive conduct by Sussich
not been brought, the nature of and extent of his involvement as a
director of 2Up Holdings and 2Up Gaming PLC was instrumental in
giving rise to the purported agreement and alleged breach relied on
by the plaintiff.
17. The plaintiff’s Complaint at paragraph 4 pleaded that:
7
The First Defendant (Sussich) is and was at all material times
the
4.1. sole director of 2Up Holdings Pty Ltd;
4.2. secretary of 2Up Holdings
4.3. a director of 2Up Gaming PLC
18. The important element that the plaintiff would have been required to
establish in making good a claim for misleading and deceptive
conduct is whether it has satisfied me on the balance of probabilities
that the representations pleaded were made to it by Sussich and that
in reliance on them it entered an agreement with 2Up Holdings Pty
Ltd for the purchase of shares in 2Up Gaming PLC. In the event the
statements were made then the question would next have been if they
amounted to representations that were misleading or deceptive or
likely mislead or deceive.
Adequacy of Discovery
19. Throughout the course of the hearing the plaintiff made numerous
objections concerning the sufficiency of discovery. On occasions the
defendants raised objections too about the absence of documents
that it argued might have been expected to have been discovered by
the plaintiff but in the main the objections were put by the plaintiff.
Some of the objections made by the plaintiff fell at the periphery of
relevance to the matters raised on the pleadings. As well the plaintiff
made no application before the commencement of the hearing about
the failure to make discovery and, in fact on 4 August 2014, the
plaintiff told the Court that although it was unwilling to concede the
adequacy of discovery by the defendants, it did not intend to make
further application as regards to it. As well plaintiff made calls for the
production of documents during the hearing some of would not have
fallen into the category of documents I would regard as meeting the
requirement for discovery.
8
Mohammad’s account
20. Mohammad said he was a longstanding friend of Kanati. Mohammad
said that in about July 2011 he had discussions with Kanati regarding
certain financial investments Kanati had made including, an
investment in “Consolidated Capital Investments” (CCI), a listed
company whose trading had apparently been suspended and in which
Kanati had suffered some losses as a result of his investment. Kanati
told Mohammad of certain investigations he had undertaken that
identified an involvement or connection in CCI by a man named Tony
Madaca. Madaca was involved in a business known as IVIC, located
in Spencer Street, Melbourne. I was told IVIC stood for “International
Vehicle Integrity Centre”.
21. Mohammad said that in about July 2011 in company with Kanati he
attended at IVIC. He understood that Kanati was to meet Madaca.
Mohammad said he was present during the meeting between them
and he heard what transpired. He said the manager of IVIC a man by
the name of Manny Stampopolous was also present. Mohammad said
that Madaca expressed sympathy to Kanati for his losses in CCI.
Maddacca then proposed to Kanati that he might consider purchasing
shares in a company called 2Up Gaming PLC at a discount rate.
According to Mohammad, Madaca told Kanati that he had shares that
he could sell and that Kanati could buy. Mohammad said that Kanati
agreed to buy $10,000 of shares in 2Up Gaming PLC. Madaca then
mentioned to Kanati that Sussich was a director of 2Up Gaming PLC.
He next told Kanati to obtain a cheque for $10,000 and to make it
payable to a company called X2Up. Mohammad said that he and
Kanati then left IVIC’s premises and a cheque obtained. They
returned to IVIC and Kanati handed over the cheque to Madaca.
Mohammad said that he was suspicious and he said to Madaca and
to Manny Stampopolous that the proposal sounded to him “like a
scam” because the cheque from Kanati was made payable to X2Up
and not 2Up Gaming PLC. Stamapopolous said that if that was his
opinion then perhaps the whole transaction should not proceed. There
9
appears to be no involvement by Stampopolous in any of the
companies so far mentioned. However, the transaction did proceed
and the cheque from Kanati was handed over to Madaca. Mohammad
said Madaca then produced his telephone and showed them both that
2Up Gaming PLC was listed on the Frankfurt Stock Exchange.
22. Mohammad said that Kanati subsequently suggested to him that he
too should consider buying shares in 2Up Gaming PLC. Thus the first
person to suggest a purchase of shares by Mohammad was Kanati
and not Madacca. Whether Kanati was suggesting a purchase of
shares by Mohammad or by the plaintiff was not explained in the
evidence but certainly the language used by Mohammad in his
evidence in chief was consistent with a discussion that concerned a
purchase by him and not the plaintiff. Indeed on Mohammad’s
evidence the existence of the plaintiff had not been raised in any
discussions at this point in time. Mohammad said that he told Kanati
that he would need to meet Sussich before making any decision to
invest in the company. Mohammad said that the suspicions he had
expressed in the meeting between Madaca and Kanati and
Stampopolous had been somewhat if not entirely assuaged by seeing
the telephone listing on the Frankfurt Stock Exchange shown to him
by Madaca at the end of the discussion in July 2011. He said that
Kanati told him that he would arrange to have him meet Sussich and
therefore he would see that “it is alright”. Again the evidence that
Kanati would broker a meeting for Mohamamd with Sussich and not
Madaca. Mohammad said he subsequently made his own enquiries
about 2Up Gaming PLC and he recalled seeing it reported as having
a capitalisation of between €200 or 300 million.
10
The attendance by Sussich
23. Mohammad said that in late August or early September 2011 he was
again in the company of Kanati and they attended at IVIC.
Mohammad said that Madaca was present as too was Sussich.
Although Mohammad said that Stampopolous was in attendance
nothing else was made of that fact.
24. Mohammad said that some matters of generality were exchanged and
the was then asked by Madaca to look at a letter of demand
addressed to 2Up Gaming PLC from a company called Murana Park
Pty Ltd. Mohammad said that he could only recall that the letter
comprised a demand for a substantial number of shares in 2Up
Gaming PLC arising from an alleged breach of agreement. Madaca
asked Mohammad to comment on the letter but that he declined to do
so because, as he put it, he was a newly admitted solicitor and did not
think he was in a position to give advice.
25. Mohammad said that Sussich made various statements to him about
2Up Gaming PLC and, in particular, its attractiveness in the market
including to James Packer, a businessman of note, from whom an
expression of interest to buy the company had been forthcoming but
whose overtures Sussich had declined because he wanted to hold on
to the company as he believed it would produce a “5 to 10 fold
increase on investment over time”. Mohammad said he then asked
Sussich if he “would do us a deal”. He said that Sussich said that
there was a limited amount of shares left and that although they were
trading at 0.30 cents “he would sell them to me at a discount” of 0.15
cents a share but they would be held in escrow for three months.
Mohammad testified that he understood the purchase price of 0.15
was referrable to the AUD but he could not remember whether the list
price of the shares was expressed at $0.30 AUD cents or Euro cents.
Mohammad told Sussich that he wanted to buy “approximately
$50,000 worth of shares” and Sussich replied, "No problems”.
Mohammad said he would need approximately 2 to 4 weeks to get the
11
money together. Mohammad said a discussion followed about the
identity of the payee for the cheque. Sussich told him to make the
cheque payable to 2Up Holdings Pty Ltd. Despite the payee not being
2Up Gaming PLC, Mohammad raised no query of the type he
expressed in July at the time of the Kanati purchase. Mohammad said
that Sussich instructed him that when he when he had obtained the
cheque to bring it to IVIC and to give it to Madaca.
26. I gather that Mohammad used the plaintiff as a vehicle for buying and
selling shares for his benefit. Mohammad says that approximately a
month later he obtained the funds required for the purchase of the
shares in 2Up Gaming PLC after he sold some mining shares he had
been trading through the plaintiff. Mohammad purchased a bank
cheque dated 29 September 2011 in the amount of $52,000 made
payable to 2Up Holdings Pty Ltd. The cheque did not identify the
plaintiff. Mohammad said that the monies for the purchase of the
bank cheque and the cheque itself came from three sources:
$519.00 from his personal bank account;
$49,000 from the Green Advantage account; and
$2,000 in cash.
The delivery over of the bank cheque for $52,000 on 29 September 2011
27. Mohammad says he went home, copied the bank cheque and went to
IVIC where Madaca was present. Sussich was not present.
Mohammad handed the bank cheque for $52,000 to Madaca.
Mohammad said he told Madaca that he wanted a share certificate for
his allotment made in the name “Green Advantage”. Madaca said he
would make sure Sussich “got it”. Mohammad said that he reminded
Madaca that the cheque was for shares in 2Up Gaming PLC and to
be issued in the name of the plaintiff
12
28. This is the first occasion in the narrative of relevant conversations that
the plaintiff is mentioned or identified and it occurs at a point in time
after the conduct engaged in by Sussich and relied on by the plaintiff
as constituting the misleading or deceptive conduct in early
September 2011 that induced the plaintiff to agree to purchase shares
in 2Up Holdings Pty Ltd.
29. Thus at no stage to this point in time had Mohammad made mention
to Sussich of Green Advantage or that he was a director of any
company. Apart from this I find it peculiar that having expressed
scepticism about the genuineness of the $10,000 of shares
purchased by Kanati in 2Up Gaming PLC because of the lack of
correlation between the identity of the payee and the company in
which shares were to be purchased that Mohammad was willing
without demur to provide a bank cheque for $52,000 made payable to
2Up Holdings Pty Ltd for a purchase of shares in 2Up Gaming PLC.
30. For whose benefit the shares were intending to be being purchased is
uncertain on Mohammad’s evidence. The conversation relied on by
Mohammad with Sussich in which he asked if Sussisch would “do us
a deal” and indeed the entirety of the conversation he testified about
is as consistent with the purchase being made by him or by him and
Kanati and not Green Advantage of whom no mention had been
made.
31. As best as Mohammad can recall it was approximately 2 to 5 months
later that he and Kanati again attended at IVIC. He said that Madaca,
Stampopolous and Sussich were present. He said that Sussich was
excited and said that he had just traded shares in 2Up Gaming PLC
and been able to purchase a boat. Mohammad said a discussion then
followed in relation to another of Susich’s companies, Australian
Brewing Company. He said Sussich was also excited about its
performance. Mohammad said he asked Sussich, “What is happening
with 2Up? I still haven't got my share certificate” and that Sussich
said: "Don't worry; I am taking care of it. It will be issued shortly”.
13
Mohammad said he added, "Don't forget, Green Advantage” to which
Sussich replied, "Don't worry I am on top of it."
32. This conversation is of importance for the plaintiff because it is the
first occasion that Mohammad testified about in which he expressly
gave a direction to Sussich that the purchased shares were to be
issued to the plaintiff. It was put to Mohamed in cross-examination
that that at no stage did he ask for the shares. Sussich in his evidence
denied having been asked by Mohamed for the shares to be issued in
the name of the plaintiff or that Mohammad prevailed on him by words
such as "Don't forget, Green Advantage". I prefer the evidence of
Sussich on this matter.
33. Mohammad’s evidence is that thereafter and from time to time as
circumstances permitted, he attended at IVIC’s premises. He said that
on some of these occasions Sussich was present who would tell him
that the situation with the shares was under control and that share
certificates were in the process of being issued. On another occasion
Mohammad said that Madaca told him that the shares were still in
escrow but he should not worry.
34. Mohamed said that by late January or early February 2012 he had
obtained employment with a law firm and he was focused on his job
and his admission as a practitioner. He said that any time he found
himself in the city he would make time to attend at IVIC. He thought
that he might have attended on IVIC some six times. Mohamed said
that on some occasions he had discussions with Madaca. He
maintained that Madaca told him that the money was in escrow and
would be released in 2 to 3 months time and that this explanation for
delay was a recurring theme. Under cross-examination he accepted
that he could not recall Sussich being present on any specific
occasion.
35. As 2011 progressed with nothing happening Mohammad said that in
about September or October 2011 he became aware that Kanati was
14
intending to purchase further shares in 2Up Gaming PLC over and
above the $10,000 of shares he had purchased in July 2011 although
he said that he was unaware at the time of the number of additional
shares Kanati intended to purchase or the details of price per share
that he was to purchase them at. There was no suggestion in the
hearing that Kanati had not received the shares in 2Up Gaming PLC
purchased by him in about July 2011.
36. More time elapsed and Mohammad said that it was towards the
middle to late 2013 that he became increasingly suspicious. By
solicitors’ letter dated 24 January 2014 a letter of demand was sent to
2Up Holdings Pty Ltd (Ex D3). The content of the letter although brief,
is consistent with the underlying claim advanced in the proceedings
by the plaintiff.
37. I am satisfied that Mohammad and Kanati were longstanding friends. I
am satisfied that Mohammad had used the plaintiff as vehicle for
certain purchases and sales of shares for his benefit. I find that
Mohammad accompanied Kanati to IVIC in July 2011 when a meeting
occurred between Kanati and Madaca. I am satisfied that Madaca
was at that stage a shareholder in 2Up Gaming PLC. Sussich
however was not in attendance on that occasion.
38. I am also satisfied that Mohammad was again present with Kanati at
the IVIC offices in early September 2011and that on this occasion
Madaca met with Sussich for the purpose of purchasing shares in
2Up Gaming PLC.I am satisfied however by the evidence Sussich
gave that Mohammad was not privy to the conversation that occurred
between Sussich and Madaca in private at the IVIC offices in early
September 2011. Furthermore I am satisfied from the evidence of
Sussich that his conversation with Madaca was in the order of 30
minutes. I am satisfied that Mohammad and Kanati were in reception
when Madaca and Sussich went into private conversation and that
they were in reception at the conclusion of the meeting.
15
39. I am satisfied on the evidence of Sussich that on the afternoon of 29
September 2011 Sussich attended at IVIC and was provided a
cheque for $52,000 from Madaca for the purchase of shares in 2Up
Gaming PLC.
Misleading and deceptive conduct
40. The plaintiff relied on a claim of misleading or deceptive conduct by
way of oral representations made by Sussich to Mohammad. As
already flagged, the defendants put in issue to whom any statements
of the type alleged were made.
41. If representations are made to a company they can of course only be
acted on through the proper officers of a company, such as a director.
The plaintiff is a single director company. Therefore, if any
representation was made by Sussich to the plaintiff it can only have
been communicated to Mohammad. Of course the mere fact that a
statement if made to a person who happens to be a director of a
company will not be sufficient of itself to mean that the statement was
made in the relevant sense to that company and that a company has
been misled. The context in which statements are made and the facts
known to the relevant parties at the time are important.
42. When representations are relied on as giving rise to damage it is an
essential to make out a cause of action and prove loss or damage
that the plaintiff is correctly identified. This is not merely a requirement
as a matter of form4. It is a substantive requirement. In the course of
Mohammad’s oral evidence, there was considerable “slippage” in him
identifying the intended purchaser of shares in 2Up Gaming PLC. I
found this extraordinary given that Mohamed is a qualified lawyer and
admitted to practice and a director of a company that would appear to
have traded in shares and utilised the services of a stock and
securities broker.
4 Butcher v Lachlan Elder Realty Pty Ltd [2004] 218 CLR 592 at 605
16
43. Under careful cross-examination, Mohammad twice agreed with
counsel for the defendants that his conversations with Sussich were
consistent with an intended purchase of shares in 2Up Gaming PLC
by him and not the plaintiff. I am not persuaded that it is a sufficient
answer made on behalf of the plaintiff to suggest that such use of
identifying language by Mohammad in giving evidence was
inadvertent or lacked sufficient nous to appreciate and distinguish the
separate corporate personality of the plaintiff despite Mohammad
occupying the position of a single directorship and sole shareholding
of the plaintiff.
44. In relation to the reliance placed by the defendants on this issue, the
plaintiff’s counsel decried the legitimacy of recourse by the
defendants to what he described as a “positive defence” in light of
largely “bare denial” defences filed on behalf of the defendants. Whilst
this characterisation of the defences filed in the proceeding has
substance, nonetheless directions were made by me before the
commencement of the hearing in part to address this concern and I
ordered that each party file and serve points of contention. They each
did so. The defendants’ contentions expressly put in issue the matter
whether if the alleged representations were found to have been made
they were made to the plaintiff or Mohammad5. I am not satisfied that
the plaintiff was unaware or was prejudiced because the issue was
not pleaded out by defendants.
45. Furthermore Mr Harrison for the plaintiff argued that the objection
relied on by the defendants that if the representations were found to
have been made to Mohammad they were not made to the plaintiff
and so the plaintiff could not have been misled were ‘facile’6. Mr
Harrison referred to s 159(1) of the FTA, which was expressed this
way:
5 Defendant’s Statement of Facts, Issues and Contentions dated 20 August 2014 (Para 18) 6 Written submissions of plaintiff
17
A person who suffers loss, injury or damage because of a
contravention of a provision of this Act may recover the amount
of the loss or damage or damages in respect of the injury by
proceeding against any person involved in the contravention.
46. The plaintiff then noted that although s 236(1) of the ACLV is
differently worded its purport is to the same effect. It provides that:
If:
(a). a person (the claimant) suffers loss or damage because of
the conduct of another person; and
(b). the conduct contravened a provision of Chapter 2 or 37;
the claimant may recover the amount of the loss or damage by
action against that other person, or against any person involved
in the contravention.
47. However, the provisions relied on do not provide a complete or
sufficient answer to the objection by the defendant. The allegations
made by the plaintiff in the proceeding is not that the conduct
complained of by Sussich was directed to a class or classes of likely
consumers but rather that it was directed at it. Therefore, I would have
been required to be persuaded by sufficient evidence that when
Sussich is said to have engaged in the relevant conduct it was
directed to the plaintiff or to Mohammad. If there was misleading or
deceptive conduct or conduct that was likely to mislead or deceive
that was directed at Mohammad could the plaintiff have relied on any
loss it suffered as a result of action taken by Mohammad as the
director and shareholder of it. That would depend.
48. In Butcher v Lachlan Realty Pty Ltd8 the High Court has said that
where the conduct engaged in involves not a class of persons but
rather identified persons then the task of the Court is to undertake an
7 This includes the prohibition on misleading and deceptive conduct contained in s 18 of the ACLV 8 Op cit
18
analysis of the relevant conduct in relation to the plaintiff alone and
bearing in mind what matters of fact each knew about the other as a
result of the nature of their dealing or which each is to be taken to
have known.
49. Applying this methodology, and had I been required to determine the
claim for misleading or deceptive conduct engaged in by Sussich,
then I would have been satisfied that at the time of the conduct relied
on by the plaintiff, Sussich was unaware of the existence of Green
Advantage, a fact that Mohammad acknowledged in the course of his
cross-examination in which he accepted that the existence of Green
Advantage was not disclosed until a subsequent point on 29
September 2011 and on that occasion it was disclosed to Madaca
and not Sussich whom Mohammad agreed was not present when he
gave the bank cheque to Madaca with an oral direction to convey to
Sussich that the shares were to be issued in the name of the plaintiff.
50. Efforts were made in the plaintiff’s case to raise such a degree of
connection between Madaca and Sussich as to have me conclude
that Madaca was acting as an informal agent for Sussich. I do not
accept this. I accept that when Mohammad was introduced to Madaca
he was an existing shareholder in 2Up Gaming PLC and that he knew
Sussich. It is also the case that Madaca’s daughter had worked for
one of the Sussich companies. In addition Kanati came to be
introduced to Sussich and make purchases in shares of 2Up Gaming
PLC through an introduction brokered by Madaca. However, Madaca
did not tell Mohammad that he had any special entre with Sussich and
I do not accept that that Madaca was an agent for Sussich or any of
his companies let alone would I have been prepared to assume that
Mohammad acted on any such assumption in his dealings and that if
he did, that I should regard that as conduct by Sussich.
19
The pleaded representations
51. I deal first with the representation relied on by the plaintiff at
paragraph 5.4 of the Statement of Claim :
that Sussich and or 2Up Holdings would deliver to the Plaintiff
346,667 fully paid shares in 2Up Gaming PLC on the payment
by the Plaintiff of $52,000.
52. This is the significant allegation in terms of representational conduct
engaged in by Sussich. I would not have been satisfied by the
evidence of Mohammad that this representation was made out. As
already noted the plaintiff was not mentioned until 29 September
2011. I would not have been satisfied that the claim has been
established and that the plaintiff had discharged its obligation to
satisfy me that any representation of the type was made by Sussich to
Mohammad and upon which the plaintiff acted. Although it was
pleaded that Sussich made the representation “In September 20119”
Mohammad’s evidence identified the statement as made by Sussich
in early September 2011. I would have been satisfied that Sussich
cannot have made a representation to the plaintiff at that time
because he was unaware of the plaintiff. There are other evidentiary
problems that otherwise beset the plaintiff’s allegations.
53. Mohammad was asked directly whether the conversation he had with
Sussich in September 2011 made reference to 346,667 shares, and
he said that it did not. In addition it was not explained in Mohammad’s
evidence why the amount paid over by him was $52,000 when his
oral evidence was for an agreement to spend “approximately
$50,000”. The agreement pleaded in the Complaint is expressed as
one for a payment of “$52,000 for 346,667 fully paid shares”. Whether
an agreement was struck for a “specific dollar spend” or a specific
number of shares, based on a representation by Sussich, the
evidence led by the plaintiff is questionable, and I am would have
9 Para 5 Statement of Claim dated 31 January 2014
20
been unwilling to find in the plaintiff’s favour. Ultimately having
listened to Mohammad I would not have had confidence that he had
established that the words alleged to have been spoken by Sussich
were uttered or if they were, that they were spoken with a degree of
sufficient precision to amount to misleading conduct or that ther were
likely to mislead or deceive.
54. In Campbell V Backoffice Investments Pty Ltd (2009) 238 CLR 304
French J said spoke of the “practical distinction” between the
approach to characterisation of conduct as misleading or deceptive
when the public is involved, on the one hand, and where the conduct
occurs in dealings between individuals on the other. In the latter case
and making reference to the earlier decision of Butcher v Lachlan
Realty Pty Ltd, French J said:
In the case of an individual it is not necessary that he or she be
reconstructed into a hypothetical “ordinary person”.
Characterisation may proceed by reference to the
circumstances and context of the questioned conduct. The state
of knowledge of the person to whom the conduct is directed may
be relevant, at least in do far as it relates to the content and
circumstances of the conduct.
55. Trite though it may be, claims based on statutory misrepresentation
will fail if the representation is true. Mohammad admitted that the
representation pleaded at paragraphs 5.1, 5.2 and 5.3 of the
Statement of Claim were true. He admitted that he was not misled.
Mohammad claimed that he was told that the shares in 2Up Gaming
PLC were trading on the Frankfurt stock exchange at $.30.
Mohammad said that he had made his own enquiries and found the
shares in 2Up Gaming PLC were indeed trading on the Frankfurt
stock exchange at the time.
21
56. Beyond the admissions made by Mohammad that he was not misled,
the allegation at paragraph 5.2 of the Statement of Claim, is that
Sussich told Mohammad that the plaintiff could purchase shares in
2Up Gaming PLC from Sussich or 2Up Holdings Pty Ltd. The
defendants deny this. I would have been satisfied that this
representation must fail. I would not have been satisfied as a matter
of fact that Sussich was aware of the plaintiff at the time and so could
have as a matter of fact made the statement attributed to him.
However, and in any event, the plaintiff’s case was that it did
purchase shares in 2Up Holdings Pty Ltd and hence even had I
determined as a matter of fact that the statement was made, the vice
alleged in the representation is not that the statement was untrue, but
rather that the shares having been purchased they were not issued to
the plaintiff or delivered up to the plaintiff but instead to Kanati
contrary to the representation.
57. As to the representation pleaded in paragraph 5.3 of the Statement of
Claim, the plaintiff alleged that the Sussich represented that he and or
2 Up Holdings Pty Ltd would sell shares to the plaintiff in 2Up Gaming
PLC for $0.15 "per share". The defendants denied making this
representation and I accept Sussich’s denial.
58. Mr Hancock of counsel for the defendants contended that if in fact
each of the statement’s pleaded in paragraph 5 of the Amended
Statement of Claim were found to have been made by Sussich and
amounted to representations then each statement was true and was
not misleading or deceptive. It was argued too that the statements
attributed to Sussich in particular those concerning the third and
fourth pleaded representations were in any event in the manner and
nature of an expressions of intention and not actionable as
misrepresentations. On this point, I disagree with the defendants’
submission. Each of the matters pleaded are on their own terms
capable of meeting the definition of representations had I been
required to determine the matter.
22
59. It is however sufficient in order to dispose of the plaintiff’s claim to
state that I would not have been persuaded that it had established
that Mohammad entered an agreement with 2Up Holdings to
purchases shares in 2Up Gaming PLC for the plaintiff based on the
statements attributed to Sussich. I have serious reservations in
placing reliance in much of Mohammad’s evidence and I was not
persuaded for any good reason about the lack of a record of audit to
identify the transactions entered for the plaintiff by him as director.
60. Mohammed agreed with Mr Hancock that as the sole director of the
plaintiff he was responsible for all documents regarding the
preparation of the financial accounts on its behalf. Mohamed agreed
that the purchase of shares by the plaintiff would be recorded on its
balance sheet. He also agreed that expenditures by the plaintiff would
be accounted for in its financial records for a relevant financial year. If,
for example, the sum of $52,000 represented the amount of the bank
cheque for the purchase by the plaintiff of shares in 2Up Gaming
PLC, then it ought to have been reflected in an entry in the financial
accounts of the plaintiff. That was not however the case. In fact the
plaintiff did not discover any record that related to the purchase of any
such of the shares in question, or for example, monies borrowed by it
by way of loan for the cost of the purchase of the shares. There is not
for example a record of a transfer of monies referrable to the share
purchase from any bank account operated by Mohammad or even for
example by way of loan from him to the plaintiff. The sum of $519.00
said to have been paid by Mohammad from his personal account is
not recorded as a loan to the plaintiff in its financial accounts or
otherwise. The sum of $2,000 cash paid towards the purchase of the
bank cheque is also not recorded in the financial statements of the
plaintiff. The absence of records of the plaintiff lends further doubt that
Mohammad transacted for the plaintiff.
23
Susich testifies
61. Sussich is a director of 2Up Gaming PLC. He is also a director of
Matmun Holdings, accompany listed on the London Exchange. He is
also a director of 2Up Holdings Pty Ltd and other online gaming
companies. He is also a director of Matmun Holdings Pty Ltd.
62. Sussich said that on 29 September 2011 he received a telephone call
from Madaca who asked him to come by and collect a cheque “for
more shares to be purchased by him”. Sussich said under cross-
examination that at the time of the contact being made, Madaca held
a portion of unpaid shares in 2Up Gaming PLC and Sussich thought
the cheque he mentioned might have been intended to be applied on
that account or possibly to be applied to further share purchases by
him in 2Up Gaming PLC.
63. Sussich attended at IVIC and Madaca gave him a cheque for $52,000
and also $6,000 in cash and said that he would get back to him and
let him know into which entity the shares were to be issued. The
money was banked into 2Up Holdings Pty Ltd bank account and
Sussich said that he thereupon told Peter Lombardo who maintained
the share register for the company that “we would wait for advice on
the allocation of the shares”.
64. Sussich said that when he arrived at IVIC on 29 September 2011 that
Kanati and Mohamed were in attendance in the reception area. He
said that he and Madaca went into Madaca’s private office. He said
Madaca told him that wanted additional 2Up Gaming PLC shares. He
said that their discussion lasted about 30 minutes at the end of which
he left. He said Kanati and Mohammad were still seated together
when he left. He had no discussion with them.
65. Sussich denied having any discussion to do with shares with
Mohammad. He denies he made any mention of James Packer.
24
He denied ever receiving a sheet of paper that had the plaintiff’s
name written on it. Sussich denied having purchased a boat as a
result of the success from the sale of shares in 2Up Gaming PLC
although he conceded in cross-examination to having owned 2 boasts
in the past. He thought that Kanati who knew about this might have
told Mohammad which would account for Mohammad’s boating
reference.
Dispute with Kanati
66. Sussich described a dispute that subsequently arose with Kanati
concerning a previous share allotment in 2Up Gaming PLC and of
how it was ultimately resolved by an agreement that was struck for an
allocation to Kanati of additional shares. Some 700,000 shares in 2Up
Gaming PLC was allocated to Kanati from Matmun Holdings Pty Ltd
some of which shares had been partly paid and with the balance paid
from monies including the amount of $52,000 from the plaintiff.
67. Sussich said that the 700,000 allocation of additional shares to Kanati
was a partial settlement that was brokered and came to fruition in late
2012. In addition and also in late 2012 a direction was given by Kanati
to Madaca as to the issue of shares he purchased and this amount for
the purchase was made up of amounts paid over to 2Up Holdings Pty
Ltd including an amount of $52,000 from the plaintiff. Therefore the
monies represented by the $52,000 cheque given to Sussich by
Madaca on 29 September 2011 was in November 2012 allocated to
fund the further shares in 2Up Gaming PLC provided to Kanati as a
resolution of the dispute.
68. The documents put in evidence confirm the chronology of events
testified to by Sussich including, that on 10 October 2011 2Up
Gaming PLC wrote to Kanati setting out the terms on which a further
700,000 shares would be issued to him at 30 cents per share for a
total sum of $210,000. On 10 October 2011, Matmun Holdings Pty Ltd
caused a transfer to Kanati of 700,000 shares in 2Up Gaming PLC.
25
On 12 October 2011 Kanati signed a share subscription for 700,000
shares.
69. Mr Harrison submitted that I should conclude that Sussich was an
unreliable witness and a witness of untruth. I disagree. I found
Sussich to be a straightforward and very largely accurate historian of
dates and events. He had a good command of facts and the history of
the varied dealings in the shares of 2Up Gaming PLC. His account
was elementary, that having been provided an unidentified bank
cheque for $52,000 by Madaca and not anyone else on 29 September
2011, and being told that it was for a purchase of shares in 2Up
Gaming PLC in whose name such shares were to be issued would be
advised at a later time that the cheque was banked and that at the
end of 2012 he received a direction from Kanati that included as the
allocation of price that had been paid by him for his further shares in
settlement of the dispute that had arisen an amount of $52,000 from
Green Advantage. Sussich said he had no reason to be alert to or
question the identities behind Green Advantage. I agree.
Lombardo’s evidence
70. Peter Lombardo testified. He is a director of 2Up Gaming PLC having
been appointed in July 2011. He is also charged with maintaining its
share register. He explained that 2Up Gaming PLC does not hold or
operate a bank account in Australia and therefore the money received
for the purchase of shares in it are deposited into the 2Up Holdings
Pty Ltd bank account.
71. Lombardo said that as part of sorting out the dispute that had arisen
with Kanati that he undertook a process of reconciliation of shares
issued and monies paid10. He subsequently learned by letter from
10 Ex P8
26
Kanati11 that the amount was then used he was arguing he had not
been issued all his entitlement in 2Up Gaming PLC.
72. Lombardo said he agreed to an issue of 700,000 additional shares to
Kanati to make good matters in dispute that had arisen with Kanati
over the price he paid for shares of $210,000, equating to a purchase
price of 0.30 per share. An agreement was struck.
73. Lombardo’s evidence addressed various pieces of the
correspondence that passed between the parties including the
documents of October 2011 in respect to the further share purchase
by Kanati in 2Up Gaming PLC of 700,000 shares at $.30 per share
amounting to $210,000 AUD and including the transfer from Matmun
Holdings Pty Ltd of 700,000 shares in 2Up Gaming PLC to Kanati.
Ultimately a total of 1,050,000 shares were transferred to Kanati. By
letter from Kanati dated 21 November 201212 he confirmed that the
$52,000 bank cheque drawn by the plaintiff as part payment, along
with various other payments also made payable to 2Up Holdings Pty
Ltd was to be applied for the purchase of shares in 2Up Gaming PLC.
74. It is apparent from the evidence given by Sussich and Lombardo, and
I am satisfied, that a dispute had arisen with Kanati as a result of a
belief he apparently held that he had been short-changed in
connection with the purchase of shares in 2Up Gaming PLC
inconsequence of which an agreement was struck for a "top up" of
shares as a process to avoid a furtherance of the dispute and to bring
matters to conclusion.
11 Ex D6 12 Ex D6
27
The contract claim
75. The parties agreed that the questions that arise in regard to the
contract claim are:
( i) Did the plaintiff enter into an agreement with the second
defendant and if it did what were its terms
( i i ) If an agreement existed was breached by the second
defendant by a failure to issue shares to the plaintiff
( i i i) If there was a breach of any agreement as the plaintiff suffered
any loss by reason of it.
76. It is already plain from my reasons that I am not satisfied that the
plaintiff entered an agreement with 2Up Holdings Pty Ltd. Also I am
not satisfied that an agreement was made for the purchase of a
specific number of shares or that there was agreement of the amount
to be paid. Mohammad accepted that neither the number of shares
nor the amount pleaded of $52,000 was discussed. The best that can
be said is that a cheque was procured for $52,000 and provided to
Madaca by Mohammad.
77. I have already said that I prefer the evidence of Sussich to that of
Mohammad and have found that that there was no conversation
between them as claimed by Mohammad and therefore to the extent
the offer depends on the oral offer to sell by Sussich, the claim fails.
78. I reject the claim that there was concluded agreement made between
the plaintiff and 2Up Holdings Pty Ltd. At relevant times all pertinent
transactions appear to have been conducted for and on behalf of
Mohamed and not the plaintiff. The plaintiff's financial statements to
the relevant period are in evidence and as I have already mentioned
they fail to disclose any movement of funds whether by purchase,
loan or other means for the acquisition of the shares. In any event if I
28
am wrong on that matter then I am however not satisfied that there
were meaningful or comprehensible or certain terms of any
agreement. The agreement pleaded at paragraph 6 of the Statement
of Claim is that the plaintiff agreed with 2Up Holdings Pty Ltd that the
plaintiff would pay the 2Up Holdings Pty Ltd $52,000 for 346,667 fully
paid shares in 2Up Gaming PLC. I have already referred to the
absence of any clear statement of the precise number of shares that
were to constitute the purchase order making good the contract and
other uncertainties in the evidence given by Mohammad including the
identity of the contracting parties, and of course the rejection by me of
the accounts given by Mohammad of his conversations with Sussich.
79. What can be said with certainty is that a bank cheque for $52,000
payable to 2Up Holdings Pty Ltd was handed to Madaca.
Subsequently Madaca handed the cheque to Sussich, who then
banked it into the 2Up Holdings bank account. There is no evidence
that Sussich knew of the source of the funds making up the bank
cheque at the time the cheque was handed over. There is nothing
pleaded that he had any obligation of the type.
Jones v Dunkel
80. It is not an infrequent occurrence that parties seek to call in aid the
principle arising from the decision in Jones v Dunkel13 that by reason
of the unexplained absence of a party to call a witness whom it could
be expected a party would call that the Court can and should draw an
adverse inference that the failure is due to the fact that had the
witness been called the evidence would not be favourable to the
party.
81. I think that a Court should be cautious in too readily acceding to an
application to draw an adverse inference. In this case the defendants
submitted that such an inference is warranted from the plaintiff’s
failure to call or provide an explanation for not calling evidence from
13 (1959) 101 CLR 298
29
Madaca and Kanati. The two witnesses are not like in nature and their
absence warrants individual consideration. By the same token the
plaintiff submitted that an adverse inference should be drawn by
reason of the defendants’ unexplained failure to call the same two
witnesses.
82. Madaca was not called as a witness to give evidence. It could have
been reasonably assumed he would. But by whom? A subpoena was
issued by the solicitors for the defendants but it seems it was not
served. Mr Harrison submitted that Madaca was a witness in the
camp of the defendants and it would have been expected that they
would call him. There is a superficial attraction to this submission but I
am not minded to accept it. Presumably the plaintiff would have it that
an inference should be drawn that had Madaca been called by the
defendants he would have testified to having told Sussich that the
cheque for $52,00 was for the purchase by the plaintiff of shares in
2Up Gaming PLC. This is one of the positive allegations made by the
plaintiff and it does not strike me as apparent that it lay with the
defendants’ camp to call Madaca to testify to something that it is
alleged Madaca did as a result of a specific direction by Mohammad.
Nor am I persuaded that I should assume that Madaca in the
defendants’ “camp” True it is that he was a shareholder in 2Up
Gaming PLC but I find no basis to find that he was an agent of the
defendants and at no time does Mohammad contend that he was led
to believe as much. Furthermore there is no property in witnesses and
it was open to the plaintiff to seek to call evidence from Madaca. I am
not persuaded that I should draw an adverse inference against the
defendants by reason of their failure to call Madaca. By comparison
would it be appropriate to draw an adverse inference by reason of the
unexplained failure of the plaintiff to call evidence from Madaca?
Certainly I think there is a much stronger basis to form a view that I
should. Based on Mohammad’s testimony, it would have been
anticipated that Madaca would have corroborated the evidence of
Mohammad that Sussich was fixed with the relevant knowledge of the
30
source of the bank cheque and the direction into whose name the
shares were to be issued as far back as September 2011. These
being matters that were denied by the defendants it is odd that he
was not called. However given my unfavourable findings and non
acceptance of the dealings alleged by Mohammad and Sussich it is
unnecessary for me to draw an adverse inference.
83. However, I think that the fact of the absence by the plaintiff to call
evidence from Kanati is altogether different. He was the avowed and
longstanding friend of Mohammad and he was also the person who
became the recipient, improperly as the plaintiff would have it, of its
misdirected largesse to the extent of $52,000. I have had regard to
the denial by Mohammad under cross-examination that Kanati had
been a client of his or that he had acted for him in any legal
proceedings. Mohammad said that although he had advanced small
sums of money to Kanati in the past, he had never given him money
to purchase shares and neither had the plaintiff ever done so.
However as regards the capacity in which he attended with Kanati at
IVIC in July 2011,he said in response to questions under cross-
examination that he did so an adviser and also as a prospective
purchaser of shares.
84. It is also the case that it was Kanati who created and sent various
documents to 2Up Holdings Pty Ltd as to the ultimate direction to be
made of the plaintiff’s $52,000. I do draw an adverse inference by the
plaintiff’s failure to call Kanati or explain his absence and that bhis
failure is consistent with an inference that had he done so, he would
not have confirmed the plaintiff’s claim as to the use made of the
amount of $52,000.
85. In assessing the plaintiff’s claim I have also had regard to
Mohammad’s delay and failure in taking any action about the failure to
deliver up the shares to the plaintiff for as long a period of time as
transpired. I regard the delay as being in the mix of competing factual
considerations and as a matter that adversely affects the credibility of
31
the plaintiff’s claim of the existence of an agreement with 2Up
Holdings Pty Ltd for the purchase of shares by it in 2Up Gaming PLC.
No demand for a transfer of the shares was at any relevant time made
by the plaintiff and other than a letter of demand as a precursor to
litigation, Court proceedings were not commenced until 31 January
2014. The plaintiff did not make a subscription application for the
shares in 2Up Gaming PLC and neither did the plaintiff make a
transfer of shares application. Mohammad’s explained his delay by
reason that he was busy in his profession and was also embarrassed
by his actions. I found his explanations for his inertia given the
amount of the alleged purchase to ring hollow.
86. On the balance of probabilities, I am not satisfied that there existed an
intention on the part of the plaintiff to purchase shares at all. I regard it
as probable that Mohammad intended to provide funds to enable a
purchase whether by himself or in concert with Kanati of shares in
2Up Gaming PLC. What the arrangement between them may or may
not have been is unknown and not a matter necessary for me to
determine as it is sufficient that I am satisfied that no concluded
agreement existed between the plaintiff and 2Up Holdings Pty Ltd. I
am not persuaded that there is any basis to disturb the actions taken
by 2Up Holdings Pty Ltd who on my findings of fact had no reason to
be put on alert to the direction of the $52,000 provided in writing by
Kanati.
87. Therefore the plaintiff’s claim is dismissed with costs.
88. I will reserve liberty to apply within 7 days.
*******************************************