Brookfield v Real Estate Now Pty Ltd & Anor [2023] QDC 86

DISTRICT COURT OF QUEENSLAND CITATION: Brookfield v Real Estate Now Pty Ltd & Anor [2023] QDC 86 PARTIES: IAN WALTER BROOKFIELD (plaintiff) v REAL ESTATE NOW PTY LTD (ACN 153 307 432) (first defendant) and MARK WILLIAM MERGARD (second defendant) FILE NO: 868/21 DIVISION: Civil PROCEEDING: Trial ORIGINATING COURT: District Court at Brisbane DELIVERED ON: 19 May 2023 DELIVERED AT: Brisbane HEARING DATE: 23 January 2023, 24 January 2023, 30 March 2023 JUDGE: Burnett AM, DCJ ORDER: 1. The Plaintiff’s claim is dismissed. 2. The Defendants’ counterclaim is dismissed. CATCHWORDS: CONTRACT – SALE OF RENT ROLL – CONFLICT CONCERNING GOVERNING AGREEMENT CONTRACT – REPUDIATORY CONDUCT – TERMINATION MISLEADING OR DECEPTIVE CONDUCT – ALLEGED FAILURE BY VENDOR TO DISCLOSE IT WAS SUBJECT TO DEED OF COMPANY ARRANGEMENT – CLAIM DIRECTOR PERSONALLY CONCERNED WITH MISREPRESENTATION DAMAGES – SETOFF BY COUNTERCLAIM – ASSESSMENT LEGISLATION: Competition and Consumer Act 2010 (Cth) Corporations Act 2001 (Cth) s 450E(2) CASES: BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266. -- 1 of 17 -- 2 COUNSEL: Each party self-represented SOLICITORS: Each party self-represented Introduction [1] In this proceeding between the plaintiff and defendants, who were each self-represented1, the dispute concerns the sale of a rent roll forming part of their respective businesses or associate’s business as real estate agents. [2] The Amended Statement of Claim (“ASOC”) broadly alleges that the first defendant, Real Estate Now Pty Ltd (“REN”), whilst the subject of a company deed of arrangement (“DOCA”), entered into an agreement styled as the Rent Roll Sale and Purchase Agreement (the “Brookfield Agreement”) to purchase a rent roll then owned by another company, Blueprop Pty Ltd (“Blueprop”). The Plaintiff (Brookfield) alleges the consideration was never paid by REN to Blueprop. In due course Blueprop itself was wound up but immediately before being wound up Blueprop assigned by deed of assignment (“the Deed of Assignment”) to Brookfield the debt it claimed was owing to it by REN. The second defendant (“Mergard”) is alleged to be a person concerned with REN’s conduct and thereby liable for it. [3] The claim by Brookfield against REN and Mergard is premised upon a breach of contract by REN and failure by it to pay the agreed consideration pursuant to the Brookfield Agreement and/or misleading and/or for deceptive conduct by REN in contravention of the Competition and Consumer Act 2010 (Cth) because of an alleged misrepresentation made by it concerning its state of solvency. Mergard as a director of REN is a person directly concerned with the making of those representations. [4] Brookfield claims that upon REN entering into the Brookfield Agreement with Blueprop it transferred its rent roll to REN but Blueprop received no payment in return either, in part or in full.2 Part of Brookfield’s claim includes a claim in respect of an alleged breach of a “strict liability offence” under s 450E(2) of the Corporations Act.3 [5] Ultimately Brookfield claims for an undefined sum of money he claims was payable to Blueprop and for which he claims an interest as assignee pursuant to the Deed of Assignment. Additionally, he claims for damages for misleading and deceptive conduct associated with the representations Mergard is alleged to have made concerning REN’s solvency (by omission) thereby inducing Blueprop to enter into the Brookfield Agreement. [6] Mergard for himself and REN defends the claim upon the basis that the instrument relied upon by Brookfield is a fraud. He contends that the Brookfield Agreement does not bear his signature and asserts that whilst there was in fact a purchase by REN of Blueprop’s rent roll, it was governed by another arrangement for which payment was made in accordance with the terms of that agreement (the “Mergard Agreement”) and that such payments continued in accordance with that agreement until the 1 The second defendant was a director of the first defendant and also appeared for it. 2 ASOC para 6. 3 ASOC para 26(c). -- 2 of 17 -- 2 Mergard Agreement was terminated by REN for breach. He counterclaims against Brookfield in respect of his “lies and forged documents”. His claim, expressed in lay man’s terms is in respect of the allegations against him by Brookfield. I infer he seeks relief in respect of the agreement he says was on foot and I proceed on that basis. General observations [7] Whilst every effort was made to achieve full disclosure of all relevant documents prior to the trial, I am not satisfied there was such disclosure. It seems each party’s attention to irrelevant issues informed by each party’s entrenched enmity directed to the other significantly distracted their attention from attending to their duties of disclosure. This was best evidenced by Mergard’s late disclosure on the first day of the trial of significantly relevant documents. I’m satisfied his failure to disclose those documents was not malicious but informed by his lack of understanding of the issues in the proceeding. That was so particularly because the documents disclosed were significantly favourable to his case and most probative of matters he swore to in evidence. They were not the sort of documents it might be thought he had any interest in concealing. Indeed, to do so would have caused his case significant harm. [8] Generally both parties engaged in ad hominem attacks upon the character of the other which on the whole I found most unhelpful. Understandably, each lacked a degree of objectivity necessary to assist in the determination of this proceeding, that extended into disclosure. [9] Only Brookfield and Mergard gave evidence. Neither party called other witnesses despite my invitation to do so. That was particularly so for Brookfield who relied on the Brookfield Agreement allegedly signed by Mergard. Mergard denied it was his signature. Brookfield says he witnessed it. But also allegedly present at the same time was the other party to that agreement, Angela Nightingale. Brookfield stated he did not intend to call her as a witness. Brookfield and Nightingale have a close relationship, they live together and feature in share transfers for Blueprop and the Deed of Assignment. In that respect Nightingale had been a director of Blueprop but resigned and transferred her share to Brookfield. In that capacity, as director of Blueprop, Brookfield then had the company assign the debt to himself in his personal capacity. Nightingale witnessed that instrument. Plainly Nightingale was a material witness to relevant events and was in Brookfield’s camp. [10] When the prospect of an adverse inference against his case was raised because of Brookfield’s failure to produce Nightingale as a witness, Brookfield produced a psychologist’s report to address her absence. On its face it indicated Ms Nightingale had been subject to psychology sessions between January and May of 2022 and stating that there was a “future session appointment scheduled for 24/01/2023” being coincidently the second day of the trial. That letter was dated 24 January 2023. Undoubtedly Ms Nightingale’s evidence would have been helpful in resolving one of the central issues in this proceeding namely whether or not Mergard applied his signature to the Brookfield Agreement. Furthermore, there was no evidence from any witness who could have assisted with the identification of handwriting. Such a witness also would have assisted me immeasurably in resolving the central issue. [11] Ultimately, I have reservations concerning any of the oral testimony of either Mergard or Brookfield as evidence of the full truth of matters and I will not act upon their evidence in the absence of objective evidence supporting a contested assertion by -- 3 of 17 -- 3 either, except to a limited extent. For reasons which follow, I have concluded that on most material matters the objective evidence supports Mergard’s case. Accordingly, where there is a contest between Mergard and Brookfield I have generally preferred the evidence of Mergard and will act upon it unless otherwise stated. Additionally, in my view, his case also accords with human experience and is more generally consistent. The plaintiff’s case [12] Brookfield said that Blueprop conducted a real estate business. Nightingale was the proprietor of that business. Nightingale on behalf of Blueprop negotiated for the sale of Blueprop’s rent roll to REN. Brookfield said an agreement was reached between Blueprop and REN for REN to purchase the rent roll and the agreement was reduced to writing and executed by the parties on 6 July 2015 (“the Brookfield Agreement”). REN was a business conducted by Mergard and at the time of this agreement REN was the subject of a DOCA. Upon the purported execution of the Brookfield Agreement the rent roll was transferred by Blueprop to REN, but Brookfield says REN has not paid the price agreed in the Brookfield Agreement. [13] In the meantime, Blueprop assigned to Brookfield by the Deed of Assignment the debt it claimed was owing to it by REN. That assignment enlivened Brookfield’s entitlement to claim in this proceeding. [14] Furthermore, Brookfield says at the time of entering into the Brookfield Agreement he was never told by Mergard that REN was the subject of a DOCA, and on that basis contends that REN engaged in misleading and deceptive conduct by omitting to include in any documentation issued by it the statutory notice of its status as required by the Corporations Act. Brookfield said that Mergard made all the representations to him, and accordingly, Mergard was a person concerned with the misleading and deceptive conduct by REN. The Defence Case [15] Mergard denies REN entered into the Brookfield Agreement and says that his signature evident on the Brookfield Agreement is a forgery fraudulently endorsed by an unknown person; it is not his. He contended that an agreement was in fact entered into between REN and Blueprop for REN’s purchase of the rent roll and that agreement (the Mergard Agreement) was concluded on 1 September 2015. The Mergard Agreement was executed by both he for REN and Angela Nightingale for Blueprop and that the parties proceeded in accordance with its provisions. [16] Brookfield initially said that Nightingale’s signature on the Mergard Agreement is a forgery and was fraudulently applied by some unknown person,4 but later accepted the signature appeared to be her signature.5 [17] Mergard contends that the Mergard Agreement came to an end following Blueprop’s repudiatory conduct which was accepted by it. He counterclaims for damages for REN’s breach of contract. This matter is denied by Brookfield who contends the 4 T 2-17 Ln 10. 5 T 3-25 Ln 8. -- 4 of 17 -- 4 Brookfield Agreement has been breached by non-payment of the moneys due pursuant to it. Which agreement governed arrangements? [18] The operative agreement relied upon by the plaintiff is the Brookfield Agreement.6 The document on its face says it was executed on 6 July 2015. The parties to the agreement were Blueprop as vendor, REN as purchaser and Mergard as warrantor. In the execution block the printed name Angela Nightingale appears in the section provided for execution by Blueprop. A signature, “A Nightingale” also appears together with a witness identified as “Ian Brookfield” with an accompanying signature. Beneath that is a signature block for REN. There the name “Mark Mergard” appears together with a signature and again as witness is the name “Ian Brookfield” and a signature. I note coincidentally there is no signature block for Mergard as the purported “warrantor” and in any case, he does not appear to have executed the Brookfield Agreement in that capacity. This is one of a number of anomalies that appear from a document that was plainly drafted without the assistance of legal advice. [19] Brookfield said in evidence that the signatures of Nightingale and Mergard were applied when both were present and seated at the office of REN located at 238 Bourbong Street, Bundaberg. He swore that after the execution of the Brookfield Agreement Blueprop physically delivered all the relevant documentation and property lists to REN. That involved transporting four filing cabinets together with the security key rack from Blueprop’s premises to those of REN. It is unclear when this occurred, but I infer from email correspondence from the Office of Fair Trading that this was sometime in late July 20157. It also appears evident that at about that time Blueprop was in a state of turmoil. For instance, aside from the issues with its trust account, there were also issues with its office lease and rental due in respect of it. It is against this background that Blueprop was seeking to dispose of its rent roll. Finally in an email dated 27 July 2015 Nightingale sent to her landlord correspondence relating to the ‘sheds’ to be closed noting she had copied in ‘our principal licensee, Mark Mergard to assist with his plans for the office’.8 [20] The Brookfield Agreement is a somewhat puzzling document. In my view it has the hallmarks of ex post facto creation although I do not need to make any finding on that issue or speculate about it. For instance, the inappropriate inclusion of Mergard as “warrantor” might lend support to Brookfield’s claim of misleading and deceptive conduct concerning the absence of reference to the DOCA in REN’s paperwork and in turn Mergard’s liability as someone concerned with that conduct, but a review of the document reveals his identification as “warrantor” is entirely inappropriate. From a plain reading of the provisions, particularly those in Schedule 2, it is well apparent that the “warrantor” for the purpose of the agreement is a natural person associated with the vendor and not the purchaser9. Additionally, the ‘date of commencement’ provided for in various clauses has significance, yet it was never defined or expressed in any schedule as there was none addressing that term. 6 Exhibit 1, p 15-37. 7 Exhibit 2 p55-60 email chain concluding 27 July 2015. 8 Exhibit 2 p56. 9 Exhibit 1 p 31 – Schedule 2 – Warranties. -- 5 of 17 -- 5 [21] Additionally for its part Brookfield, for Blueprop, says it paid REN the monthly sum of $1,000 on account of REN’s management of the properties transferred and the Brookfield Agreement proceeded with that sum payable on a monthly basis. While it is evident that a sum of $1000 was paid on 15 July 2017, the bank statement does not record the purpose of the payment, Mergard does not accept the payment was in respect of the Brookfield agreement, and further the date does not appear to relate to any event between the parties. No further bank statements were produced to demonstrate any ongoing payments as asserted. There does not appear to be any provision in the Agreement for this monthly management fee. Nor is there any evidence that a deposit of 10 per cent of the purchase price of the rent roll was paid or indeed settled. Brookfield accepts no deposit was paid.10 Other anomalies are also evident such as the absence of a commencement date for the agreement. [22] Another odd feature of the Plaintiff’s case is the reference in the Deed of Assignment to the particular sum of $222,972 being the quantum of indebtedness between Blueprop and REN. Despite being afforded numerous opportunities, Brookfield was unable to quantify how this sum was calculated. The deed describes it as a debt owed to Blueprop as assignor by REN. The sum is not for instance a negotiated sum between Blueprop and Brookfield, even putting aside the question of whether the transaction was an arm’s length transaction. In a statement of assets and liabilities prepared by Brookfield for bankruptcy proceedings he noted the indebtedness claimed as an asset valued at $235,833.82.11 In yet another document prepared by Brookfield he notes the value of that indebtedness at $220,000. None of these figures can be reconciled. [23] Mergard put it to Brookfield that the Brookfield Agreement was never executed by him. In particular in cross examination he put to Brookfield an affidavit he, Brookfield, had filed in an earlier windup proceeding which was pursued by Brookfield against REN. In that instance Brookfield had sworn in his affidavit accompanying the statutory demand to the following matters: (a) He was the sole director of Blueprop. (b) He was responsible for the sale of the rent roll to REN. (c) The statutory demand debt of $192,972 was a sum owing by REN to Blueprop. (d) The debt arose following his approach to Mergard in June 2015 enquiring of Mergard’s interest in purchasing the rent roll which was then for sale. He then prepared the Brookfield Agreement in the form contained in Exhibit 1 as contended for in his evidence in this proceeding. (e) He said Mergard said at the time he would prepare an agreement to address the transaction. However, Mergard never prepared or presented such an agreement. [24] Significantly at paragraph 46 of the affidavit he swore: “To date the purchaser (REN) has never signed or forwarded a sale and a purchase agreement.”12 10 T3-6 Ln 5. 11 Exhibit 2, p 104. 12 Exhibit 2, p 46. -- 6 of 17 -- 6 [25] That affidavit was sworn on 30 June 2016 and in that context a copy of the Brookfield Agreement was annexed to it. However, the copy of the Brookfield Agreement attached did not contain Mergard’s signature. Nor was it witnessed13. [26] A close examination of the Brookfield Agreement is not assisted by the fact that the original was never tendered to the Court, leaving it only with copies to assist in its physical analysis. So, it is impossible to determine if, for instance, the Brookfield Agreement has been tampered with. [27] Furthermore, the circumstances surrounding execution of the agreement, in my view, were quite puzzling. In his evidence-in-chief Brookfield stated that he attended at REN’s offices in Bundaberg. He said he witnessed both signatures of Nightingale and Mergard. He also said he saw both of them sign while sitting in the office with both parties present at the same time.14 [28] In cross-examination his attention was then directed to his affidavit in the statutory demand proceedings at which point it transpired that Brookfield had taken three copies of the agreement to REN’s office. His evidence was that only one copy was executed by Mergard. Relevantly in the course of his evidence on this point the following exchange occurred. “Q: You used a precedent, you populated the schedule with the particulars? A: Yes. Q: Which are required. The document was then prepared in – or three copies of the document were prepared, you took the three copies down to Mr Mergard’s office? A: Correct. Q: And you and Mr Mergard sat in the office together with Ms Nightingale? A: Correct. Q: And the document was executed? A: I signed it. Angela Nightingale witnessed it. I handed one copy to Mr Mergard. He said leave it with us. I’ll get back to you. I’ll do my own up. Q: Well? A: And that’s and we walked out with two copies that we had signed and witnessed waiting for the other one to come back from Mr Mergard. Q: So how many copies did you sign yourself? A: I signed all three. Q: All three okay? 13 Exhibit 2 p 67. 14 T1-11. -- 7 of 17 -- 7 A: Yeah. Q: So what you left Mr Mergard with were two copies that had? A: No one copy one copy your Honour. Q: One copy that had not been executed by him? A: Correct. I saw him sign it as we got up but then he said leave it with us I’ll get back to you I’ll do my own up. Q: So you actually saw him sign three different documents? A: Yeah I saw it as we as we got up. He had it right in front of me. Q: Well just answer my question you say you saw him sign three documents? A: Yes I did.”15 [29] But this can’t be correct in at least one particular. If Brookfield had walked out of the office with two fully executed agreements, as he swore, then where did the unexecuted agreement annexed to his later affidavit come from? I do not accept his evidence on this matter. It strikes me as an invention from the witness box, especially the revelation that the one copy left with Mergard had not been executed but that Brookfield saw him “sign it as he got up (to leave)”. Assuming that Brookfield as the witness to the execution of the agreement had performed his duty correctly, he could not have witnessed Mergard’s signature until after Mergard’s signature was applied. Yet the context in which the execution by Mergard was said to have taken place was as Brookfield and Nightingale went to leave. From his evidence that appears to have been a somewhat abrupt departure. It might be that he saw Mergard write something on paper, but in context I’m not satisfied he saw Mergard apply a signature to the Brookfield Agreement. Otherwise, his evidence was that he (Brookfield) executed the agreement three times. He then walked out with two copies “we had signed and witnessed”16; that being a reference to he and Nightingale. In his evidence he said concerning witnessing events as they unfolded that Nightingale in fact witnessed his signature when in fact it was the other way round. Perhaps this was a “Freudian” slip? I take his evidence, at its highest, to mean they were both present at the same time at that point and that only Nightingale executed the agreement. [30] Mergard continued his cross examination, “Q: Was there anyone else present in the office? A: I don’t know if there was anyone else present in the front of the office but there was no-one else present in the room with us. There was you (Mergard), me (Brookfield) and Angela (Nightingale). Q: And she (Nightingale) witnessed that? A: Yes. Q: So if we ring her up we can find out? 15 T1-34, l 27, T1-35, l 7. 16 T1-34, l38-39 -- 8 of 17 -- 8 A: She witnessed my (Brookfield) signature or your signature. Q: No. Your signature. She was there in the room so? A: Yeah. She witnessed my signature, yeah. But she got up and walked out by then because of the way you (Mergard) were talking. Q: The way I was talking? A: Yeah. You upset her so she walked out.”17 [31] In earlier evidence Brookfield had said “we walked out with the two copies that we had signed and witnessed”. His later evidence stating that Mergard had upset Nightingale so much that she walked out does not sit comfortably with his earlier evidence. Again, this later evidence struck me as a recent invention designed to fortify his earlier statements made that day that Nightingale was so traumatised by these events that she now requires psychological assistance and was thus unable to give evidence. [32] All these matters in turn are to be considered against the background of his earlier evidence that Mergard had purportedly executed the Brookfield Agreement and Nightingale had witnessed it before one copy was handed to Mergard to which he responded “… leave it with us I’ll get back to you. I’ll do my own up.”18 Why would Mergard have made this statement if he had just executed the Brookfield Agreement? If he had executed the Brookfield Agreement as alleged then there would have been no need for him to make the statement Brookfield says he made; he would have been bound by the Brookfield Agreement. Similarly, why would Mergard’s statement that he would do up his own agreement go unchallenged, if in fact Mergard had just executed the Brookfield agreement as he says Mergard did? Evidence of Mergard [33] Mergard says he never executed the Brookfield Agreement. He says he first became aware of the Brookfield Agreement when he saw it attached to an affidavit filed in bankruptcy proceedings commenced against him by Brookfield. However, he says an agreement was reached between REN and Blueprop in “Julyish” 2015 for REN to assume the rent roll from it and that appears consistent with the email correspondence between Nightingale and her landlord, David Fingleton of late July.19 Mergard said an agreement was ultimately concluded between them and it constituted the one-page agreement executed by him and Nightingale on 1 September 2015 (“the Mergard Agreement”)20. The Mergard Agreement provided for the sale of the rent roll for a sum of $67,500 being 54 properties at $1,250 each. The Mergard Agreement also provided a payment plan for that sum by way of payments of $2,500 per month with the first payment to be made on 1 September 2015. In his evidence he made reference to the consideration being $55,370. But it is unclear where this figure came from. 17 T1-49, ll 27-41. 18 T1-34, l 35. 19 T1-64, l 31. 20 Exhibit 10, p 107. -- 9 of 17 -- 9 [34] In a document enclosed within Exhibit 1021 there exists a memorandum (“the Memorandum”) which provides some explanation for the transaction contended for by Mergard. In the Memorandum he says that sometime in early “2016” but which plainly was a reference to 2015 he was contacted by Brookfield concerning Nightingale’s purchase of a rent roll at Moore Park for which she had paid about $200,000 for 200 properties. He says Brookfield told him that she was trying to sell what remained of that; there were about 80 or 90 properties. He says Brookfield told him that many of the original properties had been lost through mismanagement. At that point Mergard says he was not interested but subsequently received follow up calls from Mr Brookfield calling for help. He says that ultimately he went down and had a look at the rent roll and organised for his property manager to also review it but then discovered the trust account was “not very good”. He noted there was money missing; there were double ups on receipts; and it was generally in a bad way. He said at one-point the Office of Fair Trading had frozen the trust account due to issues with it. That matter is objectively verified by an email dated 10 July 2015 at 3.04 pm from Jeri Bloom a Senior Investigations Officer from the Office of Fair Trading sent to Joanne Pitt, who I infer had some connection with Blueprop22. In the email Ms Bloom observed, “The trust account will remain frozen until such time that both yourself and Angela Nightingale provide written confirmation that the June reconciliation is correct. Your written confirmation should be provided in a statutory declaration and should also include your intention to have the final audit conducted by Paul Medwin.” [35] In his Memorandum Mergard stated that he tidied matters up before then running the business for a while under the company name of Blueprop from his office in Bundaberg. This matter appears consistent with Nightingale’s email to Fingleton of 27 July 2015 where she described Mergard (not REN) as “our principal licensee”. Being an agent, I expect she would have appreciated the term licensee in its more technical sense. The use of that term would have been inconsistent with his status as purchaser under the Brookfield Agreement, especially Cl 3.5. [36] That raises the issue of why there might have been delay between the initial acceptance by Mergard for REN of an assumption of the rent roll sometime in late July but before any formal agreement was reached between the parties. From the evidence there appear to have been a number of live issues outstanding which would have impacted the willingness of a willing but not overanxious purchaser to resolve before committing to any agreement. In my assessment Mergard was such a person. First there was the matter concerning the trust account. An audit had to occur to determine what issues remained unresolved. [37] Brookfield says he informed Mergard before 6 July that there were difficulties with the trust account and that Mergard was fully aware of those matters before he purportedly executed the Brookfield agreement on 6 July 2015. Mergard denies that evidence. [38] I do not accept Brookfield’s evidence on this point. When he was initially asked about the trust account, the following exchange occurred: 21 at pages 33-35 22 Exhibit 10 p 50 -- 10 of 17 -- 10 “Q: When do you say you informed Mergard of difficulties with the trust account? A: There were no specific issues with the trust account, other than it had to be managed by a licenced real estate agent, which we didn’t – we – Blueprop no longer had, because the partner, Joanne Pitt, had resumed, (sic), I believe it was on the 28th of June 2015, hence the conversation to offer the business to sale to Real Estate Now, because Mr Mergard holds and still holds a full real estate licence. Q: So the answer to my question is “no”. You never informed Mergard of any issues concerning the real estate – the agencies trust account; that is the answer to my question. A: No. It’s not. I just said to your Honour that I advised Mr Mergard that the issue we had with the trust account was it had to be run by a licensed real estate agent. Q: So that was the issue that you informed Mr Mergard of. A: Yes.”23 [39] Brookfield’s attention was then drawn to a letter (Exhibit 2, page 50) from the Office of Fair Trading how where the author stated: “…the trust account will remain frozen until such time as both yourself and Nightingale provide written confirmation that the June reconciliation is correct. Your written confirmation should be provided in a statutory declaration and should also include your intention to have the final audit conducted by Paul Needman”. [40] Later Brookfield stated that that was only “one of the reasons”. [41] It took some time before that concession was made and only following this exchange: “Q: What I want to know is, what did you tell Mr Mergard about the trust account prior to the 6th of July? A: That there were issues – that – that the account – the June accounts had to be reaudited. Q: Thank you, did you tell him why they had to be reaudited? A: Yes I did. Q: What did you tell him about that? A: Because there was – monies had gone missing, but Joanne Pitt had intercepted. Q: So you’re saying that as at 6 July you had told him that monies had gone missing; the trust account was frozen; and the matter was – and the trust account was being audited? 23 T3-14, ll 5-25. -- 11 of 17 -- 11 A: Correct. Q: Was that all as at the 6th of July? A: No that was prior to the 6th of July. Q: Okay when prior to the 6th of July? A: In the – in the six to ten days prior to the 6th of July.”24 [42] I did not think that Brookfield was particularly fulsome in his initial evidence. In fact, I felt that he sought to conceal the true position concerning the difficulties with the trust account and sought to distract from the real issue which was its true state. I prefer Mergard’s evidence that he was aware of issues with the trust account although he did not have a full knowledge to the extent of the difficulties and that informed his approach to the transaction. [43] The trust account difficulties were compounded by the delays it caused to on payment to its principals of rentals received by Blueprop. That in turn impacted the number of properties remaining under management to be sold in the rent roll. I accept Mergard’s evidence on this matter as a proposition of common sense; namely, principals relied upon the rental income to discharge their own obligations and thus if the cashflow was impeded or threatened they would promptly remove their business elsewhere. That matter ignores the other factor namely the impact on general confidence in Blueprop because of the trust account issues. It was unsurprising to hear evidence that at the time of initial approach there were somewhere between 80- 90 properties under management by Blueprop but that ultimately only 54 were available for assignment at the time of contract25. Again, all this accords with common sense and is in my view far more probable than the scenario presented by Brookfield, namely that despite all these unresolved issues at the time Mergard would proceed to contract in the manner Brookfield asserts. [44] My impression of Brookfield as a witness was of a man who was quite persistent, accompanied by the style and presentation of a salesman. In context I accept the evidence of Mergard stated in the Memorandum that Brookfield pursued him pressing the case for the sale of the rent roll to REN and that Mergard ultimately relented then accepted the invitation but having done so proceeded cautiously after an initial due diligence revealed difficulties with the trust account. [45] He said over time he had negotiations with Nightingale to purchase the rent roll as Nightingale did not wish to run it anymore. He says they came to an agreement. Initially he offered her $1,000 per property under management but she wanted $1,350 per property and ultimately the matter was compromised for a sum of $1,250 per property. That was ultimately reflected in the Mergard Agreement. He said the Mergard Agreement was then executed by him and Nightingale, with Nightingale staying on to help manage the properties as she knew them. Nightingale did stay on to help manage the properties and was remunerated for her work. Mergard produced invoices issued by Nightingale for services provided and evidence of payment of those invoices.26 24 T3-17, ll 19-44. 25 Exhibit 10 p33 26 Exhibit 10, pp 60-77 -- 12 of 17 -- 12 [46] In the meantime, Brookfield was engaged to do maintenance work on the properties through an entity that he had incorporated to undertake maintenance works. He did so behind a corporate veil and without the appropriate licences. Although denied by Brookfield this matter is the subject of objective verification by reference to an email from Gavin Nicholson, Senior Plumbing Investigator at the QBCC to Mergard dated 8 September 2017 advising Mergard that the QBCC commissioner had decided to take action against Brookfield and requesting any further information he might have concerning Brookfield “continuing to commit offences”. [47] In the Memorandum Mergard said that in accordance with the agreement a sum of $2,500 per month was paid to Nightingale and payments were made as summarised in his letter of 2 February 2016.27 Objective material exists supporting those payments. That material is found at Exhibit 10.28 In addition other payments were made by Mergard to Nightingale for her continued ongoing involvement in the management of the rent roll as I have earlier observed. [48] It was against this background that Mergard stated that taking over the rent roll involved taking over “a big mess”. He said that because the trust account was frozen, money could not be paid out on account of funds received and due to landlords for whom properties were being managed. [49] In the circumstances I prefer the evidence of Mergard concerning the creation of the Mergard Agreement and reject Brookfield’s evidence concerning the creation of the Brookfield Agreement. In this proceeding I am satisfied on the balance of probabilities that the agreement governing arrangements between REN and Blueprop concerning the sale and purchase of Blueprop’s rent roll was the Mergard Agreement. The parties were bound by the Mergard Agreement. [50] The Mergard Agreement was plainly an imperfect instrument. For instance, it did not accurately record the names of the respective parties to the agreement as Blueprop and REN. The instrument was on REN letterhead and referred to the “AGREED VALUE & PURCHASE PLAN FOR PURCHASE OF RENT ROLL FROM BLUEPROP PTY LTD. Each of Nightingale and Mergard as representatives of those corporate entities held the ostensible authority to complete an agreement on behalf of their respective corporations. They each executed the Mergard Agreement. In accordance with its terms REN commenced to make monthly payments to an account as directed by Nightingale. Consideration passed in execution of the agreement’s terms. [51] Brookfield says Nightingale’s signature is a forgery; she never executed that instrument. He concedes it has a likeness to her signature. The document was not witnessed and the only evidence of its provenance is that by Mergard who says she executed the instrument. As I have noted earlier Nightingale did not give evidence notwithstanding an opportunity to give evidence by telephone. Ultimately I find on balance she did apply her signature to that instrument. In that respect later conduct fortifies my view on that issue. For instance in her email of 5 November 2015 Nightingale wrote to Katrina Mergard (Mergard’s wife) of REN “RE: Invoice for Cotober 2014”, 27 Exhibit 10, pp 20-21. 28 Pages 22-31. -- 13 of 17 -- 13 “That was for September… I Received $600 total cash of September. I was away one week gallivanting in Darwin with Bijal before she went back to England during that month as well. September is the first month where these payment started.”29 From 1 September 2015 Mergard says it was agreed she would be engaged on a retainer of $200 per week. That also accords with the statement in the Mergard Agreement that the agreed purchase price a payment plan “does not reflect on the other income that you tax invoice us for” from REN. [52] Blueprop had earlier arranged for the delivery to REN of records and material related to the rent roll the subject of the agreement whilst matters were in a state of flux. Although the properties were not particularised in the Mergard Agreement, those matters were clearly capable of certain expression because by the time the parties entered into the Mergard Agreement, REN had been conducting the rent roll following the resolution of the difficulties which brought the Office of Fair Trading into play. The issue concerning parties to the Mergard Agreement is also affirmed by the title to it and the provision in the Mergard Agreement that the “Amount Owing” pursuant to that agreement “does not reflect on the other income that you tax invoice us for from Real Estate Now Pty Ltd”30. That was a statement necessary to ensure Blueprop and Nightingale’s interests were treated separately. [53] I am satisfied Nightingale did in fact execute the Mergard Agreement and it constituted the operable agreement between Blueprop and REN. Implied Terms of the Mergard Agreement [54] Mergard accepted in evidence there was an implied term of the Mergard Agreement that Blueprop would do all things reasonably necessary to assist in the transition of the management of each property on the rent roll from Blueprop to REN and not engage in conduct designed or intended to frustrate REN’s ongoing management of properties acquired from Blueprop. Such a term is fair and equitable, necessary to give business efficacy to the Mergard Agreement, so obvious that it goes without saying, is capable of clear expression and does not contradict any express term of the Mergard Agreement: See BP Refinery (Westernport) Pty Ltd v Hastings Shire council (1977) 180 CLR 266. I accept such a term was implied in the Mergard Agreement. Termination [55] Mergard claimed that subsequent to REN’s assumption of the rent roll in accordance with the Mergard Agreement, he commenced making payments in performance of the agreement as directed by Nightingale. Brookfield complains that the moneys paid by Mergard/REN were not paid to Blueprop and accordingly no consideration has been paid pursuant to the Mergard Agreement. I reject that submission. Mergard paid moneys at the direction of Nightingale. She was a director of Blueprop. In Mergard’s initial introduction to her by Brookfield he stated that “… his girlfriend Angela Nightingale had purchased a rent roll at Moore Park she had paid $200,000 for 200 properties …” and he was trying to sell it. I infer he was seeking to broker a sale for Blueprop, the entity associated Nightingale. Negotiations proceeded with Nightingale 29 Exhibit 10 p 59 30 Exhibit 10 p 107 -- 14 of 17 -- 14 and Nightingale signed the Mergard Agreement which was headed, “AGREED VALUE & PURCHASE PLAN FOR PURCHASE OF RENT ROLL FROM BLUEPROP PTY LTD (ABN 851645362520). [56] It is not relevant that the account to which the payments were made was not Blueprop’s account. Nightingale was a director of the corporation and had the ostensible authority to direct the account into which payments were to be made. The internal arrangements for this closely held corporation were not a matter for Mergard. Irrespective of what internal arrangements were in place between Nightingale and Brookfield within this closed corporation, Nightingale was plainly representing by her conduct that she was an authorised officer of Blueprop and acting within the limits of her authority concerning its affairs. Mergard was entitled to pay money due to Blueprop at her direction and did so. Payments in those circumstances constituted a full discharge of the associated liability. [57] After assuming management of the properties, Nightingale was engaged by REN on retainer and paid in accordance with her retainer. However relations commenced to deteriorate, particularly because of Brookfield’s conduct toward Mergard and REN’s management of the rent roll. Management of a number of properties was lost because Brookfield “started sending emails to the tenants and all this sort of stuff and then it caused … tenants to start moving away.”31 [58] Additionally, it was in that context that Mergard complained that Brookfield commenced placing malicious posts on Facebook about him and entities associated with him.32 I am satisfied of those matters. Brookfield did not deny it but contended they were not malicious. I do not agree. The intention to cause harm to REN was present in my view. [59] I am satisfied that Brookfield’s conduct was in breach of the implied term that Blueprop would do all things reasonably necessary to assist in the transition of the management of each property on the rent roll from Blueprop to REN and not engage in conduct designed or intended to frustrate REN’s ongoing management of properties acquired on the rent roll from Blueprop. I find the conduct complained of was repudiatory of the Mergard Agreement.33 [60] At that point Mergard says he told Brookfield, “Come and get the whole lot, we’ll have them ready for you. Just come and pick them up.”34 Following that conversation, he says he wrote his letter of 6 April, Exhibit 5 which materially stated: “We are currently seeking legal advice over your malicious accusations against our company … . You are so intent on destroying our business we will offer you your rentals back on the condition that they are gone by 15 April 3.00 pm. The files will be available for pickup until this time. If these files are not picked up at this date we will consider them abandoned and the contract between Real Estate Now Pty Ltd and Blueprop Pty Ltd will be at an end.” 31 T1-69, l 7. 32 Exhibit 10, pp 4, 5, 7, 8. 33 Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623, 647. 34 T1-66, ll5-10; 1-69, ll5-10 -- 15 of 17 -- 15 [61] Although this letter is marked “without prejudice” the letter by its terms complains of a breach and appears from its terms to accept the breach and provide a deadline for its remedy in default of which the breach would be accepted and the agreement between REN and Nightingale and Blueprop would be terminated. It is not a letter which in substance sought to negotiate some compromise so it cannot be properly characterised as true without prejudice correspondence. Ultimately no response was received to that correspondence and REN wrote to Nightingale by letter of 2 June 2016 stating it owed Blueprop $34,12035 and subsequently on 6 June 2016 stating it owed $29,120.36 The later letter made allowance for a further sum which had not been initially credited. [62] I am satisfied that Blueprop by its conduct repudiated the Mergard Agreement and that REN accepted that conduct and lawfully terminated the Mergard Agreement. Remedy for breach of contract [63] At the time of termination REN acknowledged a sum of $34,120, later $29,120 remained owing pursuant to the terms of the agreement. So much was also accepted by Mergard in the Memorandum37. While Mergard complains of other conduct by Brookfield directed to occasioning economic injury, it is impossible from the material to dispose of that matter as it is not sufficiently particularised as to either conduct or damage. [64] However, in Mergard’s letter and evidence he made two material statements. First he acknowledged that pursuant to the Merged Agreement a sum of approximately $29,000 remained payable by REN to Blueprop. Secondly and more tellingly, he stated he was prepared for Blueprop to come and recover “your rentals back”. Given he had already paid sums totalling approximately $21,000 to Blueprop, that statement made in both his letter of 6 April 2016 and affirmed in his evidence38 suggests that on balance that what he had achieved by the agreement was of no value and he was no worse off walking away, as he proposed to do. It follows and I am satisfied that the conduct of Brookfield on behalf of Blueprop had been such as to render the value of the contract worthless and that REN had been put to a great deal of trouble by the entire exercise. However, as Mergard did not demand damages for breach in this letter of termination but merely offered to return the rent roll. From that I infer he achieved some benefit from the Mergard Agreement before its termination. Even had he obtained some benefit, it was minimal as he was prepared to abandon any benefit the contract may have conveyed and return all the rent roll files notwithstanding he had already paid instalments to Nightingale to the value of approximately $21,000. [65] Doing the best that can be done given the paucity of evidence, I assess REN’s damages for wrongful breach of contract claimed by counterclaim at $29,120, which when set off against the outstanding balance due by REN to Blueprop under the Mergard Agreement results in no award. Contravention of the Trade Practices Act 35 See Exhibit 6. 36 Exhibit 10, p 32. 37 Exhibit 10 p34 38 T1-69 ln 5-10 -- 16 of 17 -- 16 [66] Brookfield further alleges that REN acting through Mergard engaged in misleading and deceptive conduct by failing to disclose that REN was the subject of a DOCA. In particular, that in contravention of Corporations Act s 450E(2), REN failed to endorse upon the operative agreement, the Mergard Agreement that it was at the time of agreement subject of a DOCA. Brookfield alleges this constituted a misrepresentation as to solvency. Mergard gave evidence that he informed both he and Nightingale of that matter early in his negotiations with her. Nightingale did not give evidence to the contrary, she did not give any evidence at all. Brookfield says no such disclosure was ever made. I have no reason to disbelieve Mergard’s evidence on this point although it has not been objectively demonstrated. As he stated in his evidence he saw no relevance of the failure to endorse the DOCA in his dealings with Nightingale despite having told her of it, as the DOCA did not materially impact the arrangements between them. It follows neither Blueprop, nor Brookfield, nor Nightingale were mislead as to REN’s solvency by reason of the omission by REN to make the Corporations Act s 450E(2) notation on the Mergard Agreement. Conclusion [67] In the circumstances I make the following findings: (a) Arrangements between the parties were governed by the Mergard Agreement; (b) The Mergard Agreement was lawfully terminated by REN on 15 April 2016 following its acceptance of Blueprop’s repudiatory conduct; (c) At termination $29,120 was owed by REN to Blueprop (d) REN’s damages are assessed at $29,120 for breach of contract. (e) After set off, Brookfield’s damages are assessed at $0; (f) The Plaintiff has no standing to pursue any contravention of the Corporations Act. (g) The Plaintiff’s claim for damages for alleged contravention of the Trade Practices Act is dismissed. [68] Orders 1. The Plaintiff’s claim is dismissed. 2. The Defendants’ counterclaim is dismissed. -- 17 of 17 --