case_text: nature of the power to grant a permanent stay of proceedings itself reveals an important principle which confines its exercise namely that the power is, in essence, a power to refuse to exercise jurisdiction. The power is to be viewed in light of the principle that the conferral of jurisdiction imports a prima facie right in the person invoking that jurisdiction to have it exercised (Gaudron J in Jago v District Court (NSW) [1989] HCA 46 ; (1989) 168 CLR 23 at 76). This principle was itself elaborated by Deane J in re Queensland Electricity Commission; ex parte Electrical Trades Union of Australia [1987] HCA 27 ; (1987) 72 ALR 1 at 12 as: 'the prima facie right to insist upon the exercise of jurisdiction (as) a concomitant of a basic element of the rule of law, namely, that every person and organisation, regardless of rank, condition or official standing, is 'amendable to the jurisdiction' of the courts and other public tribunals.' [cf Gaudron J in Jago at 76] It is clear that superior courts of justice, including the Federal Court of Australia, have the power to control and supervise proceedings brought within their jurisdiction, including the power to stay proceedings which are an abuse of process (cf Jago v District Court (NSW) [1989] HCA 46 ; (1989) 168 CLR 23 per Mason CJ at 25, 28, Deane J at 58, Gaudron J at 74, 76; Williams v Spautz [1992] HCA 34 ; (1991-1992) 174 CLR 509 at 518 per Mason CJ, Dawson, Toohey and McHugh JJ; Walton v Gardiner [1992] HCA 12 ; (1992-1993) 177 CLR 378 at 393; Lord Diplock in Hunter v Chief Constable of the West Midlands Police (1982) AC 529 at 536; Miller v University of New South Wales [2003] FCAFC 180 at [77-81] ; and note the consideration of this issue by the majority of the High Court in Batistatos v Road Traffic Authority of New South Wales [2006] HCA 27 at [5-8] and by Kirby J at [121-128]). Applications for permanent stay based on effluxion of time appear to be rare (note comments of Bryson JA in Newcastle City Council v Batistatos [2005] NSWCA 20 at 56). The issue has however been the subject of comment by the High Court of Australia in the context of criminal proceedings ( Jago ), in relation to tribunal deliberations ( Walton v Gardiner ), and recently in relation to civil proceedings ( Batistatos ). In any event, the caution with which courts approach an application for a permanent stay of proceedings before them is also well-known. It has been described as an exercise of discretion by a court in only the most exceptional circumstances. As Dixon J said in Cox v Journeaux (No 2) [1935] HCA 48 ; (1935) 52 CLR 713 at 720: 'The inherent jurisdiction of the Court to stay an action as vexatious is to be exercised only when the action is clearly without foundation and when to allow it to proceed would impose a hardship upon the defendants which may be avoided without risk of injustice to the plaintiff. The principle, in general paramount, that a claim honestly made by a suitor for judicial relief must be investigated and decided in the manner appointed, must be observed. A litigant is entitled to submit for determination according to the due course of procedure a claim which he believes he can establish, although its foundation may in fact be slender. It is only when to permit it to proceed would amount to an abuse of jurisdiction, or would clearly inflict unnecessary injustice upon the opposite party that a suit should be stopped.' [see also Batistatos at 71, Jago at 31]


case_outcome: cited

case_text: validity of s 9 of the Act was confirmed by the High Court in Koowarta v Bjelke-Petersen (1982) 39 ALR 417. The grounds in s 9 of the Act have been described as a 'mini Bill of Rights' (P Bailey Human Rights: Australia in an International Contex t Butterworths 1990 p 188).


case_text: comment appears equally relevant today: one of the few cases considering s 9 in isolation is Macedonian Teachers' Association of Victoria Inc v Human Rights and Equal Opportunity Commission (1998) 91 FCR 8 per Weinberg J, confirmed on appeal as Victoria v Macedonian Teachers' Association of Victoria Inc [1999] FCA 1287 ; (1999) 91 FCR 47. In that case, Weinberg J at first instance found inter alia that: • 'based on' in s 9(1) encompasses the broader, non-necessarily causative, relationship expressed in the phrase 'by reference to' • motive, intention or purpose are irrelevant under s 9(1).


case_text: 9 is expressed in general terms, and in most cases is pleaded in association with other provisions of the Act including s 15 as was the situation in this case (another example of a case involving both s 9 and s 15 is Meka v Shell Company Australia Ltd [2005] FMCA 250). As pointed out by Bailey: 'The purpose of s 9 is to provide a broad proscription of racial discrimination in almost any field... It provides a basis for challenge to many forms of discriminatory action ... However apart from Koowarta's case, s 9 has not so far been greatly used. This is probably because of its generality, and also because many of the major discriminations will be caught by the particular provisions in the remainder of Part II of the Act.' [Peter Bailey Human Rights: Australia in an International Context Butterworths 1990 p 189]


case_text: is clear that superior courts of justice, including the Federal Court of Australia, have the power to control and supervise proceedings brought within their jurisdiction, including the power to stay proceedings which are an abuse of process (cf Jago v District Court (NSW) [1989] HCA 46 ; (1989) 168 CLR 23 per Mason CJ at 25, 28, Deane J at 58, Gaudron J at 74, 76; Williams v Spautz [1992] HCA 34 ; (1991-1992) 174 CLR 509 at 518 per Mason CJ, Dawson, Toohey and McHugh JJ; Walton v Gardiner [1992] HCA 12 ; (1992-1993) 177 CLR 378 at 393; Lord Diplock in Hunter v Chief Constable of the West Midlands Police (1982) AC 529 at 536; Miller v University of New South Wales [2003] FCAFC 180 at [77-81] ; and note the consideration of this issue by the majority of the High Court in Batistatos v Road Traffic Authority of New South Wales [2006] HCA 27 at [5-8] and by Kirby J at [121-128]).


case_outcome: applied

case_text: for permanent stay based on effluxion of time appear to be rare (note comments of Bryson JA in Newcastle City Council v Batistatos [2005] NSWCA 20 at 56). The issue has however been the subject of comment by the High Court of Australia in the context of criminal proceedings ( Jago ), in relation to tribunal deliberations ( Walton v Gardiner ), and recently in relation to civil proceedings ( Batistatos ). As the Court of Appeal of New South Wales pointed out ([2005] NSWCA 20 at [13]): • grounds (i) and (iii) were the same in substance, as there was no suggestion that the proceedings in Batistatos were an abuse of process other than because the defendants were irretrievably prejudiced by reason of the delay in the proceedings being brought; and • ground (ii) indicated reliance by the defendants on the power of the Court to summarily dispose of proceedings in Pt 13 r 5, the test for which was whether the case was so clearly untenable that it could not possibly succeed (Barwick CJ in General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69 ; [1964] 112 CLR 125 at 129-130). Hoeben J at first instance rejected the submissions of the defendants in relation to ground (ii) that the plaintiff's claim was so obviously untenable that it could not possibly succeed or so manifestly faulty that it did not admit of argument ([2004] NSWSC 796 at [26]). Accordingly, his Honour declined to make an order summarily dismissing the plaintiff's claim. The conclusion of Hoeben J on this issue was endorsed by the NSW Court of Appeal ([2005] NSWCA 20 at [48]). That particular aspect of the decision of the Court of Appeal was not appealed to the High Court. In delivering the lead judgment of the Court of Appeal, Bryson JA noted that, notwithstanding that the relevant limitation periods applicable to the plaintiff had not expired, it was nonetheless competent for the Court to entertain an application for a permanent stay on the proceedings due to effluxion of time ([2005] NSWCA 20 at 51-52, 57, citing McHugh JA in Herron v McGregor (1986) 6 NSWLR 246 at 253-255). Although Hoeben J was persuaded by the plaintiff's location of three additional witnesses who had recollections of the road and the events which had happened in 1965, and affidavits of those witnesses, that the defendants had not taken steps reasonably open to them to identify and locate other persons with similar information, the Court of Appeal was not similarly influenced. Bryson JA considered that the information in the affidavits of the three 'new' witnesses was 'extremely slight and goes no real distance at all to establishing in any concrete way the state of affairs in which the accident happened in 1965... These three affidavits illustrate, to my mind rather fully, the process of degradation of the availability and quality of evidence where there are long delays' ([2005] NSWCA 20 at [65]). Accordingly, the Court of Appeal considered that Hoeben J erred in concluding that the defendants had not taken steps reasonably open to them to elicit knowledge and evidence of what the position then actually was ([2005] NSWCA 20 at [67]). In the view of the Court of Appeal: 'the simple and overwhelmingly clear position is that no useful evidence is available upon which to conduct a trial into the question whether the plaintiff's injuries were caused by the negligence of the defendants, and no further search or inquiry is in any way likely to locate any such evidence; so that a trial of the proceedings could not rise above a debate about the effect of scraps of information, and it is impossible to inform the debate with any realistically useful information.' [[2005] NSWCA 20 at [79]] Further, in the view of the Court: '...it would manifestly be quite unjust to allow these proceedings to go to what would in form be a trial but in substance would be only a ceremonial enactment of an opportunity to establish whether or not the plaintiff has the rights he claims.' [[2005] NSWCA 20 at [81]] Accordingly, the Court of Appeal allowed the appeal from the decision of Hoeben J, and ordered that the proceedings be permanently stayed. The majority judgment was that of Gleeson CJ, Gummow, Hayne and Crennan JJ. Their Honours observed that the appeals before them concerned abuse of process as understood in the exercise of the 'inherent jurisdiction' of superior courts to stay proceedings (at [5]).


case_text: nature of the power to grant a permanent stay of proceedings itself reveals an important principle which confines its exercise namely that the power is, in essence, a power to refuse to exercise jurisdiction. The power is to be viewed in light of the principle that the conferral of jurisdiction imports a prima facie right in the person invoking that jurisdiction to have it exercised (Gaudron J in Jago v District Court (NSW) [1989] HCA 46 ; (1989) 168 CLR 23 at 76). This principle was itself elaborated by Deane J in re Queensland Electricity Commission; ex parte Electrical Trades Union of Australia [1987] HCA 27 ; (1987) 72 ALR 1 at 12 as: 'the prima facie right to insist upon the exercise of jurisdiction (as) a concomitant of a basic element of the rule of law, namely, that every person and organisation, regardless of rank, condition or official standing, is 'amendable to the jurisdiction' of the courts and other public tribunals.' [cf Gaudron J in Jago at 76]


case_text: which are an 'abuse of process' however are potentially a broad class, not limited to fixed categories. As pointed out by the majority of the High Court in Batistatos at [9]: 'What amounts to abuse of court process is insusceptible of a formulation comprising closed categories. Development continues.' (Note similar comments of Lord Diplock in Hunter v Chief Constable of West Midlands Police at 536, Richardson J in Reid v New Zealand Trotting Conference [1984] 1 NZLR 8 at 9.) In Batistatos , their Honours considered earlier decisions where abuse of process in the sense of abuse of court process was discussed, and observed that circumstances where courts have formed the view that conduct constituted abuse of process included where: • proceedings were pending in another forum • proceedings were instituted for an improper or illegitimate purpose • proceedings were seriously and unfairly burdensome, prejudicial or damaging, including where there had been an unreasonable delay in commencing proceedings • proceedings were of serious and unjustified trouble and harassment • the use of the court's procedures would bring the administration of justice into disrepute • proceedings were frivolous or vexatious • there was no triable issue • it was impossible for the defendants to obtain a fair trial in the circumstances of the case.


case_text: an employer/employee relationship exists between parties is determined by the nature of their relationship and whether indicia of employment are evident. This issue has been the subject of much judicial comment. The leading Australian case on the topic is Stevens v Brodribb Sawmilling Company Pty Ltd [1986] HCA 1 ; (1986) 160 CLR 16 per Mason J at 24 and Wilson and Dawson JJ at 36, recently considered by the Full Court of the Federal Court in ACT Visiting Medical Officers Association v Australian Industrial Relations Commission [2006] FCAFC 109 at [19-21] , where incidents of the employment relationship were identified as: • the measure of control that the putative employer is entitled to exercise over the worker • the mode of remuneration • the provision and maintenance of equipment • the obligation to work • the hours of work • the provision for holidays • the deduction of income tax • the delegation of work • the right to have a particular person do the work • the right to suspend or dismiss the person engaged • the right to the exclusive services of the person engaged • the right to dictate the place of work.


case_text: reference to 'contract for services' in s 3(1) is to the traditional distinction at common law between an 'employee' who was employed under a 'contract of service', and an independent contractor who was engaged under a 'contract for services'. Historically, employers could be liable for wrongs inflicted on a third party by an employee, but not where the worker was an independent contractor (see for example B Creighton and A Stewart Labour Law: An Introduction (The Federation Press, 2000) pars 7.02-7.06 and the recent discussion of these principles by the High Court in Sweeney v Boylan Nominees Pty Ltd [2006] HCA 19 ; (2006) 227 ALR 46 at 49). This distinction is not relevant in the case before me the only point is whether the applicants were employees of the respondent at the relevant time.


case_title: Victoria v Macedonian Teachers' Association of Victoria Inc [1999] FCA 1287 ; (1999) 91 FCR 47


case_text: is clear that superior courts of justice, including the Federal Court of Australia, have the power to control and supervise proceedings brought within their jurisdiction, including the power to stay proceedings which are an abuse of process (cf Jago v District Court (NSW) [1989] HCA 46 ; (1989) 168 CLR 23 per Mason CJ at 25, 28, Deane J at 58, Gaudron J at 74, 76; Williams v Spautz [1992] HCA 34 ; (1991-1992) 174 CLR 509 at 518 per Mason CJ, Dawson, Toohey and McHugh JJ; Walton v Gardiner [1992] HCA 12 ; (1992-1993) 177 CLR 378 at 393; Lord Diplock in Hunter v Chief Constable of the West Midlands Police (1982) AC 529 at 536; Miller v University of New South Wales [2003] FCAFC 180 at [77-81] ; and note the consideration of this issue by the majority of the High Court in Batistatos v Road Traffic Authority of New South Wales [2006] HCA 27 at [5-8] and by Kirby J at [121-128]). Applications for permanent stay based on effluxion of time appear to be rare (note comments of Bryson JA in Newcastle City Council v Batistatos [2005] NSWCA 20 at 56). The issue has however been the subject of comment by the High Court of Australia in the context of criminal proceedings ( Jago ), in relation to tribunal deliberations ( Walton v Gardiner ), and recently in relation to civil proceedings ( Batistatos ).


case_outcome: related

case_text: On 13 July 2007 I delivered judgment on liability ( A & L Silvestri Pty Ltd v Construction, Forestry, Mining and Energy Union [2007] FCA 1047 ; (2007) 165 IR 94) . The findings can be summarised as follows: (1) Lane, CFMEU and CFMEU NSW contravened s 170NC of the Workplace Relations Act 1996 (Cth) (Pre-Reform). It is now common ground that no case of such breach was pleaded against CFMEU NSW. (2) Lane, Primmer, Kelly, CFMEU and CFMEU NSW contravened s 45D of the Trade Practices Act 1974 (Cth). (3) Lane, Primmer, Kelly, CFMEU and CFMEU NSW interfered with the contract between LGB and Silvestri P/L. 2 Damages for breach of s 45D of the Trade Practices Act 1974 (Cth) and interfering with the contract and penalties for breach of s 170NC must now be determined. It is not necessary to repeat the factual background to the proceeding, save for where it is relevant to the consideration of remedies. Phrases and terms used in these reasons (if otherwise undefined or unexplained) are to be understood by reference to the judgment on liability. 3 The respondents contend that the contract between LGB and Silvestri P/L was an hourly hire and that damages should not exceed compensation for more than two hours' work. I disagree. Both parties to the contract understood that the job entailed all of the excavation required at the site. I so held in the judgment on liability ( A & L Silvestri Pty Ltd [2007] FCA 1047 ; (2007) 165 IR 94 at [83] ). The benefit of that arrangement was denied by reason of the wrongful actions of the respondents. 4 Silvestri P/L's primary claim is for damages based upon the time that was taken to complete the job by other contractors many months, with more than one machine operating at times. I do not accept that approach. The question is the time that Silvestri P/L would have taken. Both Antonio Silvestri and Krkovski estimated that the job would take three to four weeks. There was evidence of inefficiency on the part of successive excavation contractors in completing the job and there was a holiday period. Nonetheless, the time actually taken does indicate that the parties were over-optimistic in the estimate of three to four weeks. Any such estimate would necessarily depend upon the nature of the material encountered, weather and other factors. I will take eight weeks working at the rate of five days and 40 hours per week as to length of the job. I allow $105 per hour to take account of excavator and hammer hire as well as excavator hire, leading to a loss of revenue of $33,600 less variable costs of $100 per day for fuel and oil totalling $4,000 leaving a net loss of revenue of $29,600. During the eight week period from 22 October 2003, Silvestri P/L earned $6,687 for excavator, mini excavator and mini excavator float hire. The amount lost is therefore near enough to $23,000 plus interest from 22 October 2003 to the date of judgment. I cannot see that there is any practical difference as to calculation of damages between the count in tort and the count based upon s 45D. 5 A preliminary question arises as to the number of contraventions committed. The applicants submit that each of the "explicit threats" by Lane constituted a separate breach of s 170NC by both Lane and the CFMEU and therefore each can and should be the subject of a separate penalty. They seek declarations for, in effect, six contraventions, each relating to an identified event. The respondents submit that the application and the amended statement of claim allege only one contravention of s 170NC and seek only the imposition of one penalty in respect of the conduct pleaded. In the alternative, the respondents contend that, if there are separate contraventions by Lane (and through him the CFMEU), then they were part of a single course of conduct to which the totality principle would apply, as in imposing a penalty for a number of offences it is necessary to ensure that the penalties in aggregate are just and appropriate. I accept that only one contravention evidenced by a series of actions is alleged on the pleadings and will proceed accordingly.


case_text: A number of authorities discuss the factors to be taken into account in fixing a penalty, many of them borrowing from related fields, including the criminal law. It is sufficient to refer to the recent case of Kelly v Fitzpatrick [2007] FCA 1080 ; (2007) 166 IR 14 as an example. However, the discretion is at large. There are no mandatory statutory criteria and it is wrong to regard factors seen as relevant by one court as statutory criteria. Indeed, lists of factors can confuse an essentially straightforward task and lead to over-elaborate reasoning. The maximum penalty for the Union is $11,000 and $2,200 for Lane. 7 On any view Lane's contravention must be ranked at the high end of the range, although not as the most serious. His actions were concerted, deliberate and persistent over a period. They affected not only a small business operator in Silvestri P/L, but a significant project in the city of Wollongong. This cannot be seen as an isolated incident out of character. Lane presented his demands as part of a campaign to control industrial relations in the building industry in Wollongong. His conduct was belligerent and arrogant. He denied the case against him and fought it all the way. Following judgment he was quoted in an article in the Illawarra Mercury as follows: Mr Lane said the decision was an "absolute outrage". "I had no goal whatsoever of extracting an EBA between (Mr Silvestri) and his employees, because there were no employees" he said. In a letter addressed to the Court on 10 August 2007, Lane stated that he did not recall making the comments as quoted but did not deny making them. He withdrew his comments and apologised to the Court for making them, adding that they were made in haste with insufficient thought. The evidence shows that Lane's apology was the result of a direction by the CFMEU State Secretary. He is not entitled to any discount for genuine contrition as to the events of October 2003. 8 A number of character references were tendered on behalf of Lane. The references show that Lane is well regarded by his peers in the industry. However, some of the references seem to suggest that Lane's conduct was characteristic and justifiable. It may be accepted that Lane is generally of good character, but the relevant issue here is whether he is prepared to abide by the law of the land as to workplace relations and union activity.


case_text: A number of findings involving unlawful behaviour by officials related to the CFMEU have been made in recent years, in addition to the other case involving Lane (eg Construction, Forestry, Mining & Energy Union v Coal & Allied Operations Pty Ltd (No 2) [1999] FCA 1714 , (1999) 94 1R 231; Construction, Forestry, Mining & Energy Union v Hamberger [2003] FCAFC 38 ; (2003) 127 FCR 309 ; Alfred v Walter Construction Group Ltd [2005] FCA 497 ; Martino v Construction, Forestry, Mining and Energy Union, Magistrates Court of Victoria (Industrial Division), 10 May 2006; Alfred v Construction, Forestry, Mining and Energy Union , District Court of New South Wales, 3 March 2004; Hadgkiss v Blevin [2004] FCA 697 ; [2004] FCA 917 ; Hadgkiss v Construction, Forestry, Mining and Energy Union [2007] FCA 524 ; (2007) 162 IR 385; Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65 ; (2007) 158 FCR 543 ; Australian Competition and Consumer Commission v Construction, Forestry, Mining and Energy Union [2006] FCA 1730 ; (2007) ATPR 42-140 ; Cruse v Multiplex Ltd [2007] FCA 2015 ; Cruse v Construction, Forestry, Mining and Energy Union [2007] FMCA 1873 ; and Alfred v Lanscar [2007] FCA 1001 ; (2007) 167 IR 320). Counsel for the CFMEU submits that only building industry cases are relevant, and then only those that involve the relevant divisional branch (the New South Wales Construction and General Divisional Branch), bearing in mind that the Union is an amalgamated federation ( Re Election for Office in the Construction, Forestry, Mining and Energy Union; Ex parte Sutton [2002] FCA 971 ; (2002) 115 IR 345 at [23] ). I agree that the classes of case identified are the most relevant, but I do not agree that the other cases are irrelevant. Ultimately, union officials will act in accordance with the policies of the union. An official of one geographic or industry branch will observe the manner in which policies are applied by the federal body in relation to other branches. These various cases illustrate that the federal body has not been effective in ensuring that officials act in accordance with the law. I note that there is no evidence of offending officials (including Lane) suffering any serious disciplinary penalties. 14 In my opinion, notwithstanding the purely vicarious nature of the liability of the CFMEU, the penalty in this case, when compared with the maximum penalty, should adequately reflect the systematic nature of the failure of the CFMEU to deter or prevent actions of the kind involved in this case and act as a spur towards effective action by the CFMEU and the State entities connected with it. A penalty of $5,500 will be imposed. 15 Declarations as to contravention will be made. The respondents should pay the first applicant damages in the sum of $23,000 plus interest from 22 October 2003 to the date of judgment. The respondent Lane is to pay a penalty of $1,800. The respondent CFMEU is to pay a penalty of $5,500. The applicants should bring in revised draft minutes of order to give effect to these reasons. Costs can be considered. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles. Associate: Dated: 11 April 2008 Counsel for the Applicants: Mr RM Goot AM SC, Mr MJ Heath Solicitor for the Applicants: Minter Ellison Lawyers Counsel for the Respondents: Mr JH Pearce Solicitor for the Respondents: Taylor & Scott Date of Hearing: 15 August 2007 Date of Judgment: 11 April 2008 AustLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback URL: http://www.austlii.edu.au/au/cases/cth/FCA/2008/466.html


case_text: courts have recognised the importance of access to source financial documentation in the face of conflicting financial evidence (for example, Hamilhall Pty Ltd v AT Phillips Pty Ltd [1994] FCA 1446 ; (1994) 54 FCR 173 , ALF No 12 Pty Ltd v Starkey [2006] QSC 297). However the fact that source financial documentation is not available does not mean that the Court is unable to make a determination on a question of financial position (for example, David Towney v Minister for Land & Water Conservation for NSW [1997] FCA 656 , ALF No 12 Pty Ltd v Starkey [2006] QSC 297).


case_title: Andar Transport Pty Ltd v Brambles [2004] HCA 28 ; (2004) 217 CLR 424


case_text: law is clear that contractual provisions in a guarantee are to be construed strictly, and, in relation to provisions for the benefit of the principal, contra proferentum : Ankar Pty Ltd v National Westminster Finance (Aust) Ltd [1987] HCA 15 ; (1987) 162 CLR 549 at 561; Apple Computer Australia Pty Ltd v Mekrizis [2003] NSWSC 126 at [127] . In relation to the 1998 profit shortfall however, it is clear that the fact and amount of a profit shortfall for 1998 were agreed, on an informed basis, by Mr Poh on behalf of both applicants and Mr Forbes. Failing other reasons which have been advanced by the respondents, and to which I shall turn shortly, in my view the amount of $127,284 represents the profit shortfall for the year ending 31 December 1998 for the purposes of cl 3.3 of the share sale agreement and is recoverable from Mr Forbes by the applicants pursuant to the Forbes Guarantee. 2. What is the position of Mrs Forbes in relation to the 1998 profit shortfall? It is settled law that a surety will be discharged from his or her obligations where there is a fundamental alteration to the guaranteed obligations to which the surety has not consented: Ankar [1987] HCA 15 ; (1987) 162 CLR 549 , Wallace-Smith v Thiess Infraco (Swanston) Pty Ltd [2005] FCAFC 49 at [302] . As the majority said in Ankar (1987) 162 CLR 546 after discussing a number of English cases: These statements of principle ... indicate that the principle is the by-product, not so much of the general law of contract, as of the special relationship between creditor and surety arising out of the suretyship contract upon which equity fastened to protect the surety when the creditor's conduct affected the surety's liability: Holme v Brunskill . According to the English cases, the principle applies so as to discharge the surety when conduct on the part of the creditor has the effect of altering the surety's rights, unless the alteration is unsubstantial and not prejudicial to the surety. The rule does not permit the courts to inquire into the effect of the alteration. The consequence is that, to hold the surety to its bargain, the creditor must show that the nature of the alteration can be beneficial to the surety only or that by its nature it cannot in any circumstances increase the surety's risk, e.g. a reduction in the debtor's debt or in the interest payable by the surety. The mere possibility of detriment is enough to bring about the discharge of the surety. (at 559-560) As I have already observed, a surety is discharged where there is a fundamental alteration to the guaranteed obligations to which the surety has not consented unless the alteration is unsubstantial and not prejudicial to the surety: Ankar [1987] HCA 15 ; (1987) 162 CLR 549 ; Wallace-Smith [2005] FCAFC 49. Third, even if contrary to my view as to the weight of evidence before the Court the acquisition of Favco was not the decision of Mr Forbes, the acquisition of Favco was not an event which caused a material variation to the terms of the share sale agreement: Ankar [1987] HCA 15 ; (1987) 162 CLR 549 at 559. It could not be said, for example, that the acquisition of Favco involved conduct on the part of the creditor (Forbes Asia) having the effect of altering the suretys' rights: Ankar [1987] HCA 15 ; (1987) 162 CLR 549 at 559. Finally, the respondents cannot point to any provision in the terms of the guarantee side letters as executed by the respondents which support the proposition that the acquisition of Favco involved a departure from the terms as agreed in the guarantee. In this respect the events of which the respondents complain can be contrasted with, for example, the facts of Ankar [1987] HCA 15 ; (1987) 162 CLR 549 itself, where the High Court held that the surety had been discharged from liability because, inter alia : Accordingly, I consider that this aspect of the respondents' defence fails. 7. Even if the vendors' profit guarantee as articulated in clause 3.3 of the share sale agreement is valid, are the applicants estopped from relying on it because of the alleged representations of Mr Poh as pleaded in paragraph 13 of the respondents' defence? In relation to this issue, the respondents submit in summary:


case_text: law is clear that contractual provisions in a guarantee are to be construed strictly, and, in relation to provisions for the benefit of the principal, contra proferentum : Ankar Pty Ltd v National Westminster Finance (Aust) Ltd [1987] HCA 15 ; (1987) 162 CLR 549 at 561; Apple Computer Australia Pty Ltd v Mekrizis [2003] NSWSC 126 at [127] . In relation to the 1998 profit shortfall however, it is clear that the fact and amount of a profit shortfall for 1998 were agreed, on an informed basis, by Mr Poh on behalf of both applicants and Mr Forbes. Failing other reasons which have been advanced by the respondents, and to which I shall turn shortly, in my view the amount of $127,284 represents the profit shortfall for the year ending 31 December 1998 for the purposes of cl 3.3 of the share sale agreement and is recoverable from Mr Forbes by the applicants pursuant to the Forbes Guarantee. 2. What is the position of Mrs Forbes in relation to the 1998 profit shortfall? As I have already observed, as a general proposition the law construes terms in guarantees contra proferentum in the surety's favour. It is clear that the profit guarantee under cl 3.3 exists solely for the benefit of Forbes Asia. Such a clause should be strictly construed ( Je Maintiendrai Pty Ltd v Australia and New Zealand Banking Group Ltd (1985) 38 SASR 70 at 71, Apple Computer [2003] NSWSC 126 at [127] , O'Donovan J & Phillips J, The Modern Contract of Guarantee (4th ed, looseleaf) at 5.920). The legal principles emerging from Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 have been largely confined to circumstances where a banker's certificate has been issued as to the amount of indebtedness of a debtor to the bank (for example Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 , Je Maintiendrai Pty Ltd v Australia and New Zealand Banking Group Ltd (1985) 128 SASR 70, Campbell v National Australia Bank Ltd [1994] SASC 4526 , Equus Financial Services Limited v Sabri [1994] FCA 1331 , George Biritz v National Australia Bank Limited [1995] VSC 91 , Shomat v Rubenstein (1995) 124 FLR 284 , Thurwood v First for Finance Pty Ltd [1997] FCA 559 , Australia & New Zealand Banking v Pan Foods Company Importers & Distributors Pty Ltd [1998] VSC 346 , Jenkins v National Australia Bank Ltd [1999] VSCA 33 , State Bank v Lo [2000] NSWSC 1191 , State Bank of NSW v Kit Cheng Chia [2000] NSWSC 552 , Australia and New Zealand Banking Group Ltd v Dzienciol [2001] WASC 305 , Julong Pty Ltd v Fenn [2002] QCA 529 , Apple Computer [2003] NSWSC 126 , Commonwealth Bank of Australia v Bouwman [2003] WASC 205 , Timms v Commonwealth Bank of Australia [2004] NSWSC 76 , Permanent Trustee Company Limited v Gulf Import and Export Company [2008] VSC 162). Since and possible because of Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 , bankers' certificates have become well-known in practice. That is not to say that the principle articulated in Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 has not been extended beyond the banker/customer/surety relationship, however circumstances in which the Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 principle is applicable are primarily confined to those involving the issue of a certificate as to the existence of a fact pursuant to legislation, or certain types of agreement, for example:


case_title: ASIC v Rich [2005] NSWSC 417

case_text: business records are prepared as internal records in the course of or for the purposes of the business (Austin J in ASIC v Rich [2005] NSWSC 417 at [212] ). Business records can clearly include opinions ( Ringrow Pty Ltd v BP Australia Ltd [2003] FCA 933) however as observed by Austin J in ASIC v Rich [2005] NSWSC 417: It is most unlikely that those expressing opinions in business records would attend to the requirements of s 78 or s 79 , let alone with the precision required by Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705. It would not occur to the people creating those documents that they should set out to justify their opinions in the same way that an expert would do in preparing a written report for a court hearing. In those circumstances, to apply the opinion rule to business records that meet the requirements of s 69 would be substantially to undermine, if not to negate, the implementation of the policy underlying the business records provisions, asserted so forcefully by Hope JA in Albrighton (at 548-549) and by the Australian Law Reform Commission in its Interim Report on Evidence at [709]. Courts would be prevented from having access to substantial components of the records of businesses so as to assess them for what they are, on the ground that they do not satisfy requirements which their authors would not have regarded as relevant. As Brownie AJ remarked in a somewhat different context ( Linfox Transport (Aust) Pty Ltd v Arthur Yates & Co Ltd (2003) 47 ACSR 261 at [23]), "it does not seem apt in this context to draw a lawyerly distinction between the way a witness might or might not be permitted to give opinion evidence in court with the way in which a company officer routinely reports to his superiors". (at [212])


case_text: legal principles emerging from Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 have been largely confined to circumstances where a banker's certificate has been issued as to the amount of indebtedness of a debtor to the bank (for example Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 , Je Maintiendrai Pty Ltd v Australia and New Zealand Banking Group Ltd (1985) 128 SASR 70, Campbell v National Australia Bank Ltd [1994] SASC 4526 , Equus Financial Services Limited v Sabri [1994] FCA 1331 , George Biritz v National Australia Bank Limited [1995] VSC 91 , Shomat v Rubenstein (1995) 124 FLR 284 , Thurwood v First for Finance Pty Ltd [1997] FCA 559 , Australia & New Zealand Banking v Pan Foods Company Importers & Distributors Pty Ltd [1998] VSC 346 , Jenkins v National Australia Bank Ltd [1999] VSCA 33 , State Bank v Lo [2000] NSWSC 1191 , State Bank of NSW v Kit Cheng Chia [2000] NSWSC 552 , Australia and New Zealand Banking Group Ltd v Dzienciol [2001] WASC 305 , Julong Pty Ltd v Fenn [2002] QCA 529 , Apple Computer [2003] NSWSC 126 , Commonwealth Bank of Australia v Bouwman [2003] WASC 205 , Timms v Commonwealth Bank of Australia [2004] NSWSC 76 , Permanent Trustee Company Limited v Gulf Import and Export Company [2008] VSC 162). Since and possible because of Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 , bankers' certificates have become well-known in practice. That is not to say that the principle articulated in Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 has not been extended beyond the banker/customer/surety relationship, however circumstances in which the Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 principle is applicable are primarily confined to those involving the issue of a certificate as to the existence of a fact pursuant to legislation, or certain types of agreement, for example:


case_title: Australia and New Zealand Banking Group Ltd v Dzienciol [2001] WASC 305


case_title: Bulk Chartering v T and T Metal (1993) 114 ALR 189


case_title: Campbell v National Australia Bank Ltd [1994] SASC 4526


case_title: City of London v New Hampshire Insurance Company (unreported, Phillips J, Queens Bench Division (Commercial Court) 18 January 1991

case_text: in any event I consider the facts that the profit forecasts which formed the framework for negotiations and discussions in relation to the profit guarantee related only to the Brisbane-based business of Forbes Australia, and that there was no suggestion prior to 22 September 1997 that Forbes would undergo any radical expansion in its operations, are of no moment in relation to the liabilities of the respondents as guarantors. I take this view because I consider that the acquisition of Favco in the circumstances I have outlined was actually, to paraphrase comments of Phillips J in City of London v New Hampshire Insurance Company (unreported, Phillips J Queens Bench Division (Commercial Court) 18 January 1991), discussed in Butterworth's Journal of International Banking and Financial Law , March 1991, pp 144-5 and cited in Duffy Bros Fruit Market (Campbelltown) v Gumland Property Holdings Pty Ltd [2007] NSWCA 7 at [220] ) an event "arising out of a contemplated course of dealing" and as such it remained within the scope of the guarantee. No provision of the share sale agreement or the guarantees signed by the respondents limited the activities of Forbes Australia following execution of the share sale agreement. The expansion of the business of Forbes Australia under the control of Mr Forbes as chief executive officer by the acquisition of Favco was not an event which could be considered as outside the terms of either the share sale agreement or the relevant guarantees. There was no covenant in any relevant agreement that, for example, Forbes Australia would continue to operate a business based only in Brisbane (contrast for example Spencer, Turner and Boldero v Lotz (1916) 32 TLR 373 where the Court held that the intention of the parties was that the guarantee should only be in respect of goods supplied in a certain location and not otherwise).


case_title: Commonwealth Bank of Australia v Bouwman [2003] WASC 205


case_text: assuming that the effect of cl 3.3 and Annexure 1 is that an audit opinion is akin to a "Dobbs" certificate as submitted by the applicants, I do not accept that the position as to the audited profits before tax is so finally and conclusively determined by the tender of the Deloitte Touche Tohmatsu audit report that the respondents are not permitted to challenge the findings of the report on the basis that it does not comply with Annexure 1, which provided the machinery of calculation adverted to in cl 3.3. The High Court in Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 accepted that a clause of this nature should not be interpreted as covering all grounds which go to the validity of the amount certified, for example illegality (at 651). Similarly, the Courts have found that a certificate can be challenged on such grounds as fraud and obvious error ( Permanent Trustee Company Limited v Gulf Import and Export Company [2008] VSC 162) , although if the certificate is properly tendered the onus falls upon the defendant to demonstrate by acceptable evidence that the certificate is incorrect ( Commonwealth Bank of Australia v Oberdan [2000] SASC 428 at [14] , Concrete Constructions Group Pty Ltd v Coddlestone Pty Ltd [1995] ACTSC 332).


case_title: Concrete Constructions Group Pty Ltd v Coddlestone Pty Ltd [1995] ACTSC 332


case_title: Corumo Holdings Pty Ltd v C Itoh Ltd (1991) 24 NSWLR 370

case_text: agree with the respondents that any ambiguity in relation to cl 4 ought be resolved in their favour. Not likely do the Courts assume that a party to a contract gives up all defences available at law. However in my view the respondents' defence with respect to the variations to the share sale agreement are not assisted by their submissions in respect of cl 4. Unlike the situation as considered in Corumo Holdings (1991) 24 NSWLR 370 , variations to the share sale agreement in this case were not such as to impact on the obligations of the respondents. Prima facie , the respondents are bound by cl 4 of the Forbes Guarantee. 6. Was the transaction resulting in the acquisition of Favco by Forbes Australia an alteration in the factual substratum sufficient to discharge the respondents as guarantors? In relation to this point the respondents submit in summary: The applicants submit in summary: The acquisition of Favco was Mr Forbes' idea alone. The evidence of Mr Poh, which Mr Forbes did not dispute in his evidence in chief, was that Mr Poh expressly told Mr Forbes that it was his (that is, Mr Forbes') decision. Mr Forbes, as chief executive officer, had exclusive control over such expenses of the company. The acquisition of Favco, being Mr Forbes' own decision, cannot alleviate him of his responsibility under the profit guarantee. Consideration


case_text: Dixon J observed in Cox v Journeaux (No 2) [1935] HCA 48 ; (1935) 52 CLR 713 at 720, the jurisdiction of the Court to stay an action as vexatious is to be exercised only when the action is clearly without foundation and when to allow it to proceed would impose a hardship upon the respondents which could be avoided without risk of injustice to the applicant. His Honour also said that a litigant is entitled to submit a claim for determination notwithstanding that its foundation may be slender; and It is only when to permit it to proceed would amount to an abuse of jurisdiction, or would clearly inflict unnecessary injustice upon the opposite party that a suit should be stopped. (at 720) Abuses of procedure usually fall into one of three categories:


case_text: principles represent the law in Australia ( Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd [1975] HCA 49 ; (1975) 133 CLR 72 , Northside Developments Pty Ltd v Registrar-General [1990] HCA 32 ; (1990) 170 CLR 146 , Pacific Carriers Ltd v BNP Paribas [2004] HCA 35 ; [2004] 218 CLR 451).


case_title: David Towney v Minister for Land & Water Conservation for NSW [1997] FCA 656


case_text: my view, the following issues require decision. Did Forbes Australia experience a profit shortfall in the financial year ending 31 December 1998? What is the position of Mrs Forbes in relation to the 1998 profit shortfall? Was the effect of cl 3.3 and Annexure 1 of the share sale agreement such that the production of audited figures for the financial year ending 31 December 1999 was conclusive evidence of those figures, consistent with the decision of the High Court in Dobbs v National Bank of Australasia Ltd [1935] HCA 49 ; (1935) 53 CLR 643? Was the change of control of Forbes Australia from the vendors to Forbes Asia an alteration in the factual substratum sufficient to discharge the respondents as guarantors? Did the third and fourth deeds of variation to the share sale agreement result in the discharge of the respondents as guarantors? Did the transaction resulting in the acquisition of Favco by Forbes Australia result in the discharge of the respondents as guarantors under the Forbes Guarantee? Even if the vendors' profit guarantees as articulated in cl 3.3 of the share sale agreement are valid, are the applicants estopped from relying on them because of the alleged representations of Mr Poh as pleaded in para 13 of the respondents' defence? Was the applicants' cause of action statute barred? Was the Forbes Lot 8 Lease Guarantee enforceable? What are appropriate rulings in relation to the notice of motion filed 12 September 2007? I now turn to each of these issues. 1. Did Forbes Australia experience a profit shortfall in the financial year ending 31 December 1998? So far as concerns the 1998 financial year the applicants submit in their Statement of Facts, Issues and Contentions as follows: In my view Mrs Forbes is not bound by the agreement reached by Mr Poh on behalf of the applicants and Mr Forbes in relation to the 1998 profit shortfall. Further, the substituted agreement with respect to the 1998 profit shortfall represented a material alteration to the calculation of that shortfall, the terms of the principal agreement and in particular the liability of the guarantors with respect to the amount guaranteed for the year ending 31 December 1998. It is not claimed, and there is no evidence, that this alteration in any way benefited Mrs Forbes. Accordingly, any liability of Mrs Forbes in relation to a profit shortfall for the calendar year ending 31 December 1998 pursuant to the Forbes Guarantee and cl 3.3 of the share sale agreement was discharged in light of the substituted agreement reached by Mr Poh and Mr Forbes in respect of that year, and to which she has not consented. 3. Was the effect of clause 3.3 and Annexure 1 of the share sale agreement such that the production of audited figures for the 1999 financial year was conclusive evidence of those figures, consistent with the decision of the High Court in Dobbs v National Bank of Australasia Ltd [1935] HCA 49 ; (1935) 53 CLR 643? In relation to the year ending 31 December 1999 the applicants submit that Forbes Australia recorded an audited loss before tax, calculated by reference to the Formula in Annexure 1 of the share sale agreement, of $341,284.00. This loss, recorded in Forbes Australia's audited financial report for that year prepared by Deloitte Touche Tohmatsu, together with the failure of Forbes Australia to reach the guaranteed profit of $1,350,000 (being 90% of $1,500,000 in accordance with cl 3.3.3 of the share sale agreement as varied) resulted in Forbes Australia experiencing a profit shortfall for that year of $1,691,284. The applicants submit further that the fact that the loss was recorded following an audit in accordance with Annexure 1 of the share sale agreement means that it is conclusive evidence of that loss. The applicants refer to the decision of the High Court in Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 as authority for this proposition. The applicants' case in relation to the claimed 1999 shortfall was helpfully summarised by Counsel in closing submissions, as follows: Mr Jones: Your Honour, the applicant's case is very straight forward, and that is the terms of the share sale agreement, clause 3.3 says that the profit guarantee the amounts of the profit guarantee are to be referenced by the audited accounts. Now, in evidence is the only document which fits within that description. It's the audit by Deloittes, the company auditors. They are the audited accounts. If they are not audited accounts, and if they are not audited accounts to which that clause refers, then, one may ask rhetorically what conceivably could possibly fit that description of audited accounts. There's no suggestion, there's no pleading that that audit report, those accounts are in any way were fraudulently prepared or are not what they say they are... There's much complaint raised that, "Oh, we can't test it." That's true to a point, insofar as that every single document which those auditors would have seen are no longer available, and there's the evidence, particularly, that the correspondence between the instructing solicitors explain why that is, and, namely, that the company went into a period of administration for a period of time, and lost control of all of its records, and when it came out of administration it never got those all of those records back. And for some reason the accountants the administrators no longer have them, and unfortunately Deloittes no longer have everything either. Now, but it's... And it's a novel proposition put by the respondent that the plaintiff, in particular a company can't rely on its own audited accounts, which is what we're seeking to do. Now, if your Honour accepts that they are the audited accounts of the company for the period 31 December 1999, then, in our submission, that is the end of the story. They fit the description of the accounts referred to in the profit guarantee clause, and clearly on their face, they comply with the terms in the share sale agreement. My friend, in his submissions, put to your Honour that they don't, they merely there's a further step that needed to be done, and that hasn't been done, is the effect of my friend's submission. If you Honour will turn to exhibit 1A, at page 148, which is at the end of the audit report Deloittes audit report. There it is. There it is. That's the calculation in accordance with clause 3.3 of the share sale agreement. So the applicant has done all it can conceivably, in terms of establishing what the profit was or and rather the loss was, and what the profit shortfall was, in this case. And you have the subsequent to that report is the report of Ernst and Young which merely confirms the position of the Deloittes calculation. But your Honour need not, strictly speaking, rely on refer to it as the only report, because the Deloittes report is what it is, the audited reports of the company. (TS pp 391-392) The respondents' case with respect to the claimed loss in the 1999 calendar year falls into three parts namely an attack on the applicants' interpretation of cl 3.3 as a matter of law, submissions with respect to the Deloitte Touche Tohmatsu report itself, and submissions as to the admissibility of the report. In relation to the applicants' interpretation of cl 3.3, the respondents submit that the applicants' claims with respect to the final and conclusive nature of an audit report allegedly produced in compliance with cl 3.3 of the share sale agreement are unsustainable in light of ordinary principles of interpretation applicable to commercial contracts because: Further submissions of the respondents with respect to the authority of the Deloitte Touche Tohmatsu report are in summary: In Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 the bank brought an action against the appellant to recover the sum of ₤998 8s 7d pursuant to a guarantee signed by the appellant. So far as material the instrument of guarantee provided: ... 8. A certificate signed by the manager or acting manager for the time being of your head office or of any other office of your bank at which the banking account of the customer shall for the time being be kept stating the balance of principal and interest due to you by the customer shall be conclusive evidence of the indebtedness at such date of the customer to you. The appellant in Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 submitted that the clause was invalid because it had the effect of ousting the jurisdiction of the Court and was therefore contrary to public policy. More specifically the appellant submitted that: In finding for the bank the majority of the High Court observed (at 651): This clause does not purport to impose upon the bank the necessity of obtaining the certificate it describes. It is not a qualification of the undertaking to pay contained in the first clause. It does not make a certificate a condition precedent to recovery. The promise remains a promise to pay the amount owing; it does not become a promise to pay the amount owing if certified or a promise to pay only what is certified as owing. The bank could recover without the production of a certificate if, by ordinary legal evidence, it proved the actual indebtedness of the customer. But the clause, if valid, enables the bank by producing a certificate to dispense with such proof. It means that, for the purpose of fixing the liability of a surety, the customer's indebtedness may be ascertained conclusively by a certificate. It was contended, however, for the appellant that, upon its true construction, the clause did not make the certificate conclusive of the legal existence of the debt but only of the amount. It is not easy to see how the amount can be certified unless the certifier forms some conclusion as to what items ought to be taken into account, and such a conclusion goes to the existence of the indebtedness. ...(T)he manifest object of the clause was to provide a ready means of establishing the existence and amount of the guaranteed debt and avoiding an inquiry upon legal evidence into the debits going to make up the indebtedness. The clause means what it says, that a certificate of the balance due to the bank by the customer shall be conclusive evidence of his indebtedness to (652) the bank... Parties may contract with the intention of affecting their legal relations, but yet make the acquisition or rights under the contract dependent upon the arbitrament or discretionary judgment of an ascertained or ascertainable person. The majority then considered issues relevant to arbitration and concluded: There are many familiar kinds of contracts containing provisions which make the certificate of some person, or the issue of some document, conclusive of some possible question. The most conspicuous example, perhaps, is the certificate of the engineer or architect under contracts for the execution of works or the construction of buildings. For these reasons we think the certificate of the officer of the bank is conclusive upon the parties of the amount and existence of the customer's indebtedness. However, after considering the submissions of both parties I have concluded that the applicants have not substantiated their case in relation to alleged profit shortfall for the 1999 calendar year based on the Deloitte Touche Tohmatsu report. Although there is force in the submission of the applicants to the effect that, if the audited financial statements for 1999 prepared by the auditors of Forbes Australia did not contain information as to "audited profits before tax" of that company as described in cl 3.3 and Annexure 1 of the share sale agreement, one indeed might ask what else in the circumstances of this case could conceivably fit that description, I am not persuaded that the reasoning in Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 applies in these circumstances for the following reasons. Construction of clause 3.3 The legal principles emerging from Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 have been largely confined to circumstances where a banker's certificate has been issued as to the amount of indebtedness of a debtor to the bank (for example Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 , Je Maintiendrai Pty Ltd v Australia and New Zealand Banking Group Ltd (1985) 128 SASR 70, Campbell v National Australia Bank Ltd [1994] SASC 4526 , Equus Financial Services Limited v Sabri [1994] FCA 1331 , George Biritz v National Australia Bank Limited [1995] VSC 91 , Shomat v Rubenstein (1995) 124 FLR 284 , Thurwood v First for Finance Pty Ltd [1997] FCA 559 , Australia & New Zealand Banking v Pan Foods Company Importers & Distributors Pty Ltd [1998] VSC 346 , Jenkins v National Australia Bank Ltd [1999] VSCA 33 , State Bank v Lo [2000] NSWSC 1191 , State Bank of NSW v Kit Cheng Chia [2000] NSWSC 552 , Australia and New Zealand Banking Group Ltd v Dzienciol [2001] WASC 305 , Julong Pty Ltd v Fenn [2002] QCA 529 , Apple Computer [2003] NSWSC 126 , Commonwealth Bank of Australia v Bouwman [2003] WASC 205 , Timms v Commonwealth Bank of Australia [2004] NSWSC 76 , Permanent Trustee Company Limited v Gulf Import and Export Company [2008] VSC 162). Since and possible because of Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 , bankers' certificates have become well-known in practice. That is not to say that the principle articulated in Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 has not been extended beyond the banker/customer/surety relationship, however circumstances in which the Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 principle is applicable are primarily confined to those involving the issue of a certificate as to the existence of a fact pursuant to legislation, or certain types of agreement, for example: In this case it is clear that: Any clause which purports to specify how a particular issue will be determined so as to preclude the parties from subsequently ventilating that issue in court must be expressed in the clearest of terms ( Stylis v United Medical Protection Ltd [2007] NSWCA 109). Neither cl 3.3 (nor Annexure 1) clearly express such a limitation. While these provisions do purport to prescribe a method of calculation of profits, they do not purport to have the effect of finality as was the situation in many of the cases to which I have referred. In the absence of such language the Court will be loath to impute such an effect: Permanent Trustee Company Ltd v Gulf Import and Export Company & Emirates Trading Agency LLC [2008] VSC 162 at [38] . The preparation of an audit opinion in accordance with Australian Accounting Standards, while usually undertaken by experts, is clearly not a banker's certificate as contemplated in Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 and the overwhelming majority of cases where the Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 principles have been applied. Nor, in my view, is it akin to a banker's certificate, whereby a person nominated by the relevant bank certifies the existence of a fact appearing in bank records, namely the recorded amount of indebtedness of a customer to the bank. Further, in the sense that an audit report is produced, albeit in an expert fashion, but based upon information provided by the company itself, in my view it is not akin to a certificate given by an engineer, an architect or a builder, who certifies the existence of a state of affairs in relation to construction of a building which he or she has personal knowledge and control. Clause 3.3 can be contrasted with cll 3.4.2, 3.4.3 and 3.4.4 of the share sale agreement which do purport to prescribe certifications by third parties in a manner akin to cases where Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 has been applied. These clauses refer to the retention and subsequent payment of the "Retention Sum" by the vendors' solicitors as follows: ... 3.4.2 secondly, to the Company, such sum of money which represent the difference in the Net Tangible Asset ("NTA") of the Company represented by the Vendors under the Said Accountants (as hereinafter defined ) as at 30.6.97 namely A$1,611,432.00 and the actual NTA of the Company as certified by a firm of accountants appointed by the Purchaser in verifying the NTA of the Company as represented by the Vendors to the Purchaser; 3.4.3 thirdly, to the Company such sum of money which represent the loss and damages suffered by the Company as a result of FFT's breach of FFT's warranties, representations and covenant under the FEH/FFT Agreement upon the Vendors' Solicitor's receipt of FEH's auditor's certification of such amount of loss and damages suffered by the Company; 3.4.4 fourthly, to the Company, such sum of money which represent the loss and damages suffered by FI as a result of FBT's breach of FBT's warranties, representations and covenants under the FIA/FIPL Agreement, upon the Vendors' Solicitor's receipt of FEH's auditor's certification of such amount of loss and damages suffered by the Company. Clauses 3.4.2, 3.4.3 and 3.4.4 provide for conclusive certification by nominated persons of certain facts. Such language does not appear in cl 3.3. Significantly, cl 17 of the share sale agreement provides that " any dispute in connection with the agreement should be finally settled by arbitration by an independent person appointed by the President for the time being of the Australian Society of Certified Practising Accountants (Queensland) at the request of either party". This clause did not exclude disputes in respect of cl 3.3. The existence of cl 17 and the fact that it applies to all disputes militates against an interpretation that audited financial statements were to be a final and conclusive determination of the profits of Forbes Australia within the meaning of cl 3.3. Possible failure of Deloitte Touche Tohmatsu report to comply with Annexure 1 Even assuming that the effect of cl 3.3 and Annexure 1 is that an audit opinion is akin to a "Dobbs" certificate as submitted by the applicants, I do not accept that the position as to the audited profits before tax is so finally and conclusively determined by the tender of the Deloitte Touche Tohmatsu audit report that the respondents are not permitted to challenge the findings of the report on the basis that it does not comply with Annexure 1, which provided the machinery of calculation adverted to in cl 3.3. The High Court in Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 accepted that a clause of this nature should not be interpreted as covering all grounds which go to the validity of the amount certified, for example illegality (at 651). Similarly, the Courts have found that a certificate can be challenged on such grounds as fraud and obvious error ( Permanent Trustee Company Limited v Gulf Import and Export Company [2008] VSC 162) , although if the certificate is properly tendered the onus falls upon the defendant to demonstrate by acceptable evidence that the certificate is incorrect ( Commonwealth Bank of Australia v Oberdan [2000] SASC 428 at [14] , Concrete Constructions Group Pty Ltd v Coddlestone Pty Ltd [1995] ACTSC 332). In these proceedings, in summary: In relation to the alleged profit shortfall for the year ending 31 December 1998 an agreement was reached by Mr Poh on behalf of the applicants and Mr Forbes as to the agreed profit shortfall. The absence of source financial documentation was, as I have already found, irrelevant in relation to the validity and enforcement of that agreement. In relation to the alleged profit shortfall for the year ending 31 December 1999, while I consider that the absence of source financial documentation was a key issue for reasons I have already explained, I do not consider that the applicants' claim with respect to alleged profit shortfall for that year was in any fashion an abuse of process. The applicants pleaded, inter alia , that the Deloitte Touche Tohmatsu report satisfied the requirements of cl 3.3 and Annexure 1 of the share sale agreement akin to a certificate as discussed in Dobbs [1935] HCA 49 ; (1935) 53 CLR 643. In my view this was a legitimate claim, notwithstanding that this aspect of the applicants' claim was unsuccessful. Admissibility of documents and section 135 and section 136 of the Evidence Act The respondents have also sought exclusion of the material in: In relation to these documents: For the reasons I gave earlier in this judgment, the Deloitte Touche Tohmatsu report is inadmissible. It follows that the Ernst & Young report dated 4 October 2001 and the letter from Freehills on behalf of the applicants to Mr Grant dated 6 April 2001 are also inadmissible pursuant to s 135 of the Evidence Act . In the interests of completeness however I note that even had I not considered the Deloitte Touche Tohmatsu report inadmissible in accordance with s 135 I would have made such an order in respect of the Ernst & Young report dated 4 October 2001 on the basis that: While there is evidence that the original instructions from Mr Poh to Ernst & Young to prepare to the report were given in 2000 (and possibly prior to contemplation of litigation), evidence also demonstrates that 19 months passed before the report was delivered to the applicants during which time letters had been exchanged between the legal representatives of the parties. Further, in the covering letter dated 4 October 2001 from Ernst & Young to Mr Poh delivering the report, the author notes "... the procedures were performed solely to assist you in determining the quantum and importance of certain financial issues to be raised with the previous Managing Director, Mr Mark Forbes". I consider an inference can be drawn from the surrounding circumstances that the Ernst & Young report was "a document prepared for or obtained for the purpose of conducting, or for or in contemplation of or in connection with, a proceeding" and accordingly excluded from the definition of "business record" by s 69(3)(a) of the Evidence Act . I do not consider that an order pursuant to either s 135 or s 136 of the Evidence Act should be made in relation to para 34 and para 35 of, and pp 13-54 of annexure "PK2" to, the affidavit of Poh Kiat affirmed herein on 15 March 2006. I take this view because: Mr Poh's evidence directly answered evidence of Mr Forbes in his affidavit sworn 16 December 2005 and Mr Brauer in his affidavit sworn 25 January 2006. A letter from Marsh & Partners to the directors of Forbes Group Australia dated 16 February 2000 and a letter from Marsh & Partners to Mr Forbes dated 14 March 2000, both of which are exhibited to Mr Poh's affidavit (and found within pp 13-54 of Annexure "PK2" to which the respondents object) are also exhibited to Mr Forbes' affidavit sworn 16 December 2005 as Annexure "MF-4". Accordingly, it is clear that the respondents were relying on some of the same material they now seek to impugn. The material is relevant to both the applicants' claims concerning the 1998 profit shortfall and the respondents' defence. I do not consider that an order pursuant to either s 135 or s 136 of the Evidence Act should be made in relation to Mr Blackwood's expert report. In my view no grounds have been substantiated by the respondents' to support such an order. The application is successful in part. I consider that the applicants are entitled to recover the agreed 1998 profit shortfall under the share sale agreement and the Forbes Guarantee as damages from Mr Forbes, being the sum of $127,284. The applicants have also sought interest "pursuant to a share sale agreement" or pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth). The parties have not directed my attention to any interest rate specified in the share sale agreement the subject of these proceedings. However s 51A of the Federal Court of Australia Act provides: (1) In any proceedings for the recovery of any money (including any debt or damages or the value of any goods) in respect of a cause of action that arises after the commencement of this section, the Court or a Judge shall, upon application, unless good cause is shown to the contrary, either: (a) order that there be included in the sum for which judgment is given interest at such rate as the Court or the Judge, as the case may be, thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date as of which judgment is entered; or (b) without proceeding to calculate interest in accordance with paragraph (a), order that there be included in the sum for which judgment is given a lump sum in lieu of any such interest.


case_title: Duffy Bros Fruit Market (Campbelltown) v Gumland Property Holdings Pty Ltd [2007] NSWCA 7


case_text: is trite law that past consideration is no consideration ( Eastwood v Kenyon [1840] EngR 80 ; (1840) 11 A & E 438 , 113 ER 482 , Roscorla v Thomas [1842] EngR 70 ; (1842) 3 QB 234 , 114 ER 496, and see the discussion in such learned texts as Chitty on Contracts (30th ed, Vol 1, Sweet & Maxwell, 2008) at 270 et seq and Carter JW, Carter on Contract (Vol 1 looseleaf, Butterworths, 2002) at [06-230] et seq). However where the giving of the consideration and the making of the promise are substantially one transaction, the exact order of events is not decisive and the consideration is treated as executed consideration rather than past consideration (Carter JW, Carter on Contract (Vol 1 looseleaf, Butterworths, 2002) at [06-250], Chitty on Contracts (30th ed, Vol 1, Sweet & Maxwell, 2008) at 271). So, for example, a contract to erect buildings on land and a contract to grant of lease of land were in fact one transaction, notwithstanding that the lease was not entered until the relevant buildings were completed: Westminster City Council v Duke of Westminster [1991] 4 All ER 136 , discussed in Chitty at 271). Further, executed consideration is good consideration in circumstances where an act is done at the request of the promisor, it is understood that payment would be made, and the payment is legally recoverable ( re Casey's Patents [1892] 1 Ch 104 , Pao On v Lau Yiu Long [1979] UKPC 2 ; [1980] AC 614 at 629).


case_title: Equus Financial Services Limited v Sabri [1994] FCA 1331


case_text: of actual and ostensible authority in agency law are well-known. A succinct explanation was given by Diplock LJ in Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at 502: An "actual" authority is a legal relationship between principal and agent created by a consensual agreement to which they alone are parties. Its scope is to be ascertained by applying ordinary principles of construction of contracts, including any proper implications from the express words used, the usages of trade, or the course of business between the parties ... An "apparent" or "ostensible" authority, on the other hand, is a legal relationship between the principal and the contractor created by a representation, made by the principal to the contractor, intended to be and in fact acted upon by the contractor, that the agent has authority to enter on behalf of the principal into a contract of a kind within the scope of the "apparent" authority, so as to render the principal liable to perform any obligations imposed upon him by such a contract. To the relationship so created the agent is a stranger. He need not be (although he generally is) aware of the existence of the representation but he must not purport to make the agreement as principal himself. The representation, when acted upon by the contractor by entering into a contract with the agent, operates as an estoppel, preventing the principal from asserting that he is not bound by the contract. It is irrelevant whether the agent had actual authority to enter into the contract. We have already indicated that actual authority may be implied. It is, however, important to emphasise that the authority impliedly granted by the principal to the agent must be such as could be validly granted by express agreement.


case_text: usual practice in the Federal Court is to adopt the rates of interest applied in the Supreme Court of the State in which the application is commenced unless there is evidence that the rates are penal or not commercial: GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 688 at [7] . The current rate of interest prescribed under s 48 of the Supreme Court Act 1995 (Qld) is 10% per annum. No submissions were made by the parties as to an appropriate rate of interest. I consider that the rate of interest of 10% per annum should be applied in respect of the sum of $127,284 to which the applicants are entitled from the date the applicants' cause of action arose. Accordingly, the appropriate orders are as follows: In relation to the amended application filed 31 March 2006: (a) the applicants are entitled to damages as against the first respondent for breach of the Forbes Guarantee and the Forbes Lot 8 Lease Guarantee in the amount of $127,284; (b) the first respondent is pay the applicants interest at the annual rate of 10% on the sum ordered to be paid in sub-paragraph 1(a) herein pursuant to section 51A of the Federal Court of Australia Act 1976 (Cth), to be calculated from the date the applicants' cause of action arose; (c) the application is otherwise dismissed. In relation to the notice of motion filed 12 September 2007: (a) pursuant to section 135 of the Evidence Act 1995 (Cth) pages 130-192 of annexure "PK1" to the affidavit of Poh Kiat affirmed on 25 October 2005 are excluded from evidence admitted, or to be admitted, in this proceeding; (b) the notice of motion is otherwise dismissed. In view of the mixed outcome in the case I consider it appropriate to invite the parties to make submissions as to costs orders. Accordingly I also make the following directions: The applicants are to file and serve submissions as to costs, and copy them in electronic form to the associate, by 4.00 pm on 6 July 2009. The respondents are to file and serve submissions as to costs, and copy them in electronic form to the associate, by 4.00 pm on 20 July 2009. The applicants are to file and serve submissions as to costs in reply, and copy them in electronic form to the associate, by 4.00 pm on 27 July 2009. The issue of costs is to be decided on written submissions without the necessity for a hearing unless either party should contact my chambers and the other party by 4.00 pm on 30 July 2009 and request a hearing or unless the Court schedules a hearing to hear oral submissions. I certify that the preceding one hundred and eighty-eight (188) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Collier. Associate: Dated: 22 June 2009 Counsel for the First and Second Applicants: Mr N Perram SC and Mr BL Jones Solicitor for the First and Second Applicants: Jackson Lalic Counsel for the First and Second Respondents: Mr R Bain QC and Mr PD Tucker Solicitor for the First and Second Respondents: BCI Duells Date of Hearing: 12, 13, 14 February 2008 and 15, 16 July 2008 Date of Judgment: 22 June 2009 AustLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback URL: http://www.austlii.edu.au/au/cases/cth/FCA/2009/675.html


case_title: George Biritz v National Australia Bank Limited [1995] VSC 91


case_text: have noted the absence of witnesses capable of giving evidence as to the Deloitte Touche Tohmatsu report, and the lack of opportunity of the respondents to test the contents of the report. This is not, however, automatically fatal to the admissibility of a business record. As Heerey J observed in Guest v Commissioner of Taxation [2007] FCA 193 at [25] : The terms of s 69(2)(a) do not suggest that it is an essential precondition of admissibility that the "person" in question be identified. The ordinary meaning of the language is that it is sufficient that the person who made the representation, whoever he or she is, had or might reasonably be supposed to have had, personal knowledge of the asserted fact. The policy behind the provision is clear enough. Routine business records, made before any legal proceeding arises or is contemplated (cf the exception in s 69(3)) , have an inherent likelihood of reliability which outweighs the common law's aversion to hearsay evidence where the maker of a statement cannot be tested by cross-examination. The utility of s 69 would be greatly diminished if it were necessary to locate among large organisations, perhaps over a long period of time, persons who made representations, often in circumstances where the practical needs of the organisation did not require any identification at the time the representations were made.


case_title: Hamilhall Pty Ltd v AT Phillips Pty Ltd [1994] FCA 1446 ; (1994) 54 FCR 173


case_title: Holme v Brunskill [1877] 3 QBD 495

case_text: is settled law that a surety will be discharged from his or her obligations where there is a fundamental alteration to the guaranteed obligations to which the surety has not consented: Ankar [1987] HCA 15 ; (1987) 162 CLR 549 , Wallace-Smith v Thiess Infraco (Swanston) Pty Ltd [2005] FCAFC 49 at [302] . As the majority said in Ankar (1987) 162 CLR 546 after discussing a number of English cases: These statements of principle ... indicate that the principle is the by-product, not so much of the general law of contract, as of the special relationship between creditor and surety arising out of the suretyship contract upon which equity fastened to protect the surety when the creditor's conduct affected the surety's liability: Holme v Brunskill . According to the English cases, the principle applies so as to discharge the surety when conduct on the part of the creditor has the effect of altering the surety's rights, unless the alteration is unsubstantial and not prejudicial to the surety. The rule does not permit the courts to inquire into the effect of the alteration. The consequence is that, to hold the surety to its bargain, the creditor must show that the nature of the alteration can be beneficial to the surety only or that by its nature it cannot in any circumstances increase the surety's risk, e.g. a reduction in the debtor's debt or in the interest payable by the surety. The mere possibility of detriment is enough to bring about the discharge of the surety. (at 559-560) In Holme v Brunskill [1877] 3 QBD 495 Cotton LJ (Thesiger LJ concurring) said: The true rule in my opinion is, that if there is any agreement between the principals with reference to the contract guaranteed, the surety ought to be consulted, and that if he has not consented to the alteration, although in cases where it is without inquiry evident that the alteration is unsubstantial, or that it cannot be otherwise than beneficial to the surety, the surety may not be discharged; yet, that if it is not self-evident that the alteration is unsubstantial, or one which cannot be prejudicial to the surety, the Court, will not, in an action against the surety, go into an inquiry as to the effect of the alteration, or allow the question, whether the surety is discharged or not, to be determined by the finding of a jury as to the materiality of the alteration or on the question whether it is to the prejudice of the surety, but will hold that in such a case the surety himself must be the sole judge whether or not he will consent to remain liable notwithstanding the alteration, and that if he has not so consented he will be discharged. (at 505-506)


case_text: I have already observed, as a general proposition the law construes terms in guarantees contra proferentum in the surety's favour. It is clear that the profit guarantee under cl 3.3 exists solely for the benefit of Forbes Asia. Such a clause should be strictly construed ( Je Maintiendrai Pty Ltd v Australia and New Zealand Banking Group Ltd (1985) 38 SASR 70 at 71, Apple Computer [2003] NSWSC 126 at [127] , O'Donovan J & Phillips J, The Modern Contract of Guarantee (4th ed, looseleaf) at 5.920). The legal principles emerging from Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 have been largely confined to circumstances where a banker's certificate has been issued as to the amount of indebtedness of a debtor to the bank (for example Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 , Je Maintiendrai Pty Ltd v Australia and New Zealand Banking Group Ltd (1985) 128 SASR 70, Campbell v National Australia Bank Ltd [1994] SASC 4526 , Equus Financial Services Limited v Sabri [1994] FCA 1331 , George Biritz v National Australia Bank Limited [1995] VSC 91 , Shomat v Rubenstein (1995) 124 FLR 284 , Thurwood v First for Finance Pty Ltd [1997] FCA 559 , Australia & New Zealand Banking v Pan Foods Company Importers & Distributors Pty Ltd [1998] VSC 346 , Jenkins v National Australia Bank Ltd [1999] VSCA 33 , State Bank v Lo [2000] NSWSC 1191 , State Bank of NSW v Kit Cheng Chia [2000] NSWSC 552 , Australia and New Zealand Banking Group Ltd v Dzienciol [2001] WASC 305 , Julong Pty Ltd v Fenn [2002] QCA 529 , Apple Computer [2003] NSWSC 126 , Commonwealth Bank of Australia v Bouwman [2003] WASC 205 , Timms v Commonwealth Bank of Australia [2004] NSWSC 76 , Permanent Trustee Company Limited v Gulf Import and Export Company [2008] VSC 162). Since and possible because of Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 , bankers' certificates have become well-known in practice. That is not to say that the principle articulated in Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 has not been extended beyond the banker/customer/surety relationship, however circumstances in which the Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 principle is applicable are primarily confined to those involving the issue of a certificate as to the existence of a fact pursuant to legislation, or certain types of agreement, for example:


case_title: Jenkins v National Australia Bank Ltd [1999] VSCA 33


case_title: Julong Pty Ltd v Fenn [2002] QCA 529


case_title: Koenigsblatt v Sweet [1923] 2 Ch 314

case_text: fact that the oral agreement between Mr Poh and Mr Forbes did not result in a written amendment to the Forbes Guarantee does in my view detract from the validity of the agreement with respect to the 1998 profit shortfall so far as concerns Mr Forbes, where the agreement was implemented by reference to journal entries in the accounts of Forbes Australia (cf Koenigsblatt v Sweet [1923] 2 Ch 314). Notwithstanding the agreement reached by Mr Poh and Mr Forbes however, it also appears clear that despite the relevant journal entry Forbes Australia continued to pay Mr Forbes rent in respect of the Lot 8 lease (TS p 302 ll 9-11). Subsequently a journal entry reversing the prepayment was entered in Forbes Australia's general ledger on 30 June 1999. The fact that this event occurred does not appear to be in doubt (for example evidence that it occurred was given by Mr Brauer in his affidavit sworn 25 January 2006 para 28). Prima facie on these facts, it follows that if the 1998 profit shortfall agreed by the parties on 14 January 1999 is enforceable, not only is that amount ($127,284) outstanding from the respondents, but because Forbes Australia continued to pay rent of Lot 8 and Lot 9 and any purported prepayment of rent was reversed in the accounts, the applicants have substantiated their claims that:


case_title: Lanlex No 29 P/L v Leach [1996] NSWSC 615


case_title: LU Simon Builders Pty Ltd v AD Forbes (1992) 2 VR 189


case_title: Malika Holdings Pty Ltd v Stretton [2001] HCA 14


case_text: more substance is the claim by the respondents that, because the nominated consideration for the respondents entering the Forbes Lot 8 Lease Guarantee was the previous agreement of Forbes Australia to enter into the Lot 8 Lease with the respondents, the consideration for this agreement is past consideration and invalid. Of particular moment is the fact that the Forbes Lot 8 Lease Guarantee is not in the form of a deed, where consideration would have been unnecessary ( Morley v Boothby [1825] EngR 575 ; (1825) 3 Bing 107 ; 130 ER 455).


case_title: Northside Developments Pty Ltd v Registrar-General [1990] HCA 32 ; (1990) 170 CLR 146


case_title: Pacific Carriers Ltd v BNP Paribas [2004] HCA 35 ; [2004] 218 CLR 451


case_title: Pao On v Lau Yiu Long [1979] UKPC 2 ; [1980] AC 614


case_title: Parker v QBSA [2000] QCA 422

case_text: observed by McPherson J in Parker v QBSA [2000] QCA 422 at [13] , the provision concerning conclusiveness of certificate of title under the Torrens system of registration is perhaps the best known Australian legislative example of the issue of a certificate having a final effect.


case_text: legal principles emerging from Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 have been largely confined to circumstances where a banker's certificate has been issued as to the amount of indebtedness of a debtor to the bank (for example Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 , Je Maintiendrai Pty Ltd v Australia and New Zealand Banking Group Ltd (1985) 128 SASR 70, Campbell v National Australia Bank Ltd [1994] SASC 4526 , Equus Financial Services Limited v Sabri [1994] FCA 1331 , George Biritz v National Australia Bank Limited [1995] VSC 91 , Shomat v Rubenstein (1995) 124 FLR 284 , Thurwood v First for Finance Pty Ltd [1997] FCA 559 , Australia & New Zealand Banking v Pan Foods Company Importers & Distributors Pty Ltd [1998] VSC 346 , Jenkins v National Australia Bank Ltd [1999] VSCA 33 , State Bank v Lo [2000] NSWSC 1191 , State Bank of NSW v Kit Cheng Chia [2000] NSWSC 552 , Australia and New Zealand Banking Group Ltd v Dzienciol [2001] WASC 305 , Julong Pty Ltd v Fenn [2002] QCA 529 , Apple Computer [2003] NSWSC 126 , Commonwealth Bank of Australia v Bouwman [2003] WASC 205 , Timms v Commonwealth Bank of Australia [2004] NSWSC 76 , Permanent Trustee Company Limited v Gulf Import and Export Company [2008] VSC 162). Since and possible because of Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 , bankers' certificates have become well-known in practice. That is not to say that the principle articulated in Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 has not been extended beyond the banker/customer/surety relationship, however circumstances in which the Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 principle is applicable are primarily confined to those involving the issue of a certificate as to the existence of a fact pursuant to legislation, or certain types of agreement, for example: In this case it is clear that: Any clause which purports to specify how a particular issue will be determined so as to preclude the parties from subsequently ventilating that issue in court must be expressed in the clearest of terms ( Stylis v United Medical Protection Ltd [2007] NSWCA 109). Neither cl 3.3 (nor Annexure 1) clearly express such a limitation. While these provisions do purport to prescribe a method of calculation of profits, they do not purport to have the effect of finality as was the situation in many of the cases to which I have referred. In the absence of such language the Court will be loath to impute such an effect: Permanent Trustee Company Ltd v Gulf Import and Export Company & Emirates Trading Agency LLC [2008] VSC 162 at [38] . The preparation of an audit opinion in accordance with Australian Accounting Standards, while usually undertaken by experts, is clearly not a banker's certificate as contemplated in Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 and the overwhelming majority of cases where the Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 principles have been applied. Nor, in my view, is it akin to a banker's certificate, whereby a person nominated by the relevant bank certifies the existence of a fact appearing in bank records, namely the recorded amount of indebtedness of a customer to the bank. Further, in the sense that an audit report is produced, albeit in an expert fashion, but based upon information provided by the company itself, in my view it is not akin to a certificate given by an engineer, an architect or a builder, who certifies the existence of a state of affairs in relation to construction of a building which he or she has personal knowledge and control. Clause 3.3 can be contrasted with cll 3.4.2, 3.4.3 and 3.4.4 of the share sale agreement which do purport to prescribe certifications by third parties in a manner akin to cases where Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 has been applied. These clauses refer to the retention and subsequent payment of the "Retention Sum" by the vendors' solicitors as follows: ... 3.4.2 secondly, to the Company, such sum of money which represent the difference in the Net Tangible Asset ("NTA") of the Company represented by the Vendors under the Said Accountants (as hereinafter defined ) as at 30.6.97 namely A$1,611,432.00 and the actual NTA of the Company as certified by a firm of accountants appointed by the Purchaser in verifying the NTA of the Company as represented by the Vendors to the Purchaser; 3.4.3 thirdly, to the Company such sum of money which represent the loss and damages suffered by the Company as a result of FFT's breach of FFT's warranties, representations and covenant under the FEH/FFT Agreement upon the Vendors' Solicitor's receipt of FEH's auditor's certification of such amount of loss and damages suffered by the Company; 3.4.4 fourthly, to the Company, such sum of money which represent the loss and damages suffered by FI as a result of FBT's breach of FBT's warranties, representations and covenants under the FIA/FIPL Agreement, upon the Vendors' Solicitor's receipt of FEH's auditor's certification of such amount of loss and damages suffered by the Company. Clauses 3.4.2, 3.4.3 and 3.4.4 provide for conclusive certification by nominated persons of certain facts. Such language does not appear in cl 3.3. Significantly, cl 17 of the share sale agreement provides that " any dispute in connection with the agreement should be finally settled by arbitration by an independent person appointed by the President for the time being of the Australian Society of Certified Practising Accountants (Queensland) at the request of either party". This clause did not exclude disputes in respect of cl 3.3. The existence of cl 17 and the fact that it applies to all disputes militates against an interpretation that audited financial statements were to be a final and conclusive determination of the profits of Forbes Australia within the meaning of cl 3.3. Possible failure of Deloitte Touche Tohmatsu report to comply with Annexure 1 Even assuming that the effect of cl 3.3 and Annexure 1 is that an audit opinion is akin to a "Dobbs" certificate as submitted by the applicants, I do not accept that the position as to the audited profits before tax is so finally and conclusively determined by the tender of the Deloitte Touche Tohmatsu audit report that the respondents are not permitted to challenge the findings of the report on the basis that it does not comply with Annexure 1, which provided the machinery of calculation adverted to in cl 3.3. The High Court in Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 accepted that a clause of this nature should not be interpreted as covering all grounds which go to the validity of the amount certified, for example illegality (at 651). Similarly, the Courts have found that a certificate can be challenged on such grounds as fraud and obvious error ( Permanent Trustee Company Limited v Gulf Import and Export Company [2008] VSC 162) , although if the certificate is properly tendered the onus falls upon the defendant to demonstrate by acceptable evidence that the certificate is incorrect ( Commonwealth Bank of Australia v Oberdan [2000] SASC 428 at [14] , Concrete Constructions Group Pty Ltd v Coddlestone Pty Ltd [1995] ACTSC 332).


case_title: re Casey's Patents [1892] 1 Ch 104


case_text: business records are prepared as internal records in the course of or for the purposes of the business (Austin J in ASIC v Rich [2005] NSWSC 417 at [212] ). Business records can clearly include opinions ( Ringrow Pty Ltd v BP Australia Ltd [2003] FCA 933) however as observed by Austin J in ASIC v Rich [2005] NSWSC 417: It is most unlikely that those expressing opinions in business records would attend to the requirements of s 78 or s 79 , let alone with the precision required by Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705. It would not occur to the people creating those documents that they should set out to justify their opinions in the same way that an expert would do in preparing a written report for a court hearing. In those circumstances, to apply the opinion rule to business records that meet the requirements of s 69 would be substantially to undermine, if not to negate, the implementation of the policy underlying the business records provisions, asserted so forcefully by Hope JA in Albrighton (at 548-549) and by the Australian Law Reform Commission in its Interim Report on Evidence at [709]. Courts would be prevented from having access to substantial components of the records of businesses so as to assess them for what they are, on the ground that they do not satisfy requirements which their authors would not have regarded as relevant. As Brownie AJ remarked in a somewhat different context ( Linfox Transport (Aust) Pty Ltd v Arthur Yates & Co Ltd (2003) 47 ACSR 261 at [23]), "it does not seem apt in this context to draw a lawyerly distinction between the way a witness might or might not be permitted to give opinion evidence in court with the way in which a company officer routinely reports to his superiors". (at [212]) The absence of the author of the report, or anyone who could explain it, as a witness in these proceedings is, however, an issue which goes to weight to be attributed to the evidence: Ringrow [2003] FCA 933 at [27] . Although the Deloittes Touche Tohmatsu report may be a "business record" for the purposes of s 69 of the Evidence Act and prima facie admissible, a balance must be struck between the probative and prejudicial value of the report. Section 135 of the Evidence Act empowers the court to refuse to admit evidence its probative value is substantially outweighed by the danger that the evidence might: (a) be unfairly prejudicial to a party; or (b) be misleading or confusing; or (c) cause or result in undue waste of time. In my view the prejudice likely to be suffered by the respondents from admission of the Deloittes Touche Tohmatsu report outweighs its probative value. I form this view because as I have already explained, I consider that the evidence discloses grounds for serious concern as to the compliance of the Deloitte Touche Tohmatsu audit report with cl 3.3 and Annexure 1 of the share sale agreement. This issue is compounded by the absence of the author of the report, any witness who could speak to the report, and the absence of source financial documentation, all of which mean that the contents of the report cannot be properly tested by the respondents. Accordingly I consider the Deloitte Touche Tohmatsu report should be ruled inadmissible pursuant to s 135 of the Evidence Act .


case_text: purpose of the s 69 exception to the hearsay rule for business records was noted by Sperling J in Roach and Ors v Page and Ors (No 27) [2003] NSWSC 1046 at [11] : The thinking behind the section is clear enough. Things recorded or communicated in the course of the business and constituting or concerning business activities are likely to be correct. There is good reason for the courts to afford to such records the same kind of reliability as those engaged in business operations customarily do. The same is not true of publications made for wider dissemination, for entertainment, for advertising or for public relations purposes. Such publications are justifiably received with healthy scepticism.


case_title: Shomat v Rubenstein (1995) 124 FLR 284

case_text: legal principles emerging from Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 have been largely confined to circumstances where a banker's certificate has been issued as to the amount of indebtedness of a debtor to the bank (for example Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 , Je Maintiendrai Pty Ltd v Australia and New Zealand Banking Group Ltd (1985) 128 SASR 70, Campbell v National Australia Bank Ltd [1994] SASC 4526 , Equus Financial Services Limited v Sabri [1994] FCA 1331 , George Biritz v National Australia Bank Limited [1995] VSC 91 , Shomat v Rubenstein (1995) 124 FLR 284 , Thurwood v First for Finance Pty Ltd [1997] FCA 559 , Australia & New Zealand Banking v Pan Foods Company Importers & Distributors Pty Ltd [1998] VSC 346 , Jenkins v National Australia Bank Ltd [1999] VSCA 33 , State Bank v Lo [2000] NSWSC 1191 , State Bank of NSW v Kit Cheng Chia [2000] NSWSC 552 , Australia and New Zealand Banking Group Ltd v Dzienciol [2001] WASC 305 , Julong Pty Ltd v Fenn [2002] QCA 529 , Apple Computer [2003] NSWSC 126 , Commonwealth Bank of Australia v Bouwman [2003] WASC 205 , Timms v Commonwealth Bank of Australia [2004] NSWSC 76 , Permanent Trustee Company Limited v Gulf Import and Export Company [2008] VSC 162). Since and possible because of Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 , bankers' certificates have become well-known in practice. That is not to say that the principle articulated in Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 has not been extended beyond the banker/customer/surety relationship, however circumstances in which the Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 principle is applicable are primarily confined to those involving the issue of a certificate as to the existence of a fact pursuant to legislation, or certain types of agreement, for example:


case_title: South Australian Railways Commissioner v Egan [1973] HCA 5 ; (1973) 130 CLR 506