Access Training Group Limited v James Michael Jane & Ors; Access Group Training Limited v Venture Capital Fund Australia Limited

These proceedings arise from an abandoned attempt to list a vocational training business on the Australian Stock Exchange (ASX). Each of the two main sets of commercial entities involved in this failed endeavour claims to be owed money by the other.

Access Group Training Pty Ltd (AGT) is a company that provided, in the period from early 1997 to late 2019, nationally accredited vocational training services in New South Wales, Queensland, Victoria and the Australian Capital Territory.

At all relevant times, all of the shares in AGT were held by two married couples: James and Judith Jane, and John and Suellen Goard (the AGT Shareholders). Each of the four AGT Shareholders held 25% of the shares in AGT, and each was a director of AGT.

Venture Capital Fund Australia Limited (VCFA) was incorporated on 13 January 2015, and specialises in identifying venture capital opportunities for high net-worth investors. Ross Lambert was a founder of VCFA and is its managing director.

Mr Jane and Mr Lambert met in the mid-1990s and they became, together with each other’s spouses, close friends.

From around mid-2014, Mr Lambert and Mr Jane had a number of discussions regarding the possibility of expanding AGT’s operations into the Chinese market. Mr Lambert and his business associates were looking, at this time, to develop the aged care sector in China, and thought that AGT could assist with the training and accreditation of Chinese aged care workers.

Mr Lambert suggested that Mr Jane should consider listing AGT on the ASX. He explained that this would assist AGT to become registered in China as a vocational training provider, and would also mean that the AGT Shareholders could get a return by selling shares in the business to Chinese investors.

The proposed listing would also have been for VCFA’s benefit. In order to provide training for aged care workers in China, VCFA needed either to be included in the Chinese Central Government’s education curriculum or to offer its training services through a listed education company on a respected international stock exchange.

Initially, the proposal being discussed involved the listing of AGT. However, because of a concern that this course of action might affect profitable contracts which AGT held with the Commonwealth government, the proposal subsequently changed. Instead, the plan became to set up a parent company to hold all of the shares in AGT, and to list this parent company on the ASX. For this purpose, a company which was called Access Group Training Holdings Limited (Holdings), was incorporated on 20 October 2015. (Its name was subsequently changed to Access Training Group Limited and then, after it was converted from a public company into a proprietary company, Access Training Group Pty Limited.) Initially, all of the shares in Holdings were owned by the AGT Shareholders.

It was proposed, in broad terms, that the following steps would be taken in respect of the proposed listing: VCFA would subscribe for 17m shares in Holdings for a price of $1.7m (or $0.10 per share), and would thereby acquire a 74% stake in the company; Holdings would use this $1.7m for the sole purpose of paying a deposit to the AGT Shareholders for the purchase of their shares in AGT; Holdings would become the sole shareholder of AGT; Mr Jane would enter an employment agreement with Holdings and become its managing director; Holdings would issue 6 million shares to Mr Jane (representing a 26% shareholding); and Holdings would then undertake an initial public offering (IPO) at a price of $0.20 per share, with a view to listing on the ASX by 31 December 2016.

In late August 2016, pursuant to the terms of a Share Subscription Agreement between VCFA and Holdings, VCFA acquired a 74% stake in Holdings for the payment of $1.7m. Holdings immediately paid this sum to the AGT Shareholders. At the time of payment, the terms of an agreement between Holdings and the AGT Shareholders relating to the sale of the shares in AGT (the Share Sale Agreement) had been negotiated, but had not been executed. As matters transpired, the planned IPO did not proceed, and the AGT Shareholders did not transfer their shares in AGT to Holdings, but retained the $1.7m deposit.

These events led to two proceedings, which were heard together.

In the first proceeding, numbered 2019/374869 (the 2019 Proceeding), Holdings sues the four AGT Shareholders for the return of the amount of $1.7m which was paid to them in August 2016. Holdings contends that, in circumstances where this sum was paid to the AGT Shareholders and where the proposed Share Sale Agreement was never executed, let alone completed, the AGT Shareholders are liable to repay this sum as money had and received.

In response, the AGT Shareholders contend that a Share Sale Agreement was in fact entered in around late February 2017. They acknowledge that, pursuant to the terms of this agreement, they were obliged to repay the $1.7m deposit to Holdings by the date 12 months after the termination of that agreement. However, the AGT Shareholders contend that they were entitled, pursuant to the terms of the Share Sale Agreement, to set off against that obligation any amounts payable to AGT by either Holdings or VCFA.

In the second proceeding, numbered 2020/219022 (the 2020 Proceeding), AGT sues VCFA for repayment of a loan of $1.3m said to have been made by AGT, together with interest. VCFA accepts that payments totalling $1.3m were made to VCFA, but disputes that those payments were made by way of a loan, and instead contends that those payments represented a fee for services which had been rendered by VCFA in relation to the proposed expansion of AGT’s business into the Chinese market.

In the 2020 Proceeding, AGT also claims money said to be owed by VCFA pursuant to an agreement between them which was entered in 2015, relating to shared office premises in Chatswood. It is common ground that AGT and VCFA agreed to share, on a 50/50 basis, the rental and outgoings in respect of those premises. The only issue in dispute is whether AGT has established that any amount is outstanding pursuant to this agreement.

Mr Doyle Gray appeared for the plaintiff in the 2019 Proceeding (Holdings), and the defendant in the 2020 Proceeding (VCFA). VCFA is now the holder of 100% of the equity in Holdings.

Mr Crispin appeared for the defendants in the 2019 Proceeding (the AGT Shareholders) and for the plaintiff in the 2020 Proceeding (AGT). The AGT Shareholders remain the holders of 100% of the equity in AGT.

Because the events which are the subject of the 2020 Proceeding precede those which are the subject of the 2019 Proceeding, I deal first with the claim made by AGT against VCFA in respect of the alleged $1.3m loan; secondly with the claim by AGT against VCFA in respect of the rent and outgoings on the Chatswood premises; and thirdly, with the claim by VCFA against the AGT Shareholders for repayment of the $1.7m deposit.

It is common ground that AGT and AGT Management Pty Ltd (AGT Management) paid, between August 2015 and March 2016, the sum of $1.3m to VCFA. The main dispute regarding those payments is whether they represented the payment of fees for services which had been rendered by VCFA (as VCFA contended); or instead, loans made by AGT to VCFA (as AGT contended).

There was no document predating the payments which recorded, or referred to, either an agreement for services or an agreement for loan. Each of AGT and VCFA contended that the agreement which gave rise to the payments was an oral agreement between Mr Jane of AGT and Mr Lambert of VCFA.

According to Mr Lambert, in around 2015, he proposed to Mr Jane that, in order to strengthen the proposed listed business, it would be beneficial for AGT to offer certain educational businesses in China as part of the IPO. These included an online game-based maths teaching program, a training management system, and a company to offer AGT vocational training courses in China (the Chinese Businesses). Mr Lambert deposed that the Chinese Business required considerable cost and time to develop to a point of being operational and available for AGT to offer as part of the IPO.

Mr Lambert gave evidence that he and Mr Jane had a number of discussions in around mid-2015 about funding the costs of the float:

Mr Jane did not dispute that VCFA was developing the Chinese Businesses. However, it was his evidence that AGT “loaned money to VCFA to further this”:

Mr Jane denied that he requested VCFA to issue invoices to AGT in respect of any of the payments made by AGT. He deposed that “VCFA did not have any contract or agreement with AGT to provide services for which it could invoice AGT”, and that he “always maintained to Ross [Lambert] that the money paid by AGT to VCFA were loans”.

Neither party suggested that the payments made by AGT to VCFA were by way of a gift. The argument at trial proceeded on the basis that the moneys must have been paid either pursuant to an agreement for services or pursuant to a loan agreement. That is, one of these agreements must have been in place, and the question was which one had been formed.

It is well settled that regard may be had to the subsequent conduct of parties to determine whether a contract was formed: Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 at [25] per Heydon JA; Pavlovic v Universal Music Australia Pty Ltd (2015) 90 NSWLR 605; [2015] NSWCA 313 at [118] per Beazley P (Bathurst CJ and Meagher JA agreeing). In Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 at 78; [1907] HCA 38, Griffith CJ said (O’Connor J agreeing) that, where the question was whether the parties had in fact concluded an agreement at a particular time, “any statements or conduct on their part after that date inconsistent with the existence of a concluded contract are relevant for this purpose”.

In Johnston v Brightstars Holding Company Pty Ltd [2014] NSWCA 150 at [124], Basten JA (Gleeson JA agreeing) observed that:

In circumstances where the transactions in question arose out of conversations between Mr Jane and Mr Lambert some eight years ago, where neither can recall the specifics of what was said, and where there is disagreement regarding whether the substance of their agreement was one for services or for a loan, it is necessary to examine the objective documentary evidence, including their communications after the time of the alleged agreement, in order to determine the relative probabilities of their respective positions, and in particular, to determine whether those communications reveal a common assumption as to the existence and terms of the agreement between them.

As outlined below, although there are some materials that support VCFA’s position, I consider that the evidence overwhelmingly supports the conclusion that the moneys at issue were loaned by AGT to VCFA.

VCFA placed particular reliance on three invoices which it issued in August and September 2015. The payments in question were made after those invoices were issued and, except in the case of the third invoice, the amounts of those payments corresponded with the amounts stated in the invoices as being due and payable.

The first invoice was numbered 0000001 and was issued by VCFA to AGT Management on 3 August 2015. AGT Management is a related party of AGT. Its directors were Mr Jane and Mr Goard.

The invoice was for an amount of $600,000 plus GST, for a total of $660,000. The due date was specified to be the date of issue of the invoice.

The description given on the invoice was “AGT float costs as discussed”. There was no detail provided of the matters to which these costs related, or the basis on which the figure had been calculated, with the invoice merely stating “Rate $600,000.00 + GST”.

Mr Lambert claimed that there was “a more detailed breakdown” in respect of the amounts claimed on each of the invoices. His re-examination was deferred in order to allow him time to search for what he described as “the detailed document relating to the invoices”. However, none was subsequently produced. It must be inferred that no such document is available.

On 4 August 2015, the day after the invoice was issued, AGT Management paid the amount of $660,000 to VCFA.

The fact that GST was included in the invoice for $660,000 which was issued by VCFA, and that this amount was paid by AGT Management, provides some evidence in support of the contention that services were rendered by VCFA to AGT. However, as against that, AGT Management did not treat any part of the payment made as being for GST in its own accounts. When Ms Pearce entered this payment in the accounts of AGT Management, she allocated the whole of the payment of $660,035 to the account “Loan – Venture Capital”, and noted that it was “BAS Excluded”. The difference between the amount of the payment received by VCFA ($660,000) and the amount recorded in AGT Management’s accounts ($660,035) was due to a bank fee of $35 that was paid by AGT Management.

Mr Jane gave unchallenged evidence that, if the invoices were bona fide and payable, it would have been AGT’s normal business practice to claim a credit for the GST. That makes obvious commercial sense. The fact that the entire payment was treated as “BAS Excluded” is evidence of a contemporaneous view, on AGT Management’s part, that no part of the sum of $660,035 that it had paid represented GST. That is consistent with the view, also expressed in these contemporaneous allocations, that the whole of the amount was paid by way of a loan.

On 5 August 2016, Ms Pearce reallocated this payment from “Loan – Venture Capital” to “Loan – Access Group Training Pty Ltd”. Mr Jane explained that this change occurred because, although the payment was made by AGT Management, the entity making the loan to VCFA was AGT, with AGT incurring an intercompany liability to AGT Management for the amount that AGT Management had advanced to VCFA on AGT’s behalf.

On 24 September 2015, VCFA issued invoice number 0000002 to AGT. It was for an amount of $400,000 plus GST for a total of $440,000.

Again, the due date was specified to be the date of issue of the invoice. The description provided on the invoice was “IPO costs – Preparation of prospectus including copy writing, graphic design, research, creation of charts, and excel spreadsheets”. There was no breakdown of how this amount was calculated, by reference to the work said to be done, with the invoice specifying the “Rate” for the work as simply being “$400,000.00 + GST”.

In his affidavit, Mr Lambert deposed that the work the subject of this invoice included:

If that is correct, then the description on the invoice of the work that was done bore no relation to the work to which the invoice related. Mr Lambert offered no explanation why this was so.

On 29 September 2015, AGT paid the amount of $440,000 to VCFA. However, AGT did not claim any input credit for any GST in respect of this payment. Although the payment was initially allocated by an internal bookkeeper on 6 October 2015 to “Equity, Capital Raising & IPO Expenses”, with the tax rate being noted as “GST on Capital”, this was amended by Ms Pearce on 23 November 2015, when she allocated the entire amount of $440,000 to the account “Loan – Venture Capital Fund”, with the tax rate being noted as “BAS Excluded”. Mr Jane gave evidence that the initial entry by the internal bookkeeper was in error, and was subsequently corrected by Ms Pearce, who was AGT’s external accountant, so that no input credit for GST was claimed.

On 24 September 2015, VCFA issued invoice number 0000003 to AGT Management, with a due date of 24 October 2015.

This third invoice was addressed to AGT Management. According to the description on the invoice, it was issued in respect of the following services:

Again, this description bears little relation to the work which Mr Lambert described as having been the subject of this invoice, namely “obtaining high-level technical copywriting and document translations and the production of a six-minute corporate video for promotion of AGT in China”. The last of these tasks was described as “a mammoth exercise”, since the screen copy needed to be written in both English and Mandarin, and “there were countless storyboards produced in order to end up with a professional quality video”. Further, Mr Lambert deposed that part of the work undertaken related to the building of “an extensive internet boost platform in China” to enable one of its online programs, “Mangahigh”, to run efficiently and stream to hundreds of schools throughout China. Some $300,000 was said to have been spent on the Mangahigh licensing rights and the internet signal boosters, together with translation costs. Despite this, there is no reference in the third invoice to either the video or the Mangahigh project. As with the other invoices, Mr Lambert did not produce any detailed document providing a breakdown of the amounts charged in the third invoice. Nor was there any documentary evidence that AGT or AGT Management had requested VCFA to undertake such tasks on its behalf.

The work described in the invoice was billed at the rate of “$200,000.00 + GST”. This invoice showed that $200,000 had been paid as at the date of issue (24 September 2015), such that only $20,000 remained outstanding, which equated to the amount of the GST on the invoice.

All of the seven payments (totalling $200,000) which VCFA claimed were made by AGT Management in respect of this invoice were made after the invoice was issued, and in some cases six months after it was issued. VCFA and Mr Lambert did not offer any explanation as to why the invoice wrongly stated that everything except the amount of the GST had already been paid. Nor was there any explanation as to why, on the evidence, VCFA did not appear ever to chase AGT for the payment of the outstanding amount of $20,000.

The fact that the invoices in question provide, on Mr Lambert’s own evidence, incorrect information about to the work to which they relate and (in one case) the amount which was outstanding casts significant doubt on the invoices’ reliability, particularly in circumstances where those anomalies are unexplained.

Having regard to the matters outlined above, I do not consider that the evidence of the invoices, and the payments made following the invoices, reveal a common assumption by VCFA and AGT as to the existence and terms of the agreement between them.

In contrast, there are some communications between the parties, in November 2015 and February 2016, which were contemporaneous with a number of the payments in question being made, and which do reveal a common assumption that the substance of the transaction was that the moneys paid by AGT and AGT Management were being advanced as loans to VCFA.

First, on 20 November 2015, Mr Jane wrote to Mr Lambert, Mr Poulos and Mr Campbell of VCFA, stating:

This email was sent shortly after the first two payments totalling $1.1m had been made in August and September 2015, and on the day that a further payment of $100,000 was made by AGT Management to VCFA. The email unequivocally states that AGT and AGT Management were of the view that the payments totalling $1.2m, had all been “advanced as loan funds … to VCFA”. There was no reference to any invoice, let alone any suggestion that the payments represented an agreed fee for services.

In response, none of the officers of VCFA to whom the email was addressed disputed Mr Jane’s statement that all of the payments which had been made to date represented advances to VCFA. None referred to any agreement for services, or claimed that the amounts were in fact paid in respect of services. Instead, the only response from Mr Lambert, on 26 November 2015, was “Thanks Jim”. Neither Mr Lambert nor Mr Poulos referred to this email, which was attached to Mr Jane’s affidavit, in their own affidavit evidence.

The payment of $100,000 to VCFA was entered in AGT Management’s accounts at around that time with the allocation “Loan – Venture Capital”. As with the earlier entries, the tax rate for this payment was “BAS Excluded”, reflecting that no input tax credit was claimed by AGT Management. This payment was reallocated on 5 August 2016 by Ms Pearce from “Loan – Venture Capital” to “Loan – Access Group Training Pty Ltd”, reflecting that there was an intercompany loan by AGT Management to AGT in respect of the moneys that AGT Management had advanced to VCFA on AGT’s behalf.

Secondly, on 15 February 2016, Mr Lambert sent, on VCFA’s letterhead, a letter to AGT, marked for the attention of Mr Jane. The letter stated that “we have been honouring our loan repayments as per our agreement and confirm the following loan repayment position”. The letter indicated that the “Amount owed” as at 31 December 2015 was $440,000.

The sum of $440,000 was the amount which had been paid by AGT to VCFA as at that date (excluding the payments made by AGT Management). This was the sum that had been reallocated in AGT’s accounts from “Equity, Capital Raising & IPO Expenses” to “Loan – Venture Capital Fund”. That is, the reallocation in AGT’s internal accounts was consistent with the position acknowledged in VCFA’s correspondence to AGT.

The February 2016 letter reveals, consistently with the terms of the November 2015 email exchange, a common assumption that the payment of $440,000 by AGT to VCFA represented an advance which was repayable in full. Further, the terms of the letter are inconsistent with any common assumption that the amount in question had been paid as a fee for a service rendered by VCFA.

Insofar as Mr Lambert’s letter suggested that loan repayments had been made to prior to the date of the letter, it was incorrect. It is common ground that no amount was paid back to AGT in respect of the $1.3m at issue in these proceedings.

Subsequently, AGT Management made six further transfers to VCFA, from mid-February to mid-March 2016, totalling a further $100,000. Although each transfer was effected by AGT Management, each was described in VCFA’s bank statements as “AGT Payment”. Further, each was initially entered in AGT Management’s accounts with an allocation to “Loan – Ross Lambert”, and each was subsequently assigned by Ms Pearce in August 2016 to “Loan – Access Group Training Pty Ltd”, reflecting that the transfers from AGT Management to VCFA were made on behalf of AGT, which incurred an intercompany liability in respect of each transfer. Each such entry designated the tax rate to be “BAS Excluded”.

Mr Lambert gave evidence in his affidavit to the effect that Mr Jane agreed with him that there was never any loan agreement in place, and VCFA did not need to repay the sum of $1.3m, but asked Mr Lambert to say that this money had been loaned to VCFA (when each of them knew that was not true), in order “to justify this to [the other directors of AGT] when they find out the money’s not there, Jack [Goard] in particular.” This is, in substance, an allegation that Mr Jane requested Mr Lambert’s assistance to create a paper trail, which they both knew to be false, in order to deceive Mr Jane’s fellow directors of AGT.

When the trial opened, the parties indicated that they had reached a general consensus, between them, that they would not insist upon a strict application of the rule in Browne v Dunn. In that context, I emphasised to the parties that I would not make any finding that a party had behaved dishonestly, including by creating or signing documents which they knew to be false, unless this was squarely raised with them, and counsel for VCFA acknowledged the need to do so: “we appreciate any allegation in the nature of serious misconduct really does have to be confronted”. Significantly, it was not suggested to Mr Jane in cross-examination that he had any intention to deceive his fellow directors, or that he knowingly created a false document in order to do so. Those were serious allegations which ought to have been put to him in detail, so that he had an opportunity to respond. I found Mr Jane to be an honest witness, who directly answered the questions put to him, who made concessions where appropriate, and whose evidence was consistent with the contemporaneous documents. His version of events was not challenged in any significant way.

Those matters provide a sufficient basis to reject any such allegation against Mr Jane. Further, and in any case, Mr Lambert made various concessions in cross-examination which were inconsistent with his affidavit evidence.

The most significant of those concessions concerned a document headed “Loan – Venture Capital Fund Transactions”, which was signed by Mr Jane as director of AGT and Mr Lambert as director of VCFA (the Loan Acknowledgement). By this document, AGT acknowledged that the amounts shown in the document, totalling $1,300,035, “have been loaned to [VCFA]”, and VCFA acknowledged that “the above amounts have been received by [VCFA] as a loan from [AGT]”.

In the Loan Acknowledgement, the amount of $1,300,035 is broken down into a series of payments from each of AGT and AGT Management. The payments from AGT Management are described as follows: “Loan from Access Group Training Pty Ltd paid via AGT Management Pty Ltd”. This description, and the terms of the acknowledgement by VCFA set out above, support AGT’s claim that all of the payments made by AGT Management were payments on behalf of AGT, and that each of those payments was made by way of a loan.

Mr Lambert identified the Loan Acknowledgement as a document which was provided by VCFA to AGT. He gave evidence in cross-examination that the Loan Acknowledgement was produced by VCFA’s auditor, explaining that, in order to sign off on the audit of VCFA’s accounts, the auditor required “everyone who had lent money to the company” to acknowledge the loan.

However, on Mr Lambert’s evidence, AGT was not a person “who had lent money to the company”. In cross-examination, when confronted with this issue, Mr Lambert said that the reason why he sent the Loan Acknowledgement to AGT was that VCFA’s “accounts lady” could not find the invoices that had been sent to AGT: “We had to complete our audit, and if it wasn’t income, and we didn’t have the invoices to show that it was income, then it had to be a loan. We didn’t have any other option.” That explanation lacks credibility. Mr Lambert knew that the three invoices in question had been sent to AGT. If the payments from AGT represented income received by VCFA in respect of services rendered by it, and there was a problem with finalising VCFA’s accounts because the relevant invoices could not be located in VCFA’s records, it would have been a simple matter for Mr Lambert to ask his close friend, Mr Jane, to send him copies of those three invoices; and it would have made more sense to take that step rather than to ask Mr Jane to sign a document which (on Mr Lambert’s evidence that no loan agreement was in place) they both knew to be false. The alternative, and more probable explanation for Mr Lambert’s decision to send the Loan Acknowledgement to Mr Jane was that, as the document itself stated, AGT had loaned money to VCFA.

In that regard, Mr Lambert conceded in cross-examination that he believed the Loan Acknowledgement to be true at the time that he signed the document. He also conceded that, as far as he could tell, Mr Jane believed that the moneys paid had been paid by way of a loan.

Those concessions are directly inconsistent with his evidence that he and Mr Jane in fact believed the opposite to be true, and that documents acknowledging the loan were produced at Mr Jane’s request.

Further, and consistently with the terms of the Loan Acknowledgement, Mr Lambert accepted in cross-examination that:

Mr Lambert gave evidence that these financial documents were prepared by VCFA’s accountant, based on information provided by VCFA; that the documents were then checked by VCFA to ensure that they were accurate; and that he was personally involved in this process at the time these particular documents were prepared. Mr Lambert also confirmed that, at the time the balance sheet was prepared (showing the $1.3m loan from AGT), he was confident that it was correct.

Mr Lambert said in cross-examination that the reason why the amounts paid in respect of the invoices to AGT were recorded as a loan was because he personally allocated the payments to loans on the bank statements. Those statements were in evidence, with Mr Lambert’s handwritten allocation alongside particular payments.

Again, this evidence given by Mr Lambert in cross-examination is inconsistent with his affidavit evidence that he believed that all of the payments represented fees for services, and none was a loan. Mr Lambert sought to deal with this inconsistency by explaining that he allocated the amounts paid by AGT and AGT Management to loans in VCFA’s accounts, “almost like I’d parked them there” because “we didn’t have accounts in our chart of accounts for income, and we didn’t have any income”.

I find this explanation implausible. On Mr Lambert’s evidence, VCFA did in fact have income, being the payments by AGT in respect of fees. If these payments had been “parked” to loans, because there was no account available for income, then this would presumably have been brought to the accountant’s attention when Mr Lambert was presented with a P&L which showed no income, and a balance sheet which showed a $1.3m loan. Mr Lambert confirmed that if the payments had been received in respect of the invoices, then they should have been recorded as income in the P&L, but instead no income was shown. However, Mr Lambert, who reviewed those documents for accuracy, did not suggest any changes be made to them.

Significantly, the treatment of the payments in VCFA’s own accounts is consistent with the treatment of the same payments in the accounts of AGT and AGT Management, which, as noted above, allocated all of those payments to “loan” accounts, without any element of GST. The consistency of those entries across the two sets of accounts is at odds with Mr Lambert’s evidence that documents describing the payments as a loan were created solely for the purpose of deceiving Mr Jane’s fellow directors of AGT. The more likely explanation, which is supported by the contemporaneous communications and the treatment of the payments in both company’s records, as well as Mr Jane’s own evidence, is that the payments were made by way of a loan, and that both of the companies understood this to be the case.

In August 2016, Mr Jane, as a director of AGT, and Mr Lambert, as a director of VCFA, signed a deed regarding the amounts totalling $1.3m which had been paid to VCFA between August 2015 and March 2016 (the First Deed).

The Recitals to the First Deed were as follows:

Clause 2 of the First Deed provided as follows:

Clause 3.1 provided as follows:

Clause 3.3 provided as follows:

Clause 3.4 provided as follows:

Schedule 1 to the First Deed set out the primary advances made to VCFA. These fell into two groups: first, the advance of $440,000 made by AGT on 24 September 2015; and secondly, the advances made by AGT Management totalling $860,035, comprising the amount of $660,035 on 4 August 2015; the amount of $100,000 on 20 November 2015; and the amounts totalling $100,000 between mid-February and late March 2016. The amounts transferred by AGT Management were listed under the heading “Loan from [AGT] paid via [AGT Management]”.

Mr Lambert deposed that the version of the First Deed which he signed did not have the schedules attached. Whether or not that was the case is of little consequence. Mr Lambert deposed that the first draft of the deed was sent to him on 8 September 2016. On that day, Mr Kerridge sent Mr Lambert a copy of the First Deed which included each of the two schedules. It is likely that Mr Lambert reviewed the schedules at that time.

In any case, even without reading the schedules, Mr Lambert was well aware of the payments which the First Deed described as the “Primary Advances”. The Recitals to that deed expressly refer to the amount of $1,300,035 as having been advanced by AGT to VCFA. This is the sum of the payments which, to Mr Lambert’s knowledge, were made by AGT and AGT Management to VCFA between August 2015 and March 2016. The content of Schedule 1 is relevantly the same as the content of the Loan Acknowledgement, which Mr Lambert provided to Mr Jane (see paragraphs 65-66 above). The same individual payments making up the same total figure appear in each document. Accordingly, whether or not Mr Lambert read Schedule 1 prior to signing the First Deed, he must have been aware, when he did sign it, of the specific payments totalling $1,300,035 to which the Recitals of the First Deed referred.

As for Schedule 2, it merely provides a calculation of the amount of interest owing as at 30 June 2016, based on the date of payment of each of the amounts in question (which is not in dispute), and applying an interest rate of 10% (which is expressly referred to in the Recitals to the First Deed). Accordingly, whether Mr Lambert saw Schedule 2 is of little consequence, since he was aware of the matters on the basis of which the figures in the Schedule were calculated.

Further, Mr Lambert gave evidence that he instructed VCFA’s auditor in around July 2017 that interest totalling some $246,619 should be disclosed in VCFA’s accounts as owing to AGT as at 30 June 2017. Significantly, this amount broadly equates with the interest shown in Schedule 2 to the First Deed. (That Schedule refers to interest as at 30 June 2016 of $105,982.75, with interest accruing at a daily rate from 30 June 2016 onwards of $385.21. Allowing for another 365 days at this daily rate results in a total figure for interest of $246,584.40 as at 30 June 2017.)

VCFA contended that the First Deed could not be binding on it because the deed was executed only by Mr Lambert, rather than by two directors of VCFA.

As discussed below, it is common ground that Mr Poulos did not sign the First Deed, and disputed its contents. Mr Jane was aware of those matters, and so could not have been of the view that Mr Lambert was signing with the authority or agreement of his fellow directors of VCFA.

However, the primary significance of the First Deed lies not in the enforceability of any provisions which it contains concerning matters such as security and repayment, but rather in the acknowledgements set out in the Recitals.

The undisputed fact that the First Deed is signed by Mr Jane and Mr Lambert provides evidence that each of them, being the only persons who had knowledge of the conversations that gave rise to the relevant transactions, understood that advances had been made and were repayable. Further, the evidence, provided by the terms of the Recitals in the First Deed, that Mr Jane and Mr Lambert shared this understanding is consistent with the terms of Mr Jane’s email of 20 November 2015, and Mr Lambert’s response; the terms of the letter dated 15 February 2016, which Mr Lambert sent to Mr Jane; and the contents of the Loan Acknowledgement, which each of Mr Jane and Mr Lambert also signed.

Accordingly, the First Deed is significant primarily because it reveals a common assumption on the part of each of AGT and VCFA (and, in particular, on the part of the only officers of AGT and VCFA who were involved in the relevant transaction) that there existed an agreement between them that VCFA would repay in full the amount of $1.3m which had been advanced by AGT to VCFA, together with interest from the date of payment.

Whether Mr Poulos was of a different view is of little consequence, since he accepted in cross-examination that his only source of knowledge about the relevant transactions was what Mr Lambert told him.

Mr Poulos sent an email to Mr Kerridge on 14 September 2016, stating that he was not prepared to sign the loan agreement which had, by that time, already been signed by Mr Lambert. The terms of this email, which were drafted by Mr Lambert, are significant. The email does not dispute that the moneys were paid by way of advances from AGT to VCFA, but disputes that the intention was that AGT would be able to call for repayment of the advances prior to the float being completed (emphasis added):

The language of the email is confused, particularly insofar as it is stated that the “advances” were not “loans”. However, it is significant that there is no suggestion whatsoever in this email that any of the “advances” represented the payment of a fee for services provided by VCFA to AGT, and the terms of the email are incompatible with any such arrangement. If such an arrangement were in place, it would not make sense to describe, repeatedly, the payments as “advances”; or to speak of an intention that AGT would “recoup these funds”; or to speak of arrangements being made “as compensation for the advanced funds”. The terms of this email are, like the majority of the other contemporaneous documents, inconsistent with VCFA’s defence to the loan claim, which depends on a contention that all of the relevant amounts were paid pursuant to a services agreement between VCFA and AGT.

The emails sent around the time that the First Deed was signed indicate that some pressure was placed on VCFA to sign the deed in order to provide support for the receivable of some $1.3m shown in AGT’s accounts as a loan to VCFA. On the day that Mr Kerridge first sent a draft of the First Deed to Mr Lambert, he stated that: “We will need to close off the doc for the audit. UHYHN [AGT’s auditors, UHY Haines Norton] are pressing to get this done this morning…”. Later that day, Mr Kerridge provided a copy of the First Deed which had been executed by AGT, stating: “In terms [of] the audit please see the enclosed deed in the form approved by the auditors duly executed to be countersigned.” On 14 September 2016, Mr Kerridge again asked Mr Lambert for the deed to be countersigned, stating: “UHYHN have completed audit which is signed off. They are refusing to release until the deed has been returned re the VCFA loan account.”

Those matters support rather than undermine the reliability of the First Deed. Each of Mr Jane and Mr Lambert knew that the deed was a document which was going to be provided to external auditors for the purposes of finalising the accounts of AGT as at 30 June 2016. Further, each knew that it was proposed that the profit and loss and balance sheet of AGT as at 30 June 2016 would appear in the prospectus that was being prepared for the proposed IPO, and would therefore be relied upon by investors. Each would have known that it was important that accurate information about the assets of AGT be provided both to its auditors and to prospective investors.

On around 19 April 2017, Mr Jane, as director of AGT, and Mr Lambert, as director of VCFA, signed a further deed (the Second Deed). The Second Deed included the following recital C:

The reference to a deed dated “29th August 2016” is likely a typographical error. There was no evidence that there existed, in draft or final form, any deed dated 29 August 2016. The parties clearly intended to refer to the First Deed, which was dated 30 August 2016.

Mr Lambert agreed in cross-examination that, when he signed this Second Deed, it was because he accepted that its contents were true.

Again, and consistently with other communications between the parties outlined above, this document reveals a common assumption on the part of VCFA and AGT that a loan agreement had been entered between them, and that the terms of that agreement included that VCFA would pay the full amount of $1.3m which had been advanced by AGT.

For the reasons set out above, I find that the amount of $1.3m was advanced by AGT to VCFA; that interest accrued on that loan at the rate of 10% from the date of each advance; and that no amount has been repaid by VCFA in respect of the principal or interest on that loan.

However, it does not follow that AGT is entitled to an order for repayment for the full amount of the loan and interest thereon, for reasons explained below.

It is common ground that in around 2015 AGT and VCFA entered into an agreement to share, on a 50/50 basis, the rent and outgoings in respect of office premises at Chatswood.

The only issue in dispute is whether AGT has established that any amount is outstanding pursuant to this agreement.

In early 2015, Mr Lambert had a conversation with Mr Jane about finding premises for the Sydney-based head office of the proposed listed company. As Mr Jane was based in Dubbo, and Mr Lambert was based in Sydney, Mr Jane asked Mr Lambert to see if he could find suitable premises.

Mr Lambert contacted a number of real estate agents and inspected a number of properties in Chatswood. He selected premises located on level 5, 8 Thomas Street, Chatswood (the Chatswood Premises) as suitable for the listed company.

Following discussions which involved, among others, Mr Jane and Mr Lambert, VCFA and AGT reached an agreement that AGT would lease the Chatswood Premises, on the basis that AGT and VCFA would share the use of the premises, and would split the rent and outgoings.

In its pleading, AGT alleged that the agreement reached was that AGT would pay the rent only for the first year, and that VCFA would pay the rent thereafter. However, this is at odds with the terms of a letter subsequently sent by AGT’s Chief Financial Officer, Michael McGann.

On 30 June 2016, Mr McGann wrote to Mr Lambert setting out the terms of the agreement which had been reached regarding the sharing of rent and outgoings in respect of the Chatswood Premises. Omitting formal parts, the letter stated as follows:

When asked about this letter, Mr Lambert confirmed that this represented the agreement between the parties.

Accordingly, I find that the terms of the agreement reached between the parties in respect of rent and outgoings were as set out in Mr McGann’s letter (the Chatswood Agreement).

On 22 May 2015, AGT entered into a lease of the Chatswood Premises for a term of 3 years with a 3 month rent free period (the Lease). The Lessor was Chatswood RSL Club Limited. The Lease was signed by Mr and Mrs Jane, as directors of AGT. The Lease provided that the annual rent in the first year of the term was $135,600 per annum gross plus GST, and the Lessee (AGT) must pay the annual rent in advance by monthly instalments (cl 5(4)). In the second and third years, the annual rent was the amount of the first year’s rent, or any variation of it resulting from an increase of 4% of the preceding year’s rent (cl 5(3)).

In order to establish a breach of the Chatswood Agreement, it was a simple matter for AGT, as Lessee, to provide evidence of the total amount of rent and outgoings payable in respect of the Chatswood Premises during the term of the Lease, and the total amount which had in fact been paid by AGT for rent and outgoings. If the latter were shown to exceed 50% of the former, AGT would thereby establish a claim under the Chatswood Agreement for the amount of the difference.

However, AGT led no such evidence.

Instead, AGT relied on the terms of an email which Mr McGann sent to Mr Lambert on 17 October 2017. At this point in time, the Chatswood Lease still had more than seven months to run, until 22 May 2018. Mr McGann attached a summary statement, which was said to show that “AGT is owed $150,608 in rent/expenses (excluding the advanced funds)”. (The reference to the “advanced funds” is likely a reference to the balance of the loan owing from VCFA to AGT. It should be noted that Mr Lambert did not respond to say that no sums had been advanced, and no such loan existed.)

The attached statement set out, by number and date, a list of invoices issued to VCFA. Those invoices were not in evidence. Further, there was no evidence that the amounts shown as “due” from VCFA for these invoices as at 31 October 2017 remained due when the Lease ended, or as of today. There was no updated statement as at any date after October 2017, or any primary documentary records to allow the calculation of any amount outstanding from VCFA under the Chatswood Agreement as at the date of the hearing.

In his email, Mr McGann stated that: “I regret to advise that unless payment is received by end of month, we will not be making further payments to this lease.” Mr Lambert replied, on the same date, as follows: “I agree we do need to get this up to date”. VCFA tendered documents showing that, from October 2017 through to May 2018 (that is, through to the end of the Chatswood Lease), it paid rent and outgoings directly to the Lessor.

Having regard to the evidence of those payments by VCFA, and in circumstances where AGT has not led evidence to establish the quantum of the payments which it made in respect of rent and outgoings over the term of the Chatswood Lease, AGT has not shown that VCFA failed to meet its obligation under the Chatswood Agreement to cover 50% of the rent and outgoings.

For the reasons given above, I am not satisfied that AGT has established either breach or loss in respect of its claim concerning the Chatswood Agreement.

This aspect of its claim in the 2020 Proceeding must be dismissed.

It is common ground that:

Holdings brought a claim against each of the AGT Shareholders for money had and received. Holdings submitted that: “the [AGT Shareholders having the deposit paid to them on behalf of [Holdings], and by failing to repay it to [Holdings], have been unjustly enriched at the expense of [Holdings]”.

The High Court has emphasised that unjust enrichment is not to be determined by some subjective assessment of the merits of the case, but by reference to whether or not some qualifying or vitiating factor is present. In David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353; [1992] HCA 48, Mason CJ, Deane, Toohey, Gaudron and McHugh JJ observed (at 379) that:

One established category of case where a claim for money had and received is available is where there has been a total failure of consideration: Coshott Family Pty Ltd v Lyons [2022] NSWCA 216; (2022) 110 NSWLR 44 at [35] per Kirk JA (Meagher JA and Griffiths AJA agreeing). The notion of “consideration” is not here limited simply to the contractual sense: ibid., citing Roxborough v Rothmans of Pall Mall (2001) 208 CLR 516; [2001] HCA 68 at [101]-[107] per Gummow J.

In Equuscorp Pty Ltd v Haxton; Equuscorp Pty Ltd v Bassat; Equuscorp Pty Ltd v Cunningham’s Warehouse Sales Pty Ltd (2012) 246 CLR 498; [2012] HCA 7, French CJ, Crennan and Kiefel JJ observed (at [31], footnotes omitted) that:

Although there was no reference in Holdings’ pleadings to a total failure of consideration, this was the basis on which the case was put. That is, Holdings contended that the sum of $1.7m, which was the proposed deposit under the Share Sale Agreement, was paid in circumstances where the Share Sale Agreement had not been executed, and was not subsequently executed, such that (in terms of the words of Professor Birks quoted above) “the state of affairs contemplated as the basis or reason for the payment has failed to materialise”.

The AGT Shareholders disputed that there had been a total failure of consideration. They contended that a Share Sale Agreement was executed by Holdings and the AGT Shareholders in around late February 2017, or there was otherwise mutual assent by the parties to be bound by its terms; and that the terms of this agreement governed the repayment by the AGT Shareholders of the $1.7m deposit (the Deposit). In particular, they submitted that the relevant clause of this agreement (namely, clause 5.9(d)) permitted the AGT Shareholders to set off, against their obligation to repay the Deposit, any amounts owing by either Holdings or VCFA to AGT.

I consider below, first, the background to the payment of the $1.7m to the AGT Shareholders; secondly, whether Holdings and the AGT Shareholders entered into the Share Sale Agreement upon which the AGT Shareholders rely; and thirdly, whether, pursuant to the terms of cl 5.9(d) of that agreement, the AGT Shareholders are entitled to set off against their obligation to repay the Deposit to Holdings, any amounts claimed to be owing by Holdings or VCFA to AGT.

On 7 June 2016, Mr Lambert asked Mr Stafford to draft a Share Sale Agreement based on an initial term sheet which had been prepared in relation to the planned IPO. Mr Stafford was a partner of Eakin McCaffery Cox, who acted for both the AGT parties and the VCFA parties in relation to the proposed IPO.

Mr Stafford provided a first draft of the Share Sale Agreement to Mr Jane, Mr Lambert and Ms Pearce on 20 June 2016. Mr Lambert accepted that he was subsequently sent several drafts of this agreement.

On 27 July 2016, a document headed “Access Group Training Holdings Ltd – Pre IPO Capital Raising Term Sheet” was executed as “a binding [sic] term sheet” by Mr Jane on behalf of AGT, and by Mr Lambert on behalf of VCFA.

This term sheet provided for the issue of new ordinary fully paid securities in the capital of Holdings to form part of the pre IPO Capital of Holdings at $0.10 per share, and for an amount of $1.7m, described as the “Pre IPO Amount” to be paid from the date of execution of the term sheet until “Close”, which was expected to occur on 31 July 2016. The term sheet also included the following provision:

Although the language is confused, it appears that this clause is the genesis of what subsequently became cl 5.9(d) of the Share Sale Agreement, which is discussed further below.

On 11 August 2016, there was a meeting of the due diligence committee which was established in relation to the proposed IPO. It was attended by, among others, Mr Warwick Kerridge (as chair), Mr Jane, Mr Stafford, Dr Paula Robinson and Mr Lambert (as “observer”). Mr Kerridge was a representative of O’Connell Partners, who were retained in relation to the proposed IPO. Dr Robinson had been proposed, on the recommendation of Mr Kerridge, as a non-executive director of Holdings. She was subsequently appointed to that position on 24 August 2016.

The minutes of this meeting record that the “share sale agreement for the sale of shares in Access Group Training Pty Ltd was essentially complete and the balance of the transaction documents would be available in draft form by 17 August 2016 and available for discussion on 19th August 2016 as required”, with the aim being to “finalise the terms thereof” on 19 August 2016. The minutes record that:

On 12 August 2016, Mr Stafford sent an email to Mr Jane attaching a revised draft of the Share Sale Agreement. Mr Stafford added:

On 15 August 2016, Mr Jane proposed to Mr Kerridge that clause 5.9(d) of the Share Sale Agreement should be amended to add “that shares 14.16% would be reduced by any debt from VCFA to AGT P/L so maybe $200K of shares not $1.7 million”. The arithmetic indicates that Mr Jane believed that, at this time, a debt of $1.5m was owing from VCFA to AGT (which is broadly in line with the amount of the advances plus interest, as recorded in the First Deed). He was, in effect, proposing that clause 5.9(d), which dealt with the consequences of the listing not proceeding in circumstances where VCFA had already paid the sum of $1.7m, needed to be amended to take into account the outstanding loan liability of VCFA to AGT. In an email sent much later, on 16 May 2018, Mr Jane stated that the reason why cl 5.9(d) was added into the draft Share Sale Agreement was that “we were correctly concerned about having the loan repaid by VCFA”.

On 24 August 2016 at 8.23am, Mr Kerridge sent an email to Dr Robinson, Mr Jane and Mr Lambert, attaching what was described as an “execution copy” of the Share Sale Agreement with a date stamp “19.8.2016”, and a copy of the Share Subscription Agreement. Mr Kerridge stated that the intention was “to finalise the share subscription of 17,000,000 new securities in the capital of [Holdings] @ $0.10 per new security as well as the share sale agreement whereby [Holdings] enters into an agreement to acquire 100% of the issued capital of [AGT]”. He further stated: “It is proposed that both of these agreements will be signed this morning at or about 10.00am.” Mr Kerridge asked Dr Robinson to “execute the signing page of both of the enclosed agreements and return the signed pages”, in order to “facilitate this completion”. He said that he would “then attach these pages to the balance of the document”; and that he would telephone when “the remainder of the signatories are in place to seek your authority to complete exchange”.

It is important to note that Mr Kerridge’s proposal for effecting the entry into these agreements involved the following steps: (a) Mr Kerridge would send the entire agreement to each signatory; (b) the signatory would execute and return only the signing page of the agreement (and not the balance of the pages); and (c) Mr Kerridge would then attach the signed pages to the balance of the document. That procedure will be of some significance when it comes to the question of the execution of the Share Sale Agreement.

Mr Lambert responded to Mr Kerridge (copied to Mr Jane and Dr Robinson) at 10.00am on 24 August 2016, noting that this was “the first time we have seen the final versions of these documents and need time to review”. Shortly afterwards, at 10.08am, Mr Kerridge sent execution copies of each of the Share Sale Agreement and the Subscription Agreement to Mr Jane, Mr Lambert, Mr Poulos and Dr Robinson, asking them to “use this version for your review”, and to “review the documents as required in order that the final form can be signed off for exchange”. Mr Kerridge proposed that once the final form of these documents was agreed, “the agreements be signed by the respective parties and held until the balance of the subscription funds are received (ie $200,000) into the trust account of Pearce Accountants”. Dr Robinson responded that she would wait until the final version was sent through before execution, and suggested that she might speak to Mr Stafford to confirm the final copy before signing.

The version of the Share Sale Agreement attached to Mr Kerridge’s email had a footer that included the words “AGT SSA execution copy 24.8.2016(4)”. It provided that on the date that the agreement was entered, Holdings would pay the Deposit of $1.7m to the AGT Shareholders in their Respective Proportions (that is, 25% to each Shareholder) without set off or deduction: cl 4.3(a)(i). It also provided that, on the same date, Mr Jane would sign an employment agreement with Holdings and, in furtherance of the execution of that agreement, Holdings would issue 6,000,000 ordinary fully paid shares in the capital of Holdings to Mr Jane, in consideration of his agreeing to act as managing director upon the listing of Holdings (which shall be cancelled in the event of the failure of Holdings to be listed): cl 4.3(a)(ii)-(iii). In addition, Holdings agreed that the AGT Shareholders “shall be entitled to the immediate use and enjoyment of the Deposit”: cl 4.3(b).

This ”execution copy” of the Share Sale Agreement provided that Completion would occur at 10.00am on the Completion Date, which was defined as the date when Listing occurs or such other date as agreed between the Parties: cl 5.1. Completion was conditional upon a number of conditions precedent being fulfilled (or waived under cl 2.3) on or before the Sunset Date, which was 31 December 2016 or such other date as agreed to by the Parties.

Clause 5.9(d) of this “execution copy” of the Share Sale Agreement provided as follows:

As set out above, each of cl 5.9(d)(ii)(1) and (2) took into account any payments which were due by Holdings or by a related party of Holdings to either AGT or the AGT Shareholders. This drafting appears designed to address the concern that Mr Jane had expressed regarding the recoverability of the moneys that had been advanced by AGT to VCFA.

Clause 6A of the “execution copy” of the Share Sale Agreement provided as follows:

On 24 August 2016, Mr Lambert sent an email to Mr Kerridge and Mr Jane, and copied to his fellow directors of VCFA. In this email (which, as noted below, attached the signed Share Subscription Agreement), Mr Lambert stated: “We note several changes from the [previous] versions inclu[d]ing [Mr Jane] Additional Shares Cl[au]se 6A. We are very happy for you jim to receive these.” It is plain that this was a reference to clause 6A of the Share Sale Agreement, which is set out above. It must be inferred that Mr Lambert had reviewed the execution copy of the Share Sale Agreement attached to Mr Kerridge’s email, and was aware of the changes made to that agreement from previous versions, including the insertion of clauses 5.9(d) and 6A. In his affidavit, Mr Lambert deposed that clause 5.9(d) was inserted into the Share Sale Agreement by an amendment after June 2016, and added: “I was a director of Holdings at that time and the clause had never been discussed with me by the other board members or with Mr Stafford”. In fact, clause 5.9(d) was added before Mr Lambert became a director of Holdings; he likely reviewed it at the time; and he did not express any concern about its terms.

On 25 August 2016, Mr Jane forwarded Mr Kerridge’s 10.08am email, together with the “execution copies” of the agreements, to Mark Nicholaeff of UHY Haines Norton. He expressly referred to clause 5.9(d)(i) and (ii) of the Share Sale Agreement, and added: “we are of the view that should the deal either not go ahead – Warwick [Kerridge] will talk to you shortly to explain our next steps and the paperwork you will receive to indicate our confidence that we will get our funds + interest”. This email provides further evidence that, from Mr Jane’s perspective, AGT had loaned money to VCFA, and that clause 5.9(d) was amended in order to ensure that, in the event that listing did not proceed, AGT was able to get back from VCFA “our funds + interest”.

Mr Kerridge’s email of 24 August 2016 at 10.08am explained that the Share Sale Agreement would be signed, once “the final form is agreed and the 2016 accounts [are] attached”. The “execution copy” of the Share Sale Agreement which was attached to his email had a placeholder page for Annexure A, which was to be a copy of AGT’s “draft balance sheets and profit and loss statements prepared in a manner consistent with [AGT’s] accounting policies and/or conventions for the Financial Year ending 30 June 2016”. Further, it was proposed that by Schedule 2 to the Share Sale Agreement, each of the AGT Shareholders would provide a series of warranties including, relevantly, the following:

The delay in finalising the 2016 accounts, caused in part by the dispute between VCFA and AGT over the loans that had been made and the terms of the First Deed (see paragraphs 89 and 94-96 above), likely explains why the Share Sale Agreement was not in fact executed at the same time as the Share Subscription Agreement.

On 24 August 2016, Holdings and VCFA entered into the Share Subscription Agreement. It was common ground that this agreement was duly executed by the parties, and was binding on them.

The agreement was signed by two directors of Holdings, namely, Mr Jane and Dr Robinson. Further, the copy that was executed by VCFA and returned by Mr Lambert to Mr Jane at 5.11pm on 24 August 2016, was signed by two directors of VCFA, namely, Mr Lambert and Mr Dong.

Recital A to the Share Subscription Agreement recorded that Holdings agreed to issue the Subscription Shares to VCFA, and VCFA agreed to subscribe for the Subscription Shares on the terms contained in the agreement.

The Subscription Shares were defined as 17,000,000 ordinary class shares in the capital of Holdings at the Issue Price of $0.10 per Subscription Share (for a total “Subscription Price” of $1.7m), which “shall represent 74% of the total issued share capital of [Holdings] at the time of their issue to [VCFA]”.

Clause 3.2 of the Share Subscription Agreement provided that Completion (meaning completion of the issue of the Subscription Shares to VCFA) will take place and effect as from 9.00am on the Completion Date.

The Completion Date was defined as “the date when the Share Sale Agreement is signed or [such] other date as agreed to by the Parties”. The “Share Sale Agreement” was defined as meaning “the Share Sale Agreement between [Holdings] and [the AGT Shareholders] dated on or about the date of this Agreement” (emphasis added). By cl 2.6 of Sch 2 to the Share Subscription Agreement, Holdings warranted that “it has signed the Share Sale Agreement”.

Clause 3.3 provided that on the Completion Date:

Clause 3.4 of the Share Subscription Agreement provided that the obligations of the parties in respect of Completion are interdependent. Clause 3.6(a) provided that, soon after Completion, Holdings agrees to undertake an IPO at the IPO Price (of $0.20 per share) with a view to listing on the ASX in the fourth quarter of 2016 (that is, by 31 December 2016), and Holdings would “take all necessary action to progress this”.

Pursuant to cl 3.3(d), Holdings was obliged, on Completion, to apply the Subscription Price of $1.7m “immediately and solely for the Purpose”. The “Purpose” was defined as meaning to fund the Deposit of $1.7m that was payable by Holdings to the AGT Shareholders under the terms of the Share Sale Agreement.

The intention of the parties, as set out in these clauses, was that the Share Sale Agreement would be signed on or about the same date as the Share Subscription Agreement; that the steps comprising “Completion” under the Share Subscription Agreement would occur on the date when the Share Sale Agreement was signed; and that, in particular, VCFA would pay, on this date, the sum of $1.7m to Holdings as the price for its 17m shares in Holdings, and Holdings would immediately and solely use that sum to fund the Deposit of $1.7m that was to be payable by Holdings to the AGT Shareholders under the terms of the Share Sale Agreement.

It is common ground between the parties that the Share Sale Agreement was not in fact executed on or about the date that the Share Subscription Agreement was entered. The position of AGT and the AGT Shareholders is that the Share Sale Agreement was not executed until around 28 February 2017; and the position of VCFA and Holdings is that there is no evidence that it was ever executed.

Further, it is common ground that “Completion” under the Share Subscription Agreement (meaning the issue of 17m shares in Holdings to VCFA) occurred in circumstances where the Share Sale Agreement had not been executed. According to the ASIC extract for Holdings:

Further, as outlined below, VCFA paid the balance of $1.7m into the trust account of Ms Pearce, by way of the payment of the Subscription Price.

Having regard to the definition of “Completion Date” as meaning the date on which the Share Sale Agreement is executed, or such other date as the Parties agree, it must be inferred that Holdings and VCFA agreed that Completion should occur under the Share Subscription Agreement, even though the Share Sale Agreement had not been executed.

Mr Lambert gave unchallenged evidence that in around late July or early August 2016, he and Mr Jane had a conversation at the Chatswood Premises. Mr Jane explained that his wife was concerned about the deal going ahead and asked that “as a show of good faith”, the amount of $1.7m be “paid straight away”. Mr Jane proposed that the money be paid into the trust account of AGT’s accountant, Ms Pearce, and that she “hold the money as a deposit against the expected sale of our AGT shares to [Holdings]”. Mr Lambert indicated that VCFA could deposit $1.5m into Ms Pearce’s trust account as “a sign of good faith” reasonably quickly, and could pay the remaining $200,000, which was coming from third party sources, into the trust account as soon as it became available.

On 8 August 2016, VCFA paid the sum of $1.5m into Ms Pearce’s trust account.

Shortly before the Share Subscription Agreement was signed, a meeting took place which involved Mr Lambert, Mr Jane and Mr Poulos. Mr Lambert gave evidence that, at this meeting, it was agreed between him and Mr Jane that, if the proposed listing did not happen by 31 December 2016, Mr Jane would ensure that the $1.7m was paid back to VCFA within seven business days. (According to Mr Lambert’s affidavit, the meeting took place on 26 August 2016 at the Chatswood Premises. Mr Jane disputed that the meeting could have taken place in Chatswood on 26 August, since he was in Dubbo on that date, but otherwise did not dispute Mr Lambert’s evidence that a conversation took place in the terms he recorded. Although not much turns on the precise date, I find it is likely, given the terms of Mr Kerridge’s email of 25 August 2016 referred to below, that the relevant meeting took place at his offices on 24 August 2016.)

On 25 August 2016 at 11.01am, being the morning after the Share Subscription Agreement was executed, Mr Kerridge sent an email to, among others, Mr Lambert, Mr Jane and Ms Pearce, noting that Ms Pearce had not yet received the remaining $200,000 of the $1.7m in subscription funds into her trust account or the authority to release funds from her trust account. Mr Kerridge noted that he had spoken to Mr Lambert “to confirm that these will be attended to in accordance with the agreement reached during the meeting yesterday at Level 12, 28 O’Connell Street Sydney in order for the subscription to be completed”. This is likely a reference to the agreement between Mr Lambert and Mr Jane referred to in the previous paragraph. Mr Kerridge asked for confirmation to be given once the remaining $200,000 in funds had been transferred and the authority to release funds had been supplied.

Mr Kerridge also noted that he had advised the company accountants “to issue only 5,999,600 new shares as Jim already holds 400 shares which will not then need to be cancelled and which will not alter the share capital structure”. The issue of 6 million shares in Holdings to Mr Jane was a step required by the Share Sale Agreement, in consideration for Mr Jane’s entry into an employment agreement with Holdings. Mr Lambert, who received this email, must have been aware that this was a step that was contemplated by clause 6A of that agreement, since he had reviewed, and specifically indicated his agreement with, the terms of that clause (see paragraphs 146-147 above).

On 25 August 2016 at 2.05pm, Mr Kerridge sent an email to, among others, Mr Jane, Mr Lambert, Dr Robinson and Ms Pearce, stating that: “I can now confirm that all document signatories are held”. Mr Kerridge indicated that, in order to complete the exchange of the counterparts, he required confirmation of the transfer of the sum of $200,000, and delivery to Ms Pearce of the authority to release the subscription funds of $1.7m. Mr Jane and Dr Robinson must have been aware that this was only a reference to signatories in respect of the Share Subscription Agreement, since they had not yet executed the Share Sale Agreement. For his part, Mr Lambert did not give any evidence to the effect that he understood that the Share Sale Agreement had been executed at this time, or took any steps on that basis.

On 26 August 2016 at 5.47pm, Mr Lambert sent to Ms Pearce, copied to Mr Jane, an authority to release funds from her trust account. This authority referred to two payments made into the trust account, namely, a payment of $1.5m on 8 August, and a payment of $200,000 on 26 August. The authority, which was signed by each of Mr Lambert and Mr Poulos, stated that: “These funds are paid for [Holdings] in accordance with the subscription agreement executed on 24/8/2016 and should be dealt with at the direction of [Holdings].” This letter concluded as follows:

In closing submissions, Holdings and VCFA confirmed that they did not sue for breach of the “agreement” referred to in this letter. Counsel for Holdings agreed in closing address that Holdings did not “rely on this as giving rise to a contractual claim, but as part of the matrix of facts that supports [Holdings’] claim for unjust enrichment”.

As noted above, the authority from VCFA stated that the moneys paid into Ms Pearce’s account should be dealt with at the direction of Holdings. At this stage, there were only two directors of Holdings, namely, Mr Jane and Dr Robinson. On 26 August 2016 at 4.10pm, Ms Pearce sent an email to each of them, attaching “the trust authority for you both to sign to release the deposit funds for [the] Share Sale [Agreement]”. The signed document sent back by Dr Robinson, headed “Pearce Accounting Group Pty Ltd Trust Account Authority”, included the following authorisation:

The subscription funds of $1.7m were disbursed on 29 August 2016. Holdings pleaded, and each of the AGT Shareholders admitted, that on that date, a payment of $425,000 was made to each of the AGT Shareholders.

At 5.17pm on 29 August 2016, Ms Pearce sent an email to Mr Lambert, copied to Mr Jane, confirming that the $1.7m paid into her trust account had been disbursed in accordance with the terms of the Share Subscription Agreement. Ms Pearce added the following comment regarding the “agreement” referred to in VCFA’s authority of 26 August 2016 (set out in paragraph 171 above):

No contention was made in these proceedings that Ms Pearce paid out any money in breach of trust, or otherwise than in accordance with the authority that had been given to her.

There is no evidence of any issue being raised by Mr Lambert in late August 2016 or in the months that followed about payments being made out of Ms Pearce’s trust fund to Holdings in circumstances where the Share Sale Agreement had not been executed. In that regard, Mr Lambert deposes that he was unaware that Holdings had directed that those funds were to be disbursed to the AGT Shareholders, despite there being no binding Share Sale Agreement in place.

I accept that there is no evidence that VCFA was informed, in around late August 2016, that the sum of $1.7m had been paid to the AGT Shareholders. However, just three weeks later, on 21 September 2016, Mr Lambert became a director of Holdings. In circumstances where the funds of $1.7m represented, in effect, the only moneys which had been received by Holdings prior to the time of his appointment, and those moneys had been paid out in full, leaving Holdings with no cash, he must have become aware of this fact soon after his appointment. There is no evidence that he raised any issue, in the period following his appointment, about the payment of the $1.7m to the AGT Shareholders that had occurred in August 2016.

Having regard to the matters set out above, I find that the sum of $1.7m which was paid, at Holdings’ direction, to the AGT Shareholders was paid on the basis that it was anticipated that the Share Sale Agreement would be executed soon thereafter, and on the basis that this represented a payment in respect of the “Deposit” that was payable by Holdings to the AGT Shareholders immediately upon the execution of that agreement.

As matters transpired, the proposed IPO did not take place by 31 December 2016. It was common ground that the parties continued to work together on the planned listing of Holdings during 2017, and that the planned IPO was not abandoned until some time in 2018.

There was in evidence a version of the Share Sale Agreement dated 28 February 2017, which included a number of copies of the execution page, signed by various persons.

There were a number of differences between this signed copy of the Share Sale Agreement and the “execution version” that had been circulated in August 2016. In particular, the signed Share Sale Agreement dated 28 February 2017 extended the Sunset Date from 31 December 2016 to “30 June 2017 or such other date as agreed to by the Parties”. Clause 5.9(d) was in substantially similar terms to the corresponding clause in the execution version, with the exception of a variation in the terms of subclause 5.9(d)(ii)(1). The version in the signed agreement read as follows:

Mr Lambert was, in cross-examination, taken to the signature pages of the 28 February 2017 document, and accepted that the pages in question were signed by each of Mr Jane, Dr Robinson, Mrs Jane, Mr Goard and Mrs Goard.

Each of those signatures, other than that of Dr Robinson, was witnessed. Pursuant to s 149 of the Evidence Act, it is not necessary to adduce the evidence of an attesting witness to a document (not being a testamentary document) in order to prove that the document was signed or attested as it purports to have been signed or attested.

While not disputing that the persons who appear to have signed those pages did in fact sign those pages, Holdings disputed that the AGT Shareholders had established that the document signed by them was the same as the document signed by Dr Robinson. That was because the pages of the document leading up to, and following, the execution pages bore a footer 1955683_1.docx, which was the same as the footer on the execution page signed by Dr Robinson, but each of the pages signed by the AGT Shareholders bore a different footer (“AGT AUST FINAL SSA”). In addition, one of those pages, which was signed by Mr and Mrs Jane, bears two horizontal black lines not seen on the other pages, of the type that can be created when photocopying or faxing a document, while the other page, signed by Mr and Mrs Goard, is much darker than the rest.

Holdings submitted that the footer “AGT AUST FINAL SSA” on the pages signed by Mr and Mrs Jane and Mr and Mrs Goard indicates that this page came from Mr Kerridge. In this regard, Holdings tendered a number of emails from Mr Kerridge attaching different drafts of the Share Sale Agreement which each had the same footer. Given that source for the footer, the appearance of the executed version of the Share Sale Agreement is likely explained by the fact that Mr Kerridge followed, for this agreement, the same process as he had proposed for the Share Subscription Agreement and Share Sale Agreement in August 2016 (see paragraphs 139-140 above): namely, he provided copies of this document to each of the AGT Shareholders, and asked them to sign and send him back just the signature page, on the basis that he would then assemble a complete document with each of the relevant signature pages added to the document signed by Dr Robinson. For example, it appears that the page signed by Mr and Mrs Goard was sent from overseas, since the person who witnessed their signatures is identified as Andrew Nisbet, General Manager, Hilton Hanoi Opera. The dark appearance of the page signed by Mr and Mrs Goard is, having regard to those matters, likely due to the particular scanning device used at that location to send the execution page back to Mr Kerridge.

Further, the fact that the execution pages signed by each of Mr Jane and Dr Robinson bore different footers is of little consequence given that Mr Jane gave unchallenged evidence that he and Dr Robinson both signed the same document, being the Share Sale Agreement bearing the date 28 February 2017. In any case, there is evidence which specifically ties Mr Jane to the version of the agreement which was executed by Dr Robinson and which bears the footer “1955683_1.docx”: namely, Mr Jane has made handwritten amendments to, and initialled, clause 3 of the Share Sale Agreement on a page bearing that exact footer.

Although the Share Sale Agreement is dated 28 February 2017, it appears to have been signed around 2 March 2017. VCFA tendered a number of drafts of the agreement attached to emails from Mr Kerridge. One of these was sent to Mr Jane on 27 February 2017 at 12.09pm. In this version, the date of execution had not been filled in and remained blank. On 2 March 2017 at 6.38am, Mr Jane sent Mr Kerridge an email with a “Couple of points re [the Share Sale Agreement] to tidy up”. One of those points was a query: “What is the date of the agreement?” Shortly afterwards, at 8.55am on the same day, Mr Kerridge sent an amended agreement back to Mr Jane, which now had a date entered: “THIS AGREEMENT is made on 28 February 2017”. This is the latest version of the agreement in evidence. The date on which it was sent appears to match the date of the Employment Agreement that was entered between Mr Jane and Holdings. According to a draft Prospectus, which was in evidence, this Employment Agreement was entered on 2 March 2017. (The draft prospectus appears to have been prepared in around March 2017, since it names as directors of Holdings a number of persons who were only appointed in that month.)

Having regard to those matters, it is likely that the Share Sale Agreement which is dated 28 February 2017 was signed on around 2 March 2017.

Mr Jane was the last witness to be called to give evidence at the hearing. Towards the end of his cross-examination, he was asked by counsel for Holdings a number of questions regarding the nature of the relationship between Mr Kerridge and Dr Robinson, and regarding Mr Kerridge’s conviction for fraud around 20 years prior to the events that are the subject of these proceedings.

In closing address, and in supplementary written submissions dated 24 October 2023 which were provided after the hearing had concluded, Holdings advanced a submission to the following effect:

Counsel for AGT and the AGT Shareholders objected to questions being asked and documents being tendered in relation to these matters, and to the submission being advanced, on the grounds that no such issue was pleaded or particularised.

There is considerable force in this objection. The case run by Holdings and VCFA was that the sum of $1.7m was paid to the AGT Shareholders in circumstances where no Share Sale Agreement was executed, with the result that there was a total failure of consideration and this sum was repayable as money had and received. That is, it was necessary for Holdings to establish, as part of its case, that no such agreement had been entered. In response, the AGT Shareholders pleaded that the signed Share Sale Agreement had been executed on around 28 February 2017, and referred specifically to the copy signed by Dr Robinson, Mr Jane, and the other AGT Shareholders. In its Amended Reply, Holdings “denie[d] that the pleaded Share Sale Agreement is a binding and effective agreement, including in circumstances where it was not duly executed by or on behalf of [Holdings]”.

That is, the only matter specifically raised in the Amended Reply, in respect of the denial that the Share Sale Agreement was binding and effective, was an issue regarding its due execution by or on behalf of Holdings. There was no reference to fraud and no pleading of any of the material facts relied upon in support of the submission now advanced.

No case of fraud was advanced, or referred to, in particulars, or in any of the correspondence between the parties that was in evidence. Nor was any such case advanced in written or oral openings. It was not a case that could be advanced for the first time at the conclusion of the cross-examination of the final witness in the proceedings, and by the tender of documents in closing submissions.

In any event, the submission advanced by Holdings and VCFA is without any sound factual foundation. As set out above, the argument has two main premises.

The first is that, in around April 2015, Mr Kerridge and Dr Robinson were cohabiting, and that this was concealed from the parties when he recommended her as a non-executive director for Holdings. The only evidence relied upon in this regard was a series of ASIC searches. These reveal that, as at 23 July 2012 and 27 September 2017, Dr Robinson lived at a particular address in Mosman; and that, as at 26 March 2021, 20 February 2023 and 20 March 2023, Mr Kerridge lived at the same address. That evidence, which shows that each of two individuals lived, several years apart, at the same address, does not establish that the two were cohabiting at that address at any point in time, let alone in April 2015, when Mr Kerridge recommended Dr Robinson as a non-executive director of Holdings, or in around February 2017, when he is said to have “procured” her signature on the Share Sale Agreement.

The second premise of the submission is that Mr Kerridge has committed fraud in the past, and that this provides a basis to infer that he has “done again what he has done before”. However, the judgment which was tendered in this regard (Law Institute of Victoria Limited v Kerridge [2005] VLPT 5) cannot prove the existence of the facts recorded in the judgment: Evidence Act, s 91; Ainsworth v Burden [2005] NSWCA 174 at [109] per Hunt AJA (Handley and McColl JJA agreeing).

Holdings contended that the prohibition in s 91 of the Evidence Act is subject to the exception in s 92, and that this exception applied. Section 92(2) of the Evidence Act relevantly provides as follows:

That provision can have no application to the proposed use of the evidence of Mr Kerridge’s past convictions, since he is neither a party to the proceedings, nor a person through or under whom any party claims.

Further, insofar as the facts recorded in the judgment were relied upon to prove that Mr Kerridge had a tendency to act in a particular way, then it would be necessary to give reasonable notice of the intention to present such evidence (Evidence Act, s 97(1)(a)), and this was not done. Counsel for Holdings argued that the evidence was not tendered to prove that Mr Kerridge has or had a tendency to act in a particular way, but instead to prove that “Mr Kerridge in fact created the disputed share sale agreement, and so the sheaf of papers in fact are not authentic” (emphasis in original), citing Elomar v R; Hasan v R; Cheikho v R; Cheikho v R; Jamal v R [2014] NSWCCA 303 at [344]-[372] (Bathurst CJ, Hoeben CJ at CL, Simpson J).

In Elomar, the Court described the syllogistic process of tendency reasoning as having the following steps (at [360]):

That is, tendency evidence is “a means of proving, by a process of deduction, that a person acted in a particular way, or had a particular state of mind, on a relevant occasion, when there is no, or inadequate, direct evidence of that conduct or that state of mind on that occasion”: ibid.

Such reasoning is at the heart of the contention which was advanced by Holdings in respect of Mr Kerridge. In written submissions, this was put in terms that the Court should infer that Mr Kerridge has “done again what he has done before”. Similarly, in closing oral address, the submission was in the following terms:

That is, in effect, a submission that the fact that Mr Kerridge has on a previous occasion behaved in a dishonest manner by fabricating documents in a commercial setting provides a basis for inferring that he may have engaged in the same conduct again in the (entirely unrelated) circumstances of this matter.

Even if those matters were able to be overcome, I would not, having regard to s 140 of the Evidence Act and Briginshaw v Briginshaw (1938) 60 CLR 336, infer such a serious matter as fraud and the creation of a false or misleading company record, from the inadequate factual foundation put forward by Holdings. Even assuming that there was a relationship between Mr Kerridge and Dr Robinson, that he had some sway over her, and that he was personally keen for the Share Sale Agreement to be executed (none of which is established on the evidence), Mr Kerridge could have readily achieved that objective by asking Dr Robinson to sign the Share Sale Agreement which had been negotiated with the AGT Shareholders, without any need to “procure” her to sign a single page which he later added to a different document.

The submission also ignores that Mr Jane gave unchallenged evidence that he and Dr Robinson both signed the particular Share Sale Agreement dated 28 February 2017 upon which the AGT Shareholders relied.

For all those reasons, even if the submission were open on the pleadings, it should be rejected.

Holdings submitted that, even if I found that each of Mr Jane and Dr Robinson executed the same version of the Share Sale Agreement, being the version which was dated 28 February 2017 and annexed to Mr Jane’s affidavit (as Mr Jane deposed), nonetheless I should find that the agreement was not duly executed by Holdings.

Section 127(1) of the Corporations Act 2001 (Cth) provides as follows:

As at 28 February 2017, Holdings had three directors: Mr Jane, Dr Robinson and Mr Lambert. In its submissions on this issue, Holdings pointed out that, while Dr Robinson signed above the line for a “Director” of Holdings, Mr Jane (who was a party in his own right) signed the agreement in only one place, alongside his own name, and not also above the line for a “Director” of Holdings, which appeared on the same page.

Section 127(1)(a) of the Corporations Act is satisfied if the document in question is signed by two directors of the company. There is no requirement that each director’s signature appear alongside the name of the company. In Northside Veterinary Property Pty Ltd v Dalmacija Sydney Croatian Club Ltd [2022] NSWSC 589, the contract in question was signed by two persons who were in fact directors of the defendant club, but neither purported to sign in any particular capacity, such as a director. Darke J held (at [62]) that because the contract was signed by two persons who were directors, it was, as a matter of fact, executed in accordance with s 127(1)(a): “That is so even if the document, on its face, does not appear to have been signed in accordance with s 127(1) (see Corporations Act, s 129(5)).”

In Gibbons v Pozzan (2007) 209 FLR 233; [2007] SASC 99 at [30], Duggan J (with whom Gray and White JJ agreed) said that the purpose of s 127 is to move away from certain common law formalities as to the execution of documents and look at substance and intention. Each of Dr Robinson and Mr Jane, as well as each of the other AGT Shareholders, clearly intended, by signing the agreement, that it would become a binding contract between Holdings and the AGT Shareholders. It would frustrate that evident intention, and elevate form over substance, to conclude that the agreement was not in fact duly executed by Holdings merely because Mr Jane signed the agreement in only one space (alongside his printed name), rather than two spaces on the same page (namely, both alongside his name and alongside the name of Holdings).

For those reasons, I find that the Share Sale Agreement was duly executed by Holdings.

In any case, the AGT Shareholders plead not only the due execution of the Share Sale Agreement, but also, in the alternative, that the conduct of Holdings and the AGT Shareholders revealed a mutual assent between the parties to be bound by the terms of the Share Sale Agreement.

Where parties have negotiated the terms of a written agreement, but the agreement has not been duly executed by them, the formation of an agreement may be inferred from the conduct of the parties. The relevant principles were recently summarised by Ward P (Meagher and Gleeson JJA agreeing) in Forte Sydney Construction Pty Ltd v N Moit & Sons (NSW) Pty Ltd [2022] NSWCA 186 at [88]-[97]. Relevantly, those principles include the following:

The signed version of the Share Sale Agreement dated 28 February 2017, like the execution version circulated in August 2016, provided that it was a condition precedent that Mr Jane sign an Employment Agreement with Holdings (cl 2.1(b)), and also provided that Holdings agreed to issue 6,000,000 ordinary class shares to Mr Jane at a deemed issue price of $0.10 per share on the date that he signs that agreement (cl 6A(a)).

Those steps appear to have been taken. This is shown by the fact that, after the IPO project was abandoned, Holdings passed a number of resolutions (which are discussed further below), including that the Employment Agreement between Mr Jane and Holdings be terminated, and that the 6 million shares in Holdings issued to Mr Jane be cancelled.

The fact that Holdings had taken these steps, which it was obliged to take pursuant to the Share Sale Agreement, would convey to an objective bystander that Holdings had agreed to be bound by the terms of the Share Sale Agreement which had been signed by, inter alia, Dr Robinson and Mr Jane.

Further, the payment of the Deposit itself signified an intention to be bound by the terms of the Share Sale Agreement. As set out in paragraph 173 above, the authority by which the payment was authorised stated that Holdings paid the Deposit “in accordance with the share sale agreement between Access Group Training Holdings Limited as purchaser and Access Group Training Pty Ltd (AGT) and James Michael Jane, Judith Anne Jane, John Charles Goard and Suellen Fay Goard”. Mr Jane, who had negotiated the terms of the Share Sale Agreement on behalf of the AGT Shareholders, was aware of the terms of that authority, which he signed on behalf of Holdings. The payment of that money by Holdings, and its acceptance by the AGT Shareholders, constitutes conduct that evinced a mutual assent to be bound by the terms of the Share Sale Agreement, which had been negotiated to an “execution copy” at the time that the payment was made. To adopt the language used by Kirby P in Empirnall Holdings, I find that an objective bystander, examining the facts of the case, would conclude from the course of dealings between the parties that each of Holdings and the AGT Shareholders accepted the terms of the agreement that had been negotiated between them.

On that basis, an agreement would have been entered in respect of the “execution copy” of the Share Sale Agreement which was brought into existence shortly before the Deposit was paid. If I had found that the Share Sale Agreement dated 28 February 2017 was not executed, but the “execution copy” had been entered by the parties through the payment and receipt of the Deposit, the analysis which follows below concerning the operation of clause 5.9(d)(i) and (d)(ii)(2) would not be affected, since those parts of cl 5.9(d) are identical in those two versions of the agreement.

In any case, for the reasons given above, I have concluded that the Share Sale Agreement dated 28 February 2017 was executed by Holdings and the AGT Shareholders. The analysis below proceeds on the footing that the 28 February 2017 agreement was the operative form of the document at the time when the question of the effect and operation of clause 5.9(d) arises.

On 23 April 2018, Mr Stafford sent an email to Mr Jane, Dr Robinson and Mr Lambert, which referred to recent communications and discussions “regarding the apparent discontinuation of the IPO and the resulting fallout”.

Mr Stafford’s email noted that “under the Share Sale Agreement between the AGT [Shareholders] and [Holdings] (SSA) … all conditions precedent (CP’s) had to be met by 30 November 2017”. As noted above, the Sunset Date in the Share Sale Agreement dated 28 February 2017 was 30 June 2017. Mr Stafford’s statement suggests not only that the agreement was understood to be binding, but also that it had been subsequently amended.

Mr Stafford noted that since one of those conditions precedent to the Share Sale Agreement, namely, the listing of Holdings, had not occurred, the parties had the right to terminate the Share Sale Agreement.

Mr Stafford’s email attached a document headed “Position Paper”. It identified the “primary issue” as follows:

The Position Paper stated that the Share Sale Agreement had been signed on 28 February 2017 by Holdings and the AGT Shareholders. It recorded VCFA’s position as being that the “SSA be terminated” and that the shares “to Jim [Jane] issued pursuant to the SSA and his employment agreement with [Holdings] be cancelled”.

In response to this Position Paper, Dr Robinson relied on the terms of the Share Sale Agreement to argue that the Deposit was repayable by the AGT Shareholders to Holdings. On 14 May 2018, she wrote an email to Mr Jane, copied to Ms Cai, Mr Kerridge, Mr Stafford and Mr Doble, stating that:

Ms Cai was of a similar view. On 23 May 2018, she did not express any doubt about whether or not the Share Sale Agreement was binding on Holdings, but instead agreed with Dr Robinson that what needed to be done was “quite simple”: “The agreement is cancelled, the deposit is returned and then all of the debts of [Holdings] are paid and the surplus [is] held for shareholders”.

On 17 July 2018, the directors of Holdings (Mr Jane, Dr Robinson and Ms Cai) signed a circulating resolution. The matters resolved include:

The terms of resolution 3 impliedly acknowledged that the parties had entered into the Share Sale Agreement (here called the “AGT Agreement”), since the resolution proceeded on the basis that the agreement could be, and should be, terminated; that “the process under clause 5.9(d)” of the Share Sale Agreement was binding on the parties; and that the “deposit” of $1.7m was “paid under” the Share Sale Agreement.

There was no evidence of a notice of termination being sent by Holdings to the AGT Shareholders after the date of this resolution. Nonetheless, Mr Jane was plainly aware of the resolution of 17 July 2018, which he signed; and he stated, in his affidavit filed in these proceedings which was read on behalf of all of the AGT Shareholders, that “the circular resolution terminated” the Share Sale Agreement. I have proceeded on that basis.

By the circular resolution of 17 July 2018, Holdings elected “to treat the Deposit as a debt due to [Holdings] by [the AGT Shareholders]” within the meaning of cl 5.9(d). According to cl 5.9(d), and subject to any right of set off, this debt became “repayable within 12 months of the date of termination of this Agreement for failure so to complete”, that is, by 17 July 2019.

Paragraphs (b) and (c) of Resolution 3 were relied on by the AGT Shareholders as establishing that, within the meaning of cl 5.9(d) of the Share Sale Agreement, “there are payments due by [Holdings] …. to … [AGT]” which are to be “offset by the [AGT Shareholders]” against their obligation to repay the Deposit in their Respective Proportions. However, these paragraphs do not establish that there were any such “payments due”. Instead, these paragraphs set out a process whereby AGT would provide Holdings with a list of costs incurred by it for and on behalf of Holdings in respect of the IPO, and then Holdings would “engage AGT about the Costs as soon as practicable to determine and agree upon the Costs to be off set against the deposit”. That is, there was to be a process of negotiation leading to an agreement about the quantum of the costs that could properly be set off against the Deposit. There is no evidence that this process was undertaken, or what the results of the process were, and in particular there is no evidence of any agreement between AGT and Holdings that any particular sum of money was “due” to AGT in respect of those costs.

Paragraph (d) of Resolution 3 refers to the termination of the Employment Agreement with Mr Jane, which has been discussed above.

On 4 November 2018, a further circulating resolution of Holdings was signed by each of its shareholders (namely, by Mr Jane, and by Mr Lambert and Mr Poulos on behalf of VCFA), and by each of its directors (Dr Robinson, Mr Jane and Ms Cai). The resolutions made included the following:

These resolutions, passed by all of Holdings’ shareholders and directors, again impliedly acknowledged that Holdings entered, and was bound by, the terms of the Share Sale Agreement with AGT; that the sums totalling $1.7m paid to the AGT Shareholders in August 2016 represent “the deposit paid thereunder”; and that “the process under cl 5.9(d)” of the Share Sale Agreement is binding on the parties.

Each of Mr Poulos and Ms Cai gave evidence that they signed this resolution because Mr Lambert told them to do so. For his part, Mr Lambert deposed that, although he was not convinced that the 28 February 2017 agreement had been duly executed or was binding, he saw that the resolutions involved the return of the $1.7m and “made a decision to accept them and move forward”.

For the reasons set out above, I have found that Holdings and the AGT Shareholders entered into the Share Sale Agreement dated 28 February 2017.

It follows that Holdings’ claim for money had and received must fail, as it was premised on the contention that no such agreement was executed, with the result that there was a total failure of consideration in respect of the Deposit. Instead, and consistently with the position adopted in the resolutions of Holdings in 2018, the repayment of the Deposit is governed by the terms of clause 5.9(d) of the Share Sale Agreement.

Holdings did not seek in the 2020 Proceeding any amount said to be due pursuant to clause 5.9(d) of that agreement. However, the AGT Shareholders accepted that, in circumstances where the claim for money had and received failed because I upheld their contention that the Share Sale Agreement had been entered and clause 5.9(d) governed the repayment of the Deposit, it was open to me to determine whether any amount was in fact owing to Holdings under clause 5.9(d), after determining the extent of any set off available under that clause (which was put in issue by Holdings’ Reply).

One oddity of the drafting of clause 5.9(d) is that it provides that in the event that Completion does not occur for any reason:

That is, the clause appears to provide, inconsistently, for a right on the part of the AGT Shareholders to “retain” the Deposit, and an obligation on the part of the same persons to repay the Deposit “as a debt due” to Holdings.

The apparent inconsistency is explained by the balance of cl 5.9(d)(ii)(2) and the circumstances known to the parties at the time when the Share Sale Agreement was entered in around early March 2017.

Clause 5.9(d)(ii)(2) provided that the obligation to repay the Deposit as a debt was subject to a right on the part of the AGT Shareholders to “offset” against that debt any “payments due by [Holdings] or a Related Party of it to [an AGT Shareholder] or to [AGT]”. It was common ground that the reference to an “offset” in cl 5.9(d) invoked the legal notion of set off which, in general terms, means the setting of money cross-claims against each other to produce a balance. The reference to “payments due” must be a reference to payments due as at the time that the Deposit itself fell due for repayment. As noted above, this was to be 12 months after the date of termination. As at the time that the Share Sale Agreement was entered, the Sunset Date was 30 June 2017, and therefore any obligation to repay the Deposit as a debt would likely fall due around 12 months after that Sunset Date, that is, around 30 June 2018 (or later).

At the time that the Share Sale Agreement was entered, it was known to the parties that VCFA had an obligation to repay AGT the amount of $1.3m which had been advanced to VCFA, together with interest accruing at 10% per annum. On the interest figures provided in the First Deed, the amount that would be owing as at 30 June 2018 (presuming no repayment before then) was the sum of the advances ($1,300,035), plus the amount of interest as at 30 June 2016 ($105,982.75), plus two years’, or 730 days’, interest after that point in time at the daily rate of $385.21 ($281,203,30), resulting in a total amount due as at 30 June 2018 of some $1.687m.

Accordingly, it was known by all parties that, unless VCFA chose to repay the advances before 30 June 2018, there would be, at the time that the obligation on the part of the AGT Shareholders to repay the Deposit as a debt arose, a liability on the part of VCFA to repay AGT an amount almost equivalent to the amount of the Deposit.

Against the background of those matters, it becomes apparent why cl 5.9(d) provided that the AGT Shareholders were entitled to retain the Deposit, but that Holdings could elect to require the repayment of the Deposit. The parties must have understood that the effect of such an election on Holdings’ part would be that the AGT Shareholders would exercise their right of set off so as to reduce, and likely eliminate altogether, the obligation to pay any amount in respect of the Deposit. In that sense, if Holdings exercised its election, the AGT Shareholders would “retain” the Deposit, but the consequence would be that VCFA’s debt to AGT would be reduced by the amount of the Deposit. Alternatively, if Holdings elected not to require repayment of the Deposit, the AGT Shareholders would retain the Deposit, and VCFA would remain indebted to AGT, but VCFA would be entitled to 14.16% of the shares then on issue in AGT (cl 5.9(d)(ii)(1)).

As set out at paragraphs 230 and 236 above, Holdings elected, by the resolutions of its shareholders (including VCFA) and its directors (including the two VCFA nominees, Mr Poulos and Ms Cai), to require repayment of the Deposit as a debt, in the knowledge that this would in turn give rise to the set-off right under cl 5.9(d)(ii)(2).

In order to consider the extent of set off under cl 5.9(d), it is necessary to consider any “payments due” by either a related party of Holdings (relevantly, VCFA) to AGT, or by Holdings itself to AGT, as at the date when the repayment of the Deposit fell due.

In their defences filed in the 2019 Proceeding, each of the AGT Shareholders pleaded (paragraph 58) that:

Clause 5.9(d) allows the AGT Shareholders to set off, against their obligation to repay the Deposit in their respective proportions, any “payments due by … a Related Party of [Holdings] … to [AGT]”.

The Share Sale Agreement defines a “Related Party” as meaning:

The relevant point of time to consider set off is when the Deposit falls due for repayment pursuant to clause 5.9(d), which is the date 12 months after the date of termination of the Share Sale Agreement (namely, 17 July 2019).

In November 2018, each of Mr Jane and Dr Robinson ceased to be a director of Holdings. So, by the time the deposit fell due for repayment in July 2019, there is no doubt that Holdings was controlled by VCFA, and VCFA was therefore a related party of Holdings: Corporations Act, ss 50AA and 228(1).

It follows that, according to its terms, clause 5.9(d) operates so that the AGT Shareholders can set off, against their obligation to repay the Deposit to Holdings, any debt owed by VCFA to AGT.

It is open for parties to a contract to agree not only to set off debts owing by each to the other, but also debts owing by or to related entities of either party: see, for example, Sinochem International Oil (London) Co Ltd v Mobil Sales and Supply Corp (Sinochem International Oil Co Ltd, third party) [2000] 1 All ER (Comm) 474 at [30]; [2000] 1 Lloyd’s Rep 339; R Derham, Derham on the Law of Set-Off (4th ed, 2010) at [16.02]. In Sinochem, Mance LJ commented that “a straightforward wish to provide for set-off of affiliate indebtedness corresponds with obvious realities of the corporate groupings through which international organisations … commonly conduct their business”.

Set off by agreement does not depend on any statutory foundation and is in law equivalent to actual payment on each side: Re Keith Bray Pty Ltd (1991) 5 ACSR 450 at 451 per McLelland J; In the matter of Integrated Growth Solutions Pty Ltd [2017] NSWSC 368 at [25] per Gleeson JA.

In Federal Commissioner of Taxation v Steeves Agnew & Co (Vic) Pty Ltd (1951) 82 CLR 408 at 420, Dixon J observed that: “If cross-liabilities in sums certain of equal amounts immediately payable are mutually extinguished by an agreed set-off, that amounts to payment for most common-law and statutory purposes.” His Honour quoted (at 420-421) with approval the following observations by Mellish LJ in Harmony and Montague Tin and Copper Mining Company (Spargo’s Case) (1873) LR 8 Ch 407 at 414:

Similarly, in Commissioner of Stamp Duties (NSW) v Perpetual Trustee Co Ltd (Saxton’s Case) (1929) 43 CLR 247; [1929] HCA 27, Isaacs J observed (at 269-270) that:

Although AGT was not a party to the Share Sale Agreement, its only directors and shareholders are the four AGT Shareholders (Mr and Mrs Jane, and Mr and Mrs Goard). Having regard to entry by the AGT Shareholders into the Share Sale Agreement, which provided for a set off in respect of the debt due by VCFA to AGT, and the reliance by the AGT Shareholders in response to Holdings’ claim on the set-off in clause 5.9(d) in proceedings which were heard together with AGT’s claim against VCFA (and in which AGT and the AGT Shareholders were represented by the same solicitors and counsel), I find that AGT has, by its directors and shareholders, unequivocally communicated that it would accept the application of the set-off in clause 5.9(d) in satisfaction of the debt which was due by VCFA to AGT.

AGT and the AGT Shareholders opened their case in these proceedings on the basis that:

That is, AGT for its part accepted that clause 5.9(d)(ii)(2) operated so that its debt could be satisfied by application of the set off mechanism. This was confirmed in the closing address for AGT and the AGT Shareholders:

Similarly, Holdings and VCFA accepted that, if clause 5.9(d)(ii) was binding, then the clause operated so that any debt of VCFA to AGT could be set off against the obligation of the AGT Shareholders to repay the Deposit to Holdings. Counsel for Holdings and VCFA put the position as follows in opening address:

In circumstances where all the relevant parties are before me, where there is no suggestion that any of them is insolvent, and where they agree that clause 5.9(d), if binding, would operate so as to permit the debt from VCFA to AGT to be set off against the debt of the AGT Shareholders to Holdings, I do not need to consider the issue of the precise mechanism by which the clause would be binding as against a non-party such as AGT, in the event the clause’s application was disputed. Instead, I proceed on the basis that the clause should be interpreted and applied in the way that all of the parties agree.

I have found that, as at 17 July 2019, VCFA was indebted to AGT in respect of the Principal Advances of $1,300,035 and interest thereon at the agreed rate of 10% per annum. Using the figures in Schedule 2 to the First Deed, the interest due at 30 June 2016 was $105,982.75, with interest accruing at a daily rate of $385.21 thereafter. The period from 1 July 2016 to 17 July 2019 (inclusive) is a period of 1,112 days. Applying the agreed daily interest rate produces a figure of $428,353.52 for the interest owing for this period. This produces a total indebtedness as at 17 July 2019 of $1,834,371.27.

This amount was “due” as at 17 July 2019 by either of two mechanisms. First, if the terms of the First Deed were binding on VCFA, then that deed provided that the whole of the outstanding principal, together with accrued and unpaid interest thereon, would be repaid by 30 September 2017 (cl 3.4.1). Secondly, if that deed was not binding on VCFA, then the loan having been made without a specified date for repayment would have been repayable on demand. A loan of money payable on request creates an immediate debt: Young v Queensland Trustees Ltd (1956) 99 CLR 560 at 566 per Dixon CJ, McTiernan and Taylor JJ; [1956] HCA 51.

Because the amount payable by VCFA to AGT in respect of the loan exceeded the amount of the Deposit as at the date when the Deposit fell due for repayment under cl 5.9(d), namely 17 July 2019, the result is that, after the application of the contractual set-off in clause 5.9(d), no amount is payable by the AGT Shareholders to Holdings in respect of the Deposit.

It follows that, in the 2019 Proceeding, the claim made by Holdings for repayment of the Deposit must fail.

The application of the contractual set-off mechanism also has consequences for the 2020 Proceeding. As a result of the set-off being applied, AGT is taken to have received, as at 17 July 2019, a payment of $1.7m in respect of the balance of the outstanding principal and interest balance due from VCFA as at that date (being $1,834,371.27). The result is that the amount due by VCFA to AGT was reduced to $134,371.27 as at 17 July 2019.

Accordingly, in the 2020 Proceeding, AGT is entitled to repayment of the amount of $134,371.27, together with interest at the agreed rate of 10% on that amount from 17 July 2019 to the date of judgment.

In their defences, each of the AGT Shareholders pleads that prior to 17 July 2018, it was agreed between AGT and Holdings that costs of the IPO which had been incurred by AGT would be set off against the Deposit; and that on 17 July 2018, Holdings “passed a circular resolution giving effect to the agreement”.

However, the resolution of 17 July 2018 does not acknowledge any pre-existing agreement, but instead commits Holdings to undertake discussions with AGT about costs, with a view to reaching an agreement about what is owing (see paragraphs 230 and 234 above).

The reason that the resolution was worded in this way appears to be explained by the terms of email correspondence between the directors of Holdings prior to the resolution being passed. In particular, on 20 May 2018, Dr Robinson sent an email to the other directors (Mr Jane and Ms Cai), as well as Mr Stafford and Mr Kerridge, expressing the view that the problem with the proposed set off of IPO expenses incurred by Holdings against the amount owing by the AGT Shareholders to Holdings was that Mr Jane was “on both sides of the fence”. She stated that: “The debts, whatever they are, need to be examined and source documents provided so that they can be approved in a professional manner”. There is no evidence that such a process was undertaken.

Instead, Ms Pearce deposed that in June 2018, Mr Jane instructed her to “generate invoices for the IPO expenses that [Holdings] owes to AGT”. Ms Pearce generated two invoices on 25 June 2018, numbers 2273 and 2274. Despite being generated on that date, the invoices were dated, respectively, 30 June 2016 and 30 June 2017, and were stated to be due for payment on the dates they bore. Each invoice was addressed by AGT to Holdings. There was no reference on either invoice to any agreement pursuant to which they were issued. Instead, invoice no. 2273 simply stated that the amount of $113,652 was for consulting and legal fees, without any statement of the subject matter of the relevant work. Likewise, invoice no. 2274 for the amount of $628,193.34 referred to consultancy, legal, accounting and audit fees, as well as directors fees, filing fees and general expenses. The “reference” given on each of these invoices was in identical terms: “expenses paid on behalf”. Ms Pearce did not explain how she arrived at the figures in these invoices, or how she determined that these amounts had been paid by AGT on behalf of Holdings, or were due by Holdings to AGT.

Ms Pearce deposed that she subsequently generated two further invoices. On 17 September 2019, she generated invoice no. 2292 for the sum of $219,164.38, which was addressed to Holdings and dated 30 August 2018, with a due date of 29 September 2018. The description on this invoice was “IPO expenses to be reimbursed”, with no indication of what those expenses were for, or to whom they had been paid. On 11 December 2019, Ms Pearce generated invoice no. 2294 for the sum of $24,020.04, which was addressed to Holdings and dated 1 July 2019, with a due date of 31 July 2019. The invoice was described as being for “IPO Expenses Paid – Eakin McCaffrey Cox” for July, August and November 2018, and “Directors Fees – Paula Robinson (21/11/2018)”. Again, Ms Pearce did not give any evidence explaining how she arrived at the figures in those invoices, or why each was backdated.

The AGT Shareholders claim that they are entitled to set off, pursuant to clause 5.9(d), the total amount of these four invoices, being $985,029.76 plus interest (presumably from the “due date” specified on the invoices, even though this was a date some months or years before the invoice was actually issued). The fact that invoices were issued does not mean that there was any liability to pay the amounts in the invoices, to which the terms of clause 5.9(d) are capable of applying. Although, according to Ms Pearce, Mr Jane told her that Holdings owed “IPO expenses” to AGT, neither Ms Pearce nor Mr Jane referred in their affidavits to any written document evidencing any such agreement. Nor, as noted above, did the circular resolution of July 2018 provide evidence of an agreement to repay any amount of expenses having been reached prior to the resolution. Nor is there any evidence that, after receipt of the invoices, Holdings acknowledged any liability to pay them.

The AGT Shareholders rely on a conversation which, according to Mr Jane, occurred “in 2016” between himself and Mr Goard. It is not clear whether this conversation occurred at a time when Mr Goard was a director of Holdings (a position that he ceased to hold in mid-August 2016). The conversation was in the following terms:

This evidence was not challenged. However, it does not establish a binding agreement between Holdings and AGT for Holdings to reimburse AGT for all costs incurred by AGT in relation to the IPO. It is not clear whether Mr Jane and Mr Goard were at this time intending to speak for each of AGT and Holdings, so as to give rise to a binding agreement between those entities; or were instead discussing, solely from the perspective of AGT, how matters should proceed.

There were in evidence a number of invoices that were addressed to AGT by various service providers, which were said by AGT to substantiate the claim for IPO expenses. However, there was no affidavit evidence explaining that each of the relevant invoices received by AGT from third parties related to the IPO, or explaining the relationship between these documents and the invoices which AGT subsequently issued to Holdings, in circumstances where the latter set of invoices are relied upon to establish and quantify the set off claim.

Given those matters, the AGT Shareholders have not established that the total amount of the invoices generated by Ms Pearce ($985,029.76) represents, within the meaning of clause 5.9(d), “payments due by [Holdings] … to … AGT” on the date that was 12 months after the termination of the Share Sale Agreement (that is, due as at 17 July 2019). Accordingly, I am not satisfied that this amount is able to be set off against the AGT Shareholders’ liability, pursuant to clause 5.9(d), to repay the Deposit of $1.7m in their Respective Proportions.

However, since I have found that the debt of VCFA to AGT may be set off against the AGT Shareholders’ obligation to repay the Deposit under cl 5.9(d), and the former is greater than the latter, the failure of the AGT Shareholders to establish any amount owing by Holdings to AGT does not affect the outcome under that clause.

I have found that AGT loaned funds totalling some $1.3m to VCFA, and that no amount has been repaid by VCFA in respect of those advances, or in respect of interest which is accruing at the rate of 10% per annum on the loan balance.

I have found that a Share Sale Agreement was entered between Holdings and the AGT Shareholders. It follows that Holdings has not established that the state of affairs contemplated as the basis or reason for the payment of the $1.7m Deposit failed to materialise, and therefore has not established that there was a total failure of consideration. Accordingly, Holdings’ claim for money had and received must fail.

Further, I have found that the question of repayment of the Deposit was governed by the terms of the Share Sale Agreement, and in particular by cl 5.9(d) of that agreement. Because Holdings terminated the Share Sale Agreement on 17 July 2018, and elected to seek repayment of the Deposit, the AGT Shareholders were, pursuant to that clause, obliged to pay that amount to Holdings by 17 July 2019, but were entitled to set off against that obligation any amount owing by VCFA to AGT in respect of the loan funds and interest accruing thereon. Because the sum owing by VCFA to AGT as at 17 July 2019 exceeded the amount of the Deposit, the effect of the set off being applied pursuant to clause 5.9(d) is that the AGT Shareholders have fully satisfied their obligations under that clause.

At the same time, the effect of the set off is to reduce the amount of the debt due by VCFA to AGT as at 17 July 2019 to $134,371.27. It follows that, in the 2020 Proceeding, AGT is entitled to judgment in an amount representing only the balance left after the application of the contractual set off, together with interest accruing at the rate of 10% per annum on that remaining balance from 18 July 2019 to the date of judgment.

The parties should bring in short minutes of order to give effect to these reasons for judgment, which deal with interest to the date of judgment.

I will provide the parties with an opportunity to confer regarding the appropriate costs orders in the light of these reasons, and to make submissions, with any supporting evidence, in the event that agreement cannot be reached on the proposed form of costs order in each proceeding. Similarly, I will hear any dispute about the interest calculations in the event that these cannot be agreed.

For those reasons, I make the following orders in each of the 2019 Proceeding and the 2020 Proceeding.