Tok v Rashazar

1. [1]

   PAYNE JA: I agree with Stern JA.

2. [2]

   KIRK JA: I agree with Stern JA.

3. [3]

   STERN JA: On 22 January 2016 Attila Tok, the first appellant, entered into a “contract for the sale of business” with Rashazar Pty Ltd (Rashazar), the third respondent (the share sale agreement). The relevant business was that of Fresh Cut Australia Pty Ltd (Fresh Cut), the second appellant. The price was $275,000, expressed to be “for 30 shares in [Fresh Cut]”. The purchase price was paid in full in 2016, in two tranches, and Rashazar also paid stamp duty on the share sale agreement of $10,110.45 ($2,520.45 of which was interest), but no shares in Fresh Cut were ever transferred to Rashazar. This was not discovered by Hassan Rashazar (Mr Rashazar), the sole director and shareholder of Rashazar, or by any of the other respondents, for at least some years (the evidence does not disclose precisely when they became aware of this but it was clearly at least after the end of 2019). In the interim, Mr Rashazar and his son Omid Rashazar (whom I will refer to, for convenience, as Omid) had made cash payments of $84,147 in total to Mr Tok to cover what were said to be expenses of Fresh Cut or capital gains tax on the share sale agreement (the cash payments) and had made payments of $16,965.48 in total to the Australian Taxation Office (ATO) to discharge superannuation guarantee liabilities of Fresh Cut (the ATO payments).

4. [4]

   In proceedings commenced in 2022, Mr Rashazar, Omid and Rashazar sought damages for breach of contract and/or restitution against Mr Tok and Fresh Cut. The primary judge awarded damages for breach of contract of $285,110.45 (reflecting the purchase price and stamp duty paid by Rashazar) against Mr Tok. The primary judge found that Mr Tok had failed to transfer his 30 shares in Fresh Cut to Rashazar and that this was a breach of a fundamental term, and a repudiation of, the share sale agreement in respect of which there had been a total failure of consideration: Rashazar v Tok [2024] NSWDC 443 at [99], [102]. For completeness, the primary judge also considered Rashazar’s claim for restitution of the purchase price under the share sale agreement. Her Honour found that Fresh Cut had been unjustly enriched in the sum of $100,000 and Mr Tok had been unjustly enriched in the amount of $175,000. Each was liable to make restitution to Rashazar in the amount by which they had been unjustly enriched.

5. [5]

   The primary judge also found that Mr Tok was unjustly enriched, and was liable to make restitution to Rashazar, in the sum of $84,147 by reason of the cash payments and that Fresh Cut was unjustly enriched, and was liable to make restitution to Rashazar, in the sum of $16,965.48 by reason of the ATO payments.

6. [6]

   Mr Tok and Fresh Cut (together, the appellants) appeal against those findings. They ask this Court to set aside the awards of damages based upon both breach of contract and restitution and, in effect, to dismiss the claims made against Mr Tok and Fresh Cut.

7. [7]

   For the reasons set out below the appeal should be dismissed.

The grounds of appeal

1. [8]

   By ground one, the appellants contend that the primary judge erred in assessing damages for breach of contract by reference to the Rashazar’s wasted expenditure.

2. [9]

   By ground two, the appellants contend that Rashazar was not entitled to restitution of the amount paid under the share sale agreement on account of mistake of fact in circumstances where the primary judge neither set aside the share sale agreement nor declared it void. The respondents concede that the primary judge erred in this regard. I will thus not consider ground two further. The respondents contend, however, that the primary judge’s conclusion as to restitution should nonetheless be upheld on the ground, set out at [13] below, advanced by way of notice of contention.

3. [10]

   By ground three, the appellants challenge the primary judge’s awards of restitution for the cash payments and the ATO payments. As to these, they contend:

4. [11]

   Notwithstanding that ground 3(b) was limited to only one of the ATO payments, the appellants’ submissions were advanced as if both ATO payments were challenged. Notwithstanding that no amendment application was made, given that the respondents’ submissions were also premised on the basis that ground three challenged both ATO payments, I have proceeded on the basis that both ATO payments were challenged.

5. [12]

   To the extent that the appellants seek to challenge credit-based factual findings, they accept that these must be shown to be “glaringly improbable”: Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [29] and confirmed in Lee v Lee (2019) 266 CLR 129; [2019] HCA 28 at [55].

The notice of contention

1. [13]

   By notice of contention served on 3 April 2025, the respondents contend:

2. [14]

   The respondents sought leave to rely upon the notice of contention by a notice of motion filed 8 April 2025. Leave was opposed, largely on the basis of delay, which was said to require time-consuming and substantive consideration by the appellants’ legal team, diverting them from their preparation for the appeal. Notwithstanding this contention, the appellants made comprehensive and well-researched written submissions responding to the notice of contention in their written reply submissions filed on 15 April 2025. They also advanced detailed oral submissions on the only notice of contention ground ultimately pressed. Beyond having to respond in a compressed period of time, the appellants did not suggest that the late service of the notice of contention caused any prejudice. The appellants also contended that the respondents had not contended before the primary judge that there was a total failure of consideration and, had they done so, it could have affected the evidence. That contention should be rejected. As set out at [38] below, a total failure of consideration was alleged in the pleadings and it was also raised in the appellants’ opening and closing submissions before the primary judge.

3. [15]

   Having regard to s 56 of the Civil Procedure Act 2005 (NSW), leave should be granted to the respondents to rely upon the notice of contention and the appellants should pay the respondents’ costs of the notice of motion. In this way, the appeal will be resolved on the basis of the real issues in the proceedings.

Background

1. [16]

   The primary judge’s factual conclusions are, in the main, not challenged. I have thus set out the factual background, so far as relevant to this appeal, by reference to the primary judge’s findings supplemented by reference to the documentary evidence, indicating where a finding is challenged on appeal. I have also included reference, by way of background, to the primary judge’s adverse credit findings against Mr Tok.

2. [17]

   Mr Rashazar, along with his family, came to Australia from Iran in August 2013. From around 2015, Mr Rashazar was pursuing a Business Investment Visa, which provided a pathway to permanent residency, and was seeking to purchase an interest in a business in Sydney for this purpose. Mr Rashazar was assisted in this process by Omid due to Omid’s proficiency in English. It was critical to the success of the visa application that the business relied upon in the application increase its turnover over a period of at least two years.

3. [18]

   The share sale agreement provided, on its first page, that a price of $275,000 was payable “for 30 shares in [Fresh Cut]”. In cl 12, it was said that Fresh Cut had 100 shares owned by Mr Tok. The agreement was thus for Rashazar to purchase 30% of the shares in Fresh Cut.

4. [19]

   The share sale agreement was structured so that an initial tranche of $100,000 was to be paid upon completion, which was to occur within 28 days of the contract date. A second tranche of $175,000 was due to be paid within two years of the completion date: cl 11. Pursuant to cl 13:

5. [20]

   It is implicit in cl 13 that 30 shares in Fresh Cut had been transferred to Rashazar. Otherwise, it would make no sense for Rashazar to sign a transfer of shares document providing for the shares to be transferred back to Mr Tok. In fact, contrary to what was provided in cl 13, no transfer of shares document was attached to the share sale agreement.

6. [21]

   On 22 January 2016, Mr Rashazar and Omid arranged for payment of the initial tranche of $100,000 to an account (of Fresh Cut), the details of which had been given to Omid by Mr Tok. Then, in November 2016, Mr Tok threatened to “cancel the contract” unless he received the second tranche payment, notwithstanding that it was not due until early 2018. In response, on 24 November 2016, Mr Rashazar and Omid paid the second tranche of $175,000 to Fresh Cut’s account.

7. [22]

   The primary judge rejected Mr Tok’s evidence that the second payment was initiated by Mr Rashazar and Omid and that this amount was paid from “a bag of cash” and then that the cash was then repaid by Mr Tok back to Mr Rashazar and Omid. This evidence was directly contradicted by a document produced by the Commonwealth Bank, which showed that the amount was transferred by card and almost immediately transferred from Fresh Cut’s account to an account held by Mr Tok and his wife. On this issue the primary judge found that Mr Tok had “lied under oath” and that this seriously undermined his credibility as a witness. Her Honour found that Mr Tok’s credibility was further undermined by his evasive and unresponsive answers. By contrast, her Honour found that Mr Rashazar, Omid and Mr Rashazar’s other son Navid sought to impart a truthful version of evidence, and she preferred their evidence where it contradicted that of Mr Tok.

8. [23]

   As to the transfer of the 30 shares in Fresh Cut, Mr Tok’s evidence was that they were transferred to Rashazar on 22 January 2016. In support of this, he relied upon an Australian Securities and Investments Commission (ASIC) Form 484 relating to Fresh Cut lodged on 28 January 2016. On its face, this recorded a change to the register of members, described as a decrease, by 30 shares, in the shares held by Mr Tok and an increase, by 30 shares, in those held by Rashazar. However, as was effectively accepted by Mr Tok in his oral evidence, no interest held by Rashazar was ever recorded on the register of members of Fresh Cut which was produced in response to a Notice to Produce. According to that document, at all times since its inception on 9 October 2013, Mr Tok held 34 shares in Fresh Cut and two other shareholders are recorded as holding 33 shares each.

9. [24]

   The primary judge, having extracted s 1274B of the Corporations Act 2001 (Cth), which provides that a document that purports to have been prepared by ASIC is admissible as prima facie evidence of the matters stated, found that there was abundant evidence to contradict this prima facie evidence. Relevantly, the respondents were never given a transfer form or share certificate, there was no memorandum or resolution of the sole director of Fresh Cut in relation to the purported transfer, Mr Rashazar was never paid any profits or dividends from Fresh Cut nor was he provided with any relevant financial information about Fresh Cut’s operations and the register of members of Fresh Cut recorded no change to the membership details since the incorporation of Fresh Cut in 2013 and has never recorded an interest held by Rashazar. The primary judge thus rejected Mr Tok’s evidence that the 30 shares in Fresh Cut were transferred to Rashazar. The appellants challenge this finding. I deal with this at [72] below.

10. [25]

    Mr Tok’s evidence was that Rashazar transferred the 30 shares in Fresh Cut back to him following a meeting in 2020. In support of this, he exhibited a purported share transfer from Rashazar to him, apparently signed by Mr Rashazar, dated 30 June 2018. The primary judge found that this meeting did not take place and was not satisfied that the share transfer was a genuine document or that Mr Rashazar had signed it.

11. [26]

    On 15 June 2016, Omid met with Altug Sanli, Mr Tok and Fresh Cut’s accountant. The primary judge found that Mr Sanli must have been taking instructions from Mr Tok, being the sole director of Fresh Cut. Omid said in his affidavit that:

12. [27]

    The primary judge found that Omid, in the company of Navid, made an initial payment of $9,500 and a further payment of $7,272 in cash to Mr Tok in about April to May 2016.

13. [28]

    On 26 October 2016, Omid again met with Mr Sanli, who told him that Mr Rashazar was required to pay capital gains tax in relation to the share sale agreement. Mr Sanli said that $24,500 was to be paid by June 2017 and $42,875 by June 2018. The primary judge found that Omid, once again in the company of Navid, made payments totalling $24,500 between October 2016 and June 2017 and $42,875 between June 2017 and July 2018, and accepted Omid’s explanation as to the source of these funds. The primary judge found that these payments were made “under the mistaken belief, engendered by Mr Tok directly and through his accountant, Mr Sanli, that [Rashazar] was liable to make the payments to Mr Tok”.

14. [29]

    In ground three the appellants challenge the findings at [27]-[28] above.

15. [30]

    Omid’s affidavit evidence was that in September 2019, Mr Sanli told Omid that Fresh Cut was required to pay superannuation to the ATO and that Rashazar was required to pay a share of that superannuation, in the sum of $2,308.96. Omid arranged for this payment to be made to the ATO on 4 September 2019. Then, on 16 November 2019, Mr Sanli told Omid that Fresh Cut owed a further $14,656.52 in superannuation liabilities and that Mr Rashazar, on behalf of Rashazar as shareholder, was required to pay this full amount as Mr Tok was refusing to pay. Omid arranged for this payment to be made to the ATO on 17 November 2019. The primary judge found that Rashazar paid the $14,656.52 “in the circumstances deposed to by Omid”. I would also infer that her Honour accepted Omid’s evidence as to the first of the ATO payments. Her Honour found that both of the ATO payments were made by Rashazar under the mistaken belief that it was a shareholder of Fresh Cut and obliged to make the payment.

The primary judge’s findings on liability and damages

1. [31]

   The primary judge found that the share sale agreement was an enforceable contract, that Mr Tok was in breach of the share sale agreement as he did not transfer the 30 shares to Rashazar and that Rashazar was entitled to damages against Mr Tok for breach of contract. As to the assessment of damages, the primary judge found:

2. [32]

   In these circumstances, and “given the total failure of consideration”, the primary judge held that the appropriate measure of Rashazar’s damages for the breach of contract was the expenditure reasonably incurred by it pursuant to the share sale agreement.

3. [33]

   As to the respondents’ alternative claim for restitution on the basis of unjust enrichment, the primary judge found that the initial payment of $100,000 was made by Rashazar under a mistake of fact, being that “30 shares in Fresh Cut would be transferred to [Rashazar] by Mr Tok in exchange for the payment”. Her Honour found that neither Rashazar, nor anyone associated with the company, received any benefit in exchange for this payment and Fresh Cut was unjustly enriched and liable to make restitution of $100,000 to Rashazar.

4. [34]

   Her Honour found that the second payment of $175,000 was also made under the false belief that Mr Tok had transferred the 30 shares to Rashazar. In light of the evidence that the funds were transferred to an account in the joint names of Mr Tok and his wife (see [21] above) such that Fresh Cut was a mere conduit, Mr Tok was found to have been unjustly enriched and was liable to make restitution of the $175,000 to Rashazar.

5. [35]

   The primary judge found that Fresh Cut received the benefit of the ATO payments and was unjustly enriched, and was liable to make restitution to Rashazar, in the amount of $16,965.48.

6. [36]

   As to the cash payments, her Honour held that Mr Tok was unjustly enriched, and was liable to make restitution to Rashazar, in the amount of $84,147.

Termination of the share sale agreement

1. [37]

   An important predicate of the appellants’ contentions on appeal was that the share sale agreement had never been terminated by Rashazar. That foundational contention should, however, be rejected.

2. [38]

   As is well known, the issue and service of a summons or pleadings may involve an election which affects the parties’ rights: Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 at 570 (Brennan J); [1982] HCA 29; Ryder v Frohlich [2004] NSWCA 472 at [89] (McColl JA, Hodgson and Ipp JJA agreeing). Here, by their Further Amended Statement of Claim (FASOC) at [16], the respondents pleaded that by failing to transfer 30 shares in Fresh Cut, Mr Tok “repudiated the Share Sale Agreement”. They pleaded further that there had been a “failure of consideration or basis with respect to the payment of $275,000 [under the share sale agreement]” by reason of which Mr Tok or Fresh Cut had been unjustly enriched and was liable to make restitution to Rashazar. Whilst acceptance of the repudiatory breach was not explicitly pleaded, it is tolerably clear that the basis of this pleading was that Rashazar elected to treat the share sale agreement as terminated having regard to the repudiatory breach by Mr Tok. Rashazar was, in this pleading, making it clear that they wanted their money back because, as Kirk JA put it during oral submissions, “the deal is dead”: Tcpt, 16 April 2025, p 6(26-33). If not communicated earlier (and there is no evidence before the Court of pre-action correspondence or communications), by service of this pleading, the respondents communicated their acceptance of Mr Tok’s repudiatory breach of the share sale agreement.

Ground one

1. [39]

   The appellants’ key contention under ground one is that Rashazar’s damages for breach of the share sale agreement should not have been assessed by reference to the amount of lost expenditure in this case. They contend that, as the respondents did not seek to prove the value of the 30 shares in Fresh Cut that were to be transferred under the share sale agreement, Rashazar should have been awarded only nominal damages for the breach of contract. For this reason, they contend the primary judge erred in giving judgment for Rashazar against Mr Tok and Fresh Cut in the sum of $285,110.45 (being the purchase price paid under the share sale agreement plus the stamp duty paid by Rashazar).

2. [40]

   Whilst the appellants accept that damages for breach of contract can in some cases be assessed by reference to wasted expenditure, relying upon the judgment of the plurality in Cessnock City Council v 123259932 Pty Ltd [2024] HCA 17; (2024) 98 ALJR 719 (“Cessnock”), they say that this is limited to cases where there is some factor which precludes the court assessing the position a plaintiff would likely have been in had the contract been performed. They submit that this is not such a case, as the respondents did not prove that there was relevant uncertainty in proving the value of the 30 shares in Fresh Cut or that such uncertainty was caused by the appellants’ breach of contract. They say that, properly analysed, it is simply the failure by the respondents to adduce evidence that precludes the Court assessing damages by reference to the value of the 30 shares in Fresh Cut. They say that that is neither a form of uncertainty that can fall within the ambit of the facilitation principle as described by the plurality in Cessnock nor a difficulty which flows from Mr Tok’s breach of contract.

3. [41]

   The evidence before the primary judge included a letter dated 19 September 2022 sent on behalf of Mr Rashazar to his former immigration solicitors (alleging negligence on their behalf). This identifies that ostensibly regular financial statements of Fresh Cut prepared by Mr Sanli’s firm, Ideal Accounting & Taxation Pty Ltd for at least the financial year ending 23 January 2018, had been sought for the purpose of an application by Mr Rahsazar for a Business Skills (Residence) (class DF) visa, but had proved to be unreliable. According to that letter, the reason given by the case officer at the Department of Home Affairs for refusing Mr Rashazar’s visa application was that:

4. [42]

   In this letter, Mr Rashazar’s solicitors alleged that Mr Rashazar had been a victim of a scam directed by Mr Tok and other associates including the “accounting firm” and that the “alleged false or misleading information was a part of the Financial Statements prepared by ‘Ideal Accounting & Taxation Ltd.’”.

5. [43]

   Omid was cross-examined about this and explained that Ideal Accounting & Taxation Pty Ltd was “the only accountant we had”. He also said that:

6. [44]

   Two things flow from this evidence considered in the context of the primary judge’s adverse credit findings against Mr Tok. First, whilst Mr Tok exhibited financial statements of Fresh Cut for the years ending 23 January 2017 and 23 January 2018 to his affidavit (and a profit and loss statement for the year ended 30 June 2015 was annexed to the share sale agreement), no weight could properly be put either by the Court, or by the respondents, on these documents. Second, that there was evidence before the primary judge that, prior to issuing these proceedings, the respondents had been thwarted in their efforts to obtain financial information from Mr Tok to put to their own accountants, were aware that financial information produced by Mr Sanli was unreliable and considered that they were the victims of a scam perpetrated by Mr Tok and his accountants.

7. [45]

   Against this background, it is entirely understandable that the primary judge found at J[102] that neither she nor the respondents had any information about the value of Fresh Cut or its profitability.

8. [46]

   The respondents’ claim for loss and damage suffered by reason of Mr Tok’s breach of contract was particularised as being the $275,000 paid by Rashazar under the share sale agreement together with the stamp duty: FASOC at [17]. Mr Tok’s response was a bare denial. No attempt was made by the respondents to value the shares to be transferred. Nor did the appellants seek to establish that the 30 shares in Fresh Cut that were to be transferred to Rashazar under the share sale agreement were in fact worth less than the wasted expenditure claimed.

9. [47]

   As to loss, the respondents’ oral closing submission before the primary judge was:

10. [48]

    In their written closing submissions, the respondents contended that the relevant measure of loss should be selected by reference to the nature of the contract, including whether it was entered into with a view to direct or immediate profit, citing as support the Chief Justice’s judgment in Cessnock at [33]. In that paragraph, the Chief Justice explained that Mason CJ and Dawson J in Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 85; [1991] HCA 54 (“Amann”) had held that a plaintiff did not have an unconstrained choice whether to frame its claim as one for wasted expenditure and that how a plaintiff’s claim for damages is framed would be expected to turn on the nature of the claim and “on the plaintiff’s appraisal of the practical exigencies of proving and quantifying categories of damage that might potentially be available to be claimed”.

11. [49]

    For their part, the appellants contended in their oral and written closing submissions that her Honour should find that the 30 shares in Fresh Cut were in fact transferred to Rashazar, that there was no breach of contract and that the respondents’ claim was ultimately a rescission claim dressed up as a claim for damages or restitution because the respondents wanted to get their money back because their visa application failed. They contended that the share sale agreement was not repudiated by Mr Tok and that there was no total failure of consideration. They did not address the issue of whether damages for breach of contract could be assessed by reference to wasted expenditure.

12. [50]

    An important predicate of the primary judge’s reasoning at J[102] (set out at [31] above) was that the value and profitability of Rashazar on the counterfactual that it had become a 30% shareholder of Fresh Cut were relevant to the assessment of damages for breach of contract. Implicit in this was a finding that events after the date when the obligation of Mr Tok to transfer the shares crystallised would be relevant to the assessment of damages. The correctness of this finding was implicitly raised in ground one, as the appellants contended that they could have put evidence before the Court as to the value of the 30 shares in Fresh Cut as at the date of breach.

13. [51]

    In considering this contention, the starting point is necessarily “[t]he rule of the common law … that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed”: Robinson v Harman (1848) 1 Exch 850 at 855 (Parke B); Tabcorp Holdings Ltd v Bowen investments Pty Ltd (2009) 236 CLR 272; [2009] HCA 8 (“Tabcorp”) at [13] (French CJ, Gummow, Heydon, Crennan and Kiefel JJ). As to when damages are assessed, ordinarily, as was held in Johnson v Perez (1988) 166 CLR 351 at 367; [1988] HCA 64, damages for breach of contract are assessed as at the date of the breach, however:

14. [52]

    Wenham v Ella (1972) 127 CLR 454; [1972] HCA 43 (“Wenham”), cited in the extract set out above, involved a breach of contractual obligation of the appellant to transfer shares which would have given the respondent a 6/20 undivided share in a profit-making property. The High Court, upholding the trial judge’s award, held that the respondent’s compensable loss included the loss of “the product of the interest in the land” from the date of the failure to transfer to the date of judgment: at 461 (Barwick CJ; see also Menzies J at 463, Walsh J at 464-465; Gibbs J at 472-4; Stephen J at 474). Menzies J observed that the “rules which operate satisfactorily in cases where purchasers have not paid money, cannot be applied automatically to cases where purchasers have paid money for what has not been delivered to them”: at 464 (see also Barwick CJ at 463 and Gibbs J at 473). Walsh J at 466 (cited with approval by Steward J in Elisha v Vision Australia Ltd [2024] HCA 50; (2024) 99 ALJR 171 at [82]) described an error in the appellant’s contention as:

15. [53]

    In a passage recently cited with approval by Ward P (Meagher JA and Griffiths AJA agreeing) in Khattar v Khattar [2023] NSWCA 133 at [215], Gibbs J observed at 473-4 that:

16. [54]

    To similar effect, the link between the date at which damages for breach of contract are assessed and the duty to mitigate was explained by Oliver J, in Radford v de Froberville [1977] 1 WLR 1262 at [1285] (referred to by the High Court in Tabcorp and cited with approval in Renown Corporation Pty Ltd v SEMF Pty Ltd (2022) 110 NSWLR 246; [2022] NSWCA 233 at [11] (Brereton JA, Meagher and Mitchelmore JJA agreeing)):

17. [55]

    Consistent with this, Wenham was distinguished in CH Leahman Investments Pty Ltd v Tuesday Enterprises Pty Ltd [2024] WASCA 142 (“CH Leahman”) at [274] (Buss P, Vaughan JA, Lundberg J) on the basis that in Wenham the purchaser had paid the full purchase consideration whereas in CH Leahman “[a]t all times the appellant continued to be in a position to deploy the resources that it would otherwise have had to commit to the completion of the purchase of the Rexwells’ share”.

18. [56]

    Further, in the passage set out at [53] above, Gibbs J recognised that events after the date of breach may be relevant to the assessment of damages even when assessed as at the date of breach. To similar effect, in Hungerfords v Walker (1989) 171 CLR 125 at 163; [1989] HCA 8, Dawson J held:

19. [57]

    Having regard to this authority, the primary judge did not err in finding events after the breach of contract were relevant to the assessment of damages for breach given that Rashazar paid in full for the 30 shares in Fresh Cut in 2016 and none of the respondents were aware of the breach of contract until some years after it occurred.

20. [58]

    A second critical premise of the primary judge’s conclusion at J[102] is that this was an appropriate case in which to assess damages for breach of contract by reference to wasted expenditure. The primary judge’s key finding in this regard was predicated both upon the lack of information available to the respondents and the Court and upon her Honour’s finding that the question of what might have happened to Fresh Cut if Rashazar had been a 30% shareholder was imponderable.

21. [59]

    The plurality judgment of Edelman, Steward, Gleeson and Beech-Jones JJ in Cessnock at [61] explained when it is that damages for breach of contract can properly be calculated by reference to wasted expenditure:

22. [60]

    At [139], the plurality further explained:

23. [61]

    Having regard to these principles, the appellants’ contention that the primary judge erred in assessing damages for breach of the share sale agreement by reference to wasted expenditure should be rejected. The primary judge correctly identified that integers relevant to the assessment of damages premised upon Mr Tok’s compliance with the share sale agreement were “imponderable”. As I explain below, that plainly flowed from Mr Tok’s breach. That, together with the obvious difficulty in obtaining reliable financial information about the financial performance of Fresh Cut, justified the primary judge facilitating the respondents’ burden of proof by assuming (or inferring) in their favour that, had the contract been performed, they would have recovered the expenditure they reasonably incurred in anticipation of, or reliance on, the performance of the contract.

24. [62]

    This is so notwithstanding that, as the appellants point out, there was no evidence before the primary judge of the respondents making requests for financial information specifically for the purpose of Fresh Cut being valued. First, as already set out, there was evidence before the primary judge of the respondents seeking financial information and that information either being refused or, when provided, being seriously inaccurate. In these circumstances, it was apparent that there would be difficulties in obtaining reliable financial information. Second, in any event, such information would not have overcome the imponderables which the primary judge identified.

25. [63]

    To the extent that the primary judge implicitly found that Fresh Cut’s financial position might have been different had Rashazar been a 30% shareholder, the appellants do not challenge this finding and I am in any event satisfied that her Honour did not err. The primary judge found at J[94] that Mr Tok said that Mr Rashazar would have a management role, but that this did not occur. In fact, neither Mr Rashazar, nor Omid, had any substantive involvement in the financial management of Fresh Cut. Omid’s evidence was that he asked Mr Tok to permit Mr Rashazar to get involved in the management of the company but that Mr Tok did not agree to Mr Rashazar becoming a second director of Fresh Cut and Mr Rashazar was only allowed to be involved in management for “some little stuff”.

26. [64]

    Mr Rashazar’s evidence as to this in cross-examination was:

27. [65]

    It is impossible to know, however, what would have happened if Mr Tok had in fact transferred the shares as agreed and had treated the share sale transaction as a genuine commercial transaction, not as the sham that he pleaded it was: Defence to FASOC at [6]. Instead, as was apparent from his evidence, Mr Tok effectively ignored the share sale agreement.

28. [66]

    It follows that ground one must be rejected.

The notice of contention ground

1. [67]

   Whilst my conclusion as to ground one makes it unnecessary to consider the notice of contention ground, given that it was fully argued and consistent with Kuru v State of New South Wales (2008) 236 CLR 1; [2008] HCA 26 at [12] and Boensch v Pascoe (2019) 268 CLR 593; [2019] HCA 49 at [8], I will deal with this ground.

2. [68]

   The key question under the notice of contention ground is whether the primary judge’s finding of restitutionary liability for the purchase price under the share sale agreement was supported by her Honour’s finding that there was a total failure of consideration under that agreement. The respondents contend that it is. They say that the primary judge’s approach accords with the established principle that a restitutionary remedy is available where there is a total failure of consideration under a contract even if the contract is not rescinded ab initio.

3. [69]

   The appellants, however, contend that restitutionary relief is unavailable here for a number of reasons. First, they say, restitutionary relief is unavailable because the share sale agreement has not been rescinded or terminated. My finding that the share sale agreement was terminated answers this contention. To the extent that the appellants contended that restitutionary relief is unavailable unless the contract which provides context for the restitutionary claim has been rescinded ab initio, they did not identify any case that supported that contention. Moreover, it is inconsistent with one of the texts they rely upon, I Jackman, The Varieties of Restitution (2nd ed, 2017, The Federation Press) (Varieties of Restitution) at 90:

4. [70]

   Nor does the only judicial observation that the appellants sought to rely upon in support of this contention, the judgment of McCallum JA in Miraki v Griffith (2021) 106 NSWLR 280; [2021] NSWCA 263 (“Miraki”), assist the appellants. In Miraki, McCallum JA was considering whether a claim in restitution could “[circumvent] the protective effect of [the Minors (Property and Contracts) Act 1970 (NSW)] on an otherwise valid contract”: at [88]. In the course of considering this question, her Honour considered what she described as “Mr Jackman’s argument”, taken from Varieties of Restitution, at 98-99, that Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516; [2001] HCA 68 should have been (but was not) decided on the basis that the “cards lay where they had been placed by a binding contract”. Ultimately, in Miraki McCallum JA did not decide the point, Bell P held that it was unnecessary to decide whether the “so-called ‘subsidiarity doctrine’, to the effect that contractual allocation of risk cannot be subverted by alleging a cause of action stemming from unjust enrichment covering the same conduct, may have arisen”: at [35], and Payne JA declined to decide the issue.

5. [71]

   Second, the appellants contend that there was not in any event a total failure of consideration here. They say that the respondents obtained an equitable right to have the 30 shares in Fresh Cut transferred to them and thus received something by way of consideration for their payment of $275,000 under the share sale agreement. That contention must be rejected. The share sale agreement provided, as set out on its first page, that a price of $275,000 was to be paid for 30 shares in Fresh Cut. The consideration provided for involved the transfer of those shares. That was not done. Nothing was done by way of part-performance of the contract, cf Baltic Shipping Co v Dillon (1993) 176 CLR 344 at 350; [1993] HCA 4 (“Baltic Shipping”), relied upon by the appellants. As the primary judge found, this was a total failure to give the consideration provided for under the contract.

6. [72]

   Third, the appellants contend that the primary judge erred in finding that the 30 shares were not transferred to Rashazar as promised. In this regard, they rely upon the Form 484 and the prima facie position under s 1274B of the Corporations Act (discussed above at [23]-[24] above) and contend that there was no evidence to the contrary. This contention fails at the first hurdle. The Form 484 on its face stated that a change had been made to Fresh Cut’s register of members, but the register of members was before the Court and proved that, in fact, no such change had been made. That was evidence of the most cogent character to displace the prima facie position under s 1274B of the Corporations Act. The other matters relied upon by the primary judge in her Honour’s judgment at J[58] only serve to reinforce that conclusion.

7. [73]

   Fourth, the appellants contend that the respondents had to elect whether to sue for damages for breach of contract or for restitutionary relief. The difficulty with this contention (that may be correct as a matter of principle) is that the appellants did not contend below that restitutionary relief was unavailable because the respondents had to elect between inconsistent remedies. This was so notwithstanding that, in the FASOC, the respondents clearly sought relief by way of damages for breach of contract (at [17]), “alternatively” restitutionary relief on the basis of a total failure of consideration (at [18] and [20]-[22]), and in the further alternative restitutionary relief on the basis of mistake (at [19]-[22]). Had the appellants contended that the respondents had to make an election, they may well have done so. In these circumstances, the appellants should be precluded from advancing this contention for the first time on appeal: Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 438 (Latham CJ, Williams and Fullagar JJ); [1950] HCA 35; Water Board v Moustakas (1988) 180 CLR 491 at 498 (Mason CJ, Wilson, Brennan and Dawson JJ); [1988] HCA 12.

8. [74]

   Fifth, the appellants contend that restitutionary relief is unavailable in this case by reason of the so called “subsidiarity principle”, which they say precludes such relief being granted where the parties’ relationship was governed by a valid contract. They rely upon Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221; [1987] HCA 5 (“Pavey”), Nikolic v Oladaily Pty Ltd [2007] NSWCA 252 (“Nikolic”), and Coshott v Lenin [2007] NSWCA 153 (“Coshott”), together with Varieties of Restitution in support of this contention. As is apparent from the analysis below, however, none of the cases or academic writing relied upon supports their contentions as to the breadth or effect of the subsidiarity principle.

9. [75]

   Pavey involved a claim by a builder on a quantum meruit for work done and materials supplied in circumstances where the contract between the parties was unenforceable under s 45 of the Builders Licensing Act 1971 (NSW) as it was not in writing. The High Court found that a claim on a quantum meruit was available. Deane J at 256, in a passage relied upon by the appellants here, explained that such relief would only be available where there was no applicable genuine agreement or where such an agreement was frustrated, avoided or unenforceable. It is clear, however, that his Honour was here addressing whether there was agreement “governing the claimant’s right to compensation.” That statement is readily explicable given that relief by way of quantum meruit would have subverted any agreement by the parties as to price.

10. [76]

    In Coshott, a solicitor sought to recover costs due to him in circumstances where his client had been paid a sum by way of settlement which was inclusive of costs. Having found that there must have been a retainer which covered the solicitor’s entitlement to have his costs paid, Mason P, with whom Spigelman CJ and Campbell JA agreed, said:

11. [77]

    Nikolic was another a claim for the cost of supplying services in a construction context. At [101] Mason P said that:

12. [78]

    I have already dealt with Varieties of Restitution.

13. [79]

    Consistent with these authorities, the subsidiarity principle goes no further than precluding the grant of a restitutionary remedy in circumstances where to do so would undermine a relevant allocation of risk under a contract. So understood, the principle does not preclude a claim for restitution simply because the plaintiff could also have pursued a claim for damages for breach of contract. This is explained by Gageler J in Mann v Paterson Construction Pty Ltd (2019) 267 CLR 560; [2019] HCA 32 (“Mann”) at [83]:

14. [80]

    At [84], his Honour rejected the notion that “overlapping remedies in contract and in restitution are in some way anomalous”, observing that the “potential for a cause of action in restitution to overlap with a cause of action in damages for breach of contract was recognised in [Baltic Shipping at 355]”. In this regard, it should be observed that in Baltic Shipping, at 355-356, Mason CJ held that the action to recover money paid on a total failure of consideration is “available only if the contract has been discharged, either for breach or following frustration”, noting that “discharge” here “operates only prospectively, that is, it is not equivalent to rescission ab initio”.

15. [81]

    In Mann, Nettle, Gordon and Edelman JJ held that the contractor was entitled to maintain an action to recover restitution as upon a quantum meruit for services performed where a wrongful repudiation of the contract had the effect of preventing the contractor from becoming entitled to receive remuneration under the contract for services already rendered: at [170]. Thus, a restitutionary remedy was granted notwithstanding that it was sought against the background of a valid contract.

16. [82]

    Here, the restitutionary claim predicated upon a total failure of consideration did not undermine the parties’ allocation of risk under the share sale agreement. The subsidiarity principle did not preclude that claim succeeding.

17. [83]

    Had it been necessary to do so, I would thus have upheld the respondents’ notice of contention ground.

Ground three of the appeal

1. [84]

   As set out at [10] above, ground three of the appeal challenges the primary judge’s findings as to the cash payments and the ATO payments.

2. [85]

   By ground 3(a), the appellants contend that the primary judge erred in finding that Rashazar adopted a mistaken belief or that the payments were made pursuant to a mistaken belief. The appellants contend that Omid’s evidence when being cross-examined indicated that the various payments were in fact made because it was necessary for immigration purposes that the payments be made. Two passages of evidence during Omid’s cross-examination are relied upon. First:

3. [86]

   I would reject the appellants’ contention that this suggests that the payments were not made by reason of, or pursuant to, a mistaken belief that Rashazar was a shareholder in Fresh Cut. Indeed, Rashazar’s shareholding in Fresh Cut was the very reason why it would be necessary for the purpose of Mr Rashazar’s visa application to provide financial support, that was said to be necessary, to Fresh Cut. It is somewhat absurd to suggest that Omid would have arranged for payments to be made to the benefit of Fresh Cut if he had been aware that no shares in Fresh Cut had in fact been transferred to Rashazar.

4. [87]

   Second:

5. [88]

   Omid also gave oral evidence that Mr Tok had “[kept] telling us, if I call immigration ‘they will kick you guys, you guys out from Australia and then you guys get no permanent residency.’”

6. [89]

   All of this evidence is consistent with Omid believing that Rashazar was a shareholder in Fresh Cut and this being the overarching reason why he arranged for the cash payments and the ATO payments. Whilst the visa application, and the involvement of Mr Rashazar’s immigration solicitors, may have provided some of the context for these payments, and it appears that Mr Tok made threats that he would contact immigration authorities if the payments were not made, there is no error in the primary judge’s conclusion that they were made on the basis of a mistaken belief that Rashazar was a shareholder in Fresh Cut.

7. [90]

   Moreover, contrary to the appellants’ contention, this evidence does not undermine Omid’s affidavit evidence that he made the cash payments and the ATO payments after he was requested to do so by Mr Sanli, on instructions from Mr Tok. None of his oral evidence was inconsistent with that key evidence.

8. [91]

   By ground 3(b), the appellants contend that the primary judge erred in upholding Rashazar’s restitutionary claim as regards the ATO payments without having made any finding that Mr Tok requested that Rashazar make the payments. As I have already found, it may be inferred that the primary judge accepted Omid’s evidence that Mr Sanli told him that Rashazar was liable to pay the first of the ATO payments. The primary judge expressly accepted Omid’s evidence that Mr Sanli told him that the ATO payments had to be made by Mr Rashazar. The respondents also relied at trial upon emails from Sunny Bui, described as a tax accountant at Ideal Accounting & Taxation Pty Ltd (Mr Sanli’s firm), attaching or including “Super payment instructions” for the ATO payment of (at least) the $14,656.52 and asking him to “let me know when you have done the payment so I will check the ATO system”.

9. [92]

   It is clear from this that this is not a case where Omid (acting on behalf of Rashazar) took it into his mind to provide a benefit to Fresh Cut: cf Progressive Pod Properties Pty Ltd v A & M Green Investments Pty Ltd [2012] NSWCA 225. Rather, the money was paid on the basis of a mistaken belief that Rashazar was a shareholder of Fresh Cut after Omid was told by Mr Sanli that, because Rashazar was a shareholder in Fresh Cut, Mr Rashazar had to make the payment. Her Honour did not err in granting this restitutionary relief.

10. [93]

    By ground 3(c), the appellants challenge the primary judge’s finding that the cash payments were made. The appellants say that this finding was glaringly improbable in circumstances where there was no objective evidence of the payments and they rely upon what they say were inconsistencies as between the evidence of Omid and Navid as to this.

11. [94]

    Both Omid and Navid addressed the cash payments in their affidavit evidence. Omid’s evidence was that he paid the first cash payment of $16,772 in June 2016, in one tranche of $9,500 and a second tranche of $7,272. He said that he made the further cash payments of $24,500 and $42,875 in multiple tranches, and that Navid was present on each occasion.

12. [95]

    Navid’s affidavit evidence was that in June 2016 he went with Omid when Omid gave Mr Tok $9,500 in cash. Then, in about August 2016, he went with Omid and Omid gave Mr Tok $7,272 in cash. He said that from October 2016, for about two years, he and Omid kept going back to see Mr Tok to make cash payments. They did that about 18 or 19 times and on each occasion he saw Omid give cash to Mr Tok. He said that between June 2017 and July 2018 the precise amount that Omid gave Mr Tok was $42,875 and that Omid “had the figures with us”.

13. [96]

    When asked in cross-examination where the $9,500 in cash had come from, Navid said “we were working and then we [were] making money from Iran as well”, although he later said, “[t]hat one is like – I think that was from was saving money” and that he did not know where the money came from but his brother knew where it came from. As to the $7,272, he said that it was “[j]ust my brother’s money”. When first asked where the $24,500 came from, he said “[y]eah we were working”, but when asked if it came from him, he said “no”. He later said he thought it was Omid’s money but that “I was working” as well, but when asked whether any of it was his money he said “[y]eah together our money, with my money as well” although he did not know how much of it he paid. As for the $42,875, he said that he thought that was the total amount, and that some of it came from his account as he thought he remembered that that was 2018 when he was working.

14. [97]

    Omid was also asked in cross-examination about these payments. As to the payments of $9,500 and $7,272, he said that they borrowed some from a family friend (later described as cousins) and some was paid by him and his brother working in Mr Tok’s kebab shop for cash. As for the payments of $24,500 and $42,875, Omid said that he and his brother “we push out more work, we get more cash and he pays for it” and that the work was at the New Star Kebab (Mr Tok’s kebab shop).

15. [98]

    As the appellants contend, there is some inconsistency as to whether Navid contributed to the payment totalling $16,772, and Navid’s evidence as to the payment totalling $16,772 was a little confused before he said that Omid would know where the money came from. Beyond that the evidence is largely consistent that the money came from Omid and Navid working. The inconsistencies or elements of confusion do not go to the core of the evidence. Rather, as the primary judge found, the evidence is consistent with both Navid and Omid doing the best they could to give honest evidence. It must be borne in mind that both were being asked about events that occurred many years earlier, in circumstances where they plainly had not kept any written records of the cash payments or how they sourced the money for them.

16. [99]

    Overall, I am not satisfied that her Honour’s credibility based factual findings as to the cash payments are glaringly improbable. Far from it. Her Honour heard Omid and Navid give evidence and clearly believed their accounts. The fact that they did not make any written record of the payments does not make it implausible that the payments were made. It is clear that Omid and Navid did not consider there was any need to record the payments and the primary judge accepted their evidence, which must have included Omid’s evidence that the reason why he made no record of the payments was because he “was assured by Mr Tok that, he is recording to his black book and we trusted him”.

17. [100]

    It follows that ground three must be rejected.

Conclusion

1. [101]

   The appeal should be dismissed.

2. [102]

   The orders I propose are:

   1. (1)

      Leave is granted to the respondents to file the notice of contention.

   2. (2)

      Notice of contention reflecting the one ground pressed at the hearing on 16 April 2025 to be filed with the Court by 4 pm on 8 May 2025.

   3. (3)

      Appeal dismissed.

   4. (4)

      Appellants to pay the respondents’ costs of the appeal and of the notice of motion filed on 8 April 2025.