Simpson v Donnybrook Properties Pty Ltd [2010] NSWCA 229 (9 September 2010)

Last Updated: 9 September 2010

NEW SOUTH WALES COURT OF APPEAL

CITATION:
Simpson v Donnybrook Properties Pty Ltd [2010] NSWCA 229


FILE NUMBER(S):
2006/256929

HEARING DATE(S):
11 August 2010

JUDGMENT DATE:
9 September 2010

PARTIES:
Gregory Lane Simpson (Appellant/ Cross Respondent)
Donnybrook Properties Pty Ltd (First Respondent/First Cross Appellant)
William Diarmid Slater (Second Respondent/Second Cross Appellant)

JUDGMENT OF:
Hodgson JA Macfarlan JA Young JA

LOWER COURT JURISDICTION:
Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S):
SC 3014/06

LOWER COURT JUDICIAL OFFICER:
Rein J

LOWER COURT DATE OF DECISION:
11 December 2009

LOWER COURT MEDIUM NEUTRAL CITATION:
Mathas v Slater; Donnybrook Properties Pty Ltd v Simpson [2009] NSWSC 1397

COUNSEL:
D F Jackson QC and J A C Potts (Appellant/Cross Respondent)
G C Lindsay SC and A J Paterson (Respondents/Cross Appellants)

SOLICITORS:
Eakin McCaffery Cox (Appellant/Cross Respondent)
Bellantonio & Rees (Respondents/Cross Appellants)

CATCHWORDS:
Contract- Loan agreement- whether appellant personally liable to repay loan- whether personal guarantee. Equitable Compensation- interest- date of calculation- non-application of limitation period from date of payment- whether consistency required that the interest be calculated from the later date of the plaintiff's discovery of its loss. Equity- Fiduciary duties- whether appellant accountant undertook to act in the interests of the respondents as their investment advisor at the relevant time- appellant made investment suggestions or advice relating to a transaction he was involved in- relationship of friendship- primary judge erred in inferring provision of investment advice. Equity- Defences- limitation of actions- Limitation Act 1969- whether against conscience and unjust to apply limitation period by analogy calculated from date of investment. Statutory Interpretation- Real Estate and Business Agents Act 1978 (WA) ss 4, 60- whether appellant was carrying on a "business" in respect of a real estate transaction- isolated one off deal relating to two parcels of land not "carrying on a business" within s 4- whether s 60 disentitles appellant from receiving "any commission, reward, or other valuable consideration in respect of his services"- unlicensed appellant without appointment in writing signed by respondents.

LEGISLATION CITED:
Civil Liability Act 2002, s 5D
Limitation Act 1969
Real Estate and Business Agents Act 1978 (WA), ss 4, 60

CATEGORY:
Principal judgment

CASES CITED:
ASIC v Citigroup Global Markets Australia Pty Limited (No 4) [2007] FCA 963; 160 FCR 35
Brickenden v London Loan & Savings Co [1934] 3 DLR 465 (PC)
Daly v Sydney Stock Exchange [1986] HCA 25; 160 CLR 371
Farrell v Bannister (1952) 52 SR (NSW) 73
Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; 156 CLR 41
Huat v Rintag Pty Ltd [2000] ANZ Conv Rep 2
Pavan v Ratnam (1996) 23 ACSR 214
Pilmer v Duke Group Ltd [2001] HCA 31; 207 CLR 165
Re Griffin; Ex parte Board of Trade (1890) 60 LJQB 235
Suttor v Gundowda Pty Ltd [1950] HCA 35; 81 CLR 418
Townsend v Roussety & Co (WA) Pty Ltd [2007] WASCA 40; 33 WAR 321
White v Illawarra Mutual Building Society Ltd [2002] NSWCA 164

TEXTS CITED:


DECISION:
(1) Appeal allowed.
(2) Orders 1 and 5 made by Rein J on 15 December 2009 be set aside.
(3) Order that the plaintiff's claim against the first defendant be dismissed.
(4) Order that the cross appeal be dismissed.
(5) Order that the plaintiff/first cross defendant and the second cross defendant pay the first defendant's/cross claimant's costs below.
(6) Order that the respondents/cross appellants pay the appellant's/cross respondent's costs of the appeal and the cross appeal.
(7) Order that, if eligible, the respondents have a certificate under the Suitors' Fund Act 1951 in respect of the costs of the appeal.



JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

2006/256929

HODGSON JA

MACFARLAN JA

YOUNG JA

Thursday 9 September 2010

SIMPSON v DONNYBROOK PROPERTIES PTY LTD

Headnote

The proceedings concerned disputes between on the one hand William Slater and a company which he controls Donnybrook Properties Pty Ltd (“Donnybrook”), the respondents/cross appellants, and on the other hand Gregory Simpson, the appellant/cross respondent, and a company he controls GLS Properties Pty Ltd (“GLSP”) (a party at trial but not on appeal). Messrs Slater and Simpson had been friends and Mr Simpson, a chartered accountant, had organised the incorporation of Donnybrook and complied its financial statements. Mr Simpson claimed that in 2002 Mr Slater sought his aid in selling Lots 15 and 16 of a West Australian property named “Sweetwater” with the promise of a 3% commission.

On 11 June 1999 Donnybrook advanced $750,000 to GLSP pursuant to two oral agreements between the Slaters on behalf of Donnybrook, and Mr Simpson either on his own behalf (appellant’s case) or on behalf of GLSP (respondents' case). First, GLSP had loaned $400,000 at a 12.5% interest rate to Tilquin Pty Ltd, a company controlled by a friend and business associate of Mr Simpson, and Donnybrook agreed to loan GLSP (the appellant’s case) or Mr Simpson (the respondents’ case) the same sum at the same rate. Secondly, $350,000 was intended for an investment relating to a development project in Mona Vale. The project was being undertaken by Stanley Gardens Pty Ltd (“SGPL”) in which GLSP held a 50% share. On the appellant’s case GLSP was entitled to a 50% profit share and Mr Simpson’s brother was to undertake the building work on the project. The appellant claimed that the $350,000 investment sum was advanced in order to obtain Donnybrook a 50% share in the net profits made by GLSP in the Mona Vale project. The respondents claimed that Mr Simpson promised there would be profits and the return of the investment sums. In fact, SGPL made no profit, and GLSP was unable to meet the alleged liabilities under the loan or investment.

At trial, Rein J relevantly held, first, that GLSP was indebted to Donnybrook for the loan sums, but that Mr Simpson was not liable as GLSP's guarantor or as the true recipient of the loan. Secondly, on the basis of twelve matters (some post-dating June 1999) his Honour found a relationship of reliance between the respondents and the appellant such that Mr Simpson owed fiduciary duties as an investment advisor to the Slaters regarding their decision to invest in the Mona Vale project. Rein J held that Mr Simpson breached those duties by involving the Slaters in a risky investment in which he had a personal interest without providing appropriate advice concerning the risks that the Slaters would lose their money; GLSP's lack of security for sums advanced to SGPL; and the absence of written agreements or proper documentation. He also considered that Mr Simpson breached his duties by failing to demonstrate that the sums were used for their investment purpose. Thus, Mr Simpson was liable to pay Donnybrook the investment sums. However, Rein J rejected the respondent’s contention of a promise to obtain an interest in land, but held that the agreement was for half of GLSP’s profits. Thirdly, his Honour upheld Mr Simpson's claim entitlement to a 3% commission on the sale of Sweetwater.

On appeal, Mr Simpson argued that his liability for breach of fiduciary duty was not pleaded and was only put before the court in closing submissions in reply to which the appellants had no right of reply. Additionally, there was no fiduciary relationship and no evidence that the Slater’s loss was caused by Mr Simpson’s breach. Rather, Mr Simpson was asked as a friend for investment ideas and assisted, but had not assumed the role of investment advisor as at 11 June 1999. The matters occurring substantially later in time were insufficiently probative to prove the contrary. The appellant also argued that the primary judge had erred in disregarding a limitation period on the investment sums and that interest should only have been awarded from 2004. Mr Slater and Donnybrook cross-appealed that Mr Simpson should be found personally liable for the loan, and that Real Estate and Business Agents Act 1978 (WA) (“REBA”), s 60 ought to have prevented the Mr Simpson’s claim for commission. Both sides argued that they ought to receive costs at first instance if their respective appeals succeeded.

The appeal raised six issues:

(1) whether Mr Simpson acted in an advisory capacity such that he owed the respondents fiduciary duties;

(2) whether Mr Simpson’s alleged breach caused the respondents’ loss;

(3) whether liability based on breach of fiduciary duty had been properly pleaded or should have been permitted;

(4) whether the limitation period and interest calculation should be approached from the date in 2004 at which Donnybrook knew it would not recover its capital given the repayment offers, rather than the date of alleged breach as pleaded;

(5) whether Mr Simpson was personally liable to repay the loan;

(6) whether Mr Simpson was a “real estate agent”, carrying on a “business” as such under REBA, ss 4, 60 and thus precluded from receiving commission.

The Court Held (Young JA, Hogdson and Macfarlan JJA agreeing):

(1) As to whether Mr Simpson owed the respondent fiduciary duties: a person described as an “investment advisor” is not necessarily a fiduciary. The existence of fiduciary duties will depend on the circumstances of the case. As a matter of inference, the matters relied on by the primary judge to show that Mr Simpson was an investment advisor who was undertaking to act in the interests of the Slaters in the $350,000 investment transaction were insufficient to reach that conclusion. Accordingly, there was no justification for Mr Simpson owed fiduciary duties as an investment advisor.

Pilmer v Duke Group Ltd [2001] HCA 31; 207 CLR 165, applied; Daly v Sydney Stock Exchange [1986] HCA 25; 160 CLR 371, distinguished; ASIC v Citigroup Global Markets Australia Pty Limited (No 4) [2007] FCA 963; 160 FCR 35; Pavan v Ratnam (1996) 23 ACSR 214; Townsend v Roussety & Co (WA) Pty Ltd [2007] WASCA 40; 33 WAR 321, referred to.

(2) As to whether Mr Simpson’s alleged breach caused the loss: obiter, the onus was on the Slaters, not the alleged fiduciary, to prove that had there been full disclosure they would not have entered into the transaction. There were sufficient surrounding facts and circumstances to permit the primary judge to draw an inference that the respondents loss’ had been caused by the breaches as he had determined existed.

White v Illawarra Mutual Building Society Ltd [2002] NSWCA 164, applied; Brickenden v London Loan & Savings Co [1934] 3 DLR 465 (PC), distinguished.

(3) As to whether a case based on fiduciary duty was properly pleaded or should have been permitted:

Young JA (Hodgson, agreeing): the plaintiffs/respondents’ fresh case at trial based on breach of fiduciary duty should not have been permitted where it only appeared in the closing submissions in reply after which the defendants/appellant had no right of reply. Although the fresh case was hinted at in opening submission and cross-examination, the appellant was not clearly made aware of it.

Suttor v Gundowda Pty Ltd [1950] HCA 35; 81 CLR 418, applied.

Macfarlan JA, dissenting: the primary judge was entitled to proceed upon the basis that Donnybrook ought be permitted to raise the case of breach of fiduciary duty. Although undesirable conduct, the submissions of Donnybrook in reply clearly articulated the case before the primary judge, and no attempt was made by Mr Simpson to have the matter re-listed for the purpose of taking objection to them.

(4) As to the limitation period and the calculation of interest: obiter, consistency required that where the primary judge had exercised a discretion not to apply the Limitation Act 1969 by analogy because the appellant had offered to repay the investment sum four years after the contested event, that the same approach should be taken to the question of which date interest should be calculated from.

(5) As to whether Mr Simpson was personally liable to repay the loan: that the primary judge was entitled to find as a matter of fact that Mr Simpson had not guaranteed the loan, nor recognised a personal obligation to Donnybrook, rather than GLSP owing those funds.

(6) As to whether REBA, s 60 precludes Mr Simpson from receiving commission from a real estate agent: the primary judge was entitled to find that although there was two potential bidders to two parcels of land, and despite the land’s large value and area that the deal was a one-off transaction. Accordingly, the transaction was isolated and not the carrying on by Mr Simpson of a “business” as a real estate agent. Thus the appellant was not a “real estate agent within ss 4, 60 REBA.

Farrell v Bannister (1952) 52 SR (NSW) 73, applied; Re Griffin; Ex Parte Board of Trade (1890) 60 LJQB 235, considered.

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

2006/256929

HODGSON JA

MACFARLAN JA

YOUNG JA

Thursday 9 September 2010

SIMPSON v DONNYBROOK PROPERTIES PTY LTD

Judgment

1 HODGSON JA: I agree with Young JA.

2 MACFARLAN JA: I agree with the orders proposed by Young JA and, subject to what follows, his reasons.

3 I respectfully disagree with his Honour’s view that Donnybrook should not have been permitted to raise the case of breach of fiduciary duty upon which it succeeded at first instance (see [113] below). It is true that Donnybrook did not clearly articulate that case until its submissions in reply but the case was, by this means, put before the primary judge and no attempt was made on behalf of Mr Simpson to have the matter relisted for the purpose of an objection being taken to the contents of the submissions in reply. In my view the primary judge was entitled to proceed, as he did, upon the basis that that case was before him for determination. I add nevertheless that the conduct of Donnybrook in raising the case so late is to be deprecated.

4 YOUNG JA: This is an appeal with a cross appeal against the decision of Rein J in the Equity Division of this court in respect of a series of discrete disputes between the parties to this appeal.

5 The appellant is Gregory Lane Simpson. He is associated with a legal person not a party to the appeal, but which is frequently referred to, that is, a company he controls, GLS Properties Pty Ltd (GLSP). On the respondents’ side are Donnybrook Properties Pty Ltd (Donnybrook) and William Diarmid Slater who are parties to the appeal and Denise Sharon Slater (Mrs Slater) who is not.

6 Before the primary judge, the principal respondent was the plaintiff and made the following claims:

(1) for the balance of the $400,000 loan said to have been advanced by Donnybrook to Mr Simpson or Mr Simpson and GLSP of which approximately $127,000 is now owing or alternatively said to have been advanced to GLSP and guaranteed by Mr Simpson under a collateral agreement. This claim was amended during the hearing to also be a claim made against GLSP in the alternative;

(2) for the repayment of the investment of $350,000 by Donnybrook and paid to Mr Simpson or Mr Simpson and GLSP. Again it is said that if the advance was made to GLSP, the investment was guaranteed by Mr Simpson. This claim was also amended during the hearing to be a claim made in the alternative against GLSP; and

(3) Mr Slater’s claim for the payment of the $60,000 of legal fees paid to Deacons in connection with the sale of Lots 15 and 16 Woolcott Street, Henley Brook WA (“Lots 15 & 16”) to Investa Developments Pty Ltd (“Investa”) under the settlement and the costs of defending the Deacons proceedings.

7 Mr Simpson’s claims against the respondents were:

(4) that he is entitled to a commission of 3% of the sale price on Lots 15 and 16. The plaintiffs claim he was entitled to only 2% and that there was an agreement that he accept half of the commission payable by Investa to Mr Manners, the agent appointed by it (anticipated to be around $98,000 and when paid was $99,983.96) and which has in fact been paid to Mr Simpson; and

(5) that he is entitled to the proceeds of sale of the horse Hendrix sold for $120,000 (at market value, it was agreed) less a small amount for veterinary expenses. He claims that since he paid $12,500 towards the purchase price and since $12,500 (and not $25,000, as he was informed) was the actual price, he had a 100% interest in the horse. Mr Slater contends that he paid $25,000 for Hendrix. Mr Slater claims that when the costs of maintaining Hendrix are taken into account there is no net profit to be shared.

8 It is convenient to refer to those claims by the number I have ascribed to them in the above summary.

9 The primary judge decided those claims as follows:

Claim 1: GLSP is liable to Donnybrook for the balance of the loan account, ie $127,252 plus interest at the rate of 9% to December 2009 in the sum of $48,540.55. Mr Simpson is not personally liable for this loan balance.

Claim 2: Mr Simpson is liable to Donnybrook to pay $350,000 plus interest, from 10 June 2000 to 15 December 2009 in the sum of $316,668.48 subject to the offset of the amount referred to in (5) below;

Claim 3: Mr Simpson is not liable for $40,000 of Deacons’ fees or the costs of defending the Deacons claim.

Claim 4: Mr Slater is liable to pay to Mr Simpson a commission of $268,833 plus interest from 1 April 2007 in the sum of $70,677.31.

Claim 5: Donnybrook is liable to pay Mr Simpson $60,000 from the proceeds of sale of Hendrix, plus interest from four weeks after the sale of the horse (the interest to 15 December 2009 being $7,308.49).

10 The primary judge ordered each party pay his or its own costs. In his brief reasons for this in a supplementary judgment of 15 December 2009, the primary judge said that although Mr Simpson lost Claim 1, he escaped personal liability and GLSP only lost on a late amendment and that he succeeded in a number of the sub-issues that arose.

11 The appeal is in respect of Claim 2 and the order for costs.

12 The gravamen of the appeal on Claim 2 is that the primary judge found Mr Simpson liable for breach of fiduciary duty when that allegation was never pleaded and in any event, there was no fiduciary relationship, if there was, there was no breach or, if there was, it had no causal relationship with the alleged damage suffered and there was an applicable limitation period which was disregarded. In any event, interest should only have been awarded from 2004.

13 The appellant says that he was entitled to costs at first instance or, at least should be after adjustments on appeal.

14 The cross appeal is with respect to Claims 1 and 4 and the order as to costs.

15 As to claim 1, the cross appellants say that Mr Simpson should personally have been found liable for the debt. As to Claim 4, the cross appellants say that s 60 of the West Australian Real Estate and Business Agents Act 1978 prevented the cross respondent’s claim for commission.

16 The cross appellants say that the Slater interests substantially succeeded before the primary judge and should have been awarded costs and in any event after adjustments on appeal, they should receive costs.

17 The primary judge set out the relevant background facts to Claims 1, 2 and 4 and I will selectively quote from the early part of his judgment to provide the basis for the factual understanding of the issues raised on the appeal and cross appeal.

18 Mr Simpson had organised the incorporation of Donnybrook and compiled financial statements for Donnybrook for the 1998 and 1999 tax years and then sent them to Mr Woodgate of Carter Woodgate, who were Mr Slater’s main accountants. Mr Simpson also prepared the draft annual tax return for Donnybrook for the year ending 30 June 1999.

19 In 1999 the Slaters received a large sum, exceeding $750,000, on the sale of a racehorse named Jox and were looking for an investment for those funds. Mr Simpson and the Slaters had become friends sharing a common enthusiasm for horses and equestrian events. Mr Simpson was a chartered accountant then operating under the name Davey Simpson.

20 As will appear, the $750,000 found its way into the hands of Mr Simpson or GLSP, $350,000 as an investment in a development at Mona Vale (Claim 2) (the principal subject of the appeal) and $400,000 as a loan (Claim 1) (the principal subject of the cross appeal).

21 As at June 1999 GLSP held units in a unit trust that was developing a large project in Wollongong. Another unit holder was Tilquin Pty Ltd (“Tilquin”), a company owned or controlled by Mr Rory O’Brien. Tilquin and Mr O’Brien had some business association with Mr Simpson and Mr O’Brien was a friend of Mr Simpson.

22 GLSP was considering lending money to Tilquin to enable Tilquin to buy the units in the Wollongong development. GLSP lent $400,000 to Tilquin at a high rate of interest and GLSP (on Mr Simpson’s case) borrowed the $400,000 from Donnybrook at the same high rate of interest (Claim 2). Donnybrook claims that the loan was actually made to Mr Simpson although it accepts that Donnybrook’s cheque for $750,000 (which included the amount of $400,000) was made out, at Mr Simpson’s request, to GLSP and banked in GLSP’s account.

23 Approximately one year later Tilquin transferred the units in the Wollongong unit trust to GLSP and the mortgage given by Tilquin to GLSP was cancelled. GLSP continued to hold the units and when the Wollongong development was completed received the moneys due not only for the units bought by GLSP but also those transferred to GLSP by Tilquin.

24 Mr Simpson says that originally he had intended that some sort of documentation would be provided to Donnybrook to evidence its interest in the Tilquin mortgage, but this did not happen. He says that the Slaters agreed to the end of any involvement of Tilquin and its replacement by GLSP, and GLSP was at all times the borrower from the plaintiffs. Mr Simpson told Mr and Mrs Slater that the high rate of interest would have to be reduced from 12.5% per annum to 10% per annum, which he said was a fair rate and which the Slaters accepted. It was later reduced to 9%. No security documentation was provided evidencing the loan by Donnybrook.

25 The second amount, of $350,000 (Claim 2) (which was the balance of the $750,000 proceeds of the cheque paid by Donnybrook to GLSP on 11 June 1999) was paid, on the Slaters’ case, to Mr Simpson following a discussion with Mr Simpson. GLSP held one share in Stanley Gardens Pty Ltd (“SGPL”). SGPL was created to develop a site in Mona Vale which was to be called “Stanley Gardens”. The other shareholder was a company called Blue Ribbon Pty Ltd (“Blue Ribbon”) which was controlled by a Mr Barry Hammond. The building work at Stanley Gardens was to be undertaken by Mr Simpson’s brother, John Simpson (“John”).

26 According to Mr Simpson, GLSP and Blue Ribbon had agreed to split profits on the venture 50/50 and that he and John had agreed to split the GLSP 50% share 50/50 giving John and Mr Simpson a 25% interest each and Donnybrook a 25% interest. John had no written agreement with anyone relating to his work on the project and a company search of SGPL shows that he became a director of SGPL only in October 2002.

27 Mr Simpson says that when Mr and Mrs Slater expressed an interest in taking a share of Stanley Gardens (also referred to in the evidence as “the Mona Vale project”) he indicated that he would need to speak to John. He says he did so and that John agreed that the 25% share in the project they each held could be reduced to 12.5% so that the profits in the project would be shared: 12.5% Mr Greg Simpson, 12.5% Mr John Simpson, 25% Donnybrook and 50% Blue Ribbon. However, Mr Simpson, even on his own evidence, did not mention Blue Ribbon or Mr Hammond to the Slaters.

28 Mr Simpson claims that what he promised to Donnybrook through Mr and Mrs Slater was that Donnybrook would gain a 25% share in the net profits made by GLSP in the Mona Vale project. This would be brought about by GLSP selling the Slaters a 25% interest in the profits to be derived from the Project. He says that he did not promise that there would be any profits.

29 Stanley Gardens did not make a profit according to Mr Simpson and this is almost certainly the case. Thus, GLSP, according to Mr Simpson, had no obligation to repay the $350,000 to Donnybrook if the money invested by GLSP in the Mona Vale project was lost. However, he admits that the balance of the $400,000 loan (Claim 2) is owing by GLSP.

30 The evidence is that GLSP cannot meet its liability to repay the balance of the loan and it would follow, a fortiori, that GLSP cannot meet any liability to repay the $350,000, if that is owing. In 2003, money owed by GLSP to Mr Simpson was repaid to him and it has not traded since 2003.

31 As at 2002, relations between the Slaters and Mr Simpson were good and they remained so until 2004.

32 Turning now to the Western Australian land transactions, Mr Slater or his interests were entitled to land in Western Australia known as “Sweetwater” referred to as Lots 15 & 16. He had come to this ownership by a series of manoeuvres including litigation with a Mr McColl which was decided by Hasluck J as Slater v Strawberry John Pty Ltd [2002] WASC 204.

33 Mr Simpson assisted Mr Slater financially in the final settling up with Mr McColl.

34 Lots 15 and 16 were both sold to Investa for a total of approximately $12 million.

35 Mr Simpson, in late December 2001 or early 2002, suggested that Mr Slater and Donnybrook’s interests would best be served if they retained Mr Forsyth of Deacons. Mr Simpson had used Mr Forsyth’s services in other matters and was confident, he said, that Mr Forsyth would be able to draft the appropriate clauses to deal with some difficult aspects of the transaction involving Lots 15 and 16. When the settlement was imminent, Deacons obtained a direction from Mr Slater authorising $100,000 from the settlement to be paid to Deacons.

36 The appeal was heard on 11 August 2010, Mr D F Jackson QC and Mr J A C Potts of counsel appearing for the appellant/cross respondent and Mr G C Lindsay SC and Mr A J Paterson of counsel appearing for the respondents/cross appellants.

37 I return to Claim 2.

38 It is common ground that Donnybrook provided $350,000 to GLSP as an investment in the Mona Vale project. The money was advanced by a single bank cheque for $750,000 in favour of GLSP whose issue was authorised by Donnybrook and debited to its account.

39 At the trial, the Slater interests said that there was a contract whereby the $350,000 was to be used to give them a one quarter interest as tenants in common in the Mona Vale land and there were representations made that the project would be completed in a year and the $350,000 would then be repaid plus one quarter of the profits. Furthermore, in a conversation, Mr Simpson personally guaranteed repayment.

40 Mr Simpson said that the transaction was simply one whereby the $350,000 was paid to him beneficially as the purchase price for a one quarter share of the profits from the Mona Vale project.

41 Mr Lindsay says that in [74], the primary judge rejected this scenario.

42 The primary judge actually said in [74]-[78]:

“74 I find that:

(1) The $350,000 was paid to GLSP at the direction of Mr Simpson.

(2) The terms of the advance were that Donnybrook would recover one half of such profits as would be made by GLSP (or SGPL) on the Mona Vale project. I express this in the alternative because I have considerable doubt that Mr Simpson made clear to the Slaters that GLSP was involved in the Mona Vale project. One matter of importance in that regard is that in his letter of 15 July Mr Simpson referred to GLSP in respect of the $400,000 loan: see [26], but not the Mona Vale project which is under the heading ‘Stanley Gardens Pty Ltd’.

(3) Mr Simpson gave no guarantee that GLSP (or inferentially, SGPL) would finish the project within a set time or successfully market and sell all the units within a set time.

75 Mr Simpson’s version of what he said was that the Slaters would receive a 50% profit share that GLSP would obtain from the Mona Vale project. Even on Mr Simpson’s evidence he put no legal colour to that – he did not say that it would be a share sale, a share transfer, a joint venture or a loan with profit sharing in lieu of interest. He did not explain how profits would be calculated. He did not say what would occur if the Mona Vale project not only made no profit, but made a loss. He gave no indication that documentation would be issued nor what form it would take. He made no mention of what security was envisaged for the investment or what documentation that might take. He did not say in his evidence that he had any intention of so doing (unlike his intention in respect of the loan). He did not make clear to the Slaters that the company he owned was not the company that owned the land (either solely or as co-owner) and was undertaking to project. He never mentioned that only SGPL was the owner and that another person (other than his brother John) was involved in the project. He did not reveal that his arrangements with John were wholly informal. John, it appears, was not a shareholder and had no agreement with SGPL: see Exhibit A1 at p 71 et seq. Mr Simpson said he had an arrangement between him and his brother and was not sure if that included GLSP: see T248.9-28.

76 In fact no documentation was prepared (not even a receipt or an acknowledgement of the $350,000 in the letter of 15 July 1999) either for the investment or the protection of the investment by means of security.

77 Further no evidence has been produced by Mr Simpson or GLSP that shows what was done with the $350,000 received as part of the $750,000.

78 There is no evidence produced that shows that GLSP was to receive a share of the profits of the Mona Vale project. The only indication that this might be so is the fact that GLSP owned one share of two issued in SGPL in whose name the land was purchased and which was the developer of the site. That fact does not establish that GLSP is entitled to any profit.”

43 The primary judge clearly rejected the Slaters’ scenario, including rejecting the evidence that the conversation about a guarantee took place. He seems to have approved of the Simpson version of the transaction, though does not expressly say so and his remarks suggest that he was not fully satisfied. However, of the two versions, the Simpson version is preferred.

44 However, the appellant says that it is sufficient for him that the primary judge rejected the Slaters’ version of the transaction.

45 The principal reason why the primary judge found Mr Simpson liable was that he found that Mr Simpson was an investment adviser to the Slaters and owed them fiduciary duties which he breached by involving them in a risky investment in the Mona Vale project in which he himself had a personal interest.

46 In view of Mr Jackson’s submissions, it will be necessary to work through those twelve propositions set out below, which the primary judge considered supported his conclusion that Mr Simpson was a fiduciary owing fiduciary duties to the Slaters, and I will do shortly.

47 The primary judge then continued at [95] to hold that, contrary to the appellant’s submissions, the present was not a case in which the parties were at “arms length” or on an “equal footing”. The Slaters were not people who were shown to have had experience in any investment other than horses and Lots 15 and 16 or to have had the assistance of “fully independent professional advice” in relation to the $350,000 investment.

48 The primary judge said that on the totality of the evidence, Mr and Mrs Slater were seeking advice from Mr Simpson about the investment of the $750,000 and relied on him in their decision to have Donnybrook invest $350,000 in the Mona Vale project and reposed trust and confidence in him.

49 The primary judge also said at the end of [95]:

“I do not accept that Mr Simpson did not believe that the plaintiffs were relying on him or that he did not purport to give advice to the Slaters about what they should do with their money (whether or not he had the relevant expertise). Mr Simpson was, I think, “implicated” in the affairs of the Slaters and Donnybrook and they would objectively have had an expectation that their interests were being served by him”.

50 The primary judge then considered and substantially discarded submissions as to why he should not consider Mr Simpson as a person owing fiduciary duties and then said at [97] that in all the circumstances he was persuaded that Mr Simpson was providing investment advice in connection with the $350,000 and owed the plaintiffs a fiduciary obligation not to prefer his own interests over theirs.

51 Perhaps the most significant parts of the judgment in respect of Claim 2 are [98] and [99] which are set out below though I have marked with a distinguishing letter for ease of reference, sentences which were the subject of counsel’s submissions which I will subsequently consider:

98 (A) Mr Simpson did not provide any advice or warning about the $350,000 investment. He did not explain what “profit share” meant nor did he warn the Slaters that not only may they make no profit at all on the $350,000 but that they may lose all of their money. He did not explain that the entity to which they were, on his case, paying money (i.e. GLSP) had no security for any money advanced to SGPL and he did not provide full information about the nature of the project and it’s financing. He did not provide any documents relating to projected costs and unit sale prices and Mr Simpson said he did not know if any existed: see T248.30 – T249.8. He did not warn the Slaters that he was not proposing to organise any documentation in relation to the transaction with Donnybrook, nor that there was no written agreement in place between SGPL and GLSP, or between himself, his brother, GLSP and SGPL as to how the profits were to be shared. In my view he did not give “the best advice” that an advisor could give about the investment and its risks. I think that the investment was a highly imprudent one and one which, consistent with the role his 15 July letter suggested he was purporting to fulfil, he should have warned against, or, at the very least, the deficiencies of which he should have explained in clear terms.

99 I think that there is another respect in which Mr Simpson breached his fiduciary obligations to the plaintiffs. (B) He was inviting them to take up a share in the Mona Vale project and it was left entirely to him as to how that would occur. It appears he did nothing in that regard and there is not even evidence that the funds paid into GLSP’s account for that express purpose were paid out to SGPL or used for some purpose connected with the Mona Vale project. His affidavits are silent on the topic. If the $350,000 was not paid to SGPL or used in connection with the Mona Vale project, then in my view Mr Simpson has breached a duty owed by him to the plaintiffs. He has not shown what has happened to the $350,000. I do not think that proving that SGPL was in debt to GLSP in 2005 proves that any money provided by the plaintiffs to GLSP was paid by GLSP to SGPL. (C) I am not satisfied that GLSP had any agreement or arrangement with SGPL for the sharing of profits – no document is in evidence and Mr Simpson’s evidence about his brother was very vague. (D) In my view, Mr Simpson had an obligation to advise Mr and Mrs Slater that GLSP had no arrangement to receive a share of profits of the Mona Vale project and that they would be wholly reliant on Mr Simpson in this regard and he has not demonstrated that he did anything to satisfy his obligations in respect of how the money would be utilised. In view of the conclusion I have reached on these matters I do not need to consider whether Mr Simpson was trustee of the $350,000.

52 As I indicated earlier, the primary judge’s conclusion that Mr Simpson was a fiduciary owing duties which he breached causing loss to the Slaters is resisted by the appellant on almost every possible ground.

53 First, he says that this case was never pleaded against him and he had no chance to meet it. The respondents contest this. In view of my reasons on other aspects of the case, I will deal with this ground after considering the other grounds put against the decision on Claim 2.

54 Before I deal with those other grounds, it is useful to note the primary judge’s findings as to the credibility of the principal witnesses.

55 The primary judge held that the reliability of recollection of all witnesses was open to question because of the age of some of the matters to which they were giving evidence.

56 In broad measure the primary judge accepted the submissions of the defendants that Mr Slater was an unimpressive witness whose credibility was severely undermined in cross-examination. In particular, the primary judge did not accept that his description of himself as a “truck driver” was an honest one and accepted the defendants’ submission that it was deliberately designed to present himself as an unsophisticated person, which his own letters and emails and his conversations and past actions demonstrate he is not.

57 The primary judge accepted that Mrs Slater was a more credible witness than Mr Slater and rejected the defendants’ submissions that her evidence in critical respects was unsatisfactory and that she should not be accepted as a witness of credit. However, the matters to which attention is drawn by the defendants left the primary judge in doubt as to the reliability of her evidence, so he approached her evidence with some caution, but not with the same level of concern that he had with Mr Slater’s credibility.

58 The primary judge assessed Mr Simpson as a very calm, quietly spoken and unflappable witness who answered questions asked carefully. He made a number of admissions when they were required. The contrast between the effect of cross-examination of Mr Slater and of Mr Simpson was quite stark.

59 However, the primary judge said at [41] that there were a number of aspects of Mr Simpson’s evidence which led him to approach his evidence with a substantial degree of caution – notwithstanding the clear contrast between his presentation and that of Mr Slater: He gave details of 10 matters and concluded that these doubts relating to Mr Simpson’s credit were particularly important when it came for him to rule on Claim 2.

60 The second ground of appeal is that the primary judge erred in holding that Mr Simpson acted in an advisory capacity.

61 Before embarking on the relevant facts and circumstances, It is useful to review some well worn territory as to what is a fiduciary and what makes a person a fiduciary as, without appreciation of the ground rules, some fuzzy thinking is often produced.

62 Basically, a fiduciary is a person who undertakes or had thrust upon him or her by the law an obligation to act for the benefit of another. This flows from Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; 156 CLR 41, 67. Although, as B H McPherson demonstrates in “Fiduciaries: Who are They” (1998) 72 ALJ 288, 289, that statement is not open to too critical an examination, it is a useful starting point.

63 As McPherson says at 290-1, the law contrasts the position of people who are at arm’s length and accordingly can act solely in their own interests with people who have assumed by contract or conduct the burden of acting in another’s interests, or to look at the matter from the other person’s viewpoint, “Have I surrendered control of this function to another in whom I have confidence will be acting in my interests?”

64 An early statement in this area was made by Brennan J in Daly v Sydney Stock Exchange [1986] HCA 25; 160 CLR 371, 385, where he said:

“Whenever a ...person who holds himself out as having expertise in advising on investments is approached for advise on investments and undertakes to give it, in giving that advice, the adviser stands in a fiduciary relationship to the person whom he advises.”

65 There is no doubt that at least some investment advisors will owe fiduciary duties. However, it is an error to think that merely because one can put the tag “investment advisor” on a defendant that he or she will be a fiduciary: Pilmer v Duke Group Ltd [2001] HCA 31; 207 CLR 165, 197. It will depend on the circumstances of the case, ASIC v Citigroup Global Markets Australia Pty Limited (No 4) [2007] FCA 963; 160 FCR 35, 75 at [266].

66 Examples of financial advisers not being fiduciaries are provided by Pavan v Ratnam (1996) 23 ACSR 214 (NSWCA); Townsend v Roussety & Co (WA) Pty Ltd [2007] WASCA 40; 33 WAR 321.

67 The primary judge reached his conclusion that Mr Simpson was a fiduciary and owed fiduciary duties to the Slaters, which he breached, after reciting twelve points in [94] of his reasons.

68 In [94] of his judgment, the primary judge said:

94 The first question is whether Mr Simpson was providing investment advice to the plaintiffs and whether the plaintiffs were relying on him in that regard. I think that there are a number indications that the plaintiffs relied on Mr Simpson in relation to the investment of the $350,000, some matters which, although they occur later, demonstrate the nature of the relationship over an extended period including 1999:

(1) they sought his opinion about investments even on Mr Simpson’s own evidence: see paragraphs 53 and 109 of Mr Simpson’s affidavit of 19 November 2008, and see Mr Slater’s affidavit of 29 September 2008 at paragraphs 13 - 27 and Mrs Slater’s affidavit of 30 September 2008 at paragraphs 15 – 24.

(2) He provided advice: see letter of 15 July 1999 set out at [26] above and the paragraphs referred to in (1) above.

(3) He saw the Slaters at his office and wrote to them on his practice’s letterhead.

(4) He had previously provided accounting advice (see Mr Simpson’s ‘pro forma’ invoice at Exhibit A4 at p 1326) and appears as at June 1999 to have already offered advice in relation to Mr Slater’s problems with Strawberry John. He wrote to the ANZ Bank on behalf of Donnybrook in April 1999 and advised the bank of Donnybrook’s net asset position: see Exhibit A1 at p 163.

(5) He did subsequently provide business advice in connection with the Strawberry John litigation and its aftermath.

(6) On his evidence he offered to interpose GLSP in relation to the $400,000 loan before receipt of the cheque and this and the terms of the letter of 15 July suggest that he was looking after the interests of the plaintiffs.

(7) He offered advice in respect of the Mona Vale project investment itself, when he said (on his own evidence) that he thought it would be a good investment, and that he had confidence in John’s ability: paragraph 109 of his affidavit of 19 November 2008.

(8) This apparent ‘involvement’ in the plaintiffs’ welfare is reinforced on his side by his subsequent offer to repay the $350,000 investment and to pay the Deacons fees, and reinforced on the plaintiffs’ side by reason of their willingness to hand over $750,000 without a shred of documentation and subsequently having nothing beyond the letter of 15 July in the case of the $400,000 and not even that in the case of the $350,000.

(9) He says he offered to repay the $350,000 to Donnybrook in 2003: see T282–T283.

(10) Even as late as 6 June 2004, in an email to Mr Simpson, Mr Slater said: “we are prepared to stay in Mona Vale until you decide what the best option is, providing we can have the balance of the cash we have invested with you”: see Exhibit A2 at p 614.

(11) By his email of 5 September 2004 at Exhibit A3 at p 760, Mr Simpson offered to contribute part of his commission to help with the settlement of the Strawberry John proceedings and he stated ‘I have only your best interests at heart as I have always had’.

(12) In an email of 12 January 2005 he said “I believe I have always acted to try and help you”: see Exhibit A4 at p 1235.”

69 The appellant says that the these matters are insufficient individually or together to support the primary judge’s finding. Essentially, Mr Simpson, as a friend, was asked for “ideas”’ for investment and assisted. However, I need to go through the twelve matters individually and note Mr Jackson’s submissions.

70 As to item 1, Mr Jackson submits that a proper review of the evidence which included the cross-examination on the affidavits cited would show that, prior to 11 June 1999, Mr Simpson did not assume the role of an investment advisor. The highest the discussions between the parties went was that the Slaters would discuss investments and Mr Simpson would tell them of the investments he himself had made.

71 As to item 2, the letter post dated the loan and does not contain any relevant investment advice.

72 Item 3 is completely equivocal. Of course, a sole practitioner accountant would see even friends in his office and use letterhead.

73 Item 4 refers to accounting advice given by Mr Simpson and a letter written by him to a bank on the Slaters’ behalf. However, there is no investment advice involved in these facts.

74 As to items 5 and 8, Mr Jackson again points out that the “investment” was made on 11 June 1999.

75 As to item 6, it is too long a step to take that, just because Mr Simpson took a step to look after the Slaters in respect to Claim 1, he was acting as a fiduciary re Claim 2.

76 The seventh item goes no further than to show that friends often talk to each other about investments.

77 The offer to repay, item 9, again is many years after the investment and merely shows a relation of friendship.

78 Item 10, again is 5 years after the loan and cannot assist in fixing the relationship between the parties in 1999.

79 Item 11 is again 5 years after the loan. Mr Simpson’s statement, “I have only your best interests at heart as I have always had” whatever its context, is in the same plight as item 10.

80 Item 12 occurs in January 2005, much the same words are said as item 11 and, again Mr Jackson says that they were uttered too long after the loan to have any relevance, but, even if they were relevant, they merely indicate friendship.

81 The respondents’ principal riposte is that this was a factual finding made by a judge who had the advantage of hearing the evidence and should not lightly be set aside.

82 The respondents say that it should be noted that the primary judge actually said that these matters were “indications that the plaintiffs relied on Mr Simpson” not that they operated on his mind to demonstrate that he was acting as an advisor.

83 Next, it should be noted that the primary judge did recognize that many of the items post-dated the loan, but considered that they went to show that there was a continuous relationship over a significant period.

84 I turn now to [98] and [99] of the primary judge’s reasons.

85 Mr Jackson’s submission as to the sentences I have marked “A”,”B”, “C” and “D” is that what was happening was that the Slaters were not investing in the Mona Vale project directly, but were purchasing part of GLSP’s entitlement to the profits of the Project, there was no need for detailed descriptions of the Project.

86 Other matters which, to my mind, are material are that Mr Simpson was never paid for any investment advice that the Slaters may have gathered from him. However, he may have derived some benefit from the fact that he received the $350,000. However, the Slaters were not ignorant of the fact that Mr Simpson was personally involved in the Mona Vale project.

87 I appreciate that the trial judge was in a better position than we are to see the witnesses and to find primary facts. However, in my view the solutions to the problems posed for this appeal do not involve interfering with primary fact finding; what is challenged is the inferences drawn from those facts and fact finding as a matter of integration of assorted primary facts.

88 I cannot see sufficient justification for the finding that Mr Simpson was a fiduciary as an investment advisor. The primary judge has fully set out the circumstances which led him to that view. However, while not necessarily accepting all that Mr Jackson has said about the 12 items, there is to my mind insufficient in that list or in [98]-[100] to show that Mr Simpson was an investment advisor who was undertaking to act in the interests of the Slaters in the $350,000 “investment” transaction. Most of the items are equally as well explained by the existence of a longstanding friendship and the fact that no fee was ever charged reinforces the friendship view.

89 Accordingly, I would set aside the finding that Mr Simpson was an investment advisor with respect to Claim 2.

90 The third ground is that the primary judge erred in finding that Mr Simpson owed fiduciary duties.

91 The appellant says that the only reason for giving Mr Simpson the tag “fiduciary” was that he was said to be an investment advisor.

92 This matter falls away as the appeal succeeds on the ground that Mr Simpson was not an investment advisor.

93 Grounds 2A, 2B, 4 and 5 point to the fact that the primary judge held that Mr Simpson breached his fiduciary duty not to prefer his interests over those of the Slaters.

94 Again, it is unnecessary to pursue this in view of my conclusion that Mr Simpson was not a fiduciary in respect of Claim 2.

95 However, the appellant says that all that the evidence demonstrated was that if at all, Mr Simpson breached obligations by failing to warn or failing to advise about the investment. These had nothing to do with Mr Simpson preferring his own interests. Thus, even if the basis for a fiduciary duty had been established, the appellant says that the Slaters’ case would fail on this point.

96 I do not think that that is so. It may well be that the Slaters did not have a proper understanding of the transaction or that their $350,000 would pass to Mr Simpson beneficially thus they were never in a position to give full and informed consent to him taking that benefit.

97 As to causation, the appellant submits that the primary judge merely assumed that the Slaters’ losses were caused by the Simpson breaches. There was not the evidence to show that this was so.

98 The respondents say that causation was a matter of common sense and it was clear to anyone of common sense that the Mona Vale project was so improvident that no right minded person would have invested in it.

99 In White v Illawarra Mutual Building Society Ltd [2002] NSWCA 164 at [138], Powell JA said of a plaintiff:

“She bore the onus of establishing, on the balance of probabilities, that, had there been no breach of retainer/negligence or breach of fiduciary duty, she would not have entered into the loan agreement or granted the mortgage.”

100 In the same case, Hodgson JA agreed with Powell JA but added at [142]-[145] that the principle in Brickenden v London Loan & Savings Co [1934] 3 DLR 465 (PC) that an erring fiduciary cannot maintain that his or her breach would not have altered the plaintiff’s decision did not apply where the fiduciary had a conflict of duty and duty: in such cases, the beneficiary must prove that, but for the non-disclosure, he or she would not have entered into the transaction. The third judge, Hamilton J, agreed with both judgments.

101 It seems to me that, in the instant case, the onus was on the Slaters to prove that had there been full disclosure they would not have entered into the transaction. They did not give direct evidence as to this. Perhaps s 5D of the Civil Liability Act 2002 prevented such evidence being given, though that is to be doubted as that section applies to causes of action in negligence not equity proceedings for breach of fiduciary duty. The vital question is whether the surrounding facts and circumstances permit the appropriate inference to be drawn in the Slaters’ favour.

102 Although there is a paucity of evidence, I consider that there was sufficient for the primary judge to draw the inference he did draw.

103 As to the point about Limitations, the appellant says that the $350,000 was paid by Donnybrook to GLSP on 11 June 1999.

104 The primary judge said that, because of Mr Simpson’s offer to repay the $350,000 in June 2003, it was unconscionable to apply the Limitation Act 1969 by analogy.

105 The appellant puts that there was no basis for taking this attitude, but, if there was, it should also be applied to the question of interest which should only have been computed from 2004 (the date by which the respondents knew they would not recover their capital).

106 In my view the primary judge, in dealing with a claim in equity, was entitled to take this view. However, I agree that consistency required the same approach to be taken to the question of the date from which interest should be calculated.

107 I now return to ground 1, that the primary judge determined the appellant’s liability on a case that had not been presented.

108 We have been taken though the pleadings, the affidavits, the transcript and the submissions that were before the judge below.

109 There is scant material in the statement of claim about the breach of fiduciary duty on which the Slaters succeeded. Paragraph 25 touches on the subject slightly. However, it is really only in the closing submissions of the counsel for the Slaters in reply that the case becomes clear.

110 Of course, at this stage, the defendant had no right of reply.

111 In hindsight, the thought goes through one’s mind that counsel for the defendants should have applied to the judge to disregard the submissions in reply that raised a new case or applied for leave to answer them or even to reopen so that evidence could be led on the fresh issues. That, however, did not occur.

112 Although I speak in terms of a new case, what appears to be happening is that the germ of the idea may be found in paragraph 25 of the statement of claim, it got some foliage during the evidence, but it was only fully exposed during the closing submissions in reply.

113 The situation appears to be one where under the principle in Suttor v Gundowda Pty Ltd [1950] HCA 35; 81 CLR 418 the fresh case should not have been permitted to be raised at such a late stage.

114 Because there was a little uncertainty at the close of the oral hearing as to how much the allegation that Mr Simpson owed a duty as an investment advisor was forecast to Mr Simpson or to the Court, the Court agreed that both sets of counsel could submit further written submissions on the subject. This they did.

115 Mr Lindsay and Mr Paterson furnished a 20 page document. It seemed to me that the major points made in this document were the assertions that para 21 of the respondents’ opening written submissions dealt with the present ground and that there was no objection by the appellant’s counsel to questions put in cross-examination to witnesses for the appellant on matters which could only be relevant if the presently relevant count was before the court.

116 The latter point was illustrated by copious reference to the transcript. However, the point was weakened by the fact that a good deal of the material relied on could not have been the subject of objection as it could possibly have been relevant to other aspects of the case.

117 The appellant’s counsel addressed this document by saying, “Indeed, the labyrinthine nature of Donnybrook’s Submissions demonstrates the fact that it necessarily needs to resort to a collection of disparate, seemingly unrelated, footprints in the sand, scattered through the pre-trial and trial phases, to try to demonstrate with the benefit of hindsight that something was fairly in issue, when it was not.”

118 That almost poetic rhetoric makes one treat the statements as hyperbole at least to a degree, but, it does make the point that one cannot see where the appellant was clearly made aware of the case which was ultimately found against him. It was hinted at almost from the opening of the trial, there were further hints in cross examination, but it was only in the final written address that the allegation was clearly raised.

119 In my view that was too late.

120 Thus, had the appeal not succeed on the merits, it should be upheld on this more technical ground.

121 Accordingly the appeal must be allowed with costs here and below.

122 As to the cross appeal on Claim 1, the problems in part spring from the fact that the transaction of the loan of $400,000 was carried out in haste and without proper documentation.

123 There is no dispute that the loan was made and partly repaid and the primary judge correctly noted the outstanding balance.

124 The key dispute is whether the loan was to GLSP as found by the primary judge or to Mr Simpson personally as the cross appellants claim.

125 Again, it is necessary to look closely at the affidavits and transcript.

126 As the primary judge said at [45]-[46], there was no dispute that on 11 June 1999 Donnybrook handed over a cheque made out to GLSP for $750,000. There is no dispute that that amount found its way into the account of GLSP. There was no dispute that the $750,000 was made up of the $350,000 the subject of Claim 2 and the $400,000 loan, the subject of Claim 1. There was no dispute that the agreement in respect of both aspects was orally made between on the one hand, Mr and Mrs Slater on behalf of Donnybrook, and on the other, Mr Simpson, either on his own behalf (the plaintiffs’ case) or on behalf of GLSP (Mr Simpson’s case).

127 The primary judge said at [47] that the critical conversation occurred on 7 June 1999 which the Slaters say occurred in Mr Simpson’s office, though Mr Simpson says it occurred over the telephone. Mr Slater, Mrs Slater and Mr Simpson gave differing evidence as to that conversation.

128 The primary judge seems basically to have accepted Mrs Slater’s version which was, “Simpson said to us: ‘I’ve got a client who is interested in taking four hundred thousand as a loan for six months. I think we can get 12.5 % to be secured by mortgage.’” Mr Simpson gave her and Mr Slater an authority to sign with GLSP’s name on it and she asked “who’s GLS Properties?” and Mr Simpson replied “It’s my company”.

129 Mr Simpson deposed that, in that conversation, he said: "There is still that friend of mine who needs to borrow $400,000. If you do not feel comfortable with that I can put my company GLS in between you and him and I would lend it on to him at the same rate. I know him well. I have spoken to him and he would pay 12.5% interest". The primary judge accepted that this was said.

130 At [51] and [53] the primary judge said that although Mr Slater had deposed to Mr Simpson guaranteeing the loan, he accepted the evidence of Mrs Slater and Mr Simpson that there was no provision for a guarantee.

131 The primary judge next noted that the Slaters relied on a letter from Mr Simpson’s of 15 July 1999 written on his firm’s letterhead (Davey & Simpson) in relation to the $400,000 loan.

132 So far as is material to the $400,000 loan, that letter reads:

Loan $400,000

Loan funds of $400,000 @ 12.5% have been made. Interest for one year – $50,000

As agreed interest will be paid monthly in advance at $5,000.00 per month for ten months

I have put GLS Properties P/L (my company) between the borrower (Tilquin Investments Pty Ltd) and Donnybrook Properties P/L so that in the unlikely event that there is a problem in the repayment of the money then it falls to me to repay it. I feel more comfortable with this position so that you will never have to worry that your funds are at risk. Security in the form of a mortgage has been given and also security in the form of shares in the investment of Tilquin has also been given. This security adds up to over $1.3 million so the position is secure. Documents to reflect your interest in this security and your interest (charge) over GLS Properties have to be signed by you in due course.

Give me a call if you have any queries about any of the above mentioned.

133 The primary judge said at [52] that the letter of 15 July 1999 makes it clear that GLSP is a company. The word “me” is used but in a sentence which explains that GLSP will be interposed. The letter is close in its terms to the conversation to which Mr Simpson deposes and quite different to the conversation to which Mr Slater deposes.

134 The next matter involved in the primary judge’s decision is that in 2000, Mr Simpson offered to repay the loan from his own funds.

135 As to this, the primary judge said at [53] that Mr Simpson’s explanation for having offered to repay the $400,000 (out of his own money) in 2003 was that Tilquin had ceased to be involved. He was not asked why he regarded it as appropriate to offer to pay money to the Slaters (or Donnybrook) that were owed by GLSP and it was not put to him that he did so out of a recognition of an obligation that it was he, personally, who owed the money to Donnybrook, and not GLSP.

136 The primary judge ruled that the fact of the offer to repay was consistent with Mr Simpson having regarded himself as having a personal obligation but did not establish that he did undertake a personal obligation in the conversations of June 1999. It was also consistent with GLSP being unable to repay the funds and Mr Simpson being willing to loan money to his company so that Donnybrook could be repaid.

137 In my view, the judge was perfectly entitled to find the facts the way he did and there is no warrant for this court to interfere with his finding.

138 The cross appeal on claim 1 must thus be dismissed.

139 As to the cross appeal on Claim 4, the key point is the applicability of s 60 of the Western Australian Real Estate and Business Agents Act 1978 (REBA) which Act would preclude Mr Simpson receiving commission from a real estate deal if he came within the definition of a real estate agent under that statute as his appointment was not in writing nor was he licensed.

140 As the primary judge noted, of critical importance to this issue is s 4 of the REBA which is, relevantly, in the following terms:

“real estate agent means a person whose business either alone or as part of or in connection with any other business, is to act as agent for consideration in money or money’s worth, as commission, reward or remuneration, in respect of a real estate transaction as defined by this section...

real estate transaction —

(a) means a sale, exchange, or other disposal and a purchase, exchange, or other acquisition of real estate and any exclusive right whether deriving from the ownership of a share or interest in a body corporate or partnership, or otherwise, to the use or occupation of real estate including the leasing, and letting, and the acquisition under lease or letting of tenancy or occupation of real estate; and (b) includes any sale, exchange, or other disposal and any purchase, exchange, or other acquisition of goods, chattels or other property relating to a real estate transaction of a kind specified in paragraph (a); and (ba) includes the collection of rents or other payments for use or occupation; and (c) also includes an option to enter into a real estate transaction...”

141 The primary judge referred to a number of authorities decided on similar legislation in other States and in respect of statutes in pari materia.

142 The primary judge said at [111] that Mr Simpson was involved in only one real estate transaction – that relating to Lots 15 and 16 in Western Australia. His involvement in Lots 15 and 16 and the offer by Mr Slater of a commission arose out of the assistance he had provided to the plaintiffs in the Western Australian proceedings. There is no evidence apart from the Lots 15 and 16 sale that he had, for the plaintiffs, or anyone else acted as or in the capacity of a real estate agent.

143 The primary judge considered that the case was governed by Farrell v Bannister (1952) 52 SR (NSW) 73 which he noted was applied in Western Australia by Miller J in Huat v Rintag Pty Ltd [2000] ANZ Conv Rep 2. In Farrell v Bannister, K W Street CJ (with whom Owen and Clancy JJ agreed) said at p 74:

“what the legislation was prohibiting was the conducting of a business, or something in the nature of a business, such as that carried on by a real estate agent, unless the person conducting the business held a licence under the Act. If he was not carrying on such a business, and if the transaction was one isolated case of acting in the matter of bringing a purchaser and vendor together for the same of a specific piece of land, then that is not prohibited by the section”

144 Mr Lindsay submitted that on the facts in the present case, there was more than just one transaction. There were two parcels of land and there were two potential bidders. The land had a considerable area and was very valuable.

145 It is true that all businesses start with one transaction and it can be the case that that one transaction is intended to be the first of many, see eg Re Griffin; Ex parte Board of Trade (1890) 60 LJQB 235, 237.

146 However, in the instant case, the judge had to make a determination on a question of fact, he did so and determined that the transaction involving Lots 15 and 16 was a one off transaction and that Mr Simpson was not carrying on business as a real estate agent. He was well within his mandate so to find.

147 Thus, the cross appeal must be dismissed with costs.

148 Accordingly, I would propose the following orders:

(1) Appeal allowed.

(2) Orders 1 and 5 made by Rein J on 15 December 2009 be set aside.

(3) Order that the plaintiff’s claim against the first defendant be dismissed.

(4) Order that the cross appeal be dismissed.

(5) Order that the plaintiff/first cross defendant and the second cross defendant pay the first defendant’s/cross claimant’s costs below.

(6) Order that the respondents/cross appellants pay the appellant’s/cross respondent’s costs of the appeal and the cross appeal.

(7) Order that, if eligible, the respondents have a certificate under the

Suitors’ Fund Act 1951 in respect of the costs of the appeal.

**********

LAST UPDATED:
9 September 2010