IN THE MAGISTRATES’ COURT OF VICTORIA AT MELBOURNE: No: E10432979 BETWEEN: GREEN ADVANTAGE PTY LTD Plaintiff -and- MARINO SUSSICH First Defendant -and- 2UP HOLDINGS PTY LTD Second Defendant

MAGISTRATE: GINNANE DATE OF DECISION: 13 APRIL 2015 WHERE HEARD: MELBOURNE APPEARANCES COUNSEL SOLICITORS For the Plaintiff D C Harrison Seoud Solicitors For the Defendants D J Hancock Comlaw Solicitors

Catchwords: misleading and deceptive conduct – breach of agreement -application of Australian Consumer Law – date of commencement - whether law applicable to “persons” - representations for the purchase of shares by first defendant in second defendant where first defendant director of second defendant - whether any agreement made – identity of parties -plaintiff company controlled by sole director and shareholder – whether proposed amended pleading extended beyond grant of leave at conclusion of hearing – amendments disallowed - application of the rule in Jones v Dunkel – plaintiff’s claim dismissed

REASONS FOR DECSION

HIS HONOUR Introduction

1. The plaintiff has commenced a proceeding by way of Complaint and

Statement of Claim dated 31 January 2014 seeking relief against the

defendants by way of damages in the amount of $52,000 together

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with interest in relation to an alleged purchase by it of shares in a

company called 2Up Gaming PLC. The plaintiff brings two claims, the

first of which alleges misleading or deceptive conduct by the first

defendant Marino Sussich. The second claim is for breach of contract

brought against the second defendant 2Up Holdings Pty Ltd. The

plaintiff’s claim is against the defendants jointly and severally in the

sum of $52,000 together with interest and costs.

The parties 2. The first defendant Sussich is a director of the second defendant, 2Up

Holdings Pty Ltd. The second defendant 2Up Holdings Pty Ltd is a

wholly owned subsidiary of a British company named 2Up Gaming

PLC whose shares the plaintiff claims it agreed to purchase from 2Up

Holdings Pty Ltd. Sussich is the sole director and secretary of 2Up

Holdings Pty Ltd and is also a director of its British holding company

2Up Gaming PLC.

3. Rabi Mohammad is an Australian lawyer. He was admitted to practice

on 23 August 2011. He is the sole director and shareholder of the

plaintiff. He is not a party to the proceeding although he is a central

player in this litigation.

The pleadings

4. The plaintiff alleges that the certain matters pleaded in paragraph 5 of

its Statement of Claim amounted to representations that were made

by Sussich to Mohammad in September 2011 in trade or commerce

and that the plaintiff relied upon the representations and agreed to

purchase shares in 2Up Gaming PLC and paid 2Up Holdings $52,000

for the share purchase but in fact the representations were misleading

or deceptive and the shares were not issued to it. Therefore, as

against Sussich, the plaintiff seeks damages for misleading and

deceptive conduct and as against 2Up Holdings Pty Ltd damages for

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breach of contract on account of the money paid to it by the plaintiff

for the purchase of shares in 2Up Gaming PLC.

5. The claim advanced by the plaintiff is one for breach of an oral

agreement for the purchase of shares entered into by it with 2Up

Holdings Pty Ltd on the basis of oral representations made to it by

Sussich that were misleading or deceptive.

6. The defendants advance a number of matters in opposition to the

claims made and relief sought by the plaintiff, among them being to

deny the occurrence of the statements pleaded in paragraph 5 of the

Complaint, to deny that any such statements amounted to actionable

representations, and further that if they did, they were not made by

Sussich to the plaintiff but instead to Mohammad. As pleaded, the

success of the plaintiff’s proceeding rested upon the conclusion I was

asked to reach about a number of statements attributed to Sussich by

Mohammad in September 2011 concerning the purchase of shares in

2Up Gaming PLC. The allegations are expressed as follows1:

5. That in September 2011, Sussich in trade or commerce, told

Rabee Mohammad a director of the Plaintiff (Mohammad), that:

5.1. shares in 2Up Gaming P L C were trading on the Frankfurt

stock exchange at 0.30;

5.2. the plaintiff could purchase shares in 2Up Gaming PLC from

Sussich or 2Up Holdings Pty Ltd;

5.3. that Sussich and or 2Up Holdings would sell shares to the

Plaintiff in 2Up Gaming PLC for $ 0.15, and

1 Para 5 Statement of Claim

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5.4. that Sussich and or 2Up Holdings would deliver to the

Plaintiff 346,667 fully paid shares in 2Up Gaming PLC on the

payment by the Plaintiff of $52,000.

7. It was conceded by the defendants that 2Up Holdings received a

cheque for $52,000, and furthermore there is no dispute that the

cheque was banked into its account. They say the shares were not

delivered up to the plaintiff but instead were delivered to a man called

Chabal Kanati and as will become apparent, they say that they were

entitled to do so.

The claim against Sussich under statute - a question of jurisdiction

8. A contest arose at the conclusion of the hearing in the course of oral

submissions and subsequently in written submissions filed and

exchanged between the parties after the reservation of decision about

the reach of the Australian Consumer Law2 (ACL) to natural persons

engaged in misleading and deceptive conduct. It was argued for

Sussich that the ACL applies to corporations and not persons and

therefore paragraph 11 of the plaintiff’s Statement of Claim was

defective in pleading that:

11 Further and in the premises, Sussich has engaged in conduct

in trade or commerce that is misleading or deceptive contrary to

section 18 of the Australian Consumer Law.

9. Section 18 (1) of the ACL is expressed in these terms:

A person must not, in trade or commerce, engage in conduct

that is misleading or deceptive or is likely to mislead or deceive.

10. Furthermore in Victoria the ACL was adopted into law by operation of

ss 7 and 8 of the Australian Consumer Law and Fair Trading Act 2012

(Vic) which was given Royal Assent on 8 May 2012 with the

2 The ACL is contained in Schedule 2 to the Australian Competition and Consumer Law

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commencement date for relevantly s 183 of that Act being 1 July 2012

and it provided that in its application the ACL may be referred to as

the Australian Consumer Law (Victoria) (ACLV). The ACLV had no

operative effect in regard to the conduct alleged against Sussich to

have occurred in September 2011.

11. The plaintiff cried foul of reliance by the defendants on such matters

so late in the proceeding. It is true that the issue was not raised at any

stage before the commencement of the proceeding and there were

opportunities to do in the course of interlocutory applications heard

before different Magistrates of the Court and by the Court as presently

constituted.

12. In any event the plaintiff argued that whilst it accepted that s 18 of the

ACL could not apply to the matters alleged to have occurred in

September 2011 nonetheless the Fair Trading Act 1999 (Vic) (FTA)

was in force at the relevant time and s 9 of the FTA was expressed in

sufficiently similar terms to s 18 of the ACLV which it submitted

applied to “persons”.

13. I do not accept as a matter of law that the effect of the ACLV applies

generally to “persons” as opposed to the ACL which applies to

corporations engaged in trade or commerce. There is no basis in the

Australian Consumer Law text to support this submission by the

plaintiff as a matter of general application.

14. On the final day of the hearing I granted the plaintiff leave to amend

its Statement of Claim by permitting the inclusion of “Vic” after the

words, “Section 18 of the Australian Consumer Law” as they

appeared in paragraph 11 of the Statement of Claim. The plaintiff

provided an “Amended Complaint” and “Amended Statement of

Claim” together with its written “Outline of Submissions”. The

amendments went beyond the specific and limited amendment

allowed. The defendants in the course of their own written

3 S 18 of the Act

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submissions objected to the grant of leave for the enlarged

amendments.

15. It was not appropriate for the plaintiff to plead and then rely in

submissions on amendments that went beyond the amendment that

was sought and allowed by the Court. The defendants submitted that

to permit the plaintiff to do so would be prejudicial to it coming as it

does after the evidence had concluded and the parties had closed

their cases. The defendants submitted that the further amendments

are not merely consequential on the limited leave that was allowed. I

agree. The amendments other than the amendment permitted to

paragraph 11 are disallowed. Whilst I have disallowed the enlarged

amendments made without leave, in the event that my decision to

disallow the further amendments is wrong, I am satisfied that their

allowance would not have altered the outcome of my decision.

16. I am also satisfied that the claim against the first defendant for

statutory misleading and deceptive conduct under the ACLV must fail

as there is no basis to claim that Sussich is caught by the statutory

prohibitions on misleading and deceptive conduct. However, in the

event that I am wrong in law in relation to this conclusion, and

conscious that the case occupied a number of days of hearing and

much oral and documentary evidence was produced together with

submissions, and that the real nature of the dispute between the

parties was well explored, I intend to proceed to state my reasons for

my decision on this part of the plaintiff’s claim because even had the

plaintiff’s claim alleging misleading or deceptive conduct by Sussich

not been brought, the nature of and extent of his involvement as a

director of 2Up Holdings and 2Up Gaming PLC was instrumental in

giving rise to the purported agreement and alleged breach relied on

by the plaintiff.

17. The plaintiff’s Complaint at paragraph 4 pleaded that:

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The First Defendant (Sussich) is and was at all material times

the

4.1. sole director of 2Up Holdings Pty Ltd;

4.2. secretary of 2Up Holdings

4.3. a director of 2Up Gaming PLC

18. The important element that the plaintiff would have been required to

establish in making good a claim for misleading and deceptive

conduct is whether it has satisfied me on the balance of probabilities

that the representations pleaded were made to it by Sussich and that

in reliance on them it entered an agreement with 2Up Holdings Pty

Ltd for the purchase of shares in 2Up Gaming PLC. In the event the

statements were made then the question would next have been if they

amounted to representations that were misleading or deceptive or

likely mislead or deceive.

Adequacy of Discovery

19. Throughout the course of the hearing the plaintiff made numerous

objections concerning the sufficiency of discovery. On occasions the

defendants raised objections too about the absence of documents

that it argued might have been expected to have been discovered by

the plaintiff but in the main the objections were put by the plaintiff.

Some of the objections made by the plaintiff fell at the periphery of

relevance to the matters raised on the pleadings. As well the plaintiff

made no application before the commencement of the hearing about

the failure to make discovery and, in fact on 4 August 2014, the

plaintiff told the Court that although it was unwilling to concede the

adequacy of discovery by the defendants, it did not intend to make

further application as regards to it. As well plaintiff made calls for the

production of documents during the hearing some of would not have

fallen into the category of documents I would regard as meeting the

requirement for discovery.

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Mohammad’s account

20. Mohammad said he was a longstanding friend of Kanati. Mohammad

said that in about July 2011 he had discussions with Kanati regarding

certain financial investments Kanati had made including, an

investment in “Consolidated Capital Investments” (CCI), a listed

company whose trading had apparently been suspended and in which

Kanati had suffered some losses as a result of his investment. Kanati

told Mohammad of certain investigations he had undertaken that

identified an involvement or connection in CCI by a man named Tony

Madaca. Madaca was involved in a business known as IVIC, located

in Spencer Street, Melbourne. I was told IVIC stood for “International

Vehicle Integrity Centre”.

21. Mohammad said that in about July 2011 in company with Kanati he

attended at IVIC. He understood that Kanati was to meet Madaca.

Mohammad said he was present during the meeting between them

and he heard what transpired. He said the manager of IVIC a man by

the name of Manny Stampopolous was also present. Mohammad said

that Madaca expressed sympathy to Kanati for his losses in CCI.

Maddacca then proposed to Kanati that he might consider purchasing

shares in a company called 2Up Gaming PLC at a discount rate.

According to Mohammad, Madaca told Kanati that he had shares that

he could sell and that Kanati could buy. Mohammad said that Kanati

agreed to buy $10,000 of shares in 2Up Gaming PLC. Madaca then

mentioned to Kanati that Sussich was a director of 2Up Gaming PLC.

He next told Kanati to obtain a cheque for $10,000 and to make it

payable to a company called X2Up. Mohammad said that he and

Kanati then left IVIC’s premises and a cheque obtained. They

returned to IVIC and Kanati handed over the cheque to Madaca.

Mohammad said that he was suspicious and he said to Madaca and

to Manny Stampopolous that the proposal sounded to him “like a

scam” because the cheque from Kanati was made payable to X2Up

and not 2Up Gaming PLC. Stamapopolous said that if that was his

opinion then perhaps the whole transaction should not proceed. There

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appears to be no involvement by Stampopolous in any of the

companies so far mentioned. However, the transaction did proceed

and the cheque from Kanati was handed over to Madaca. Mohammad

said Madaca then produced his telephone and showed them both that

2Up Gaming PLC was listed on the Frankfurt Stock Exchange.

22. Mohammad said that Kanati subsequently suggested to him that he

too should consider buying shares in 2Up Gaming PLC. Thus the first

person to suggest a purchase of shares by Mohammad was Kanati

and not Madacca. Whether Kanati was suggesting a purchase of

shares by Mohammad or by the plaintiff was not explained in the

evidence but certainly the language used by Mohammad in his

evidence in chief was consistent with a discussion that concerned a

purchase by him and not the plaintiff. Indeed on Mohammad’s

evidence the existence of the plaintiff had not been raised in any

discussions at this point in time. Mohammad said that he told Kanati

that he would need to meet Sussich before making any decision to

invest in the company. Mohammad said that the suspicions he had

expressed in the meeting between Madaca and Kanati and

Stampopolous had been somewhat if not entirely assuaged by seeing

the telephone listing on the Frankfurt Stock Exchange shown to him

by Madaca at the end of the discussion in July 2011. He said that

Kanati told him that he would arrange to have him meet Sussich and

therefore he would see that “it is alright”. Again the evidence that

Kanati would broker a meeting for Mohamamd with Sussich and not

Madaca. Mohammad said he subsequently made his own enquiries

about 2Up Gaming PLC and he recalled seeing it reported as having

a capitalisation of between €200 or 300 million.

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The attendance by Sussich

23. Mohammad said that in late August or early September 2011 he was

again in the company of Kanati and they attended at IVIC.

Mohammad said that Madaca was present as too was Sussich.

Although Mohammad said that Stampopolous was in attendance

nothing else was made of that fact.

24. Mohammad said that some matters of generality were exchanged and

the was then asked by Madaca to look at a letter of demand

addressed to 2Up Gaming PLC from a company called Murana Park

Pty Ltd. Mohammad said that he could only recall that the letter

comprised a demand for a substantial number of shares in 2Up

Gaming PLC arising from an alleged breach of agreement. Madaca

asked Mohammad to comment on the letter but that he declined to do

so because, as he put it, he was a newly admitted solicitor and did not

think he was in a position to give advice.

25. Mohammad said that Sussich made various statements to him about

2Up Gaming PLC and, in particular, its attractiveness in the market

including to James Packer, a businessman of note, from whom an

expression of interest to buy the company had been forthcoming but

whose overtures Sussich had declined because he wanted to hold on

to the company as he believed it would produce a “5 to 10 fold

increase on investment over time”. Mohammad said he then asked

Sussich if he “would do us a deal”. He said that Sussich said that

there was a limited amount of shares left and that although they were

trading at 0.30 cents “he would sell them to me at a discount” of 0.15

cents a share but they would be held in escrow for three months.

Mohammad testified that he understood the purchase price of 0.15

was referrable to the AUD but he could not remember whether the list

price of the shares was expressed at $0.30 AUD cents or Euro cents.

Mohammad told Sussich that he wanted to buy “approximately

$50,000 worth of shares” and Sussich replied, "No problems”.

Mohammad said he would need approximately 2 to 4 weeks to get the

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money together. Mohammad said a discussion followed about the

identity of the payee for the cheque. Sussich told him to make the

cheque payable to 2Up Holdings Pty Ltd. Despite the payee not being

2Up Gaming PLC, Mohammad raised no query of the type he

expressed in July at the time of the Kanati purchase. Mohammad said

that Sussich instructed him that when he when he had obtained the

cheque to bring it to IVIC and to give it to Madaca.

26. I gather that Mohammad used the plaintiff as a vehicle for buying and

selling shares for his benefit. Mohammad says that approximately a

month later he obtained the funds required for the purchase of the

shares in 2Up Gaming PLC after he sold some mining shares he had

been trading through the plaintiff. Mohammad purchased a bank

cheque dated 29 September 2011 in the amount of $52,000 made

payable to 2Up Holdings Pty Ltd. The cheque did not identify the

plaintiff. Mohammad said that the monies for the purchase of the

bank cheque and the cheque itself came from three sources:

$519.00 from his personal bank account;

$49,000 from the Green Advantage account; and

$2,000 in cash.

The delivery over of the bank cheque for $52,000 on 29 September 2011

27. Mohammad says he went home, copied the bank cheque and went to

IVIC where Madaca was present. Sussich was not present.

Mohammad handed the bank cheque for $52,000 to Madaca.

Mohammad said he told Madaca that he wanted a share certificate for

his allotment made in the name “Green Advantage”. Madaca said he

would make sure Sussich “got it”. Mohammad said that he reminded

Madaca that the cheque was for shares in 2Up Gaming PLC and to

be issued in the name of the plaintiff

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28. This is the first occasion in the narrative of relevant conversations that

the plaintiff is mentioned or identified and it occurs at a point in time

after the conduct engaged in by Sussich and relied on by the plaintiff

as constituting the misleading or deceptive conduct in early

September 2011 that induced the plaintiff to agree to purchase shares

in 2Up Holdings Pty Ltd.

29. Thus at no stage to this point in time had Mohammad made mention

to Sussich of Green Advantage or that he was a director of any

company. Apart from this I find it peculiar that having expressed

scepticism about the genuineness of the $10,000 of shares

purchased by Kanati in 2Up Gaming PLC because of the lack of

correlation between the identity of the payee and the company in

which shares were to be purchased that Mohammad was willing

without demur to provide a bank cheque for $52,000 made payable to

2Up Holdings Pty Ltd for a purchase of shares in 2Up Gaming PLC.

30. For whose benefit the shares were intending to be being purchased is

uncertain on Mohammad’s evidence. The conversation relied on by

Mohammad with Sussich in which he asked if Sussisch would “do us

a deal” and indeed the entirety of the conversation he testified about

is as consistent with the purchase being made by him or by him and

Kanati and not Green Advantage of whom no mention had been

made.

31. As best as Mohammad can recall it was approximately 2 to 5 months

later that he and Kanati again attended at IVIC. He said that Madaca,

Stampopolous and Sussich were present. He said that Sussich was

excited and said that he had just traded shares in 2Up Gaming PLC

and been able to purchase a boat. Mohammad said a discussion then

followed in relation to another of Susich’s companies, Australian

Brewing Company. He said Sussich was also excited about its

performance. Mohammad said he asked Sussich, “What is happening

with 2Up? I still haven't got my share certificate” and that Sussich

said: "Don't worry; I am taking care of it. It will be issued shortly”.

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Mohammad said he added, "Don't forget, Green Advantage” to which

Sussich replied, "Don't worry I am on top of it."

32. This conversation is of importance for the plaintiff because it is the

first occasion that Mohammad testified about in which he expressly

gave a direction to Sussich that the purchased shares were to be

issued to the plaintiff. It was put to Mohamed in cross-examination

that that at no stage did he ask for the shares. Sussich in his evidence

denied having been asked by Mohamed for the shares to be issued in

the name of the plaintiff or that Mohammad prevailed on him by words

such as "Don't forget, Green Advantage". I prefer the evidence of

Sussich on this matter.

33. Mohammad’s evidence is that thereafter and from time to time as

circumstances permitted, he attended at IVIC’s premises. He said that

on some of these occasions Sussich was present who would tell him

that the situation with the shares was under control and that share

certificates were in the process of being issued. On another occasion

Mohammad said that Madaca told him that the shares were still in

escrow but he should not worry.

34. Mohamed said that by late January or early February 2012 he had

obtained employment with a law firm and he was focused on his job

and his admission as a practitioner. He said that any time he found

himself in the city he would make time to attend at IVIC. He thought

that he might have attended on IVIC some six times. Mohamed said

that on some occasions he had discussions with Madaca. He

maintained that Madaca told him that the money was in escrow and

would be released in 2 to 3 months time and that this explanation for

delay was a recurring theme. Under cross-examination he accepted

that he could not recall Sussich being present on any specific

occasion.

35. As 2011 progressed with nothing happening Mohammad said that in

about September or October 2011 he became aware that Kanati was

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intending to purchase further shares in 2Up Gaming PLC over and

above the $10,000 of shares he had purchased in July 2011 although

he said that he was unaware at the time of the number of additional

shares Kanati intended to purchase or the details of price per share

that he was to purchase them at. There was no suggestion in the

hearing that Kanati had not received the shares in 2Up Gaming PLC

purchased by him in about July 2011.

36. More time elapsed and Mohammad said that it was towards the

middle to late 2013 that he became increasingly suspicious. By

solicitors’ letter dated 24 January 2014 a letter of demand was sent to

2Up Holdings Pty Ltd (Ex D3). The content of the letter although brief,

is consistent with the underlying claim advanced in the proceedings

by the plaintiff.

37. I am satisfied that Mohammad and Kanati were longstanding friends. I

am satisfied that Mohammad had used the plaintiff as vehicle for

certain purchases and sales of shares for his benefit. I find that

Mohammad accompanied Kanati to IVIC in July 2011 when a meeting

occurred between Kanati and Madaca. I am satisfied that Madaca

was at that stage a shareholder in 2Up Gaming PLC. Sussich

however was not in attendance on that occasion.

38. I am also satisfied that Mohammad was again present with Kanati at

the IVIC offices in early September 2011and that on this occasion

Madaca met with Sussich for the purpose of purchasing shares in

2Up Gaming PLC.I am satisfied however by the evidence Sussich

gave that Mohammad was not privy to the conversation that occurred

between Sussich and Madaca in private at the IVIC offices in early

September 2011. Furthermore I am satisfied from the evidence of

Sussich that his conversation with Madaca was in the order of 30

minutes. I am satisfied that Mohammad and Kanati were in reception

when Madaca and Sussich went into private conversation and that

they were in reception at the conclusion of the meeting.

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39. I am satisfied on the evidence of Sussich that on the afternoon of 29

September 2011 Sussich attended at IVIC and was provided a

cheque for $52,000 from Madaca for the purchase of shares in 2Up

Gaming PLC.

Misleading and deceptive conduct

40. The plaintiff relied on a claim of misleading or deceptive conduct by

way of oral representations made by Sussich to Mohammad. As

already flagged, the defendants put in issue to whom any statements

of the type alleged were made.

41. If representations are made to a company they can of course only be

acted on through the proper officers of a company, such as a director.

The plaintiff is a single director company. Therefore, if any

representation was made by Sussich to the plaintiff it can only have

been communicated to Mohammad. Of course the mere fact that a

statement if made to a person who happens to be a director of a

company will not be sufficient of itself to mean that the statement was

made in the relevant sense to that company and that a company has

been misled. The context in which statements are made and the facts

known to the relevant parties at the time are important.

42. When representations are relied on as giving rise to damage it is an

essential to make out a cause of action and prove loss or damage

that the plaintiff is correctly identified. This is not merely a requirement

as a matter of form4. It is a substantive requirement. In the course of

Mohammad’s oral evidence, there was considerable “slippage” in him

identifying the intended purchaser of shares in 2Up Gaming PLC. I

found this extraordinary given that Mohamed is a qualified lawyer and

admitted to practice and a director of a company that would appear to

have traded in shares and utilised the services of a stock and

securities broker.

4 Butcher v Lachlan Elder Realty Pty Ltd [2004] 218 CLR 592 at 605

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43. Under careful cross-examination, Mohammad twice agreed with

counsel for the defendants that his conversations with Sussich were

consistent with an intended purchase of shares in 2Up Gaming PLC

by him and not the plaintiff. I am not persuaded that it is a sufficient

answer made on behalf of the plaintiff to suggest that such use of

identifying language by Mohammad in giving evidence was

inadvertent or lacked sufficient nous to appreciate and distinguish the

separate corporate personality of the plaintiff despite Mohammad

occupying the position of a single directorship and sole shareholding

of the plaintiff.

44. In relation to the reliance placed by the defendants on this issue, the

plaintiff’s counsel decried the legitimacy of recourse by the

defendants to what he described as a “positive defence” in light of

largely “bare denial” defences filed on behalf of the defendants. Whilst

this characterisation of the defences filed in the proceeding has

substance, nonetheless directions were made by me before the

commencement of the hearing in part to address this concern and I

ordered that each party file and serve points of contention. They each

did so. The defendants’ contentions expressly put in issue the matter

whether if the alleged representations were found to have been made

they were made to the plaintiff or Mohammad5. I am not satisfied that

the plaintiff was unaware or was prejudiced because the issue was

not pleaded out by defendants.

45. Furthermore Mr Harrison for the plaintiff argued that the objection

relied on by the defendants that if the representations were found to

have been made to Mohammad they were not made to the plaintiff

and so the plaintiff could not have been misled were ‘facile’6. Mr

Harrison referred to s 159(1) of the FTA, which was expressed this

way:

5 Defendant’s Statement of Facts, Issues and Contentions dated 20 August 2014 (Para 18) 6 Written submissions of plaintiff

17

A person who suffers loss, injury or damage because of a

contravention of a provision of this Act may recover the amount

of the loss or damage or damages in respect of the injury by

proceeding against any person involved in the contravention.

46. The plaintiff then noted that although s 236(1) of the ACLV is

differently worded its purport is to the same effect. It provides that:

If:

(a). a person (the claimant) suffers loss or damage because of

the conduct of another person; and

(b). the conduct contravened a provision of Chapter 2 or 37;

the claimant may recover the amount of the loss or damage by

action against that other person, or against any person involved

in the contravention.

47. However, the provisions relied on do not provide a complete or

sufficient answer to the objection by the defendant. The allegations

made by the plaintiff in the proceeding is not that the conduct

complained of by Sussich was directed to a class or classes of likely

consumers but rather that it was directed at it. Therefore, I would have

been required to be persuaded by sufficient evidence that when

Sussich is said to have engaged in the relevant conduct it was

directed to the plaintiff or to Mohammad. If there was misleading or

deceptive conduct or conduct that was likely to mislead or deceive

that was directed at Mohammad could the plaintiff have relied on any

loss it suffered as a result of action taken by Mohammad as the

director and shareholder of it. That would depend.

48. In Butcher v Lachlan Realty Pty Ltd8 the High Court has said that

where the conduct engaged in involves not a class of persons but

rather identified persons then the task of the Court is to undertake an

7 This includes the prohibition on misleading and deceptive conduct contained in s 18 of the ACLV 8 Op cit

18

analysis of the relevant conduct in relation to the plaintiff alone and

bearing in mind what matters of fact each knew about the other as a

result of the nature of their dealing or which each is to be taken to

have known.

49. Applying this methodology, and had I been required to determine the

claim for misleading or deceptive conduct engaged in by Sussich,

then I would have been satisfied that at the time of the conduct relied

on by the plaintiff, Sussich was unaware of the existence of Green

Advantage, a fact that Mohammad acknowledged in the course of his

cross-examination in which he accepted that the existence of Green

Advantage was not disclosed until a subsequent point on 29

September 2011 and on that occasion it was disclosed to Madaca

and not Sussich whom Mohammad agreed was not present when he

gave the bank cheque to Madaca with an oral direction to convey to

Sussich that the shares were to be issued in the name of the plaintiff.

50. Efforts were made in the plaintiff’s case to raise such a degree of

connection between Madaca and Sussich as to have me conclude

that Madaca was acting as an informal agent for Sussich. I do not

accept this. I accept that when Mohammad was introduced to Madaca

he was an existing shareholder in 2Up Gaming PLC and that he knew

Sussich. It is also the case that Madaca’s daughter had worked for

one of the Sussich companies. In addition Kanati came to be

introduced to Sussich and make purchases in shares of 2Up Gaming

PLC through an introduction brokered by Madaca. However, Madaca

did not tell Mohammad that he had any special entre with Sussich and

I do not accept that that Madaca was an agent for Sussich or any of

his companies let alone would I have been prepared to assume that

Mohammad acted on any such assumption in his dealings and that if

he did, that I should regard that as conduct by Sussich.

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The pleaded representations

51. I deal first with the representation relied on by the plaintiff at

paragraph 5.4 of the Statement of Claim :

that Sussich and or 2Up Holdings would deliver to the Plaintiff

346,667 fully paid shares in 2Up Gaming PLC on the payment

by the Plaintiff of $52,000.

52. This is the significant allegation in terms of representational conduct

engaged in by Sussich. I would not have been satisfied by the

evidence of Mohammad that this representation was made out. As

already noted the plaintiff was not mentioned until 29 September

2011. I would not have been satisfied that the claim has been

established and that the plaintiff had discharged its obligation to

satisfy me that any representation of the type was made by Sussich to

Mohammad and upon which the plaintiff acted. Although it was

pleaded that Sussich made the representation “In September 20119”

Mohammad’s evidence identified the statement as made by Sussich

in early September 2011. I would have been satisfied that Sussich

cannot have made a representation to the plaintiff at that time

because he was unaware of the plaintiff. There are other evidentiary

problems that otherwise beset the plaintiff’s allegations.

53. Mohammad was asked directly whether the conversation he had with

Sussich in September 2011 made reference to 346,667 shares, and

he said that it did not. In addition it was not explained in Mohammad’s

evidence why the amount paid over by him was $52,000 when his

oral evidence was for an agreement to spend “approximately

$50,000”. The agreement pleaded in the Complaint is expressed as

one for a payment of “$52,000 for 346,667 fully paid shares”. Whether

an agreement was struck for a “specific dollar spend” or a specific

number of shares, based on a representation by Sussich, the

evidence led by the plaintiff is questionable, and I am would have

9 Para 5 Statement of Claim dated 31 January 2014

20

been unwilling to find in the plaintiff’s favour. Ultimately having

listened to Mohammad I would not have had confidence that he had

established that the words alleged to have been spoken by Sussich

were uttered or if they were, that they were spoken with a degree of

sufficient precision to amount to misleading conduct or that ther were

likely to mislead or deceive.

54. In Campbell V Backoffice Investments Pty Ltd (2009) 238 CLR 304

French J said spoke of the “practical distinction” between the

approach to characterisation of conduct as misleading or deceptive

when the public is involved, on the one hand, and where the conduct

occurs in dealings between individuals on the other. In the latter case

and making reference to the earlier decision of Butcher v Lachlan

Realty Pty Ltd, French J said:

In the case of an individual it is not necessary that he or she be

reconstructed into a hypothetical “ordinary person”.

Characterisation may proceed by reference to the

circumstances and context of the questioned conduct. The state

of knowledge of the person to whom the conduct is directed may

be relevant, at least in do far as it relates to the content and

circumstances of the conduct.

55. Trite though it may be, claims based on statutory misrepresentation

will fail if the representation is true. Mohammad admitted that the

representation pleaded at paragraphs 5.1, 5.2 and 5.3 of the

Statement of Claim were true. He admitted that he was not misled.

Mohammad claimed that he was told that the shares in 2Up Gaming

PLC were trading on the Frankfurt stock exchange at $.30.

Mohammad said that he had made his own enquiries and found the

shares in 2Up Gaming PLC were indeed trading on the Frankfurt

stock exchange at the time.

21

56. Beyond the admissions made by Mohammad that he was not misled,

the allegation at paragraph 5.2 of the Statement of Claim, is that

Sussich told Mohammad that the plaintiff could purchase shares in

2Up Gaming PLC from Sussich or 2Up Holdings Pty Ltd. The

defendants deny this. I would have been satisfied that this

representation must fail. I would not have been satisfied as a matter

of fact that Sussich was aware of the plaintiff at the time and so could

have as a matter of fact made the statement attributed to him.

However, and in any event, the plaintiff’s case was that it did

purchase shares in 2Up Holdings Pty Ltd and hence even had I

determined as a matter of fact that the statement was made, the vice

alleged in the representation is not that the statement was untrue, but

rather that the shares having been purchased they were not issued to

the plaintiff or delivered up to the plaintiff but instead to Kanati

contrary to the representation.

57. As to the representation pleaded in paragraph 5.3 of the Statement of

Claim, the plaintiff alleged that the Sussich represented that he and or

2 Up Holdings Pty Ltd would sell shares to the plaintiff in 2Up Gaming

PLC for $0.15 "per share". The defendants denied making this

representation and I accept Sussich’s denial.

58. Mr Hancock of counsel for the defendants contended that if in fact

each of the statement’s pleaded in paragraph 5 of the Amended

Statement of Claim were found to have been made by Sussich and

amounted to representations then each statement was true and was

not misleading or deceptive. It was argued too that the statements

attributed to Sussich in particular those concerning the third and

fourth pleaded representations were in any event in the manner and

nature of an expressions of intention and not actionable as

misrepresentations. On this point, I disagree with the defendants’

submission. Each of the matters pleaded are on their own terms

capable of meeting the definition of representations had I been

required to determine the matter.

22

59. It is however sufficient in order to dispose of the plaintiff’s claim to

state that I would not have been persuaded that it had established

that Mohammad entered an agreement with 2Up Holdings to

purchases shares in 2Up Gaming PLC for the plaintiff based on the

statements attributed to Sussich. I have serious reservations in

placing reliance in much of Mohammad’s evidence and I was not

persuaded for any good reason about the lack of a record of audit to

identify the transactions entered for the plaintiff by him as director.

60. Mohammed agreed with Mr Hancock that as the sole director of the

plaintiff he was responsible for all documents regarding the

preparation of the financial accounts on its behalf. Mohamed agreed

that the purchase of shares by the plaintiff would be recorded on its

balance sheet. He also agreed that expenditures by the plaintiff would

be accounted for in its financial records for a relevant financial year. If,

for example, the sum of $52,000 represented the amount of the bank

cheque for the purchase by the plaintiff of shares in 2Up Gaming

PLC, then it ought to have been reflected in an entry in the financial

accounts of the plaintiff. That was not however the case. In fact the

plaintiff did not discover any record that related to the purchase of any

such of the shares in question, or for example, monies borrowed by it

by way of loan for the cost of the purchase of the shares. There is not

for example a record of a transfer of monies referrable to the share

purchase from any bank account operated by Mohammad or even for

example by way of loan from him to the plaintiff. The sum of $519.00

said to have been paid by Mohammad from his personal account is

not recorded as a loan to the plaintiff in its financial accounts or

otherwise. The sum of $2,000 cash paid towards the purchase of the

bank cheque is also not recorded in the financial statements of the

plaintiff. The absence of records of the plaintiff lends further doubt that

Mohammad transacted for the plaintiff.

23

Susich testifies

61. Sussich is a director of 2Up Gaming PLC. He is also a director of

Matmun Holdings, accompany listed on the London Exchange. He is

also a director of 2Up Holdings Pty Ltd and other online gaming

companies. He is also a director of Matmun Holdings Pty Ltd.

62. Sussich said that on 29 September 2011 he received a telephone call

from Madaca who asked him to come by and collect a cheque “for

more shares to be purchased by him”. Sussich said under cross-

examination that at the time of the contact being made, Madaca held

a portion of unpaid shares in 2Up Gaming PLC and Sussich thought

the cheque he mentioned might have been intended to be applied on

that account or possibly to be applied to further share purchases by

him in 2Up Gaming PLC.

63. Sussich attended at IVIC and Madaca gave him a cheque for $52,000

and also $6,000 in cash and said that he would get back to him and

let him know into which entity the shares were to be issued. The

money was banked into 2Up Holdings Pty Ltd bank account and

Sussich said that he thereupon told Peter Lombardo who maintained

the share register for the company that “we would wait for advice on

the allocation of the shares”.

64. Sussich said that when he arrived at IVIC on 29 September 2011 that

Kanati and Mohamed were in attendance in the reception area. He

said that he and Madaca went into Madaca’s private office. He said

Madaca told him that wanted additional 2Up Gaming PLC shares. He

said that their discussion lasted about 30 minutes at the end of which

he left. He said Kanati and Mohammad were still seated together

when he left. He had no discussion with them.

65. Sussich denied having any discussion to do with shares with

Mohammad. He denies he made any mention of James Packer.

24

He denied ever receiving a sheet of paper that had the plaintiff’s

name written on it. Sussich denied having purchased a boat as a

result of the success from the sale of shares in 2Up Gaming PLC

although he conceded in cross-examination to having owned 2 boasts

in the past. He thought that Kanati who knew about this might have

told Mohammad which would account for Mohammad’s boating

reference.

Dispute with Kanati

66. Sussich described a dispute that subsequently arose with Kanati

concerning a previous share allotment in 2Up Gaming PLC and of

how it was ultimately resolved by an agreement that was struck for an

allocation to Kanati of additional shares. Some 700,000 shares in 2Up

Gaming PLC was allocated to Kanati from Matmun Holdings Pty Ltd

some of which shares had been partly paid and with the balance paid

from monies including the amount of $52,000 from the plaintiff.

67. Sussich said that the 700,000 allocation of additional shares to Kanati

was a partial settlement that was brokered and came to fruition in late

2012. In addition and also in late 2012 a direction was given by Kanati

to Madaca as to the issue of shares he purchased and this amount for

the purchase was made up of amounts paid over to 2Up Holdings Pty

Ltd including an amount of $52,000 from the plaintiff. Therefore the

monies represented by the $52,000 cheque given to Sussich by

Madaca on 29 September 2011 was in November 2012 allocated to

fund the further shares in 2Up Gaming PLC provided to Kanati as a

resolution of the dispute.

68. The documents put in evidence confirm the chronology of events

testified to by Sussich including, that on 10 October 2011 2Up

Gaming PLC wrote to Kanati setting out the terms on which a further

700,000 shares would be issued to him at 30 cents per share for a

total sum of $210,000. On 10 October 2011, Matmun Holdings Pty Ltd

caused a transfer to Kanati of 700,000 shares in 2Up Gaming PLC.

25

On 12 October 2011 Kanati signed a share subscription for 700,000

shares.

69. Mr Harrison submitted that I should conclude that Sussich was an

unreliable witness and a witness of untruth. I disagree. I found

Sussich to be a straightforward and very largely accurate historian of

dates and events. He had a good command of facts and the history of

the varied dealings in the shares of 2Up Gaming PLC. His account

was elementary, that having been provided an unidentified bank

cheque for $52,000 by Madaca and not anyone else on 29 September

2011, and being told that it was for a purchase of shares in 2Up

Gaming PLC in whose name such shares were to be issued would be

advised at a later time that the cheque was banked and that at the

end of 2012 he received a direction from Kanati that included as the

allocation of price that had been paid by him for his further shares in

settlement of the dispute that had arisen an amount of $52,000 from

Green Advantage. Sussich said he had no reason to be alert to or

question the identities behind Green Advantage. I agree.

Lombardo’s evidence

70. Peter Lombardo testified. He is a director of 2Up Gaming PLC having

been appointed in July 2011. He is also charged with maintaining its

share register. He explained that 2Up Gaming PLC does not hold or

operate a bank account in Australia and therefore the money received

for the purchase of shares in it are deposited into the 2Up Holdings

Pty Ltd bank account.

71. Lombardo said that as part of sorting out the dispute that had arisen

with Kanati that he undertook a process of reconciliation of shares

issued and monies paid10. He subsequently learned by letter from

10 Ex P8

26

Kanati11 that the amount was then used he was arguing he had not

been issued all his entitlement in 2Up Gaming PLC.

72. Lombardo said he agreed to an issue of 700,000 additional shares to

Kanati to make good matters in dispute that had arisen with Kanati

over the price he paid for shares of $210,000, equating to a purchase

price of 0.30 per share. An agreement was struck.

73. Lombardo’s evidence addressed various pieces of the

correspondence that passed between the parties including the

documents of October 2011 in respect to the further share purchase

by Kanati in 2Up Gaming PLC of 700,000 shares at $.30 per share

amounting to $210,000 AUD and including the transfer from Matmun

Holdings Pty Ltd of 700,000 shares in 2Up Gaming PLC to Kanati.

Ultimately a total of 1,050,000 shares were transferred to Kanati. By

letter from Kanati dated 21 November 201212 he confirmed that the

$52,000 bank cheque drawn by the plaintiff as part payment, along

with various other payments also made payable to 2Up Holdings Pty

Ltd was to be applied for the purchase of shares in 2Up Gaming PLC.

74. It is apparent from the evidence given by Sussich and Lombardo, and

I am satisfied, that a dispute had arisen with Kanati as a result of a

belief he apparently held that he had been short-changed in

connection with the purchase of shares in 2Up Gaming PLC

inconsequence of which an agreement was struck for a "top up" of

shares as a process to avoid a furtherance of the dispute and to bring

matters to conclusion.

11 Ex D6 12 Ex D6

27

The contract claim

75. The parties agreed that the questions that arise in regard to the

contract claim are:

( i) Did the plaintiff enter into an agreement with the second

defendant and if it did what were its terms

( i i ) If an agreement existed was breached by the second

defendant by a failure to issue shares to the plaintiff

( i i i) If there was a breach of any agreement as the plaintiff suffered

any loss by reason of it.

76. It is already plain from my reasons that I am not satisfied that the

plaintiff entered an agreement with 2Up Holdings Pty Ltd. Also I am

not satisfied that an agreement was made for the purchase of a

specific number of shares or that there was agreement of the amount

to be paid. Mohammad accepted that neither the number of shares

nor the amount pleaded of $52,000 was discussed. The best that can

be said is that a cheque was procured for $52,000 and provided to

Madaca by Mohammad.

77. I have already said that I prefer the evidence of Sussich to that of

Mohammad and have found that that there was no conversation

between them as claimed by Mohammad and therefore to the extent

the offer depends on the oral offer to sell by Sussich, the claim fails.

78. I reject the claim that there was concluded agreement made between

the plaintiff and 2Up Holdings Pty Ltd. At relevant times all pertinent

transactions appear to have been conducted for and on behalf of

Mohamed and not the plaintiff. The plaintiff's financial statements to

the relevant period are in evidence and as I have already mentioned

they fail to disclose any movement of funds whether by purchase,

loan or other means for the acquisition of the shares. In any event if I

28

am wrong on that matter then I am however not satisfied that there

were meaningful or comprehensible or certain terms of any

agreement. The agreement pleaded at paragraph 6 of the Statement

of Claim is that the plaintiff agreed with 2Up Holdings Pty Ltd that the

plaintiff would pay the 2Up Holdings Pty Ltd $52,000 for 346,667 fully

paid shares in 2Up Gaming PLC. I have already referred to the

absence of any clear statement of the precise number of shares that

were to constitute the purchase order making good the contract and

other uncertainties in the evidence given by Mohammad including the

identity of the contracting parties, and of course the rejection by me of

the accounts given by Mohammad of his conversations with Sussich.

79. What can be said with certainty is that a bank cheque for $52,000

payable to 2Up Holdings Pty Ltd was handed to Madaca.

Subsequently Madaca handed the cheque to Sussich, who then

banked it into the 2Up Holdings bank account. There is no evidence

that Sussich knew of the source of the funds making up the bank

cheque at the time the cheque was handed over. There is nothing

pleaded that he had any obligation of the type.

Jones v Dunkel

80. It is not an infrequent occurrence that parties seek to call in aid the

principle arising from the decision in Jones v Dunkel13 that by reason

of the unexplained absence of a party to call a witness whom it could

be expected a party would call that the Court can and should draw an

adverse inference that the failure is due to the fact that had the

witness been called the evidence would not be favourable to the

party.

81. I think that a Court should be cautious in too readily acceding to an

application to draw an adverse inference. In this case the defendants

submitted that such an inference is warranted from the plaintiff’s

failure to call or provide an explanation for not calling evidence from

13 (1959) 101 CLR 298

29

Madaca and Kanati. The two witnesses are not like in nature and their

absence warrants individual consideration. By the same token the

plaintiff submitted that an adverse inference should be drawn by

reason of the defendants’ unexplained failure to call the same two

witnesses.

82. Madaca was not called as a witness to give evidence. It could have

been reasonably assumed he would. But by whom? A subpoena was

issued by the solicitors for the defendants but it seems it was not

served. Mr Harrison submitted that Madaca was a witness in the

camp of the defendants and it would have been expected that they

would call him. There is a superficial attraction to this submission but I

am not minded to accept it. Presumably the plaintiff would have it that

an inference should be drawn that had Madaca been called by the

defendants he would have testified to having told Sussich that the

cheque for $52,00 was for the purchase by the plaintiff of shares in

2Up Gaming PLC. This is one of the positive allegations made by the

plaintiff and it does not strike me as apparent that it lay with the

defendants’ camp to call Madaca to testify to something that it is

alleged Madaca did as a result of a specific direction by Mohammad.

Nor am I persuaded that I should assume that Madaca in the

defendants’ “camp” True it is that he was a shareholder in 2Up

Gaming PLC but I find no basis to find that he was an agent of the

defendants and at no time does Mohammad contend that he was led

to believe as much. Furthermore there is no property in witnesses and

it was open to the plaintiff to seek to call evidence from Madaca. I am

not persuaded that I should draw an adverse inference against the

defendants by reason of their failure to call Madaca. By comparison

would it be appropriate to draw an adverse inference by reason of the

unexplained failure of the plaintiff to call evidence from Madaca?

Certainly I think there is a much stronger basis to form a view that I

should. Based on Mohammad’s testimony, it would have been

anticipated that Madaca would have corroborated the evidence of

Mohammad that Sussich was fixed with the relevant knowledge of the

30

source of the bank cheque and the direction into whose name the

shares were to be issued as far back as September 2011. These

being matters that were denied by the defendants it is odd that he

was not called. However given my unfavourable findings and non

acceptance of the dealings alleged by Mohammad and Sussich it is

unnecessary for me to draw an adverse inference.

83. However, I think that the fact of the absence by the plaintiff to call

evidence from Kanati is altogether different. He was the avowed and

longstanding friend of Mohammad and he was also the person who

became the recipient, improperly as the plaintiff would have it, of its

misdirected largesse to the extent of $52,000. I have had regard to

the denial by Mohammad under cross-examination that Kanati had

been a client of his or that he had acted for him in any legal

proceedings. Mohammad said that although he had advanced small

sums of money to Kanati in the past, he had never given him money

to purchase shares and neither had the plaintiff ever done so.

However as regards the capacity in which he attended with Kanati at

IVIC in July 2011,he said in response to questions under cross-

examination that he did so an adviser and also as a prospective

purchaser of shares.

84. It is also the case that it was Kanati who created and sent various

documents to 2Up Holdings Pty Ltd as to the ultimate direction to be

made of the plaintiff’s $52,000. I do draw an adverse inference by the

plaintiff’s failure to call Kanati or explain his absence and that bhis

failure is consistent with an inference that had he done so, he would

not have confirmed the plaintiff’s claim as to the use made of the

amount of $52,000.

85. In assessing the plaintiff’s claim I have also had regard to

Mohammad’s delay and failure in taking any action about the failure to

deliver up the shares to the plaintiff for as long a period of time as

transpired. I regard the delay as being in the mix of competing factual

considerations and as a matter that adversely affects the credibility of

31

the plaintiff’s claim of the existence of an agreement with 2Up

Holdings Pty Ltd for the purchase of shares by it in 2Up Gaming PLC.

No demand for a transfer of the shares was at any relevant time made

by the plaintiff and other than a letter of demand as a precursor to

litigation, Court proceedings were not commenced until 31 January

2014. The plaintiff did not make a subscription application for the

shares in 2Up Gaming PLC and neither did the plaintiff make a

transfer of shares application. Mohammad’s explained his delay by

reason that he was busy in his profession and was also embarrassed

by his actions. I found his explanations for his inertia given the

amount of the alleged purchase to ring hollow.

86. On the balance of probabilities, I am not satisfied that there existed an

intention on the part of the plaintiff to purchase shares at all. I regard it

as probable that Mohammad intended to provide funds to enable a

purchase whether by himself or in concert with Kanati of shares in

2Up Gaming PLC. What the arrangement between them may or may

not have been is unknown and not a matter necessary for me to

determine as it is sufficient that I am satisfied that no concluded

agreement existed between the plaintiff and 2Up Holdings Pty Ltd. I

am not persuaded that there is any basis to disturb the actions taken

by 2Up Holdings Pty Ltd who on my findings of fact had no reason to

be put on alert to the direction of the $52,000 provided in writing by

Kanati.

87. Therefore the plaintiff’s claim is dismissed with costs.

88. I will reserve liberty to apply within 7 days.

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