BJEK Pty Ltd as trustee for the EL and SL Fogarty Family Trust v Henbury Cattle Co Pty Ltd - [2021] NTSC 16

CITATION:BJEK Pty Ltd as trustee for the EL and SL Fogarty Family Trust v Henbury Cattle Co Pty Ltd & Ors [2021] NTSC 16
PARTIES:BJEK PTY LTD (ACN 105 399 675) as trustee for the EL AND SL FOGARTY FAMILY TRUST

v
HENBURY CATTLE CO PTY LTD (ACN 169 887 629)
and
CROSS COUNTRY FUELS PTY LTD (ACN 080 235 927)
and
ANDERSON, Ashley Robert
and
FAR MANAGEMENT PTY LTD
(ACN 065 559 613)
and
ROHAN, David
and
ANDERSON, Neville

TITLE OF COURT:  SUPREME COURT OF THE NORTHERN TERRITORY
JURISDICTION:  SUPREME COURT exercising Territory jurisdiction
FILE NO:59 of 2016 (21631761)
DELIVERED:  23 February 2021
HEARING DATE:  28 January 2021
JUDGMENT OF:  Kelly J

CATCHWORDS:
ASSESSMENT OF DAMAGES – damages for conversion of cattle – assessment to be based on the average selling price of cattle in the final year in which cattle were converted – direct selling costs to be deducted – evidence that no additional mustering costs would have been incurred if converted cattle had been on the station – no deduction for mustering costs
Supreme Court Rules 1987 (NT), R 59.02(3)
Sellars v Adelaide Petroleum N.L. and Others (1994) 179 CLR 332, referred to
REPRESENTATION:
Counsel:
Plaintiff:A Harris QC with N Floreani
Defendants:P Franco QC
Solicitors:
Plaintiff:Bowden McCormack
Defendants:Ward Keller
Judgment category classification:    B
Judgment ID Number:  Kel2106
Number of pages:  15

IN THE SUPREME COURT
OF THE NORTHERN TERRITORY
OF AUSTRALIA
AT DARWIN
BJEK Pty Ltd as trustee for the EL and SL Fogarty Family Trust v
Henbury Cattle Co Pty Ltd & Ors [2021] NTSC 16

No. 59 of 2016 (21631761)

BETWEEN:

BJEK PTY LTD (ACN 105 399 675) as trustee for the EL AND SL FOGARTY FAMILY TRUST

Plaintiff

AND:

HENBURY CATTLE CO PTY LTD (ACN 169 887 629)
First Defendant

AND:

CROSS COUNTRY FUELS PTY LTD (ACN 080 235 927)
Second Defendant

AND:

ASHLEY ROBERT ANDERSON
Third Defendant

AND:

FAR MANAGEMENT PTY LTD
(ACN 065 559 613)
Fourth Defendant

AND:

DAVID ROHAN
Fifth Defendant

AND:

NEVILLE ANDERSON

Sixth Defendant

CORAM: KELLY J
REASONS FOR JUDGMENT
(Delivered 23 February 2021)
Introduction

The plaintiff, BJEK Pty Ltd (“BJEK”) owns and operates Palmer Valley Station (“Palmer Valley”) south of Alice Springs. The directors and shareholders of BJEK are Edward Lloyd Fogarty and Sheri Lynne Fogarty. (BJEK, Edward Fogarty, Sheri Fogarty and their related entities are referred to as “the Fogartys” except where it is necessary to differentiate amongst them.)
The neighbouring property, Henbury Cattle Station (“Henbury”) is owned by Henbury Holdings Pty Ltd (“Holdings”). The first defendant, Henbury Cattle Co Pty Ltd (“HCC”) conducts a cattle station enterprise on Henbury. The current shareholders of HCC are the second, third and fourth defendants and Roy Anderson. The directors are the third, fifth and sixth defendants. (The defendants are referred to as “the Andersons” except where it is necessary to differentiate amongst them.)
Palmer Valley is directly south of Henbury. Palmer Valley and Henbury share a boundary.
In 2014 BJEK, together with E and S and K Fogarty as trustee for EL & SL Fogarty Superannuation Fund, Edward and Sheri Fogarty as trustee for Tressa Vale Trust and Edward Fogarty, Sheri Fogarty and Kristy Fogarty agreed with the second, third and fourth defendants to acquire Henbury. To this end they incorporated Holdings and HCC.
The Fogartys and the Andersons, through Holdings and HCC, began operating a cattle business on Henbury. However, relations between the two families irretrievably broke down in the later part of 2015. As a result, they decided that they no longer wished to own Henbury together or to conduct a cattle station enterprise on Henbury together, and by Deed of Settlement made on 11 December 2015 (“the Deed”) the Fogarty interests transferred their respective interests in Holdings, Henbury Unit Trust and HCC to the second, third and fourth defendants.
Clause 3.6 of the Deed provides:
3.6 The parties acknowledge and agree that:-
(a)A muster is likely to commence on Henbury Station in or about March 2016 (but must commence no later than 30 April 2016);
(b)On each occasion prior to processing and drafting commencing on Henbury Station, the Anderson Interests will provide not less than 48 hours prior notification by station two way radio or landline telephone of the drafting to the Fogarty Unit Interests, and the Fogarty Unit Interests may send a representative to Henbury Station (that representative being any person other than Edward Fogarty) to identify and remove any cattle owned by Palmer Valley at its own cost;
(c)The Anderson Interests will use all reasonable endeavours to transfer from the Palmer Valley PIC (Property Identification Code) to the Henbury Station PIC those cattle owned by Henbury Station by 30 September 2016.
The Andersons undertook four drafts of Henbury Station in the first part of 2016 pursuant to this protocol, which proceeded without incident. Things went awry on the fifth draft in June 2016. The Andersons held a muster and draft on 16 and 17 June 2016 without notifying the Fogartys. The Andersons say that they did so because Mr Fogarty went on to Henbury in contravention of the terms of the Deed. (This was the subject of correspondence between the parties’ solicitors.)
Mrs Fogarty formed the view that the Andersons had:
(a)failed to notify the Fogartys of the June muster and draft so they could steal some of their cattle;
(b)secreted a big black bullock she had seen in order to steal it; and
(c)tried to pass Palmer Valley cattle off as sale cattle by removing the orange NLIS buttons and inserting red floppy tags in the hole in the offside ear. (The agreement for marking sale cattle was for a red or purple floppy tag to be inserted into the near side ear.)
The Fogartys instituted these proceedings and applied for and obtained an injunction restraining the Andersons from mustering and drafting cattle off Henbury except in the presence of representatives of the plaintiff (who must not be Mr Fogarty) and, initially, representatives of the police and DPI. An interim injunction was granted on 12 July 2016 and an interlocutory injunction on 12 August 2016.
Pleadings were exchanged and the first defendant filed a counterclaim. The matter went to trial on issues of liability only and I handed down judgment on the questions of liability on 3 December 2019.
I found that during the three year period 1 July 2014 to 30 June 2017 the plaintiff had converted 1,500 cattle, consisting of wandering stock and the offspring of wandering stock, belonging to the first defendant. Among the orders I made on 3 December was:
The plaintiff is to pay damages to the first defendant of the full value of 1,500 cattle (being wandering stock and the offspring of wandering stock) for conversion of those cattle.
I also found in favour of the plaintiff in relation to six of the disputed cattle and in favour of the first defendant in relation to 22 specific cattle.
At a directions hearing on 3 June 2020, the parties requested clarification of this order and each made submissions about how these damages should be assessed.
The first defendant contended that the preferable method for assessing damages for the converted cattle was to calculate the size of the herd that would have been generated by those cattle from 1 July 2017 to the date of the assessment of damages using the same assumptions as to herd composition, calving rates etc as were used to calculate the number of cattle converted. (That number was calculated by the first defendant to the end of the 2019/2020 season as 2,805 cattle.) The first defendant then proposed multiplying that number by the average sale price of cattle in the final season. Counsel performed the calculation using the average sale price for 2017 which resulted in an award of damages of $3,388,950, though he contended that the 2020 prices were about 10% higher. To this would be added interest.
The first defendant contended, in the alternative, that damages for the conversion of the 1,500 cattle converted as at 30 June 2017 be calculated by taking the average price at which adult cattle and calves were sold in 2017, and applying those figures to the assumed number of adult cattle and calves making up the 1,500 cattle (on the assumptions set out in the calculation of the number of cattle converted). The first defendant initially calculated their damages using this method at $1,748,250. Interest would be added to that figure and the first defendant contended that a higher rate of interest should be awarded if damages were to be calculated according to this method.
The plaintiff contended that a proper analysis of the quantum issue requires a consideration of:
(a)the prices that would have been received by Henbury between the years 2015 to 2020;
(b)husbandry practices on Henbury to determine which cattle would have been sold when; and
(c)costs which would have been incurred by Henbury in producing the cattle.
The plaintiff contended that after a calculation had been done by means of this detailed analysis, the Court should deduct from the figure so ascertained, the costs incurred by Palmer Valley in producing the cattle, and then further reduce the figure to reflect the prospect that the defendants would not have profited from the sale of the cattle.
To that end, the plaintiff sought discovery of a vast range of documents from the defendants.
At a directions hearing on 3 June 2020 the parties asked for a preliminary ruling on the basis on which damages were to be assessed. For the reasons which follow, I directed that damages for conversion of the 1,500 converted cattle would be assessed by taking the average price at which adult cattle and calves were sold by Henbury in 2017 after deducting the direct costs of getting the cattle to market, and applying those figures to the assumed number of adult cattle and calves making up the 1,500 cattle on the assumptions set out in the calculation of the number of cattle converted annexed to the judgment on liability. To that would be added an appropriate figure for interest.
It seemed to me that if the defendants were to have their damages assessed by including the progeny of the cattle converted as at 30 June 2017, then it would be necessary (as the plaintiff asserted) to deduct from the figure so ascertained, the costs that would have been expended by the defendant in producing the cattle. (I saw no reason why the costs expended by Palmer Valley in producing them would also be deducted.)
Conversely, if the costs of production were to be taken into account as the plaintiff proposed, then it seemed to me that fairness would dictate that an assessment of the actual loss suffered by the defendants should take into account the increase in the herd that would have occurred since 2017.
I was advised by both counsel that that would involve extensive discovery and perhaps double the length of the hearing on quantum. I did not think it appropriate to go through such an exercise to assess the quantum of damages.
First, it seemed to me that it was appropriate to adopt the average price for each category of cattle converted, using the assumptions used in calculating the number of cattle converted, there being no reason to suppose the sale price which could have been achieved on the sale of the converted cattle would have differed from the average.
Second, the first defendant calculated its damages taking the progeny into account as considerably higher than the damages calculated using the average sale price of cattle at 30 June 2017 multiplied by the number converted as at that date ($3,388,950 as distinct from $1,748,250). However, if the costs of production of the cattle were to be deducted, there is no way of knowing whether the end result would be higher or lower than $1,748,250, and every reason to suppose it would be much the same. I saw no practical utility in the parties incurring the cost of carrying out extensive discovery, requiring extensive additional affidavit evidence and an extended hearing when there is a sensible alternative way to estimate the first defendant’s loss.
An issue also arose between the parties as to what was meant by “the full value” of the cattle in the order. The order was framed in terms of the usual formulation of damages for conversion. It means the amount of money that the first defendant would have received in the hand if the converted cattle had been sold as at 30 June 2017. That will be reflected by the average sale price for cattle in the various categories less any direct costs that would have been incurred in getting them to market.
There was a hearing on quantum on 28 January 2021 at which the plaintiff relied upon a sixth affidavit of Sheri Fogarty and the first defendant relied on a seventh and eighth affidavit of Neville Anderson. Both parties have also provided written submissions.
The major issue on the damages hearing was whether the direct costs of getting the converted cattle to market should include mustering costs.
Mrs Fogarty provided estimated figures for mustering costs. She was not required for cross-examination; those figures being accepted as reasonable by the first defendant.
Mr Anderson provided information about the actual sale prices received by Henbury for cattle sold during 2017 along with the cost of transport and agents’ fees which the first defendant agreed should be deducted as direct costs of getting the cattle to market.
Mr Anderson deposed that if the additional 1,500 cattle had been on the property, they would not have required another muster; that the cost of mustering depends on the area mustered and not on the number of cattle recovered in the muster; and that, accordingly, no additional mustering costs would have been incurred by Henbury if the 1,500 cattle had not been converted.
Mr Anderson was cross-examined. During that cross-examination he readily conceded that it is necessary to muster cattle in order to get them to market. However, his evidence that an additional muster would not have been necessary was unchallenged, and he did not concede that any additional mustering costs would have been incurred if the 1,500 converted cattle had been included in the herd in 2017.
The assumptions made in determining the makeup of the converted cattle resulted in a finding that there would have been 351 calves, and that the balance of the cattle were evenly divided between male and female cattle. The plaintiff contended in written submissions that those assumptions should not necessarily apply to the Court’s consideration of the mix of cattle that would have been sent to market; that the best evidence of what the first defendant would have done had the converted cattle been available to it is what it did with the cattle it had; and that the Court should assess damages on the basis that the mix of adult males and females were in the same ratio as the ratio of sexes in the cattle sold by the first defendant in the 2017 year.
The obvious fallacy in that contention is that the Court is not concerned with what cattle would have been sent to market in 2017; it is concerned with establishing the value of the 1,500 converted cattle at that date. It is only for the purpose of establishing that value that the average sale price is being utilised; it is the price that the first defendant could have obtained for the converted cattle. As set out in the Schedule in Annexure 3 to the judgment on libaility, I adopted the assumption that half of the wandering cattle would be male and half female because the analysis of the breakdown of the plaintiff’s herd in Table 10 of the Hall Chadwick report reveals that in each year analysed, breeders constituted roughly 50% of the herd.[1]
The basis upon which the value of the cattle will be calculated is therefore that set out in the Schedule in Annexure 3 to the judgment on liability: that is to say:
·calves 351
·adult females 574.5
·adult males 574.5.
The other issue in contest between the parties is whether the deduction of direct costs to get the cattle to market should include mustering costs.
The plaintiff submitted that mustering costs should be deducted. There is no dispute about the quantum of those costs as set out in Mrs Fogarty’s affidavit. In written submissions, counsel for the plaintiff contended:
The defendant’s submission that mustering costs are a fixed or sunk cost should be rejected. The Court’s task is to determine what costs would have been incurred in getting 1,500 to market. The mustering costs incurred by the defendant in 2017 related to it bringing 2,791 head of cattle to market. Another 1,500 head would have involved a separate muster.
That contention cannot be accepted. The uncontested evidence of Mr Anderson is that, if 1,500 additional cattle had been on Henbury in the 2017 year, there would not have been a need for an additional muster and no additional mustering costs would have been incurred. Mustering costs should therefore not be deducted.[2]
The plaintiff contends that it is appropriate that the quantum of the plaintiff’s liability be reduced to reflect the prospect that the defendants may not have profited from the sale of the cattle in accordance with the principles in Sellars v Adelaide Petroleum N.L. and Others.[3]
It is not appropriate to apply the principle in Sellars v Adelaide Petroleum. This is not a case of valuing a lost commercial opportunity. The Court’s task is to ascertain the value of 1,500 converted cattle. As counsel for the defendants pointed out, those cattle had a value, and the use of average prices to assess this value implicitly factors in both the chance that a hypothetical sale would achieve a higher than average value as well as the chance of a lower than average value. Further, an allowance was made for contingencies in the assessment of the number of cattle converted. The calculation of the number of cattle converted yielded a figure of 1,614. The explanation given in the notes to the schedule for rounding that number down to 1,500 is as follows:
NOTES:
• The calculation is a rough one. The 75% calving rate has been applied to opening numbers of breeders. (No attempt has been made to calculate the opening and closing average.) No allowance has been made for mortality on a yearly basis.
• Therefore I have rounded down the number so calculated to 1,500 to make a global allowance for these matters.
The parties are agreed that the damages calculation for converted cattle should be performed on the basis that the number of adult cattle converted was 1,143 (1,500 less 351 calves = 1,149 cattle less six disputed cattle which were declared to be the property of the plaintiff).
The average prices which the first defendant received for Henbury cattle in 2017, after deducting sale costs, were as follows:
·calves  $   271 per head
·adult female cattle            $1,127 per head
·adult male cattle               $1,368 per head
The first defendant’s primary submission was that calves should be valued at $500 each. The reason for that is that Henbury was selling young calves at an average age of three months in 2017, but the assumption underlying the calculation of 1,500 converted cattle is that they would have been born over the course of the year. So, as at 30 June, some may be very young, some may be almost 12 months old; and, assuming the average age is six months, then the three month price would be too low. While there is some logic to this submission, it requires the Court to speculate about a number of matters, including the selling price for older calves. In line with the broad brush approach I have adopted to quantify the first defendant’s loss, I intend using the actual average selling price for calves sold by Henbury in 2017.
I assess damages for the conversion of 1,143 cattle at $1,521,014 made up as follows:
·calves  $     95,121
·adult female cattle            $   644,081
·adult male cattle               $   781,812
TOTAL$1,521,014

To that must be added the following amounts for the value of specific cattle which have been agreed between the parties:
·two Lucy Creek cattle $ 3,588
·20 cattle from Crawford drafts $28,780
TOTAL$32,368
That brings the total damages on the first defendant’s counterclaim to $1,553,382 ($1,521,014 + $32,368).
Interest on that amount to the date of judgment (23 February 2021), calculated in accordance with Rule 59.02(3) of the Supreme Court Rules 1987 (NT), will be allowed in the amount of $402,560.

[1] That report showed that breeders (females) constituted between 51% and 53% of the total herd. I adopted a conservative figure of 50%. If I had used the average (ie 52%) the calculation of the number of cattle converted would have been higher.

[2] The first defendant’s actual position in 2017 was net sale price of 2,791 head of cattle LESS actual mustering costs for one muster. Comparing that with the position the first defendant would have been in if those cattle had not been converted, on the (artificial) assumption that all 1,500 converted cattle would have been sold in 2017, the first defendant’s position would have been net sale price of 2,791 + 1,500 cattle LESS actual mustering costs for one muster.

[3] (1994) 179 CLR 332 (“Sellars v Adelaide Petroleum”)