Boz One Pty Ltd v McLellan

IN THE SUPREME COURT OF VICTORIA AT MELBOURNE Not Restricted

COMMON LAW DIVISION

No. S CI 2009 10160

BETWEEN

BOZ ONE PTY LTD (ACN 089 415 430) and WALLABAH PTY LTD (ACN 007 096 531) (in its capacity as trustee of the James Rolfe Family Trust)	Plaintiffs
And
ANDREW JAMES McLELLAN, CRAIG DAVID CROSBIE and INVESTEC BANK (AUSTRALIA) LIMITED (ACN 071 292 594)	Defendants
and
GADENS LAWYERS	Third Party

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JUDGE:	DIGBY J
WHERE HELD:	Melbourne
DATE OF HEARING:	4-8, 12-14, 18, 25 and 27 March 2013
DATE OF JUDGMENT:	9 May 2014
CASE MAY BE CITED AS:	Boz One Pty Ltd & Anor v McLellan & Ors
MEDIUM NEUTRAL CITATION:	[2014] VSC 208

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REAL PROPERTY - Mortgages – Mortgagee’s duty – Whether all reasonable steps taken to obtain market value – Duty and breach under s 420A Corporations Act 2001 (Cth) – Whether appropriate remedy damages or taking of accounts.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr A Sandbach with Mr D Clough	Goldsmiths Lawyers
For the First and Second Defendants	Mr G Dalton	Moray & Agnew
For the Third Defendant	Mr H N G Austin	Arnold Bloch Liebler
For the Third Party	Mr S Maiden	Colin Biggers & Paisley

TABLE OF CONTENTS

Introduction......................................................................................................................................... 1

General background..................................................................................................................... 1

Summary of relief sought............................................................................................................ 2

Overview of the key issues......................................................................................................... 2

Summary of overall conclusions..................................................................................................... 4

James Geoffrey Rolfe......................................................................................................................... 7

Background to Proceedings............................................................................................................. 7

The Glodale and First Melbourne Capital Pty Ltd Loans...................................................... 7

The IPS Shares................................................................................................................................ 8

The Wallabah Debt....................................................................................................................... 9

The Lewis Loan and the Lewis Charge................................................................................... 11

Appointment of the Receivers and Sale of the Assets........................................................... 13

Issues in these Proceedings............................................................................................................ 17

Principal issues – plaintiffs-defendants.................................................................................. 17

Subset issues – between plaintiffs and the first, second and arguably the third defendants    18

The Pleadings................................................................................................................................... 20

The plaintiffs’ contentions......................................................................................................... 20

Plaintiffs’ Further Particulars of Breach (at 27 February 2012)................................... 21

Plaintiffs’ asserted value of IPS shares and Wallabah debt........................................ 23

The Receivers’ Defence.............................................................................................................. 24

Investec’s defence........................................................................................................................ 28

Summary of the significant evidence........................................................................................... 33

A detailed exposure of the relevant facts is necessary.............................................................. 33

Crosbie’s evidence in chief........................................................................................................ 33

Meeting on 9 October 2003............................................................................................... 41

Valuation of the Assets..................................................................................................... 44

Crosbie’s evidence under cross-examination......................................................................... 48

Valuation of the Assets..................................................................................................... 50

Litigation to remove the Lewis Charge.......................................................................... 54

The Status of the Leases and Subleases......................................................................... 55

Receivers’ meeting with Gadens on 25 June 2003........................................................ 56

Meeting on 9 October 2003............................................................................................... 58

Re-Examination of Crosbie.............................................................................................. 72

Conclusion as to Crosbie’s Evidence.............................................................................. 75

DavidReichenberg – legal practitioner.................................................................................. 76

Evidence in Chief............................................................................................................... 76

Cross-examination of Reichenberg................................................................................. 82

Leases...................................................................................................................................... ..... 83

Value of the Wharf properties......................................................................................... 92

Valuations of the IPS shares............................................................................................. 93

Meeting of 9 October 2003................................................................................................ 95

The valuations.................................................................................................................. 107

Threat of voluntary administration of IPS................................................................... 111

Cross-examination by Counsel for Investec................................................................ 116

Re-examination by Counsel for Gadens...................................................................... 117

Expert evidence in relation to valuation issues – damages............................................... 118

Cross-examination in relation to the December 2012 draft report........................... 125

The parties’ principal submissions............................................................................................. 134

The defendants’ duty under s 420A(1) of…