CFA Group v Mars Trading

[2001] NSWSC 67

CITATION:	CFA Group v Mars Trading [2001] NSWSC 67
CURRENT JURISDICTION:	Equity Division Commercial List
FILE NUMBER(S):	SC 50020/00
HEARING DATE(S):	21/02/01
JUDGMENT DATE:	22 February 2001
PARTIES :	CFA Group Services Pty Limited - First Plaintiff CFA Administration Pty Limited - Second Plaintiff Mars Trading Pty Limited - First Defendant Yengrin Pty Limited - Second Defendant Macadamia Properties Pty Limited - Third Defendant Ellicott Pty Limited - Fourth Defendant Carbest Pty Limited - Fifth Defendant Graham Edward Hayes - Sixth Defendant
JUDGMENT OF:	Rolfe J

COUNSEL :	Mr J.E. Marshall - Plaintiffs Mr I. Wales SC - Defendants
SOLICITORS:	Clayton Utz - Plaintiffs Helliars City Solicitors - Defendants
CATCHWORDS:	Application for adjournment.
DECISION:	I order that the Notice of Motion dated 19 February 2001 be dismissed and that the defendants pay the plaintiffs' costs of the Notice of Motion.

THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

ROLFE J

THURSDAY, 22 FEBRUARY 2001

50020/2000 - CFA GROUP SERVICES PTY LIMITED & ANOR v
MARS TRADING PTY LIMITED & ORS

JUDGMENT

HIS HONOUR:

Introduction

1    By a Summons issued on 6 March 2000 the plaintiffs, for which Mr J.E. Marshall of Counsel appeared, sought orders against the defendants, for which and whom Mr I.M. Wales of Senior Counsel appeared, for payment of a specified sum, damages and complete indemnity pursuant to guarantees allegedly given. The plaintiffs’ case, put shortly but, I think, adequately for present purposes, is that they entered into various contracts with the defendants for the sale by them to the defendants of commercial product, business assets and realty in about October and November 1999. It is the plaintiffs’ case that the defendants wrongfully repudiated these contracts by failing to complete them with the consequence that the plaintiffs then sold those assets on a less favourable market and, put once again a little simplistically, the plaintiffs claim damages being the difference between the price for which they had contracted to sell to the defendants and the price at which they were able to sell.

2    The defendants filed detailed defences on 31 March 2000, the principal one being that of the first defendant, which was partially incorporated by reference in a number of the other defences. In paragraph 33 of the first defendant’s Defence, it did not admit that there was any wrongful repudiation by it of the contract for sale, being a contract entered into on or about 22 December 1999 for the sale and purchase of land at 37 Converys Lane, Wollongbar on which a factory is erected, and further alleged that if the first plaintiff had suffered any loss and damage it had failed to mitigate that, as the sale of the factory for $500,000 to the subsequent purchaser was not at a proper and a market place value, nor was it as a result of a properly conducted marketing campaign with reasonable care being taken by the first plaintiff to ensure that a proper and reasonable price was obtained for the property. Other defendants also raised the alleged failure of the plaintiffs to mitigate their damages in the same or essentially the same terms.

3    The proceedings have been the subject of extensive case management, as is usual in respect of matters in this List and, on 19 May 2000, I made orders by consent, which noted that the defendants did not intend to rely on any further witness statements other than those served upon the plaintiffs on 18 May 2000. These statements did not deal with the issue of mitigation. I also ordered, by consent, that the plaintiffs file and serve their witness statements on or before 17 June 2000. On 30 June 2000, Hunter J extended the time for the filing of the plaintiffs’ statements to 7 July 2000 and directed the defendants to file their statements by 20 July 2000. Presumably the defendants had had further thoughts about the need for statements.

4    On 21 July 2000, Hunter J noted that the defendants had failed to comply with the earlier direction for the filing of statements and directed that any statements upon which the defendants sought to rely be filed and served by 18 August 2000. On the same day his Honour specially fixed the hearing for the week commencing 26 February 2001 and gave the usual directions under the Commercial List Practice Note.

5    The purpose of the giving of these directions was to ready the case for a hearing on the appointed day. The directions having been given, the Court expects the parties to comply with them and, if that is not possible, to apply to it for a variation.

6    On 16 February 2001, the matter was mentioned before Hunter J. His Honour noted that there was an outstanding issue in relation to discovery so far as the defendants were concerned and directed them to give discovery of the documents referred to in a certain document he identified by 5 pm on 21 February 2001. He also noted that Mr M.J. Fitzgerald, the solicitor for the defendants, had foreshadowed an application to vacate the hearing set down for 26 February 2001. He ordered that any such application be supported by affidavits and gave directions in that regard. His Honour did not note, and there was no suggestion to me that this matter was raised before him, that the defendants had any complaint about the plaintiff’s discovery.

What Happened Thereafter

7    On 19 February 2001, the defendants filed a Notice of Motion seeking an order that the hearing date of 26 February 2001 be vacated. That Notice of Motion was supported by Mr Fitzgerald’s affidavit of 19 February 2001 in which he deposed that the plaintiffs’ claim arose, in part, out of the contracts between the parties to which I have referred, the purchase price for all the property totalling $7m; that the plaintiffs sought to rescind the contracts as at 22 December 1999 and then sold the properties to a Mr Findlay Andrews or interests associated with him “for considerably less than was agreed to be paid by the defendants”; that the contracts for sale to Mr Andrews were exchanged and completed on 7 January 2000; and that the plaintiffs were claiming the difference between the price the defendants had agreed to pay and the price Mr Andrews paid. The affidavit continued that the defendants contend that the sale to Mr Andrews and/or his associated companies was at an under value:-

“.. and essential to the presentation of the defendants (sic) case is that evidence of value of the properties be available at the hearing of this matter.”

In view of the pleadings to which I have referred this must have been obvious to the defendants and those advising them at least by March 2000. Indeed, one would not anticipate that the failure to mitigate point would be raised unless the defendants were in the possession of some evidence to support it.

8    Mr Fitzgerald deposed that on 21 July 2000 the Court was informed that the defendants were attempting to arrange those valuations and that on 30 November 2000 his firm served upon the solicitors for the plaintiffs a valuation of Ennew & Hunt Valuers dated 10 August 1999 and, on 6 December 2000, sought to have Mr Ennew update those valuations and provide an opinion as to what “may have been the value of the properties as at the 31 December 1999”. Mr Fitzgerald’s affidavit then dealt with correspondence between the solicitors from 11 December 2000 and with attempts by the defendants to obtain other valuation evidence.

9    On 20 February 2001, Ms Farmer-Maloney, the solicitor for the plaintiffs with the day to day conduct of the matter, swore an affidavit in paragraph 4 of which she set out details in the defences of the allegations of failure to mitigate. In paragraph 5 she referred to the orders made by Hunter J on 21 July 2000 and, in paragraph 6, she deposed that the defendants did not file and serve their valuation evidence by 18 August 2000. She annexed her letter to the solicitors for the defendants of 21 August 2000 noting that no such evidence had been served and seeking urgent advice as to when it would be forthcoming. On 22 August 2000, Mr Fitzgerald replied that:-

“… our client was arranging the Valuations direct and we are seeking instructions as to when the same will be available. Given, that the hearing has already been appointed for this matter for February 2001, we can see no prejudice to the plaintiff in failing to have them available by Friday 18 August 2000. As and when the valuations are received, we will provide them to you.”

This letter showed a somewhat cavalier approach to the directions given. The directions having been given, the defendants were bound to comply with them or to seek dispensation from compliance.

10    On 31 August 2000, Ms Farmer-Maloney wrote seeking valuation evidence and stating that if agreement could not be reached upon an appropriate extension of time by which it was to be filed she would have no alternative but to have the matter re-listed for further directions. There was no response and, on 17 November 2000, Ms Farmer-Maloney wrote again stating that unless the valuation was received “by close of business next Wednesday, 22 November 2000” she had instructions to re-list the matter for further directions.

11    On 22 November 2000, Mr Fitzgerald responded that he had an appointment with his client on 23 November 2000 “and will advise you further after that appointment”. On 29 November 2000, the solicitors for the plaintiffs again sought valuation evidence and, on 30 November 2000, Mr Fitzgerald sent a letter to them enclosing a copy of the Ennew & Hunt Valuers’ valuation dated 10 August 1999 “by way of service”. This was as clear an indication as there could be that the defendants proposed to rely on the report.

12    That document was a valuation report of properties at 1306 Dunoon Road, Dunoon and 89 Missingham Road, Dunoon. It stated that it was made under instructions from Mr Mark Pearce, the company secretary of the first plaintiff. It was dated 10 August 1999. It gave various valuations based on market value, going concern/asset value and fire sale value.

13    By letter dated 11 December 2000, the solicitors for the plaintiffs objected to the use of this valuation asserting that “on its own” it was not admissible as valuation evidence, as it would need to be part of an expert statement from Mr Ennew. The letter continued that additionally Mr Ennew had at no time discussed his valuation with Mr Fitzgerald nor given any authority for his clients to use or to rely upon it, and that the report was commissioned by and on behalf of the plaintiffs. The letter stated that, “in the circumstances” the plaintiffs would be objecting to any attempt by the defendants to rely upon the valuation for the purposes of its valuation evidence.

14    There are several points which should be made about this letter. Firstly, I agree that for reliance to be placed on the valuation it would have to be established through Mr Ennew that he had the necessary qualifications to carry it out and that he had done so. However, although there was no statement as such I do not see, as presently advised, why the defendants could not call Mr Ennew to prove the valuation, in so far as a valuation as at 10 August 1999 is relevant. The plaintiffs and their solicitors having been put on notice of the material in it and have had an adequate opportunity to consider it. I am informed that the plaintiffs have subpoenaed Mr Ennew for the hearing and, if there is any difficulty in securing his attendance I shall grant leave to the defendants to issue a subpoena on short notice.

15    The other objections to the use of the valuation do not seem to me to be valid.

16    On 13 December 2000, Mr Fitzgerald wrote to the solicitors for the plaintiffs stating that he was corresponding with Mr Ennew “regarding updating his valuation and providing an expert report”.

17    On 21 December 2000, Ms Farmer-Maloney replied that the plaintiffs had retained Mr Ennew to provide evidence on their behalf and:-

“We therefore ask that you advise us by return whether there is any additional material upon which your client will be seeking to rely at the hearing in February next year by way of valuation evidence failing which we will make arrangements for the preparation, filing and service of our client’s valuation evidence in these proceedings.”

18    On 12 January 2001, the solicitors for the plaintiffs served a statement by Mr Ennew of 29 December 2000 in which he set out his qualifications; the fact that he had made the valuation in August 1999; and a subsequent review of the contracts entered into with Mr Andrews. He expressed the view:-

“Based on my knowledge of the Lismore area, and in particular, macadamia property and associated sales during the period between August and December 1999 I can say that the fall in the projected price of nut-in-shell, which is a dominant factor in the industry, caused the market to stall. Recent sales indicate that vendors are lowering expectations and accepting lower prices for property than would have been accepted in August 1999.”

19    He referred to two sales and concluded:-

“In my opinion, the purchase price contained in each of the Findlay Andrew sale agreements was a fair and reasonable price for the subject properties having regard to the quiet state of the market.”

20    The letter of 12 January 2001 from the solicitors for the plaintiffs also said that it was anticipated that one further statement would be filed on the question of valuation evidence, but, on 12 February 2001, the solicitors for the plaintiffs advised that no further evidence, save for an Affidavit of Debt, would be filed.

21    In paragraph 11 of his affidavit, Mr Fitzgerald said that after receipt of Mr Ennew’s statement the defendants sought to obtain another valuer. Several were approached, but were either unable or unprepared to provide valuations. A third stated on 7 February 2001 that he would be prepared to undertake the task, but the present occupants of the properties have, apparently, denied him access. Mr Hoolihan said, not unreasonably, that a valuation could not be carried out without an inspection.

22    In his submissions, Mr Wales conceded that the Court could not compel the present owners to allow Mr Hoolihan onto the land and, in the circumstances, he would have to “do the best he could”. Why he did not start to do that days ago with the benefit of Mr Ennew’s report was neither the subject of evidence, nor sought to be explained.

23    In paragraphs 18 and 19 Mr Fitzgerald deposed:-

“18. The defendants say that they are not ready for hearing, it is vital that valuation evidence be available for the due presentation of their case.
19. The defendants say that any prejudice occasioned to the plaintiff by this vacation, is substantially reduced by the fact that in respect of its claim for damages the plaintiff has received by way of enforcement of securities held by it as at the 22 December 2000 an amount of $975,687.95.”


Mr Fitzgerald made no reference to the need for further discovery, nor for the need to investigate the circumstances of the second sale. He had made no such complaints to Hunter J on 16 February 2001.

The Application For An Adjournment

24    The application for an adjournment by the defendants is utterly without merit. The issue of the value of the properties was expressly raised by them in their pleadings filed on 31 March 2000. Notwithstanding, I was asked by consent to note on 19 May 2000 that the defendants did not intend to rely upon any further witness statements other than those served upon the plaintiffs on 18 May 2000. Those included no valuation evidence. It must have then occurred to the defendants that evidence of valuation would have to be provided and Hunter J ordered that that be done by 18 August 2000, almost a month after his Honour made the order and following his Honour’s order of 30 June 2000 that the defendants file their statements by 4 pm on 20 July 2000. His Honour fixed the hearing on 21 July 2000 for 26 February 2001.

25    Thereafter, as the correspondence to which I have referred in some detail discloses, the defendants, so far as the evidence shows, failed to obtain an expert valuer’s report, save for obtaining, in some way, the valuation of 10 August 1999 upon which they obviously intended to rely. The service of that on the solicitors for the plaintiffs indicated, as clearly as could be, which Mr Wales conceded, that it was intended to rely on that report. Although the solicitors for the plaintiffs raised certain objections to that, I do not consider that those objections can be sustained provided that Mr Ennew is called. I can see no basis on which the plaintiffs can complain that they are prejudiced by reliance on Mr Ennew’s valuation of August 1999 and, it appears, they will rely upon his update as appearing in his statement, which the plaintiffs obtained and which Mr Fitzgerald was seeking.

26    It appears there has been some attempt to obtain further valuation reports this year without success for the reasons I have stated.

27    However, those attempts were made far too late, unless Mr Hoolihan is now prepared to report without obtaining access. That is entirely a matter for which the defendants are responsible in circumstances where the solicitors for the plaintiffs were drawing to the attention of the defendants’ solicitor the need for such evidence. It is not the fault of the plaintiffs that the present owners of the properties will not grant a valuer access to them, nor, in my opinion, does that provide a valid reason for an adjournment.

28    But the critical point of difficulty from the defendants’ point of view, in addition to their gross delay in obtaining the evidence in defiance of directions given by the Court, is that I can see no reason why they cannot rely upon the evidence of Mr Ennew, which, presumably, they wished to do and which has been updated in the statement obtained by the solicitors for the plaintiffs.

29    I should add that Mr Wales expressly and on several occasions said that the need to apply for an adjournment was because of the failure of the defendants to prepare their case properly.

Prejudice

30    The defendants’ assertion, made through their solicitor, that the valuation evidence “is vital” to the presentation of their case has to be viewed against the history of the attempts to obtain it:-

(a) In May 2000, after the defences which made the valuation evidence relevant were filed, it was noted that no further evidence was to be filed on behalf of the defendants. At that stage they had filed no valuation evidence.
(b) Thereafter, and without any explanation, so far as the evidence discloses, the defendants were in breach of two directions given by Hunter J on 20 June 2000 and 21 July 2000, the latter breach being drawn to their solicitor’s attention frequently by the solicitors for the plaintiffs.
(c) The response of 30 November 2000 was to furnish the valuation of Mr Ennew.
(d) Notwithstanding the objections from the solicitors for the plaintiffs, there was no suggestion that the solicitor for the defendants formed the view that they could not rely upon Mr Ennew’s report and, if there had been any doubt about the matter, the Court should have been approached to resolve it. I have already expressed my view about the ability to rely on that report.
(e) It was not until this year that further attempts were made to obtain other valuations.
(f) An update of Mr Ennew’s valuation has now been obtained, which was a requirement of the defendants, and, if they wish, they can tender that together with his report.
(g) There is the concession that Mr Hoolihan may be able to prepare a report without going onto the land.

31    There is clearly prejudice to the plaintiffs. Ms Farmer-Maloney states in paragraph 21 of her affidavit:-

“The plaintiffs have expended considerable costs in preparation of the scheduled hearing. All of the plaintiffs’ witnesses are available and ready to attend the hearing for the purposes of cross-examination as requested by the defendants. The interstate and country witnesses have made travel arrangements in order to be in Sydney for the hearing and conferences have been arranged with the plaintiffs’ counsel on Sunday 25 February 2001.”

32    There is also the obvious prejudice to the plaintiffs of not having their case heard as soon as possible. A real purpose of case management in the Commercial List is to ensure the early resolution of commercial disputes so that the ultimate result is known by the parties as soon as possible and they can arrange their affairs accordingly. I have no idea, at this stage, which party or parties will be successful in this litigation. However, I am completely satisfied that all parties are entitled to know the outcome, at least at first instance, without delay.

33    I have sought to demonstrate that there is nothing in this application which has, in my opinion, any merit. In so far as the defendants are left without evidence that is entirely their own fault. On the other hand I am not satisfied that they are left without evidence. They have the evidence available, which was originally relied on, namely the valuation evidence of Mr Ennew, which has been updated.

34    Mr Wales also made submissions about problems with the plaintiffs’ discovery, with which I have dealt, and the need to properly investigate the circumstances of the second sale. This was not a matter to which Mr Fitzgerald referred in his affidavit. If it was important it should have been attended to months ago.

Orders

35    On 21 February 2001 I dismissed the defendants’ Notice of Motion filed on 19 February 2001 seeking that the hearing date of 26 February 2001 be vacated with costs. These are my reasons for doing so.

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Last Modified: 02/23/2001