Coonwarra Pty Ltd v CornoNero Pty Ltd; GJB Building Pty Ltd v AI & PB Property Ltd (Ruling)
[2021] VSC 59
•17 February 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST
S ECI 2017 00190
| COONWARRA PTY LTD | Plaintiff |
| v | |
| CORNONERO PTY LTD (and others according to the Schedule attached) | Defendants |
S ECI 2019 01225
| GJB BUILDING PTY LTD (ACN 607 342 343) (and another according to the Schedule attached) | Plaintiffs |
| v | |
| AI & PB PROPERTY PTY LTD (ACN 167 992 323) (deregistered) (and others according to the Schedule attached) | Defendants |
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JUDGE: | NICHOLS J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 9 October 2020, 22 December 2020; Submissions filed 11 and 12 September 2020, 5 and 26 October 2020 |
DATE OF RULING: | 17 February 2021 |
CASE MAY BE CITED AS: | Coonwarra Pty Ltd v CornoNero Pty Ltd; GJB Building Pty Ltd v AI & PB Property Ltd (Ruling) |
MEDIUM NEUTRAL CITATION: | [2021] VSC 59 |
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PRACTICE AND PROCEDURE — Application that two proceedings be heard and determined together — Whether common questions of fact or law — Whether risk of inconsistent findings — Whether risk of adverse credit findings giving rise to prejudice in second proceeding — Whether prejudice occasioned by delay — Application granted — Supreme Court (General Civil Procedure) Rules 2015, r 9.12.
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APPEARANCES: | Counsel | Solicitors |
| For Coonwarra | Mr A T Schlicht | Simon Nixon |
| For the GJB Plaintiffs | Mr R Garratt QC with Mr A Germano | Corrs Chambers Westgarth |
| For Mr Breckenridge | Ms V Blidman | Dentons Australia |
| For Mr Ascenzo | Mr J Tsalanidis | Portfolio Law |
| For Hartwig and the BCP entities | Mr C Juebner with Mr K Hickie | Russell Kennedy |
HER HONOUR:
Introduction
The question for decision in this ruling is whether two proceedings before the Court (S ECI 2017 00190 - the Coonwarra Proceeding, and S ECI 2019 01225 – the GJB Proceeding) should be tried separately or together.
The first proceeding is concerned with the sale and development of land at Plenty Road Mernda (Mernda Land), owned by the plaintiff (Coonwarra). Coonwarra says that it entered into an agreement for the development of the land with Trimont Pty Ltd (Trimont), a company now in liquidation, and that the agreement was novated to CornoNero Pty Ltd (CornoNero), who purchased the business and assets of Trimont. Coonwarra sues CornoNero and its directors Breckenridge and Ascenzo who, Coonwarra says, led it into borrowing against the land, funds from which borrowings were in fact paid out to entities unrelated to Coonwarra. CornoNero and Trimont, it says, engaged in a fraudulent design to use the Mernda Land as security to obtain funds for purposes other than the development of the land, assisted by Breckenridge and Ascenzo. Coonwarra also sues Berkeley Capital Partners (BCP) who, it says, caused funds to be paid out in breach of loan agreements. Breckenridge and Ascenzo, along with the director of BCP, Hartwig, were each directors of CornoNero. Ascenzo was also a director of Trimont and Breckenridge was its CEO.
CornoNero and its majority shareholder GJB Building Pty Ltd (GJB) are the plaintiffs in the GJB Proceeding (the GJB plaintiffs). They sue Breckenridge, Ascenzo, Hartwig, BCP and a related entity Berkeley Capital Developments (together with BCP the BCP entities). Their claims fall broadly into two categories. First, they say that Breckenridge and Hartwig (for the BCP entities) misled CornoNero into purchasing Trimont’s construction business, which they represented to be profitable when it was in fact insolvent, and led GJB to acquire shares in CornoNero. Second, they say that Breckenridge, Ascenzo and Hartwig acted in breach of their directors’ duties and other obligations in causing CornoNero to enter a number of transactions which were not disclosed or adequately disclosed to CornoNero’s board or authorised by it, and which were not in the best interests of the company. Some, but not all, of the transactions have a connection with the dealings the subject of the Coonwarra Proceeding.
Breckenridge and Ascenzo are then, defendants in both proceedings, as is one of the BCP entities. CornoNero is the principal corporate defendant in the Coonwarra Proceeding and is a plaintiff in the GJB Proceeding. Coonwarra is not a party to the GJB Proceeding. The principal individual actors in the events the subject of the Coonwarra Proceeding are Martin Van Der Burgt, the sole director of Coonwarra, and his son Ben, and Breckenridge, Ascenzo and Hartwig. Geoff Brady (the GJB Plaintiffs’ principal), Breckenridge, Ascenzo and Hartwig are the individuals centrally involved in the dealings the subject of the GJB Proceeding.
These proceedings have been managed together since the GJB Proceeding was issued in March 2019, and were, at the request of all parties save the GJB plaintiffs, mediated together in mid-2020. In September and October 2020 the parties sought orders for steps leading to trial and at that time I directed the parties to make submissions as to whether the matters should be heard jointly or together. Coonwarra sought, and was granted, a timetable that would have the matter ready for trial by April 2021, and filed its evidence in November 2020.
CornoNero and GJB seek an order under rule 9.12 of the Supreme Court (General Civil Procedure Rules 2015 (Vic) that the proceedings be tried together, with evidence in one proceeding to be evidence in the other. Coonwarra opposes that order and says its case is ready to be tried and should proceed first. The defendants Breckenridge, Ascenzo, Hartwig and the BCP entities contend that the proceedings should be tried separately. If tried alone the Coonwarra Proceeding will be ready and can be heard in mid-April 2021. The GJB Proceeding will be ready and can be heard in late August 2021.
Rule 9.12 provides that:
(1) Where two or more proceedings are pending in the Court, and—
(a) some common question of law or fact arises in both or all of them;
(b) the rights to relief claimed therein are in respect of or arise out of the same transaction or series of transactions; or
(c) for any other reason it is desirable to make an order under this Rule—
the Court may order the proceedings to be consolidated, or to be tried at the same time or one immediately after the other, or may order any of them to be stayed until after the determination of any other of them.
(2) Any order for the trial together of two or more proceedings or for the trial of one immediately after the other, shall be subject to the discretion of the trial Judge.
As the language of the rule indicates, the Court has a wide discretion in respect of an application of this kind. Factors that will inform the exercise of the discretion are recognised to include:
(a) whether the proceedings are broadly of a similar nature;
(b) whether there are common issues of fact and law;
(c) the extent of overlap in witnesses;
(d) the risk of inconsistent findings;
(e) the prospect of multiple appeals with substantial delays if the proceedings are not tried at the same time;
(f) the time savings and efficiencies that might be achieved;
(g) the stage each proceeding has reached; and
(h) the effect on the prospects of non-judicial resolution.[1]
[1]See for example, Traditional Values Management Ltd v Taylor & Ors [2012] VSC 299, [10]-[11] (Ferguson J) (Traditional Values).
Those matters are to be considered in the context of the overarching purpose of the just, efficient, timely and cost effective resolution of the real issues in dispute, and the entitlement of the parties to a fair trial.[2]
[2]Civil Procedure 2010 (Vic) ss 7-9; Traditional Values, [11].
Parties’ Submissions
Coonwarra says in substance that:
(a) The fact that it is not a party to the GJB Proceeding speaks against a joint trial. Coonwarra should not have to endure the expense and inconvenience of a trial that would commence later and run about three weeks longer than a trial of its proceeding alone.
(b) The proceedings are only superficially similar. The issues in the GJB Proceeding are far more numerous and complex than those in the Coonwarra Proceeding. They concern transactions to which Coonwarra was not a party, and in which it had no involvement. One aspect of the GJB Proceeding concerns alleged misconduct by CornoNero’s directors in relation to its dealings with Coonwarra. Those matters are common. But the conduct alleged must first be determined before the allegation can succeed.
(c) There is then, only a relatively minor overlap of issues and little risk of inconsistent findings.
(d) There is only a minor overlap of lay witnesses between the proceedings and no overlap of expert witnesses (which will be required in the GJB trial but not in the Coonwarra trial).
(e) Coonwarra is ready for trial and it is entitled to have its case heard and determined without unnecessary delay.
(f) Coonwarra will be further prejudiced if its case is not tried as soon as it can be ready, because it owes and needs funds to pay a taxation debt for the GST component of the sale of the Mernda Land, of $777,191.37 plus interest. Coonwarra’s solicitor Simon Nixon deposed to the arrangement between Coonwarra and its guarantors, including its principal Martin Van Der Burgt, and the Australian Taxation Office, which allows for incremental repayment until the debt must be repaid in full by 28 May 2021. Mr Nixon said that an extension of the time for repayment of the debt was obtained through negotiations following adjournments of the proceeding after the GJB Proceeding was issued, and that at that time of negotiation, “the parties considered that the hearing of the proceeding would either have occurred or be pending” by 28 May 2021, and that he is unable to say whether further extensions will be granted. The implication of the submission is that Coonwarra expects that an earlier trial will produce a judgment sum for it and will do so more quickly than a later trial, and that outcome will assist Coonwarra to manage its dealings with the Australian Taxation Office in relation to the debt.
The GJB plaintiffs submit in substance that:
(a) Breckenridge is a central actor in all of the claims, undertaking multiple roles as promoter of Trimont, director of CornoNero and arguably agent for Coonwarra. The full context of his conduct must be examined to avoid inconsistent findings arising from selective forensic analysis of his role. The transactions, and especially Breckenridge’s role in them, are so interconnected that the only thorough way to understand them is as a whole sequence. The same point applies to the actions of Ascenzo and Hartwig. They elaborate the point in these terms:
The conduct of Breckenridge, Hartwig and Ascenzo is best examined in sequence and not in a disconnected way.
So: at a time when Trimont is insolvent or verging on insolvency [CornoNero allegation], Breckenridge and Hartwig arrange the December 2014 loan [Coonwarra allegation], and either or both procure the execution of the ADA [Coonwarra allegation], after which in early 2015 they introduce Mr Brady to the prospect of buying Trimont business assets [CornoNero allegation]; Ascenzo along with either or both of them are then involved in preparing the BSA, which conceals the ADA [CornoNero allegation] at a time when Coonwarra says CornoNero acceded to the ADA which CornoNero denies [issue in both proceedings]. Shortly before this Breckenridge and Hartwig arrange the second Coonwarra loan for $5.2 million, which Hartwig says was to be disbursed on Trimont’s instructions. Coonwarra alleges that CornoNero is also implicated in the misapplication of its money, which CornoNero denies. In February 2016, Breckenridge and Hartwig arrange a third Coonwarra loan for $2.4 million, which Hartwig says was to be disbursed and was disbursed on Trimont’s instructions as to $1.8 million. Coonwarra alleges that CornoNero acceded to the ADA at this point, if not before, and that CornoNero is implicated in the disbursement of these moneys, which CornoNero denies.
Then come the August 2016 transactions when Coonwarra’s land is sold by Breckenridge [allegation in both proceedings], Breckenridge gives Coonwarra the Development Guarantee [allegation in both proceedings], Breckenridge procures a loan of $1 million and grants security [CornoNero allegation], and Breckenridge procures the MJSC Development Contract [allegation in both proceedings]. While the documents may not be in dispute, what is to be made of Breckenridge’s, Hartwig’s and Ascenzo’s conduct in relation to the transactions requires consistent and comprehensive treatment. The evidence put on by the witnesses will need to deal also with the matters relied upon by Breckenridge, Hartwig and Ascenzo as disclosures in the board reports of the prospective MJSC Development Contract, and with the dealings relied upon in relation to the Expenditure Guidelines and convention defences.
…
Breckenridge is involved in all or virtually all transactions in both cases. Coonwarra’s allegation that the ADA was novated to CornoNero entails an allegation of a consensual dealing between Coonwarra, Trimont and CornoNero on which occasions it seems Breckenridge wearing all three hats is (on Coonwarra’s case) to be taken as making an agreement with himself in three capacities (and not simply engaged on a frolic of his own). Similarly the allegation that CornoNero agreed to assume responsibility for Trimont’s past breaches of obligation entails evidently Breckenridge agreeing with himself while wearing Coonwarra and CornoNero hats simultaneously (and while not engaged on a frolic of his own).
(b) Separate trials risk inconsistent findings:
(i) in connection with the attribution, if any, of Breckenridge’s conduct to Trimont, CornoNero (as director and CEO) and as Coonwarra’s agent, in circumstances in which the allegations in both proceedings involve him simultaneously wearing many hats;
(ii) in relation to the implementation by the defendants to the Coonwarra proceeding of a dishonest design to use the Mernda Land to obtain funds for their own purposes (raised in the Coonwarra Proceeding) and the ability of Trimont to meet its obligations (raised in the GJB Proceeding);
(iii) in the event it is found in the GJB Proceeding that Hartwig did not have any interest in the sale of Trimont assets to a funded purchaser, when in the Coonwarra Proceeding he is found to have benefitted from the application of the loans.
Hartwig contends that although the actions of Brady, Breckenridge and Ascenzo would be analysed in both proceedings and the credit of each of those witnesses would be challenged, that is insufficient to give rise to a relevant risk of inconsistent findings of fact or judgments. Hartwig also said that it appears that the GJB plaintiffs’ desire to have the two proceedings heard together is driven by their belief that it will be to their strategic advantage, in the hope that the Court will find that Breckenridge, Ascenzo and Hartwig have acted dishonestly towards Coonwarra and so, on the basis of “general dishonesty”, disbelieve their evidence insofar as it is relevant to the GJB Proceeding. By framing this submission around the strategic intent and imputed belief of GJB and CornoNero, Hartwig failed to grasp the nettle in relation to the significance of the potential credit findings that might be necessary, and did not submit that either alternative entailed prejudice to him. Breckenridge adopted Hartwig’s proposed orders and otherwise relied only on the different stages the proceedings had reached.
Ascenzo adopted an agnostic approach to the question of joint or separate trials, saying that he did not oppose separate trials but considered that it was a matter for the Court.
The pleaded claims
The parties’ submissions are best analysed by reference to a more detailed consideration of the pleaded claims. At this stage the only party to have filed its evidence is Coonwarra, who will call both Martin and Ben Van Der Burgt. Breckenridge has informed the Court that he expects to give evidence for himself in each proceeding, Ascenzo will give evidence for himself in each proceeding, and Hartwig will give evidence for himself and his related companies in each proceeding. It is necessary that matters be fixed for trial now, to enable their management and the management of the Court’s business more generally. The pleaded cases sufficiently expose the issues for the purposes of determining this issue.
The Coonwarra Proceeding
Coonwarra alleges in substance that –
(a) Breckenridge and Ascenzo approached it to develop the Mernda Land. In December 2014 it entered an agreement by which Trimont would undertake the development and sale of the Mernda Land (the ADA). The ADA founded fiduciary duties, whether by creating a partnership or joint venture between the participants, in addition to contractual terms of good faith and acting in best interests.
(b) The ADA was novated to CornoNero which assumed responsibility for Trimont’s past obligations owed to Coonwarra under the ADA, and assumed equitable duties to Coonwarra.
(c) Breckenridge and Ascenzo recommended, and organised with BCP, for three loans to be made to Coonwarra, of $1.5 million, $5.2 million and $2.4 million in December 2014, August 2015 and February 2016 respectively, secured by the Mernda Land and personal guarantees from Martin Van Der Burgt. Coonwarra entered the loan agreements by reason of misleading representations by Breckenridge and Ascenzo.
(d) The loans were to be raised for the purpose of the development of the Mernda land under the ADA, but were instead applied elsewhere without return to Coonwarra. In each case the loan was not in fact for the benefit of the development of the land or the ADA and was commercially unviable for those purposes.
(e) By their conduct in connection with the loan agreements Breckenridge, Ascenzo and CornoNero breached fiduciary duties owed to Coonwarra, and CornoNero breached the ADA.
(f) In fact, the funds from the Coonwarra loans were applied towards developments being undertaken by the defendants to the Coonwarra proceeding either individually or together, or through their related entities, or otherwise used to reduce or extinguish liabilities of the defendants, contrary to the ADA and contrary to Coonwarra’s interests. CornoNero knowingly received the sums of $5.2 million and $1.8 million advanced by BCP using the land as security, in breach of fiduciary duties. The breaches were a dishonest and fraudulent design by CornoNero and/or Trimont to use the land as security to obtain funds to be used for purposes other than the development of the land and against the interests of Coonwarra and the partnership or joint venture. Each of Breckenridge and Ascenzo assisted CornoNero and/or Trimont to commit the breaches and to give effect to the fraudulent design.
(g) BCP breached the relevant loan agreements by advancing loaned monies to other parties for unrelated transactions.
(h) In furtherance of the proposed sale in August 2016 of the whole of the Mernda Land, promoted by Breckenridge, Breckenridge offered a personal guarantee and a guarantee by CornoNero for $6,500,000, which remain unpaid.
(i) The sale of the land occurred, with the authority of Coonwarra, for $7.8 million, exclusive of GST, with no deposit payable. After repayment of the three loans, Coonwarra received $50,000. A debt to the Australian Taxation Office, owing from Coonwarra on the sale, remains outstanding and is payable from May 2021. The sale itself is not the subject of any claim.
Each of the defendants denies liability. Among other things, CornoNero denies that the ADA was of legal effect, raising a Masters v Cameron[3] issue. It denies, among other things, that it procured Coonwarra to enter the loan agreements. It denies any breaches of fiduciary duty and the making of any misleading representations.
[3](1954) 91 CLR 353.
CornoNero denies that Breckenridge had authority from its board to execute the guarantee purportedly given in its name in respect of the sale of the Mernda Land and says it was not validly executed.
Breckenridge accepts that the ADA was entered into but that denies it gave rise to any fiduciary duties; says his own alleged guarantee offered in August 2016 was only an offer to enter into a guarantee and does not plead to the guarantee he allegedly caused CornoNero to give to Coonwarra; says that all matters relating to the financing and development of the Mernda Land under the ADA were negotiated between Ascenzo and the Van Der Burgts; and denies the allegations of knowingly assisting breach of fiduciary duty.
Ascenzo admits the ADA was entered into and that CornoNero accepted the obligations of Trimont under it, says no loss or damage was suffered by Coonwarra arising from the application of the monies loaned by the December 2014 loan agreement, and otherwise denies or does not admit to the remainder of the allegations.
BCP admits that it advanced monies loaned by Coonwarra to Trimont but says it did this at the direction of Coonwarra and that Coonwarra directed it to take instructions for the application of monies from representatives of Trimont, which it did in respect of each loan. It says to the extent this is in breach of any obligation it owed Coonwarra, Coonwarra was negligent in so instructing it and so should have its liability reduced by an appropriate proportion.
Ascenzo, BCP and CornoNero each make claims under Part IVAA of the Wrongs Act 1958 (Vic), and in the case of Ascenzo and CornoNero, Part VIA of the Competition and Consumer Act 2010 (Cth) for proportionate liability from concurrent wrongdoers. BCP makes such a claim against CornoNero, Breckenridge and Ascenzo; Ascenzo against CornoNero, Breckenridge and BCP; and CornoNero against Breckenridge and Ascenzo.
The GJB Proceeding
The GJB plaintiffs allege in substance that:
(a) Ascenzo, Breckenridge and Hartwig (both for himself and for BCP) misled them about the profitability and solvency of Trimont’s business. They seek to establish the counterfactual, that Trimont was insolvent as at February 2015.
(b) In reliance on those representations GJB was incorporated and entered a share sale agreement by which it took 51% of CornoNero and a business sale agreement by which CornoNero acquired the construction business of Trimont, after which Breckenridge and Hartwig joined Brady and Ascenzo as directors of CornoNero. CornoNero assumed various liabilities of Trimont, but not liability under the ADA between Trimont and Coonwarra.
(c) Breckenridge, Hartwig and Ascenzo (at times with other entities) engaged in or caused CornoNero to enter into a number of transactions and to make certain payments which were not disclosed or adequately disclosed to CornoNero’s board, and were not in the company’s interest. In doing so, each of Hartwig, Ascenzo and Breckenridge was in breach of the duties they owed as directors of CornoNero. More particularly they say as follows:
(iv) Breckenridge, Hartwig and Ascenzo (or one or other of them) caused CornoNero to make certain payments to others otherwise than in discharge of, or on account of, debts or liabilities of CornoNero.
(v) Breckenridge, Hartwig and BC Developments caused CornoNero to borrow $1 million from Mernda Junction Shopping Centre Pty Ltd (MJSC) in breach of directors duties and a governing shareholders’ agreement, which permitted Breckenridge to obtain funds without the board knowing that a liability was being incurred or the purposes for which the funds were being applied; Breckenridge and Hartwig also misrepresented the fact of the borrowing and the intended application of the funds.
(vi) Breckenridge and Hartwig caused CornoNero to enter and give effect to an agreement with MJSC to develop the Mernda Land, immediately after its sale by Coonwarra (the “Mernda Development Contract”). The fee payable to CornoNero to develop the land was substantially below the effective cost of the contracted works, and was not in CornoNero’s interests and was not approved by the CornoNero board.
(vii) Breckenridge and Hartwig caused CornoNero’s entry into the Mernda Development Contract, contemporaneously with Breckenridge’s procuring of the sale of the Mernda Land from Coonwarra to MJSC, all in circumstances where they knew that Coonwarra was heavily indebted to BCP, the real security for which was the Mernda Land. The implication arising from this pleading appears to be that the repayment of BCP’s loans to Coonwarra resulting from the sale of the Mernda Land (alongside an underpriced development agreement) to MJSC, motivated Breckenridge and Hartwig’s organising of this suite of transactions, as opposed to their seeking to advance the best interests of CornoNero.
(d) Specifically in relation to the allegations made in the Coonwarra Proceedings that Coonwarra and Trimont entered the ADA and CornoNero acceded to the obligations of Trimont under the ADA, the GJB plaintiffs say that they deny those allegations in the Coonwarra Proceeding but if those were the facts, none of Breckenridge, Ascenzo or Hartwig disclosed those dealings to the CornoNero board, CornoNero did not authorise those transactions, and the accession by CornoNero was not in its interests.
(e) The sale of the Mernda Land to MJSC, and a guarantee of the same from CornoNero (as alleged in the Coonwarra Proceeding) were undertaken without the knowledge or consent of the board of CornoNero.
Each of the defendants denies any wrongdoing. The director defendants raise business judgment rule defences, say that the impugned transactions were in fact known to CornoNero’s board and advance why they in fact acted in good faith and for a proper purpose. Each says he acted honestly and should be excused from any liability pursuant to s 1317S or s 1318 of the Corporations Act 2001 (Cth). Each claims contributory negligence in the GJB proceeding and seeks to diminish his liability by alleging that the other defendants were concurrent wrongdoers.
Analysis
It is my view that despite the fact that, as Coonwarra correctly says, substantial parts of the GJB Proceeding do not concern it, the intersections between the proceedings mean that the appropriate order is that the matters be tried together.
Whether or not CornoNero acquired Trimont’s business by reason of representations concerning its profitability and whether those representations were misleading or deceptive – a matter that the GJB plaintiffs intend to establish by proving Trimont’s insolvency at February 2015 – are not matters that need to be determined in the Coonwarra Proceeding. Nor are a number of the transactions and payments that CornoNero and GJB say Breckenridge, Hartwig and Ascenzo and associated entities caused CornoNero to enter or to make, and nor is the question whether those transactions were disclosed to CornoNero’s board, or in its interest.
That notwithstanding, I do not accept that the elements that are common to the proceedings are inconsequential.
While it is true that a relatively small number of the dealings impugned in the GJB Proceeding concern Coonwarra and the Mernda Land, the fact that those dealings are raised in both proceedings is significant. The intersection between the proceedings concerns, at its heart, conduct engaged in by Breckenridge, Ascenzo and Hartwig. As the GJB plaintiffs correctly submit, Breckenridge was involved in most of the transactions that are significant to both cases. While a number of those transactions are not relevant to the Coonwarra Proceeding, some are the subject of both proceedings.
For example, the contention at the heart of Coonwarra’s case is that the ADA was a binding agreement that was novated to CornoNero by consensual dealing between Coonwarra, Trimont and CornoNero. That issue requires, among other things, a determination as to the capacities in which Breckenridge was acting. Breckenridge’s authority to bind CornoNero and the manner in which he acted for CornoNero and Trimont, including in the period of time in which the Coonwarra transactions occurred, are more generally, a central issue in the GJB Proceeding. Similarly, Coonwarra alleges that Breckenridge gave, and caused CornoNero to give, guarantees in August 2016 to Coonwarra. Breckenridge denies the guarantee in his name was, properly construed, a guarantee at all, rather than an offer to guarantee given in comfort, and does not plead at all to the one he allegedly caused CornoNero to give. CornoNero denies that any guarantee was given in its name by disclaiming both its valid execution and Breckenridge’s authority to give it. It says, in its proceeding, that if a guarantee was given on its behalf, Breckenridge is liable to it for breach of duty, given the purported guarantee was neither disclosed nor authorised by CornoNero, and that if it is wrong and it is bound by the guarantee then Breckenridge should be jointly liable.
While it is true that documentary evidence will be likely be central to the resolution of many if not all of the issues raised in each proceeding, it cannot be reasonably concluded at this stage that evidence from the individuals involved in the transactions will be irrelevant or unimportant. On questions of authority and assumption of responsibility (which at this stage are appropriately described broadly), there is an appreciable risk of inconsistent findings if the trials are heard separately.
Questions of authority and attribution of responsibility do not, in these proceedings, amount to mere technicalities. For example, on Coonwarra’s case, the defendants engaged in a fraudulent design to cause Coonwarra to raise loans for their use, the discharge of which required the sale of its significant asset in the Mernda Land. On the GJB plaintiffs’ case, it was CornoNero itself who was unwittingly led into this same sale, by persons including the same defendants, this time seeking to discharge those same liabilities and leaving it with an uncommercial development agreement.
I accept that the GJB plaintiffs’ allegations (made in their proceeding) concerning the entry into the ADA and CornoNero acceding to Trimont’s obligations under the ADA are conditional, in that the GJB plaintiffs say that if Coonwarra’s allegations are accepted, then the transactions were not authorised. Allegations of that kind might have been made by CornoNero filing a rule 11.15 notice in the Coonwarra Proceeding. That said, in the event that Coonwarra establishes the making of the ADA and its novation to CornoNero, the GJB plaintiffs’ claims for relief against the directors have to be determined. Both claims involve questions of authority. Were those claims determined by different judges, the risk of inconsistent findings would arise.
Whilst it is possible to posit an outcome in which the claims and defences in the Coonwarra and GJB Proceedings could be determined without inconsistent findings, the probabilities are against such an outcome in my assessment. I accept that in deciding whether proceedings should be tried separately or together, the eradication of the possibility of any inconsistent finding is not an overriding imperative, but a factor to be weighed with others.
The probabilities are also against a determination of the Coonwarra Proceeding without the need to squarely consider the credit of the common witnesses who are central actors and parties to both proceedings (Breckenridge, Ascenzo and Hartwig), in relation to dealings that link Coonwarra, CornoNero and Trimont, in relation to which it is likely that they will have to give evidence and be cross examined twice on intersecting issues. Coonwarra contends that CornoNero knowingly received funds advanced by BCP using the Mernda Land as security, and that that conduct was a dishonest and fraudulent design by CornoNero or Trimont, assisted by Breckenridge and Ascenzo, who gave effect to the fraudulent design. GJB and CornoNero allege in their proceeding (among other things) that Breckenridge and Hartwig caused CornoNero to enter the Mernda Development Agreement in order to facilitate the sale of the Mernda Land to MJSC and thereby facilitate repayment of the Coonwarra loans, misusing their positions. They allege that each of Ascenzo, Breckenridge and Hartwig breached their duties as directors. The directors, by their defences, positively assert that their actions were in good faith and for a proper purpose, and seek to be excused from any liability by reason of their having acted honestly.
I accept that the fact that an adverse credit finding may be made against a witness is not alone a fact that need colour the trial judge’s perception of separate transactions (or be seen to do so) and that credit assessments may go against witnesses on some matters but not on others.[4] I also accept that it is possible, without forming any view about the merits of the claims, that Coonwarra may fail to establish elements of its case on grounds unrelated to the credit of the individual defendants.
[4]Slea Pty Ltd v Connective Services Pty Ltd & Ors; Mortgage Results Pty Ltd v Millsave Holdings Pty Ltd [2017] VSC 327 [23] (Almond J).
Nevertheless, judged at this point in time (and the matter must be judged now so that the resources of the parties and the Court can be marshalled and not wasted), the risk of overlapping evidence, including on matters going to credit, is appreciable given the nature of the allegations made. That factor weighs in favour of all issues being heard together.
The submissions of Hartwig and Breckenridge that seek to attribute to CornoNero a desire to colour the assessment of the evidence by a general finding or impression of dishonesty do not assist, because they do not sufficiently engage with substance of the respective cases as pleaded or the proper approach to overlapping witnesses dealing with matters going to credit. They refrained from exposing in submissions their own tactical and forensic interests in any explicit way.
A separate trial of the Coonwarra matter would be ready to proceed in mid-April 2021 on an estimate of 1 week. The GJB Proceeding (whether heard alone, on an estimate of 3-4 weeks, or together with the Coonwarra Proceeding) will be ready to proceed by late August 2021.
The alternatives are, on the one hand, a single trial dealing with all issues, that avoids the risk of inconsistent findings and common witnesses giving evidence on some important matters twice, including where real credit issues may arise, and on the other hand, a second trial, four and half months later, involving substantially the same parties save for Coonwarra, including on some of the same transactions, which will involve traversing some of the same evidence.
Separate trials would have the benefit of allowing Coonwarra to proceed sooner and without having to attend a longer trial. I accept that Coonwarra will bear that delay and will likely incur some extra costs in connection with a joint trial, although there will be parts of a joint trial in which it will not need to participate. Requiring Coonwarra to participate in a longer and more complex trial than would be the case if no order for joint trials were made, is a factor in favour of rejecting the GJB plaintiffs’ application, but I must weigh all issues in the balance.
In my view, the fact that Coonwarra’s action will be tried in August rather than April 2021 is regrettable but does not amount to an overly long delay. The likelihood of additional costs to Coonwarra is also regrettable but is outweighed by the need to avoid the difficulties discussed above, of entertaining separate trials. I consider that fewer resources, of both the parties and the Court, considered globally, will be expended if all matters are determined together. That is so, notwithstanding that the individual defendants are content to attend two trials, some four and a half months apart. Although there are factors that point both ways, overall, the interests of justice will be better served by a single trial.
That assessment is not altered by the fact that Coonwarra has pressing obligations to the tax office. Even if it were a consideration capable of weighing sufficiently in the balance against the issues concerning overlapping witnesses, the proposition that fixing a shorter trial in mid-April rather than a longer trial in late August will solve or ameliorate Coonwarra’s difficulties is subject to a number of imponderables.
I will fix both matters for a trial commencing in late August 2021 with the evidence in one proceeding being evidence in the other. I will direct the parties agree (or to propose to me, if not agreed) arrangements for trial that ensure that those issues that are relevant to Coonwarra and those that are not, are dealt with at times that minimise the need for Coonwarra’s representatives to attend court. I will fix the matter for directions shortly, to that end.
SCHEDULE
S ECI 2017 00190
BETWEEN:
COONWARRA PTY LTD (ACN 063 839 832)
Plaintiff
and
CORNONERO PTY LTD (ACN 606 176 069)
First Defendant
and
TRIMONT PTY LTD (in Liquidation) (ACN 006 065 701)
Second Defendant
and
PETER ANDREW BRECKENRIDGE
Third Defendant
and
SILVIO ASCENZO
Fourth Defendant
and
BERKELEY CAPITAL PARTNERS PTY LTD (ACN 078 247 319)
Fifth Defendant
S ECI 2019 01225
BETWEEN:
GJB BUILDING PTY LTD (ACN 607 342 343) as trustee for the GJB BUILDING TRUST
First Plaintiff
and
CORNONERO PTY LTD (ACN 606 176 069)
Second Plaintiff
and
AI & PB PROPERTY PTY LTD (ACN 167 992 323) (deregistered)
First Defendant
and
SILVIO ASCENZO
Second Defendant
and
PETER BRECKENRIDGE
Third Defendant
and
BERKELEY CAPITAL PARTNERS PTY LTD (ACN 078 247 319)
Fourth Defendant
and
BERKELEY CAPITAL DEVELOPMENTS PTY LTD (ACN 116 121 665)
Fifth Defendant
and
BRETT HARTWIG
Sixth Defendant
2
2
0