Gamble v Wilson
[2011] NSWDC 240
•03 June 2011
District Court
New South Wales
Medium Neutral Citation: Gamble v Wilson [2011] NSWDC 240 Hearing dates: 7, 8, 9, 10, 11 February and 17 March 2011 Decision date: 03 June 2011 Before: Letherbarrow SC DCJ Decision: 1.Judgment for the plaintiffs against the defendants on the claim in the sum of $24,438 inclusive of pre-judgment interest.
2.Judgment for the defendants/cross-claimants against the plaintiffs/cross-defendants on the cross-claim in the sum of $32,001.52 inclusive of pre-judgment interest.
3.The defendants/cross-claimants are entitled to set off against the judgment sum set out in Order 1 the judgment sum referred to in Order 2 such that the plaintiffs/cross-defendants are to pay to the defendants/cross-claimants the sum of $7,563.52.
4.Each party to bear their own costs of the proceedings including the motion dated 10 August 2009 but excluding those referred to in the order made by his Honour Judge Elkaim of 27 October 2010.
Catchwords: CONTRACT -landlord and tenant - lease of premises for hardware business - claim in conversion by lessees consequent upon lessors terminating lease and retaking possession - whether lease validly terminated - whether lessor had right to retake possession - cross-claim for breach of lease by lessors - assessment of damages for conversion and breach of lease Cases Cited: Penfolds Wines Pty Limited v Elliott (1946) 74 CLR 204, Flowfill Packaging Machines Pty Ltd v Fytore Pty Ltd (1993) Aust Torts Reports 81-244, Barclays Mercantile Business Finance Ltd & Anor v Sibec Developments Ltd & Ors [1993] 2 ALL ER 195, Petre v Henier (1701) 12 Mod Rep 519, Upton & Anor v TVW Enterprises Ltd & Anor (1985) 7 ATPR 40-611, Craig v Marsh (1935) 35 SR (NSW) 323, Clayton v Le Roy (1911) 2 KB 1031, Crowther v Australian Guarantee Corporation Ltd (1985) Aust Torts Reports 80 - 709, Solloway v McLoughlin [1938] A.C. 247, Trailways Transport Ltd v Thomas [1996] 2 NZLR 443, Johnson Matthey (Aust) Ltd v Dascorp Pty Ltd et al [2003] VSC 291, Furness v Adrium Industries Pty Ltd (1993) Aust Torts Reports 81 - 245, Livingstone v Rawyards Coal Co (1880) 5 App. Cas. 25, Butler & Ors v The Egg and Egg Pulping Marketing Board (1966) 114 CLR 185, Kuwait Airways v Iraq Airways [2002] UKHL 19; [2002] 2 A.C. 883, Whitmore v Black (1884) 13 M.&W. 507, Whitehouse v Atkinson (1828) 3 C.&P. 344, Payzu v Saunders [1919] 2 KB 581 CA, Saunders v Williams [2003] B.L.R. 125 CA Texts Cited: Clerk, J.F. and Lindsell, W.H.B., Clerk & Lindsell on Torts (Sweet and Maxwell, 16th ed, 1989), Clerk, J.F. and Lindsell, W.H.B., Clerk & Lindsell on Torts (Sweet and Maxwell, 20th ed, 2010), McGregor, H, McGregor on Damages (Sweet and Maxwell, 18th ed, 2009) Category: Principal judgment Parties: Godfrey Gamble (First Plaintiff)
Karen Gamble (Second Plaintiff)
Robert Leo Wilson (First Defendant)
Claude Stanley Wilson (Second Defendant)Representation: First and Second Plaintiffs:
Mr J Birman/Mr T Young
First and Second Defendants:
Mr S Gardiner/Ms C O'Mahony
First and Second Plaintiffs: Birman & Ride
First and Second Defendants: Walsh & Blair
File Number(s): 2009/339774
Judgment
Introduction
1. On 1 May 2002, the plaintiffs as lessees, entered into a standard Law Society of New South Wales lease (Exhibit A) with the defendants as lessors, whereby the former agreed to rent the latter's warehouse and surrounding yard (the "premises") located at 13 Douglas Road, Tuncurry for the purpose of running a hardware business.
2. The relevant provisions of the lease were as follows:
(i) a term of five years terminating on 30 April 2007 with an option to renew for a period of a further five years. This option could not be exercised prior to 1 October 2006 and had to be exercised by 1 January 2007 (Item 11);
(ii) the rent was to be paid in advance by monthly instalments commencing at $4,917, with annual increases based on the Consumer Price Index. If the option was exercised, there was to be a review to market (Items 12 and 14);
(iii) the plaintiffs were to pay all "Outgoings" during the term of the lease which included local council rates and charges, water, sewerage and drainage charges, land tax and insurance, with the obligation to pay land tax suspended for the first year (Item 13);
(iv) all rent and other monies payable under the lease were exclusive of GST with the liability for GST (payable in respect of any taxable supply), being additional and payable by the plaintiffs to the defendants at the same time as rent and other monies were payable (Item 17);
(v) the defendants had a right to enter and take possession of the property if, inter alia, "rent or other money due under this lease is 14 days overdue for payment" (Cl 12.2.2);
(vi) if the defendants allowed the plaintiffs to continue to occupy the premises after the expiry of the lease, other than under a new lease, they did so under a monthly tenancy on the same terms (with some exceptions) and the plaintiffs "must go on paying the same rent and other money in the same way that (they) had to do under the lease just before the lease period ended..." (Cl 12.4);
(vii) prior to the plaintiffs permanently vacating the premises, they were to repaint all parts of the building thereon which were painted at the time they took possession or during the lease and any extension of the term, with such repainting to be in accordance with the defendants' reasonable specifications (Item 22);
(viii) the plaintiffs must maintain the premises in their condition as at the commencement date subject to fair wear and tear and also reimburse the defendants for the cost of fixing structural damage caused by the plaintiffs apart from such wear and tear (Clause 7.2 and 7.3).
3. Pursuant to the lease, the plaintiffs moved into the premises and conducted their business known as "Great Lakes Hardware" therefrom. The plaintiffs very quickly fell behind in the rent although the relationship between the parties remained reasonably good.
4. Whilst there was considerable evidence surrounding the issue of the exercise of the option, it is common ground that this was never validly exercised despite, at least, the second defendant believing it had been, and the plaintiffs remained on as monthly tenants from May 2007 until October 2008 (T196.35 - 198.6).
5. Over the period that the plaintiffs were monthly tenants, relations between the parties deteriorated significantly and the defendants ultimately issued proceedings against the plaintiffs for non-payment of rent and other monies out of the Wagga Wagga Local Court on 2 October 2008.
6. On 11 October 2008, it is common ground that the defendants locked the plaintiffs out of the premises whilst the plaintiffs' business was still operating and stock (the "stock") and other goods including certain plant and equipment (the "goods") were still on the premises.
7. Most of the stock and goods remained locked inside the premises at the time that the plaintiffs filed their original statement of claim in the Wagga Wagga District Court on 28 April 2009 seeking over $600,000 in damages from the defendants for conversion. This claim is now contained in an amended statement of claim which seeks a little over $580,000 although this amount was reduced somewhat in submissions.
8. On 10 August 2009, the defendants filed a motion in the District Court at Wagga Wagga seeking orders pursuant to rule 43.2 of the Uniform Civil Procedure Rules, 2005, NSW as to whether the plaintiffs or "any other entity" were entitled to the stock and goods still at the premises which had been "abandoned" by the plaintiffs. An order was also sought requiring whomever "the court determines is entitled to possession" of the stock and goods to collect it.
9. On 31 August 2009, the defendant's local court proceedings were, by consent, transferred to the District Court at Wagga Wagga and are now contained in a further amended statement of cross claim.
10. On 9 September 2009, consent orders were made disposing of the defendants' said motion whereby certain of the items of the stock and goods still on the premises owned by another company were to be removed by it with the plaintiffs to remove "all items of hardware stock, tenants fixtures and fittings, motor vehicles and plant and equipment situated" there other than such other company's goods.
11. Thereafter, the remaining stock and goods were moved by the plaintiffs to a rented warehouse in Taree. The auctioneer they had retained then arranged an auction which took place on 8 November 2009 and resulted in the plaintiffs ultimately netting less than $30,000.
12. Prior to the transfer of the remaining stock and goods to the Taree warehouse, the plaintiffs sold a portion of same after regaining entry and some of it was voluntarily returned to other companies which had made claims thereon.
The Hearing
13. By an earlier order of another judge of this court, the trial proceeded by way of evidence in chief being given by affidavit with cross examination of the deponents.
14. The hearing took place over five days in Wagga Wagga last February with addresses taking place in Sydney on 17 March last.
15. Apart from some twenty one affidavits from twelve deponents, the parties tendered a considerable volume of documentary material. Both parties also provided several sets of written submissions together with various spread sheets and schedules of damages in the form of "Scott" schedules.
The Issues
16. As to the plaintiffs' claim in conversion, the major issues are:
(i) did the defendants have a right to take possession of the premises on 11 October 2008? The answer to this question depends upon, inter alia, whether the plaintiffs were fourteen days overdue in paying rent and other monies under the lease. This in turn depends upon what the rent then was, about which there was considerable dispute, and whether the defendants had orally agreed to defer the payment of all sums due for three months and if so, on what basis. This issue also involved determining whether the plaintiffs were only obliged to pay outgoings made known to them by the defendants and whether, in the circumstances, GST was payable. Whilst the plaintiffs have pleaded that the termination of the lease was unlawful, their claim in conversion is not really dependent on such unlawfulness. Even if their occupation was lawfully terminated, the defendants could still have converted the subject property. Nevertheless, the plaintiffs have pleaded an unlawful termination and whilst this question is really more relevant to the cross claim, it is convenient to refer to it here.
(ii) Did the defendants convert the stock and goods located on the premises when they retook possession? This involves a consideration of whether the defendants denied the plaintiffs possession of the stock and the goods or whether the plaintiffs abandoned it. It also involves determining whether the defendants were justified in withholding possession due to the claims of numerous third parties made relatively shortly after the lockout.
(iii) if the defendants did convert any stock and goods to which the plaintiffs were entitled to possession, what was it? There was a considerable dispute as to what was actually on the property at the time of the lockout and also as to what items had been disposed of by the plaintiffs prior to the auction;
(iv) if any conversion took place, how are the plaintiffs' damages to be calculated? For example, are the plaintiffs entitled to the original wholesale cost of the relevant items, their replacement value at the time of the alleged conversion or, as was urged on behalf of the plaintiffs, their full retail value? In this regard, the defendants argued, inter alia, that the plaintiffs had not proved they suffered any loss and that most of the remaining items brought their true value at the auction which was highly publicised and well attended. In response, the plaintiffs described such auction as a "fire sale" over which they had no control. This in turn raises questions of mitigation.
17. As to the defendants' cross claim, the major issues are:
(1) what is the outstanding rent, if any? This involves determining what the rent was during various periods after the original term of the lease expired up to the time of the lockout and whether the defendants are entitled to rent thereafter up until the transfer of the remaining items to Taree in late 2009 and if so at what rate.
(2) what is the outstanding sum, if any, in relation to outgoings and GST? This depends upon the determination of a number of the above issues as well as whether the defendants failed to advise the plaintiffs as to what these amounts were and when they fell due and whether this was required under the lease in any event.
(3) what sums are the defendants entitled to for repainting costs and for various forms of damage allegedly caused to the premises by the plaintiffs as well as those claimed for rubbish removal and cleaning?
Evidence Called by the Plaintiffs
Mr Godfrey Gamble
18. Mr Gamble, the first plaintiff, swore three affidavits dated 16 November 2010, 14 January 2011 and 21 January 2011 which became Exhibits B, C and D respectively. Annexures thereto were designated with his initials coupled with a number, such as "GAG 1". Items exhibited to the affidavits were described as such together with a number, such as "Exhibit 1". The second plaintiff, Mr Gamble's wife, was largely uninvolved in the subject events and gave no evidence in the proceedings although some conversations in which she took part are referred to by others.
19. When he first took possession of the premises in May 2002, Mr Gamble stated that the front driveway was in a poor state of repair as were the male and female vanity basins in the toilets. He said that the previous tenants were a heavy haulage company which used to park their semi-trailers and other trucks on the tarmac around the premises (Exhibit B - paras 8 and 10). In this regard, Exhibit 1 to Exhibit B, comprises various photographs taken of the premises when the prior tenant was still in possession.
20. As to GST, Mr Gamble deposed that the ATO audited his business in mid 2002 and denied his claim for reimbursement thereof which he had been paying pursuant to the lease. He said he informed the second defendant, Mr Claude Stanley Wilson ("Mr Stan Wilson"), of this and asked for a tax invoice which he received but he said that he thereafter received no other such tax invoices nor any further "request for payment of GST" from the defendants until November 2008 (Exhibit B - paras 12 and 13). He stated that at no time from May 2002 until the lockout did the defendants ever advise him that they had incurred any liability to pay GST in respect of the lease of the premises (Exhibit B - para 14). Nevertheless, Mr Gamble conceded that he continued to pay GST to the defendants as he "assumed" he was "obliged" to do so under the terms of the lease (Exhibit B - para 17).
21. As to the rent, pursuant to the "Schedule of Rent Payable and Paid" (GAG 2), Mr Gamble stated that he had in fact overpaid rent by about $40,000 as at October 2008 (Exhibit B - para 16).
22. As to council and water rates, Mr Gamble deposed that he had only occasionally received the relevant accounts in the mail from the first defendant, Mr Robert Leo Wilson ("Mr Robert Wilson") the second defendant's brother, which he always paid (Exhibit B - paras 20 to 23).
23. As to insurance, Mr Gamble deposed that prior to the receipt by fax of a letter in June 2008 (GAG 4), the defendants did not advise him of any costs that they had incurred in insuring the premises nor make any requests for payment thereof from him (Exhibit B - para 24).
24. As to land tax, Mr Gamble deposed that the defendants never told him what was owing in this regard, nor did they ever ask him to pay it, nor to reimburse them for any payments they made (Exhibit B - para 26).
25. By early 2007, Mr Gamble deposed that he and his wife had decided "to quit the hardware business" as they "did not want to be locked into a further 5 year lease". However, as they wanted to sell the business as a going concern "it was important to continue to trade from the business until we could find a buyer" and if a buyer had been found, Mr Gamble said he "would have been keen to also secure a formal extension of the lease" that he could assign to them (Exhibit B - para 28).
26. From February 2007 Mr Gamble deposed that the business' turnover "suddenly dropped by about 33% and thereafter continued to decline" which he believed was due to, inter alia, the global economic crisis and the fact that a newly opened "Bunnings" hardware warehouse in nearby Forster increased competition (Exhibit B - para 29).
27. Thereafter, the plaintiffs remained in the business and "did not exercise the option". Whilst Mr Gamble thought that a rent increase would be inevitable, he deposed that at no stage was there ever an agreement as to the rent to be paid after the expiration of the lease save as provided for in Clause 12.4 of Exhibit A.
28. Despite the above, Mr Gamble deposed that on 10 May 2007 he faxed a letter to Mr Stan Wilson (GAG 5) which states:
"We are interested in taking up the option for extending the lease for another 5 years."
29. Mr Gamble said that the contents of this fax "are true because I was interested in renewing the lease with the proviso (that I admittedly did not express in GAG5) that I could find a buyer for the business" (Exhibit B - para 32).
30. It would seem that whilst the period for exercising the option pursuant to the lease had lapsed on 1 January 2007, both parties were either unaware of this provision or ignored it.
31. After the expiry of the original lease term, Mr Gamble said that Mr Stan Wilson would call at the premises "to demand payment of rent" as well as other monies and although "the question of the rent had not been resolved", Mr Gamble said that he paid him "irregular lump sums more or less in accordance with his demands to avoid further confrontation because I wanted him to leave the store" (Exhibit B - paras 33 and 34).
32. Mr Gamble said that from January 2007 he had several discussions with Mr Stan Wilson "about the future of the lease" and "about the new rent". He said that Mr Wilson wanted a "fair market rent" and that in July 2007, he agreed with him to instruct a valuer to prepare a report as to such a rent with the plaintiffs and the defendants to share the cost equally. In accordance with this agreement, a Mr James Cassidy of Robert Gould & Associates prepared a rental assessment (Exhibit 11) which Mr Gamble received in November 2007. It concluded that a fair market rent was $92,380 per annum exclusive of GST. Mr Gamble deposed that he "could not afford to pay" this amount (Exhibit B - para 38).
33. In late November 2007 at a meeting with Mr Stan Wilson, Mr Gamble said that he told him the plaintiffs "would not enter into a new lease" unless the defendant made certain repairs, most of which Mr Wilson agreed to but he then demanded a monthly rental instalment of $8,468.16 in accordance with Mr Cassidy's market assessment which Mr Gamble paid. Mr Gamble said that despite agreeing to these repairs, the defendants never carried them out (Exhibit B - paras 39 - 41).
34. On 24 July 2008, there was a meeting between Mr Gamble, the defendants and the latter's real estate agent, a Mr Peter Katen, at a service station operated by the defendants. At this stage Mr Gamble said that "communications between the parties had broken down". At this meeting, Mr Gamble said he told the others present that the plaintiffs "were not in a financial position to sign a new lease" and that they wanted to remain as month to month tenants and that they were "attempting to restructure or sell the business and could not afford to pay more than $4,000 per month in rent". Mr Gamble said that the defendants agreed to this reduced rate for a period of three or four months but that this "was temporary and they still expected us to pay any other monies due to them after that time" (Exhibit B - paras 43 - 45).
35. In consequence of this arrangement, Mr Gamble made payments to the defendants in August and September 2008 of $4,000 per month.
36. Around this time, Mr Gamble said that a local businessman, a Mr Des Wiggins, had approached him and was a prospective buyer for the hardware business. Mr Gamble said that he told Mr Stan Wilson that he had such a buyer in late September 2008 and Mr Wilson demanded to know his name but Mr Gamble "refused to disclose" this because he had "been requested not to do so" (Exhibit B - para 47).
37. This oral demand was followed up by a letter from Walsh & Blair, the defendants' solicitors, dated 8 October 2008 (Annexure E to Exhibit 1), which advised that unless such proposed purchaser's name and contact details were communicated by 5pm on Friday 10 October 2008 the defendants "will take such further action as they may be advised and this without further notice to you".
38. On Saturday 11 October 2008, Mr Gamble attended at the subject premises "but wasn't able to enter them because the padlock to the gate had been changed" and "Stan Wilson and a security guard were present and refused to allow me to enter". Mr Gamble said that he asked Mr Wilson "for access to the premises to remove the property and he refused". At the same time, Mr Gamble was served with the abovementioned statement of claim issued out of the local court at Wagga Wagga on 2 October 2008, claiming just under $70,000 from the plaintiffs, primarily made up of outstanding rent in the sum of a little over $56,000 (Exhibit B - para 57).
39. Thereafter, Birman and Ride, the plaintiffs' lawyers located in Perth, wrote several letters (GAG 7 - 10) to Walsh & Blair with no immediate response.
40. Six days after the lockout on 17 October 2008, Mr Gamble deposed that he telephoned Mr Robert Wilson and asked him to release the detained stock and property which he refused to do although he agreed that Mr Gamble could remove his business records and computer at a suitable time which would be advised (Exhibit B - para 59). Other evidence establishes that this subsequently occurred on 27 November 2008.
41. As to what stock and goods were on the premises as at 11 October 2008, Mr Gamble deposed that as to the former, a stocktake had been undertaken "of the trading stock in the premises as at 30 June 2008". This involved him and his staff physically counting every item of stock and recording it on a computer. From 1 July 2008 up until the subject lockout Mr Gamble deposed that "every purchase and sale of stock was recorded in a computer at the point of sale and the stock levels and values were automatically adjusted".
42. Shortly after the lockout, Mr Gamble stated that he produced Exhibit 2 to Exhibit B "being a printout of data reporting each item of stock in the store at 11 October 2008..., the wholesale cost and the proposed retail mark up". In relation to the retail mark up applied to the wholesale price, same was determined by Mr Gamble based on his "observations of prices charged by competitors, retail mark-ups recommended by wholesalers and industry practice" (Exhibit B - paras 49 - 52).
43. The conclusion that Mr Gamble drew from the above and as set out in Exhibit 2 to Exhibit B is that the wholesale value of the stock as at 11 October 2008 was $309,085.07 with its retail value being $573,268.94 (Exhibit B - para 53).
44. In relation to certain parts of the stock, Mr Gamble deposed that certain suppliers, pursuant to the terms of the relevant agreements were entitled to retain ownership of their goods until the plaintiffs sold them to customers and the suppliers were paid in full (Exhibit B - para 54).
45. In addition to the stock, Mr Gamble listed the goods located on the premises as at 11 October 2008 together with his "estimate" of their value at that time totalling some $52,000 (Exhibit B - para 55).
46. On 10 November 2008, Walsh & Blair sent a letter to the defendants' lawyers (GAG 11) enclosing, inter alia, various tax invoices for insurance premiums issued by Elders Insurance in relation to "building insurance" which the defendants had paid in relation to the subject premises since the commencement of the lease. This letter claimed reimbursement in the amount of approximately $7,500 so paid until the time of the lockout which was slightly more than the amount first claimed in June 2008 pursuant to GAG4. This larger amount was included in a proposed amended statement of claim to be filed in the Wagga Wagga local court proceedings commenced by the defendants which was annexed to the letter.
47. In March 2009, at Mr Stan Wilson's request, Mr Gamble attended the subject premises at which time a Mr Alan Slater, a director of a company trading as "Confast" was also in attendance. At this meeting, Mr Gamble authorised Mr Slater to remove various goods apparently owned by Confast, the wholesale value of which Mr Gamble states was $7,174.48 including GST, for which he was given a "credit" by Mr Slater.
48. In late August 2009, Mr Gamble received certain correspondence from the defendants (Annexures F, G, I and J of Exhibit 1) which detailed claims made to Mr Robert Wilson by four companies being John Danks & Son Pty Limited, BOC Limited, John McCurdie Sales Pty Limited and Test-Right Import Australasia Pty Limited. Such claims asserted ownership over numerous items of stock still on the premises. In each case, Mr Gamble stated that, inter alia, this was the first time this correspondence "or notification of any other communication between the defendants and the relevant company" came to his attention (Exhibit B - para 71) although several of these letters refer to numerous unsuccessful attempts that had been made to contact Mr Gamble directly.
49. After the consent orders were made in the Wagga Wagga District Court on 9 September 2009, Mr Gamble regained possession of "the detained property" from the premises and in the period up to 10 October 2009 delivered to Test-Right Imports Australasia Pty Limited, John McCurdie Sales Pty Limited and BOC Limited "the items that they owned". John McCurdie Sales Pty Limited gave him a credit for a little over $11,000 in relation to the items returned to it.
50. The plaintiff then sold a number of listed items direct from the premises and the amount received for same "did not exceed $10,000". Thereafter, the balance of the "detained property" was conveyed to the warehouse in Taree (Exhibit B - para 73).
51. When he regained possession of the stock and goods from the premises, Mr Gamble said that "a number of pot plants had been damaged beyond repair" and the "packaging for many items had deteriorated" and "there was significant weather damage to a number of goods that had been stored outside since 11 October 2008" (Exhibit B - para 75).
52. In relation to the repainting of the premises, the plaintiff said that he was not given the opportunity to do so because of the lockout.
53. Further, the plaintiffs had caused no damage to the "driveway, downpipes, vanity basin...and fences" which were in the same condition as when he took possession in 2002 save for "fair wear and tear" (Exhibit B - para 76).
54. Whilst Mr Gamble swore the two further affidavits mentioned (Exhibits C and D), the contents of same were largely in reply to matters raised in various affidavits relied upon by the defendants and I propose to refer to them where appropriate later in this judgment.
55. In cross examination, Mr Gamble denied that he had in any way altered the document produced as a result of his stocktake (Exhibit 2 to Exhibit A) prior to its printing.
56. In relation to his audit by the Australian Tax Office, Mr Gamble agreed that he would have documents "in the archives somewhere" but no such documents were ever tendered (T115.17 - 25).
57. Similarly, Mr Gamble said that the actual invoices for the stock he purchased between 2002 to approximately June 2007 were "in storage" but these were also not tendered in evidence (T115.46 - 116.9).
58. In relation to such obligations as council rates and land tax, Mr Gamble stated that his obligation to pay same under the lease was when "asked for" and "when they were requested by the vendors" (T116.46 - 117.14).
59. In relation to the market review conducted by Mr Cassidy, Mr Gamble agreed that after he received a copy in November 2007 he paid the exact figure once but not because any agreement had been reached in relation to it but "because I was asked to by Stan on one of his regular visits" and because "we were behind in the rent" (T119.34 - 43). Mr Gamble clearly accepted that the plaintiffs were behind in the rent around this time and that this was due to "poor cash flow as a result of a downturn in business" (T120.15 - 16).
60. Mr Gamble denied that his fax of 10 May 2007 (Annexure GAG5 to Exhibit B), advising the defendants that they were interested in taking up the option for a lease, was misleading.
61. Mr Gamble was then cross examined upon his third affidavit (Exhibit D). Paragraph 1 refers to numerous discussions between Mr Gamble and a Mr Banks, an employee of another hardware store, occurring between 2008 and 2009 "with a view to (Mr Banks) and his partners buying the Great Lakes Hardware business or at least some of my plant, equipment and stock". Annexure GAG24 to Exhibit D is a letter written by Mr Gamble to Mr Anthony Banks in January 2009 enclosing "the list of plant and equipment we discussed" and advising that he was "open to offers, anything you don't want I'll take and sell". In Mr Gamble's handwriting on the enclosed list which totals $77,000, he has written "save $45K the Lot".
62. In a similar vein, Mr Gamble confirmed that he took "both plant and equipment and product" from the premises and sold it for cash when he was allowed back in and prior to the remainder of the stock and goods being transferred to the warehouse in Taree to be sold at auction (T130.48 - 131.3). He reiterated that he received a bit less than $10,000 for these items but also stated that he agreed to pay the auctioneer commission on them even though they weren't sold by the auctioneer as he "was providing an overall benefit to me". Mr Gamble denied that he in fact sold more than $10,000 worth of the stock (T131.24 - 31).
63. In relation to the meeting in July 2008, Mr Gamble stated that the parties agreed thereat that in exchange for him paying $4,000 per month for three months, all obligations under the lease would be deferred until after the three month period (T137.11 - 34). Further as the plaintiffs were then on a monthly lease, Mr Gamble agreed that he believed "all of the other clauses of the lease that he signed in 2002 just fell away" and that "none of the terms of the original lease at all continued to apply" (T138.3 - 20).
64. It was also put to Mr Gamble that he told the defendants at the July meeting that he "owned the goods in the premises" to which he replied (T138.26 - 28):
"Not exactly that. I added a qualification to it. I owned the goods in the premises except for the goods that were still unpaid - invoices, outstanding invoices."
65. It was put to Mr Gamble that this qualification as to what he owned was never mentioned and that in fact he agreed at this meeting to execute a "mortgage over those goods" to give the defendants "some satisfaction to continue to deal with you because of your lack of payments in accordance with the lease...". Mr Gamble denied both propositions (T138.30 - 35).
66. Mr Gamble then agreed that the letter he received from the defendants' solicitors after this meeting concerning the execution of a "chattel mortgage" in respect of the goods on the premises (pp 58-59 of Exhibit CSW-1 to Exhibit 4) "came out of the blue..." (T139.22- 28).
67. Mr Gamble denied it was at the July 2008 meeting that he first told the defendants that he wanted to sell the business, stating that he had done this more than once with the first time being in 2007 prior to the lease expiring (T168.22 - 169.7).
68. Mr Gamble also agreed that he was in the United Kingdom for two weeks over May and June 2008, a further three weeks over December 2008 to January 2009 and for a period of three months from May to August 2009 before finally moving permanently to the United Kingdom at the end of November 2009, apparently shortly after the subject auction (T113.13 - 114.9).
69. Despite agreeing that it was his belief that the defendants "were using the goods as some form of bargaining chip over the rent" Mr Gamble believed that they locked him out "purely because (he) wouldn't tell them the name of the purchaser" and that it "had nothing to do with the rent", (T141.4 - 22). However, later in his cross examination he said that he thereafter formed the view that "the rent had something to do with it as well" and since had come to the view that the defendants "were holding on to the stock to try and somehow or other transfer it to prospective purchasers of the business or new lessees" but stated that this belief was "only hearsay" (T172.5 - 35).
70. Mr Gamble was then cross examined as to the wholesale value of the stock on the premises as at 30 June 2009 which he had deposed was some $309,085.07 (Exhibit C - para 19). This is the same figure which he said was the wholesale value as at 11 October 2008 (Exhibit B - para 53). He was taken to a trading account prepared for the business (Annexure GAG 23 to Exhibit C). This document sets out the trading income and cost of sales as well as the gross profit from trading for the financial years 2008 and 2009. In relation to the 2009 financial year, such document discloses that the business opened that year with $235,914.50 by way of "opening finished goods" which is the same figure as for "closing finished goods" as at the end of the 2008 financial year. It also discloses that the business made purchases of $123,609.41 in the 2009 year which when added to $235,914.50 results in a figure of $359,523.91. In that year the business made sales of $208,991.95 at a cost of $194,523.91. When the amount for the cost of the sales is subtracted from the sum of $359,523.91 the amount of "closing finished goods" as at 30 June 2009 is recorded as $165,000.
71. This document indicates that as at 30 June 2009 the wholesale value of goods (meaning stock) on the premises, was $165,000. However, as stated in paragraph 19 of Exhibit C, Mr Gamble maintained that the wholesale value of the stock on the premises as at 30 June 2009 was $309,085.07 but said he instructed his accountant "to adopt the figure of $165,000 to reflect the fact that the stock would have inevitably have diminished because of the (defendants') conduct".
72. Mr Gamble did not agree with the proposition that this trading account misrepresented the financial position of the business to the tax office (T145.8 - 19).
73. Further, Mr Gamble would not "agree with an estimate of the value of the stock as at October 2008" of $120,000 (T145.27 - 29).
74. Mr Gamble also stated that he kept the "stock high during...most of 2008 while I was trying to sell the business" and he "didn't let stocks run down" (T144.48 -49). In this respect, Exhibit Z comprises numerous colour photographs which it is common ground depict the condition of the premises at the time of the lockout. Whilst there still appears to be a considerable amount of stock on the premises, several photographs also show a significant number of empty and depleted racks and shelves.
75. Approximately one month after the lockout, Mr Gamble agreed that his then solicitors wrote a letter on his instructions to the defendants' solicitors dated 21 November 2008 (T158.27) which is Annexure C to Exhibit 3. The penultimate paragraph of this letter is as follows:
"In relation to stock claimed by Danks, BOC and ELGAS and the pallets located on the premises, we are in the process of liaising with the relevant parties in order to determine the stock in question. We note that our client does not consent to the removal of any stock other than the water cooler and water kegs referred to above until such time as he has received appropriate information from the suppliers. In the event that consent is granted we will advise you of this in due course."
76. Mr Gamble stated that 60 percent of the "material...in the store" in fact belonged to Danks (T158.33 - 34).
77. When asked when he or his solicitors next wrote to the defendants to give permission for items other than the water cooler and water kegs to be released, Mr Gamble stated that he did not know (T159.35 - 40). It is common ground that there is no such correspondence.
78. The plaintiffs' solicitor's said letter of 21 November 2008 was written partly in response to the defendants' solicitor's letter of 17 November 2008 (Annexure B to Exhibit 5), the relevant parts of which are as follows:
"We are instructed that Mr Gamble has already removed your clients' financial records from the premises. Our clients do not object to your clients arranging a mutually agreed time with our clients within the next seven (7) days to collect their personal property and business and financial documentation from the premises.
In relation to the stock located at the premises, we have received no evidence from you that your clients own any of the stock and in fact the letter you have provided us from Confast suggests that all stock held at the premises remains the property of Confast. We are instructed that our clients have been approached by other supplies including Danks who also claim ownership of the stock.
Furthermore we are instructed that our clients have been approached by:
(a) BOC in relation to stock, empty gas bottles and storage cages;
(b) ELGAS in relation to bottles and cages; and
(c) Twin Palms Natural Spring Water in relation to a water cooler and empty kegs;
to be granted access to remove the above items.
We enclose a copy of letter from Twin Palms dated 14 November 2008.
Would you please let us know whether your clients consent to the above items being released to the respective owners. We are also instructed to request your clients' consent to the pallets located at the premises being returned to their owner/s."
79. In turn, the letter of 17 November 2008 was expressed to be in response to, inter alia, a letter of the plaintiffs' solicitors of 7 November 2008 (Annexure A to Exhibit 5) in which a request is made for the defendants to permit the plaintiffs to have access to the premises within "the next 14 days to remove from the premises all of the stock".
80. After the letter from the plaintiffs' solicitors of 21 November 2008, the next piece of correspondence between the parties is a letter from the defendants' solicitors to the plaintiffs of 14 May 2009 (Annexure D to Exhibit 5) which is as follows:
"We note that our clients are currently holding stock which has remained in our clients' premises at 13 Douglas Road, Tuncurry, for the last seven months.
Our clients intend to re-lease the premises and do not propose to hold the stock any longer.
We note, however, that John Danks & Son Pty Ltd and other creditors claim to have title to the stock.
Would you please provide us with proof of your entitlement to the stock within the next 14 days.
If the issue cannot be resolved amicably as to who is entitled to the stock, our clients will have no alternative but to seek declaratory relief and orders from the Supreme Court.
If our clients are forced to do this we put you on notice that we will be seeking an order that you and John Danks & Son Pty Ltd pay our clients' costs of the application."
81. In relation to the plaintiffs' allegation that some of the "detained" property had been damaged beyond repair by the time the plaintiffs got access to the premises in September 2009, Mr Gamble agreed that he had in fact watched Mr Robert Wilson move the goods ordinarily on display for sale outside to a position inside so they "would be protected from the weather...". However, Mr Gamble said that these items were so stacked up inside that, for example, the pots were "chipped and cracked with plastic fertiliser bags and the like being stacked on pallets on top of each other crushing the bags underneath" (T162.47 - 163.34).
82. When it was suggested to Mr Gamble that the auctioneer he engaged, Mr Bennett, sold all the material still on the premises at "a very good price", he replied (T164.1):
"Mr Bennett wouldn't know what a price was for something."
83. When pressed as to Mr Bennett being put forward to the court as Mr Gamble's expert auctioneer, Mr Gamble agreed but stated that "he wouldn't know what the price of a bag of fertiliser was..." (T164.5 - 6).
84. Towards the end of Mr Gamble's cross examination, I asked him a number of questions as to, inter alia, what he would have done with the stock and goods if he hadn't been locked out but was unable to obtain a new lease. This led to some further questions concerning what he would have done if he had to quit the premises quickly due to non-payment of rent as well as the auction that actually took place. This evidence is as follows (T166.17 - 167.33):
"Q ...what would you have done with the stock in those circumstances anyway?
A. What I would like to have done was to have a - to sell out of the stock. Either sell it to another proprietor if they could negotiate their own lease, and either do that and run a store from there, or take it away and set up a store somewhere else.
Q. If you couldn't get a new lease and you were going to be out of the business anyway, your intention in relation to the stock was, hopefully, (you) could sell the business to someone else who'd get their own lease?
A. Yes.
Q. Or, barring that, (you) would take the stock, what, sell it at auction?
A. No. I would have a closing-down sale. Have a sale from the premises, which would be a controlled sale, which we could scan goods out, they would be sold individually at a reduced price.
Q. But if you couldn't get a new lease or sell the business holus-bolus to someone else, then you would have had an auction sale on the premises?
A. No, not an auction. I would have just continued trading, selling the stock 80% off, something like that - sorry - 20% off, at 80%, something like that.
Q. Assume you had to get out?
A. I had to get out quickly?
Q. Yes. Or you had no lease, you hadn't been paying rent and you had to go, and you couldn't sell the business to someone else, but you had the stock inside the business, what would you have done with it?
A. The final result would have been to have an auction on the premises, where all the stock was.
Q. Somewhat like the auction that you had off the premises?
A. No. It would have been a better auction because we were forced - because we had to pack stuff up, a lot of small items were bundled into cardboard boxes, taken up to storage, taken up to the auction, and those cardboard boxes were sold as a job lot, and they might contain $200, $300-worth of tools, and they perhaps went for $20, $30.
Q. Were you at the auction?
A. Yes.
Q. If you are so critical of it, why did you agree to those sorts of sales taking place?
A. Well, I did not think that the goods would go for such a low value as they did at the auction. During the auction, I couldn't stop it.
Q. I don't know whether I'm an expert on auction law, but if things were going - the first lot went incredibly cheaply, why didn't you tell the auctioneer, well, I want to put a reserve on the rest of this?
A. I tried to, but unfortunately it wasn't possible.
Q. What do you mean by that?
A. Well, it was a very busy auction, we had a large number of items that we needed to sell in one day. The auction was going continuously, there was no breaks, it went continuously from about 9am in the morning, through till about 5 o'clock at night.
Q. You knew right from the word go that you were getting prices that you were very unhappy with?
A. After about the first hour or so, yes.
Q. Then because it was under way, you just couldn't stop it?
A. I couldn't stop it, no.
Q. He was your auctioneer, wasn't he?
A. Yes."
85. On the fifth day of the hearing, Mr Gamble was recalled for further cross examination in relation to some documents provided to the defendants the day before. Such documents were headed "Great Lakes Hardware GST [Detail - Accrual] for the financial years 2006 - 2008 inclusive". They became Exhibit 12 and suggest that GST was paid on all rental payments made throughout this period.
86. In light of Exhibit 12, it was put to the plaintiff, inter alia, that "every time you paid a lease payment in respect to the premises, you claimed the GST tax input credit" to which the plaintiff answered he couldn't say "without going through the records" (T279.7 - 9).
87. When Mr Gamble was asked whether the records forming Exhibit 12 show that the payment of 3 July 2006 in relation to rent also include tax at the rate of 10 percent, he replied "no, no" and stated that "anybody could have gone in there and changed that before it was printed out" and that the document "looks like" this had occurred although he then went on to say they were somehow created "by the girl we had at the time" (T277.31 - 50). He further stated that the MYOB program apparently adds GST automatically (T278.11 - 13).
88. During his cross examination, Mr Gamble often appeared rather offhand and somewhat vague in the witness box. He did not strike me as having a particularly good recollection of a number of events. Further, I found several parts of his evidence quite unimpressive and these caused me to seriously question his overall credibility. These included his communications with the defendants regarding exercising the option, the valuation of the stock, particularly as disclosed in the documents prepared by his accountant, the conduct at the auction and his explanation of Exhibit 12.
Mr Craig Antony Beaton
89. Mr Beaton's two affidavits of 21 and 24 January 2011 were admitted by consent and became Exhibits F and G respectively. The latter was merely a recital of the relevant expert's code of conduct.
90. Mr Beaton was not cross examined.
91. In Exhibit F, Mr Beaton deposed that he was a director of Abacus Stocktaking Services Pty Limited, a member of the Stocktakers Institute of Australia Incorporated and had been a stocktaker for some eleven years, routinely performing business stocktakes for the purposes of, inter alia, selling such businesses.
92. In early 2010, Mr Beaton said Mr Gamble delivered to him a list of stock comprising 9,481 hardware products "with a wholesale value of $309,085.07 including GST", said to be the stock in store at Great Lakes Hardware on 11 October 2008, together with fourteen lever arch files containing "wholesalers invoices to Great Lakes Hardware in respect of the stock".
93. Mr Beaton conducted what he called a comprehensive audit of the stock list to determine whether the wholesale valuation of the stock listed therein was "reasonable" and accurately reflected the "landed cost" to Great Lakes Hardware, meaning the cost including freight charges for delivery to the business.
94. To perform this audit Mr Beaton said he randomly selected one hundred and sixty items and compared the wholesale cost recorded on the stock list with the invoices for the product. He was able to locate the relevant invoices for 90 percent of these one hundred and sixty items and for the remaining 10 percent he sourced valuations "from suppliers and internal data bases to determine the validity of the wholesale price...".
95. As a result of this sample audit, Mr Bennett said he was "satisfied that the wholesale prices of the items listed in the stock list are reasonable and accurately reflect the landed cost to Great Lakes Hardware at the time of purchase".
96. Mr Beaton also stated that he "did not inspect the stock in question and am therefore unable to offer an opinion as to the saleability of the stock as at 11 October 2008 or at the present time...".
97. Finally, Mr Beaton expressed the view that "it is inevitable that many of the items in the Stock List if not sold within a reasonable time of purchase (i.e. 3 - 6 months) are likely to deteriorate and therefore lose value due to deterioration of packaging, shop soiling, discontinued lines or water damage".
Mr Anthony David Banks
98. Mr Banks swore 1 affidavit of 21 January 2011 which became Exhibit E.
99. Mr Banks deposed that he was the purchasing manager for Home Timber and Hardware which conducted a store at Thornton in New South Wales. One of such store's major wholesale suppliers of hardware products was John Danks & Son Pty Limited and Mr Banks had regular contact with its senior business manager, Mr Kevin Carr.
100. In mid 2008, Mr Banks became aware that Mr Gamble "wanted to sell" Great Lakes Hardware and between then and 2009 Mr Banks had several discussions with him about buying the business "or at least some of its plant, equipment and stock" (paras 4 and 5).
101. In approximately January 2009, Mr Banks attended the premises and observed that, inter alia, trading stock remained stored thereat and "from my knowledge of the industry a significant proportion of the stock were items supplied by Danks" (para 6).
102. At this attendance at the premises, Mr Robert Wilson was present and Mr Banks said that he told him of his intentions which prompted Mr Wilson to state that "the Gambles owe us rent and we are not releasing the stock until the rent is paid" and "you should not pay the Gambles any money" (para 8).
103. Mr Banks stated that he used a portable scanner to scan the barcodes of the items of Danks stock that he was interested in buying which he estimated "was about one fifth of the total Danks stock in the premises" (para 9).
104. He later produced a document using computer software being a list of the items scanned which is Annexure "ADB1" to Exhibit E. Mr Banks stated that he edited this list "to indicate values for items that I was prepared to buy" with the total being $18,965.67 (para 11).
105. Mr Banks also prepared a document headed "tuncurry offer" (Annexure ADB 2 to Exhibit E) listing some of the goods still at Great Lakes Hardware, such a Ford flatbed truck, a forklift and other items which together with ADB 1 was faxed to Mr Gamble on 4 February 2009. Mr Banks stated that he not only offered Mr Gamble $18,895 for the items in ADB 1 but a further $25,000 for the items in ADB 2 "but we did not reach any agreement on these matters" (paras 12 - 14).
106. The evidence elicited from Mr Banks in cross examination was rather difficult to follow. He seemed to accept that Mr Wilson in fact stated that any money Mr Banks paid Mr Gamble "should be held on trust while it's sorted out" (T105.6 - 9). Further, he seemed confused as to what he was referring to by use of the term "stock" (T104.1 - 27).
107. Nevertheless, Mr Banks agreed that the items he offered to purchase as set out in ADB 1 were "in good nick" and "would sell" (T99.9 - 16).
108. He also gave evidence that Mr Kevin Carr from Danks had told him that as a result of their own visit a few weeks before, they had estimated the value of all the Danks' stock then on the premises as being worth "about a hundred and something thousand, roughly about 110 or something" (T99.31 - 100.1 - 10).
109. In addition to the Danks stock, which Mr Banks also said was not the "majority of stock on the premises", there was "a fair bit of other stock there" which was "stock from suppliers who obviously had nothing to do with Danks" (T99.5 - 7 and T100.2 - 4).
110. In relation to the condition of the stock apart from that which he was interested in purchasing, Mr Banks said that it "looked a bit shop soiled, been there a bit" (T101.13 - 15).
Mr Kevin Daniel Carr
111. Mr Carr swore one affidavit of 8 February 2011 which became Exhibit M. Initially, upon objection, paragraphs 32 to 34 inclusive were disallowed but I subsequently revoked my rejection of paragraphs 33 and 34 (T217.34 - 41).
112. As a result of my ruling that paragraph 32 was rejected, Mr Carr was not cross examined.
113. Mr Carr deposed that since 1997 he had been employed by Danks which ran a franchise business known as "Home Hardware". It also supplied wholesale hardware products to approximately seven hundred and fifty retail member stores throughout Australia.
114. In about 2002, Mr Carr said that he was promoted to New South Wales state development manager where he took on additional responsibility in relation to the home hardware franchise business. In 2006, he was further promoted to New South Wales state sales manager in which role he supervised Danks sales staff throughout New South Wales and was responsible for all Danks sales to all of its customers. In early 2008, Mr Carr was yet again promoted to the position of senior business manager and his responsibility in this role was to assist Home Hardware members develop their stores.
115. Around the time of his final promotion, Mr Carr became aware that the plaintiffs wanted to sell their Great Lakes Hardware business and in October 2008 he became aware that they had been locked out and had ceased trading.
116. At the time of the lockout, Mr Carr deposed that Great Lakes Hardware owed Danks "at least $70,000" in relation to goods it had supplied. As a result, Mr Carr travelled to the plaintiffs' store in October 2008 in the company of Mr Robert Wilson and a colleague of Mr Carr, whereupon the premises were unlocked by Mr Wilson for the purpose of them having access to the store.
117. Mr Carr and his colleague stayed for the rest of the day and were in fact locked in by Mr Wilson who left the premises. They also returned for approximately half of the next day to complete their assessment.
118. Mr Carr, who was put forward as an expert in the plaintiff's case, described what he saw during the first day of their visit in the following terms:
"15.4 my initial impression when I walked into the store was that it was severely understocked;
15.5 I estimated on the balance of my experience and what I observed, that the value of the stock in the premises was about $120,000;
15.6 the Danks Stock was interspersed with stock from other suppliers and/or wholesalers (i.e. Medallist, Duralex); and
15.7 I estimated that the stock potentially supplied by Danks comprised at least 80% of the total stock at the premises."
119. It would seem that the valuation of $120,000 contained in paragraph 15.5 of Exhibit M was in relation to Danks stock as opposed to all the stock in the store (see para 13.4).
120. Mr Carr deposed that he and his colleague scanned the bar codes of the Danks products and entered their quantity manually, although he accepted that he could not be certain that all of the items scanned were supplied by Danks as some were apparently similar to those supplied by other wholesalers and further there may have been some operator errors "if incorrect bar codes or quantities are keyed in".
121. The scanning equipment was connected to a telephone line and the data transmitted back to Danks head office in Melbourne. Apparently this led to an initial estimate that some $292,000 worth of Danks stock was on the premises. However, Mr Carr's immediate supervisor, a Mr Brad Richards, in an email copied to Mr Carr (Annexure KDC 1 to Exhibit M) referred to the appearance of "a few errors that stand out that would reduce the stock on hand from approx $292K to $109K" which was in keeping with both what "Mr Carr and his colleague believe is in the store (excluding stock not carried by Danks)".
122. Mr Carr went on to depose that the value of $109,000 referred to in this email was "consistent with the advice that I had given Brad Richards".
123. Mr Carr also deposed that whilst he could not "be specific", it was inevitable that the value of the goods in the premises in October 2008 would have been far greater than their value in about October 2009 (Exhibit M - para 27) and that the "value of the stock in the premises would have diminished significantly as soon as the (plaintiffs) ceased to trade...because the best price is inevitably achieved in a retail situation" (Exhibit M - para 28). He said he could not "specify a percentage by which the value of stock has diminished but I can say it would be substantial" due to reasons such as dust, a failure to clean and maintain the stock, the "possibility" of vermin, lines being superseded or discontinued and new or cheaper lines being introduced to the market (Exhibit M - paras 30 - 31).
Mr Alan Douglas Slater
124. Mr Slater swore two affidavits of 7 December 2010 and 27 January 2011 which became Exhibits K and L respectively. Mr Slater was also put forward as an expert by the plaintiffs and Exhibit L was simply an adoption of the relevant expert's code.
125. Mr Slater deposed to being a director of a company trading as Confast which was a wholesale supplier of hardware products to retail hardware stores including the plaintiff's business up until it ceased trading in October 2008.
126. At the time of the lockout, Mr Slater said that Confast was owed $8,860 for items supplied on credit to the plaintiffs in 2008 with the terms of such supply being that until they were sold, they remained the property of Confast.
127. In early November 2008, Mr Slater deposed that he telephoned Mr Robert Wilson, identified himself and the nature of the debt owed by the plaintiffs and further explained that he had been unable to contact Mr Gamble and wanted to collect Confast's property from the premises.
128. He said that Mr Wilson replied, inter alia, that the plaintiffs had been evicted for non-payment of rent and "to protect the interests of (the plaintiffs' creditors) he had not permitted" Mr Gamble to remove stock, plant and equipment situated at the premises at the time of the eviction and he was not prepared to release the Confast's property at that time (Exhibit K - para 7).
129. Mr Slater said further correspondence ensued which did not result in him obtaining access and between December 2008 and March 2009 he spoke by telephone to Mr Wilson on a number of further occasions advising, inter alia, that Mr Gamble was happy for him to collect the Confast property and he only needed Mr Wilson's approval. However, Mr Wilson said he required "proof of Confast's title" before entertaining any such request (Exhibit K - para 9).
130. On 6 March Mr Slater said he faxed "documentation in support of Confast's claim for possession" to Mr Wilson but received no response and despite numerous attempts to contact Mr Wilson, he was given "the impression that he was reluctant to assist me in this regard" (Exhibit K - para 11).
131. In early March 2009, Confast obtained a default judgment for the abovementioned debt owing by the plaintiffs. In this respect, Mr Gamble had expressed surprise in the witness box at being informed of the existence of this default judgment during cross examination.
132. On 13 March 2009, Mr Slater faxed a "letter of demand" to Mr Robert Wilson referring to the default judgment and requesting access on Friday 9 March to "reclaim all goods".
133. After faxing this letter, Mr Slater said he had a further conversation with Mr Robert Wilson to confirm that he would collect the property on the coming Friday in which Mr Wilson said that his brother "did not want the Confast goods to be released". Nevertheless, Mr Wilson confirmed that they would be available for collection on the Friday and Mr Slater in fact attended that day and retrieved them.
134. After such retrieval, Mr Slater undertook a stocktake of the items and "determined that their wholesale value inclusive of GST was $7,774.48" and expressed the view that with the industry standard 40 percent mark up "the retail value of the Confast goods was in the order of $10,044" (Exhibit K - para 16).
135. Thereafter, Mr Slater issued a credit note to the plaintiffs reducing the debt in question by the wholesale cost mentioned.
136. In cross examination, Mr Slater said that the balance of the debt has never been paid by the plaintiffs despite attempted enforcement proceedings against Mr Gamble and it was still owed (T91.29 - 92.9). He further stated that prior to obtaining the default judgment he was unable to speak to Mr Gamble and agreed that "he was a pretty hard bloke to get in contact with" (T92.11 - 19).
137. Mr Slater said that he first sought access to the premises to retrieve Confast stock prior to 5 November 2008 but didn't manage to do so until March 2009 although in the meantime his wife got access in November 2008 to obtain a list of the Confast items (T92.29 - 34, 93.15 - 22 and 94.9 - 13). Mr Slater emphasised that it took "four and a half months of negotiation" to retrieve the Confast property (T92.46).
138. Mr Slater also said that when the Confast property was picked up it was "covered in dust" but was in "reasonable condition" and they issued a full credit for it and then resupplied it to other retailers (T94.17 - 26).
Mr Douglas Bennett
139. Mr Bennett, a proprietor of Bennett's Liquidation and Auctions, swore two affidavits, dated 16 November 2010 and 28 January 2011, which became Exhibits H and J respectively. Exhibit J is merely a recital and adoption of the relevant expert's code of conduct.
140. In Exhibit H, Mr Bennett said that in October 2009 Mr Gamble engaged him to auction "trading stock and plant and equipment" from Great Lakes Hardware as a result of which he inspected the stock and goods at the business' premises and prepared a catalogue (Annexure BEN 1).
141. Thereafter, he assisted Mr Gamble relocate "most of the goods" to a rented warehouse in Taree and commenced to advertise the auction in three local newspapers and on two radio stations. The warehouse was open for inspection of the stock and goods for three hours per day for one week before the auction, which ultimately took place on 8 November 2009.
142. The total proceeds from the auction were $56,080.40 from which Mr Bennett deducted, inter alia, $17,207.50, being monies owed to Esanda Pty Limited on a Daihatsu truck sold in the auction. After the further deduction of commission and a number of other minor matters detailed in paragraph 6 of Exhibit H, Mr Bennett paid Mr Gamble a net figure of $23,942.61. Subsequent to the auction Mr Bennett sold some further items at a net of commission sum of $2,579.97 bringing the total paid to Mr Gamble of $26,522.58.
143. Mr Bennett said that the amount of advertising and public display were greater "than usual for this type of auction" which "attracted a crowd larger than usual and the amounts realised reflect the additional effort that had been made in this regard" (Exhibit H - para 9).
144. In cross examination, Mr Bennett agreed that Mr Gamble sold some items before the actual auction took place as "we didn't have the agency agreement tied up till...about the 5th or 6th" of November (T84.31 - 36). When asked how many such items Mr Gamble sold himself, he replied that he "couldn't tell you exactly" but that this apparently happened prior to moving the materials to the warehouse in Taree (T85.7 - 19). Asked to further explain, Mr Bennett replied (T85 47 - 86.1):
"A. Well there was a lot of stock in the place and then there was a lot of stock going out like different companies were picking up the stock that they still owned so I couldn't exactly tell you what stock was owned by them, the companies, and then Godfrey did sell some of it without my knowledge, or that I know of."
145. Mr Bennett agreed that there "people coming and going taking stuff all the time" (T86.45 - 46) and that he saw these people enter the hardware business' premises "and pay cash for items to Mr Gamble" (T86.50 - 87.8).
146. As a result Mr Bennett estimated that Mr Gamble would have taken about $10,000 in cash upon which he took commission after speaking to Mr Gamble (T88.15 - 16).
147. After discovering that Mr Gamble was selling some of the materials prior to the auction, Mr Bennett also spoke to Mr Robert Wilson to see if the auction could be done at the hardware business' premises but Mr Wilson refused stating "I want the stuff out" (T87.47 - 50).
148. In relation to Annexure BEN 1 to Exhibit H, Mr Bennett advised that the numbers written in the second column from the right headed "Bid No" represented the number given to the individual bidder. This indicated that there were one hundred and one registered bidders but Mr Bennett in fact stated that they "had more than that" and that it "was a very good response for the auction" (T88.23 - 36).
149. As to the auction itself, Mr Bennett indicated that whilst there were initially a few reserve prices "in the end they just said sell" (T89.5 - 7). However, Mr Bennett stated that no items sold below a reserve in any event and in some cases they "got better than what the reserves were" (T89.15 - 16).
150. When asked whether he would describe the auction as a "fire sale" he answered "No" (T89.20 - 21). This evidence contrasts starkly with the allegation made in the plaintiffs' opening that not only was the auction a "fire sale" but that the plaintiffs' "had no alternative" but to sell the stock and goods by such a method (T46.36 - 47.1).
151. As to the general condition of the stock and goods, Mr Bennett said that it was "Very good" and whilst they had "a bit of dust" on them, after being transferred to Taree "they were all clean and presentable" (T89.39 - 43).
Other Documentary Material Tendered in the Plaintiffs' Case
152. The plaintiffs tendered a "Rent Summary" received from the defendants (Exhibit N) relevant to the period from April 2002 to June 2005. The running balance of same indicates that the plaintiffs were rarely ever up to date with the rent during this period and, further, they were making a GST payment every time that they paid rent.
153. Exhibits P and Q are faxes dated 31 March and 28 April 2008 respectively, sent by the defendants to the plaintiffs requesting, inter alia, payments of money to make up rent shortfalls. Further, Exhibit Q refers to a note having been sent by the defendant "re outstanding rates" and requesting a separate payment to the defendants in relation thereto.
154. Exhibit V is a letter from Mr Gamble to the defendants' solicitors dated 9 October 2008, apparently sent by fax, declining to divulge the name of the potential purchaser for the business as Mr Gamble had been requested by such purchaser not to do so "whilst they complete other business within the region".
155. Exhibit X is a letter from a Mr Des Wiggins, whom Mr Gamble had identified in cross examination as the prospective purchaser, dated 14 October 2008, regarding a "business discussion with Mr Robert Wilson on 11 October, 2008". After receiving a message from Mr Wilson, Mr Wiggins met him at the Wilsons' service station in Tuncurry at which time Mr Wiggins said he "told Mr Wilson that I had lost interest in purchasing the business due to the high cost ($300,000) and lack of profit turnover (reported to me by Mr Gamble) as approximately $40,000. A different offer was discussed for Mr Wilson to muse over."
Evidence Called by the Defendants
Mr Peter Allen Katen
156. Mr Katen, a licensed real estate agent, swore one affidavit of 17 December 2010 (Exhibit 8).
157. Mr Katen deposed that he has known the defendants for approximately twenty years, acting as their real estate agent in relation to leasing, purchasing and selling properties and also giving them general advice as to real estate matters (para 4).
158. In late 2001, Mr Katen was retained by Mr Stan Wilson to act for the defendants on the lease of the subject premises to the plaintiffs. He could not recall either of the plaintiffs making any request to repair the driveway or the hardstand prior to their occupation, nor any objection to their paying GST or other outgoings prior to executing the lease (paras 5 - 9).
159. In early June 2007, Mr Stan Wilson told him that the plaintiffs "have agreed to take up their option to renew the Lease (however) we cannot agree on the amount of rent payable". Mr Wilson then went on to tell Mr Katen that the plaintiffs had agreed to obtain the abovementioned rent appraisal from Robert Gould & Associates and in the meantime had agreed to pay "an interim amount" based on Mr Katen's estimate of a current market rental which he was asked to provide (para 11). He was also told that the plaintiffs had agreed to backdate the Robert Gould & Associates figure to 1 May 2007 after the appraisal was obtained.
160. In early July 2008, Mr Katen deposed that Mr Robert Wilson contacted him and advised that "we are having trouble with the Gambles" and that they "are not paying their rent" and that there was a "need to resolve the situation in relation to the market rent evaluation". As a consequence, Mr Katen arranged and attended the meeting of 24 July 2008 at the defendants' service station in Tuncurry at which Mr Gamble and the two defendants attended (para 14).
161. At paragraph 15, Mr Katen deposed to the following conversation occurring at such meeting:
"Stanley said: Why haven't you returned the signed Variation of Lease sent to you in February?"
Mr Gamble said: "We have decided not to sign the Variation of Lease because our sales are down and we are trying to sell the business and now only want a monthly Lease."
Stanley said: "Robert and I want you to continue to operate your business. However, it can't keep going the way it is because you owe us a large amount of money for rent and outgoings."
Mr Gamble said: "I know we owe you money for rent and outgoings, but at the moment our turnover has been down because a Bunning's hardware store has recently opened at Forster. Our sales have decreased considerably. However, I expect that our sales will improve in October."
Stanley said: "We can give you a reduced rent of $4,000.00 per month for 3 months for the period July to October. However, you will have to make up the difference between the reduced rent and the agreed rent as per the independent valuation. Any overdue amounts are to be added to the current amounts outstanding and interest will be charged at the same rate as it is charged on the current amounts outstanding. Also you have to pay the outgoings as per the Lease."
Mr Gamble said: "That's fine."
Stanley said: "We also need some security for the reduced rent and the amounts outstanding. Would you have any problem providing us with a stock mortgage as security?"
Mr Gamble said: "No, that's fine."
Robert said: "Do you have current financial figures for the business?"
Mr Gamble said: "No, but I will give you a copy of the figures by the end of the month."
162. In September 2008, Mr Robert Wilson contacted Mr Katen and told him that the Gambles "are still not paying the rent they agreed to pay" and had not provided their financial figures. He went on to state that "Stan and I think that the Gambles might close the business and take off to England to avoid paying their debts" and that they were "thinking of taking possession of the property". Mr Katen said he replied that "that seems reasonable given that they have remained in arrears of their rental payment for more than a year" (para 17).
163. In cross examination, Mr Katen adhered to his recollection of what was said at the subject meeting and specifically remembered the term "stock mortgage" as this was something raised by Mr Stan Wilson and was a term that he had never heard before (T180.35 - 44).
164. Mr Katen further advised that Mr Gamble "only wanted a monthly lease and that the defendants accepted that he would remain on the premises for the time being on such a basis" (T180.19 - 24).
165. Mr Katen also stated that the parties agreed on a monthly rental of $4,000 "in an effort to continue the business" but that it was also made "very clear that whatever the difference in the rental was that would be viewed as a debt and it had to be paid" (T181.21 - 26). He agreed that this sum would attract interest. He also agreed that "the only payment that the Gambles had to come up with in the next three to four months was $4,000 a month" (T181.31 - 33).
166. Mr Katen said he understood that the phrase "taking possession of the property" meant "changing the locks and taking possession of the premises and of the stock..." (T183.16 - 19).
167. A little later in cross examination the following exchanges occurred (T184.36 - 185.16):
"Q. Did you express the view Mr Katen that it sounded reasonable to you for the Wilsons to take possession of the goods in the premises, if the Gambles hadn't paid the rent
A. If that's what their advice was from the solicitors, it sounded reasonable to me.
Q. They made it clear to you that that's what they were thinking of doing
A. Yes.
Q --locking the Gambles out and taking possession of the stock in the premises?
A Yes.
HIS HONOUR
Q. Over the rent or to make them pay the rent.
A. Yes, to have - yes.
Q. In other words, if they paid the rent they'd give them the stock back.
A. I can assure you they didn't want the stock and they didn't want to take this action. It was a matter of last resort, and they had, yeah.
Q. But your understanding was that if they paid the rent they wouldn't - that the Wilsons would let them have the stock.
A. Absolutely. Absolutely.
Q. But not otherwise.
A. Well I can't think for - I can't say how they thought, yeah. But to my knowledge if they had of walked up and paid they absolutely would've had the key back. We don't want - they didn't want the stock."
Mr Claude Stanley Wilson
168. Mr Stan Wilson, the second defendant, swore a single affidavit dated 21 December 2010 (Exhibit 4).
169. Mr Wilson deposed that prior to entering into the subject lease he agreed that the defendants would carry out certain repairs and maintenance to the subject property including cleaning the concrete floor, tidying the outside areas, repairing outside lights and replacing skylights. He said all of the matters were attended to either shortly before or shortly after the plaintiffs commenced to occupy the premises with the outside lights in fact being replaced as opposed to repaired.
170. After the lease commenced and between May 2003 and May 2004, Mr Wilson stated that various repairs were undertaken to the carpark area including the resealing of large areas of the yard. He said that Mr Gamble made no complaint regarding these nor as to other matters (paras 9 - 19).
171. Further, around August 2003, Mr Wilson had a conversation with Mr Gamble due to his belief that damage was being caused to certain outdoor areas of the subject premises by the use of a forklift and bobcat. He requested that such use cease although he said that such request was ignored. As a result he undertook the construction of the three new concrete slabs which were built in the unloading area at the rear entrance to the premises (paras 63 - 64).
172. When the lease first commenced, Mr Wilson said that the initial payment made on 4 May 2002 was $4,917 which did not include any GST component. As a consequence he telephoned Mr Gamble and advised him that "you have to pay the rent of $4,917 plus GST" to which Mr Gamble replied "ok". Thereafter, on 27 June 2002, Mr Gamble made two direct internet transfers of $491.70 for the GST payments relevant to May and June as evidenced by a copy of the bank statement annexed at page 7 of Exhibit CSW-1 to Exhibit 4. Mr Wilson said that the plaintiffs then "continued to pay GST on the rent owed on the premises on a sporadic basis" (paras 22 - 25).
173. In relation to the GST payments, Mr Wilson deposed that he and his brother "have at all times remitted 1/11th of all rental payments received for the building to the Commissioner of Taxation" (para 27).
174. Between October 2002 and June 2008, Mr Wilson deposed that he sent twelve letters and faxes to the plaintiffs "requesting that they pay outstanding amounts for rent and outgoings" (para 29). Copies of same are part of Exhibit CSW-1.
175. On 2 May 2007, he deposed that he attended a meeting with Mr Gamble at the subject premises where the following conversation took place (para 32):
"I said: "As you know the Lease finished on 30 April this year. Do you intend to take up the option to renew the Lease?"
He said: "Yes we do."
I said: "Okay then we need to obtain an appraisal of the rent because I think the current rent you are paying is well below the current market rent and there may need to be an increase in rent. Once the rental assessment has been completed, any adjustment of the rent will then have to be backdated to 1 May 2007."
He said: "That is fine."
I said: "I suggest that we use Gould & Associates to complete the rental assessment. I can give you their contact details so that you can make your own enquiries."
He said: "Okay, I will speak to them soon and find out how much they will charge."
I said: "I will need a letter from you confirming that you will take up the option to renew the Lease. I will contact Peter Katen of PRD Nationwide and get him to give us an estimate of what he thinks the rent might be. We can then use the figure determined by Peter as a rental figure for the interim until the rental assessment is completed by Gould & Associates."
He said: "Okay, that will be fair to both parties."
176. Mr Wilson then received the letter from the plaintiffs of 10 May 2007 which stated that the plaintiffs were "interested in taking up the option for extending the lease for another five years" (para 33).
177. Mr Wilson then deposed that as a result of the abovementioned conversation and subsequent letter he believed that the option had been exercised (para 34).
178. In June 2007, Mr Wilson sought and received a letter from Mr Katen which he then sent on to the plaintiffs setting out the current market rents on "similar property" prior to the completion of the market assessment with a view to reaching some agreement.
179. On 1 August 2007, Mr Wilson faxed a letter (p 28 of CSW-1) to the plaintiffs asking for the then outstanding rent of $14,123.29 to be paid urgently and advising that he would audit the building's insurance payments "for which you are liable and prepare an account" and that he would also "audit the rate payments but I do not hold the records here in Bathurst and it will take time". The letter went on to propose from May 2007 a monthly rental at $6,700 plus GST.
180. No agreement as to rent was reached and Mr Wilson said he then proceeded to obtain the rental assessment from Robert Gould & Associates which he provided to the plaintiff.
181. On 23 November 2007, at a meeting with both plaintiffs, certain discussions took place in which Mr Wilson said the plaintiffs agreed to pay the rent as per the rental assessment but on condition of various repairs and upgrades (paras 46 - 47).
182. On 19 December 2007, Mr Gamble paid the sum of $8,468.16 into the defendants' bank account in accordance with the rental assessment conducted as a result of which Mr Wilson instructed his solicitors to send a Variation of Lease for execution to the plaintiff which was not returned despite numerous letters from the defendants' solicitors requesting it (paras 51 -54).
183. Mr Wilson stated that by June 2008 as the variation of the lease had not been returned nor had rent been paid, he sent two letters to the plaintiffs seeking a meeting which were not responded to as a result of which he had Mr Katen organise the meeting of 24 July 2008 (paras 55 - 58).
184. Mr Wilson's version of what transpired at this meeting is contained in paragraph 59 of Exhibit 4 and is essentially the same as that deposed to by Mr Katen referred to in paragraph 161 above.
185. After this meeting, Mr Wilson had his solicitors draft up a stock mortgage which was sent to the plaintiffs but never executed.
186. In cross examination, Mr Wilson agreed that upon his understanding of the lease, outgoings were payable by the plaintiffs after the defendants received the relevant account and "then serve(d) a notice upon the tenant to pay them" (T193.1 - 4).
187. A little later the following exchange occurred as to this issue (T193.26 - 34):
"Q. So in other words, I think you accept that before Mr Gamble had to pay the council rates and the water rates you'd have to receive those from the council or the relevant authority and pass them onto him.
317. As to the authority to which I referred the parties after reserving my decision, Mr Gardiner submitted that the appropriate measure of damages, assuming a conversion was proved, was the value of the goods at the time of the conversion less their value as at the date of their return. He submitted that the most reliable and persuasive evidence as to the value of the stock and goods as at October 2008 was the evidence of Mr Carr and Mr Banks which Mr Gardiner suggested established a stock value of somewhere around $120,000.
318. In relation to the "value of the goods when returned" he submitted that "almost $100,000 in sale was achieved" after such return.
319. Mr Gardiner then criticised the absence of any forensic accounting evidence and ultimately again submitted that the "plaintiffs have completely failed to prove any damage...should conversion be found".
The Law
320. There is no doubt that damages for conversion are assessed on a compensatory basis and that the general principle is that the injured party should receive compensation in a sum which, so far as money can do so, will put him in the same position as he would have been in if the tort had not been committed: Livingstone v Rawyards Coal Co (1880) 5 App. Cas. 25, at p39.
321. Whilst this means that damages are normally assessed by reference to the market value of the goods, the application of the general compensatory principle may lead to a different method of assessment. As was said in Butler & Ors v The Egg and Egg Pulping Marketing Board (1966) 114 CLR 185 at 191:
"In most cases of conversion it is, of course, obvious that (the general principle's) application will result in the injured plaintiff recovering the full value of the property converted since that will usually represent the loss that he has sustained by the defendant's wrongful act. Hence the statement which appears so often in the books that the general rule is that the plaintiff in an action of conversion is entitled to recover the full value of the goods converted, but this statement should not be allowed to obscure the broad principle that damages are awarded by way of compensation."
322. Further, the purpose of compensatory damages must not be forgotten in their assessment. As Lord Nicholls said in Kuwait Airways v Iraq Airways [2002] UKHL 19; [2002] 2 A.C. 883 at [67]:
"The aim of the law, in respect of the wrongful interference with goods, is to provide a just remedy. Despite its proprietary base, this tort does not stand apart and command awards of damages measured by some special and artificial standard of its own... The fundamental object of an award of damages in respect of this tort, as with all wrongs, is to award just compensation for loss suffered."
323. In cases where the goods converted are returned, as is the case here, the application of these principles has resulted in the recoverable loss being measured by the fall in value of the property between the time of its conversion and its return: Solloway v McLoughlin (supra); Trailways Transport Ltd v Thomas (supra).
324. Further, "the fall in value of property subsequently returned is only recoverable if such loss is proved, or can be inferred, to have been suffered in the particular circumstances...but otherwise only nominal damages are recoverable...": Clerk & Lindsell on Torts, Twentieth Edition (2010) at 17 - 111; see also McGregor on Damages, Eighteenth Edition (2009) at 33 - 074.
325. In situations where the claimant must sell the property in any event, it has also been held that the value of the property to which he is entitled may be limited to the amount obtained by the converter's sale thereof provided it was bona fide: Whitmore v Black (1884) 13 M.&W. 507; Whitehouse v Atkinson (1828) 3 C.&P. 344; McGregor on Damages at 33 - 048.
326. There is also no doubt that a claimant seeking damages for conversion has a duty to mitigate his loss and this was accepted in argument by Mr Birman. The general principle of mitigation is as stated in McGregor at 7 - 014:
"The extent of the damage resulting from a wrongful act, whether tort or breach of contract, can often be considerably lessened by well-advised action on the part of the person wronged. In such circumstances the law requires him to take all reasonable steps to mitigate the loss consequent on the defendant's wrong, and refuses to allow him damages in respect of any part of the loss which is due to his neglect to take such steps."
327. It has long been settled that the question of mitigation of damage is a question of fact (Payzu v Saunders [1919] 2 KB 581 CA) and that the onus of proof is on the defendant (Saunders v Williams [2003] B.L.R. 125 CA).
Consideration
328. I have already found that the defendants' retaking of possession of the premises was lawful but that in doing so they converted the relevant stock and goods.
329. Applying the above principles, if the conversion had not occurred, the plaintiffs would either have been given access to the premises shortly after the lockout to retrieve the stock and goods or had it delivered to them by the defendants. In either case, when they regained possession, I find that they would most likely have dealt with the goods and property in a similar way to that which they did after regaining possession in September 2009. That is, they would have returned various items to third party suppliers and auctioned the rest. This is because they had no other retail premises from which to attempt to sell the stock and goods and had already determined "to quit the hardware business" and seemed to be in the process of moving to the United Kingdom. Mr Gamble's evidence referred to in paragraph 84 of these reasons further supports this conclusion.
330. The question then becomes what is the difference between what the plaintiffs would have recovered by returning the stock and goods to the relevant third parties and auctioning the rest within a short period after the lockout and what they received when these actions actually took place some considerable time later. Unfortunately, there is little evidence to assist in answering this question.
331. Mr Gamble referred to the deterioration of packaging and water damage to items stored outside as well as damage to pot plants but this evidence was quite imprecise and lacked any detail.
332. The plaintiffs' auctioneer, Mr Bennett, gave no evidence as to what an earlier in time auction may have realised. He also gave no evidence that the stock and goods had deteriorated in any significant way since the lockout but rather said that their general condition was "Very good" and apart from having "a bit of dust" on them "they were all clean and presentable". I also do not accept that Mr Bennett's auction was a "fire sale" as suggested by the plaintiffs. I accept Mr Bennett's evidence to the contrary that it was both a well attended, well advertised and well run auction realising good prices. In any event, even if I am wrong in this respect, Mr Gamble clearly had control over the auction and should have mitigated the plaintiffs' loss by not letting it proceed if it turned into "a fire sale".
333. Mr Slater described the retrieved Confast stock as at March 2009 as also "covered in dust" but in "reasonable condition" and stated that Confast issued a full credit for it and resupplied it to other retailers for the purpose of normal sale.
334. Mr Banks stated that the items he offered to purchase were "in good nick" and "would sell". However, he described the condition of the stock apart from that which he was interested in purchasing as looking "a bit shop soiled, been there a bit".
335. Mr Beaton did not inspect any of the stock and was unable to offer an opinion as to its "saleability" at any point. However, he did express the view that "many of the items in the Stock List if not sold within a reasonable time of purchase (i.e. 3 - 6 months) are likely to deteriorate and therefore lose value due to deterioration of packaging, shop soiling, discontinued lines or water damage".
336. Mr Carr stated that it was inevitable that the value of the goods in the premises in October 2008 would have been far greater than their value in about October 2009 but he could not "be specific" and based his opinion upon the fact that the "best price is inevitably achieved in a retail situation". Whilst he could not specify a percentage in relation to such decrease in value between such a retail situation and a subsequent auction he said that it "would be substantial" and also mentioned the fact that over time relevant lines become superseded or discontinued with newer or cheaper lines being introduced to the market.
337. Whilst I accept, on what evidence there is, that if the plaintiffs had the goods and stock returned to them shortly after the lockout they probably would have been able to dispose of them at a better price, it is almost impossible to determine how much more they would have received at this earlier point in time.
338. Further, I find that the plaintiffs contributed significantly to the delay which occurred prior to them receiving the goods back in around September 2009. There is ample evidence that the plaintiffs were not able to be contacted by various third party claimants. They also were in the United Kingdom for several weeks over December 2008 to January 2009 and for three months from May to August 2009. Additionally, the letter written by their lawyers on 21 November 2008 effectively instructed the defendants not to release any of the stock until the plaintiffs had sorted out their position in relation to the third party claimants after which they indicated they would further contact the defendants. As mentioned, the next piece of correspondence was in fact from the defendants' solicitors in May 2009.
339. I also accept Mr Gardiner's submission that, to a degree, the plaintiffs had "abandoned" the stock and goods whilst they followed their interests in the United Kingdom.
340. Consequently, I find that the defendants have established that the plaintiffs did not mitigate their loss by using their best endeavours to, inter alia, deal with the various third party claims expeditiously.
341. Ultimately the auction and subsequent sales resulted in gross proceeds of just under $60,000. Mr Gamble sold other items for approximately $10,000 with other stock and goods being returned generally on a full credit basis.
342. In all these circumstances it is not possible to adopt any mathematical calculation to determine the plaintiffs' loss. In fact, the evidence is so scarce that I gave serious consideration to only awarding the plaintiffs nominal damages. However, there is some evidence upon which I can act, albeit not in any precise way.
343. Accordingly, I award the plaintiffs $20,000 by way of damages for the conversion. This represents an increase of approximately one third on the gross takings from the November 2009 auction. I direct that interest should be agreed between the parties and dealt with in the short minutes.
344. If I am wrong in the method of assessment adopted it would have been necessary for me to assess the value of the stock and goods on the premises as at the date of the lockout.
345. In his "Supplementary Submissions on Quantification of Damages for Conversion" of 24 May 2011, Mr Birman adhered to his earlier submission as to the "market value" of the converted stock and goods as being over $600,000 as at the date of the conversion but seemed to accept that this amount should be reduced by the total of gross value of the goods returned to third parties and the gross proceeds of the auction.
346. However, in such an alternative scenario, I would not have accepted Mr Birman's submission as to "market value" which is based upon a full retail price for all the items contained in the wholesale stock list.
347. As to such stock list, I agree with Mr Gardiner's submissions that it does not prove what was on the premises at that time, when such items were purchased or what prices were paid and in circumstances where the original invoices were apparently available but never tendered. The stock list is also significantly contradicted by the evidence of other witnesses such as Mr Banks and Mr Carr, not to mention the plaintiffs' own document being Exhibit 12.
348. Mr Carr's evidence was that the value of the Danks stock was "about $120,000" and that it was "at least 80 percent of the total stock at the premises". It is unclear as to what basis Mr Carr was valuing the Danks stock, for example, retail, wholesale or replacement, and he gave no evidence as to the value of the remaining 20 percent.
349. Mr Gamble also apparently offered the entire business including all the stock and goods to Mr Wiggins for a sum of $300,000 which Mr Wiggins regarded as "high".
350. As to the goods, Mr Gamble offered them to Mr Banks at a reduced figure in January 2009. Further, I have been unable to locate a number of them on Mr Bennett's catalogue (Annexure BEN1 to Exhibit H) and do not know their fate.
351. There is also the photographic evidence referred to which shows the store as at the time of the lockout in a considerably understocked state.
352. In short, if I had to determine the "market value" of the stock and goods on the premises as at the time of the lockout, I would similarly not have been able to do so in any precise or mathematical way.
353. Further, I would also have found that the defendants had established that the plaintiffs had not mitigated their loss by their actions after the lockout and consequently I would have assessed damages in much the same amount even if I had adopted the method of assessment urged upon me by Mr Birman.
The Cross Claim
Rent Owing as at Date of Lockout
354. I have already found that the defendants were entitled to outstanding rent including GST as at the time of the lockout and have directed the parties to agree on the precise amount.
Interest on Unpaid Rent
355. In his written submissions, Mr Birman concedes that the defendants are entitled to simple interest calculated at the rate of 12 percent per annum on any arrears of monies due pursuant to Item 14 and Clause 5.1.5 of Exhibit A. Whilst Mr Gardiner has undertaken certain calculations as to interest, these are based on a different outstanding amount and I direct the parties to reach agreement as to same and include them in the abovementioned short minutes.
Outgoings
356. I have already found that the only outstanding outgoings notified to the plaintiffs as at the date of the lockout were in relation to building insurance premiums in the amount of $6,847.48 as per the defendants' fax of 19 June 2008. The larger amount of $7,465.24 was claimed by letter dated 10 November 2008 and whilst the increase is partially explained by the inclusion of a pro rata amount for the three months from June to October 2008, I am not able to further reconcile these two claims and in the circumstances am only prepared to award the smaller figure.
357. In relation to the other amounts claimed by way of council rates, water rates and land tax as set out in paragraph 28 of the further amended cross claim, I have already referred to the unsatisfactory nature of the evidence in relation to these matters. The only relevant evidence is contained in paragraph 3 (ii) of Exhibit 2 and paragraphs 68 - 74 of Exhibit 4 including pages 71 and 72 of Exhibit CSW-1 thereof. As to council rates this evidence is thoroughly confusing and it is anything but clear as to what is actually outstanding over and above what the plaintiffs have already paid. As to water rates paragraph 71 of Exhibit 4 states that an amount of $825.45 has been paid by the defendants but not reimbursed by the plaintiffs but there is no account that I am able to locate and nor is one referred to in the written submissions. As to land tax, paragraph 69 of Exhibit 4 seems to confirm the oral evidence that the defendants were for many years in dispute with the relevant department and were unable to give the plaintiffs an account. The sum of $5,103.66 claimed for the land tax is not otherwise referred to in Exhibit 4 nor Exhibit 2 and again I have not been able to locate an account nor did the oral or written submissions direct me to one.
358. Accordingly, the only amount I am prepared to award the defendants by way of outstanding outgoings is in relation to the amount of $6,847.48 for building insurance.
Interest on Outgoings
359. As with rent, interest is payable on this amount and I direct the parties to calculate same and include it in the short minutes.
Repainting
360. Despite an amount of over $33,000 for repainting costs being claimed in paragraph 36 of the further amended statement of cross claim, the parties agree that should this be allowed such costs are, in fact, $12,990.
361. Mr Gardiner argues that repainting costs are clearly payable pursuant to Item 22 of Exhibit A. Mr Birman, however, submits that nothing should be allowed in this regard based on his submission that the month to month tenancy was unlawfully terminated, which submission I have rejected above. Mr Birman also submits that as the premises have not yet been repainted nothing can be claimed and further that if they re-lease the premises at some stage in their current state this "would obviate the need to do so".
362. In my view, the obligation to repaint the premises pursuant to Item 22 of Exhibit A is not avoided if it has not been attended to at the time that the landlord lawfully terminates the tenancy as is the situation here. Further, there is nothing in Exhibit A which requires the defendants to have undertaken such repainting prior to seeking the costs thereof from the plaintiffs. Finally, the fact that the defendants have been attempting to re-lease the premises in their current condition does not, in my view, override the plaintiffs' obligation to repaint under the lease.
363. Accordingly, I allow the sum of $12,990 for repainting costs.
Damage to Driveway
364. The defendants claim that the plaintiffs caused structural damage to the driveway of the premises and pursuant to Clauses 7.3.1 and 12.3 of Exhibit B are responsible for the cost of the repairs thereto in accordance with the quote from Ditchfield Contracting Pty Limited of 23 November 2009 in the sum of $38,240 including GST (Annexure L to Exhibit 2).
365. Mr Birman argues that nothing should be allowed in respect of this claim for a number of reasons. Firstly, he argues that Clause 7.3.1 only requires the tenant to "reimburse the landlord for the cost of fixing structural damage caused by the tenant, apart from fair wear and tear" and it is clear that no such work has yet been undertaken by the defendants and therefore there is nothing to "reimburse". Secondly, he argues that the evidence clearly establishes that when the lease commenced there was structural damage or wear and tear to the driveway that required the defendants to complete extensive work at their own expense at various times throughout 2003 and 2004 (Exhibit 4 - paras 14 - 18 and T212.21). Thirdly, whilst he conceded that the plaintiffs were obliged to maintain the driveway in the condition it was at the start of the lease, they were not obliged to repair any structural defects or fair wear and tear pursuant to Clause 7.2 of Exhibit A and there is no evidence that any alleged damage to the driveway was other than fair wear and tear. Fourthly, he submitted that there was in fact no evidence that the state of the driveway was any worse at the end of the lease than at its beginning. Finally, he submitted that if any such costs were recoverable they should not include GST as it was recoverable by the defendants as an input tax credit.
366. Again, the evidence in relation to this aspect of the cross claim is rather confusing. The quote from the contractor is a one page document in which the work is described in three lines. It is not at all clear what the work is, over what areas of the subject premises it is to take place and whether it relates to structural damage caused by the plaintiffs.
367. Mr Gamble's evidence concerning the driveway (Exhibit B - paras 8, 10 and 76.4) was that it (and the other items allegedly damaged referred to below) was in the same condition at the time of the lockout as at the commencement of the lease.
368. On the other hand, Mr Robert Wilson denied that this was the case (Exhibit 3 - para 45) Further, he stated (Exhibit 4 - paras 63 and 64) that after he saw a forklift with solid rubber tyres and a bobcat steer loader being driven around the premises, he spoke to Mr Gamble telling him that they were damaging the driveway and asked him to stop this practice. He said Mr Gamble agreed to do so but "that request and several further requests were ignored" with the result that damage was caused "to the tar sealed area adjacent to the concrete apron at the rear of the building where supplies were unloaded by the forklift". As a result Mr Wilson "constructed three large concrete slabs at the rear entrance to the premises to extend the existing concrete apron entrance which had been extensively damaged by the use of the forklift in that area, which was the immediate" unloading area.
369. The conflict in the affidavit evidence between Mr Gamble and Mr Wilson on this topic was not clarified by what little cross examination occurred on this issue which was largely ignored in the running of the trial.
370. The defendants bear the onus of establishing their entitlement to damages for damage allegedly occasioned to the "driveway". I am not satisfied that they have discharged this onus as I am not able to determine, inter alia, what actual damage was done, when it was done or if the repair quotation relates in whole, in part or not at all in relation to it. Accordingly, I find that the defendants have not discharged their onus of proof in relation to these matters and I am not prepared to allow any damages in relation to this aspect of the cross claim.
Downpipes, Vanity Basin and Fences
371. The defendants claim $2,757 for alleged damage caused to these items by the plaintiffs as per the quotations which are Annexures J, K and L to Exhibit 2. Each quote is said to be "to repair damage" to the item in question.
372. As mentioned, Mr Gamble deposed that these items were in the same state at the time of the lockout as they were at the time of the commencement of the lease which the first defendant denied. Again these matters were not taken up in cross examination in any meaningful way and in these circumstances and in the absence of other material, such as photographs depicting the damage, I find that the defendants have not discharged their onus of proof in relation to these matters and I similarly do not allow any damages in relation thereto.
Cleaning Expenses
373. The defendants seek the sum of $6,017 by way of damages for the plaintiffs' alleged breach of Clause 12.3 of Exhibit A in relation to, as it was put in their written submissions, "the cost to remove materials and debris; clean the property and check and disconnect cabling at the end of the lease". This sum is made up as per quotes (Annexures M and N to Exhibit 2) of $128.15 for electrical expenses and $3,850 for "removing debris and cleaning" plus an amount of $2,038.85 "for time spent by employees of the (defendants) cleaning the property". As to this last sum, Annexure O comprises copies of tax invoices of the defendants for "Reimbursement for wages - Clean up of Home Hardware inclusive of GST" dated 31 October and 19 November 2009.
374. It is unclear to me why the defendants have not only apparently paid their own employees to clean up the property in October and November 2009 but around the same time obtained the quote being Exhibit N which is for almost double this amount and "was prepared on the basis that the Site is to be left in a groomed condition".
375. Further, Mr Gamble deposed (Exhibit B - para 10) that at the time of entering into the lease there were "piles" of rubble, broken bricks and blue metal in the carpark, an allegation he was not cross examined upon and which was not responded to by the defendants.
376. In relation to this aspect, Mr Birman submitted that no sum should be allowed as it was "accrued post-unlawful termination" and, in relation to the wages because they were "Paid by the Wilsons to the Wilsons".
377. It therefore appears that the plaintiffs do not argue that cleaning was unnecessary nor do they submit that the premises were in exactly the same condition in relation to cleanliness at the time of the lockout as they were at the commencement of the lease.
378. However, there not only seems to be an unexplained overlap between the costs referred to in Annexures N and O but also there is uncontested evidence that there were "piles" of rubble and the like on the premises at the commencement of the lease.
379. In the circumstances, I am only prepared to allow the amount paid by the defendants to its servants, being $2,038.85 under this head.
Amounts Claimed After the Lockout
380. In paragraphs 33 and 34 of the further amended statement of cross claim, the defendants claim $112,336.09 for damages allegedly incurred from October 2008 until September 2009 when the stock and goods were finally removed from the premises.
381. This total is made up as to $101,617.92 by twelve monthly rental payments of $8,468.16 including GST together with the sum of $10,718.17 for various outgoings such as council and water rates, electricity and security costs incurred over this period.
382. Mr Gardiner argued in his written submissions that these amounts were payable because the plaintiffs "refused and failed, in breach of Clause 12.3 of the Lease, to remove the goods and equipment from the property". If they had done so, he argued, the defendants would have been able to release the property at the last applicable rent between the parties to some unidentified "third-party tenant" who would also have been responsible for the various charges making up the $10,718.17.
383. Not surprisingly, Mr Birman argued that nothing should be allowed after October 2008 for a number of reasons. Firstly, he submitted that the reason that the stock and goods remained on the premises was because of its conversion by the defendants. Secondly, he submitted that there was simply no evidence that if the property was vacant, the defendants could have leased it to anybody, let alone at the suggested rent. In this regard, he also relied upon the evidence that the defendants have been trying to rent the property since September 2009 without any success. Thirdly, he argued that in relation to matters such as the various outgoings and security costs, the defendants would have incurred these in any event.
384. I have already found that the defendant lawfully retook possession of the premises in October 2008 thereby bringing the month to month tenancy then operating to an end. In light of my finding that the subject stock and goods were at that time converted by the defendants who locked them inside the premises, I can see no basis upon which they can thereafter claim any such amounts. Further, I agree with Mr Birman that there is no evidence of any prospective tenant being lost to the defendants whose efforts to lease the premises post September 2009 have also come to nothing. Further, the security costs were, as Mr Birman put it, "at the choice" of the defendants.
385. Accordingly, I am not prepared to allow any of the damages claimed post October 2008.
Summary
386. The addition of the above amounts awarded pursuant to the cross claim results in a total of $21,876.33 plus the to be agreed amount for outstanding rent and GST as at the date of the lockout. Interest must also be added where applicable. I have already directed that interest should be agreed between the parties and dealt with in the short minutes.
Conclusion and Directions
387. It follows that the plaintiffs have succeeded in their claim and the defendants have also succeeded in their cross claim.
388. I make the following directions:
(i) The parties are to bring in short minutes of order to give effect to these reasons.
(ii) Such short minutes are to be provided to my Associate by 5pm on Monday 12 June 2011.
(iii) The matter is listed at 9.30am on Wednesday 15 June 2011 for the making of final orders.
(iv) The exhibits are to remain with the file for 28 days after judgment and thereafter are to be returned to the parties.
If the parties are unable to agree on interest or the proper costs order to be made, I will hear argument on 15 June 2011.
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Decision last updated: 17 October 2013
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