Kochergen, Jacob Jack & Anor v Bell, Geoffrey York & Ors Bell, Geoffrey York & Ors v Kochergen, Jacob Jack

[1997] FCA 1307

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY	SG 87 of 1995

BETWEEN:

JACOB JACK KOCHERGEN
AND
JOAQUIN INVESTMENTS PTY LTD
(ACN 008 165 197)

APPLICANTS

AND:

AND:

AND:

GEOFFREY YORK BELL,
BRUCE RAYMOND SPANGLER,
CW PTY LTD (ACN 007 901 546),
NICHOLAS JOHN STORER,
CHRISTOPHER MARTIN GARRETT
AND
BENTLEYS SERVICES PTY LTD (ACN 007 534 643)

RESPONDENTS

GEOFFREY YORK BELL,
BRUCE RAYMOND SPANGLER,
CW PTY LTD (ACN 007 901 546),
NICHOLAS JOHN STORER,
CHRISTOPHER MARTIN GARRETT,
BENTLEYS SERVICES PTY LTD (ACN 007 534 643)
AND
ENVIROWASTE ENTERPRISES PTY LTD (ACN 008 046 562)

CROSS CLAIMANTS

JACOB JACK KOCHERGEN,
JOAQUIN INVESTMENTS PTY LTD (ACN 008 165 197),
JACKIE BILLIE KOCHERGEN
AND
ELAINE ANN KOCHERGEN

CROSS RESPONDENTS

JUDGE:

MANSFIELD J

DATE:

13 NOVEMBER 1997

PLACE:

ADELAIDE

REASONS FOR DECISION

HIS HONOUR:        This is the fourteenth occasion on which the Court has given directions in this matter involving attempts to have the parties resolve the pleadings issues between them.  I had occasion to consider those issues previously.  I delivered a judgment in respect of a number of then outstanding issues on 5 May 1997.  I will not refer to the course of pleadings up to that date as it is set out in that judgment.

At that time I gave the cross claimants leave to amend their cross-claim in certain respects.  Because I was told that particulars of the claims for damages as then inadequately specified in pars 26 and 27 of that document could not be provided within a short time and that expert advice was being sought, I extended the time for the provision of those particulars as part of the cross-claim until 27 June 1997.  That time was further extended to 8 August 1997 on the application of the cross claimants and further extended as a result of correspondence between the parties in relation to a form of particulars proposed.  Ultimately, on 29 October 1997 particulars of losses were filed in accordance with a direction given on 13 October 1997.

The particulars of losses of the cross claimants provided on 29 October 1997 is now attacked by the cross respondents in a number of respects.  Following counsel for the cross respondents developing submissions as to the flaws in that document, the cross claimants have produced yet another version of those particulars of losses proposed to be incorporated in a further amended cross-claim.  It was handed up to me this morning.

In this ruling, I shall endeavour to refer to the numbering used in the document filed on 29 October 1997 and headed “Particulars of losses” specifically, and separately to the document handed up to me this morning, so as to avoid misunderstanding.

In the document handed up to me this morning, some of the matters complained of by the cross respondents have been addressed and will require little further attention.  Some of them are contested and I will rule upon them.  Some of them have been addressed in a significantly different way by the cross claimants indicating that they now wish a company called C & J Investments Pty Ltd (“C & J”) to be added as a cross claimant and to amend the cross-claim further as specified in pars 42-46 of the proposed further amended cross-claim handed up to me this morning.  As well, certain of the complaints in respect of pars 27(h)(ii), 27(h)(iii) and 27(h)(iv) have added to them in the document handed up to me this morning further particulars to explain why the present particulars of losses filed on 29 October 1997 can give rise to a claim in damages on behalf of one or more of the cross claimants when on their face they do not do so.

I will deal with each of those four aspects of the particulars separately.

The complaint of inconsistency in the pleading in par 26(c) of the particulars of losses given on 29 October 1997 has been acknowledged.  The cross claimants seek leave to amend the number 121 to the number 114.  That number will reconcile with the attachment to the particulars of losses as filed on 29 October 1997.  I give leave to amend par 26(c) of those particulars of losses to reflect that change.

There were a number of complaints in respect of pars 27(b)(i) in conjunction with, or by comparison with, pars 27(c), 35 and 38-41 of the particulars of losses filed on 29 October 1997.  Again, those complaints have been acknowledged.  The cross claimants seek leave to delete par 35 and pars 38-41 of the statement of claim and the line in par 27(b)(i) of the particulars of losses which reads “truck and forklift:  para 8(i) hereof $15,000.”  That is a sensible course of action.  I give that leave.  Upon that leave having been given, there is no need to further address those issues.

It was next complained that par 27(b)(iii) was nonsensical.  It claims as giving rise to a loss of $350,000:

“(b)Difference between the consideration paid pursuant to the arrangement for the business and assets and their actual value:

. . .

(iii). . . CW agreed to purchase bins for $350,000.00 on the condition that this amount was loaned back to CW.”

The claim is for $350,000.  There is no allegation - and I am told by counsel for the cross claimants that they are presently unable to make any allegation - as to what the bins’ actual value was at the time of the transaction.  Separately, in par 26 there is a claim for damages for breach of contract specifying loss and damage in respect of the value of the bins but this claim was not related to par 27(b)(iii) in the submissions.  The position therefore is that the cross claimants simply cannot assert at present - and despite these proceedings having been on foot for some two years - the difference between the cost of the bins, on the one hand, and their value on the other, and so they cannot specify a loss.  The cross respondents are entitled to know what the claim is in that regard if it is to be pursued.  In the absence of a pleading of actual value of those bins, or that they had no value whatsoever, in my view, par 27(b)(iii) is inadequate and should be struck out.  By way of contrast, I note that par 27(b)(i) and (iv) deal separately and appropriately with the value of, and cost of acquiring, the business and assert that the business itself had no value.  I note also that separately in par 27(a) CW Pty Ltd adopts the allegations of loss and damage in par 26.  Paragraph 26 claims, and specifies, losses for bins allegedly purchased which were either not received (both roll off bins and compaction bins) and compaction bins received but of no value.  That allegation seems to reinforce the view that if there is some further or additional loss by reason of the bins being purchased for $350,000 and having some lesser value at that time, such loss is capable of being identified and properly quantified and particularised, if it is to be pursued.  I strike out par 27(b)(iii) of the particulars provided on 29 October 1997.

I can deal briefly with a complaint about pars 27(c) and 27(d) of those particulars.  It is complained that there is inconsistency or double-dipping.  That is because the claimed loss in respect of a forklift truck and Isuzu vehicles appears as two separate amounts.  First, there is the difference between price or alleged value, on the one hand, and their actual value on the other hand, said to be $4,500.  In addition there is a claim for cost of repairs to the forklift vehicle of $5,500.  Counsel for the cross claimants accepts that it will be necessary to prove that repairing a forklift truck at a cost of $5,500 which, on the pleading, was one of at least two and possibly more vehicles with a collective value of $4,500 will be difficult.  It is not immediately apparent how that can be done.  I am told that it is proposed to be done.  I do not think in those circumstances that there is necessarily an inconsistency between those two claims, albeit, as acknowledged, a difficulty in fact in making them both out.  I propose to allow those paragraphs to stand.

The cross respondents complain of pars 27(e) and 27(f) of the particulars of losses filed on 29 October 1997.  They are now expressed in the document handed to me this morning in sub-pars 27(f) and 27(g) in which the claim for loss of profits is identified as an amount per year set out in the forecasts referred to in par 8(h)(iii) of the cross-claim.  It is confined to a claim for one year's loss of profits.   In each of those claims it is contended by counsel for the cross respondents that they are untenable because of the nature of the claim.  Reliance is placed upon Gould v Vaggelas (1983-1985) 157 CLR 215 at 220 and 221-222, and Gates v The City Mutual Life Assurance Society Ltd (1985-1986) 160 CLR 1 at 11.

The causes of action identified in the cross-claim are misrepresentation under s 7 of the Misrepresentation Act 1972 (SA) and breach of contract.  The measure of damages for misrepresentation under the Misrepresentation Act 1972 (SA) is as if the misrepresentation had been made fraudulently and were actionable in tort. In that respect, that legislation is more specific than the more general prescription in s 82 of the Trade Practices Act 1974 (Cth).  It is contended that the claim in par 27(e) of the particulars of damages filed on 29 October 1997 can only be based upon the tortious measure of damages and so cannot include expectation losses.  It is then contended that the claim in par 27(f) of those particulars cannot exist with the claim for loss of profits, and in any event cannot be maintained for the period claimed without pleading facts to show it was reasonable to continue to incur those losses over that period.  The difference in the measure of damages in tort and in contract are clear:  see Gates (above, at 11-12). As was there pointed out, whilst the measure of damages in contract is prima facie the difference between the real value of the business and the price paid, in deceit an applicant is also entitled to recover for the prejudice or disadvantage suffered in consequence of altering that person’s position by reason of the inducement, so as to be able to recover all reasonably foreseeable loss: Gould (above, at 223-224).

Thus the claim at par 27(f) of those particulars is maintainable at law.  If it is for too long a period, it will not all be reasonably incurred.  If there are particular material facts in support of the reasonableness of the period of that claim, they should be pleaded or particularised; if they are not, evidence concerning such matters might not be admitted at the hearing.  The claim in par 27(e) of those particulars is more difficult.  There is considerable force in the submission.  I have ultimately decided to allow that pleading to stand for two reasons.  Firstly, although par 26 refers to breaches of contract causing damages, par 27 refers to “conduct” inter alia of Joaquin Investments Pty Ltd (“Joaquin”) causing damage and Joaquin is one of the contracting parties.  It is not necessarily the case that pars 26 and 27 are mutually exclusive, in the sense that par 26 only deals with the claim for damages for breach of contract.  Secondly, whilst I think it is apparent that there will be difficulty in maintaining successfully both claims, and that in context it may be difficult to successfully maintain the claim for damages for loss of profits or projected income in tort, I am in effect being asked to dismiss that claim before the hearing.  Both Gates (above) and Gould (above) involved decisions made after full hearings.  I should strike out such a claim only if I am firmly convinced that on no view of the facts or law could it be sustained.  Counsel for the cross claimants asserts that it is sought to be maintained, even as a measure of damages in tort, as a loss consequent upon entering into the overall arrangement.  That may or may not prove to be correct.  But I am not sufficiently satisfied that no view of the facts or law could permit it.  The proper course of action in those circumstances is to allow the allegation to stand.  In making that ruling, I am not to be taken in any way as indicating that the cross claimants have a sound or potentially good claim in respect of either or both of those heads of damage or, on the other hand, that their claim is likely not to succeed.  I am simply ruling on the basis that, as a matter of law, I am not satisfied that the bases of the claim as identified are hopeless.

The next paragraphs under attack are those contained in pars 27(h)(ii), (iii) and (iv) of the particulars of losses provided on 29 October 1997.  As they presently stand, sub-par (iii) does not relate to an expense said to be incurred specifically by one of the cross claimants other than Mr Spangler.  That is correct.  The cross claimants now seek to allege in the document handed to me this morning as follows:

“(iii)The sum of $66,774.98 was deducted from the purchase price under an agreement dated 17 March 1995 between Envirowaste Mini Bins Pty Ltd (formerly Ficor Pty Ltd), Collex Waste Management Pty Ltd, Bell and Spangler for the cost of site cleaning.  This cost was a liability incurred by Envirowaste to Collex in relation to site clean up.  Envirowaste was unable to pay the cost due to insufficient funds.  Ficor Pty Ltd discharged the liability of Envirowaste by offsetting this amount from the proceeds of sale due under the agreement dated 17 March 1995.  This was done pursuant to an oral loan agreement at about the time of the first payment.  Envirowaste is liable to repay the amount to Ficor Pty Ltd.

$67,774.98”

The bold type represents the proposed additional amendment.  It is unclear whether that cost appears as an expense in the business records of any of the cross claimants, or whether it is included in the expenses and losses incurred totalling $700,757.49 in par 27(g) of the particulars.  I do not rule on that basis.  However, as it is presently expressed, I do not think that proposed amendment sufficiently identifies the basis of the claim so that the cross respondents know adequately the nature of the claim and so they can respond to it.  It may be that it can properly be particularised and be preserved within the claim.  At present neither the nature of the agreement dated 17 March 1995, nor of the oral loan agreement, are properly identified.  It also seems to suggest that Envirowaste, a cross claimant, contracted with Collex to clean up the site, but no particulars of that contract are given.  I suspect this claim may appear more complex than it is.  If one of the cross claimants suffered loss because a representation of the condition of the site was not correct, it may claim that loss.  In the normal course, that loss would be reflected by the cost incurred in cleaning the site.  Unless that expense was not in fact incurred by that cross claimant, then the claim is a relatively straight forward one.  It should not be more complicated simply because the funds used to pay that cost were from funds borrowed for that purpose.  Nor should it be more complicated if the work was contracted through an agent.  In respect of sub-pars (ii) and (iv), similar comments can be made.

I do not propose therefore to allow the proposed amendments in the form presented to me this morning, nor do I think it is appropriate for pars 27(h)(ii), (iii) and (iv) of the particulars of losses as given on 29 October 1997 to stand.  I do not strike them out at the moment but will simply adjourn the matter for a short time while the cross claimants consider those observations, and then to present particulars which meet the requirement that both the Court and the cross respondents know clearly the nature of the claim alleged and the basis of it.  If no amendment is brought forward beyond that presently before me, as presently minded I will strike out those paragraphs.

I turn then to consider the proposed further amendment to the cross-claim by adding pars 42-46 in terms of the document handed to me this morning.  That involves separately an application by C & J to be added as a party to the cross-claim, and C & J seeking some relief in the cross-claim, and the inclusion in the cross-claim of proper particulars of its claim.  That cannot simply be done by the present cross claimants proposed particulars.  In addition, the exchange between counsel for the present cross claimants and myself identified some possible deficiencies in the claim as presently formulated.  I do not propose to allow the amendment as presently formulated.  If C & J wishes to pursue it, it should make an appropriate application including presenting the form of amendment to the cross-claim in sufficient detail to avoid any further issues as to pleadings.  It is not presently clear to me, if the advances of money from C & J to CW Pty Ltd or to Envirowaste Enterprises Pty Ltd were as identified, that it has lost any amount.  Counsel for the present cross claimants said that as he presently understood his instructions, those loans were interest free.  There is no claim for loss of capital.  It is difficult to see how there can be a loss then suffered following the repayment of those loans.  There may be more to it.  I simply do not know.  At present, there is not sufficient detail as to the terms of the loans contained within the document handed to me this morning.  The other part of C & J’s foreshadowed claim relates to its purchase of shares for $100,000.  How that comes to produce a loss is again not explained.  Why that loss should be represented by interest and bank charges on $330,000, which it either borrowed or had available through borrowing in the period November 1992 to March 1995, is not explained.  It is difficult at present to imagine how the proper measure of a loss for the purchase of shares in CW Pty Ltd for $100,000 is interest and bank charges on $330,000.  It may be, as counsel for the cross claimants suggested, that it is a loss of the opportunity to participate in dividends.  But a shareholder has no entitlement to dividends unless and until they are declared by the directors.  So again, it is difficult to see how in the absence of the directors of CW Pty Ltd having declared dividends, that there is any loss.  There may be circumstances beyond simply the purchase of the shares which warrant the claim.  At present they are not spelled out.  Furthermore, counsel for the cross claimants indicated that no other amendments to the presently amended cross-claim are intended beyond possibly identifying Mr Bell and Mr Spangler as directors of C & J in par 3 of the cross-claim.  If matters remain at that point, there will be no allegation that C & J entered into whatever transactions it did enter into in reliance upon any conduct on the part of any of the cross respondents.  Again it will be difficult to see how in those circumstances it has a claim at all against any of the cross respondents.  It may have entered into this transaction in reliance upon matters put to it by Messrs Bell and Spangler, or for other reasons.  If it is to be joined as a party in the proceeding it must have a cause of action against the cross respondents clearly identified.  Accordingly I do not allow those amendments at the present time.

I am concerned that this matter is taking so long, and at considerable expense to the parties, without even getting to the point where it is ready for trial.  On the other hand I am anxious not to do injustice to any of the parties by peremptorily precluding them from pursuing their proper claims in Court.  I propose now to fix a short time within which the cross claimants and if it wishes to C & J to make any further application in respect of the matters I have reserved.  In the meantime I propose to give directions as if the pleadings were closed, to get this matter moving.  If there is to be any further application for amendment, it will have to be done in that context.  I fix Friday, 28 November 1997 at 9.10 am as the date for any further applications to be made by the cross claimants in respect of amending the cross-claim, the particulars of losses, or for any application to add any party as a cross claimant.  I direct that any documents to be relied upon by the cross claimants or by C & J on that occasion be filed and served by 12 noon on 26 November 1997.

I certify that this and the preceding eight (8) pages are a true copy of the Reasons for Decision herein of the Honourable Justice Mansfield.

Associate:

Dated:            

Counsel for the Applicants and Cross Respondents:	Mr C Brohier
Solicitors for the Applicants and Cross Respondents:	Thomson Playford
Counsel for the Respondents and Cross Claimants:	Mr P Heinrich
Solicitors for the Respondents and Cross Claimants	Minter Ellison
Date of Hearing:	13 November 1997
Date of Decision:	13 November 1997