Lindfield NSW Pty Ltd v Netdeen Pty Ltd trading as GJ Gardner Homes

[2024] NSWSC 937

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Lindfield NSW Pty Ltd v Netdeen Pty Ltd trading as GJ Gardner Homes [2024] NSWSC 937

Hearing dates:

29 – 31 July 2024

Date of orders:

1 August 2024

Decision date:

01 August 2024

Jurisdiction:

Equity - Commercial List

Before:

Elkaim AJ

Decision:

1. The plaintiff is permitted to pursue the claim as particularised in MFI 7.

2. The spreadsheets forming part of MFI 7 are admitted into evidence as Exhibit G.

3. The plaintiff is to lead no further evidence in support of the claim.

4. Whatever the ultimate result of the case the plaintiff is to pay the defendant’s costs for half a day of hearing together with any costs occasioned by the addition of the alternative claim.

5. The defendant has leave to make any application it considers necessary in relation to meeting the claim.

Catchwords:

CIVIL PROCEDURE – application to make an alternative damages claim in addition to primary claim – where defendant submits they would be unable to meet the claim without further time – held alternative claim allowed to be pursued

Category:

Procedural rulings

Parties:

Lindfield NSW Pty Ltd (Plaintiff)
Netdeen Pty Ltd trading as GJ Gardner Homes (Defendant)

Representation:

Counsel:
Mr T Castle SC (Plaintiff)
Ms D Levi (Plaintiff)
Mr S Couper KC (Defendant)
Mr J Gooley (Defendant)

Solicitors:
Addisons (Plaintiff)
Thomas Geer Lawyers (Defendant)

File Number(s):

2023/237902

Publication restriction:

No

JUDGMENT

1. When this matter commenced on Monday of this week the plaintiff foreshadowed the making of a damages claim in addition to its primary claim. The claim was variously styled as an alternative claim or a subset claim. I think it is better described as an alternative claim because it will only arise if the primary claim is unsuccessful.

2. The defendant said it would oppose the claim. Yesterday, the claim was put in writing and given particulars said to adequately describe, for the defendant’s purposes, the nature of the claim being made.

3. The defendant, having examined the particulars, maintained its opposition, stating that, while the claim could be met, it would require two days to do so and that, in turn, the case could not be completed within its allotted time and further time would be necessary for that purpose.

4. In the simplest terms, for current purposes, the plaintiff, if otherwise successful, is seeking damages arising from the termination of a master franchise agreement between itself and the defendant.

5. The master franchise agreement operated in a way that the plaintiff was effectively a middle entity between the defendant and sub-franchisees. The sub-franchisees are residential builders who pay, effectively as a royalty, a sum calculated by percentage upon the value of building contracts between the sub- franchisees and persons with whom they contract for the erection of residences.

6. The primary damages claim is encapsulated in the report of an expert, Mr Potter dated 3 May 2024, although slightly amended in a second report of 17 July 2024. A depiction of the claim can be found at p 2859 of Exhibit A (vol 5).

7. Essentially the primary claim is based on a prediction of cash inflows to the sub- franchisees which would ultimately translate to amounts paid to the plaintiff. Over the 10 year period up to the end of the financial year of 2034, Mr Potter estimates the plaintiff would have, had the master franchise agreement been renewed, derived an amount within the range of $23.8 million to $25.6 million.

8. The calculations necessarily involve a number of assumptions which, if not entirely accepted, could reduce the claim, theoretically to any amount down to zero. Thus, the defendant’s exposure is for any amount up to $25.6 million.

9. The alternative claim is for $4,924,225. It has this basis: the master franchise agreement came to an end on 27 May 2024. On this date, amongst other events, the plaintiff was cut off from the defendant’s computer system.

10. As at this date there were 885 outstanding sales in the NSW and ACT area. This figure of 885, applying certain discounts, was reduced to 580 giving a contract value of unfulfilled sales as at 27 May 2024 of $439,582,215. Applying Mr Hope’s conversion rate of 80% from sales into contracts, the figure came down to $351,665,772. The royalty rate of 2% that would be owing to the plaintiff would produce a figure of $7,033,315. After deducting expenses of $2,109,090, the above figure of $4,924,225 is produced.

11. In opposing the alternative claim, the defendant made these points:

1. there was no pleading that included, in terms, the alternative claim;

2. the plaintiff had abandoned any claim arising from slabs laid in June 2024. These sales had not been extracted from the plaintiff’s calculations;

3. evidence would be needed to meet the claim, probably requiring two days when there would be investigation and preparation of evidence in response. There would inevitably be an extension of the case beyond the 10 days allocated;

4. no explanation was given for the late formulation of the claim; and

5. if I understood the submission correctly, an assumption had been made about the admissibility of Mr Potter’s reports such that there was no need to analyse all of his conclusions.

12. Each of the above points has merit, some more than others. For example, I think the point about the extraction of the June slabs could probably be easily dealt with.

13. On the other side of the argument the plaintiff made these points:

1. the source material for the claim has come entirely from the defendant so that the defendant must be familiar with its content;

2. the claim falls within the further amended commercial list statement, filed on 22 July 2024, where it is contended by the plaintiff, at [25]:

“In the absence of a renewal of the MFA for a Further Term of 10 years on and from 1 July 2024, either at all, or pursuant to the existing terms of the MFA or terms which are consistent with the purpose and/or object of MFA as stated in paragraphs 4 and 5 above, the plaintiff will suffer loss and/or damage as follows:

(a)….

(b) loss of the future revenue to be earned from each of the Sub-Franchise Agreements transferred to the defendant, having regard to clauses 14.6(b), and 24.1 of the MFA …”

3. the claim is firstly an alternative, and secondly for a figure well below the primary claim. In particular, it is for a figure that could be, in rough terms, similar to a possible result arising from a discounting of the primary claim; and

4. the argument was really one of the admissibility of the spreadsheets produced by the defendant (MFI 7), rather than leave to pursue the alternative claim, a question which could be dealt with in final submissions.

14. As to the last point, the admissibility of the spreadsheets depends upon their relevance and their relevance can only be to the establishment of the alternative claim.

15. The commercial list is established to enable swift treatment of commercial disputes necessarily involving the efficient and timely preparation of claims, defences and supporting evidence.

16. At the same time, it is important that the whole of a dispute between parties is heard and resolved (whether by compromise or decision).

17. The notice to produce should have been served much earlier. The pleading putting forward the alternative claim should have been more specific and directed to the precise elements of the claim. However, the topic of sales, contracts and slabs is well known to the parties and calculations derived from their existence was a regular part of the dealings between them.

18. I find it difficult to envisage the need for two days to meet the claim although I of course do not doubt the genuineness of the assessment made by His Majesty’s learned counsel. However, the need for the extra time does not necessarily mean there should be an adjournment for two days. I can see no reason why material, perhaps evidence, cannot be investigated and prepared while the case is continuing. Almost $5 million is a large amount, but it is an amount made up primarily from the defendant’s documents with which I assume they have some familiarity.

19. I will therefore allow the alternative claim to be pursued but I will not permit any further evidence to be lead in support of the claim. I will not adjourn the matter at this stage. I note that the witness currently giving evidence is likely to be detained in that capacity for at least another full day. The defendant will have leave to raise the matter again should it consider that further preparation is necessary.

20. I also think there should be a cost penalty imposed upon the plaintiff, at least to the extent of the half day used yesterday for the preparation of the claim and any other costs thrown away by the addition of the alternative claim.

21. I make the following orders:

1. The plaintiff is permitted to pursue the claim as particularised in MFI 7.

2. The spreadsheets forming part of MFI 7 are admitted into evidence as Exhibit G.

3. The plaintiff is to lead no further evidence in support of the claim.

4. Whatever the ultimate result of the case, the plaintiff is to pay the defendant’s costs for half a day of hearing together with any costs occasioned by the addition of the alternative claim.

5. The defendant has leave to make any application it considers necessary in relation to meeting the claim.

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Amendments

02 August 2024 - Interested Party removed, Defendant's Solicitor entered details in JusticeLink in error

Decision last updated: 02 August 2024