The Gull Lexington Group v Laguna Bay (Banongill) Agricultural
[2017] VCC 525
•9 May 2017
IN THE COUNTY COURT OF VICTORIA
AT MELBOURNE
COMMERCIAL DIVISION
GENERAL CASES LISTRevised
Not restricted
Suitable for publicationCase No. CI-17-00167
THE GULL LEXINGTON GROUP PTY LTD Plaintiff v LAGUNA BAY (BANONGILL) AGRICULTURAL PTY LTD Defendant ---
JUDGE:
HER HONOUR JUDGE MARKS
WHERE HELD:
Melbourne
DATE OF HEARING:
28 March 2017
DATE OF RULING:
9 May 2017
CASE MAY BE CITED AS:
The Gull Lexington Group v Laguna Bay (Banongill) Agricultural
MEDIUM NEUTRAL CITATION:
[2017] VCC 525
REASONS FOR RULING
---Catchwords: EXPERT EVIDENCE – ALLEGATION OF BIAS – SUMMARY JUDGMENT APPLICATION - Expert valuation of livestock – Whether actual or apprehended bias on part of expert – Whether no real prospect of success.
Cases Cited:Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (2013) 42 VR 27; Legal and General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314; AGL Victoria Pty Ltd v SPI Networks (Gas) Pty Ltd [2006] VSCA 173; 500 Burwood Highway Pty Ltd v Australian Unity Ltd [2012] VSC 596.
Ruling: Summary judgment for the defendant.
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APPEARANCES:
Counsel Solicitors For the plaintiff Mr A Kirby Thomson Greer For the defendant Mr R Peters Norton Rose Fulbright HER HONOUR:
1 The plaintiff (Gull) sold Banongill Station at Skipton to the defendant (Laguna). The livestock on Banongill was included in the sale. The value of the livestock was to be agreed if possible, but if not, by clause 4.3.1 of the Business Asset Sale Deed, Gull and Laguna agreed to appoint Mr Xavier Shanahan as an expert to determine the livestock’s final value.
2 Gull and Laguna could not agree on the value of the livestock, and on 1 November 2016 Mr Shanahan was appointed to value it. On 7 November 2016 he valued the livestock at $5,272,100.
3 Gull does not accept Mr Shanahan’s valuation. It says that Mr Shanahan did not make the valuation in accordance with the contract because he did not ascribe a value to about 5,000 merino lambs. Further or alternatively, it says that he failed to carry out the valuation impartially. Gull seeks to have the Shanahan valuation set aside entirely, and to have the court appoint an appropriately qualified special referee to carry out a new valuation.
4 Laguna says that there is no real prospect of Gull succeeding in this case and it should not go to trial. It seeks summary judgment. Alternatively it seeks to have the amended statement of claim struck out.
5 I will order summary judgment in favour of Laguna. For the reasons set out below, I am satisfied that Gull’s claims do not have a real prospect of success, as opposed to a fanciful chance of success. This is the test to be applied in considering if summary judgment should be given under section 63 of the Civil Procedure Act 2010 (Vic): Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (2013) 42 VR 27 at [29].
Gull’s pleaded case
6 The hearing was conducted on the basis of the claims made by Gull in a proposed amended statement of claim. Orders were made at the outset of the hearing, by consent, that Gull have leave to file and serve an amended statement of claim, in the form of the proposed amended statement of claim served with its written submissions on 27 March 2017, without the inclusion of paragraph 11 of that proposed amended statement of claim. On 28 March 2017 Gull then filed the amended statement of claim.
7 The amended statement of claim sets out the events leading up to the making of the Shanahan valuation. It goes on to plead:
“9. Wrongfully, the expert’s valuation was not performed in accordance with the agreement in that he failed to take the three components of ewes, wool and lambs into account.
PARTICULARS
The expert’s valuation did not value 5000 merino lambs.
10. Further, and alternatively, in breach of the implied term the expert’s valuation was not carried out honestly and impartially.
PARTICULARS
The breach is apparent, alternatively can be inferred, from the following matters:
(i) the expert’s firm, including through Tony Shanahan, Xavier Shanahan’s father, had previously carried out work for the purchaser’s farm manager, Mr John Sheehan, but this was not disclosed to the vendor. This work by the expert’s firm included work for Yaloak Estate of which Sheehan was previously the manager from 2001 until 2014. Xavier Shanahan met and spoke to the expert through this connection at Yaloak Estate and attended the Yaloak Christmas party each year Sheehan was there;
(ii) the expert had a private phone conversation with Mr John Sheehan about the Banongill valuation, before being appointed by the parties, but this was not disclosed to the vendor;
(iii) the expert had a private phone conversation with Mr John Sheehan about the Banongill valuation after attending at Banongill on 26 October 2016 for the purposes of the valuation;
(iv) the expert had conversations with Sheehan on 2 November 2016 when inspecting Banongill for the purposes of the valuation;
(v) the expert had further conversations with Mr John Sheehan from 8 November to 1 December 2016 about the Banongill valuation after the expert’s valuation was provided;
(vi) the fact that the expert failed to value the 5000 merino lambs and has given no or no credible reason for this failure. The expert stated by email dated 9 November 2016 to Ms Georgia Yanner, previous solicitor for the plaintiff, that the lambs were not valued as they were not at a weanable age. The plaintiff’s expert, James Gordon (TB White & Sons) and the defendant’s expert, Graeme Nicholson (Elders), as well as the three stock agents subsequently retained by the plaintiff and referred to below, all ascribed value to the merino lambs;
Further and better particulars may be provided after discovery and the return of subpoenae and before trial.”
8 The prayer for relief seeks to have the Shanahan valuation set aside, and the subject matter of that valuation referred to an appropriately qualified special referee under rule 50 of the County Court Civil Procedure Rules 2008 (Vic).
Setting aside an expert determination
9 Where a valuation has been provided by an expert approached jointly by the parties in order to determine a result they agree to be bound by, there are only limited circumstances where a court will order that the valuation be set aside. One such circumstance is where the valuation is not made in accordance with the contract appointing the expert. Others are where the valuer acted fraudulently, collusively, dishonestly or with lack of impartiality: Legal and General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314 at 335-6; AGL Victoria Pty Ltd v SPI Networks (Gas) Pty Ltd [2006] VSCA 173 at [43-44], [51-53]. Otherwise, the valuation is not reviewable for error in the exercise of a judgment, opinion or discretion entrusted to the expert: 500 Burwood Highway Pty Ltd v Australian Unity Ltd [2012] VSC 596 at [172-173].
Did Mr Shanahan make the valuation in accordance with the contract?
10 The particulars of Gull’s claim in this respect simply say that the expert’s valuation “did not value 5000 merino lambs”. However, the evidence filed in this application by both Gull and Laguna establishes that Mr Shanahan did make the valuation in accordance with the contract appointing him. He took the lambs into account in arriving at his valuation. He did it by taking into account in the price he ascribed to the ewes the value of ewes, lambs and wool in a “per unit” price. It is apparent from the evidence that this is one of the methods available to value lambs which have not yet been weaned and cannot yet be separated from their mothers. At its highest, Gull’s case is that Mr Shanahan did not give the lambs a separate value, and that the total quantum of the valuation was not increased either at all, or sufficiently, by reason of the lambs. However, this does not mean that Mr Shanahan did not carry out the process of considering what they were worth as part of his valuation process, and ascribing a total value to the livestock which included that consideration by him, which is what he was appointed to do.
11 Mr Shanahan was given a letter of instruction appointing him to value the livestock. It attached a copy of clause 4.3 of the Business Asset Sale Deed:
“4.3 The livestock shall be bought and sold at their current market value, determined as follows –
4.3.1 At least 30 days prior to the Settlement Date, the Vendor and the Purchaser and/or their agreed representative shall together undertake a final livestock count and current market valuation of the sheep and cattle based upon age, sex and general condition, inclusive of any progeny…”
12 The Shanahan valuation lists the livestock he valued. It states “when any price for a ewe and lamb or cow and calf is listed the price is for the ewe or cow and the lamb or calves shall be given in”. The page headed “Merino” has prices of ewes with lambs at foot: a total value of $812,430. It lists 4,820 ewes and 4,928 lambs. It does not set out separate values for the ewes and the lambs. The page headed “Merino ewes and lambs” includes an assessment of lambs at foot as “still obviously young and recovering from marking and mulesing”. The valuation separately sets out a value for merino ewes which had no lambs at foot.
13 In his affidavit, Mr Shanahan explained that he valued the lambs as part of a unit with the ewes. He said that when lambs are so young that they have not been weaned from the ewes and cannot survive on their own (i.e. they are “at foot”), stock agents usually value the ewes and lambs as one unit. The evidence is that other agents (including those relied on by Gull) agree that this is one way this is done, although some would separate amounts attributable to the ewes, and to the lambs, and sometimes to wool as well.
14 On 8 November 2016, the day after Mr Shanahan gave his valuation, Mr McIntyre acting for Gull called Mr Shanahan:
a) Mr McIntyre says that Mr Shanahan –
“advised me that in his opinion, the merino lambs were “virtually unsaleable” because they were not of weanable age and they had lice”.
b) Mr Shanahan says of the same conversation –
“I told him that the lambs did not have an independent commercial value because they were not of weanable age. I told him I had taken the lambs into consideration when I valued the ewes”.
15 On 9 November 2016, in an email answering a question from Gull’s solicitor Mr Shanahan explained that he valued the lambs as part of a unit (the unit being the ewes, lamb and wool). He said he had taken into consideration that there was approximately 100% lambs at foot and he believed the lambs “compliment” [sic] the ewes to achieve one value. He said he did not value the ewes and lambs “by adding a ewe value plus wool plus lamb”.
16 There is difference of opinion between the valuers who have sworn affidavits as to what is meant by “given in”. I accept that it is a little used term in the industry. I accept that there is some confusion about what it means: Mr Craig Pertzell has said it means that the lambs are provided for free; others (including Mr Shanahan) say that it means their value is included in the value ascribed to the ewe (the unit value).
17 It is apparent from the evidence that:
a) Some stock agents do a valuation by attributing a separate value to each ewe, its lamb and its wool and then adding each separate value to reach a unit price; and
b) Others do not reach separate values. They attribute one value for each ewe, its lamb and wool, together, as a unit price.
18 It is apparent on the evidence that Mr Shanahan considered the lambs in arriving at his valuation. He chose to carry out the valuation process that he was entrusted with by ascribing a unit value that included the lambs. He was entitled to do this, provided in ascribing a value to the livestock he took into account all the livestock, including the lambs.
19 Gull also relied on the evidence of Mr James Gordon (its initial valuer) who said that Mr Shanahan did not follow the ground rules of the valuation because he did not ascribe a separate amount for the lambs in the valuation. Mr Gordon said that these ground rules were established between him and Mr Nicholson when they first tried to agree on a value for the livestock. However, it was not part of the joint letter of instruction to Mr Shanahan that he should separately set out a value for the lambs. This so-called ground rule was not one that Mr Shanahan was required to abide by in carrying out the valuation in accordance with the letter of instruction to him. Mr Shanahan was required to value all the livestock, inclusive of progeny. He did this.
20 This is not a case where, mistakenly, Mr Shanahan valued the wrong amount of livestock (valuing the other livestock, but not considering the lambs in that process). That would have been an error of which Gull could have successfully complained. For example, if an accountant values the wrong amount of shares when his job is to value a particular amount of shares in a company, he has not carried out the valuation he was appointed to do: AGL Victoria Pty Ltd v SPI Networks (Gas) Pty Ltd [2006] VSCA 173 at [73]. Here it is apparent from the valuation itself that Mr Shanahan considered the lambs in arriving at his valuation. He has also explained this in conversations and emails following the valuation, and in his affidavit in this application. Nothing that has been filed on behalf of Gull establishes that it has a real prospect of success in proving that Mr Shanahan valued the wrong amount of livestock.
Did Mr Shanahan fail to carry out the valuation impartially?
21 Gull originally pleaded that in breach of the implied term in the contract, the expert’s valuation was not carried out “honestly and impartially”. However, it does not advance a case that Mr Shanahan acted dishonestly. Gull has clarified that, in circumstances where the authorities talk of the need for the expert to act honestly and impartially, Gull is alleging a breach of that composite term, on the basis that it says Mr Shanahan did not act impartially. This was made clear both in correspondence by Gull’s solicitor to Laguna’s solicitor and in the hearing before me. The pleading would have been clearer had it simply said that in breach of the implied term that an expert must act honestly and impartially, the expert failed to carry out the valuation impartially.
22 The breach alleged on the pleading is that Mr Shanahan failed to act impartially. This is an allegation of actual bias. None of the material facts pleaded particularised at paragraphs (i) to (v) of the particulars to paragraph 10 of the amended statement of claim could, if proven, establish bias:
· Gull alleges that Mr Shanahan lacked impartiality in part because he did not disclose that someone at his firm (of nine people) had previously done work for Gull’s current farm manager, or because Mr Shanahan had previously met and had conversations with that manager, including at Christmas parties over the years. Why should these matters have been disclosed in any event? I was not taken to any authority to add weight to the suggestion that these matters should have been disclosed, or that they could establish that Mr Shanahan was not being impartial in doing his valuation.
· Gull does not plead anything that was allegedly said in any of the conversations it particularises in support of its allegation of bias. I do not accept that the mere fact of private conversations, without more, can establish bias.
· The only substantive allegation of bias is that set out in paragraph (vi) of the particulars to paragraph 10 of the amended statement of claim: the alleged failure to include a value for the lambs and the allegation that Mr Shanahan “has given no or no credible reason” for this failure. But if Mr Shanahan had failed to consider the lambs in his valuation process, that would have meant he had not carried out the valuation he was appointed to do. I have dealt with this above. I do not accept that this allegation would independently found a claim that Mr Shanahan did not act impartially.
23 In any event, given the evidence filed as to what the conversations particularised in paragraph 10 of the amended statement of claim actually consisted of, Gull does not have real prospects of success of establishing bias:
· After it was apparent that Gull and Laguna could not agree on the price for the livestock, Gull invited Mr Shanahan to Banongill to value the livestock on 26 October 2016 without Laguna being there. Laguna found out, and asked Mr Shanahan to leave Banongill until a valuation procedure was agreed between Gull and Laguna. The farm manager, Mr Sheehan, was not on Banongill at the time. Mr Sheehan called Mr Shanahan later (after Mr Shanahan left Banongill) to apologise for Laguna having to ask him to leave and to ask about what procedure Mr Shanahan wanted put in place for the valuation. This conversation, and the failure to disclose it, does not show a lack of impartiality.
· Gull pleads that the expert had a private phone conversation with Mr Sheehan about the Banongill valuation after attending Banongill on 26 October 2016 for the purposes of the valuation. It also pleads that the expert had conversations with Mr Sheehan on 2 November 2016 when inspecting Banongill for the purposes of the valuation. Mr Shanahan denies any conversations other than what was discussed during the inspection of the livestock on 2 November 2016 in the presence of two Gull representatives in a 4-wheel drive. So too does Mr Sheehan. There was no evidence of conversations which could establish bias.
· Gull says that Mr Shanahan had further conversations with Mr Sheehan, from 8 November to 1 December 2016, after the valuation was provided. It is not clear how it is put that conversations (about which no content is given) after a valuation has been given could possibly show or lead to an inference of a lack of impartiality at the time the valuation was provided. I reject the submission that Gull could establish a lack of impartiality by Mr Shanahan on this basis.
24 In the hearing of the application, Gull said it also relies on apprehended bias. However, the appearance of partiality is not sufficient to set aside an expert’s opinion, even if that appearance is made out: see the comments of, and cases cited by, Vickery J in 500 Burwood Highway Pty Ltd v Australian Unity Limited [2012] VSC 596 at [174-179]. Gull has no real prospects of success in establishing that apprehended bias is available to it as a cause of action to set aside the expert’s valuation. In any event, Gull has no real prospects of success in establishing that the matters particularised in paragraph 10 of the amended statement of claim by Gull could, if proven, establish an apprehension of bias.
Conclusion
25 I am satisfied that Gull has no real prospect of success in establishing that Mr Shanahan did not carry out the valuation correctly, or did not act impartially. I will order that there be summary judgment for Laguna.
26 I direct the parties to provide to me, by 4.30 pm on 15 May 2017, a minute of proposed consent orders arising from these reasons, or, if they cannot agree, with separate orders and submissions of the orders they say should follow. If necessary, a further hearing will be listed to enable the parties to make oral submissions on the appropriate orders that follow.
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Certificate
I certify that these 9 pages are a true copy of the reasons for ruling of her Honour Judge Marks, delivered on 9 May 2017.
Dated: 9 May 2017
Samantha Marinic
Associate to Her Honour Judge Marks
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