Valleyfield P/L v Primac Ltd

[2003] QCA 440

SUPREME COURT OF QUEENSLAND

CITATION:	Valleyfield P/L v Primac Ltd & Anor [2003] QCA 440
PARTIES:	VALLEYFIELD PTY LTD ACN 051 841 279 AS TRUSTEES OF THE PARKER UNIT INVESTMENT TRUST (plaintiff/respondent) v PRIMAC LIMITED ACN 010 023 284 (first defendant) NETAFIM AUSTRALIA PTY LIMITED ACN 056 229 755 (second defendant/appellant/applicant)
FILE NO/S:	Appeal No 3605 of 2002 SC Number 344 of 1999
DIVISION:	Court of Appeal
PROCEEDING:	Application for Stay of Execution
ORIGINATING  COURT:	Supreme Court at Townsville
DELIVERED EX	14 October 2003
TEMPORE ON:
DELIVERED AT:	Brisbane
HEARING DATE:	14 October 2003
JUDGE:	McPherson JA
ORDER:	Application dismissed upon undertakings made by both parties. Costs of and incidental to the application to be paid by the applicant Netafim Australia.
CATCHWORDS:	APPEAL AND NEW TRIAL – APPEAL PRACTICE AND PROCEDURE – QUEENSLAND – STAY OF PROCEEDINGS – GENERAL PRINCIPLES AS TO GRANT OR REFUSAL – applicant lost at trial and on appeal – application for special leave to High Court filed four weeks out of time – whether any prospect of success on appeal – long delay before High Court hearing – respondent’s financial position greatly weakened by damage caused by applicant – whether refusal of stay will destroy subject matter of litigation
COUNSEL:	SC Doyle QC, with B Porter, for the appellant/applicant P Morrison QC for the respondent
SOLICITORS:	Clayton Utz for the appellant Lyon Smith for the respondent

McPHERSON JA: This is an application for a stay of
proceedings on a judgment delivered in the Court of Appeal on
the 8th of August 2003. That judgment allowed an appeal
against a judgment given on 25th March 2002 by Justice

Cullinane in favour of the plaintiff Valleyfield Pty Ltd	10
against the second defendant Netafim Australia Pty Ltd for damages of $3.7 million. It did so by reducing those damages from $3.7 million to $1.7 million.
The second defendant now wishes to appeal to the High Court	20
against the judgment given against it and, to that end, has
filed an application for leave to appeal to that Court. The
application was filed on 9th October 2003 which was some four weeks out of time so that an extension of time will be needed before the application can proceed according to the rules.	30
The second defendant asks for the stay until special leave is granted and then until the appeal, if any, is determined. It should perhaps be added that the application for special leave
seems to have been provoked by an application on the part of	40
the plaintiff itself for special leave to appeal to the High damages given at trial.
The action arises out of the design and installation of a drip	50

irrigation system on two properties in North Queensland where
the plaintiff conducts or at relevant times, in 1997 and 1998,
conducted bean farming operations. The trial Judge found that
the second defendant had designed the irrigation system
negligently and gave damages against it, which, as I said,
were reduced on appeal. 2 60

The application for an immediate stay is based essentially on

the proposition that the plaintiff was a trading trust which	10
appears to have no or few assets or regular income, and is
heavily indebted to others. There is a real prospect, so it
is said, that it will pay the judgment moneys if and when
received to those creditors and that the plaintiff will
consequently be unable to recover that money if it succeeds in	20
its proposed appeal to the High Court.
The prospects of the plaintiff obtaining special leave and its
prospects in the consequent appeal, if any, do not seem to me
to be especially compelling. As regards liability, the	30
primary issue at trial turned on findings of credibility. The trial Judge made findings in favour of the plaintiff based on his having seen and heard the principal witnesses.
Those findings have survived challenge to the Court of Appeal,	40
so that there are now, as I see it, concurrent findings of four Judges in favour of the plaintiff in respect of critical matters of fact.
Having read the judgments at both levels, I would be inclined,	50

with respect, to rate the second defendant's prospects of success as unimpressive. Estimates before me suggests that the application for special leave is not likely to be heard before March 2004 or, at any rate, early next year, and that the appeal is not likely to be heard, if leave is given, before probably about June 2004. As well, of course, there will be some delay in reserving and considering judgment before a decision in the matter is finally given.	3	60
10

The damages were reduced on appeal from $3.7 million to $1.7
million essentially because the primary Judge was held to have
applied the contractual measure of expectation damages,
instead of the tortious restitutionary measure of damages.

Because it is accepted that the irrigation system cannot be	20
rectified simply enough to suit the plaintiff's property it
would appear to follow that the plaintiff, assuming liability
in its favour, is entitled to recover the outlay in purchasing
and installing the system, together with other expenditure
incurred in growing alternative crops in the season that	30
followed shortly after the installation.
It seems to me unlikely that the second defendant will succeed
in reducing the quantum of those damages much further; but if
it does so, the reduction, I suspect, is not likely to be of a	40
substantial character.
On the evidence the plaintiff's present parlous financial
position, as it has been put to me, appears to be the direct
result of having relied on the second defendant's misleading	50

conduct as it was found to be at the trial. It has outlayed, as one would expect, a great deal in legal costs which will not be taxed or paid until the litigation is over. Those are relevant considerations in determining whether or not a stay should be granted. It may be added, although it may not be of any direct relevance at all, that the second defendant is an offshoot of a foreign corporation whose only major assets are in a place abroad.	4	60
10

As against this, Mr Parker, who appears to be the principal
individual active in the trading trust which engages in the
farming, has offered to guarantee repayment of the judgment
sum to the second defendant personally if it is paid to the

plaintiff and the judgment on liability is then reversed in	20
the High Court.
He owns the two farms on which the activities of trust have
been carried on, one of which, I was informed, is or is about
to be let at a price, after which the farming activities	30
confined to the smaller of the two properties.
Putting those assets together with the assets of the plaintiff
itself to arrive at a net asset value over liabilities
suggests, on one view, that there may be an excess ranging	40
from perhaps $2.3 million on the second defendant's original
valuation, to some $3 million on the plaintiff's valuation.
These figures, however, are not in any sense entirely reliable
because no special investigation of the valuations and their
reliability has been carried out at this stage. It must,	50

however, be said that one would be inclined to accept the
plaintiff's valuation, or that of Mr Parker, somewhat more
readily than that of the second defendant inasmuch as the
valuers in the case of the second defendant have not been on
to the property in the course of their investigation and
valuation, and they have, it would appear, valued it as a
sugar cane farm. 5 60

Added to this is that there is income from the two farms	10
either in the form of profitable trading or farming or of income from the lease of the property, which in gross terms appears to have extended up to about a million dollars a year in the last two years.
20
Once again, the figures on this question are to some extent
distorted by the impact of taxation considerations and it is
probably not desirable to place a great deal of weight on the
contentious claims of either party. Nevertheless, I am
content to accept that, both in terms of income and in terms	30
of assets the plaintiff, when coupled with those of Mr Parker and the trust properties is by no means devoid of value.
All in all it seems to me that there is a reasonable prospect
that, with Mr Parker's personal guarantee, the second	40
defendant would recover the amount of damages awarded even if it were successful in reversing the decision of the Court of Appeal after it had paid the plaintiff in this case.
Costs are, of course, another matter. They will follow the	50

final outcome of the litigation and one's assessment of what
they are likely to produce therefore necessarily depends on
the assessment of the prospects of obtaining special leave and
succeeding in the case. But in cases like this it has never
been the practice or rule that an unsuccessful defendant is
entitled to be covered fully against the possibility of not
recovering all of its assets, or all of its costs of appeal. 6 60

There is a weighing up to be done in the process of deciding	10
what course must be taken. It is right that the balance should not be pressed too strongly against a party who has been successful at two levels of Courts in retaining a substantial judgment in its favour.
20
The plaintiff as applicant has approached this application on the footing that it is supported by the decision in Jennings
Construction Limited v Burgundy Royale Investment Pty Ltd
[No 1] (1986) 161 CLR 681. But the subject matter of the
litigation there was certain statutory liens which were fated	30
to disappear altogether if the stay was not granted to prevent
them from being cancelled immediately. That is not the case here. The money payable under the judgment in favour of the plaintiff is in no true sense a "subject matter" of the
litigation in need of preservation pending the appeal.	40
The amount of the judgment debt if paid does not become trust
moneys in the hands of the plaintiff. Pending resolution of
the application for special leave it would not be recoverable
in specie if the appeal were to succeed. The second	50

defendant's commercial error was in having anything to do with
someone who was, as it has now turned out, simply not wealthy
enough to sustain the losses inflicted by the second defendant
through its tortious conduct. Not many customers can sustain
such losses, which is one reason why persons injured in that
way tend to sue the tortfeasors who caused damage to them. 7 60

No doubt many of the considerations in the Jennings

Construction case that are referred to by Justice Brennan in	10
his Honour's reasons in the High Court are relevant to stay orders in general; but, as his Honour's reasons show, it was the preservation of the specific subject matter in that instance that his Honour's order was directed to achieving.
20
That is not, of course, the case here. If it matters, the provisions of Order 70, rule 28, in Queensland relating to security for costs pending appeals do not impose any
particular or specific test or criterion for granting or
witholding such relief, but leave it instead to the general	30
discretion of the Court of Appeal or a Judge of the Court to be exercised according to principles that are well known through their development over many years.
Refusal of the stay in this case will not destroy the subject	40
matter of the litigation. That subject matter is a claim by
the plaintiff for damages and tort. It will continue to exist
even if no stay of judgment is granted to the second
defendant, who will remain as before entitled to continue its
own application to the High Court for leave to appeal if it	50
chooses to make one, as it has now done.
The second defendant expressed concern that there is a real

risk that if it is a successful appellant it will not be able to recover the money it has paid to the plaintiff because the plaintiff is not in an especially strong financial position 8 60

after suffering this loss and this litigation. But that, in my opinion, is not sufficient to justify depriving it of the fruits of its judgment simply because the second defendant has	10
also now made an application for special leave to the High
Court, the more so as, in this case, Mr Parker has personally
offered to guarantee repayment of the amount of the judgment
moneys in the event of the application and the appeal
succeeding.	20
In my view, if the test to be applied in these cases is, as is
suggested by a line of decisions in the High Court in which the Jennings Construction principle has been applied, there are no circumstances that I would describe as exceptional to	30
justify ordering the stay of execution or of judgment in this case.
It is not enough for the second defendant to suggest there are
some nice points that may eventually be reached in the course	40
of a journey through the judgments in the Supreme Court, or that they would interest the High Court, if one could be quite certain that they would ever arise.
The result is that the application for special leave seems to	50
me to present problems which make it a less attractive means
of resolving the kind of points that the second defendant says
will arise if it reaches the stage of being the subject of an
appeal.

9   60

It remains for me to say that the application should, in my

view, be dismissed. I am, however, concerned about the fact that there is a separation of assets and liabilities in this case between Mr Parker, as the individual who appears to	10
represent the trading trust, and the incorporated trading trust itself which presents as the entity that is engaged in doing the business and incurring the liabilities.
I think that the dismissal of the application raises a	20
question whether the second defendant should not be protected against the consequences of that bifurcation in or separation of assets and liabilities so that the second defendant, if it is successful in the end, is not left looking at an empty
vessel.	30
...
McPHERSON JA: The costs of and incidental to the application
for the stay, I order to be paid by the second defendant	40
Netafim Australia which was the applicant in the application for the stay.

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