Westpac Banking Corporation v B J Dodwell
[2008] QDC 197
•22 August 2008
DISTRICT COURT OF QUEENSLAND
CITATION:
Westpac Banking Corporation v B J Dodwell & Anor [2008] QDC 197
PARTIES:
WESTPAC BANKING CORPORATION
ABN 33 007 457 141v
BRYAN JOHN DODWELL AND JANICE ANN DODWELL
FILE NO/S:
BD 171/06
DIVISION:
Civil
PROCEEDING:
Claim
ORIGINATING COURT:
Brisbane
DELIVERED ON:
22 August 2008
DELIVERED AT:
Brisbane
HEARING DATE:
28 July, 11, 12, 21 August 2008
JUDGE:
Robin QC DCJ
ORDER:
Judgment for plaintiff against second defendant for $240,567.45 plus interest and costs
CATCHWORDS:
Guarantor of defaulting lessee’s obligations under chattel lease sued by lessor bank for shortfall after sale of leased chattels and other equipment made available as security – sales by private treaty to a company to which the lessee had disposed of its entire undertaking as a going concern immediately before going into voluntary administration – defence pleaded bank had breached “its duty to mitigate its losses” – valuation evidence established best price obtainable would be from that company, which would not want to risk another party purchasing – subject property was highly specialised (five multi-colour form printing presses) used in a declining industry containing few potential purchasers – matters considered included the company’s being allowed to continued free possession and use of the presses for some nine months, including six or seven months after completion was due under the asset sale agreements, whether the guarantors should have been kept informed during the period, rather than only given demands at the end, whether a public auction should have been held, whether there was another serious potential purchaser the bank should have pursued – no evidence to support second defendant’s defence of lack of benefit (consideration) or independent advice, being overborne by the first defendant (her husband), intending to sign only as a director of a co-guarantor, etc
COUNSEL:
Ms Luchich for plaintiff
Mr Gardiner for second defendant (11 and 12 August)
SOLICITORS:
Gadens for plaintiff
Sawford Voll, town agents for Dunstan Legal, Mona Vale (from 11 August)
This proceeding has had a chequered history since being set down for trial on 28 and 29 July 2008. On the first day, Mr and Mrs Dodwell appeared, bereft of legal assistance, having terminated their solicitor’s retainer. Mr Dodwell is bankrupt. While the claim could not proceed against him, it seemed he was intending to present Mrs Dodwell’s case for her. It was asserted, with some support from the solicitor principal, who attended at the court’s request, that the Dodwells had an expectation that their counsel would continue notwithstanding termination of the solicitor’s retainer. The Dodwells sought an adjournment for two weeks which was granted. Mrs Dodwell informally sought a further adjournment in the last few days before the adjourned hearing; the request never got to the point of being an application in which the plaintiff participated. The trial proceeded on 11 and 12 August with Mr Gardiner of counsel representing Mrs Dodwell. He was not the original counsel. The plaintiff’s case was completed except for cross-examination of its last witness, the valuer Mr Freeman, who was indisposed and had given evidence-in-chief by telephone. Mr Gardiner was indulged in his desire to have Mr Freeman (who had been there on 28 July) physically present for cross-examination and his desire not to embark on presentation of Mrs Dodwell’s case (whereby half a day of court time was sacrificed). Once Mr Freeman’s circumstances became clearer, Thursday 21 August 2008, which had been accepted as a date convenient to counsel (and one on which the trial could be comfortably completed, according to Mr Gardiner) was set for completion of the trial. The day before, the Sydney firm now acting for Mrs Dodwell, with some acquiescence by the plaintiff’s solicitors, wrote to my associate proposing a further adjournment to an occasion suitable for counsel when two consecutive days would be available because it was “anticipated that six witnesses will be called in support of Mrs Dodwell’s case.” I insisted on the matter going ahead. On 21 August 2008, Mr Gardiner appeared as a courtesy to the court, to indicate that his retainer had terminated “last Tuesday”; with Ms Luchich’s agreement, Mr Gardiner was permitted to withdraw, although he remained in court for a time and had some communication with Mrs Dodwell, who was left on her own. She made it clear that she was without funds to engage any further professional assistance. She held out no hope that an adjournment would improve the funding situation. Mr Freeman entered the witness box and was re-sworn, but Mrs Dodwell asked him no questions. Ms Luchich closed the plaintiff’s case, on the basis that there would be no further amendments to the defence. It was made clear to Mrs Dodwell that, bereft of legal representation, she might still give and call evidence, including that of her husband, who was said to be the one au fait with matters. The court indicated it would wait until after lunch to allow Mr Dodwell time to come to Brisbane from Maleny. Mrs Dodwell showed no interest in calling him or in giving evidence herself. It emerged that a third of the anticipated “six witnesses” might have been Mr Osbourne (referred to below). He was mentioned as a potential purchaser of printing equipment which the bank sold to someone else – at an undervalue, according to the defence. I am confident Mrs Dodwell understood that she could have called Mr Osbourne, who was close enough to the Dodwells to be appointed their representative when creditors of their company met in its voluntary administration. It is difficult to accept that Mrs Dodwell was “at sea” to the extent she claimed or that there was much reality to assertions that six witnesses had been identified and might be called. My impression is that Mrs Dodwell was really after an adjournment, in a rather desperate hope that something might turn up. She indicated that she would call no evidence, even that she was contemplating consenting to a judgment, in which respect I discouraged her. I indicated that I would consider her pleaded defence and consider whether the evidence contained anything in support. Mrs Dodwell did indicate a couple of areas of broad concern which are covered in the discussion which follows.
The plaintiff bank claims $240,567.45 against the defendants as guarantors of the obligations of a company called Form Print (Qld) Pty Ltd under two chattel leases of printing equipment. The first in time (10 April 2003 – no. 012-0051004-000) related to a Ukita Business Forms Press serial no. 101 model MF151 three colour offset (“Ukita 3 colour”) acquired from Currico Nominees Pty Ltd for $265,974 exclusive of GST. The second, of 21 May 2003 (012-0051004-001, exhibit 13) related to an Imer model 120 four colour variable size business form press serial no. 120BF/95 ($375,000 exclusive of GST – “the Imer 4 colour”) and an Imer 1-110BF three colour variable size continuous business form press serial no. 142/91 ($175,000 exclusive of GST – “the 1991 Imer”) acquired from JW Agencies Pty Ltd.
The plaintiff took from Form Print (Qld) Pty Ltd (mentioned in the execution clause as “Form Printing” – see exhibit 7) by way of security a bill of sale dated 10 April 2003 in respect of a 1995 Imer three colour continuous business form press model 1-110BF serial number 179-95 (“the 1995 Imer”) and a 1983 Ukita single colour continuous business form press model 204P serial number 154 (07/1983) (“the 1983 Ukita”).
The claim is calculated as at 22 December 2005, by when the chattel leases had come to an end by the bank’s taking possession of the equipment and selling it and when the bank says it made demand on the defendant guarantors (exhibits 52 and 53). Interest is claimed from that date at a contractual rate to the date of the claim, thereafter at 9% under the Supreme Court Act1995. There have been minor revisions upwards and downwards of the amount claimed. The calculations of Mr Meagher explained in his evidence which culminates at pages 4 and 5 of the transcript for day 2 incorporate refinements such as a credit for part of the GST payable on solicitors’ costs to reflect GST relief available to the bank. The components producing the aggregate claim (before interest) are:
$235,364.32 shortfall under the chattel leases after disposal of the leased items and those in the bill of sale;
$1,262.66 for interest to the date of the abovementioned demands; and
$3,840.47 solicitor’s costs of preparing the sale agreements.
Mr Meagher’s work was not challenged. I accept his calculations as accurate.
Form Print (Qld) Pty Ltd appointed an administrator on 15 March 2005.
The leased equipment was sold by private treaty to Form Print National Pty Ltd by an Asset Sale Agreement dated 27 May 2005 (exhibit 42) for $427,500. This included the Ukita 3 colour, the Imer 4 colour and the 1991 Imer. The equipment in the bill of sale (i.e. 1995 Imer and the 1983 Ukita) was sold to the same buyer under an Asset Sale Agreement similarly dated (exhibit 43) for $127,500. Those prices were exclusive of GST. Comparison with the acquisition prices (which do not necessarily reflect market prices at the time) may explain the defence assertions of sale at an under-value.
The plaintiff did not test the market by selling at auction. On the evidence, the prices paid at auction would have been reduced by 10% commission to the agent (5% seller’s commission, 5% buyer’s commission) and further expenses such as advertising estimated at $15,000 (although the company likely to have been appointed selling agent offered to bear those expenses above a nominal $1,000 or so). If the equipment, which was extremely bulky, especially the Imer 4 colour, had to be moved to and stored at some place(s) where an auction could take place and potential purchasers could examine it, there would be substantial additional costs and (on the evidence) risk of damage if special precautions (which might well involve cost) were not taken.
Unusual features which invite concern and enquiry (indeed this appeared to be the main point of Mrs Dodwell’s submissions to the court) were that the purchaser enjoyed free possession and use of the equipment from about 15 March 2005 until the making of the Asset Sale Agreements and thereafter; completion occurred months late on 5 December 2005. It should have been by 3 June 2005 or thereabouts under exhibit 42, 15 July 2005 under exhibit 43. The bank, by Mr Baker, did manage to extract a $25,000 deposit on 12 August 2005. Mr Baker accepted that Form Print National’s letter of 11 May 2005 confirming that it would pay $437,500 for the leased equipment was a mistake, that what was intended was acceptance of the bank’s earlier counter-offer of $427,500. No assertion was made that the additional $10,000 should have been collected by the bank.
While with hindsight it may be seen as odd that the purchaser was considerably indulged, nothing suggests that the bank should have anticipated the delay that happened. The last few days’ grace were to allow St George Bank to finalise the purchaser’s finance. There were very limited options from the plaintiff bank’s point of view, in any event. Form Print (Qld) Pty Ltd and the defendants (Mr Dodwell in any event) acted to sell that company’s business to Form Print National Pty Ltd (the company of a Mr Spark) by contract dated 14 March 2005, more or less complete copies of which are in exhibits 63 and 28. There are some unusual features of this Business Sale Contract including that completion was to occur the very next day. The purchase price was $322,080, apportioned $293,571.30 to plant and equipment, $28,508.70 to business chattels and client schedule. By special condition 2:
“2.1The Purchase Price shall be $322,080.00 (“the total price”) and is made up as follows:
(a)Payment by the Buyer of all employee entitlements (being all unpaid entitlements of employees of the Seller including but not limited to superannuation and long service leave) (the total of which entitlements is referred to as “the first amount”); and
(b)the greater of the amount of either $22,800.00 or the amount calculated in accordance with the following formula (“the balance amount”):
A - B = C
Where A is $322,080.00
B is the first amount
C is the balance amount”
By 4.5 the buyer acknowledged the responsibility for and acceptance of risk associated with (inter alia): securing a new lease of the premises, assignment of the lease over equipment “to Westpac … or the use or acquisition of such equipment; and any claim by a liquidator against [it] for any reason.”
Westpac was not told anything about this transaction, meaning that its consent to assignment of the leases was never asked for. It appears that the bank had not been put on notice by any default in rental payments and that the first the bank knew of any financial trouble afflicting the lessee was from contact with the administrator, who sought relevant financial information from it. Exhibit 24 is Mr Baker’s letter referring to Mr Crosthwaite’s enquiry of that date, 30 March 2005.
When Mr Khatri came in on 15 March 2005 as voluntary administrator, there was nothing for him to take control of apart from some files. Mr Spark’s Form Print National Pty Ltd had been put in possession of the lessee’s equipment, its premises, indeed its whole business. Mr Khatri’s impression was that the description of Mrs Dodwell as “office manager” in company documents was consistent with his observations; in cross-examination he did not quibble with Mr Gardiner’s suggestion of “accounts clerk”. So far as ultimate distributions of earnings in the business are concerned, the Dodwells participated equally – see, for example, for the tax year 2001-2002 at pages 9 and 10 of 31 in exhibit 19, one of the lease applications to the plaintiff which Mr Venus prepared for the lessee company. Mrs Dodwell was among the most handsomely remunerated staff.
In the circumstances, Mr Spark was in the box seat, so to speak, having de facto possession of all of the equipment, control of the premises where the equipment was, and of the business in which it was being used. To clear the way for the bank, Mr Khatri formally disclaimed any interest in any of the leased equipment on 31 March 2005 (exhibit 25) (in due course he consented to the bank enforcing its security rights under the Bill of Sale on 13 May 2005: exhibit 36). By the end of March Mr Baker had learned that Mr Spark was not interested in taking over the chattel leases; accordingly, by letter of 1 April 2005 (exhibit 38) he was invited to submit an offer in relation to all five presses. Mr Spark wrote back on 5 April that he or one of his companies was very keen to purchase all five items and was liaising with his finance broker. Mr Baker’s next step, for the bank, was to obtain valuations, which Mr Freeman prepared on behalf of his employer, which issued the Inventory & Appraisal Report (exhibit 30) on 11 April 2005. It is convenient to reproduce a good deal of it here.
“As requested this valuation has been prepared on the basis of MARKET VALUE FOR EXISTING USE & ESTIMATED AUCTION REALISATION which may be defined as:
MARKET VALUE FOR EXISTING USE is synonymous with Market Value Continued Use and/or Current Going Concern Value. Market Value of Existing Use is defined as the estimated amount at which property might be expected to exchange by a willing buyer and a willing seller, neither being under compulsion, and each having reasonable knowledge of the relevant facts, with equity to both. Continued use assumes that the buyer and seller contemplate retention of the facilities at their present location for continuation of the current operations. This opinion of market value is not intended to represent the amount that might be realised from a piecemeal disposition of the property in the marketplace or from some other use of the property. These values are expressed in current dollars.ESTIMATED AUCTION REALISATION “The gross amount realisable at a properly promoted, conducted and attended public auction sale held by this company under forced sale conditions, and under present day economic trends.”
This takes into consideration such inflationary or depreciable conditions as physical location, difficulty of removal, adaptability or specialisation, marketability, physical condition, overall appearance and total psychological appeal. It further takes into consideration the ability to draw interested buyers.
Each item in this valuation has been individually assessed with regard to a total package auction sale, and the values shown are not intended for the piecemeal selling of specific items by private treaty.
Should any of the major items appraised be withdrawn from sale, the overall attraction may not be as great and could adversely affect the return on the balance of the sale. Furthermore, should the items be relocated elsewhere for sale e.g. Auction Rooms, it could realise a lesser figure than shown. In the event of either situation occurring then a re‑evaluation would be necessary.The values expressed in this report are current for 3 months from this date however, should during that period there be a meaningful change in the National or World Economy, values may need to be reviewed.
The original signed and certified copy of this report should be considered as the only reliable source of information. Soft or electronically transmitted copies may be subject to manipulation outside the control of Gray Eisdell Martin.
CM Pty Ltd
As trustee for the GEM Trust
Trading as Gay Eisdell MartinSPECIAL COMMENTARY
Our investigations reveal that over the last several years that business forms printing companies have been declining in numbers as demand for this style of printing is also declining.
We are advised that there are around 10 major forms printers left on the Eastern Seaboard of Australia with minor forms printers scattered around, mainly in regional Australia.SALE PROSPECTS
We recommend that as a last resort should these machines be removed from their current working environment. Maximum realisation would be achieved by selling these machines in‑situ.
We note your advises that the new purchaser of Form Print (Qld) Pty Ltd has shown interest in purchasing these machines. It is also noted that he is not interested in paying market value for them but wants to pay a forced sale value to you.These machines are certainly worth more to the purchaser of the business than they are to any other party.
There are many reasons for this and some are as follows –
They are currently installed in the business premises and are said to be in perfect working order
No removal costs need be incurred i.e. dismantling and preparation of the transport, transportation costs, re‑commissioning costs and time to do so)
These machines form an integral component to the business and with out them the business cannot operate.
Our investigations reveal that the other major forms printer in Brisbane is very keen to purchase these machines. In doing so this business would be in sole control of the forms printing business in Brisbane. Should they be sold to this opposition company the new purchaser of Form Print (Qld) Pty Ltd would be left with only two options. These would be to close down the business or repurchase traditional forms presses. This would cause major disruptions to the business, with the prospect of lost clientele to the opposition printer. This is not an option that we belie the new purchase of your clients business would wish to entertain.
GAINING MAXIMUM REALISATION
We believe to gain maximum realisation for your equipment you should offer the 5 machines to the open market on an “Offers Invited Campaign”.
We would target every Business Forms Printer in Australia and would seek offers on each individual piece of equipment.
By understanding this option, the new purchaser is then placed in a position, by which he does not want to risk the machines being sold to another party. He would be well aware that should he have any downtime, he risks loosing clientele to his opposition which would have a detrimental effect on his recently acquired business.
We also believe that the Brisbane opposition would pay a premium price for this equipment. In doing so Gray Eisdell Martin would charge commission to Westpac of five per cent (5%) and charge and retain a buyers premium of five per cent (5%). We would be prepared to absorb the majority of marketing costs and would limit the amount charged to you at $1,000.
We thank you for your instructions in this matter and look forward to receiving your further instructions.
Asset No. Market Value For Estimate Auction
Existing Use Realisation Range
SECTION ONE
PRINTING PLANT
AND EQUIPMENT
1-1 1 1988 Ukita Business Forms
Offset press model MF151, serial
no. 101, 3 colour with GP Tinter
180,000 70,000 – 120,0001-2 1 1995 Imer Business Forms Press
model 1-120 BF, serial no. 120BF/95,
4 colour
280,000 80,000 – 150,0001-3 1 1991 Imer Business Forms Press
model i-110BF, serial no. 142/91,
3 colour
130,000 40,000 – 70,000
(N.B. The following 2 machines have
been valued on a sight unseen basis as
at time of inspection we were not asked
to value the same.)
1-4 1 1995 Imer Business Forms Press
model i-110BF serial no. 179-95,
3 colour
150,000 45,000 – 80,0001-5 1 1983 Ukita Businses Forms Press
model 204P, serial no. 154 single
colour
30,000 10,000 – 20,000TOTAL SECTION ONE $770,000 $245,000 - $440,000
”
The commercial competitor was identified as Colour Scan, represented by Mr Osbourne and (as Mr Baker set out in his diary memo of 12 April 2005, exhibit 39); the price it was prepared to pay as $300,000. Mr Spark was granted until 22 April 2005 to submit a written offer, failing which it was intimated that an agent for sale might be appointed. The need for “co-operation with respect to access”, should no agreement to acquire be reached, was foreshadowed. The bank “knew” that Mr Spark was seeking “$1.2 million” to acquire all of Form Print (Qld)’s equipment. The deadline was extended and an offer of $437,000 for all 5 items understood (but not expressed) to exclude GST came in some days later. The bank rejected that offer, inviting a new one, also advising that the consent sought from the administrator to enforcement of the bill of sale was not yet received. By 5 May, Mr Spark offered $550,000 (GST excluded) – he said (according to Mr Baker’s diary memo exhibit 39) to avoid “demise” of his business, should a competitor purchase the equipment. The memo noted the suggestion that another party would offer $300,000 to $350,000, should the equipment become available. Mr Baker, noting that Mr Spark’s sum fell short of the market value of $770,000 and exceeded the auction value of $440,000 (maximum), recommended acceptance, considering that agents’ and auction costs would be saved. Once conditions such as the administrator’s consent and the lessee’s failure to remedy default or pay out the chattel lease were satisfied, the formal asset sale agreements were executed.
The bank accepted the requirements of s 84 of the Property Law Act 1974 in relation to exercising power of sale in respect of the equipment in the bill of sale; it presumably acknowledged its duty under s 85(1) to take reasonable care to ensure that property be sold at the market value – which I do not take to correspond with Mr Freeman’s “market value for existing use”. Ms Luchich suggested that the relevant statutory duty would now be the one set out in s 420A of the Corporations Act 2001 (Commonwealth):
“(1)In exercising a power of sale in respect of property of a corporation, a controller must take all reasonable care to sell the property for:
(a)if, when it is sold, it has a market value—not less than that market value; or
(b)otherwise—the best price that is reasonably obtainable, having regard to the circumstances existing when the property is sold.”
Neither of those statutory provisions is relied on in Mrs Dodwell’s further amended defence prior to 27 September 2007. Rather, it is pleaded that in selling as it did, the plaintiff “failed in its duty to mitigate its losses”. It is asserted that there would have been no net loss under the chattel leases had the equipment been sold for its “proper value”.
In this aspect, the defence amounts to an allegation of sale at an undervalue, an outcome which it is contended might have been avoided by the bank’s taking reasonable care to do as well as it could. Mr Freeman’s valuation evidence is thus very important. His evidence-in-chief was impressive, and worthy of acceptance by the court. It supports the conclusion that in disposing of the equipment the plaintiff in the circumstances took reasonable care to sell for market value. No challenge was made in the end to Mr Freeman’s evidence, which I do accept. There were other valuations about, not sworn to, prepared on earlier occasions. To the extent that higher figures may appear, there appears to me to have been an element of seeking to inflate the value of Form Print (Qld)’s whole enterprise. Mr Freeman descended to considerable detail regarding the enquiries he made underlying his valuations, naming those in the relevant sector of the printing industry he consulted. It was not suggested to him that his enquiry should have been wider, or different, or that the results of them were misunderstood or mis-stated, or that his conclusions and expressed opinions were wrong. Mr Freeman’s view (page 44 of the transcript of day 2) was that the $610,500 inclusive of GST paid by Form Print National was “substantially higher” than might have been achieved at an auction sale, even before taking into account the commission and advertising:
“And also if the landlord wouldn’t co-operate and wouldn’t allow the equipment to be sold, the bank would have to go to the cost of removing that equipment, which would have an effect as well on the overall sale price.”
On the evidence, Mr Freeman contacted all or most of those who might be interested in the very limited market for the equipment. That sector of the industry was in decline with “a lot of people exiting” (page 26). One specific instance mentioned of the decline in demand for the printing of sophisticated forms is the wholesale abandonment of some sophisticated forms such as airline tickets, they are largely replaced by electronic ticketing and checking in. At page 39, Mr Freeman was persuasive that some of the higher valuations were “inconsistent with the industry in general” … “with the industry being in decline and demand for that equipment diminishing”. At page 38 Mr Freeman described how he discussed with Mr Baker means of getting Mr Spark to pay more than a “forced value” – which proved effective in the event, whereas he (Mr Freeman) could not get Colour Scan (Mr Osbourne) to increase his $350,000 offer. There was absolutely nothing in the evidence to suggest that Mr Spark (to whom the equipment would have greatest value) could have been got to pay more than he did. The probability is that at auction Mr Spark would not have had to go so high. Mr Freeman correctly regarded the sale as a forced one.
Is there any significance in the long delay preceding the plaintiff’s completing its asset sale agreements with his company? Mrs Dodwell contended there was, that in some unspecified way the delay and the free use of the equipment that the purchaser got vitiated the sales. With respect to her, it seemed irrational to make the suggestion that Mr Spark would have failed to maintain the equipment properly. Acting in that way would only have had point until about 11 May 2005 when the price was finalised. Essentially, the delay until payment was actually made was unexplained. Some of it may have been attributable to the purchaser’s arranging finance, apparently sought to cover more than acquisition of the five presses acquired from the plaintiff. There is no evidence about difficulties Mr Spark may have faced or asserted he faced, nothing to cast any light on whether what he had agreed to pay was the most that the plaintiff acting reasonably could have achieved. Assuming that the delay was the equivalent of some discount, there is nothing to show that the nominal or “discounted” price could or might have been forthcoming from some other buyer. It was asserted to Mr Baker (day one, page 91) that he had not adequately investigated or pursued a possible purchase by the company called Colour Scan. This was identified as Form Print (Qld)’s only real competitor. For lack of anything else that might be referred to, it is obviously the $300,000 to $350,000 proposal Mr Baker had referred to at page 82 which fell far short of the figures under serious discussion with Mr Spark. It is pure speculation whether Mr Osbourne could have been further interested in the latter part of 2005. There is no suggestion whatever that he renewed any approach to the bank.
As Mrs Dodwell presented matters, she and her husband were not in a position to seek to influence developments, as they were kept in the dark by Westpac. Notwithstanding a discrepancy in street numbers in the demands of 22 December 2005 (which the defence denies receipt of), I am satisfied that both Mr and Mrs Dodwell knew at that time of Westpac’s demands on them. She asserted from the bar table that, until that time, she had no idea that she would be pursued under her guarantees. The plaintiff does not assert that it provided any information to the guarantors or accept that it was under any obligation to provide anything to them. There is evidence from Mr Khatri that in reports to creditors (available to the Dodwells) it was made clear that Westpac would have (and once exhibits 42 and 43 had been concluded did have) a substantial claim against the company for the deficiency. It would seem obvious that this exposed guarantors to liabilities. It is of no benefit to Mrs Dodwell to say that she did not read such material.
Another of her points (which I would be inclined to accept, although it came as a statement from the bar table rather than in sworn evidence) was that she considered everything to do with the chattel leases had come to an end by Form Print National Pty Ltd taking on responsibility. This strikes me as a misunderstanding of the effect of clause 4.5 of the Business Sale Contract of 15 March 2005. If Mrs Dodwell is correct about clause 4.5, which is set out in paragraph 5 of her final pleading, and she is disappointed in the outcome, the blame would appear to lie with Form Print National, rather than with the bank, which had no knowledge of this very unusual transaction.
As I indicated at the end of the trial I would do, I proceed to consider briefly the contentions in the defence. Whether the guarantors received any written demand dated 22 December 2005 or not (my view is that they did receive them), a further demand of 24 July 2008 was expressly admitted by Mr Gardiner. It is not established that any demand was necessary for the claim against guarantors to succeed.
I have already rejected the contention that Form Print National assumed Form Print (Qld)’s liabilities to the plaintiff. Somewhat inconsistently, it was then pleaded that Mrs Dodwell was deprived of “her right of subrogation according to law” by not being informed of “the sale, assignment of the lease or entry of a new lease as between the Plaintiff and Form Print National”. The consequence was said to be that she lost “the opportunity to pay out the lease” or to “call upon Form Print National to perform its obligation pursuant to the Business Sale Contract”. I find none of this persuasive against the plaintiff’s claim, still less the conclusion drawn of offence to s 52 and 51AB of the Trade Practices Act 1974 (Commonwealth).
I do not understand the pleaded point that the claim somehow fails because the amount of it together with interest and costs falls short of the aggregate “residuals” specified in the chattel leases, unless the assertion is that those values should have been obtained from Mr Spark’s company.
A series of points follows, based on Mrs Dodwell’s being married to her husband and following his lead in executing guarantees. It is said she was not, like him, a director or shareholder of Form Print (Qld) and that she got no benefit from execution of guarantees which therefore were not supported by consideration. That she gained a benefit, direct or indirect, from Form Print (Qld)’s business is clearly established by the documents. The contention that she believed the only guarantee she was signing was one given by a company called Matchmont Pty Ltd is belied by the form of the documents in exhibit 6 and exhibit 13. In each case, there are obviously separate guarantees identifying the relevant guarantor by name; there are separate executions, so that Mrs Dodwell has signed as guarantor herself, and then 15 or 20 cms below a second time as an officer of Matchmont Pty Ltd. For the execution by the company, Mr and Mrs Dodwell’s signatures sufficed; for their individual executions, a commissioner for declarations was brought in as a witness. Mr Holman (supposedly a senior employee of Form Print (Qld)) in exhibit 6 and Mr McPherson in exhibit 13. A Yerkey v Jones (63 CLR 649) point is pleaded, that Mrs Dodwell didn’t understand the full import of the transactions, that her husband told her that she had to sign, “that there would be no problem with loan repayments”. This was, I thought, effectively abandoned by the Dodwells in combination before me on 28 July 2005; there is no evidence to support the point, or the points in paragraphs following that Mrs Dodwell was overborne by her husband, etc and that the plaintiff ought in some way to have appreciated this, also that she would get no “profit” in the transactions, etc. The plea of lack of any independent advice regarding the documents is belied by the evidence of Mr Les Venus, a finance broker who gave unchallenged evidence of having clearly explained to Mrs Dodwell that execution of each of the guarantees would place her own assets on the line should Form Print (Qld) not perform.
Last comes the “mitigation” point. It’s not explained how Form Print National’s supposed enjoyment of the presses for the periods said to be nine months without payments in respect of lease or hire has any practical relevance. It is not shown that that unusual factor affected the price ultimately obtained, that it damaged the equipment or that Form Print National or anyone else would have been prepared to pay for lease or hire. The complaint of failure to obtain a valuation “which would have revealed a significantly higher value” is defeated by the plaintiff’s presentation of Mr Freeman’s valuation and his evidence. There was a failure to advertise, as pleaded, but it is not possible in the circumstances to develop any serious concern that that reduced the realisation, especially given the quite wide consultation undertaken by Mr Freeman which was likely to unearth interest in the equipment, if there was any genuine interest in it, apart from Mr Spark’s. If there was a refusal “to allow interested parties to make any offers” (which seems to me not the case), it is not shown that, Mr Osbourne apart, there were any such interested parties; he was never got above $350,000. Lastly, there is pleaded failure to hold a public auction “which normally would be done”. It is no doubt the case that the holding of a properly advertised and conducted public auction will often be a protection for any entity such as the plaintiff effecting sales like those of present concern. Here, the evidence is clear that a public auction would have brought in less than the $610,500 (including GST) achieved. Indeed, I would go so far as to say that nothing in the evidence suggests that Mr Spark would have been pushed at an auction to bid as much as he paid.
On analysis, the defence bespeaks a rather desperate casting around for some way of defeating the plaintiff’s claim. Cruel as it might have seemed to refuse the request for another adjournment, it seems to me unlikely in the extreme that the Dodwells, who have had well over two years to consider this claim and prepare to meet it, would have been able to turn up anything.
I have assumed that the guarantors have at least the same rights to complain about anything the plaintiff may have done or not done as would Form Print (Qld). See the interesting discussion in Florgale Uniforms Pty Ltd v Orders [2004] VSC 65 at [363] ff.
Ms Luchich’s written submissions set out some pertinent provisions of the contractual documents executed in favour of the plaintiff, including provisions about notices and interest (which the plaintiff was entitled to “capitalise” as and when it saw fit). I propose to reproduce only two, the first of which is the basis for Mr Meagher’s unchallenged calculations:
“7.2 Payments on Termination
On early termination of this Lease under Clause 7.1 the Lessee will pay to Westpac an amount equal to the sum of:(a)the amount of any rental and other money then payable under this Lease; and
(b) at the option of Westpac either:
(i)the present value at the date of termination (determined by Westpac by applying discount rate which is 85% of the Implicit Rate) of the Residual Value of the Goods stated in the Schedule to the relevant Lease, and of all the Rental that would have been payable during the period of that Lease but for the termination; or
(ii)the Casualty and Termination Value in respect of the Goods as at the date of such termination plus 0.5% (as an estimate of administration costs and costs of terminating early) of such Casualty and Termination Value.”
[Mr Meagher adopted (i)]
and the provision regarding sale of goods on termination:
“7.6 Sale of Goods on termination
(a)If any of the Goods come into Westpac’ possession after termination of this Lease under clause 7.1, Westpac must submit those Goods for sale at the time and in the matter it thinks fit. This may, but need not, be an auction without reserve. Westpac has no other obligation to offer the Goods for sale. Westpac has no duty as to when or how the sale must be carried out or as to the price achieved.
(b)If Westpac sell any of those Goods, Westpac must pay to the Lessee an amount equal to the gross proceeds of sale actually received by Westpac, less the sum of:
(i)all costs and expenses of and incidental to the sale; and
(ii)any other amount then owing by the Lessee to Westpac.
If the sum of (i) and (ii) exceeds the gross proceeds of sale actually received, the Lessee must pay Westpac an amount equal to the excess.”
The claim as calculated by Mr Meagher is made out and, in addition, the plaintiff is entitled to interest from the time of the 22 December 2005 demand to the date of issue of the claim (a month and a day later) at 11.74% per annum under clause 10 of the second guarantee, namely $2,476.07 and interest thereafter until today at the Supreme Court Act rate of 9% which Ms Luchich calculated as $55,820.12 until the date when the trial concluded. A day later, the total amount for which the plaintiff will have judgment against Mrs Dodwell would be $298,922.96, which includes a further day’s interest of $59.32.. She will also be ordered to pay the plaintiff’s costs of and incidental to the action to be assessed on a standard basis.
Judgment for the plaintiff against the second defendant for $240,567.45 together with interest to the date of judgment of $58,346.51 and costs of and incidental to the claim to be assessed on the standard basis, if not agreed.
0