Circle Petroleum (Qld) Pty Ltd v Greenslade [1998] QSC 289

IN THE SUPREME COURT OF QUEENSLAND No 1792 of 1992 Before the Hon. Mr Justice Muir [Circle Petroleum (Qld) P/L v Greenslade] BETWEEN: CIRCLE PETROLEUM (Q'LAND) PTY LIMITED ACN 010 676 570 Plaintiff AND: PETER OWEN GREENSLADE Defendant BY ORIGINAL ACTION AND: PETER OWEN GREENSLADE Plaintiff AND: CIRCLE PETROLEUM (Q'LAND) PTY LIMITED ACN 010 676 570 First Defendant AND: ANTONY KEITH RAPSON Second Defendant AND: BARRY MALCOLM O'HALLORAN Third Defendant AND: ROBERT ERNEST GAY Fourth Defendant AND: ALAN RUSSELL ABRAHAMS Fifth Defendant BY COUNTERCLAIM REASONS FOR JUDGMENT - MUIR J. Judgment delivered 18 December 1998 CATCHWORDS: DAMAGES - s.535 Companies Code (Qld) - calculation of damages for defendant’s breach of duty to plaintiff company. -- 1 of 6 -- Counsel: Mr J.C. Bell QC, with him Mr P.P. McQuade for the plaintiffs (defendants by counterclaim) Mr D.R. Cooper for the defendant Solicitors: Blake Dawson Waldron for the plaintiff Purcell Chadwick for the defendant Hearing dates: 18 September 1998 -- 2 of 6 -- IN THE SUPREME COURT OF QUEENSLAND No 1792 of 1992 Before the Hon. Mr Justice Muir [Circle Petroleum (Qld) P/L v Greenslade] BETWEEN: CIRCLE PETROLEUM (Q'LAND) PTY LIMITED ACN 010 676 570 Plaintiff AND: PETER OWEN GREENSLADE Defendant BY ORIGINAL ACTION AND: PETER OWEN GREENSLADE Plaintiff AND: CIRCLE PETROLEUM (Q'LAND) PTY LIMITED ACN 010 676 570 First Defendant AND: ANTONY KEITH RAPSON ACN 010 676 570 Second Defendant AND: BARRY MALCOLM O'HALLORAN Third Defendant AND: ROBERT ERNEST GAY Fourth Defendant AND: ALAN RUSSELL ABRAHAMS Fifth Defendant BY COUNTERCLAIM REASONS FOR JUDGMENT - MUIR J. Judgment delivered 18 December 1998 1 When I handed down reasons in this matter on 31 August 1998, I invited the parties to calculate, and hopefully agree on, damages in accordance with my findings. I also invited further submissions on the question of whether relief pursuant to s.535 of the Companies (Queensland) Code should be given to the defendant on the basis that the defendant, as equal owner of the -- 3 of 6 -- 2 plaintiff, in effect, suffered half the loss caused the plaintiff by his conduct. 2 The matter came back before me for further argument on 18 September 1998. The defendant’s counsel contended that submissions made on behalf of the plaintiff took him by surprise and I permitted further written submissions to be delivered. The Section 535 argument 3 It was submitted on behalf of the defendant that - “... the Court (should) consider the reality of the situation by ... stripping away the corporate structure to consider if Ampol has in fact suffered a loss ...” It was submitted that there should be an enquiry in order to enable such an exercise to be conducted. 4 I am unable to accept this submission. In his defence the defendant raised the matter of relief under s.535 but neither the defence nor the particulars provided in response to a request for further and better particulars delivered by the plaintiff adverted to the point now under consideration. 5 Although there may be something in the point that, in having regard to s.535, it is permissible to look at the profit which Ampol, as the defendant’s co-venturer, received from the trading with Promco after 23 January 1990, I have concluded that I should make no adjustment under s.535 on that account. 6 An attempt was made in the course of cross-examination to ascertain whether such profits had been made and if so, their amount. The attempt failed. Consequently, there is no evidence establishing the matters on which the defendant seeks to rely. It would have been open to him to obtain the required evidence by subpoena or third party discovery, assuming that the point was open on the pleadings. In my view, it is not desirable or just that the case be prolonged by permitting the defendant to adduce further evidence at this late stage. Further, I accept the plaintiff’s submission that the point is one which should have been pleaded, and the plaintiff -- 4 of 6 -- 3 could not reasonably be expected to predict and meet it. The plaintiff’s counsel points out also that Ampol was a normal trade creditor of the plaintiff and the defendant was not himself a shareholder of the plaintiff and a co-venturer of Ampol. Those are further difficulties in the path of the defendant on this point. Finally on this aspect of the matter, I note that no further submissions were made with a view to demonstrating that the defendant had, from a practical view point, suffered half the loss which I held the plaintiff to have suffered. Calculation of damages 7 The plaintiff contends that the plaintiff’s damages should be calculated by taking the cost of products supplied to Promco after 23 January 1990 and not paid for, adding to that direct selling costs at 4.3% of sales, and by deducting the profit on sales made and paid for. Also to be deducted are dividends received from trustees in bankruptcy and dividends to be received from such trustees. The plaintiff contends that moneys received by the plaintiff from Promco after 23 January 1990 were applied in payment of pre-January 1990 accounts and that, in assessing the plaintiff’s loss, those payments should not be taken into account. I cannot accept that proposition. 8 The following observations of Mason CJ, Dawson, Toohey and Gaudron JJ in Haines v Bendall (1991) 172 CLR 60 at 63 are relevant - ‘The settled principle governing the assessment of compensatory damages, whether in actions of tort or contract, is that the injured party should receive compensation in a sum which, so far as money can do, will put that party in the same position as he or she would have been in if the contract had been performed or the tort had not been committee; ... Compensation is the cardinal concept. It is the “one principle that is absolutely fair, and which must control all else”: Skelton v Collins (1966) 115 CLR 94, at 128, per Windeyer J. Cognate with this concept is the rule, described by Lord Reid in Parry v Cleaver [1970] AC 1 at 13, as universal, that a plaintiff cannot recover more than he or she has lost.’” If the defendant had not been in breach of duty, trading with Promco would have ceased on 23 January 1990. Promco then owed $1,299,651.70. I find that, on the balance of probabilities, the plaintiff would not have recovered that sum even if it resorted to having Promco wound up. -- 5 of 6 -- 4 There is evidence to support the conclusion that Promco, for some time, had been unable to pay its debts as they fell due and was using its trading with the plaintiff on favourable terms in order to stave off inevitable liquidation. There is no reason to suppose that the plaintiff’s dividend on the winding up of Promco would have been materially greater than the payments it eventually received from the trustee in bankruptcy. The true loss sustained by the plaintiff then must be calculated by reference to all of the benefits received by the plaintiff from its trading with Promco. The plaintiff’s accounting practice of crediting payments during the period in question against pre-January 1990 debts has no bearing on the loss actually suffered by the plaintiff. Those damages need to be assessed by reference to how much worse off the plaintiff was in reality as a result of the continued trading not by reference to the plaintiff’s appropriation of moneys to various accounts. 9 I calculate damages as follows - Cost to the plaintiff of petroleum products sold to Promco after 23 January 1990 $2,698,478 plus cost of sales in respect of those products (4.3% of price of sales of $2,827,704) 121,591 less moneys received from Promco on trading account after 23 January 1990 $1,917,329 less $300,000 (plus costs of sales of $1290) $ 301,290 less bankruptcy receipts $62,715 2,820,069 Total $538,735 10 I allow interest on this sum at the rate of 8 percent from 1 December 1992, the date of issue of the writ ($217,501.34). 11 I give judgment for the plaintiff in the sum of $756,236.34. 12 I order that the defendant pay the plaintiff’s costs including reserved costs of and incidental to the action to be taxed. -- 6 of 6 --