Finborough Investments Pty Ltd v Airlie Beach Pty Ltd & Anor [1993] QSC 268 [1995] 1 Qd R 12

State Reporting Bureau TRANSCRIPT OF PROCEEDINGS (Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Director, State Reporting Bureau.) · ····-·····-.,---- ~- <··--- ~··· :~:; ~:su~o ! / : O.:.te h ; to l'j'S, SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION SHEPHERDSON J No 791 of 1992 FINBOROUGH INVESTMENTS PTY LTD Plaintiff and AIRLIE BEACH PTY LTD First Defendant and GIUSEPPE EMANUELE Second Defendant BRISBANE •• DATE 15/09/93 JUDGMENT 1 -- 1 of 32 -- 150993 HIS HONOUR: I refuse the application for leave to amend and the application for leave to re-open the defendants' case and I propose to give judgment for the plaintiff against the defendants. I publish my reasons. HIS HONOUR: I give judgment for the plaintiff against the first defendant for $899,670.65 and I give judgment for the plaintiff against the second defendant for $782,995.93. HIS HONOUR: In the circumstances then, I order the defendants to pay the plaintiff's costs of and incidental to the action, such costs to be fixed on a solicitor and client basis to be taxed. (ARGUMENT ENSUED AND A DRAFT JUDGMENT WAS HANDED U~) HIS HONOUR: I will leave that order as it is in the draft which is as far as costs go, first and second defendants to pay the plaintiff's costs of and incidental to the action, including reserved-costs, on a solicitor and client basis to be taxed. Order as per draft, which I have altered. 2 JUDGMENT 10 20 30 40 50 60 -- 2 of 32 -- 0 0 0 0 IN THE SUPREME COURT OF QUEENSLAND Brisbane No. 791 of 1992/ /I ! Before Mr. Justice Shepherdson [Finborough Investments & Airlie Beach P/L) BETWEEN FINBOROUGH INVESTMENTS PTY LTD Plaintiff and AIRLIE BEACH PTY LTD First Defendant and GIUSEPPE EMANUELE Second Defendant JUDGMENT - SHEPHERDSON J. Judgment delivered 15th September 1993 CATCHWORDS: Counsel: Solicitors: Hearing Dates: CONTRACT - variation alleged - whether proven. Heyworth-Smith for plaintiff. O'Reilly for defendants. Kenyans for plaintiff. Sly Weigall Cannan & Peterson for defendants. 26th, 27th, 28th, 29th, 30th July 1993 and 2nd August 1993. -- 3 of 32 -- -------------···------ IN THE SUPREME COURT OF QUEENSLAND No. 791 of 1992 BETWEEN I FINBOROUGH INVESTMENTS PTY LTD Plaintiff and AIRLIE BEACH PTY LTD 0 First Defendant and 0 GIUSEPPE EMANUELE Second Defendant JUDGMENT - SHEPHERDSON J. Delivered the 15th day of September 1993 0 In this action the plaintiff sued the first defendant for 0 moneys owing under a contract dated 4th April 1989 for the sale of property and sued the second defendant as guarantor for payment of those moneys. By the time the action came for trial on 26th July 1993 the sale had been completed but all purchase moneys had not been paid. In the statement of claim in the specially endorsed writ, the plaintiff claimed against the first defendant balance of purchase moneys of some $1.389 million plus certain interest and against the second defendant some $1.3 million plus certain interest. -- 4 of 32 -- 2 At the commencement of the trial the defendants, by defence delivered 12th June 1992 had pleaded that the contract for sale was varied by an oral agreement made on 20th December 1991 between Maxwell Croft on behalf of the plaintiff and Brian Hartley on behalf of the first defendant in terms of which oral agreement it was alleged that the first defendant would, over a period of twelve months from January 1992 to December 1992 pay to the plaintiff sums totalling $720,000 in full satisfaction of its obl~gations under the contract of sale. The relevant parts of the defence are paras 9, 10 and 11 which I now set out:- "9. The contract was further varied on 20 December 1991 ('The further variation'} by an oral agreement made on that date between Mr Croft for the Plaintiff and Mr Hartley for the First Defendant that, in mutual consideration of the respective financial positions of the Plaintiff, Mr Croft, the First Defendant and the second Defendant, the stated inability of the First Defendant to complete the contract and the financial hardship to the Plaintiff to be otherwise caused thereby, and in further consideration of the First Defendant's obligations under the further variation, the First Defendant would make the following payments to· the Plaintiff in full satisfaction of. the contract and as and by way of completion thereof - (a} $30,000.00 monthly from January-June 1992 (inclusive} (b) $180,000.00 in July 1992 (c) $30,000.00 monthly from July-December1992 (inclusive} (d) $180,000.00 in December 1992 $180,000.00 180,000.00 180,000.00 180,000.00 $720,000.00 10. It was the mutual intention of the Plaintiff by Mr Croft and the First Defendant by Mr Hartley that all of the First Defendant's obligations a~ to the payment of moneys under the contract as 0 0 0 0 -- 5 of 32 -- 0 3 first made and as subseq~ently varied prior tothe further variation be discharged and that those obligations merge in the new obligations ofthe First Defendant by the further variation. 11 . In the premises the obligations of the First Defendant relied on by the Plaintiff in theStatement of Claim were discharged by the further variation." In its reply, the plaintiff denied the alleged variation and in addition to the denial, pleaded that the variation (if made} was not supported by consideration. The defendants presented their cases first because they bore the onus of proving the only matter in issue namely establishing the variation alleged. At commencement of the trial it appeared 0 that there was no dispute about the amount payable by the defendants if the defendants' case failed although I was not told the exact amount. The trial proceeded with both sides leading evidence. After all evidence was in and counsels' addresses had almost: ended the 0 defendants sought leave to amend their defence and call further evidence. As the defendants' pleadings stood at the close of the evidence, the matter of consideration was dealt with in para. 9 Q which I have earlier set out. Miss O'Reilly, counsel for the defendants first announced the amendments she proposed be made to the defence of both defendants after plaintiff's counsel Mr Heyworth-Smith had addressed and after Miss 0' Reilly had completed most of her address. Miss O'Reilly sought· leave to add .two ·further paragraphs to her clients' defence namely paras 9A and 9B which read:- "9A Further or alternatively, the further variation is supported by the consideration of a benefit to the -- 6 of 32 -- 4 plaintiff by reason of Elders Finance Limited standing behind the payments referred to in paragraph 9 (a) those payments being approved in a cash support budget by Elders Finance Limited for the first six months of 1992. 9B Further or alternatively, the further variation is supported by consideration of the defendants' promise to the plaintiff, made on 20 December 1991 by Brian Hartley for the defendants to Maxwell Lance Croft for the plaintiff that, the defendants would, in respect of the payments set out in paragraph 9, use their best· endeavours to obtain a letter of comfort from Elders Finance Limited." Miss O'Reilly quite candidly told me that she needed leave to reopen her clients' case to call two witnesses from Elders () Finance, a Mr Grier and a Mr Jaenke. She did not, at that stage, have any proof of evidence from either of these persons. () Because Miss 0' Reilly had no such p~oofs and because I believed the plaintiff was entitled to them before the applications to amend and for leave to call further evidence were dealt with, I adjourned the two applications to the following day 30th July. At 2.30 p.m. on that day Miss O'Reilly sought and was granted leave to read and file 2 several affidavits of Brett () St Clair Bolton a solicitor from the firm acting for the defendants. Copies of signed statements from Grier and Jaenke were exhibited to one of these affidavits. On 30th July 1993 () Miss O'Reilly broadened her application to reopen the defence evidence by seeking to adduce evidence which she said was relevant to the telephone conversation between Croft and Hartley on 20th December 1991 when it was said the variation agreement was made. This further evidence, in Miss O'Reilly's submission, supported the credibility qf Hartley in that ·she said it indicated the state of Hartley's knowledge at 20th December 1991 and more particularly, that Hartley must have known at -- 7 of 32 -- 5 20th December 1991 that Elders Finance had earlier told him that Elders would not guarantee the payments the· subject ·.of the variation agreement. I add that it was part of Hartley • s evidence given at trial that he told Croft on 20th December that Elders would not guarantee those payments; It was quite clear from evidence led at the trial that there was a credibility issue between Croft and Hartley as to exactly what was said in the telephone conversation of 20th December 1991 in which 0 conversation, on the defendants' case, the variation agreement was reached. Mr Fryberg Q.C. who on 30th July 1993 appeared to lead c-) Mr Heyworth~Smith for the plaintiff, submitted that I could not as a matter of law allow into evidence this further evidence concerning Hartley 1 s knowledge of Elders 1 alleged refusal to guarantee the payments. He submitted that the evidence was not probative of Hartley' s credit and that I could not permit 0 evidence to be led from one witness merely to bolster the credit of another witness. He also submitted that the evidence thus far led at trial disclosed no issue as to Hartley's state of mind as c=J at 20th December 1991. I should here say that on 30th July 1993 Miss 0 1 Reilly made it perfectly clear that the evidence she wished to lead on reopening went ~nly to the proposed para. 9A and that she intended to rely on para. 9B to argue what she said was a matter of law based on evidence already led. During argument on 30th July, it appeared that Miss O'Reilly had apparently not previously appreciated that the consideration pleaded in para. 9 of the defence at the start of the trial and the consideration pleaded in the proposed para. 9A differed. It -- 8 of 32 -- 6 was not appropriate for Miss . 0' Reilly to attempt to draft a further para. 9 on her feet while addressing me and so the matter was adjourned to 2.30 p.m. on 2nd August 1993 so that a pleading could be prepared which would let the plaintiff know exactly what the defendants' proposed new pleading contained. I should here say that Mr Fryberg strongly opposed both the applications made and in argument presented me with a written outline of his submissions upon which he.expanded. One submission was that the amendment to include para. 9A would be futile and this submission effectively highlighted the need for Miss.O'Reilly to amend the existing para. 9 of the defence. The matter resumed on the 2nd c=) August 1993 when Miss O'Reilly produced a document described as c=) a "further amended defence and counter-claim". It was apparent from this document that Miss O'Reilly had had the assistance of a named Queen's Counsel in settling this amended pleading. Without discussing this amended pleading in detail, it is obvious that the previously proposed 9A and 9B have been abandoned, the basis of defence originally pleaded, viz. the variation, has been markedly.amended and the first defendant now proposes to allege that it had borrowed the $720,000 from Elders Finance Limited in order to pay the plaintiff and had in fact paid that sum to the plaintiff which sum it said the plaintiff had accepted, with the result that the contract had been discharged :by performance. I pause to say that the allegation as to payment of the $720,000 is patently a reference to a matter not in evidence at the trial but certainly commented on and not disputed during the trial namely that on .. application for summary judgment the defendants were given conditional leave to defend the condition being that 0 0 -- 9 of 32 -- 0 ------------~--- ··------- 7 they paid the $720,000 by instalments. by a certain- date. Further, the -defendants by the proposed defence and counter-claim sought to say that by reason of the facts now pleaded in their latest pleading it would be unconscionable for the plaintiff to retain the benefitof the $720,000 and deny the existence of the agreement of 20th December 1991. I heard argument from both sides on Miss 0 1 Reilly 1 s late- applications but did not give any decision. -Miss 0 1 Reilly then addressed me on the assumption that her applications failed so that in effect I heard full addresses from both· counsel on the evidence as it stood. 0 I propose to refuse Miss 0 1 Reilly 1 s applications for-leave to further amend and to reopen the defence evidence. ~ shall _later give my reasons for that.- In the meantime I return then- to the matter as it was litigated until Miss 0 1 Reilly 1 s late applications almost at the end of addresses. 0 0 In terms of the contract on which the plaintiff has sued,- settlement of the sale and purchase was due on 28th· February 1 9 91 but the sale did not settle on that date. Instead,· the parti'es extended the settlement date to 6th March 1991. Further extensions followed, the last being to -30th November 1991. · There were three such extensions and as consideration for each the first defendant paid the plaintiff an agreed sum. The sale still did not settle on 30th November 1991. I am satisfied there was no settlement on the agreed dates 28th February 1991 to 30th November 1991 (all inclusive) because the first defendant had financial problems. Maxwell Lance Croft and Giuseppe Emanuele the third defendant had discussions which -- 10 of 32 -- 8 resulted in the several extensions, Croft representing the plaintiff and Emanuele representing the first defendant. These several extensions were confirmed in correspondence between the solicitors acting for the parties. On 21st November 1991 Croft and Emanuele met in Emanuele's Brisbane office. I find Emanuele told Croft that he could not meet the guarantee that he had given to the plaintiff and asked for an extension of three months for the first defendant to settle the sale. Emanuele offered that the first defendant pay the plaintiff monthly instalments of $7,000 for twelve months, that the first defendant transfer to the plaintiff a ten acre 0 block of land at Airlie Bay and that the first defendant pay the 0 plaintiff $250, 000 in December. It was apparently agreed between the part·ies that· the land was· worth about $300,000 although this figure was not mentioned in the offer. On 23rd November 1991 in a telephone conversation with Hartley who was manager of The Emanuel Group, Croft refused this offer and made a counter offer which .was that the first defendant make an immediate payment of $20,000, transfer the ten acre block of land at Airlie Bay, pay monthly instalments of $7,000 for twelve months and make a final payment of $500,000 in December 1992. I find that at the time Croft· made this· counter offer he. knew that the companies controlled by the ·second defendant known as The Emanuel Group and of which ·the first defendant was one had a very large cash fl.ow problem and further that although the $20,000 might not seem a large ·amount, Croft genuinely believed this was a considerable amount of money to be paid by The Emanuel Group at that time 0 0 -- 11 of 32 -- 9 because he had previously found it very hard to get money out of The Emanuel Group. Hartley told Emanuele Croft's counter offer; Emanuele told· Hartley to reject it and Hartley did this in a conversation with Croft in Hartley's Brisbane office. On 9th December 1991 Hartley spoke to Croft on the telephone. In this conversation which Hartley had instigated Hartley offered to pay $30,000 per month for two years and said 0 that that offer was to be discussed with Elders and that the defendants also expected Croft to assist in recovering $100,000 from a man named Jenkin. Croft, I find, asked Hartley to put 0 this offer to Croft's solicitors who were named Kenyans. Hartley 0 0 did this in a letter dated 9th December 1991. That letter· which c,is written on the letterhead of "The Emanuel Group" forms parb: of ex. 2. It was signed by Hartley and included the fol·lowing:- "Mr Croft requested that we put our . counter -o-ffer through your office in order that this matter be satisfactorily resolved. In essence, the terms of our counter offer is as follows:- 1 . The sum of $30, 000 to be payable on a ·monthly basis for a period of twenty-four (24) months 2. Mr Croft is to give a formal undertaking that he will use his best endeavours to request a Mr Bob Jenkins to refund our deposit of $100;000 under the contract known as 'Reef International Pty Ltd'. Mr Croft is to immediately liaise with 'Mr Brett Bolton of Sly and Weigall and to give Mr Bolton a formal statement relating to this particular matter. 3. This counter offer is conditional upon the formal approval of Elders Finance., Limi t.ed. consenting tothe monthly payments as described in item 1 and to the guarantee of those payments:" -- 12 of 32 -- 10 I find the sending-of this letter accorded with the earlier conduct of the plaintiff and defendants ~n documenting through their solicitors' arrangements made to extend settleme-nt dates .. By a letter dated 20th December 1991 (ex. 12) Kenyans wrote to the. defendants' solicitors Sly Weigall Cannan & Peter son enclosing a copy of the letter of 9th December 1991 received from Hartley.and said that the offer was unaccaptable. In the letter Kenyans demanded immediate payment failing which court proceedings would issue. The original of this letter bears a rubber stamp showing it was received by Sly Weigall Cannan and Peterson on 24th December 1991 but although a faxed copy of it 0 may.. have been . sent to Sly Weigall Cannan & Peterson on 20th 0 December 1991 there is no direct evidence to that effect. Exhibit ·2 contains in document "L" what appears to be a photocopy of the original letter but document "L" gives no indication of transmission by facsimile - nor does it cont~in a copy of the rubber stamp in ex. 12 showing receipt by Sly Weigall Cannan & Peterson on 24th December 1991. In light of document 11 L 11 containing no such.rubber stamp mark, I infer 11 L 11 is a copy of 0 the letter faxed to Sly Weigall Cannan & Peterson on 0 20th· December 1991 . · . The sending by Hartley. of the letter dated 9th December 1991 addressed to Kenyans did:not accord with Hartley's oral evidence before me. Hartley told me that in the conversation with Croft on 9th December, Croft had said he would think about the proposal as he was going away on business for a few days. In evidence in chief Miss O'Reilly.asked him ''Did you ~xpect on the conclusion of that conversation-that you would next hear from.him or that -- 13 of 32 -- 0 0 0 -------------------- 11 you would have to call him again" and he answered "At the time I thought I would hear from him". He _then went on to say "I cannot recall whether I heard from him or whether I had made attempts to contact him.until the next time I talked to him". He said this next time was on 20th December. Hartley's evidence as to the conversation with Croft on 9th December is hardly consistent with the above letter of 9th December. written to Kenyans in which he had said "Mr Croft requested that we put our counter offer through your office in order that this matter be satisfactorily resolved" .. I find that at 9th December. Croft was endeavouring to. resolve the matter of the outstanding settlement by having both sides' solicitors in_effect handle negotiations although there. is no dou]::>t that Croft was prepared to listen to Hartley' s off.er .. Hartley, in his evidence in chief did not mention.his letter of 9th December 1991 and, if I accepted Hartley's evidence in chief it reads ~lausibly enough to justify Hartley having telephoned. Croft on 20th December 1991, as he swore he did at a time. when Croft was at his home in Chapel Hill and about to leave with:his () family for the Christmas break. According to the evidence of Hartley, when he telephoned Croft on 20th December Hartley had. with him Trent Arthur Ziepes who Hartley in evidence frequently described as his "colleague". On. Hartley's evidence Ziepes.was present at the time of this conversation. Ziepes was the accounts manager of The Emanuel Group. There is no doubt and it is not in issue that Hartley did telephone and speak to Croft on 20th December 1991 at a time when Croft was at his home at Chapel Hill. According to Hartley, during this conversation ·Hartley's -- 14 of 32 -- 12 telephone was in conference or speaker mode so that Croft could hear Hartley speaking with Ziepes and Ziepes and Hartley could hear Croft speaking. Hartley ·said he told Croft that he had Ziepes with him and that he was putting him on the speaker because the telephone had a conference ·facility. Hartley gave evidence that he and Ziepes made some calculations to try to see whether.they could work out a proposal that Croft would get his money much earlier. ·He said he made an offer to Croft of $30,000 a month. from January to June, in July a lump sum payment of $180,000, a further $30,000 a month from July to December with a further payment of $180,000 in December and thus Croft would 0 get his money in· twelve months as opposed to 24 months as 0 originally discussed. -According to Hartley, Croft replied words to the effect "Yes I can't see any problems with that I guess I'll be happy with that". Hartley said that he qualified the offer made by saying "I would have to get the approval of Joe Emanuele" and that Croft said "Would it be guaranteed by Elders?". According to Hartley he said "It cannot be guaranteed by Elders but I will use my best endeavours to see whether Elders will offer a letter of comfort to show their support for the company for six months". He said that this meant the six months to June 1992 and that he concluded the conversation by explaining to Croft that the defendants' offices were closing down for the Christmas break and reopening on 6th January and that he would contact Croft as soon as the office reopened. In summary then,·. Hartley' s evidence was to the effect that Croft agreed·to accept the payments totalling $720,000 on the 0 0 -- 15 of 32 -- 0 13 terms offered and that that acceptance -was subject to Hartley obtaining the second defendant's approval. Croft in his evidence denied any such agreement was made. According to him, the conversation with Hartley opened with his rejecting Hartley 1 s offer of 9th December. He went on to say that Hartley asked if he would mind giving his reasons and he replied "Brian, the reasons are that the amount is too-small and time is too long"; that Hartley said "Were there any other reasons?", that Croft replied .that he had creditors who were pressing him and for those reasons it was not acceptable, that Hartley said if he could get Joe to agree to $30,000 payments for 0 twelve months and two balloon payments of $180,000, one on 1st () 0 July and another on 1st December "would I accept that?" and that he Croft asked· "What about the guarantee- from ·Elders?".: Croft: said that Hartley replied "I will do my best". According to Croft he, Croft, then said "Brian if you can get Joe Emanuele to agree to those terms and if you can get Elders to give me a guarantee I will look at that very favourably". Croft mentioned further conversation about Christmas and exchange of Christmas greetings. Croft in evidence before me said that Hartley did. not tell him that Ziepes was present, that he did ~ot hear Ziepes 1 voice, that a telephone in conference or speaker mode has a characteristic sourid and that he did not hear that sound when Hartley was speaking. The evidence of Ziepes conf·irmed Hartley 1 s evidence as to the conversation with Croft on 20th December and as to the telephone being in conference or speaker mode. According to Ziepes he was present in Hartley 1 s office at Hartley 1 s invitation because Hartley had Croft on the phone. -- 16 of 32 -- 14 Indeed, according to Ziepes, it was Ziepes who formulated the offer which Hartley put to Croft and which he said Croft accepted. Ziepes said he wrote the offer on a piece of paper while Hartley was talking and he passed the paper to Hartley. This piece of paper was not produced at trial. It is the defendants 1 case that on 20th December 1991 Hartley telephoned the second defendant at his South Australian beach home; that Emanuele was out but later telephoned Hartley and approved the alleged agreement. Hartley has sworn that on 0 7th January 1992 he telephoned Croft and told him that he had spoken to Joe Emanuele on 20th December regarding the agreement they had made and that he had confirmed that agreement. He said 0 he asked Croft to come into the office the following day to formalise the agreement and Croft agreed to come in as arranged. Croft says that the only conversation with Hartley was Hartley saying that Emanuele had given his agreement to negotiations of the 20th and asking him to come into the office next day. I 0 prefer Croft 1 s evidence as to the contents of the telephone conversation of 7th January. Hartley spoke of a meeting with Croft next day in which he presented Croft with a document which 0 he said he had already prepared. That document is ex. 4 and is dated 8th January 1992. It reads:- "MAX CROFT: FINSBOROUGH (sic) INVESTMENTS PTY LTD 1. $30,000 per month for 12 months. 2. 2 x payments of $180,000 due July 1992 and December 1992 = $360,000 = $360,000 $720,000 -- 17 of 32 -- 15 3. Max to give an undertaking to use his best endeavours to secure from Robert Jenkins of Reef International a refund of the deposit of $100,000 paid under the Reef International contract. 4. Elders Finance Limited will record in writing that they will support The Emanuel Group of Companies of any payments made to Mr Croft for the period January 1992 to July 1992 and the situationto be: reviewed for the forthcoming 6 months." Croft said that at this meeting Hartley repeated his earlier advice that Joe had given his agreement to the negotiations of the 20th and said "Your payments from the 1st January to the 30th ~ June, I have managed to get Elders to agree to pay those payments and to stand behind those payments"; that Croft said "What about ~ my other payments?" and Hartley said "Well your balloon payment on the 1st of July and the rest of your payments until December plus your balloon payment on the 1st December I am sure that Elders will stand behind those as well. •• According to Croft, Hartley seemed to be reading from a paper and Croft said "Well what have we got here? What's this?" - ~ and Hartley said "Let • s call it a letter of comfort" and Croft 0 . . said "Well what about after 30th of June?" to which Hartley replied "Well there is no reason that I cannot see that Elders will not stand behind the rest of the payments". Croft said that on this he stood up and said to Hartley "This i~n•t a guarantee. This is no good to me. The best thing I can do is sue Joe Emanuele under his guarantee and perhaps that will make Elders either pay me or come to a guarantee". Hartley pushed the piece of paper which is ex. 4 across to Croft who said "If you can come up with anything else, give me a ring I • m going· home •• . According to Hartley, ex. 4 had been prepared before Croft arrived on 8th January; that on Croft's -- 18 of 32 -- 16 arrival Hartley showed him the document and he said "No I'm not accepting that; that Hartley said "I thought we had an agreement reached on 20th December"; that Croft commented "I want to look at some alternatives" and that Croft had spoken of suing the company and suing Joe Emanuele personally as guarantor under the contract. Croft. told me that the first time he had heard the words "letter of comfort" used was at the meeting with Hartley on 8th January 1992. I accept the truth of this evidence. Now there were a number of matters not in dispute-between the parties and they are relevant to this question of credibility 0 of Hartley and Ziepes on the one side and Croft on the other as 0 to what·was said on 20th December 1991. The first is that on 21st November 1990 Croft first knew that the second defendant's guarantee of the first defendant's debt was apparently worthless. Up to that date there had been 3·occasions when Croft had agreed with Emanuele to extend the first defendant's time for completion and I accept that up until then he believed the second defendant to be a very wealthy man 0 well able to meet personally the first defendant • s monetary 0 liabilities under the contract. The second is that in December 1991 The Emanuel Group was in parlous financial circumstances and entirely dependent upon Elders Finance Limited's support to keep solvent. On 1Oth December· 1991 Hartley had met with Elders Finance. As a result The Emanuel Group was obliged to report to Elders Finance its progress in a number of its companies reaching arrangements with their creditors. One of these companies was the first defendant and its:creditor was the plaintiff to whom -- 19 of 32 -- 0 0 0 0 17 it owed approximately $1.1 million .. Thirdly, it was vital for the first defendant to come to a conclusion with the plaintiff of which conclusion Elders Finance would approve. The first and second defendants knew they owed the plai,ntiff some $1 . 1 million and that, unless a satisfactory arrangement was reached with the plaintiff, plaintiff could in effect bring down the whole Emanuel Group. In evidence Hartley conceded that in December 1991 the Group was at crisis point. With loss of the value of the second defendant's guarantee of the first defendant's debt it was understandable that in the· discussions which Croft had· with Hartley on the 9th and 20th December Croft should be concerned that the offered payments were guaranteed by Elders Finance who· he knew were the Group's then financiers. I mention at this· point that during cross-examination Hartley said that Croft had always expressed concern that "whatever payment we made to him it would have to be guaranteed by Elders". In Hartley's letter to Kenyans dated 9th December 1991 the. contents of which I have earlier set out, Hartley, when discussing the first defendant's offer of $30,000 per month .for a period of 24 months concluded the letter· by saying that the offer was "conditional upon the formal approval of Elders Finance Limited consenting to the monthly payments and to the guarantee of those payments. So, at that stage, some eleven days before the al·leged variation agreement, Hartley acknowledged that Croft was looking for a guarantee of the payments totalling_$720,000. According to Hartley, when the .·conversation of 20th December· 1991 occurred, Croft agreed to accept$720,000 with no guarantee -- 20 of 32 -- 18 by Elders but a promise by Hartley to use his best endeavours to obtain a letter of comfort from Elders to show Elders' support for the first defendant for the six months to June 1992. In those six months the first defendant would, if the terms of the agreement were correct, make six payments each of $30,000. Croft's evidence is that he told Hartley that if he could get Joe Emanuele to agree to those terms and if he could get Elders to give him a guarantee he would look at that offer very favourably. I thought that Hartley was not a credible witness when it came to the details of the conversation with Croft on 20th 0 December. I reject his version where it conflicts with Croft and especially do I reject his evidence insofar as he said that in 0 effect there could be no guarantee by Elders but that he would use his best endeavours to see whether Elders would offer a letter of comfort to show their support for the company for the. next six months. I find that Croft did say to Hartley "Brian if you can get Joe Emanuele to agree to those terms and if you can get Elders to give me a guarantee I will look at . that very favo:u:r::ably". 0 I find that Croft was very concerned about and regarded as 0 essential , to any agreement ·he might reach with the first defendant a guarantee by Elders Finance of the first defendant's liability under such agreement. I should at this stage mention a criticism made by Miss O'Reilly of Croft's evidence as to the conversation with Hartley on 20th December. In cross-examination of Hartley Mr Heyworth-Sm;i..th.asked Hartley the following (p. 71) :- "Well I put:.· it to you that Mr Croft's closing statement to you was 'if you can get Elders to stand behind it.I might. look at it favourably' and Hartley replied 'I cannot recall him saying that'." -- 21 of 32 -- -------------- --···---~-----·~--------~--~-~---·-~-------~ ---·-·-----~ 19 As already indicated, when Croft gave evidence later in the trial Croft said he had used the word 'guarantee'. In her closing submissions Miss 0' Reilly attacked this change in language submitting that, the above question having been put to Hartley on instructions, Croft was untruthful and unreliable. In my view this criticism is unfounded. I find that from a commercial viewpoint the phrase "stand behind it" and the word "guarantee" in the context in which Hartley and Croft were then talking 0 meant, as each man then knew, the same thing. Hartley in his evidence when cross-examined clearly recognised that · "stand behind it" meant the same as "guarantee" and his response makes 0 it quite apparent that Hartley did not in that conversation 0 0 construe "stand behind it" as meaning "give support to" . .... Overall, I could not believe· Hartley and Ziepes as to their versions of the conversation between Hartley and Croft on 20th December. Each man might read well enough in the transcript but each was plausible and I thought not credible. I thought that Hartley when giving evidence as to this conversation-either ignored or overlooked the existence of a letter he wrote to Elders Finance Limited on 15th January 1992. In that letter which is part of ex. 2 he reported to Elders Finance the result of negotiations by four of the Group's companies with their creditors. The letter details the results of negotiations with three of the companies and it then discusses.the-matter of the plaintiff's contract. In that letter Hartley said:- "We are experiencing extreme difficulty· in finalisingnegotiations with Mr Max Croft of FinboroUgh Investments to settle the outstanding d~bt- ofapproximately $1.1 million. The following offer was made to Croft but subsequently rejected. $30,000 permonth retrospective to December 1991 to December 1992. ~ -- 22 of 32 -- 20 A payment of · $180, 000 in July 1992 and again in December 1992 making a total of $720,000. Before Elders consented to the relevant payments being made to the parties under the four (4) agreements it was required and acknowledged that the parties were to agree in total to a debt repayment programme and that no legal action against the Group would be taken for a period of six (6) months from January 1992 provided the Group did not default under the debt repayment programme. Whilst we reconfirm our acknowledgment of this requirement, we are extremely concerned that our ·failure to secure an agreement 'with Finborough Investments Pty Ltd will impact heavily on the negotiations with the three ( 3) remaining parties that, if we are not allowed to proceed with those agreed repayment schedules they will instigate legal action without delay . . . If Elders reconsider our request to allow us to commence payments with the three (3) parties agreed to we are reasonably confident that by legal tactics delay any judgment Finborough may seek at least for some time . . . We again seek your consent to request for the debt repayment programme to commence with the agreed parties as soon as possible." In my view if first defendant had reached the variation agreement with plaintiff to which Hartley testified, surely that fact must have been mentioned in that letter. It was not and instead "failure to secure an agreement with" the plaintiff is recognised by Hartley. In. that letter, Hartley also recognised 0 0 0 the threat posed by plaintiff's outstanding debt of approximately 0 $1.1 million and expresses a degree of confidence in being able to delay plaintiff's judgment by "legal tactics". When Hartley was cross-examined on this letter of 15th January 1992 his replies were unconvincing and evasive. I, note that on 20th January 1992 the solicitors for the defendants had written to the plaintiff's solicitors giving what was said to. be "a last opportunity to reconsider its position and to accept the offer previously made ... on 20th December 1991. -- 23 of 32 -- -~-~ --------------------------------~--~~-~---~- --~-~~~--~ 0 0 0 0 21 In my view this letter of 20th January 1992 cannot be used to reinforce or confirm Hartley' s evidence as to the alleged variation agreement made on 20th December 1991. It may indeed be regarded as one of the legal tactics of delay and the defendants' last throw of ~the dice in trying to reach . some satisfactory arrangement with the plaintiff. I mention also evidence of Graham Kenneth Sara an accountant who from September 1987 to 16th January 1992 was the financial controller of The Emanuel Group. I am satisfied that late in the afternoon of 13th January _1992 there was ·a meeting in the Brisbane boardroom of the first defendant and that at that meeting were Rocco Emanuele (the son of second defendant)., Jim Blackley / Hartley, Ziepes and Sara. I. find also that the second defendant· entered the room and asked ''What's happening'!., that Hartley said "Max Croft won't accept the contract" and that the second defendant pointed his finger at Sara ·and said ''Max Croft is your friend you should make him accept the deal". · I am satisfied that thereafter Hartley discussed with Sara in general terms only and not specifically some· of the offers which. had been put to Croft. I find that on the evening of 13th.January Sara telephoned Croft and told him that the second defendant wanteff Sara to talk to him in respect of the contract or offers· and· asked would he be prepared to have lunch with Sara on the following day. I find that Croft agreed and that next day Sara and Croft did have lunch. There is disagreement in the evidence of Sara and Croft as to ·exactly what was discussed but I am satisfied that there were some discussions with a view to trying to find if there ~ere any chance of agreement being reach~d ori -- 24 of 32 -- 22 a compromise of the·plaintiff's claim- a compromise which would· help·the defendant satisfy Elders Finance requirements. I find that no agreement was reached. I find that on 15th January 1992 Sara spoke to Mr Rocco Emanuele and told him in broad terms that no agreement had been reached. On 16th January 1992 Hartley dismissed Sara. Although it might seem strange that Sara, who had not taken .part in any negotiations between the first defendant and Croft, should be sent to talk with Croft, I thought Sara was an honest witness doing his best to tell me the truth. As I have said although ,0 there was disagreement between Croft and Sara as to what was mentioned in the way of offers at lunch I do not regard such 0 disagreement as indicating that Croft and Sara or either was being untruthful. In my view, the fact the second defendant instructed Sara to have lunch with Croft because he knew Croft ' was a friend of Sara's and to try to make him accept some deal is another.indicator of the intense desire of the first and 0 second. defendants to reach some sort of compromise with the plaintiff and so meet the requirements of Elders F;inance their financial. backer. 0 Another· matter which has influenced me to find against Hartley and Ziepes as to the alleged variation agreement is that although Hartley knew, as evinced by his letter to Kenyans dated 9th·December 1991, that Croft required offers to be made and dealt· with via solici.tors, on this occasion of 20th December 1991, if Hartley is believed, he Hartley did not follow such a course. The variation agreements earlier reached whereby the settlement date had been extended finally to 30th November 1991 -- 25 of 32 -- 0 0 0 0 ·~-- -------------;------ ·---- 23 were all agreed between Emanuele and Croft and then dealt with by the solicitors. There was no letter from . the defendants' solicitors as to the alleged agreement until the above letter of 20th January 1992 - written after the letter of 15th January to Elders Finance which I have already mentioned. I add that in reaching my decision on the credibility issues between Hartley and Ziepes on the one s.ide and Croft on the other concerning the alleged variation agreement I have taken into account Miss 0' Reilly' s submissions including those to the effect that Hartley' s evidence as to the agreement is more probable than Croft's because Croft, knowing that the second defendant's guarantee was worthless and having granted several extensions to complete was likely to have agreed to the best offer and to have ta:ken what he could get rather than run the risk of suing £or the then $1.1 million odd debt with the result of gettirig·nothing from an insolvent company. At the end of the day the vital question in this case is whether the defendants have proved on the .balance of probabilities the variation agreement· on which they' rely:. . In this they have failed. I have rejected both Hartley and Ziepes as credible witnesses. I thought they fabricated their evidence as to Croft's acceptance of the offer and their evidence as to Hartley's saying in effect he would use his best endeavours to get Elders to offer a letter of comfort for the first six months. I mention a meeting at The Emanuel Group's offices . on 14th January - after Croft and Sara had lunch. At the meeting, Croft Hartley Ziepes and Rocco Emanuele were present. Hartley had telephoned Croft on 14th January and arranged the. meeting .. Croft -- 26 of 32 -- 24 tape recorded the second part of the meeting (without the knowledge of the other persons present). I find that at this meeting the parties did discuss possible methods of reaching a compromise between the defendants and the plaintiff but that no agreement was reached. A transcript of the tape is part of ex. 2. The tape itself is ex. 8 but is not distinct. I do however find that during this tape recorded interview Hartley said 11 that's getting up close to 1.1 you know" and that in saying this Hartley took account of the land at Airiie Bay worth about $300,000 together with sums totalling $720,0~0. I find that on 14th January Hartley knew that the guarantees from Elders 0 were not forthcoming and that Croft was looking for payment of 0 most if not all of the plaintiff's debt. At that stage, payment of a substantially lesser sum was out of the question in the absence of guarantee of payment of that lesser sum. The defendants having failed to prove the variation agreement alleged there is no need to consider the matter of consideration pleaded in the reply and there will be judgment for the plaintiff against the defendants. As to the amounts of the judgments it is necessary to note that on 26th June 1992 Justice White gave the defendants conditional leave to defend this action. The conditions required both defendants to pay to the solicitors for the plaintiff the following:- (a} $180,000 by 4 p.m. on Monday 29th June 1992. {b) $180,000 by 4 p.m. on Wedriesday 8th July 1992._ (c) $30,000 monthly thereafter payable by 4 p.m. on 1st of the months July 1992 to December 1992 inclusive. (d) $180,000 by 4 p.m.· on 1st December 1992. 0 0 -- 27 of 32 -- 0 ~~~~--~~~~---------·-·-~~- 25 No formal order by Justice White. has be~n filed but the draft which bears the signatures of counsel for all parties shows the above conditions. I have been told that all payments have been made. In the writ the plaintiff claimed against the .first defendant $1,389,751.94 plus interest at $675.53 per day from 28th May 1992 and against the second defendant $1,299,076.19 and interest at $657.53 per day from 28th May 1992. The plaintiff did not tell me .during the trial the .exact amount or amounts of the judgments which it seeks. The amounts must take into account the $720, 000 so far paid. During the 0 hearing, amounts in round figures were mentioned e.g. about 0 0 $820,000-and in the latest application to.amend its pleading.the . ' . . . first defendant has sought to coun.ter-claim $877, 94.5. 67. _said in the pleading to be the amount claimed by the plaintiff. In argument Miss O'Reilly told me that this was the amount for which the plaintiff sought judgment. When I deliver these reasons I shall ask Mr Heyworth-Smith to advise me the exact amount of the judgment claimed against each_defend?nt. When I am satisfied as to those amounts I shall give judgment agains.t the first and second defendants for the appropriate sums. I return now to the application for leave to amend and the application for leave to reopen the defendants' case. Both parties have been helpful with authorities. The court's guiding principle in deciding "whether to gr~nt an application for leave. to reopen is whether the interests of justice are better served by allowing or rejecting the -- 28 of 32 -- 26 application as the case may be 11 (Urban Transport Authority v. Nweiser (1992) 28 N.S.W. L.R. 471 at 478. The cases show a distinction between those where application for leave to reopen is made before and after judgment. The guiding principle to which I have referred is a broad one. It appears that the New South Wales Court of Appeal in GSA Industries Pty Ltd v. NT Gas Limited (1990) 24 N.S.W. L.R. 710 and the Full Court of the Federal Court of Australia in Federal Commissioner of Taxation v. Brambles Holdings Ltd ( 1991) 99 A.L.R. 523 have adopted all or part. of the following statement by Lord Griffiths in Ketteman v. Hansel Properties (1987) 1 A.C. 189 at p. 220:- 11 Whether an amendment should be granted is a matter for the discretion of the trial judge and he should be guided in the exercise of the discretion by his assessment of where justice lies.. Many and diverse factors will bear upon the exercise of this discretion. I do not think it possible to enumerate them all or wise to attempt to do so. But justice cannot always be measured in terms of money and in my view a judge is entitled to weigh in the balance the strain the litigation imposes on litigants, particularly if they are personal litigants rather than business corporations, the anxieties occasioned by facing new issues, the raising of false hopes, and the legitimate expectation that the trial will determine · the issues one way or the other. Furthermore to allow an amendment before a trial begins is quite different from allowing it at the end of the trial to give an apparently unsuccessful defendant an opportunity to renew the fight on an entirely different defence. Another factor that a judge must weigh in. the balance is the pressure on the courts caused by the great increase in litigation and the consequent necessity that, in the interest of the whole community, legal business· should be conducted efficiently. We can no longer afford to show the same indulgence towards the negligent conduct of litigation as was perhaps possible in a more leisured age. There will be cases in which justice will be better served by allowing the consequences of the negligence of the lawyers to fall upon their own heads rather than by 0 0 0 0 -- 29 of 32 -- 0 0 0 0 allowing an amendment at a very late stage of theproceedings." (The underlining is mine.) The Brambles Holdings case was a revenue matter but it is worth recording and noting with approval the following remarks of Sheppard J. at pp. 528-9:- " Lord Griffiths was dealing with a situation different from the present involving as it did theseeking of leave to amend during a trial. But whether an amendment is allowed during a trial, or a new ground of appeal is added during the hearing of an appeal, is a matter within the discretion of the primary judge or the court which hears the appeal as · the case may be. Obviously the discretion is a wide one and each case will depend upon its own facts and circumstances. Nevertheless, I would adopt, with respect, what Lord Griffiths has said about the strainthat litigation imposes on litigants, anxiety occasioned by the need to face new issues and the legitimate expectation that the trial will determine. the issues which have been raised by the pleadings when the hearing commences. I would;also respectfully adqpt his remarks concerning the pressure on courts caused by the gr_eat increase in litigation and the public interest that there is in the business of the courts and of the legal profession being conducted efficiently. The public costs of maintaining the system of courts which this country has is considerable.· Those who are privileged to practise before the courts should understand that the days when careless work will usually be overlooked are over. The profession charges high fees for the work which it. does. It has a responsibility to see that the work is done well. The day has come when failure to ·discharge professional obligations efficiently will not be tothe account of the community or of the parties but to the account of the profession itself." In GSA Industries (supra) Samuels J.A. (at p. 715) referred to the second paragraph from Ketteman's case quoted above and went on to say at p. 716:- "I might interpolate that in that more leisured age an order for costs was generally regarded as complete compensation for delay occasioned either by.the grant, of an amendment or the grant of an adjournment.However the emollient of an order for costs as a panacea may now be· assigned to the Aladdin' s · cave which Lord Reid rejected as one of the fairy tales inwhich we no longer believe." -- 30 of 32 -- 28 Later on (also at p. 716) he said:- "Justice, procedural justice that is, in the conduct of litigation depends very largely upon establishing and then fulfilling the reasonable expectations of the litigants. Those expectations in turn depend very largely upon the parties' ability to accept that certain things will happen in the times laid down by the court after the parties have had full opportunity to put their points of view." I would with respect adopt what has been said by Sheppard J. and Samuels J.A. In Nweiser (supra) Clarke J.A. with whose reasons the other members of the court agreed said (at p. 476):- "The primary purpose for the rules pursuant to which cases are contested in this State is the furtherance of the interests of justice. For this reason the exercise of the discretion to allow an application to reopen depends essentially upon the trial judge's view as to ·whether the interests of justice are served better by granting than refusing the application. Of course, there needs to be finality iri litigation and a limit upon the number of issues which it is open to the parties to contest at a hearing." (The underlining is mine.) 0 0 There needs to be finality in litigation and my initial reaction to the very late application to amend the defence and Q to add a counter-claim was to refuse it. I accept that the court lists do exert pressure on the trial judge to deal as 0 expeditiously as possible with the increasing flow of litigation in the courts. If the present applications were granted the matter would not be finally heard until 1st November 1993 and perhaps one or two days thereafter and that would be only because I would set aside that date in a civil list allocated to me on the calendar. It would mean that another litigant would have his or her day in court delayed. I ask myself "Why should I give the applicants an indulgence to litigate new issues and fight on a -- 31 of 32 -- \ 29 different defence and so delay the final decision for several months?'' The change proposed by the pleading is a radical one. An alternative basis of defence is added one of alleged unconscionability in the plaintiff to retain the benefit of the $720,000 and yet deny the existence of the alleged variation agreement. I must say I found this pleading strange because the $720,000 had been paid pursuant to an order of this Court giving 0 the defendants leave to defend. The plaintiff has at all times denied the alleged variation agreement and as I have said the order giving leave to defend was conditional on payment of the () sums totalling $720,000. I refuse leave to amend and leave to reopen the case. The reasons for that are the very late raising of new issues with which·· the plaintiff had not had a chance to deal in the case as presented by the defendants at trial and the need for finality in litigation. The above underlined words of 0 Sheppard J. and Clarke J.A. are relevant to my decision. -- 32 of 32 --