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  • Unreported Judgment

Valleyfield Pty Ltd v Primac Ltd

 

[2003] QCA 440

 

SUPREME COURT OF QUEENSLAND

PARTIES:

FILE NO/S:

SC Number 344 of 1999

Court of Appeal

PROCEEDING:

Application for Stay of Execution

ORIGINATING COURT:

DELIVERED EX
TEMPORE ON:

14 October 2003

DELIVERED AT:

Brisbane

HEARING DATE:

14 October 2003

JUDGE:

McPherson JA

ORDER:

Application dismissed upon undertakings made by both parties. Costs of and incidental to the application to be paid by the applicant Netafim Australia.

CATCHWORDS:

APPEAL AND NEW TRIAL – APPEAL PRACTICE AND PROCEDURE – QUEENSLAND – STAY OF PROCEEDINGS – GENERAL PRINCIPLES AS TO GRANT OR REFUSAL – applicant lost at trial and on appeal – application for special leave to High Court filed four weeks out of time – whether any prospect of success on appeal – long delay before High Court hearing – respondent’s financial position greatly weakened by damage caused by applicant – whether refusal of stay will destroy subject matter of litigation

COUNSEL:

SC Doyle QC, with B Porter, for the appellant/applicant

P Morrison QC for the respondent

SOLICITORS:

Clayton Utz for the appellant

Lyon Smith for the respondent

McPHERSON JA:  This is an application for a stay of proceedings on a judgment delivered in the Court of Appeal on the 8th of August 2003.  That judgment allowed an appeal against a judgment given on 25th March 2002 by Justice Cullinane in favour of the plaintiff Valleyfield Pty Ltd against the second defendant Netafim Australia Pty Ltd for damages of $3.7 million.  It did so by reducing those damages from $3.7 million to $1.7 million.

 

The second defendant now wishes to appeal to the High Court against the judgment given against it and, to that end, has filed an application for leave to appeal to that Court.  The application was filed on 9th October 2003 which was some four weeks out of time so that an extension of time will be needed before the application can proceed according to the rules.

 

The second defendant asks for the stay until special leave is granted and then until the appeal, if any, is determined.  It should perhaps be added that the application for special leave seems to have been provoked by an application on the part of the plaintiff itself for special leave to appeal to the High Court against the judgment of the Court of Appeal reducing the damages given at trial.

 

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

 

The application for an immediate stay is based essentially on the proposition that the plaintiff was a trading trust which appears to have no or few assets or regular income, and is heavily indebted to others.  There is a real prospect, so it is said, that it will pay the judgment moneys if and when received to those creditors and that the plaintiff will consequently be unable to recover that money if it succeeds in its proposed appeal to the High Court.

 

The prospects of the plaintiff obtaining special leave and its prospects in the consequent appeal, if any, do not seem to me to be especially compelling.  As regards liability, the primary issue at trial turned on findings of credibility.  The trial Judge made findings in favour of the plaintiff based on his having seen and heard the principal witnesses.

 

Those findings have survived challenge to the Court of Appeal, so that there are now, as I see it, concurrent findings of four Judges in favour of the plaintiff in respect of critical matters of fact.

 

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

 

The damages were reduced on appeal from $3.7 million to $1.7 million essentially because the primary Judge was held to have applied the contractual measure of expectation damages, instead of the tortious restitutionary measure of damages.  Because it is accepted that the irrigation system cannot be rectified simply enough to suit the plaintiff's property it would appear to follow that the plaintiff, assuming liability in its favour, is entitled to recover the outlay in purchasing and installing the system, together with other expenditure incurred in growing alternative crops in the season that followed shortly after the installation.

 

It seems to me unlikely that the second defendant will succeed in reducing the quantum of those damages much further; but if it does so, the reduction, I suspect, is not likely to be of a substantial character.

 

On the evidence the plaintiff's present parlous financial position, as it has been put to me, appears to be the direct result of having relied on the second defendant's misleading conduct as it was found to be at the trial.  It has outlayed, as one would expect, a great deal in legal costs which will not be taxed or paid until the litigation is over.  Those are relevant considerations in determining whether or not a stay should be granted.  It may be added, although it may not be of any direct relevance at all, that the second defendant is an offshoot of a foreign corporation whose only major assets are in a place abroad.

 

As against this, Mr Parker, who appears to be the principal individual active in the trading trust which engages in the farming, has offered to guarantee repayment of the judgment sum to the second defendant personally if it is paid to the plaintiff and the judgment on liability is then reversed in the High Court.

 

He owns the two farms on which the activities of trust have been carried on, one of which, I was informed, is or is about to be let at a price, after which the farming activities confined to the smaller of the two properties.

 

Putting those assets together with the assets of the plaintiff itself to arrive at a net asset value over liabilities suggests, on one view, that there may be an excess ranging from perhaps $2.3 million on the second defendant's original valuation, to some $3 million on the plaintiff's valuation.

 

These figures, however, are not in any sense entirely reliable because no special investigation of the valuations and their reliability has been carried out at this stage.  It must, however, be said that one would be inclined to accept the plaintiff's valuation, or that of Mr Parker, somewhat more readily than that of the second defendant inasmuch as the valuers in the case of the second defendant have not been on to the property in the course of their investigation and valuation, and they have, it would appear, valued it as a sugar cane farm.

 

Added to this is that there is income from the two farms either in the form of profitable trading or farming or of income from the lease of the property, which in gross terms appears to have extended up to about a million dollars a year in the last two years.

 

Once again, the figures on this question are to some extent distorted by the impact of taxation considerations and it is probably not desirable to place a great deal of weight on the contentious claims of either party.  Nevertheless, I am content to accept that, both in terms of income and in terms of assets the plaintiff, when coupled with those of Mr Parker and the trust properties is by no means devoid of value.

 

All in all it seems to me that there is a reasonable prospect that, with Mr Parker's personal guarantee, the second defendant would recover the amount of damages awarded even if it were successful in reversing the decision of the Court of Appeal after it had paid the plaintiff in this case.

 

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

 

There is a weighing up to be done in the process of deciding what course must be taken.  It is right that the balance should not be pressed too strongly against a party who has been successful at two levels of Courts in retaining a substantial judgment in its favour.

 

The plaintiff as applicant has approached this application on the footing that it is supported by the decision in Jennings Construction Limited v Burgundy Royale Investment Pty Ltd [No 1] (1986) 161 CLR 681.  But the subject matter of the litigation there was certain statutory liens which were fated to disappear altogether if the stay was not granted to prevent them from being cancelled immediately.  That is not the case here.  The money payable under the judgment in favour of the plaintiff is in no true sense a "subject matter" of the litigation in need of preservation pending the appeal.

 

The amount of the judgment debt if paid does not become trust moneys in the hands of the plaintiff.  Pending resolution of the application for special leave it would not be recoverable in specie if the appeal were to succeed.  The second defendant's commercial error was in having anything to do with someone who was, as it has now turned out, simply not wealthy enough to sustain the losses inflicted by the second defendant through its tortious conduct.  Not many customers can sustain such losses, which is one reason why persons injured in that way tend to sue the tortfeasors who caused damage to them.

 

No doubt many of the considerations in the Jennings Construction case that are referred to by Justice Brennan in his Honour's reasons in the High Court are relevant to stay orders in general; but, as his Honour's reasons show, it was the preservation of the specific subject matter in that instance that his Honour's order was directed to achieving. 

 

That is not, of course, the case here.  If it matters, the provisions of Order 70, rule 28, in Queensland relating to security for costs pending appeals do not impose any particular or specific test or criterion for granting or witholding such relief, but leave it instead to the general discretion of the Court of Appeal or a Judge of the Court to be exercised according to principles that are well known through their development over many years.

 

Refusal of the stay in this case will not destroy the subject matter of the litigation.  That subject matter is a claim by the plaintiff for damages and tort.  It will continue to exist even if no stay of judgment is granted to the second defendant, who will remain as before entitled to continue its own application to the High Court for leave to appeal if it chooses to make one, as it has now done.

 

The second defendant expressed concern that there is a real risk that if it is a successful appellant it will not be able to recover the money it has paid to the plaintiff because the plaintiff is not in an especially strong financial position after suffering this loss and this litigation.  But that, in my opinion, is not sufficient to justify depriving it of the fruits of its judgment simply because the second defendant has also now made an application for special leave to the High Court, the more so as, in this case, Mr Parker has personally offered to guarantee repayment of the amount of the judgment moneys in the event of the application and the appeal succeeding.

 

In my view, if the test to be applied in these cases is, as is suggested by a line of decisions in the High Court in which the Jennings Construction principle has been applied, there are no circumstances that I would describe as exceptional to justify ordering the stay of execution or of judgment in this case.

 

It is not enough for the second defendant to suggest there are some nice points that may eventually be reached in the course of a journey through the judgments in the Supreme Court, or that they would interest the High Court, if one could be quite certain that they would ever arise. 

 

The result is that the application for special leave seems to me to present problems which make it a less attractive means of resolving the kind of points that the second defendant says will arise if it reaches the stage of being the subject of an appeal.

 

It remains for me to say that the application should, in my view, be dismissed.  I am, however, concerned about the fact that there is a separation of assets and liabilities in this case between Mr Parker, as the individual who appears to represent the trading trust, and the incorporated trading trust itself which presents as the entity that is engaged in doing the business and incurring the liabilities. 

 

I think that the dismissal of the application raises a question whether the second defendant should not be protected against the consequences of that bifurcation in or separation of assets and liabilities so that the second defendant, if it is successful in the end, is not left looking at an empty vessel.

 

...

 

McPHERSON JA:  The costs of and incidental to the application for the stay, I order to be paid by the second defendant Netafim Australia which was the applicant in the application for the stay. 

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Editorial Notes

  • Published Case Name:

    Valleyfield P/L v Primac Ltd & Anor

  • Shortened Case Name:

    Valleyfield Pty Ltd v Primac Ltd

  • MNC:

    [2003] QCA 440

  • Court:

    QCA

  • Judge(s):

    McPherson JA

  • Date:

    14 Oct 2003

Litigation History

No Litigation History

Appeal Status

No Status