Brimaud, Kenneth Maurice v Boston Securities Entertainment Investments Pty Ltd & Ors [1998] FCA 1392

EX TEMPORE REASONS FOR JUDGMENT HIS HONOUR: On 9 September 1998, I delivered reasons for reaching the conclusion that Mr Brimaud is entitled to damages in respect of the repudiation of the 8 May Agreement insofar as it relates to the first tranche. However, I indicated that I would give the parties the opportunity of further argument in relation to costs and the quantum of an appropriate discount after they had the opportunity of considering my conclusions and the reasons for them. I have now received written submissions from both parties and have heard further oral argument in relation to the question of assessment of damage and costs. In relation to the assessment of damage I expressed the view in my reasons of 9 September 1998 that the appropriate date for determining the market price of shares in Cinema Plus was the date of judgment subject to a discount of that price to take account of the lack of saleability of shares in Cinema Plus until the expiration of the period of compulsory retention. It had been thought during the course of the trial that that period would expire in early October although the precise date was not known. Further evidence has now been given which indicates that the period will expire on 10 October 1998. Having regard to the imminence of that date and not yet having entered judgment, it seems to me that if the rationale which I adopted in my reasons of 9 September is persisted in, it would be appropriate to defer entering judgment until after that date has expired in order to avoid the need for argument and possible evidence as to what adjustment if any should be made to the current market price. In my reasons I indicated that I concluded that Mr Brimaud would have received 440,000 shares in Cinema Plus, which he probably would have been required to retain until the end of the period which is now referred to as the escrow period. Mr Brimaud would therefore have been subject both to the benefit and burden of holding those shares had there been performance of the 8 May Agreement. After I delivered my reasons the parties indicated that they wished to make further submissions in the light of those reasons. In particular, the respondents indicated that they wished to make substantive submissions to the effect that the measure which I proposed was not appropriate. The question was raised as to whether I should permit argument on that question. I am of the view that it is appropriate and fair that I do permit and hear the argument. Judgment had not been entered. The way in which I expressed my conclusions does not necessarily reflect the way in which the matter had been put by the applicant. Accordingly, I consider that it is appropriate to take account of any further submissions which the respondents wish to make in order to dissuade me from the view which I expressed. I have now heard that argument. The submission on behalf of the respondents was that the contract as found by me related to 1 per cent of the intended total issued capital of Cinema Plus. After the capital had been adjusted in the way that I have indicated in my earlier reasons, 1 per cent would amount to 440,000 shares. The 8 May Agreement did not relate to 440,000 specific shares and accordingly, any obligation of the parties could be satisfied by 440,000 shares from any source. One such source was the market. It was contended that Boston could have purchased 440,000 shares on the market on or shortly before the due date for completion and could have delivered those shares to Mr Brimaud. The contention was that that course ought to have been open because the contract did not provide for the delivery of 440,000 shares subject to the escrow period restriction but simply 440,000 shares or 1 per cent of the augmented capital of Cinema Plus. However, I do not consider that that submission quite reflects the way in which I found the 8 May Agreement. It is correct to say that I did not conclude that there was a contract in relation to specific shares. However, the conclusion which I intended to indicate was that the 8 May Agreement was for 1 per cent of the issued capital as it was when Cinema Plus was fully capitalised. Initially, the parties had contemplated that that total capital was something other than the 44 million shares which the total capital finally became. Nevertheless, the obligation was to deliver one per cent of that final capital prior to any public offer. For that reason, it seems to me to be appropriate to treat the obligation as relating to part of the initial capital of Cinema Plus and not part of the further augmented capital arising from the public offer. It follows, in my opinion, that the shares which would have been the subject of delivery had the 8 May Agreement been performed, would have been shares which were the subject of the restriction. Certainly, it may have been possible for Boston to go into the market place and buy 440,000 shares of the new shares which had been issued pursuant to the public offer. However, there was no attempt to do that. There would be a real question as to whether Cinema Plus would have been able to do that at that stage, since it would have involved buying its own shares. As I have indicated in my reasons, there is some doubt as to precisely what was the nature of the obligation in relation to the first tranche. I am not sure that either party formulated a final view as to whether or not it was an obligation to issue new shares by Cinema Plus from those shares which would have been allotted to Boston or whether it was an obligation on the part of Boston to transfer shares which were to be allotted to it by Cinema Plus. Since Boston and Cinema Plus have been represented by the same legal team, it has not been thought necessary to determine that question because the only matter in issue is assessment of a monetary judgment and not the performance of any obligation. There may be some issue which would arise as between Boston and Cinema Plus as to how any judgment is apportioned between them but that is not a matter which is in issue before me. It follows, in my opinion, that the submission, which was subsequently made on behalf of the respondents in relation to the date for assessment of damage, should be rejected. Certainly, the reasoning behind my adoption of the date of judgment is that the 440,000 shares would have been subject to the restriction for the escrow period. Nevertheless, as I have said, had performance been effected in accordance with the obligations of the 8 May Agreement Mr Brimaud, would have received shares subject to that restriction. In the events which have occurred, of course, that may turn out to be a bonus depending upon the final evidence as to the market value of the shares when the escrow period ends. It may be, of course, that all of the shares which are the subject of escrow are offered to the market, which may have a depressing effect on the market price. That, of course, is a risk that Mr Brimaud, in accordance with the rationale I have adopted, must accept. Accordingly, I adhere to the view which I expressed in my earlier reasons that the appropriate course is to calculate the value of shares in Cinema Plus as at the date of judgment. I propose therefore to adjourn the matter once again until 16 October 1998, by which time it will be possible for the actual circumstances to be known as to the market price of shares in Cinema Plus following the expiration of the escrow period. The date of calculation, I would have thought, would be the first business day after the period expires, unless the parties wish to address me further, on the basis of further evidence if necessary, that that is not an appropriate date. However, it seems to me that Mr Brimaud, if he wanted to realise his investment, or the investment which he would have had, had there been performance, would not have been able to do so until, in the events which have occurred, 12 October 1998. Two other matters have been raised concerning the assessment of damages. The first concerns a dividend which was received in respect of shares in Cinema Plus. The evidence now before me indicates that a dividend has been declared and paid to shareholders of Cinema Plus. Had Mr Brimaud been the holder of shares during the escrow period, he would have received that dividend. While the respondents have contended that the appropriate date for calculation of damages was November or December 1996, they accept that if I adhere to the rationale which I indicated above, then it would be appropriate to include the amount of the dividend in the amount of any judgment. Since I have indicated that I have considered that the appropriate date for assessment is the day after the escrow period expires, it follows that the damages should include the dividend which would have been received by Mr Brimaud. That dividend would have been received with effect from 1 January 1998 and would have been the amount of $11,440. It is appropriate that interest be allowed on that amount from that date until the date of judgment. The second matter relating to damages concerns a further submission made on behalf of the respondents to the effect that there was a failure to mitigate on the part of Mr Brimaud. It was contended on behalf of the respondents that, since I have found that Mr Brimaud had available and would have been prepared to pay the balance of the price payable in respect of the first tranche, being the sum of $34,806, Mr Brimaud should have gone into the market and purchased 34,806 shares. It was submitted that an adjustment should be made in the calculation of damages accordingly. That is to say, it was contended that he should receive interest on that sum and that number of shares should be deducted from the number of 440,000, being the shares which he would have received on completion of the 8 May Agreement. No question of mitigation had been raised before the supplementary submissions were made. I do not regard that as being a bar, however, to the making of the submission at this stage. It was not suggested by counsel for Mr Brimaud that there was any prejudice by reason of the matter having been raised at this stage rather than at some earlier stage. However, I am not satisfied that there has been unreasonable conduct on the part of Mr Brimaud in that regard. The real concern in mitigation of damage is that an applicant or claimant must take all reasonable steps to mitigate the loss to him or her consequent upon the respondent's wrong and is not entitled to recover damages for any such loss which he or she could thus have avoided but has failed through unreasonable action or inaction to avoid. Put in another way, the applicant cannot recover for avoidable loss provided the conduct of the applicant was unreasonable. I do not consider that Mr Brimaud's failure to go into the marketplace immediately after the 8 May Agreement was terminated was unreasonable. There was no suggestion that it was reasonably foreseeable that the price of shares in Cinema Plus would rise in the way that they have. Had there been some fair indication that the price was going to go up significantly, that might have been a basis for Mr Brimaud going to the marketplace and buying shares at the price at which they came onto the market. In the absence of any such suggestion, however, it was not unreasonable for Mr Brimaud to do nothing but simply to commence proceedings as he did. There had certainly been no suggestion from the respondents that Mr Brimaud should be going into the marketplace in order to buy shares and to mitigate his loss. The respondents' attitude rather was that there was no claim at all and that he was not entitled to anything. In the circumstances, I do not consider that there has been any failure to mitigate such as would justify a reduction in the damages. The onus of establishing want of mitigation is clearly on the respondents. I am not satisfied that that onus has been discharged. The other matter upon which I have now heard further submissions concerns the question of costs. The first matter concerns the costs of Mr Blom who, although a party to the proceedings has, on one view, been entirely successful. That is to say, a claim was made against him but the claim failed in its entirety. It is significant, from the point of view of the exercise of my discretion, that Mr Blom was represented by the same legal team as represented Boston and Cinema Plus. It is likely that there were some additional costs incurred by reason of the fact that specific allegations were made by Mr Brimaud against Mr Blom, although, as I think I have indicated in my earlier reasons, those allegations were all ancillary and subsidiary allegations, except insofar as it appears to be alleged that Mr Blom was a party to the contract. If Mr Blom had been separately represented, and it may be that it would have been reasonable for him to be separately represented, then it would clearly have been appropriate to make an order that Mr Brimaud, as an unsuccessful applicant, pay his costs. However, in exercising a discretion as to costs, a certain amount of flexibility must be involved. If it were appropriate for the Court to analyse in precise detail where costs have been wrongly incurred, then it would be appropriate, as I have said, to order that Mr Brimaud pay Mr Blom's costs insofar as there were any costs incurred over and above the costs of the defence of the proceedings by Boston and Cinema Plus. However, for reasons which I will briefly elaborate on, I do not think it is appropriate for the Court to endeavour to engage in what would almost be an exercise in taxation of costs in endeavouring to isolate and appropriate costs to particular issues and particular results. On the other hand, I do consider that it is appropriate that the Court recognise the extent to which parties have been significantly unsuccessful in the conduct of proceedings. True it is that the claim made by Mr Brimaud arises out of the one agreement, that is the 8 May Agreement. Nevertheless, as I indicated in my earlier reasons, there were three quite separate heads of claim, each of which, from one point of view, gives rise to a separate cause of action. In relation to the claim in respect of the first tranche, Mr Brimaud has been successful and, on one view, he should have the costs of that claim. However, in relation to the other two claims, he has been unsuccessful. I have found that there was no variation of the 8 May Agreement. His cause of action in respect of the second tranche was, in substance, based on an estoppel which he simply failed to make out. Alternatively, it was based on alleged misleading or deceptive conduct which he failed to make out. In those circumstances, I consider that it is appropriate that Mr Brimaud bear the costs of that issue. The third cause of action related to Mr Brimaud's allegation of entitlement to be maintained in office as a director of Cinema Plus. That issue took very little time and really involved the true construction of a brief conversation and the 8 May Agreement. The real dispute as to costs concerns the estoppel or misleading/deceptive conduct case in relation to the second tranche. Again, as I have said, I do not think it is appropriate to endeavour to engage in an exercise of determining in great detail the extent to which the costs can be specifically attributed to one issue or another. On the other hand, my assessment of the way in which the case was conducted and the extent of the evidence and the extent to which the length of the case was increased by the conduct of that issue, is that it was not insignificant. It is really only a matter of judgment as to how costs should be appropriated in those circumstances. I am mindful of the fact that Mr Brimaud has been successful to a significant degree in recovering damages. On the other hand, I am mindful of the fact that he has been unsuccessful not just on a factual matter relating to that question but on a totally separate cause of action. Doing what I think can only be a matter of judgment, I think that it is appropriate that the respondents pay 15 per cent of the applicant's costs of the proceedings. As to costs of today, my impression, from my recollection of the way the argument proceeded on the last occasion and from what little I know of what communications occurred during the week, is that any additional costs required by an attendance next week ought to be borne by the respondents. If there is no need for any further attendance, then no costs have been thrown away. Today would have been necessary in any event so today's costs should be costs of the proceedings. However, insofar as there is any need for a further attendance next week because of the incorrect information about the date of the expiration of the escrow period, I would have thought it is appropriate the respondents pay the costs of that attendance.