Croft v Evertop Investments Pty Ltd

BACKGROUND 8 The proceedings were issued in 2006. They have not moved particularly quickly and for the slow rate of progress each side blames the other but there has been an additional complication in that Mr Croft was declared bankrupt on 4 May 2009. On that date a sequestration order was made by a Registrar of the Federal Magistrates Court against Mr Croft's estate. On 18 June 2010, the sequestration order was set aside and the creditor's petition on which the order was based was dismissed. 9 Steps were taken by the Crofts to re-enliven the proceeding and as various measures taken have resulted in little progress, Mr Croft stressed his anxiety to the Court that the matter should proceed to trial as soon as possible. Indeed, in his words he was prepared to go to trial 'tomorrow'. 10 At a directions hearing conducted early this month, I indicated that I would endeavour to list the matter for trial for a period of seven days in March or April 2011. I requested the parties to provide their unavailable dates to facilitate that course and expressed the hope that the parties could confer in relation to issues to be resolved before trial with a view to agreeing the necessary directions. If agreement was not possible, I indicated I would make directions.

NECESSARY PROCEDURES 11 Agreement was not reached. It has not been reached on many aspects of the proceeding. The respondents have requested that the trial not be conducted as early as I had suggested. It was the view of senior and junior counsel that the matter would not be ready for trial by March or April 2011 due to the need for the Crofts to further amend their statement of claim, to (possibly) supplement their expert's report, for the respondents' experts to respond and various other identified procedural aspects. In the course of ascertaining steps which would be required to fix pre-trial directions, the solicitors and counsel for the respondents also identified the need for experts to confer before trial. I accept that in this proceeding that step is highly desirable. I was informed by M/s Black, appearing for the respondents at a directions hearing earlier this week, the response of their expert would take three months in itself 12 In addition, I was informed that each of the counsel for the respondents would not be available for trial until 1 July 2011. As M/s Black for the respondents acknowledged, that fact taken alone may not be particularly weighty in the balancing exercise if it were possible to engage other counsel. However, as she observed and I accept, there are a number of other matters which need to be taken into account. Those matters include the fact that on 22 April 2009, a Deputy District Registrar of this Court made orders requiring the Crofts to provide discovery and to amend their pleadings. They were the last orders made in the matter before it was effectively stayed as a result of the sequestration order. 13 It is apparent that the Crofts have not complied with those last orders for discovery and amendment. In particular, they have not filed and served an amended statement of claim quantifying their losses. Consequently, the respondents have not been able to file and serve their amended defence and counterclaim. The respondents will also be amending their defence to plead a limitation defence while dealing with other issues. 14 To gauge the ambit of these steps, M/s Black relies on affidavit material showing that the first and second respondents, for their part, have provided discovery on oath comprising of more than 10,000 documents and more than 125,000 pages. Those matters were provided in discovery by way of pre-action discovery in Federal Court matter WAD 21 of 2005 which is a related action pursued by the Crofts against Evertop and Mr Kidd. 15 The difficulty with making an amendment to quantify losses is that the Crofts believe that the respondents have not provided proper discovery and therefore the Crofts are not able to articulate their actual losses until such additional discovery is supplied. It seems that further discovery will be given by the respondents. Apparently the solicitors for the respondents have only recently received the further documents for discovery of the respondents while the matter was in a hiatus during the currency of the sequestration order. Those documents, received by the solicitors on 15 December 2010, require detailed examination before further discovery, if any, can be made.

The amendment to the pleading 16 Various paragraphs of the current amended statement of claim for the Crofts plead that they are entitled to a refund of all monies paid in excess of a 10% margin on the costs price paid by the respondents for stock purchased by the Crofts from the respondents. In addition, the Crofts plead they are entitled to recover the value of their loss of opportunity to earn additional profits that would have resulted from increased advertising expenditure had the representations regarding contributions to advertising allegedly made by or on behalf of the respondents been true and had all monies contributed by the Crofts towards advertising been spent on advertising. Next, the Crofts claim they are entitled to recover the value of their loss of opportunity to make additional sales within their exclusive sales territories which losses they suffered as a result of the respondents selling stock within those exclusive territories. Next, the Crofts contend that they are entitled to an account of profits received by the respondents which flow directly or indirectly from advertising. 17 It will be necessary for the Crofts to quantify these matters with some precision in their pleading and also in any expert report before the respondents can be expected to reply. If it is not possible to do so to some extent or at all, it will be necessary for affidavit evidence to be supplied to explain the difficulty.

Discovery 18 It appears that the categories of discovery required by the Crofts is substantial. While they were represented by solicitors, the Crofts, through their solicitors, informed the respondents' solicitors on 21 January 2008, it appears, that the Crofts had agreed to discover the following categories of documents: documents and correspondence between you, or on your behalf, with Jansin Pty Ltd relating to the business of Jim Kidd Sports Thornlie; documents and correspondence relating to your purchase of the Jim Kidd Sports Thornlie business from Jansin Pty Ltd (including a copy of the sale agreement); documents and correspondence relating to the appointment of a receiver and manager to Jim Kidd Sports Thornlie and Jim Kidd Sports Willetton on 11 July 2006 and any reports prepared by the receiver and manager in relation to those businesses; documents and correspondence relating to your payment of the licence fees as alleged at paragraph 22(a) and 37(a) of your amended statement of claim; documents and correspondence relating to your payment of the advertising fee as alleged at paragraph 22(b) and 37(b) of your amended statement of claim, including documents and correspondence relating to your disclosure to our clients of, your gross revenue for each calendar month; documents and correspondence relating to our clients being engaged or involved in business or activities the same or similar to those engaged in by you within the area of ten kilometres from the premises as alleged in your amended statement of claim; documents and correspondence relating to you being charged a margin in excess of 10% on stock purchased from the Jim Kidd Sports warehouse including details of each specific item of stock on which you were charged a margin of more than 10%; and the following documents referred to in the Pitcher Partners' report dated 21 September 2006: (a) the "Discovered Electronic Records" in Adobe Acrobat (i.e. PDF) format as referred to at paragraph 6 / page 16; (b) "the records provided by the Respondents" as referred to at paragraph 7.1 / page 17; (c) the "affidavit sworn on 27 May 2005 on behalf of the Fourth Applicant" as referred to at paragraph 7.2 / page 18; (d) the "information provided by the First Applicant" as referred to at paragraph 8.3.1 / page 30; (e) the "Respondents' own calculations and records" referred to at paragraph 8.3.1 / page 30; and (f) the "set of invoices provided … by the Applicants" and, in particular, "every tenth invoice" as referred to at paragraph 9.2 / page 42. 19 No reason has been advanced why that discovery cannot or should not now be given.

Directions 20 At the directions hearing scheduled at the request of the respondents to deal with these issues, the respondents provided a minute of proposed orders in the following terms: 1. The Applicants provide discovery on oath by 14 January 2011. 2. The Applicants file and serve an amended statement of claim quantifying their loss by 14 January 2011. 3. The First and Second Respondents file and serve any amended defence and counterclaim by 31 January 2011. 4. Any application by the Applicants for further and better discovery by the First and Second Respondents be brought by 14 January 2011. 5. The matter be listed for trial for 15 days from a date not before 1 July 2011. 6. Costs be in the cause. 21 It seems clear that the respondents' timetable, let alone the fixing of trial dates for March and April 2011 is far too optimistic.

CONCLUSION 22 I do not proposed to make the orders sought by the respondents as I think, as a start, it is highly unlikely that the Crofts will be able to meet the deadline in the first two of those orders. 23 I will adjourn the matter to a further directions hearing in February 2011 but in the meantime would suggest that the parties attempt to negotiate a more realistic timetable with a view to the trial being held in July 2011. If a revised timetable cannot be agreed, each party is to file and serve a minute of proposed directions by 25 January 2011. 24 For present purposes, the only orders I propose making are for the filing of minutes and for the directions hearing to be adjourned to Tuesday, 1 February 2011 at 11.00 am to endeavour to settle the timetable to trial. Costs of the two directions hearings this month will be in the cause. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher.