Drinkwater v Caddyrack Pty. Limited

SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

1 MASTER: The substantive proceedings were heard before Young J in 1997. His Honour made orders on 23 October 1997. His Honour made subsequent orders to give effect to the essential items of relief on 28 November 1997. Those orders were entered on 12 December 1997. They included orders concerning the value of shares in a company, Caddyrack Pty Ltd, and an order that, in the event that the parties failed to agree as to the value of those shares, a Master hold an enquiry to certify the value of the shares. Also included in the orders made by his Honour on 28 November 1997 was an order in the following terms: Within 21 days of these orders each party is to serve on the other a detailed proposal of valuation for the shares together with any experts' reports which are said to support such valuation. 2 In due course the matter was listed on call-over before me on 25 November 1998 for the purpose of fixing a hearing date. The plaintiffs had complied with the requirement of preparing a valuation of the shares. The defendants as at the date of the call-over had not complied with that requirement. It would appear from the correspondence that has been placed before the Court, in particular correspondence between the solicitors for the defendants and a firm of solicitors in Newcastle and their Sydney agents, that no application was made on behalf of the defendants for an adjournment in order to enable the defendants to place before the Court evidence of the valuation of the shares. But the defendants appeared upon the call-over and allowed the matter to be fixed for hearing, with the only evidence as to the valuation of the shares being that which had been prepared on behalf of the plaintiffs. 3 The correspondence to which I have referred states that at the call-over the Master directed that the defendants be ready to proceed on the date fixed for the hearing, being 2 February 1999. With considerable urgency the defendants have today, 1 February 1999, made an application that the hearing fixed for tomorrow, 2 February, be adjourned. The essential basis for the application is that the defendants are not ready for the hearing, in that they have not prepared any evidence as to the valuation of the shares. 4 The plaintiffs oppose any adjournment. They point to the fact that they have complied with the orders of the Court concerning the valuation of the shares; They submit that the delay in bringing on for hearing this enquiry into the valuation of the shares will have a prejudicial effect upon the result of that enquiry, in that, so it is submitted, the greater the delay in having the matter brought on for hearing, the more the events which have occurred since 25 September 1997 (that being the relevant date for the valuation) will affect the valuation of the shares in the company. 5 It should here be observed that the company has been wound up and a liquidator has been appointed. It should also here be recorded that there is currently pending an appeal to the Court of Appeal from the decision of Young J. However in that regard the Court was at the call-over on 25 November 1998 informed on behalf of the plaintiffs that the appeal would not affect the valuation of the shares or the enquiry which his Honour had directed, whilst on behalf of the defendants informed that the representative of the defendants had no instructions in that regard. 6 It should also be noted that no application has ever been made by the defendants to seek a stay of execution upon his Honour's orders pending the hearing of the appeal. 7 Various matters are said to have brought about the present position in which the defendants now say they are not ready to have the matter heard tomorrow. 8 One of those matters is that after the decision by Young J the defendants withdrew the retainer of the solicitors, McDonald Johnson, who had appeared for them during the hearing at first instance, and retained another firm, Henry Davis York. However, in early September 1998, that is about two and a half months before the date of the call-over to which I have already referred, the defendants re-engaged McDonald Johnson. It is said on behalf of the defendants that various matters which occurred during the period whilst Henry Davis York were acting for the defendants were not communicated to the current (and original) solicitors acting for the defendants, being McDonald Johnson. However, quite apart from that aspect there appears to have been a very considerable degree of lack of communication between the solicitors for the defendants and their Sydney agents in respect to the call-over of 25 November 1998. 9 The impression I gained from the correspondence which has been placed in evidence is that the Court, either intentionally or unintentionally, was led by the representative of the defendants who appeared at the call-over to believe that the defendants were prepared to have the matter heard without any valuation evidence being adduced on behalf of the defendants. I am now told that the defendants are desirous of having such evidence placed before the court. 10 What happened on 25 November 1998 at the call-over highlights the necessity for whoever appears at a call-over to have a full and adequate knowledge of the case. If the defendants at that stage had been desirous of placing before the Court valuation evidence and if, even despite directions as to when that evidence should be filed, the evidence was not then available, it seems likely that the Court would not have proceeded to fix a hearing date. 11 One other aspect which concerns me is that on 7 April 1998 at the time when Henry Davis York were acting for the defendants, the solicitors for the plaintiffs (who I would emphasise are totally without any blame for whatever has arisen and have at all times acted in accordance with the various directions of the Court) wrote to Henry Davis York noting that the plaintiffs' valuation had been served some time previously and saying that unless they received a valuation from the defendants by 9 April they proposed to approach the Court and have the matter referred to a Master in accordance with the orders of his Honour of 28 November 1997. The following day, 8 April 1998, Henry Davis York responded to that letter and said: Our clients are presently having Mr McDonald value the company. That valuation will be completed shortly but may not be completed by the close of business on 9 April 1998. Whilst that valuation is being completed we expect that you will not take steps to have the matter referred to the Master. 12 I am told from the Bar table by Counsel (who of course is not instructed by Henry Davis York), that the valuation referred to in that letter was not a valuation of the shares but a valuation in relation to the winding-up of the first defendant and of other companies involved in the proceedings. That seems a somewhat tortured construction of the letter of 8 April 1998, which was responding to a letter of the previous day which clearly referred to the expert valuation contemplated by Young J and required by the order of the Court. 13 The Court must in considering this application for an adjournment attempt as best it can to do justice between the parties. It has been submitted on behalf of the defendants that if this matter proceeds to a hearing tomorrow the defendants will be denied the opportunity of placing before the Court evidence to be obtained on their behalf as to the value of the shares. The Court in those circumstances would be left only with the valuation obtained on behalf of the plaintiffs. The defendants would, without having expert advice, have considerable difficulty in conducting the cross-examination in relation to the valuation of the plaintiffs. 14 I appreciate that any adjournment of the matter will cause prejudice to the plaintiffs. I appreciate also that the Court expressly stated on 25 November 1998 that the matter would be heard on 2 February and that the defendants should be in a position to proceed to a hearing on that date. 15 I have already emphasised that there can be no criticism whatsoever directed to the conduct of the plaintiffs or their legal advisers in this matter and that the entirety of the criticism of the Court should be directed to the defendants and their legal advisers, the principals in Newcastle, their Sydney agents, and the previous solicitors who were retained for a period on behalf of the defendants. It is sometimes said that the Court in such circumstances, where it is the legal advisers who are to blame for a situation which has arisen, should allow the parties to seek redress against those legal advisers and should not grant an adjournment in circumstances such as the present. Nevertheless, I am of the view that it is appropriate that the matter should not proceed to a hearing tomorrow. 16 I propose to vacate tomorrow's hearing date. I propose to fix another hearing date before myself at the earliest opportunity and to make mandatory directions addressed to the defendants concerning the filing of evidence in relation to the valuation of the shares. 17 I propose to make an order that the defendants pay the costs of the plaintiffs of today's application and the costs of the plaintiffs thrown away by reason of the vacating of tomorrow's date. I should indicate that I propose to reserve to the defendants leave for them to make an application that those costs be borne by one or more of the various firms of solicitors who have been involved in the situation and who appear to have been responsible for the position which has now arisen. 18 I make the following orders:

1. Upon the application of the defendants, which is opposed by the plaintiffs, I vacate the hearing date of 2 February 1999. 2. I direct that this matter be heard by me on a date to be fixed by arrangement with my Associate in the month of March 1999. 3. I order that the defendants on or before 22 February 1999 serve upon the plaintiffs all affidavits of valuation of the shares referred to in the order made on 28 November 1997 and entered on 12 December 1997. 4. I order that the defendants pay the costs of the plaintiffs of the notice of motion filed by the defendants on 1 February 1999 and the costs occasioned by the vacating of the hearing date of 2 February 1999. 5. I grant leave to the plaintiffs to proceed forthwith to assessment of the foregoing costs. 6. I reserve to the defendants liberty to apply on seven days' notice for an order substituting for the defendants in order 4 hereof any or all of the present or past solicitors for the defendants or the agent or agents of such solicitors.

I certify that this and the preceding pages are a true copy of the reasons for judgment of Master McLaughlin

Dated: 1 February 1999 Associate Mark A. Provera

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