HARDIE FINANCE CORPORATION PTY LTD -v- AHERN [No 3] [2010] WASC 403 (22 December 2010)

HARDIE FINANCE CORPORATION PTY LTD -v- AHERN [No 3] [2010] WASC 403 (22 December 2010) - WASC 2010 case summary — Zoe

[927]

2.3.11 ... it appears that the events of 21 March 1998 had an immediate impact (closure of the business) and subsequent impact (reduced public perception and confidence) on the business of Pac-Am. Both impacts clearly and adversely affected sales.

2.3.12 I have ... calculated the immediate impact of the closure of the business and the resultant reduction in sales in March 1998 to be $55,384.45 and the resultant increase in the loss for March 1998 to be $39,322.96.

2.3.13 Further I have calculated ... that this loss of profit in March 1998 combined with the subsequent impact of the events of 21 March 1998 on trading between April 1998 and May 1999 reduced Net Profits by $727,358.

...

2.3.15 In addition to the additional sales and profit which could have been generated had the events of 21 March 1998 not occurred, Pac-Am would also have avoided the need to incur and pay for certain expenses arising from the events of 21 March 1998. These included legal fees ..., repair costs, and costs of replacing inventory.

2.3.16 If the events of 21 March 1998 had not occurred and Pac-Am had achieved the levels of profit referred to ... then the financial position of Pac-Am would have been dramatically improved.

2.3.17 Further, if Pac-Am had achieved these results, and avoided unnecessary expenses, then it would have had a significantly better Working Capital position represented by a greater cash at bank balance and/or fewer creditors. Further, it is highly likely in this circumstance that it would have been able to pay its debts as they fell due.

...

2.3.19 I have not been provided with any information during the course of preparing this report that indicates the anticipated trading results would not have continued in subsequent years.

2.3.20 Accordingly, I am of the opinion that if Pac-Am had achieved the results as calculated above and continued to trade after June 1999 then it is not unreasonable to conclude that the business could have continued to trade from the Premises for the full period of the Lease (exhibit 706 pages 7 - 8).

[979]

643 Fifthly, a further key foundation for Mr Smith's conclusion that Pac-Am's demise was attributable to the Repossession was his calculation of the anticipated sales that Pac-Am would have made had the Repossession not occurred. Two aspects of his methodology in calculating those figures appear to be open to question. First, in examining Pac-Am's trading sales figures prior to, and after, March 1998, Mr Smith excluded from his calculations Pac-Am's sales for the months of April and May 1999, and thus did not examine the entire period for which Spageddies traded. Mr Honey noted that these figures appeared to have been excluded 'because Mr Smith has assumed that the trading results for those months were 'significantly worse than the previous months' because they were 'adversely impacted by the fact that the business of Pac-Am was in the process of closing down' (refer to par 5.5.5 of the Smith report; exhibit KK par 8.2 page 9). The assumption made by Mr Smith appears to me to be problematic. Mr Smith acknowledged that he had not been provided with any information to explain the substantial decline in Pac-Am's results between April and May 1999 (ts 1087), yet he nevertheless appears to have assumed that the poor results could be attributed to the restaurant closing down. In addition, Mr Smith's assumption about the explanation for the figures for April and May 1999 has an element of implausibility about it. Mr Honey's evidence was that based on his experience, and having regard to the short shelf life of restaurant stock and staff morale issues, 'restaurant closures tend to happen quickly once the decision is made to close the restaurant. I don't believe that it is reasonable to assume that the process of closing down the restaurant would have taken two months' (exhibit KK page 9). Finally, Mr Smith's assumption of the explanation for Pac-Am's figures for April and May 1999 does not sit comfortably with Mr Smith's finding that in February and March 1999 Pac-Am very nearly, or in fact, achieved the anticipated results he calculated that it would have made had the Repossession not occurred (ts 1087). Rather than explore the possibility that the stark contrast in the results for April and May may have indicated that the collapse of Pac-Am was due to factors other than the Repossession, or to seek to explore why that was not the case, Mr Smith simply assumed that the business was in the process of shutting down as early as April and May 1999, and therefore excluded those months from his consideration (ts 1088 - 1089).

[1023]

The tort of causing loss by unlawful means differs from the Lumley v Gye principle, as originally formulated, in at least four respects. First, unlawful means is a tort of primary liability, not requiring a wrongful act by anyone else, while Lumley v Gye created accessory liability, dependent upon the primary wrongful act of the contracting party. Secondly, unlawful means requires the use of means which are unlawful under some other rule ('independently unlawful') whereas liability under Lumley v Gye requires only the degree of participation in the breach of contract which satisfies the general requirements of accessory liability for the wrongful act of another person... . Thirdly, liability for unlawful means does not depend upon the existence of contractual relations. It is sufficient that the intended consequence of the wrongful act is damage in any form; for example, to the claimant's economic expectations. ... Under Lumley v Gye, on the other hand, the breach of contract is of the essence. If there is no primary liability, there can be no accessory liability. Fourthly, although both are described as torts of intention (the pleader in Lumley v Gye used the word 'maliciously', but the court construed this as meaning only that the defendant intended to procure a breach of contract), the results which the defendant must have intended are different. In unlawful means the defendant must have intended to cause damage to the claimant (although usually this will be, as in Tarleton v McGawley, a means of enhancing his own economic position). Because damage to economic expectations is sufficient to found a claim, there need not have been any intention to cause a breach of contract or interfere with contractual rights. Under Lumley v Gye, on the other hand, an intention to cause a breach of contract is both necessary and sufficient. Necessary, because this is essential for liability as accessory to the breach. Sufficient, because the fact that the defendant did not intend to cause damage, or even thought that the breach of contract would make the claimant better off, is irrelevant.

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (1233 paragraphs)

HARDIE FINANCE CORPORATION PTY LTD -v- AHERN [No 3] [2010] WASC 403 (22 December 2010)

(a) The parties, the primary participants in the events giving rise to this action, and the witnesses

(b) Findings as to the credibility of the witnesses

(i) The leases in respect of the premises and of Shop 28

(ii) The negotiations for the fit-out of the Premises

(iii) The Contract for the fit-out and the Romalpa clause

(v) The dispute between FC and Pac-Am in relation to payment for the fit-out

(vi) Legal advice provided to FC by Mr Ahern

(i) Whether items were thrown over the balcony to the trucks below

(ii) Whether damage was done to the Premises in the course of the Repossession

(iii) The conversation between Mr Ahern and Mr Stewart at the commencement of the Repossession

(f) Pac-Am's proceedings in the Supreme Court against Mr Ahern, FC and others.

(b) Legal principles in relation to joint tortfeasors

(c) Did Mr Ahern and FC agree to pursue a joint purpose in conducting the Repossession, and to detain Pac-Am's property thereafter, and did they engage in concerted action to do so?

(d) Conclusion: were Ahern and FC joint tortfeasors?

(c) Principles in relation to trespass and conversion

(d) Did Mr Ahern's entry onto the Premises constitute a trespass to land?

(e) Did the entry by FC's servants or agents onto the Premises constitute a trespass to land?

(ii) By virtue of the Romalpa clause, did FC's servants and agents enter the Premises with Pac-Am's consent?

(A) Did the Romalpa clause in the Contract and the Contract Variation authorise the entry of FC's servants and agents because payment for the invoiced price for the goods supplied under the initial fit-out of Spageddies was overdue at the time of the Repossession?

(C) Was the additional work performed by FC for Pac-Am at the Premises the subject of a further variation or variations to the Contract, so that the Romalpa clause in the Contract also applied to the goods supplied in relation to that additional work?

(D) Was the additional work performed by FC for Pac-Am at the Premises the subject of a separate agreement, a term of which included the Romalpa clause?

(E) If the additional work performed by FC at Spageddies was subject to a Romalpa clause, was the payment of the invoiced price for the goods supplied in relation to this additional work overdue at the time of the Repossession?

(G) Conclusion: whether FC's servants and agents engaged in a trespass to land

(f) Did the conduct of either defendant constitute a trespass to goods or conversion of goods?

(g) Relevance of the apology and of the settlement of the Pac-Am action to the defendants' liability for trespass or conversion

(h) Conclusion: was the conduct of either defendant on 21 March 1998 wrongful?

(b) Principles in relation to establishing a duty of care in cases of economic loss

(ii) Autonomy of the individual and non-interference in ordinary commercial behaviour

(iii) Other freedoms, controls and limitations established by the law

(iv) The defendant's knowledge of the risk and of the magnitude of the risk

(c) Did either of the defendants owe HFC a duty to take care not to cause it economic loss?

The foreseeability of the damage suffered by HFC

The salient features of the case in relation to the relationship between FC and HFC

HFC had the means to protect itself from damage of the kind which it claims to have suffered

The information available to HFC should have alerted it to the need to take steps to protect itself from damage of the kind it claims to have suffered

Impact of the imposition of a duty on FC's pursuit of legitimate commercial interests

Conclusion: whether FC owed HFC a duty of care

(ii) Whether Mr Ahern owed HFC a duty of care

The foreseeability of the damage suffered by HFC

The salient features of the case in relation to the relationship between Mr Ahern and HFC

Impact of a duty of care on Mr Ahern's pursuit of legitimate commercial interests and on other freedoms, controls and limitations established by the law

Conclusion: Whether Mr Ahern owed HFC a duty of care

(a) Overview of the parties' cases in relation to causation

(b) Principles governing the determination of causation

(c) The basis for HFC's case in relation to causation

(d) The basis for the defendants' case in relation to causation

(e) Evaluation of the evidence, other than the expert evidence, relating to the question of causation

(ii) The untenable financial position claim: overview

(iii) The untenable financial position claim: Pac-Am's financial position before the Repossession

High costs of wages, food and beverages, and insufficient cash flow as a result of insufficient revenue from trading

Pac-Am's high level of debt and the refusal by some of its creditors to supply goods on credit

Pac-Am's dependency on its investors to inject funds into the business

Conclusion: Pac-Am's financial position prior to 21 March 1998

(iv) The untenable financial position claim: Pac-Am's financial position after the Repossession

Insufficient cash flow as a result of insufficient revenue from trading

Pac-Am's high level of debt and the refusal by some of its creditors to supply goods on credit

Pac-Am's continued dependency on its investors to inject funds into the business

(f) Evaluation of the expert evidence relating to the question of causation

(iii) Parallels and divergences in the expert evidence

(iv) Whose expert evidence is to be preferred?

(g) Determination of causation having regard to the evidence relating to the unsuitable location and untenable financial position claims

(b) The elements of, and rationale for, the unlawful means tort

(i) Rejection of the 'hybrid' tort of interference by unlawful means with contractual relations

(ii) Elements of the unlawful means tort - intention to injure the plaintiff

(iii) Elements of the unlawful means tort - wrongful or unlawful means

(iv) Application of the unlawful means tort in the appeal in Douglas v Hello! Ltd

(c) Does the unlawful means tort form part of the Australian common law?

(d) If so, are the elements of the tort established in this case?

(i) Are the elements of the unlawful means tort established in relation to Mr Ahern's conduct?

(ii) Are the elements of the unlawful means tort established in relation to FC's conduct?