Mr Hill's cross appeal
86 Mr Hill submits that the primary judge erred in finding that, as at 19 June 2002, he would have been unable to raise the funds needed to complete the 9 May agreement by the payment of $6.9 million. I have summarised her Honour's findings in [33] above. Mr Hill challenges these findings on a number of bases.
87 It was submitted that the evidence led by Mr Hill at trial established that it was more probable than not that he would have been in a position as at 19 June 2002 to raise the necessary funds to complete the purchase at the true price. It is necessary to examine this submission with respect to each of the witnesses upon which Mr Hill relied to support a finding that, individually or in combination, those witnesses constituted a source of funds available to him for the purpose of completing the purchase of the wine business.
88 It was first submitted that Mr Hill could have raised the sum of $1.36 million from a Mr Grahame Montgomery, a director of a company which specialised in corporate mortgage brokering. In April or May 2002, Mr Hill's wife, Ms Rose, approached Mr Montgomery on behalf of BDT Holdings Pty Limited (BDT) the owner of the property 14 Ferdinand Street, Hunters Hill (the Hunters Hill property) in which Mr Hill and Ms Rose resided. At that time Mr Montgomery was successful in obtaining refinancing approval for BDT's existing mortgage over that property in the sum of approximately $1.7 million. According to her Honour (at [198]), Mr Montgomery made the assessment that in about June 2002, BDT would have had "little difficulty" in securing additional finance in an amount up to 75% of the value of the Hunters Hill property. At the relevant time it was valued at $3 million, of which 75% was $2.2 million. Accordingly, a further $550,000 could have been raised rather than the $1.36 million referred to in Mr Hill's submission.
89 However, the raising of that further amount was subject to personal guarantees being provided and assumed that Mr Hill had access to a lump sum payment or, alternatively, an annuity from his superannuation fund which would enable him to assist BDT in servicing the loan. The primary judge found (at [199]) that no evidence was called to justify that assumption. In those circumstances, her Honour was correct to find (at [199]) that Mr Montgomery's evidence with respect to raising a further $550,000 on the Hunters Hill property was of little value to Mr Hill.
90 Ms Rose also owned a property at Ryde. Mr Montgomery said he would have no difficulty raising finance up to 80% of its value. He said he could have raised $440,000 to be secured against that property. He also said that he could raise a further $312,000 over a property owned by Ms Rose in Victoria. At most, therefore, Mr Montgomery on behalf of Ms Rose might have been able to raise $756,000 although the terms upon which such loans may have been made does not seem to have been canvassed.
91 Secondly, it was submitted that Mr Brian McGuigan would have considered an equity investment in the order of $2 - $4 million. However, this was in return for a significant shareholding in the wine business. Her Honour found (at [191]) that if Mr McGuigan was to make a loan in those amounts, he would have required appropriate security and for the loan to have been on commercial terms. Furthermore, in his affidavit of 31 March 2003, Mr McGuigan set out in [15] a number of assumptions that he had been asked to make on the basis of which he said he believed he would invest between $2 - $4 million in the business in return for a significant shareholding. Those assumptions included a valuation of the wine brands (Basedow, Marienberg and Fernhill) in the business plan at $10 million and an inventory of bulk and packaged wines at approximately $13 million. Although not referred to by the primary judge, those assumptions were never made good. The highest valuation of the stock and brands contended for at the hearing by Mr Hill was based on Mr Gaetjens' evidence valuing the stock at $7.5 million and the brands at $1.56 million. These values fell far short of the assumptions Mr McGuigan was asked to make and upon which he expressed his belief as to the amount he would be prepared to invest.
92 Thirdly, reliance was placed upon evidence of Mr Don Cunnington, the managing director of PayNow Pty Ltd (PayNow), who said he might have lent $3 million to be secured against inventory. However, as her Honour found (at [183]), any such advance was subject to the standard conditions of PayNow which included a first-ranking fixed and floating charge over all of the assets and undertakings of the wine business company as well as due diligence to determine the existence, quality, quantity and title to the inventory the subject of the finance. There were a number of conditions which would have been imposed by PayNow in respect of which it does not appear that there was any evidence to suggest that they could be satisfied. Furthermore, Mr Cunnington was asked to make the same assumptions as Mr McGuigan and, as I have observed, the evidence did not support their validity.
93 Fourthly, it was submitted that Mr Brierley considered it "very likely" that he could have raised funds in the order of $6 million together with $800,000 to be secured against the Marienberg property and $250,000 through a leaseback on plant and equipment. However, as her Honour observed (at [185]), Mr Brierley's evidence was that he would have approached PayNow to obtain a facility of $5.9 million although Mr Hill never asked him to do so. Accordingly, the problems associated with accepting Mr Cunnington's evidence applies to Mr Brierley. His evidence also related to raising funds on the Hunters Hill property and against the other properties owned by Ms Rose with which I have dealt above.
94 Finally, it was asserted that finance would have been available to be secured against the wine stock. It was submitted that as the wine stock had a value of at least $7 million, finance of about $4.2 million would likely have been available against it. However, this contention went no further than that advance with respect to the evidence of Mr Cunnington and Mr Brierley.
95 Although Mr Hill knew by no later than 24 June 2002 that the real purchase price of the wine business was $6.9 million, as the primary judge found (at [226]), he never requested Mr Brierley to pursue the raising of funds for the purpose of being ready, willing and able to complete at that price. Nor did he attempt to take up what her Honour referred to as "the prima facie generous offers made by Mr McGuigan". Furthermore, her Honour found (at [228]), and it is not challenged, that commercial commonsense dictated that it was doubtful that financiers would have been willing to make loans when the person upon whom the burden was cast for repayment of those loans had no personal capacity to do so and very few assets.
96 As the primary judge found (at [232]), the only source of finance which Mr Hill pursued after 24 June 2002 was Mr Wehrle but without success. Accordingly, her Honour was therefore satisfied (at [235]) that Mr Hill pursued Mr Wehrle to the exclusion of other options because that was the only way he could possibly fund the purchase without having imposed upon him the further financial burden relating to the repayment of loans. The fact that Mr Hill was financially stressed was illustrated by the fact that not only did he have to rely upon Mr James for a partial loan of that part of the deposit relating to the purchase of the distribution business, but also he could only raise the balance of the deposit by mortgaging the Hunters Hill property. In these circumstances, her Honour was entirely justified in finding that she was not persuaded that Mr Hill was in a position to purchase the wine business at a price of $6.9 million.
97 Mr Hill submitted that her Honour had erred in valuing the wine stock in the wine business. The valuation of the stock and the wine brands was relevant, as her Honour acknowledged at [206], to the ascertainment of what would have been available by way of security for the purpose of any fundraising by Mr Hill as at 9 June 2002 to complete the purchase.
98 As already observed, Mr Gaetjens' evidence was that the bulk and bottled wine stock should be valued at $7.5 million and the wine brands at $1.56 million. He also valued certain land and buildings at $1 million to arrive at a total value of the wine business of $10 million. However, after considering the evidence, including the criticisms made of Mr Gaetjens by Mr Lonergan called on behalf of Mr James, her Honour considered (at [225]) that the value of the wine business was "somewhere in the vicinity of $5 million". It was submitted that she was in error in so finding.
99 Mr Gaetjens was not cross-examined in respect of his valuation of the wine stock at $7.5 million or the value of land and buildings at $1 million. Nor was his evidence with respect to those items the subject of challenge by contrary evidence. I am therefore prepared to accept for present purposes, as was more or less conceded by Mr James, that her Honour's estimated value of the wine business at $5 million was too low and that a valuation of the wine stock in the amount of $7.5 million should have been accepted.
100 However, even if one accepts Mr Gaetjens' evidence that the wine stock was worth $7.5 million and the Basedow, Marienberg and Fernhill brands were worth $1.56 million, there was no evidence that, based on those valuations, Mr McGuigan would have invested $2 million - $4 million in the wine business or alternatively, he or Mr Cunnington would have been prepared to make a commercial loan of $2 million - $4 million in the case of Mr McGuigan or $3 million in the case of Mr Cunnington.
101 As already observed, each of those witnesses expressed his opinion as to the amount he would have invested or lent upon the assumption that the wine brands were valued in the business plan at $10 million and the inventory at approximately $13 million.
102 Furthermore, it is apparent from what I have said that her Honour's conclusion that Mr Hill would not have been in a position to raise the necessary funds as at 19 June 2002 to purchase the wine business for $6.9 million was not dependant upon her assessment of the valuation of the business at $5 million. Her rejection of Mr Hill's capacity to raise the necessary funds was based upon more fundamental considerations.
103 In my opinion, the primary judge was correct in finding that Mr Hill did not have the capacity to raise the necessary funds to complete the 9 May agreement and, therefore, was never ready, willing and able to complete that purchase.