Jeogla v ANZ

THE SUPREME COURT OF NEW SOUTH WALES COMMERCIAL DIVISION

50129/98 Jeogla Pty Limited & ors v RBA Wright & anor JUDGMENT The Proceedings 1 These are proceedings concerning the sale by the second defendant as receiver and manager appointed by the first defendant, of certain properties and certain livestock. The proceedings concern four properties. The first of the properties was known as 'Hernani'. The second property was known as 'Tiercel'. The third property was known as 'Jeogla'. The fourth property was known as 'Bald Hills'. As a matter of convenience, Hernani and Tiercel which were adjoining properties, were together referred to as 'Hernani' and the properties known as Jeogla and Bald Hills were together referred to as 'Jeogla'. Those descriptions used by witnesses and during submissions are generally adopted for the purposes of the Judgment. 2 Hernani had been owned by Wright family interests since approximately 1923. It occupied an area of 981 hectares or 2,453 acres. It was a grazing property situate about 12 kilometres north of Ebor, 30 kilometres west of Dorrigo and 90 kilometres east of Armidale. Title to the property was unrestricted freehold. 3 Jeogla or 'Jeogla Station' as it was sometimes called, had been owned by Wright family interests since 1902. It was a grazing property situate approximately 51 kilometres east of Armidale. It occupied an area of approximately 6,286 hectares, namely 15,532 acres. It was situate approximately 45 kilometres south-west of Hernani. Title was unrestricted freehold. 4 Jeogla Pty Limited ('Jeogla'), which is the first plaintiff, in its own capacity and as trustee for the BA Wright Family Trust, was at all material times up to November 1998, the proprietor of Jeogla and was at all material times up to August 1998, the proprietor of Hernani. The directors of Jeogla were Mr RBA Wright and his wife Mrs BA Wright, who are respectively the second and third plaintiffs in the proceedings. 5 Bald Hills Pty Limited which is the fourth plaintiff, was at all material times up to November 1998, the registered proprietor of Bald Hills. 6 Jeogla was at all material times up to August 1998, in its own capacity and as trustee for the Wright Family Trust, the proprietor of Tiercel. 7 On 1 December 1997, the Australia and New Zealand Banking Group Limited ('the Bank') which is the first defendant, appointed Mr Keith William Skinner ('Mr Skinner' or 'the receiver and manager') who is the second defendant, as receiver and manager of Hernani and of all livestock and plant and equipment located on or used in connection with the operations of Hernani. 8 On 1 April 1998, the Bank appointed the receiver, as receiver and manager of Jeogla and of all livestock, plant and equipment located on or used in connection with the operations of Jeogla. 9 The property, Hernani, was sold for $1.1million by contracts exchanged on 20 April 1998. That contract did not include as a parameter thereof, the cattle then running on Hernani. That cattle was sold on or about 16 June 1998 for the sum of $195,983 to the purchaser of the Hernani property. That sale was at a price of 77cents per kilogram live weight. 10 On 22 September 1998 contracts were exchanged for the sale of Jeogla. This occurred after the property had been passed in at auction and following negotiations which then ensued with the highest bidder. The contract included a right of first refusal to the purchaser in respect of the purchase at a predetermined price, of the cattle then on Jeogla. That right of first refusal was exercised. The land component of Jeogla was sold for $5,75million [being $4.5million as to Jeogla and $1.25million as to Bald Hills] and the cattle was sold (subject to stock count) pursuant to the exercise of the right of first refusal for $1,735,300.00. The sale was completed in late October or early November 1998. 11 The central issue in the proceedings involves whether the Bank or Mr Skinner breached its/his relevant duty to the plaintiffs under section 420A of the Corporations Law in exercising the power of sale by selling: (a) the cattle situated on Hernani; (b) the Jeogla property; (c) the cattle situated on the Jeogla property; 12 The construction of section 420A Corporations Law is raised as a question of principle. That section provides as follows: '420A(1) In exercising a power of sale in respect of property of a corporation, a controller must take all reasonable care to sell the property for: (a) if, when it is sold, it has a market value - not less than that market value; or (b) otherwise - the best price that is reasonably obtainable, having regard to the circumstances existing when the property is sold. (2) Nothing in subsection (1) limits the generality of anything in section 232.' 13 A number of questions as to the proper construction of the section are raised. One such question is whether the section imposes upon a mortgagee a duty to take reasonable care to ensure that the property is sold at not less than market value. The defendants contended that upon its proper construction the section did not contain such a duty. [Submissions 30 April 1999, paragraph 2] However, whether or not the section imposed a duty of reasonable care to obtain market value or a lesser duty of good faith in accordance with section 420A(1)(b), the defendants contended that they had satisfied the relevant tests. 14 The plaintiffs' case is that there was at all material times, an extremely valuable breeding herd running on Jeogla Station and conveniently managed by being situate upon Jeogla and Hernani. 15 The herd is said to have been dedicated to the beef-maker line of cattle, being a distinctive sub-set of the Hereford breed built up by selective breeding over 100 years to generate the current version of the herd. 16 There was no real issue but that the herd had an impeccable background and as I understood it, reputation. That this was the case seems clear at the least from the history which was not in contention, set out as part of the information memorandum circulated in advance of the Jeogla auction. That information memorandum at page 3 states inter alia: 'In 1899 Charlotte May [Wright] [Richard Wright's great grandmother] bought Wallamumbi Station - 6,070 hectare (14,987 acres) property, 25 kilometres south of Wongwibinda, and in 1902 purchased 'Jeogla Station' - 5,677 hectares (14,017 acres), which joins Wallamumbi on the eastern side. Wallamumbi at that stage was 5,668 hectares (13,995 acres). In 1827 the late George Wyndham (great-grandfather of Richard Wright) imported to Australia 5 cows and 1 bull - the first Hereford cattle on the Australian mainland. Apart from the importation of 5 females from the famous Treworgan Stud, United Kingdom, in 1952, no females have been introduced to the stud for more than 100 years. Following one of the many family splits, the management of 'Jeogla Station' became the responsibility of the late Bruce Wright, a partner of PA Wright & Sons. During the 1970's the need for greater production efficiency prompted the development of Beefmaker cattle by Richard and his uncle, David Wright. At the same time the Jeogla Hereford Stud was formed as an offshoot of the Wallamumbi Hereford Stud. The V1V Hereford Beefmakers maintain their reputation of consistent premium prices from high quality cattle underpinned by quality assurance. "Jeogla Station" was the first cattle operation in Australia to be accredited under the National Cattlecare Programme and was also one of the first cattle operations to obtain quality assurance accreditation under ISO9002. The quality assurance programme ensures that the cattle are beyond reproach in respect of chemical residues, bruising, hide damage minimisation and best practice management. 'Jeogla Station" has introduced a "cell grazing system" designed to enhance quality pasture but with the added benefit of constant education of young cattle in preparation for sale. Consequently apart from genetic selection for good temperament the environment and management practices are such that the value-adding potential is maximised for back grounders or feedlotters. Production females are similarly handled with matron cows all sold at 8 - 10 years of age P.T.I.C. Over 40 sales have been conducted through on property auction sales on a regular basis with a broad spectrum of outside support from centres in all states of Australia. In excess of 50,000 head have been marketed in this way. On March 16, 1998 a further innovation provided spirited competition on a national basis with the addition of the Computer Aided Livestock Marketing. A total of 1,778 Hereford Beefmaker steers went under the hammer in a sale described by some sectors of the media as superb. All subsequent on-property sales have integrated CALM. The history of the cattle involved goes back some 171 years, resulting in stock of impeccable genetic background and outstanding performance . It is the belief of the "Jeogla Station" management that the secret of success is extreme quality control, coupled with comprehensive and highly accurate descriptions entailing every aspect of the life of the animals involved.' [Emphasis added] 17 The herd is said to have comprised over 5,000 head of cattle at any particular point of time. It had a substantial value on any view. 18 The plaintiffs' case is that upon appointment as receiver and manager as aforesaid, the receiver found himself confronted with two properties and either one or two herds, depending upon how they were dealt with. The cattle running upon Jeogla Station and upon Hernani were from the same genetic pool. 19 Jeogla, the property, also contained the core and infrastructure of merchandising, which included sale yards and the Computer Aided Livestock Marketing ['CALM'] cattle selling system. That system allows purchasers all over the country to bid for livestock by description. 20 Local cattle saleyards in Armidale were also generally available. 21 Cattle were sold also from time to time to particular buyers as part of the ordinary realisation of the herd and its progeny. 22 In relation to the head counts which were involved in segments of the evidence, it is necessary to keep in mind that as one progresses through the year, cattle counts will change as a necessary concomitant of the relevant cycles. Autumn cattle will drop their young between approximately March and May of the relevant year. Spring cattle will drop their young between approximately July and September. From time to time, the progeny will stay with the cow [usually for about 7 months before being weaned] - and during these periods references are to the cow with calf at foot. In due course the weaned cattle become stand alone beasts and are recorded as such. 23 The plaintiffs' case embraced the proposition that from time to time the cattle are culled so that production sale stock is obtained. This involves cows who have reached approximately eight years old; heifers not considered as a sufficiently good line for retention as breeding animals, bulls and steers who are not considered desirable for retention as breeding stock and other bulls that have stood for example in the breeding cycle for approximately one year. 24 The plaintiffs' case is that incidental to the breeding programme, was the production of cross-breed cattle with a Jersey strain in such cattle. This occurred, the Court was informed, because it was the practice to mate heifers retained in the breeding herd in their first year with Jersey bulls. The resultant calf is smaller than a full sized calf. A crop of 'Jersey crosses' which are the result, then require to be sold off. 25 Generally over time, the headcount of the herd is said to remain relatively constant, as does the age cycle. 26 The plaintiffs claim that the herd was in effect a 'beef generating machine' and one which has had applied to it substantial science and which, in refining over the years the characteristics of the cows and bulls, has led to a very high quality herd. Cows forming part of the herd have a high level of fertility. The bulls and cows in the herd are said to produce cattle with a confirmation that optimises the amount of beef available from the carcass. 27 The case was put in opening by Mr Cotman SC as one raising as the principal issue the question of how the receiver ought to have dealt with the herd for the purpose of sale. 28 Mr Cotman submitted that the receiver had had in his hands two assets of substantial value. The first was the land. The second was the breeding herd. 29 It was common ground that during the period of the receivership, in addition to the sales the subject of the proceedings, the usual production sales continued. 30 The plaintiffs emphasised that there had been created on Jeogla, a selling facility for the sale by auction on-site of cattle and the CALM purchase participation. 31 Mr Cotman submitted in opening that the receiver had in his hands a very large herd being, in effect, a beef producing facility and that this was quite distinct from the product of a beef producing factory. 32 The submission was that having been selected and assimilated into the breeding herd, the receiver had on hand a group of cows and bulls which had particular characteristics. These were animals with a fourfold cachet in the market. First, there was the fact that any particular animal was the product of this particular herd. Secondly, there was the fact that this was V1V branded cattle. Thirdly, there was the fact that the produce was certified as a product of a property which, as to management practice, breeding practices and beef producing practices, had quality assurance practices resulting in ISO9002 certification. Fourthly, the particular cattle care progeny was certified by the cattle care certification. 33 Mr Cotman submitted that the herd had an objectively verifiable history both as to its genetics and as to its management. Each of these were said to have interacted to give the product of the herd a standing in the market that was relatively unique. 34 Mr Cotman put that in relation to the property which was in the receiver's hands, this could be exploited in a number of different ways. Ultimately, the Hernani cattle had been sold at 77cents per kilo live weight. The Jeogla cattle had been treated with differently. 35 A dispersal sale differs from a production sale in that it involves the dispersal of a large herd either in one line or in sub-sets comprising of stand alone breeding cattle. 36 Mr Cotman submitted that one was able to present to the market the herd presenting as its principal attribute, the fact that it was the machine which drove the property. His submission was that what the receiver was selling was the future production of the cattle. The submission was that a significant value was present being inherent in all the attention, expense and time that had been spent in bringing to a very sharp focus, the genetic qualities of the beasts, being management time and attention devoted to bringing to that point the chemical-free management which had optimised production and quality of the beef produced. 37 Mr Cotman in his opening submissions, asserted that the first obvious choice was to sell the land and the cattle separately, the cattle being sold by dispersal sale. The second obvious choice was to deal with the cattle as integrated into the sale of land transactions. In relation to the so-called integrated approach, the choices Mr Cotman put were first, to sell the land and to give the purchaser of the property, a right of first refusal to purchase the cattle at a defined and predetermined price. The further option was to sell the land and to give a right of first refusal to the purchaser of the property, but at no defined price. 38 There are plainly various advantages and disadvantages in pursuing these alternative options. A proper understanding of those advantages and disadvantages and of the approach of the receiver in the context of the advice he received as to those advantages and disadvantages, is at the heart of the issues litigated. 39 The ultimate decision of the receiver was that Jeogla should be offered for sale by auction and the purchaser given a right to acquire the cattle at a predetermined price. 40 In opening, Mr Cotman stated that the plaintiffs' principal complaint was that there was never any solicitation of the market in relation to the cattle herd on Jeogla in whole, or in breeding units, to decide what prices could be obtained through a dispersal sale of the herd, sold in its coherent form, or sold through subsets of stand alone breeding sections. His submission was that this suggested 'dispersal sale market' for the herd, was simply not enquired into. Mr Cotman opened the plaintiff's case on the basis that the evidence would prove that the sale price achieved for the sale of the Jeogla cattle, following the exercise by the purchaser of the Jeogla property of the right of first refusal, was a sale price based on saleyard appraisal figures of July 1998. In short, the evidence would prove that the cattle purchase price achieved for the sale of the cattle on Jeogla was far short of the 'dispersal sale market value' of such cattle, such market value being the best and highest value in the appropriate market for the herd 41 Mr Cotman asserted that on the evidence, the appraisal prices upon which the sale prices were based, would be shown to have sprung out of saleyard figures, 'as if elements of the herd from time to time had been sent into the saleyards to be sold through the pens as, in effect, common or garden sales or sales of one-off cattle'. The plaintiff's case was that the appraisal process was not based upon a price or value that sprang out of any attempt to explore what was the market worth, on a dispersal basis, of such a valuable herd. Factual Outline 42 I turn now to set out the relevant facts. In large measure these were uncontroversial. Where controversial, reference is made in the Judgment to what was in issue. The Mortgages 43 On 16 December 1983, Registered Mortgage number T939348 was given by Jeogla over Hernani. 44 On 28 February 1991, a Registered Mortgage number Z578904 was given by Jeogla over Jeogla. 45 On 28 February 1991, Mortgage Debenture registered number 251817 was given by Jeogla in its own right and as trustee of the Family Trust. 46 On 26 February 1992, Registered Mortgage number E743605 was given by Jeogla in its own capacity and as trustee of the trust over Tiercel. 47 On 26 February 1992, Registered Mortgage number E897920 was given by Jeogla over Jeogla. 48 On 26 February 1992, Registered Mortgage number E897918 was given by Bald Hills Pty Limited over Bald Hills. 25 November 1996 - Notice of Termination of Facilities 49 On 25 November 1996, the Bank gave Notice of Termination of facilities. 3 December 1996 - Letters of Demand 50 The Bank forwarded Letters of Demand on 3 December 1996. 16 December 1996 - Mediation pursuant to Farm Debt Mediation Act 51 On 16 December 1996, a mediation was held pursuant to the Farm Debt Mediation Act. 17 December 1996 - The December Deed 52 By Deed dated 17 December 1996, the Bank, Jeogla, Miribel Holding Pty Limited, Aralon Holding Pty Limited, Bald Hills Pty Limited and Mr and Mrs Wright agreed upon a number of matters including the obligation of the Jeogla Group to make 'Principal reduction' payments to the Bank in late March 1997 and in late June 1997. 12 March 1997 and 20 March 1997 53 On 12 March 1997, Certificates were issued pursuant to section 11 of the Farm Debt Mediation Act to the Bank in relation to Mortgage Debenture registered number 251817 and to Mortgages numbered T939348, E743604, Z578904, E897920 and E897918. May 1997 - The May Deed 54 In May 1997, a further Deed was entered into between the Bank, Jeogla, Miribel, Aralon, Bald Hills and Mr and Mrs Wright. The Deed recited that the Jeogla Group had defaulted in its obligations owed to the Bank by the December Deed and provided inter alia for a further amount to be paid by the Jeogla Group to the Bank on or before 30 June 1997. 27 May 1997 55 On 27 May 1997, the second defendant was appointed agent for the Bank in possession to the property known as 'Warrabah'. 11 June 1997 56 On 11 June 1997, the sale of Broadmeadow by Trentstone Pty Limited was settled. 30 June 1997 - Jeogla Group Default under the May Deed 57 On 30 June 1997, the Jeogla Group defaulted under the May Deed. 4 July 1997 - Proceedings 50153 of 1997 Commence 58 By Summons filed on 4 July 1997, the Bank commenced proceedings in the Commercial Division of the Court number 50153 of 1997. 1 September 1997 - The September Deed 59 On 1 September 1997, a further Deed was entered into between the Bank, Jeogla, Miribel, Aralon, Bald Hills and Mr and Mrs Wright. 7 November 1997 - Hernani and Tiercel put to Auction 60 On 7 November 1997, the Hernani and Tiercel properties were put to auction by the Wrights. The property was passed in at the auction. 28 November 1997 - Jeogla Group Default under September Deed 61 On 28 November 1997, the Jeogla Group defaulted under the September Deed. 62 On about 28 November 1997, the receiver received a copy of a report dated 24 November 1997 prepared by Chris Meares of Meares & Associates who acted as agents for Jeogla on the sale of Hernani. [KWS4] The report generally dealt with the status of the marketing campaign in respect of the Hernani Station. 63 It is generally unnecessary to detail the circumstances in relation to which the receiver went about approaching the auction of Hernani as the plaintiffs no longer press their claim in the proceedings in relation to the sale of that property. 1 December 1997 - The Bank appoints a Receiver and Manager over Hernani and Tiercel 64 By appointment dated 1 December 1997, the Bank appointed the second defendant as receiver and manager of the properties known as Hernani and Tiercel. 65 At the time of the receiver's appointment on 1 December 1997, he was aware that Hernani had been offered for sale by public auction by Jeogla on 7 November 1997. 11 December 1997 - Judgment entered in favour of the Bank for possession 66 On 11 December 1997, Judgment was entered in favour of the Bank for possession of the properties Hernani, Tiercel, Warrabah, Jeogla, Bald Hills, Richardsons Arcade and 122 Dumaresq Street, Armidale. 15 December 1997 67 On 15 December 1997, settlement of the Warrabah property took place. 15 January 1998 - Auction Agency Agreement - Hernani 68 On 15 January 1998 an Auction Agency Agreement was entered into in respect of the property Hernani. January 1998 69 The marketing of the Hernani property commenced in January 1998. 6 March 1998 - Hernani and Tiercel are put to Auction 70 On 6 March 1998, the receiver put Hernani and Tiercel to auction. The properties were passed in at the auction and the highest bid was $875,000. The receiver had set the reserve price in consultation with the Bank at $1,415million. 71 After the property was passed in, the receiver had discussions with Mr Frank Spilsbury of Elders who had been acting on the sale. Mr Spilsbury told the receiver that the bids that were made at the auction were a reflection of the current market and that it was his view that neither the absence of the Forestry Lease, nor knowledge of the Wright's financial difficulties, had had any material effect on the bidding. [The reference to the Forestry Lease was a reference to a lease held by Wright interests over land adjacent to Hernani.] The receiver asked Mr Spilsbury to continue to negotiate with any of the interested parties with a view to getting the price up to or in excess of the reserve and Mr Spilsbury said that he thought the reserve was too high. 19 March 1998 72 Elders at Armidale prepared on 19 March 1998, an estimate of prices for the cattle on Hernani [KWS 22]. The estimate is appended to the Judgment as Appendix 1. 31 March 1998 - Default 73 31 March 1998 had become a defined date for the purpose of paying a segment of the debt under the Deed. Default took place when the payment was not made. 1 April 1998 - Receiver and Manager Appointed to Assets and Undertakings of Jeogla Pty Limited including Bald Hills and Jeogla Station 74 On 1 April 1998, the second defendant was appointed receiver and manager of all the assets and undertakings of Jeogla Pty Limited in its own capacity and as trustee of the BA Wright Family Trust including the properties Bald Hills and Jeogla Station. The appointment did not cover those assets in respect of which the second defendant had been appointed receiver and manager on 1 December 1997. 75 Following the early April 1998 appointment, the receiver had discussions with Mr Richard Braham who had been employed by Jeogla as manager of Jeogla Station. The receiver also reviewed Mr Braham's curriculum vitae and formed the view that Mr Braham had the appropriate expertise to manage the properties on his behalf and employed Mr Braham to do so. 2 April 1998 76 On about 2 April 1998, the receiver met with Mr Warren Dellow whom he was aware was interested in purchasing Hernani. Prior to this meeting, Mr Dellow had made an offer to purchase the property at $1,050,000 and had also offered to purchase the livestock on the property at a price of 0.63cents per kilogram live weight. At the meeting in early April, Mr Dellow increased his price for Hernani to $1.1million but would not increase his offer for the livestock. Mr Dellow advised the receiver that this was his final offer and that if the receiver did not accept the offer he was moving to purchase another property. Mr Dellow agreed to keep his offer open for a further five days whilst the receiver sought bank approval or otherwise for the sale. The receiver asked Mr Dellow to formally submit his offer through Elders. That offer was submitted formally. [Elders' letter of 6 April 1998 submitting the offer - KWS 24] 77 The receiver formed the view that the offer of $1.1million represented the market value for Hernani at the time. In the light of the fact that the plaintiffs no longer press their case in respect of the sale of the Hernani property, it is unnecessary to summarise the evidence of the receiver as to the basis for this view which he formed 20 April 1998 - Contracts for Sale of Hernani exchange 78 On 20 April 1998, contracts for the sale of Hernani were exchanged. The livestock running upon Hernani was not sold as part of the transaction. The purchase price of $1.1million obtained, did not include the livestock. The contract is to be found at KWS 25. 79 Following the sale of the property Hernani, the receiver and Mr David McCarthy of the receiver's office, had various negotiations with Mr Dellow in relation to the sale of livestock located on Hernani. Mr Dellow eventually made the final offer of $0.77cents per kilogram on an 'as is where is' basis, which meant that the receiver did not have to pay agents' commission and associated costs, freight and freight insurance. 8 May 1998 80 By letter from Elders to the receiver dated 8 May 1998 [KWS 26], Elders (Mr Maddigan), wrote to the receiver advising that Mr Maddigan and Mr Spilsbury had inspected the listed cattle on Hernani on 1 May 1998 and that Mr Maddigan had found the cattle to be 'generally in a forward to prime condition, with the odd beast showing a degree of lightness due to age, disease or a genetic problem'. 81 The letter advised that the spring 1996 heifers were small framed whilst quite healthy. Mr Maddigan believed this to be from lack of improved pasture feed in their early growing stages. 82 Mr Maddigan stated: 'I have put an estimate on prices based on the Armidale sale on 7 May 1998 (market report attached).' 83 Mr Maddigan also included with the letter the offer from Mr Dellow and stated that he had put his estimate of price 'on these and the net price'. 84 The enclosures to this letter are appended to the Judgment as Appendix 2. Late April - Early May 1998 85 In late April and early May 1998, the receiver asked three rural property agents to prepare marketing submissions for the sale of Jeogla Station [Jeogla and Bald Hills]. The agents were Elders who had been the agents appointed by the receiver on the sale of Hernani, Meares & Associates who were the agents engaged by Mr and Mrs Wright and Jeogla Pty Limited on the marketing and sale of Hernani in October and November 1997, and LJ Hooker Rural, who were known to the receiver as experts in the sale of rural properties. 86 On 8 May 1998, Mr McCarthy accompanied Mr Spilsbury and Mr Hamersley from Elders Rural on an inspection of Jeogla. On 13 May 1998, Mr McCarthy accompanied Mr Nolan from LJ Hooker Rural and Mr P Watts from PR Watts & Co, Armidale, on an inspection of Jeogla. Mid-May 1998 - The Hooker's Marketing Action Plan 87 On 14 May 1998, LJ Hooker Rural submitted a marketing action plan to the receiver [KWS 28]. The plan included the following: 'On Wednesday 13 May 1998 Paul Watts of PR Watts & Co, Armidale, and David Nolan of LJ Hooker Rural - Sydney inspected the prestigious and very well known Armidale District property, "Jeogla Station" . . . The VIV brand and the ISO accreditation should also be included in the sale together with mention of the availability of on-going management. We would recommend the livestock and plant and equipment be included in the sale of the property as a separate item. A detailed livestock schedule with values would be prepared and be included in the information memorandum . The successful purchaser of "Jeogla Station" would then be given first right of refusal to purchase the livestock . This recommendation would also apply to the plant and equipment . . . Opinion of Market Value After our inspection of the property, taking the above into consideration and carrying out our due diligence in relation to the property market values in the Armidale and surrounding districts, together with the overall market for large scale holdings in New South Wales, we are of the opinion the market value of "Jeogla Station" for the land and improvements is between $5,250,000 - $5,750,000. The above values are our opinion of the present day market place and are not to be misconstrued as a formal valuation. NB We would suggest a premium could be achieved over and above our opinion should the property be promoted in a professional manner to the widest possible market.' [Emphasis added] 88 Under cross-examination, Mr Skinner gave evidence that at the time he received this marketing action plan, there was already active in his mind as an issue whether to offer Jeogla with or without the livestock. [T203] 89 Mr Skinner's evidence was that as he understood it, Hookers recommendation in its marketing action plan was that a detailed livestock schedule with values would be prepared and be included in the information memorandum, this to be disclosed as being the price at which a right of first refusal could be exercised by the purchaser of the land. [T204] 90 Not only did Mr Skinner accept that Hookers had in their marketing action plan referred to selling the land with the cattle included at a nominated price disclosed in the information memorandum, [T207] but he also answered as follows: 'Q. And you assume, I take it, that the price that would be nominated in the information memorandum would be as close as possible to market price for the cattle didn't you? A. Yes I believe so yes. Q. So that in effect, as you understood it, the cattle were priced neutral, save as to their availability to the purchaser of the land? A.. Yes.' [T207] 91 The receiver accepted that he had understood that what Hookers were saying was that they did not want to discount the cattle, or put a premium on the cattle, and that the cattle should be offered at market value, so that a purchaser of the land, if the purchaser wished, could 'have a going concern business, buy the land and obtain the cattle at fair market value'. [T208.5] 92 Mr Skinner's evidence was as follows: 'Q. You are saying, as I understood it, the figure that Hookers were talking about was a figure for the land sold with the prospect of being a going concern, because of the option to take up the cattle at market price? A. That's correct. Q. It is also then self evident, is it not, that if in fact you have mispicked the nomination of the price of the cattle and you are now, for example, significantly below market with the price you have nominated, would you expect that you would still get effectively the correct dollars because the person would up their bid for the land if they wanted the cattle and the land? A. That's right. Q. Conversely, if you had pitched the price too high a person might buy the land and simply say "I'm not going to take up the cattle at that price. I'll go into the market and buy them at a dispersal sale of the cattle"? A. Yes.' [T208-209] Late April/early May 1998 - The Elders Rural Marketing Submission 93 A marketing submission was prepared and submitted to the receiver by Elders Rural in late April/early May [KWS 29]. Under the heading 'Executive Summary', the marketing submission stated, inter alia: 'Consideration is also given to the marketing of the property with the cattle herd as part of that marketing.' 94 The Executive Summary also stated that the estimated selling price for the property was in the range of $6.48million to $7.25million without stock or plant and that given the right conditions, a premium price above that figure could be achieved. It recommended a marketing programme 'to ensure that the property received maximum exposure in the marketplace'. 95 At page 8 of the Elders' Marketing Submission, the recommended marketing campaign is dealt with, inter alia, in the following terms: 'We believe a marketing campaign should focus on an auction for say mid-August, possibly Wednesday 12th or perhaps later that month. The reason for this time frame centres around a time which pre-spring in the New England while other areas of the tablelands are about to go into the spring. We would anticipate, particularly if the current weather patterns continue, that is the breakdown of the El Nino, a general improvement in seasonal conditions. We believe the demand for cattle will be strong this coming spring and summer because of the drop in numbers caused by the drought. A general feeling of anticipation can be captured at this time rather than waiting or running the risk of the season going off . . . For a proposed auction date 12th August it would be necessary to commence the promotion the week of 29th June. Promotion material would need to be prepared early in June at least after the cattle sale at Jeogla on 22 May. Also the Elders Rural Property Album deadline for July is 23rd June. As part of the marketing campaign consideration needs to be given to the overall presentation of the properties. We believe we have a unique opportunity to capitalise on the industry recognition of the 171 years of Hereford Breeding, the V1V brand recognition together with the outstanding quality of the herd. Plant will be minimal because of the grazing nature of the property. A clearing sale therefore would not have much to offer so it would be best to include the plant. . . . Livestock values nominated in the contract either at a set figure or a range in which the buyer can nominate his values . If values have changed much between nomination and exchange then the purchaser can adjust his bid in the land component. A full count on delivery with numbers adjusted at contract value plus or minus which will alter settlement gross. We believe it would be highly desirable to present the property as a full commercial trading enterprise with disclosure of trading figures. These figures will need careful study to determine whether the bottom line will enhance or assist in the final sales figure to be achieved for the asset.' [Emphasis added] 96 Mr Skinner's evidence under cross-examination as to his understanding, having read this marketing submission, included the following: 'Q. Do I understand you to have understood that to mean that if your nominated price for the cattle ends up being too low relative to the market at the time of the auction, it doesn't matter because that would be picked up in the bid for the land? A. Well it could be either way. If the price was too high then they would probably discount the value of the land as well, yes. Q. Or simply not take up the option to take up the cattle at the price nominated? A. Yes, the purchaser could have just bid for the land with no intention of buying the livestock, yes. Q. If the livestock was well in excess of market value you would expect a purchaser to say buy the land and not take up the option to buy the livestock thinking they can do better by just buying the land? A. Other than its an auction sale, if someone takes a different view it could increase. Q. That's the risk of thinking that way? A. Yes. Q. But the real risk of [sic] your point of view, in terms of an under realisation of the cattle, was that if you fixed the price of the cattle in advance of the auction sale and the market moved up you would want to be satisfied that you had a mechanism to pick up that increase through the land sale, wouldn't you? A. Yes, I've considered that selling the land and livestock together as a business normally achieves the best price - not just livestock - any business. And the mechanism that we put in place enabled someone to bid with confidence that they could pay their assessment of the combined value, irrespective of how its apportioned and that that would give us the best price in the market place. Q. Right. But you understood that you might also have to give consideration to selling the components separately didn't you? A. Oh, that was quite - it was one alternative that could have occurred, yes. Q. Because the property you were selling was suitable not only for cattle, it was also suitable for sheep, for cropping, for mixed farming, a number of different uses wasn't it? A. It was, but I understand the best use of it was for grazing. Q. But certainly the range of purchasers that you have been told might be interested in this property may include people who had no interest in taking over the cattle herd and running it as a beef grazing property? A. That was always a possibility, yes. Q. And indeed, as you understood the advice that you were receiving, the property had an intrinsic worth simply because it could be used for a number of different grazing and farming activities in various permutations and connotations? A. Well, I wouldn't hold myself out to be an expert to be able to be precise as to how to value a property with all those alternative uses. My understanding from reading the valuations and the other information I got from the respective agents was that, yes, there were alternative uses for the property. Without exception I think they all said that the best use and most value was its grazing and that was the extent of my understanding of the respective values.' [T205-206] 97 At page 12 of the Elders' Marketing Submission the following appears under the head 'Estimated Selling Price': 'In assessing the likely final sales figure for the combined submission of Jeogla Station and Bald Hills we are conscious of the fact that there is no set value for any piece of real estate whatever it is or wherever it is. For the purpose of marketing these properties it is however extremely important to work within a reasonable range of values that will be part of the overall strategy to achieve the best price possible, having made known the availability of the submission. Comparable sales in this New England area of similar sized properties are just not available as none have been made. We can however justify the use of a dry sheep equivalent price for similar land, cleared, improved and pastured with a fertilizer history. These figures are for a fenced and watered property with the above attributes. This figures is in the range of $115 to $120 per dry sheep equivalent area. We would convert to a cow area by using the ratio of 12 sheep to 1 cow and calf area. Using this method we can either calculate the recent stocking levels to a total DSE multiplied by the price range, and add the value of the buildings for a resultant figure. If we said the reasonable current stocking rate was a total of 4,300 cows with say 80 bulls this would produce a total DSE of 52,400. Multiplied by say $115 plus the improvements at $818,000 gives a figure of $6.8million . We could do the same exercise using a value for a cow area or the same exercise using the D.S.E. value factor of $120 which would give us a figure of $7.1million. It would appear the annual performance of the property would range form 7D.S.E. per hectare during the winter to 9D.S.E. per hectare during the summer. We are well aware of the opportunity stocking that can be pursued during the summer period on improved New England pastures to augment and expand on cash flow. In summary we therefore believe the final sales figures will be in the range of from $6.48million to $7.25million without stock and plant. If we add the possible value of the cow herd alone at say an average of $400 per head this produces a figure of $1.72million .' [KWS29 at page 12] [Emphasis added] 98 Mr Skinner's further cross-examination on this document appears at transcript 211-213. 99 Mr Skinner was then asked whether he was concerned at all that Elders in their proposal in relation to the sale of Jeogla, appeared to be nominating a range of values for the cows on Jeogla which was significantly higher than the range of values for which the Hernani cows were being appraised also by Elders. Mr Skinner's answer was: 'In the appraisal for selling Jeogla - sorry in the marketing submissions I didn't put a lot of weight on the values of either the livestock or the properties. I got a valuation or an appraisal of the livestock on Hernani and I subsequently got one for those livestock on Jeogla. Likewise, I got a valuation of the properties. That is what I placed emphasis on in terms of value. The submissions from agents - the emphasis is on what they are going to do or their recommendations in terms of how they go about selling the particular assets, how they market them, what resources they've got, what their ability to penetrate the market is, etc. I didn't spend a lot of time nor did I put a lot of weight on the values that you are referring to. Q. Did you put at least this much weight on them, Mr Skinner: What Meares and Elders were telling you was that in their view the commercial herd was a very valuable component of the properties that you were putting up for sale? A. Yes. Q. That when one looked at it on a stand-alone basis, when one looked as to the land and as to the cattle, or if you look at the cattle and the land together, the cattle had a very substantial value? A. That's correct, yes.' [T216] 100 Mr Cotman put to Mr Skinner at transcript 217-218, that a very comprehensive valuation had been obtained from Herron Todd White with respect to the land at Jeogla. He then put the following questions: 'Q. Am I right in thinking that the only assessment or review that you obtained of the value of the herd, either on Hernani or on Jeogla, were the letters from Elders and their supporting tabulation of cattle numbers and amounts that we have seen as at 8 May in relation to Hernani and I think for 30 July in relation to Jeogla? A. I can't state the exact dates, but yes, it was the two documents that I got from Elders. Q. I think I'm being unfair to you insofar as there was one additional document which was a letter written by Mr Maddigan explaining the differences between what was in the Hernani assessment and what was in the Jeogla assessment. Do you remember he wrote a letter in August . . . This was apparently written on 27 August 1998 from Mr Maddigan to Mr McCarthy.' [T218] Early May 1998 - The Meares Marketing Submission 101 The Meares & Associates marketing submission was prepared on 5 May 1998 and submitted to the receiver under cover of letter dated 7 May 1998 [KWS 30]. This submission includes the following: 'Summary of recommendations Preferred Method and Time of Sale It is recommended that Jeogla Station be offered for sale for auction on Thursday 12 November 1998 in Sydney. Sale Format The sale will initially include all the land together with the fixed improvements with livestock, plant and machinery optional. In the first instance, the property would be offered for sale as a whole, and if unsold then in two portions, namely Jeogla Station . . . and Bald Hills . . . An inventory of livestock, plant and machinery will also be drawn up and made available to successful purchasers. The valuations for both livestock and plant would be taken at the commencement of the marketing campaign at the end of September . . . Estimate of Likely Selling Price It is estimated that the current market selling price of the land would range from $7.5million to $8.5million. Whilst the livestock have not been inspected, it is estimated that they could be worth $2million to $3million with plant and machinery $400,000 to $500,000. This would give an overall gross of $10million to $12million . At this stage an in depth assessment of current market selling price has not been carried out due to the time constraints in the preparation of this report. Therefore the figures quoted are subject to a comprehensive inspection and assessment which could be carried out almost immediately. Whist the grazing industry at the moment is showing depreciated returns, the above prices include a premium of approximately 10% to 15% above current market levels which reflect an investment opportunity with the quality of Jeogla Station. ' [KWS30 at page 3] 102 The Meares Marketing Submission also at page 1 in the introductory section stated inter alia: 'Today Jeogla Station, which is highly regarded both nationally and internationally as a leading cattle breeding property, carries approximately 5,000 principally commercial breeding cows, the progeny of which are mainly sold through three production sales throughout the year. . . . One of the features of the Wright family's cattle breeding programme has been the evolution of the Beefmaker breed. Beefmaker cattle constantly achieve premium prices as a result of excellent carcass yields. . . . The purpose of this submission is to recommend a marking strategy which will allow the vendors to dispose of the land and fixed assets, the renowned V1V herd, plant and machinery and maximise the values obtained. As the family name together with the brand names of Jeogla Station and V1V are internationally known, it will be important to market the assets both nationally and internationally . . .' [KWS30 at page 1] 103 At transcript 215-216, Mr Skinner under cross-examination in relation to the Meares Marketing Submission and in particular as to Mr Meares' estimates with respect to the livestock, gave evidence that he did not believe Mr Meares to be a livestock valuer so that the value which Mr Meares placed on livestock was, to Mr Skinner's perception, nowhere near what Mr Skinner would place on the appraisals that he had received from Elders. Mr Skinner's evidence was that 'I just didn't consider that valuation in the context of the cattle. It was an indicative price by Mr Meares who had not inspected the livestock. It didn't have a lot of weight with me'. [T216] The Receiver Selects Hooker as Preferred Marketing Agent 104 The receiver reviewed the respective marketing action submissions and formed the view that LJ Hooker Rural was his preferred agent for the marketing and sale of Jeogla Station. He recommended to the Bank that he appoint LJ Hooker Rural as agent, with PR Watts & Co as their conjunction agent in Armidale for the following reasons: (a) The receiver's preference was that the property be sold by an agent based in the city in conjunction with an agent in the country, as in the receiver's experience, city agents were able to market substantial properties to a far wider audience. (b) The receiver had received favourable references on Mr Nolan from LJ Hooker Rural from a number of managers in credit units of leading Australian banks. (c) The receiver was satisfied with the LJ Hooker Rural marketing action plan. 20 May 1998 - Letter requiring the Wrights to vacate 105 By letter dated 20 May 1998 from Deloittes [PX 680], notification was given to the Wrights that they were required to vacate the property within one month. 20 May 1998 - Auction Agency Agreement - L J Hooker (Rural) re Jeogla 106 By Auction Agency Agreement entered into on 20 May 1998, LJ Hooker (Rural) was appointed as agent for the sale of Jeogla. [KWS 32] The sale of Hernani cattle had not yet taken place. The receiver continued to retain the option of removing the Hernani cattle to Jeogla Station for sale together with the cattle running on Jeogla. [T202] 22 May 1998 - Production sale on Jeogla 107 On 22 May 1998, a production sale took place on Jeogla. This was a CALM sale. In preparation for the sale, Mr Maddigan had inspected the livestock in late April and prepared on 7 May an estimate of prices. The Receiver's Office Prepare a Comparison 108 At some stage, presumably soon after 22 May1998, Mr McCarthy from the receiver's office, prepared a document which assessed Mr Dellow's offer by comparing it to the Elders' appraisal and the prices achieved at the sale from Jeogla on 22 May 1998, together with an assessment of the gross price taking into account trucking costs and commission if the stock had been sold at auction. That document [KWS 26A] is appended to the Judgment as Appendix 3. Based on the documents appended to the Judgment at appendices 2 and 3, the receiver formed the view that the offer from Mr Dellow represented market price for the Hernani cattle. 16 June 1998 - Sale of cattle running on Hernani 109 On 16 June 1998, an invoice for the sale of the livestock running on Hernani was sent from the second defendant to the purchaser of the Hernani property, Mr Dellow, at a price of 0.77cents per kilogram. As previously indicated, the sale of the livestock on Hernani was not pursuant to any contractual right reposed in the purchaser of the Hernani property. The Wrights leave Jeogla 110 On 18 or 19 June, the Wrights physically left Jeogla Station. 7 July 1998 - Media Advertising Campaign Listing 111 On 7 July 1998, LJ Hooker Rural prepared a listing which was approved by the receiver, being a listing of the media advertising campaign proposed for Australian newspapers for the sale of Jeogla. The proposal covered advertisements in the Financial Review, The Land, Queensland Country Life on dates in August and September 1998. 112 An example of the advertisement which appeared as per the proposed campaign, is to be found at KWS 38. It reads: 'Armidale/New England District Approx 16,500 Acres - 6,677 Ha "Jeogla Station" A Foundation Stone Of Australia's Cattle Industry - 171 Years of Hereford Breeding . Home of the famous VIV Hereford beefmakers = Consistently carrying in excess of 4,000 mixed aged females = National Cattlecare Program Accreditation and ISO9002 = Large scale on farm livestock selling and handling complex . Versatile and undulating grazing country - magnificently watered = 5km frontage to Oakey River - substantial spring fed dams in all paddocks = Well presented and maintained improvements - and/incl main homestead . Comprehensive list of livestock & plant available. Experienced on-going management available' Auction Tuesday September 22, 1995 . . .' 21 July 1998 - Mr Nolan of Hookers advises as to three alternative methods of presenting Jeogla Station to the market place 113 By letter dated 21 July 1998, Mr Nolan of LJ Hooker Rural wrote to the receiver advising, inter alia, as follows: 'As discussed, we are writing in relation to our recommendations for the livestock on "Jeogla Station" together with additional advertising and promotional suggestions. The livestock are critical to the eventual sale of the property. There are three obvious ways in which "Jeogla Station" can be presented to the market place and these are as follows: (a) Land and Improvements - Cattle sold via a dispersal sale This scenario would not be attractive to perspective [sic] purchasers as they would have to compete with a large field of buyers at the dispersal sale or outsource the cattle from other avenues. As a result they would create their own premium in the market as well as finding it nearly impossible to locate big lines of well bred and proven breeders. Because of the above, prospective purchasers would have to discount their opinion of the land and improvement value to compensate for the above livestock purchases. In the New South Wales Rural Property Market it would be rare to find an operation the size of "Jeogla Station" being sold without the livestock. We have witnessed in Queensland large scale properties being sold without the cattle but this has normally been brought about by existing land owners looking to buy fattening country for existing livestock they already own. In the case of Jeogla Station, it would be viewed in the market place as predominantly a breeding property as opposed to being a fattening property. (b) Land and Improvements - first option of purchasing the cattle herd - No value given prior to the auction In this scenario, potential investors would certainly be hesitant in purchasing the property without having the knowledge in relation to the value of the herd. The majority of purchasers would feel they could be held to ransom after they had purchased the property and therefore they would be in a similar position to the purchasers in category (a), having to outsource the cattle. As a result of the above, purchasers would make significant discount allowances when calculating the value of the land and improvements. (c) Land and Improvements and the cattle herd as an option at an agreed value There is no doubt this is the most attractive package for potential investors . It is also the best method of maximising the value of the land and improvements. When taking into consideration the value of the land and improvements in comparison to the value of the herd then it would be sensible to protect the value of the property. By having the first option to purchase the cattle this will allow potential investors to carry out their due diligence in a fairly accurate manner and because of this a premium for the land may be achieved. The recent media speculation by Mr Wright (The Land, Thursday 4 June 1998) of the property including livestock and plant having a value in the vicinity of $17million would in our opinion be based on absolutely ridiculous "blue sky" assumptions. For the record, "Jeogla Station" is a very well known large scale breeding property running a substantial herd of Herefords [the word 'Beefmaker' in handwriting appears in this place in the letter, but it is unclear to me whether it formed part of the letter as sent] cattle which are also highly regarded in many quarters. However while the successful purchaser of "Jeogla Station" will take all that into consideration they will also be very mindful of the overall cost and therefore the future returns based on their capital invested.' [Emphasis added] 114 It is convenient to refer hereafter to the three alternatives put in this letter as 'Alternative (a)', 'Alternative (b)' or 'Alternative (c)'. 115 Mr Skinner accepted that the choice that he made was ultimately to follow the third of these recommendations, namely to sell the land and improvements and the cattle herd as an option at an agreed value. [T222] 116 The same letter had included a section dealing with 'local and international marketing' and advised the receiver of further research carried out by LJ Hooker Rural on this topic. LJ Hooker Country and Rural Tasmania had been contacted as Mr Roly Gibbons of that branch had been marketing a property for the Tasman Dairy Company called 'Woolnorth'. This was arguably Tasmania's most well known property and had a market value of approximately $12million. Based on productivity it was a larger holding that Jeogla Station however similar in reputation. Mr Nolan advised the receiver in this letter : 'So where the enquiry from overseas came from was most interesting. Roly Gibbons had a good response from the UK and Europe via the Farmers Weekly and The Country Life. He found they also received good enquiry from Asia but it turned out to be very general and more of a fact finding mission than anything of any substance . . . Roly in summarising all of the above informed us over 95% of his international enquiry came through prospective purchasers having their own representatives in Australia. Roly also was in agreement the livestock should be offered to the successful purchaser at an agreed value . He also has a substantial list of both Australian and International investors who he will provide to us in order for the information on Jeogla Station to be sent. In summary, we as the appointed selling agents would recommend the livestock be included at a predetermined figure. In order to prove an independent value of the herd then an outside stock and station agency should be commissioned. We would recommend Elders Pastoral be paid to carry out this valuation. Elders Pastoral have sold cattle in the past under instructions from Mr Rick Wright and this would also help alleviate Mr Wright in trying to discredit our opinions in relation to the herd's value . . . Please find attached our draft advertisement of the forthcoming auction of Jeogla Station. . . . Also attached is our recommended addition to the already approved advertising budget. The new budget indicates the cost of two advertisements in the Weekly Times in Victoria and also two advertisements for both the Farmers Weekly and Country Life in the UK.' [KWS 39] [Emphasis added] The Receiver approves the Advertising Campaign 117 In due course the receiver approved an advertising campaign covering the advertising on 6 August 1997 in the Weekly Times, on 7 August 1997 in Country Life, on 9 August 1997 in Farmers Weekly, on 13 August 1997 on Weekly Times, on 14 August 1997 in Country Life and on 15 August 1997 in Farmers Weekly - KWS 40. 118 Those advertisements were in the same or similar form to the advertisement earlier detailed in this Judgment to be found at KWS 38. 29 July 1998 - The Receiver Seeks Mr Maddigan's Appraisal 119 By letter dated 29 July 1998, the receiver wrote to Mr Maddigan in the following terms: 'I . . . seek your services in providing a market appraisal of the livestock on Jeogla. Jeogla Station is being offered for sale by auction on 22 September 1998 and the successful purchaser of the property will have the first option to purchase the livestock at a predetermined price based on the market appraisal provided by you. In determining the market appraisal, please give due consideration to the history of breeding and identification with the VIV brand. Your market appraisal will form part of the contract for sale of the livestock and should be in a detailed form setting out your appraisal on each category and age of livestock. I understand that a per head appraisal is the usual approach for livestock of this nature. However if this is not the case, please advise the appropriate unit of valuation. As the livestock will be sold in October, your appraisal should reflect your view of the livestock at that time.' [Emphasis added] 120 The letter also referred to the Elders' fee for its services and included the following: 'If the livestock is not sold to the purchaser of the property and a disposal sale is held which is conducted by Elders and West Farmers Dalgety as co-agents, then I confirm your agreement that the appraisal fee will be deducted from your agents fee for the sale.' [KWS 35] [Emphasis added] 121 Under cross-examination, Mr Skinner was asked in relation to the above paragraph in the letter whether he there intended to refer to a dispersal sale, that is to say a sale of all the cattle off Jeogla in the event that the purchaser didn't want to take them up. The answer was given as follows: 'Yes, it was intended if the purchaser didn't exercise the first right of refusal or the option, whatever you like to call it, then insofar as I then disposed of the livestock by whatever other means, and I hadn't at that stage limited it to any one particular means, then the appraisal fee would be a deduction off the commission that he may have earned, assuming of course, that I did appoint Elders to do it.' [T223] 1 August 1998 - Marketing of Jeogla commences 122 On 1 August 1998, the marketing of Jeogla commenced. 7 August 1998 - Herron Todd White Valuation 123 On or about 7 August 1998, the receiver received a valuation of Jeogla and Bald Hills, carried out Robin Gardiner of HTW Valuers (Dubbo) Pty Limited [Herron Todd White]. In paragraph 38 of the receiver's affidavit of 1 April 1999, he deposed that he had 'relied on this valuation as representing the market value of Jeogla'. 124 In summary, the valuation at page 36, assessed the subject values in the following terms: 'Current market value (i) Jeogla Station $4,550,000 (ii) Bald Hills $1,525,000 (iii) Jeogla Station/Bald Hills as a single aggregation $6,200 Forced Sale Value (i) Jeogla Station $4,000,000 (ii) Bald Hills $1,375,000 (iii) Jeogla Station/Bald Hills as a single aggregation $5,300,000' 125 On 7 August 1998, Mr Gardiner of Herron Todd White, wrote to the receiver referring to his valuation of the properties set out in his report of 5 August 1998 and stating: 'The valuation assessments, both fair market values and forced sale values, would stand if the properties were offered for sale by the receivers. Further, I hereby confirm that you may rely upon my valuation report.' [KWS 34] 7 August 1998 - Mr Maddigan's Appraisal 126 By letter dated 4 August 1998 but received by the receiver on 7 August 1998, Mr Maddigan enclosed his current market appraisal of the livestock on Jeogla as requested by the receiver in the receiver's letter of 29 July. A value of $1,656,120.00 was given for all cattle. Mr Maddigan's letter included the following: 'The livestock . . . were inspected by me on 30 July 1998. This market appraisal is at all times subject to market and climatic forces which can either increase or decrease the estimated price. We have estimated the price on the current market taking into consideration the expected growth of the cattle for delivery in October 1998.' 'KWS 36] The enclosed appraisal is Appendix 4 to this Judgment. 127 The receiver deposed in paragraph 41 of his affidavit of 1 April 1999 that he had 'relied on this appraisal as representing the market value for the cattle'. 13 August 1998 - Sale of Hernani and Tiercel Settlement 128 On 13 August 1998, the sale of the Hernani and Tiercel properties were settled. 13 August 1998 129 A 3-page advertisement appeared in the LJ Hooker Rural Guide issued on or about 13 August 1998 and an advertisement appeared on the LJ Hooker Internet Website from 7 August 1998. The LJ Hooker Rural Guide advertisement is appended as Appendix 5. 130 Mr Skinner deposed in paragraph 45 of his affidavit of 1 April 1999 as follows: 'I relied on the expertise and experience of LJ Hooker Rural in determining the appropriate marketing programme for the sale of Jeogla. I also determined that I would offer the livestock, and the plant and equipment for sale by separate contract, and that the purchaser of Jeogla should be given first right of refusal to purchase those assets. In making this determination, I relied on the recommendation of LJ Hooker Rural, and my own experience and also had regard to the recommendation of Elders Rural and Meares & Associates as noted in their respective marketing submissions.' 131 Mr Skinner also gave evidence to the effect that the information memorandum had been provided to any person expressing a serious interest in purchasing Jeogla. That information memorandum is a very detailed document which, together with the inclusion, covers some 48 pages. The first ten pages of the information memorandum are appended as Appendix 6. 22 September 1998 - Auction of Jeogla and Bald Hills Properties 132 On 22 September 1998, the auction of the Jeogla and Bald Hills properties took place. The properties were passed in at the auction. Contracts for Sale were exchanged later that day. The components of the purchase price were $5.75million paid for the property and $1.671million paid for the cattle running on the property. 133 The contracts for the sale of livestock provided that the purchase price was to be adjusted after a stock count carried out pursuant to clause 8 of the contract. Mr Skinner deposed that the prices specified in schedule 1 to the contract were based on an appraisal of the stock conducted by Elders as at 30 July 1998 plus an average premium of 13%. The purchase price for the stock after the stock count was $1,671,391. Of that amount, a deposit of $173,530 had been paid on exchange. Settlement of the Sale of Jeogla and Bald Hills Properties 134 In late October or early November 1998, settlement of the sale of the Jeogla and Bald Hills properties took place. Witnesses Mr Skinner 135 Under cross-examination, Mr Skinner accepted that at 29 July 1998, the drafting of the information memorandum would have been taking place. He believed that he would have instructed his solicitors to prepare the sale contract but he was not certain at what stage it then was. He was then asked as follows: 'Q. Leaving aside the contract for the moment, in relation to any brochures or information memorandum or advertisements, had the selling process via the print media started at that point? A. I can't recollect, I'm sorry. The process - no. The process was managed by Hookers. I just can't be sure from my memory exactly what stage it was at. Q. Had you at this point in time [29 July 1998] decided that the market appraisal would not be included in the information memorandum ? A. No, no conscious decision either way at that stage. Q. Well, certainly you had Hooker's recommendation that the appraised price or the price at which the cattle would be sold ought to be in the information memorandum . . . A. I can't recollect. Certainly, I had been - I knew what their recommendation was. Whether that was something I considered when I wrote this letter, I don't know. Q. Well, as you understood the recommendation, it was as appears in KWS39 that the potential purchasers should be told "You have an option and the option will be at a nominated figure "? A. That's right . . . Q. As you understood what Hookers were saying in the letter to which I addressed your attention, first of all, purchasers might be discouraged from bidding if they thought that they would have to compete to get the cattle in a dispersal sale? A. Not necessarily discouraged from bidding. Q. Well certainly discouraged from bidding their best dollar? A. Yes. Q. And one of the reasons being that Hooker's view was that purchasers would be very mindful of the overall cost of the acquisition and if one element was uncertain, they couldn't assess the overall cost? A. Well it takes two elements to be uncertain. I mean, if there was one element in addition to the price of the land, yes. . . . So that's - it would be difficult for them to bid with two uncertain elements when they are just bidding one price, so we had to - my understanding of it and the way we proceeded was that we looked in all the elements including the plant and equipment and the other assets and left just the one element that was going to dictate the ultimate price.' [T224-225] 136 Mr Skinner was asked under cross-examination whether in deciding to embrace alternative (c), namely offering the land and improvements in the cattle herd as an option at an agreed value, he had any debate with Hookers as to how one would promote that choice - or promote that fact to potential purchasers of Jeogla. His answer was: 'Not specific to that item. It was more discussed in terms of information on the whole package.' 137 The following evidence was given: Q. Did you have a recollection at the time that you read this letter that Hookers had advised you in their proposal to sell . . . that if the cattle were to be offered with the first option at an agreed value, the values ought to be included in the information memorandum? A. Not that specifically , I had a number of discussions with Mr Nolan from Hooker throughout the period that resulted in the process that we undertook, so I can't specifically say today that when I read that letter I related it back to the original proposal. Q. Certainly as you understood it Mr Nolan considered it important that a potential purchaser know that any option to purchase the livestock was an option at an agreed value before the auction of the land ? A. Yes. Q. From the material at page 311 at an agreed value which was itself disclosed to purchasers or potential purchasers, so that they could do their sums or their due diligence, as was put by Mr Nolan about the prospect of purchasers? A. I can't see those words, but yes, it was Mr Nolan's view that the purchasers had to know the price of the livestock so they could assess what they were paying for the land at auction .' [T228-229] [Emphasis added] 138 Under cross-examination at page 231, Mr Skinner was asked in relation to the information memorandum, where in the document one found that it was stated by the receiver through his agents that what he intended to do was to sell the cattle at an agreed value in connection or conjunction with the sale of the land. His answer was: 'As I said, you're looking at this in isolation from the other information the prospective purchasers got. 139 The following evidence was given: Q. Well the brochures circulated by Hookers, the newspaper advertisements published by Hookers and others, in effect light reading, if you like, the first line of advertising, didn't make any mention of the prospect that the successful purchaser of the land would have the first option to buy the cattle at an agreed value, did they? A. No, that's correct. The advertising didn't and the information memorandum said there was an opportunity to buy yes . Q. When you get the information memorandum, you're told variously that you have an option or an opportunity to purchase it, but no reference to "at an agreed price" . . . A. In the information memorandum in isolation it does not say that price. The potential purchasers, when inquiring for an information memorandum, were provided, where appropriate, the livestock details as well as the other information they requested on speculative properties, etc. Q. The livestock details are given in the information memorandum? A. The livestock prices to be precise. Q. I see. How was it they were given the livestock prices? A. Through Mr Nolan. Q. So is this right: If a person, having seen an advertisement or brochure, was still interested enough to get the information memorandum and, having got on information memorandum, they were still interested enough that they spoke to Mr Nolan, they might then be given the information concerning the livestock values, what, as a schedule? A. Well, we provided a schedule to Mr Nolan, who I understand passed it on to prospective purchasers . It may have been at the same time as the information memorandum, it may not have been subsequent. Q. Well how did you come to that understanding Mr Skinner? A. In discussions with Mr Nolan and Mr McCarthy. Q. So is this right: You say that in a discussion you had with Mr Nolan or Mr McCarthy at some time during the marketing of this property, it was considered that - it was discussed that part of the information circulated to prospective purchasers was the cattle schedule and values? A. Yes, in fact before we settled the schedule, we got Mr Nolan involved to agree the format and the values, not as a valuer but . . . Q. Well where does one find in your affidavit any reference to that? A. It's not in the affidavit.' [T232] 140 At transcript 233, it was put to Mr Skinner that it was critical to the strategy that he had adopted in relation to the sale of the land that people unambiguously know that the cattle were being offered as an option to purchase at an agreed value and he accepted that this was the strategy. It was then put to Mr Skinner as follows: 'Q. Because if they didn't know that, they may be dissuaded from being interested in getting involved at all? A. I would - a bit more to price than "at all". If people were interested in the property, then I think the total absence of a livestock price would not have totally dissipated their interest. It may have affected the price they paid . Q. But the advice that you had received from Mr Nolan was if people thought either they were going to have to compete at a clearing sale and merely have an opportunity to buy or have simply an option that may involve being held to ransom, either of those two situations would significantly affect the marketability of the property; is that right ? A. Significantly affect the marketability of the property doesn't mean to say that people won't participate in an auction. It may affect their price. Ultimately it could have either result. I guess, but my main concern at the time was the price.' [T233] [Emphasis added] 141 The question which is underlined above was then put again to Mr Skinner and he was asked whether that was the advice he received. His answer was: 'I can't recall the specific words. If it's in a document I can check that, but certainly my recollection of the advice was that without the livestock at a fixed price, it could affect the price we received for the property.' [T233] 142 At transcript 234, the following was put to Mr Skinner: 'Q. The short answer is . . . this, Mr Skinner, isn't it, that for a purchaser to know what he might be up for if he buys the land and the herd was an important piece of information to decide whether or not you could afford to be at the table playing at all, wasn't it? A. That's correct. Q. In other words, the people who might turn up at the auction were those people who thought they could afford to pay what it was necessary to get Jeogla and it's cattle if that's what they were after. A. That's correct.' . . . [Emphasis added] 143 Generally Mr Skinner in my view, accepted under cross-examination that unless the livestock price at which the cattle were to be offered was known in advance, a very material piece of information would not have been communicated to prospective purchasers or those who might otherwise have been interested in the purchase. And at transcript page 235 in being tested on what information was given to prospective purchasers, Mr Skinner gave the following evidence: 'Q. . . . You say that the way in which people might come into possession of the livestock price was if Mr Nolan gave them a schedule, not reproduced in your affidavit and not referred to in your affidavit, as being one distributed by Mr Nolan which you believe was being distributed to prospective purchasers? A. Yes, that and a lot of other information given to prospective purchasers. Q. Well, the other information given to prospective purchasers was essentially the cattle numbers and the composition of the herd, wasn't it? A. Well, people who inspected the property were given further information. As in selling any business the information memorandum is a starting point. You've then got to cater to whatever the particular requirements of the potential purchasers might be and provide what information is appropriate. Q. Well did you direct Mr Nolan that in relation to people inquiring as to the prospect of acquiring Jeogla that they should be given a copy of the livestock schedule? A. Most definitely.' [T235] 144 In being tested on whether the livestock schedule which Mr Nolan had been directed to furnish to interested parties recorded the price of the cattle in terms of the market value of the cattle as at July, Mr Skinner's evidence was that that had been the base that the price was calculated upon but it was not the July price. His evidence was that : '. . . the July price was Mr Maddigan's valuation or appraisal at July and then with a further factor over and above that that was arrived at by Mr Maddigan coming down to Sydney to our office and going through the schedule, preparing it, discussing potential market movements and putting an addition factor over and above his valuation back in July.' [T235] 145 Mr Skinner's evidence was that Mr Maddigan's appraisal of 4 August which had been received by the receiver's office on 7 August was understood by Mr Skinner to be an appraisal based on the current price projecting the growth of the cattle between that point in time and October. However, there was more to the matter. In this regard at transcript 236 and following, Mr Skinner's evidence was that the original appraisal of 29 July had the autumn cows valued at a price but had not separated or assumed that the cattle were weaned by October and listed separately. Hence, discussions which ensued back on a date in August had involved a necessity to readjust the schedule and to separate the weaners out from the cows. Mr Maddigan had looked again at his valuation. Certain adjustments to the figures were made. Importantly on Mr Skinner's evidence, these adjustments included 'putting a factor over and above Mr Maddigan's valuation on the figures that we put into the livestock schedule'. [T236] 146 Mr Skinner was then asked as follows: 'Q. Well, let's see if we can deal with that. You of course have said in your affidavit that the document reproduced behind the letter is the schedule as produced by Mr Maddigan? A. That was the schedule that accompanied his letter of 4 August. Q. And is the other schedule to which you are referring the schedule that was used as to the basis for the September livestock contract? A. Yes. Well, no, no sorry, that was a summary of it. There was a more detailed summary that we sent to Mr Nolan from recollection. Q. Well where do we find that document in your affidavit? A. It's not in this document in this affidavit . Q. Well if you assume it's not in Mr Nolan's affidavit and it's not in Mr Maddigan's affidavit where does one find this document ? A. Well I have a copy in my files . Q. Well is this the sequence of events. We've got the Maddigan appraisal . . . being the document reproduced behind the exhibit we are now looking at it. There is some intermediate document prepared in consultation between who, yourself, Mr Maddigan and Mr Nolan or? A. The process was David McCarthy met with Mr Maddigan over a day or two - I can't recollect the exact time - and reworked the schedule. They sent it to Mr Watts, PR Watts in Armidale. He reviewed it as well and made some recommendations. And it was also then provided to Mr Nolan and agreed to by Mr Nolan. Q. And the final manifestation of this process is, I take it, at least the first working of the schedule to the September 22 contract, the precount version? A. Yes, the schedule in the contract reflected the values they arrived at on that exercise I mentioned. Q. Now, when was it that the document that you've referred to as having gone through this debate process ultimately came into existence? A. It was finally signed off the second or third week of August . Q. So about a month before the auction ? A. Yes. Q. And so I take it that so far as being able to publish the price of the cattle, that the cattle would be offered as part of the option, that could not be done before the third week of August ? A. Second or third week. I can't remember the date, but yes, that's - within that window. Q. And is it right that the figure in this reworked document was still about $1.65,66million? A. It's the figure that was in the contract. I - it'll be in one of these annexures to the contract if I can look at that. the livestock contract will have the figure. It's about $1.7million . . .' [T237] 147 Ultimately, Mr Skinner was asked: 'Q. Well, . . . is this right. That the figure that was being adopted was, in effect, a what, a guess as to what the market price might be in September 1998, based on the July prices for the various types of cattle described by Mr Maddigan in his letter? A. That was the base, yes. Q. So that you were attempting to project forward in time the physical state of the cattle herd as it would be in October, the first component? A. That's right. Q. And secondly to compute or estimate a market price by reference to the July prices projected forward to September/October? A. Yes. Well as I've said earlier it is very very difficult to forecast prices. So whilst on the one hand - well, what we thought was here is the valuation which came up by Mr Maddigan. Assuming there is some uplift in the market then let's put a factor on the top, but ultimately I was comfortable that the sale process that we've described would - even if we haven't put a factor on - would result in the equivalent net total proceeds. So, you know, I wouldn't profess to be able to say that I can estimate a market price in three months' time. It was a factor we put on to hopefully accommodate, if there was some lift. Q. But your assumption was that if you had underestimated the market the promotion of the sale of the land in connection with the herd would be such that any discount in the price of the herd against prevailing market prices in September would be picked up in the bid price for the land? A. Basically yes. Q. That of course assumes that all persons interested in the Jeogla land cattle combination have been persuaded to attend the auction by the promotion of an auction with the cattle at a nominated price doesn't it ? A. Yes they'd have to be aware of the price beforehand yes . Q. And if the promotion of the sale did not bring to their attention, either the fact that there was an option at an agreed price, or that there was in fact an agreed price of $1.6 or $1.7million, material information was not being communicated to the correct place; is that right? A. If we hadn't told the potential purchasers the price, yes . Q. And I think you agree with me that at least so far as the brochures and information memorandum simpliciter are concerned those documents make no mention of the fact that either it's an option at an agreed price situation or what the price is? A. No, I think it just said the opportunity to purchase the livestock yes. Q. And indeed it is not until you are some little way into the promotion process that you are able to nominate the price because you haven't fixed up yourself what the price is until you've gone through this discussion process that you've referred to? A. Yes, the price wasn't fixed, as I said, until the second or third week of August.' [T238-239] [Emphasis added] 148 Mr Skinner accepted that because he assumed that any shortfall between the nominated price for the cattle and the actual market price of the cattle, if there one, would be picked up in the sale of the land, he wasn't concerned to keep track of what was happening to the market price of cattle between July/August when he went through the exercise which he spoke of. [T239] 149 It was put to Mr Skinner that during this period in fact there was a very strong increase in the value of breeder cattle - that is to say from July to September. His evidence was that he couldn't recollect when he became aware of that. His evidence was that certainly there was an increase in prices in that period but he may have only become aware of it after the auction - he could not be certain. He was in fact away for two or three weeks before the auction. He had not reviewed prices during that period. 150 Mr Skinner was asked: 'Q. Well, would you agree that the price of cows, even in the Armidale yards, lifted by a third during that period? A. No, I couldn't say that. I just don't have that knowledge. I don't know. Q. Because you had in place no mechanism to tell you if there was a significant change in the value of the Jeogla herd between July and 22 September ; that's right, isn't it? A. No, I did not review the livestock price before the auction sale. Q. No? A. The market price I mean. Q. Because you assumed that any error that might have undervalued the value of the Jeogla herd in its sale with the land would be picked up in the price bid for the land? A. Correct.' [T240] 151 In fact, during Mr Skinner's absence he left Mr Campbell in charge of the receivership and had told Mr Campbell that the purchaser should be offered a right of first refusal for the purchase of the livestock and that the prices specified in schedule 1 of the draft contract for sale of the livestock included a premium above the market appraisal conducted by Elders. [T240] 152 As to paragraph 41 of Mr Skinner's affidavit in which he had deposed that he relied upon the 4 August Maddigan appraisal as representing the market price for the cattle, Mr Skinner's evidence at transcript 241, was that he was referring to Mr Maddigan's estimate of the market price for which the cattle could be sold in September. 153 Mr Skinner had, as has already been noted, stated in paragraph 52 of his affidavit, that the contract for the sale of the livestock was to envisage an adjustment after a stock count but that the prices specified were based on the appraisal of stock conducted by Elders plus an average premium of 13%. Mr Skinner was asked under cross-examination whether he agreed that the process of reasoning that had caused the prices in the schedule to be nominated prior to the auction, to be an uplift of 13% was to allow for an anticipated increase in price between July and September. He accepted that this was the case and this was the major factor. 154 At transcript 243, Mr Skinner gave the following evidence: '. . . it needs to be clear that the July valuation was Mr Maddigan's estimate based on - or his estimate of market price at that date, but within the category - within a condition he forecast them to be in October; so it was high. He wasn't trying to estimate or guess what the market may do between July and October. . . . The discussion in August centred around reclassifying the livestock better. If you've seen the schedule that's annexed to the livestock contract you'll see that that's different to Mr Maddigan's July appraisal. Q. You've split out the heifers? A. And changed the prices. Q. And you have changed the pricing to reflect the price that calves that were at foot in July are now stand alone animals as of September? A. Yes, but Mr Maddigan anticipated that in his July valuation, so that wasn't - the schedule is set out differently, but he did anticipate that they would be in that condition, as I understand it, in October because he was using an October delivery date, so that the concept is not different. What did change, though, when they were split out he reassessed his values and then we put a margin on over and above those. Part of that was just safety, anticipating market increases. I know from my experience that in September the markets do normally lift, but it was a price that they came up not just overall, but they went through each category - "they", being David McCarthy and Andy Maddigan, reassessed each line and that was the value that was ultimately arrived at and put to me for approval.' 155 At transcript 244 under cross-examination in relation to the possibility that by the auction time, there would prove to have been an undervaluation of the stock. The following appears: 'Q. What I'm suggesting to you is this, as you've said to his Honour a number of times now, you considered in the auction process that you had set up if there was any undervaluation of the stock it would be picked up in the price bid for the land? A. That's correct. Q. To that extent the option to take the cattle at that price had a value if the market price of the cattle was in fact greater than the agreed value for the cattle? A. Yes, both ways; if the market was up or down it had an effect, either a premium or a discount, either way. Q. We need not concern ourselves with discount because you could, of course, simply not take up the option and take the land and acquire the cattle another way. A. Well, I think you do have to consider it because in the process that we put in place a purchaser that wanted to buy the property and the livestock as a business was going to assess the total. Whether they thought there was a premium or a discount on the livestock would get reflected up or down in the sale price of the land. Q. . . . Is this right, that in September you did not know whether the option that you were offering in relation to the purchase of the livestock was or was not itself intrinsically valuable . . . the option to take up the livestock could acquire value of its own, could it not, if the agreed sale price or nominated sale price in your contract was less than the cattle were worth? A. When you say its "a value on its own", its only got value if it is with the land, if it's sold together. Q. I understand that Mr Skinner, but you say the value that would attach to the capacity to take up the cattle at an agreed price in connection with the price of the land in connection with the purchase of the land . . . might add a premium to the price you pay for the land because that option had intrinsic value if the price or the value of the cattle had gone up? A. Yes I agree with that. Q. It was because you were not gathering information as to the actual value of these cattle, as you moved up towards the auction date, you did not know whether the option in fact had intrinsic value or not, did you? A. That's not right. I mentioned that we met with Mr Maddigan at the end of August. That was three weeks or four weeks before the auction with the 13% factor on top. It was the considered view of Mr Maddigan and us that that would cater for the current market, so it was unlikely, in my mind, that there was a huge premium or discount. Q. I see. On the basis of the Maddigan assessment as at June and the massaging of the figures toward the end of August, plus the 13%, you formed the view that that was market value as at 22 September; is that right? A. Well, an estimate of what the market might be as at 22 September yes.' [T244-245] 156 Under cross-examination, Mr Skinner was asked whether he had directed his mind to what would happen if the land did not sell at the auction and his answer was that he would have had to sit down and reassess the whole plan forward. There were a lot of considerations which would have had to have been taken into account. [T245] 157 The following appears in Mr Skinner's cross-examination: 'Q. Your selling strategy at the auction was that the agreed price option for the cattle would attract to your sale both those persons who wished to buy as a going concern and those persons who simply wanted to buy the soil and not take up the option for the cattle? A. Yes correct. Q. And if those two lots of buyers didn't get you to a satisfactory price, one of the alternatives that then confronted you was, was it not, whether you would do better selling the cattle separately to the land, by a dispersal sale? A. If we hadn't got to a satisfactory price yes, an alternative was to sell the two separately. Q. If you had a person who was bidding a price that appeared on a reasonable assessment simply to be the price of the property as land, you could do what you did with Hernani, which was to sell the cattle separately. A. Yes. Q. Did you give a consideration as to what the break points in pricing would be between selling the cattle and the land and selling the two separately? A. On the assumption that the livestock prices reflected the market price, which was the assumption I was working on, or the estimated market price, then the range of valuations we had for the property was somewhere between $5.3 to $6.2million, so getting a price midway within that range, and I've got to say this is after the auction because I was not at the auction, but in talking to Mr Campbell the view was that the purchaser was buying the two, a combined venture - sorry, the highest bidder offered on the basis that he was going to exercise the option. Given that the price of the land was within that range and a value of the livestock was fixed beforehand, then it was quite reasonable to presume that we actually did get a premium . . . Q. Did you give any consideration to what price you would offer for the cattle separately to the land, in order to see what could be realised for the cattle as a separate exercise? A. . . . My view was that if the property had achieved more than the market value on the basis it was sold, together with the livestock fixed at that price it was fixed at, then I would have recommended to the bank to accept the sale . . . If it had gone below that then I would have said "No, let's discuss an alternative strategy". Q. Did you ever ask anyone to value this cattle herd on the basis that it be submitted to a dispersal sale ? A. No, I just asked for a valuation of the cattle . Q. Did you ever ask anyone who provided you with such a value or appraisal whether they had considered what these animals might realise in a dispersal sale? A. Well, I understand that the valuation provided by Mr Maddigan was the value of the livestock on a market value basis, which would imply a sale . . . Q. Quite? A. Now, he - yes. Sorry - what's the right word - a sale by mechanism of the livestock. Whether you want to call it a dispersal sale or some other sort of sale he had in mind, he valued the cattle at the market price of the figure he put on it, the $1.7million approximately. Q. Did you ever enquire of him as to what market he had in mind as the market in which the hypothetical sale was taking place ? A. Not specifically. The market is all the people that buy livestock . Q. But with the greatest of respect, Mr Skinner, you said to us yesterday that you understood that there might be significant price differentials between the same beast offered in a fat market and the beast that was eligible to do so being offered in a store cattle or breeding sale? A. I think I said yesterday that depends on the market conditions at the time. The price differential can be different, yes. Q. The differences may be very marked between the meat value of a particular beast and its value in the breeding market? A. That's potentially possible, yes. Q. Did you ask Mr Maddigan, "Look, when you say market prices at a given point in time, to which market are you referring for these animals, because I see a breeding herd and I see animals which might be turned off for breeding or for meat? What sort of market or marketing do you have in mind when you express these numbers ? A. No, I don't think I asked specifically . . . Q. Did you ask anyone to express an opinion as to what might be realised for these animals were they put forward in a dispersal sale as a breeding herd? A. Not on that basis, no. As I said before, the prices finally agreed with Mr Maddigan were forwarded to Mr Watts of PR Watts, the stock and station agents in Armidale, and they agreed with the pricing as well. It's two different agents, stock and station agents. I presumed that a stock and station agent knows the appropriate basis to value livestock. Q. You asked neither Mr Maddigan nor Mr Watts to direct their minds to what would be the likely outcome so far as price if the animals were submitted to a dispersal sale? A. I did not give them that. I did not ask that specific question, no. Q. But you understood in relation to a breeding herd, save in particular market conditions, that that would be the highest and best realisation of the animals didn't you? A. Of the cows? Q. Yes? A. The breeding cows. I would say yes . . . Q. And you or the bank had spent considerable time, effort and money in getting substantial valuations of the land expressed on a number of different bases in the valuation report? A. On two bases yes.' 'Q. Mr Skinner, where does one find any advice to you as to what the realisation outcome might be if the cattle were offered into the various markets into which those cattle might be sold in August and September of 1998 ? A. I didn't go about separately valuing - sorry, I did not receive any advice on what the cattle might realise for argument sake if they were all sent to slaughter, which was one option, I guess, or if they were sold in different types of sales whether it was in the Armidale sale yard or off the property. The advice I received was that the best mechanism for maximum price was the land and livestock sold together and . . . that is the spectrum of the advice that I received . . . Q. One of the matters that should interest you, I take it, is to what extent any uplift in the price that you might expect to get for the land was justified by any diminution in the prospective realisation proceeds of the herd when you sold them together; is that right? A. Yes. Q. Well, did you have any appraisal from anyone as to what you could expect to receive on realisation if you sold the herd by a dispersal sale separately from the land? A. Well, I relied on Mr Maddigan's valuation being the value of the cattle in the market at that time. I did not specifically ask him whether there was a dispersal sale or selling them all to a meat works for auction , no, I didn't get valuations on different bases, but I believed the purpose of getting the valuation or the appraisal was so that I could do two things - first of all, was to fix the price in the contract but also based on the appraisal, being three or four weeks after the adjustments, after the date of the auction. I had the view that that would be close to market place . . .' [T246-250] [Emphasis added] 158 At transcript 251-252, Mr Skinner's evidence was that what was occurring at the auction, he understood, was that this was a dispersal. 'Well, if you are selling all, it is a dispersal. You can't - may be it's the terminology, but if you're selling 5,000 cattle off a property, that's dispersal.' 159 Mr Skinner at transcript 252, accepted that his evidence was that the Maddigan appraisal was taken to be what would be attained on, in effect, a properly conducted dispersal sale to all comers bidding for those animals. He was then asked and answered as follows: 'Q. Of course when it came to the auction, access to the animals was conditioned by having 5million or more to buy the land first before you could get a crack at the animals? A. At the - yes, that's correct, at that auction, yes. Q. So that the access to competitive bidding in relation to the animals was predicated on the proposition that any bidders prepared to pay, in effect, a door fee for $5million to get into the sale yard at all? A. I wouldn't express it that way, but, yes, for someone to buy, they had to be able to afford the land and the livestock. Q. Therefore you had effectively confined the prospective purchasing group in relation to the land and the livestock to those able to meet $7million or so as the minimum price? A. Yes. Q. Did you consider what effect that might have on the prospects of achieving the highest and best realisation for the cattle? A. In the - yes, I did consider the total package and the - I'll go back and start again. In assessing the method of sale of the land and the livestock and based on the advice I got from the various agents - real estate agents, rural agents - that the best realisation for the land was to sell the two together, I then got a valuation or an appraisal of the livestock that I believed fixed a market price for the livestock. Now, in that scenario, I believed I would maximise the total realisations.' [T252-253] 160 Mr Skinner was asked whether he had looked for anyone who was certified as a valuer who was prepared to give him a valuation of the herd. His answer was : 'No, I believed I could rely on Mr Maddigan's experience on the basis of his business, his reputation, the fact that he conducted Jeogla sales for a number of years, I thought he was in the best position to give me the appropriate value. Q. These are the Jeogla production sales you are referring to? A. Yes. Q. Did you enquire of him as to whether he had ever conducted a dispersal sale of a herd of the quality of Jeogla herd? A. I'm not sure if I could put it that way, but I certainly enquired if he was qualified in selling store cattle which are cattle to restock, etc. . . . Q. These are the very matters that you did consider in relation to the sale of land, how it would be promoted, at what cost, what range of prices. Do we find anywhere in your consideration of the cattle any consideration of these issues and assistance with defining how much would be involved in undertaking these various courses? A. If I can do it by way of analogy. If you've got any business that you are attempting to sell and it is a total business, it's got premises and it's got stock in trade, etc, then it is quite often that you will get a valuation of the land and buildings in the form that was done in this case and you might get a particular person, it could be an auctioneer, it could be somebody else, to give you an indication of the stock. The stock in trade is different, if I can use those words, to land and buildings. The stock is something that's regularly traded. Livestock is sold every week throughout the State. It is, in my view, a different category of asset than land and building. Q. But, Mr Skinner, the thing that is not sold regularly every week in New South Wales is a top quality breeding herd offered on a dispersal basis to people interested in cattle breeding and the production of beef from a commercial herd is it ? A. There are regular sales of breeding cattle. In my view you're confusing the fact that the number - nobody was going to buy, in my view, 4,000 head of these cattle at once. When you reduce them down to pens of 20 or so head of cattle, of breeders, that is not uncommon to be sold . . .' [T253-254] [Emphasis added] 161 The cross-examination includes the following: 'Q. Mr Skinner, assuming all that is correct, is this right : with the sale of this herd, you assumed that this herd would not, so far as the prices it would obtain on sale, perform significantly differently from ordinary store cattle sales conducted around the state from time to time. A. No, I didn't say that. I said it would not vary differently from Mr Maddigan's appraisal. Q. Well, Mr Maddigan's appraisal, may I take it you considered to be based on ordinary store cattle outcomes around the place in the sale yards; is that right? A. Plus faced with the premium for the Jeogla brand. If you look at my letter, I asked him to take that into consideration in his appraisal. My letter of instructions set out that I wanted him to take into account the brand and the name. I think I even included the Cattle Care etc. I wanted him to take that into account into his appraisal and he did. Q. Did you then ask anyone who might have had some experience in conducting a sale of a herd of this type to offer an opinion as to whether Mr Maddigan was or was not right? A. As I mentioned when we fixed the prices, they were sent to Mr Watts of PR Watts, another agent, and he approved - he agreed with them. Q. You simply assumed that those prices would reflect what you would get on a dispersal sale? A. Correct. Q. And you asked neither of those people to direct his mind to advising you nor did you ask anyone else to advise you as to whether there might be more advantageous ways of realising the stock than selling them in connection with the sale of the land at the appraised price from Mr Maddigan ? A. No, I didn't think I needed to. ' [T255] Mr E.J. Crowe 162 Evidence was given by Mr E.J. Crowe, a licensed auctioneer and a licensed stock and station agent and a licensed real estate agent. Mr Crowe's evidence is regarded as reliable and is accepted. It is detailed below and returned to later in the Judgment. Mr Crowe's evidence was that he sells and values cattle throughout New South Wales and in particular in the New England and North West area of New South Wales. From about April 1964 to about April 1965, he worked with Elders Stock and Station Agency at Yass and conducted livestock auctions and was involved in livestock sales. From April 1965 to about April 1966 he worked with Elders Stock and Station Agency at Tamworth and conducted livestock auctions and was involved in livestock sales. That work at Yass and Tamworth involved mainly sheep and cattle. 163 From1966 to approximately 1976 Mr Crowe worked for the Stud Stock Department of Elders and was based at Tamworth. He sold, purchased and valued stud stock in that capacity. He conducted stud stock sales for Elders during that period. That work involved mainly sheep and cattle. 164 From about 1976 to about 1979, Mr Crowe was the Breed Development Officer for the Australian Hereford Society. His work in this capacity involved developing and promoting the Hereford breed of beef cattle. He obtained a very detailed awareness of the characteristics and value of Hereford cattle as part of this employment. 165 From approximately 1979 to the present time, Mr Crowe has worked as both a stock and station agent and on a farm which he owns near Tamworth. 166 During the period 1980 to approximately 1988, Mr Crowe was a guest auctioneer at the autumn and spring sales held at Jeogla Station. 167 Mr Crowe's evidence was that on 30 May 1998 he had attended at Jeogla Station and inspected and carried out a valuation of certain cattle at the Station. 168 His valuation is appended to the Judgment as Appendix 7. 169 His evidence was that Jeogla Station is recognised as one of the leading beef cattle operations in eastern Australia. His evidence was that he is familiar with the V1V Hereford Beef Maker Cattle from Jeogla. His evidence was that these are high quality cattle. His evidence was that the Bank of sound genetic material built into the herd over many decades of effort have ensured a predictable product that has been keenly sought after from both breeders and fatteners from many areas of Australia. 170 Mr Crowe also gave evidence that the herd had been at the forefront of performance testing and quality assurance. This had been monitored through Ausmeat Feedback Trials. His evidence was that this gave a high degree of quality assurance which is keenly sought within the industry at the present time. 171 Mr Crowe's evidence was that he had conducted auction sales at facilities other than Jeogla during the course of his career. Such facilities were to be found all over eastern Australia including New South Wales, Victoria and South Australia but principally in New South Wales. 172 His evidence was that the valuations which he made at the time 'were on the basis of a proper organised and promoted auction sale on that day'. [Transcript page 12] 173 In referring to such an auction sale, he had in mind as the location for the sale the Jeogla property. Insofar as the facility which he had in mind was concerned, it was very good and this was because the selling by itself was set up in the area. There was a good sale ring. Seating for buyers was excellent. The art system for the display of cattle pre-sale was excellent and the general facility for the conduct of such a sale were totally adequate. 174 Mr Crowe gave evidence as to the differences between different types of auction sales of cattle which he had encountered in the course of his experience. He referred to stud cattle auctions, commercial cattle auctions and fat cattle auctions. In relation to the auction sales which he had participated in at Jeogla during the 1980's, those embraced probably all three types of auction but principally were commercial cattle sale auctions. There had been some studs involved but not many. The sales which Mr Crowe had been involved in would have involved he said, a small percentage of stud cattle but principally good breeding cattle, commercial breeding cattle. 175 His evidence as to the attributes of a production sale was that it usually embraced surplus cattle as well as cattle that were sold to the fattening industry, being feed lots or grass fattening. Such a sale would embrace most ranges of cattle which would be cast for age cows to be culled and the like. Also sold in the same way would be surplus breeding cattle of advancing ages including male cattle being steer male cattle bred on the property. 176 He had been associated in particular with two production sales a year at Jeogla. Those production sales held in Autumn and Spring were, he recalled, part of the general farm process. This was because Jeogla was solely a beef breeding enterprise. The basis of the business run on Jeogla, he understood, was that the two sales conducted enabled the principals to run the business and be financially viable. 177 As to why one might approach the market to sell the cattle in Autumn was concerned, his evidence was that Jeogla being situated in the New England area, there were difficulties for Winter more than certain other geographical areas. It was usual that one would tend to have sales in Autumn when one was coming into the more difficult Winter period. That was a common practice for farmers other than Jeogla as well. In terms of the Autumn sales, he had in mind that this took place at Jeogla in May. May was really the onset of Winter periods in the New England area. 178 Mr Crowe was asked whether, if one went to the Armidale sale yards in May one would see sales conducted which were representative of the quality of stock available generally in the district at the time. His answer was that there would be various sales conducted at the Armidale sale yards in May. Armidale has a regular facility, stock market which takes place on Thursday each week. There would be several weaner sales. These embrace calves from 7 to 11 months of age and included in those sales are surplus females and sometimes older steers. 179 As to the nature and quality of cows sold in Armidale during May, in terms of fat stock, Mr Crowe's evidence was that these would be cattle who were to be put to the processing side of the industry and that very little of May would be going back into the breeding herd. At a fat stock sale, Mr Crowe would not have expected breeding quality to be very significant. His evidence was that it would be quite exceptional if there was breeding quality which was significant in the May fat stock sale. The standard of weaner sale stock would be good. 180 He was asked whether to the extent that one had weaners, sending those into the market in May out of the breeding stock, he would in his experience, expect the best quality such weaners to be sent in. His answer was in the negative and this was because the cattle that would be offered at a Thursday market in Armidale in May would normally be fat stock market cattle which would have a residual value only. His evidence was that any cattle intended for a further breeding programme would be put into a very differently advertised programme sale. 181 As to the cattle that would be put into the Armidale May fat stock sales, his evidence was that they would have reached the end of their breeding life. If they were only young they had probably had calving difficulties. They would have poor milking ability and/or their calving would be over. They would have reached an age when it was no longer productive to maintain them as sound breeding units. 182 Insofar as his evidence had been that breeding cattle would be sold in an entirely different way was concerned, he was asked how in the ordinary course of things if a farmer wanted four or five breeding stock sold, they would be offered for sale. His evidence here was that it was unusual to have otherwise than a multi-vendor steer sale. Smaller sales were not the usual. 183 His evidence was that one would not find during May too many breeding cattle for sale at the stockyards in Armidale. The sales in May, apart from the fat stock sales, would mainly embrace weaner sales and this was because of the season. Steer sales started to become active in Armidale from mid-September on through October, November in the spring and early summer months at a time when farmers were restocking. By then, farmers would see that they had more feed at their disposal and would certainly be more prepared to take on extra animals feeling more secure generally from the more favourable period of the year. 184 Insofar as multi-vendor sale of steer cattle breeding wise and the like were concerned, he was asked how in the ordinary course, those sales were conducted by the person responsible for selling. His evidence was that they would be advertised through the general media, the rural press and television advertising. This would depend upon the numbers. 185 He was asked to assume that he as stock and station agent was charged with the responsibility of conducting a multi-vendor steel cattle auction such as he had been describing and in that regard what amount he would expect to spend on such a sale. His answer was : 'This can vary depending what, on what market you are trying to appeal to. If you only have a small number of cattle obviously you are not going to embark on a huge advertising programme in future. You might do it on a locality nature but if it isn't a big sale, a small sale, you might only spend 2 or $3,000 in preparing a steer sale in a local area. If it is a yard sale or a dispersal sale then you would certainly be having a far greater sized budget.' [Transcript page 18] 186 In Mr Crowe's terms, the numbers of cattle he had in mind when talking about a small sale were $400 to $600. In his experience, the large sales that he referred to could involve something like 2 or 3,000 head of cattle. 187 His evidence was that a dispersal sale is the complete disposal of a herd. A production sale is often referred to as a sale where the females make up the major portion of the sale. A reduction sale on the other hand may be one where most breeds of cattle could be developed. 188 Mr Crowe had had experience of dispersal sales of cattle herds from time to time in his career. Such a situation might arise where there was a deceased estate being wound up or in certain circumstances breeders change their directions and move into another line of agricultural production. His evidence was as follows: 'Q. you have seen dispersal sales of a herd such as you see on Jeogla and have been seeing on jobs over a number of years, does that have any different connotation to dispersal sales, meaning, I am selling all my cattle? A. Yes. The Jeogla herd is one that had been built up over three generations and it had a reputation in the beef industry not only in this State but right throughout Australia, as being a very reliable supplier of beef animals for both breeding and fattening. Q. And when you say "a reliable supplier" to what are you referring as the elements of reliability? A. I guess with the production of beef, meaning from the Jeogla property, . . . I mean produced with more muscle less fat, yet at the same time retaining those characteristics of doability, fertility and growth . . . doability is exemplified by an animal's ability to convert feed into beef by such things as grain in a feedlot or grass in a pasture situation.' [Transcript page 20] 189 His evidence was as follows: 'If you are contemplating the sale of the whole of a herd such as Jeogla, first of all would it be a herd that you would sell through the fat cattle or the weaner market at the local sale yard? A. No. Q. Why? A. Referring to the Jeogla cattle? Q. Yes. A. First and foremost they have a very good selling complex on the property. You would not load cattle and transport them to the Armidale stockyards when you have a selling facility which is already constructed on the property . . . the other feature is that the type of cattle sales that Jeogla had become very highly regarded for, you would maintain that successful selling programme. There would be no need for you to move cattle to a saleyard like Armidale . . . Q. Would you then, in conducting the auction on Jeogla, conduct it as a fat cattle market sale? A. No. Q. How would you be conducting an auction of the Jeogla herd on Jeogla if it fell to you? A. They would be sold on a per head basis as distinct from selling per kilogram of live weight. Q. Would you handle the promotion of such a sale differently from the way you would deal with the sale of fat cattle. A. Yes. Q. In what respects? A. A sale of fat cattle, it is important to have the support of the producing side of the industry. A sale of cattle of the nature we are dealing with here at Jeogla, you would be directing your advertising and selling to the breeding side of the beef cattle industry. Q. The producers rather than the consumers? A. Correct . . . Q. Where do you find producers of cattle such as the herd at Jeogla? A. They are white face cattle produced in most areas of Australia but I think these are specific beef maker cattle that we are referring to and this is a breed that has been developed by the Wright family. Q. But are beef makers specifically peculiarly sensitive to being within five kilometres of the Wright household? A. Beef makers are bred in many areas of Australia. Q. And in your promotion of a dispersal of the Jeogla herd where would you seek to promote such a sale? A. Well I would certainly embrace the three eastern states of Australia and if you were disposing of the entire herd of Jeogla your advertising would embrace Queensland, New South Wales and Victoria in particular and you expect you would be buying support from at least those areas. Q. Would it make a difference to buying support between putting a few hundred beasts up for sale and putting up 5,000? A. Yes. Q. Why? A. In the industry we call it strength in numbers. Q. How does that manifest itself and why? A. If I was a grower in the West Coast of Victoria and I was interested in obtaining a line of breading cattle from Jeogla, I would think the trip, as greater trip physically it would be far more worthwhile if I had an opportunity to bid on 5,000 rather than 500. The opportunity of a larger number of animals in the sale affords more opportunity to buyers attending.' [Transcript page 22] 190 His evidence was that assuming a dispersal of the cattle at Jeogla would involve the disposal about 5,000 head of cattle his advertising budget would have been through the medium of rural press, radio, television - approximately $14,000 to $15,000. 191 Mr Crowe's evidence was that it was his view that disposing of the subject herd ought be by sale at a dispersal sale or a store sale on a per head price basis. His experience was that disposal of a herd of cattle of this nature could only employ these modes of sale. If one was going to a fat sale situation, then it was very different because then sale would take place on a cents per kilo basis. Disposing of cattle of this nature he would expect to be at an open auction where a price per head basis was established. [Transcript page 24] 192 Mr Crowe was asked and answered as follows: 'Q. In your experience . . . is the price paid for breeding cattle, breeding cows such as the 1994 Beefmaker cow, in your list, determined by the price being paid for killing cattle at the same time? A. Almost insignificant. Perhaps the only qualification I would make, if somebody was selling something of their own for a pretty good price it might see them better set up financially to go forward and spend a better price. But if I could explain, that selling cattle of this nature on a per kilo basis is very foreign to me. These are breeding cattle and have a real value . . . Q. In your experience have you seen breeding cattle being sold on a per kilo basis? A. Never, never in my experience . Q. Why is that, in your experience? A. I think it would be generally agreed you would not achieve their real value. You would be having no regard for the genetics package that is involved. You would be having no regard for the state of breeding, whether it be a three, four or ten year old. All has a bearing and I just think it would be a most unsatisfactory way of disposing of cattle of this nature . . . Q. In so far as the dollar amount that you have attributed to the various classes of animal that you describe in your annexure A, in arriving at those figures do you take into account, in any degree, a price per kilo that might be obtained for meat, embodied in either the cow or the calf, the heifer, the steer or the bull ? A. No . Q. What did you take into account in attributing those dollar amounts to those various classes of animals described in your schedule? A. I had regard to the growth and condition of the cattle, the quality of the cattle, the condition and quality of the calves at side, for those cows that had calves at side and the general wide acceptance that the job the cattle had as really being an elite herd in the beef cattle industry in this State. Q. Did you take into account that they were sold on a dispersal basis ? A. Yes, yes , I had regard to the fact that - I mean, it would only be - if I could say to the Court, it would only be a dispersal that would see these type of cattle go under an auctioneer's hammer . These are the basis of three generations of a family breeding, as I say, an elite herd of cattle, and if they were maintaining their form in the beef industry, there would be no reason to sell them. They wouldn't be prepared to part with them. But if they were leaving the industry for whatever reason, and these cattle were at a properly promoted and organised sale, then I am secure that the values I have nominated - they are average prices . If I could just explain to the Court, with the numbers involved, take the first 446, there may be cows there that could make 650 or $680. There may be some that may make $520 or $540, but I was interested in arriving at an average figure which is common in a valuation of this nature, and was secure in my estimation that those particular lines were worth the money that I have listed on that valuation . . . Q. In the auction sale did you have in mind in striking the values that you described in your paragraph A, you were assuming this was a dispersal sale ? A. Yes . that would be the only reason these cattle would be, as I say, submitted for sale if it was a dispersal. Yes, that would be what I had in mind, yes.' [Transcript pages 25-26] [Emphasis added] 193 Mr Crowe's evidence was that at a properly promoted and advertised auction sale, he would imagine a sale of this nature could draw 400 or 500 potential buyers, each selecting the grade of animal that they see fit and placing their own value on such animals. In his experience, 'where a property and stock on hand is wrapped up in one, of course that is only a negotiation between the purchaser and the seller which sometimes [he believed] could be effective, but that is the exception. . . . rather than the rule', and in this case he believed their real value, would be best achieved at a separate public auction. [Transcript 27-28] 194 In Mr Crowe's experience, it was not correct to say that the buyers who might be interested in attending a dispersal sale of the herd were likely to be in the market for land. [Transcript 28] 195 Mr Crowe gave the following evidence: 'Q. I want you to assume, Mr Crowe, that if an appraisal were made, this is of the Jeogla cattle at 30 July 1998, based on, amongst other things, the prices achieved at a livestock sale at Armidale on 23 July 1998, detailed in a Livestock Market Detailed Cattle Report issued by the National Livestock Reporting Service - to be fair I will show you the document that has been referred to. I am showing you two pages extracted from an affidavit that will be read in the proceedings reproducing a document headed 'Livestock Market Detail Cattle Report' from 23 July 1998 to 23 July 1998 Armidale Yarding 700 - is that a document with which you are familiar? A. Yes. I see these reports from time to time yes. Q. Can you, from a perusal of that document, tell his Honour what type of sale is there being reported on? A. This is the regular weekly fat stock market at the Armidale City Sale Yards . . .'. [T 28] 196 Mr Crowe gave the following evidence: 'Q. In relation to the cattle that you saw on Jeogla, and appraised as to their value in your annexure A, before appraisal of such cattle, would you have regard to the prices being paid by purchasers in the Thursday sales at Armidale, in May, that you have seen in the reports I just handed to you? A. It would be of no significant relationship to the values that I have made.' [T 29] [Emphasis added] 197 Mr Crowe was reminded that in his affidavit, he had said that it was his expectation that if the cattle that he saw on 30 May 1998 were sold in spring of 1998, they would command a higher price. He was then asked as follows: 'Q. And then you went on to say "I estimate the price would have been 10 to 15% higher". Now, first of all, when you said, 'I estimate the price would have been 10 to 15% higher", to what were you directing your mind in making that statement . . . Q. First of all, I take it that you are addressing yourself to 10 to 15% higher than the figures you have nominated in your report? A. Correct . . . Q. You were writing your affidavit in January 1999, well after the event of spring 1998. Did you in fact make any observation concerning the prices of cattle, the values of cattle as between May 1998 and spring 1998 ? A. Yes, there had been some increases in cattle prices . Q. Was that increase localised to particular cattle or particular types of cattle, in your observation, or was it general? A. It was general . Q. And your recollection, in percentage terms expressed in that way, in what amount had the value changed between May 1998 and spring 1998? A. I feel the values of the animals that I valued would have increased by 15% . . . Q. . . . Between May and September . . . would you in the ordinary course of things expect the price, the value at least to change in any way, whatever else the market was doing? A. Yes. Q. Why is that? A. The spring period obviously offers better opportunities for both breeding cattle and fattening cattle to improve in value. I mean, in a good spring season situation you are not going to have supplementary feeding costs, whereas back in May you could not be sure. Q. I take it that [is] a matter you would expect to effect the general market price of cattle? A. . . . Yes. Q. As between any given herd of cattle, between May and September, would you expect some change in the value of the herd to occur, whether or not the general market increased? A. Yes. Q. Why is that? A. Cows with calves, autumn drop at side in May have obviously grown on to be of greater value by September . . .' [Transcript 30- 31] [Emphasis added] 198 Mr Crowe was asked and answered as follows: 'Q. You saw the cattle in May. Did you have, when you came to write your affidavit, any belief as to what would have occurred in relation to the value of that herd between May and September? A. Yes. Q. What was that belief? A. Well it is my belief that the herd would have improved in value to 10 to 15%. Q. What matters would have contributed to that increase of 10 to 15%? A. Firstly, the growth of calves at side or the born new calves that were in utero back in May, the steers would have grown out, they would have had an extra growth and consequently more weight, and coupled with that would have been the favourable seasonal conditions that were experienced in a wide range of New South Wales for the spring of 1998.' [Transcript 32] 199 Mr Crowe under cross-examination, was asked as follows: 'Q. Can I take you back to the details of the sales at the Armidale Fat Sales. Would you agree that if somebody was valuing the Jeogla cattle it would be appropriate to look at these published records of the sales and then add on some premium for the value of the cattle, having regard to the fact that it came from Jeogla or that it was V1V brand cattle that was being sold? A. No . Q. What is wrong with that methodology? A. The Armidale sale that you have made reference to is one - as I think we have addressed already - it is a market place for processing cattle. It is market results which are achieved in the main, not necessarily all, but in the main. This is the Armidale Weekly Fat Market held on the Thursday of each week for cattle that are going to processors and apart from the male cattle on my valuation list, I wouldn't think any of those cattle submitted to auction on 30 May would go to the processing side of the industry, they would all go back out to breeders, so for sales at the weekly sales at Armidale that you made reference to, that gives me no real guide as to the value of the cattle running on Jeogla on 30 May . . . Q. You do not have any objective guide yourself, do you, to make a comparison? A. I have a very good guide on what processing cattle are worth because they are listed in the livestock market reports for the various grades of cattle but these cattle don't fit into those categories. These are breeding cattle with three family generations of breeding behind them, giving a far greater degree of product for the resultant progeny than most of the cattle that would go through the Armidale Fat Market Sale Day.' [Transcript 47] 200 In re-examination, Mr Crowe at transcript page 57, gave the following evidence: 'Q. It was suggested to you by Mr Jacobson that there was no information upon which you could form a view about the prices that you attributed to the animals in your annexure A and I think you said to him that the results from the Armidale fat sales were not something that you considered. What other source of information did you have in mind when you answered my learned friend's question? A. Well, just - sorry, okay. Early in the month of May 1998 I journeyed to Maniro, Cooma, where there were just over 2,000 Angus females put through a public auction system - very good cattle - as Angus, probably on a level with what V1B [sic] makers are as beef makers. But the tops of those cattle were making $800, $850. There is another very well promoted and organised Angus sale at Scone in the Hunter Valley each year at the end of May. The tops of those cattle make more value than I have had here. I mean, you are dealing with, as I mentioned earlier, an elite herd of cattle and where you have that standard going before the public in a properly promoted sale, you definitely command a premium, rightfully so, and this is what the people are prepared to pay . . . . Q. Apart from the sales that you attended personally of the breed of cattle that you have referred to, are the results of sales of that type - that is to say, of the store cattle for commercial herd - published in any publication? A. Oh yes, the Land Newspaper, Hereford Quarterly, the Angus Annual Magazine. I could take you to the Stewarts Creek sale held in Roma each year - a very highly regarded sale, a multi-vendor sale, but yarding 3,500, 4,000 cattle. But people from Victoria go there to buy, because they know the quality, they know there are the numbers and they know that the cattle they can take on and make money with, fit into their breeding programmes and this is an exact parallel .' [T57,58] [Emphasis added] 201 Mr Crowe was asked the following question and answered as follows: 'Q. When you inspected the cattle in the paddocks, I think you said to his Honour that you were being given information from time to time by Mr Wright about the cattle; from your physical observation of the cattle, did you perceive any incongruity between what you were being told and what you saw? A. No.' [T 59] Evidence given by Mr David Nolan 202 Mr Nolan is a stock and station agent and real estate agent who had, for 20 years, been such. Since November 1996, he had been the principal of LJ Hooker Rural New South Wales. Before that he had been the National Manager of LJ Hooker Rural Australia. He was the agent appointed by the receiver on the sale of Jeogla and Bald Hills. At the time he made his submission to the receiver for appointment as an agent to sell Jeogla Station, he had looked over the property and had made observations as to the condition of the cattle at the time. Mr Nolan's evidence is generally accepted as reliable. 203 Mr Nolan's evidence was that he had not turned his attention to the question of the value of the herd or the valuing of the herd until about 21 July 1998, being the date when he wrote his letter of advice to the receiver as to how the herd might be dealt with in conjunction with the property. 204 Mr Nolan's evidence was that he anticipated as a mode of realisation, that buyers be informed first of all that the buyer of the land could also acquire the plant, equipment and stock. He was reminded that in his submission to the receiver, he had said that 'a detailed livestock schedule with values would be prepared and included in the information memorandum'. His evidence was that this was his thinking at the time he prepared the submission to the receiver and that this was because he considered that it was desirable that people considering whether they were interested in Jeogla should be told, first of all 'if you buy the land you will have the right to buy the cattle', and secondly 'it won't be in a competitive situation against other people, you will have the right to buy them at a particular predetermined price. [T284-285] 205 His evidence was that his thinking was that it would be necessary for the predetermined nominated price to be communicated to potential purchasers so that they could work out what their total budget might be in relation to a purchase of Jeogla and the cattle. 206 As to the promotional material, Mr Nolan accepted that the material which he went forward with into the market place, started to be circulated in early August and comprised brochures and newspaper advertisements and entries in the Hooker magazine in relation to rural land. This was backed by the prospect of sending out an information memorandum to persons who had expressed an interest in the property. Mr Nolan accepted that in the first line of advertising material, that is say the brochures, newspapers and magazine entries, it was not stated that the property was being offered with the option to acquire the stock at a predetermined price, but simply stated that the buyer would have the opportunity to acquire the stock or an option to buy the stock according to which publication one looked at. He accepted that in the information memorandum, it was again disclosed that while the purchaser would have the opportunity or the option to acquire the livestock, it was not stated that it would be at a predetermined price or as to what that price was. [T285] 207 Mr Nolan accepted that it was not until some time late in August that he had any figures from the receiver in relation to the price at which the stock might be offered to the market. He was asked whether he addressed himself to the question as to what prices might be realised for the stock sold, for example, through a dispersal sale or sold in a line or in lots as a breeding herd or sold into the meat market. His answer was in the negative and that his recommendation was to use Elders to predetermine the value of the livestock. Mr Nolan had wanted to divorce himself from the situation and had recommended the receivers to use Elders because they were previously Mr Wright's stock agents and knew the livestock. 208 Mr Nolan was asked and answered as follows: 'Q. . . . I am just trying to step you through the ingredients of it to make sure we all understand how your thought process worked. Your first proposition is that the buyer of land in securing the land at a dispersal sale or seeking to secure the cattle at a dispersal sale, would be confronted with paying a premium? A. Correct . Q. And the premium you refer to is whatever bid is necessary, whether it be $1 or $5 to take the bid price for the beast above the price that other purchasers or potential purchasers of the cattle were prepared to pay? A. Correct. Q. Which premium may or may not be offset by the proposition that if you are having an on-station dispersal sale of these animals through the Jeogla sale yards, that same purchaser will not have to incur costs and will not have to incur risks that other potential purchasers of that livestock would incur, or would in acquiring the cattle on Jeogla? A. There would be some savings, yes. Q. So he has, in effect, an absolute cost advantage, relative to other purchasers who are away from Jeogla in varying degrees . . .? A. . . . Yes, I agree he has an advantage, but no because of what we were discussing earlier.' [T 288-289] [Emphasis added] 209 Mr Nolan was asked: 'Q. Did you . . . consider what the value of the herd disposed of in the dispersal sale context might be, relative to the price that one might nominate in the contract? A. No sir, because the livestock were being left to be valued by Elders. Q. But you see did you suggest (sic) that Elders ought be asked to advise whether, in the pricing of the stock, they were to price at the dispersal sale value or at something less than dispersal sale value, or what? A. I didn't see any documentation in relation to the instructions, but I was verbally told that they were asked to provide a premium on the livestock . Q. A premium over what? A. Well see I didn't see any instructions but I was - I believed there was a market value and a premium value put on the cattle. Q. Were you told that the premium was a premium over the meat value of the cattle? A. You mean the hanging up on the abattoirs? Q. Yes? A. I am sure that would have been the case sir, I have no doubt. Q. Because as you understood . . . A. On the breeding herd I am talking about. Q. As you understood the breeding herd would command a substantial premium over its mere meat value ? A. I would imagine sir, yes . Q. Because as you have said these were well bred, proven breeders, that commanded a premium in the market? A. Yes sir .' [T 289-290] [Emphasis added] 210 Mr Nolan had had experience in dealing with livestock and had had experience with the sale of large numbers of quality breeding cattle. He accepted that what the receiver had in the Jeogla sale was a very large number of very high quality animals. He was then asked: 'Q. And a sale that you would expect to attract attention from purchasers of, or potential purchasers, of breeding cattle from the East Coast of Australia and probably further afield? A.. I was actually surprised that we didn't receive more phone calls just about the livestock. We received - in the marketing of the whole property we received very few calls just purely on the livestock, which I was surprised about. ' [Emphasis added] 211 His experience was clearly that he received very few enquiries simply about the livestock. He accepted that it was correct to say that in the marketing campaign that was constructed, it was never suggested that the livestock herd was for sale as a separate component. He accepted that the advertising that he mounted at best suggested that the livestock might come up for consideration after Jeogla Station had been disposed of. [T291] 212 Mr Nolan accepted that he expected that the number and type of purchasers interested in the Jeogla herd, or parts of it, would be a substantially larger number and a substantially wider range of purchasers, than those who would be interested simply in the land or the land plus the cattle. [T 291] 213 Mr Nolan accepted that as he understood it, people who already had properties of their own, might simply wish to buy one or two hundred animals to add to their herd or to change the direction of the property or to improve or enhance it. That was the sort of purchaser that he would have expected to appear at a clearance sale such as a dispersal sale of a herd such as the one on Jeogla. He accepted that no advertising at all was directed to the prospect of the cattle herd being realised separately from the land. [T291-292] 214 The advertisement that appeared in the paper had simply said: 'Comprehensive list of livestock and plant available'. There was no separate advertisement for livestock. [T292] 215 He was then asked: 'Q. . . . So is this right, that apart from whatever was obtained by the receiver from Elders, you undertook no separate appraisal of the cattle as to the best methods for realisation of the cattle, or the prices that might be obtained? A. No sir. Q. And you undertook no separate exposure of the cattle to the market as an item for sale to determine the nature and extent of interest in the cattle in the market? A. No sir. Q. And one of the matters that you observed was that, contrary to your expectations, you got relatively few enquiries concerning the cattle simpliciter as a result of the advertising that was carried on? A. Yes sir. Q. So is this right; that as you understood it as you came up towards the auction, the persons likely to appear at the auction were either those interested only in the land, and not interested in buying the cattle at all, or those interested in buying the land and buying the cattle? A. Mm [which I interpret as yes]. ' 216 Mr Nolan was asked: 'Q. Well, presumably you had some people who you couldn't tell whether they were interested in the cattle or not? A. Well, as I said earlier sir, no one really indicated they were. . . . Q. . . . As I understood your last answer to me, you are saying you were getting no independent enquiry concerning the cattle ? A. Very few. Q. Very little independent enquiry concerning the cattle ? A. Right .' [T293] [Emphasis added] 217 Mr Nolan at transcript 294 gave evidence that he would have assumed that Elders had put a premium on the cattle. He believed that the value that Elders put on the cattle would have been a premium, based on dispersal sale or based on just cattle being sold wherever. 218 At transcript 295, Mr Nolan was referred to his option (a) in his letter. He was asked: 'Q. And it is the prospect of getting more than dispersal sale prices that you thought would be disincentive to the purchaser of the land, or having to pay more than dispersal sale prices that you thought might be the disincentive to the purchaser in your alternatives (a) and (b)? A. I think in this case the purchaser would want to know the destiny of the livestock and plant, yes.' [T295] 219 Mr Nolan gave evidence that he assumed that the value that would be nominated for the cattle in advance of the auction would be an approximation of the sale price of those cattle in a well organised dispersal sale and that, therefore, he assumed that people having seen that value and seen the schedules of the descriptions of the livestock and so forth would come to the auction unafraid of any premium or being held to ransom, as he had described in his alternatives (a) and (b). His evidence was : 'Q. And would simply bid what they considered to be the proper value for the land? A. Correct. Q. So your theory of the sale, if you like, was that you could get the market to reveal its real appraisal of the land by taking out of the equation, risk in relation to the value of the livestock, but sell the livestock for its proper value? A. Yes sir. . . . I would imagine [Elders] would have been instructed to put a premium on the cattle . . . Q. The premium that you're referring to, I take it, is the premium to reflect the breeding of the cattle and so forth, which premium you would expect to be realised in a dispersal sale ? A. Yes sir . Q. And when you describe it as a premium, take it [sic] you mean as an increment in addition to the price to reflect the quality of the herd and its status as a prime breeding herd? A. Yes sir.' . . . 'Q. You assumed market value struck according to the appropriate market for the description of the cattle on Jeogla? A. Yes.' [T 298-299] [Emphasis added] 220 At transcript 302, Mr Nolan gave the following evidence in cross-examination: 'Q. And indeed you assumed for the purposes of your work in relation to this auction, that the option was price neutral, that is to say the market value was approximately the same as the exercise price of the option? A. Considering the time frame of the valuation of the livestock it would be fair to say that it was stable. Q. So you assumed that the option had no particular value in the equation that you were dealing with at the auction sale on the 22nd? A. In other words did the cattle get dearer? Q. No, you assumed that the cattle market value was approximately the same as the contract price? A. Well that is what we were provided by Elders, yes. Q. And therefore you have assumed that the option had no particular value, the only . . . A. No, I didn't say that, I think the option of acquiring the cattle would have a value. Q. It's principle value was it excluded the forms of risk that you have referred to in (a) and (b) of your letter? A. Yes. Q. And therefore, I take it, you assumed that the prices being bid for the land on 22nd September reflected simply the value of the land, unaffected by the value of the cattle . . . A. . . . I believed that the land was bid on the basis that everybody - the successful purchaser would have known what his destiny was in relation to the livestock and plant.' [T302] 221 Mr Nolan gave evidence that the property was passed in at the auction. 222 Mr Nolan could not recall whether, in the introduction to the auction and during the conduct of the auction, the price that the cattle were being offered had not been separately referred to as part of the auction 'spiel'. A video of Jeogla Station auction was tendered which is accepted by the defendants as making plain that this was indeed the case. [P17] 223 After the property was passed in at the auction, there was some short discussions between Mr Nolan and the receiver and he then returned to his office. He had phone contact in regard to the offer that was subsequent to the property being passed in and then the eventual purchaser had contact with the receivers and a sale was agreed upon. Mr D. Graham 224 Mr Graham is a cattle breeder who deposed that he had developed substantial expertise in breeding, purchasing and selling cattle and in particular Hereford cattle. He deposed that he had been involved in purchasing cattle and assessing and analysing the quality of cattle and their value for about 35 years. [Affidavit 24 December 1998 paragraph 1] 225 Mr Graham deposed that he had first purchased Hereford breeders from Jeogla Station in the 1970's and had purchased hundreds of those cows from that time. He deposed that his father had purchased Hereford breeders from the Jeogla Station back in the 1950's. 226 Mr Graham deposed that on or about 6 August 1998, he noticed an advertisement in 'the Land' newspaper, advertising the auction of Jeogla Station which caught his eye as he knew the property well and had purchased cattle from it in the past. He deposed that he was very interested in putting a syndicate together to buy the property as he knew the property as a leading cattle breeding property with an International Quality Assurance Approval also having Cattlecare Accreditation and the superior V1V Hereford Beefmaker brand. 227 He deposed that on the basis of his experience with similar properties and knowledge of the qualities of Jeogla he formed a view as to the value of the property. 228 Mr Graham deposed that he telephoned Mr Paul Watts of PR Watts & Co, Stock and Station Agents who was named in the advertisement as an agent for Jeogla and said to Mr Watts: "I am interested in Jeogla. I see you are handling the sale. What do you think it is worth". 229 Mr Graham deposed that Mr Watts had replied that in Mr Watts' view it was worth about $500 an acre which made it $8million but that this did not include the cattle. 230 Mr Graham deposed that he had formed a view, given the quality of the livestock on the property, that the property 'lot, stock and barrel' was worth around $10million. [Affidavit 24 December 1998, paragraph 12] 231 This paragraph in his affidavit was admitted as evidence of his state of mind at the time, as distinct from his expert opinion as to value at the date. 232 Mr Graham deposed that a few days later he contacted Mr Nolan of LJ Hooker Real Estate who were also named in the advertisement as agents for the sale of the property. He deposed that a conversation took place in which words to the following effect were said: 'Mr Graham: I am interested in Jeogla. What price do you think the property will be auctioned at? Mr Nolan: At about $5-$6million not including the stock and plant. I will send you a catalogue.' 233 Mr Graham deposed that on or about 20 August 1998, he received documents from Mr Nolan which included a catalogue and an LJ Hooker flier. Those documents, annexed to his affidavit, comprised what is generally referred to in this affidavit as the information memorandum and a flier or circular advertising the forthcoming auction. I note that the flier stated, inter alia: 'An added bonus for the successful purchase of Jeogla Station will be the opportunity to purchase the livestock and plant and equipment currently on the property'. There was no statement in the flier to the effect that there was a right of first refusal or such a right at a predetermined price. 234 Mr Graham deposed that soon after he had received these documents, he contacted Mr McEvoy, a business associate whom he had dealt with many times before in relation to the purchase and development of properties. Evidence was admitted of this conversation as proving that it took place and not as proof of the truth of the underlying facts stated in it. In the conversation deposed, Mr Graham gave evidence that he had said to Mr McEvoy: "Jeogla Station at Armidale is going to auction. They are saying it will go for about $5-6million without the stock. The stock are very good quality. I think the whole thing is worth about $10million. I think you should consider it." 235 Mr Graham deposed that he and Mr McEvoy then discussed the matter generally, discussing matters such as the value of the property, the stock inspection and other such matters. These types of discussions are said to have occurred on a few occasions in about August to September 1998. 236 Mr Graham then deposed that on about Friday 18 September 1998, he spoke with Mr McEvoy and they proposed to call the agent with a view to placing an offer for the property. 237 Mr Graham deposed that later on the same day he had telephoned Mr Nolan and, words to the following effect, were said: 'Mr Graham: My associate, Mr McEvoy, and I are interested in purchasing Jeogla, and would be interested in an offer of $9milllion to buy the Station and the livestock. Mr Nolan: There is another party who is very interested in purchasing the property and it is likely that this party will purchase the and [sic] the property will not go to auction as planned on 22 September 1998.' 238 Mr Graham deposed that he then said the following words, thinking that perhaps Mr Nolan's negative response was linked to the value of his offer: 'Mr Graham: At what price would the property be sold at? Mr Nolan: I don't know. Mr Graham: Please keep me informed about progress of the sale. Mr Nolan: I will keep you informed.' 239 Mr Nolan denied having any such conversation with Mr Graham. 240 Mr Graham then deposed that on Monday 21 September 1998, he had again contacted Mr Nolan and words to the following effect were said: 'Mr Graham: We would like a copy of the contract. We want to place a formal offer of $9 million for the property and livestock. Mr Nolan: It is highly likely the property will sell before auction, but I will send you a contract.' 241 Mr Nolan denied having any such conversation with Mr Graham. 242 A contract was in fact sent to Mr McEvoy, so Mr Graham deposed. Mr Graham deposed that it had arrived in the late afternoon of Monday 21 September 1998. 243 Mr Nolan had given evidence that on 21 September 1998 he received a telephone call from Mr Graham who had said to him: "I would like you to urgently arrange for a contract to be sent to Mr Michael McEvoy of the McEvoy Development Group in Liverpool". Mr Nolan had given evidence that he had said he would arrange for that to be done straight away. 244 Mr Graham deposed that, having had the conversations earlier referred to and set out in his affidavit with Mr Nolan, he formed the view that it was unlikely that the property would go to auction as there was an interested buyer who would purchase the property. He deposed that accordingly he did not, nor did any agent of his, attend the auction on 22 September 1998. 245 Mr Graham deposed that on Tuesday 22 September 1998, he was informed that the auction had gone ahead and that the property had been passed in at $5.75million and that he then contacted Mr Nolan and asked how much the property sold for and Mr Nolan had responded, saying words to the effect that "the property has not been sold, however negotiations are currently under way and it is likely that the property will be sold soon". 246 Mr Nolan denied receiving any telephone call from Mr Graham on 22 September 1998. He gave evidence that the contracts for the sale of Jeogla and its livestock and plant and equipment were exchanged late in the evening on that day. His evidence was that the first phone call he received from Mr Graham was on 23 September 1998 after the contracts had been exchanged, when a conversation to the following effect took place. 'Mr Graham: I was interested in purchasing Jeogla Station. I understand it was passed in at auction. Mr Nolan: It was passed in but has since been sold. Contracts were exchanged yesterday. Mr Graham: Well I want to buy it for $9 million. Mr Nolan: The property has already been sold and is not on the market. Contracts have been exchanged. Mr Graham: Mr McEvoy of McEvoy Development Group was actually at the auction. In his opinion, the property was knocked down very quickly at the close of bidding. Mr Nolan: The property was passed in - it was not sold under the hammer at the auction. Mr Graham: I can bring you in a bank cheque for the amount of the deposit. Mr Nolan: The property has been sold. There is no point in pursuing this.' 247 Mr Nolan deposed that subsequently, Mr Graham had again telephoned him and that he had at that stage told Mr Graham to contact the receiver. 248 Mr Graham deposed that he had contacted Mr McEvoy after speaking with Mr Nolan on 22 September 1998 and informed Mr McEvoy of his conversations with Mr Nolan and suggested to Mr McEvoy that they urgently send an offer to Mr Nolan for $9million to purchase the property and livestock. This section of Mr Graham's affidavit was admitted only as proving the conversation and not as proving the facts stated in the conversation as correct. 249 On 23 September 1998, M & A McEvoy Development Group forwarded an offer to the receiver's office. The offer was conditional upon certain matters, to purchase Jeogla and Bald Hills Stations together with plant, equipment and livestock for a total purchase price of $9million, including the land component of Bald Hills and Jeogla Stations; including the livestock and plant and equipment as set out respectively in the contract for sale of livestock prepared by Norton Smith & Co. and the contract for sale of plant and equipment prepared by the same firm of solicitors. [PX 1601] 250 Mr Graham deposed that later on the same day, that is to say 23 September 1998, he had contacted Mr Skinner and asked Mr Skinner if the property had been sold and if so, for how much. His evidence was that Mr Skinner's response was that he could not reveal how much the property had been sold for but that it had been sold. 251 Mr Graham further deposed that on 24 September 1998, he again contacted Mr Skinner and a conversation took place in which words to the following effect were said: 'Mr Graham: Have you received a formal offer to purchase Jeogla from M & A McEvoy Development Group? Mr Skinner: Thank you I have received the offer but unfortunately the property has been sold . . . If the contract does not go through I will let you know.' 252 According to Mr Graham, Mr Skinner informed him that Mr Skinner would formally respond to the offer in due course. 253 Mr McCarthy deposed that he believed that the conversation to which Mr Graham referred was with Mr Chris Campbell, a partner of Deloittes and himself, as Mr Skinner was overseas on leave at the time. Mr McCarthy recalled receiving a telephone call from Mr Graham on 24 September 1998 which he transferred to Mr Campbell. Mr Campbell took the call as a conference call so that Mr McCarthy could hear the conversation. He McCarthy recalled the conversation as one in which words to the following effect were said: 'Mr Graham: I want to buy Jeogla Station. Mr Campbell: Sorry Mr Graham, the auction was yesterday and the property has been sold. Mr Graham: What did it sell for? Mr Campbell: I'm sorry I cannot tell you the contract is subject to confidentiality provisions. Mr Graham: I will offer you $9 million for the property and for the plant. Mr Campbell: The property has already been sold and it is subject to contract. Mr Graham: You are under an obligation to accept the highest price. Mr Campbell: You're too late. The property went to auction yesterday, it was passed in but we negotiated with the highest bidder. Contracts have now been exchanged. I will note your interest. If the contract doesn't complete for any reason we will contact you.' 254 Mr McCarthy's evidence was that within a few days after that conversation, he received a message on his voice mail to the following effect: 'David, this is Rick Wright speaking. I have been contacted by Dudley Graham. I am not sure who he is, but he is interested in purchasing Jeogla. Someone should follow up with him.' 255 Mr McCarthy's evidence was that Mr Wright did not leave a telephone number where Mr McCarthy should contact him. 256 Mr Campbell deposed that he recalled a telephone conversation with Mr Graham on 23 September 1998 at which Mr McCarthy was present and in the course of which the following was said: 'Mr Graham: I want to offer $9 million to purchase Jeogla and Bald Hills Stations. Mr Campbell: Contracts for the sale of the Jeogla properties were exchanged yesterday and therefore I cannot deal with your offer. If the contracts do not settle I will let you know.' 257 Mr Graham also deposed that he had been involved in breeding Hereford cattle for 35 years approximately and that during that time the Jeogla Station cattle had been a famous Hereford breeding property producing superior quality cattle. In his experience, a breeding herd was always sold on a per head basis, whereas cattle sold as meat to the meatworks, were sold on a per kilogram basis. 258 Mr Graham also deposed that if the V1V Jeogla Breed Herd was to be sold, that in his opinion, would produce a very rare opportunity for cattle producers to purchase a superior breeding herd or part thereof. He deposed that such a large dispersal sale would have created substantial interest throughout New South Wales and Australia. His evidence was that it is rare that you can buy cattle which have the benefit of years of superior breeding and genetics and that, based on his experience, persons would have widespread and substantial competitive interest in the opportunity to purchase the breeding cattle from Jeogla. 259 Mr Graham also deposed that he believed the best place to sell the stock would have been on Jeogla Station property through its sale facilities. He deposed that he believed that appropriate advertising of a disposal sale, giving two months' notice to potential purchasers, would have led to successful sales. He deposed that in late November 1998, he had sold some of his Hereford cattle from his breeding herd for $500 per head through the Wodonga Saleyards. He deposed that those cattle were not as good a quality as the Jeogla cattle and that he believed that the Jeogla breeding cattle could easily have obtained $700 per cow. 260 In relation to Mr Graham's evidence of his first telephone conversation to Mr Watts, Mr Watts denied having that telephone conversation but did give evidence that, according to his records, he first spoke with Mr Graham on 18 August 1998, this also being his recollection. Mr Watts deposed that, in this conversation, words to the following effect were said: 'Mr Graham: My name is Dudley Graham. I have known the Wrights from Jeogla Station for many years and have bought thousands of cattle from them over those years. I am trying to locate the Wrights. Do you know where they are? Mr Watts: No I don't. Mr Graham: I understand that you are one of the agents acting on the sale of Jeogla Station. How much do you think it is worth? Mr Watts: Country in the New England is making between $300 and $700 an acre depending on size and location and soil types. Jeogla Station is in a good area, is well run and has good stock and I believe it will sell well at auction. Mr Graham: So it would be worth $500 an acre? Mr Watts: I really can't say how much it would go for. Mr Graham: But it would be worth about $500 an acre? Mr Watts: A price of $500 an acre means that the property would be sold for $8million excluding stock. I do not think that is right but the property will sell well at auction. Mr Graham: So you think it would go for $500 an acre? Mr Watts: I did not say that. You said that. If you are interested in the property, I will send you a brochure. You can then come up and inspect Jeogla Station then we will talk about values.' 261 In giving evidence in chief, Mr Graham accepted a deal of Mr Watts' version of the conversation but insisted that he had said to Mr Watts that a price of $500 an acre would imply about $8million as to the value of the whole property. According to Mr Graham, when he told Mr Watts that the property was worth about $500 an acre, Mr Watts did not second his opinion. 262 Under cross-examination, Mr Graham gave evidence that he made just the one offer of $9million to Mr Nolan rather than two offers to Mr Nolan. [T 164] 263 He was asked whether he informed Mr Nolan on Friday 18 September that he was interested in making an offer of $9million to buy the Station and the livestock. This is, of course, what he had deposed to in paragraph 16 of his affidavit. His answer was that he did not recall discussing the matter then but had discussed the matter with Mr Nolan on the Monday (which was the 21st of September). 264 His evidence included: 'Q. You did not say on Friday 18 September, that your associate, Mr McEvoy, and yourself are interested in purchasing Jeogla and would be interested in an offer of $9million to buy the station and the livestock; is that correct? A. We discussed that and that was the verbal offer. It wasn't on paper. But what day, I think it was a Monday. Q. And there was only one such conversation, was there? A. At that one time, yes. Q. And you didn't have any such conversation with Mr Nolan on the Friday before the auction - that is, on 18 September 1998 - is that what you tell the Court? A. Not that I can recall. Q. You tell his Honour, do you that on the Monday before the auction, you contacted Mr Nolan and you told him you wanted to place a formal offer for $9million for the property and the livestock; is that what happened? A. That's true. Q. And that was the only occasion, was it, on which the figure of $9million was mentioned in a conversation with Mr Nolan; is that right? A. Yes. Q. Only mentioned it once? A. Once on that phone call. . . . Q. But prior to the auction you only mention the $9million once, is that right? A. Yes I did. Q. And it didn't happen on Friday 18 [the transcript includes a typographic error here] September, is that right? A. Not that I can recall, no. Q. Well, have a look at paragraph 16 of your affidavit on page 4 . . . Do you see in the first sentence you have sworn that you told Mr Nolan that your associate, Mr McEvoy, and yourself were interested in purchasing Jeogla and would be independent in an offer of $9million to buy the Station and the livestock, that's what you swore to, correct? A. Yes, I can see that there. Q. Well, that paragraph is entirely false, isn't it Mr Graham? A. I'm not saying it is and I'm not saying it isn't. Q. Well it's a simple question, is it true or is it false? A. The time might be wrong, but it's not false. Q. It only happened once? A. It only happened once. Q. Well, let me put it to you this way; you had only one conversation with Mr Nolan prior to the auction in which you mentioned the figure of $9million; is that correct? A. Yes, that's correct. Q. And it wasn't on the Friday? A. Well I'm not too sure, okay, its a long time ago. Q. Well, have a look at paragraph 18 of your affidavit on page 5. Do you see that you said there you told Mr Nolan, "We'd like a copy of the contract, we want to place a formal offer of $9million for the property and the livestock. Is that correct? A. True. Q. In your affidavit you've sworn that the figure of $9million was mentioned twice in your conversations with Mr Nolan prior to the auction, haven't you? A. Yes, well that must be true. It's only a small thing to me.' [T164-166] 265 It was then put to Mr Graham that his affidavit was a tissue of lies and that he had given quite inconsistent evidence in his affidavit to that given in the witness box. His answer was that it was all in the affidavit in black and white and he denied that the affidavit was a tissue of lies. 266 In further cross-examination, it was put to Mr Graham that his evidence that on the Friday he had spoken with Mr Nolan, who had said that another party was very interested in purchasing the property and that it was likely that that party would purchase the property which would not go to auction as planned on 22nd September 1998 was totally false. Mr Graham denied that this was false. The evidence included: 'Q. Do you seriously suggest that Mr Nolan did not express any interest in talking to you about your offer of $9million is that what you say? A. Yes. Q. That's just not true is it Mr Graham? A. It is true.' 267 Mr Graham also admitted that he himself did not have any funding in place to purchase the property and the cattle for $9million as at 22 September 1998. He said that he was not organising the funding but that it was to be organised. He was then asked: 'Q. You were seeking to put together some syndicate were you, to purchase this property? A. Yes. Q. And the details of that syndicate hadn't been finalised as at 22 September? A. I didn't fully know where - how will I put it? I wasn't doing the funding, put it that way, no. It was being organised, I know that, yes. . . . Q. There was no letter addressed to you prior to 22 September 1998 which recorded any offer by any bank or institution of the sum of $9million for the purchase of the property and the cattle, was there? A. No. Well, when you fund anything you always have the offer before you start putting your money together is the way I've always approached it. . . . Q. You agree with me then, do you, that there was no offer made to you or to anybody else that was going to join with you in the purchase of this property for the funding of the purchase of $9million for the cattle and the real estate, was there? A. Yes.' 268 Mr Graham was also asked : 'Q. You see, the reason you were not interested in purchasing this property at the auction was because you wanted more time to be able to see whether you could get the funds in place to purchase the property; that's right, isn't it? A. That is true but it could be done. It could be done. There was no problem about it.' 269 I do not accept Mr Graham as having given reliable evidence. I was not impressed by his demeanour in the witness box. He departed from his sworn evidence given on affidavit in relation to the number of occasions when, on his affidavit evidence, the so-called $9million offer was made. I formed the clear view that Mr Graham's evidence should be rejected and it is rejected. Nothing which Mr Graham said, unless corroborated by other evidence generally in the case, may be relied upon. To the extent, however, that Mr Graham gave evidence that Jeogla Station cattle had been a famous Hereford breeding property producing superior quality cattle during the time in which he had been involved in breeding Hereford cattle for 35 years, this evidence may be accepted as it is corroborated by much other evidence and indeed, there did not seem to be a real issue raised by the bank or by the receiver on this topic. Mr D.W.L. Palmer 270 Mr Palmer is the General Manager Corporate Affairs, Meat and Livestock Australia (formerly the Australian Meat and Livestock Corporation). During this career, he had spent approximately 20 years as a grazier, interested in beef cattle. 271 His extensive curriculum vitae covered periods in which he had managed his family property on the New South Wales Southern Tablelands and neighbouring properties and had been employed by the Hampshire Cattle Breeders Association as a licensed inseminater to under their genetic programmes. From 1980 to July 1986 he had been owner/manager of a property of some 4,000 acres in the Houghton Valley which had included mixed grazing and farming, carrying 300 breeding cattle and 1500 wethers. 272 From 1986 to January 1987, he had been executive assistant to the Chairman of the New South Wales Meat Industry Authority. From January 1987 to July 1989, he had been Executive Officer of the Meat and Livestock, New South Wales Farmers Association. From July 1989 to May 1990 he had been Deputy Director of the Cattle Council of Australia. From May 1990 to October 1995, in his capacity as Executive Director of the Cattle Council of Australia, his responsibilities and activities had included many aspects of work on issues affecting the beef - cattle/red meat industry including ministerial correspondence and correspondence with departmental officers and other contacts of official capacity. He had maintained a close dialogue with senior federal bureaucrats in the Department of Primary Industries and Energy. He had maintained a close liaison with the industry funded statutory corporation and had represented the Council on numerous steering committees within the Meat Research Corporation and contributed to the promotional planning process undertaken by the Australian Meat and Livestock Corporation. He had represented the Cattle Council at various domestic and international public engagements and at various enquiry hearings, including Senate Standing Committees, Caucus Primary Industry Committee and Coalitions Primary Industry, Regional Development and Local Government Committees. 273 From November 1995 to June 1998, he had been Manager, Food Safety and Quality Assurance, Australian Meat and Livestock Corporation. And from July 1998 to the present time he had been General Manager, Corporate Affairs Meat and Livestock Australia in which regard his responsibilities and activities included maintaining a relationship with livestock levy payers and community groups connected with meat and livestock industry. 274 Mr Palmer's evidence was that the Cattlecare On-farm Quality Assurance Training Programme ('Cattle Care') is a quality assurance programme. To ensure accreditation, the producer has to achieve a cattle care standard. This is done by an external accreditation audit. There are subsequent audits every year. 275 Mr Palmer's evidence is accepted as reliable. 276 His evidence was that the Cattle Care Programme aims to produce beef that will be effectively guaranteed to be safe and in accordance with the internationally accepted Food Safety Plan called 'HACCP (Hazard Analysis Critical Control Point'). 277 Mr Palmer's evidence was that the ISO9002 are international quality assurance standards that are internationally developed and recognised. That accreditation is a more stringent accreditation than Cattle Care because it involves compliance with the various international standards of quality assurance and the total quality management system and the cattle producer has to meet ISO requirements. His evidence was that there are only between three to six rural producers in Australia with ISO9002 accreditation and that there are only approximately three cattle producers with that accreditation. 278 His evidence was that Cattle Care Accreditation and ISO9002 Quality Assurance means that the producer who has such accreditation and quality assurance, has an improved management system and has improved production performance. His evidence was that the value of the product that has such accreditation and quality assurance is likely to increase because of such accreditation and quality assurance. 279 His evidence was that V1V Hereford Beefmaker Cattle are one of the very highly regarded brands in the beef cattle market which command a premium on average beef cattle prices. 280 Mr Palmer was asked whether, in the course of his employment, he had had opportunity to observe the market reception of meat or cattle produced out of farmers producing Cattle Care and/or ISO9002. His evidence was: 'A. The answer to that question is twofold. There is the view of producers involved in the program that they acquire a preferred supplier status and at times will create or will command a premium for the sale of those stock in the marketplace. Equally, the processors, the buyers, not publicly but they will state their preference, is to be buying stock from Cattle Care or similar operations because it gives them a confidence that those cattle are sound, clean and are fit for purpose.' [T 104] 281 Mr Palmer gave evidence in relation to the market in relation to cattle being sold for the purpose of purchase for further breeding or use as breeding stock in the industry. His evidence dealt with the fact that the Australian Beef Industry represents 2½ % of the World's cattle population. Australia produces, he said, less than 4% of the World's beef and yet ships and trades into 110 markets around the World. Australia, he said, is the largest exporter of those products. His evidence was that each of those markets have stringent demands on Australian beef. One, he said, was in the area of product integrity, meeting high expectations of customers and consumers. Secondly, there was the need for the cattle to meet tight specifications. His evidence was that each of those markets have tight specifications which must be met in the area of food safety area, the ISO9002. The Cattle Care Programme aimed at the safety and cleanliness and purity of those products to customers and consumers. In relation to meeting the specifications and the genetic involvement, his evidence was that the genetic inputs to the cattle are critical in meeting the tight specifications to which he had referred. 282 Mr Palmer gave some evidence with respect to on-farm sales relating to the market performance of V1V Beefmaker Cattle. His observation was that those cattle commanded a premium over comparable store cattle in respect of age, weight and type. His evidence was as follows: 'Q. Mr Palmer in relation to the premium you said you had observed, are you able to assist his Honour as to what extent or what, expressed in whatever denomination you can, that premium was that you observed? A. I observed something in the order of 5-8cents on that particular sale per kilo over corresponding cattle. Q. And corresponding cattle, what price per kilo were they enjoying? What was the base price, if you like? A. My recollection for that sale was that the base price or the public price was about $108 to $110 and these cattle were making something around $120. Q. So far as herds capable of producing the cattle, that two pronged specification you referred to earlier, the integrity specification one side; the Cattle Care ISO9002 and the product time specifications on the other, that are suitable for the export markets you referred to. In your observation, do those herds have any characteristics in the market when they change hands? A. Most certainly . . . One such market that we ship to is the European Union and they have very clear stipulations and demands and the difference from value from that market to another market might be 4,000 to 5,000 a tonne and it is about aiming and pitching your herd around production at those markets which can command a better price over other markets.' [T106-107] 283 Under cross-examination, Mr Palmer's evidence included the following: 'Q. If cattle were sold from the Jeogla Station which cattle has an ISO9002 accreditation, the purchaser who purchases the cattle and takes it to another property, at least on that assumption, wouldn't necessarily get an ISO9002 accreditation would he? A. Probably not. Q. It would depend entirely upon the management system employed by the purchaser of the property, is that correct? A. Correct. Q. And the same would apply to Cattle Care accreditation? A. Correct.' [T108] 284 Mr Palmer was asked: 'Q. But there are requirements of the ISO9002 accreditation which are not applicable to the Cattle Care accreditation, is that right? A. Well, I might reverse it. Cattle Care is a subset of ISO. Q. So if you have the ISO9002 accreditation, would you automatically get Cattle Care accreditation? A. Yes.' [T110] 285 Mr Palmer was asked: 'Q. You gave some evidence about a matter I asked you some questions about a few minutes ago, that is the premium of 5-8 cents. That is per kilo is it? A. Correct. Q. Of cattle. When did this sale take place? A. Oh, I hope this is right but I think it was April last year, I think but I just can't remember I am sorry. I have had invitations and notices to every V1 sale over many years. I went to one last April I think. Q. Where did it take place? A. At the Jeogla saleyard . . . it might have been the year before . . . Q. What sort of cattle commanded that premium of 5 cents to 8 cents a kilo? A. There were steers and heifers being sold, 12-15 months old cattle, a range of ages but something in the order of 10-15 months of age and the trend across the whole yard. Q. You had at the time some knowledge of what you then regarded as the market price for that type of cattle is that correct? A. I believe so. ' [T111] 286 Mr Palmer gave the following evidence: 'Q. And the premium that was attained was something in the order of what, as far as you can recollect in general terms. Five to perhaps 8 cents above that? A. Five to 8 cents, I said. Q. Five to 8 cents. Well, would you agree that in percentage terms the premium was something less than 5-8%? A. Going on the price of 120-odd cents on the day as compared to local price, that is about the right percentage terms.' [T112] 287 Mr Palmer gave the following evidence under cross-examination: 'Q. Will you not agree that if that is the premium which is applicable to the turnover or product of the farm, that it would be quite inappropriate to attribute a higher premium to that which remains on the property? A. To bring in the herd, the breeding herd, which is not as we are talking about as what stays behind is the breeding herd, in my view and based on the evidence over many years, is that the premium in those would be far higher . Q. But would you not agree that the value of what one might regard as the capital stock in the form of the cattle on the property can only be reflected by looking at the returns obtained for that cattle in sales such as production sales? A. It is partly reflected in the production produced, most certainly. Q. It wouldn't make any commercial sense whatsoever for somebody who was looking at the purchase of the breeding cattle to pay a premium of, say, 50% for that cattle if it was only producing, when you sold the product, a premium in the order of 5-8%, would it ? A. Well, this is not the trend, this is not the outcome. I am sorry but the realities are, when you are buying a known gene pool there are very significant premiums to be paid and if there is only one buyer, you wouldn't get the premium but if there are multiple buyers, you will get it. Since time began, good cattle fetch a premium. Q. The premium would not be out of proportion to the premium which is applicable and which is attained on the sale of the product, would it? A. No, it will depend more on supply and demand at the time of the sale.' [T112-113] [Emphasis added] 288 Under further cross-examination, Mr Palmer was tested on purchasers of a herd. The evidence was as follows: 'Q. A person who sought to purchase a herd of cattle in the order of 5,000 would not be your average Pitt Street farmer would he? A. No. I can't answer that one yes or no. It would be seen as a great asset to buy in this case and it would be open, if available. Five thousand cattle in one line is not a usual purchase, if I can answer it that way. Q. The sort of person who would purchase a line of cattle of that size would be confined to a fairly select group of people, would that be correct? A. Well, they would be committed people once they owned them. Again, unfortunately I have to digress slightly, that those sorts of numbers - it can become a commodity if the price is right, so that encourages different people for different purposes, but if we are dealing with a breeder buying a line of 5,000 cattle, that is quite a unique occurrence. . . . Q. It would be foolhardy, wouldn't it, for somebody to purchase that size of herd of cattle at a premium way out of proportion to the sort of premium that is being attracted at production sales for the cattle from that property. That's right isn't it ? A. No, not necessarily, because we dealt with this question, a little while ago. That the genetic base inherent in the herd is only partly reflected in the product produced, and the price differentials would track similarly to that partial allocation if you like, to the genetic worth of the production inherent in the herd . Q. It would be a foolhardy decision to pay a premium of 50%, wouldn't it ? A. Well, it happens, I'm sorry it happens . Q. It would be an irrational decision to make, wouldn't it? A. Commentators, not necessarily, it depends on what they are buying. Some who didn't have the view or the feel for it might say they have paid too much, others would say - I'm not talking about Jeogla, I am just talking about how the market works, the cattle market. When you are dealing between production animals and a breeding herd, the degree of rationality when purchasing top quality breeders is less rational, if you like, than when you are buying animals that are on a clearly destined market path to an end consumer market. . . . Q. Let me just approach it another way. Would you not agree that the value of the genetic pool diminishes if cattle is on sold from a particular breeding property to other breeding properties? A. No. Q. Would you not agree that if cattle is sold to a purchaser who takes it to another breeding station, that the cattle is more likely to be crossed with different lines of cattle? A. Only to the degree of enhancing their own genetic material. If I might add, a purchase might be deliberately purchased in order to enhance and build upon the genetic base that was previously owned. Q. It might do something to improve the worth of the existing cattle on the purchaser's property but it would be inclined to have a downward impact on the genetic value of the cattle that had been purchased from Jeogla, wouldn't it? A. No it would be complimentary.' [T113-115] [Emphasis added] 289 In re-examination, the following was asked: 'Q. In relation to the premium that my learned friend was asking you about in relation to the - he described it as well bred cattle, what in your experience are the characteristics that a breeder would be seeking to buy, paying a premium for well bred cattle? A. Well, they are looking for cattle whose progeny and products will meet tight specifications in a range of markets around the world. Specifications are set against yield, age, maturity, just a general yield of a carcass to feed that particular market . Q. Does the efficiency of beast as a grower of beef affect the equation? A. The efficiency of the products or the efficiency of the cow? Q. The efficiency of a progeny of the herd to graze maturity producing meat, is that a matter that will affect the premium you are referring to ? A. The overall efficiency of a herd and product in terms of its eating and the way it deals with itself is physical to its own purpose. Q. What about the facility of the herd ? A. Absolutely . Q. The consistency of the products it produces? A. From the meat buyers point of view they are looking to buy even one line of cattle that meets a particular market specification and those that can produce those one line cattle are sought after in the marketplace.' [T116] [Emphasis added] Mr G.R. Peart 290 Mr Peart is a director of Hassall & Associates, Agricultural Consultants. He is a Senior Agricultural Consultant who has worked in that field for 30 years. He has a Masters Degree in Rural Science from the University of New England and has been a registered land valuer for the last 17 years. His work includes acting as business manager for the marketing of rural properties including at December 1998, the marketing of a $7-8million property in the Central West of New South Wales. 291 Mr Peart's affidavit dealt with the marketing of the subject property and the marketing reports which had in fact been prepared by Elders and LJ Hooker Rural. His evidence is accepted as reliable. 292 Mr Peart deposed that 'fair market value' was, in his view, to be defined as the price achieved between a willing but not anxious buyer and a willing but not anxious seller in an arms length transaction. He deposed that fair market value 'is represented by the contract price that can be achieved where a property is formally marketed to the widest possible audience of appropriately finance potential buyers both within Australia and overseas. . . . Professional marketing will be essential in identifying potential buyers and will involve the preparation of such information as historical and projected income figures, demographic and zoning status, where necessary. The seller must assemble all the physical, financial and legal data to present both a contract of sale and an information memorandum to potential buyers. Potential buyers must be given ample time to carry out due diligence and prepare and pursue finance applications prior to auction or tender'. 293 Mr Peart deposed that he is familiar with the Jeogla property and surrounding district and in particular aware of the manner in which Mr Richard Wright conducted the business. He had gained this awareness through many years of contact with the Wright family. 294 In Mr Peart's opinion, a marketing strategy that would have been appropriate for a property of this type would include documentation to contain 'the preparation of first class descriptive and advertising material that would capture the interest and imagination of a class of potential client who could afford a property of this value (ie in the range $10million to $15million), the assembly of sufficient information from past performance to allow potential buyers to carry out a due diligence and prepare and pursue finance applications and the preparation of a contract for sale which clearly set out the terms and conditions, but allows some flexibility to meet particular buyers' needs'. [Affidavit 21 December 1998, paragraph 6] 295 Mr Peart deposed that Jeogla has a famous historic name and would be recognised within the top 100 properties in New South Wales. He deposed that the Wrights had the first registered Hereford cattle herd in Australia and that the property has a secure rainfall and a large economy of scale which would make it attractive to investors across the whole of Australia and also internationally. He deposed that the property is positioned on the Eastern Falls country facing the ocean which ensures high and regular rainfall as well as easy access to the Central and North Coast of New South Wales and a large well serviced university City of Armidale. He deposed that marketing needs to be done at a highly professional level using all potential outlets of the internet, print media, mailing lists to keep potential investors of this scale and warranted some television advertising. He deposed as follows: 'The achievement of the ISO9002 status for the famous Jeogla Hereford cattle herd dramatically reduces risks for the new buyer and gives the property a status and potential to earn premiums on its beef output not enjoyed by 99 percent of herds in Australia. Well marketed, this is likely to bring a premium to the property particularly from risk averse city investors and especially overseas investors who have seen problems with chemical and disease contamination of cattle in Europe and the USA. The property is likely to attract a significant amount of overseas attention if marketed properly internationally.' [Affidavit paragraph 8] 296 In dealing with the presentations of Elders and LJ Hooker, Mr Peart deposed that Elders have an excellent branch network across the country, have their own branches in most major and many minor towns and their own agents in Armidale. He then deposed 'LJ Hooker don't have this internal network and in the case of marketing one of the best known properties on the New England, are using a local man to give the property profile and to run their inspections. That man's main profile is as a saleyard stockman and he has little strength in land selling, land knowledge and client relationships which are so important in selling multi-million dollar properties'. [Affidavit paragraph 12(c)] 297 Mr Peart deposed as follows: 'Facts that support the price Jeogla Station is a famous specialist beef property and has the oldest Hereford herd in Australia running on it. Its computerised cattle selling over the last 15 years has made it well known across Eastern Australia. It has ISO9000 registration on the herd which guarantees them as disease free and chemical free and guarantees a whole chain of management events which makes for increased profit. The herd is enrolled in Cattlecare and a whole management team is in place to run this property for the sort of major rural, city or overseas investor who is likely to buy.' [Affidavit paragraph 12(d)] 298 In examining the two reports on which he was asked to comment, Mr Peart rated both advertising proposals 'as extremely minimalist and totally inadequate'. 299 Mr Peart deposed that he believed that a lead up time of a minimum of 4 months should be allowed for the marketing campaign for the sale of Jeogla. This time, he deposed, would have enabled the property to have been prepared, and to have prepared the Information Memorandum, the brochure, all the advertising, flown press to the property, got editorial material in at the start of the advertising campaign, prepared the material to go onto the internet, developed a mail out list of 500-800 people who were in the league to buy a property like this and to specifically target some 50 likely buyers is the sort of campaign that would have brought the maximum result for such an outstanding property'. [Affidavit paragraph 12(e)] 300 In summary, Mr Peart deposed as follows: 'In reviewing the two proposals I do not think the LJ Hooker proposal should have been accepted when compared to the Elder proposal. The LJ Hooker proposal on comparison with the Elders proposal envisaged a sale price of $1.3million less, selling costs of $60,000 more and an advertising budget of $10,000 less, resulting in a $1.4million lower result for the vendor. Comparing the two assessments on professionalism, targeted market, being seen to be in with the right class of client who could afford this, on profile through the market, and on recent sales, then one would have to have selected Elders without a doubt on every comparison. However, I believe that neither proposal was satisfactory in regard to the quality and uniqueness of the property'. [Affidavit paragraph 12(f)] 301 In giving evidence, Mr Peart was closely tested on what would occur at a relevant auction and as to advantages and disadvantages on several proposals. He gave evidence that he had recently been involved in preparing the sale of a property in the Macquarie River District of some 52,000 acres, having 10,000 sheep and 1,700 cattle running on it - the cattle being a stable breeding herd of short horn cattle. He was responsible for developing the marketing plan for the sale of the cattle and the land. 302 In relation to the cattle, Mr Peart gave evidence that the price was fixed, by reference to the market, in 'advance' of the sale. It is a situation in which the markets referred to for the purpose of fixing the price of the cattle were the sales of top breeding herds and not meat value. Information as to the price of top breeding herds for the exercise he said, come from both dispersal clearing sales of herd and from specialist auctions of breeders of high quality breeders that take place around the cattle areas. Such prices are published in The Land newspaper in New South Wales and similar rural press in all the other states. [T63] 303 In relation to this particular sale, his evidence was that he had regard to prices in states other than New South Wales and particularly Queensland, because it is such an important cattle breeding state. For a herd of 1700 size he definitely expected interest in such a herd from Queensland. 304 Mr Peart gave evidence that he had also been involved in other transactions where he was selling both land and substantial sized commercial herds. Some 6 or 8 months prior to the Macquarie River District situation, he had been involved in a sale of approximately 500 cows and was presently representing the purchaser in preparing the financial proposal to buy the herd. That was a 500 head commercial herd. The information he looked at for the price, in so far as pricing of this herd was concerned, was the specialist dispersal sales and specialist breeder sales market. His evidence was : 'Q. I take it that the animals on these properties to which you have referred, they would be taken to market and sold simply as meat to purchasers of livestock for slaughter, if they are sold on that basis what, in your experience, is the means by which the price is calculated for such animals? A. A purely weight times age times the current market price for meat. Q. In your observation and experience does a price calculated that way for the sort of beast that you were selling in the transactions that you have referred to, is the value you are putting on the animal greater than, equal to or less than that which would be obtained if it was sold simply as meat? A. Greater than. Q. Can you give his Honour some assistance to what degree it may be greater than the price of the animal as meat? A. Depending on quality of the article that you are selling, 50% premiums are often obtained, 100% premiums are sometimes obtained. Q. When you are enjoying 100% premiums, in what circumstances has that figure been arrived at? A. Where the herd has the reputation, where the cattle are well presented, where they have a known breeding history which one records to say they have calf each year, that they are within a restricted calving period.' 'Q. Is a well-presented breeding animal an animal which is necessarily well-presented for sale as meat? A. No. . . . A cow suckling a calf will be quite down in weight and not ready for meat market at all but will still realise the very top breeding cow/calf price. Q. If you were to take such animals to market for meat, would you take the calf off them and feed them up? A. If that was the only way of disposing of the, yes. Q. In what circumstances would you contemplate selling an active breeding cow for meat? A. The short answer is never.' [T64-65] [Emphasis added] 305 Under cross-examination, Mr Peart accepted that his instructions in relation to the affidavit which he had made were instructions only to comment upon the marketing programme that he assumed had been followed for the sale of Jeogla Station. In short, he had not made any effort to look at, as he was not asked to look at, material that had actually been put before the public for sale of the property. In those circumstances, he was shown the coloured information memorandum in fact used in relation to the Jeogla sale and he accepted that it contained a number of important items including giving some degree of prominence to the ISO and Cattle Care accreditations, to the V1V brand, to the famous name of the property, to the history of the property and to the rainfall. [T69-70] 306 Mr Peart was cross-examined in relation to the evidence which he gave in chief, to the effect that it may be possible to obtain a premium on the sale of cattle if they are offered by way of a dispersal sale. He was reminded that the figures he had put on this matter were up to 50% and in some cases even 100%. That, he said, was a premium to be achieved over and above the meat value. He was asked whether he consulted any documents before he made that assessment and his answer was: 'Those sales and those sorts of premiums are regularly demonstrated in the Weekly Rural Press and I have been involved in sales where premiums of 100% have been achieved'. [T71] 307 Mr Peart then referred to some specifics in that regard. 308 His evidence was that the premiums that exist for high quality existing flocks and herds are always there which was demonstrated in weekly marketing records in the rural press. His evidence was: 'Famous herds are rarely dispersed'. [T72] 309 At transcript page 74, the following appears in Mr Peart's cross-examination: 'Q. When you are looking at purchase of a property of some 15,000 acres with about 4 or 5,000 head of cattle, that is a fairly expensive price tag that the purchaser is looking to put forward for the purchase of the property and the cattle, is that right? A. Yes. Q. The purchaser who knows he has a right of first refusal from your experience would be looking at the maximum price that he would be prepared to pay for the whole of that package, is that right? A. Only on the understanding that he has some idea of what the price of cattle are going to be. If it is totally open-ended, you have the right of first refusal of the cattle on no specified price, then the owner of the cattle can specify any price. . . . Q. It would be clearly unwise to have a right of first refusal which does not nominate a price at which that right of first refusal can be exercised, correct? A. Yes, if that was so everyone who attended the auction should have widely known what the asking price of the cattle was . Q. Mr Peart, would you agree that to offer the rural property for sale at auction with a so-called right of first refusal which does not spell out the price at which the purchaser may exercise that right of first refusal, would not be something which would be attractive at all to a purchaser ? A. It makes - it introduces a large unknown into the financial affairs of the prospective purchaser because he does not know at what price he may be able to purchase the cattle and he may lose that purchase in the bargaining with the vendor . Q. The one thing that purchasers don't like when they are working out the price that they may wish to pay for a property is financial unknowns, would you agree with that? A. Yes. Q. It would be a huge disadvantage in the reasoning process of the prospective purchaser to have such a financial unknown is that right ? A. Yes . . . . Q. So it would not be much good to a purchaser to put his hand up for a price for half the formula without knowing what he was going to have to pay in order to secure the other half of the formula, that is right, isn't it? A. It certainly puts pressure on him to pay a very high price for the cattle. Q. And the one thing that the purchaser would want to avoid was to be put into a position where he would be put under pressure for the price he would have to pay for the cattle that is right isn't it? A. Yes. Q. It would really be a disincentive to him to put up his hand to bid for the real estate isn't that right? A. Yes.' [T74-75] [Emphasis added] 310 In re-examination, Mr Peart was asked whether in his observation of dispersal sales, it was ordinarily the case that the whole herd is sold as one. His answer was: 'In a normal auction dispersal sale no, the herd is offered in total but it is very rare for one purchaser to be able to successfully purchase at public auction the whole herd, so the only way to get the whole herd is to have it under a contract.' 311 He was then directed to the situation where land and cattle are to be sold at a nominated price. He agreed that if the cattle price was too high, the purchaser of the land may let the cattle fall to auction and pick them up there. His evidence was then: Q. Take the opposite situation if you would, where the price nominated for the cattle is significantly under the market value of the land, is that in your estimation, an appropriate way to offer the land and cattle to the market? A. No. . . . People judge the value of the land and the value of the cattle almost totally in isolation. . . . Because they see reported and they are judging all the time the value of their land, the value at which they can purchase land, that is reported by the Valuer General, they all know the sales that are appropriate to their land that have gone on so they estimate what they will have to pay for land and they are estimating from the sales reports what the cattle herd is worth but I've never been involved in a case where there was a sort of trade-off position between land and stock . . . . Q. Now I think you said in answer to a question from my learned friend concerning the pricing of the cattle in the assumed offer of the land with the cattle at a nominated price, it could be widely known what that price is? A. Yes. Q. By what mechanisms did you or what mechanisms did you have in mind as to dissemination of that information when you gave that answer? A. Well, the most legally binding would be in my view to have it as part of the contract of sale or that it be publicly announced by the agents that the cattle were available to be purchased at this price well prior to the auction or at worst, announced at the auction. Q. Is it information that you would consider material to an understanding of the property advertised in brochures for the property? A. Yes, if the cattle are to be offered as part of the package deal, yes. Q. And in your experience is that material information to an understanding of the value of the aggregate offer? A. Yes.' [T77-78] [Emphasis added] Evidence given by Mr R.B.A. Wright 312 Mr Wright in his affidavit of 10 December 1998, dealt with a number of the background facts which are not in issue and have already been set out in the Judgment. He set out his personal history and the fact that he had been born on Jeogla Station in 1947 and had lived there his whole life except for a number of years when he was in boarding school, a period as a 'jackeroo' and three years of tertiary education. He was not tested on his evidence that he had accumulated the knowledge of the property and farming in Australia possessed by two former generations prior to his father and passed on to him through his father and through reading station diaries. He was not tested on paragraph 18 of his affidavit of 10 December 1998 in relation to which he had stated that he had gained extensive experience in numerous aspects of property management including management of livestock, management of genetics of cattle, understanding of global cattle markets and trends, managing properties in accordance with the ISO9002 and Cattle Care standards and generally knowing about the properties Hernani and Jeogla Station and how they operated and how to operate them. 313 Mr Wright had spent all his life involved in the farming and grazing industry and in particular in the beef cattle grazing industry. He had attended cattle auctions since he was a child. He had arranged the cattle auctions at Jeogla Station since 1977. He constantly followed the prices of cattle both in Australia and overseas. 314 Mr Wright's evidence is accepted as reliable. Notwithstanding his obvious interest in the proceedings, and although from time to time being prone to exaggeration, he impressed me as by and large doing his best to accurately record the events in question and to fairly express his opinions. 315 On about 1 April 1998, Mr Skinner had attended at Jeogla homestead together with an employee of his firm, Mr David McCarthy. In the course of the conversation at which Mrs Wright was also present, a number of matters were dealt with. A conversation was admitted on a limited basis to prove the communication of information as to how one might market the subject sales insofar as Mr Wright had had to pass on to Mr Skinner his comments, and insofar as what the receiver or Mr McCarthy had had to say in the conversations, those statements being admitted as proving only what it is that was being sold and for no other purpose. [T 5] 316 In the course of this conversation, Mr Skinner referred to his appointment as receiver and manager of Jeogla Pty Limited and other companies in the group. He stated that he would be managing the properties and would expect Mr Wright to carry on the day to day management with his staff who would also be spoken to as to their future. 317 Mr Wright said words to the effect: "I would like some indication from you as to time frame. I need to know about what you propose as to sell down of cattle, the future of Hernani and the cattle on it and most importantly Jeogla. You no doubt have become aware that this enterprise is of national importance and international significance. I am presently organising cattle for a sale that is to take place on 22 May 1998. I need to know from you what you propose to do with the cattle on Hernani because some of them have to come down to Jeogla for the sale. The longer we wait to move those cattle, the greater the risk of an animal welfare problem. . . .". Mr Skinner said: " . . . I don't know the intricacies of this kind of operation but if I have to no doubt I will find an expert somewhere . . .". . . . Mr Wright said: "Tell me what you believe, with your knowledge and experience as a receiver what a cow/calf area is worth?" Mr Skinner said: "I have no idea". Mr Wright said: "Can you please tell me when you have in mind to sell Jeogla". Mr Skinner said: "In the spring." Mr Wright said: "The breeding cows commence calving at Hernani on 1 August." Mr Skinner said: "So what?" Mr Wright said: "Any proposed sale should bear in mind that the cattle will commence calving on 1 August. If the cattle are moved beforehand, or soon thereafter, there would be problems with cows dying, this should be avoided." 318 Mr McCarthy denied the terms of the above described conversation. He deposed that the conversation which took place was to the following effect: 'Mr Skinner: I have been appointed as receiver and manager of Jeogla Pty Limited, in its own capacity and as trustee for the BA Wright Family Trust, receiver of "Bald Hills" and receiver of Richardsons Arcade and Dumaresq Street. Here are copies of my appointment documents, and my letters to the directors of the company. I have also given you a letter of acknowledgment of your responsibilities as directors. Mr Wright: We are not in receivership". Mr Skinner: The receivership appointments have occurred and this should be recognised. Mr Wright: Peter Hardy and Hassals have sent a proposal to the bank in relation to the sale of properties and repayment of the debt. Mr Skinner: Yes the bank sent it to me last night and have asked me to look at it. The bank has not rejected it but wants me to review it before they give you a decision. Mr Wright: This matter is in limbo as the proposal has been submitted and I have not received a response. Mr Skinner: Rick you should take your own legal advice on the matter.' 319 Following Mr Wright having left the room to do so, Mr McCarthy or Mr Skinner said: 'Rick, the proposal from Hassals does not give any backup assumptions and it is very difficult to read as it has been faxed. Ms Wright: I will ring Hassals and have them provide the backup information today.' 320 I do not see that any issue in the case turns on the above described conversation or on the other conversations which are set out immediately following this paragraph. In short, it is ultimately unnecessary to decide between the differing versions of the conversations. 321 On the same limited basis as previous referred to, a conversation which took place between Mr Wright, Mr McCarthy and Mr Skinner early in April was deposed to by Mr Wright. In this conversation Mr Wright had said: "I want to make it very clear to you about the genetics that have been developed on Jeogla over the last 100 or more years. The key to the business and the genetic value of this herd is the core breeding herd. The core breeding herd as a genetic pool is not only a very valuable asset for Jeogla but is important to Australia. There are very few such breeding herds or such genetic pools in Australia and we should do whatever we can to preserve those that do exist." Mr McCarthy: "As far as we are concerned the cattle are worth 67cents a kilo. That's the going price for meat and as far as we are concerned your cattle are no different." Mr Skinner: "I've told you before, we have been told by the Bank to get their money in and we intend to do that by whatever means we have to. We are under the Bank's instructions, if it means selling what you regard as a valuable herd, so be it." 322 Mr McCarthy accepted that he recalled Mr Wright saying words to the above general effect. He denied, however, that he or Mr Skinner had said words to the effect attributed to them by Mr Wright. 323 Mr Wright first learned that Hernani had been sold for delivery on 1 August at a price of $1.1million on or about 29 April 1998. He had a conversation with Mr Skinner and Mr McCarthy at that time. The conversation was admitted only as proving that it took place and not to prove the truth of facts stated by either party to the conversation. In the conversation, words to the following effect were said: Mr Skinner: "I am able to tell you that Hernani has been sold for $1.1million with delivery to take place on 1 August. The buyer does not want any cattle." Mr Wright: "I think that is a sale at gross under value . . . As I told you in March, had it been marketed with Jeogla internationally there would have been a substantial price paid for both properties because of the way that they work well together and because of the combined overall carrying capacity." Mr Skinner: "We are under Bank instructions and none of that means anything to me. My instructions are to get the Bank's money back as quickly as possible . . . Since the buyer does not want the cattle I will be disposing of the cattle one way or another. I am under Bank instructions about this but will act to get as much money for the cattle as quickly as I can." Mr Wright: "In relation to the cattle, you simply can't sell these cattle as you would sell steers in a sale yard, breeding cows are the factory for producing the meat. We haven't put 170 years of breeding into these cattle for them to be sacrificed in this way. They cannot all be moved because they start calving on 1 August and any movement of them now would probably be an offence under the animal welfare laws and would be sacrificial of their value. A lot of the cows would die. . . ." Mr Skinner: "I have said to you before and I will say again we are under Bank instructions to recover their money as quickly as we can irrespective of any of these finer points that you keep raising [a reference to so much of the conversation as involved difficulties in moving pregnant cows and the like] ." 324 Mr McCarthy could not recall having a conversation with Mr Wright to the above effect. He did, however, deny that Mr Wright at any time said to him words to the effect: 'As I told you in March, had it been marketed with Jeogla internationally there would have been a substantial price paid for both properties because of the way that they work well together and because of the combined overall carrying capacity.' 325 Mr Wright complained that at the auction of Hernani and subsequent sale, no mention was made whatever of the status and qualification of the property as Cattle Care audited. 326 Mr Wright deposed that on 14 May 1998, whilst he attended an inspection of Jeogla with Mr Watts, Mr Nolan, Mr McCarthy and Mr Graham, a conversation took place. Evidence of the conversation was admitted into evidence as proving the conversation having taken place and not as proving the truth of the underlying facts therein referred to. In this conversation, words to the following effect were, inter alia, said: Mr Wright - pointing to some cattle: "How would you value these cattle?" Mr Nolan: "We are experts in land and that includes being experts in cattle." . . Mr Wright, pointing to some Jersey cross-calves - "I'd like you to look at those cattle over there. What do you think they are worth". Mr Nolan: "I think they would be worth $40 a head at the moment." Mr Wright: "Well I can tell you that as recently as last week I sold that group of cattle over there for $160 a head because of what can be done with genetics." Mr Wright: "What do you know about quality assurance in the beef industry?" Mr Nolan: "Nothing." Mr Wright: "Do you know the consequences of having quality assurance particularly when it comes to marketing?" Mr Nolan: "No, would you explain to me what you are talking about." Mr Wright: "This is the first property in Australia that is gearing itself to market its product globally. That includes live cattle, beef, wool, live sheep and mutton. Also the office procedures are second to none when it comes to running this sort of business. These procedures are included in the ISO specifications. Without a detailed knowledge of those matters I don't know how you could imagine you could market the property. These matters make international marketing essential if any proper value is to be obtained." 327 Mr McCarthy gave evidence that he was present when Mr David Nolan from LJ Hooker Rural, inspected the property and that Mr Wright may have said the words attributed to him in the above excerpt from Mr Wright's affidavit, either on that day or upon other occasions. He did not recall Mr Nolan's responses but denied that Mr Nolan had said the words which Mr Wright attributed to him. 328 Mr Wright gave evidence that he did not believe that a reasonable price was obtained for Jeogla Station for the following main reasons: (a) Jeogla Station he said, was a pre-eminent and famous cattle property and was probably in the top 100 rural properties along the eastern seaboard of Australia. It produces cattle. On an average year, he said, the gross income received from the sale of cattle on Jeogla Station was about $1.5million. His evidence was that the annual expenses for Jeogla Station were about $500,000 which would include an allowance of about $150,000 for interest on a loan and this would leave about $1million in net income before tax. (b) The high quality and well known brand V1B Hereford Beefmaker was not marketed. 329 Mr Wright also gave evidence in relation to the 22 May 1998 production sale of cattle at Jeogla Station. His evidence which I accept as reliable, was that the cattle sold at that sale were 'culled' cattle, meaning that the cattle were surplus to the Jeogla Station herd and were cattle culled from the herd because the quality of the cattle sold were not as good a quality as the cattle remaining in the Jeogla Station herd. His evidence was that many of the cattle sold were aged or old cows. Such production sales, which usually occurred at Jeogla Station in about March-May each year before winter, were to get rid of the cattle in the herd that were aged or of lesser quality to the rest of the herd. Such a sale was carried out so that the worst quality cattle were culled and the Jeogla Station herd maintain its high quality. 330 Mr Wright's further evidence which is accepted as reliable, was that the cattle on Hernani were sold under the V1V brand and were no different from the cattle on Jeogla Station in quality. Hernani was, he said, used as a satellite property to Jeogla Station. The cattle on Hernani were sold in the V1V Jeogla sale. They were all, he said "Jeogla cattle". Depending upon the circumstances, his evidence was that cattle on Hernani were moved to Jeogla Station or vice versa. 331 Mr Wright's evidence which is accepted as reliable was that on or about 30 May 1998 he had arranged for Mr Crowe to value a sample of the stock on Jeogla Station as at 30 May 1998 for immediate sale with no time to market them or condition them. His evidence was that on or about 18 August, Armitage and Buckley, Licensed Auctioneers, Stock and Station Agents and Real Estate Agents of Armidale, valued the stock then on Hernani and RBA12 to his affidavit was a copy of that valuation. 332 Mr Wright deposed in paragraph 59 of his affidavit that on 5 June 1998, he had a conversation with Mr McCarthy at the sale barn at Jeogla Station. The paragraph was admitted as proving only the conversation as having taken place. The conversation, Mr Wright said, had involved words to the following effect: Mr Wright: "I would like to talk to the new owner of Hernani about agistment. What is his name?" Mr McCarthy: "Warren Della [sic] and he is in Italy at the moment." Mr Wright: "Delivery date on Hernani is still August 1st is it?" Mr McCarthy: "Yes, and we're going to sell him the cattle at 77c per kilogram. That is a better result than you got in your Sale Barn." Mr Wright: "But the cattle we sold in the Barn were cull cattle. You are proposing to sell sound breeding cattle at 77c per kilogram. This would be a sacrifice of them." 333 Mr Wright's evidence was that, on or about 29 June 1998, the cattle at Hernani were sold by the bank and Mr Skinner at 77cents per kilogram, achieving then a total sale price of about $177,000. As far as he was aware, there was no attempt made to sell them otherwise than to the purchaser of Hernani. They were, he said, not sold by a competitive process to the market and his evidence was that they were not sold for market price. 334 Mr Wright's evidence which is accepted was that, since the cattle at Hernani were sold in about June 1998, cattle prices had increased. He estimated that the meat price for cattle had increased by about 50cents per kilo and estimated that the value of an average good quality V1V Hereford Beefmaker breeding cow with a calf at foot was as at December 1998, about $750. His evidence was that there was an extreme shortage of good quality breeding cows. 335 Mr Wright's evidence was that he understood the livestock on Jeogla Station and the plant and equipment were sold by the bank and receiver to the Jeogla Station purchaser and that as far as he was aware, there was not attempt otherwise to sell or market that livestock and property. 336 Mr Wright's evidence was: 'The cattle sold at Jeogla Station and Hernani were sold without taking into account the top quality of V1V Hereford Beefmaker cattle. These cattle are more fertile and produce higher quality meat than average cattle. Jeogla Station together with Hernani and their V1V Hereford Beefmaker Cattle is recognised as one of the leading beef cattle operations in Eastern Australia.' [Affidavit paragraph 64] 337 Mr Wright's evidence was that, in relation to the completion of the Jeogla Station cattle which he believed took place on about 23 November 1998, that as at that date there would have been about 7,000 stock. This figure of 7,000 he said "includes Spring calves of about 1500 which were born in a nine-week period commencing July 1 to about September 7. If the figure of about $1,671,000 for the Jeogla Station livestock includes all these cattle, this makes the value obtained for the livestock on Jeogla Station lower". 338 Mr Wright's evidence was that, as far as he was aware, there was no attempt to sell the Jeogla Station or the Hernani cattle by any competitive process to the market. 339 Mr Wright's evidence was that, in his opinion, the cattle at Hernani and Jeogla Station were sold in the wrong manner and at the wrong time. As far as he was aware, there was no marketing or advertising of the sale of the cattle at Hernani or Jeogla Station. He believed the cattle should have been sold through the Jeogla Station sale barn and the CALM process. In his opinion, the stock should have been sold when they looked their best which is when the cattle had improved their condition after winter and had the benefits of fattening in the spring season - the time they should have been sold, he said, was November 1998. 340 Mr Wright gave evidence which is accepted, that in his opinion Jeogla Station and Hernani were in drought during 1997 and into 1998 and that there had been good rains in about April - June which indicated a likelihood of a good spring. However, when the rains had come this occurred in Winter and Winter at Jeogla Station and Hernani was very severe. The properties, he said, had started to recover in Spring 1998 and were in a very good condition from about the middle of October 1998 to about December 1998. 341 Mr Wright's evidence was that no one from the bank or Mr Skinner's office or Mr Skinner had formally notified him of the sale of Hernani, Jeogla Station, the livestock or the Jeogla Station plant and equipment. He had had to obtain what information he had from conversations, scattered correspondence, annexures to affidavits and the like. 342 In a second statement, dated 22 February 1999, Mr Wright had referred to a number of particular documents which were, in due course tendered. These related to a sale on 5 February 1999 by the new owners of Jeogla Station of cattle at Jeogla Station. That sale was the bi-annual steer sale which normally would occur in about October/November of each year but in relation which the sale had been postponed from November 1998 to February 1999 due to the change in ownership. 343 He had not in fact attended the sale. Annexed to his affidavit was a copy of the buyer action sheet, summarising the sales of the cattle at auction. He noted that approximately 1200 weaners and steers aged between 10 months and 16 months had been sold at the auction sale, those being merely the progeny of the core V1V Hereford Beefmaker breeding herd at Jeogla Station. His evidence was that the value of that progeny was less than the core breeding herd. The range of sales for the progeny was 110-138 cents per kilogram for the Beefmaker heifer calves and up to a price of 149 cents per kilogram for the weaner steer calves. 344 By comparison, he was aware that the core breeding herd of Hernani Station was sold privately by the receiver for the average price of 77 cents per kilogram. His evidence was that the Hernani stock of V1V Hereford cattle breeders and the same quality as the Jeogla Station cattle. 345 Generally, Mr Wright's statement of 22 February 1999 was one in which he gave evidence which is accepted, that the results of the 5 February 1999 auction sale at the Jeogla Station sale barn on site showed the ease at which the Jeogla breeding herd and the Hernani breeding herd could have been sold by well publicised auction dispersal sales. The results of the 5 February 1999 auction sale, he said, showed that of the 39 sale lots at the auction sale, 24 lots were sold by the CALM interface system to people bidding by computer at Goulburn, Upper Hunter, Merriwa and Barraba and not physically present at the auction. Mr R.J. Gardiner 346 Mr Gardiner is a certified practising Valuer and registered valuer and a director of Herron Todd White, Valuers. He prepared a valuation dated 5 August 1998 of Jeogla and Bald Hills, earlier referred to. He had also, on 7 August 1998, written to the receiver in terms earlier referred to in this Judgment. He had responded to an affidavit originally made by Mr T.J. Stewart on 17 June 1998 and to a valuation report annexed to that affidavit dated 9 June 1998, but Mr Stewart's affidavit was not read by the plaintiffs. Mr R.D. Fitzgerald 347 Mr Fitzgerald is an Agricultural Consultant who had prepared a report to assist with Mr Gardiner in the valuation of Jeogla Station and Bald Hills. The report is to be found at PX 1069. It dealt with the long term carrying capacity and value of Jeogla Station. It is unnecessary to deal with the detail of the report, save to make plain that the carrying capacity section appears at PX 1078 and deals with the dry sheep equivalent carrying capacity on different bases. Mr Fitzgerald also had dealt with a response to the affidavit of Mr T.J. Stewart which had not ultimately been read in the proceedings. Mr David McCarthy 348 Mr McCarthy, who is employed by Deloitte and Touche Consulting Group and is a Chartered Accountant, had assisted the receiver in the receivership of Jeogla, prior to 4 January 1999. His evidence comprised dealing with paragraphs 33, 34, 35, 36, 37, 40 and 41 to Mr Wright's statement dated 10 December 1998. Where Mr Wright's statement has been referred to earlier, Mr McCarthy's relevant responses have already been set out. 349 Mr McCarthy also dealt with sections of Mr Graham's affidavit. Likewise, in relation to these sections where Mr Graham's evidence was given, Mr McCarthy's response is set out. 350 Mr McCarthy also deposed that in about November 1997 he spoke with Mr Wright, when Mr Wright had said to him words to the effect: 'When Hernani was auctioned in November it was passed in at $1.25million. We are considering appointing a new agent Frank Spilsbury from Elders, Armidale. He is the only agent in the area who understands rural properties.' 351 Mr McCarthy also deposed that on or about 18 December 1997, he telephoned Mr John Hutchinson, a partner in Hutchinson and Harlow, Real Estate Agents and Insurance Brokers, known to him as having acted as Jeogla Group's insurance broker. In that conversation, Mr McCarthy had said: "My name is David McCarthy, I am a manager with Deloitte Touche Tohmatsu. Keith Skinner, who is a partner of the firm, is receiver and manager of Hernani Station, a property owned by the Wright family. I have had numerous conversations with your partner, John Harlow, in relation to the insurance matters of the Jeogla Group and he has referred me to you for your opinion on your preferred choice of rural real estate agents in this area, specifically to market Hernani Station . . ." Mr McCarthy deposed that Mr Hutchinson had stated that Frank Spilsbury of Elders had a very good rural background and would be his preferred choice ahead of any other rural agents in the area. Mr John Collier 352 Mr Collier had sworn an affidavit on 1 April 1999. He is a director of Raine & Horne Rural Northern New South Wales which operates as a professional rural marketing agency and he specialises in rural property marketing. He dealt generally with Mr Peart's affidavit. He disagreed with a deal of Mr Peart's recommendations with respect to the specifics for marketing and advertising material to be used for auction. In his view, to allow the property to be advertised for a period of four months would be too long and would result in the market perceiving the vendor as being weak and substantially increase the marketing costs to no benefit to the vendor. In his view, a marketing period of around six to eight weeks from publication of the first advertisement was sufficient. 353 He had reviewed the information memorandum prepared by LJ Hooker Rural for Jeogla which was supplied to potential purchasers. He found it particularly thorough and extensive, containing all relevant information of:

• the property description;
  • accurate livestock numbers;
  • information on the National Cattle Care Programme;
  • the improvements throughout the property;
  • ongoing management in relation to Mr Braham and information regarding his skills and experience;
  • rainfall records;
  • information from the Rural Lands Protection Board for the V1V brand;
  • the thorough valuations by Mr Knock of Rushtons;
  • the topography maps, aerial photos, paddock, water and structural improvements maps;
  • as well as the general information not the Armidale District [sic]. 354 In his view, no stone had been left unturned in the presentation. 355 He considered the advertising material put together by Mr Nolan to be very professional and thorough in terms of quality and content. 356 He generally dealt only with materials covered in Mr Peart's affidavit and his affidavit evidence did not go to questions such as dispersal sales and premiums. Nor did his affidavit deal with the question of the significance of prior advertising publication and promotion on the basis of specific information as to a right of first refusal to purchase the cattle at a pre-determined and announced price. He was not cross-examined on his affidavit. Michelle E. Harpur 357 Ms Harpur is the solicitor for the defendant, having the day to day conduct of the proceedings with Norton Smith & Co. Her affidavit evidence dealt with the prior history of the various sets of proceedings involving the plaintiffs, the Bank and the Receiver. Her evidence was not challenged and gives background history of the litigation. Mr A.I. Armstrong 358 Mr Armstrong is a partner of Norton Smith who acted for Jeogla Pty Limited in its own capacity and as trustee for the Wright Family Trust in the sale of the property known as Hernani and Tiercel. His affidavit dealt with his preparation of the contract for sale and issues concerning the occupation permit granted by the Department of State Forests, adjoining the property, in favour of Jeogla Pty Limited and Mr & Mrs Wright, trading as BA & RB Wright & Partners. The subject of the forestry permit did not occupy any real time during the hearing and no ultimate issues specifically was addressed to that topic. Mr C.R. Campbell 359 Mr Campbell is a partner of Deloitte Touche Tohmatsu and a registered liquidator. Whilst the receiver was overseas on business on leave from 14 September 1998 to 19 October 1998, Mr Campbell was responsible for the receivership. He had a number of conversations with Mr Skinner prior to his departure and received a briefing on matters arising out of the receivership. On 11 September 1998, he met with Mr Skinner and representatives of the Bank and Mr Nolan in order to discuss the proposed auction. Mr Nolan discussed his progress report of 10 September 1998 which detailed all enquiries he had received in relation to the sale of Jeogla. 360 Mr Campbell was informed by Mr Skinner, amongst other things that: . The Bank had obtained a valuation of Jeogla from Herron Todd White dated 5 August 1998 which valued the property at between $5.3 and $6.2million. . The reserve price for the sale should be set in consultation with the Bank and notified to the auctioneer immediately prior to the auction. . The purchaser should be offered first right of refusal for the purchase of the livestock, plant and equipment in accordance with the terms of the draft contract. . The price as specified in schedule 1 to the draft contract for the sale of livestock, included a premium above the market appraisal conducted by Elders. 361 On 18 September 1998, Mr Campbell again met with representatives of the Bank and Mr Nolan to discuss the parties who may be interested in purchasing Jeogla. Mr Nolan discussed his progress report dated 18 September 1998. After Mr Nolan had left the meeting, Mr Campbell also discussed the setting of the reserve price with the representatives of the Bank which included Mr Soper. They agreed that the reserve price would be set on 21 September 1998 and that Mr Campbell would notify Mr Nolan of the reserve price at the commencement of the auction by letter. 362 A conversation took place on 21 September 1998 between Mr Soper of the Bank and Mr Campbell. That conversation was admitted as evidence only of the conversation and not of the underlying facts. In the conversation, Mr Campbell had said that the range in the valuation was between $5.3million and $6.2million and Mr Soper had said that he thought the reserve should be set at the high end of the valuation at $6.2million even though it seemed unlikely from their discussions with David Nolan that the price would ever be reached. Mr Campbell agreed with that. He said that in setting the reserve price at that level it had the advantage that Mr Nolan and the auctioneer would be required to refer the highest bids to the receivers prior to passing the property in so that they could make a decision on the day. 363 Detail of the auction was also included in Mr Campbell's affidavit. His evidence was that the highest bid for Jeogla at the auction was $5.75million and that although that bid was within the range of the valuation of the property provided by Mr Gardiner, after discussion with the Bank he instructed Mr Nolan that the property should be passed in and that he would immediately commence negotiations with the highest bidder in an effort to increase the offer. 364 Later, negotiations had taken place in the auction rooms of LJ Hooker with representatives of the highest bidder at the auction Peakhurst Properties Pty Limited. Most of the negotiations occurred through Mr Nolan. In the course of those negotiations, Mr Nolan had said to Mr Campbell; 'The highest bidder is Peakhurst Properties. They had told me that they have exceeded their limit and are not going to increase their offer. In fact they are considering reducing their offer from $5.7million'. Mr Campbell had responded that the receiver would not accept any reduced offer but that the buyer would have to come up and subsequently Mr Nolan had said to Mr Campbell: 'I've tried to get them to increase their price. They will not. They have now said that they want to reconsider their offer and want to call this off for the moment. They are going to ring you later in the day to negotiate further'. 365 Mr Campbell said that negotiations terminated at approximately 1pm that day. 366 Mr Campbell's evidence was that later on the same day, he received a telephone call from the representative of Peakhurst Properties who indicated that negotiations were to continue at their request. Negotiations then resumed at about 2:30pm on the afternoon. At the commencement of those negotiations, Peakhurst Properties' representatives said that the offer made at the auction was formally withdrawn and they wished to make a new offer. Mr Campbell could not recall the exact amount of the offer but did recall that it contemplated a delayed settlement of over twelve months and that the affect of the offer was that it was about $300,000 less than their highest bid at the auction. He rejected that offer. 367 Mr Campbell's evidence was that after further negotiations throughout the afternoon, Peakhurst Properties offered to pay the original bid price of $5.75million. His evidence was: 'As there was no other party who had expressed an interest before or after the auction in purchasing Jeogla for a price close to this amount, I formed the view that this was the market price and the best price reasonably obtainable in the circumstances and accepted the offer'. 368 Mr Campbell's evidence was that Peakhurst Properties 'had indicated that it wished to purchase the livestock and plant and equipment, and we then commenced negotiations for the sale of these assets. Various offers were made on behalf of Peakhurst Properties which were below the valuation. Following further negotiations, Peakhurst Properties increased its offer to the purchase price as specified in the respective contracts for sale . . . In the case of the livestock, the offer and eventual purchase price included a premium above the value specified by Elders in their appraisal . . . and was therefore above market price'. He decided to accept the offer. It was his belief that the offer was 'better than could be achieved if the cattle were sold by auction taking into account the delay and costs involved'. In the case of plant and equipment, the offer was only slightly less than the valuation and his belief was that in his view, more than would be realised had it been necessary to auction the plant and equipment in a clearing sale. He also accepted that offer. 369 Mr Campbell also dealt with paragraphs 23 and 24 of the Graham affidavit. Where those matters are referred to, the effect of Mr Campbell's evidence is set out against Mr Graham's evidence earlier in this Judgment. 370 After receiving a facsimile from M & A McEvoy Development Group of 23 September 1998 Mr Campbell had responded on 25 September 1998 confirming that contracts had been exchanged. Mr A.R. Madigan 371 Evidence was given by Mr Madigan, who is a Licensed Stock and Station Agent, Licensed Real Estate Agent and Licensed Business Agent and is the Branch Manager of Elders Limited in Armidale. He has been in the employ of Elders for fourteen years, being formerly employed by Dalgetys Limited for six years. The question of the reliability of Mr Madigan's evidence is dealt with later in the Judgment. 372 Mr Madigan holds accreditation with CALM as a Professional Livestock Assessor Level 1 (Cattle), and as a National Livestock Assessor (Cattle). In order to maintain CALM accreditation, he is required to assess a minimum of 20 lots of cattle, of varying head, per year. Mr Madigan deposed that assessment of livestock involves the physical inspection of the stock to determine age, type, breed, weight and fat and muscle measurement. This determines what markets the stock is sold to. 373 Mr Madigan has been an Auctioneer for 20 years. He is the Auctioneer for Elders at the cattle and sheep sales at the Armidale stockyards which, for the last 3 years, have been held every Thursday. Mr Madigan deposed that he, at the request of Mr Wright, has represented Elders in the cattle auction sales on Jeogla Station for the last 3 years. His involvement has either been in his capacity as Assessor, or as Auctioneer, or both. 374 Mr Madigan deposed that in March 1998, he was instructed by Mr Skinner to estimate the market price at that time of stock located on Hernani and Tiercel. He provided this estimation on 19 March 1998, on the basis of the age and class listing of livestock provided by Mr Skinner and his own knowledge of the market and the prices achieved at the 19 March 1998 Armidale cattle sale. Subsequently, in April 1998, Mr Skinner instructed Mr Madigan to inspect and value the Hernani and Tiercel cattle. Mr Madigan deposed that he inspected the cattle on 1 May 1998 and provided an estimation as to price as at 7 May 1998 to Deloitte Touche Tohmatsu on 8 May 1998. His estimation, of 75c per kilogram, was based on his own knowledge of the market and the prices achieved at the 7 May 1998 Armidale cattle sale. 375 Mr Madigan deposed that at the time he undertook the 7 May 1998 valuation, he was aware that Mr Skinner had received an offer from the purchaser of Hernani and Tiercel, Mr W Dellow, to purchase the livestock at the price of 77c per kilogram. His evidence was: '…in order to assess Mr Dellow's offer, I prepared a document comparing the price offered by Mr Dellow with my estimate of price provided to the Second Defendant dated 7 May 1998. .. As an average price per kilogram, Mr Dellow's offer represented an increase of 2c per kilogram above my estimate. In addition, the offer made by Mr Dellow was on a "as is where" basis. If the Second Defendant had sold the cattle at Auction at Armidale sale yards or Jeogla Station, the Second Defendant would have incurred significant costs of transporting the cattle, travel insurance and costs relating to the sale, commission and yard dues. Taking into account these costs, I formed the view that the offer by Mr Dellow represented a price per kilo at Auction of 85c. In addition, the Second Defendant would also have been required to pay advertising costs. The costs for advertising stock for an Auction is between $4 to $5 per head. The sale of the stock to Mr Dellow also avoided potential problems concerning the welfare of the stock. .. The movement of pregnant cows can cause birth difficulties and transit tetany. Further, if the cows have calved, mismothering can occur when transporting them to sale yards… ' [Affidavit 30 March 1999, para 7] 376 Mr Madigan, on instruction from Deloitte Touche Tohmatsu, inspected the Jeogla livestock on 30 July 1998 for the purpose of providing a market appraisal. His evidence was that his appraisal of the value of the cattle as at 30 July 1998 was based on his knowledge of the markets, the VIV brand and the breeding and the prices achieved at the livestock sale at Armidale on 23 July 1998. 377 In a letter sent to Deloitte Touche Tohmatsu on 27 August 1998, Mr Madigan noted the variance in price between his appraisal of the Hernani cattle in March and May 1998 and his appraisal of the Jeogla cattle in August 1998. He explained the price variance as based on a number of factors: '1. The Hernani (spring) cows were due to calve in August, and the Jeogla (spring) cows are calving now and have calves at foot.

  Appendices 1 to 9 are not included

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