[2011] NSWCA 226
Briginshaw v Briginshaw (1938) 60 CLR 336
[1990] HCA 11
Director General of Department of Community Services
Re Sophie [2008] NSWCA 250
Egan v Egan [2018] NSWSC 202
Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640
Source
Original judgment source is linked above.
Catchwords
[2013] NSWCA 179
Bale v Mills (2011) 81 NSWLR 498[2011] NSWCA 226
Briginshaw v Briginshaw (1938) 60 CLR 336[1990] HCA 11
Director General of Department of Community ServicesRe Sophie [2008] NSWCA 250
Egan v Egan [2018] NSWSC 202
Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640[2014] HCA 7
G v H (1994) 181 CLR 387[1994] HCA 48
Golden Strait Corporation v Nippon Yusen Kubishika Kaisha [2007] 2 AC 353
Goldsbrough Mort & Co Ltd v Quinn (1910) 10 CLR 674[1910] HCA 20
Hammoud Brothers P /L v. Insurance Australia Ltd [2004] NSWCA 366
Isles & Nelissen (2021) 65 Fam LR 1[1995] HCA 4
Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361[2011] HCA 11
M v M (1988) 166 CLR 69[1988] HCA 68
Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633[2014] NSWCA 184
McCormick v Riverwood International (Australia) Pty Ltd (1999) 167 ALR 689[1999] FCA 1640
Morley v ASIC (2010) 247 flr 140[2010] NSWCA 331
Neat Holdings Pty Limited v Karajan Holdings Pty Limited (1992) 67 ALJR 170[1987] SC 55-580
Qantas Airways Limited v Gama (2008) 167 FCR 537
[2008] FCAFC 69
Ryan v Wright [2004] NSWSC 749
Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq) (2019) 99 NSWLR 317
[2019] NSWCA 11
Vieira v O'Shea [2012] NSWCA 21
Weissensteiner v The Queen (1993) 178 CLR 217
[1993] HCA 65
Wilson v Wilson (1854) 5 HL Cas 40
Judgment (74 paragraphs)
[1]
[1910] HCA 20
Hammoud Brothers P /L v. Insurance Australia Ltd [2004] NSWCA 366
Isles & Nelissen (2021) 65 Fam LR 1; [2021] FedCFamC1F 295
Jagatramka v Wollongong Coal Ltd [2021] NSWCA 61
K v The Queen (1997) 22 Fam LR 592
Kizbeau Pty Limited v WG & B Pty Ltd (1995) 184 CLR 281; [1995] HCA 4
Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11
M v M (1988) 166 CLR 69; [1988] HCA 68
Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633; [2014] NSWCA 184
McCormick v Riverwood International (Australia) Pty Ltd (1999) 167 ALR 689; [1999] FCA 1640
Morley v ASIC (2010) 247 flr 140; [2010] NSWCA 331
Neat Holdings Pty Limited v Karajan Holdings Pty Limited (1992) 67 ALJR 170; [1992] HCA 66
New South Wales Land and Housing Corporation v Australia and New Zealand Banking Group Limited [2015] NSWSC 176
New South Wales v Hathaway [2010] NSWCA 184
Nobile v National Australia Bank Ltd [1987] ATPR 40-787; [1987] SC 55-580
Qantas Airways Limited v Gama (2008) 167 FCR 537; [2008] FCAFC 69
Ryan v Wright [2004] NSWSC 749
Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq) (2019) 99 NSWLR 317; [2019] NSWCA 11
Vieira v O'Shea [2012] NSWCA 21
Weissensteiner v The Queen (1993) 178 CLR 217; [1993] HCA 65
Wilson v Wilson (1854) 5 HL Cas 40; (1854) 10 ER 811
Texts Cited: Stephen Odgers, Uniform Evidence Law, 12th Ed, Thomson Reuters)
Justice Dyson Heydon AC, Cross on Evidence (12th ed, 2019, LexisNexis)
Category: Principal judgment
Parties: KCPC Pty Ltd (First Plaintiff)
Khatambuhl Somerset Pty Ltd (Second Plaintiff)
Silknote Pty Ltd (Third Plaintiff)
Patricia Anne Wallace (Fourth Plaintiff)
Ivamar Pty Ltd (First Defendant)
Mark Ivan Burke (Second Defendant)
Ivan Burke (Third Defendant)
Representation: Counsel:
A Connolly (Plaintiff)
P Bolster (Defendant)
These proceedings broadly concern two families: the Wallaces and the Burkes. The Wallace family acquired three properties ("the properties") near the Manning River and Khatambuhl creek in Northern New South Wales, two in Cundle Flat and one in Mount George, in their own right or through companies established by the Wallace family for the purposes of developing an agricultural business. In the course of developing that business, Harry Wallace employed Ivan Burke as a station hand at one of those properties. Ivan Burke and the Burke family had historically resided in Cundle Flat and undertook farming work in the surrounding Mount George (Manning River) region ("the region") [1] . Over time, a close professional and personal relationship developed between Harry and Patricia Wallace and Ivan and Colleen Burke. This culminated in shared overseas trips and the attendance of special familiar events such as weddings and funerals.
The employment relationship between the Wallaces [2] and Ivan Burke commenced with Ivan performing work as a station hand. However, in 2010 the professional relationship between the families transformed into yearly lease arrangements that delegated complete management of the properties to the Burkes [3] including Ivan's son, Mark, with the central activity being the rearing, maintenance and sale of cattle. Those yearly arrangements continued until 2014 when a four-year lease agreement ("2014 Lease Agreement") was established. In 2017, another four-year lease agreement (the "2017 Lease Agreement") was entered into.
At least from the beginning of 2019, the region experienced drought which reached its peak at the end of November 2019. In November and December of 2019 bushfires broke out which burnt boundary fences on one of the properties (the Burkes were involved in fighting the fires).
After a meeting between representatives of the Wallaces and the Burkes on 28 November 2019 ("the November 2019 meeting"), the 2017 Lease Agreement was terminated on and from 1 December 2019. [4] By the time of the termination of the 2017 Lease Agreement, the Burkes were 10 months in rent arrears.
Thereafter, the Burke family supplied feed for a short period until the Wallace's took over the purchasing of feed to maintain the cattle on the properties. [5]
The Burke family continued to work on the properties. The nature and terms of those arrangements for work were controversial.
[4]
PROCEDURAL HISTORY
By a Statement of Claim, filed on 14 July 2020 ("SOC"), KCPC Pty Ltd ("KCPC"), Khatambuhl Somerset Pty Limited ("KS"), Silknote Pty Limited ("SN"), and Patricia Anne Wallace ("Patricia"), herein after referred to collectively as "the plaintiffs" or "the Wallaces" (or "the Wallace family"), brought proceedings against Ivamar Pty Ltd ("Ivamar"), Mark Ivan Burke ("Mark") and Ivan Charles Burke ("Ivan"), herein after referred to collectively as the "the defendants" or "the Burkes" (or "the Burke family").
The defendants filed a Defence on 24 August 2020, which was thrice amended. The final amended Defence ("FAD") was filed on 18 October 2020. The defendants also filed a cross-claim on 24 August 2020, which was thrice amended. The final amended cross-claim ("CC1") was filed on 18 October 2022.
The plaintiffs filed a Defence to the cross-claim ("DCC") on 17 November 2020. The plaintiffs additionally filed a cross-claim ("CC2") on 5 December 2022. There has been no Defence to the second cross-cla Annexures (1509009, docx) im filed by the defendants.
These proceedings took place over a five-day hearing on 5, 6, 7, 8 December 2022 and 31 March 2023. In between 8 December 2022 and the resumption of the matter in 2023, a mediation between the parties took place under Court order which was ultimately unsuccessful.
[5]
DRAMATIS PERSONAE
At the outset of this factual background, it is useful to identify key persons (natural or legal) and properties central to this dispute.
Patricia, the fourth plaintiff, was married to Mr Harry Lachlan Wallace ("Harry") who died in January 2018. Patricia and Harry, as well as the Khatambuhl Creek Trust and its trustee, KS and KCPC were parties to the 2017 Lease Agreement, as were Ivan, Mark and Ivamar.
Mr John Wallace ("John") and Ms Kirstie Anne Wallace ("Kirstie") were the children of Patricia and Harry and took over management of some Wallace family companies, in the capacity of directors, as Harry and Patricia aged. [8]
The properties, that the Wallace family either owned or controlled through companies, can be described as follows: [9]
1. The first property, "Somerset", was 2,200 acres, on the south bank of the Manning River, and was owned by the second plaintiff, KS.
2. The second property, "Westwood Park", was 165 acres, on the north bank of the Manning River, and was owned by the fourth plaintiff, Patricia.
3. The third property, "Khatambuhl", was 8,500 acres, straddled Khatambuhl creek north of the Manning River, and was owned by the third plaintiff, SN.
Most of the Wallaces' cattle were on Somerset. [10] There was a much smaller number of cattle on Westwood. Combined, those two properties were nearly double the size of the cattle on Khatambuhl. [11]
Khatambuhl is one of the largest stations in the region. There are two valleys in Khatambuhl that are divided by a range which comes from the south end. There are escarpments of each side of the range. There is a creek which runs through the centre of the property.
Mark, the second defendant, is the son of the third defendant, Ivan. Mark and Ivan are the sole directors of the first defendant, Ivamar.
A description of the additional parties who provided evidence in this hearing are as follows:
1. Mr Hannaford swore an affidavit dated 22 February 2021 indicating that he was a stock and station agent of Hannaford Stock & Land Australia ("HSLA") who conducted the cattle count on the properties from February to March 2020.
2. Mr Mark Willock ("Mr Willock"), swore an affidavit dated 22 February 2021 indicating that he was the accountant of the plaintiffs and had been an accountant for members of the Wallace family and the companies run by the family for over 15 years.
3. Mr Lindsay Thomas McLoughlin ("Mr McLoughlin"), swore an affidavit dated 7 May 2021, indicating that he was the brother-in-law of Ivan and the uncle of Mark. Mr McLoughlin lived in a house on the Khatambuhl property.
4. Mr Peter Damian Fry, swore an affidavit dated June 2021, indicating that he was employed by the Burke family and undertook work at the properties between 2013 and 2020.
5. Mr Benjamin John Lockhart, swore an affidavit dated 18 May 2021, indicating that he transported cattle for the Burke family.
[6]
ISSUES AND CLAIMS
The parties prepared a joint memorandum of issues ("JMOI"). Whilst the parties did not delineate the issues by reference to causes of action, it is appropriate that issues be corralled in this way. The three broad causes of action were as follows:
1. Breach of contract (and cross-claims by the defendant in that respect);
2. Breach of Australian Consumer Law ("ACL"); and
3. Miscellaneous claims made by the defendants.
[7]
Breach of contract (and cross-claims)
Under the first of those causes of action, the plaintiffs prosecuted a claim on these alternative bases:
1. breaches of the 2017 Lease Agreement;
2. breaches of an agreement said to be reached in consequence of the termination of that lease in November 2019 (which included a contest as to whether such an agreement was reached);
3. breaches of the agreement on or about 23 January 2020 (the "January Agreement").
The particularisation of those claims only fully materialised during the course of the plaintiffs' submissions. The claims for damages in these respects were as follows:
1. Payment of $34,000 plus interest, equalling $37,400, for outstanding rent from the defendants due under the 2017 Lease Agreement;
2. Payment of $49,500, for the unpaid portion of the purchase price for the sale of "Plant & Equipment" under cl 3 and appendix I of the 2017 Lease Agreement;
3. Payment for the unpaid portion of sale proceeds, being 15% of the total sales over $700,000 (as per cl 11 of the 2017 Lease Agreement), for the financial year from 1 July 2017 to 30 June 2018;
4. Payment for the unpaid portion of sale proceeds, being 15% of the total sales over $700,000 (as per cl 11 of the 2017 Lease Agreement), for the financial year from 1 July 2018 to 30 June 2019;
5. Damages for the market value of the shortfall in the number of cattle counted, between February and March 2020, in comparison to the 'heard profile' set out in cl 1(d) of the 2017 Lease Agreement or in the Agreement that followed the termination of the 2017 Lease Agreement;
6. Damages for breach of the 2017 Lease Agreement that required regular maintenance of the fences on the properties.
The claims in 1 and 2 of the proceeding paragraph were admitted by the defendants (collectively "the admitted matters").
I also note at this juncture that the plaintiffs confirmed (in their written submissions) that they abandoned their pleaded claims for damages in four respects: for the return of missing property of the first plaintiffs; arising from a breach of the defendants' obligations under the 2017 Lease Agreement to manage the herd profile via ensuring each animal received a NLIS tag arising from diverted feed from the first plaintiffs' cattle to cattle not owed by the plaintiffs; arising from the agistment of cattle not owed by the plaintiffs on the plaintiffs property.
[8]
The Lease
1. The parties to the 2017 Lease Agreement and whether Ivan and Mark are parties to it;
2. Whether the number of cows required for the full complement of the KCPC herd was 1222 (as contended for by the plaintiffs) or 1122 (as contended for by the defendants);
3. Whether the numbers of cattle in the herd on 1 December 2019 were below the herd profile numbers (1222 or 1122 cows, 556 calves, 620 weaners, 29 bulls);
4. Whether the defendants breached their obligation under the 2017 Lease Agreement to maintain the Herd Profile;
5. How much the defendants are liable to pay the plaintiffs under cl 11 of the 2017 Lease Agreement in respect of sales of cattle in the year ended 30 June 2018;
6. How much the defendants are liable to pay the plaintiffs under cl 11 of the 2017 Lease Agreement in respect of sales of cattle in the year ended 30 June 2019;
7. Title to the plant and equipment on the properties other than the Sale P&E (listed in Appendix 1 to the 2017 Lease Agreement);
8. Whether the defendants wrongly removed the chattels listed in [41] of the SOC (excluding irrigation pipes) from the properties and are liable either to return those chattels to the plaintiffs or pay damages for their value;
9. Whether the defendants failed to carry out regular maintenance of fences on the properties in breach of the 2017 Lease Agreement;
10. Whether the defendants are liable to pay damages, and if so their quantum, for the cost of maintenance work to fences on the properties incurred by the plaintiffs.
[9]
The Agreements Reached subsequent to termination of the 2017 Lease Agreement
1. Whether the matters set out in sub-paragraphs 17(a) to (q) of the SOC were agreed upon by the plaintiffs and the defendants at the November 2019 meeting or at the January meeting, and whether the matters set out in subpars 17(b) (in part), 17(h) and 17(l) were agreed upon at all;
I interpose to set out sub-pars 17(a)-(q) of the SOC:
17. On or about 28 November 2019, the plaintiffs and the defendants agreed as follows:
a. The 2017 Agreement would be terminated with effect on and from 1 December 2019.
b. On 1 December 2019, the defendants would hand the herd over to KCPC with cattle numbers in accordance with the Herd Profile and thereafter manage the herd for KCPC in accordance with the usual practices of the beef cattle industry and otherwise manage the Three Properties in accordance with good rural land management practices.
c. On and from 1 December 2019, the defendants would not be permitted to sell any animals in the herd without the consent of the plaintiffs.
d. The defendants would be permitted to sell up to 400 head from the herd (being cattle surplus to the Herd Profile) during December 2019 and retain the proceeds from the sales after paying arrears of rent and the outstanding balance of the purchase price for the Sale P&E.
e. The defendants would not be required to pay rent for any month later than November 2019.
f. The plaintiffs would be responsible for all outgoings for Khatambuhl Creek, Westwood Park and Somerset after November 2019.
g. The plaintiffs would be responsible for paying for ongoing feed for the herd after mid-December 2019.
h. Until the earlier of 30 April 2020 and the date when all the cattle in the herd had been sold, the plaintiffs would pay the defendants a total of $2,400 per week to cover the labour of the second and third defendants and fuel for each of them.
i. The defendants would invoice the plaintiffs on a monthly basis for the cost of any casual labour by other workers.
j. In the period from 1 January 2020 to 30 June 2020 inclusive, the defendants would receive 10% of the proceeds of the sale of any cattle from the herd net of the costs of sale and the costs incurred by the plaintiffs in feeding the cattle.
k. In respect of all sales of cattle from the herd:
i. the sales had to be sales on behalf of KCPC;
ii. documentation of the sales had to be sent to the plaintiffs; and
iii. funds from the sales had to be deposited into the bank account of KCPC
l. The defendants were to provide the plaintiffs with a plan for feeding the cattle in the herd (on the assumption that the herd would pe de-stocked by 30 April 2020).
m. KCPC would pay for all stockfeed itself, rather than reimburse purchases made by lvamar.
n. The second defendant would vacate and clean up Somerset house and the bunkhouse by 30 June 2020.
o. The plaintiffs would pay for materials for any new fencing.
p. Any bulldozer work, timber harvesting or other additional work was to be discussed and agreed between the plaintiffs-and the defendants.
q. The agreement of 28 November 2019 was without prejudice to the plaintiffs' accrued rights under the 2017 Agreement.
I continue with the issues under the heading 'Agreement reached subsequent to the termination of the 2017 Lease Agreement':
1. Whether the defendants were under an obligation under the alleged November 2019 Agreement to hand over the herd with cattle numbers in accordance with the Herd Profile, and whether that obligation was breached;
2. Whether the defendants were liable under an alleged agreement made in January 2020 to pay the plaintiffs the market value of the shortfall of cattle found on the 2020 cattle count;
[10]
Cross-claims by the defendants under the January Agreement
The issues associated with the defendants CC1 was as follows:
1. Whether the email from John to Mark on 23 January 2020 ("the January 2020 email") records the terms of an agreement made between the plaintiffs and the defendants at that time;
2. If the January 2020 email does record an agreement, whether the defendants are estopped from relying on the terms referred to in the particulars to par 14 of the CC1;
3. Whether the plaintiffs are liable by virtue of the January Agreement to pay three invoices issued to KCPC;
4. Whether in April 2020 the defendants were engaged by Mr Hannaford (as the agent of the plaintiffs);
5. Whether the plaintiffs are liable by virtue of the January Agreement to pay two invoices issued by the defendants to Mr Hannaford;
6. Whether the defendants are entitled to remuneration as pleaded in par 24 of the CC1.
The claims advanced by the defendants in this respect were not clearly articulated in the CC1. I will take a moment at this juncture to discuss them.
By the time of the final submissions, the claims made by the defendants, in this respect appear to be as follows:
1. Payment of $160,338.75 for unpaid invoices for works completed by the Burkes after the termination of the 2017 Lease Agreement; and
2. Payment of 10% of the net proceeds of cattle sold by the plaintiffs between 1 January 2020 and 30 June 2020; and
3. Payment of $20,000 to cover "all old issues of expenditure" on the properties by the defendants; and
4. Return of the defendant's property, listed in a table that appears in the CC1.
I will now break down, one by one, each claim. Prayer 1 is extracted from CC1 and affirmed in the closing written submissions. Prayer 1 comes from both the CC1 and closing written submissions.
Prayer 3 appears in the closing written submissions as "[t]he agreement [sic] regarding the $20,000 should be enforced". I have made the assumption that the "agreement" being referred to appears in the January 2020 email that alleges to sum up the January meeting between the Wallace's and the Burke's where it was allegedly agreed there will be a one-off payment by the Wallace family to the Burke family of "$20,000 to cover all old issues i.e./equipment, hay sheds etc this will be paid prior to 30th June".
Prayer 4 appears in the CC1 as "[a]n order permitting the Cross-Claimants to access the Cross-Defendants' properties for the purpose of retrieving the Cross-Claimants 'plant & Equipment located on the properties". The same claim appears in the defendant's closing written submissions as "[t]he plaintiffs should also be required to deliver up the Burkes personal property". The personal property being referred to appears in the table in CC1 at [41].
[11]
Australian Consumer law
The plaintiffs claimed damages under ss 236 and 237 of the ACL (which appear in Schedule 2 of the Competition and Consumer Act 2010 (Cth)), for misleading and deceptive conduct pursuant to s 18 of the ACL, in relation to the representation that there were enough cattle for the defendants to sell 400 animals in December 2019 and the 'herd profile' would still remain intact. The issues identified in that respect of the JMOI were as follows:
1. Whether the defendants at the November 2019 meeting represented to the plaintiffs that there were enough animals in KCPC's herd on the properties that the defendants could sell 400 animals from the herd in December 2019 and the herd profile would remain intact;
2. Whether the defendants represented to the plaintiffs on or about 20 January 2020 that the herd profile of 1222 cows, 556 calves, 620 weaners and 29 bulls was then intact;
3. Whether the plaintiffs relied on that herd number representation in the manner pleaded at [36] of the SOC, or on the January herd profile representation in the manner pleaded in [6] of the CC2.
Paragraph 36 of the SOC was as follows:
36. The plaintiffs relied on the Herd Number Representation:
a. by agreeing with the defendants on or about 28 November 2019 that the defendants would be permitted to sell up to 400 animals from the herd in December 2019;
b. by not requiring on or about 28 November 2019 and later that a count of the cattle on the Three Properties be undertaken in late November or early December 2019;
c. by agreeing with the defendants on or about 28 November 2019 that the defendants would manage the herd after 30 November 2019 and would be remunerated for doing so;
d . by agreeing with the defendants on or about 28 November 2019 that the defendants would receive 10% of the proceeds of the sale of any cattle from the herd net of the costs of sale and the costs incurred by the plaintiffs in feeding the cattle.
Paragraph 6 of the CC2 was as follows:
6. The Plaintiffs relied on the 2020 Herd Profile Representation:
a. by agreeing with the Defendants on or about 20 January 2020 that the Defendants could retain the proceeds of the sale in December 2019 of up to 400 head of cattle from the herd;
b. by agreeing with the Defendants on or about 20 January 2020 that, as an incentive, from 1 January 2020 to 30 June 2020 only and inclusive, from all sales of KCPC cattle the Defendants would receive 10% of the sale price less the costs of sales (being commission, fees and transport costs) and the cattle feeding costs (including freight and feeding equipment);
c. by agreeing with the Defendants on or about 20 January 2020 that, from 1 December 2019, subject to the provision of invoices containing correct information and weekly activity reports, the Plaintiffs would pay the Defendants $6,000 plus GST per week to cover all labour of both management and casuals to run the Three Properties seven days a week, all workers' on-costs (including workers' compensation, superannuation and overtime), all equipment (whether the Defendants' own or from an external source) and running costs (being fuel, repair and maintenance, registration and insurance), and further subject to review of the arrangement in April and June 2020 based on cattle numbers and general workload;
d. by agreeing with the Defendants on or about 20 January 2020 that the Plaintiffs would pay to the defendants a one-off payment of $20,000 prior to 30 June 2020 in relation to all claims by the Defendants for compensation in relation to past improvements made by the Defendants to the Three Properties, to equipment and to the use of the Defendants' own hayshed.
The particulars of issue 3 concerning the ACL were as follows:
1. by agreeing with the defendants that the defendants would be permitted to sell up to 400 animals from the herd in December 2019 and retain the proceeds;
2. by not requiring at the November 2019 meeting and later that a count of the cattle on the properties be undertaken in late November or early December 2019;
3. by agreeing with the defendants that the defendants would manage the herd after 30 November 2019 and would be remunerated for doing so;
4. by agreeing with the defendants that the defendants would receive 10% of the proceeds of the sale of any cattle from the herd net of the costs of sale and the costs incurred by the plaintiffs in feeding the cattle;
5. by agreeing with the defendants at the January Agreement that the plaintiffs would pay the defendants a one-off payment of $20,000.
1. Whether the herd representations in November 2019 or January 2020 constitute conduct engaged in in trade or commerce;
2. Whether the herd number representation or the January herd profile Representation was correct;
3. Whether the making of the representations in November 2019 or January 2020 constituted conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the ACL;
4. Whether the plaintiffs have suffered loss or damage by reason of the making of those representations;
5. Whether the defendants used feed that had been purchased by KCPC as feed for KCPC cattle between mid-December 2019 and the end of April 2020 to feed other cattle;
6. Whether the defendants wrongly caused or permitted cattle other than KCPC's cattle to be agisted on Somerset between 1 December 2019 and 31 March 2020 and, if so, the quantum of damages to be paid by the defendants;
7. If the January 2020 email does record an agreement, whether the representation in January 2020 was conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the ACL and the plaintiffs should be relieved of their obligations under the agreement.
[12]
Miscellaneous Other Issues
The JMOI identified three miscellaneous claims brought by the defendants as follows:
1. Whether the defendants have suffered any loss in relation to silage from a sorghum crop and, if so, in what quantum; (The claim relating to the silage by the defendants was not pressed in the defendants' closing written or oral submissions. I will treat the claim as not pressed).
2. Whether the defendants are entitled by virtue of the January Agreement to payment of 10% of all net cattle sales between 1 January 2020 and 30 June 2020; (This issue is already addressed under the breach of contract heading).
3. Whether the defendants have been unable to retrieve equipment left by them on the properties because they have been locked out of the properties and, if so, whether they have suffered any loss or damage. (This issue is mentioned in relation to the defendants' cross-claim).
[13]
FINDINGS OF FACT (INCORPORATING THE CONSTRUCTION OF THE 2017 LEASE AGREEMENT AND ANY SUBSEQUENT AGREEMENT AFTER TERMINATION OF THAT AGREEMENT)
The relationship between the Wallace and Burke families, as briefly outlined in the introduction, begun in the 1970's between Harry and Patricia Wallace and Ivan and Colleen Burke and over the decades developed into a significant professional and personal relationship.
In 1974, Ivan was appointed as a station hand at the Khatambuhl property which was purchased by Harry some years prior to that date. During Ivan's employment at the property, he undertook work to renew and upgrade fences, construct new steel cattle yards, clear areas of regrowth and slash and fertilize open areas of the property to assist in the development of the agricultural business of the Wallace family overall.
The close relationship between the Burke and Wallace families was demonstrated by occasions attended by both families outlined in Ivan's affidavit sworn on 9 June 2021:
"(b) Along with my late wife Colleen we went as Harry 's guests to Zimbabwe, along with Wallace family members and other friends, to celebrate Pat Wallace' 60th Birthday.
(c) Colleen and I also went to Vanuatu as guests of Harry and Pat Wallace and family.
(d) When Colleen died suddenly in December 2002, Pat Wallace delivered a moving eulogy which outlined the connected association and closeness which our families enjoyed, along with her personal friendship with Colleen.
(e) Along with members of my family, I went to India for Andrew Wallace's wedding.
(f) I and members of my family enjoyed a time with the Wallace Family in the Cook Islands.
(g) When my daughter, Kate and her husband Clem Ayres were married at Woolgoolga, in July 2017, Harry and Pat Wallace were our guests.
(h) I had gone to Scotland and Thailand with Harry and Pat Wallace, during which Harry Wallace would introduce me to extended family and acquaintances as "my other son".
(i) In 2006 Craig Burke and Mark Burke and myself and my brother-in-Law, Hilly Dunn went on a Kokoda Track walk with John Wallace, Andrew Wallace and other Wallace Family members, Hunter Johnson and Jake and Dan Knight."
Ivan described the relationship as familial, stating the following in his affidavit of 9 June 2021:
"over the years from the 1970's me and my family had many associations with Harry Wallace, Pat[ricia] Wallace and their family. We had developed such a close relationship to the extent that from my observation it was as though Harry and Pat Wallace thought of, or at least treated, me and my family as an extended part of their family."
[14]
2014 Lease Agreement
The next lease in sequence was titled "LEASE AGREEMENT v5" but for the purposes of this judgment will be referred to as the "2014 Lease Agreement".
The 2014 Lease Agreement was entered into between Harry, Patricia, SN as the trustee of Khatambuhl Creek Trust, KS, KCPC and Ivan, Mark and Ivamar. [12] The 2014 Lease Agreement was signed on 5 May 2014 and the term of the agreement was from 1 April 2014 to 30 June 2017. [13] Each page of the agreement is initialled by five signatories to the 2014 Lease Agreement: Harry and Patricia, Mark and Ivan, and Kirstie on behalf of the SN as trustee of the Khatambuhl Creek Trust and KCPC.
The assets stated under cl 1 of the lease were: [14]
"a) the property known as Khatambuhl Creek Pastoral but excluding the Top and Bottom houses and Hardes house but including Tommy's Hut
b) the property known as Westwood Park but excluding Westwood house
c) the property known as Somerset including the Somerset house and Bunkhouse
d) the cattle herd profile that existed at 1 July 2010 being 1222 cows (being 941 cows, 194 replacement heifers and 87 culls), 556 calves, 620 weaners and 29 bulls, being a total of 2377 head (See Appendix II)
e) the P&E list as attached to the 2010/11 Lease Agreement less the Toyota Ute driven by Ivan Burke plus the Excavator plus the Kubota Tractor (part-time) plus a Post Hole driller but excluding Item A(14) being the ride-on mower, Item A(18) being 3 Hiilux Utes and Item B(2) being the FIAT tractor with attachments, but with the third Hilux Ute and the FIAT tractor ownership being subject to the April and May 2014 Lease payments being made before 8 May 2014."
Clause 1(a) to (c) concerns property, cl 1(e) concerns motor vehicles but of most significance is cl 1(d), which deals with the number of cattle.
The 2014 Lease Agreement spans five pages with the first three pages making up the primary agreement. An appendix begins halfway down page three that lists the "main plant & equipment items" at the Khatambuhl and Somerset properties. Page five contains a handwritten tally ("the tally") which deals with the total cattle asset under the lease with a delineation of the cattle on each property as of 1 July 2010. The tally records 1065 cows counted at the Khatambuhl property, 70 cows counted at the Westwood Park property and 87 cows counted at the Somerset property. The sum of those numbers is 1222 cows, which is recorded correctly as the total number of cows in the tally and in cl 1(d) of the 2014 Lease Agreement. The tally further showed a total of 556 calves, 29 bulls and 620 weaners being the total cattle counted across the three properties.
[15]
2017 Lease Agreement
The 2017 Lease Agreement substantially replicated the 2014 Lease Agreement. It was entered into between the same parties. These parties are specified in the preamble to the 2017 Lease Agreement, the signature provision of the 2017 Lease Agreement and John's affidavit of 22 February 2021 at [12]. [15] It was signed by the Burke parties on 3 April 2017 and the Wallace parties on 24 April 2017. The anticipated term [16] of the agreement was from 1 July 2017 to 30 June 2021. [17]
The assets stated under the 2017 Lease Agreement in cl 1 were very similar to those under the 2014 Lease Agreement. In relation to the real property and motor vehicle assets, cll 1(a)-(c) were the same except the "Jane Russell blocks" were included in cl 1(a) rather than "Tommy's Hut", and cl 1(e) does not appear. Most significantly, cl 1(d) in the 2017 Lease Agreement is identical to cl 1(d) in the 2014 Lease Agreement but does not contain the parenthetical words "(being 941 cows, 194 replacement heifers and 87 culls)" to describe the make-up of the herd of cows. Clause 1 is extracted below:
"1. Assets
The assets included in this agreement are:
a) the property known as Khatambuhl Creek Pastoral Co but excluding the Top and Bottom houses and Hardes house but including the Jane Russel blocks.
b) the property known as Westwood Park but excluding Westwood house
c) the property known as somerset including the somerset house and bunkhouse,
d) the cattle herd profile that existed at 1 July 2010 being 1222 cows, 556 calves, 620 weaners and 29 bulls, being a total of 2377 head (See Appendix II)"
The 2017 Lease Agreement spans five pages with the first four pages making up the primary agreement. Appendixes I and II appear on page five and are both typed. Appendix I of the 2017 Lease Agreement provides a "Valuation of equipment for Mark Burke". Appendix II is titled "Cattle numbers" for 30 June 2010 and consists of a table with columns bearing the titles, "year", "cows", "calves", "weaners", "bulls" and "total". The entries for each column are as follows: the cows are recorded as "1122", the calves are recorded as "556", the weaners are recorded as "620", the bulls are recorded as "29" and the total is recorded as "2377". I note that Appendix II provides less details of the breakdown of the herd profile compared with the tally that appears in the 2014 Lease Agreement. As earlier mentioned, both parties accept that 2377 is an incorrect sum of the total cattle.
[16]
Construction of the 2017 Lease Agreement: Issue of cattle numbers specified in the 2017 Lease Agreement
Counsel for the plaintiffs submitted that ascertaining the correct "definition of the herd profile" in the 2017 Lease Agreement is to be resolved as a matter of construction. Counsel for the defendants did not identify the means of resolving the issue or, in substance, address this issue other than making reference to 1122 cows in his closing written submissions. In my view, the plaintiffs are correct.
As mentioned, there is an inconsistency between the figure of cows stated in cl 1(d) of the 2017 Lease Agreement, being "1222", and the figure of cows stated in Appendix II of the 2017 Lease Agreement, being "1122". The resolution of this discrepancy is a matter of construction as it requires the Court to construe the 2017 Lease Agreement.
A related issue, is what is the correct total number of cattle under the herd profile having regard to the 2017 Lease Agreement. It was common ground that the number of cattle was incorrectly recorded in both the 2014 and 2017 Lease Agreements as 2377. The plaintiffs submitted a finding of cow numbers at 1222 would yield a total of 2427 cattle, whereas the defendants contended the herd profile was a total of 2327 cattle corresponding to its contention as to the proper construction of the 2017 Lease Agreement as to the number of cows.
As to the first proposition, counsel for the plaintiffs submitted that the figure for cow numbers under the 2017 Lease Agreement and corresponding sum of cattle under the herd profile "can be corrected as a matter of construction of the 2017 Agreement either by applying the principle of falsa demonstratio non nocet or by recourse to the surrounding circumstances in which the 2017 Agreement was made".
Counsel sought to rely on the authority of Ryan v Wright [2004] NSWSC 749 ("Ryan v Wright") stating that "Gzell J found that a restraint provision in a contract was not unenforceable due to inaccuracy in the contract's definition of "business" and that the inaccurate description should be struck out as a falsa demonstratio".
Ryan v Wright was a case where Mr Ryan and DeMorgan Pty Ltd ("DeMorgan") brought proceedings against Mr and Mrs Wright for contempt of Court for breaching an undertaking given to the Court to refrain from, in broad terms, directly or indirectly carrying on a business in competition with DeMorgan and directly or indirectly approaching a customer of DeMorgan (at [3]). Mr Ryan was a shareholder of DeMorgan and Mr and Mrs Wright were former shareholders of DeMorgan. Mr and Mrs Wright were sole shareholders of Ridges Estate Pty Ltd ("Ridge"). The undertakings given to the Court resembled cl 13.1(a) in the shareholder agreement of DeMorgan, which counsel for the plaintiffs referred to as the 'restraint clause', which read as follows:
"Notwithstanding any other provisions of this Agreement, the Shareholders must not do any of the following things during the period commencing on the date of this Agreement and ending three (3) years after a Shareholder ceases to be a Shareholder or a Director ceases to be a Director of the Company without the prior written approval of the holders of at least 90% of the Shares: -
(i) directly or indirectly carry on a business in competition with the business of the Company or its Associates;
(ii) directly or indirectly approach an agency who is a customer of the Company or its Associates."
[17]
The November 2019 Meeting
The meeting proceeded between John, Kirstie, Mark and Ivan on 28 November 2019. The meeting was also attended by Mr Willock who, as outlined by the dramatis personae, was the accountant of the plaintiffs. By this stage, the Burke family were 10 months in rent arrears. Kirstie gave evidence that she took notes during the meeting. These are extracted below:
"Been in drought effectively 2013.
Insignificant damage. Fencing problems, KC OK for ground-cover, estimate fencing - difficult.
Wieners: 800, cows - 1200, Calves - 500, Bulls - 27 (40 deaths) No cows over 7 years. Age 2-4 cows:325, 4-6 cows (1300 at Somerset, 115 Westwood, balance at KCPC)
Drought for 2 years.
Exit Strategy: $10,000 a day feed.
Strategy: selling down the young cattle. Have to feed calves until they are at age.
Terminate Lease decision made. Burkes requested time to think about it. MB says he can feed for $60,000 a month so 3 months $180,000.
What are the next stages: 6 month clause. 2,200 cattle returned + rent. $40,000 P&E owed. MB said he would sell and repay. 2 weeks left for feed. $240,000 to grain-feed 1200 cows. $350,000
Send 400 off to export in next 2 weeks: $750-$1000 sale price
Discussed the strategy of keeping KCPC and selling Somerset.
3-4 month feed plan and sale plan. Management plan. $500,000 due in with cattle sales. Owes tractor. Only enough feed for 2 weeks.
6 months selling all the herd.
$350,000 coming in will pay Burke debts. We chip in the $350,000 for the feed. Come up with a herd value.
Fences - critical - Dalrae. Actions: priority boundary fences."
Following this meeting, an email was sent from Kirstie to John, Mark and Mr Willock on 29 November 2019 with the subject line "Memorandum of Understanding - Burke Family and Wallace Family". The email of 29 November 2019 ("MOU") [28] read as follows:
"Dear Mark & Ivan,
Further to our meeting yesterday conclusions and actions are as below:
1. As of 1st December Wallace Family (WF) and the Burke Family (BF) by mutual agreement agree to the termination of the Lease signed and dated 24/4/2017.
2. The number of the herd outlined in the Lease Clause 1 are: 1222 Cows + 556 calves + 620 weaners + 29 bulls.
3. As of 1st December, cattle cannot be sold without consent of the WF.
4. WF consents to the sale of up to 400 head in December with the proceeds being used firstly to repay outstanding rent, the balance of the equipment and then any remaining funds are retained by the BF.
5. No rent required in December or ongoing until the end of the period of Lease. The WF will assume payment of all outgoings as outlined in the Lease Clause 2.d (Rates, Electricity, Levies, Insurance, Irrigation charges).
6, The Wallace Family agree to pay for the ongoing feed of the cattle starting in mid-December.
7. WF agree to pay the Burke Cattle Co $2400 per week ($1000 per week for Ivan and Mark each, plus $200 each to cover fuel and incidentals) until 30th April 2020 or until all cattle are sold. Any other casual labour such as Kelvin or Peter should be invoiced separately on a monthly basis.
8. As an incentive, from 1st January - 30 June 2020 only and inclusive, all sales of the cattle will garner the Burkes 10% of the cattle sale prices, less costs of sale and the cattle feeding costs incurred by the WF.
9. All sales of cattle must be done through the KCPC Pty Ltd company and documentation of sales sent to the WF and funds deposited into that company's bank account.
10. The BF are to come back with a feed plan for the cattle, with an intention to de-stock the herd by 30th April. WF to pay for stockfeed directly from KCPC Pty Ltd rather than via the BF company.
11. Mark Burke to vacate and make good (ie clean up) Somerset House and the Bunkhouse by 30 June 2020.
12. WF to cover any of the material costs associated with new fencing.
13. Any bulldozer work or timber-harvesting or other additional work to be mutually discussed and agreed between the WF and BF.
14. If BF wishes to discuss a caretaker role for Khatambuhl Creek from 1 July 2020, the details and terms of the role will be decided at a future date.
15. This letter is done on a without prejudice basis.
Could you please acknowledge receipt and acknowledgement of the points above via return email.
Kind regards,
Kirstie
Director, KCPC"
[18]
Conclusion: Mutual Termination and November 2019 Agreement
The 2017 Lease Agreement was terminated effective from 1 December 2019 following the November 2019 meeting. By the date of the termination of the 2017 Lease Agreement, the defendants had been managing the properties for about 9 years. At the point of termination, the defendants were 10 months in rent arrears.
As mentioned, an issue arose in the proceedings as to whether or not the 2017 Lease Agreement was terminated by consent. [32] In that respect, I have come to the conclusion that the 2017 Lease Agreement was ultimately terminated by consent of the defendants.
The starting point for that assessment was the November 2019 meeting.
Before turning to the accounts of the November 2019 meeting, I would observe that my overall impression of John and Kirstie in cross-examination is a favourable one. Kirstie's evidence was measured, considered and frank. John's evidence may have exhibited some argumentative aspects but, generally speaking, his answers were responsive and considered. I consider they were honest and reliable witnesses, even though there is, as I have mentioned, some equivocation in Kirstie's evidence about the intention of the Wallaces' prior to the November meeting and some minor inconsistencies in their accounts at that meeting.
John was cross-examined as to whether he and Kirstie had determined, prior to the meeting, they would terminate the lease. His response was that, whilst both of them had in mind the prospect of termination in the circumstances, they would await the outcome of the meeting to reach a final position.
In certain aspects of cross-examination of Kirstie's evidence she seemed to have suggested (sometimes in combination with other propositions) that she had determined the 2017 Lease Agreement would be terminated prior to the November meeting. There is one passage of Kirstie's evidence where this issue was put squarely:
"Q. had you and your brother agreed that the lease was going to be terminated. Is that right? Or was it just an option?
A. It was an option. Yes, it was an option.
Q. Be very clear about this?
A. Okay.
Q. Before the meeting began, from what I understand you're saying, termination was just an option?
A. We they had already breached the terms of the lease
Q. Yes.
A. Okay, so, based on that, yes, we were going to terminate.
Q. And you'd already decided that before you walked into the meeting? Or had you?
A. Yes.
Q. Two days earlier you sent an agenda for the meeting, at page 1241 of the Court book, which suggests that termination was only an option at that stage. Point 5 and with it, point 6?
A. Yes.
Q. Your evidence today would seem to suggest that you and your brother had discussed, and made a decision, that you were going to tell the Burkes it's all over, at the meeting?
A. Unless there was some convincing information the Burkes gave us, as a result of the meeting, that was the intention, yes."
[19]
The November 2019 Agreement?
The plaintiffs pleaded the existence of an agreement emerging from the November 2019 meeting, the terms of which were contained in the MOU.
Whilst I have concluded that the parties mutually agreed to the termination of the 2017 Lease Agreement, as recorded in the MOU and elsewhere, I consider that the defendants were correct to submit that the Court should find no agreement was reached in November 2019 or thereafter in terms of the MOU, even though the MOU referred to remuneration that was to be paid to the Burkes for managing the properties and an incentive payment in respect of cattle sales both occurring from the date of termination.
The MOU was stated to be provided on a without prejudice basis. There were clearly terms within it that remained unresolved. No reply was provided to the email for quite some time. Kirstie followed up the email with a request for a response for 4 December 2019 and Mark responded in a manner consistent with their being remaining issues under the proposed agreement. Mark stated that things would be sorted out "this week". On 23 December 2019, Mr Snelgrove sent a communication asserting that an agreement had been made but nonetheless demanded a response by 31 December and that the arrangement was without prejudice to his clients' rights under the 2017 Lease Agreement.
John accepted that the MOU was merely a proposal and stated that the Burkes had accepted it when they responded in January 2020, even though variations were introduced to the terms of the purported November 2019 Agreement.
In classic terms of the requirement of offer and acceptance for the formation of a contract, I consider that an offer was made but no acceptance was communicated in clear and unequivocal terms: Goldsbrough Mort & Co Ltd v Quinn (1910) 10 CLR 674 at 678 (per Griffith CJ). Furthermore, if it were the case that the proposed agreement was in some way accepted, it is a real question whether acceptance was communicated.
[20]
The January Meeting
An email was sent by John to Mark on 16 January 2020 arranging the January meeting with the subject line "Re: Response to the MOU". The January meeting took place at Khatambuhl on the 20 January 2020 between John, Mark and Ivan. John provided a recollection of the meeting in his affidavit of 22 February 2021 which corresponds to the January 2020 email that provides a "summary of the points".
The January 2020 email from John to Mark is extracted below:
"Hi Mark,
Further to our meeting on Monday 20th Jan, please find a summary of the points:
1. All outstanding rents and equipment to be paid before 31st Jan 2020- this is $170,900 (including GST) as $56,100 was paid last week.
2. As at 30th November the following WF cattle were accounted for 1,222 cows+ 556 calves+ 620 weaners+ 29 bulls. There has been losses since the 1st Dec, with BF to provide a summary of when (dates) and where+ if possible photos of the deaths (possible inspection may be required). There needs to be a report at the end of every month. The stock count will be conducted on the proposed dates of 27th Feb .with any adjustments to be agreed and made as per Clause 10 of the Lease.
3. The herd sell down in general terms will be as follows, with copies of sales to be provided to WF;
February 100 cows to Wingham abattoirs
100 weaners to Edwards for export
March 200 cows to Wingham abattoirs
100 weaners to Edwards for export
April 100 cows to Wingham abattoirs
100 weaners to Edwards for export
Total 700 approx $550,000
* Mark to get the Wingham abattoir pricing/rate sheet
4. As an incentive, from the 1st January - 30 June 2020 only and inclusive, all sales of the cattle will garner the Burkes 10% of the cattle sale prices, less costs of sales.
(commission/fees/transport) and the cattle feeding costs (including freight & feeding equipment) incurred by the WF.
General estimate of herd
Cows 1,222 @ $750 = $916,500
Weaners 620 @ $850 = $569,500
Calves 556 @ $400 = $222,400
Bulls 29 @ $8 00 = $ 23,200
$1, 723, 600
5. Feed costs , WF has paid $ 394,616 since December, with the following needed
Required
* Pellets 3 loads =$60,000
* Pasture hay 80t per week @ $300 X 6 weeks =$150, 000
$210,000
Currently at KCPC
Grain - till Mid Feb
Pellets - till mid Fe b
Hay- 60 bales arriving this week
Somerset
Hay - end of Jan
6. Operations management from 1st Dec, WF will pay the BF $ 6,000 + GST per week to cover- (invoices to be supplied with correct info)
a. All labour for both management and casuals to run all the properties across the 7 day week.
b. All workers on -costs- (workers comp, superannuation, over-time etc.)
c. All equipment (whether it be Burke's or external) and running costs (fuel/R&M/Rego/insurance)
d. This will arrangement be reviewed in April & June based on cattle numbers and general work load.
e. BF to provide a weekly activity report.
f. WF will be appointing a selling agent- John Hannaford to assist with the cattle sales and managing the sale of Somerset, and leasing of KCPC and Westwood. BF to work with John Hannaford to organise the cattle, review feed reqs, prepare for the stock count on the 27th Feb and review the work program and have a more defined cattle sales program.
7. 1 off payment WF will pay BF $20,000 to cover all old issues ie/ equipment, hay sheds etc this will be paid prior to 30th June.
8. Somerset, BF to install new garden fence, fixed broken panels in awnings, de-clutter the house, repair the septic and re-establish the garden, remove the redundant spa and fill in, clean up the staff quarters. WF or its selling agent will have contractors come to the house to look at replacing the carpet, blinds and painting and other items needed to prepare the house.
9. KCPC priorities- BF to provide feedback on the following;
a. Quotes for re -building the Baxter's boundary fence, with the Burke's labour and or using external contractors
b. Negotiations with Rolf for a contribution
c. Estimates for dozing the fence line
d. Meeting with the Native Vegetation Manager to discuss the opportunity to clear off re-growth in Baxters and the Red-Cutting paddock, plus need to look at burned forest areas, such as House paddock, Amos, Mckays etc ..
e. Fixing other boundary fences on the Paddock creek eastern side and other important internal fences, such as the Hut & Hardes
10. Caretaker role for Ivan will be discussed once cattle & Somerset have been sold. It is the intention to agist/lease out Westwood & KCPC
As per Point 5 please liase with Kirstie on timing of ordering the next loads of feed.
Regards
John"
(emphasis added)
[21]
The January Agreement
John did not receive a response to the above email from Mark or Ivan. In cross-examination, Ivan stated he could not recall this meeting. His evidence at [59] of his affidavit of 9 June 2021, where he discusses the January meeting, should therefore be rejected. In his affidavit of 10 June 2022 at [10], Mark describes this email from John as a "summary of our meeting on 20 January 2020". Mark's evidence in that respect is as follows:
"Q. You had a meeting on 20 January, did you not?
A. Yes.
Q. You and your father and Mr Wallace. After that meeting Mr Wallace sent you an email on 23 January 2020.
A. I believe so, yes.
Q. You didn't respond to that email subsequently, did you?
A. No, I think everything was decided in that meeting.
Q. Your evidence is the email is a summary of the meeting?
A. It's a direction from the meeting, yes."
I consider the email from John should be found to be an accurate record of the content of the January meeting. The email corresponds to John's affidavit and is contemporaneous to the meeting it records. In my view, the January 2020 email clearly represents an agreement reached between the parties in January 2020 in accordance with the content of that email (the "January 2020 Agreement"). I resolve the issues stated in the JMOI as to whether the email "records the terms of agreement" in these terms.
On 30 January 2020, KCPC paid the council rates due for each of the properties. In early February 2020, Mr Hannaford informed John that the defendants were intending to sell 200 head of cattle in mid-February. In response to this, John contacted Mr Snelgrove and on 5 February 2020, Mr Snelgrove sent a letter to Mark stating "it has come to the attention of our clients that you intend to shortly sell cattle from those properties through Wingham Abattoir." The letter also reinforced that no cattle were to be sold without authorisation from the Wallace family until a stocktake of the cattle was completed and requested a response from Mark by 10:00am on 10 February 2020, stating that he would act in accordance with those directions. No response or acknowledgement was ever received from Mark or Ivan.
Mr Snelgrove sent another letter to the livestock manager of the Wingham abattoir, Mr Stephen Moy, on 5 February 2020 which similarly stated, "It has come to the attention of our clients that cattle from these properties may shortly be offered for sale to you by or on behalf of Mark and/or the Burke Cattle Company." The letter stated that Mark and Ivan did not have authority to sell any cattle owed by KCPC and requested to be contacted if there was any attempt to sell KCPC cattle that could be recognised by "a registered large stock brand and earmark". A follow-up email was sent by Mr Snelgrove on 6 February 2020 to Mr Moy which also copied in Mark confirming that all the proceeds of the sale of KCPC cattle being sold are to be deposited into a bank account that John would elect and later provide those details.
[22]
General: The Plaintiff's Submissions on Breach Of Contract
The plaintiffs relied upon, in this respect, several causes of action. These were as follows:
1. A claim for damages based on a breach of a term of the 2017 Lease Agreement that the herd profile be maintained; or
2. A claim for damages based on breach of the agreement formed at the November 2019 meeting including the term that the defendants would hand over the herd with the herd profile intact; or
3. A claim for the market value of the missing cattle based on the agreement made in January 2020.
In oral submissions, counsel for the plaintiffs clarified that the above causes of actions were "alternatives".
[23]
The Plaintiffs' submissions
The plaintiffs made the following submissions in relation to the first claim, being the 2017 Lease Agreement:
1. The plaintiffs pleaded that cl 2(a) (that the defendants would maintain the herd profile), was a term of the 2017 Lease Agreement and that the definition of the herd profile was 1,222 cows, 556 calves, 620 weaners and 29 bulls.
2. In FAD at 15, the defendants admitted the whole paragraph 15 in the SOC but contended that the herd profile included only 1,122 cows. It is common ground, therefore, that the defendants had an obligation to maintain the herd profile, but there was an issue as to whether the correct number of cows was 1,222 or 1,122.
3. On the basis of the evidence of the cattle count and of the inadequacy of any other explanations for the shortfall found in 2020, there is strong and persuasive evidence to support the finding that the shortfall in the cattle numbers existed at the beginning of December 2019 and that the Burkes' failed at that time to hand over the herd in the requisite numbers.
4. The Court should therefore find that the defendants breached the 2017 Lease Agreement by failing to maintain the herd profile. The loss suffered by the first plaintiff is the value of the missing cattle and the offspring who would have been born to the missing cows if those cows had been present.
5. The numbers of the missing cattle are as follows:
1. 300 cows;
2. 87 calves;
3. 157 weaners; and
4. 4 bulls.
1. The lost offspring to the missing 300 cows have been estimated on the basis of a 80% birth rate to be 240, as identified in the defendants document titled "Cattle Numbers - March 2019".
2. The first plaintiff's damages have been calculated in the affidavit of Kirstie Wallace affirmed on 4 December 2021.
3. The calculations yield the following results:
1. 300 cows: $318,624.00;
2. 87 calves: $85,081.65;
3. 157 weaners: $153,538.15;
4. 4 bulls: $5,008.72;
5. 240 additional calves not born to the missing 300 cows: $234,708.00;
Total: $796,960.52.
1. The first plaintiff claims damages in the amount of $796,960.52 plus interest. Interest should run from 1 December 2019, when the cattle should have been handed over, or alternatively from 1 April 2020, when the cattle could have been sold and their value realised.
The plaintiffs submitted that the existence of a shortfall in cattle was an important factual element to make out each of the cause of action. The plaintiffs submitted that to establish the shortfall in cattle requires consideration of the following:
1. The definition of the herd profile;
2. The reliability of the count carried out in 2020;
3. The likelihood that the shortfall was caused by events other than the failure of the defendants to provide sufficient animals in December 2019.
[24]
There was uncertainty about the herd numbers at the end of 2019
The plaintiffs contended that it is clear that the defendants did not keep reliable records of the stock on the properties and hence did not know how many cattle there were in November 2019 when they made a representation to the plaintiffs that there were cattle on the properties in excess of the herd profile.
The plaintiffs submitted that the defendants had no reasonable basis for their representation that the herd profile was intact in November 2019 and that there were strong reasons to conclude that a deficit of 548 animals on 1 December 2019 "was entirely possible and, in the absence of any plausible explanations for the shortfall found later, probable".
[25]
No lack of feed in late 2019 and early 2020
The plaintiffs submitted that the defendants provided feed for the cattle in the first two weeks of December 2019 and after that time the plaintiffs took over the supply of the feed for the herd. The plaintiffs bought a large amount of feed from early December 2019 onwards such that there was no reason why the cattle would die from lack of feed. Between December 2019 and March 2020, the first plaintiff spent a total of $471,393.05 on the provision of feed to the herd.
The plaintiffs submitted that on numerous occasions over the above-mentioned period, Mark communicated with Kirstie about the necessary feed for the herd and on 10 December 2019 Mark assured Kirstie that there was sufficient feed for the cattle. Further, it was submitted that John had visited the Khatambuhl property between 19 and 21 January 2020 "and did not see cattle that were severely emaciated" and that Mr Hannaford did not consider the cattle on the Somerset and Khatambuhl property to be distressed as such.
The plaintiffs submitted there was no reason why the cattle in the herd would die from lack of food.
[26]
No lack of water in late 2019 and early 2020
The plaintiffs submitted that the suggestion by the defendants the herd died from a lack of water was unfounded. They relied on John's statement in cross-examination that the properties had a large number of dams on them, some of which did not run out of water; Mr Hannaford's statement in cross-examination that in January of 2020 when he visited the properties, he saw water in dams and in the creek where the cattle could drink; and a statement by Mark on 23 December 2023 that there was enough water in the dams for the next few months.
[27]
The cattle did not wander away into the bush or onto other properties
The plaintiffs submitted that there is strong evidence against the proposition that the shortfall in cattle of the herd can be explained by cattle wandering away from the properties. The only property where wandering cattle was "potentially relevant" was Khatambuhl. The plaintiffs pointed to evidence which demonstrated that it was quite unlikely that cattle would wonder off Khatambuhl either into the bush or onto other properties.
The shortfall in cattle numbers cannot be explained by the theory that the cattle wandered away from the property and were not recovered.
[28]
There was a lack of evidence of the deaths of cattle.
The plaintiffs submitted that it can be safely inferred that the animals were not dying and the defendants' contention that the shortfall could be explained, at least in large part, by numerous deaths of animals in the herd, is mere speculation unsupported by any evidence. The evidence is rather to the contrary effect.
In the result, the plaintiffs submitted that a shortfall of cattle was made out which extended to each alternative subsidiary cause of action: the 2017 Lease Agreement, the agreement formed in November 2019 or the January 2020 Agreement. I will discuss the submissions on the existence of an agreement formed in November 2019 or in January 2020 under separate headings below.
[29]
The Defendants' Submissions
The defendants submitted that the plaintiffs' case does not establish "that there was a deficiency in the herd at the relevant time, i.e., 28 November 2019".
To support that contention, counsel for the defendants made submissions on the burden and standard of proof. The plaintiffs' claim was backed, in effect, on a proposition that the defendants "converted or stole the stock". From that starting point, the defendants made the following submissions:
"C. Burden and standard of proof
13. The allegations that the plaintiffs make against the individual defendants, Mark and Ivan Burke, in respect of the herd leased to their company Ivamar are serious allegations and matters of high gravity to people who are experienced farmers and graziers. The implication of the allegation is that the Burkes, despite their long-standing positive relationship to the Wallace family extending back of many years, were responsible for removing from the Three Properties a significant number of stock in the period leading up to the termination of the lease on 28 November 2019. The claim is, in effect, that they converted or stole the stock.
14. Section 140 of the Evidence Act 1995 (NSW) provides as follows:
140 CIVIL PROCEEDINGS: STANDARD OF PROOF
(1) In a civil proceeding, the court must find the case of a party proved if it is satisfied that the case has been proved on the balance of probabilities.
(2) Without limiting the matters that the court may take into account in deciding whether it is so satisfied, it is to take into account -
(a) the nature of the cause of action or defence, and
(b) the nature of the subject-matter of the proceeding, and
(c) the gravity of the matters alleged.
15. In Neat Holdings Pty Limited v Karajan Holdings Pty Limited [1992] HCA 66; (1992) 67 ALJR 170: 110 449 at [2], the plurality of Mason CJ, Brennan J, Dean J and Gaudron J
"The ordinary standard of proof required of a party who bears the onus in civil litigation in this country is proof on the balance of probabilities. That remains so even where the matter to be proved involves criminal conduct or fraud. On the other hand, the strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what it is sought to prove. Thus, authoritative statements have often been made to the effect that clear or cogent or strict proof is necessary 'where so serious a matter as fraud is to be found'. Statements to that effect should not, however, be understood as directed to the standard of proof. Rather, they should be understood as merely reflecting a conventional perception that members of our society do not ordinarily engage in fraudulent or criminal conduct and a judicial approach that a court should not likely make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct." As Dixon J. commented in Briginshaw v Briginshaw at p 711:
"The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved "…".
16.Similarly, when serious allegations of sexual abuse of children are raised in Family Court parental matters, Odgers notes that the Court has held that, "the evidence must be 'very carefully evaluation' and '[i]nexact proofs, indefinite testimony, or indirect inferences are insufficient to ground a finding of abuse'" citing K v The Queen (1997) 22 Fam LR 592 at 599, 602-603. See also M v M (1988) 166 CLR 69; [1988] HCA 68; and more recently Isles & Nelissen [2021] FedCFamC1F 295.
17. The same reason applies in other similar contexts; e.g., Hammoud Brothers P/L v. Insurance Australia Ltd [2004] NSWCA 366 where at issue was whether a motor vehicle had been stolen for the purposes of a claim under an insurance policy.
18. In New South Wales v Hathaway [2010] NSWCA, at 263, the Court of Appeal observed that;
"In the language of Briginshaw, the seriousness of that finding and the gravity of the consequences flowing from it are such that it requires "clear or cogent or strict proof" in order to be made out on the balance of probabilities."
19. In Morley v ASIC [2010] NSWCA 331 at [750]-[753] the Court also said:
[751] As Dixon CJ put it on another occasion, what is required is "an affirmative conclusion … establish[ed] to the reasonable satisfaction of a judicial mind" (Jones v Dunkelat 305). His Honour went on to say (ibid at 308) that "[t]he facts proved must form a reasonable basis for an actual conclusion affirmatively drawn of the truth of which the tribunal of fact may reasonably be satisfied." See also West v Government Insurance Office of NSW (1981) 148 CLR 62 at 66.
[752] In Rejfek v McElroy the court spoke of "clear and cogent" proof. In the usual case it is, in our opinion, preferable to use the positive language of cogency to the negative language in Briginshaw v Briginshaw of "inexact proofs, indefinite testimony or indirect inferences". Both positive terminology - "adequate material to enable a court to reach a comfortable satisfaction"; and negative terminology - "uncertain inferences", was used in the relevant passage in Whitlam v Australian Securities and Investments Commission.
[753] In order to be satisfied on the balance of probabilities, within the meaning of s 140, the tribunal of fact must reach an affirmative conclusion, or a definite conclusion, or an actual persuasion. This state of mind turns on the cogency of the evidence adduced before it. Relevant to the cogency of the evidence actually adduced is the absence of material evidence of a witness who could have been called and in fulfilment of the duty of fairness should have been called. In Whitlam v ASIC it was said that absent diligence in calling available evidence, a court is left to rely on uncertain inferences. The case of the party in default suffers in its cogency, and it is made more difficult for the tribunal of fact to reach an affirmative conclusion, a definite conclusion or an actual persuasion: the more so if the Briginshaw principles involving the gravity of the consequences apply. In our opinion, that is the consequence of the breach of the obligation of fairness.
See generally Odgers, Uniform Evidence Law, 12th Edition at [EA.140.60-120]
20. It is to be noted that the inherent unlikelihood of an occurrence of a given description, which is referred to by Dixon J in Briginshaw, should be taken into account under s 140; Qantas Airways Limited v Gama (2008) 167 FCR 537 at [138]:
"As identified above, in addition to taking into account the three matters specifically identified in s 140(2), it was open to his Honour to have regard to other relevant matters. Other relevant matters could include the inherent unlikelihood, or otherwise, of the occurrence of the matter of fact alleged (see the passage from Briginshaw v Briginshaw set out in [4] above) and the long standing common law rule that evidence is to be weighed according to the proof which it was in the power of one party to produce and the power of the other party to contradict (Medtel Pty Ltd v Courtney (2003) 130 FCR 182 per Branson J at [76])."
21 This is critical in the present case where, as will be developed in these submissions, the defendants and in particular Ivan Burke, had a long and close personal history of working closely with the Wallace, including a close relationship with the parents of the current Wallace dynasty, dating back to the 1970s; see [5] to [8] of Ivan Burke's affidavit, about which he was not challenged at CB Volume 1, p 297-298.
22. That relationship extended to Ivan and Mark taking action to protect Khatambuhl Creek and the herd that ran on it from bushfires from August 2019 onwards that led to Mrs Wallace, who was not called to give evidence, giving him a $3,000 Flight Centre gift card in November 2019, some weeks before her children made the decision to terminate the lease.
23. Against this background, the plaintiffs have elected not to call evidence or present a case that establishes where the missing cattle went if indeed the herd profile was deficient on 28 November 2019.
24. As Brennan and McHugh JJ said in G v H (1994)181 CLR 387 (a paternity case) at 391 [8]:
"…when a court is deciding whether a party on whom rests the burden of proving an issue on the balance of probabilities has discharged that burden, regard must be had to that party's ability to adduce evidence relevant to the issue and any failure on the part of the other party to adduce available evidence in response. As Mason CJ, Deane and Dawson JJ explained in Weissensteiner v The Queen (1993) 178 CLR 217 at 227.":
"it has never really been doubted that when a party to litigation fails to accept an opportunity to place before the court evidence of facts within his or her knowledge which, if they exist at all, would explain or contradict the evidence against that party, the court may more readily accept that evidence. It is not just because uncontradicted evidence is easier or safer to accept than contradicted evidence. That is almost a truism. It is because doubts about the reliability of witnesses or about the inferences to be drawn from the evidence may be more readily discounted in the absence of contradictory evidence from a party who might be expected to give or call "t."
25. In Director General of Department of Community Services; Re Sophie [2008] NSWCA 250 at [50], Sackville AJA, observed that:
"More recent authorities have pointed out that s 140(2)(c) does not impose any hard and fast rules governing the proof of serious allegations from circumstantial evidence. The requirement stated in Briginshaw v Briginshaw, that there should be clear and cogent proof of serious allegations, does not change the standard of proof, but merely reflects the perception that members of the community do not ordinarily engage in serious misconduct." (citations omitted)
26. Similarly, in Bale v Mills [2011] NSWCA 226 at [73], the Court of Appeal comprising Allsop P, Giles JA and Tobias AJA, after referring to Re Sophie, made this observation:
"[73]. The inference sought was one, but only one, possibility. The matters to which we have already referred… in discussing what was not put to Mr Schipp reveal that a recognition of error and conscious dishonesty are not the only possible explanations. The inference that Mr Schipp was aware of the error and intentionally deceived his client is a possibility. It is a possibility about which minds might differ as to whether it is sufficiently probable to be a proper inference, that is more probable than not... In our view that inference cannot be drawn as more probable than not, for the reasons set out below. Most importantly, however, could it be drawn with the requisite confidence in circumstances where that inference and its significance was never raised with Mr Schipp so that he was deprived of any opportunity to respond to it? The answer is plainly, no."
27. Lest there be any doubt about it, the plaintiffs' case is a case that the defendants engaged in serious misconduct; one that they effectively converted or stole cattle that they say were worth well in excess of $500,000. However, give the way that they have framed and prosecuted such a case, the plaintiffs have sidestepped this fundamental feature of it.
28. This can be seen in two critical ways.
29. Firstly, there is the failure of the plaintiffs to put forward a case about where the cattle went. They say they didn't die, they say they didn't wander away, they say that they were fed enough and watered enough despite the drought to survive, leaving the only possible reason to account for the deficit as active wrongdoing on the part of the Burkes. Despite this and leaving aside the evidence about the sale of the cattle by the Burkes that was agreed on 28 November 2019 they don't articulate where they went or how this is said to have occurred.
30. The plaintiffs have failed to engage with where the cattle went and offer no case theory or evidence whatsoever about how this could have happened.
31. There is not a shred of evidence that shows any movement of funds in a Burke bank account, a movement of cattle to or from a Bourke property, or a transfer of an animal under the NLIS that would support the contention that the herd was being stripped by the Burkes prior to 28 November.
32. No such case was put to either Ivan or Mark Bourke. It should have been.
[30]
The plaintiffs were in breach of the 2017 Lease Agreement in failing to carry out a herd count on or before 28 November
The defendants submitted that the first hurdle facing the plaintiffs was that they failed to comply with the 2017 Lease Agreement when it came to determining if there was a shortfall in the herd profile.
The 2017 Lease Agreement was terminated in November 2020, seven months short of its full five-year term that was to have expired on 30 June 2021.
Clause 10 of the 2017 Lease Agreement enabled the plaintiffs to terminate that agreement without notice, "in the event that BF has not made the lease payments in full for two consecutive months." "BF" appears in the 2017 Lease Agreement as an abbreviation for the Burke Family.
There is no issue that the plaintiffs were entitled to terminate the 2017 Lease Agreement at that time, given that the lessees were more than two months behind in the payment of rent, however, it was incumbent on them, having elected to terminate, to carry out the stock count that was mandated and expressed in urgent and imperative terms.
It was submitted this is clear from cl 10 of the 2017 Lease Agreement, which provided that:
"a herd count will be made immediately prior to or on the date of termination and BF will pay WF market price for any cattle that are less that the cattle profile as set out in Appendix II."
The defendants submitted that the plaintiffs failed to comply with cl 10 when they terminated the 2017 Lease Agreement as no engagement was made with a qualified person to carry out the herd count for months until Mr Hannaford was engaged to do so in February 2020. Furthermore, this failure is made worst by the fact that John agreed that he, Kirstie and Mr Willock had discussed the fact that they needed to do a stock take if they did terminate the lease.
It was contended by the defendants that it was typical of John to blame the Burkes for the plaintiffs' failure to comply with the 2017 Lease Agreement, and that it was relevant that the plaintiffs could have, but did not, initiate a stock count at the termination of that agreement. A contemporaneous stock count was crucial as it would have established, one way or another, the size of the herd at that time and the failure to take that action is a material matter in evaluating whether the plaintiffs have established a deficiency for the purposes of s 140(2) of the Evidence Act 1995 (NSW).
[31]
The plaintiffs failed to carry out any stock count until March 2020
The second hurdle the defendants submitted the plaintiffs faced was that, notwithstanding the fact that they knew they had to carry out a stock count, could have carried out a stock count and had already had some discussions with Mr Hannaford about doing so, they did nothing to effect a stock count until March 2020. The defendants submitted that, while the flooding in February 2020 limited access to parts of Khatambuhl, there was no reasonable explanation for the delay. The stock count was inadequate and inaccurate.
The third hurdle the defendants submitted the plaintiffs faced was how little time was spent carrying out the stock count, given the size of the properties, and in particular Khatambuhl. It was put by the plaintiffs in written submissions that Mr Hannaford carried out the count in a careful manner and the count yielded reliable results but the defendants submitted that he, in fact, did not.
It was contended that despite Mr Hannaford's experience working with cattle, he was completely unfamiliar with the properties in question and with Khatambuhl in particular.
The defendants submitted that Mr Hannaford was engaged by the Wallace family for work additional to the cattle count, which is demonstrated by the invoices he issued, including the following: [48]
"Initially assess stock condition and propose sustainable feeding programme.
- Purchase necessary fodder and mineral supplements.
- Organise labour for continual feedings of stock 7 days a week.
- Make sure adequate feeding and machinery available.
- Produce a Budget as a guideline to ongoing costs on a weekly basis.
- Provide all and to process all accounts due for this operation.
- Provide difference scenarios in relation to sale of stock as costs and drought progress.
- Keep owners informed weekly with all progress by e-mail."
Mr Hannaford's rate was $80/hour + GST including travel time from Gloucester and his station hands were at $45/hour plus GST.
Mr Hannaford's time at the properties, together with that of his staff, was recorded for posterity in the time sheets that he kept, and the invoices based upon them, all of which was in evidence. [49] Mr Hannaford's first substantive interaction with the Wallace's occurred on 21 and 22 January 2020 when he met John on 21 January. His invoices record a total of 6 hours in respect of a four hour meeting with Mr Wallace on 21 January 2020 and 2 hours in respect of further work on 22 January 2020. The second meeting is described as "Administration John Hannaford - Office - Formulate Selling and Stock Plan". That stock plan does not appear to be in evidence.
[32]
The plaintiffs have failed to provide the details of any subsequent counts of cattle.
The defendants submitted that there has been no transparency from the plaintiffs regarding the numbers of cattle on the properties following the count and that there is no subsequent evidence of the count.
In this respect, I interpose to note that the documentary evidence of the cattle found between May and October 2020 in the Court Books does provide evidence on subsequent checks for additional cattle by Mr Hannaford.
The defendants further submitted that there was evidence to clearly establish cattle sales of 2,045 animals between 1 December 2019 and 31 August 2021.
[33]
The plaintiffs do not proffer any explanation for what happened to the allegedly missing stock.
The defendants submitted that, on the question of the onus and standard of proof, the nature of the plaintiffs' case was that there was a substantial shortfall in the number of cattle worth, on their case, in excess of $500,000. The plaintiffs must, therefore, deal with or engage with what they say happened to the cattle. It is only in that context that the question of whether the Court can be satisfied to the requisite standard that their case is made out.
The defendant submitted that the plaintiffs' written submission "glosses over" the fact that, if there was a deficiency as of 28 November 2019, what became of the animals that were missing.
The defendant submitted that the plaintiff made a "faint attempt in cross-examination" to suggest that the Burkes may have moved cattle from the Wallace properties onto their own, but no submission is made that there was any conversation or otherwise unlawful sale of the cattle.
The defendant submitted that it was "inherently implausible that the Burkes would not have been interested in the count."
[34]
The herd was under threat at the time the lease was terminated and remained under threat until well after the drought broke in early February 2020
At the time the lease was terminated, there had been a long period of drought at Khatambuhl and Somerset not the "dry spell" that John sought to convey. That drought continued until early February when 153 mm fell on the 9ᵗʰ of February, following some showers in January.
Mr Hannaford described the cattle at Khatambuhl in these terms:
"Q. When you went up to Khatambuhl Creek, you did see cattle that were distressed?
A. Yes. Yeah, not distressed, but they'd had a hard, obviously hard time during the drought."
This is consistent with what Ivan told John on 18 December 2019 when he told her things were not looking good with heat stress that week. In her reply, Kirstie described the situation as being extremely grim. Mr Hannaford said that he gave advice to the Wallace's about the distressed cattle on Khatambuhl in these terms:
"… on Khatambuhl Creek cattle, there were a lot of old cows up there, and the other thing about managing a large beef herd, that once a cow gets to a certain age, especially in the country, which can be eight to nine years old, you take them off on an age basis, especially if their mouth is starting to break, and then bring your young heifers in the bottom, so you maintain the status quo."
This was consistent with a theory that Mr Hannaford employed during a drought:
"…anything that is weak or old, first you remove off the property, prior to them trying to feed them first. The old theory that a bad beast will eat as much as a good one, so you bring the drawbridge up and look after your best stock, and move the other ones off the property, um, to get rid of them."
Mr Hannaford recognised that weaker and older animals were under dire threat in those conditions.
Later in 2020, Mr Hannaford said that he sold off the weak and old cattle at Khatambuhl after he took over. [53] The Burkes, on the other hand, were prevented from doing this by the terms of the 2017 Lease Agreement and the requirement to maintain the herd profile. The defendants asserted that there was simply no evidence that they sold anything in this period unless it was specifically agreed upon and that, in February and March of 2020, in respect of the sales arranged, the Wallace's unfairly complained about the sales organised by the Burkes who only acted in accordance with the selling plan of the plaintiffs. The defendants submitted that the Burkes were directed to action the sales and Mr Hannaford was informed.
[35]
The plaintiffs failed to call Patricia
The defendants submitted that Patricia, despite being one of the plaintiffs, was not called to give evidence in these proceedings despite the fact she visited the properties prior to November 2020. The defendants contended that Patricia's evidence as to the state of the stock at that time would have been helpful. Additionally, her evidence as to the trustworthiness and reliability of the Burkes, and in particular Ivan, would also have been helpful. Kirstie admitted that her mother and Ivan had a strong relationship.
The Court should infer that the uncalled evidence would not have assisted the Burkes; Jagatramka v Wollongong Coal Ltd [2021] NSWCA 61 at [49]; Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361 at [64]. See Justice Dyson Heydon AC, Cross on Evidence (12th ed, 2019, LexisNexis) at [1215].
Instead of calling Mrs Wallace, the plaintiffs chose to make further serious allegations against the Burkes in their affidavit evidence, suggesting that the Burkes made threats to contaminate dams, injure children and sell cattle without consent, none of which were pursued in cross-examination and do not seem to form part of the plaintiffs' case. These allegations should not have been made.
[36]
The consequences, under the contract, of a deficiency as November 2019 meeting
The defendants submitted that the 2017 Lease Agreement provides a clear method for determining the consequences for the Burke's in respect of any deficiency of cattle numbers upon termination of that agreement and as such it follows that the plaintiffs' claim is not a claim for damages, but a claim for an accrued entitlement under the contract. However, if the claim is assessed as damages, as a general rule, they are assessed at the date of breach.
The plaintiffs were at liberty to adduce evidence of the market for beef cattle in the location or vicinity of the properties and has elected not to do so.
[37]
Breach of contract: unpaid portion of sale proceeds under the 2017 Lease Agreement
[38]
The plaintiffs' submissions
1. The plaintiffs submitted that the defendants have admitted to claims for the unpaid portions of sale proceeds under cl 11 of the 2017 Lease Agreement owed for the 2017-2018 and 2018-2019 financial years. That admission arises from [47]-[53] of FAD, although I note that there appears to be a spelling mistake at paragraph [51] which should read 30 June 2019 not 30 June 2018, and [54] of the affidavit of Mark of 10 June 2021. The plaintiffs submitted that the quantum is not admitted.
2. The plaintiffs submitted, pursuant to cl 11 of the 2017 Lease Agreement, that the defendants were required to pay a profit share of 15% of each financial year's total sales above $700,000 plus GST. In the financial years 2017-2018 and 2018-2019 the plaintiffs submitted that the defendants have not paid the requisite 15% plus GST.
3. In the 2017-2018 financial year, the plaintiffs submitted the total profit of the defendants was $768,535.00 which is $68,535.00 in excess of $700,000. In the result, 15% of that total profit plus GST ($10,280.25 + $1,028.02) equates to a total of $11,308.27 owed to the plaintiffs by the defendants.
4. In the 2018-2019 financial year, the plaintiffs submitted the total profit of the defendants was $742,670.41 which is $42,670.41 in excess of $700,000 and in the result, 15% of that total plus GST ($6,400.56 + $640.05) equates to a total sum of $7,040.61 owed to the plaintiffs by the defendants.
[39]
The defendants' submissions
The defendants did not make any oral or written closing submissions on claims three and four, despite the fact counsel for the plaintiffs expressly raised that "additional payments under cl 11 of the 2017 agreement... [is] not mentioned in the defendant's written submissions… so I don't know if there's anything further that my friend wishes to say against it".
[40]
Breach of contract: failure by the defendants to maintain the fences on the properties
[41]
The plaintiffs' submissions
The plaintiffs made the following submissions in relation to fence maintenance:
1. The plaintiffs claim damages for the costs of carrying out maintenance to fencing on the properties that the plaintiffs alleged ought to have been carried out by the defendants under cl 2(b) of the 2017 Lease Agreement.
2. John inspected the fences on Khatambuhl and Westwood on 7 April 2020. The plaintiffs' solicitors subsequently wrote to the defendants on 9 April 2020 setting out the ordinary maintenance work that had to be carried out on the fences of Khatambuhl Creek identified by John.
3. The first plaintiff had fencing maintenance work carried out and the fencing contractor's invoices distinguished between regular maintenance that ought to have been carried out under the 2017 Lease Agreement and work not of that kind.
4. Ivan, in his affidavit of 9 June 2021 and cross-examination, conceded that a lot of regular maintenance of the fencing had not been done in 2018 and 2019.
5. The first plaintiff paid the invoices for the fencing work done.
6. The claim is for $13,809 (exclusive of GST), being the sum of the invoiced amounts marked as "Maintenance", plus interest.
[42]
The defendants' submissions
The defendants made the following closing written submission in relation to fence maintenance:
"This will be addressed in detail in oral argument, however there is no evidence at all to establish the claims. The highest that the evidence rises is that there was a wish list of items that needed repair and that this amount to proof of a failure on the part of the Burkes to properly maintain the fences on Khatambuhl Creek."
In oral submissions the defendants outlined the evidence as the following:
"Mr Wallace went up to the property. Then we see a letter from Mr Snelgrove complaining about the state of the property… So, Mr Snelgrove sends a letter indicating a list of complaints and the next step in the logical chain of the evidence is that there are all these invoices for this work that was carried out."
The defendants then submitted, in relation to that evidence, as follows:
"There is nothing that your Honour can look at, in terms of a photograph, a report, a Scott schedule, that says that fence posts number 123, that's located next to this dam, has obviously not been maintained for A, B, C and D reasons; there is nothing there to suggest that.
So, it is really a case of mere assertion that some fences had not been taken care of, and that is strapped up with some questioning of Ivan Burke when he was asked: Well, that some of the maintenance had perhaps not been carried out because he was trying to stop the cattle from dying and protecting them from the fires, the very matters about which Mrs Wallace Senior thanked him and rewarded him.
So, it is a very odd claim the way it is put and, in my submission, when your Honour looks at the evidence that is relied on in my learned friend's submissions, it really does go nowhere."
[43]
The plaintiffs' submissions
The plaintiffs made the following submissions in relation to the second basis for the claim in contract:
1. At [17] of the SOC, the plaintiffs pleaded the formation of an agreement at the November 2019 meeting outlining its terms. At 17 of the SOC, the plaintiffs pleaded that it was a term of the agreement reached in November that on and from 1 December 2019 the defendants would hand the herd over to the first plaintiff with cattle numbers in accordance with the herd profile.
2. At par 17 of FAD, the defendants denied that this agreement was made on 28 November and say that "the agreement was reached on 23 January 2020". This is a reference to the date of the email from John to the Burkes setting out the outcome of the January meeting and to the January Agreement.
3. At [17] of FAD, subject to placing the conclusion of the agreement in January 2020, the defendants admitted all of the terms pleaded in SOC [17] except to the following extent:
1. The defendants did not admit the term pleaded at SOC 17 to the effect that the defendants were to provide the plaintiffs with a plan for feeding the cattle in the herd (on the assumption that the herd would be de-stocked by 30 April 2020).
2. At FAD par 17, the defendants admitted the plea in SOC at 17 that the 2017 Lease Agreement would be terminated with effect on and from 1 December 2019, but say that it was the plaintiffs who terminated the lease.
3. At FAD par 17, the defendants admitted SOC 17 "insofar as the defendants would 'hand over the herd' on a specified date, but otherwise do not admit the balance of the clause". No specified date other than 1 December 2019 was advanced by the defendants, and the defendants' admission that the 2017 Lease Agreement was terminated with effect on and from 1 December 2019 and their insistence that they would not be responsible for the herd after November 2019 point to 1 December 2019 as the agreed date.
4. At FAD par 17, the defendants declined to admit that it was agreed that the herd being handed over was "with cattle numbers in accordance with the herd profile".
1. The plaintiffs pleaded the shortfall in the cattle numbers, breach of the obligation of the agreement at the November 2019 meeting , and loss and damage from the breach.
2. The evidentiary bases for the allegations of the shortfall and the defendants' breach of their obligation are the same as those for the claim for breach of cl 2(a) of the 2017 Lease Agreement. The plaintiffs submitted that those allegations have been made out. The remaining issue is whether the herd that the defendants agreed that they would hand over was a herd with cattle numbers in accordance with the herd profile.
3. Numerous matters were agreed at the November 2019 meeting. The email of 29 November 2019 from Kirstie Wallace set out an outline of what the parties had agreed and there were a number of matters yet to be resolved. Among the matters that were settled were the following:
1. the lease was terminated with effect on and from 1 December 2019;
2. the herd numbers were 1,222 cows, 556 calves, 620 weaners and 4 bulls;
3. on and from 1 December 2019, cattle could not be sold without the consent of the Wallaces;
4. the Wallaces consented to the Burkes' selling up to 400 cattle that were excess to the herd quota;
5. the Wallace family would feed all the cattle;
6. all cattle sales were to go through the first plaintiff;
7. the money from sales of cattle was to be paid to the first plaintiff.
1. There was also discussion what the Burkes would be paid to look after the herd on the Three Properties.
2. From the facts that the lease was being terminated with effect on and from 1 December 2019, that the Wallaces were taking on responsibility for feeding the herd and that future sales of cattle were only to occur with the consent of the Wallaces and through the first plaintiff, it is clear that the parties were proceeding on the basis that the herd was being handed over to the Wallaces at the beginning of December 2019.
3. The Wallaces were keen to know whether the herd was intact in accordance with the numbers in the 2017 Lease Agreement. The Burkes assured them that they were.
4. It was agreed in November 2019 and ratified in January 2020 that the Burkes were handing over the herd with cattle numbers in accordance with the herd profile of 1,222 cows, 556 calves, 620 weaners and 29 bulls.
5. In the light of the evidence of the existence of the shortfall at 1 December 2019, the Court should find that the defendants breached the obligation to hand the herd over with cattle numbers in accordance with the herd profile.
6. The damages under this claim are calculated in the same manner as those claimed under the breach of cl 2(a) of the 2017 Lease Agreement.
[44]
The defendants' submissions
The defendants contended that there was no agreement formed at the November 2019 meeting. Their submissions in relation to that were as follows:
1. The plaintiffs contended that an agreement was reached at the November 2019 meeting about a range of matters that included, relevantly, the remuneration that was to be paid to the Burkes for managing the properties and an incentive payment in respect of cattle sales. The correspondence and conduct of the parties does not bear out that allegation.
2. The following day, Kirstie sent the MOU which set out 15 points, the last of which stated that the letter was on a without prejudice basis. It concluded with a request for receipt and acknowledgement, the letter having begun with a statement to the effect that it set out the conclusions and actions arising from the meeting the previous day. No such acknowledgement was forthcoming. The defendants submitted it is not hard to understand why, because, for example, the proposal included a provision for the payment to the Burke Family of $2,400 a week until 30 April 2020 or until all the cattle were sold. This was just over a third of what was actually agreed and well under what the Wallaces paid Mr Hannaford after the Burkes left.
3. The letter also included a reference to the Burke's having agreed to the mutual termination of the lease. Nothing in the evidence suggests that the termination of the lease was ever agreed to. The evidence makes it clear that the Wallaces had already agreed amongst themselves to terminate the lease, and this was one of the reasons why the meeting was called in the first place.
4. Although the plaintiffs had made the decision to terminate, they had not engaged anyone else to manage the property, meaning the Burkes could simply have departed the properties on and from the 28 November 2019. To their credit, they did not do so. To their further credit, they continued to feed the herd with feed they had bought until mid-December and co-operated with Kirstie in relation to the purchase of further feed. For example, on 2 December 2019 Kirstie and Mark had a text exchange in these terms:
"Kirstie: Hi Mark we have got the funds to order feed for a month mid- December if you wanted to send me the details via e-mail? Kirstie
Mark: I have pellets coming tomorrow which will last mid-month which I have paid for. You'll need to order hay as it will run out on Thursday. I'll attach Erin's contact card and you can organise here as well as Macdonald transport…"
1. On 17 December 2019 Kirstie sent John an email raising the sourcing of feed for the cattle and suggested John give mark a call to discuss that. John replied on 18 December 2019 stating "have left message for him & spoken to Ivan. Not looking good with heat stress this week." Kirstie responded in these terms; "Yes, it is going to be extremely grim but what options are there? Unless you truck the cattle all off somewhere and even Mark said that would put the cattle under more stress." John responded on 23 December to the effect that, inter alia, he had spoken to Mr Hannaford who could have a caretaker in place from the 3rd if Mark pulls the pin and walks off. They did not walk off.
[I pause to note, that the email being referred to in the Court Book indicates that Mr Hannaford "could have a caretaker in place from w/c 30th" not the 3rd, as counsel for the defendants submitted. Continuing then with the summary of the defendants' submissions]:
1. There was no reply to the email of 29 November 2019. Kirstie followed up this email with a request for a response on 14 December 2019. Mark responded to the effect that it would be sorted out, "this week". On 23 December, Mr Snelgrove entered the fray with a letter asserting that an agreement had been reached at the November 2019 meeting and demanded a response by 31 December, yet stated that the arrangements were without prejudice to his clients' rights under the lease which were reserved.
2. That could not have been correct. The lease had been terminated, but no agreement had been reached in the interim. Despite all this, the Burkes continued to manage the properties and feed the KCPC herd.
3. On the same day, Mark was communicating with Kirstie about the steps he was taking to get feed.
4. Mark responded on 9 January, with a without prejudice "Memorandum of Understanding", in response to the 29 November e-mail. On 16 January 2020, John sent an e-mail with a list of outcomes that the Wallace family were looking for at a meeting to be held on the following Monday, i.e., 20 January 2020.
5. The parties met on 20 January, following which John sent an e-mail to Mark and Kirstie summarising the position reached from his perspective. The most relevant terms of that agreement were that:
1. As of 30 November 2019, 1,222 cows, 556 calves, 620 weaners and 29 bulls "had been accounted for", with losses having occurred since 1 December.
2. A stock count was to be conducted on 27 February, with any adjustments to be agreed and made as per cl 10 of the lease.
3. The herd would be sold down.
4. An incentive of 10% of the cattle sale price, less the cost of sales would be paid to the Burke for sales between 1 January and 30 June 2020. John set out a general estimate of the herd and its value;
"Cows 1,222 @$750 = $916.500
Weaners 620 @850 = $569,500 Calves 556@ $400 = $22,400 Bulls 29 @800 = $23,200"
1. It should be observed how different these prices, given the context of the ongoing drought, differ from the prices the plaintiffs seek for the purposes of their damages claim;
2. On and from 1 December 2019,
"WF will pay BF $6,000 + GST per cover (invoices to be supplied with correct information)
a. All labour for both management and casuals to run all the properties across the 7-day week….etc"
1. A one-off payment of $20,000 to cover all old issues prior to 30 June 2020.
1. It is to be immediately observed that it was contemplated by John that there had been losses since 1 December 2019. He also contemplated that any deficiency in the number of cattle and any claim in that regard be dealt with in accordance with cl 10 of the 2017 Lease Agreement.
2. There was no indication that the obligation to pay the other entitlements of the Burkes under the agreement was tied to the number of cattle determined by the stock count.
3. Clearly, no agreement was reached about these matters until the January meeting.
[45]
The plaintiffs' submissions
The plaintiffs made the following submissions in relation to the third basis for the claim for breach of contract:
1. The plaintiffs pleaded in CC2 at par 1 that, if the plaintiffs and the defendants entered into the January Agreement, then that agreement contained a term to the following effect:
1. A stock count would be conducted commencing on 27 February 2020 and any adjustments to the cattle numbers would be agreed and made in accordance with cl 10 of the 2017 Lease Agreement, which relevantly provided that the defendants would pay the plaintiffs market price for any deficiency of cattle numbers below the herd profile (being 1222 cows, 556 calves, 620 weaners and 29 bulls). Any cattle that were surplus to the herd profile would become the property of the defendants.
1. The plaintiffs provided particulars of the January Agreement as follows:
1. The terms of the January Agreement were recorded in the January 2020 email, which recorded the outcome of the January meeting between John, Mark and Ivan .
1. The plaintiffs pleaded that the defendants were liable to pay the first plaintiff the market value of any shortfall from the herd profile in the cattle handed over on 1 December 2019, that the defendants have failed to pay the amount due, and that the defendants are indebted to the first plaintiff for that amount (CC2 [3] and [4)]. The plaintiffs sought judgment for the relevant amount in [1] of the relief claimed in CC2.
2. No defence to CC2 was served.
3. The January 2020 email was relied on by the defendants as a basis for part of their cross-claim. The relevant portion of the email is extracted below:
"Further to our meeting on Monday 20th Jan, please find a summary of the points:
…
2. As at 30th November the following WF cattle were accounted for 1,222 cows + 556 calves + 620 weaners + 29 bulls. There has been some losses since the 1st Dec, with BF to provide a summary of when (dates) and where + if possible photos of the deaths (possible inspection may be required). There needs to be a report at the end of every month. The stock count will be conducted on the proposed dates of 27th Feb. with any adjustments to be agreed and made as per Clause 10 of the Lease."
1. As earlier discussed in this judgment, John gave affidavit evidence of the relevant part of the January meeting. In cross-examination, Ivan could not recall the January meeting, however, Mark, described the January 2020 email as "a summary of our meeting of 20 January 2020" and stated he did not respond to the email because he thought everything had been decided in the meeting.
2. Mark subsequently sought to resile from his earlier evidence (and the defendants' pleaded position) about the content of the January 2020 email by suggesting that he disagreed with some parts of the email and that John recorded what suited him. However, Mark agreed that he had not raised any objection with John about the email.
3. At the January meeting, John proposed that there would be a stock count starting on 27 February 2020, and that the parties would make adjustments in accordance with cl 10 of the 2017 Lease Agreement.
4. The January 2020 email recorded the parties' agreement that adjustments would be made in accordance with cl 10 of the 2017 Lease Agreement.
5. The cattle count yielded a shortfall of 548 animals. In accordance with the January agreement, the defendants owed the first plaintiff the market price of the missing animals. The calculation of that amount is set out in Kirstie's affidavit of 3 December 2021 at [6].The market value of the 548 missing animals was $562,252.52 (this does not include the amount for lost offspring of the missing cows). Interest on that amount should run from the date on which the defendants were notified of the shortfall on 30 March 2020.
[46]
The defendants' submissions
The defendants submitted that the January agreement did not include a term to the effect of the term pleaded. Their submissions on that issue are as follows:
1. The plaintiffs contended at [118] of their written submissions that the January agreement contained a term to the following effect:
"A stock count would be conducted commencing on 27 February 2020 and any adjustments to the cattle numbers would be agreed and made in accordance with clause 10 of the 2017 Agreement, which relevantly provided that the Defendants would pay the Plaintiffs market price for any deficiency of cattle numbers below the herd profile (being 1222 cows, 556 calves, 620 weaners and 29 bulls) ("the Herd Profile") but any cattle that were surplus to the Herd Profile would become the property of the Defendants."
1. They also relied upon the January 2020 email as particulars of that agreement.
2. The January 2020 email does not bear out the rather tortured construction for which the plaintiffs contended.
3. Firstly, it states that on 30 November that 1,222 cows, 556 calves, 620 weaners and 29 bulls had been accounted for.
4. Secondly, it contemplated that losses had occurred, with the extent of them to be identified. This should have come as no surprise to the Wallaces given the stress they knew the herd was under. This meeting occurred during the nadir of the drought and before it broke in early February.
5. Thirdly, it expressly provided that any adjustments were to be by agreement and pursuant to cl 10. Quite clearly, that agreement contemplated what was to happen if there was a deficiency.
6. The Court should not find that there was a term in the form contended by the plaintiffs.
[47]
Cross-claim by the defendants under the January agreement
The plaintiffs made common submissions in relation to claims one, being the payment for unpaid invoices after termination of the 2017 Lease Agreement and, two, being the payment of 10% of the net proceeds of cattle between January and June 2020, and three, being the payment $20,000 to cover all old issues, of the cross-claim.
In that respect, the plaintiffs submitted the following:
1. It is unclear which of the claims raised on the CC1 are pressed by the defendants.
2. The claim for renumeration at $6000 per week plus GST, the payment of $20,000 and the 10% incentive of the net proceeds of sale were dealt with by the submissions of the plaintiffs on misleading conduct. The plaintiffs sought to be relieved of the obligation to pay that remuneration in whole or in part: Nobile v National Australia Bank Ltd [1987] ATPR 40-787 ("Nobile").; Kizbeau Pty Limited v WG & B Pty Ltd (1995) 184 CLR 281 at [298] (Brennan, Deane, Dawson, Gaudron and McHugh JJ ("Kizbeau")
3. Two of the claims based on invoices issued by the defendants are for remuneration for work performed for HSLA, totalling $26,137.75 (inclusive of GST) in invoices issued to HSLA. The entitlement of the defendants to any payments from HSLA for work done for HSLA is a matter between the defendants and HSLA. The plaintiffs have no liability for any such amounts. Further, the terms of any engagements of the defendants by HSLA and the defendants' entitlements under such terms are not sufficiently supported by the evidence.
In the result, the plaintiffs submitted that if it is found that the plaintiffs and the defendants made an agreement in January 2020 providing for payment to the defendants of management fees, or an incentive payment (10%) or the $20,000 one-off payment, the plaintiffs sought orders under s 237 of the ACL relieving them of the burden of each of those obligations. Further, in relation to the payment of $20,000, that was a payment offered as part of an overall deal that depended on the defendants' representation that the herd numbers were intact. The defendants had no legal entitlement to the $20,000 or any other amount for compensation.
[48]
The defendants' submissions
The defendants provided very brief submissions on their cross-claim which are extracted below:
"183. For reasons that have already been canvassed, the Burkes are entitled to the remuneration provided for under the January Agreement. There was no challenge to the work having been performed during the relevant period.
184. The tax invoices in respect of same are in evidence and clearly reflect the agreement are at CB Vol 4, p 1471, 1472, 1646 and 1645.
185. Curiously, the plaintiffs assert that in the case of the last two invoices that were addressed to Mr Hannaford, as the plaintiffs' agent, that no liability can arise, however the terms of the agreement are clear - the agreement was with the Wallaces and the fact that the invoices were sent to Mr Hannaford cannot detract from that. Seeking to hide behind the shield of Mr Hannaford's agency is not to the plaintiffs' credit.
186. The agreements regarding the $20,000 and the 10% of sales to 30 June 2020 stand and for the reasons already given, should be enforced.
187. The plaintiffs should also be required to deliver up the Burkes' personal property, a matter that will be developed in oral address."
In relation to claim 4, being the return of the defendants' property, the plaintiffs submitted the following in their closing written submissions:
"The defendants make claims for the return of some items of plant and equipment or damages in respect of them (FASCC pars 39-42 (EX10-CB1.146-147). The allegations are denied or not admitted by the plaintiffs (DCC pars 39-42 at EX10-CB1.158). Those claims have not been made out. There is insufficient evidence to support the claims."
Despite the above extracted submission ([187] of the extract) being made, the issue was not expanded upon in oral submissions.
[49]
The plaintiffs' submissions
The plaintiffs submitted that the defendants have contravened s 18 of the ACL and that the shortfall in cattle, that they say is established per the submissions above, is an important factual element to make out the following causes of action:
1. A claim for damages under s 236 of the ACL for the sale of 309 head in December 2019 advanced in both the SOC and the CC2;
2. A claim for relief under s 237 of the ACL in the SOC and the CC2.
The plaintiffs made submissions under the following headings:
1. Claims based on misleading conduct;
2. The herd number representation in November 2019;
3. The claim for damages arising from the herd number representation in November 2019;
4. Other Relief arising from the herd number representation in November 2019;
5. The herd profile representation made in January 2020.
The content of those submissions appears below:
[50]
Claims based on misleading conduct
The plaintiffs pleaded contraventions of s 18 of the ACL, claims for damages under s 236 and claims for other relief under s 237 of the ACL. All of the claims depend on allegations that the defendants made misleading representations to the plaintiffs regarding the numbers of cattle in the herd either in late November 2019 or in January 2020.
[51]
The herd representation in November 2019
At the November 2019 meeting, the defendants represented to the plaintiffs that there were enough animals in the first plaintiff's herd on the properties that the defendants could sell 400 animals from the herd in December 2019 and the herd profile would remain intact.
The claims for damages and other relief arising from the herd representation in 2019 are pleaded at SOC [35]-[40]. These are extracted below:
"35. On or about 28 November 2019, the defendants represented to the plaintiffs that there were enough animals in KCPC's herd on the Three Properties that the defendants could sell 400 animals from the herd in December 2019 and the Herd Profile would remain intact ("the Herd Number Representation").
36. The plaintiffs relied on the Herd Number Representation:
a. by agreeing with the defendants on or about 28 November 2019 that the defendants would be permitted to sell up to 400 animals from the herd in December 2019;
b. by not requiring on or about 28 November 2019 and later that a count of the cattle on the Three Properties be undertaken in late November or early December 2019;
c. by agreeing with the defendants on or about 28 November 2019 that the defendants would manage the herd after 30 November 2019 and would be remunerated for doing so ;
d. by agreeing with the defendants on or about 28 November 2019 that the defendants would receive 10% of the proceeds of the sale of any cattle from the herd net of the costs of sale and the costs incurred by the plaintiffs in feeding the cattle;
37 The Herd Number Representation was conduct engaged in in trade or commerce.
Particulars
(1) The representation was made during negotiations about the terms on which the 2017 Agreement was to be terminated and the terms constituting the further commercial relationship between the plaintiffs and the defendants.
38 The Herd Number Representation was not correct.
Particulars
(1) The numbers of animals in the herd were materially below those required for maintenance of the Herd Profile and could not support sale of up to 400 animals in December 2019 on the defendants' account.
(2) See the particulars of herd numbers handed over to the plaintiffs set out in the Particulars subjoined to paragraph 31 above.
37 The Herd Number Representation was conduct engaged in in trade or commerce.
39 In the premises, the defendants engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of section 18 of the Australian Consumer Law.
40 By reason of the defendants' contravention of section 18 of the Australian Consumer Law, the plaintiffs have suffered loss and damage.
Particulars
(1) Agreement to terms in the November 2019 Management Agreement that were disadvantageous to the plaintiffs, including:
(a) that the defendants would be permitted to sell up to 400 animals from the herd in December 2019;
(b) that the defendants would manage the herd and the Three Properties after 30 November 2019 and would be remunerated for doing so;
(c) that the defendants would receive 10% of the proceeds of the sale of any cattle from the herd net of the costs of sale and the costs incurred by the plaintiffs in feeding the cattle.
(2) Losses arising from forbearance by the plaintiffs to appoint managers other than the defendants and carry out a count of the cattle on the Three Properties immediately.
(3) Loss of 311 animals from the herd sold by the defendants in December 2019 or their value.
(4) Losses arising from mismanagement of the herd by the defendants after 30 November 2019 (for which refer to paragraphs 49 to 51 inclusive."
[52]
The claim for damages arising from the herd representation in November 2019
The defendants sold at least 309 head as part of the agreed 400 in December 2019. The plaintiffs claimed damages and interest with respect to the sale of those cattle.
[53]
Other Relief arising from the herd representation in November 2019
The plaintiffs submitted that they should be relieved of the obligation to pay that remuneration in whole or in part: Nobile; Kizbeau at 298.
That submission was predicated upon the premise (which was disputed) that the plaintiffs agreed to remunerate the defendants for the defendants' services in relation to the first plaintiff's herd on and from 1 December 2019 and the plaintiffs were otherwise liable to pay the defendants in accordance with that agreement. A similar submission was made with respect to the January agreement.
The plaintiffs fixed upon aspects of the purported November agreement wherein it was said that the plaintiffs proposed rates for payment of the defendants and coverage of casual labour and an incentive payment based on sales of cattle between 1 January 2020 and 30 June 2020. It was submitted that the last figures discussed by the plaintiffs and the defendants (in January 2020) were an all-inclusive figure of $6,000 per week plus GST as management fees and a 10% incentive payment.
The proposals purportedly arising at the November 2019 meeting and the January meeting were made on the basis that the herd profile would be intact even after the sale of 400 head in December 2019.
[54]
The representation in January 2020
The plaintiffs' submissions in this respect were predicated upon representations made in the January meeting. I will further discuss those submissions in my considerations below. The plaintiffs also made submissions as to the implications of the ACL with respect to certain entitlements said to arise for the defendants under the January agreement. Again, I will return to those matters below.
[55]
The defendants' submissions
The defendants rebutted the plaintiffs claim in respect of misleading and deception conduct. Their submissions as to the making of the representations was as follows:
[56]
The herd representation at the November 2019 meeting
In the case of the herd representation at the November 2019 meeting, it was said that the defendants represented there were enough animals on the properties on 28 November 2019 to make up the herd profile and that the defendants could sell 400 animals from the herd in December 2019 and the herd would remain intact. It was alleged that this representation was made at the November 2019 meeting. There is no issue that during the course of the discussions at the November 2019 meeting the conversation extended to the herd profile being in terms that corresponded with the herd representation. That is what the Burke's believed. The evidence does not establish that they were wrong about that.
[57]
The herd representation in January 2020
In the case of the herd representation in January 2020, it is said that at the January meeting the defendants represented to John that the herd profile was then intact.
The plaintiffs relied upon the January 2020 email referred to above as proof on this representation being made.
As previously indicated, the January 2020 email does not bear out that submission. There is nothing in that email to suggest that such a representation was made at that time.
The evidence does not support the claim that the plaintiffs relied upon the representation in respect of any of these matters.
The MOU does not suggest that a representation that the herd profile was intact was a condition of the agreement that Kirstie was proposing or that any of the other terms she was proposing were conditional upon it. If a conditional agreement was what was intended, it would have been easy to express the offer in those terms.
For similar reasons, which apply to the herd representation allegedly made at the November 2019 meeting, the defendants denied, in the event that it is determined that such a representation was made, that it was relied upon.
In this respect it is to be noted that the plaintiffs submitted that they relied upon the herd representation in January 2020 in the following ways:
1. Not taking steps to reverse the previous agreement about the sale of up to 400 head of cattle;
2. Offering to pay 10%;
3. Offering to pay $6,000 plus GST for labour;
4. Offering to make a $20,000 payment to resolve various outstanding disputes.
Precisely how they would have reversed the agreement about the sale of 400 head is far from clear.
The plaintiffs' case is that it suffered a loss by reason of permitting the sale of 309 head as part of the agreed 400 in November 2019. The measure of damages claimed are the prices for comparable stock that were achieved by the plaintiffs after the drought broke. This does not represent the actual loss, as the animals were sold in December 2019 before the drought broke. Relying on post drought prices to fix a loss that accrued during the drought is impermissible as it does not reflect loss.
The plaintiffs relied upon s 237 of the ACL.
It is fundamental requirement to the grant of relief that the orders sought either compensate for loss or damage of prevent or reduce the loss or damage suffered. The relief is also discretionary.
[58]
Breach of Contract
The question of whether there was a shortfall in the herd numbers at the time of the November 2019 meeting by comparison to the herd profile specified, (as required to be maintained) in the 2017 Lease Agreement, was a central issue in the trial and I will, therefore, commence my considerations in that respect. The related question is the state of the herd numbers as at the January meeting.
Logically, it is appropriate to commence those considerations by evaluating the parties' submissions as to the reliability of the cattle count conducted by Mr Hannaford in February-March 2020. The plaintiffs contentions were premised upon the reliability of the count in itself, or as adjusted, by 69 head of cattle found in between April and October 2020.
In my view, Mr Hannaford was well qualified to conduct the cattle count based upon his qualification and experience. He was a stock and station agent of 20 years' experience and had a lifetime of experience of cattle farms and mustering. This was not gainsaid by the defendants.
The defendants' submission that Mr Hannaford "was completely unfamiliar with the properties in question and with [Khatambuhl]" must be rejected. Mr Hannaford had been raised in the same country as Khatambuhl and he had worked on a large property, Giro Station, that was "very similar" to the Khatambuhl property. He was familiar with the layout of Khatambuhl. He was not initially familiar with Somerset but came to know the property well. Mr Hannaford described the property as a high-quality property with some timber up the back.
Mr Hannaford conducted the cattle count in a careful manner. He conducted the muster according to an orderly method, creating secure yards and moving out progressively to the boundaries. The counting system involved constant double checking of numbers and was recorded both on paper and electronically. If the cattle were found not to have NLIS tags, the tags were placed upon them. Any unbranded calves were branded.
In his affidavit of 7 June 2021, Mr McLoughlin complained of an apparent irregularity in Mr Hannaford not recording previous NLIS tags during the cattle count. However, he does not state that there was other than a consistent process of entering NLIS tags in the computer system.
Mr McLoughlin also complained that Mr Hannaford was wrong to state (in [11] of his affidavit of 22 February 2021) that the scanning of cattle took place in the presence of either of the Burkes or himself. However, Mr Hannaford simply indicated that the Burkes were frequently present on the properties when work was being carried out and provided some assistance in the stock count process such as pushing up cattle and mustering. What Mr Hannaford emphasised was that the Burkes did not provide him any useful or detailed information about the number of cattle that could be found in the various locations on the properties.
[59]
2017 Lease Agreement: claim for shortfall of cattle
Clause 2(a) was a term of the 2017 Lease Agreement which required the defendants to maintain the herd profile which was defined as 1222 cows, 556 calves, 620 weaners and 29 bulls.
The evidence before the Court established that it is more probable than not that a shortfall in cattle numbers, by reference to the herd profile in the 2017 Lease Agreement, existed on and from 1 December 2019 and that the defendants failed at that time to hand over the herd in the requisite numbers. As mentioned, I consider that this inference is available upon the basis of strong and persuasive evidence.
The shortfall in cattle was as follows:
1. 300 cows;
2. 87 calves;
3. 157 weaners;
4. 4 bulls,
making a total shortfall of 548 head.
Before I come to the central issues raised by the defendants as to the proper assessment of the plaintiffs claim in this respect, it is necessary to return to the cattle sold in December 2019. According to the NILS's documentation, cattle were sold on 4, 11 and 12 December 2019, the total number being 309. As properly conceded by counsel for the plaintiffs, those cattle must be treated as being available on and from 1 December 2019 and not calculated as part of the shortfall, even though they will become relevant in considering the claims under ACL.
The 309 cattle sent to Edwards Livestock in December 2019 were not, in fact, surplus to the herd profile and their removal caused loss to the first plaintiff. The 309 head comprised 131 heifers and 178 steers. The 131 heifers would have reduced the shortfall of cows to 169. The 178 steers would have reduced the shortfall of weaners to nil and, applying the additional 21 weaners to the shortfall of calves, would have reduced the shortfall of calves to 66.
Adjusted in this manner the shortfall in cattle was as follows:
1. 169 Cows;
2. 66 Calves;
3. Nil Weaners;
4. 4 Bulls.
This makes the total shortfall of 239 head.
[60]
Assessment of loss for shortfall of cattle
I find, therefore, that the defendants breached the 2017 Lease agreement by failing to maintain the herd profile. The loss suffered, in that respect, is the value of the missing cattle. There is also an issue as to the loss occasioned by offspring who would have been born to the missing cows if those cows had been present.
The claim advanced by the plaintiffs, based on calculations by Kirstie in her affidavit of 4 December 2021, is represented in a table as follows:
The amounts appearing under the column "Average Values" are calculated upon the basis of Annexure D to the affidavit of Kirstie of 4 December 2021. In those tables, Kirstie refers to the proceeds of sale excluding GST for cows, weaners (steers and heifers) and bulls between 1 May 2020 and 27 May 2020. Upon this basis, Kirstie worked out the average sales yields of cows, weaners, and bulls (the net cost of sale) which were then applied to the abovementioned table. Kirstie estimated that calves would be sold when weaned.
Putting aside issues associated with the method of assessing value, what is clear from the table is that the plaintiffs' claim for loss of cattle is predicated upon sales in April and May 2020 and not at the date of the termination of the 2017 Lease Agreement on and from 1 December 2019.
The calculation of lost offspring is based upon the 300 missing cows having an estimated birth rate of 80% being 240. This is based upon the document produced by Mark marked as Annexure A.
The plaintiffs' claim is for damages arising from the breach of contract. It was submitted that the appropriate date for the assessment of damages was not the date of the breach on and from 1 December 2019 but in 2020 when the count was conducted, and cattle were sold. It was accepted that the starting position is that the date for the assessment of damages is normally the date of the breach of contract when the defendants failed to hand over the requisite number of cattle.
It was submitted by the plaintiffs that the date of breach for the assessment of damages was not an absolute rule and the ultimate purpose for damages was compensation. The bases for this submission were as follows:
1. It was understood from November 2019 meeting that the cattle were being handed back to the plaintiffs who would pay for the costs of maintaining the cattle and then sell them in 2020.
2. There were practical reasons for this approach. The cattle were in poor condition, and it was not appropriate to transport them at the time. There was also a problem in booking the cattle in for sale. There had been an earlier arrangement to sell the cattle in November, but the date was moved to December.
3. The plaintiffs expended a significant amount of their resources on the maintenance of the cattle until their sale in April and May 2020.
[61]
2017 Lease Agreement: claim for failure to maintain fencing
As to the issue of fencing maintenance, cl 2(b) of the 2017 Lease Agreement deals with paddock maintenance. That provision not only required the maintenance of paddocks but regular maintenance of constructed features of the properties including fences.
I have earlier summarised the submissions of the parties in that respect and will not repeat them here. It is sufficient to observe that the plaintiffs made a claim for the costs of carrying out maintenance to fencing on the properties that ought to have been carried out by the defendants under the 2017 Lease Agreement.
In my view, the evidence does establish that there was a failure to carry out maintenance on the fences by the Burkes and that the plaintiffs bore the cost of rectification of the same. It is true, as submitted by the defendants, that maintenance was affected by the climatic conditions which affected the work of the Burkes in the sense that they were taking measures to protect the cattle. However, Ivan's evidence was that the regular maintenance had not been done in both 2018 and 2019.
Based on the evidence in the form of invoices for fencing work, in my view, the plaintiffs have made good the claim for $13,809 (exclusive of GST). This amount can be brought to account in Short Minutes of Order prepared by the parties in accordance with directions given later in this judgment.
[62]
2017 Lease Agreement: claims under cl 11
As to unpaid claims under cl 11 of the 2017 Lease Agreement, the plaintiffs pleaded the following (in the SOC):
"48. In the year from 1 July 2017 to 30 June 2018, sales of cattle from the herd exceeded $700,000.
Particulars
(1) On the basis of information presently available, the defendants sold 604 head of cattle from the herd in the year from 1 July 2017 to 30 June 2018, and the value of those sales was greater than $720,000.
…
51. In the year from 1 July 2018 to 30 June 2019, sales of cattle from the herd exceeded $700,000.
Particulars
(1) On the basis of information presently available, the defendants sold 770 head of cattle from the herd in the year from 1 July 2018 to 30 June 2019, and the value of those sales was greater than $924,000."
In the defendants penultimate Amended Defence, the defendants admitted they had made over $700,000 in those respective financial years but corrected the quantum. These are extracted below:
"(kkk) (bb) The cattle sales referred to in Clause 48: Corrected: The cattle sales for the financial year ending 30 June 2018 was approximately $768 ,535 (excl. GST). The 15% of the profit over $700,000 would in such case be $10,28 0.25. …
The First Defendant will pay this amount subject to its Cross-Claim in these proceedings.
…
(nnn) (cc) The cattle sales referred to in Clause 51: Corrected: The cattle sales for the financial year ending 30 June 2019 was approximately $714,670 (excl. GST). The 15% of the profit over $700,000 would in such case be $2,200.50. …
The First Defendant will pay this amount subject to its Cross-Claim in these proceedings."
However, the defendants, in their FAD, only admitted the plaintiffs made profits exceeding $700,000 in those financial years but "Otherwise do not admit the balance of the paragraph", namely, the quantum.
In my view, the plaintiffs have established these claims as stipulated in their submissions set out on the basis of the respective financial statements of Ivamar. In the result, the plaintiffs were entitled to judgment for:
1. $11,308.27 (from 15 August 2018)
2. $7,040.61 (From 15 August 2019)
The plaintiffs sought interest from 15 August 2018 for the first amount and from 15 August 2019 for the second amount. The quantum of interest shall be determined under the procedures in the Orders and Directions section of this judgment.
[63]
The claim under the purported November 2019 Agreement
This claim by the plaintiffs was in substance for losses occasioned from the shortfall of cattle and was an alternative to the claim made under the 2017 Lease Agreement.
It is therefore unnecessary to consider the matter further in that light but in any event, I have found that a contract was not formed out of the MOU.
[64]
The claim under the January agreement
The plaintiffs pleaded under CC2 at par 1 that the plaintiffs and the defendants had entered into the January agreement and that the agreement included a term that a stock count would be conducted commencing on 27 February 2020 and any adjustment to cattle numbers would be agreed and made in accordance with cl 10 of the 2017 Lease Agreement.
The Court has earlier found that an agreement was made in January 2020 and that the terms of the agreement were those contained in the January 2020 email including the term pleaded in the CC2.
However, the claim by the plaintiffs, in this respect, rises no higher than the claim made for the shortfall of cattle under the 2017 Lease Agreement and is a true alternative to the claim under that agreement. The conclusions reached as to loss for the shortfall of cattle under the 2017 Lease Agreement are equally applicable to this claim, but there shall be no double counting.
However, more will need to be said about the existence of the shortfall of cattle against the herd profile in the context of representations made by the defendants and the operation of the ACL. I will deal with those matters below.
[65]
CLAIMS BASED ON MISLEADING AND DECEPTIVE CONDUCT BASED ON ACL
Section 18 of the ACL is in Chapter 2 of the ACL and provides:
A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or likely to mislead or deceive.
The expression "trade or commerce" is defined in s 4 of the ACL and covers "trade or commerce within Australia" including "any business or professional activity (whether or not carried on for profit)".
By virtue of s 2(2)(a) of the ACL, the expression "engage in conduct" refers, among other things, to doing any act. That includes the making of a representation.
Section 236(1) of the ACL provides:
If:
(a) a person (the claimant) suffers loss of damage because of the conduct of
another person; and
(b) the conduct contravened a provision of Chapter 2 or 3;
the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention.
Section 237(1) of the ACL provides that a court may, on application of a person (the injured person) who has suffered, or is likely to suffer, loss or damage because of the conduct of another person that was engaged in a contravention of a provision of Chapter 2, make such order or orders as the court thinks appropriate against the person who engaged in the conduct or a person involved in the conduct. Subsection 237(2) further provides that the order must be an order that the court considers will either compensate the injured person in whole or in part for the loss or damage, or prevent or reduce the loss or damage suffered, or likely to be suffered, by the injured person. The kinds of orders that may be made under s 237 are described non-exhaustively in s 243 of the ACL.
Section 243 of the ACL provides as follows:
243 Kinds of orders that may be made
Without limiting section 237(1), 238(1) or 239(1), the orders that a court may make under any of those sections against a person (the respondent) include all or any of the following:
(a) an order declaring the whole or any part of a contract made between the respondent and a person (the injured person) who suffered, or is likely to suffer, the loss or damage referred to in that section, or of a collateral arrangement relating to such a contract:
(i) to be void; and
(ii) if the court thinks fit - to have been void ab initio or void at all times on and after such date as is specified in the order (which may be a date that is before the date on which the order is made);
(b) an order:
(i) varying such a contract or arrangement in such manner as is specified in the order; and
(ii) if the court thinks fit - declaring the contract or arrangement to have had effect as so varied on and after such date as is specified in the order (which may be a date that is before the date on which the order is made);
(c) an order refusing to enforce any or all of the provisions of such a contract or arrangement;
(d) an order directing the respondent to refund money or return property to the injured person;
(e) except if the order is to be made under section 239(1) - an order directing the respondent to pay the injured person the amount of the loss or damage;
(f) an order directing the respondent, at his or her own expense, to repair, or provide parts for, goods that had been supplied by the respondent to the injured person;
(g) an order directing the respondent, at his or her own expense, to supply specified services to the injured person;
(h) an order, in relation to an instrument creating or transferring an interest in land, directing the respondent to execute an instrument that:
(i) varies, or has the effect of varying, the first mentioned instrument; or
(ii) terminates or otherwise affects, or has the effect of terminating or otherwise affecting, the operation or effect of the first mentioned instrument.
[66]
Was there a representation made in the November 2019 meeting?
I have found that, at the November 2019 meeting the defendants represented to the plaintiffs there were enough cattle in the first plaintiff's herd on the properties that the defendants could sell 400 cattle from the herd in December 2019 and the herd profile would remain intact.
I have earlier set out the evidence upon which that conclusion was reached but would mention at this juncture in particular the following:
1. At the November 2019 meeting, Mark confirmed that the first plaintiff's herd was intact and that the 400 head of cattle proposed to be sold in December 2019 were excess to the herd profile numbers in the 2017 Lease Agreement.
2. The Wallace's agreed to the sale of up to 400 head on the basis that they were excess.
3. The representation was reflected in the terms set out in the MOU, particularly at numbered paragraphs 2 and 4.
In November 2019, Mark and Ivan were both parties to the 2017 Lease Agreement and were directors of Ivamar.
As the earlier mentioned, the herd profile under the 2017 Lease Agreement was 1222 cows, 556 calves, 620 weaners and 29 bulls.
The representation was incorrect, as the herd numbers were in deficit and could not sustain the removal of any animals, still less 400 animals, and preserve the herd profile.
The herd numbers had been a matter about which the Wallaces had shown close interest throughout 2019. The responses given by the Burkes (as earlier discussed), involved speculation, were without proper foundation and were most likely directed to mitigating the concerns of the Wallace's regarding growing arrears of rent under the 2017 Lease Agreement.
The defendants submitted that the MOU did not suggest that a representation that the herd profile was intact was a condition of the agreement that Kirstie was proposing or that any other terms that she was proposing were conditional upon it. This submission is unsustainable.
Central to the issues discussed in the November 2019 meeting was the state of the herd profile which was an extension of inquiries of that kind that had been made by the Wallaces throughout 2019.
The MOU specifically set out the herd profile in the 2017 Lease Agreement and coextensively, in my view, referred to the consent to the sale of up to 400 head of cattle. The Burkes understood this in the MOU response. They referred to a stocktake having been completed at 29 November and that "it is agreed that the livestock numbers at that time were in excess of the lease values".
[67]
Loss occasioned from the November 2019 representation
The plaintiffs made the following submissions with respect to damages arising from the sale of the 309 cattle as follows:
"148. These 309 animals were moved pursuant to the agreement for the sale of up to 400 head in December 2019 (Mark Burke XXN, T236.40-42, T237.40-42, T238.40-T239.5).
149. The 309 cattle sent to Edwards Livestock in December 2019 were not in fact surplus to the herd profile and their removal caused substantial loss to the first plaintiff. The 309 head comprised 131 heifers and 178 steers. The 131 heifers would have reduced the shortfall of cows to 169. The 178 steers would have reduced the shortfall of weaners to nil and, applying the additional 21 weaners to the shortfall of calves, would have reduced the shortfall of calves to 66. Applying the figures in Kirstie Wallace's affidavit of 4 December 2021 (at EX10-CB1.224) the damages for the loss of the cattle sold in December 2019 are as follows (not including interest):
a. Cows: $139,132.48 (131 at $1,062.08);
b. Weaners: $153,538.15 (157 at $977.95);
c. Calves: $20,536.95 (21 at $977.95);
d. Calves that would have been born to the missing cows: $101,706.80 (104 (being 131 x 80/100) at $977.95);
3. Total: $414,914.38.
150. Interest should run from the dates of the removal of the animals, 4 and 11 December 2019."
The defendant's alternative case in reply was that if the plaintiffs did suffer any loss, in respect of permitting the sale of 400 head in December 2019, the damages were limited to the value of the stock sold.
The defendants submitted that the plaintiffs' case is that it suffered a loss by reason of permitting the sale of 309 head as part of the agreed 400 sale in November 2019. The measure of damages claimed are the prices for comparable stock that were achieved by the plaintiffs after the drought broke. It was submitted that relying on this does not represent that actual loss, as the animals were sold in December 2019 before the drought broke. Relying on post drought prices to fix a loss that accrued during the drought is impermissible as it does not reflect loss.
I accept the defendants' submissions in this respect. The calculation of the damages will be, therefore, based upon the assessment of loss in that respect.
The parties did not directly address the calculation of damages in that respect. I will provide an opportunity for them to deal with that question following the publication of this judgment.
[68]
The January Meeting: Representations
I will briefly repeat and elaborate upon earlier conclusions as to representations arising from the January meeting. These conclusions are coextensive with the conclusions reached as to misleading and deceptive conduct in the November 2019 meeting. They are mirrored in the January meeting. The relief available to the plaintiffs in that respect is equivalent to the assessment of loss under the ACL with respect to November 2019 meeting.
The claims for damages and other relief arising from representations made during the January meeting were pleaded at CC2 ([5]-[10]) and the relief claimed appeared at [2]-[4]. No defence to the CC2 was served by the defendants.
I accept the submissions of the plaintiffs in this respect which may be summarised as follows:
1. At the January meeting, the defendants represented to the plaintiffs that there were enough animals in the first plaintiff's herd on the properties that the herd profile (of 1,222 cows, 556 calves, 620 weaners and 29 bulls) was then intact.
2. Although Mark refused in cross-examination to concede that he had told John at the January meeting that the cattle were all present, his own evidence was that in early January 2020 he thought that most of the cattle were present so far as he could tell. In cross-examination Mark conceded that, in early January 2020, the cattle at Somerset were "close to the number" and that he was not at Khatambuhl to see what deaths had occurred there, but Ivan would have told him if there had been many deaths at Khatambuhl. The calculation of the value of the herd carried out by John at the meeting proceeded on the basis that cattle corresponded to the full herd profile in the 2017 Lease Agreement and that the cattle might be sold on that basis. I agree that it may, therefore, be concluded that Mark did make the representation at the January meeting.
3. Similar to the circumstances of the representation at the November 2019 meeting, the representation made at the January meeting was made in a context where the plaintiffs and the defendants engaged in further commercial negotiations about the terms on which the defendants would continue to work for the plaintiffs. It was, therefore, made in trade or commerce for the purposes of s 18 of the ACL.
4. Mark and Ivan continued to be the directors of Ivamar at that time.
5. For the reasons earlier given with respect to the state of the herd in November 2019, the representation was incorrect as the herd numbers were substantially below the herd profile numbers as specified in the 2017 Lease Agreement.
6. The representation as to the herd profile in the January meeting constituted, therefore, misleading or deceptive conduct or conduct likely to mislead or deceive under s 18 of the ACL.
7. The plaintiffs relied upon the representation of the aforementioned representations, at least to the extent that they took no steps to reverse the previous agreement that the defendants could retain the proceeds of the sale in December 2019 of up to 400 head of cattle from the herd. Nor did the plaintiffs claim for restitution of the cattle sold in conformity with the representations.
8. The plaintiffs also contended that there was reliance indicated by certain parts of the January agreement which correlate to claims made under the cross-claim and also relate to the proposition by the plaintiffs that any claims arising with respect to those entitlements under the January agreement may be defeated under the ACL.
[69]
Reliance and the operation of ACL regarding claims under the January agreement
The plaintiffs submitted that they would not have agreed to the January agreement provisions if the defendants had not made the aforementioned representations in the January meeting.
It was further submitted that the first plaintiff lost the 309 cattle sold by the defendants in December 2019 and the proceeds of those sales. The plaintiffs sought damages being equal to the value of the 309 animals plus interest in the same terms I have discussed with respect to the loss arising from the misleading and deceptive conduct in the November 2019 meeting.
Upon the basis that the Court had found, as it has, the existence of the January agreement containing the January agreement provisions, then the plaintiffs' sought orders under s 237 of the ACL relieving them of the burden of each of those obligations.
The plaintiffs' submission in this respect derived from written submissions of the plaintiffs which focused upon the November 2019 meeting and the purported November 2019 agreement.
I will focus upon those submissions presently so far as they concern the January agreement and the January agreement provisions.
The plaintiffs' submission in support of them being relieved of the obligation to make payment in accordance with to the January agreement provisions in whole or in part was based upon the following submissions:
1. The shortfall of the cattle numbers from the herd profile was 22.57% of the herd, a substantial difference that undermines the basis of any agreement on remuneration. The plaintiffs thought that they were paying remuneration underpinned by an asset pool containing a further 548 head of cattle.
2. If the defendants are to be paid any remuneration in relation to management fees, the rate should be adjusted to reflect the substantial reduction in the herd.
3. If it is found that the plaintiffs agreed to pay the defendants the incentive payment, the incentive payment was underpinned by the larger asset pool of the intact herd. The value to the Wallaces of the 548 missing animals would have covered the whole of any incentive payment that would have been payable to the defendants if the herd had been intact. It is unconscionable on the part of the defendants to demand a 10% share that had been negotiated on a false basis, requiring the plaintiffs both to give up that 10% and also to bear the losses resulting from the shortfall in the herd numbers.
4. Other factors that weigh in favour of the elimination or reduction of management fee and 10% incentive are:
1. The defendants ought to have provided invoices containing correct information weekly activity reports but did not do so (par 6 and par 6(e) of the January 2020 email).
2. The defendants had their own and Craig Burke's cattle running on Khatambuhl Creek and Somerset after November 2019. On 20 February 2020, Mark told John that the defendants had 18 heifers and 8 cows on Somerset and 60 cows on Khatambuhl, and that Craig Burke had cattle on Somerset. The defendants were doing work on the Wallace properties for their own benefit also.
[70]
THE DEFENDANTS' CROSS-CLAIM
The defendants claimed 10% of the net proceeds of sale of cattle between 1 January 2020 and 30 June 2020.
In that respect, I accept that the representations made by the Burkes were made in trade and commerce and were misleading and deceptive or likely to mislead and deceive in contravention of s 18 of the ACL. The plaintiffs relied upon the representations in entering into the January agreement and suffered loss by reason of the defendant's contravention. Nevertheless, for the reasons I have given above, the plaintiffs should be relieved of any liability under the January agreement by orders under s 237 of the ACL.
The plaintiffs also claimed that it would be unconscionable for the defendants to rely upon the onerous and adverse terms produced by the 10% incentive and, in the result, the defendants were therefore estopped from doing so. It is unnecessary to decide that matter in view of the conclusion I have reached under the ACL.
Different considerations arise in relation to the management fee. By the cross-claim, the defendants submitted that they had agreed to supply labour to run the properties across a seven-day period without the responsibilities of management, which had ended with the termination of the 2017 Lease Agreement ([15] of the CC1).
It was also pleaded that, at the January meeting, the plaintiffs appointed Mr Hannaford to act as a Regional Manager in relation to properties and that on 1 April 2020, the defendants received an email from Mr Hannaford as agent for the plaintiffs requesting the defendants to provide work on a casual contractor basis. That offer was accepted and they undertook work. On 5 and 13 May 2020, the defendants issued invoices to Mr Hannaford for payment of work undertaken at his request. No payment has been made for those invoices.
At [22] of the CC1, the defendants made the following claim:
The plaintiffs pleaded that the defendants had agreed to provide labour to run the three properties, denied that the supply of labour was without management and responsibility and otherwise did not admit the claim.
In relation to the management agreement, in addition to the earlier arguments to which were referred the plaintiffs responded to the cross-claim as follows:
1. The representations made in the January meeting found an estoppel against the defendants for reliance on the terms of the January agreement in relation to the claims.
2. Two of the claims were based on invoices issued by the defendants for remuneration for work performed for HSLA totalling $26,137.75 (inclusive of GST) in invoices issued to HSLA. It was contended that the entitlement of the defendants to any payments from HSLA for work done for HSLA is a matter between the defendants and HSLA. No liability arises in that respect.
[71]
CONCLUSION
In the circumstances, the plaintiffs have established that the defendants breached their obligations under the 2017 Lease Agreement in the following respects:
1. A failure to make payments with respect to the admitted matters.
2. A failure to make payment for the unpaid proportion of sale proceeds for the financial years 1 July 2017 to 30 June 2018 and 1 July 2018 to 30 June 2019 in accordance with cl 11 of the 2017 Lease Agreement.
3. A failure to maintain the herd profile and return to the plaintiffs the cattle in the herd profile in accordance with cl 2(a) and Appendix II (as properly construed) of the 2017 Lease Agreement as at the date of mutual termination of that agreement on 1 December 2019.
4. A failure to maintain fences in accordance with cl 2(b) of the 2017 Lease Agreement.
The plaintiffs shall have judgment under the SOC in those respects in accordance with the findings of the Court in this judgment for damages or compensation with respect to claims arising from those breaches. The loss will be assessed by reference to the sales of cattle by the Burkes in December 2019. It should be noted that the calculation of the shortfall of the herd on the termination of the 2017 Lease Agreement was adjusted for the sale of 309 cattle in December 2019 (those losses will be reflected in rectification of loss or damage under the ACL).
There is a counterpart breach to the January agreement with respect to the shortfall in the herd profile as at 1 December 2019. In that respect, the plaintiffs may have judgment under the CC2 corresponding to the findings as to the shortfall of cattle in this judgment but it must be noted that the claim under CC2 in this respect is a true alternative to the claim for the shortfall in cattle under the SOC. The loss will be assessed by reference to the sales of cattle by the Burkes in December 2019.
The Court has found that, at the November 2019 meeting, the defendants represented to the plaintiffs that there were enough animals in the herd on the properties that the defendants could sell 400 animals from that herd in December 2019 and the herd profile would remain intact. The plaintiffs relied upon that representation which was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the ACL and, in that respect, suffered loss and damage upon the sale of 309 cattle from the herd in December 2019. The plaintiffs should have relief under s 18 of the ACL in that respect and judgment under the SOC.
[72]
ORDERS AND DIRECTIONS
The Court makes the following orders and directions:
1. The plaintiffs shall file and serve Short Minutes of Order reflecting this judgment within 14 days of the date of publication of this judgment including the calculation of damages or compensation but excluding interest and costs.
2. In the event that the defendants dispute the draft Orders filed and served pursuant to Order (1) they shall file and serve Short Minutes of Order specifying the variation to those orders sought within 7 days of the receipt of the plaintiffs' Short Minutes of Order.
3. The plaintiffs shall file and serve draft orders as to interest and costs, separate and additional to the Short Minutes of Order pursuant to Orders (1) and (2) above, submissions in support of the same (not exceeding 5 pages in length, unless by leave of the Court) and any evidence with respect to interest or costs within 7 days of the receipt of draft orders pursuant to Order (2).
4. The defendants shall file and serve draft orders as to interest and costs together with submissions (not exceeding 5 pages in length, unless by leave of the Court) and any evidence in response to the plaintiffs' draft orders, submissions and evidence filed and served pursuant to order (3) within 7 days of the receipt of the draft orders pursuant to Order (3).
5. The Court shall resolve any disputes arising as to the form of orders, interests or costs on the papers, unless any party seeks an oral hearing with respect to the same.
[73]
Endnotes
Mount George (Manning River): Ex 6.
A term defined below in the procedural history.
Ibid.
Plaintiffs' Chronology, page 2 [note: this chronology was agreed to by both parties per Transcript, 5 December 2022, page 8].
The Burkes had supplied feed to the cattle.
Notwithstanding the figure of 311 cattle sold in the joint chronology, the parties adopted a common position in their written and oral submissions of the sale number being 309. The difference appears to derive from an inconsistency between the National Livestock Identification System ("NLIS") documentation showing 311 and the 'European Union Vendor Declaration (Cattle and Waybill)' showing 309. I shall adopt the common position stated by the parties in their submissions.
CB, p 17, [65].
An ASIC company search of 19 February 2021 found that John was a director of the first plaintiff, KCPC, and the third plaintiff, Silknot. As per an ASIC company search of 19 February 2021, Kirstie was a director of the first plaintiff, KCPC, the second plaintiff, KS and the third plaintiff, Silknot. I note, that the agreed Dramatis Personae, provided by the parties during the hearing, identified John and Kirstie as 'officers' of those companies rather than directors.
As per the agreed Dramatis Personae.
The cattle on the properties were, in fact, owed by KCPC: SOC, [9].
Those ratios as at March/April 2020: see email from Hannaford to Mark of 3 April 2020 (J/W-2, p 75-76).
Ivan and Mark were the sole directors of Ivamar: FAD at [12] and [14].
Lease Agreement v5, Cl 7.
Lease Agreement v5, Cl 1.
I note that the pleadings in the SOC do not refer specifically to SN as the trustee of Khatambuhl Creek Trust.
Anticipated term is referred to as the term of the contract was not fulfilled.
2017 Lease Agreement, cl 9
"Cattle Numbers - March 2019", CB p 1210.
Transcript 7 December 2022, p 168-169.
Also referred to as 'Martin's'.
Also known as Stanton's'.
Transcript 7 December 2022, p 168 - 169
It is not entirely clear the status of that company but Ivan and Mark were at the meeting and were described as directors.
[74]
Amendments
17 May 2024 - Paragraph [587], second sentence - changed "plaintiffs" to "defendants".
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 17 May 2024
In December 2019, 309 cattle from the properties were sold by the Burkes. [6]
A meeting between the Wallaces' and the Burkes' interests occurred on 20 January 2020 ("the January meeting"). A further agreement emerged from that meeting.
Mr John Hannaford ("Mr Hannaford"), a stock and station agent, begun working on the properties in February 2020 and conducted a cattle count on the properties between 26 February and 27 March 2020. The count was initially scheduled to begin on 10 February 2020, but heavy rains caused flooding in Khatambuhl Creek and delayed the commencement of the count until 26 February 2020. [7]
At the conclusion of the count, Mr Hannaford found a significant deficiency in cattle numbers compared to the cattle herd profile stated in the 2017 Lease Agreement.
The issues from the JMOI that correspond to those causes of action were stated as follows:
There were some claims pursued in CC1 which remained at the end of the proceedings unsupported by evidence and/or were not referenced in the defendants' closing written or oral submissions. I will refer briefly to those particular matters at the close of this judgment.
On 20 June 1990, SN was registered. Patricia was appointed as a director to SN in December 1990 and Kirstie was appointed as a director in August 2001. Harry Wallace was the registered proprietor of Khatambuhl until 24 June 2019. At some point thereafter, SN became the registered proprietor. SN was also the trustee for the Khatambuhl Creek Trust.
On 12 May 2004, KS was registered. Patricia was appointed as a director on 12 May 2005 and Kirstie was appointed as a director on 1 September 2008. KS was the registered proprietor of Somerset at the time of the proceedings. The evidence does not reveal when the Somerset property was purchased and who was the original registered proprietor.
On 25 January 2005, KCPC was registered. Kirstie was appointed as a director on 15 May 2007, Patricia was appointed as a director on 28 February 2018 and John was appointed as a director on 12 September 2018. KCPC was the owner of the cattle on the properties.
It is unclear when Westwood Park was purchased and by whom. Patricia Wallace was the registered proprietor of the land at the time of the proceedings.
The Wallace and Burke Families entered into a yearly lease agreement for the financial year of 2010 to 2011. The lease does not appear in evidence. That lease agreement was followed by a number of other yearly lease agreements between the families between 2011-2012, 2012-2013 and 2013-2014.Those leases also do not appear in evidence.
Clause 1(d) refers to the cattle asset as the "cattle herd profile", however, the parties generally used the expression "herd profile". The common meaning of herd profile, conveyed throughout both parties' submissions, was that it meant the total number of cows, calves, weaners, and bulls, and I will use that term consistently in this judgment. The term "cattle" will also be used to refer to a group of animals regardless of whether they are cows, calves, weaners, or bulls.
The tally in the appendix to the 2014 Lease Agreement also provides the herd profile (across the properties). However, the Appendix incorrectly records the herd profile as 2377 (a fact accepted by all the parties). The correct sum is 2,427 cattle.
Various forms of 'maintenance' were required under the 2014 Lease Agreement. Clause 2 read:
"a) Herd Maintenance - BF [Burke Family] will maintain the herd profile and will progressively improve the genetics so that a premium product is produced
b) Property Maintenance - all buildings, houses, grounds including Tommy's Hut are to maintained in good order and condition by BF
c) Paddock Maintenance - BF will maintain all the pastures with regular programs of pasture improvement together with regular maintenance of roads, dams, cattle grids and fences. All fencing materials, gates, gate fittings and accessories are to be supplied by WF [Wallace Family] and constructed by the BF.
d) P&E Maintenance - BF will maintain all P&E in good working order. WF will not be responsible for replacing any P&E item which has reached the end of its working life and should any item of P&E be no longer required then WF is to be paid the trade-in or market value of such item if it is sold or otherwise disposed of.
e) Insurance - BF will insure all the properties including all houses and outbuildings for fair replacement value and take out Public Liability insurance for $20 million on all 3 properties and BF will arrange to have various owner's interest noted on such policies with copies of all policies when renewed being forwarded to WF within one month of renewal
f) Other services - BF to pay all rates, levies, taxes, irrigation and other fees incurred by the above 3 properties and to pay for all services to the properties except for the phone and electricity charges for the Top house, Bottom house, Westwood house and Hardes house."
There were additional clauses in the agreement that required the Burke family to report on the status of the herd. Clause 3 was titled 'Heard Count' and read:
"BF will do full stock-takes at 30 June of each year and by 1 August each year will advise WF of the results."
Clause 4 was titled 'Reporting' and read:
"BF will give WF a hard copy report by 7th of each month of the BF major activities carried out during the previous month, including but not limited to: calves branded, sales, deaths, Al-ing, pasture treatment, P &E maintenance, property maintenance."
Reporting of cattle numbers and maintenance, as I understand, occurred during meetings every few months between KCPC and Burke Cattle Co Pty Ltd. Figures were sometimes reported in a word document form or communicated verbally. Attendees of these meetings were usually John, Kirstie, Mark and Ivan.
Clause 9 specified that a lease payment of $13,000 was payable every calendar month (plus GST), paid in advance on the 28th day of each proceeding month, until 30 June 2015. After 30 June 2015, for each subsequent year, the lease payments would increase by the greater amount of either (1) a 3% per annum increase or (2) the NSW CPI increase for the previous 12 months until 31 March.
Clause 10 in the agreement dealt with profit share from cattle sales between the Wallace and Burke families and reads as follows:
"BF will commit 10% of total revenue for cattle or other sales originating from the above three properties above $500,000 in each financial year commencing 1 July 2014 to environmental outcomes that will improve productivity and reduce carbon emissions such as solar panels for pumping water or reducing electricity grid consumption."
The termination clause of the agreement read as follows:
"BF may terminate this agreement by giving three (3) month's notice in writing. WF may terminate this agreement by giving six (6) month's notice in writing or by giving fourteen (14) day's notice in writing in the event that BF has not made the Lease Payments for two consecutive or non-consecutive months without the prior written consent of WF or there is some other significant breach of the commitments made by BF. In the event that either BF or WF terminates this agreement then a herd count will be made prior or on the date of termination and BF will pay WF market price for any cattle that are less than the original 1 July 2010 cattle profile (Appendix II as detailed in 1(d) above). Any cattle which are more than that profile will be the property of BF. A stocktake will be done of all P&E and payment made to WF of reasonable value for any missing itwm. Any outstanding Lease Payments, trade creditors or other charges real or contingent as at the date of termination will continue to be the responsibility of BF."
The 2014 Lease agreement ran its term.
The number of cows mentioned in Appendix II of the 2017 Lease Agreement, being "1122", stands in contrast to the number of cows specified in cl 1(d) of the 2017 Lease Agreement, being "1222". As such, there is an inconsistency between the terms of the agreement, as specified in cl 1(d) and Appendix II as to the number of cows (as mentioned, the 2014 Lease Agreement refers to the number of cows as 1222 in both cl 1(d) and in the Appendix to that agreement). The defendants maintained that the parties agreed that the 2017 Lease Agreement provided for the number of cows being "1122". That is disputed by the plaintiff.
This issue will be addressed shortly, under the heading 'Issue of Number of cows specified in the 2017 Lease Agreement,' which appears immediately after the remaining outline of the terms and form of the 2017 Lease Agreement.
The maintenance clause of the 2017 Lease Agreement (cl 2), is different to the 2014 Agreement and reads as follows:
"a) Herd Maintenance - As summarised in Appendix II, BF will maintain the herd profile and will progressively improve the genetics so that a premium product is produced.
b) Paddock Maintenance - BF will manage all the pastures with regular programs of fertiliser and pasture improvement together with regular maintenance of roads, dams, cattle grids and fences.
Before this agreement comes into effect BF will set out its broad plan for such improvements and maintenance for WF's approval.
c) Insurance - BF will insure all the properties including all houses on the properties, including those not included in this Agreement, at values to be agreed and take out Public Liability Insurance for $20 million on each of the 3 properties and BF will arrange to have the various owner's interest noted on such policies with copies of all policies when renewed being forwarded to WF within one month of renewal.
d) Other services - BF to pay all rates, levies, taxes, irrigation and other fees incurred by the above 3 properties and to pay for all services to the properties except for the phone and electricity charges for the Top house, Bottom house, Westwood house and Hardes house."
Similar to the 2014 Agreement, cl 4 and 6 of the 2017 Lease Agreement provide reporting responsibilities of the Burkes. Clause 4 was titled "Herd Count" and read as follows:
"BF will do a full stock-takes at 30 June of each year and by 15 August each year will advise WF of the results of the count."
Clause 6 was titled "Reporting" and read as follows:
"WF requires BF to give quarterly report on the activities of that month including mating, weaning, sales, fence maintenance, ploughing, clearing, fertilising. WF will provide a draft template for this purpose."
Clause 11 specified the lease payment of the agreement would be $17,000 per calendar month (plus GST) paid in advance on the 28th day of the preceding month. Clause 11 also had an additional section, titled "PLUS" that dealt with profit shared under the agreement. This read as follows:
"PLUS:
A profit share which BF will pay WF by 15th August of each year, being the additional amount of 15% of all the prior year's total sales over $700,000 and WF agrees that such amount will be spent on improvements to the properties.
Note: GST will be in addition to all the above Lease Payments and the Plant & Equipment amounts."
Lastly, the termination clause of the 2017 Lease Agreement, cl 10, read as follows:
"Both WF and BF may terminate this agreement by giving six (6) month's notice in writing. WF may terminate this agreement in the event that BF has not made the Lease payments in full for two consecutive months without the prior written consent of WF or BF has made a serious breach of the undertakings specified in Clause 2.
In the event that either BF or WF terminates this agreement then a herd count will be made immediately prior to or on the date of termination and BF will pay WF market price for any cattle that are less than the cattle profile as set out in Appendix II. Any cattle which are more than that profile will be the property of BF.
If WF terminates this agreement for reasons other than BF failing to make two consecutive lease payments or a major failure to meet conditions as specified above, then WF will pay BF the sum equal to three month's lease payments for each year or part thereof as from 1 July 2017 plus or minus any amounts appropriate for adjustments to cattle numbers or liabilities which BF was due to pay but has not paid and to cover the value of any improvements, crops, hay, fertiliser, chemicals, or other supplies on the properties at the Termination date."
The terms of the 2017 Lease Agreement are not in issue except the inconsistent figure of cows stated in cl 1(d) of the primary agreement and in the table of appendix II. This issue is addressed below.
Additionally, cl 1.1 defined the term 'business' to mean the development and sale of the "product" in Australia and overseas. There was no definition of "product". Counsel for Mr and Ms Wright submitted that the defendants were only restrained from carrying on a business of development and sale of a "product" in competition with DeMorgan and since neither DeMorgan nor Ridge carried on such a business, the provision was meaningless. Counsel submitted DeMorgan and Ridge provided security services to users of computer systems not sale of a "product".
In that respect, Gzell J held as follows: :
"I do not accept that construction. In this commercial document the parties intended that there should be a constraint upon the carrying on of business in competition with DeMorgan. It was its business that the parties intended to protect and, being inaccurate, the definition of "business" in cl 1.1 of the shareholder's agreement should be struck out under the falsa demonsrtatio non nocet (a false description does not injure) maxim."
Gzell J held consideration of cl 13.1(a) was not strictly relevant to whether Mr and Mrs Wright were guilty of contempt of court for breaching an undertaking. However, his Honour determined that the undertakings might be construed in light of cl 13.1(a) (at [15]) but that the final determination must be made upon the terms of the undertaking per say. In that respect, Mr Wright was found to have breached the undertaking. The Court found a contempt of Court with respect of that breach (at [62]), but not by dint of cl 13.1 as such.
This case offers some support for the plaintiff's contention, in that Gzell J stated in obiter that cl 1.1 of the shareholders agreement could be "stuck out" under the falsa demonstratio non nocet (a false description does not injure) maxim (at [9]) on account of the consideration that "in this commercial document the parties intended that there should be a constraint upon the carrying on of business in competition with DeMorgan" (at [9]). However, that is a case far removed from the present circumstances and, in any event, there must be at least some doubt that the principle extends as far as was contemplated by his Honour in obiter dicta.
The counsel for the plaintiffs also sought to rely on the case of Egan v Egan [2018] NSWSC 202 ("Egan v Egan"). In Egan v Egan the defendant "executed a mortgage to secure a loan from the plaintiff" (at [1]) but failed to make any repayments. The plaintiffs sought possession of the property.
An issue arose as to whether the "Deed of Loan" was effectively incorporated into the mortgage as neither the mortgage or Annexure A of the mortgage referred to a "Deed of Loan". Instead, Annexure A of the mortgage referred to "the Deed of acknowledgment of loan" rather than "the Deed of loan".
At [83], Davies J followed what had been said by Kunc J in New South Wales Land and Housing Corporation v Australia and New Zealand Banking Group Limited [2015] NSWSC 176 at [46] that "A 'misnomer' is an error in naming something or someone" and that the test for a misnomer was "whether the misnomer was the product of a mistake made in circumstances in which it would have been plain to all who are concerned with the relevant document as to who the party was that was referred to in the document" (at [49]). Following that principle, Davies J held (at [84]) that it would have been plain to the parties to the present arrangement that what was meant by the words "Deed of acknowledgement of loan" was the "Deed of loan" because the only documents executed on the date of the mortgage was the mortgage and the "Deed of Loan" and there was no such document as a "Deed of acknowledgement of Loan". The words "Deed of acknowledgment of loan" were found to be falsa demonstratio and Annexure A did incorporate the "Deed of loan" into the mortgage.
In reliance upon that authority and the principle of falsa demonstratio, counsel for the plaintiffs submitted that "the figures of 1,122 and 2,377 are the products of mistakes made in circumstances in which it would have been plain to the parties that 1,122 is a typographical error for 1,222 and that 2,377 is a restatement of the error found in the second appendix to the 2014 agreement".
That submission may be accepted for two reasons. Firstly, cl 1(d) of the 2017 Lease Agreement not only refers to 1222 cows but references Appendix II in such a way as would indicate that figure was intended to be reflected in the Appendix. The words in brackets "(See Appendix II)" gives that impression. It may also be noted that the number for calves, weaners and bulls in cl 1(d) were accurately translated into Appendix II.
I also accept the submission of the plaintiffs that the same conclusion may be reached by reference to the relevant surrounding circumstances known to both the plaintiffs and the defendants at the time of the formation of the 2017 Lease Agreement. These were as follows:
1. The wording of the 2017 Lease Agreement closely follows the wording of the 2014 Lease Agreement between the same parties. Clause 1(d) of the 2014 Lease Agreement is identical to cl 1(d) of the 2017 Lease Agreement, save that the earlier agreement includes a parenthetical calculation of the cattle making up the 1,222 cows (a grouping of 87, 194 heifers and 941 cows).
2. Appendix II of the 2014 Lease Agreement sets out the same figures for cows (and otherwise) as those found in cl 1(d) of that agreement.
3. Each page of the 2014 Lease Agreement, including the Appendix was initialled by Ivan and Mark.
4. Ivan and Mark agreed in cross-examination that Appendix II to the 2014 Lease Agreement accurately set out the calculation of the cattle count as at 1 July 2010.
5. There is no evidence that the parties to the 2017 Lease Agreement agreed there was a change in the number of cows such that it may be reflected in the 2014 Lease Agreement.
Of particular note, in cross-examination, Ivan acknowledged that at various places in his affidavit evidence when he referred to a "cattle quota" he understood that to be made up of 1,222 cows. The questions immediately prior to the reference to cattle quota concerned the 2017 Lease Agreement which indicates that Ivan's answers concerned the 2017 Lease Agreement, rather than the 2014 Agreement. The relevant part of the transcript from 7 December 2022 is extracted below:
"Q. I wonder if you could turn over to page 1147 in the Court book.
A. 1147. Yes, I have it now. Yes, I'm right now.
Q. Do you recognise that document?
A. Yes.
Q. That's the lease agreement between the Burke interest and the Wallace interests in April 2017, isn't it?
A. Yes.
Q. On that page, 1147, do you see that there's a paragraph marked, "One assets"?
A. Yes.
Q. At paragraph D, there's a description of the herd profile that existed at 1 July 2010.
A. Yes.
Q. Do you agree with me that the description there is the same as the one in the lease agreement that I took you to a moment ago from 2014?
A. Yes, looks like it.
Q. Mr Burke, can I ask you to turn over to page 1151?
A. Yes.
Q. You see at the bottom of the page there, there's an appendix 2, cattle numbers.
A. Yes, yes.
Q. Then underneath that is a list of numbers for various categories of cattle.
A. Yeah, cows, calves, weaners and bulls.
Q. As at 30 June 2010.
A. Yes.
Q. Do you see there that it says, "Cows, 1,122"?
A. Yes.
Q. Did you understand that that was a mistake for 1,222 that appears on the front page?
BOLSTER: I object, your Honour.
WITNESS: No, I don't.
BOLSTER: There's no mistake case pleaded here.
CONNOLLY: I'm just asking for Mr Burke's understanding.
BOLSTER: It's not relevant unless there is.
HIS HONOUR: Yes.
CONNOLLY
Q. Mr Burke, were you aware of the number written in appendix 2 for cows, 1,122?
A. I presume that would be right.
Q. What did you think was the correct number of cows making up the herd profile?
BOLSTER: I object. Can't be relevant, your Honour. The agreement says what it says. There's no application for rectification. What he thought about the agreement is material to how it's to be construed or enforced.
HIS HONOUR: That must be right.
CONNOLLY: It may make a difference, your Honour, as to what was intended by the alleged representation in 2019.
HIS HONOUR: That's a different matter. You're testing him on the agreement, and his intention as to the agreement or what he understood it to be is irrelevant as a matter of construction of the agreement.
CONNOLLY: Yes, your Honour. I'll put the question a different way.
Q. At various places in your evidence, you refer to a cattle quota, and cattle that are excess to quota. Do you remember saying that in your affidavits?
A. Yes.
Q. When you refer to the cattle quota, you're referring, are you not, to the figures that are on the front page of this agreement
A. That would be right.
Q. 1,222, 556, 620, and 29.
A. Yes, yes.
The same conclusion may be reached by application of principles that a contract may be reconciled by construction. Leeming JJA in Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq) [2019] NSWCA 11 provides a useful summary of principle where a contract can be rectified by construction (at [6] - [8]):
"Rectification by construction
6. At common law, if the error is clear, and it is also clear what a reasonable person would have understood the parties to have meant, then the mistake may be corrected as a matter of construction. This is old law. Lord St Leonards said in Wilson v Wilson (1854) 5 HL Cas 40 at 66-67; 10 ER 811 at 822:
"Now it is a great mistake if it is supposed that even a Court of Law cannot correct a mistake, or error, on the face of an instrument: there is no magic in words. If you find a clear mistake, and it admits of no other construction, a Court of Law, as well as a Court of Equity, without impugning any doctrine about correcting those things which can only be shown by parol evidence to be mistakes - without, I say, going into those cases at all, both Courts of Law and of Equity may correct an obvious mistake on the face of an instrument without the slightest difficulty."
7. Examples may be found in linguistic errors, such as "inconsistent" being read as "consistent" in Fitzgerald v Masters (1956) 95 CLR 420; [1956] HCA 53, or conceptual errors, such as "lessor" being read as "lessee" in McHugh Holdings Pty Ltd v Newtown Colonial Hotel Pty Ltd (2008) 73 NSWLR 53; [2008] NSWSC 542. The language of a contract is not read like a computer program, such that any slip is fatal.
8. Two conditions are necessary in order to correct the contractual language in this manner: (a) that the literal meaning of the contractual words is an absurdity and (b) that it is self-evident what the objective intention is to be taken to have been: see Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633; [2014] NSWCA 184 at [117]-[119], approving National Australia Bank Ltd v Clowes (2013) 8 BFRA 600; [2013] NSWCA 179."
The sole place the cow numbers are recorded as 1122 in the 2017 Lease Agreement is in Appendix II. The terms of the 2017 Lease agreement appear before the Appendix. Clause 1(d) specifies 1222 cows in the herd profile (which incidentally accords with cl 1(d) in the 2014 Lease Agreement). The erroneous sum figure of 2377 cattle, that is mistakenly carried across from the 2014 to the 2017 Lease Agreement, additionally demonstrates a pattern of mistaken figures in the Appendix and is supportive of the conclusion that the figure of 1122 cows in Appendix II of the 2017 Lease Agreement was a plain mistake.
Notwithstanding the error in Appendix II to the 2017 Lease Agreement being numerical, in my view, the principles of rectification by construction apply. The figure for cows in Appendix II of the 2017 Lease Agreement as "1122" is an absurdity. as it is plainly inconsistent with the terms of the agreement. It is self-evident that the objective intention of the parties is that the figure was intended to read as "1222".
It follows that the figure for cows, being "1122", in Appendix II of the 2017 Lease agreement is an error and should be read "1222.
Taking into account all the above factors, the correct construction of Appendix II of the 2017 Lease Agreement, in my view, is that the figure for cows in Appendix II of the 2017 Lease Agreement should be read as "1222" not "1122" so as to rectify a mistake or error. It follows that the 2017 Lease Agreement specifies the number of cows in the herd profile as 1222.
It is unnecessary to make reference to subsequent events to reach that conclusion. However, I record the plaintiff's contention in that respect as an introduction to other aspects of the factual background and because they are, in their terms accurate. They are as follows:
1. The figures of 1,222 cows, 556 calves, 620 weaners and 29 bulls were referred to by John without protest at the November 2019 meeting.
2. The figures of 1,222 cows, 556 calves, 620 weaners and 29 bulls were set out in the email from Kirstie to Mark and Ivan on 29 November without subsequent demur from the Burkes.
3. Those figures were also endorsed by the Burkes at the January meeting with John, both as the full complement of the herd and as a basis for calculating a notional value of the herd. Those figures were also set out in writing by John in the January 2020 email to which the Burkes raised no objection.
4. At the meeting between the Wallace and the Burke families on 21 January 2019, Mark reported that the number of cows was approximately 1400 and there was a buffer of 100 to 150 cows for sale if necessary. If Mark had thought that the herd profile number for cows was 1122, the buffer would have been 200 to 250.
At the meeting between the Wallace and the Burke families on 20 March 2019, Mark reported that 150 old cows had been culled and that, when 62 heifers that had been put with bulls were included, the cows then numbered 1,250. [18]
In the light of this analysis and the FAD, the following pleadings in the SOC with respect to the terms of the 2017 Lease Agreement may be accepted. These are extracted below (adjusted to the style of this judgment):
"15. There were terms of the 2017 Agreement as follows, among others:
a. The term of the agreement was from 1 July 2017 to 30 June 2021.
b. The Wallace Family Entities would lease to the defendants:
i. Khatambuhl Creek (except the Top and Bottom Houses and Hardes House, but including the Jane Russell blocks);
ii. Westwood Park (except Westwood House);
iii. Somerset (including the Somerset house and bunkhouse); [together "the properties"] and
iv. the plant and equipment on the properties (except the plant and equipment sold to the defendants pursuant to the 2017 Agreement) ("the Lease P&E").
c. KCPC would provide the defendants with a herd of cattle on the properties having the following profile: 1222 cows , 556 calves, 620 weaners and 29 bulls ("the Herd Profile") .
d. The defendants would do the following (among other things):
i. for the term of the 2017 Agreement pay the Wallace Family Entities $17,000 plus goods and services tax per month in advance on the 28th day of the preceding month;
ii. pay the Wallace Family Entities by 15 August of each year 15% of all the prior year's sales over $700,000, plus goods and services tax;
iii. maintain the Herd Profile;
iv. progressively improve the genetics of the herd so that a premium product was produced;
v. manage all the pastures of the Three Properties with regular programs of fertiliser and pasture improvement, together with regular maintenance of roads, dams, cattle grids and fences on [the properties];
vi. pay all rates, levies, taxes, irrigation and other fees incurred by [Khatambuhl] , Westwood Park and Somerset and pay all services to them except for the telephone and electricity charges for the Top house, Bottom house, Westwood house and Hardes house;
e. KCPC would sell to the defendants all the items of plant and equipment listed in Appendix 1 to the 2017 Agreement ("the Sale P&E") .
f. For the Sale P&E, the defendants would pay a total of $95 ,000 plus goods and services tax in the following instalments:
i. $25,000 plus goods and services tax on 28 June 2017;
ii. $25,000 plus goods and services tax on 28 December 2017;
iii. $25,000 plus goods and services tax on 28 June 2018; and
iv. $20,000 plus goods and services tax on 28 December 2018.
g. The defendants were agents for KCPC for the sale of KCPC's cattle on the [properties] (subject to their obligations to maintain the Herd Profile and to improve the genetics of the herd) and were entitled to retain the net proceeds of the sale of such cattle (subject to their obligation to pay the Wallace Family Entities 15% of each year's sales over $700,000, plus goods and services tax) .
16 Pursuant to the 2017 Agreement, the defendants had possession of the [properties] and the plant and equipment and the herd provided with them on and from 1 July 2017."
I note that pars 15, (b), (f) and [16] were admitted in full per the FAD.
The defendants admitted 15 but stated that the herd profile was overstated by 100 cows (in that the true number was 1122 cows, rather than 1222 as alleged by the plaintiffs). That issue has been resolved above in favour of the plaintiffs.
The defendants also admitted 15 but repeated the response "pleaded at 15 of the defence as above".
Similarly, the defendants admitted 15 but repeated "the grounds pleaded at 15(f) of the defence as above".
While the caveats in the FAD in 15 and 15 are not entirely clear, they appear to be a reference to the defence of 15 of the FAD.
In that respect, the defendants admitted 15 but stated that "agency was implied and not specified, in the written agreement."
Specifically, the 2017 Lease Agreement provided, inter alia, that the defendants had an obligation to maintain the herd profile as specified in that Agreement. The sole disputed issue raised by the defendants, in that respect, was the correct number of cows under the agreement. I have found, as a matter of construction, that number was 1222. The herd profile was, therefore, a total of 2427 cattle consisting of 1222 cows, 556 calves, 620 weaners and 29 bulls.
It appears likely the defendants moved cattle around nine different properties available to them to assist in raising the cattle: six properties controlled by the Burkes and three properties owned by the Wallace family.
Counsel for the plaintiffs submitted that the Burkes moved cattle around eight different properties on account of the oral evidence from Mark where he stated that the Burkes only weighed cattle at one of the eight properties available to them.. Ivan outlined nine properties (6 Burke properties and 3 Wallace properties) available to the Burke family more precisely in cross-examination and, therefore, his evidence in this regard will be preferred.
Ivan referred to six properties that the defendants and his other son, Craig Burke, raised cattle on. [19] These included one property owned by Ivan that adjoined the Khatambuhl and Westwood property ("Burke Khatambuhl"), a second property owned by the Burke family located 45 minutes from Somerset ("Rushfield"), a third property owned by the Burke family located 20 minutes from Somerset ("Burrell Creek") [20] , a fourth property leased by the Burke family located 45 minutes from Somerset ("Gloucester") [21] , a fifth property owned by Craig Burke located nearby at Mount George ("Mount George") and a sixth property leased to Ivan near Nowendoc River ("Nowendoc River"). [22] When combined with the properties, there are nine separate properties.
There were separate Property Identification Codes ("PICs") in the NLIS for each of the Burke properties. It emerged in the cross-examination of Mark that the Burke family did not record the movement of cattle from Wallace properties to Burke properties in the NLIS. It was also noted by Ivan in cross-examination that the Burke family bought or leased other properties to provide additional space for cattle to graze in order to relieve the pressure on the Somerset property in the drought conditions when there is less grass for grazing.
The undertaking of the 2017 Lease Agreement was carried out in line with the terms of the agreement until September 2018, where the Burke family were beginning to have difficulty in making the monthly lease payments. An ongoing drought in the Manning River region had an impact on the grass grown on the properties and consequently on the amount of feed the defendants had to purchase to ensure the cattle were maintained. The extent of the drought is an issue in dispute between the parties in these proceedings. I will return to this issue later in this decision.
As previously mentioned, meetings between KCPC and Burke Cattle Co Pty Ltd [23] occurred every few months where reports were received and discussions were had on matters concerning the lease. At a meeting on 21 January 2019, the Burkes were four months in rent arrears and reported they had to spend "$180,000 on grain this past season" [24] . Mark advised "cattle numbers were up and they have a buffer of 100-150 to sell if worse comes to worse". The Burkes estimated that there were approximately 1400 cows. [25] In item 3 of the meeting, it was indicated, as an "action", Mark would provide overall cattle numbers to KCPC within the coming week. That did not occur. Mark also discussed fencing issues with power outages and electric fences losing electricity, resulting in cows getting out.
At a meeting on 20 March 2019, the Burkes were five months in rent arrears. Meeting minutes recorded that cattle numbers were discussed during that meeting. It was agreed by Ivan that the Burkes wanted to demonstrate in that meeting they had adequate assets given the rental arears and the outstanding equipment payments and that those assets included cattle numbers. The minutes recorded that year-to-date cattle numbers were "sitting at 2617 head + 55 steers + 85 wagyu = 2755." It was further recorded that "the lease states a total of 2377 head so the extra cattle as Burke equity = 378. Calving rates estimated to be around 80%."
A document was provided by Mark to John at the meeting outlining in greater detail the cattle numbers as of March 2019 (extracted in Annexure A). The typed entries on the document were made by Mark. The handwritten entries at the bottom of the document were made by John. A further handwritten entry in the box, indicating sales forecast, was also made by John. Mark accepted in cross-examination that the estimates of cow numbers were speculative. Nonetheless, Mark reported that 150 old cows had been culled and that, when 62 heifers that were put with bulls were included, the cows were numbered at 1250. Those numbers were consistent with what Mark said in January 2019 about 1400 cows and a buffer of 100-150 but, as I shall find, this did not mean the estimates were reliable. This reflected his estimate of how many cows formed part of the Wallace herd at that time.
There was an objection taken in the cross-examination of Ivan by counsel for the defendants that was not raised in submissions as to whether the document was "minutes" of the meeting or just a "note". [26]
Whilst the record of the meeting of 20 March 2019 was not titled meeting "minutes", I have treated the record as minutes because that is the way John, in his affidavit of 22 February 2021, and Kirstie, in her affidavit of 22 February 2021, refer to them. This appears to be the regular form which is used to record the meetings held between the Wallaces and the Burkes. There was no cross-examination of John or Kirstie on this issue.
Furthermore, there was no rejection of that characterisation of the document by Ivan or Mark and, in cross-examination, Mark referred to a document (recording the contents of the meeting of 21 January 2019) in essentially the same way, as "minutes".
Whilst Mark raised some difficulties with making corrections to minutes, and that the minutes principally focused on information concerning the Burkes, the evidence does not suggest inaccuracy as such in the text of the minutes. On the balance of probabilities, the meeting "minutes" are accurate.
Item 5 of the minutes dealt with Fencing and Yards and stated the following:
"Mark spoke about waiting to get feedback from electricity company. Problem is MB doesn't get power outage notifications when the communication tower gets outage so is unaware when fences aren't electrified.
We spoke about need to do some work on fencing at Somerset and KCPC . Materials are around but budget $5k until the end of this financial year .
JW spoke about a new approach to fencing. Just because a fence-line exists now, doesn't necessarily mean it should be replaced in exactly the same place. Think strategically about each new fence-line.
We spoke about how Westwood needs a new set of yards where the old ones were as currently Ivan has to take the cattle to his place. Budget of $30k of steel panels to replace."
On 4 June 2019, KCPC sent Mark and Ivan a formal letter to notify them that they were 6 months in rent arrears and as such in breach of the 2017 Lease Agreement. On 30 October 2019, Kirstie sent an email to Mark asking how they were doing financially with the cattle and feed. Mark replied on 4 November 2019 stating they were "doing it tough" and spending about $10,000 a week "trying to keep the cattle going". Mark said that irrigation was restricted to nights only, they were out of irrigated feed, "effectively every animal [was] being fed" and asked for help to continue feeding the cattle.
Additional to the drought, in November and December of 2019 bushfires broke out in the region and burnt hills on the properties and surrounding hills. This prompted a visit by John and Kirstie on 10 November 2019 to the properties to "see what damage fires had done". On 23 November 2019, Kirstie spoke with Mark to discuss the farm conditions and the possibility of a "mutually beneficial exit plan". Kirstie sent an email to John and Mark summarising that discussion, which included the following: [27]
1. After 6 years of feeding cattle, Mark questioned whether it was "worth it anymore."
2. Mark estimated it would cost between $400,000 and $500,000 to feed the cows "to make it through the winter" (presumably of 2020 which was the following year).
3. After the fires, feeding the cattle was costing the defendants $15,000 a week.
4. Due to the drought and high winds, the fertility of the soil at Somerset was affected, reducing the capacity to grow "great pastures."
On 26 November 2019, Kirstie sent an email to Mark and John which outlined a proposed agenda for a meeting to be held on 28 November 2019. The proposed agenda read as follows:
"1. Overall assessment of Property Conditions, Impact of Fire and Soil Fertility & Pasture Damage
2. Cattle Numbers, Sex, Ages and Location (Somerset & KCPC)
3. Future Weather and Water Forecast and Likely Impacts on Properties, Livestock and Community
4. Feed Requirements and Cost: how long, solutions to fund (eg sell down cattle, borrow more money, government assistance?)
5. Burke's Plan for Lease: continue or give notice to terminate
6. Exit Strategy? (e.g. cut losses and sell down all cattle, Reimburse/reconcile all outstanding payments/debts?
7. Future for Somerset, KCPC, Westwood, Mark's role and future, Ivan's role and future, Wallace family's role and future
8. Any other business/issues"
No immediate response was received from the Burke family.
There is no dispute that, in the aftermath of the November 2019 meeting, that the parties treated the 2017 Lease Agreement as terminated on and from 1 December 2019. In the defendants' final written submissions, counsel made reference to the plaintiffs "having elected to terminate". In my view, , despite propositions put in cross-examination to John and Kirstie that the termination was not made by consent, it was a mutual termination. I will return to this consideration below.
However, there is a residue of controversy about whether an agreement was put in place at that time in terms of the MOU as to ongoing arrangements between the parties. I will return to that issue below.
At this juncture, I note that in Ivan's affidavit of 9 June 2021, he refuted the proposition of cl 4 of the MOU that stated that proceeds from the 400 cattle being sold in December 2019 should be "used firstly to repay outstanding rent, the balance of the equipment and then any remaining funds". [29] It is clear from the evidence that Mark proffered in the November 2019 meeting not only that the herd profile was intact in accordance with the provisions of the 2017 Lease Agreement but further, that there was sufficient cattle in excess of the herd profile under that agreement to permit the sale of 400 cattle, (which had been, in fact, booked for sale in December 2019) whilst having the herd profile intact. So much is clear from John's evidence, in his affidavit of 22 February 2021. Even though Ivan prevaricated in cross-examination about whether he knew the exact numbers, he did not dispute that Mark had provided that number of excess cattle. I accept John's evidence that he was advised that the 400 cattle had been booked for sale in December 2019.
In my view, it is equally clear that the November 2019 meeting addressed the termination of the lease in the context of rental arrears. The mechanism for sale of excess cattle and the rectification of rental arrears, consistent with the operation of the 2017 Lease Agreement, was entirely plausible given the issues addressed at the November 2019 meeting. That such an arrangement was put in place is consistent with Kirstie's contemporaneous notes. It is also consistent with Mark's and Ivan's response to the MOU. [30] In my view, it was the intention of the Wallaces and the Burkes that the sale proceeds would be used to pay the outstanding rent and amounts owing on plant and equipment.
On 2 December 2019, Kirstie began ordering feed for the cattle and between 4 and 11 December 2019, 309 KCPC cattle were sold by the defendants. [31] Despite the Burke family moving ahead with the sale of cattle, they had not responded to the MOU. On 14 December 2019, Kirstie sent Mark an email asking for a response to the MOU by 20 December 2019. The Burke family, again, did not meet this request.
On 23 December 2019, Mr John Snelgrove ("Mr Snelgrove"), the lawyer acting for the Wallace family, sent a letter via email to Mark, requiring a response from the Burke family to the MOU by 5pm on 31 December 2019.
Mark and Kirstie communicated by telephone and email about purchasing the necessary feed for the cattle between December 2019 and March 2020 and on 23 December 2023, Mark stated that there was enough water in the dams for the next few months. This conversation is evidenced by an email from Kirstie to John and Mark Willock that sought to provide an update on a conversation Kirstie had with Mark.
On 3 January 2020, at 5:05pm Kirstie sent another follow up email to Mark and John reiterating the need to get a response to the MOU from the Burke family as the bank required such details in order to loan the Wallace family more money. Later that day at 7:37pm, Mark and Ivan sent an email response to Kirstie which stated they intended to provide a response to the MOU by 8 January 2020. In the background of this communication John had asked Mr Hannaford, the principal stock and station agent of HSLA, to organise and supervise a stock count of the cattle at the properties. This was initially scheduled for 27 February 2020 but was brought forward to early February 2020. Despite this, the count did not occur until 26 February 2020.
On the 9 January 2020, Mark and Ivan emailed Kirstie their response to the MOU. The response was contained in an attachment to the email which is extracted below ("MOU response"):
Without prejudice
Memorandum of Understanding - Burke Family and Wallace Family
Response to your email 29th November 2019
It is mutually agreed that the cattle herd be dispersed and the Somerset property be sold at the request of the Wallace family for the purpose to disperse funds to siblings and family relating to the estate of Harry Wallace.
The Burke family commenced a long lease with the Wallace family in July 2017 for 4 +3+3 years, of the properties, livestock and infrastructure.
A stocktake was completed at the 29th of November and it is agreed that the livestock numbers at that time were in excess of the lease values. Burke family take no responsibility for losses of stock beyond this date. However it is in the interests of the Burke family to maintain stock numbers as any excess to the number are the property of the Burke family.
The Burke and Wallace families agree to terminate the lease as at the 1st December 2019 with respect to the livestock trading enterprise.
Burke family agree to pay outstanding Lease payments up to the 30th November 2019 on this basis -
Burke family to be able to sell 400 head of cattle of excess cattle.
All calves to be early weaned (minimum 90kg) from mid-January or when large enough. Cows to be fed to allow them to freshen up suitable for transport and slaughter. Weak cattle will not be loaded as per new transport guidelines. First kill date is the 12th of February 2020.
Wallace family responsible for all feeding costs during the liquidation of the herd.
Burke family will maintain LPA and EU accreditation to give Wallace family market access for EU sales. Livestock sales to be paid into Wallace accounts but will need to be processed through Burke EU accreditation for export and domestic sales.
Wallace family is to assume all costs of Electricity, Rates, Insurance, irrigation charges etc from 1st December 2019. Costs such as animal health, vets and any other variable or fixed costs are the responsibility of the Wallace family.
From the 1st of January all cattle sales in the Wallace name will be totalled. Burke family will be paid 7% of this value plus GST. This is to be paid monthly to the Burke family until all cattle are sold. It is estimated that all cattle will be sold by June 30th 2020.
Burke family to be compensated for improvements made and infrastructure not provided as part of the lease.
Hay shed was not replaced at Westwood after it was written off through storm damage- non repairable. Recently we constructed our own shed at a cost of $85000 to use for hay storage. We want compensation for the non -replacement of this structure which was for our use in the lease. During this time we have had to use the machinery shed to store hay in causing rodent damage to irrigation plant wiring and electronics and damage to tractor wiring resulting equipment needing to be sold as it was so faulty. Consequently our equipment has not always been in shedding such as mowers and slashers etc which has caused deterioration. Addition costs of transporting hay and wrapping into silage have also occurred without the shed being available . We want compensation of $40000 plus GST to be paid for this. Mr Wallace refused to replace the Hay shed.
Burkes have spent a considerable amount of money on upgrades to roads, implementing bio solid storage facilities, water troughs, new dams and reconstruction of existing dams on the basis that the lease would be for extended period of time.
To be compensated for this very early termination of the lease we want a share of the sale of the Somerset property. The property was purchased for $2.65 million including machinery (50k) and Water access license. It was valued at $4 million (including the water license) recently. We want 5% plus GST of the increased value at the time of sale or before 31st December 2020 using the values assigned here. Upgrades by the Burke family will add significant value to the Somerset property.
As the Wallace family will not retaining any livestock we want to run 200 head of cattle on Khatambuhl creek and Westwood properties until December 2022.
Burke remuneration during dispersal/liquidation
From December 1st 2019 the Burkes will paid for their labour and equipment hire.
3 staff working (2 for 7 days a week) until June 30 2020.
$4500/week to be paid to Burkes weekly.
Burke's responsible for own workers comp and tax during this time.
Equipment hire - tractors/dozer/excavator $100/hour plus GST paid weekly.
Fuel will be supplied by Burke's.
All repairs and maintenance of large equipment by Burke's.
Wallace family to take over insurance or get own insurance for property/ public liability/buildings from 13th January 2020 .
Any small equipment like augers and pumps etc. Any repairs and maintenance will be Wallace responsibility as there is no hire cost on this.
Post liquidation arrangement - caretaker arrangement
From 1st July 2020.
Burkes to work 3 days/week $3000/week doing fencing, maintenance, clearing and tidy up work in all paddocks. Burkes to supply all equipment/machinery and tools required for tasks.
Burkes to have access to timber for firewood production/lucaas mill 2 days per week.
Equipment hire all large machines $100/hour per machine (minimum 20 hours per week combined).
Burkes to supply fuel.
This arrangement is to continue until December 31st, 2022.
If required Burkes have option to continue this arrangement for another 3 years on the same terms.
Outstanding lease payments
Burkes to pay outstanding lease payments by January 30th, 2020 less $40000 plus GST for shed compensation. We want $14000 plus GST in compensation for the sale of the new Holland tractor due to damage caused .
Mark Burke to vacate Somerset House by 30th June 2020. In good faith we will continue to replace the fence around the house at our cost. We are not required to do this in our lease (repairs and maintenance, not replacement) but we will as it will assist in the sale of the Somerset property. The minor storm damage repairs around the house will be completed. We will re-establish the gardens if it rains and water is available.
We reserve the right to vary this agreement if further advice is received from our accountant.
(emphasise added)
In cross-examination, Mark stated the stocktake, completed on 29 November 2019, provided only a "rough estimate" based off Ivan's records.
Plainly, Kirstie's evidence vacillates in this passage between an indication of an intention to terminate as the only option and on which left open the prospect of other options. I consider a fair reading of Kirstie's evidence to be that, whilst there was every prospect the 2017 Lease Agreement would be terminated, as a result of breaches of the agreement, her and John had left open the prospect, albeit a slender one, that there might be an alternative course of action.
Overall, I do not consider John's evidence in this respect to be shaken in cross-examination. Kirstie's evidence was equivocal in the respects I have mentioned but my assessment is as I provided above. Neither pieces of evidence would suggest that John and Kirstie were other than honest and reliable witnesses particularly as their statements as to their thoughts prior to the meeting broadly accorded with that which transacted at the November 2019 meeting. Nothing in that survey of the evidence is determinative alone of that which eventuated at the November 2019 meeting.
Comparing affidavit evidence as to the accounts of the November 2019 meeting, there would seem to be a substantial similarity in John and Kirstie's accounts of the opening components of the meeting including a rejection of Mark's suggestion to sell down the young cattle and a reference to the need to consider termination of the 2017 Lease Agreement in those circumstances. On John's account, he refers to himself as saying the only option is to terminate the agreement. Kirstie attributes to John the words "We don't see that this can continue".
The accounts that then follow do not necessarily align in the order of events, and to some extent in content, but two aspects are clear on the respective accounts:
1. John was asserting the 2017 Lease Agreement should be terminated, although on his account it is described as being the "best option"; and
2. that at some juncture around the discussion of termination the Burke's became very heated.
There was also a discussion about selling Somerset, although it is not entirely clear whether that was raised by John or Mr Willock, who also attended the meeting. There then followed a further stage at the meeting, at which there was a discussion about post termination arrangements. John records Mark as saying "That will simplify things and now we can move forward" after describing the business dealings following termination. Kirstie recalled that John stated the 2017 Lease Agreement was terminated and followed on from him stating "Let's note we are terminating the Lease, move on and talk about the exit strategy…". On Kirstie's account, the Burke's asked for an opportunity to consider the termination of the lease after John had mentioned termination of the lease because of breaches.
Both John and Kirstie describe Mark as stating that there was an intention to work together in selling properties and the herd.
Overall, I consider John and Kirstie's evidence as to the November 2019 meeting to be an honest attempt to recall the exchanges that occurred in an obviously heated and difficult meeting in which, on their accounts, there was an open discussion about business models moving forward and a recognition by Mark (obviously after some real agitation) to accommodate those new arrangements upon termination.
This assessment is consistent, in my view, with the documentary record. The starting point in that respect, is the notes Kirstie took during that meeting which stated, inter alia, "Terminate Lease decision made. Burkes requested time to think about it".
Immediately after the meeting, an email was sent by Kirstie (on 29 November 2019) with John's agreement which stated, inter alia, "1. As of 1st December Wallace Family (WF) and the Burke Family (BF) by mutual agreement agree to the termination of the Lease signed and dated 24/4/2017."
That assessment was shared by the Burkes. In the MOU response, sent on 9 January 2020, the Burke's stated, inter alia, "The Burke and Wallace families agree to terminate the lease as at 1st December 2019 with respect to the livestock trading enterprise". This is plainly a reference to the 2017 Lease Agreement, which was the only lease between the parties operating as at that date. [33]
Whilst the Burkes used the word "agree" in the present tense, the communication can only be sensibly understood as referring to a state of affairs that Mark and Ivan understood to have operated since 1 December 2019 as arising from the November 2019 meeting. This communication is an affirmation of the counterpart aspect of Kirstie's communication of 29 November 2019 (the MOU).
Ivan and Mark hesitated to acknowledge that the 2017 Lease Agreement was terminated by consent. In cross-examination Mark said the following in relation to termination by consent:
"27. Q. As regards termination, it was agreed by the end of the meeting that the lease would end?
A. Yes, the Wallaces decided to terminate the lease.
Q. But you accepted that because there was no other way forward, was there?
A. When someone decides to terminate it you have to accept it. It's their decision.
Q. Wasn't it the fact you not only accepted it but you consented to the termination as being the best way forward.
A. I didn't accept it nicely. I didn't like it. I'd built a business.
Q. But you did accept it?
A. What else can you do? They want to terminate. That's their decision.
…
45. Q. Turn up page 1245, item 1 is termination by mutual agreement. That's where the matter landed at the end, isn't it?
A. I'll say we weren't happy about the termination but there was nothing more we could do or say about that. They'd made their decision and so we went along with it."
When seen in the light of the communication sent on 9 January 2020, Mark's response not only represented indignation (and as was found there were many occasions in Mark's evidence where he gave somewhat aggressive responses) but some prevarication even though his answers may be properly understood as the Burkes consenting to the termination with reluctance.
Looking more broadly at credit issues, counsel for the plaintiffs submitted that the Court would not find Ivan or Mark to be dishonest but were unreliable witnesses. It was submitted that many crucial factual issues were not the subject of mention in Mark and Ivan's affidavits, and they gave no coherent accounts of what happened at various meetings in chief or in cross-examination. They were poor historians.
Those credit submissions by the plaintiffs may be readily accepted upon the basis of my close consideration of Ivan and Mark's evidence. Additionally, in a number of respects, I have found many aspects of their evidence to be unsatisfactory, which I comment upon during the course of this judgment.
Later in the evening on 5 February 2020, John sent an email to Mark asking for an update on the "cattle sorting" and advised him that the cattle count was planned to begin on Monday 10 February 2020. On 7 February 2020, John sent another reminder email to Mark stating he would be at the Khatambuhl property at 8:00am on Monday 10 February with Mr Hannaford, another stockman and Mr Peter Fry to assist with the stock count and would aim to come down to Somerset by late Tuesday or Wednesday to begin the cattle count at that property.
Heavy rain fell on 10 February 2020 which flooded the properties and resulted in a delay to the stock count. Mark stated, in his affidavit of 10 June 2021, that the heaviest day of rainfall in this period was 280mm which caused a large amount of damage to the properties. Although the rain broke the drought, purchasing feed was still necessary.
The overall effect of the drought from at least the beginning of 2019, the bush fires in November and December of 2019 and the flood in February 2020, on the health of the cattle and the fencing at the properties is an issue in dispute. The defendants submitted that many cattle perished as a result of the harsh climate during these periods. The plaintiffs contended that there was no evidence of such deaths (save for one case). The plaintiffs disputed the severity of the impact upon the herd and the properties by these climatic events. I will return to those issues separately in dealing with factual controversies.
On 14 February 2020, John sent Mark an email stating he was planning to resume the stock count on Wednesday 19 February, depending on water levels. Later on 14 February, Kirstie forwarded John an email from Wingham Beef of 10 February 2020 confirming the booking to receive 200 KCPC cattle on 11 February 2020 for slaughter on 12 February 2020. John sent an email to Mr Moy on 19 February 2020 asking about the number of cows booked for slaughter in March. Mr Moy replied to John the same day and advised John that 200 KCPC cows were booked for slaughter on 5 March 2020 and that the numbers in the February delivery had been "well short of booked numbers". [34]
On 15 February 2020, Kirstie sent Mark an email outlining the amount owing in rent arrears and the purchase price of the plant and equipment. This email also outlined that the Wallace family, to date, had spent $474,557.93 on feed for the cattle.
A meeting was scheduled for 20 February 2020 between John, Mr Hannaford, Mark and Ivan ("February Meeting"). At the meeting stock numbers at the three properties were discussed. John asserted, in his affidavit of 22 February 2021, that Ivan provided the following numbers of cattle at that meeting: 1558 head counted which is made up of 878 cows and 680 calves and weaners. Those cattle numbers do not appear in the email John sent to Mr Hannaford on 21 February 2021 that provided a summary of the meeting or in the typed copy of the handwritten notes recounting the meeting, which John made later that day after the February Meeting ended. John emailed these typed notes to Kirstie on 22 February 2020. Neither Ivan nor Mark set out a detailed version of the February Meeting except to briefly recount an argument with John.
On 25 February 2020, Kirstie received a phone call from Mark where he stated John had behaved "out of line", [35] sought to reiterate that the defendants had not stolen any hay or cattle and demanded all outstanding payments (it would seem, for work undertaken by the defendants on the properties since the termination of the 2017 Lease Agreement), should be made immediately before the end of business that day. Kirstie typed notes regarding the contents of the conversation shortly after the call ended and emailed them to John. In those notes, Kirstie recorded that during the call Mark threatened that if those payments were not received, they could "have a contamination problem" at Somerset which would result in a $35,000 fine from the Local Council.
On 26 February 2020, Mr Hannaford commenced the stock count of the cattle at all the properties. This was completed on 27 March 2020, when Mr Hannaford emailed a copy of the final stock count to John and Kirstie. In that document, Mr Hannaford stated that the count consisted of 821 cows, 456 calves, 457 weaners and 10 bulls which came to a total of 1744. [36]
On 30 March 2020, Mr Snelgrove sent a letter to the defendants that outlined the results of the cattle count, the amount of cattle there should be, as per the 2017 Lease Agreement, and gave the number of deficit cattle being 343 cows, 100 calves, 163 Weaners and 11 bulls totalling 617 animals less than the herd profile. [37] The letter also raised with the defendants that some KCPC branded cattle on the Somerset property belonged to them and as a result, were not included in the cattle count. The letter sought proof of purchase of those cattle and an explanation as to the deficit cattle numbers by 5:00pm on 2 April 2020.
A further letter addressed to the defendants was sent by Mr Snelgrove on 30 March 2020 which stated:
1. the defendants were required to relocate out of the main house at Somerset and move to the workers cottage by 15 April 2020;
2. the current management agreement of $6000 per week would cease on 31 March 2020 and any work the defendants may do on the properties will be conducted "through John Hannaford of Hannaford Stock and Station Agents on terms and conditions to be agreed between the Burke interests and John Hannaford";
3. any outstanding management fees would not be paid until the defendants produced the daily management reports; and
4. if the defendants were retained by Mr Hannaford before 15 April 2020 they could remain in the workers cottage on Somerset until the termination of such agreement. On termination, the defendants "will vacate the workers cottage within 7 days."
Two additional emails were sent from Mr Snelgrove on 30 March 2020 to the manager of Gooch Agencies and Ray White Gloucester stating "it has come to our attention of Our Clients that cattle may shortly be offered for sale through your agency by or on behalf of the Burke Interests. Please note that the Burke Interests do not have any authority to sell cattle for Our Client" and requested to be contacted if any such sale was offered.
On 1 April 2020, John and Ivan spoke over the phone on three occasions.
John provided an account of that call in an email to Mr Snelgrove at 8.58am on that day ("the first phone call"). Ivan did not provide any details of that call. John advised Ivan that the shortfall in cattle was as high as 606 cattle. John's recollection of the first call was that Ivan told him he thought there were 41 deaths of cattle since 1 December 2019 and that he had documented that fact by hand in a book. Ivan agreed a deficit was unacceptable. In cross-examination, Ivan confirmed his shock at being informed of that deficit. John also asked Ivan whether cattle on a Burke property with the KCPC brands on them belonged to the plaintiffs to which Ivan responded in that the Burke family had bought the KCPC cows they claimed were theirs on Somerset 12 months ago from "Auction Plus". Ivan stated that he had records for the purchases.
A second phone call occurred a few hours later ("second phone call"). John also documented the second call in an email to Mr Snelgrove, Mr Hannaford and Kirstie at 10.55am. John recorded that in that call Ivan provided clarification on the number of documented cattle deaths since 1 December 2019 which he now believed was 37, according to his field book. However, John stated in this email that Ivan had no photographs or ear tags to confirm those deaths. It is reasonably clear that the 37 cattle referred to in the second phone call was a reference to the same cattle the subject of the original estimate of 41 deaths but adjusted downwards.
John's account of the conversation was as follows:
"Ivan Burke: 'I have written down deaths at Khatambuhl in my field book. I've got 4 at Westwood, 4 in the Bottom Paddock, 1 at Tommy's, 5 at Bedding Ground, 1 in the Horse Paddock, 3 in the House Paddock, 2 in Brush Gully, 5 in Hereford Paddock, 4 at Bob 's Creek, 7 at Hardes, 1 at Baxter 's. That makes 37. All cows. I believe those are all since the 1st of December. I will speak to Mark and get him to tell you what has happened at Somerset since the 1st of December.'
I made a note of the places and numbers.
John Wallace: 'Do you have any photos of the carcases or eartags from them?'
Ivan Burke: 'No Foxes and dingoes chew out the eartag once the beast goes down.'"
That evidence would appear to concern an assertion of loss at Khatambuhl.
A third phone call ("third phone call") took place between Ivan and John on 2 April 2020 which contradicted aspects of the first and second phone calls. This call is discussed in detail shortly.
Later on 1 April 2020, Mr Snelgrove sent a letter to the defendants which stated the following:
1. Acknowledged that John had spoken to Ivan over the phone where it was indicated a deficiency in cattle numbers;
2. Required some evidence of the defendants purchase of KCPC cattle at "Auction Plus" 12 months ago;
3. Noted that, while the defendants were on any Wallace family property, they had continuing obligations, like "for example, not to damage or destroy property, plant and improvements; actions that may lead to stock injury or loss; and generally not impeding the authorised persons and contractors of the Wallace Family Interests acting on or about their properties";
4. Adopted paragraph 8 of the January 2020 email that set out the agreement of the January Meeting and reiterated that "what is set out above should not be taken as indicating other things that the Burke Family Interests had agreed to be done have in fact been done"; and
5. Threatened legal action if there was no satisfactory response to the letter.
Mr Snelgrove also sent a follow-up letter to Ray White Gloucester on 1 April 2020 regarding the "avoidance of doubt [that] the Burke Interests have no authority, agency or other right in respect of the cattle of our client."
John dropped off a copy of Mr Snelgrove's letters of 30 March 2020 and 1 April 2020 to the letter box at Ivan's property and then phoned Ivan at 5.15pm on 2 April 2020 to see whether he had received the letters.
John emailed a recollection of this third phone call with Ivan about cattle numbers to Mr Snelgrove shortly after. John stated that Ivan advised him that he now thought a lot of cattle had been lost over the last 12 months despite the fact that Ivan acknowledged that Mark, in the November and January Meeting, had stated that all the cattle were there and accounted for. John recounted that Ivan asked, "If we are short, what value are you putting on them, surely not today's value" and stated that a disagreement followed regarding what market value would be placed on the cows if the Burkes were found to be short. John again reiterated that the Wallace family would commence legal action (as he did in the first phone call) if they did not "get a response soon on what their plan is to fix the problem". Ivan did not provide a detailed recollection of the phone call except acknowledging it occurred and that John asserted they were "600 down" to highlight that the figure was different to the last number of cattle John stated were missing. [38]
On 3 April 2020, Mr Hannaford sent Mark an email attaching a spread sheet of the results of the cattle count which also appears to show numbers of the cattle deaths Ivan reported and some cattle sales to Wingham Abattoir in February and March of 2020. [39] This spread sheet recorded the count as: 821 cows, 456 calves, 457 weaners but did not include final numbers of bulls. Those figures amounted to the total number of 1734 cattle and represented the herd profile arising from the cattle count conducted by Mr Hannaford at the date of that communication (Annexure B).
Around this date John received some information from Mr Hannaford that made him suspect the defendants were attempting to sell cattle into the Japanese export market through Edwards Livestock Company of Oakey Queensland ("Edwards Livestock") and, on 3 April 2020, John sent an email to Matt Edwards of Edwards Livestock that is extracted below:
"Hi Matt,
As discussed, our family own the Somerset, Khatambuhl Creek and Westwood Park properties in The Manning Valley.
All the cattle on these properties are our cattle. Our commercial leasing arrangement with the Burke family was terminated on 30th November 2019.
We are currently in the process of selling the Somerset property.
We have appointed John Hannaford of Hannaford stock & station Agents based in Gloucester to manage both the cattle sales and the property sale. I have CC'd in John to this email and his Mob No. 0419 249 565.
As you mentioned, Mark had booked 60 Wagyu X steers for this month (delivered to Taree sale yards Min 270kgs at curfew)- we were all unaware of this- please liase directly with John Hannaford.
Rgds
John
0419 419 633"
On 7 April 2020, John instructed Mr Snelgrove to send another letter to Matt which included the following:
"Our clients have been, but are no longer, managed by interests associated with Ivan and Mark Burke and their company Ivamar Pty Ltd trading as Burke Cattle Company (Burke Interests).
It has come to the attention of Our Clients that cattle may shortly be offered for sale through your agency by or on behalf of the Burke interests. Further, it is Our Clients understanding that the cattle for sale comprises up to 65 Angus Wagyu cross steers. Our Clients have strong reason to believe that these cattle are the property of Our Clients."
The letter also requested that Edwards Livestock should contact Mr Snelgrove immediately if any of the Burke family or any other third party on their behalf present cattle for sale.
On the same date, Mr Snelgrove sent a letter to the defendants referring to the letters of 30 March 2020 and 1 April 2020, noting the lack of response as demanded and that "It has recently come to the attention of the Wallace Family Interests that you are in the process of selling 65 Angus Wagyu cross teers, which our clients believe are their property". This letter demanded the defendants produce evidence that they were the legal and beneficial owners of these cattle before 4:00pm on Thursday 9 April 2020, otherwise court proceedings would be commenced against the defendants without further notice to them.
Additionally, on 7 April 2020, John inspected the fencing at the Khatambuhl and Westwood properties with a fencing contractor, Mr John Turner ("Mr Turner") and stated, in his affidavit of 22 February 2021, that the condition of the fencing was not good and that "many fences had broken wires, were laying over and did not have creek blocks. I made a list of repairs that needed to be done." Whether the poor state of the fencing was the fault of the defendants who failed to maintain them as per the 2017 Lease Agreement or whether the fires and floods had destroyed the fencing is a further issue in dispute.
On 9 April 2020, John instructed Mr Snelgrove to send a letter to the defendants. This letter firstly referred to the letters of 30 March, 1 April and 7 April 2020, noted the lack of response by the Burkes and went on to allege the defendants had not met their obligations under the 2017 Lease Agreement in relation to fence maintenance and provided a list of maintenance work that was required to be done on the properties but excluded any part of the fencing that "have been affected by the fire." [40] I also note that a liability owed to the Elders Rural Services Australia Limited was also raised in this letter but as that liability is not the subject of claims made by the plaintiffs I will not include those details except to note that items ordered from that company included fence parts. [41]
Following John's visit to the properties with Mr Turner, fencing work was undertaken by JT's Landscaping and Rural Maintenance ("JT's"). This work was undertaken, along with other general works on the properties, between 10 April 2020 and 10 July 2020.
On 15 April 2020, in response to the email and letter sent to the defendants by Mr Snelgrove on 9 April 2020, [42] Mark sent a formal response to the "questions asked by the Wallace family" [43] from himself and Ivan. The contents of that email are extracted below: [44]
"Response to Wallace family termination agreement.
House and occupation
The house, bunk house and surrounds at Somerset will be in good repair when
Mark Burke vacates. The fence will be complete and the storm damage will be
repaired, gardens will be re-established and the spa (which has never worked)
will be removed and the hole filled in.
No incoming inspection report was completed. The Burke family have installed a new double oven and solar hot water system.
A few days work will have the house in good repair.
Very hard to use welders and grinders in a total fire ban to complete tasks.
We had insufficient water to wash house etc and the drought has filled both buildings with dust.
The priority was to keep the cattle alive a best we could, not repair and wash a
house.
Mark has always taken pride in the house gardens, lawn and property and it will be left in a very tidy condition.
Damage that occurred to the front verandah roof from the EastCoast low during February will not be repaired as John Hannaford indicated that pergola/awning is to be replaced with some other structure. I will remove the new sheeting that I fitted to the structure 2 years ago.
Mark and his children will not be moving into the Bunkhouse. The building is
too small. With the new restrictions associated with Covid-19 the two secondary school age boys are required to study at home. They require wi-fi connectivity to complete their study.
Mark is financially unable to move to a new residence until all outstanding
wages, expenses, reimbursements and compensation is paid to the Burke family. Outgoings need to be covered for the last four months and Mark require money so set up a new residence.
Livestock numbers
The cattle properties have just experienced the worst drought since records have been kept. This was in conjunction with large bushfires and then followed by a flood and very heavy rain over an eight-week period.
The Lease between the Burke family and the Wallace family was very clear in stating that a livestock numbers on termination of the lease was to be completed immediately before or immediately after the termination date.
The termination date was the 1st of December 2019.
It was physically impossible to do this at that time due to the fires, the destruction of fences, lack of water, heat and physical condition of livestock to
move them long distances.
The Burke family take no responsibility for the losses of livestock from the 1st
of December onward.
It was agreed at a meeting with the Wallace family at the end of November that it was clearly obvious that excess cattle were present, and they gave approval for the Burke family to sell 400 head. The Burke family sold young cattle only on the basis that knew that weaner cattle were present at Khatambuhl Creek to replace them. The cow numbers present at the end of November had enough calves to make the calf count correct.
In a meeting with the Wallace family at the end of June 2019 we advised that we were going to sell our excess cattle down to fund the feeding of the remaining Wallace cattle. We did advise the Wallace family how many excess cattle we had as a draconian clause in the contract demanded the Wallace expected to get a slice of the excess cattle on renewal of the lease.
The Burke family operated two properties on the Gloucester river where we ran approx. 280 breeding cattle that we had accumulated over our tenancy.
These cattle were owned outrightly by the Burke Family and had nothing to do with the Wallace family cattle. We had purchased a property at Gloucester and leased another one approximately 12 months later.
The Wallace family cattle numbers at the end of June 2019 were at or in excess in each category.
We did all things that the Wallace family had asked. Organised fencing materials, contacted neighbour about replacing boundary fence, organised equipment to clear fence lines etc.
We increased the feeding rate as they requested. We centralised the feeding where possible. We early weaned calves where possible. We organised an excavator to clean out dams as they rapidly dried up.
We did the best we could given the conditions, lack of infrastructure and time.
It was in the Burke family's interest to try to save as many cattle as possible as
we were incentivised to do so through the sale of the animals. 10% of the revenue for the sale of the animals is to be paid to the Burke Family.
The Burke family paid for hay up until the middle of December 2019 and pellets until the 22nd of December 2019 when the Wallace family supplies of hay and grain arrived.
The Burke family purchased their own hay and grain for their cattle.
The Burke family was not advised cattle numbers until they were requested from John Hannaford on Friday the 3rd of April. The Burke family have had discussion with John Hannaford about the categories of livestock in the count
supplied.
The initial number the Wallace Family have provided is different from the initial number in the contract.
The main variance is the weaner number. At least 40% of cattle categorised as calves are weaners. It was agreed that any calf over 90kg would be a weaner.
These weaner cattle remained on the cows as there was insufficient room to
move them to Somerset.
A large number of cows have died and also their calves. Many cattle have wondered off chasing feed after the rain, died of pneumonia during the flood, eaten toxic plants in the gully's, creeks and in and around rivers.
We have estimated that around 140 cows, 180 calves, 30 heifers, 30 calves 20 weaners and 4 bulls had died from 1 December 2019 up until mid-January 2020 due to the drought and other factors such as dystocia, photosensitisation etc.
A further 30head have been found since the count numbers advised. 4 deaths
have also occurred.
A large amount of cattle have died or disappeared from the top end of Khatambuhl Creek due to the flood, pneumonia, eating new shoots on plants that were toxic, chasing green feed in neighbouring properties, national park and crown land. The only secure paddock on Khatambuhl Creek that was available was a 15 acre paddock at the old yards which is located on the bottom end of the property.
Due to the flooding it was inaccessible for 3 weeks on and off and usually only by tractor.
Termination payments
The Wallace family agreed to pay the Burke family 10% of the revenue of the
cattle sales.
John Hannaford has been engaged by the Wallace family to handle the sale of
livestock and we are led to believe the sale of the Somerset property.
We will be requesting that 10% of the sale of each batch of cattle sold be withheld and paid to the Burke family by Hannaford livestock Australia within one week of receipt of funds by the purchaser.
A clause exists in the contract that requires the Wallace family to pay a an (sic) early termination fee for ending the lease early. The Wallace family have admitted liability for not replacing sheds and damage to equipment. They were also not able to keep up with fencing equipment which in turn affected our ability to run the business effectively.
We don't wish to go down this path provided the Wallace family pay all termination payments as agreed.
Fencing
In meetings held with the Wallace family they had expressed that they were in
financial difficulty and had trouble getting money out of their businesses in Papua New Guinea. When the Burke Family had requested fencing materials,
we asked by the Wallace family could you just get the bare minimum as the Wallace family did not have the funds. This had been the case for quite a few years.
We concentrated on replacing fencing at Somerset as much more could be
achieved on the smaller farm with limited funds.
We have also put-up new fencing around the river flats at Westwood as this
was a critical issue.
The Wallace family could not make a decision on the replacement of fencing on purchased blocks of land. Harry Wallace wanted to re-fence on portion lines, and others wanted to fence in more practical locations or on different locations with recently purchased small parcels of land. Some wanted to fence the scrub/timbered country off completely and some wanted to fence a laneway right through the centre of the property. There were mixed messages and we are still unsure what they wanted to do.
All fencing was in basic working order at the end of the lease except those areas affected by the recent fires. Fire damage is out of our control and we take no responsibility for that. Cattle grids have filled up with dirt in the February flooding.
All creek blocks and associated fencing were knocked down in the flooding of
February and not the responsibility of the Burke Family.
The Wallace family took on all responsibility for property at the 1st of December 2019.
Anything that is not fire or flood related we are happy to rectify if you can provide evidence that it was not in working condition prior to the 1st of December 2019. The Wallace family will need to provide materials as per our agreement.
Property development
The Burke family had completed all tasks in terms of property maintenance including extensive fertilising and liming, pasture improvement each year, spraying when possible due to the dry seasons and fencing as limited by
supply.
The Burke family had approached the Wallace family to replace and develop the irrigation system at Somerset. We made a proposal to the Wallace family in June/July 2019 to match in investment as per the lease clause. To date we have not had a reply regarding this. The Wallace family were unable or unwilling to keep up with the commitments to lease in this regard.
The Wallace family have also admitted some liability for not replacing the hayshed at Westwood Park and have committed to pay $20000 in compensation. The Burke family built a new shed on their own property at the
cost of $85000.
Elders Account
In response to the Elders rural services account.
All fencing materials, animal health products were authorised by the Wallace
family. We were instructed to get fencing materials for the boundary fence at
Baxters creek. The Wallace family to organise a contractor if the neighbour
refused to participate in replacing the fence.
All materials are located under the tree and in the shed at Westwood Park.
The other unused materials are located in the shed at Somerset. Photos have been sent to John Hannaford.
John Wallace is aware of this. Scott Burley confirmed to me today that he had
a conversation with John Wallace last week (approx. 8/9th April 2020) and John indicated to Scott that he remembered seeing them under the tree at" Westwood Park".
I have spoken with Scott Burley at Elders Taree and have advised that John Hannaford is now the authority on that account.
John Hannaford requested extra NLIS tags, vaccine, drench and animal health products for preg-testing and marking.
The Burke family have purchased their own animal health products and used
some of there own in the first month of handover for Wallace cattle.
The Burke family are supplying chemical for spraying weeds at Somerset.
Sale of Cattle
The Burke family will sell a quantity of cattle. They are the progeny of our
cattle from our Gloucester Properties and other cattle owned by us.
They are earmarked with our earmark and our NLIS tags and management
tags. All the Wallace family cattle have "banged tails". Ours do not.
Work for John Hannaford livestock
Mark, Ivan and Kelvin will be working for John Hannaford livestock completing
normal farming activities as requested by John Hannaford.
This may involved repairing fences as required, slashing. Mulching and spraying to keep the properties in order.
John Hannaford will be invoiced, and the payments are to be made by him on
the Wallace families behalf. This will be a very similar arrangement as per
working for the Wallace family previously. We do not consider this work to be a cost of selling the cattle but that of a normal working farm. The only costs we expect to deducted from the sale of cattle are any commission, freight and levies as per our MOU agreement.
Closing remarks
We do feel sorry that for the livestock of the Wallace Family that have died or
disappeared. The Burke Family take no responsibility for the drought or fire.
The Burke family worked tirelessly to keep them alive.
We believe that the Wallace family need to grateful that the rain came and the
drought ended when it did. Another 3 weeks and more than half of the cattle
would have perished. The resulting increases in prices have outweighed any
losses many times over. A loss of 20-25% is considered quite acceptable given the seriousness of the drought, fire and flood.
(emphasis added)
Mr Snelgrove replied to the email from Mark and Ivan a few hours later stating that, although his response did not represent "a final reply to your email response" "your reply is both short and does not provide the documentation we expected let alone demanded. As to the latter we repeat our demands". On 23 April 2023, Mr Snelgrove sent a letter to the defendants reiterating that they are not permitted onto the Wallace properties without Mr Hannaford's permission and any such unauthorised access will not be tolerated and treated as a trespass. This communication by Mr Snelgrove was after the cattle count and reflected Mr Snelgrove's doubts as to the reliability of the estimates of cattle deaths. In the absence of proof those concerns were no doubt exacerbated by the substantial difference between Ivan's earlier estimates of cattle deaths and those provided on 15 April 2020. Those doubts were well foundered as I will later discuss.
On 26 April 2020, John and Ivan spoke on the phone. John sent an email, with typed file notes outlining this conversation, to Mr Snelgrove and Kirstie later that day. John recalled that Ivan was very upset as he had been told by Mr Hannaford that he was no longer needed to work on the properties and that Bill would be kicked out of Westwood. John stated Ivan said he "just put Bill in an ambulance" and accused Mr Hannaford of being a cattle thief. John told Ivan to focus on "the fact that we are up to 450 cows short with no explanation", the property is in a terrible state and criticised Ivan for not even having the courtesy to respond to their requests for information. John recounts the final discussion on the phone as follows: [45]
"He was getting emotional and then said;
~I better not meet him on the road
~An my kids better not be on the their trikes/quad bikes on the road
~Plus there is only going to be 1 of us left in the Valley
He then said "Get Fucked" and hung up."
John went to Taree Police after the phone call to report the matter. [46]
Ivan refuted that recollection of the phone call in his affidavit of 9 June 2021. Ivan acknowledged that he was upset because it was clear to him, after being told he was no longer required and hearing many rumours regarding the future plans for the Khatambuhl and Westwood properties, that there would be no possibility of a caretaker role for him after June 2020. Ivan states that John "harangued me in extremely derogatory terms about my son Mark and Mark's not replying to the barrage of legal letters on behalf of the Wallace family" and "used considerable expletives". The number of cattle stated on the phone call being "450 short" was consistent between Ivan and John's recollection. Ivan noted that John's file note did not label the end of the phone calls as threats but John did in his email to "Sector Supervisor" at the Gloucester Police Station, Mr Scott Chester ("Mr Chester"). Mr Chester's email of 26 April 2020 confirms that he spoke to Ivan, served and advised Ivan of the contents of "the letter" (I believe this is the letter sent by Mr Snelgrove on 23 April 2020 as the letter from Mr Snelgrove on 27 April 2020 referred to that letter in conjunction with Mr Chester, serving a formal letter), [47] and that Ivan denied the making of threats towards John or his children and was just trying to ask John to stop his children driving or riding on the council road.
The letter of 27 April 2020, that I raised above, was addressed to the defendants and referred to a visit from Mr Chester and a letter of 23 April 2020 that was served and explained to Ivan, namely, that Ivan had no right to access the properties of the Wallace family interests. The letter also stated that Ivan had removed property owned by the Wallace family being a molasses trailer and fencing equipment. A chain of emails between Mark and Ivan and Mr Snelgrove ensued but concern matters no longer in issue in this claim.
After the cattle count Mr Hannaford continued to work on the properties. In between April and October 2020, after the completion of the stock count, he found an additional 69 cattle. The addition of these numbers made the final reported stock numbers of Mr Hannaford's count 896 cows.
I note that in John's affidavit of 22 February 2021 he includes a table with the cattle count numbers and deficiencies that are not consistent with Mr Hannaford's final cattle count numbers. This table appears as follows:
"74. On the results of the stock count, including the strays, the herd numbers were deficient as follows:
On 14 May 2020, John emailed Mr Edwards from Edwards Livestock and requested the sale values of the 110 sales made by Burke Sons Investments in December 2019 which came back at $90,724.95. Mr Edwards also confirmed Edwards Livestock did not purchase cattle under any other entities. Following discovery of this sale John instructed Mr Snelgrove to send a letter to the defendants on 18 May 2020. The body of that letter is extracted below:
"Dear Mr Mark Burke and Mr Ivan Burke,
Re: December 2019 Cattle Sales
As you are aware, we act for the Wallace Family Interests.
In relation to the cattle that you arranged to be sold in December 2019 on behalf of our client's company, KCPC Pty Ltd, we are instructed that you have not provided any details in relation to the sale of those cattle, nor have you accounted to our client in respect of the net proceeds received.
Accordingly, please immediately provide to us a copy of all sale documents that you issued to selling agents as well as all sale documents received from those selling agent s in respect of the cattle sold.
On behalf of KCPC Pty Ltd we demand that in addition to providing this information that you immediately pay into our Trust Account the net proceeds that you received from those selling agents in respect of all the cattle sold. Details of our Trust Account are attached in the PDF."
John stated, in his affidavit of 22 February 2021, the defendants did not respond or supply any information about these sales in December 2019 or pay over any of the proceeds of such sales. Mark, in cross-examination, stated that these sales were part of the 400 animals they were permitted to sell in December 2019.
Mark vacated the Somerset property on 29 May 2020.
The issue surrounding the definition of the herd profile of the 2017 Lease Agreement has been resolved earlier in this judgment, as a matter of construction, in favour of the plaintiffs, such that the 2017 Lease Agreement was construed to record 1222 cows in the herd profile.
The plaintiffs contended that the cattle count in February and March of 2020, undertaken by Mr Hannaford, was conducted in a careful manner and yielded reliable results.
The plaintiffs submitted the cattle count, taking into account the 65 cattle which were sold in early 2020 and one confirmed cattle death, yielded a deficiency of 343 cows, 100 calves, 160 weaners and 14 bulls. Furthermore, between April 2020 and October 2020, another 69 cattle were found which adjusts the deficit to 300 cows, 87 calves, 157 weaners and 4 bulls, making a total shortfall of 548 cattle.
The plaintiffs submitted a deficit of 548 cows as of 1 December 2019 was "entirely possible and, in the absence of any plausible explanations for the shortfall found later, probable". To support that contention, the plaintiffs made five submissions as follows:
1. There was uncertainty communicated by the Burkes in cross-examination about the herd numbers at the end of 2019; and
2. There was no lack of feed in late 2019 and early 2020; and
3. There was no lack of water in late 2019 and early 2020; and
4. The cattle did not wander away into the bush or onto other properties; and;
5. There was a lack of evidence of the deaths of cattle.
Those submissions are the subject of elaboration below:
The defendants made further submissions (a)-(h) under the primary submission that "there was no shortfall in the herd profile" as follow:
1. The plaintiffs were in breach of the 2017 Lease Agreement in failing to carry out a herd count on or before 28 November.
2. The plaintiffs failed to carry out any stock count until March 2021.
3. The stock count was inadequate and inaccurate.
4. The plaintiffs have failed to provide the details of any subsequent counts of cattle.
5. The plaintiffs do not provide any explanation for what happened to the allegedly missing stock.
6. The herd was under threat at the time the lease was terminated and remained under threat until well after the drought broke in early February 2020.
7. The plaintiffs failed to call Mrs Wallace.
8. The consequences, under the contract, of a deficiency as the November 2019 meeting.
The expanded summary of these contentions appears below.
It was submitted that the fact that the plaintiffs chose to do nothing to initiate the count, while also being in contact with Mr Hannaford, was "all the more telling given the threat that they perceived to the herd from the ongoing effect of drought and fire that had been the catalyst of the decision to terminate…".
The records also indicate a 5 hour meeting with the Burkes on 30 January 2020 at Somerset, "re future direction and selling Plan."
No further work was carried out by Mr Hannaford until 20 February when one of his employees, Mark Howard ("Mr Howard"), carried out 10 hours of stock work. Later in February, there was a seven hour meeting with the notation, "Steve Brown (Pregnancy Tester) and Mr Howard regarding testing of cows, sorting cattle and which Paddocks to use, started process." [50]
The results of that testing [51] are in evidence and reveal that of the 237 cows tested, only 33 were pregnant, contrary to the claim that ordinarily 80% of cows should calve. However, as other evidence demonstrates, that season was not normal given the stress that the cattle were under in light of the drought.
The HSLA tax invoice for March records Mr Hannaford being at the properties on the following occasions (the data represented here also appears in the defendants closing written submissions as a summary of the March Invoices): [52]
1. 10 March
1. Work: KC - Scanned - Bottom Yards - Separated Calves/weaners & tagged all - 132 cows.
2. Time Hours: 7
3. Time onsite: 5
1. 12 March
1. Work: KC - Scanned second lot of cows, marked and emasculated calves.
2. Time Hours: 7
3. Time onsite: 5
1. 13 March
1. Work: Somerset - Continued scanning rest of weaners and tagged calves - finished.
2. Time Hours: 11
3. Time onsite: 9
1. 14 March
1. Work: HSLA office consolidating NLIS and numbers to files.
2. Time Hours: 2
3. Time onsite: 0
1. 17 March
1. Work: Somerset - scanned weaners and heifers at yards - 375 for the day.
2. Time Hours: 9
3. Time onsite: 7
1. 25 March
1. Work: KC Steel Yards - scanned and drenched cows (111) Went to Ivan to check boundary and realignment of fence.
2. Time Hours: 7
3. Time onsite: 5
1. 26 March
1. Work: KC Top Yards Scan and process 85 Calves. Return to cattle bedding ground paddock.
2. Time Hours: 6
3. Time onsite: 4
1. 31 March
1. Work: Meeting with John Wallace in Office. Inspection of "westbrook" - 200 Iron Posts/100 Steel Strainers/16 End Assembly/ 29 Bars.
KC - went to top station and Baxters to confirm fencing and clearing.
1. Time Hours: 9
2. Time onsite: 9
The time onsite was taken in the defendants' submissions from Mr Hannaford's time sheets at the various properties. That was the extent of the physical work carried out in country by Mr Hannaford in respect of the stock count.
In so far as Khatambuhl is concerned, the total time recorded for Mr Hannaford included an hour travelling to the properties from his home in Bretti, his office in Gloucester, and a further hour travelling home. This was confirmed in cross-examination.
On the basis of those figures, Mr Howard did a total of 71.5 hours of stock work on all properties across 10, 11, 12, 13, 17, 25, 26 and 27 March 2020. 53.5 of those hours were spent at Khatambuhl. It is not at all clear how much of this was related to the stock count. It is not clear whether this included travel time or not, but it is to be observed that the Wallace's agreed to pay for travel time for station hands from Gloucester.
Mr Hannaford agreed that the delay in getting the stock count up and running was attributable to the breaking of the drought in early February. He said that he did Somerset and Westwood first because, "they were the most accessible cattle to get to initially". He also said that in so far as Khatambuhl was concerned, he was, "waiting for the fencing team to give us some security."
Mr Hannaford agreed that there is no record of any, "reconnaissance or survey carried out by yourself about familiarising (himself) with Khatambuhl, and explained this in these terms:
"….because we, at first, wanted to gather in as much - many of the cattle, and Peter Fry, who was the other fellow who was working up there at the time, knew that country intimately, so it was about mustering and getting enough cattle together so that we could actually start on the process of counting and identifying."
As for what this meant he stated:
"Q. When you say security for fencing at Khatambuhl Creek, that refers, doesn't it, to the fact that quite a portion of the fencing around Khatambuhl Creek had been destroyed in the fires.
A. A certain amount had, yes."
Khatambuhl had a thousand acres of "what you would call timber at the back. You know, from a stock point of view, you wouldn't run a great deal of cattle on that."
Mr Hannaford did not carry out an examination of the boundary and explained why in these terms:
"I couldn't get myself up there anyway because of my health condition at that stage, and I don't ride horses anymore, and so I - there's no way you'd get up there in the four-wheel drive."
He was then asked:
"Q. The extent of your impression of the property and your observations of it were where you could get to in your Land Cruiser or your Pajero or whatever it was.
A. Yep. I could see most of the country that, but I could get up a lot of those ridges as far - it was quite accessible. It's only the, as I said, the high country that you couldn't get into where you'd probably be lucky to get a horse along anyway these days."
Mr Hannaford agreed that cattle dying in a drought like that, disintegrate very quickly. He also agreed that foxes and eagles and other birds would take whatever is left of the carcass.
It was put to him that he did not know how many were left unaccounted for in these terms:
"Q. You don't know how many were there while you were there, do you?
A. What's that?
Q. You don't know how many in total were there, like that, do you?
A. We got--
Q. You got 36. There could be more up there today, you don't know.
A. That's like saying how long is a piece of string.
Q. It is, isn't it?
A. Yes, it is.
Q. You don't know how many cattle were left on Khatambuhl Creek, or Somerset, when you finished the count on 27 March, do you?
A. I knew exactly what was on Somerset, because there was no problem with fences down that way. I knew exactly what was on Westward, and our whole plan was worked around, and that's why we kept going back into those areas, because cattle naturally draw out into the open when their mates disappear on them, and that's how we managed to capture those 37."
The defendants submitted that it is telling that Mr Hannaford failed to mention Khatambuhl.
Mr Hannaford explained that the trip with Ivan to check boundary and realignment, referred to in his invoice, involved him and Ivan going up to the top end of the property, because he:
"…wanted to see what the access was to the top end of the property, which was going on to be the next place we'd go to, and Ivan described, you know, how to get in and which road to take, and whether we could get a tabletop truck in there to get any cattle out that we found up there."
When Mr Hannaford was asked whether they found cattle up there, he said that from May to October 2020 they found 37 heads in about 4 lots. He said:
"They came out and I think there was an eight, and then there was a ten, and then there was twos and threes that came out, because those paddocks had no stock in them. They came out of the bush."
Mr Hannaford agreed that in the northern part of Khatambuhl there was extensive fire damage to the fencing and that the boundary fencing up there was still being fixed when he finished up in the last week of November 2020. The defendants submitted that Mr Hannaford had no idea about the length of the boundary fencing.
The defendants contended that nothing demonstrated more clearly that the stock count was inadequate than Mr Hannaford's evidence that some additional cattle were found on four separate occasions in the months following the conclusion of the cattle count.
Mr Hannaford agreed that if neighbouring cattle could get out of their paddock and start roaming around Khatambuhl, there was nothing to stop KCPC cattle doing the same thing. However, he speculated that, "neighbours would've indicated to us if cattle had of turned up." In this respect, Mr Hannaford said that one neighbour reported a number of cattle up in the high country that he thought belonged to KCPC, but they were never returned.
The defendants highlighted that Ivan disagreed with the proposition that it was unlikely that the cattle would wander away from the areas where they were feeding, saying that they would be looking for extra pasture. Ivan conceded that older cattle would return to where there was good quality feed being put out to them. However, he also stated that some cattle will roam away, and some do not; younger cattle are more likely to walk away.
Ivan stated he asked for daily tallies but never received them and was shocked when he was told of the alleged number of cattle missing.
Mr Hannaford's count is said to have established a shortfall of 343 cows, 100 calves, 163 weaners and 11 bulls. The first indication that the stock count was unreliable came between April and October 2020 when a further 69 cattle, comprising 43 cows, 13 calves, 3 weaners and 10 bulls were "found" on the property.
The defendants submitted that "to be fair to Mr Hannaford" an expectation that he should be able to complete a comprehensive count in the timeframe of his invoices was "optimistic to say the least".
The defendants highlighted that, in cross-examination, Mr Hannaford stated he had suffered stock losses of cattle on his unirrigated property as a result of the drought.
On closer examination of Mr Hannaford's evidence, it is clear that he did not state in evidence that he suffered losses as asserted by the defendants. The effect of Mr Hannaford's evidence was that he did not suffer losses, but he sold his cattle in early 2019 "when the season started to get dire". The evidence, in this respect, is extracted in full below:
"Q. I take it then, during the drought, you would've had some stock losses, because of the force of the drought? [this was excluded from the quote in the defendant's submissions]
A: No, because I run a backgrounding operation, which is buying steers in, and then taking them up to a certain weight, and selling them to the feeder, so I made a decision then, and I basically sold all my cattle when the season started to get dire.
Q. When was that?
A. Um, that would've been in - it went for - that would've been back in 19, early 19.
Q. Early 19?
A. Yeah.
Mr Hannaford agreed that Mr Burke told him that the February 2020 flooding, meant that he was unable to get up onto Khatambuhl for about a week to feed the cattle, but added "they're not all going to die in a week."
The defendants then pointed out that in oral evidence John had a "different view" to Mr Hannaford and extracted the following evidence:
"Q. You reject the proposition, do you, that the cattle were weak at the end of the drought?
A. I reject the fact that we spent an enormous amount of money keeping our cattle alive and, as it turned out, they were 25% less than what we were told they were. So, we never said at any point to the Burkes, "Do not keep the feed up to our cattle." They fed right through to February."
John suggested that so long as you keep up the feed during a drought, weak cattle would not die:
"Q. In any drought there will be a natural loss of cattle. The weak cattle dying, the younger, weaker calves dying, the older, weaker, sicker cows dying, won't there?
A. Yes, if the feed isn't kept up to them, sure."
The defendants submitted that Ivan said that at the time of that meeting it was costing the defendants around $10,000 a week to feed the cattle and that that was "not easy to find in a drought every week". It is not clear what meeting the defendants are referring to but it appears to be the November 2019 meeting.
Ivan agreed that by November it was around $15,000 a week.
The defendants submitted that Ivan rejected the proposition that the Burkes would not have been able to fund the feeding of the cattle over the next few months in these terms: "I disagree with that. We would've been able to find money to keep feeding."
The defendants submitted that the preceding submissions and evidence provides that the Burkes were committed to protecting and maintaining the herd. The Burkes had a long-standing relationship with the Wallace family and were well regarded by the Wallaces.
The Burkes protected the properties from fires that ran through them throughout the second half of 2019 and were acknowledged for that. As late as November 2020, Patricia went so far as to give Ivan a flight centre voucher for $3,000 in respect of his efforts.
The Burkes were honest with the Wallaces about the pressures they were under which is demonstrated by the emails leading up to termination. The fact that the Burkes did not walk out when the 2017 Lease Agreement was terminated, despite there not being an agreement reached about their remuneration, the defendants contend is to the Burkes considerable credit.
In November 2019, Mark and Ivan were both parties to the 2017 Lease Agreement and were directors of Ivamar. [54]
The herd profile to which the 400 head were excess was the herd profile that included 1,222 cows.
The herd representation was made during the November 2019 meeting, when the plaintiffs and the defendants were engaged in commercial negotiations about the termination of the 2017 Lease Agreement and the terms on which the defendants would work for the plaintiffs after the termination. The conduct of its nature bore a commercial character. It was therefore made in trade or commerce for the purposes of s 18 of the ACL.
The herd representation made at the November 2019 meeting was incorrect, as the herd numbers were in deficit and could not sustain the removal of any animals, still less 400 animals, and preserve the herd profile.
The plaintiffs relied on the herd representation made in 2019 in several ways:
1. They agreed that the defendants would be able to sell up to 400 head in December 2019 and retain the proceeds of the sales as their own. [55]
2. They did not require a count of the cattle to be conducted immediately. [56]
3. They proposed to engage the defendants to manage the herd after the termination of the 2017 Lease Agreement. [57]
4. They proposed that the defendants would receive 10% of the net proceeds of the sale of any cattle from the herd between 1 January 2020 and 30 June 2020 and the costs incurred by the plaintiffs in feeding the cattle.
The plaintiffs' will not suffer loss or damage by reason of the entitlement of the defendants under the January agreement.
The remuneration that was agreed for the ongoing management of the herd from the date of termination onwards. If the plaintiffs had not agreed to pay the Burkes for this work, they would have had to pay someone else, most likely Mr Hannaford. After the Burkes left the property, this is precisely what eventuated. Viewed in these terms, there is no rational basis to suggest that the Burkes ought not to be paid their remuneration in full.
The same can be said about the agreement to pay $20,000 to resolve other outstanding disputes, which had nothing whatsoever to do with the size of the herd. This promise was not a loss attributable to any misleading and deceptive conduct on the part of the Burkes.
The agreement to pay 10% of ongoing sales as an incentive was offered in November as a means of enticing the Burkes to stay and oversee. The Wallace's did not suffer a loss as a result of that commitment. It is very much tied to the obligation to remunerate the Wallace's for their work. It follows that the claims made by the plaintiffs for relief in respect of their obligations to pay the Burkes the remuneration due to them, the 10% on any sales, the $20,000 to resolve other outstanding issues must fail.
In relation to the miscellaneous claims and corresponding issues outlined in the JMOI, these were earlier discussed.
By way of contrast, Mr Hannaford was, in fact, assisted by skilled stockmen on horseback, accompanied by dogs and directed by walkie-talkies, who could get to ground that was otherwise inaccessible. It was suggested to Mr Hannaford that there was no record of any reconnaissance or survey carried out by himself to familiarise himself with Khatambuhl. That proposition collides with Mr Hannaford's familiarity with the region and similar properties within it, as well as the layout of Khatambuhl.
Khatambuhl was a large property, but Mr Hannaford adopted a methodology to gather as many cattle as possible. He indicated that Mr Peter Fry was "a fellow who knew the country intimately" and that the objective was to muster and get enough cattle to start the process. Whilst Mr Hannaford's health prevented him from examining all boundary areas, he indicated that by use of 4-wheel drive vehicles, he could see most of the country including getting to the ridges. Mr Hannaford accepted that he was limited in getting to the high country, but he had described the unlikelihood of cattle moving into that area. He ultimately did find, by further search, a limited number of cattle (37) in about four lots when he travelled up to some boundary points at the top end of Khatambuhl from May to October 2020.
Without repeating the earlier summary of submissions of the defendants, a contention was put that too little time was spent carrying out the stocktake. Reliance was placed upon timesheets, invoices, records of meetings, the stress cattle were placed under at Khatambuhl and that various steps contemplated by the stocktake were not taken. For the reasons discussed below, I reject that submission.
It was put to Mr Hannaford that he did not know how many cattle were on Khatambuhl and Somerset when the count was finished. Mr Hannaford replied that he knew exactly how many cattle were on Somerset and Westwood. Mr Hannaford stated that there was pre-testing at Somerset and that he had a written plan for the carrying out of the stock count. Mr Hannaford then proceeded to provide an explanation as to how he had reconciled the number on Khatambuhl.
I will turn to various other propositions that were put to Mr Hannaford but overall my impression was that he robustly maintained that the process he had embarked upon was thorough and was in accordance with appropriate stocktaking methods. Mr Hannaford's print outs from his electronic records were in evidence.
An illustration of his evidence under cross-examination was as follows:
Q. I want to suggest to you that the stock count that you did, at Khatambuhl Creek in particular, did not enable you to track down a very large number of cattle, that were in the bush at the extremes of the property. What do you say about that?
A. Incorrect.
Q. I want to suggest to you, that you were not able to count cattle that had left the property, and gone onto neighbouring properties and neighbouring forest. What do you say about that?
A. I disagree.
Q. I want to suggest to you, that the size and topography and layout of Khatambuhl Creek, required far more attention and time, than the time you record in your sheets, between 10 March and 26 March, which is just to be clear to you and I think you may have it in front of you on pages 23 and 24 of that volume we were talking about for you, five hours on the 10th, five hours on the 12th, nine hours on the 13th, seven hours on the 17th, five hours on the 25th, and four hours on the 26th. I want to suggest to you, that those hours did not enable you to carry out a proper survey of Khatambuhl Creek, for the purposes of carrying out the stock count?
A. I disagree.
Q. The plan that you referred to "the formulae are selling and stock plan", how many pages was that? Was that a ten page written document?
A. It was presented in evidence I assume.
Q. Did you prepare a plan for the stock count of a similar nature?
A. Yes.
...
Q. That's your affidavit of 22 February. Paragraph 10 on page 3, "From 26 February to 27 March, I organised and supervised a stock count of the cattle on the three properties." I don't believe, and I may be wrong, that there is a written plan of attack about how you would go about doing that.
A. I'm very sure there is one somewhere, because it was typed out and sent to John Wallace, as an email.
Q. From you, was it?
A. Yes.
Q. If there is, we'll see what it says.
A. Okay.
I find Mr Hannaford to be a very credible witness. In the absence of a concession by Mr Hannaford or plausible rebuttal evidence by another independent expert evidence called by the defendants suggesting that the time spent and allocation of resources was inadequate or the stock count was inherently flawed in some way, I do not accept that the submissions advanced by the defendants challenging the reliability of Mr Hannaford's work (the count) based upon an analysis of records such as invoices and timesheets or Mark or Ivan's evidence (such as that evidence went to the issue) may be accepted over the evidence of Mr Hannaford.
The defendants' time-based analysis was rejected by Mr Hannaford. Other challenges to the count arising from the evidence of Mark and Ivan in these proceedings as to the adequacy of the count were quite insubstantial. In any event, I reject them.
No complaint was made by Ivan or Mark during the course of the count or its aftermath about the actual methodology used in the count. The high point of the defendants' complaints in this respect was that Ivan asked for daily tallies but did not receive them and was shocked when he was told of the shortfall. However, it was not unreasonable for Mr Hannaford to provide the Burkes his count at the end of the process. There was certainly no proper basis for them to perform a supervisory role. As I will discuss below, their own record keeping had been poor and John had, for some time, then been asking for accurate estimates on cattle numbers.
There was also a criticism of a single dyslexic stockman employed by Mr Hannaford to assist in the count. [58] Mark additionally recited a conversation between himself and Mr Hannaford where Mr Hannaford purported to refuse to sign the daily tally sheet to shift responsibility to stockmen. [59] Mr Hannaford stated the conversation never occurred. [60] Mr Hannaford was not cross-examined on this point, however, Mark was. Mark confirmed his allegation that Mr Hannaford had refused to sign the daily tally but I doubt the reliability of Mark's account. I accept Mr Hannaford's evidence in preference to that of Mark, as Mark's account is implausible given the manner in which Mr Hannaford approached his work and because I have not found Mark to be a reliable witness.
The defendants submitted that there were inadequacies in the count occasioned as a result of Mr Hannaford and his team not examining the far reaches of the properties, particularly around the boundaries or higher areas around the escarpments, ridges, or bush areas. A related submission was that there was extensive damage to fencing and that fencing was still being repaired when Mr Hannaford finally concluded work at the properties in November 2020.
It was submitted that the cattle could have strayed into nearby properties, particularly up in the high country and the cattle could wonder into neighbouring properties. Finally, it was put that the stragglers that were found on four separate occasions, months following the conclusion of the count, was clear evidence of the inadequacy of the stock count.
One significant difficulty with this aspect of the defendants' case was that, as earlier mentioned, a significant proportion of the Wallace cattle were on Somerset and Westwood where boundary fences were not affected by the fires or flooding. [61] As Mr Hannaford observed, there was no reason to suppose that any cattle were lost on those properties from that factor. Mr Hannaford, in cross-examination, stated he knew exactly what was on Somerset because "there was no problem with fences down that way".
Mr McLoughlin gave evidence that Westwood was partially a flat grazing property and partially hilly and timbered. He said there were no fires on Westwood, there was hand feeding and water was available to the cattle. If the gate from Westwood to Ronny Murphy's property had been left open, to get to the Nowendoc River, the cattle on Westwood would have had to leave guaranteed feed and water on the Manning River flats to cross several steep timbered ridges in very hot conditions. [62] Such a departure from Westwood is implausible.
On the evidence, it was only at Khatambuhl that loss of wandering cattle was potentially relevant. However, I do not consider that, even on that property, cattle escaping to other properties, particularly in significant numbers, is, on the evidence, a reasonable proposition.
Ivan had a property which shared a boundary with the Khatambuhl and Westwood properties but never informed John that any Wallace cattle had gone onto his property.
John was in contact with other neighbours of the Khatambuhl property and none of those neighbours had reported that any Wallace cattle were on their properties except Rolf Kern who informed John and Mr Hannaford that there were a few cattle at the top end of Khatambuhl creek that may have been Wallace cattle.
In June 2020, John set up two motion sensitive cameras in the northwest of Khatambuhl, but no cattle recorded by those cameras were identified as Wallace cattle.
On 7 August 2021, John rode through two neighbouring properties of Khatambuhl, one to the northeast, and one to the north, however, did not see any Wallace cattle.
Although the boundary fences on the Khatambuhl property were damaged, they were in remote areas where the cattle were less likely to go. Most of the cattle on the Khatambuhl property remained near the feeding points and the available sources of water. In November 2019, the cattle that had been grazing in areas that were approached by fires had been allowed to move away from the fires through gates that were left open to give access to lower paddocks.
As to the proposition that the cattle had strayed into rugged or high country or into areas where there was bush, I consider the following aspects of Mr Hannaford's evidence to be compelling in this respect:
1. He was cognisant of the possibility of stragglers and went back over the top of the Khatambuhl property a number of times to pick up cattle that might have come out of the bush after the other cattle had been removed.
2. He thought it was highly unlikely that a lot of cattle were still stuck up in the bush at the high end of the Khatambuhl property because any such cattle would come out once the other cattle have been removed and Mr Hannaford's team did find the cattle that came out later and went back over the country a number of times.
3. During the cattle count in February and March 2020, Mr Hannaford was aware that some animals might avoid mustering by remaining in the bush, however, he took steps to find and collect such stragglers at that time.
4. By December 2019, the cattle on Khatambuhl were already accustomed to being hand fed and were unlikely to use energy to go away into rugged country where there was no water.
5. Cattle would not have gone up into the tough high country of Khatambuhl because there was no water up there and the country to which the cattle would had to have moved was rugged and uninviting.
6. It was put to Mr Hannaford that cattle might wander off into the bush and die to which he gave the following convincing evidence:
"Q. What about when the cattle wander off into the bush and die there?
A. Yeah, but, I mean, you're suggesting that the cattle are too weak to go anywhere. Why are they going to go and walk up steep mountains into the bush, and disappear into the hills?
Q. They head off because -
A. Where there's no -
Q. - they're lost -
A. No, no, they're not lost. They go where there's feed, and when they have the strength to go. If they don't have the strength to go, they will not traipse up great mountains, and if there is no water in those mountains - and you've already suggested that the water was a problem - um, why are they going to go into areas where they're going to disappear into the bush?"
The remaining issue, raised by the defendants, was that further cattle were located after the count prior to Mr Hannaford's departure.
It is true that Mr Hannaford continued to work on the properties until November 2020 and rounded up a further 69 head between April to October 2020.
Mr Hannaford, in his affidavit of 22 February 2021, stated that in May 2020 he located 9 bulls and in August 2020 he located 17 cows, 7 calves, 3 yearlings and a bull. Mr Hannaford later clarified, in his affidavit of 10 March 2022, that those additional 37 cattle found after the count was concluded were in fact found at various times up until October 2020 when the last 14 of the 37 were located at Baxter's creek (located at the Khatambuhl property).
Mr Hannaford also indicated that 19 further cattle were found in April 2020 on Khatambuhl (13 cows and 6 calves). Additionally, another 13 animals were recovered, however it is unclear on which of the properties they were found. It would appear from the evidence that all but 23 of that cattle were found on Khatambuhl. [63]
In summary, 33 cattle were confirmed by Mr Hannaford's affidavit of 22 February 2021 and 10 March 2022 to have been found at Khatambuhl while it remains unclear which of the properties the remaining 36 cattle were found.
Mr Hannaford gave a plausible explanation as to why the 37 cattle were not caught by the earlier count in addition to the explanation he gave for Westwood as follows:
"Q. 37. They stayed there for months, until August, September, October, didn't they?
A. They stayed there for months because they had never come out over the time. They were what we call, "Clean skins". There were two to three year old calves that had grown up that hadn't been cut, um, there were heifers there big enough to join, that came out of those cattle, so they were cattle that, due the fact they hadn't been mustered correctly, had always disappeared at the sound of a bike, or vehicle.
Q. You don't know how many were there while you were there, do you?
A. What's that?
Q. You don't know how many in total were there, like that, do you?
A. We got
Q. You got 36. There could be more up there today, you don't know.
A. That's like saying how long is a piece of string.
Q. It is, isn't it?
A. Yes, it is.
Q. You don't know how many cattle were left on Khatambuhl Creek, or Somerset, when you finished the count on 27 March, do you?
A. I knew exactly what was on Somerset because there was no problem with fences down that way. I knew exactly what was on Westward, and our whole plan was worked around, and that's why we kept going back into those areas, because cattle naturally draw out into the open when their mates disappear on them, and that's how we managed to capture those 37.
Q. Six months later.
A. Now, how many have come out since?
Q. Six months later? Six months, March to October.
A. Yeah, yeah, that's right. How many have come out since? This is two, three, two years ago."
There is, therefore, a rational basis for the relatively small number of cattle not caught by the count being found at a slightly later time. The significance of this is twofold. First, these explanations point against propositions that the original count was unreliable. Secondly, they indicate that, as Mr Hannaford put at the end of his answers in the extract immediately above, it is quite improbable that there are any cattle not accounted for by the count, when the additional 69 cattle are taken into account.
It follows then that the count may be treated as a reliable estimate of the number of cattle at the time of the count, if adjusted by the number of 69 cattle found at various times during the period Mr Hannaford worked on the properties, up to November 2020. In coming to that conclusion, I have also had regard to the various factors pointed to by the defendants as a possible explanation for any shortfall in cattle as against the herd profile in the 2017 Lease Agreement which I will discuss below.
Those considerations as to the cattle count represent the logical starting point for the consideration of whether there was a deficiency in the number of cattle on the properties as at the date of the termination of the 2017 Lease Agreement. The number of cattle on the properties identified by the count, adjusted by the number of later cattle found between April and May 2020 was 821 cows, 456 calves, 457 weaners and 10 bulls. The total number of cattle except bulls was 1734. If bulls are included the total herd profile was 1744. To that total must be added the 69 cattle subsequently found which gives a total adjusted count of 1813 cattle. I will return to further dissect those tallies, but it is clear in the face of the adjusted count that there is a significant shortfall in the herd profile in the 2017 Lease Agreement.
The defendants contended that the plaintiff's case must be understood as representing allegations of serious misconduct. It was suggested that the plaintiffs had alleged active wrongdoing whereby the defendants had "effectively converted or stole cattle that they say was worth well in excess of $500,000". That contention was made upon the basis that, if all other possibilities were excluded, that must be the effect of the plaintiffs' submissions. The other possibilities alluded to were that the cattle did not die, did not wander away, had ample feed and water and had survived the drought. Emphasis was placed upon the longstanding positive relationship between the Wallace and Burke families and the unlikelihood of the Burkes engaging in wrongdoing by removing a large number of cattle from the properties.
From these propositions there developed a contention that the plaintiffs' needed clear and strict proof of the allegations of fraud, conversion or theft and that the plaintiffs could not make good these allegations on the basis of inexact proof, indefinite testimony or indirect inferences.
As a broad proposition, the defendant's reliance upon s 140 of the Evidence Act and their discussion of general legal principles in that respect (see [229] of this judgment) may be accepted as a matter of legal principle as long as they are understood to be directed to the onus of proof as opposed to the standard of proof. The state of satisfaction required, in that respect, will be greater where, for example, the gravity of the matters alleged is more serious such as criminal conduct or fraud.
A difficulty confronting the defendants in their reliance upon what, in substance, was the application of Briginshaw principles [64] and, in that respect, the necessity for clear or cogent or strict proof is that the plaintiffs' neither placed reliance upon fraud, or serious misconduct constituting theft or conversion in their pleadings (regarding the shortfall of cattle) nor advanced any such proposition in their submissions in relation to the shortfall of cattle. [65] This no doubt accounts for the way that the defendants constructed their submissions to assert that the plaintiffs' were alleging active wrongdoing, because excluding other considerations such as the cattle wandering off, the Court was left with "the only possible reason to account for the deficit as [being] active wrongdoing on the part of the Burkes".
However, the plaintiffs' submissions proceeded upon the basis that the defendants did not, in substance, have proper accounting for the number of cattle on the properties and, therefore, inadequate control over or management of them.
I agree with the submission advanced by the plaintiffs that the defendants' position as at the November 2019 meeting was itself incompatible with an allegation of dishonesty as they had asserted that, at the time of the termination of the 2017 Lease Agreement, there was an excess of cattle over the herd profile in that Agreement. I have found that the asserted excess by Mark, at the time of the termination of the 2017 Lease Agreement, was 400 cattle.
Before I turn more closely to the state of the herd numbers as at time of the November 2019 meeting, it is also important to return to the judgment in Weissensteiner v The Queen (1993) 178 CLR 217 upon which the defendants had placed reliance. The relevant passage of that judgment is at par 227 in the judgment of Mason CJ, Dean and Dawson JJ as follows:
"We have quoted rather more extensively from the cases than would otherwise be necessary in order to show that it has never really been doubted that when a party to litigation fails to accept an opportunity to place before the court evidence of facts within his or her knowledge which, if they exist at all, would explain or contradict the evidence against that party, the court may more readily accept that evidence. It is not just because uncontradicted evidence is easier or safer to accept than contradicted evidence. That is almost a truism. It is because doubts about the reliability of witnesses or about the inferences to be drawn from the evidence may be more readily discounted in the absence of contradictory evidence from a party who might be expected to give or call it…"
The application of that principle in the present matter does not assist the case for the defendants. At the time of the termination of the 2017 Lease Agreement, the Burkes' had operated under the lease for 2 years and 4 months. They had been in continuous management of the properties for at least 9 years by that time. Accordingly, the plaintiffs had not been in a position for a considerable period of time to independently assess what cattle were on the properties. They were reliant upon the defendants to tell them what the cattle numbers were and where the cattle were located. A herd count was to be conducted by the Burkes and "advised" to the Wallaces (cl 4).
This difficulty was exacerbated by the way the Burkes managed the cattle, as will be discussed below. Many of the cattle did not have functioning NLIS tags and there was movement of cattle from the properties to the Burkes properties and vice versa. As I will now discuss, the information provided to the plaintiffs in meetings held in January and March 2019 was scant and inadequate.
One of the assets under the 2017 Lease Agreement was the cattle herd. An obligation under the lease agreement was for the defendants to maintain the herd profile as well as progressively improving the genetics so that "a premium product is produced". It followed that it was the defendants and not the plaintiffs that held the requisite knowledge about cattle numbers at the point of the termination of the Agreement about which evidence could be given as to the state of the herd at the date of termination (beyond bald assertions as to the number of cattle).
As mentioned above, cl 4 of the 2017 Lease Agreement required that the defendants do a full stocktake at 30 June of each year and by 15 August each year will advise the plaintiffs of the count. This clearly indicates that the knowledge of the herd numbers was held by the defendants and that the plaintiffs relied upon their statement of herd numbers in order to keep check on the herd.
There were two meetings in 2019 between the parties prior to the November meeting. There is not in evidence a record of such meetings in 2018. As I will now discuss, there was throughout the period 2019 up to and including the termination meeting, a great deal of concern about herd numbers by the Wallaces (and a justifiable uncertainty after inquiries were made of the Burkes).
The plaintiffs made a compelling submission that the Burkes had little or no reliable records of stock on the properties and did not know how many cattle there were for at least the 2019 period.
In addition to my earlier findings, that conclusion is available for the following reasons:
1. When the 2017 Lease Agreement was terminated, Ivan could say only that the cattle numbers were very close to the herd profile numbers "As far as I was aware".
2. The cattle numbers provided in the January meeting were expressed in vague round numbers. As previously mentioned, the "action plan" was that Mark would provide "overall cattle numbers". He did not do so. Mark's evidence on that question, is a further example of his evidence being unsatisfactory. His evidence in cross-examination in this respect, was argumentative and evasive as illustrated by the extract below:
"Q. Up in item 3, in those notes, it's recorded that an action for you was to provide cattle numbers to KCPC within the coming week. Do you see that?
A. Is that on the next page?
Q. It's three quarters of the way down on page 1, 1206.
A. Okay. Can you repeat your question again?
Q. An action item for you
A. Oh, okay, sorry.
Q. was to provide cattle numbers to KCPC within the coming week?
A. Yes, and I think not sure what the reply would've been, but
Q. But is it the case that you didn't actually provide any detailed numbers?
A. KCPC cattle numbers are what's on the lease. No more, no less.
Q. Which is 1222 cows?
A. No. 1122 cows.
Q. Isn't it 1222, as on the front page?
A. No, I don't believe so.
Q. They wanted to know what your overall numbers were, and there was an action item for you to provide that information. Is that right?
A. It was none of their business.
Q. So you didn't provide it?
A. Um, we might've given some brief numbers. I don't recall."
1. The numbers on Annexure A provided by Mark at the 20 March 2019 meeting were not reliable:
1. Mark was unwilling to concede that the note on that document, "150 old cows culled since last meeting" was certainly an accurate description of what had happened, and he speculated that the note could have been carried over from an earlier document in error, but he was not sure whether it was a mistake or not.
2. The numbers for cows were rounded and not necessarily reliable; they were "reflective" of what Ivan would have told him at some time as regards the cattle on Khatambuhl and rounded estimates as regards the cattle on Somerset. Mark conceded the numbers involved speculation.
3. The numbers for calves on the document were merely estimates, just projections that did not have any close connection with the calves that were born or to be born.
4. The numbers for weaners on the document were also merely projections of what the numbers might be. [66]
1. The plaintiffs further submitted that the defendants moved cattle around eight different properties available to them, three belonging to the plaintiffs and "five Burke properties".
2. Mark agreed that there would have been separate PICs in the NLIS for each of the Burke properties that he listed. One of the reasons that the Burkes bought or leased the other properties was to have additional space for cattle in order to relieve the pressure on Somerset in the drought conditions.
3. As previously mentioned, the Burkes did not record in the NLIS any movements of Wallace cattle off the properties when they moved them to one of the Burke family's properties. [67] Nor did the Burkes record any return of Wallace cattle to the properties. For example, although the Burkes stated that they delivered 30 head of cattle to Khatambuhl on 5 March 2020, [68] they did not cause the movement of the cattle to be recorded in the NLIS or inform the Wallaces of the movement. [69] The movement is absent from the NLIS records of movements to the Wallace PIC in the period from 1 January 2020 to 31 December 2020 obtained by Kirstie Wallace on 25 July 2021. [70] I accept the submission of the plaintiffs that it was not possible to have determined what stock was on the properties from the NLIS records.
4. As to the representations as to cattle numbers at the November 2019 meeting, I note that the first italicised portion of the MOU response, appearing earlier in this judgment, demonstrates that the following representations were made by the Burke's in that communication:
1. The Burkes informed the Wallace's in early January 2020 that they had done a stocktake on 29 November 2019.
2. Any such stocktake was carried out after the November 2019 meeting.
3. The Burkes asserted that the livestock numbers on 29 November 2019 were in excess of the lease values.
4. Although the Burkes adverted to the possibility of losses after 29 November 2019, they did not state that there had been any losses between 29 November 2019 and the MOU response on 9 January 2020. I accept the submission of the plaintiffs that the Burkes implied that there were still cattle in excess of the 2017 Lease Agreement values.
1. Nonetheless, when Mark was cross-examined about the asserted stocktake on 29 November 2019, he said that it was a "rough estimate" based on Ivan's records. [71] Ivan gave evidence that he did not have figures for the cattle on Somerset and that he did not know for sure how many cattle were on Khatambuhl. [72] It was common place for the evidence of Mark and Ivan that, when challenged upon estimates, as to cattle numbers, they would indicate a lack of personal recollection and defer to the other. I agree with the submission by the plaintiffs that the estimations of cattle numbers via a stocktake on 29 November 2019 were unreliable. I also agree that the estimates given as to herd numbers by the Burkes in the November meeting, by that account alone, were even more unreliable.
2. It follows that, the Burkes had no reasonable basis for their representation that the herd profile was intact in November 2019.
I accept the submission of the plaintiffs that there is no reliable basis, on the evidence, to conclude that the herd numbers on the properties at the end of November 2019 were equivalent or greater than the herd profile specified in the 2017 Lease Agreement. [73] There is no proper basis to accept the assertions of the Burkes during the November 2019 meeting of the parties as to cattle numbers.
In my view, the various estimates are for cattle numbers provided by the Burkes up to and including the MOU response (where they again assert 400 excess) are unreliable and should not be used as a basis for the assessment of cattle numbers during the operation of the 2017 Lease Agreement up to the time of the termination of that agreement or for that matter to the time of the giving of the MOU response.
However, what is reliable is the cattle count conducted by Mr Hannaford as adjusted by the cattle located during the balance of his work (April - October 2020). Upon the basis of that count, the deficit in cattle, when viewed against the herd profile specified in the 2017 Lease Agreement, was as follows:
1. When the plaintiffs carried out the cattle count in February and March 2020, the herd numbers (taking into account 65 sales (57 cows, 3 weaners and 5 bulls and one confirmed death of a cow during the count) were in deficit as follows:
1. 343 cows;
2. 100 calves;
3. 160 weaners;
4. 14 bulls.
1. Between April 2020 and October 2020, the first plaintiff found a further 69 head (43 cows, 13 calves, 3 weaners and 10 bulls). Consequently, the final deficits were as follows:
1. 300 cows;
2. 87 calves;
3. 157 weaners;
4. 4 bulls,
making a total shortfall of 548 head.
I will return to the implications of the sale of 309 cattle in December 2019 later in this judgment.
If the Burkes' estimate of cattle numbers on and from 1 December 2019 (or on any other occasion where such estimates were given during the year 2019) were, as I have found, unreliable, then there is no direct evidence of the number of cattle on the properties as at the date of the termination of the 2017 Lease Agreement. The plaintiffs sought that the Court infer that the deficit of 548 cattle as derived from the count of cattle in March 2020, adjusted in the ways discussed above, constituted the deficit of cattle in the herd profile under the 2017 Lease Agreement as at the date of the termination of that agreement.
A conclusion of that kind cannot be reached on the basis of possibilities. It is necessary for the plaintiffs to establish that the shortfall is more probable than not: Bale v Mills [2011] NSWCA 226 at [73] (Allsop P, Giles JA and Tobias AJA).
A central feature of the debate between the parties, in that respect, was whether the combination of drought, fire and flood constituted circumstances which made any deficit in cattle as at the date of the termination of the 2017 Lease Agreement no more than a mere possibility given those intervening factors (out of the hands of the Burkes) operated to create the shortfall later found in 2020. The defendants contended that the herd was under threat at the time the lease was terminated and remained under threat until well after the drought broke in early February 2020.
As earlier mentioned, there was a drought from at least early 2019, (and most likely earlier, in 2018) which continued through a peak in November 2019 to February 2020 when 153mm fell on 9 February 2020. [74] The circumstances of the cattle at the time of the termination of the agreement through to the breaking of the drought was the subject of some evidence of a general character. Mr Hannaford described the cattle at Khatambuhl as experiencing a "hard time" during the drought but disputed that the cattle were distressed. In mid-December 2019, Ivan suggested that the cattle were experiencing heat stress in the week commencing 16 December 2019. On 18 December 2019, Kirstie stated to John, in the course of discussing the purchasing of feed: "yes it is going to be extremely grim but what options are there? Unless you truck the cattle all off somewhere and even Mark said that would put the cattle under more stress". John agreed to a question in cross-examination that the cattle were under 'extreme stress at that time' being November 2019 when the 2017 Lease Agreement was being terminated.
The defendants placed reliance upon the evidence of Mr Hannaford, that a strategy that may be employed to deal with the drought was to remove by sale older and weaker beasts from the property. Indeed, Mr Hannaford indicated that on his own property he sold his cattle. Essentially, his theory was that if numbers were reduced, the monies that were produced through sale can be used to maintain the rest of the herd (which were younger and stronger) with feed and protein supplements.
He did not, however, agree with the proposition that the maintenance of old cattle or weak cattle including calves during a drought may risk a substantial number of them dying. In substance, Mr Hannaford stated that good management would prevent that outcome.
It is clear that the Wallaces, consistent with the 2017 Lease Agreement, determined not to sell cattle but rather to provide feed to the cattle. That task originally fell to the Burke's after the termination of the 2017 Lease Agreement but was subsequently taken over by the Wallace's. That process of feeding the cattle was continuous except for a period where the flood prevented feed getting to cattle at Khatambuhl for about a week. Mr Hannaford denied that cattle would die if deprived of feed for a week.
John insisted that the provision of food at substantial cost would have and did maintain the herd. He indicated that requests had been made of the Burkes to indicate if cattle had died and no reports had been received of that kind. Rather, he emphasised that the Wallace's had been advised that the cattle numbers were in excess of the herd profile in the 2017 Lease Agreement.
It may be accepted that the Burkes did not quit the property after the termination of the lease, provided feed for the cattle for a short period of time and apparently had determined to continue to do so, except for the intervention of the Wallaces who provided feed from mid December 2019. It may also be recognised that the Burkes were involved in protecting the properties during the fires; a fact that was recognised demonstrably by Patricia in November 2020.
I will return to the defendant's case based on drought, fires and floods but as their reliance on those events was, in substance, to demonstrate that the cattle on the properties were lost due to those occurrences, the question that should be first asked, as a matter logic, is whether there was evidence as to the deaths of cattle on the properties between the termination of the 2017 Lease Agreement and the completion of the cattle count.
I agree with the submission by the plaintiffs that the shortfall in cattle cannot be explained by numerous deaths of animals in the herd. As I will discuss below, the evidence is to the contrary effect.
As earlier discussed, after Mr Snelgrove sent a letter to Mark on 30 March 2020 setting out the shortfall in cattle numbers. Three telephone conversations occurred between John and Ivan regarding the shortfall.
What is evident from those conversations for present purposes of evaluating the extent of the death of any cattle from the termination of the lease to the declaration of the cattle count (based upon the evidence of Mark and Ivan) was that it was clear that Ivan was surprised by the shortfall. It must follow that he could not previously have seen evidence of large numbers of deaths or noticeable absences of cattle.
What Ivan did in conversations with John was to assert a relatively small shortfall in Khatambuhl based upon loses from 1 December, although he later speculated that the losses may have occurred over a 12 month period.
Ivan's evidence in cross-examination, as to the reliability of the estimates, was unsatisfactory and went more generally to the credibility of his evidence. The following passage of his evidence represents dissembling and evasive evidence and underlines the speculative nature of his estimates:
"Q. Your figures were 37 or 41?
A. Um, 37, 40, or something like that number.
Q. These are numbers that you had not provided to Mr Hannaford during the count. Is that right?
A. Yes, I rang Mr Hannaford and told him what I counted.
Q. When did you ring him?
A. Um, I don't know when I rang him, um, but I did ring him, and it's written down, and there was four here, five here, or something, but I rang Mr Hannaford and told him about the deaths.
Q. Could you be confused about a conversation that you'd had with John Wallace about the numbers of deaths?
A. No.
Q. You don't know when it was that you rang Mr Hannaford?
A. No.
Q. It could've been after the count had been done?
A. It was when they took over the count, and he asked me to give him a ring and tell him how many cattle was that I noticed dead around the place, and I gave him the number, over the telephone.
Q. You'd been patrolling the property and feeding the animals all through December and January, had you not?
A. Yes.
Q. If there had been any deaths, you would've seen them, would you not?
A. Yes.
Q. The figure that you gave Mr Hannaford was all the deaths that you said had happened between 1 December and the end of March 2020. Is that right?
A. No.
Q. No?
A. No. When the drought was really bad I'm not sure of the dates in, say, um, late December/January, when I was feeding cattle up the creek, there was cows getting bogged in dams, and you'd pull them out and they'd be dead next morning, and so forth, from being weak.
Q. Those are the ones you say you counted
A. No.
Q. are they not?
A. No. The ones that I counted were down around the bottom end.
Q. Where's Baxter's in Khatambuhl Creek?
A. It's up, um, the top end, um, of Khatambuhl Creek over John's Delray.
Q. It's the top end?
A. No, it's not the top end, it's over on the if you go up Khatambuhl Creek, you go to the top station, you go left, and if you're going over to Baxter's Creek, you go right.
Q. Is Tommy's in the top end?
A. What's that?
Q. Is Tommy's paddock in the top end?
A. No.
Q. Where's that?
A. Just up from my property.
Q. The bedding ground?
A. Yes, that's just down from the, um, wooden yards at Khatambuhl Creek.
Q. So that's in the top end?
A. No, it's just down from the yards, and around the bottom paddock.
Q. And Bob's Creek?
A. Bob's Creek is, um, over on the left hand side if you're standing at the new steel yards, across the way.
Q. By early April 2020, the only deaths of which you'd informed Mr Hannaford, were these number of around 40. Is that right?
A. But there was a lot more deaths earlier in the thing, up Khatambuhl Creek further.
Q. Did you tell anyone about that?
A. Well, it was only common knowledge. Johnny Wallace was up there every now and then, and they could see how weak the cattle were, and they were getting bogged in the dams.
Q. Did you tell Mr Wallace how many deaths you'd seen?
A. I can't recall that at the moment, no.
Q. Why didn't you tell him about the deaths if you'd seen them?
A. Well, just in conversation we would've spoke about it, but I can't recall saying, "Oh, there was that many dead there", or whatever."
The same assessment may be reached with respect to the estimate of losses given by the Burkes on 15 April 2020.
Ivan conceded that he had not seen 370 carcasses "or anything like that" figure on the properties or Khatambuhl in particular in December 2019 and January-February 2020. When Ivan was pressed that 370 deaths was not a reasonable estimate of deaths, he avoided answering the question directly and deflected as follows:
"Q. If someone were to suggest that as many as 370 had died, you wouldn't think that that was a reasonable estimate, would you?
A. Well, um, there could still be cattle in the head of Khatambuhl Creek, or over in Delray on some of my country that I lease over at Street's I'm missing about 40 head and this weekend as I'd organised I've got cattle over there that's been there for two years that belongs to the neighbours.
Q. It's alive, that cattle that you're looking to bring back. I s that right?
A. What's that?
Q. That cattle that you're looking to bring back, it's alive now?
A. Yes.
Q. We're not talking about dead cattle when you say cattle that's wandered into the bush?
A. No."
Similarly, Mark was unwilling to confirm the estimate of 370 deaths and suggested the cattle may have wandered off. The following represents an unsatisfactory part of his evidence:
"Q. Do you say that you estimated that over 370 cattle died between 1 December and mid January?
A. I didn't say that they were deaths completely. There was cattle that had died. There could've been cattle that wandered off."
In the communication of 15 April 2020, Mark said that the information in that email was "highly likely". His justification was that it was less than 20% of the herd. He conceded that the Burkes had estimated what had died. The Burkes stated in the same email that around 140 cows, 180 calves, 30 heifers, 30 calves, 20 weaners and 4 bulls "had died from the 1st December 2019 up until mid January 2020…". If an adjustment is made for the double counting of calves, the total is 374. However, the estimates variously given by the Burke were inconsistent and no basis for them was ever properly provided to the Wallaces or this Court. More significantly, I agree with the submissions by the plaintiffs that it is impossible to reconcile the assertion by Ivan that there were deaths in December 2019 and January 2020 with his statement in cross-examination that there were no deaths prior to 30 January 2020. [75] This is extracted below:
"Q. I put it to you that at that time you never told him anything about any deaths on the properties prior to 30 January.
A. There wasn't any deaths."
The evidence of the Burkes, with respect to their estimates of death, can be compared with what information they were or were not communicating during the period in which the estimates of death relate. There was no communication to the Wallaces in December 2019 or January 2020 that large numbers of cattle were dying. The contrary was the case, as Mark assured the Wallaces in the January meeting that the cattle numbers were at least intact. Further, Mark's own evidence was that it appeared to him that most cattle were present in early January 2020 although it was difficult for him to tell.
My overall assessment of the credibility of the Burkes evidence, in this respect, is that their estimates for the death of cattle from the termination of the agreement until the count are unreliable and cannot be accepted.
Further, there is countervailing evidence as to the deaths of cattle.
Mr Hannaford and his stockmen were on the lookout for the remains of dead cattle and found carcases of about 30 dead cattle, which Mr Hannaford assessed to have died between 5 and 10 months before December 2019. It is obvious that Mr Hannaford would have seen many more carcases if the shortfall of more than 500 animals had been the result of deaths. Mr Hannaford did not see evidence of cattle deaths that would have occurred in December 2019 or January 2020 neither near feeding and watering areas that the cattle would have been in during drought conditions, or in the bush after wandering away.
The evidence that any animals had died during December 2019 and January 2020 after being bogged in dams is limited and doubtful. Ivan agreed in cross-examination that only a few cattle were bogged in dams.
It is only speculation by the defendants that the herd may have fed on poisonous plants after rain came. Mr Hannaford rejected the proposition that the herd was in danger from eating toxic weeds when the drought broke. There is no evidence that any animals did eat toxic weeds or died from having done so.
The absence of evidence of the deaths of cattle in the period from 1 December 2019 to the end of the cattle count, was not overcome by the defendant's reliance, in general terms, on the existence of a lack of water and feed on the properties during the drought. While the drought clearly had distressed the herd, the evidence does not sustain that there was an absence of water and feed on the properties during the drought.
The evidence discloses that there was enough water available to the herd in December 2019 and January 2020 to keep the herd alive until the drought broke, as follows:
1. The properties had a large number of dams on them. There were approximately 14 dams on Khatambuhl and as many as 20 dams on Somerset. [76] The dams on the properties were of varying depths, but some were very deep and did not run out of water. [77]
2. When Mr Hannaford visited the properties in January 2020, he saw water in dams on Somerset and Khatambuhl and water holes in the creek itself where cattle could drink. [78]
3. On 23 December 2019, Mark told Kirstie that there was enough water in the dams for a few months. [79]
A similar conclusion may be reached with respect to the availability of feed for the herd.
As earlier mentioned, the Burkes provided feed to the herd in the first two weeks of December 2019. The Wallaces then took over supply of feed for the herd and purchased a large amount of feed from early December 2019 onwards, spending $471,393 until mid-March 2020.
The amount of feed purchased was, in fact, advised by Mark. Mark also advised on the type of feed and various sources for it. Kirstie made it clear to Mark that the Wallace's would pay for necessary feed in December 2019. On 10 December 2019, Mark assured Kirstie there was sufficient feed. By late December 2019, 60 bales of hay were arriving per day and additional pellets were being sourced. By that stage, Mark was advising that the feed situation as "okay" although the cattle had not been putting on as much weight as he would have liked. The hay was being driven up to more remote areas. John visited Khatambuhl from 19-21 January 2020 and did not see cattle that were severely emaciated.
Finally, whilst Mr Hannaford had suggested that a methodology in handling the drought was to sell down the herd, he acknowledged that the alternative course (no doubt more expensive) was to purchase feed to keep the animals alive.
It follows that the defendant's contention that the shortfall could be explained, in whole or substantial part, by the death of cattle in the herd on the properties between the termination of the 2017 Lease Agreement and the cattle count (whether caused by drought or otherwise) is not supported by the evidence.
The defendants also relied upon a number of additional factors which might account for the loss of cattle, one of which was that cattle may have wandered away into the bush or onto other properties. I have earlier rejected those considerations as factors which undermined the reliability of the cattle count. The same evidence is strongly against the proposition that the shortfall in the herd can be explained by cattle having wandered away from the properties, particularly Khatambuhl.
The evidence sustains the conclusion sought by the plaintiffs that the shortfall of cattle cannot be explained by cattle from the Wallace herd going into properties neighbouring Khatambuhl or cattle from the Wallace herd going into the bush areas at the top end of Khatambuhl. In the latter case, the cattle that did go into those areas were retrieved and mustered either in the February-March 2020 cattle count or the subsequent musters up to October 2020. In any event, those factors do not undermine the reliability of the cattle count.
There were some other factors brought to account by the defendants in meeting the claim that there was a shortfall in the herd as at the date of the termination of the 2017 Lease Agreement which it is appropriate to address at this juncture. Those were as follows:
1. The plaintiffs were in breach of the lease in failing to carry out a herd count on or before the November 2019 meeting.
2. The plaintiffs failed to carry out any stock count until March 2021.
3. The plaintiffs have failed to provide the details of any subsequent counts of cattle.
4. The plaintiffs failed to call Mrs Wallace.
I have earlier summarised the defendant's submissions with respect to these matters and do not repeat that summary here, but I will deal with some salient points.
The first two factors relied upon by the defendants appear to overlap and have the following features:
1. The failure to undertake the stock count upon termination of the 2017 Lease Agreement is a material matter in evaluating whether the plaintiffs had established a deficiency in cattle numbers, for the purposes of s 140(2) of the Evidence Act. A contemporaneous stock count would have established, one way or another, the size of the herd at the time of the termination of the 2017 Lease Agreement. The plaintiffs failed to take action which they knew they had to take and was available to them to establish the herd size.
2. The plaintiffs failed to undertake the stocktake until March 2020, almost 4 months "after the termination and the time mandated by clause 10." By that stage, the drought had broken and parts of Khatambuhl were the subject of flooding.
The terms of cl 10 of the 2017 Lease Agreement have been earlier set out in this judgment.
It was common ground that the conditions for the termination of that agreement existed in November 2019 because the defendants had not made lease payments in full for two consecutive months without the prior written consent of the plaintiffs.
It was suggested by the defendants that the lease may have been terminated without notice in those circumstances. That was not a matter of debate but there must be some real doubt about that proposition as the first paragraph of cl 10 does not speak in those terms but rather suggests that a condition for the termination of the 2017 Lease Agreement by the plaintiffs was a default in lease payments. It is, however, unnecessary to determine that question because I have found that there was a mutual termination.
As mentioned in the above summary of the defendants' submissions, it was further suggested that upon termination of the 2017 Lease Agreement it was incumbent upon the plaintiffs to immediately undertake the herd count. This was said to arise by virtue of the second paragraph of cl 10.
There are arguably two difficulties with that proposition. First, the second paragraph of cl 10 establishes, as a pre-condition for the herd count, that "either BF or WF terminates this agreement". The agreement does not appear to contemplate a mutual termination. On this basis, cl 10 would not have compelled either party to undertake the stocktake at the point of termination. In any event, it should be noted that either party may have instigated the herd count.
Secondly, both parties proceeded upon the basis that the herd count would not occur until a later time at the beginning of 2020. At the time of the termination of the 2017 Lease Agreement, it had been declared by the Burkes that the herd size was in excess of the herd profile. That was the representation made by the defendants and the plaintiffs acted upon it, so much so, that 309 cattle were sold in December 2019. [80] In any event, the defendants asserted that a stocktake was completed as at 29 November 2019 in their MOU response and that it had been agreed that the livestock numbers at the time were "in excess of the lease values", although, as I have found, the numbers provided, by the purported stocktake, were unreliable and inaccurate. To that it may be added that Mark gave evidence that the Burkes did not have time in late 2019 to carry out a stocktake. The position was no different for the Wallaces who were attempting to grapple with the aftermath of the termination of the 2017 Lease Agreement and the maintenance of the herd during the drought.
The evidence of John in this respect is telling:
"Q. It effectively picked up the language that had been adopted in the earlier leases, and the record speaks for itself about that. But one of the things about this lease was that it provided that on termination, there was to be a stock count either before or at the date of termination.
A. Yes.
Q. Had you and Mr [Willock] and your sister discussed the fact that you needed to do a stock take if you were going to terminate the lease?
A. Yes.
Q. Did you take any steps to engage Mr Hannaford or anyone else to do that before you went up there on 28 November?
A. We'd had some discussions with Mr Hannaford.
Q. My question is there was no reason why you, with your resources, could not have engaged anyone to do a stock count either before or on or shortly after 28 November. That's got to be correct, hasn't it?
A. Could have. We could have organised a stock take, but on the basis that Mr Mark Burke had told us a number of times that there was the stock were all intact, and there were excess numbers. He also said on the 2nd in his MOU that a stock take was done on the 29th, the day after he wrote to us and told us that a stock take had been done the day after.
Q. That was after you did the deal, wasn't it?
A. They were his words.
Q. That was after you did the deal, wasn't it?
A. Yes.
Q. I want to suggest to you that you did not rely on anything that Mr Burke said about the stock in delaying the stock count. What do you say about that?
A. I say Mr Burke from the time we engaged back in the start of 2019 we'd asked him to confirm the numbers, he constantly confirmed the numbers were
all intact plus there were excess. We took his representation that all the cattle were there plus some, that's why we gave permission to sell up to 400.
Q. May I suggest that if ascertaining the amount of stock on hand at 28 November, or on the date of any termination, was important to you and the Wallace family interests, you would have arranged for that to be done at the time you terminated the lease; correct?
A. No."
The defendants were critical of John's explanation in cross-examination as to why he had not conducted a stocktake until February/March 2020, namely, that the plaintiffs had been informed on a number of occasions that there were excess numbers of stock. It was said that this was typical of answers given by John of blaming the defendants for the plaintiffs' own failures, but that criticism is unfair and the position was in fact as described by John.
The terms of the January agreement do not contradict the earlier conclusion reached in this judgment, that the parties varied the terms of the 2017 Lease Agreement so as to provide for a cattle count in February/March 2020. Rather the January agreement confirms that conclusion by its terms. The January agreement provides for the stock count commencing in late February but otherwise preserves the terms of cl 10 of the 2017 Lease Agreement.
Further, in the January 2020 email, John wrote to Mark and identified that the stock count would be conducted late February "with any adjustments to be agreed and made per Clause 10 of the Lease". The communication also stated that the Wallaces would be appointing Mr Hannaford to assist with the cattle sales and managing the sale of Somerset. It was suggested that the Burkes would work with Mr Hannaford to "organise the cattle, review feed reqs, prepare for the stock count on the 27th Feb…".
In April 2020, Mark sent an email to Mr Snelgrove in which he mentioned the livestock numbers on termination of the lease were to be completed immediately before or immediately after the termination of and from 1 December 2019. Having said that, however, he stated "it was physically impossible to do this at the time due to the fires, the destruction of fences, lack of water, heat and physical condition of livestock to move them long distances". Nor is there an occasion before June 2020 when the Burke's complained about the cattle count being delayed until February/March 2020 even though they did complain, as I have mentioned, about their level of involvement in the cattle count and about one dyslexic stockman.
In my view, the above analysis of the evidence bearing upon the operation of cl 10, discloses that the Burkes and Wallace's expressly, or at least implicitly, agreed to vary the terms of the 2017 Lease Agreement so as to vary the term requiring that "a herd count [be conducted] immediately prior to or on the date of termination." In my view, this approach is to be preferred over the first mentioned consideration whereby the clause would have no operation because of there being a mutual termination.
The third proposition advanced by the defendants as to a failure to provide details of a subsequent count is unclear both in its own terms and as to its connection to a breach of contract. In any event, whilst there was no evidence of a subsequent cattle count, it was plain that Mr Hannaford continued to search the properties which ultimately resulted in the additional 69 cattle being found as referred to earlier in this judgment.
Finally, the defendants relied upon what was described as a failure by the plaintiffs to call Patricia. It was submitted the Court should infer that the uncalled evidence would not have assisted the Wallaces. However, if an adverse inference were to be drawn from a failure to call Patricia, it is not entirely clear from the defendants' submission just what inference would be available in that respect and, in all the circumstances, whether it would be a matter of any significance in the disposition of this aspect of the plaintiffs' case.
The inferences sought to be drawn seem to be limited to two matters. The first is that Patricia could have cast a light on the state of the stock prior to "28 November 2020" (which should be properly understood as a reference to the date of the November 2019 meeting). The second is that Patricia would have cast a light upon the trustworthiness and reliability of the Burkes.
As to the first matter, there does not seem to be any real dispute that the herd was experiencing hard or distressed conditions through the drought during 2019 (or at least the latter half of the year) although various expressions were used to describe their condition of the cattle. It is difficult to see what further light Patricia could have shown upon the state of the herd during a drought unless she expressed a view as to cattle deaths which issue was not raised by the defendants in this respect. Secondly, the trustworthiness of the Burkes relates essentially to the notion that allegations of wrongdoing, such as theft and conversion, had been made by the plaintiffs. I have rejected that proposition.
In substance, the plaintiffs contended that the estimates of cattle numbers given by the defendants were unreliable and that, in fact, no proper and reliable estimation had been made by them. It was suggested by the plaintiffs that the Burkes response was driven by their desire to keep arrangements under the 2017 Lease Agreement afloat, notwithstanding rent arrears and that, in those circumstances, the Burkes had engaged in "wishful thinking" in providing their estimates. The Burkes did not have a proper understanding of the herd, at least from a numerical viewpoint, throughout 2019, even though the existence of the drought might have suggested an imperative to do so. The existence of the drought had created the anxiety in the Wallaces to get to the bottom of the cattle numbers which led John to seek accurate cattle numbers throughout 2019.
Overall, the above propositions advanced by the plaintiffs in those respects were reasonable and do not amount to an allegation of serious misconduct. They may involve allegations of mismanagement or a lack of performance in mentioning the herd. But that is a different issue and of significantly less seriousness. In any event, I have taken the allegation expressed in that way into account, pursuant to s 140(2)(c) of the Evidence Act because the allegation is being made with respect to the reputation of experienced farmers.
It may be accepted that the Wallaces and the Burkes had historically had a close relationship for many years, particularly in the case of Ivan and Colleen and Harry and Patricia. However, it is plain that the relationship soured somewhat after the next generation of the respective families become involved in the management of the properties. Nonetheless, my impression of John's evidence does not correspond to the defendant's submission that John showed antipathy towards the Burkes. There can be little doubt that during 2019 and early 2020 that John experienced frustrations in dealing with the Burkes and ultimately, expressed some concerns about those dealings to which I will return. No part of Kirstie's evidence would suggest any animosity towards the Burkes. None is reflected in her dealings with them throughout what was plainly a difficult experience for all parties at the time of the termination of the 2017 Lease Agreement and in the aftermath of that event. On the other hand, it is clear that Mark was openly hostile during the various meetings regarding the 2007 Lease Agreement and negotiations which then followed. That underlying anger was reflected from time-to-time in the witness box.
It was submitted that, instead of calling Patricia, the plaintiffs chose to make further serious allegations against the Burkes in their affidavit evidence which were not pursued in cross-examination and do not seem to form part of the plaintiffs' case. It was submitted they should not have been made. These matters concerned alleged threats made by Ivan (re: complaint to police about children on roads) and Mark (re: contaminating Somerset).
I have looked closely at the evidence of John and Kirstie when cross-examined upon these issues by the defendants' counsel. I do not consider that it reflects adversely on their evidence otherwise given in the trial, even though their counsel did not cross-examine Mark and Ivan upon the topics. Their evidence is forthright in response to the propositions put to them. The events which are complained of were obviously matters of grave concern to Kirstie and John and there are contemporaneous records of the complaints made including an email from Mr Chester following up on a police report John made. If it is suggested that the complaints were invented in order to damage the Burkes, then I would reject that proposition.
This is not to say that the Court makes an adverse finding with respect to Mark and Ivan in this respect. In the absence of cross-examination on the issues raised by the plaintiffs, no such finding is available.
Finally, the defendants contended that the plaintiffs had failed to demonstrate what had become of the missing animals as at the November 2019 meeting.
Plainly, many of the conclusions reached earlier in this judgment have a bearing upon this consideration and I will not repeat them here.
In considering whether the plaintiffs have discharged an obligation to demonstrate the existence of the missing cattle as at the November meeting, it must be borne in mind the limits on the plaintiffs' abilities to adduce evidence on those issues and any failure on the part of the opposing party to call evidence in response: G v H [1994] HCA 48; (1994) 181 CLR 387 at [391]-[392] ( Brennan and McHugh JJ).
The plaintiffs had sought information as to cattle numbers over an approximately 11 month period in 2019 leading to the November 2019 meeting. Such information as was provided was unreliable. The estimates were speculative. There was an absence of proper records kept by the Burkes, including NLIS. The cattle was moved across nine properties. It was clear that any proposition that the herd was in excess of the herd profile, or even that the herd profile was intact involved, to use expression used by the plaintiffs' counsel, "wishful thinking", particularly in a context where the only apparent means for the Burkes to raise funds to meet the substantial rent arrears under the 2017 Lease Agreement (10 months by the November 2019 meeting) was via the sale of cattle in excess of the herd profile.
Any obligation existing on the plaintiffs to demonstrate not only the existence of the missing cattle but where those cattle may have gone needs to be considered in that light, and further, in the light of the fact that the defendants had the obligation under the 2017 Lease Agreement of maintaining the herd profile and reporting the state of the herd profile at intervals identified by the agreement (by implication), properly and accurately. That obligation included the requirement to identify cattle that were missing, and if missing, the reasons for their loss. This was simply not done over the 2019 period, notwithstanding the anxiety of the Wallaces to obtain such information; no doubt, concerns amplified by the existence of the drought.
The next aspect of this consideration is as follows. I have found the cattle count to be reliable, although the numbers of cattle found need to be adjusted by the additional cattle located after the count between April and October 2020. The finding of those additional cattle during Mr Hannaford's engagement at the properties and the absence of any cattle subsequently found gives a high degree of confidence in the assessment of the final shortfall in cattle arising from the cattle count if it is adjusted to take into account the additional cattle found.
The defendant's contentions that the shortfall in cattle, demonstrated in the cattle count, may be explained, or explained in large part, by the deaths of animals in the herd, by cattle going missing onto other properties by their own motion (as opposed to being mustered or driven to the other properties) or by disappearance in the bush and high areas of Khatambuhl has simply not been sustained on the evidence.
It follows that the plaintiffs are correct to submit that there is no reliable basis on which to conclude that the herd numbers on the properties at the time of the November 2019 meeting were at the level of the herd profile or greater. There are substantial reasons to conclude that there was a shortfall at that time in the amount demonstrated by the cattle count as adjusted by the April to October location of cattle (and with due allowance for cattle sold in December 2019.
On the evidence in the proceedings, a deficit in those terms as at 1 December 2019 was entirely possible, and in the absence of any plausible explanation for the shortfall found later (and there is none) probable. I will turn now to the precise calculation of the deficit which should be taken into account in assessing loss.
The defendant's submissions on the assessment of loss were as follows:
1. The contract provides a clear an unambiguous method for determining the consequences for the Burke's in respect of any deficiency. It provided that after a stock count that was to be made immediately prior to or on the date of termination, the Burkes' would have to pay the market price for any cattle that were less that the cattle profile set out in Annexure II.
2. It follows that the plaintiffs' claim is not a claim for damages, but a claim for an accrued entitlement under the contract. It is clear from that provision that the market price applicable was the market price at the date of termination.
3. Contrary to the 2017 Lease Agreement, the plaintiffs relied upon an analysis by Kirstie based up the market price of the cattle in sales that occurred between 1 April and 21 May 2020, almost 6 months after the lease was terminated.
4. Alternatively, if the claim is framed as a claim for damages arising consequent upon breach of the contract, the defendants are in the same position in any event, as damages are assessed at the date of breach.
5. As a general rule, damages for breach of contract involving a marketable asset are assessed as at the date of breach. In the case of wrongful repudiation of a contract, this is the date on which the injured party accepts the repudiation and terminates the contract: AKAS Jamal v Moolla Dawood Sons & Co [1916] 1 AC 175; Campbell Mostyn (Provisions ) L td v Barnett Trading Co [1954] 1 Lloyd's Rep 65. (See also Golden Strait Corporation v Nippon Yusen Kubishika Kaisha [2007] 2 AC 353 ("Golden Strait").
6. Damages are compensatory. To give the plaintiffs a value that is higher than the market that was in effect at the time of the breach is not compensatory.
There is considerable force in the contention by the defendants that in substance the plaintiffs claim is not a claim for damages but a claim for an accrued entitlement under the contract.
I also agree with the submission of the defendants that the contract provides that the calculation of the value of a shortfall in capital is the market price for any cattle that are less than the herd profile at the date of termination.
The proper construction of the second paragraph of cl 10 of the 2017 Lease Agreement is that the market price will be the market price at the point of termination. The agreement does not expressly state that the market price will be calculated in that way but, when read in context, it is the only construction available given the grammatical connection between the conduct of a herd count upon termination and the requirement to pay for any shortfall at the market price.
Neither the variation to the 2017 Lease Agreement, to provide for a head count in February/March 2020 nor the equivalent terms of the January agreement alter that conclusion. In my view, the only term of cl 10 of the 2017 Lease Agreement that was varied in those respects was the date at which the count would occur and not the term for the calculation of the value of the shortfall. No part of the transactions between the parties with respect to the head count contemplates any variation to that term of the 2017 Lease Agreement. The January 2020 Agreement expressly provides for the continuance of cl 10 of the 2017 Lease Agreement save for the date of the count.
No different conclusion would follow if an assessment were to be made of damages arising from the breach.
The general rule is that damages for breach of contract are assessed at the date of the breach. That rule will yield if, in the particular circumstances, some other date is necessary to provide adequate compensation: Vieira v O'Shea [2012] NSWCA 21 at [44] (per Basten and Maegher JJA with whom Handley AJA agreed).
The plaintiffs contended that it was envisaged that "these cattle" would be sold in 2020 and so the appropriate date is an assessment in 2020 when they were sold. Thus, the value was said to be realised in the future and the plaintiffs lost the opportunity to make those sales later.
However, the cattle to which the plaintiffs are referring in that context must be the cattle which represented the shortfall giving rise to the breach of contract at the point of termination of the contract. The contract itself specified that that breach is to be assessed at the point of the termination of the contract because of the breach. It is common ground, and I have found, that the termination occurred on and from 1 December 2019. Furthermore, just compensation must reflect the value of the cattle at the time of the termination of the lease when the shortfall materialised. Finally, the plaintiffs brought no evidence as to the market for beef cattle in the location or vicinity of the properties as would have been appropriate in the assessment of damages under the plaintiff's case for damages: Golden Strait at [34].
Accordingly, the assessment of compensation for the shortfall of cattle as at the termination of the 2017 Lease Agreement is the market price for the cattle that is less than the herd profile at the date of termination. The actual shortfall of cattle in that respect has been assessed above in this judgment (save for the question of the loss of offspring which will be discussed below). What remains is the assessment of the market price of the shortfall of cattle.
The defendants submitted that the Court may have regard, in that respect, to either the September sale prices or December sale prices for the cattle on the properties.
Both of those sale periods correspond to the ongoing drought but, in my view, the December prices should be used to assess market value at the point of the termination of the agreement. They occurred at a time corresponding to the peak of the drought and at a time proximate to the date of termination (within two weeks of 1 December 2019).
The parties did not address the assessment of appropriate market price arising out of the December sales. I will make a provision for short submissions in that respect in the event that the parties are unable to agree to draft orders reflecting this determination.
As mentioned, there is one further consideration relevant to the losses occasioned by the shortfall of cattle numbers as against the 2017 Lease Agreement herd profile.
The plaintiffs claimed as damages a sum equivalent to lost offspring based upon 300 missing cows having an estimated birth rate of 80%, being 240. The formula of 80% was predicated upon the assessments made by Mark in Annexure A.
Apart from the unreliability of many of the figures given in that document and more generally the defendants calculation of cattle numbers throughout 2019, the figure appears to be purely an estimate and was given in March 2019 at an earlier stage of the drought.
In contrast, Mr Hannaford carried out pregnancy testing at the beginning of the cattle count and found that of 237 cows tested, only 33 were pregnant. That would suggest a percentage of about 14%. If damages were to be assessed on that basis that would be the more reliable estimate on the evidence before the Court. The calculation would be made on the basis of the shortfall for cows found earlier in this judgment, being 169.
However, the defendants advanced a submission which has some real force. It was contended that the appropriate test is the herd that existed as at 1 December 2019 as it is that herd that needs to be assessed (assuming some of the cows were pregnant) whether under cl 10 of the 2017 Lease Agreement or in general damages. That would require an assessment which assumed that the cows would yield progeny after the date of termination. Whilst a pregnant cow may be worth more at that date of termination than cows that are not pregnant, the assessment of market price in accordance with cl 10 of the 2017 Lease Agreement is that of the cows at the date of termination. There is no provision or the assessment of offspring and there is no evidence of the greater value of cows that were pregnant.
In the result, I reject the plaintiffs claim with respect to offspring.
The loss occasioned by the shortfall of cattle shall be assessed in accordance with [478] above and the loss calculated by the market rate as at 1 December 2019 calculated in accordance with the December sale proceeds of cattle from the properties.
The plaintiffs shall be required to bring in Short Minutes making a calculation reflecting that conclusion.
The representation made by the Burkes was, therefore, misleading or deceptive or likely to mislead or deceive.
The representation was made by Mark during the November 2019 meeting, when the plaintiffs and the defendants were engaged in commercial negotiations about the termination of the 2017 Lease Agreement and the terms on which the defendants would work for the plaintiffs after the termination. By its nature the conduct bore a commercial character: Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 at 603 (per Mason CJ and Deane, Dawson and Gaudron JJ); McCormick v Riverwood International (Australia) Pty Ltd (1999) 167 ALR 689 at 695 [30]; All Options Pty Ltd v Flightdeck Geelong Pty Ltd [2019] FCA 588 at [1]-[3] and [95]. It was, therefore, made in trade or commerce for the purposes of s 18 of the ACL.
In response to the plaintiffs' submissions on reliance, the defendants advanced four submissions, as follows:
1. First, in the case of the sale of the 400 head that the plaintiffs were wanting the defendants to "bring" the amounts outstanding under the lease. Paragraph 4 of the MOU referred to, "WF consent(ing) to the sale of up to 400 head in December with the proceeds being used firstly to repay outstanding rent, the balance of the equipment and then any remaining funds are retained by BF." The sale of the 400 head was a means of the Burkes paying outstanding arrears.
This was done, at least in part, and acknowledged by Kirstie on 15 February; when she referred to $149,600 having been paid in January and February 2020.
The plaintiffs written submissions proceed on the basis that, "the Wallaces' believed that there were up to 400 excess head available for sale, Otherwise they would have been giving away their own assets to fund the payment of the arrears." Kirstie's email [which email?] demonstrates conclusively that that was not the case.
1. Secondly, in the case of the contention that there was a deferral of the cattle count, the evidence, is contrary to reliance. As previously submitted, the plaintiffs attended the November 2019 meeting with a clear intention to terminate the lease, which is precisely what they did. They knew they had to carry out the stock count and chose not to do so. There is not suggestion in any correspondence that this was because of what the Burkes said about the herd.
2. Thirdly, in the case of the submission that the plaintiffs only permitted the Burkes to continue to feed the first plaintiff's herd on the basis that it was intact, they had not made any plans to insert a new manager to take over in the event that lease was terminated.
The inescapable conclusion is that they were perfectly content for the Burkes to continue to do what they were doing and had been doing, i.e., keeping the stock alive "in the teeth of a severe and ongoing drought."
1. Fourthly, the defendants submitted it is to be recalled that at the same time that the Wallace's terminated the lease, they indicated that the herd would be sold. It was clearly contemplated that the Burkes would manage that process, a matter that is clear from the terms of the offer. There was no suggestion at that time that anyone else would manage this process. This was a fee that one would naturally expect to be paid in the circumstances.
Additionally, it was submitted that the plaintiffs' proposition, that a deficiency in the number of cattle would have meant that none of these matters would have been pursued by the Wallaces flies in the face of the agreement that protected the Wallaces, namely, the provisions in cl 10 of the 2017 Lease Agreement. Put another way, the Wallaces were always protected by a backstop whereby the Burkes would have to make up the difference in the case of a deficiency in any stock count.
My conclusion is that the evidence discloses that the plaintiffs relied upon the defendant's representation at the November meeting.
As a broad proposition, I accept the submission of the plaintiffs that "it seems impossible that the plaintiffs in those circumstances would have agreed that the Burkes would keep money on the sale of the 309 if they had understood that they were just giving the cattle to the Burkes in effect. So the whole of the arrangement that went forward after that meeting was predicated on the sure, firm assurances from the defendants that the herd profile was there and that there were substantial numbers of cattle in excess of that, such that the defendants could sell up to 400".
That submission was plainly available on the evidence and accords with the findings that I have otherwise made in this judgment. It is also commercially realistic.
Turning to the particular matters referred to by the defendants responsively to the plaintiffs' written submissions, my conclusions are as follows:
1. The contention advanced by the defendants concerning the sale of up to 400 head appears to hinge upon the proposition that the true purpose of the sale of the 400 head was to provide a means of the Burkes paying outstanding arrears.
2. It may be accepted on the evidence that the proceeds from the sale of up to 400 head would be used to defray the outstanding arrears under the 2017 Lease Agreement. However, it is an entirely different proposition to suggest that the plaintiffs would have agreed to such an approach had they not believed that the Wallace's the 400 cattle were in excess of the herd profile. The plaintiffs were correct to suggest that otherwise they would have been permitting the defendants to delve (for sale) into the cattle within the herd profile (producing a breach of the 2017 Lease Agreement) to fund the very payments due by the defendants in rent under the agreement. The proposition is non-sensical.
3. I have earlier rejected the defendants second proposition as to the deferral of the stock count and the circumstances of the termination of the lease. In particular, I have accepted that the termination was mutual and there was an agreement to conduct the count in the following year. The Burkes assured the Wallaces that there were, in fact, excess cattle on the properties. It would have been unnecessary to conduct the count, in November 2019, in those circumstances, particularly where there was a mutual arrangement for a count to be held in only 2020 and there was an urgency to management of the consequences of the drought.
4. The engagement of the defendants to manage the herd after the termination of the 2017 Lease Agreement is consistent with the notion that the herd was intact. Many of the conditions that were established in the aftermath of the determination were consistent with those circumstances.
5. As to the fourth proposition, it is true to say that a fee of this kind might have been expected to be paid upon the continuation of the Burkes management of the property. However, the condition that the defendants would receive 10% of the proceeds of the sale of any cattle from the herd, between 1 January 2020 and 30 June 2020 net] of the costs of sale and the costs incurred by the plaintiffs in feeding the cattle, has as its foundation a conception of the state of the herd within the requisite period and the prospects of sale of cattle in that respect.
Overall, it is a commercially unreal proposition to suggest that the plaintiffs would have proposed or agreed to the sale of 400 head unless the representation had been made giving the assurance that the herd profile was intact.
Given that I have found that an agreement was made in January 2020 in terms of the January 2020 email, it is appropriate to turn to the factors identified by the plaintiffs to establish reliance. It is convenient in that respect to commence the consideration of the cross-claims brought by the defendants in that same context. Three parts of the January agreement that are relevant in that respect are set out below, (acknowledging that there is repetition of an earlier extract:
1. Paragraph 4 of the January agreement provides as follows ("10% incentive"):
"4. As an incentive, from the 1st January - 30 June 2020 only and inclusive, all sales of the cattle will garner the Burkes 10% of the cattle sale prices, less costs of sales (commission/fees/transport) and the cattle feeding costs (including freight & feeding equipment) incurred by the WF.
General estimate of herd
Cows 1,222 @ $750 = $916,500
Weaners 620 @ $850 = $569,500
Calves 556 @ $400 = $222,400
Bulls 29 @ $800 = $ 23,200
$1, 723, 600."
1. Paragraph 6 of the January 2020 Agreement provides as follows (the "management fee"):
"6. Operations management from 1st Dec, WF will pay the BF $ 6,000 + GST per week to cover- (invoices to be supplied with correct info)
a. All labour for both management and casuals to run all the properties across the 7 day week.
b. All workers on -costs- (workers comp, superannuation, over-time etc ..)
c. All equipment (whether it be Burke's or external) and running costs (fuel/R&M/Rego/insurance)
d. This will arrangement be reviewed in April & June based on cattle numbers and general work load
e. BF to provide a weekly activity report
f. WF will be appointing a selling agent- John Hannaford to assist with the cattle sales and managing the sale of Somerset, and leasing of KCPC and Westwood. BF to work with John Hannaford to organise the cattle, review feed reqs, prepare for the stock count on the 27th Feb and review the work program and have a more defined cattle sales program."
1. Paragraph 7 of the January Agreement provides as follows (the "one-off payment"):
"7. 1 off payment WF will pay BF $20,000 to cover all old issues ie/ equipment, hay sheds etc this will be paid prior to 30th June."
(collectively the "January agreement provisions").
I will first turn to considerations of reliance and the claim by the plaintiffs under the ACL to counter the cross-claim.
The primary basis upon which the plaintiffs resisted the defendants' contentions as to reliance and claims made under the ACL with respect to the January agreement provisions was that the plaintiffs did not suffer loss of damage by reason of the operation of the January agreement.
The defendant's submissions in this respect were as follows (following the order in which the January agreement provisions were set out above):
1. The incentive in the form of an agreement to pay 10% of ongoing sales was offered in November as a means of enticing the Burkes to "stay and oversee". The Wallaces could not suffer loss from such a commitment and it is tied to the obligation to remunerate the Wallaces for their work.
2. The clearest demonstration of an absence of loss or damage was the remuneration that was agreed for the ongoing management of the herd from the date of termination onwards. If the plaintiffs had not agreed to pay the Burkes for this work, they would have had to pay someone else, most likely Mr Hannaford. After the Burkes left the property, this is what eventuated.
3. The agreement to pay $20,000 was designed to resolve other outstanding disputes. This had no connection to the size of the herd. This promise was not a loss attributable to any misleading and deceptive conduct on the part of the Burkes.
The defendants also submitted that the 2017 Lease Agreement provided "the clearest and fullest remedy to the plaintiffs in respect of any deficiency in the herd".
Returning to the question of reliance, I do not accept the submission of the defendants that the plaintiffs have failed to demonstrate reliance upon the representations with respect to the 10% incentive.
The 10% incentive had its origins in the proposal advanced by the plaintiffs in the MOU. In my view, it is clear that the incentive offered in 2019 was predicated upon the representation of the Burkes that the herd profile was intact. Numbered par 2 of the November 2019 email referred to the herd profile under the 2017 Lease Agreement immediately following a statement that there was a mutual agreement to terminate that lease (which I have earlier found was in fact the case).
The specification of the herd profile in that paragraph principally performed the function in the Wallaces' proposal of restating provisions of the 2017 Lease Agreement as to the maintenance of the herd profile. This restatement acted as the foundation upon which the provisions in the MOU then following were based.
The 10% incentive was not a generic incentive but one predicated upon the sale of cattle and therefore had a direct connection to whether or not the herd profile was intact because the cattle were being sold from that herd.
John emphasised in his affidavit that he would not have put forward an "incentive agreement" in par 8 of the MOU if he had known there was a shortfall in cattle numbers. He emphasised that he had approved the expenditure of substantial sums by KCPC on providing food to the herd.
The connection between the MOU and the January agreement with respect to the 10% incentive was made clear in John's evidence in cross-examination as follows:
"Q. You had to do that in order to maintain the stock that were there on 1 December; correct?
A. We put in our MOU, we put the proposal of the incentive on the basis that and very clearly on the basis that they had told us that all the stock was there, and there was excess. That's what we put that in. They then responded in that email, which we got on the 9th, saying they wanted 7%, and I agreed to 10% on the basis that their representation was that they would have all the stock in to meet the lease agreements, and they also said they had excess."
Furthermore, the reliance by the Wallaces upon the representation of herd numbers in agreeing to the 10% incentive in entering into the January agreement is demonstrated by the following evidence:.
1. In [36] of his affidavit of 22 February 2020 John states "… I would also not have put forward the incentive agreement in [8] of the MOU Email, if I'd known that there was a shortfall in cattle numbers…"
2. In cross-examination John stated as follows:
"Q. You ended up entering into an agreement with them in 2020 in those terms; didn't you?
A. In January we came to an arrangement on the incentive agreement on the basis that the herd was intact, that the herd numbers, as I confirmed in the evidence, that the cows, calves, heifers and bulls were there, and they confirmed that there was excess. On that basis I then put together the incentive scheme."
1. As I have found, the Burkes made representations as to the herd numbers in the January 2020 meeting. The reliance placed upon those herd numbers in coming to the 10% incentive is obvious on the face of the January 2020 email which was the foundation for the January agreement. In cl 4, which establishes the 10% incentive, the agreement provides estimates for the herd for the purposes of calculating the incentive which are predicated upon the herd numbers in the 2017 Lease Agreement.
2. Further, the value to the Wallaces of the missing animals would have covered substantially any incentive payment that would have been payable to the defendants if the herd had been intact.
3. I also accept the submission by the plaintiffs that it is unconscionable on the part of the defendants to demand a 10% share that had been negotiated on a false basis, requiring the plaintiffs both to give up that 10% and also bear the losses resulting from a shortfall in the cattle numbers.
In short, the incentive payment was underpinned by a larger asset pool of the intact herd. Whether or not the 10% incentive was an enticement to the Burkes to "stay and oversee" or not, it is clear from the above considerations that the Wallaces would suffer loss from any such commitment in the manner described.
A different scenario arises however in relation to the management agreement.
Paragraph 6 of the January agreement provides that the management fee is for all labour, to run the properties across seven days per week, together with worker's on-costs and equipment. The defendants were correct to submit that the plaintiffs have failed to demonstrate loss or damage in this respect. The management fee is simply remuneration for the ongoing management of the herd from the date of termination onwards. I also agree with the submission of the defendants that, if the plaintiffs did not agree to pay the Burkes for this work, they would have had to pay someone else, most likely Mr Hannaford.
I note, in this respect, that I do not consider that a proper basis for any offset has been established as a result of the defendants running their own and Craig Burkes cattle on Khatambuhl and Somerset after the November 2019 meeting, particularly when no specific basis for the claim, in that respect, has been pursued by the plaintiffs.
A similar conclusion may be reached with respect to the one-off payment. The $20,000 was stipulated under the agreement as being to "cover all old issues" which included equipment, hay sheds and the like. In other words, it was designed to deal with outstanding disputes as to property. I do not accept that it had any connection to the size of the herd profile and whether it was kept intact. The promise was not a loss attributable to any misleading or deceptive conduct on the part of the Burkes.
I reject the plaintiff's submissions in this respect in relation to the management fee for the following reasons:
1. For the reasons earlier given, the defence under the ACL was not established.
2. In my view, an estoppel does not arise from reliance as to this term of the January agreement. There is no unconscionability in relying upon this payment notwithstanding the representation, as the payment was for work performed under the contract. There is no other basis for estoppel argued in the plaintiffs' case.
3. The work referred to in par 22 of the cross-claim was performed during the relevant period [between 1 December 2019 - 22 February 2020]. The tax invoices in respect of the same are in evidence and clearly reflect the agreement to perform the work. [81]
4. The plaintiffs contended that the last two invoices for 5 and 13 May 2020 appearing in the above-mentioned table from the cross-claim were issued to Mr Hannaford as the plaintiff's agent and that no liability can therefore arise. However, I agree with the submissions of the defendants that the January agreement is clear. That the agreement was with the Wallaces and the fact that the invoices were sent to Mr Hannaford cannot detract from that fact. Paragraph 6 of the January agreement provides that the Wallaces will be appointing Mr Hannaford as the selling agent to assist with cattle sales and managing the sale of Somerset, leasing KCPC and Westwood. Further, the Burkes were to work with Mr Hannaford to organise the cattle, review fee requirements and prepare the stock count, review the work program, and have a more defined cattle sales program. I reject the plaintiffs' contention in this respect.
For reasons earlier given, a one-off payment has no relationship to the representation, there was no reliance upon it and there is no protection available under the ACL. In my view, no issue of estoppel arises in that respect. The cross-claim in that respect is, in my view, successful.
The oral submissions for the defendants make clear that this claim would engulf the fifth item in [22] of CC1 vis-a-via compensation for non-replacement of a hayshed by the Wallaces. Accordingly, that claim will be treated as not pressed. This concession results in the Court no longer having to consider that claim. As earlier outlined in this judgment, the defendants claimed in CC1, "[a]n order permitting the Cross-Claimants to access the Cross-Defendants' properties for the purpose of retrieving the Cross-Claimants 'plant & Equipment located on the properties". The specific plant and equipment claimed is outlined in a table referred to in [41] of the CC1. The same claim appears in the defendant's closing written submissions as "[t]he plaintiffs should also be required to deliver up the Burkes personal property".
There is limited evidence in support of this claim but in so far as there is evidence from Ivan about certain pieces of personal property, it is uncontested. Apparently, certain items of plant and equipment were not able to be collected after the Burkes were excluded from the properties. The written submissions of the defendants do not deal in any detail with the particular items of plant and equipment listed in [41] of CC1 that were the subject of evidence. Without the Court receiving the benefit of that assistance by the defendants' counsel in that respect, my understanding on the evidence of the plant and equipment that was not obtained by the defendants consisted of the follows:
1. The air compressor,
2. 2 small box trailers,
3. 2 horses,
4. Molasses tank and shed.
The defendants claim for relief in this respect was expressed as a primary claim and two alternative claims; in prayers for relief 5, 6 and 7 of the CC1. No submissions were made on these alternatives. The defendants should have relief as to the specified plant items but the form of relief can be the subject of discussion and, if necessary, further submissions by the parties. That approach will be accommodated in the final conclusion and directions of this judgment.
By prayer for relief 4 of CC1, the defendants sought damages for "breaches of certain lease obligations". Those alleged breaches were particularised at [38] of CC1 which placed reliance upon cl 7 of the 2017 Lease Agreement.
I have some doubt as to whether cl 7 of the 2017 Lease Agreement operates in the manner suggested by this claim as the provision states that where major capital expenditure is required then the Wallaces and the Burkes will "mutually agree" on the expenditure to be made. There was no evidence of such an agreement. The provision also refers to the Wallaces providing new material for replacement fencing but there is an absence of evidence which would suggest a breach in that respect.
In any event, this claim may be dismissed as not being pursued by the defendants. Counsel for the plaintiffs expressly raised in his closing oral submissions that the defendants had raised no submissions about this matter and that he presumed therefore the claim was not being pursued. Nothing further was said by the defendants in their oral submissions or at any other time before judgment was reserved.
The same conclusion, for the same reasons, may be reached with respect to the defendants' silage claim.
In my view, the defendants cross-claim should be resolved as follows:
1. The claim based upon the 10% incentive is dismissed.
2. The claim based upon the management fee is granted.
3. The claim based upon the one-off payment is granted.
4. The claim for the return of plant and equipment is granted in part and subject to resolution of the primary or alternative claims advanced by the defendants.
5. The claim in relation to silage is dismissed.
6. The claim for the breach of obligations by the plaintiffs under the 2017 Lease Agreement specified in [38] of CC1 is dismissed.
Essentially the same conclusion arises with respect to representations made in the January meeting, and in that respect the plaintiffs may have judgment under CC2 although the claim was pursued as an alternative claim with respect to the sale of cattle in December 2019.
By virtue of the January agreement, the plaintiffs had obligations to the defendants with respect to the 10% incentive, the management fee, and the one-off payment. The plaintiffs sought relief from those obligations under the ACL upon the basis that they were induced to take them by the defendants' misleading and deceptive representations.
The Court grants that relief under s 18 of the ACL with respect to the 10% incentive but not the management fee and one-off payment. The defendants shall have judgment under CC1 in those latter respects.
The Court has granted, in part, the defendants claim with respect to certain personal plant and equipment. However, the final disposition of that claim, and in particular, the granting of the primary or alternative claims in that respect will require resolution in accordance with the terms of this judgment. The Court has otherwise dismissed various claims raised by the defendants under the CC1 on the basis that they were not pursued or there was insufficient evidence. Those claims were as follows:
1. Alleged breaches of obligations by the plaintiffs under the 2017 Lease Agreement referred to in [38] of CC1.
2. The claim in relation to silage.
The plaintiffs shall produce Short Minutes of Order reflecting these conclusions and in particular, in that respect, shall calculate damages or compensation in accordance therewith.
In the event that there is any dispute as to those draft orders, the Court will make directions providing for the resolution of the same, on the papers.
The plaintiffs claimed interest from various dates. The parties should confer as to the calculation of interest. The plaintiffs' claim for interest should be reflected in separate and additional Short Minutes of Order representing an agreement as to interest or alternatively the plaintiffs claim in that respect. In the event of a dispute, both parties will be given an opportunity to make submissions about claims for interest.
Upon the basis of this judgment, it would seem to be appropriate to have an apportionment as to costs. However, the Court has not received submissions from the parties in that respect. The plaintiffs should include in the separate Short Minutes of Order the orders sought by the plaintiffs with respect to costs, either as an agreed matter or alternatively as stating the plaintiffs claim in that respect. The defendants will be given an opportunity to propose alternative costs orders. Both parties will be provided the opportunity to make submissions in writing with respect to costs, and call evidence with respect to the same.
JW/2, p 13.
Ibid.
Transcript 7 December 2022, p 174-175.
CB, p 1239
The short form MOU has been adopted because of the description given to the email by Kirstie. However, it should not be taken that the use of that shortform represents a view that an agreement was formed in those terms as such.
CB, p 309
MOU, [5] and [6].
Affidavit of Ivan of 9 June 2021, page 14 [57]; CB, pp 430,431 and 432
This issue was not listed in the statement of issues but emerged during the prosecution of the defendants' case.
It is not entirely clear what the Burke's were referring to in mentioning a livestock trading enterprise although most likely it concerned their understanding about gains to be made by rearing cattle greater than the herd profile. As I will later discuss, there seemed to be a view by the Burkes that this surplus cattle was theirs to sell, whereas the arrangement was for the sharing of gains under the 2017 Lease Agreement.
CB, p 176; JW/2, p 50.
K -1, pp 125-126.
J/W-2, pp 58-59.
J/ -2, p 60.
CB, p 315; Affidavit of Ivan, 9 June 2021, [77].
J/W - 2, p 75-76.
J/W - 2, p 82-83.
Invoices can be found in J/W - 2, p 85-88.
However, the communication appears to be in response to communication from Mr Snelgrove and the Wallace family extending back to 30 March 2020.
J/W - 2, p 102.
J/W - 2, p 103-110.
J/W - 2, p 116.
CB, p 184.
J/W - 2, p 118.
Additional CB, Vol 6, p 18.
Additional CB, Vol 6, pp 18 et seq.
Additional CB, Vol 6, p 20.
CB, p 1480.
Defendants closing written submissions, pp 14-15 (based on Additional CB, Vol 6, p 23-24).
Transcript 6 December 2022, p 142 [10].
As earlier mentioned: CB, p 17 (also FAD [12]-[14]); CB, pp 5-6 (also SOC [12]-[14]).
CB, p 170 [36]; Transcript 5 December 2022, p 47, [47]- 48[2].
John at Transcript 5 December 2022, p 47 [4]-48 [2]; Kirstie at Transcript 6 December 2022, p 109 [16]-[21] and P 111 [28]-[46].
John at Transcript 5 December 2022, p 42 [18] [21] and 64 [8] [10] and Transcript 6 December 2022, p 84 [5]-[8] and Mark at Transcript 7 December 2022, p 231 [50] - p 232 [6].
Affidavit of Mark of 10 June 2021 at [188].
Ibid at [189]-[191].
Affidavit of Mr Hannaford of 10 March 2022 at [21].
John's affidavit of 25 September 2021 states that most of the Wallace cattle were kept on the Somerset or Westwood property's where the fencing was not affected by the fires or flooding: Affidavit of John of 25 September 2023, p 91 17.
Transcript 8 December 2022, page 265-266.
14 of the 37 cattle were found at Baxters Creek. The 19 cattle found in April 2020 were from Khatambuhl. The 13 animals separately identified by Mr Hannaford do not appear to have a specific designation but appear in a context which would suggest they came from Khatambuhl.
Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34.
Although the plaintiffs did contend in the alternative that it could meet the onus of proof to establish conscious wrongdoing.
(Mark XXN, T210.17-32); Mark speculated that his estimates and projections for the cattle numbers in Annexure A were within a tolerance of 5% or 10% (Mark XXN, T216.17-22). A difference of 10% in the herd would yield a shortfall of 242 animals, nearly half the shortfall identified in 2020 (if adjustment is not made for sales in December 2019).
(Ivan XXN, T176.29-T177.4; Mark Burke XXN, T220.40-49)
(Affidavit of Mark 10.06.21 par 69 at EX10-CB1.269)
(JW/2 par 10 at EX10-CB1.190 (=EX2 page 3); KW/2 par 10 at EX10-CB1.219
(EX15-CB4.1747).
(Mark XXN, T230.19-36).
(Ivan XXN, T178.26-42)
It was ultimately concluded that there was a shortfall.
There were showers in January 2020 but neither parties suggested that they broke the drought.
Transcript 7 December 2022, p 187.
John Wallace RXN, T85.11-16
John Wallace RXN, T85.23-27.
Hannaford XXN, T134.43-T135.22.
KW/1 par 45 at EX10-CB1.210; email of 23 December 2019 at EX14-CB3.1290.
This will be discussed further under the heading "Reliance and the operation of ACL regarding claims under January 2020 agreement".