NELLBAR PTY LTD -v- JONES PARTNERS PTY LTD [No 2] [2020] WASC 336 | Case summary

Judgment (6 paragraphs)

[1]

On 4 September 2020 I made orders dismissing the defendants' application to reopen these matters. I indicated I would publish reasons for my decision. These are those reasons.
The present application can only be understood by reading my reasons for decision in the two actions: Nellbar Pty Ltd v Jones Partners Pty Ltd [2018] WASC 292. Of particular relevance is the fact the reasons anticipated buy out orders being made for two companies - Roadtrains Australia Pty Ltd and Hampton Transport Pty Ltd. In fact the buy out of these two companies by the plaintiff was always problematic - the plaintiff had to raise many millions of dollars and as at the time of the making of the orders it was by no means clear the plaintiff could raise the necessary finance. For their part, the relevant defendants (who I will refer to as 'Jones Partners') were of the view a trade sale might be possible which would give the best return to all concerned. What none of the parties wanted was the appointment of a liquidator. They recognised that would destroy substantially the value of both businesses. The crafting of orders proved difficult. There were competing minutes and in keeping with their past practice, the parties found agreement difficult. But eventually on 26 June 2019 orders were made which reflected agreement between the parties.
The orders were executory - that is to say, they reflected ongoing attempts to sell businesses and they anticipated orders being varied as circumstances changed. The orders made did not actually include amounts which reflected the valuation evidence given at trial. That omission was deliberate. All parties agreed there was a need for commercial confidence - no‑one wanted a potential buyer to simply access the court file to see what value the parties put on particular assets. That said, at no time did any party seek to reserve their position with respect to the valuation which had been put on particular assets. In other words, neither party sought to incorporate in the orders what might in other circumstances be called 'a rise and fall clause'. When I made the orders on 5 June 2019, I anticipated the matter would come back for further orders at a date convenient to the parties. On 3 October 2019, I made orders extending the date for compliance with Order 3 of the earlier orders to 14 October 2019. On 30 June 2020, the plaintiff filed a minute of proposed orders. The effect of these orders was that the plaintiff would buy out Road Trains Australia Pty Ltd and Hampton Transport Services Pty Ltd would be sold on the open market. The minute was supported by an affidavit of Barton Cecil Jones sworn 26 June 2020. Essentially, Mr Barton Jones said that although the plaintiff could not buy out all of the transport business, it had arranged finance for the purchase of Road Trains Australia Pty Ltd. The affidavit confirmed there was still a dysfunctional relationship between the parties.

There was no further affidavit evidence filed which dealt with these two controversial paragraphs. Both paragraphs were strongly opposed by the plaintiff. During the course of his submissions, I asked counsel for Jones Partners how long it might take to obtain the valuations proposed in these two paragraphs. Counsel took instructions and offered what seemed like an optimistic timeframe. Without going to specifics, counsel maintained that within four to six weeks all of the valuations anticipated by the orders could be obtained.
In response, counsel for the plaintiff submitted there was no warrant for revisiting the valuation evidence. He also made the point that the plaintiff had available at present finance to buy out Road Trains Australia Pty Ltd. He submitted - not unreasonably - there was no guarantee such finance would be available if the matter was delayed even for six weeks. He made the further point there was no guarantee the parties would agree on revised valuations and the matter would, in effect, have to be litigated again.
Having heard argument I reserved my decision. After reviewing the evidence in both matters, I determined it would not be in the interests of justice to allow for further valuation evidence. In particular, I was influenced by the fact these proceedings had been on foot for almost seven years. Even prior to that the parties recognised they needed to separate their interests and had negotiated in an attempt to do so. At this point counsel for the plaintiff had not submitted that the orders sought by Jones Partners were not available under the liberty to apply provision in the orders. Given the orders proposed by the Jones Partners had only been brought to his attention shortly before the hearing, that omission was understandable. When I considered the matter I did not do so with limitations in the liberty to apply order in mind.
The matter was then brought back on 4 September 2020 when, in effect, Jones Partners asked me to reconsider my decision not to make orders allowing for a revaluation of the assets. The application was supported by an affidavit of John Load Cecil Jones sworn 3 September 2020. In essence, Mr John Jones said he believed that earlier valuations of the assets - in particular Road Trains Australia Pty Ltd and Edjudina Station - were out of date and these assets were worth considerably more than was reflected in the valuations. Much of what Mr John Jones said was hearsay. But what I was prepared to accept is that it was arguable there had been a significant increase in the value of certain assets and that, as a consequence, Jones Partners would receive less than a fair entitlement.
At this hearing, counsel for the plaintiff maintained as his primary point it was not open to me to make orders for a revaluation under the liberty to apply provision. Counsel made reference to the decision of Le Miere J in Patterson v Humfrey [No 2] [2016] WASC 343. In that decision his Honour considered in some detail just what was meant by 'liberty to apply'. His Honour concluded at [16]:

Applying those principles it is clear that the liberty to apply provision here would not allow for revaluation of the assets. To make the orders as proposed by Jones Partners would be effectively to revisit my original decision. This was not a case of supplementing the main orders. Rather, it was a case where Jones Partners sought to vary the nature or substance of the main orders. For that reason the orders sought by Jones Partners were simply not available. Put another way, my jurisdiction was exhausted and any variation to the orders would have to be sought in another court.
Even if that were not the case, I was still not satisfied it would be in the interests of justice to order a revaluation of the assets. In other words, I had not changed the view I reached after the hearing on 26 August 2020. One of the main reasons why I remained of that view was the last minute nature of the orders sought by Jones Partners. The orders I made on 1 July 2020 were open ended - Jones Partners could have filed detailed affidavits in relation to value. They chose not to do so. Given the limitations on the liberty to apply provision, it may not have been of any assistance to them to do so. But the fact they did not take any step further emphasised there was the possibility this matter would never be brought to a conclusion. That does not serve the interests of justice.
For these reasons I dismissed the Jones Parnters' application. I ordered they pay the costs of the application.

NELLBAR PTY LTD -v- JONES PARTNERS PTY LTD [No 2] [2020] WASC 336 (18 September 2020)

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Judgment (6 paragraphs)