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[2006] VSC 309
Supreme Court of Victoria
2006-08-23
BONGIORNO J
Original judgment source is linked above.
CONTRACT - offer and acceptance - breach - onus of proof where forgery of contract alleged in denial of liability - tort - conversion - theft of cattle - interlocutory judgment for damages.
1 Bazadaise are an exotic breed of domestic cattle which originated in Bazas in South West France, near Bordeaux. The breed's promoters say that Bazadaise cattle produce 10 to 15 per cent more meat than average beef cattle because of their longer body and heavier rump. This case concerns the question of whether a herd of Bazadaise cows was sold by one cattle man to another or whether they were merely leased for breeding purposes for a limited period.
2 The plaintiffs in the case claim that they bought 100 Bazadaise cows from the third, fourth and fifth defendants in June 2002. The plaintiffs claim that those defendants failed to honour some of their obligations under the contract of sale and then, in June 2003, stole a number of cattle which included some of the allegedly purchased cattle from the farm on which the plaintiffs kept them. Those defendants assert that there was no sale of the cattle but merely a lease for a fee and that they (or one of them) was entitled to recover possession of the cattle, either because the lease had expired and/or the plaintiffs had not honoured their obligations under the lease agreement. Although the proceeding was originally brought against a number of defendants, the only other defendant still a party by the time it got to trial, Hay Access Pty Ltd, is alleged to have been guilty of the tort of conversion of 11 of the cattle after they were stolen from the plaintiffs and is, on that account, liable in damages.
3 As noted, the plaintiffs did not proceed against the first, second, eighth, ninth and tenth defendants, and at the commencement of the trial all questions as to damages were hived off to be dealt with subsequent to this judgment. Hence it is concerned only with questions of liability. An order pursuant to RSC r. 47.04 was made to this effect.
The agreement
4 The first plaintiff, Kinarra Pty Ltd, is a company associated with the second plaintiff, Mr Peter McDougall. Although at relevant times he was not a director of Kinarra, Mr McDougall was its secretary and, in playing the part that he did with respect to these cattle, he did so on behalf of the first plaintiff as well as on his own behalf.
5 Kinarra operated a leasehold property in the Goulburn Valley called Katunga Farm upon which it bred cattle. Mr McDougall's wife, who was the sole director of Kinarra, gave evidence at the trial but otherwise played little part in the matters the subject of this litigation.
6 Mr McDougall said that he met Mr Bernard O'Kane, the third defendant, in about October 2001. He said that Mr O'Kane told him about Bazadaise cattle and their characteristics as beef producers. A week or so later he went to O'Kane's property at Cobram East to look at some of the cattle. Subsequently, Mr McDougall said, Mr O'Kane told him about a speed breeding programme he was engaged in which involved taking ova from very young heifers and implanting them in adult host mothers. This conversation led, said Mr McDougall, to some Bazadaise cattle going from O'Kane's property to Katunga Farm to engage in this speed breeding programme. Although a good deal of evidence was given concerning this programme, it had little relevance to the central issue in the case which was whether, at some later time, O'Kane sold 100 cows to McDougall.
7 Mr McDougall said that the cattle which were taken to Katunga Farm did not live up to expectations with respect to speed breeding. He said that because of this he had a further discussion with Mr O'Kane about his putting a herd of breeding cattle together at Katunga Farm. He said he told Mr O'Kane that he had 1,000 head of cattle in mind. He said that Mr O'Kane suggested that he could lease some breeding cattle but he told O'Kane that he was not interested in leasing cattle but rather wished to purchase them outright. He considered leasing to be an uneconomic proposition. He said that Mr O'Kane suggested a different arrangement whereby he, O'Kane, could "claw back" the cattle at the end of a nominated period after a sale but McDougall said that he told O'Kane he was not interested in that arrangement either. He said he wanted to buy cattle.
8 In his evidence Mr McDougall described these negotiations with Mr O'Kane as having been between him and O'Kane and between O'Kane and one Neil Fleming, a "consultant" who was doing some work for McDougall in relation to Katunga Farm. He described Mr Fleming as "a country guy with a nose for a deal". There seems to be no doubt that Fleming acted as McDougall's agent in subsequent negotiations with O'Kane although it is equally clear that O'Kane accepted that Fleming had to obtain approval for any agreement from McDougall.
9 Negotiations between O'Kane and McDougall, and O'Kane and Fleming on behalf of McDougall, resulted, said Mr McDougall, in a written agreement signed by the O'Kane interests on 24 June 2002 at O'Kane's property at Cobram East in circumstances described by Mr Fleming. The plaintiffs' case is that at the time that agreement was signed 68 cows had already gone to Katunga Farm and a further 12 were delivered on 9 July, making a total of 80. The agreement, said McDougall was for a total of 100 cows to be purchased by the plaintiff from the O'Kane interests.
10 The reason for the initial 68 cows being on Katunga Farm is not altogether clear on the evidence. The plaintiffs pleaded that they were being agisted there on Mr O'Kane's behalf, that 56 of them had been there since about March 2002 and that the other 12 arrived on 22 May for the same reason. However, Mr McDougall and, later, Mr Fleming, said that they were there at no cost to Mr O'Kane for the purpose of harvesting eggs from them pursuant to an antecedent agreement between O'Kane and McDougall. However they came to be on Katunga Farm, those 68 cows and the subsequent 12 delivered on 9 July were, on any view, the subject of the agreement the plaintiffs say was a sale and the third, fourth and fifth defendants say was a lease which was entered into on 24 June 2002.
11 Mr Fleming gave evidence that he had had dealings with Mr O'Kane in March and April 2002. He said that in April Mr O'Kane had told him that he was in a perilous financial position and had to refinance his farm. Fleming said that he had some expertise in financial management and often gave advice in this regard. He said that in April he had had a discussion with Mr O'Kane related to working out his assets and liabilities to see whether he could service a new loan.
12 Mr Fleming said that in April he also had a discussion with Mr O'Kane about buying cattle for Mr McDougall. He said that O'Kane discussed more than one price with him for the cattle and that one price he could remember being discussed was $190,000 to be paid at the end of a certain period of time. Mr Fleming said that he prepared a document in about the middle of June 2002 which reflected Mr O'Kane's wishes, which he submitted to Mr McDougall, but Mr McDougall would not agree to it. It was never proceeded with.
13 Mr Fleming said that on 24 June he prepared a new agreement which reflected the terms upon which Mr McDougall was prepared to buy 100 Bazadaise cattle and, on Mr McDougall's instructions, faxed that agreement to Mr O'Kane. On the same day he told Mr O'Kane that Mr McDougall was not prepared to negotiate any further. He said that this conversation occurred on the telephone on the morning of 24 June and that following it he arranged to go with his wife to O'Kane's property at Cobram East to get the agreement signed.
14 Mr Fleming told the court that he and his wife attended at Mr O'Kane's property on the afternoon of 24 June. They were offered a cup of coffee and Mr O'Kane went to his office and brought back a faxed document which Mr Fleming identified as being a document which now consists of four separate pages of thermal fax paper, the first page of which is entitled "CONTRACTURAL (sic) AGREEMENT". The fax header on each of those four pages identifies the sender as being ODTAA, which Mr Fleming said was an abbreviation of his company's name. Each page shows a phone number and a line of figures, 0358732490, which Mr Fleming identified as being his fax line number. Each page was dated 24 June 2002 and time stamped 10.03 am, 10.04 am, 10.05 am, and 10.06 am respectively.
15 Mr Fleming said that when he and his wife were at the O'Kane property Mr O'Kane ". . . came out with quite a number of pages. From memory they were in long continuous sheets. They were off his fax machine and he was pulling them apart and separating the sheets."
16 Mr Fleming said that both Mr and Mrs O'Kane appeared to read the document and then each signed against their name on the last page. Mr O'Kane obtained his company seal and affixed it also to the last page. The signatures were witnessed by Mrs Fleming. A second copy of the same document was signed in a similar way. Mr and Mrs Fleming then left with one copy of the agreement, leaving the other with the O'Kanes.
17 Mrs Fleming corroborated her husband's evidence as to the signing of the agreement by the O'Kanes. She said there was a lot of thermal paper produced by Mr O'Kane and that he tore it into pages. There was ". . . a fair bit of it". When she came to sign the document she said there was ". . . lots of it." Mrs Fleming said she saw the O'Kanes sign two copies of the contract and saw the company seal applied after it was obtained by Mr O'Kane. She and her husband then left the O'Kane's home, taking one copy of the agreement with them.
18 Mr O'Kane's version of the creation of an agreement between him and Mr Fleming on behalf of the plaintiffs is quite different. He said that on an occasion in March 2002 he had had a discussion with Fleming in Fleming's office or his lounge room and that a note of that discussion was made by Fleming, in his presence, on an A4 envelope after Fleming said "I'll write this down." Mr O'Kane said they discussed leasing cattle and Mr Fleming then said "I wouldn't be able to get you $100,000 but if I could get you $60,000 and you kept all the bull calves how would that sound?" O'Kane said that he agreed and that there were 100 cows involved in the deal which would be a lease. There was also a discussion about the number of pedigree certificates that were to be supplied with the cows, when and how the $60,000 was to be paid, whether the term was to be one year or two years, and a "buy back clause" which was to be for $300,000. Mr Fleming denied this conversation and the writing of any note about a lease on an A4 envelope. In any event, on the best view of Mr O'Kane's evidence a binding contract is not proved.
19 Mr O'Kane said that on 23 June Fleming faxed a copy of a draft agreement to him. He produced that draft to the Court. It consists of a long uncut length of thermal fax paper notionally divided into five pages. It has a number of handwritten annotations on it, some of which Mr O'Kane identified as having been put there by him. It is headed "CONTRACTURAL (sic) AGREEMENT" and contains 13 sequentially numbered paragraphs. The fax header line on each notional page records the first page as having been transmitted at 5.21pm and the last page at 5.24pm on 23 June 2002. It is a fair inference that because of its drafting style and other significant features it was the progenitor of the agreement which the plaintiffs say was signed the following day.
20 As with the agreement said by the Flemings to have been signed by the O'Kanes on 24 June, this unsigned agreement provided, by its operative clause, for the plaintiffs to purchase 100 Bazadaise cattle from "O'Kane" - an entity described as including Kumara Pty Ltd and Mr and Mrs O'Kane. The annotations which Mr O'Kane said he put on the document would have changed it from a purchase agreement to a lease and effected various other changes to some of the printed terms and conditions of the transaction. The reference to Kumara Pty Ltd and Mrs O'Kane as vendors of the cattle were struck out on the draft but Mr O'Kane said he had not made those alterations. He said his wife had put a line through her name.
21 Mr O'Kane said that after he had read the fax from Mr Fleming and made the notes referred to, he phoned Fleming and told him there were clauses in the agreement that had to be changed. He said he commenced by telling Mr Fleming that Kinarra was going to lease the cattle, not purchase them. He said that Fleming replied "yes, that's a mistake". Mr O'Kane said there was no further discussion about this fundamental term of the agreement requiring alteration.
22 Mr O'Kane told the court that he then detailed to Mr Fleming a number of other terms of the draft agreement with which he did not agree and requested that they be changed also. He said Fleming agreed to all his proposed changes, except for one concerning frozen embryos, and said that he would redraft the document immediately and bring it out the next day ". . . so that the money could be paid". He said that Fleming said that Mr McDougall wanted "the agreement" signed.
23 Mr O'Kane said that the next day Fleming phoned and subsequently faxed a new agreement to him. It was of similar length to the draft he had received the day before. He said he read it in one long sheet and put it across his kitchen table. He said it was there when Mr Fleming arrived. His wife Marita O'Kane was also present. He said he did not recall Mrs Fleming being present.
24 Mr O'Kane said that when Fleming arrived a discussion occurred about a number of matters, including a cow which belonged to his son Pax, called FM6. He said that the last page of the faxed document had a long tail on it and that Fleming wrote three things on this tail whilst he was at the O'Kanes' - that any females which died had to be replaced by Kinarra, that 20% of the embryos from FM6 had to be frozen and a third matter which he could not recall. After giving this evidence Mr O'Kane went on to detail every change which he said had been made to the draft of the day before to produce the document which he signed. There were 11 such alterations. He appeared to have no difficulty in detailing these alterations with a remarkable degree of accuracy. His evidence in this respect was entirely unconvincing - to the extent that in some instances he appeared to be inventing some of these alterations as he went along.
25 Mr O'Kane said that he and his wife signed the agreement and he signed on behalf of Kumara Pty Ltd. He said that Fleming said that he would take the document away, have the three changes noted on it incorporated in it, get Mr McDougall to sign it and bring back a signed copy.
26 Shown the original of the agreement which Fleming said he had signed on 24 June, Mr O'Kane said that whilst he acknowledged his and his wife's signatures and the seal of Kumara Pty Ltd on the last page, he claimed that the previous three pages were not part of the agreement that they signed. In similar vein to his description of the changes made to the draft of 23 June, Mr O'Kane detailed the differences between the document which he said he signed and the one produced by Mr Fleming. He said the document he signed was called a "lease agreement" not a "contractural agreement". It was dated 1 June, not 25 June. The word "lease" was used instead of "purchase" in the operative clause of the document. The third line on the second page of the agreement he signed, said O'Kane, required him to provide 30 registration certificates for 30 female animals, not 40 as the agreement tendered by Fleming required. There were other differences too between the two documents which Mr O'Kane pointed out.
27 Mr O'Kane said that there was also a discussion with Fleming about the payment of the money under the agreement. He told Fleming that the money had been owed since 1 June, to which Fleming replied that it would be paid direct to a creditor of O'Kane's, "Banksia".
28 Mrs Marita O'Kane gave evidence that she was present when an agreement was signed which had been faxed to her husband. However she said she was unable to give any detailed evidence as she was "not into the cattle". Throughout her evidence Mrs O'Kane gave the impression that she wished to distance herself as far as possible from her husband's business affairs despite the fact that she said she was a director of Kumara Pty Ltd. On a number of occasions she said that her role was that of housewife and, as if to emphasise this point, referred to a number of household tasks which she undertook in that role.
29 Mrs O'Kane said that around the time the agreement was signed there had been a "heap of documents coming and going" but that she had not looked at any of them. She said that she was too busy "cleaning up" to do so but on the day an agreement was signed she saw a faxed document "right across the kitchen table". She recalled some discussion at that time about Pax's cow and something was noted on the document about that by someone. She thought it was by her husband.
30 Mrs O'Kane said she really didn't want to be part of "it" although she referred to grant money and to her husband leasing cows to Kumara (sic). She remembered signing the document but could not remember anything else about it including whether she ever saw it again.
31 Mrs O'Kane's evidence added nothing to that of her husband. She gave an impression of vagueness which lacked conviction. Her demeanour in giving her evidence and, in particular, her repeated emphasis on her domestic role to the exclusion of any knowledge of cows or of the business of Kumara Pty Ltd suggested a significant degree of disingenuity. However, as her evidence did not corroborate that of her husband in any material respect, there is no need to consider issues of credit in her case any further.
32 According to the Flemings, after the document was signed by Mr and Mrs O'Kane and sealed by Kumara Pty Ltd they left the O'Kane farm taking one copy of it with them. They said the other copy remained with the O'Kanes, although no explanation was ever proffered as to how there came to be two copies produced, although Mr Fleming did say that two copies were produced on O'Kane's fax machine. Possibilities include O'Kane using his fax machine to make another copy (i.e. using it as a photocopier) or Fleming having faxed the original twice so as to produce two copies. There may be other possibilities. If the Flemings' evidence is accepted two copies were signed and one was left with the O'Kanes. Mr O'Kane was insistent that he never had a copy of the document he signed. He said that Mr Fleming was going to send him one after the McDougall interests had signed it but that never occurred.
33 Mr Fleming said that when he arrived home he put the agreement in the "O'Kane file". The next day he removed it to fax it to Mr McDougall for him to sign. To effect this exercise conveniently he printed another copy of the first three pages of the document from his computer because he considered it would be easier to fax plain paper pages that thermal paper pages. He said he faxed the signature page of the agreement to Mr McDougall using the thermal paper original and followed it with the three newly printed pages in substitution for the other three thermal paper pages. Thus, Mr McDougall would have received, according to Mr Fleming, a true copy of the document signed by the O'Kanes and sealed by Kumara Pty Ltd.
34 After completing this exercise Mr Fleming left the original thermal paper agreement on a bench in the kitchen of his home. Later, he saw his wife use the bottom of the signature page to record two telephone numbers whilst she was engaged in a conversation on their telephone which was in the vicinity of the bench. He remonstrated with her for doing this, as a result of which she cut the bottom of the signature page off the document thereby excising the note she had made whilst preserving the integrity of the seven signatures inscribed to the right of the page. The document thus acquired an irregular bottom edge.
35 In her evidence Mrs Fleming described in similar terms to her husband how she came to write phone numbers on the document and also described how she cut the bottom of it off to remove what she had written. She did not remember what she did with the document after cutting the bottom of it but presumed that it went back "into the file". She thought that she probably discarded the excised part but could not clearly remember. She said that before she cut the page it had been the same size as the other pages.
36 Mrs Fleming's evidence thus differed significantly from that of Mr O'Kane who said that not only was the signature page considerably longer than the others when it was signed at his place but that when it left his home in the Flemings' custody it had a note concerning three additional contractual terms written below the signatures.
37 The "CONTRACTURAL AGREEMENT" in its condition as described by Mrs Fleming appears to have remained with the Flemings until Mr McDougall scanned it to send a copy electronically to the police after a number of the cattle to which it related were surreptitiously removed from Katunga Farm in June 2003 by then unknown persons. Mr McDougall told the Court that before he made the scanned copy he put a ruler along the bottom of page 3, ran a pen along the page and took off a small portion of it. He said there was a "bit of a tag on the bottom of it" which he thus removed. He said he did this so that when it was put on the scanner the copy of it would be accurate. He could not remember when he did this but believed that it was immediately prior to sending a scanned copy to the police. A perusal of the top of the next page of the document reveals a small section missing which could be the counterpart of the tag referred to by Mr McDougall.
38 Thus, there were two alterations to the fabric of the document signed by the O'Kane interests effected by Mrs Fleming and Mr McDougall respectively after it was signed. But, of course, on Mr O'Kane's version of events the alterations to the document were far more extensive - and had sinister connotations. His case is that the document signed by him and his wife and sealed by Kumara Pty Ltd was fundamentally altered to produce the document now relied upon by the plaintiffs. He maintained that there were a number of significant alterations to the first three pages of the document, the most significant of which was to change the document from a lease into a contract of sale. On Mr O'Kane's case these three pages must have been removed and replaced with pages consistent with the plaintiffs' case.
The expert evidence
39 To seek support for their respective positions concerning the agreement relied upon by the plaintiffs each of the protagonists sought expert opinion as to the document. Three expert document examiners gave evidence concerning it.
40 Mr Gary Story, who is a former member of the Victoria Police and who worked for nine years as a document examiner at the State Forensic Science Laboratories, examined the document on behalf of the plaintiffs. Although he offered opinions on various aspects of it and other documents submitted for his examination, the only matters of relevance to the question now being considered upon which he gave evidence were as to whether the document was wholly produced on Mr O'Kane's facsimile machine as the plaintiffs contend and whether all pages of the document were produced at about the same time.
41 Mr Story considered that there was medium to strong evidence to support the contention that the whole of the relevant document was produced on the same facsimile machine as the uncut five page document produced to the Court by Mr O'Kane as being the document faxed to him by Mr Fleming (and received on O'Kane's machine) the day before the relevant agreement was signed. Although Mr Story thought that the evidence that the first three pages of the agreement came from the same roll of thermal fax paper was conclusive, because the bottom edge of page 3 had been removed, the evidence that page 4 had come from the same roll as well was no more than "medium to strong". But this is not an opinion. It is a description of the strength of a particular case. If Mr McDougall's evidence is accepted there could be no basis for any opinion as to the four sheets having once been a continuous sheet - at least no basis from an examination of the cut edges of those sheets. The cropping of the bottom of page 3 to remove the tag would preclude any such opinion. The strongest conclusion in the plaintiffs' favour available on Mr Story's evidence is that there is nothing in it which precludes the plaintiffs' case. In other words, his opinion rises no higher than an opinion of consistency.
42 Mr Story's evidence must be disregarded in determining the validity of the plaintiffs' contentions. The only comfort the plaintiffs may draw from it is that there is nothing in it which supports the defendants' case. The validity of the plaintiffs' case must depend upon whether the evidence of the Flemings and Mr McDougall is accepted or whether that of Mr O'Kane is to be preferred, bolstered by the expert evidence upon which his case relied.
43 That expert evidence came from Mr Neil Holland, another forensic document examiner, who conducted a number of tests on various documents including the relevant agreement. The only report of Mr Holland initially tendered by the defendants as containing his opinion on this document is dated 26 October 2005. It is of some 17 pages together with a number of annexures including Mr Holland's 18 page curriculum vitae and a copy of a letter to Mr Holland from the defendants' solicitors which refers, with respect to unpaid fees, to "your second report". The context of this reference suggests that Mr Holland had written two reports before the one which was tendered.
44 Mr Holland's opinion expressed in his report of 26 October 2005 may be summarised as being that page 4 of the document (the signature page) was not produced contemporaneously with the first three pages. He proffers a number of reasons for this conclusion including that, to his observation, the position of the fax header on the first three pages is different to the position of the fax header on the fourth page. He also comments that an inference can be drawn that ". . . someone has deliberately cut the bottom edge of the third page so it cannot be compared with the top edge of the last page". It might be observed that this inappropriate attribution of motive to whoever cropped page 3 of the document betrayed a certain lack of objectivity on Mr Holland's behalf.
45 Mr Holland also proffered the opinion that the toner images on the first three pages of the document were different to the toner images on the last page. He developed this opinion in his oral evidence and produced a number of photographs (including enlargements of photographs) to illustrate his point. He said that he thought that either pages 1, 2 and 3 were produced on a different fax machine to page 4 or, if they were all produced on the same machine, they were produced at different times. In other words, his opinion was that pages 1, 2 and 3 were not originally part of a four page document of which page 4 was the fourth page.
46 In cross-examination Mr Holland conceded that he could detect no differences in the composition of the paper in pages 1, 2 and 3 as against page 4 and that environmental effects, such as conditions of storage, handling etcetera might account for at least some differences in the appearance of the images on page 4 as against the images on the other pages.
47 A demonstration in which Mr Holland explained a shift in the fax header to the right on page 4 as against the other pages as leading to a conclusion that page 4 was not part of the same four page document was largely unconvincing. Mr Holland admitted that he had no qualifications in electronics and it was clear that he was not an expert in the electronic or mechanical operation of fax machines. Insofar as a shift to the right of the fax header on page 4 was demonstrated, its significance was never satisfactorily explained by Mr Holland who appeared to reason that because he thought he could demonstrate such a shift the conclusion that he offered followed as a matter of logic. It did not. There may have been any number of reasons why the fax header on one page of a fax was not in the same position as a fax header on another page. Any explanation sufficient to found an inference that a document was a forgery would need to come from someone who satisfied the court that he knew a lot more about fax machines than Mr Holland did.
48 The most significant matter to emerge from Mr Holland's cross-examination, however, was his concession that he had written a prior report concerning this document, dated 9 December 2003. In that report he had expressed an unqualified opinion as to the document in the following terms:
"(iii) An examination of the thermal header image revealed that this image of all four pages is the same. There is no evidence to suggest that the header on the top of the fourth page has been fabricated. Evidence shows that this page is original and does form part of the four page document. No scan error were revealed in the header of the fourth page which would have proved that the fourth page had been copied and fabricated." (Emphasis in original)
Mr Holland's conclusion in that report was expressed in the following terms:-
An examination and analysis of the four pages of the "CONTRACTIAL (sic) AGREEMENT" item 1 established that the four pages have been produced contemporaneously and there is no evidence of the document being fabricated."
49 Mr Holland's explanation for the change in his opinion between the two reports was that after expressing the opinion of 9 December 2003 he discovered that the information transmitted in fax headers could be "manipulated"; that is to say the date, time etc could be changed. He concluded that someone had, therefore, been able to effect the deception inherent in his later opinion and that they did so. But such a conclusion begs the question and, in any event, the fact that Mr Holland did not know prior to December 2003 that the information conveyed on a fax header could be changed (e.g. to accommodate daylight saving or a change in business name) by the operator of the machine detracts significantly from any confidence one might have in his opinions as a document examiner, at least in respect of those documents produced on fax machines.
50 The authenticity of the document upon which the plaintiffs rely must be determined in this case without reference to the opinion of Mr Holland.
51 Mr John Ganas, a document examiner from the Victoria Police Forensic Services Department examined the document relied upon by the plaintiffs in the course of a police investigation into the disappearance of the Bazadaise cattle from Katunga Farm in June 2003. He produced a short report dated 19 November 2004 which offered no opinions but merely described the physical characteristics of the document as he found it. His report does not assist in the resolution of this case.
Mr O'Kane's credit
52 Before reaching a conclusion as to whether the plaintiffs have proved the agreement upon which they rely it is necessary to examine briefly some significant credit issues surrounding Mr O'Kane.
53 On 8 June 2003, almost a year after the agreement between the plaintiffs and the O'Kane interests (whatever it was) was signed, a number of Bazadaise cattle were clandestinely removed from Katunga Farm. They were some or all of the cattle the subject of the agreement signed by the O'Kanes and Kumara Pty Ltd on 24 June 2002. There is a considerable issue between the parties as to how many cattle were taken early on that Sunday morning, but whatever the number, Mr O'Kane eventually admitted that he took 60 of them after denying his involvement in their removal for about two months after they were taken. His denials were to a large number of people including police investigators and were made in the context of considerable publicity concerning the cows, their value and the fact that rewards were offered for information leading to their return. Of particular significance in the present context was the fact that Mr O'Kane made a statement to police pursuant to the Magistrates Court Act 1989 which contained a jurat enabling it to be used in a criminal proceeding. In that statement, which was false, Mr O'Kane acknowledged that a false statement made in such circumstances rendered the maker of the statement liable to be charged with perjury.
54 Further than that, Mr O'Kane actively misled the police as to his taking of the cattle in a number of ways, including by having an employee of Katunga Farm, Steven Joyce, inspect his property in August 2003 for the presence of any of the missing cattle so as to enable Joyce to provide a statement to the police to the effect that none of them were on that property. At the time, as O'Kane well knew, some at least of the missing cattle were on agistment at Apsley, in far Western Victoria, on his account. It is also more probable than not that O'Kane procured Joyce to provide other information to the police which would have the effect of diverting police suspicion from him as to the removal of the cattle.
55 There were a number of other matters which emerged from the evidence in this case which reflected adversely on Mr O'Kane's credit and the veracity of the plaintiffs' case generally. Some of them should be noted.
56 Mr Fleming was initially cross-examined by counsel for the defendants to the effect that the agreement signed by the O'Kane interests was taken, physically, by him to O'Kane's place on 9 July 2002 and that he went there without his wife. It was also put that Steven Joyce was there. Mr Fleming denied these assertions and the day after that cross-examination counsel withdrew his suggestion that the agreement was signed on 9 July and that Mrs Fleming was not present. No explanation for this change in position was ever proffered and when Mr O'Kane gave evidence he seemed to accept the correctness of Mr Fleming's evidence, at least as to the parties who were present at the time an agreement was signed.
57 In his evidence Steven Joyce referred to being at the O'Kane's when a document was produced but he gave no definitive evidence about it, although there was reference to a lease in each of two statements witnessed by police officers which Joyce acknowledged as bearing his signature. In one such statement he said he saw a lease signed on 9 July. In the other he referred to a lease which he saw on 1 June but said nothing about its being signed. These statements also contained information which Joyce acknowledged he could only have got from O'Kane as it was not information which he himself knew. The provenance of these statements was never fully explored during this case but it is probable they contained material supplied by O'Kane for Joyce to give to the police or, in the case of one of the statements, for possible use in some other way to throw suspicion off O'Kane.
58 In the course of her evidence Mrs Fleming said that on an occasion after the cattle disappeared from Katunga Farm she encountered Mr O'Kane when she was looking for them near his property using field glasses. She was with a Bruce Little. She said that O'Kane said "what are you hanging around here for? You stole your own cattle" and then called her a "fat slut".
59 When Mrs Fleming was being cross-examined counsel's attention was drawn to this statement by her and to the fact that he had not suggested that her version of the conversation was incorrect. Despite this he specifically declined to suggest to Mrs Fleming that O'Kane had not spoken in those terms. Nevertheless, when O'Kane himself gave evidence he denied he called Mrs Fleming a "fat slut" although he did concede that he had said to Mr Fleming on that or some other occasion that he had stolen his own cattle. This was at a time when O'Kane was still denying that he had taken the cattle from Katunga Farm. O'Kane's version of this exchange is false. His explanation as to why he suggested that Fleming had stolen his own cattle is disingenuous. It cannot be accepted.
60 In their evidence both Steven Joyce and an Ian Phillips, who gave evidence as to his part in assisting Mr O'Kane to take cattle from Katunga Farm on 3 June 2003, each attributed to Mr Fleming admissions that the arrangement between the plaintiffs and the O'Kane interests was a lease. Phillips went further and attributed a further admission to Fleming that although the arrangement concerning the cattle was a lease, O'Kane was never going to get his cattle back! Neither of these alleged conversations were put to Mr Fleming in cross-examination.
61 These are not the only matters which could be detailed which detract from the defendants' case, but they will suffice to explain why Mr O'Kane cannot be accepted as a witness of truth on contentious issues in this case.
The plaintiffs' witnesses
62 Neither the Flemings nor Mr McDougall gave the Court any impression other than that they were trying to recount the events of this complex fact situation as accurately as they could. None of them suffered from the disabilities with respect to their honesty which afflicted Mr O'Kane and for the most part their accounts were internally consistent. Those accounts were not improbable nor were they obviously embellished or exaggerated. In as far as there were inconsistencies in their evidence such inconsistencies were not indicative of an attempt to deceive but rather were due to the complex nature of the facts being recounted.
Resolution of the principal issues
63 In this case the plaintiffs propound an agreement in writing for the purchase by them of 100 Bazadaise cattle on specified terms as to payment, the provision of pedigree certificates and a number of other matters. The O'Kane interests seek to prove an oral agreement between Mr O'Kane and Mr Fleming on behalf of the plaintiffs by which the plaintiffs leased the same cattle for a year on certain terms. They also contend that the agreement which they signed on 24 June 2002 was a written version of this earlier oral agreement but that the plaintiffs fraudulently altered that agreement to their own advantage by replacing the first three pages of it with the agreement upon which they now rely.
64 For the reasons already advanced the evidence of Mr and Mrs Fleming is to be preferred to that of Mr O'Kane on all issues of conflict. Not only is Mr O'Kane's honesty suspect, his capacity to give an accurate account of what occurred between him and the Flemings or for that matter between him and any other witness is severely compromised by a clear readiness to seize on any available explanation, whether truthful or not, to explain any inconvenient fact.
65 Notwithstanding that the defendants' defence to the plaintiffs' claim in this case involves an allegation of fraud - indeed, an allegation of forgery - counsel for the defendants' submission that the onus of proving that contract of sale rests on the plaintiffs must be accepted. In this regard the statement by Mathews AJ in the Supreme Court of New South Wales in B L and GY International Co Ltd v Hypec Electronics Pty Ltd[1] should be accepted as a correct statement of the law. Her Honour said:-
"It was suggested in BL and GY's closing submissions that the onus of proving that the invoices contained an exhibit L are shams rests upon the first and second defendant. It was further submitted that, given the gravity of the allegations, a Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 approach should be adopted. However, this cannot be correct. It is for the plaintiff to establish on the balance of probabilities that the defendants are indebted to it in the amounts which it claims. The mere fact that the defence raised by Hypec and Colin Mead involves forgery and deception does not result in a reversal of the onus of proof."
66 Having regard to the matters referred to, the plaintiffs have established to the requisite standard that Mr Fleming faxed an agreement to Mr O'Kane on 24 June 2002, that that act constituted an offer to Mr O'Kane, his wife and Kumara Pty Ltd to purchase 100 Bazadaise cattle from them on the terms contained in it and that the subsequent signing of that document by Mr O'Kane, his wife and the sealing of it by Kumara Pty Ltd constituted an acceptance of that offer. Thus the plaintiffs have established the agreement they contend for.
67 It follows that insofar as the defendants sought to prove an alternative agreement in respect of the same cattle whereby they would lease those cattle to the plaintiffs they have failed to establish that agreement.
Subsequent events
68 The agreement between the parties required the O'Kane interests to supply 80 Bazadaise cows to the plaintiffs "at settlement". The term "settlement" is not defined in the agreement, although the terms "expiration" and "commencement" appear to relate to the dates of 25 June 2002 and 25 September 2002 respectively.
69 In any event, at the date the agreement was signed it is not in dispute that there were 68 Bazadaise cows already in the plaintiff's possession, having come from O'Kane's property on earlier dates. Some of them had apparently been supplied by O'Kane to the plaintiffs with a view to their being exhibited at the Royal Melbourne Show and others (and perhaps some of the same ones) were already being used in a breeding programme involving the harvesting of ova. There were many references to these activities in the evidence although they appear to have had little relevance to the issues in dispute A further 12 cows were delivered to Katunga Farm on 9 July so that the total supplied as of that date was 80.
70 The remaining 20 cows had to be supplied by O'Kane within 90 days of the commencement date of the agreement, that is to say by 25 September 2002.
71 The purchase price for the cattle was to be paid by the plaintiffs to O'Kane as to $60,000 on the "commencement date" of the agreement, namely 25 June 2002, and $5,000 on each of 28 July, 25 August and 25 September 2002.
72 It is common ground that the plaintiffs did not pay the $60,000 due on 25 June but rather made a number of later payments to a creditor of Mr O'Kane (Banksia Mortgagees) and to Kumara. Those payments totalled $60,010.50 by 1 August 2002.
73 Whilst it is accepted that no further payments were made by the plaintiffs to or on behalf of the O'Kane interests there is a dispute as to whether any further cows were ever delivered. The plaintiffs maintain that no further cows were delivered beyond the 80 which had been delivered by 9 July 2002. However Mr O'Kane gave evidence that a total of 91 cows were delivered. When he was challenged on this figure he said it was all recorded in a notebook, the information from which he had given to his solicitor. The notebook itself had been ". . . in my ute and it got wet". He said the dye had run and it was unreadable. No record of any kind relating to cows delivered to Katunga Farm was ever produced by Mr O'Kane.
74 On the other hand Mrs Fleming, who appeared to know most about cattle numbers of the plaintiffs' side, produced an inventory which she said she gave to the police when the cattle were stolen in June 2003. This inventory purported to list both cattle stolen and cattle remaining. It listed 69 Bazadaise cows as having been stolen and 19 as remaining, a total of 87. Mrs Fleming said, under cross-examination, that the inventory was not accurate as there were never that many Bazadaise cows on Katunga Farm and that difficulties with the reconciliation of records (including ear tags and registration certificates) with actual numbers of cows on the ground caused the discrepancy. Whether the inventory was or was not accurate it stands as an admission by the plaintiffs through their agent for what it is worth.
75 The record keeping of Katunga Farm was less than satisfactory, a surprising situation for what was intended to be an exotic cattle stud. Accordingly, Mrs Fleming's evidence cannot be subjected to any independent check. In the circumstances, the plaintiffs, who bear the onus of establishing their loss, are unable to establish any loss greater than that which results from an acceptance of what Mrs Fleming told the police. As there is no evidence as to any Bazadaise cows coming on to Katunga Farm from any source other than O'Kane, it follows that O'Kane must have delivered 87 cows, at least, up to the date of the theft. As his figure of 91 cows delivered cannot, for obvious reasons, be accepted at face value the proper figure from which to calculate the shortfall in O'Kane's compliance with the agreement is 87 cows delivered. Thus, the O'Kane interests were in breach of their obligation under the contract to the extent of 13 cows. Other evidence about the deaths of some cows can, because of its vagueness and uncertainty, be ignored.
76 The other significant obligation imposed by this agreement on the O'Kane interests was to supply a total of 75 current registration certificates for the cows they sold: 40 on 25 June 2002 and 35 within 60 days of that date.
77 Mr Fleming gave evidence that he collected between 60 and 80 registration certificates some time between 24 June and the end of that month in 2002. 31 were said to relate to cows and the balance related to bulls. The agreement did not require the O'Kane interests to provide any registration certificates for bulls and Mr O'Kane's explanation as to why they were in fact provided made no sense whatsoever. Ultimately he retreated to a position of saying that he provided the registration certificates for the bulls out of "the goodness of my heart".
78 The extent to which the defendants' failed in their obligation to provide registration certificates in respect of 75 cows was not the subject of any specific argument. The plaintiffs will be entitled to have damages assessed if any loss is ultimately proved. Otherwise they will be entitled to nominal damages only in respect of this breach of the agreement by the defendants.
Clause 9 of the contract
79 Clause 9 of the contract provides that the contract should be null and void in the event of any breach of its terms and conditions unless such breach is rectified within 30 days. The defendants seek to rely upon this clause. However, no reliance was ever placed upon the term in the course of the parties dealing with each other, no notice was ever given to the effect that the defendants relied upon the term and time was never of the essence of the agreement. As terms such as this are construed as making a contract voidable at the option of the party not in default, to avoid the contract the defendants would have had to have performed an act of avoidance, relying upon the failure by McDougall to make the three payments of $5,000 required in July, August and September 2002. No such act was performed. In any event they were in breach themselves, at least after 25 August 2002 when they failed to deliver the number of registration certificates required by the agreement. See Suttor v Gundowda Pty Ltd[2]. This clause avails the defendants nothing.
Conclusion as to breach of agreement
80 The third, fourth and fifth defendants are in breach of their agreement with the plaintiffs. The plaintiffs seek the discretionary remedy of specific performance in respect of the defendants' breaches. In the circumstances specific performance is an inappropriate remedy for a number of reasons, not the least of which is the affluxion of time since the contract was due to be performed and the nature of the subject matter of the contract. There is no evidence that the contract could now, in fact, be performed. Indeed, counsel for the plaintiffs accepted in the course of the trial that the only remedy open, as a matter of practical reality, was damages.
81 The plaintiffs will not receive a decree of specific performance. Instead they should have damages assessed against the third, fourth and fifth defendants under two heads:
(a) The value as at 25 September 2002 of 13 pure bred Bazadaise cows and
(b) The loss, if any, sustained by them as a direct result of the failure of the third, fourth and fifth defendants to supply registration certificates for the Bazadaise cows they sold by 25 August 2002.
82 On their counterclaim the third, fourth and fifth defendants will be entitled to $14,989.50 which they ought to have been paid in instalments of $4,989.50, $5,000 and $5,000 on the 25 July 2002, 25 August 2002 and 25 September 2002 respectively. Such amounts should be set off against the damages to be recovered by the plaintiffs. Otherwise their counterclaim will be dismissed.
The conversion claim
83 On 8 June 2003, just under one year after the agreement was signed, Bernard O'Kane broke into Katunga Farm and took a number of cattle. Although there was much evidence given about this event during the trial of this proceeding, by that time there was really no issue about it except as to the number of cattle O'Kane had taken. Why he did this is unclear. What is clear, however, is that he had no legal justification for doing so. He committed the tort of conversion in respect of those cattle and is liable in damages.
84 Having regard to the Court's findings as to the ownership of the Bazadaise cattle the subject of the agreement between the plaintiffs and the third, fourth and fifth defendants the only issue at this stage of this case is how many cattle O'Kane took as all of those which he took were the property of the plaintiffs. Further, insofar as he sold a number of them to the seventh defendant, Hay Access Pty Ltd, it is liable in conversion for those cattle.
85 The circumstances of the taking of the cattle from Katunga Farm were that O'Kane enlisted the aid of one Ian Phillips, who gave evidence in this trial, to ensure that he had access to the property. Although Mr Phillips took the privilege against self incrimination in respect of some questions asked of him, his use, in the witness box, of his hands in a cutting motion as if using long-handled bolt cutters left no room to doubt that he had cut the chains or locks on the Katunga Farm gates to allow O'Kane and a livestock carrier, John Toohey, access to the cattle. O'Kane's assertion that the gates at Katunga Farm were wide open when he went there may have been true, but only because Phillips had, to his knowledge, already broken in; not that it would make any difference anyway. The tort of conversion does not depend upon a forcible entry.
86 Mrs Fleming gave evidence that she calculated that O'Kane stole 116 cattle: 60 adult Bazadaise cows and 56 weaners. Despite the fact that she provided what purported to be a detailed list to the police which ran to four pages and described each of the cattle she said were stolen by reference to their identifying marks (if they had any such marks) it is impossible to have any confidence in the accuracy of this inventory. Mrs Fleming admitted that it was not accurate. The sources from which it was compiled were obviously inaccurate and it was impossible to effect a satisfying reconciliation against any objective data.
87 Mr O'Kane conceded that he took 60 head of cattle on 8 June 2003, 57 of which went to Apsley in far western Victoria on John Toohey's truck and three of which went to a property in the Goulburn Valley. He said there were 32 cows, 11 weaners and 16 calves. Mr Ball, to whose property the cattle transported by Toohey were taken said he received 30 cows, 12 weaners and 15 calves, a total of 57 head.
88 There was a large body of evidence given which sought to establish that cattle from Katunga Farm had been secreted on various properties in the Cobram area and one in Gippsland and that O'Kane had, accordingly, stolen more than the 60 head he was prepared to admit to. Various witnesses gave evidence of having recognised particular cattle on properties owned by John Crawford in the Cobram area and Faye Tuchton at Grantville in Gippsland as having come from Katunga Farm. They claim to have recognised these cattle by distinctive bovine features.
89 Identification of animals is not any easier an exercise than is the identification of humans. Having regard to the experience of the criminal law in cases involving identification and the recognition by the law generally of the dangers inherit in identification evidence it is impossible to make a positive finding that any of the plaintiffs' cattle were in fact on Crawford or Tuchton's property even on the balance of probabilities. An examination of the evidence of Mrs Fleming in particular is an insufficient basis upon which to find affirmatively that any cattle she saw outside Katunga Farm had come from there. She was extremely anxious, it seemed, to identify cattle as being from Katunga, even to the extent of travelling to far flung places to seek them out. Overall, her evidence that she identified some was not convincing.
90 This is not to say, of course, that O'Kane did not steal more cattle that he has admitted to and secreted them somewhere else. They did not all have to be removed by John Toohey. But there is no direct evidence that he did so and no acceptable evidence that they have ever been identified elsewhere so as to raise an inference that O'Kane took them.
91 In the circumstances the plaintiffs, who bear the onus of proof, have not succeeded in satisfying the Court that O'Kane stole more than 60 cattle.
The claim against the seventh defendant
92 A document tendered on the trial established that Hay Access Pty Ltd purchased 10 Bazadaise cows and calves and one Bazadaise bull on 6 October 2004 from Kumara. Mr O'Kane gave evidence that these were part of the cattle which had been at Apsley and were subsequently transferred to a property at Katamitite in the Goulburn Valley. The cattle sold to Hay Access Pty Ltd on 6 October 2004 was part of the herd stolen from Katunga Farm in June 2003.
93 On the ordinary principles of tortious liability Hay Access Pty Ltd is liable to the plaintiffs in conversion in respect of these cattle although, of course, inasmuch as it is so liable, it is jointly liable with the original tortfeasor O'Kane.
94 Counsel who appeared for the O'Kane interests on the trial of this proceeding submitted that even if Mr O'Kane and, perhaps, Kumara Pty Ltd were liable in conversion to the plaintiffs there was no evidence which would involve Mrs O'Kane in that tort and accordingly judgment should not go against her. This submission should be accepted. There is no evidence that she was in any way complicit in her husband's tortious activities. However Kumara Pty Ltd, through O'Kane, is jointly liable with him for conversion of the 60 cattle stolen from Katunga Farm.
Conclusion as to the conversion claim
95 The plaintiffs are entitled to judgment against the third and fourth defendants for damages to be assessed in respect of the conversion of 60 Bazadaise cows on 8 June 2003, such damages to be assessed. They are also entitled to damages against the seventh defendant in respect of the conversion of 10 Bazadaise cows and calves and 1 Bazadaise bull on 6 October 2004, such damages to be assessed.
Conclusion
96 Having regard to the fact that only the quantum of the plaintiffs' damages is still in issue as against the various defendants liable, the parties are directed to proceed to mediation in accordance with this judgment. Subject to hearing counsel as to form, the Court will make the following orders:-
1. That there be interlocutory judgment for the plaintiffs against the third, fourth and fifth defendants for damages to be assessed in accordance with paragraph [81] of this judgment.
2. That there be interlocutory judgment for the plaintiffs against the third and fourth defendants for damages to be assessed in accordance with paragraph [95] of this judgment.
3. That there be interlocutory judgment for the plaintiffs against the seventh defendant for damages to be assessed in accordance with paragraph [95] of this judgment.
4. That there be judgment for the third, fourth and fifth defendants against the plaintiffs for $14,989.50 together with interest pursuant to the Supreme Court Act 1986 from 25 September 2002, execution on such judgment to be stayed pending the assessment of damages on the interlocutory judgment entered in paragraphs 1, 2 and 3 hereof, such judgment then to be set off against such damages as are assessed as appropriate.
5. That by 10 September 2006 the plaintiffs serve on the third, fourth and fifth defendants full particulars of their claim for damages to be assessed in accordance with para [81] of this judgment together with any valuations, accounts and any other documents supporting or relevant to such claim.
6. That by 10 September 2006 the plaintiffs serve on the third and fourth defendant full particulars of their claim for damages to be assessed in accordance with para [95] of this judgment together with any valuations, accounts and any other documents supporting or relevant to such claim.
7. That by 10 September 2006 the plaintiffs serve on the seventh defendant full particulars of their claim for damages to be assessed in accordance with para [95] of this judgment together with any valuation, accounts and any other documents supporting or relevant to such claim.
8. That the matter proceed to mediation in accordance with the procedures set out in the Commercial List Practice Direction 2004.
9. That there be liberty to apply.
10. That the costs of the proceeding to date be reserved.
[1] Unreported [2002] NSWSC 38.
[2] [1950] HCA 35; (1950) 81 CLR 418 at 440 - 2.
Kinarra Pty Ltd
Crawford [2006] VSC 309
(1938) 60 CLR 336
(1950) 81 CLR 418