Wallis Lake Fishermen's Co-operative Ltd v A.C.N. 079 830 596 Pty Limited

Supreme Court of NSW|2008-09-05|Before: Malpass J

CITATION : Wallis Lake Fishermen's Co-operative Ltd v A.C.N. 079 830 596 Pty Limited [2008] NSWSC 925

DECISION : Appeal allowed; orders of both Appeal Panel and President set aside; defendant to pay costs of this appeal; if so entitled, to have Certificate under Suitors' Fund Act 1951; proceedings remitted back to Tribunal for determination according to law; exhibits returned.

LEGISLATION CITED : Administrative Decisions Tribunal Act 1997 Retail Leases Act 1994

PARTIES : Wallis Lake Fishermen's Co-operative Limited (Plaintiff) ACN 079 830 596 Pty Limited (Defendant)

COUNSEL : R Colquhoun (Plaintiff) G Hoeben (Defendant)

SOLICITORS : Stacks/Forster (Plaintiff) Paton Hooke Lawyers (Defendant)

LOWER COURT JURISDICTION : Administrative Decisions Tribunal Appeal Panel

LOWER COURT DATE OF DECISION : 14 December 2007

LOWER COURT MEDIUM NEUTRAL CITATION : ACN 079 830 596 Pty Ltd (trading as Jolly Joe's Fish 'n' Chips) v Wallis Lake Fishermen's Co-operative Ltd [2007] NSWADT 297

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ADMINISTRATIVE LAW LIST

30082/08 Wallis Lake Fisherman's Co-operative Ltd v ACN 079 830 596 Pty Ltd

JUDGMENT 1 HIS HONOUR: The defendant brought proceedings in the Administrative Decisions Tribunal ("the Tribunal"). In proceedings heard by the President, inter alia, an order was made that the plaintiff pay monetary compensation in the sum of $255,561 to it. This sum comprised $249,561 in respect of a retail tenancy claim and $6,000 in respect of an unconscionable conduct claim. 2 The plaintiff brought an appeal to the Appeal Panel. It was constituted by P Callaghan SC, Deputy President, S Higgins, Judicial Member and G Griffiths, Non Judicial Member. The appeal related solely to the monetary compensation allowed in relation to the retail tenancy claim. The appeal was dismissed. 3 The matter now comes before this Court by way of appeal pursuant to s 119 of the Administrative Decisions Tribunal Act 1997 ("the ADT Act"). This section allows an appeal to this Court on a question of law against any decision of the Appeal Panel. 4 The relevant facts appear from the Reasons for Decision of the Appeal Panel ("the Reasons of the Appeal Panel") and the Reasons for Decision of the President ("the Reasons of the President"). I shall briefly repeat certain of them. 5 The defendant ran a fish and chips takeaway business trading under the name of "Jolly Joe's Takeaway". Rent was paid and it was thought that the defendant had tenure until 13 April 2009. The business was conducted at premises owned by the plaintiff. On the morning of 2 August 2006, the defendant was locked out. It then brought the proceedings in the Tribunal. Mr Morris is a director of the defendant. He and his wife are the shareholders (each holds one share in the capital of the company). The defendant has been described as Mr Morris' family company. The retail tenancy claim was founded on alleged breaches of obligations under the Retail Leases Act 1994 ("the RL Act"). 6 The President made findings as to the existence of the lease and as to unlawful repudiation by the plaintiff. The plaintiff does not seek to disturb these findings. The challenge concerns the assessment of what was treated as a claim for economic loss for breach of contract. 7 It is common ground that the order made by the President was made pursuant to s 72(1)(a) of the RL Act. It enables the making of an order that a party to the proceedings pay money to a person specified in the order, whether by way of debt, damages or restitution or refund any money paid by a specified person. The order made was for monetary compensation. I take that matter no further as it was not the subject of argument. 8 I now turn to the Reasons of the President. 9 In paragraph 106 thereof, he puts forward his understanding of the economic loss claim made by the defendant. The paragraph is as follows: "The economic loss claim in this case is put in relatively simple terms. The claim is, for, principally, the return to Mr and Mrs Morris from the business after meeting all outgoings (rent, staff wages, and related costs, product costs) in the last year multiplied by the period left on the lease. As previously, noted, the applicant is a two dollar company, which has one director, Mr Morris and two shareholders, Mr and Mrs Morris. The return to Mr and Mrs Morris comprises: drawings in the nature of remuneration; lease payments in respect of the motor vehicle owned by the applicant and funded out of the takings of the business; and amounts applied in connection with their home office. The claim also includes certain future business deductions brought forward (see below)." 10 The parties had employed experts. Mr Atkinson was the expert for the defendant. Mr Edmunds was the expert for the plaintiff. The experts conferred and were asked to produce a joint report. Whilst the parties were unable to produce a joint report, there was a limited consensus reached. Whilst the experts did not agree as to the approach to be taken to the question of assessment of loss, there was an agreement as to figures. What was agreed is set forth in paragraph 107 of the Reasons of the President. In paragraphs 108 - 126 thereof, the President sets out his considerations concerning what was said by the experts. 11 Paragraph 115 reads as follows: "In my view, the information that the experts used is clearly exposed. The assumptions that they used in respects of that information are apparent. They reached a conclusion as to the level of practical profitability of the business, that is the amount that reached the shareholders Mr and Mrs Morris by way of personal benefit after meeting all outgoings, and multiplied that by the time left on the lease." 12 The Reasons of the President proceed with the following: "126 As noted earlier, Mr Edmunds put forward two lower estimates of damage (assuming a lease due to expire on 13 April 2009) for consideration by the Tribunal. One excluded Mr Morris' remuneration loss entirely from the equation, while the other diminished the remuneration loss by reference to award wage rates. 127 In my view neither of these approaches should be adopted. The applicant company is, in reality, the alter ego of Mr and Mrs Morris. Economic loss claims in a family business setting of this kind should be assessed by reference to the loss suffered by the owners of the company, i.e. Mr and Mrs Morris.

128 I am of the view that the approach the subject of the joint conclusion is the appropriate one in this case." 13 Whilst it may be erroneous to speak in terms of a "joint conclusion", the Court has been informed that this has reference to the consensus reached as to figures. 14 The Court was informed that calculation of damages was for a period from 2 August 2006 for a period of 2.7 years. Material produced by Mr Atkinson showed that the profit of the defendant for the year 2004 was $16,196, that it was $23, 441 for 2005 and that there was a loss for the defendant of $807 in 2006. The amount allowed was a composite figure which represented the total sum of the items mentioned in paragraph 106. The largest component was one that is referred to in the documentation as "director's fees" (for the year 2006, this was calculated at $62,400). This was calculated from what were the drawing from the business by Mr and Mrs Morris. The drawings were at the rate of $600 per person per week. 15 I now turn to the Reasons for Decision of the Appeal Panel ("the Reasons of the Appeal Panel"). The Reasons of the Appeal Panel first traverse factual matters and the Reasons of the President. The reasoning process of the Appeal Panel may be found in the following paragraphs: "15 The above scrutiny satisfied us that his Honour was consider, as he indicated in paragraph 107 '… losses incurred by the Applicant … ' and in paragraph 115 '… the level of practical profitability of the business …', and that he was not ignoring the separate legal personality, and losses of, the company in arriving at his assessment of the damages for the retail tenancy claim. He explained in paragraph 123 of the Decision, which we have set out above, that ' the Tribunal must, in the end, make the best assessment of all the evidence before it'. As Hayne J put it in Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10, (2003) 77 ALJR 768, cited by his Honour in paragraph 123, at [37] and [38], a claimant such as the Applicant has to prove not only that it suffered damage as a result of the breach of contract but also the amount of the loss it sustained; it has to do so on the balance of probabilities and with as much precision as the subject matter reasonably permits; nevertheless, if the claimant has adduced such evidence as it is able to, it may be that estimation, if not guesswork, will be necessary in assessing the damages to be allowed.

16 The method of assessing the Applicant's damages on the retail tenancy claim was consistent with the way in which the Applicant propounded its claim and also with that assessed by the Accountants on both sides in conference between them during the hearing.

17 There was, in our opinion, no error of law in respect of the first paragraph in the attachment to the Notice of Appeal as submitted by the Applicant." 16 The plaintiff proceeds by way of Summons. It alleges twelve grounds of appeal. The grounds of appeal are directed to the manner in which the amount allowed was assessed. Primarily, the attack is directed to what is said to be a confusion by the Tribunal concerning the assessment of damages for loss suffered by a company. In essence it is said that the wrong measure of damages was applied by allowing a sum that represented loss suffered by Mr and Mrs Morris as shareholders or in some other capacity. 17 It was common ground that the RL Act does not address the question of how the defendant's damages were to be assessed. It was also common ground that the assessment should be in accordance with common law principles. 18 Counsel for the parties were unable to assist the Court by taking it to any authority which was thought to be of assistance in dealing with this question thrown up by the appeal (in particular, counsel for the defendant was unable to point to any authority which gave support to the approach taken by the President in his assessment of damages). 19 Counsel for both parties had made written submissions. Those submissions have been supplemented orally at the hearing of the appeal. In the present case, it is unnecessary to address specific submissions made on behalf of the parties. The issue between them is whether or not the approach taken by the President was open as a matter of law. 20 This was a question which was not really addressed by the Appeal Panel. It erroneously appears to have founded its decision on, inter alia, its satisfaction that the President was ignoring the matter of separate legal personality and the consistency of the result with the presentation of the plaintiff's claim and what it saw as a consistency between the result and what the experts did. 21 Paragraph 15 of the Reasons of the Appeal Panel also referred to the need for "estimation, if not guesswork" in addressing the damages. This was a case in which there were unsatisfactory aspects of the evidence. It needs to be observed that the need for the body making the assessment to do its best on the evidence before it does not justify a departure from legal principles in the making of the assessment. 22 In my view, there has been clear error of law by the Appeal Panel (it misdirected itself as to the measure of damages that were applicable as a matter of law). In my view, the approach taken by the President was clearly erroneous. 23 The Tribunal was required to assess losses suffered by the defendant caused by the plaintiff's breach of contract. The defendant was a company. The task confronting it was not one of assessing whatever loss may have been suffered by Mr and Mrs Morris (whether it be as shareholders or in some other capacity). 24 Mr and Mrs Morris chose to conduct a business through a corporate vehicle. In the circumstances, it was the loss suffered by the defendant by reason of the breach of contract that was recoverable. It was erroneous to proceed to assess damages on the basis that the existence of the corporate vehicle could be disregarded. The incongruity of the result reached by the President may be illustrated by the observation that what was being allowed as company loss of profits included that which could be expected to be claimed as business deductions. 25 In deference to what was put on behalf of the defendant, it may be added that I do not consider that provisions in the ADT Act concerning procedures of the Tribunal assist in resolving the question before the Court in this case. 26 Accordingly, the appeal is allowed. The orders of both the Appeal Panel and the President are set aside. The defendant is to pay the costs of this appeal. If so entitled, it is to have a Certificate under the Suitors' Fund Act 1951. The proceedings are remitted back to the Tribunal for determination according to law. The exhibits may be returned. **********

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