District Court
New South Wales

Medium Neutral Citation:

Gamble v Wilson [2011] NSWDC 240

Hearing dates:

7, 8, 9, 10, 11 February and 17 March 2011

Decision date:

03 June 2011

Before:

Letherbarrow SC DCJ

Decision:

1.Judgment for the plaintiffs against the defendants on the claim in the sum of $24,438 inclusive of pre-judgment interest.

2.Judgment for the defendants/cross-claimants against the plaintiffs/cross-defendants on the cross-claim in the sum of $32,001.52 inclusive of pre-judgment interest.

3.The defendants/cross-claimants are entitled to set off against the judgment sum set out in Order 1 the judgment sum referred to in Order 2 such that the plaintiffs/cross-defendants are to pay to the defendants/cross-claimants the sum of $7,563.52.

4.Each party to bear their own costs of the proceedings including the motion dated 10 August 2009 but excluding those referred to in the order made by his Honour Judge Elkaim of 27 October 2010.

Catchwords:

CONTRACT -landlord and tenant - lease of premises for hardware business - claim in conversion by lessees consequent upon lessors terminating lease and retaking possession - whether lease validly terminated - whether lessor had right to retake possession - cross-claim for breach of lease by lessors - assessment of damages for conversion and breach of lease

Cases Cited:

Penfolds Wines Pty Limited v Elliott (1946) 74 CLR 204, Flowfill Packaging Machines Pty Ltd v Fytore Pty Ltd (1993) Aust Torts Reports 81-244, Barclays Mercantile Business Finance Ltd & Anor v Sibec Developments Ltd & Ors [1993] 2 ALL ER 195, Petre v Henier (1701) 12 Mod Rep 519, Upton & Anor v TVW Enterprises Ltd & Anor (1985) 7 ATPR 40-611, Craig v Marsh (1935) 35 SR (NSW) 323, Clayton v Le Roy (1911) 2 KB 1031, Crowther v Australian Guarantee Corporation Ltd (1985) Aust Torts Reports 80 - 709, Solloway v McLoughlin [1938] A.C. 247, Trailways Transport Ltd v Thomas [1996] 2 NZLR 443, Johnson Matthey (Aust) Ltd v Dascorp Pty Ltd et al [2003] VSC 291, Furness v Adrium Industries Pty Ltd (1993) Aust Torts Reports 81 - 245, Livingstone v Rawyards Coal Co (1880) 5 App. Cas. 25, Butler & Ors v The Egg and Egg Pulping Marketing Board (1966) 114 CLR 185, Kuwait Airways v Iraq Airways [2002] UKHL 19; [2002] 2 A.C. 883, Whitmore v Black (1884) 13 M.&W. 507, Whitehouse v Atkinson (1828) 3 C.&P. 344, Payzu v Saunders [1919] 2 KB 581 CA, Saunders v Williams [2003] B.L.R. 125 CA

Texts Cited:

Clerk, J.F. and Lindsell, W.H.B., Clerk & Lindsell on Torts (Sweet and Maxwell, 16th ed, 1989), Clerk, J.F. and Lindsell, W.H.B., Clerk & Lindsell on Torts (Sweet and Maxwell, 20th ed, 2010), McGregor, H, McGregor on Damages (Sweet and Maxwell, 18th ed, 2009)

Category:

Principal judgment

Parties:

Godfrey Gamble (First Plaintiff)
Karen Gamble (Second Plaintiff)
Robert Leo Wilson (First Defendant)
Claude Stanley Wilson (Second Defendant)

Representation:

First and Second Plaintiffs:
Mr J Birman/Mr T Young
First and Second Defendants:
Mr S Gardiner/Ms C O'Mahony
First and Second Plaintiffs: Birman & Ride
First and Second Defendants: Walsh & Blair

File Number(s):

2009/339774

Judgment

Introduction

1.On 1 May 2002, the plaintiffs as lessees, entered into a standard Law Society of New South Wales lease (Exhibit A) with the defendants as lessors, whereby the former agreed to rent the latter's warehouse and surrounding yard (the "premises") located at 13 Douglas Road, Tuncurry for the purpose of running a hardware business.

2.The relevant provisions of the lease were as follows:

(i)a term of five years terminating on 30 April 2007 with an option to renew for a period of a further five years. This option could not be exercised prior to 1 October 2006 and had to be exercised by 1 January 2007 (Item 11);

(ii)the rent was to be paid in advance by monthly instalments commencing at $4,917, with annual increases based on the Consumer Price Index. If the option was exercised, there was to be a review to market (Items 12 and 14);

(iii)the plaintiffs were to pay all "Outgoings" during the term of the lease which included local council rates and charges, water, sewerage and drainage charges, land tax and insurance, with the obligation to pay land tax suspended for the first year (Item 13);

(iv)all rent and other monies payable under the lease were exclusive of GST with the liability for GST (payable in respect of any taxable supply), being additional and payable by the plaintiffs to the defendants at the same time as rent and other monies were payable (Item 17);

(v)the defendants had a right to enter and take possession of the property if, inter alia, "rent or other money due under this lease is 14 days overdue for payment" (Cl 12.2.2);

(vi)if the defendants allowed the plaintiffs to continue to occupy the premises after the expiry of the lease, other than under a new lease, they did so under a monthly tenancy on the same terms (with some exceptions) and the plaintiffs "must go on paying the same rent and other money in the same way that (they) had to do under the lease just before the lease period ended..." (Cl 12.4);

(vii)prior to the plaintiffs permanently vacating the premises, they were to repaint all parts of the building thereon which were painted at the time they took possession or during the lease and any extension of the term, with such repainting to be in accordance with the defendants' reasonable specifications (Item 22);

(viii)the plaintiffs must maintain the premises in their condition as at the commencement date subject to fair wear and tear and also reimburse the defendants for the cost of fixing structural damage caused by the plaintiffs apart from such wear and tear (Clause 7.2 and 7.3).

3.Pursuant to the lease, the plaintiffs moved into the premises and conducted their business known as "Great Lakes Hardware" therefrom. The plaintiffs very quickly fell behind in the rent although the relationship between the parties remained reasonably good.

4.Whilst there was considerable evidence surrounding the issue of the exercise of the option, it is common ground that this was never validly exercised despite, at least, the second defendant believing it had been, and the plaintiffs remained on as monthly tenants from May 2007 until October 2008 (T196.35 - 198.6).

5.Over the period that the plaintiffs were monthly tenants, relations between the parties deteriorated significantly and the defendants ultimately issued proceedings against the plaintiffs for non-payment of rent and other monies out of the Wagga Wagga Local Court on 2 October 2008.

6.On 11 October 2008, it is common ground that the defendants locked the plaintiffs out of the premises whilst the plaintiffs' business was still operating and stock (the "stock") and other goods including certain plant and equipment (the "goods") were still on the premises.

7.Most of the stock and goods remained locked inside the premises at the time that the plaintiffs filed their original statement of claim in the Wagga Wagga District Court on 28 April 2009 seeking over $600,000 in damages from the defendants for conversion. This claim is now contained in an amended statement of claim which seeks a little over $580,000 although this amount was reduced somewhat in submissions.

8.On 10 August 2009, the defendants filed a motion in the District Court at Wagga Wagga seeking orders pursuant to rule 43.2 of the Uniform Civil Procedure Rules, 2005, NSW as to whether the plaintiffs or "any other entity" were entitled to the stock and goods still at the premises which had been "abandoned" by the plaintiffs. An order was also sought requiring whomever "the court determines is entitled to possession" of the stock and goods to collect it.

9.On 31 August 2009, the defendant's local court proceedings were, by consent, transferred to the District Court at Wagga Wagga and are now contained in a further amended statement of cross claim.

10.On 9 September 2009, consent orders were made disposing of the defendants' said motion whereby certain of the items of the stock and goods still on the premises owned by another company were to be removed by it with the plaintiffs to remove "all items of hardware stock, tenants fixtures and fittings, motor vehicles and plant and equipment situated" there other than such other company's goods.

11.Thereafter, the remaining stock and goods were moved by the plaintiffs to a rented warehouse in Taree. The auctioneer they had retained then arranged an auction which took place on 8 November 2009 and resulted in the plaintiffs ultimately netting less than $30,000.

12.Prior to the transfer of the remaining stock and goods to the Taree warehouse, the plaintiffs sold a portion of same after regaining entry and some of it was voluntarily returned to other companies which had made claims thereon.

The Hearing

13.By an earlier order of another judge of this court, the trial proceeded by way of evidence in chief being given by affidavit with cross examination of the deponents.

14.The hearing took place over five days in Wagga Wagga last February with addresses taking place in Sydney on 17 March last.

15.Apart from some twenty one affidavits from twelve deponents, the parties tendered a considerable volume of documentary material. Both parties also provided several sets of written submissions together with various spread sheets and schedules of damages in the form of "Scott" schedules.

The Issues

16.As to the plaintiffs' claim in conversion, the major issues are:

(i)did the defendants have a right to take possession of the premises on 11 October 2008? The answer to this question depends upon, inter alia, whether the plaintiffs were fourteen days overdue in paying rent and other monies under the lease. This in turn depends upon what the rent then was, about which there was considerable dispute, and whether the defendants had orally agreed to defer the payment of all sums due for three months and if so, on what basis. This issue also involved determining whether the plaintiffs were only obliged to pay outgoings made known to them by the defendants and whether, in the circumstances, GST was payable. Whilst the plaintiffs have pleaded that the termination of the lease was unlawful, their claim in conversion is not really dependent on such unlawfulness. Even if their occupation was lawfully terminated, the defendants could still have converted the subject property. Nevertheless, the plaintiffs have pleaded an unlawful termination and whilst this question is really more relevant to the cross claim, it is convenient to refer to it here.

(ii)Did the defendants convert the stock and goods located on the premises when they retook possession? This involves a consideration of whether the defendants denied the plaintiffs possession of the stock and the goods or whether the plaintiffs abandoned it. It also involves determining whether the defendants were justified in withholding possession due to the claims of numerous third parties made relatively shortly after the lockout.

(iii)if the defendants did convert any stock and goods to which the plaintiffs were entitled to possession, what was it? There was a considerable dispute as to what was actually on the property at the time of the lockout and also as to what items had been disposed of by the plaintiffs prior to the auction;

(iv)if any conversion took place, how are the plaintiffs' damages to be calculated? For example, are the plaintiffs entitled to the original wholesale cost of the relevant items, their replacement value at the time of the alleged conversion or, as was urged on behalf of the plaintiffs, their full retail value? In this regard, the defendants argued, inter alia, that the plaintiffs had not proved they suffered any loss and that most of the remaining items brought their true value at the auction which was highly publicised and well attended. In response, the plaintiffs described such auction as a "fire sale" over which they had no control. This in turn raises questions of mitigation.

17.As to the defendants' cross claim, the major issues are:

(1)what is the outstanding rent, if any? This involves determining what the rent was during various periods after the original term of the lease expired up to the time of the lockout and whether the defendants are entitled to rent thereafter up until the transfer of the remaining items to Taree in late 2009 and if so at what rate.

(2)what is the outstanding sum, if any, in relation to outgoings and GST? This depends upon the determination of a number of the above issues as well as whether the defendants failed to advise the plaintiffs as to what these amounts were and when they fell due and whether this was required under the lease in any event.

(3)what sums are the defendants entitled to for repainting costs and for various forms of damage allegedly caused to the premises by the plaintiffs as well as those claimed for rubbish removal and cleaning?

Evidence Called by the Plaintiffs

Mr Godfrey Gamble

18.Mr Gamble, the first plaintiff, swore three affidavits dated 16 November 2010, 14 January 2011 and 21 January 2011 which became Exhibits B, C and D respectively. Annexures thereto were designated with his initials coupled with a number, such as "GAG 1". Items exhibited to the affidavits were described as such together with a number, such as "Exhibit 1". The second plaintiff, Mr Gamble's wife, was largely uninvolved in the subject events and gave no evidence in the proceedings although some conversations in which she took part are referred to by others.

19.When he first took possession of the premises in May 2002, Mr Gamble stated that the front driveway was in a poor state of repair as were the male and female vanity basins in the toilets. He said that the previous tenants were a heavy haulage company which used to park their semi-trailers and other trucks on the tarmac around the premises (Exhibit B - paras 8 and 10). In this regard, Exhibit 1 to Exhibit B, comprises various photographs taken of the premises when the prior tenant was still in possession.

20.As to GST, Mr Gamble deposed that the ATO audited his business in mid 2002 and denied his claim for reimbursement thereof which he had been paying pursuant to the lease. He said he informed the second defendant, Mr Claude Stanley Wilson ("Mr Stan Wilson"), of this and asked for a tax invoice which he received but he said that he thereafter received no other such tax invoices nor any further "request for payment of GST" from the defendants until November 2008 (Exhibit B - paras 12 and 13). He stated that at no time from May 2002 until the lockout did the defendants ever advise him that they had incurred any liability to pay GST in respect of the lease of the premises (Exhibit B - para 14). Nevertheless, Mr Gamble conceded that he continued to pay GST to the defendants as he "assumed" he was "obliged" to do so under the terms of the lease (Exhibit B - para 17).

21.As to the rent, pursuant to the "Schedule of Rent Payable and Paid" (GAG 2), Mr Gamble stated that he had in fact overpaid rent by about $40,000 as at October 2008 (Exhibit B - para 16).

22.As to council and water rates, Mr Gamble deposed that he had only occasionally received the relevant accounts in the mail from the first defendant, Mr Robert Leo Wilson ("Mr Robert Wilson") the second defendant's brother, which he always paid (Exhibit B - paras 20 to 23).

23.As to insurance, Mr Gamble deposed that prior to the receipt by fax of a letter in June 2008 (GAG 4), the defendants did not advise him of any costs that they had incurred in insuring the premises nor make any requests for payment thereof from him (Exhibit B - para 24).

24.As to land tax, Mr Gamble deposed that the defendants never told him what was owing in this regard, nor did they ever ask him to pay it, nor to reimburse them for any payments they made (Exhibit B - para 26).

25.By early 2007, Mr Gamble deposed that he and his wife had decided "to quit the hardware business" as they "did not want to be locked into a further 5 year lease". However, as they wanted to sell the business as a going concern "it was important to continue to trade from the business until we could find a buyer" and if a buyer had been found, Mr Gamble said he "would have been keen to also secure a formal extension of the lease" that he could assign to them (Exhibit B - para 28).

26.From February 2007 Mr Gamble deposed that the business' turnover "suddenly dropped by about 33% and thereafter continued to decline" which he believed was due to, inter alia, the global economic crisis and the fact that a newly opened "Bunnings" hardware warehouse in nearby Forster increased competition (Exhibit B - para 29).

27.Thereafter, the plaintiffs remained in the business and "did not exercise the option". Whilst Mr Gamble thought that a rent increase would be inevitable, he deposed that at no stage was there ever an agreement as to the rent to be paid after the expiration of the lease save as provided for in Clause 12.4 of Exhibit A.

28.Despite the above, Mr Gamble deposed that on 10 May 2007 he faxed a letter to Mr Stan Wilson (GAG 5) which states:

"We are interested in taking up the option for extending the lease for another 5 years."

29.Mr Gamble said that the contents of this fax "are true because I was interested in renewing the lease with the proviso (that I admittedly did not express in GAG5) that I could find a buyer for the business" (Exhibit B - para 32).

30.It would seem that whilst the period for exercising the option pursuant to the lease had lapsed on 1 January 2007, both parties were either unaware of this provision or ignored it.

31.After the expiry of the original lease term, Mr Gamble said that Mr Stan Wilson would call at the premises "to demand payment of rent" as well as other monies and although "the question of the rent had not been resolved", Mr Gamble said that he paid him "irregular lump sums more or less in accordance with his demands to avoid further confrontation because I wanted him to leave the store" (Exhibit B - paras 33 and 34).

32.Mr Gamble said that from January 2007 he had several discussions with Mr Stan Wilson "about the future of the lease" and "about the new rent". He said that Mr Wilson wanted a "fair market rent" and that in July 2007, he agreed with him to instruct a valuer to prepare a report as to such a rent with the plaintiffs and the defendants to share the cost equally. In accordance with this agreement, a Mr James Cassidy of Robert Gould & Associates prepared a rental assessment (Exhibit 11) which Mr Gamble received in November 2007. It concluded that a fair market rent was $92,380 per annum exclusive of GST. Mr Gamble deposed that he "could not afford to pay" this amount (Exhibit B - para 38).

33.In late November 2007 at a meeting with Mr Stan Wilson, Mr Gamble said that he told him the plaintiffs "would not enter into a new lease" unless the defendant made certain repairs, most of which Mr Wilson agreed to but he then demanded a monthly rental instalment of $8,468.16 in accordance with Mr Cassidy's market assessment which Mr Gamble paid. Mr Gamble said that despite agreeing to these repairs, the defendants never carried them out (Exhibit B - paras 39 - 41).

34.On 24 July 2008, there was a meeting between Mr Gamble, the defendants and the latter's real estate agent, a Mr Peter Katen, at a service station operated by the defendants. At this stage Mr Gamble said that "communications between the parties had broken down". At this meeting, Mr Gamble said he told the others present that the plaintiffs "were not in a financial position to sign a new lease" and that they wanted to remain as month to month tenants and that they were "attempting to restructure or sell the business and could not afford to pay more than $4,000 per month in rent". Mr Gamble said that the defendants agreed to this reduced rate for a period of three or four months but that this "was temporary and they still expected us to pay any other monies due to them after that time" (Exhibit B - paras 43 - 45).

35.In consequence of this arrangement, Mr Gamble made payments to the defendants in August and September 2008 of $4,000 per month.

36.Around this time, Mr Gamble said that a local businessman, a Mr Des Wiggins, had approached him and was a prospective buyer for the hardware business. Mr Gamble said that he told Mr Stan Wilson that he had such a buyer in late September 2008 and Mr Wilson demanded to know his name but Mr Gamble "refused to disclose" this because he had "been requested not to do so" (Exhibit B - para 47).

37.This oral demand was followed up by a letter from Walsh & Blair, the defendants' solicitors, dated 8 October 2008 (Annexure E to Exhibit 1), which advised that unless such proposed purchaser's name and contact details were communicated by 5pm on Friday 10 October 2008 the defendants "will take such further action as they may be advised and this without further notice to you".

38.On Saturday 11 October 2008, Mr Gamble attended at the subject premises "but wasn't able to enter them because the padlock to the gate had been changed" and "Stan Wilson and a security guard were present and refused to allow me to enter". Mr Gamble said that he asked Mr Wilson "for access to the premises to remove the property and he refused". At the same time, Mr Gamble was served with the abovementioned statement of claim issued out of the local court at Wagga Wagga on 2 October 2008, claiming just under $70,000 from the plaintiffs, primarily made up of outstanding rent in the sum of a little over $56,000 (Exhibit B - para 57).

39.Thereafter, Birman and Ride, the plaintiffs' lawyers located in Perth, wrote several letters (GAG 7 - 10) to Walsh & Blair with no immediate response.

40.Six days after the lockout on 17 October 2008, Mr Gamble deposed that he telephoned Mr Robert Wilson and asked him to release the detained stock and property which he refused to do although he agreed that Mr Gamble could remove his business records and computer at a suitable time which would be advised (Exhibit B - para 59). Other evidence establishes that this subsequently occurred on 27 November 2008.

41.As to what stock and goods were on the premises as at 11 October 2008, Mr Gamble deposed that as to the former, a stocktake had been undertaken "of the trading stock in the premises as at 30 June 2008". This involved him and his staff physically counting every item of stock and recording it on a computer. From 1 July 2008 up until the subject lockout Mr Gamble deposed that "every purchase and sale of stock was recorded in a computer at the point of sale and the stock levels and values were automatically adjusted".

42.Shortly after the lockout, Mr Gamble stated that he produced Exhibit 2 to Exhibit B "being a printout of data reporting each item of stock in the store at 11 October 2008..., the wholesale cost and the proposed retail mark up". In relation to the retail mark up applied to the wholesale price, same was determined by Mr Gamble based on his "observations of prices charged by competitors, retail mark-ups recommended by wholesalers and industry practice" (Exhibit B - paras 49 - 52).

43.The conclusion that Mr Gamble drew from the above and as set out in Exhibit 2 to Exhibit B is that the wholesale value of the stock as at 11 October 2008 was $309,085.07 with its retail value being $573,268.94 (Exhibit B - para 53).

44.In relation to certain parts of the stock, Mr Gamble deposed that certain suppliers, pursuant to the terms of the relevant agreements were entitled to retain ownership of their goods until the plaintiffs sold them to customers and the suppliers were paid in full (Exhibit B - para 54).

45.In addition to the stock, Mr Gamble listed the goods located on the premises as at 11 October 2008 together with his "estimate" of their value at that time totalling some $52,000 (Exhibit B - para 55).

46.On 10 November 2008, Walsh & Blair sent a letter to the defendants' lawyers (GAG 11) enclosing, inter alia, various tax invoices for insurance premiums issued by Elders Insurance in relation to "building insurance" which the defendants had paid in relation to the subject premises since the commencement of the lease. This letter claimed reimbursement in the amount of approximately $7,500 so paid until the time of the lockout which was slightly more than the amount first claimed in June 2008 pursuant to GAG4. This larger amount was included in a proposed amended statement of claim to be filed in the Wagga Wagga local court proceedings commenced by the defendants which was annexed to the letter.

47.In March 2009, at Mr Stan Wilson's request, Mr Gamble attended the subject premises at which time a Mr Alan Slater, a director of a company trading as "Confast" was also in attendance. At this meeting, Mr Gamble authorised Mr Slater to remove various goods apparently owned by Confast, the wholesale value of which Mr Gamble states was $7,174.48 including GST, for which he was given a "credit" by Mr Slater.

48.In late August 2009, Mr Gamble received certain correspondence from the defendants (Annexures F, G, I and J of Exhibit 1) which detailed claims made to Mr Robert Wilson by four companies being John Danks & Son Pty Limited, BOC Limited, John McCurdie Sales Pty Limited and Test-Right Import Australasia Pty Limited. Such claims asserted ownership over numerous items of stock still on the premises. In each case, Mr Gamble stated that, inter alia, this was the first time this correspondence "or notification of any other communication between the defendants and the relevant company" came to his attention (Exhibit B - para 71) although several of these letters refer to numerous unsuccessful attempts that had been made to contact Mr Gamble directly.

49.After the consent orders were made in the Wagga Wagga District Court on 9 September 2009, Mr Gamble regained possession of "the detained property" from the premises and in the period up to 10 October 2009 delivered to Test-Right Imports Australasia Pty Limited, John McCurdie Sales Pty Limited and BOC Limited "the items that they owned". John McCurdie Sales Pty Limited gave him a credit for a little over $11,000 in relation to the items returned to it.

50.The plaintiff then sold a number of listed items direct from the premises and the amount received for same "did not exceed $10,000". Thereafter, the balance of the "detained property" was conveyed to the warehouse in Taree (Exhibit B - para 73).

51.When he regained possession of the stock and goods from the premises, Mr Gamble said that "a number of pot plants had been damaged beyond repair" and the "packaging for many items had deteriorated" and "there was significant weather damage to a number of goods that had been stored outside since 11 October 2008" (Exhibit B - para 75).

52.In relation to the repainting of the premises, the plaintiff said that he was not given the opportunity to do so because of the lockout.

53.Further, the plaintiffs had caused no damage to the "driveway, downpipes, vanity basin...and fences" which were in the same condition as when he took possession in 2002 save for "fair wear and tear" (Exhibit B - para 76).

54.Whilst Mr Gamble swore the two further affidavits mentioned (Exhibits C and D), the contents of same were largely in reply to matters raised in various affidavits relied upon by the defendants and I propose to refer to them where appropriate later in this judgment.

55.In cross examination, Mr Gamble denied that he had in any way altered the document produced as a result of his stocktake (Exhibit 2 to Exhibit A) prior to its printing.

56.In relation to his audit by the Australian Tax Office, Mr Gamble agreed that he would have documents "in the archives somewhere" but no such documents were ever tendered (T115.17 - 25).

57.Similarly, Mr Gamble said that the actual invoices for the stock he purchased between 2002 to approximately June 2007 were "in storage" but these were also not tendered in evidence (T115.46 - 116.9).

58.In relation to such obligations as council rates and land tax, Mr Gamble stated that his obligation to pay same under the lease was when "asked for" and "when they were requested by the vendors" (T116.46 - 117.14).

59.In relation to the market review conducted by Mr Cassidy, Mr Gamble agreed that after he received a copy in November 2007 he paid the exact figure once but not because any agreement had been reached in relation to it but "because I was asked to by Stan on one of his regular visits" and because "we were behind in the rent" (T119.34 - 43). Mr Gamble clearly accepted that the plaintiffs were behind in the rent around this time and that this was due to "poor cash flow as a result of a downturn in business" (T120.15 - 16).

60.Mr Gamble denied that his fax of 10 May 2007 (Annexure GAG5 to Exhibit B), advising the defendants that they were interested in taking up the option for a lease, was misleading.

61.Mr Gamble was then cross examined upon his third affidavit (Exhibit D). Paragraph 1 refers to numerous discussions between Mr Gamble and a Mr Banks, an employee of another hardware store, occurring between 2008 and 2009 "with a view to (Mr Banks) and his partners buying the Great Lakes Hardware business or at least some of my plant, equipment and stock". Annexure GAG24 to Exhibit D is a letter written by Mr Gamble to Mr Anthony Banks in January 2009 enclosing "the list of plant and equipment we discussed" and advising that he was "open to offers, anything you don't want I'll take and sell". In Mr Gamble's handwriting on the enclosed list which totals $77,000, he has written "save $45K the Lot".

62.In a similar vein, Mr Gamble confirmed that he took "both plant and equipment and product" from the premises and sold it for cash when he was allowed back in and prior to the remainder of the stock and goods being transferred to the warehouse in Taree to be sold at auction (T130.48 - 131.3). He reiterated that he received a bit less than $10,000 for these items but also stated that he agreed to pay the auctioneer commission on them even though they weren't sold by the auctioneer as he "was providing an overall benefit to me". Mr Gamble denied that he in fact sold more than $10,000 worth of the stock (T131.24 - 31).

63.In relation to the meeting in July 2008, Mr Gamble stated that the parties agreed thereat that in exchange for him paying $4,000 per month for three months, all obligations under the lease would be deferred until after the three month period (T137.11 - 34). Further as the plaintiffs were then on a monthly lease, Mr Gamble agreed that he believed "all of the other clauses of the lease that he signed in 2002 just fell away" and that "none of the terms of the original lease at all continued to apply" (T138.3 - 20).

64.It was also put to Mr Gamble that he told the defendants at the July meeting that he "owned the goods in the premises" to which he replied (T138.26 - 28):

"Not exactly that. I added a qualification to it. I owned the goods in the premises except for the goods that were still unpaid - invoices, outstanding invoices."

65.It was put to Mr Gamble that this qualification as to what he owned was never mentioned and that in fact he agreed at this meeting to execute a "mortgage over those goods" to give the defendants "some satisfaction to continue to deal with you because of your lack of payments in accordance with the lease...". Mr Gamble denied both propositions (T138.30 - 35).

66.Mr Gamble then agreed that the letter he received from the defendants' solicitors after this meeting concerning the execution of a "chattel mortgage" in respect of the goods on the premises (pp 58-59 of Exhibit CSW-1 to Exhibit 4) "came out of the blue..." (T139.22- 28).

67.Mr Gamble denied it was at the July 2008 meeting that he first told the defendants that he wanted to sell the business, stating that he had done this more than once with the first time being in 2007 prior to the lease expiring (T168.22 - 169.7).

68.Mr Gamble also agreed that he was in the United Kingdom for two weeks over May and June 2008, a further three weeks over December 2008 to January 2009 and for a period of three months from May to August 2009 before finally moving permanently to the United Kingdom at the end of November 2009, apparently shortly after the subject auction (T113.13 - 114.9).

69.Despite agreeing that it was his belief that the defendants "were using the goods as some form of bargaining chip over the rent" Mr Gamble believed that they locked him out "purely because (he) wouldn't tell them the name of the purchaser" and that it "had nothing to do with the rent", (T141.4 - 22). However, later in his cross examination he said that he thereafter formed the view that "the rent had something to do with it as well" and since had come to the view that the defendants "were holding on to the stock to try and somehow or other transfer it to prospective purchasers of the business or new lessees" but stated that this belief was "only hearsay" (T172.5 - 35).

70.Mr Gamble was then cross examined as to the wholesale value of the stock on the premises as at 30 June 2009 which he had deposed was some $309,085.07 (Exhibit C - para 19). This is the same figure which he said was the wholesale value as at 11 October 2008 (Exhibit B - para 53). He was taken to a trading account prepared for the business (Annexure GAG 23 to Exhibit C). This document sets out the trading income and cost of sales as well as the gross profit from trading for the financial years 2008 and 2009. In relation to the 2009 financial year, such document discloses that the business opened that year with $235,914.50 by way of "opening finished goods" which is the same figure as for "closing finished goods" as at the end of the 2008 financial year. It also discloses that the business made purchases of $123,609.41 in the 2009 year which when added to $235,914.50 results in a figure of $359,523.91. In that year the business made sales of $208,991.95 at a cost of $194,523.91. When the amount for the cost of the sales is subtracted from the sum of $359,523.91 the amount of "closing finished goods" as at 30 June 2009 is recorded as $165,000.

71.This document indicates that as at 30 June 2009 the wholesale value of goods (meaning stock) on the premises, was $165,000. However, as stated in paragraph 19 of Exhibit C, Mr Gamble maintained that the wholesale value of the stock on the premises as at 30 June 2009 was $309,085.07 but said he instructed his accountant "to adopt the figure of $165,000 to reflect the fact that the stock would have inevitably have diminished because of the (defendants') conduct".

72.Mr Gamble did not agree with the proposition that this trading account misrepresented the financial position of the business to the tax office (T145.8 - 19).

73.Further, Mr Gamble would not "agree with an estimate of the value of the stock as at October 2008" of $120,000 (T145.27 - 29).

74.Mr Gamble also stated that he kept the "stock high during...most of 2008 while I was trying to sell the business" and he "didn't let stocks run down" (T144.48 -49). In this respect, Exhibit Z comprises numerous colour photographs which it is common ground depict the condition of the premises at the time of the lockout. Whilst there still appears to be a considerable amount of stock on the premises, several photographs also show a significant number of empty and depleted racks and shelves.

75.Approximately one month after the lockout, Mr Gamble agreed that his then solicitors wrote a letter on his instructions to the defendants' solicitors dated 21 November 2008 (T158.27) which is Annexure C to Exhibit 3. The penultimate paragraph of this letter is as follows:

"In relation to stock claimed by Danks, BOC and ELGAS and the pallets located on the premises, we are in the process of liaising with the relevant parties in order to determine the stock in question. We note that our client does not consent to the removal of any stock other than the water cooler and water kegs referred to above until such time as he has received appropriate information from the suppliers. In the event that consent is granted we will advise you of this in due course."

76.Mr Gamble stated that 60 percent of the "material...in the store" in fact belonged to Danks (T158.33 - 34).

77.When asked when he or his solicitors next wrote to the defendants to give permission for items other than the water cooler and water kegs to be released, Mr Gamble stated that he did not know (T159.35 - 40). It is common ground that there is no such correspondence.

78.The plaintiffs' solicitor's said letter of 21 November 2008 was written partly in response to the defendants' solicitor's letter of 17 November 2008 (Annexure B to Exhibit 5), the relevant parts of which are as follows:

"We are instructed that Mr Gamble has already removed your clients' financial records from the premises. Our clients do not object to your clients arranging a mutually agreed time with our clients within the next seven (7) days to collect their personal property and business and financial documentation from the premises.

In relation to the stock located at the premises, we have received no evidence from you that your clients own any of the stock and in fact the letter you have provided us from Confast suggests that all stock held at the premises remains the property of Confast. We are instructed that our clients have been approached by other supplies including Danks who also claim ownership of the stock.

Furthermore we are instructed that our clients have been approached by:

(a) BOC in relation to stock, empty gas bottles and storage cages;

(b) ELGAS in relation to bottles and cages; and

(c) Twin Palms Natural Spring Water in relation to a water cooler and empty kegs;

to be granted access to remove the above items.

We enclose a copy of letter from Twin Palms dated 14 November 2008.

Would you please let us know whether your clients consent to the above items being released to the respective owners. We are also instructed to request your clients' consent to the pallets located at the premises being returned to their owner/s."

79.In turn, the letter of 17 November 2008 was expressed to be in response to, inter alia, a letter of the plaintiffs' solicitors of 7 November 2008 (Annexure A to Exhibit 5) in which a request is made for the defendants to permit the plaintiffs to have access to the premises within "the next 14 days to remove from the premises all of the stock".

80.After the letter from the plaintiffs' solicitors of 21 November 2008, the next piece of correspondence between the parties is a letter from the defendants' solicitors to the plaintiffs of 14 May 2009 (Annexure D to Exhibit 5) which is as follows:

"We note that our clients are currently holding stock which has remained in our clients' premises at 13 Douglas Road, Tuncurry, for the last seven months.

Our clients intend to re-lease the premises and do not propose to hold the stock any longer.

We note, however, that John Danks & Son Pty Ltd and other creditors claim to have title to the stock.

Would you please provide us with proof of your entitlement to the stock within the next 14 days.

If the issue cannot be resolved amicably as to who is entitled to the stock, our clients will have no alternative but to seek declaratory relief and orders from the Supreme Court.

If our clients are forced to do this we put you on notice that we will be seeking an order that you and John Danks & Son Pty Ltd pay our clients' costs of the application."

81.In relation to the plaintiffs' allegation that some of the "detained" property had been damaged beyond repair by the time the plaintiffs got access to the premises in September 2009, Mr Gamble agreed that he had in fact watched Mr Robert Wilson move the goods ordinarily on display for sale outside to a position inside so they "would be protected from the weather...". However, Mr Gamble said that these items were so stacked up inside that, for example, the pots were "chipped and cracked with plastic fertiliser bags and the like being stacked on pallets on top of each other crushing the bags underneath" (T162.47 - 163.34).

82.When it was suggested to Mr Gamble that the auctioneer he engaged, Mr Bennett, sold all the material still on the premises at "a very good price", he replied (T164.1):

"Mr Bennett wouldn't know what a price was for something."

83.When pressed as to Mr Bennett being put forward to the court as Mr Gamble's expert auctioneer, Mr Gamble agreed but stated that "he wouldn't know what the price of a bag of fertiliser was..." (T164.5 - 6).

84.Towards the end of Mr Gamble's cross examination, I asked him a number of questions as to, inter alia, what he would have done with the stock and goods if he hadn't been locked out but was unable to obtain a new lease. This led to some further questions concerning what he would have done if he had to quit the premises quickly due to non-payment of rent as well as the auction that actually took place. This evidence is as follows (T166.17 - 167.33):

"Q ...what would you have done with the stock in those circumstances anyway?

A. What I would like to have done was to have a - to sell out of the stock. Either sell it to another proprietor if they could negotiate their own lease, and either do that and run a store from there, or take it away and set up a store somewhere else.

Q. If you couldn't get a new lease and you were going to be out of the business anyway, your intention in relation to the stock was, hopefully, (you) could sell the business to someone else who'd get their own lease?

A. Yes.

Q. Or, barring that, (you) would take the stock, what, sell it at auction?

A. No. I would have a closing-down sale. Have a sale from the premises, which would be a controlled sale, which we could scan goods out, they would be sold individually at a reduced price.

Q. But if you couldn't get a new lease or sell the business holus-bolus to someone else, then you would have had an auction sale on the premises?

A. No, not an auction. I would have just continued trading, selling the stock 80% off, something like that - sorry - 20% off, at 80%, something like that.

Q. Assume you had to get out?

A. I had to get out quickly?

Q. Yes. Or you had no lease, you hadn't been paying rent and you had to go, and you couldn't sell the business to someone else, but you had the stock inside the business, what would you have done with it?

A. The final result would have been to have an auction on the premises, where all the stock was.

Q. Somewhat like the auction that you had off the premises?

A. No. It would have been a better auction because we were forced - because we had to pack stuff up, a lot of small items were bundled into cardboard boxes, taken up to storage, taken up to the auction, and those cardboard boxes were sold as a job lot, and they might contain $200, $300-worth of tools, and they perhaps went for $20, $30.

Q. Were you at the auction?

A. Yes.

Q. If you are so critical of it, why did you agree to those sorts of sales taking place?

A. Well, I did not think that the goods would go for such a low value as they did at the auction. During the auction, I couldn't stop it.

Q. I don't know whether I'm an expert on auction law, but if things were going - the first lot went incredibly cheaply, why didn't you tell the auctioneer, well, I want to put a reserve on the rest of this?

A. I tried to, but unfortunately it wasn't possible.

Q. What do you mean by that?

A. Well, it was a very busy auction, we had a large number of items that we needed to sell in one day. The auction was going continuously, there was no breaks, it went continuously from about 9am in the morning, through till about 5 o'clock at night.

Q. You knew right from the word go that you were getting prices that you were very unhappy with?

A. After about the first hour or so, yes.

Q. Then because it was under way, you just couldn't stop it?

A. I couldn't stop it, no.

Q. He was your auctioneer, wasn't he?

A. Yes."

85.On the fifth day of the hearing, Mr Gamble was recalled for further cross examination in relation to some documents provided to the defendants the day before. Such documents were headed "Great Lakes Hardware GST [Detail - Accrual] for the financial years 2006 - 2008 inclusive". They became Exhibit 12 and suggest that GST was paid on all rental payments made throughout this period.

86.In light of Exhibit 12, it was put to the plaintiff, inter alia, that "every time you paid a lease payment in respect to the premises, you claimed the GST tax input credit" to which the plaintiff answered he couldn't say "without going through the records" (T279.7 - 9).

87.When Mr Gamble was asked whether the records forming Exhibit 12 show that the payment of 3 July 2006 in relation to rent also include tax at the rate of 10 percent, he replied "no, no" and stated that "anybody could have gone in there and changed that before it was printed out" and that the document "looks like" this had occurred although he then went on to say they were somehow created "by the girl we had at the time" (T277.31 - 50). He further stated that the MYOB program apparently adds GST automatically (T278.11 - 13).

88.During his cross examination, Mr Gamble often appeared rather offhand and somewhat vague in the witness box. He did not strike me as having a particularly good recollection of a number of events. Further, I found several parts of his evidence quite unimpressive and these caused me to seriously question his overall credibility. These included his communications with the defendants regarding exercising the option, the valuation of the stock, particularly as disclosed in the documents prepared by his accountant, the conduct at the auction and his explanation of Exhibit 12.

Mr Craig Antony Beaton

89.Mr Beaton's two affidavits of 21 and 24 January 2011 were admitted by consent and became Exhibits F and G respectively. The latter was merely a recital of the relevant expert's code of conduct.

90.Mr Beaton was not cross examined.

91.In Exhibit F, Mr Beaton deposed that he was a director of Abacus Stocktaking Services Pty Limited, a member of the Stocktakers Institute of Australia Incorporated and had been a stocktaker for some eleven years, routinely performing business stocktakes for the purposes of, inter alia, selling such businesses.

92.In early 2010, Mr Beaton said Mr Gamble delivered to him a list of stock comprising 9,481 hardware products "with a wholesale value of $309,085.07 including GST", said to be the stock in store at Great Lakes Hardware on 11 October 2008, together with fourteen lever arch files containing "wholesalers invoices to Great Lakes Hardware in respect of the stock".

93.Mr Beaton conducted what he called a comprehensive audit of the stock list to determine whether the wholesale valuation of the stock listed therein was "reasonable" and accurately reflected the "landed cost" to Great Lakes Hardware, meaning the cost including freight charges for delivery to the business.

94.To perform this audit Mr Beaton said he randomly selected one hundred and sixty items and compared the wholesale cost recorded on the stock list with the invoices for the product. He was able to locate the relevant invoices for 90 percent of these one hundred and sixty items and for the remaining 10 percent he sourced valuations "from suppliers and internal data bases to determine the validity of the wholesale price...".

95.As a result of this sample audit, Mr Bennett said he was "satisfied that the wholesale prices of the items listed in the stock list are reasonable and accurately reflect the landed cost to Great Lakes Hardware at the time of purchase".

96.Mr Beaton also stated that he "did not inspect the stock in question and am therefore unable to offer an opinion as to the saleability of the stock as at 11 October 2008 or at the present time...".

97.Finally, Mr Beaton expressed the view that "it is inevitable that many of the items in the Stock List if not sold within a reasonable time of purchase (i.e. 3 - 6 months) are likely to deteriorate and therefore lose value due to deterioration of packaging, shop soiling, discontinued lines or water damage".

Mr Anthony David Banks

98.Mr Banks swore 1 affidavit of 21 January 2011 which became Exhibit E.

99.Mr Banks deposed that he was the purchasing manager for Home Timber and Hardware which conducted a store at Thornton in New South Wales. One of such store's major wholesale suppliers of hardware products was John Danks & Son Pty Limited and Mr Banks had regular contact with its senior business manager, Mr Kevin Carr.

100.In mid 2008, Mr Banks became aware that Mr Gamble "wanted to sell" Great Lakes Hardware and between then and 2009 Mr Banks had several discussions with him about buying the business "or at least some of its plant, equipment and stock" (paras 4 and 5).

101.In approximately January 2009, Mr Banks attended the premises and observed that, inter alia, trading stock remained stored thereat and "from my knowledge of the industry a significant proportion of the stock were items supplied by Danks" (para 6).

102.At this attendance at the premises, Mr Robert Wilson was present and Mr Banks said that he told him of his intentions which prompted Mr Wilson to state that "the Gambles owe us rent and we are not releasing the stock until the rent is paid" and "you should not pay the Gambles any money" (para 8).

103.Mr Banks stated that he used a portable scanner to scan the barcodes of the items of Danks stock that he was interested in buying which he estimated "was about one fifth of the total Danks stock in the premises" (para 9).

104.He later produced a document using computer software being a list of the items scanned which is Annexure "ADB1" to Exhibit E. Mr Banks stated that he edited this list "to indicate values for items that I was prepared to buy" with the total being $18,965.67 (para 11).

105.Mr Banks also prepared a document headed "tuncurry offer" (Annexure ADB 2 to Exhibit E) listing some of the goods still at Great Lakes Hardware, such a Ford flatbed truck, a forklift and other items which together with ADB 1 was faxed to Mr Gamble on 4 February 2009. Mr Banks stated that he not only offered Mr Gamble $18,895 for the items in ADB 1 but a further $25,000 for the items in ADB 2 "but we did not reach any agreement on these matters" (paras 12 - 14).

106.The evidence elicited from Mr Banks in cross examination was rather difficult to follow. He seemed to accept that Mr Wilson in fact stated that any money Mr Banks paid Mr Gamble "should be held on trust while it's sorted out" (T105.6 - 9). Further, he seemed confused as to what he was referring to by use of the term "stock" (T104.1 - 27).

107.Nevertheless, Mr Banks agreed that the items he offered to purchase as set out in ADB 1 were "in good nick" and "would sell" (T99.9 - 16).

108.He also gave evidence that Mr Kevin Carr from Danks had told him that as a result of their own visit a few weeks before, they had estimated the value of all the Danks' stock then on the premises as being worth "about a hundred and something thousand, roughly about 110 or something" (T99.31 - 100.1 - 10).

109.In addition to the Danks stock, which Mr Banks also said was not the "majority of stock on the premises", there was "a fair bit of other stock there" which was "stock from suppliers who obviously had nothing to do with Danks" (T99.5 - 7 and T100.2 - 4).

110.In relation to the condition of the stock apart from that which he was interested in purchasing, Mr Banks said that it "looked a bit shop soiled, been there a bit" (T101.13 - 15).

Mr Kevin Daniel Carr

111.Mr Carr swore one affidavit of 8 February 2011 which became Exhibit M. Initially, upon objection, paragraphs 32 to 34 inclusive were disallowed but I subsequently revoked my rejection of paragraphs 33 and 34 (T217.34 - 41).

112.As a result of my ruling that paragraph 32 was rejected, Mr Carr was not cross examined.

113.Mr Carr deposed that since 1997 he had been employed by Danks which ran a franchise business known as "Home Hardware". It also supplied wholesale hardware products to approximately seven hundred and fifty retail member stores throughout Australia.

114.In about 2002, Mr Carr said that he was promoted to New South Wales state development manager where he took on additional responsibility in relation to the home hardware franchise business. In 2006, he was further promoted to New South Wales state sales manager in which role he supervised Danks sales staff throughout New South Wales and was responsible for all Danks sales to all of its customers. In early 2008, Mr Carr was yet again promoted to the position of senior business manager and his responsibility in this role was to assist Home Hardware members develop their stores.

115.Around the time of his final promotion, Mr Carr became aware that the plaintiffs wanted to sell their Great Lakes Hardware business and in October 2008 he became aware that they had been locked out and had ceased trading.

116.At the time of the lockout, Mr Carr deposed that Great Lakes Hardware owed Danks "at least $70,000" in relation to goods it had supplied. As a result, Mr Carr travelled to the plaintiffs' store in October 2008 in the company of Mr Robert Wilson and a colleague of Mr Carr, whereupon the premises were unlocked by Mr Wilson for the purpose of them having access to the store.

117.Mr Carr and his colleague stayed for the rest of the day and were in fact locked in by Mr Wilson who left the premises. They also returned for approximately half of the next day to complete their assessment.

118.Mr Carr, who was put forward as an expert in the plaintiff's case, described what he saw during the first day of their visit in the following terms:

"15.4 my initial impression when I walked into the store was that it was severely understocked;

15.5 I estimated on the balance of my experience and what I observed, that the value of the stock in the premises was about $120,000;

15.6 the Danks Stock was interspersed with stock from other suppliers and/or wholesalers (i.e. Medallist, Duralex); and

15.7 I estimated that the stock potentially supplied by Danks comprised at least 80% of the total stock at the premises."

119.It would seem that the valuation of $120,000 contained in paragraph 15.5 of Exhibit M was in relation to Danks stock as opposed to all the stock in the store (see para 13.4).

120.Mr Carr deposed that he and his colleague scanned the bar codes of the Danks products and entered their quantity manually, although he accepted that he could not be certain that all of the items scanned were supplied by Danks as some were apparently similar to those supplied by other wholesalers and further there may have been some operator errors "if incorrect bar codes or quantities are keyed in".

121.The scanning equipment was connected to a telephone line and the data transmitted back to Danks head office in Melbourne. Apparently this led to an initial estimate that some $292,000 worth of Danks stock was on the premises. However, Mr Carr's immediate supervisor, a Mr Brad Richards, in an email copied to Mr Carr (Annexure KDC 1 to Exhibit M) referred to the appearance of "a few errors that stand out that would reduce the stock on hand from approx $292K to $109K" which was in keeping with both what "Mr Carr and his colleague believe is in the store (excluding stock not carried by Danks)".

122.Mr Carr went on to depose that the value of $109,000 referred to in this email was "consistent with the advice that I had given Brad Richards".

123.Mr Carr also deposed that whilst he could not "be specific", it was inevitable that the value of the goods in the premises in October 2008 would have been far greater than their value in about October 2009 (Exhibit M - para 27) and that the "value of the stock in the premises would have diminished significantly as soon as the (plaintiffs) ceased to trade...because the best price is inevitably achieved in a retail situation" (Exhibit M - para 28). He said he could not "specify a percentage by which the value of stock has diminished but I can say it would be substantial" due to reasons such as dust, a failure to clean and maintain the stock, the "possibility" of vermin, lines being superseded or discontinued and new or cheaper lines being introduced to the market (Exhibit M - paras 30 - 31).

Mr Alan Douglas Slater

124.Mr Slater swore two affidavits of 7 December 2010 and 27 January 2011 which became Exhibits K and L respectively. Mr Slater was also put forward as an expert by the plaintiffs and Exhibit L was simply an adoption of the relevant expert's code.

125.Mr Slater deposed to being a director of a company trading as Confast which was a wholesale supplier of hardware products to retail hardware stores including the plaintiff's business up until it ceased trading in October 2008.

126.At the time of the lockout, Mr Slater said that Confast was owed $8,860 for items supplied on credit to the plaintiffs in 2008 with the terms of such supply being that until they were sold, they remained the property of Confast.

127.In early November 2008, Mr Slater deposed that he telephoned Mr Robert Wilson, identified himself and the nature of the debt owed by the plaintiffs and further explained that he had been unable to contact Mr Gamble and wanted to collect Confast's property from the premises.

128.He said that Mr Wilson replied, inter alia, that the plaintiffs had been evicted for non-payment of rent and "to protect the interests of (the plaintiffs' creditors) he had not permitted" Mr Gamble to remove stock, plant and equipment situated at the premises at the time of the eviction and he was not prepared to release the Confast's property at that time (Exhibit K - para 7).

129.Mr Slater said further correspondence ensued which did not result in him obtaining access and between December 2008 and March 2009 he spoke by telephone to Mr Wilson on a number of further occasions advising, inter alia, that Mr Gamble was happy for him to collect the Confast property and he only needed Mr Wilson's approval. However, Mr Wilson said he required "proof of Confast's title" before entertaining any such request (Exhibit K - para 9).

130.On 6 March Mr Slater said he faxed "documentation in support of Confast's claim for possession" to Mr Wilson but received no response and despite numerous attempts to contact Mr Wilson, he was given "the impression that he was reluctant to assist me in this regard" (Exhibit K - para 11).

131.In early March 2009, Confast obtained a default judgment for the abovementioned debt owing by the plaintiffs. In this respect, Mr Gamble had expressed surprise in the witness box at being informed of the existence of this default judgment during cross examination.

132.On 13 March 2009, Mr Slater faxed a "letter of demand" to Mr Robert Wilson referring to the default judgment and requesting access on Friday 9 March to "reclaim all goods".

133.After faxing this letter, Mr Slater said he had a further conversation with Mr Robert Wilson to confirm that he would collect the property on the coming Friday in which Mr Wilson said that his brother "did not want the Confast goods to be released". Nevertheless, Mr Wilson confirmed that they would be available for collection on the Friday and Mr Slater in fact attended that day and retrieved them.

134.After such retrieval, Mr Slater undertook a stocktake of the items and "determined that their wholesale value inclusive of GST was $7,774.48" and expressed the view that with the industry standard 40 percent mark up "the retail value of the Confast goods was in the order of $10,044" (Exhibit K - para 16).

135.Thereafter, Mr Slater issued a credit note to the plaintiffs reducing the debt in question by the wholesale cost mentioned.

136.In cross examination, Mr Slater said that the balance of the debt has never been paid by the plaintiffs despite attempted enforcement proceedings against Mr Gamble and it was still owed (T91.29 - 92.9). He further stated that prior to obtaining the default judgment he was unable to speak to Mr Gamble and agreed that "he was a pretty hard bloke to get in contact with" (T92.11 - 19).

137.Mr Slater said that he first sought access to the premises to retrieve Confast stock prior to 5 November 2008 but didn't manage to do so until March 2009 although in the meantime his wife got access in November 2008 to obtain a list of the Confast items (T92.29 - 34, 93.15 - 22 and 94.9 - 13). Mr Slater emphasised that it took "four and a half months of negotiation" to retrieve the Confast property (T92.46).

138.Mr Slater also said that when the Confast property was picked up it was "covered in dust" but was in "reasonable condition" and they issued a full credit for it and then resupplied it to other retailers (T94.17 - 26).

Mr Douglas Bennett

139.Mr Bennett, a proprietor of Bennett's Liquidation and Auctions, swore two affidavits, dated 16 November 2010 and 28 January 2011, which became Exhibits H and J respectively. Exhibit J is merely a recital and adoption of the relevant expert's code of conduct.

140.In Exhibit H, Mr Bennett said that in October 2009 Mr Gamble engaged him to auction "trading stock and plant and equipment" from Great Lakes Hardware as a result of which he inspected the stock and goods at the business' premises and prepared a catalogue (Annexure BEN 1).

141.Thereafter, he assisted Mr Gamble relocate "most of the goods" to a rented warehouse in Taree and commenced to advertise the auction in three local newspapers and on two radio stations. The warehouse was open for inspection of the stock and goods for three hours per day for one week before the auction, which ultimately took place on 8 November 2009.

142.The total proceeds from the auction were $56,080.40 from which Mr Bennett deducted, inter alia, $17,207.50, being monies owed to Esanda Pty Limited on a Daihatsu truck sold in the auction. After the further deduction of commission and a number of other minor matters detailed in paragraph 6 of Exhibit H, Mr Bennett paid Mr Gamble a net figure of $23,942.61. Subsequent to the auction Mr Bennett sold some further items at a net of commission sum of $2,579.97 bringing the total paid to Mr Gamble of $26,522.58.

143.Mr Bennett said that the amount of advertising and public display were greater "than usual for this type of auction" which "attracted a crowd larger than usual and the amounts realised reflect the additional effort that had been made in this regard" (Exhibit H - para 9).

144.In cross examination, Mr Bennett agreed that Mr Gamble sold some items before the actual auction took place as "we didn't have the agency agreement tied up till...about the 5th or 6th" of November (T84.31 - 36). When asked how many such items Mr Gamble sold himself, he replied that he "couldn't tell you exactly" but that this apparently happened prior to moving the materials to the warehouse in Taree (T85.7 - 19). Asked to further explain, Mr Bennett replied (T85 47 - 86.1):

"A. Well there was a lot of stock in the place and then there was a lot of stock going out like different companies were picking up the stock that they still owned so I couldn't exactly tell you what stock was owned by them, the companies, and then Godfrey did sell some of it without my knowledge, or that I know of."

145.Mr Bennett agreed that there "people coming and going taking stuff all the time" (T86.45 - 46) and that he saw these people enter the hardware business' premises "and pay cash for items to Mr Gamble" (T86.50 - 87.8).

146.As a result Mr Bennett estimated that Mr Gamble would have taken about $10,000 in cash upon which he took commission after speaking to Mr Gamble (T88.15 - 16).

147.After discovering that Mr Gamble was selling some of the materials prior to the auction, Mr Bennett also spoke to Mr Robert Wilson to see if the auction could be done at the hardware business' premises but Mr Wilson refused stating "I want the stuff out" (T87.47 - 50).

148.In relation to Annexure BEN 1 to Exhibit H, Mr Bennett advised that the numbers written in the second column from the right headed "Bid No" represented the number given to the individual bidder. This indicated that there were one hundred and one registered bidders but Mr Bennett in fact stated that they "had more than that" and that it "was a very good response for the auction" (T88.23 - 36).

149.As to the auction itself, Mr Bennett indicated that whilst there were initially a few reserve prices "in the end they just said sell" (T89.5 - 7). However, Mr Bennett stated that no items sold below a reserve in any event and in some cases they "got better than what the reserves were" (T89.15 - 16).

150.When asked whether he would describe the auction as a "fire sale" he answered "No" (T89.20 - 21). This evidence contrasts starkly with the allegation made in the plaintiffs' opening that not only was the auction a "fire sale" but that the plaintiffs' "had no alternative" but to sell the stock and goods by such a method (T46.36 - 47.1).

151.As to the general condition of the stock and goods, Mr Bennett said that it was "Very good" and whilst they had "a bit of dust" on them, after being transferred to Taree "they were all clean and presentable" (T89.39 - 43).

Evidence Called by the Defendants

Mr Peter Allen Katen

156.Mr Katen, a licensed real estate agent, swore one affidavit of 17 December 2010 (Exhibit 8).

157.Mr Katen deposed that he has known the defendants for approximately twenty years, acting as their real estate agent in relation to leasing, purchasing and selling properties and also giving them general advice as to real estate matters (para 4).

158.In late 2001, Mr Katen was retained by Mr Stan Wilson to act for the defendants on the lease of the subject premises to the plaintiffs. He could not recall either of the plaintiffs making any request to repair the driveway or the hardstand prior to their occupation, nor any objection to their paying GST or other outgoings prior to executing the lease (paras 5 - 9).

159.In early June 2007, Mr Stan Wilson told him that the plaintiffs "have agreed to take up their option to renew the Lease (however) we cannot agree on the amount of rent payable". Mr Wilson then went on to tell Mr Katen that the plaintiffs had agreed to obtain the abovementioned rent appraisal from Robert Gould & Associates and in the meantime had agreed to pay "an interim amount" based on Mr Katen's estimate of a current market rental which he was asked to provide (para 11). He was also told that the plaintiffs had agreed to backdate the Robert Gould & Associates figure to 1 May 2007 after the appraisal was obtained.

160.In early July 2008, Mr Katen deposed that Mr Robert Wilson contacted him and advised that "we are having trouble with the Gambles" and that they "are not paying their rent" and that there was a "need to resolve the situation in relation to the market rent evaluation". As a consequence, Mr Katen arranged and attended the meeting of 24 July 2008 at the defendants' service station in Tuncurry at which Mr Gamble and the two defendants attended (para 14).

161.At paragraph 15, Mr Katen deposed to the following conversation occurring at such meeting:

"Stanley said: Why haven't you returned the signed Variation of Lease sent to you in February?"

Mr Gamble said: "We have decided not to sign the Variation of Lease because our sales are down and we are trying to sell the business and now only want a monthly Lease."

Stanley said: "Robert and I want you to continue to operate your business. However, it can't keep going the way it is because you owe us a large amount of money for rent and outgoings."

Mr Gamble said: "I know we owe you money for rent and outgoings, but at the moment our turnover has been down because a Bunning's hardware store has recently opened at Forster. Our sales have decreased considerably. However, I expect that our sales will improve in October."

Stanley said: "We can give you a reduced rent of $4,000.00 per month for 3 months for the period July to October. However, you will have to make up the difference between the reduced rent and the agreed rent as per the independent valuation. Any overdue amounts are to be added to the current amounts outstanding and interest will be charged at the same rate as it is charged on the current amounts outstanding. Also you have to pay the outgoings as per the Lease."

Mr Gamble said: "That's fine."

Stanley said: "We also need some security for the reduced rent and the amounts outstanding. Would you have any problem providing us with a stock mortgage as security?"

Mr Gamble said: "No, that's fine."

Robert said: "Do you have current financial figures for the business?"

Mr Gamble said: "No, but I will give you a copy of the figures by the end of the month."

162.In September 2008, Mr Robert Wilson contacted Mr Katen and told him that the Gambles "are still not paying the rent they agreed to pay" and had not provided their financial figures. He went on to state that "Stan and I think that the Gambles might close the business and take off to England to avoid paying their debts" and that they were "thinking of taking possession of the property". Mr Katen said he replied that "that seems reasonable given that they have remained in arrears of their rental payment for more than a year" (para 17).

163.In cross examination, Mr Katen adhered to his recollection of what was said at the subject meeting and specifically remembered the term "stock mortgage" as this was something raised by Mr Stan Wilson and was a term that he had never heard before (T180.35 - 44).

164.Mr Katen further advised that Mr Gamble "only wanted a monthly lease and that the defendants accepted that he would remain on the premises for the time being on such a basis" (T180.19 - 24).

165.Mr Katen also stated that the parties agreed on a monthly rental of $4,000 "in an effort to continue the business" but that it was also made "very clear that whatever the difference in the rental was that would be viewed as a debt and it had to be paid" (T181.21 - 26). He agreed that this sum would attract interest. He also agreed that "the only payment that the Gambles had to come up with in the next three to four months was $4,000 a month" (T181.31 - 33).

166.Mr Katen said he understood that the phrase "taking possession of the property" meant "changing the locks and taking possession of the premises and of the stock..." (T183.16 - 19).

167.A little later in cross examination the following exchanges occurred (T184.36 - 185.16):

"Q. Did you express the view Mr Katen that it sounded reasonable to you for the Wilsons to take possession of the goods in the premises, if the Gambles hadn't paid the rent

A. If that's what their advice was from the solicitors, it sounded reasonable to me.

Q. They made it clear to you that that's what they were thinking of doing

A. Yes.

Q --locking the Gambles out and taking possession of the stock in the premises?

A Yes.

HIS HONOUR

Q. Over the rent or to make them pay the rent.

A. Yes, to have - yes.

Q. In other words, if they paid the rent they'd give them the stock back.

A. I can assure you they didn't want the stock and they didn't want to take this action. It was a matter of last resort, and they had, yeah.

Q. But your understanding was that if they paid the rent they wouldn't - that the Wilsons would let them have the stock.

A. Absolutely. Absolutely.

Q. But not otherwise.

A. Well I can't think for - I can't say how they thought, yeah. But to my knowledge if they had of walked up and paid they absolutely would've had the key back. We don't want - they didn't want the stock."

Mr Claude Stanley Wilson

168.Mr Stan Wilson, the second defendant, swore a single affidavit dated 21 December 2010 (Exhibit 4).

169.Mr Wilson deposed that prior to entering into the subject lease he agreed that the defendants would carry out certain repairs and maintenance to the subject property including cleaning the concrete floor, tidying the outside areas, repairing outside lights and replacing skylights. He said all of the matters were attended to either shortly before or shortly after the plaintiffs commenced to occupy the premises with the outside lights in fact being replaced as opposed to repaired.

170.After the lease commenced and between May 2003 and May 2004, Mr Wilson stated that various repairs were undertaken to the carpark area including the resealing of large areas of the yard. He said that Mr Gamble made no complaint regarding these nor as to other matters (paras 9 - 19).

171.Further, around August 2003, Mr Wilson had a conversation with Mr Gamble due to his belief that damage was being caused to certain outdoor areas of the subject premises by the use of a forklift and bobcat. He requested that such use cease although he said that such request was ignored. As a result he undertook the construction of the three new concrete slabs which were built in the unloading area at the rear entrance to the premises (paras 63 - 64).

172.When the lease first commenced, Mr Wilson said that the initial payment made on 4 May 2002 was $4,917 which did not include any GST component. As a consequence he telephoned Mr Gamble and advised him that "you have to pay the rent of $4,917 plus GST" to which Mr Gamble replied "ok". Thereafter, on 27 June 2002, Mr Gamble made two direct internet transfers of $491.70 for the GST payments relevant to May and June as evidenced by a copy of the bank statement annexed at page 7 of Exhibit CSW-1 to Exhibit 4. Mr Wilson said that the plaintiffs then "continued to pay GST on the rent owed on the premises on a sporadic basis" (paras 22 - 25).

173.In relation to the GST payments, Mr Wilson deposed that he and his brother "have at all times remitted 1/11th of all rental payments received for the building to the Commissioner of Taxation" (para 27).

174.Between October 2002 and June 2008, Mr Wilson deposed that he sent twelve letters and faxes to the plaintiffs "requesting that they pay outstanding amounts for rent and outgoings" (para 29). Copies of same are part of Exhibit CSW-1.

175.On 2 May 2007, he deposed that he attended a meeting with Mr Gamble at the subject premises where the following conversation took place (para 32):

"I said: "As you know the Lease finished on 30 April this year. Do you intend to take up the option to renew the Lease?"

He said: "Yes we do."

I said: "Okay then we need to obtain an appraisal of the rent because I think the current rent you are paying is well below the current market rent and there may need to be an increase in rent. Once the rental assessment has been completed, any adjustment of the rent will then have to be backdated to 1 May 2007."

He said: "That is fine."

I said: "I suggest that we use Gould & Associates to complete the rental assessment. I can give you their contact details so that you can make your own enquiries."

He said: "Okay, I will speak to them soon and find out how much they will charge."

I said: "I will need a letter from you confirming that you will take up the option to renew the Lease. I will contact Peter Katen of PRD Nationwide and get him to give us an estimate of what he thinks the rent might be. We can then use the figure determined by Peter as a rental figure for the interim until the rental assessment is completed by Gould & Associates."

He said: "Okay, that will be fair to both parties."

176.Mr Wilson then received the letter from the plaintiffs of 10 May 2007 which stated that the plaintiffs were "interested in taking up the option for extending the lease for another five years" (para 33).

177.Mr Wilson then deposed that as a result of the abovementioned conversation and subsequent letter he believed that the option had been exercised (para 34).

178.In June 2007, Mr Wilson sought and received a letter from Mr Katen which he then sent on to the plaintiffs setting out the current market rents on "similar property" prior to the completion of the market assessment with a view to reaching some agreement.

179.On 1 August 2007, Mr Wilson faxed a letter (p 28 of CSW-1) to the plaintiffs asking for the then outstanding rent of $14,123.29 to be paid urgently and advising that he would audit the building's insurance payments "for which you are liable and prepare an account" and that he would also "audit the rate payments but I do not hold the records here in Bathurst and it will take time". The letter went on to propose from May 2007 a monthly rental at $6,700 plus GST.

180.No agreement as to rent was reached and Mr Wilson said he then proceeded to obtain the rental assessment from Robert Gould & Associates which he provided to the plaintiff.

181.On 23 November 2007, at a meeting with both plaintiffs, certain discussions took place in which Mr Wilson said the plaintiffs agreed to pay the rent as per the rental assessment but on condition of various repairs and upgrades (paras 46 - 47).

182.On 19 December 2007, Mr Gamble paid the sum of $8,468.16 into the defendants' bank account in accordance with the rental assessment conducted as a result of which Mr Wilson instructed his solicitors to send a Variation of Lease for execution to the plaintiff which was not returned despite numerous letters from the defendants' solicitors requesting it (paras 51 -54).

183.Mr Wilson stated that by June 2008 as the variation of the lease had not been returned nor had rent been paid, he sent two letters to the plaintiffs seeking a meeting which were not responded to as a result of which he had Mr Katen organise the meeting of 24 July 2008 (paras 55 - 58).

184.Mr Wilson's version of what transpired at this meeting is contained in paragraph 59 of Exhibit 4 and is essentially the same as that deposed to by Mr Katen referred to in paragraph 161 above.

185.After this meeting, Mr Wilson had his solicitors draft up a stock mortgage which was sent to the plaintiffs but never executed.

186.In cross examination, Mr Wilson agreed that upon his understanding of the lease, outgoings were payable by the plaintiffs after the defendants received the relevant account and "then serve(d) a notice upon the tenant to pay them" (T193.1 - 4).

187.A little later the following exchange occurred as to this issue (T193.26 - 34):

"Q. So in other words, I think you accept that before Mr Gamble had to pay the council rates and the water rates you'd have to receive those from the council or the relevant authority and pass them onto him.

A. Yes, and we did that and - and then I say to you that some were paid and some weren't, and then we got notice, I think it was from the - we got threat of proceedings, I think it was from the water - on the water rates, and after that we paid all our rates, and then forwarded copies onto Gamble - onto Godfrey, for him to repay us. It's my clear understanding that the Gambles had an obligation to pay the outgoings that we've just talked about."

188.It was put to Mr Wilson that in only one letter was a request made to pay a specific amount for rates and that was in a letter of 18 June 2008. Ultimately, he seemed to agree with both this proposition and that other letters requesting such payments, whilst referring to outstanding obligations, indicated that the relevant amounts had not yet been quantified (T231.49 - 235.6).

189.Mr Wilson also agreed that the statement of claim the defendants issued out of the Wagga Wagga Local Court in early October 2008 (Exhibit O) indicated that the amounts allegedly outstanding for rates and land tax were "TBA" and that their solicitors did not know what they were although he was reluctant to agree that this was simply because they had not at that time been ascertained (T245.37 - 246.37).

190.As to GST, Mr Wilson disagreed with the proposition that the plaintiffs' obligation to pay same did not arise "until you asked them to pay it" (T196.1 - 4). However, he did agree that whilst tax invoices were sent to Mr Gamble in June and August 2002, another did not issue until 3 November 2008 which was after the defendants had issued the proceedings out of the Wagga Wagga Local Court (T219.41 - 222.47). It would appear that the November 2008 tax invoice was prepared at the request of the plaintiffs' solicitors (T222.34 - 224.27).

191.Despite it being common ground that the option was never validly exercised and the plaintiffs remain on after May 2007 as monthly tenants, Mr Wilson was rather unsure of whether the option had been exercised and he described all the subsequent negotiations as relating to "how do we go about putting a new lease in place" (T196.35 - 201.39). Finally, however he agreed that the option was never exercised (T240.1 - 3).

192.Mr Wilson also confirmed that it was his belief that after the rental assessment report was completed, both parties agreed to it with the result that the rent was to be $8,468.16 including GST per month and backdated to commence from 1 May 2007 (T204.49 - 205.12). Immediately prior to May 2007 at the end of the original lease period he agreed that the monthly rent was $5,467.13 (T206.1 - 25). However, he also confirmed that on 9 September 2007 he asked Mr Gamble for a monthly payment of $6,700 until the Robert Gould & Associates "thing was sorted out" which Mr Gamble paid that day (T226.18 - 227.20). He further agreed that in March and April 2008 he made requests that the plaintiffs pay an amount of $10,000 as set out in Exhibits P & Q.

193.As to the payment of land tax, Mr Wilson agreed that as at June 2005 it had not been determined because the defendants were in dispute with the "State Revenue Department". In fact, such dispute was still not resolved at the time of trial (T208.9 - 16). He also seemed to concede that it was not until at least June 2007 that he was able to determine "what land tax Mr Gamble is supposed to pay" (T208.18 - 35).

194.In relation to the alleged damage to the asphalt and other surrounds of the subject premises, Mr Wilson did not agree that the prior tenants did more damage with their semi trailers to these areas than the plaintiff. In fact, he asserted that the situation was the other way around (T210.14 - 211.25). He also denied that these areas were in a poor state of repair at the time of commencement of the lease (T211.31) although he agreed that ongoing maintenance was required in May 2003 (T212.35 - 40).

195.In June 2007 Mr Wilson agreed that Mr Katen provided some written advice as to rental valuations of other similar premises at Tuncurry and at this point Robert Gould & Associates had not been engaged (T213.26 - 40). Ultimately, Robert Gould & Associates were retained in September/October 2007.

196.When he received a copy of the rental assessment from Robert Gould & Associates in October 2007 Mr Wilson said he passed it on to the plaintiffs and on 23 November 2007 had a meeting with them to discuss it. Whilst he thought at that stage that there was "a concluded arrangement for a lease" he agreed that it had not been put into writing nor had the rent under this "proposed new lease" at that stage been agreed (T235.15 - 236.8). At such meeting the plaintiffs raised a number of matters in relation to repair and maintenance of the premises some of which he agreed to do and others which he said he needed to speak to his brother, the first defendant, about (T236.10 - 34).

197.This part of the cross examination was apparently an attempt to establish that at this point there was no agreement between the parties to vary the rent payable under the holding over provisions of the original lease in accordance with the rental assessment conducted by Robert Gould & Associates. When this was directly suggested to Mr Wilson, his response was that at the earlier meeting in May "it was agreed that any figure struck by (Robert Gould & Associates) would be backdated and would be effective from 1 May..." (T238.33 - 40). He agreed this meant that the plaintiffs had agreed in advance as to whatever this amount was "sight unseen" although he believed there was some right of "appeal" under the original lease if they had "a strong objection" to the figure (T239.1 - 14).

198.After the November 2007 meeting, Mr Wilson sent his brother an email on 27 November (Exhibit R) setting out his understanding of what took place which stated that whilst the plaintiffs were "happy to renew" at "the relevant Gould & Associates figure" they wanted a number of things done which were then set out and have been discussed above. This email concludes with the phrase "give these some thought please..."..

199.As to the meeting of 24 July 2008, Mr Wilson stated that it was "correct" that the parties "mutually agreed that for the next three or four months, (the plaintiffs) would only have to pay you $4,000 per month" (T250.41 - 44). However, they "were still liable to pay any arrears of rent or interest or anything else that they owed but that would be paid some time after that moratorium period" (T251.4 - 9).

200.Mr Wilson was then shown Exhibit O in Schedule A of which there is a claim for unpaid rent including GST in the amount of $8,827.21 for each of the months of August and September 2008 with an acknowledgment that $4,000 had been paid for each of those months. He agreed that in those months the plaintiffs only had to pay $4,000 but that they still had "an obligation" to pay the balance thereafter (T251.17 - 42). It was not explained why the figure claimed in the schedule to Exhibit O of $8,827.21 differed from that under the rental assessment of Mr Gould of $8,468.16.

201.As to the lockout, Mr Wilson denied that a day or so prior his brother had said to him "Godfrey has refused to give me the details of the proposed purchaser, does that mean we should now proceed to lock the (plaintiffs) out?" (T252.1 - 9).

202.When it was pointed out to Mr Wilson that his brother had deposed to such a conversation in one of his own affidavits, he said that he couldn't recall it and the decision to lock the plaintiffs out was "because of non-payment of rent..." (T252.17 - 38).

203.Mr Wilson went on to say that shortly before the lockout he had asked Mr Gamble for "a payment of $4,000 that was due" and that he "turned and walked away". As a result he was locked out "for non-payment of rent" (T252.40 - 253.1).

204.Despite these answers, Mr Wilson then stated that the plaintiffs were locked out for "the combination of all the events that had occurred" (T253.10 - 20).

205.Whilst Mr Wilson later agreed that at the time of the lockout the only obligation that the plaintiffs had was to pay rent in the sum of $4,000 at the beginning of the month (T255.17 - 23), he and his brother had come to the stage of thinking "just what can we do now?" (T255.27 - 29).

206.After the lockout, Mr Wilson denied that they held on to the plaintiffs' stock "to get the rent paid" (T255.33 - 35) and said that their reason for doing so was as follows (T255.40 - 48):

"A. Immediately we locked the building down, the suppliers became aware of what had occurred, my brother's phone ran hot with creditors. We were then, as I understand it - once again, I'm not a lawyer...put in the position of acting as bailees".

207.Mr Wilson went on to state that at the time of the lockout he had "no intention" in relation to the stock and that this course was chosen as "the matter had to be brought to a head" and that "once the phone started running hot, we go, you know, oh my God..." (T256.1 - 6). He emphasised that the lockout was "an absolute last resort" (T258.2). He also said he had "no discussions at all" with his brother as to "what would happen to the stock" after the lockout (T257.7 - 10).

208.Mr Wilson agreed that Mr Gamble was "entitled to remove his stock" at "the point of entry of the building but extremely shortly after...we were made aware" of claims by others (T257.37 - 41).

209.When it was put directly to Mr Wilson that "you didn't have the right to lock up his stock", he answered (T257.46 - 47):

"A. I - I cannot answer that. I'm not - I'm not legally - I don't have the legal qualifications to - to answer. I'm unable to answer,....."

210.Asked as to what his intentions were in relation to the stock "before the phones started ringing", Mr Wilson's lengthy answer gives some insight into the position between the parties as he then saw it (T259.25 - 47):

"A. It was just a matter of this matter has to be brought to a head and it has to be dealt with. If it was dealt with short - in a short time, it would have no effect on the business but had not given great depth of thought to that, we had spent months and months and months and months trying to put leases and structures in - into place that ensured that the Gambles had a continuing business.

We had already done that. We've been down that road and all our efforts had been ignored and so the - hence the expression out of absolute frustration. We endeavoured to put a lease in place for the Gambles, and I think there's been evidence put before this court that our approaches have been avoided and, quite frankly, Godfrey and Karen were not upfront and I believe they should have been because then it would have been quite possible to put a short term lease in place and that enabled them to carry forward and sell their business provided once we were aware of what their true intentions were.

It's been revealed in this court that apparently, you know, some six months or so before we were negotiating - attempting to put leases in place, that they were aware of what their wishes were. The question begs why did they not come to us and say, "Look, we want to sell our business, let's put something in place". But they just avoided us at every occasion, did not answer letters, can't get them on the phone. It just went on and on and on, and so hence out of frustration-"

211.After the lockout, Mr Wilson stated that his brother "took carriage of the matter" and dealt with the claims made by others (T261.30 - 31).

212.Mr Wilson also confirmed that the property had not been able to be released since the lockout despite the efforts of Mr Katen and it was apparently still empty at trial (T262.15 - 49).

213.I found the second defendant at times, argumentative and determined to answer questions in the way he saw fit. I also have serious doubts as to the veracity of certain parts of his evidence, particularly his assertion that he had never thought about what was to happen to the stock once the lockout occurred and had never spoken to his brother about it.

Mr Robert Wilson

214.Mr Robert Wilson, the first defendant, swore three affidavits dated 6 August 2009, 18 June and 15 December 2010 which are Exhibits 1, 2 and 3 respectively.

215.In Exhibit 1, Mr Wilson deposed that as at the date of the lockout the plaintiffs were behind in the rent and other outgoings in an amount of a little over $76,000 despite numerous written demands from the defendants' solicitors for payment. As a result, the defendants took possession of the property in accordance with the terms of the lease which enabled them to do so if such payments were fourteen days overdue (paras 8 - 12).

216.Mr Wilson further deposed that at the time of the lockout "the plaintiffs failed to remove a significant number of items of hardware stock, fixtures and fittings and plant and equipment from the Property" (para 13).

217.Thereafter, Mr Wilson said that he and his brother were "put on notice by entities other than the plaintiffs claiming that they also have title" to various items and in this regard annexed letters from five companies, the earliest of which is dated 24 October 2008, with several being dated in 2009 (paras 20 - 25 and Annexures F to J.

218.In the first few months following the lockout, Mr Wilson said that he and his brother made numerous attempts to secure another tenant "with the possibility and intention that with agreement by all relevant parties, the subject items could be purchased by the new tenant" but such negotiations were not successful (para 27). Thereafter, due to the items remaining on the subject premises, he said that it was extremely difficult to secure a new tenant (para 28). Such items filled the entire building on the property and comprised "over 20,000 items of stock and equipment including plant (fork lift, skid steer loader and trucks)" (para 28).

219.Exhibit 2 primarily deals with quantification of the defendants' cross claim. Apart from unpaid rent as at October 2008 alleged to total $47,097.16 as per Annexure A, an amount of $29,374.07 is claimed to have been then outstanding in relation to unpaid building insurance, council rates, water rates and land tax. From November 2008 until November 2009 a sum of just on $100,000 including GST is said to be owing for lost rent. Numerous other amounts are also claimed as set out in several annexures, which include certain repair costs for damage allegedly caused to the premises by the plaintiffs.

220.Exhibit 3 deals with the meeting of July 2008 and the "Termination of the Lease" and thereafter with, inter alia, responses to Mr Gamble's primary affidavit (Exhibit B).

221.In relation to the July 2008 meeting, Mr Wilson deposes to a conversation which then occurred between Mr Gamble, himself and his brother as follows:

"Mr Gamble said: "At the moment I can't afford to pay the full rent because business has been slow and I am owed a lot of money. I want to try and sell the business."

Stanley said: "We are prepared to offer you a reduced rent of $4,000 per month for 3 months. However, you will have to make up the difference between the reduced rent and the agreed rent as per the independent valuation."

Mr Gamble said: "That is ok."

Stanley said: "You will have to pay interest on the deferred rent in accordance with the original lease. As security for this rent and the outstanding rent, we require a stock mortgage or some other form of security."

Mr Gamble said: "That will be ok. I have just done a stock take and the value of the stock is around $213,000.00."

Stanley said: "Do you own the stock?"

Mr Gamble said: "Yes we do."

I said: "Do you have current financial figures for the business?"

Mr Gamble said: "No, but I should have them by the end of the month and I will give you a copy.""

222.In relation to the termination of the lease, Mr Wilson referred to the following conversation with his brother which occurred in about September 2008 (para 9):

"I said: "Where are we up to with obtaining the financial figures from Godfrey? Has he paid any of the outstanding rent?"

Stanley said: "I haven't received anything from the Gambles. I spoke to Godfrey and he told me that he has a potential purchaser for the business."

I said: "We are at the point where we have to take action to recover the rent the Gambles owe us, but we don't want to jeopardise the potential sale of the business by terminating the lease. We need to determine how genuine the potential buyer is because at the moment we only have Godfrey's word."

Stanley said: "We need to write a letter to the Gamble's requesting the details of the proposed purchaser so that we can check the financial standing and business experience of the proposed purchaser.""

223.As a consequence, Mr Wilson hand delivered to the plaintiffs' business premises the letter dated 8 October 2008 (Annexure A) which has been referred to above, requesting the plaintiffs to disclose the identity of the proposed purchaser by 5pm on Friday 10 October 2008.

224.Later that day, Mr Wilson said he again attended at the premises and served a sealed copy of the Wagga Wagga Local Court statement of claim upon Mr Gamble and asked him the name of the proposed purchaser, which he refused to supply, whereupon he said that he would return tomorrow to see whether Mr Gamble had changed his mind (paras 11 and 12). The following day, Mr Gamble again refused to supply the details of the proposed purchaser consequent upon which Mr Wilson stated that he had the following conversation with his brother (para 14):

"I said: Godfrey has refused to give me the details of the proposed purchaser. Does that mean we should now proceed to lock the Gambles out?"

Stanley said: "Yes, we will lock them out.""

225.Thereafter, on 10 October at around 6pm, Mr Wilson attended the premises with a security guard, a locksmith and an electronic security company technician as well as Mr Katen. He said that the locks and the security systems for the premises were then changed and they left the premises at about 7pm (para 15).

226.At about 7.30am on 11 October, he attended the premises and had the following conversation with Mr Gamble when the latter arrived at 8am (para 16):

"I said: "Good morning Godfrey. We have locked you out of the building. You are not permitted to enter the premises until further notice."

He said: "What do you mean by that?"

I said: "That means we have changed the locks and locked you out of the building. We are entitled to do so under the lease as you have failed to pay the rent."

He said: "The only way I am going to be able pay you is by selling the stock.""

227.In cross examination, Mr Wilson stated that despite asserting that the defendants were entitled to know the details of any prospective lessee, he was "not sure exactly what the lease says in that regard" (T267.5 - 6).

228.Questioned as to the reason for the lockout, Mr Wilson said that when Mr Gamble "would not disclose the name of the purchaser, we could only assume that there was no purchaser and so we - we decided that we would have to lock him out" (T267.47 - 49).

229.Asked why he just didn't give the plaintiff's "a month's notice to quit", Mr Wilson replied (T268.1 - 3):

"A. We were already owed considerable money and Mr Gamble had not been forthright with us. Our options, I felt, were at an end."

230.Questioned as to his intention about the stock in the premises the following exchange took place (T268.21 - 269.5):

"A The intention of - of the stock was to - we - we had no intentions per se regarding the stock, we just wanted to stop the process that we were in. It had only became known to me afterwards that other people had laid claim to the stock so we - we then had a difficulty or I had a difficulty in - in being - being in a difficult position of liability between Mr Gamble and other people who were laying claim.

Q At the time however before you became aware of that difficulty, at the time that you and your brother decided to lock them out, do you say that you had given no consideration as to what effect that would have on him and his stock?

A I'd certainly given it consideration. This was a measure of last resort on our - on our part, your Honour, and-

Q. But was it your intention to deny him access to his stock?

A. No, absolutely not, your Honour. I just wanted to close the doors and have an orderly removal of his stock and chattels but that became kind of impossible at that time.

Q. So your intention when you decided to lock him out was shortly thereafter to let him take his stock away?

A. If we could have, yes, your Honour.

Q. And had that actually entered your mind at that stage?

A. Well, most certainly it had entered my mind, your Honour, because I would see that it would be difficult or messy but we had - we had bent over backwards to try and assist Mr Gamble and Mr Gamble was not being helpful so we basically had to pull the process to a stop and-

Q. But if you had never become aware of any other claims on the stock, what do you say your intention was to do with the stock after you'd locked him out?

A. Allow Mr Gamble to take his stock and quit the premises.

Q. So you wanted him out of the premises, including his stock?

A. Yes."

231.During the discussion that took place when Mr Gamble arrived on 11 October, Mr Wilson agreed that Mr Gamble said words to the effect "I need the stock to pay the rent" (T269.29) whereupon the following exchange occurred (T269.31 - 46):

"Q. Did you say "Well, yes, you can come and get the stock and we'd love you to pay the rent" or words to that effect?

A. Mr Gamble made a statement, he didn't - he didn't ask--

Q. I didn't ask you what he said, I asked you what you said.

A. I didn't make any comment at all.

Q. So when he made it clear he needed the stock to pay the rent, you simply ignored that comment?

A It was put in such a - a - a format that there was - wasn't asking for a - wasn't asking me to answer.

Q. Mr Wilson, he made it very clear to you that he had no hope of paying the rent if he didn't have the stock, didn't he?

A. Mr Gamble was somewhat angry, probably understandably. I treated it as him being upset about the situation. I was not happy having to be there."

232.Further, Mr Wilson agreed that a few moments before he had told Mr Gamble "that he wasn't permitted to enter the premises until further notice" (T270.38- 40).

233.Thereafter, Mr Wilson gave the following evidence (T270.42 - 44):

"Q. That must have given him the impression he couldn't get his stock, mustn't it?

A. Until - until the - I would - I would imagine so, your Honour, yes."

234.Mr Wilson also conceded that locking the plaintiffs' out of the premises had been being considered for approximately a month beforehand (T303.7).

235.Mr Wilson was then questioned about an entry dated 10 October 2008 on a "Mail Out Report" from Sydney Night Patrol (Exhibit W) which records the following:

"Spoke with Bob Wilson (Landlord) who advises client hasn't paid monies owed. Premises and stock has been taken over by Bob..."

236.In response to this notation, Mr Wilson stated (T303.36 - 39):

"I'm not agreeing that I would have said that I'd taken over the stock. The stock was in the premises. I had a responsibility for its safe keeping. I was certainly - I was very conscious of any damage or - or theft or, you know, our responsibility just to make sure that there was no damage to the stock seeing I had taken control of the building."

237.As to the agreement reached at the July 2007 meeting, Mr Wilson agreed that for the following three months the plaintiffs only had to pay $4,000 per month by way of rent and that all the other outstanding rent and other outgoings would be deferred for that period (T283.46 - 50). He went on to agree that this sum of $4,000 per month for three months was to be paid on the first day of August, September and October 2008 and that the plaintiffs paid the August and September payments (T284.1 - 285.46).

238.However, Mr Wilson was certain that the stock mortgage had been discussed and that Mr Gamble stated that in July 2008 "he'd just done a stocktake...and the value of the stock was around $213,000.00" (T294.3 - 10).

239.Mr Wilson then agreed that as at the time of the lockout the plaintiff had not paid the $4,000 rental payment due to be paid on 1 October but, despite his evidence referred to above, "all the other rentals owed up until that agreement were not deferred" (T287.10 - 11).

240.Mr Wilson was then cross examined at some length as to whether or not the sole obligation of the plaintiffs between August and October 2008 was to pay $4,000 per month with all other sums then outstanding being deferred for three months. Ultimately the following evidence was given (T292.36 - 39):

"Q I think what Mr Birman is suggesting to you is that if he'd paid the $4,000 and otherwise didn't breach the lease, the back rent he wouldn't have to catch up until after the three months had elapsed?

A. I would consider that reasonable, your Honour."

241.As to the defendants' right of re-entry, Mr Wilson agreed that under the terms of the original lease "you are only entitled to enter and take possession of the premises if the rent or any other money that was due under the lease was fourteen days overdue for payment..." (T304.24 - 27).

242.Prior to becoming aware of any third party claims on the stock Mr Wilson agreed that he intended to let the plaintiffs go back in and take it (T300.23 - 28). In relation to such third party claims he stated that he had received communications from "creditors" additional to those referred to in the correspondence discussed above, although he agreed that the first communication did not occur until the Wednesday following the prior Saturday's lockout (T312.41 - 43). However, a little later in his cross examination he said that this may have happened on the Tuesday (T316.48 - 49). He also produced some notes that he kept as to the identity of the third party claimants and listed several in evidence (T329.12 - 18).

243.Between the time of the lockout and the subsequent Tuesday or Wednesday, Mr Wilson stated that Mr Gamble did not demand the stock. Further, he interpreted his statement at the time of the lockout enquiring as to how he was going to pay the rent without his stock as a "case of fact" as opposed to a request for the stock to be returned (T317.21 - 38). However, he went on to say that he told Mr Gamble "that he was not to enter the building until further notice" and he thought it appropriate that "the solicitors needed to sort it out" (T317.39 - 318.2).

244.After the third party claims had been made Mr Wilson said that his "attitude was that I was torn between two people claiming ownership of stock and until there was resolution of that, I couldn't release it" (T320.24 - 25).

245.Along similar lines the following exchange occurred later (T323.36 - 44):

"Q Is it simply the case, Mr Wilson, that after you received these other communications from other companies saying they owned pieces of the stock that you weren't prepared to let Mr Gamble take the stock until the different owners' claims were determined?

A. Exactly, your Honour. I - I was not in a position to determine who had legal ownership. It was - even more particularly a case for our solicitors and the Gambles and the people who were - other people who were claiming ownership to basically present me with an agreed position between the Gambles that they could remove stock and the people who were claiming it."

246.Mr Wilson also confirmed that up until he received the first of these third party communications he believed that Mr Gamble owned all of the stock and goods left on the premises apart from "one month's replacement stock" (T323.46 - 324.3).

247.In relation to the letter from the plaintiffs' solicitors of 21 November 2008 (Annexure C to Exhibit 3) which advised that, inter alia, Mr Gamble "does not consent to the removal of any stock other than the water kegs referred to above until such time as he has received appropriate information from the supplier" and that in "the event that consent is granted we will advise you of this in due course", Mr Wilson gave the following evidence (T325.1 - 8):

"Q. So did you take that to mean that he was himself trying to figure out who owned what? This is Mr Gamble.

A. Yes. I believed it - it had to be Mr Gamble to do it. It's not - I didn't consider it something, one, that I could do or was my responsibility.

Q And he went on to say whilst he was figuring that out, apparently, he didn't consent to the removal of any stock from the premises.

A. That's exactly why I - why I wouldn't allow anything to go out, your Honour."

248.In relation to Mr Wiggins, Mr Wilson denied that he had become aware of his identity on the Friday before the lockout despite a note in his diary that day recording his details. He said that the note was made on Saturday morning (T331.37 - 332.43). He agreed that after the meeting with Mr Gamble on Saturday 11 October, later that morning he met Mr Wiggins at the defendants' service station. He said he did this because he had been told about an hour earlier by another person that Mr Gamble was dealing with Mr Wiggins. At such meeting Mr Wiggins told him that he wasn't prepared to pay what Mr Gamble was asking for the business (T332.17 - 333.25).

249.Mr Wilson stated that he later received a letter from Mr Wiggins dated 14 October 2008 (Exhibit X) in which Mr Wiggins said that he had lost interest in purchasing the business due to the high cost being asked by Mr Gamble ($300,000) and the lack of "profit turnover" which Mr Gamble said was approximately $40,000.

250.Mr Wilson denied that he was negotiating with various people to sell the business and its stock after the lockout and stated that all he did was refer the various people who rang him up expressing interest to Mr Gamble and was not otherwise involved (T337.28 - 338.4).

251.In relation to a truck left on the premises, Mr Wilson stated that he was told by a staff member of the business that it was "under hire purchase" and whilst he permitted Mr Gamble's mechanic to do certain repairs, apparently to enable it to keep its registration, the keys remained inside the building (T340.46 - 341.37).

252.Towards the end of his cross examination, Mr Wilson agreed that Mr Gamble "rang me early in the piece and said I would like to get my stock and I responded to him by saying that could be a problem because at that stage I'd become aware of other people laying claim to it" (T345.14 - 18).

253.Finally, he agreed that "For Lease" signs went up on the premises in about December 2008 but he confirmed that they had never been relet (T345.48 - 346.16).

254.The first defendant gave his evidence in a generally calmer fashion than his brother and in a more considered fashion. However, some parts of his evidence such as his statements that he had no intention to keep the stock and goods prior to receiving any of the third party claims I found somewhat rehearsed and lacking in credibility.

Mr Glen Frost

255.Mr Frost swore two affidavits of 13 January and 9 February 2011 (Exhibits 9 and 10). He was not cross examined.

256.In short, Mr Frost was put forward as an expert and stated that the stock report prepared by Mr Gamble as a result of his stocktake of 30 June 2008 (Exhibit 2 to Exhibit B) could have been modified by computer so that "for example, lines could be added or deleted, values could be changed and data could be merged" (Exhibit 9 - para 10).

Additional Evidence Called on the Cross Claim

257.Certain parts of the evidence referred to above are also relevant to the cross claim itself. Further, there is additional evidence relevant to such claim which I do not presently intend to summarise. Rather, I will deal with it when considering the cross claim later in this judgment.

Was the Lockout Lawful?

The Plaintiffs' Arguments

258.Mr Birman, counsel for the plaintiffs, argued that the defendants had no right to take possession of the premises on 11 October 2008. Mr Birman's argument involved the following steps:

(v)It was common ground that the plaintiffs, after May 2007, remained as tenants on a month to month basis pursuant to Clause 12.4 of the original Lease (Exhibit A) which provided, inter alia, that this monthly tenancy would, with some irrelevant exceptions, be on the same terms as the original lease.

(vi)Consequently, Clause 12.2 contained the defendants' rights to re-enter and take or demand possession of the property which, if it was based upon the non-payment of rent or other monies due, required same to be overdue for a period of fourteen days.

(vii)As a result of the parties' oral agreement in July 2008, all sums of any nature then due by the plaintiffs to the defendants were to be deferred for a period of three months (until November) on the sole condition that the plaintiffs pay an amount of $4,000 per month due, pursuant to Exhibit A, on 1 August, 1 September and 1 October 2008.

(viii)The plaintiffs paid the August and September instalments as required but whilst they had not by the time of the lockout on 11 October 2008 paid the October instalment, as at that date it was not fourteen days overdue with the result that the defendants had no right to take possession of the premises.

The Defendants' Arguments

259.In response, Mr Gardiner, counsel for the defendants, argued that the agreement to accept a reduced rent of $4,000 from August to October 2008 was conditional upon the plaintiffs providing their operating figures by the end of July, executing a stock mortgage and disclosing the name of the potential purchaser. As none of these conditions were met, the rent and other outgoings remained due and were clearly overdue by fourteen days as at the time of the lockout thereby enabling the defendants to re-enter and take possession pursuant to Clause 12.2.2. In relation to the extent of monies then owed, Mr Gardiner argued that these were quite significant as the plaintiffs had agreed to the increased monthly rental figure of $8,468.16 inclusive of GST from 1 May 2007 pursuant to the rental assessment undertaken by Robert Gould & Associates and in this respect he relied upon the single payment of this amount paid by the plaintiffs to the defendants in December 2007.

Consideration

260.I accept steps (i) and (ii) of Mr Birman's argument which I understand is also the position of Mr Gardiner.

261.However, I do not accept that the July 2008 agreement was as Mr Birman suggested, which was that it required nothing of the plaintiffs other than to pay three considerably reduced monthly rental instalments on the first day of each month. As Mr Gardiner argued, why would the defendants agree to such a one sided proposition in the circumstances then existing?

262.Further, I accept the evidence of Mr Katen, a witness whom despite being called by the defendants, conceded matters against their interests and whom I found generally quite impressive. As to the July 2008 agreement, he confirmed that the plaintiffs undertook to, inter alia, execute a stock mortgage.

263.I also accept the evidence of the defendants in relation to what was agreed at the July 2008 meeting which included the plaintiffs' said undertaking in relation to executing a stock mortgage to which they did not adhere.

264.Consequently, I find that the July 2008 agreement was conditional upon the terms as described by the defendants which were not complied with by the plaintiffs. Accordingly, pursuant to Exhibit A, the plaintiffs remained liable for, at least, all outstanding rent at that time which liability continued up to the time of the lockout and which was not deferred as argued by the plaintiffs.

265.This leads to a determination of what was the outstanding rent at the time of the lockout and whether it included a liability to pay GST.

266.As to the GST issue, Mr Birman argued that it was only payable after a specific demand was made and as the only such demand was made after the lockout, it was in fact never payable. Further, he argued that despite the clear provisions of Item 17 of Exhibit A that GST is payable "at the same time as rent and other monies", a combination of Clauses 5.1.2 and 5.3 required it to only fall due "on the next day after the request for payment is made by the landlord". Finally, Mr Birman argued that despite Exhibit A being silent on the point, any obligation to pay GST by the plaintiffs was conditional upon the defendants issuing tax invoices in relation thereto and that the "supply" of the premises was a "taxable" supply for the purpose of the relevant GST legislation. As only three such tax invoices had been issued, two in mid 2002 and one after the lockout and as the ATO had allegedly denied the plaintiffs' claims for reimbursement of the GST paid in respect of the rent, the plaintiffs simply did not have to pay it.

267.In response, Mr Gardiner argued that Item 17 of Exhibit A is perfectly clear and provides that GST is payable on the rent. Further, he criticised the "totally unsatisfactory nature of the evidence by the plaintiffs about the tax audit in 2002" in that, apart from Mr Gamble's assertion, nothing else was produced. Mr Gardiner pointed out that Mr Gamble initially said that relevant documents were "in storage" (T147.42) whereas later he said that the advice received from the ATO was "oral advice" (T79.1). Finally, Mr Gardiner argued that the plaintiffs acknowledged the requirement to pay GST on the rent by continuing to pay it and also recording it in their own financial documents being Exhibit 12.

268.I do not accept Mr Birman's argument. Item 17 of Exhibit A is clear. Clauses 5.1.2 and 5.3 refer back to "Outgoings" listed in Item 13 and GST is not mentioned in same. I do not accept Mr Gamble's evidence about the ATO audit in the absence of anything from the ATO itself. Even if the plaintiffs were denied an input tax credit for the GST, I accept the evidence that the defendants nevertheless paid GST to the ATO and are entitled to it from the plaintiffs under the lease's terms. Finally, the plaintiffs themselves usually paid it and even entered it into their own records. I do not accept Mr Gamble's evidence that the entries in Exhibit 12 were changed by someone else without his knowledge or somehow done in error by "the girl we had at the time".

269.Accordingly, I find that GST was payable under the original lease and up until the time of the lockout pursuant to the holding over provisions.

270.As a result of this finding, it is now convenient to set out in tabular form the rent and GST which was payable for the annual periods of the original lease and which are mathematically agreed between the parties:

aPeriod	Rent	GST	bTotal including GST
1/5/02 - 30/4/03	$4917.00	$491.70	$5,408.70
1/5/03 - 30/4/04	$5,086.18	$508.62	$5,594.80
1/5/04 - 30/4/05	$5,186.97	$518.70	$5,705.67
1/5/05 - 30/4/06	$5,309.35	$530.94	$5,840.29
1/5/06 - 30/4/07	$5,467.72	$546.78	$6,014.50

271.The next question to be determined is what was the rent payable from 1 May 2007 until the lockout?

272.Mr Birman submits that there was never any agreement to increase the rent after May 2007 and therefore it remained at the level of $5,467.72 (plus, according to my findings, the GST). He argued that the plaintiffs' agreement to the rental assessment of Robert Gould & Associates was conditional upon the stated maintenance and repair works being undertaken which did not occur. He also submitted the second defendant's evidence that the plaintiffs had agreed to the rental assessment figure was contradicted by his contemporaneous memorandum to the first defendant of 27 November 2007 (Exhibit R). In a similar vein, he submitted that the conversation between the first defendant and Mr Katen prior to the July 2008 meeting clearly indicated that no agreement to meet such a figure had been reached at that time and that it was stated "the situation in relation to the market rent evaluation" needed to be resolved.

273.Mr Gardiner submitted the parties had agreed to accept the rental assessment figure and this is evidenced by Mr Gamble's payment of the increased monthly figure of $8,468.16 inclusive of GST on one occasion on 19 December 2007 as well as by what is shown in Exhibit 12. This exhibit shows three entries of $25,404.48 for 30 September, 31 December 2007 and 31 March 2008 respectively. Mr Gardiner argues that these are clearly quarterly figures and if each is divided by three, a monthly rental figure inclusive of GST of $8,468.16 is achieved which is the exact figure flowing from the rental assessment.

274.In his written submissions, Mr Birman argued, inter alia, that this reading of Exhibit 12 was not put to Mr Gamble in cross examination and therefore cannot be relied upon.

275.I have not found it an easy matter to determine whether the parties agreed to accept the rental assessment of Robert Gould & Associates.

276.There seems little doubt that there were negotiations over some considerable time as to what the rent should be after May 2007. Mr Gamble admits that the parties agreed to obtain the assessment at a shared cost and that he was provided with a copy of it after which further discussions took place. The defendants say that these discussions were finalised by the plaintiffs agreeing to pay the increased amount and actually doing so, albeit on only one occasion. The plaintiffs argue that the evidence establishes these discussions were still ongoing.

277.I accept Mr Birman's submission in relation to this issue. The contents of Exhibit R and the evidence of Mr Katen lead me to conclude that the parties never finalised an agreement to increase the rent post May 2007. The one off payment by Mr Gamble of the rental assessment figure in December 2007 does not persuade me otherwise. The evidence establishes that the plaintiffs often paid varying amounts of rent at different times and I accept Mr Gamble's evidence that this figure was paid as a result of a direct request in circumstances where the plaintiffs were behind in the rent. The inference to be drawn from Exhibit 12 may or may not accord with Mr Gardiner's submission. Mr Gamble was also not given a chance to explain it. Further, there are payments shown in Exhibit 12 after May 2007 which do not support Mr Gardiner's interpretation.

278.Accordingly, I find that the monthly rent remained at the level of $5,467.72 plus GST of $546.78 from May 2007 up until the lockout.

279.The next question is to determine what outgoings were payable as at the lockout.

280.As to the outgoings listed in Item 13 of Exhibit A, these are payable pursuant to Clauses 5.1.2 and 5.3 "on the next rent day after a request is made by the landlord" and such request can be made either "after the landlord has paid an outgoing" or after he "has received an assessment or account for payment...".

281.Mr Birman argued that there is simply no evidence of any unsatisfied requests from the defendants to the plaintiffs in respect of outgoings prior to the lockout. I find that this is incorrect and that the fax dated 19 June 2008 (Annexure GAG4 to Annexure B) detailing "insurance for the lease period" totalling $6,847.48 constitutes a request for its payment. The only subsequent request is also in relation to building insurance made by letter of the defendants' solicitors dated 10 November 2008 (Annexure GAG 11 to Exhibit B) in the amount of $7,465.24. As to land tax, Mr Birman points out that the defendants are still in dispute with the Office of State Revenue and have not yet received any accounts let alone demand payment from the plaintiffs. As to council rates, Mr Birman argued that the evidence is that the plaintiffs paid what invoices they received and the defendants themselves do not know what is owing as shown in Exhibit O. As to water rates, he argued that the evidence is again that the plaintiffs paid what accounts they received and no claim was made for any balance in Exhibit O.

282.Whilst Mr Gardiner in his written submissions refers to amounts owing with respect to council rates of $15,979.75, water rates of $825.45 and land tax of $5,103.66 as at October 2008, which accords with paragraph 28 of the further amended cross claim, the evidence in relation to these matters, which I discuss further below when dealing with the cross claim, is very unsatisfactory.

283.Consequently I find that the only outgoings notified to the plaintiffs as outstanding as at the time of the lockout were the building insurances in the amount of $6,847.48. This sum had also clearly been outstanding for more than fourteen days at that time.

284.On the basis of my above findings, Mr Gardiner has calculated in his supplementary submission of 18 April 2011 that as at the lockout the outstanding rent inclusive of GST was $4,776.09. In oral argument Mr Birman conceded that in this scenario the plaintiffs would then have been behind for more than fourteen days in an amount of between $3,000 - $4,000 whereas the worksheets annexed to his email of 5 April 2011 suggest a slightly higher figure. As I intend to have the parties bring in short minutes in light of my findings, I direct them to agree as to the then outstanding amount.

285.Accordingly, I find that the defendants had a lawful right pursuant to the terms of the lease to retake possession of the premises in the manner and at the time they did because of the amount of rent, including GST plus building insurances, then outstanding for more than fourteen days.

The Plaintiffs' Claim in Conversion - Liability

The Plaintiffs' Arguments

286.In oral argument, Mr Gardiner conceded that even with a lawful retaking of the premises, the defendants would be liable in conversion in relation to the stock and goods then on the property but only if the plaintiffs had made a demand for it prior to the defendants becoming aware of the claims of the various third parties. He argued that no such demand was made before the Wednesday following the lockout by which time the first of the third parties had contacted the defendants. Thereafter, he submitted that the defendants were entitled to take reasonable time to ascertain the rights of this and other third parties who made similar claims shortly thereafter.

287.Further, Mr Gardiner submitted that within such period of time the plaintiffs' solicitors wrote to the defendants' solicitors the letter of 21 November 2008 (Annexure C to Exhibit 5) telling them that their client did not consent to the removal of "any stock" (with certain minor exceptions) until he had "received appropriate information from the suppliers" and that in "the event that such consent is granted we will advise you...". Such advice was never forthcoming. In fact, after the sending of this letter Mr Gardiner submitted that the plaintiffs "abandoned" all of the stock and goods.

288.For all these reasons, Mr Gardiner argued that the plaintiffs' claim in conversion must fail.

The Defendants' Arguments

289.Mr Birman submitted that there was a clear conversion of all stock and goods on the premises on the day of the lockout and it was not legally necessary for the plaintiffs to demand it back in order to crystallise their claim. Even if such a demand was necessary, Mr Birman argued that the conversation at the time of the lockout between Mr Gamble and the first defendant (Exhibit B - para 59) constituted such a demand.

290.Mr Birman further submitted that even if such a demand was not in fact made, the defendants were only entitled to retain the stock and goods for "a few days" to enable them to investigate the claims of the various third parties and they simply took too long to do so. He also argued that this was because their real purpose in keeping the stock and goods was to force the plaintiffs to, inter alia, pay the rent.

The Law

291.As Dixon J explained in Penfolds Wines Pty Limited v Elliott (1946) 74 CLR 204 at 229:

"The essence of conversion is a dealing with a chattel in a manner repugnant to the immediate right of possession of the person who has the property or special property in the chattel. It may take the form of a disposal of the goods by way of sale, or pledge or any intended transfer of an interest followed by delivery, of the destruction or change of the nature or character of the thing,...or an appropriation evidenced by refusal to deliver or other denial of title...An intent to do that which would 'deprive the true owner' of his immediate right to possession or impair it may be said to form the essential ground of the tort."

292.Although Dixon J referred to an "intent", it is clear that there may be a conversion without any subjective intention on the part of the converter. The intention to which Dixon J was referring was the intention to exercise dominion over the goods in question. As Young J said in Flowfill Packaging Machines Pty Ltd v Fytore Pty Ltd (1993) Aust Torts Reports 81-244, 62,514 at 65,520:

"...once the degree of user amounts to employing the goods as if they were ones own then a conversion is established. That point may be reached without any subjective intention...".

293.However, it is clear that conversion requires something more than simple retention of another's property. Such retention must be in a manner which is adverse to the rights of the party having the immediate right to possession. As the learned author of Clerk & Lindsell on Torts (Sixteenth Edition (1989) said at p 1234:

"Mere unpermitted keeping of another's chattel is not a conversion of it. There must be some detention conscientiously adverse to the rights of the owner, such as an assertion of a lien that does not exist. The ordinary way of showing a conversion by unlawful retention of property is to prove that the defendant, having it in his possession, refused to give it up on demand made by the party entitled."

294.After quoting this passage with approval, Millet J in Barclays Mercantile Business Finance Ltd & Anor v Sibec Developments Ltd & Ors [1993] 2 ALL ER 195 stated at 199:

"Demand is not an essential pre-condition of the tort in the sense that what is required is an overt act of withholding possession of the chattel from the true owner. Such an act may consist of a refusal to deliver up the chattel on demand made, but it may be demonstrated by other conduct, for example by asserting a lien. Some positive act of withholding, however, is required; so that, absent any positive conduct on the part of the defendant, the plaintiff can establish a cause of action in conversion only by making demand."

295.It has been held that such an act as, for instance, wearing a plaintiff's jewellery (Petre v Henier (1701) 12 Mod Rep 519) or locking up a plaintiff's tools or their stock so that the plaintiff could not use them without lawful excuse (Upton & Anor v TVW Enterprises Ltd & Anor (1985) 7 ATPR 40-611) was sufficient to amount to a conversion.

296.As to whether a party may retain possession of another's property for the purpose of ascertaining the claims made thereon by third parties in Craig v Marsh (1935) 35 SR (NSW) 323 at it was said by Davidson J at 326:

"...a demand and a refusal is always evidence of a conversion. If the refusal is by a person who does not know the plaintiff's title, and having a bona fide doubt as to the title to the goods, detains them for a reasonable time for clearing up that doubt, it is not a conversion...".

297.Although a defendant is entitled to "take adequate time to enquire into the rights of the claimant" (Clayton v Le Roy (1911) 2 KB 1031 at 1051) a "long delay made under the guise of seeking legal advice could...amount to a denial of the claimant's rights" (Crowther v Australian Guarantee Corporation Ltd (1985) Aust Torts Reports 80 - 709 at 69,092).

Consideration

298.At the time of the lockout, the defendants believed the plaintiffs owned most (if not all) of the stock and were entitled to immediate possession of it (T294.12 - 295.17 and 308.31 - 47). It is common ground that the first occasion that the defendants received any notice of a claim by a third party was on the following Wednesday, or perhaps, the Tuesday.

299.Whilst to ground a conversion of the goods it is not necessary to prove any subjective intention in the defendants, I do not accept either defendant's evidence as to this issue. Mr Stan Wilson stated that he never considered what would happen to the stock prior to the lockout and did not speak to his brother about it. On the other hand, Mr Robert Wilson said he intended to give the stock back prior to being contacted by the first third party. However, Mr Katen, whose evidence I accept, indicated that an intention to hold on to the stock to force, inter alia, the rent to be paid did exist in the minds of the defendants prior to the lockout. Mr Banks whose evidence on this issue I also accept, deposed that at his January 2009 visit to the premises Mr Robert Wilson told him that the defendants were "not releasing the stock until the rent is paid...".

300.Accordingly, I find that the defendants did intend to deprive the plaintiffs of the subject stock and goods on the premises by virtue of the lockout for the purpose of, inter alia, making them pay the rent. If I am wrong in this finding, I also find that the defendants act of changing the locks and barring the plaintiffs from entering the premises which were then a going concern, constituted a clear overt act of withholding possession of the relevant items from the plaintiffs in a manner repugnant to their immediate right of possession and thereby also constituted a concession.

301.Consequently, it becomes unnecessary to determine whether Mr Gamble's conversation with Mr Stan Wilson at the time of the lockout constituted a demand for the return of the stock and property as I am comfortably satisfied that the lockout constituted a conversion without the need for any such demand. However, if such a demand is necessary, I find that this conversation sufficiently constituted such a demand which was refused.

302.I also do not accept Mr Gardiner's argument that the defendants were entitled to retain possession due to the claims of third parties. I find that the conversion was complete on the day of the lockout at which time no such claims had been received. If I am wrong in this finding, I have already found that the defendants did not retain the stock for the purpose of enquiring as to such other parties claims but rather for the purpose mentioned, namely to force the plaintiffs to, inter alia, pay the rent.

303.I therefore find that the plaintiffs have succeeded in establishing a conversion of the stock and goods as alleged. I will now move to the assessment of damages flowing from this conversion.

The Plaintiffs' Claim in Conversion - Damages

Introduction

304.The method by which any damages that the plaintiffs are entitled to for conversion of the stock and plant and equipment is to be calculated was the source of considerable dispute. Further, there was an issue between the parties as to what stock and goods were actually on the premises at the time of the lockout. Finally, there were substantial differences between the parties in relation to what the evidence established was the value of these items no matter which method of valuation, be it wholesale, retail or replacement, was adopted.

305.Whilst I was referred to a large number of authorities, none related to situations where the converted items were returned. In this regard, my own researches after reserving my decision revealed some authority relevant to such a circumstance (Solloway v McLoughlin [1938] A.C. 247 & Trailways Transport Ltd v Thomas [1996] 2 NZLR 443) which I drew to the parties attention and received some additional written submissions thereon.

The Plaintiffs' Arguments

306.Mr Birman's primary submission was that the plaintiffs were entitled to recover "the full retail value of the stock (and plant and equipment)" and any consequential losses they have suffered. He relied upon the principles summarised by Redlich J in Johnson Matthey (Aust) Ltd v Dascorp Pty Ltd et al [2003] VSC 291 where at [213] his Honour stated:

"The general principle upon which the measure of damages in tort conversion is to be calculated is well established. It is the value to the owner of the thing converted at the date of the conversion. The owner's measure of damages for conversion was extensively considered by the Victorian Full Court in Furness v Adrium Industries Pty Ltd. The principle of restitution in integrum is fundamental to an award of damages for the tort of conversion. The owner must be compensated for the full value of the goods converted. The general principle as to the basis for assessing compensatory damages is that the owner, so far as money can achieve this objective, must be returned to the position in which they would have been had the tort not been committed and is normally assessed by reference to the market value of the goods. These principles have been applied on many occasions but, as this case demonstrates, the 'value' of the goods is not immediately discernible from the application of these unexceptionable principles."

307.Mr Birman submitted that I should accept that the wholesale value of the stock as of 11 October 2008 was as set out in the computer printout (Annexure 2 to Exhibit B) namely $309,085.07. Similarly, I should accept the retail mark up of same estimated by Mr Gamble, which is approximately 54 percent, leading to a total value of $573,268.94 (Exhibit B - para 53).

308.Further, he submitted that the value of the goods as estimated by Mr Gamble in paragraph 55 of Exhibit B in the amount of $52,050 was unchallenged.

309.The addition of the alleged retail value of the stock and the estimated value of the plant and equipment totalled $625,318.94 to which Mr Birman added auction costs of approximately $16,000. After the subtraction of the auction proceeds and certain other credits he sought in all an amount of $551,857. Mr Birman's precise calculations are set out in his "Schedule of the Plaintiffs' Damages" annexed to his third set of written submissions dated 16 March 2011.

310.In relation to the additional authorities that I drew to the parties attention, Mr Birman conceded that the court should reduce the plaintiffs' damages by an amount equal to the value of the goods at the date of their return but indicated that this was the approach that the plaintiffs had already adopted in their Scott Schedule with the result that his earlier submissions were effectively unaltered.

The Defendants' Arguments

311.Mr Gardiner attacked the quantification of the plaintiffs' claim in conversion on multiple fronts.

312.Firstly, as to the stock printout, he pointed out that it does not show when the items listed in it were purchased nor is there any evidence as to the purchase prices despite Mr Beaton being given some fourteen lever arch folders of "wholesalers' invoices). He also submitted that it was produced by Mr Gamble "manipulating" the computer system and "means nothing".

313.Secondly, he submitted that the evidence called in the plaintiffs' own case "destroys the quantum of the claim". In this respect he referred to the evidence of Mr Carr who he said valued all of the stock on the premises as at October 2008 at "about $120,000". He further referred to the evidence given by Mr Banks that a "significant portion" of the stock was Danks stock and that this was worth approximately $110,000. He also referred to the valuation in Mr Gamble's own trading account (Annexure GAG23 to Exhibit C) which indicates that the wholesale value of the stock as at 30 June 2009 was $165,000.

314.Thirdly, Mr Gardiner argued that the plaintiffs had failed to mitigate their loss when they received the stock and goods back by conducting a "fire sale".

315.In summary, Mr Gardiner submitted that the proper valuation of the stock as at October 2008 was no more than $120,000. After the lockout Mr Gardiner pointed out that the plaintiffs returned approximately $19,000 worth of stock to other suppliers and sold at least $10,000 privately before turning the balance over to Mr Bennett to auction which resulted in a gross receipt of approximately $70,000. Due to the overall unsatisfactory nature of the evidence, Mr Gardiner argued that in all these circumstances the true value of the stock and goods "has been recovered" or, alternatively, that the plaintiffs have simply not proved any quantifiable loss.

316.In relation to the issue as to whether any loss should be assessed on a wholesale as opposed to a retail basis, Mr Gardiner relied upon the decision of Furness v Adrium Industries Pty Ltd (1993) Aust Torts Reports 81 - 245 at 62,524 as authority for the proposition that if there existed a market into which the plaintiffs could go and purchase identical goods to those of which they had been deprived, the market price was prima facie the value of the goods. Mr Gardiner argued that there was no reason to suspect that the plaintiffs could not purchase any converted stock or goods at their original wholesale price and that was accordingly the measure of their loss as opposed to any retail sum incorporating a profit element on sales not yet made and which may never have been made.

317.As to the authority to which I referred the parties after reserving my decision, Mr Gardiner submitted that the appropriate measure of damages, assuming a conversion was proved, was the value of the goods at the time of the conversion less their value as at the date of their return. He submitted that the most reliable and persuasive evidence as to the value of the stock and goods as at October 2008 was the evidence of Mr Carr and Mr Banks which Mr Gardiner suggested established a stock value of somewhere around $120,000.

318.In relation to the "value of the goods when returned" he submitted that "almost $100,000 in sale was achieved" after such return.

319.Mr Gardiner then criticised the absence of any forensic accounting evidence and ultimately again submitted that the "plaintiffs have completely failed to prove any damage...should conversion be found".

The Law

320.There is no doubt that damages for conversion are assessed on a compensatory basis and that the general principle is that the injured party should receive compensation in a sum which, so far as money can do so, will put him in the same position as he would have been in if the tort had not been committed: Livingstone v Rawyards Coal Co (1880) 5 App. Cas. 25, at p39.

321.Whilst this means that damages are normally assessed by reference to the market value of the goods, the application of the general compensatory principle may lead to a different method of assessment. As was said in Butler & Ors v The Egg and Egg Pulping Marketing Board (1966) 114 CLR 185 at 191:

"In most cases of conversion it is, of course, obvious that (the general principle's) application will result in the injured plaintiff recovering the full value of the property converted since that will usually represent the loss that he has sustained by the defendant's wrongful act. Hence the statement which appears so often in the books that the general rule is that the plaintiff in an action of conversion is entitled to recover the full value of the goods converted, but this statement should not be allowed to obscure the broad principle that damages are awarded by way of compensation."

322.Further, the purpose of compensatory damages must not be forgotten in their assessment. As Lord Nicholls said in Kuwait Airways v Iraq Airways [2002] UKHL 19; [2002] 2 A.C. 883 at [67]:

"The aim of the law, in respect of the wrongful interference with goods, is to provide a just remedy. Despite its proprietary base, this tort does not stand apart and command awards of damages measured by some special and artificial standard of its own... The fundamental object of an award of damages in respect of this tort, as with all wrongs, is to award just compensation for loss suffered."

323.In cases where the goods converted are returned, as is the case here, the application of these principles has resulted in the recoverable loss being measured by the fall in value of the property between the time of its conversion and its return: Solloway v McLoughlin (supra); Trailways Transport Ltd v Thomas (supra).

324.Further, "the fall in value of property subsequently returned is only recoverable if such loss is proved, or can be inferred, to have been suffered in the particular circumstances...but otherwise only nominal damages are recoverable...": Clerk & Lindsell on Torts, Twentieth Edition (2010) at 17 - 111; see also McGregor on Damages, Eighteenth Edition (2009) at 33 - 074.

325.In situations where the claimant must sell the property in any event, it has also been held that the value of the property to which he is entitled may be limited to the amount obtained by the converter's sale thereof provided it was bona fide: Whitmore v Black (1884) 13 M.&W. 507; Whitehouse v Atkinson (1828) 3 C.&P. 344; McGregor on Damages at 33 - 048.

326.There is also no doubt that a claimant seeking damages for conversion has a duty to mitigate his loss and this was accepted in argument by Mr Birman. The general principle of mitigation is as stated in McGregor at 7 - 014:

"The extent of the damage resulting from a wrongful act, whether tort or breach of contract, can often be considerably lessened by well-advised action on the part of the person wronged. In such circumstances the law requires him to take all reasonable steps to mitigate the loss consequent on the defendant's wrong, and refuses to allow him damages in respect of any part of the loss which is due to his neglect to take such steps."

327.It has long been settled that the question of mitigation of damage is a question of fact (Payzu v Saunders [1919] 2 KB 581 CA) and that the onus of proof is on the defendant (Saunders v Williams [2003] B.L.R. 125 CA).

Consideration

328.I have already found that the defendants' retaking of possession of the premises was lawful but that in doing so they converted the relevant stock and goods.

329.Applying the above principles, if the conversion had not occurred, the plaintiffs would either have been given access to the premises shortly after the lockout to retrieve the stock and goods or had it delivered to them by the defendants. In either case, when they regained possession, I find that they would most likely have dealt with the goods and property in a similar way to that which they did after regaining possession in September 2009. That is, they would have returned various items to third party suppliers and auctioned the rest. This is because they had no other retail premises from which to attempt to sell the stock and goods and had already determined "to quit the hardware business" and seemed to be in the process of moving to the United Kingdom. Mr Gamble's evidence referred to in paragraph 84 of these reasons further supports this conclusion.

330.The question then becomes what is the difference between what the plaintiffs would have recovered by returning the stock and goods to the relevant third parties and auctioning the rest within a short period after the lockout and what they received when these actions actually took place some considerable time later. Unfortunately, there is little evidence to assist in answering this question.

331.Mr Gamble referred to the deterioration of packaging and water damage to items stored outside as well as damage to pot plants but this evidence was quite imprecise and lacked any detail.

332.The plaintiffs' auctioneer, Mr Bennett, gave no evidence as to what an earlier in time auction may have realised. He also gave no evidence that the stock and goods had deteriorated in any significant way since the lockout but rather said that their general condition was "Very good" and apart from having "a bit of dust" on them "they were all clean and presentable". I also do not accept that Mr Bennett's auction was a "fire sale" as suggested by the plaintiffs. I accept Mr Bennett's evidence to the contrary that it was both a well attended, well advertised and well run auction realising good prices. In any event, even if I am wrong in this respect, Mr Gamble clearly had control over the auction and should have mitigated the plaintiffs' loss by not letting it proceed if it turned into "a fire sale".

333.Mr Slater described the retrieved Confast stock as at March 2009 as also "covered in dust" but in "reasonable condition" and stated that Confast issued a full credit for it and resupplied it to other retailers for the purpose of normal sale.

334.Mr Banks stated that the items he offered to purchase were "in good nick" and "would sell". However, he described the condition of the stock apart from that which he was interested in purchasing as looking "a bit shop soiled, been there a bit".

335.Mr Beaton did not inspect any of the stock and was unable to offer an opinion as to its "saleability" at any point. However, he did express the view that "many of the items in the Stock List if not sold within a reasonable time of purchase (i.e. 3 - 6 months) are likely to deteriorate and therefore lose value due to deterioration of packaging, shop soiling, discontinued lines or water damage".

336.Mr Carr stated that it was inevitable that the value of the goods in the premises in October 2008 would have been far greater than their value in about October 2009 but he could not "be specific" and based his opinion upon the fact that the "best price is inevitably achieved in a retail situation". Whilst he could not specify a percentage in relation to such decrease in value between such a retail situation and a subsequent auction he said that it "would be substantial" and also mentioned the fact that over time relevant lines become superseded or discontinued with newer or cheaper lines being introduced to the market.

337.Whilst I accept, on what evidence there is, that if the plaintiffs had the goods and stock returned to them shortly after the lockout they probably would have been able to dispose of them at a better price, it is almost impossible to determine how much more they would have received at this earlier point in time.

338.Further, I find that the plaintiffs contributed significantly to the delay which occurred prior to them receiving the goods back in around September 2009. There is ample evidence that the plaintiffs were not able to be contacted by various third party claimants. They also were in the United Kingdom for several weeks over December 2008 to January 2009 and for three months from May to August 2009. Additionally, the letter written by their lawyers on 21 November 2008 effectively instructed the defendants not to release any of the stock until the plaintiffs had sorted out their position in relation to the third party claimants after which they indicated they would further contact the defendants. As mentioned, the next piece of correspondence was in fact from the defendants' solicitors in May 2009.

339.I also accept Mr Gardiner's submission that, to a degree, the plaintiffs had "abandoned" the stock and goods whilst they followed their interests in the United Kingdom.

340.Consequently, I find that the defendants have established that the plaintiffs did not mitigate their loss by using their best endeavours to, inter alia, deal with the various third party claims expeditiously.

341.Ultimately the auction and subsequent sales resulted in gross proceeds of just under $60,000. Mr Gamble sold other items for approximately $10,000 with other stock and goods being returned generally on a full credit basis.

342.In all these circumstances it is not possible to adopt any mathematical calculation to determine the plaintiffs' loss. In fact, the evidence is so scarce that I gave serious consideration to only awarding the plaintiffs nominal damages. However, there is some evidence upon which I can act, albeit not in any precise way.

343.Accordingly, I award the plaintiffs $20,000 by way of damages for the conversion. This represents an increase of approximately one third on the gross takings from the November 2009 auction. I direct that interest should be agreed between the parties and dealt with in the short minutes.

344.If I am wrong in the method of assessment adopted it would have been necessary for me to assess the value of the stock and goods on the premises as at the date of the lockout.

345.In his "Supplementary Submissions on Quantification of Damages for Conversion" of 24 May 2011, Mr Birman adhered to his earlier submission as to the "market value" of the converted stock and goods as being over $600,000 as at the date of the conversion but seemed to accept that this amount should be reduced by the total of gross value of the goods returned to third parties and the gross proceeds of the auction.

346.However, in such an alternative scenario, I would not have accepted Mr Birman's submission as to "market value" which is based upon a full retail price for all the items contained in the wholesale stock list.

347.As to such stock list, I agree with Mr Gardiner's submissions that it does not prove what was on the premises at that time, when such items were purchased or what prices were paid and in circumstances where the original invoices were apparently available but never tendered. The stock list is also significantly contradicted by the evidence of other witnesses such as Mr Banks and Mr Carr, not to mention the plaintiffs' own document being Exhibit 12.

348.Mr Carr's evidence was that the value of the Danks stock was "about $120,000" and that it was "at least 80 percent of the total stock at the premises". It is unclear as to what basis Mr Carr was valuing the Danks stock, for example, retail, wholesale or replacement, and he gave no evidence as to the value of the remaining 20 percent.

349.Mr Gamble also apparently offered the entire business including all the stock and goods to Mr Wiggins for a sum of $300,000 which Mr Wiggins regarded as "high".

350.As to the goods, Mr Gamble offered them to Mr Banks at a reduced figure in January 2009. Further, I have been unable to locate a number of them on Mr Bennett's catalogue (Annexure BEN1 to Exhibit H) and do not know their fate.

351.There is also the photographic evidence referred to which shows the store as at the time of the lockout in a considerably understocked state.

352.In short, if I had to determine the "market value" of the stock and goods on the premises as at the time of the lockout, I would similarly not have been able to do so in any precise or mathematical way.

353.Further, I would also have found that the defendants had established that the plaintiffs had not mitigated their loss by their actions after the lockout and consequently I would have assessed damages in much the same amount even if I had adopted the method of assessment urged upon me by Mr Birman.

The Cross Claim

Rent Owing as at Date of Lockout

354.I have already found that the defendants were entitled to outstanding rent including GST as at the time of the lockout and have directed the parties to agree on the precise amount.

Interest on Unpaid Rent

355.In his written submissions, Mr Birman concedes that the defendants are entitled to simple interest calculated at the rate of 12 percent per annum on any arrears of monies due pursuant to Item 14 and Clause 5.1.5 of Exhibit A. Whilst Mr Gardiner has undertaken certain calculations as to interest, these are based on a different outstanding amount and I direct the parties to reach agreement as to same and include them in the abovementioned short minutes.

Outgoings

356.I have already found that the only outstanding outgoings notified to the plaintiffs as at the date of the lockout were in relation to building insurance premiums in the amount of $6,847.48 as per the defendants' fax of 19 June 2008. The larger amount of $7,465.24 was claimed by letter dated 10 November 2008 and whilst the increase is partially explained by the inclusion of a pro rata amount for the three months from June to October 2008, I am not able to further reconcile these two claims and in the circumstances am only prepared to award the smaller figure.

357.In relation to the other amounts claimed by way of council rates, water rates and land tax as set out in paragraph 28 of the further amended cross claim, I have already referred to the unsatisfactory nature of the evidence in relation to these matters. The only relevant evidence is contained in paragraph 3 (ii) of Exhibit 2 and paragraphs 68 - 74 of Exhibit 4 including pages 71 and 72 of Exhibit CSW-1 thereof. As to council rates this evidence is thoroughly confusing and it is anything but clear as to what is actually outstanding over and above what the plaintiffs have already paid. As to water rates paragraph 71 of Exhibit 4 states that an amount of $825.45 has been paid by the defendants but not reimbursed by the plaintiffs but there is no account that I am able to locate and nor is one referred to in the written submissions. As to land tax, paragraph 69 of Exhibit 4 seems to confirm the oral evidence that the defendants were for many years in dispute with the relevant department and were unable to give the plaintiffs an account. The sum of $5,103.66 claimed for the land tax is not otherwise referred to in Exhibit 4 nor Exhibit 2 and again I have not been able to locate an account nor did the oral or written submissions direct me to one.

358.Accordingly, the only amount I am prepared to award the defendants by way of outstanding outgoings is in relation to the amount of $6,847.48 for building insurance.

Interest on Outgoings

359.As with rent, interest is payable on this amount and I direct the parties to calculate same and include it in the short minutes.

Repainting

360.Despite an amount of over $33,000 for repainting costs being claimed in paragraph 36 of the further amended statement of cross claim, the parties agree that should this be allowed such costs are, in fact, $12,990.

361.Mr Gardiner argues that repainting costs are clearly payable pursuant to Item 22 of Exhibit A. Mr Birman, however, submits that nothing should be allowed in this regard based on his submission that the month to month tenancy was unlawfully terminated, which submission I have rejected above. Mr Birman also submits that as the premises have not yet been repainted nothing can be claimed and further that if they re-lease the premises at some stage in their current state this "would obviate the need to do so".

362.In my view, the obligation to repaint the premises pursuant to Item 22 of Exhibit A is not avoided if it has not been attended to at the time that the landlord lawfully terminates the tenancy as is the situation here. Further, there is nothing in Exhibit A which requires the defendants to have undertaken such repainting prior to seeking the costs thereof from the plaintiffs. Finally, the fact that the defendants have been attempting to re-lease the premises in their current condition does not, in my view, override the plaintiffs' obligation to repaint under the lease.

363.Accordingly, I allow the sum of $12,990 for repainting costs.

Damage to Driveway

364.The defendants claim that the plaintiffs caused structural damage to the driveway of the premises and pursuant to Clauses 7.3.1 and 12.3 of Exhibit B are responsible for the cost of the repairs thereto in accordance with the quote from Ditchfield Contracting Pty Limited of 23 November 2009 in the sum of $38,240 including GST (Annexure L to Exhibit 2).

365.Mr Birman argues that nothing should be allowed in respect of this claim for a number of reasons. Firstly, he argues that Clause 7.3.1 only requires the tenant to "reimburse the landlord for the cost of fixing structural damage caused by the tenant, apart from fair wear and tear" and it is clear that no such work has yet been undertaken by the defendants and therefore there is nothing to "reimburse". Secondly, he argues that the evidence clearly establishes that when the lease commenced there was structural damage or wear and tear to the driveway that required the defendants to complete extensive work at their own expense at various times throughout 2003 and 2004 (Exhibit 4 - paras 14 - 18 and T212.21). Thirdly, whilst he conceded that the plaintiffs were obliged to maintain the driveway in the condition it was at the start of the lease, they were not obliged to repair any structural defects or fair wear and tear pursuant to Clause 7.2 of Exhibit A and there is no evidence that any alleged damage to the driveway was other than fair wear and tear. Fourthly, he submitted that there was in fact no evidence that the state of the driveway was any worse at the end of the lease than at its beginning. Finally, he submitted that if any such costs were recoverable they should not include GST as it was recoverable by the defendants as an input tax credit.

366.Again, the evidence in relation to this aspect of the cross claim is rather confusing. The quote from the contractor is a one page document in which the work is described in three lines. It is not at all clear what the work is, over what areas of the subject premises it is to take place and whether it relates to structural damage caused by the plaintiffs.

367.Mr Gamble's evidence concerning the driveway (Exhibit B - paras 8, 10 and 76.4) was that it (and the other items allegedly damaged referred to below) was in the same condition at the time of the lockout as at the commencement of the lease.

368.On the other hand, Mr Robert Wilson denied that this was the case (Exhibit 3 - para 45) Further, he stated (Exhibit 4 - paras 63 and 64) that after he saw a forklift with solid rubber tyres and a bobcat steer loader being driven around the premises, he spoke to Mr Gamble telling him that they were damaging the driveway and asked him to stop this practice. He said Mr Gamble agreed to do so but "that request and several further requests were ignored" with the result that damage was caused "to the tar sealed area adjacent to the concrete apron at the rear of the building where supplies were unloaded by the forklift". As a result Mr Wilson "constructed three large concrete slabs at the rear entrance to the premises to extend the existing concrete apron entrance which had been extensively damaged by the use of the forklift in that area, which was the immediate" unloading area.

369.The conflict in the affidavit evidence between Mr Gamble and Mr Wilson on this topic was not clarified by what little cross examination occurred on this issue which was largely ignored in the running of the trial.

370.The defendants bear the onus of establishing their entitlement to damages for damage allegedly occasioned to the "driveway". I am not satisfied that they have discharged this onus as I am not able to determine, inter alia, what actual damage was done, when it was done or if the repair quotation relates in whole, in part or not at all in relation to it. Accordingly, I find that the defendants have not discharged their onus of proof in relation to these matters and I am not prepared to allow any damages in relation to this aspect of the cross claim.

Downpipes, Vanity Basin and Fences

371.The defendants claim $2,757 for alleged damage caused to these items by the plaintiffs as per the quotations which are Annexures J, K and L to Exhibit 2. Each quote is said to be "to repair damage" to the item in question.

372.As mentioned, Mr Gamble deposed that these items were in the same state at the time of the lockout as they were at the time of the commencement of the lease which the first defendant denied. Again these matters were not taken up in cross examination in any meaningful way and in these circumstances and in the absence of other material, such as photographs depicting the damage, I find that the defendants have not discharged their onus of proof in relation to these matters and I similarly do not allow any damages in relation thereto.

Cleaning Expenses

373.The defendants seek the sum of $6,017 by way of damages for the plaintiffs' alleged breach of Clause 12.3 of Exhibit A in relation to, as it was put in their written submissions, "the cost to remove materials and debris; clean the property and check and disconnect cabling at the end of the lease". This sum is made up as per quotes (Annexures M and N to Exhibit 2) of $128.15 for electrical expenses and $3,850 for "removing debris and cleaning" plus an amount of $2,038.85 "for time spent by employees of the (defendants) cleaning the property". As to this last sum, Annexure O comprises copies of tax invoices of the defendants for "Reimbursement for wages - Clean up of Home Hardware inclusive of GST" dated 31 October and 19 November 2009.

374.It is unclear to me why the defendants have not only apparently paid their own employees to clean up the property in October and November 2009 but around the same time obtained the quote being Exhibit N which is for almost double this amount and "was prepared on the basis that the Site is to be left in a groomed condition".

375.Further, Mr Gamble deposed (Exhibit B - para 10) that at the time of entering into the lease there were "piles" of rubble, broken bricks and blue metal in the carpark, an allegation he was not cross examined upon and which was not responded to by the defendants.

376.In relation to this aspect, Mr Birman submitted that no sum should be allowed as it was "accrued post-unlawful termination" and, in relation to the wages because they were "Paid by the Wilsons to the Wilsons".

377.It therefore appears that the plaintiffs do not argue that cleaning was unnecessary nor do they submit that the premises were in exactly the same condition in relation to cleanliness at the time of the lockout as they were at the commencement of the lease.

378.However, there not only seems to be an unexplained overlap between the costs referred to in Annexures N and O but also there is uncontested evidence that there were "piles" of rubble and the like on the premises at the commencement of the lease.

379.In the circumstances, I am only prepared to allow the amount paid by the defendants to its servants, being $2,038.85 under this head.

Amounts Claimed After the Lockout

380.In paragraphs 33 and 34 of the further amended statement of cross claim, the defendants claim $112,336.09 for damages allegedly incurred from October 2008 until September 2009 when the stock and goods were finally removed from the premises.

381.This total is made up as to $101,617.92 by twelve monthly rental payments of $8,468.16 including GST together with the sum of $10,718.17 for various outgoings such as council and water rates, electricity and security costs incurred over this period.

382.Mr Gardiner argued in his written submissions that these amounts were payable because the plaintiffs "refused and failed, in breach of Clause 12.3 of the Lease, to remove the goods and equipment from the property". If they had done so, he argued, the defendants would have been able to release the property at the last applicable rent between the parties to some unidentified "third-party tenant" who would also have been responsible for the various charges making up the $10,718.17.

383.Not surprisingly, Mr Birman argued that nothing should be allowed after October 2008 for a number of reasons. Firstly, he submitted that the reason that the stock and goods remained on the premises was because of its conversion by the defendants. Secondly, he submitted that there was simply no evidence that if the property was vacant, the defendants could have leased it to anybody, let alone at the suggested rent. In this regard, he also relied upon the evidence that the defendants have been trying to rent the property since September 2009 without any success. Thirdly, he argued that in relation to matters such as the various outgoings and security costs, the defendants would have incurred these in any event.

384.I have already found that the defendant lawfully retook possession of the premises in October 2008 thereby bringing the month to month tenancy then operating to an end. In light of my finding that the subject stock and goods were at that time converted by the defendants who locked them inside the premises, I can see no basis upon which they can thereafter claim any such amounts. Further, I agree with Mr Birman that there is no evidence of any prospective tenant being lost to the defendants whose efforts to lease the premises post September 2009 have also come to nothing. Further, the security costs were, as Mr Birman put it, "at the choice" of the defendants.

385.Accordingly, I am not prepared to allow any of the damages claimed post October 2008.

Summary

386.The addition of the above amounts awarded pursuant to the cross claim results in a total of $21,876.33 plus the to be agreed amount for outstanding rent and GST as at the date of the lockout. Interest must also be added where applicable. I have already directed that interest should be agreed between the parties and dealt with in the short minutes.

Conclusion and Directions

387.It follows that the plaintiffs have succeeded in their claim and the defendants have also succeeded in their cross claim.

388.I make the following directions:

(i)The parties are to bring in short minutes of order to give effect to these reasons.

(ii)Such short minutes are to be provided to my Associate by 5pm on Monday 12 June 2011.

(iii)The matter is listed at 9.30am on Wednesday 15 June 2011 for the making of final orders.

(iv)The exhibits are to remain with the file for 28 days after judgment and thereafter are to be returned to the parties.

If the parties are unable to agree on interest or the proper costs order to be made, I will hear argument on 15 June 2011.

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Decision last updated: 17 October 2013

District Court New South Wales

Judgment

Introduction

The Hearing

The Issues

Evidence Called by the Plaintiffs

Mr Godfrey Gamble

Mr Craig Antony Beaton

Mr Anthony David Banks

Mr Kevin Daniel Carr

Mr Alan Douglas Slater

Mr Douglas Bennett

Other Documentary Material Tendered in the Plaintiffs' Case

Evidence Called by the Defendants

Mr Peter Allen Katen

HIS HONOUR

Mr Claude Stanley Wilson

Mr Robert Wilson

Mr Glen Frost

Additional Evidence Called on the Cross Claim

Was the Lockout Lawful?

The Plaintiffs' Arguments

The Defendants' Arguments

Consideration

The Plaintiffs' Claim in Conversion - Liability

The Plaintiffs' Arguments

The Defendants' Arguments

The Law

Consideration

The Plaintiffs' Claim in Conversion - Damages

Introduction

The Plaintiffs' Arguments

The Defendants' Arguments

The Law

Consideration

The Cross Claim

Rent Owing as at Date of Lockout

Interest on Unpaid Rent

Outgoings

Interest on Outgoings

Repainting

Damage to Driveway

Downpipes, Vanity Basin and Fences

Cleaning Expenses

Amounts Claimed After the Lockout

Summary

Conclusion and Directions

District Court
New South Wales