FEDERAL COURT OF AUSTRALIA Wykala Pty Ltd v Tasco Agroforestry Management Pty Ltd [2000] FCA 1784 Federal Court Rules O 11 r 23(1) Wheeler Grace and Peirucci Pty Ltd v Wright (1989) ATPR 40,940 at 50,251, followed Bowler v Hilda Pty Ltd (1998) 80 FCR 199 at 203, followed WYKALA PTY LTD v TASCO AGROFORESTRY MANAGEMENT PTY LTD & ANOR. NO. T 15 OF 2000 HEEREY J 4 DECEMBER 2000 HOBART IN THE FEDERAL COURT OF AUSTRALIA TASMANIA DISTRICT REGISTRY T 15 OF 2000 BETWEEN: WYKALA PTY LTD (ACN 006 666 968) APPELLANT AND: TASCO AGROFORESTRY MANAGEMENT PTY LTD (ACN 005 552 023) FIRST RESPONDENT PETER DAVID MARTIN SECOND RESPONDENT JUDGE: HEEREY J DATE OF ORDER: 4 DECEMBER 2000 WHERE MADE: HOBART THE COURT ORDERS THAT: 1. Judgment be entered for the applicant against both respondents in the sum of $482,980. 2. Declare that the contracts made between the applicant and the first respondent on 24 June 1987 and 22 May 1988 were rescinded in July 1998 as a consequence of the repudiation by the first respondent and the acceptance of that repudiation by the applicant. 3. The respondents pay the applicant's costs, including reserved costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA TASMANIA DISTRICT REGISTRY T 15 OF 2000 BETWEEN: WYKALA PTY LTD (ACN 006 666 968) APPELLANT AND: TASCO AGROFORESTRY MANAGEMENT PTY LTD (ACN 005 552 023) FIRST RESPONDENT PETER DAVID MARTIN SECOND RESPONDENT JUDGE: HEEREY J DATE: 4 DECEMBER 2000 PLACE: HOBART REASONS FOR JUDGMENT 1 The applicant by notice of motion seeks an order under Order 11 Rule 23(1) of the Federal Court Rules in default of the filing of a defence by the respondents. By order of Marshall J on 4 August 2000 a defence was to be filed and served by 25 August. 2 The applicant's claim arises out of contracts which were entered into on 24 June 1987 and 22 May 1988. In essence, each contract provided that the first respondent would sell to the applicant land in North Western Tasmania and that the first respondent would plant pine and eucalypts on the land and manage those forests and eventually harvest them at a future time. In case of the land bought in 1988 the applicant took a title as to an undivided 99 per cent interest. Mr James Norris, who is the principal of the company took the remaining 1 per cent. 3 The evidence produced by the applicant was contained in an affidavit sworn by Mr Norris and also an affidavit by Mr Dennis Chester, a forestry consultant. The evidence in those affidavits satisfies me that the applicant has made out a case for judgment. There was a substantial failure by the first respondent to carry out its obligations in relation to pruning, vermin control and other aspects of management to such an extent that the applicant was forced to take over this work itself from July 1998 onwards. The second respondent, Mr Peter Martin, who appeared in person, conceded that he told Mr Norris about that time that the first respondent would not be doing any further work. The first respondent is now in receivership and was not represented at the hearing. In that event, it seems clear that the contracts have been rescinded by reason of the repudiation by the first respondent and the acceptance of the repudiation by the applicant. 4 The damages claimed have to be assessed on the basis that if the contracts had been performed the applicant would have paid a one-off sum at the commencement of the period, the first respondent would have carried out the management and the applicant would have received the sum representing the sale price of the timber when it was harvested in the future. Following the repudiation of the agreement the applicant has been forced to carry out substantial work to date. That amounts, in the case of both pieces of land, to a total of $36,680. Then there is the estimate of future management, which is $39,830. That covers expenditure up to 2004 in the case of eucalypts and 2016 in the case of pine, totalling $39,830. Since all of that is a future amount, an appropriate discount is called for. It is not possible to estimate this on any precise mathematical basis but very roughly I have applied a one-third discount resulting in an amount of $26,000. 5 Finally, the evidence of Mr Chester is to the effect that the failure of the management to date has resulted in irretrievable loss of value of the timber to an extent of $867,080, that is, the timber will be worth that amount less than if the contracts had been performed. That loss, of course, will occur in the future. It has to be discounted back to allow for present value. Mr Chester advanced two possibilities. One, a 3 per cent rate which is simply the difference between inflation and interest rates, and another basis which was 6 per cent for the pine and 7 per cent for the eucalypts. The latter, although Mr Chester does not expand on this, I take to involve risk factors. It seems to me we are not dealing here with a sum which is certain to be received in the future. Allowance must be made for risks not covered by insurance, so I think the latter figure is appropriate, that is $420,300. 6 So the sum of the damages is, $482,980. As we are dealing with a future matter, I have followed the reasoning of Lee J in Wheeler Grace and Peirucci Pty Ltd v Wright (1989) ATPR 40,940 at 50,251, and see also Bowler v Hilda Pty Ltd (1998) 80 FCR 199 at 203 and following. 7 It is quite clear on the evidence that Mr Martin was the person behind the first respondent and conducted the dealings himself and that a case of his involvement for the purposes of 75B of the Act is made. 8 I will order that judgment be entered for the applicant against both respondents in the sum of $482,980. 9 I will declare that the contracts made between the applicant and the first respondent on 24 June 1987 and 22 May 1988 were rescinded in July 1998 as a consequence of the repudiation by the first respondent and the acceptance of that repudiation by the applicant. I will order that the respondents pay the applicant's costs, including reserved costs. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey. Associate: Dated: 6 December 2000 Counsel for the Applicant: R Young Solicitor for the Applicant: Ayliffe and Ayliffe Solicitor for the first Respondent: No appearance for the first respondent Solicitor for the second Respondent: The second respondent appeared in person Date of Hearing: 4 December 2000 Date of Judgment: 4 December 2000