Industrial Relations Commission of New South Wales in Court Session CITATION : William John Dewdney v Quality Bakers Australia Limited, Dennis Gordon Drennan v Quality Bakers Australia Limited [2000] NSWIRComm 76 APPLICANTS: William John Dewdney Dennis Gordon Drennan PARTIES : RESPONDENT: Quality Bakers Australia Limited FILE NUMBER: IRC4117 & 4118 of 1997 CORAM: Maidment J Claim for compensation for business which was resumed, question whether resumption of business and compensation paid was unfair. Allegations of failure to negotiate in a meaningful manner, unfairness generated by absence of redundancy/severance pay or pay in lieu of notice, manner of termination unfair, terms of resumption, non negotiable. CATCHWORDS : Question of admissibility of evidence as to processes and outcome of previous s 275 application. Valuation of business. Applicants seek to refute their own tax returns because of cash business, claim for compensation for lost opportunity to defraud the revenue rejected. Applicants delay, effect upon conideration of evidence. Industrial Relations Act 1996 LEGISLATION CITED : Land Acquisition (Just Terms Compensation) Act 1991 Public Works Act 1912 (NSW) Rothmans v Industrial Court of NSW [1974] 53 IR 157 Spencer v the Commonwealth of Australia (1907) 5 CLR 418 Pastoral Finance Association Ltd v The Minister [1914] AC 1083 CASES CITED : Harcourt Brace & Co (Australia) Pty Ltd v Corey [1997] 81 IR 321 Newton v Goodman Fielder Mills Ltd [1998] 81 IR 227 Myer Stores v Stowart & anor [1994] 55 IR 21 Kontos v RTA (1992) 75 LGRA 218 HEARING DATES: 06/07/1999; 06/08/1999; 06/09/1999; 06/10/1999; 06/11/1999; 04/04/2000; 04/05/2000; 04/06/2000 DATE OF JUDGMENT: 05/16/2000 APPLICANTS: Mr M Robinson of counsel Mr C Hodgson of counsel SOLICITOR: Mr R Ferry Ferrys Law Firm LEGAL REPRESENTATIVES: RESPONDENT: Mr R Goot of counsel SOLICITOR: Mr A Morris Blake Dawson Walden JUDGMENT: INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION DATE: 16 MAY 2000 CORAM: MAIDMENT J MATTER NO IRC97/4117 WILLIAM JOHN DEWDNEY V QUALITY BAKERS AUSTRALIA LIMITED. Application under s106 of the Industrial Relations Act 1996. MATTER NO IRC97/4118 DENNIS GORDON DRENNAN V QUALITY BAKERS AUSTRALIA LIMITED. Application under s106 of the Industrial Relations Act 1996. JUDGMENT 1 In 1992, as a consequence of rationalisation of its distribution process, Quality Bakers Australia Ltd ("QBA") terminated its arrangements with 460 contractor bread vendors in NSW and provided them with compensation. On 29 July 1997, William John Dewdney and Dennis Gordon Drennan, former bread vendors on the Central Coast, commenced proceedings against QBA under s.106 of the Industrial Relations Act 1996 (the "Act") claiming, in essence, that the termination of their contracts had been unfair and their compensation insufficient. THE CLAIM 2 DEWDNEY DRENNAN Loss of bread run: $56,304 $56,420 10% disturbance: $5,630.40 $5,642 4 weeks pay in lieu: $1,382.08 $1592.46 of notice Severance/redundancy $9,455.27 $13,993.56 payat 3 wks per year of service: Loss on vehicle: $2,000 $10,732.15 3 In each case the amount paid upon resumption is to be deducted from the claim for loss of run and interest is sought. THE PROCEEDINGS 4 The hearing commenced in June 1999 and ran for 5 consecutive days, the applicants being represented by Mr Robinson of counsel. As a consequence of Mr Robinson unexpectedly becoming part heard in a criminal trial, which went well beyond schedule, other days fixed later in 1999 were vacated. The hearing resumed in April 2000, the applicants then being represented by Mr Hodgson of counsel. Mr Goot of counsel represented QBA throughout the proceedings. EVIDENCE 5 Each applicant gave evidence as did John Robertson of John Robertson & Associates Pty Ltd, a registered real estate valuer who also provides business valuations. 6 In QBA's case the following were called as witnesses: 7 John Banks, Partner in KPMG Forensic Accounting Division, Director of KPMG Corporate Finance (NSW) Pty Ltd; Anthony Lloyd, currently Human Resources Director Corporate Technology Group of Goodman Fielder who in, October 1994, was QBA Group Human Resource Manager of its Australian operations; Peter Renkert, QBA New South Wales Operations Manager from July 1990 to December1993; Denis Laurie, QBA Bakery Manager of its South Coast Operations in 1994; Keith Wilson, QBA bread vendor between 1988 and January 1991, from February 1991 to August 1994 QBA Central Coast Depot Manager and currently, Sales Manager QBA's Newcastle Bakery; David Lloyd, solicitor, of Blake Dawson Waldron, solicitors for QBA. 8 Additionally, documentary evidence, including affidavits of persons not required for cross examination, was tendered. DELAY 9 The delay in commencing these proceedings has occasioned considerable doubt as to facts concerning relevant events both prior to the resumption of the runs and subsequent thereto. In fact both applicants professed memory difficulties when questioned as to the circumstances of the delay itself. Thus the delay has been such as to deny the Court the reasons for the delay. 10 Had Mr Ferry, the applicants' solicitor, given evidence the delay would no doubt have been explained. The evidence is that Mr Dewdney first saw Mr Ferry in connection with the resumption of his run in about November, 1992 and Mr Drennan saw him somewhat later. The applicants chose not to call him as a witness which, additionally, deprived the Court of evidence as to his knowledge of the progress of negotiations between the Bread Employees' and Salesmens' Association of New South Wales ("BESA") and QBA post 1992. 11 Mr Drennan did say, as to his dealings with Mr Ferry: He took statements off me, different statements, things like that and from then it went on to where we are today, but the time between things was astronomical. 12 The view I take is that uncertainties resulting from delay should be determined on a basis favourable to QBA. In other words prejudice to QBA as a result of the applicants' delay should be minimised. I do not understand Mr Hodgson to take issue with that proposition. 13 The following are some of the matters which are unable to be thoroughly explored as a result of the delay: 1. The reasons for the delay. 2. Transactions/communications between the applicants and BESA and their knowledge of the negotiations between BESA and QBA during and post 1992. 3. Profitability of the applicants' businesses. 4. The contemporaneous going rate for runs and in particular the reliability of the BESA survey and of relevant QBA internal documentation. CHRONOLOGY 14 In 1979 Mr Dewdney entered a bread vending contract with Riga Bakery P/L the purchase price being $3,800. On 19 February, 1991 he entered into a new agreement with Berzins Specialty Bakeries P/L, the then owner of Riga Bakery, which, in March 1991, was taken over by Buttercup Bakeries which was owned by QBA. 15 In March, 1985 Mr Drennan purchased a bread run and truck for $26,000 and consequently carted bread for Fielder Gillespie Davis Ltd The run was restructured in November, 1989 by the then baker, Goodman Fielders Industries Ltd, a QBA company, which paid him $10,000 and gave him a truck worth about $6,000. He signed a second Vendor's Agreement with Goodman Fielders in June, 1990. 16 In May 1991 Mr Drennan purchased a new vehicle in accordance with the provisions of the Bread Vendors Quality Bakers Australia Limited (State) Award. The purchase price was $28,469. He sold it for $15,000 in February 1993. 17 On 4 Feb 1992 QBA met with officials of BESA and informed them that it proposed acquiring each of the bread vendors' runs and disclosed a compensation scale which it intended to implement. On 6 February BESA sent a notice to its members outlining the events at the meeting. On 18 February BESA advised its members that legal advice was being obtained. On the same day QBA informed the bread vendors of the proposals and of its intention to resume each run. 18 On 4 August Mr Dewdney was advised by QBA that his agreement would terminate on about 7 September and that he would be given at least 1 month of formal notice. His run was resumed on 11 September. 19 On 4 September QBA provided Mr Drennan with a resumption notice to take effect on 4 October and an estimate of the compensation he would receive. His run was resumed on 4 October. 20 On 2 November 1992 Mr Dewdney and Mr Drennan, as partners, purchased a video hire business in which they both began to work. THE VENDOR AGREEMENTS 21 The vendor agreement entered into by each of the applicants provided that the Manufacturer could terminate the agreement at any time by giving one month's notice. Mr Drennan's agreement contained provisions as to resumption which required to the effect that if the vendor wished to sell his run QBA would be given the option to purchase it at the price the vendor was able to achieve on the market. RESUMPTION 22 Upon resumption of the runs QBA compensated the 460 bread vendors on the following scale which varied in accordance with the average number of units sold and delivered per week in the six "normal" weeks immediately preceding termination of the contract: 3,500 units or less $8 per unit 3,501-6,000 units $9 per unit more than 6,000 units $10 per unit 23 Baked goods such as pies were excluded from the calculation which was restricted to bread product units. No offer to purchase bread vendors' vehicles was made. 24 By letter dated 18 February, 1992 the bread vendors were informed that: We propose to continue to purchase all the vendor runs offered for sale that we can, as soon as we can, at the prices listed below. 25 The $8, $9 & $10 proposition was set out and the letter went on: We will continue to buy runs as outlined above but we will need to acquire all runs over time. The timing of compulsory acquisition will depend on the number of volunteers, the location of the voluntary runs and our ability to integrate and restructure the runs. 26 Mr Dewdney was paid compensation of $25,632 being calculated on 3,204 units at $8 each. Mr Drennan was paid compensation of $35,766 being calculated on 3,974 units at $9 each. QBA EVALUATION OF COMPENSATION 27 Mr Renkert, who is no longer associated with QBA, gave evidence as to the formulation by QBA of the $8, $9 & $10 resumption formula. He said that a series of meetings, attended by himself as NSW Operations Manager along with bakery managers and human resource managers, formulated the payments after considering the following factors: 1. Information known to bakery managers about the amounts for which bread runs had been bought and sold for in recent years. 2. The fact that no payment would be made in respect of baked foods. 3. The fact that no general offer would be made by QBA for the purchase of bread vendors' vehicles. 4. The fact that vendors would not receive additional redundancy or severance payments. 5. Relevant provisions contained in the vendor agreements entered into between QBA and each bread vendor with respect to the resumption of bread runs. 6. Advice to QBA by its legal advisers, including as to relevant decisions of the Industrial Commission of NSW in proceedings brought pursuant to s.88F of the Industrial Arbitration Act 1940. 28 He said that the meetings used a white board upon which a variety of information was from time to time entered during the processes which resulted in the formula. He described it as a plethora of numbers and columns. 29 His evidence was that the formula finally agreed upon had the virtue of being simple and recognised that higher unit runs were generally more valuable. He said that baked goods such as pies were excluded as they are subject to seasonal fluctuations and, in most runs, bread products formed almost the entirety of the value of the run. 30 Mr Renkert added that there were substantial voluntary resumptions under the proposal before BESA directed its members not to sign the resumption agreement. 31 The evidence discloses that, by memo dated 25 February 1992, Mr Renkert sought information from bakery managers as to the price at which runs had recently changed hands. It was put to him in cross examination that, as the resumption formula had already been determined by 25 February, the sale prices could not have been taken into account as those prices were not sought until after the event. Mr Renkert denied the suggestion and, in re-examination said to the effect that, after the formula was announced, the memo was issued in response to a perceived need to provide BESA with justification of the formula which had been decided upon. He said to the effect that the memo sought information which would confirm that which had been earlier received orally and put on the white board. 32 I accept the evidence of Mr Renkert. UNION INVOLVEMENT 33 Bread vendors were deemed employees for certain purposes of the Industrial Arbitration Act 1940 and the Industrial Relations Act 1991, their industrial interests being represented by BESA which had secured award protection for them. Both applicants were financial members of BESA at the time their runs were resumed. 34 From at least 4 February 1992 BESA was involved in this matter with officials meeting that day with QBA. On 6 February its members were advised in writing of matters raised during that meeting. 35 A further notice, dated 18 February, advised the membership to the effect that BESA's solicitors, W G McNally & Co, had briefed J Shaw QC and M Walton of counsel to "represent you in legal issues concerning the companies intentions regarding your future in the industry". Survey forms were disseminated to the members who were requested to complete and return them to McNally & Co. 36 Returns were forwarded by both Mr Dewdney and Mr Drennan. 37 On 31 July 1992 proceedings under s.275 of the 1991 Act were instituted against QBA as a test case by BESA and selected former bread vendors. 38 By report dated 29 September 1994 Mr Robertson, instructed by W G McNally & Co, prepared valuations for the purpose of that litigation in respect of the businesses of eight former bread vendors who had had their runs resumed by QBA. 39 Mediation was conducted by Marks J in October, 1994 and, following a successful outcome, a questionnaire, drafted by Blake Dawson Waldron, McNally & Co and Marks J , was forwarded by BESA to its members. Neither applicant was forwarded a questionnaire as, it would seem, they were no longer on the member register. 40 As a consequence of information responsive to that questionnaire further claims were made on behalf of other former bread vendors who seemed qualified to receive the additional benefit negotiated during the mediation. 41 Meanwhile BESA had amalgamated with the Australian Liquor, Hospitality and Miscellaneous Workers Union ("ALHMWU"), BESA consequentially being deregistered. Negotiations between ALHMWU and QBA officers and legal representatives resulted in settlement of claims by 41 former bread vendors including 4 who were not on the list of union members. The settlements were formalised by deeds which were executed in about July 1995. Payments additional to those made on resumptions of those runs resulted on the basis of a formula which had been agreed upon during mediation. ADMISSIBILITY 42 The applicants objected to the tender of evidence as to the processes and outcome concerning the BESA s.275 application. The material was accepted on the basis that relevance, and thus admissibility, would be later determined. 43 Mr Hodgson contended that, as the settlement of the BESA test case was on a without concession and confidential basis, and, as QBA must have known in reaching the settlement that other claimants might come forward under s.275 as it then was, the basis of the settlement cannot be of any relevance in these proceedings. 44 I accept the submissions of Mr Goot that these applications should not be considered in a vacuum and that they cannot be quarantined from the earlier proceedings of which the applicants were aware and in which they initially participated. He drew my attention to the following passage from the judgment of Priestly JA , with whom Kirby P and Meagher JA agreed, in Rothmans v Industrial Court of NSW [1974] 53 IR 157 at 161: I do not think, when the employment of a number of employees is being terminated at about the same time, that the question of what is unfair in regard to one employee must necessarily be decided without reference to what happens in the case of the other employees. On the contrary, it seems to me that what happens to the others must be relevant. It may be that in some cases there will be special circumstances applying to other employees which will affect the weight to be given to evidence about them. Clearly, the circumstances concerning some employees are likely to be more similar to those of a party seeking to use them in a particular case than to those of other employees. The more closely similar the circumstances are the greater the relevance, and the less similar, then, the less useful the evidence will be. I do not see however, that it can ever be said to be necessarily irrelevant. It follows from this that the Full Court can not have been travelling outside its jurisdiction in considering the evidence. 45 In considering whether or not the resumption by QBA and the compensation paid by QBA was unfair it seems to me necessary to take into consideration all of the surrounding circumstances including the formulation and publication of the resumptions, the role of BESA, the s.275 proceedings and their outcome. I consider the material to be clearly admissible. MR DEWDNEY 46 Mr Dewdney recalled having had many conversations with Mr Wills, a BESA official, prior to resumption of his run and he had a meeting with Mr McNally as to the matter. 47 He asserted that Mr Wills had told him that he could not remain as a financial member of BESA after the resumption of his run and that BESA would not then be able to represent him. In giving this evidence in 1999 Mr Dewdney said that he then had no idea as to the whereabouts of Mr Wills. 48 As to this assertion it is plain that, as was said by Mr Dewdney in his evidence, BESA represented other bread vendors after their runs were resumed by QBA. It would have thus been patently illogical and inconsistent for Mr Wills to have denied Mr Dewdney representation. Again the passage of time prevents the facts being explored. 49 Although he said in his evidence that he had a memory difficulty as to his then understanding of the situation, Mr Dewdney had understood the outcome of the test case would affect other former QBA vendors. 50 Mr Dewdney in his evidence, whilst complaining that he had difficulty remembering events of some 6 or 7 years earlier, said that he had instructed Mr Ferry to ring Mr McNally in respect of the case being run by BESA and that "Bob Ferry knew exactly what was going on". The fact that Mr Ferry turned to the valuer used by Mr McNally supports that contention. MR DRENNAN 51 Mr Drennan recalls attending upon Mr McNally and being informed by him that a test case would be mounted. He professed difficulty in now remembering the knowledge he had in 1992 and afterwards of the activities of BESA on behalf of the QBA bread vendors. He had the expectation that the outcome of the test case would affect his position. 52 He became aware that a settlement had been reached in the test case matters however he asserts that he did not follow the matter up. As he and Mr Dewdney were joint venturers it is probable that they traded information about the matter. VALUATION OF THE RUNS 53 Mr Robertson and Mr Banks each calculated an appropriate resumption value based upon the number of units in each run. 54 The competing values per unit are as follows: QBA BANKS ROBERTSON DEWDNEY $8.00 8.30 16.00 DRENNAN $9.00 8.30 14.00 55 Both QBA and Mr Banks took, for the purpose of calculating the number of units for each run, the weekly average over the 6 normal weeks prior to resumption. In Mr Dewdney's case Mr Robertson took the weekly average of the period of 28 April 1991 to 16 February 1992, the date of resumption. In Mr Drennan's case he averaged the units for the period 24 January 1991 to 16 February 1992. The resultant figures are as follows: QBA BANKS ROBERTSON DEWDNEY 3,204 3,204 3519 DRENNAN 3,974 3,974 4030 56 The value of the runs so calculated are as follows: QBA BANKS ROBERTSON DEWDNEY $25,632 26,593 56,304* DRENNAN $35,766 32,984 56,420* 57 * Additionally Mr Robertson would add "disturbance" to his above valuations in order to compensate for the stress, nuisance and actual financial costs said by him to have been caused by the resumption. 58 No actual costs are to my knowledge disclosed by the evidence. VALUATION METHODOLOGY 59 Messrs Robertson and Banks differed as to the valuation principle appropriate to the assessment of the runs. Mr Banks advocated the Spencer principle whilst Mr Robertson contended that the Pastoral Finance principle should be applied. SPENCER PRINCIPLE 60 Mr Banks made his valuation on the basis of determining what a hypothetical prudent purchaser, who is a willing but not anxious buyer, would be prepared to pay to a vendor, who is a willing but not anxious seller, in circumstances where both buyer and seller are fully informed of all operational and financial details. This approach, which was adopted in Spencer v The Commonwealth of Australia (1907) 5 CLR 418, remains, as I understand it, the conventional basis of valuation. PASTORAL FINANCE PRINCIPLE 61 Mr Robertson made his valuation on the basis of the Land Acquisition (Just Terms Compensation) Act 1991 which has application in respect of resumption of land by an authority of the State. He likened the actions of QBA to those of a resuming public authority. This approach, he contended, attracts the principle in Pastoral Finance Association Ltd v The Minister [1914] AC 1083 which is authority for the proposition that resumed land might have had a special value to its owner over and above its market value. In Pastoral Finance the claimants had purchased land because of its suitability for the transfer of their business to it, however the land was resumed before the necessary buildings were erected. The Privy Council held that, pursuant to the provisions of the Public Works Act 1912 (NSW), the claimants were entitled to that which a prudent man in their position would have been willing to give for the land sooner than fail to obtain it. 62 In postulating that the Pastoral Finance approach should apply in respect of the resumed businesses of the applicants Mr Robertson could not provide any example in which such an approach had been accepted by a court except in circumstances in which land had been acquired by a public authority. In such a land resumption special value which may attach to a business operated from the land might be a factor in assessing compensation as a consequence of the provisions of the Land Acquisition (Just Terms Compensation) Act 1991. 63 The factors said by Mr Robertson to constitute "special value" in the case of these businesses were that bread runs are purchased for reasons including: 1. the purchase of a job 2. the lifestyle and quality of life 3. independence 4. non-competitive entry level 5. opportunity of adding value and income as well as capital growth 6. significant cash component with the business 7. the desire to belong to a large organisation but yet remain independent [my emphasis] 64 Special value is said to have arisen because the chances of either applicant being able to purchase a similar business was limited. He assessed the special value as being 10% in the case of Mr Dewdney and 5% for Mr Drennan. 65 Mr Robertson gave evidence to the effect that the market value of these businesses was increased by the opportunity to fail to declare cash as taxable income. He made no bones about that and, as can be seen from the passage emphasised above, put forward the further proposition that the market value he has ascribed to them should be loaded up to in effect compensate the applicants for loss of their opportunity to defraud the revenue. The proposition that a court should compensate for lost opportunity to defraud is patently absurd. 66 The fact is that the applicants, shortly after the resumption of their businesses, acquired a video hire business which, I expect, provided cash income. Their evidence does not disclose any disadvantages to them as between the two types of business. APPLICANTS' VALUATION 1994 VALUATIONS 67 Mr Robertson's report for W G McNally & Co of 29 September 1994 gave valuations in respect of the businesses of eight former bread vendors who had had their runs resumed by QBA. As I understand it the eight comprised the group as to which the BESA sponsored test case was to be conducted. 68 Mr Robertson relied upon the BESA survey returns in order to assess the market value of each of the eight runs. In doing so he only relied on sales after 2 June 1989, ignored runs with average weekly units of less than 3,000 and excluded sales which "are clearly out of line and inconsistent with the vast majority of sales analysed and are generally forced sales because of particular circumstances surrounding the individual vendor". Of the 71 runs surveyed he was left with 22 runs, 13 of which he described as country runs and 9 as city runs. 1998 VALUATIONS 69 Mr Robertson was certainly an advocate for the applicants' case and was reluctant to accept obvious propositions which were adverse to them. He continually sought to return to his theme rather than answer difficult questions. 70 He approached his task on the basis that any doubt in relation to matters affecting the claim for compensation "must be resolved in favour of the dispossessed owner". An example he gave of such beneficial resolution of doubt was a BESA survey return in which the number of units was given as 6,800 to 6,900, Mr Robertson would take that as 6,800 as that would result in a higher multiplier being determined in favour of the applicants. 71 In preparing his valuations of the applicants' runs in 1998 Mr Robertson no longer had the BESA survey returns which he had utilised in 1994. He relied upon the material in the 1994 report which he had taken from the survey returns in respect of the 22 runs which he had then selected in order to calculate multipliers for valuation purposes. 72 The 1998 report appears to be worded in almost identical terms with his 1994 report. It appears as though the 1994 report was merely amended in 1998 by way of replacing the names of the then applicants and solicitors with those of the present and making the necessary consequential amendments. 73 One significant difference between the 1994 and 1998 reports, however, is to be found in the selection criteria adopted in respect of the BESA survey. In the 1998 report Mr Robertson recorded: From the sales of runs after the 2 June 1989 I have also extracted runs with average units per week less than 3,000. 74 The 1994 report read: From the sales of runs after the 2 June 1989 I have also extracted runs with average units per week less than 3,000 as such small runs are not comparable to those being assessed for the Applicants . [my emphasis] 75 When cross examined as to the reason for extracting the smaller runs for the purpose of his 1998 report Mr Robertson said that, as he understood it, "units below 3,000 were tending to go in and out of subsidy", referring to a QBA practice of subsidising some uneconomic runs. He denied that the words emphasised above had been deliberately omitted from his 1998 report, however, he proffered no acceptable explanation for their omission. 76 Mr Robertson considered the 6 weeks average unit figures which had been used by QBA to have been inappropriate. He added 10% to the value of Mr Dewdney's run to overcome alleged "disturbance" and 5% to that of Mr Drennan. 77 For Mr Dewdney he put forward the following valuation: Pastoral Finance principle Spencer principle Weekly units 3,519 3,519 Multiplier $16 $14.5 Value of run $56,304 $51,025 Disturbance $ 5,744 TOTAL $62, 048 78 and, for Mr Drennan: Weekly units 4,030 4,030 Multiplier $14 $13.5 Value of run $56,420 $54,405 Disturbance $ 5,642 TOTAL $62,062 THE BANKS VALUATION 79 Mr Banks, whilst dogmatic in his opinions, was conventional and had a reluctance to accept material which was unreliable being based on memory or hearsay as a basis for valuation. He refused to speculate and was hesitant to base an opinion other than on a solid factual platform. He struck me as being appropriately cautious. 80 Mr Robinson , whilst cross examining, seemed critical of the refusal of Mr Banks to accept that the applicants' tax records, on account of their cash income, should not be relied upon. I accept the evidence which is to the effect that the tax records provide the best evidence now available as to the health of the businesses in 1992. 81 The respondents were unable to obtain the BESA survey material from the applicants until 14 May 1999 and, upon examination of that material, Mr Banks prepared a report for QBA dated 31 May 1999 in which he expressed the view that the BESA material was unreliable. He considered and rejected the valuation principles used by Mr Robertson and, using advertisements placed in the Businesses For Sale Section of the Sydney Morning Herald in 1992 in respect of bread vending businesses, calculated a range of multipliers. In so doing he excluded consideration of advertisements in which a vehicle was expressed to be included, however, where an advertisement was silent as to the inclusion of a vehicle he utilised it on the basis that if a vehicle was in fact included a higher multiplier would be derived which would favour the applicants. 82 He valued both runs using a multiplier of $8.30 per unit, the Drennan run on the basis of 3,974 units giving a value of $32,984 and that of Mr Dewdney being $26,593 on the basis of 3,204 units. Mr Banks accepted the 6 weeks average of units as having been appropriate. He considered a disturbance factor to be not applicable. 83 Mr Banks reached the view that the tax records of the applicants disclosed that their businesses were only marginally profitable. He considered them to be uneconomic and declining. 84 Mr Banks readily accepted criticism of the small number of advertisements he had selected and offered that had he had more time he would have taken a bigger sample both numerically and geographically. The record of his cross examination by Mr Robinson includes the following: Q. You did the best you could in the circumstances? A. That's correct. 85 The cross examination was unrealistically critical of the failure of Mr Banks to gather taxation records of bread vendors who had sold runs at relevant times. Mr Banks identified difficulties which arise in respect of being called upon in 1999 to obtain reliable information as to transactions which had occurred in 1992 and earlier. TAX & BUSINESS RECORDS 86 Neither applicant provided their business records which, it seems, were unavailable due to the effluxion of time. MR DEWDNEY 87 In his affidavit of 15 May 1997 Mr Dewdney stated that his taxable income for the financial year ending June 1992 was $34,126.57. His taxation records, which were provided on discovery, demonstrate a gross profit of $34,126.57 and a net profit of $17,966.87. 88 Income tax records for Mr Dewdney disclose the following net profit from his bread run: y/e June 1987 $10,865 1988 $14,515 1989 $26,135 1990 $23,539 1991 $10,359 1992 $17,966 89 Mr Banks attributed the main change between 1988 and 1989 as being due to a significant reduction in depreciation. 90 In his evidence Mr Dewdney said that he had, each year, provided his tax accountant with relevant documentation including information as to cash receipts. 91 When it was suggested in cross examination that those records did not disclose a particularly profitable business his response was: Those were tax returns. 92 and, Perhaps you should see my accountant about that, I don't know; we thought we were going all right. 93 His tax account was not called to give evidence in his case, his business records were not tendered. MR DRENNAN 94 The hearing commenced on 7 June 1999, the evidence of Mr Drennan commencing on 8 June. He explained the absence of business and taxation records on the basis that the business had been the subject of an audit by the Taxation Department which, in October 1994 returned his business documents to him. He said that, as he had survived the audit, he had no further need for most of the documents and had destroyed those he did not need. 95 Mr Drennan provided income tax returns for the 1990/91 year. As he no longer had returns for 1991/92 he provided copies of assessment notices for himself and his wife. His return for 1992/3 was made available. 96 Mr Drennan's income tax returns for the year ended June 1991 disclosed a net income from the bread run of $10,478 and a taxable income of $8,987. For the year ended June 1992 he was assessed as having had a taxable income of $8,515. 97 During his evidence on 8 June Mr Drennan said that attempts had been made in recent days to access Taxation Department records concerning his business but they were no longer available from the tax office. He added that he had discovered a ledger book at his home the previous night. Counsel for the applicants informed the Court that the ledger had been provided to Mr Robertson. 98 The following morning, over the objection of Mr Goot , a page from the ledger was tendered in respect of the issue as to the purchase of Mr Drennan's run in 1989. The transcript indicates that the other content of the ledger book had not been made available to Mr Goot . 99 The page which is in evidence covers the period of 4 October to 23 November 1989. It appears to contain the type of entries one would expect of a business being the income and expenditure of the business over that period. 100 As the ledger book was not tendered the Court has not been informed as to the period of time it covers. Although he had been afforded an opportunity to examine the ledger book Mr Robertson gave no evidence as to its content nor as to any conclusions he might have been able to draw from it as to the value of Mr Drennan's business. 101 As the ledger book was not provided to the respondent its expert, Mr Banks, was deprived of the opportunity to consider it. 102 No explanation was offered as to the delay in seeking information from the Taxation Department. No evidence was offered of any attempt to acquire relevant records from Mr Drennan's taxation accountant, the accountant was not called by Mr Drennan as a witness. BESA SURVEY 103 Mr Robertson relied upon the BESA survey returns in order to assess the value of each unit. In doing so he only relied on sales after 2 June 1989, ignored runs with average weekly units of less than 3,000 and excluded sales which "are clearly out of line and inconsistent with the vast majority of sales analysed and are generally forced sales because of particular circumstances surrounding the individual vendor". He was left with 22 runs, 13 of which he described as country runs and 9 as city runs. 104 Mr Banks was critical of the exclusion of runs of less than 3,000 units unless significantly larger runs were also excluded. He also was of the view that perusal of the completed survey forms could not disclose "forced sales". He conducted an analysis of 70 acquisitions and opined that "there does not exist any discernible trend of price versus volume and the average was at a price around $10 per unit. 105 Of 30 runs of between 3,000 and 4,500 units the average price asserted by the survey participants was $9.78 with a standard deviation of $2.79 and a medium per unit of $9.63. 106 Not being satisfied that the survey provided contemporaneous value and being sceptical of a survey which was reliant upon "memories (and honesty) of owners", Mr Banks caused data to be extracted from the Businesses for Sale section of the Sydney Morning Herald on all Saturdays from June to December, 1991. Nine runs were offered for sale and, excluding those known to include a vehicle, the average asking price was $8.31 per unit. As Mr Banks considered the asking price to be likely to exceed that actually achieved he was confident that his use of the asking price would favour the applicants by resulting in a higher multiplier being derived. 107 Mr Dewdney had stated in his BESA survey return that his gross 1990/91 income was $52,676.35 and his current units 4,000. However his tax return showed a gross income of $24,170.61 for that period. In his evidence in June 1999 Mr Dewdney could not satisfactorily explain the basis on which he had provided the very precise survey figure of $52,676.35. It seems to be unrelated to any evidence in these proceedings as to the actuality. His assertion of 4,000 units was based, he said, upon his assumption that when asked to provide "current average weekly bread units" a 12 months average was required. We do not know what assumptions were made by other survey participants as to the intent of the question. 108 Mr Drennan's wife completed the survey on his behalf and asserted gross earnings of $42,000 whilst his tax assessment was made on the basis of a nett profit of $10,478. His return nominated his average weekly units as being 3,800. The survey return states that the purchase price of his run with vehicle was $32,000. The true figure is $26,000. The value of the vehicle was recorded as being $3,000, however that merely reflects an estimate, made in 1992 by Mr Drennan, of the October 1984 value of the vehicle. 109 Mr Robertson, when informed in the witness box that the purchase price was actually $26,000, agreed that the nominated figure of $32,000 was quite wrong and, if relied upon, would lead to error. In fact Mr Robertson, whilst being cross examined, expressed the understanding from the survey return that Mr Drennan had paid $35,000 being $32,000 for the run plus $3,000 for the truck. It seems to me that if Mr Robertson could so misinterpret the survey form so could a bread vendor. 110 It can thus be seen that two survey returns which can now be tested are flawed. There is no way of knowing the general level of accuracy of the returns utilised by Mr Robertson for the purpose of his valuation. 111 Mr Robinson contends that support for his assessment of the value of the applicant's runs can be demonstrated by perusal of the information furnished to Mr Renkert in response to his February 1992 memo. Mr Banks considered that material to be unreliable being at best hearsay and probably based upon memory. 112 The difficulty I face in any event is that no detailed analysis of the Renkert material has been presented to the Court. Certainly the basis of the knowledge of those responding to Mr Renkert cannot now be ascertained with any certainty. CASH COMPONENT 113 Mr Banks expressed the opinion that the applicants' income tax records provided information useful to a valuation of their businesses, he said: . . . a purchaser bases his decision on his ability to service the run and the profitability being achieved. Profitability can be measured by reference to the income tax returns of the applicants. 114 As to that proposition Mr Robertson said in his second report: He is either naive (which I doubt) or he is utilising tax figures to intentionally diminish the applicants claim. The reason these runs are bought and sold on the number of units sold is that this is the only basis which allows a useful comparison due to the amount of cash involved in the business . [my emphasis] 115 Mr Banks, in the witness box, remained firm in his view that tax return information is relevant, he denied that he had utilised tax figures in order to intentionally diminish the applicants' claim. He is recorded as saying: A. Whenever I have done a valuation I have always looked at contemporaneous information to prepare the valuations. Q. Does that include income tax returns? A. Invariably it includes income tax returns. 116 I can understand that a vendor might wish to base his asking price upon the number of units if he is dishonest in his disclosure of income to the Taxation Department. I cannot, however, understand a reluctance in a purchaser to pay regard to taxation returns in the assessment of a fair price for a business. 117 A decision in a case in the Land and Environment Court in which Mr Robertson had given evidence came to light in these proceedings unfortunately however, not until some 9 months after he had given his evidence. The case concerned a claim for compensation by the owners of land which was resumed. For five years prior to resumption the applicants had conducted a take away food shop on the land. Mr Robertson gave valuation evidence in support of the claim. In her decision Pearlman J said, [ Kontos v RTA (1992) 75 LGRA 218 at 220]: Mr Robertson adopted what he termed a "market data approach" to value the business component of the subject land (the business) as a going concern. He analysed comparable sales to determine, first, an appropriate weekly multiplier to apply to weekly turnover, and secondly, an appropriate years purchase to apply to annual nett income. He examined the trading figures from financial reports of the applicants, and, . . . . . concluded that the weekly turnover was $10,600, and the nett income per annum was $125,000. Using a weekly multiplier of 28, he reached a value of $296,800 for the business . . . . .. 118 An alternate valuation put forward by Mr Robertson in Kontos contained a goodwill component which he calculated by applying a factor of two years purchase to the nett income per annum of $125,000. 119 As the decision did not come to light in these proceedings until final submissions it was not possible to question Mr Robertson as to his reliance, in Kontos , of the financial records of the then applicants who were carrying on a take away food business which, I expect, substantially had cash income in contrast to his suggestion, in these proceedings, that Mr Banks was naïve in utilising the applicants' taxation records in valuing the businesses as those businesses had a cash component. 120 I am asked by the applicants to disregard the information which may be ascertained from their tax records on the basis that, as their income had a cash component, the gross income disclosed for tax purposes would be expected to be and is unreliable. That is the clear effect of the expert's evidence upon which their case relies. Mr Robertson said that Mr Dewdney's figures as to profit margins just don't add up and that the tax records of Mr Drennan's business are understated. 121 Mr Hodgson submitted to the effect that the Court should not second guess the result of the Taxation Department audit of Mr Drennan's affairs, he contended that: The applicants have both given evidence in relation to their tax affairs. Mr Drennan has been audited and found to be clear. Mr Dewdney doesn't concede any inappropriate behaviour. Mr Robertson gives general evidence about the industry and draws conclusions. RIGA RUN 122 Mr Robertson claimed that Mr Dewdney's run, being a Riga run, had a higher value per unit than otherwise comparable non Riga runs as a discount of 20% was afforded him whereas the non Riga runs attracted a fixed money amount per unit sold by the vendor. Mr Banks did not accept this view. 123 The basis of Mr Robertson's view was said by him to result from conversations with vendors and from a mathematical exercise which he had carried out. No survey has been conducted of the comparative value of Riga runs. The mathematical exercise was theoretical in the sense that Mr Robertson was unaware of the price at which Mr Dewdney had sold his bread to the various customers. Nor did he have any knowledge as to the costs associated with the Riga run. The 10% special value he attributed to the run as opposed to 5% for Mr Drennan, is said to derive from the asserted additional value of the run. As I understand his evidence Mr Robertson, leaving aside the 10%, had already attributed additional value to the run on account of its supposed higher profitability. 124 Mr Dewdney's vendor agreement required that he pay the Manufacturer for the bread ordered by him at the Manufacturer's wholesale price less a delivery allowance of 20%. It was up to him to determine the price he charged any particular customer so long as he did not exceed the recommended retail price. 125 The evidence does not disclose the price at which he sold the product and I am left, in the absence of business records, with his taxation documents which do not support the asserted higher profitability of the Riga run. ALLEGED UNFAIRNESS 126 The main thrust of the applicants' case is that unfairness was generated by the inadequacy of the compensation paid by QBA in respect of the runs, the failure to purchase their trucks, the failure to negotiate in a meaningful manner with either the applicants or BESA and/or the absence of redundancy/severance pay or pay in lieu of notice. 127 Additionally, it is complained that the manner of termination was unfair in that QBA was secretive and gave misleading information and had said that the terms of resumption were non negotiable. 128 Mr Hodgson relied upon various authorities including Harcourt Brace & Co (Australia) Pty Ltd v Corey [1997] 81 IR 321 for the proposition that unfairness results from insufficient notice of termination of a contract and Newton v Goodman Fielder Mills Ltd [1998] 81 IR 227 as to unfairness in circumstances of redundancy. He placed particular emphasis upon the decision in Myer Stores v Stowart & ors [1994] 55 IR 21, ( Fisher CJ, Hungerford and Peterson JJ ) in which the Industrial Court of NSW on appeal declined to uphold an appeal from a decision of Cullen J by which some 32 contract drivers whose contracts were terminated on account of restructuring were each awarded $75,000 less the value of their vehicle. The drivers had received 3 months notice of termination of their contracts. QBA SUBMISSIONS 129 Mr Goot submitted that the effective periods of notice of 7 months in the case of Mr Dewdney and eight as to Mr Drennan were sufficient as is manifested by their early acquisition of the video hire business. He points to the involvement of BESA and the participation by the applicants in the processes leading to the BESA test of the fairness of the resumptions. 130 He relies upon the failure of the applicants to take up QBA offers of assistance in gaining employment and disposing of their vehicles. 131 He argues that the QBA evidence discloses a fair and reasonable level of compensation. On the other hand he claims a Jones v Dunkel inference against each applicant arises from their failure to put forward their tax accountants as witnesses. Mr Goot contends that the Robertson methodology is inappropriate and that the survey material underpinning his valuations is not reliable. He put that Mr Banks was a more impressive witness whose reliance on the apparent lack of profitability of the applicants' businesses should be accepted. 132 Mr Goot further submitted that the extraordinary position taken by the applicants as to their own taxation records should result in a refusal to exercise discretion in their favour as should the unexplained delay in commencing these proceedings. CONSIDERATION 133 The Court is faced with utterly conflicting valuations with the qualified witnesses being at odds as to both applicable principle and as to appropriate material upon which a multiplier should be determined. The BESA survey material relied on by Mr Robertson has obvious deficiencies which are exacerbated by the delay. Mr Banks could not be expected to be confident, when provided with that material in May 1999, that it was appropriately reliable. Nor am I confident as to the reliability of that material bearing in mind my earlier observations about it. 134 I do not accept the view that the Pastoral Finance principle should apply as I do not consider the present circumstances to be in any way analogous to the resumption of land for public purposes. Nor do I accept, in the present case, that any doubt in relation to matters affecting the claims for compensation "must be resolved in favour of the dispossessed owner", if for no other reason than the difficulties of fact ascertainment arise from the applicants' delay in making their claims. 135 I note that the evidence does not support Mr Robertson's opinion that Riga runs and in particular that of Mr Dewdney attracted a higher market value. 136 The weight I would place upon Mr Robertson's valuation is further diminished by the unavailability to him in 1998 of the 71 survey returns and his reliance, not upon the survey forms, but upon his 1994 report as to another eight runs with the alteration in wording which was not satisfactorily explained. 137 On the other hand the report of Mr Banks was based upon a small sample and, as he agrees, had he been afforded more time he would have considered a wider sample, both numerically and geographically. 138 Against those competing reports I have the taxation records of the applicants which manifest low profitability coupled with the unassailed evidence from Mr Banks that the runs were declining, in the case of Mr Dewdney from April 1991 to resumption, and, in the case of Mr Drennan from December 1990. Mr Robertson expressed the view that the taxation records should be ignored as they understate the profitability of the businesses. By relying upon his evidence the applicants ask this Court to accept that those records are tainted. 139 It seems to me that the best evidence of the profitability of these businesses must be the records of income and expenditure. Neither applicant produced business records other than those prepared in respect of taxation requirements. Each used a taxation accountant, neither produced his accountant as a witness. I can only assume that the evidence from the accountants would not have assisted the respective cases of the applicants. 140 Mr Drennan relies upon a QBA document dated 3 June 1992 which provided his "approximate weekly earnings" from July 1991 to May 1992 and discloses the average of $932.49 as supporting his contention that his run was profitable. The transcript of the cross examination of Mr Banks as to that document includes the following: Q. You had access to the approximate earnings of Mr Drennan for the relevant period did you not? A. But that is there. It doesn't actually tell me what the actual earnings of Mr Drennan are, for a whole range of reasons. One, it is only prepared by the manufacturer on the basis that all the bread is sold at their recommended prices. It doesn't take into account bad debts, or other collection problems. It doesn't take into account all the expenses incurred in the run to get back to a net earnings. Even then you take it on face value. It can always be seen. That sort of earning can not give you an economic return. 141 The answer highlights the difficulties imposed upon the Court by the failure of the applicants to produce their business records. They bear the onus of proof and, to the extent that the reliability of material cannot be tested on account of the delay, QBA ought not be prejudiced. 142 Mr Renkert gave evidence as to the considerations given by QBA to a fair level of compensation, I accept that evidence. BESA was informed of the proposed resumptions and met with QBA on 4 February 1992 to discuss the matter. On 6 February BESA informed its members of the matters raised at the meeting and informed them that a working party had been set up to negotiate with management. On 18 February Mr J Shaw QC and Mr Walton of counsel were briefed by McNally & Co to represent the BESA members and QBA notified each vendor of its intention to acquire all of their runs. By memorandum dated 25 February Mr Renkert gathered material as to sales of runs in order to provide the union with that information, meanwhile BESA had conducted its own survey, Mr Dewdney and Mr Drennan being participants. The membership were kept informed by BESA and a summons was filed under s.275 of the 1991 Act in order that a test case be mounted. 143 Mr Robertson provided valuations for the purposes of the test case which was settled during mediation by Marks J on a basis which did not relevantly disturb the scale of payments which had already been made by QBA. 144 Mr Banks considers the compensation paid to the applicants by QBA to have been reasonable from his point of view as a valuer. The only financial records of the applicants which are in evidence, the tax records, manifest uneconomic runs. As the applicants chose not to produce their taxation accountants as witnesses any deficiencies in their tax returns were not explained and any supporting documentation which had been provided to the accountants was not forthcoming. 145 On the other hand Mr Robertson contends that both QBA and Mr Banks have seriously undervalued the runs. He relies upon the very same material which was gathered by BESA for the purpose of instructing McNally & Co and, in turn, Messrs Shaw QC and Walton . His 1994 report and valuations were available to the BESA legal team for the purposes of the mediation before Marks J . 146 The reality is that the best evidence now available as to the value of these runs is that disclosed by the tax records. 147 Mr Hodgson was unable to find any reported case in which an applicant/plaintiff had urged a court to ignore his tax records in assessing damages on the basis that cash receipts had been understated. I am not surprised as I consider the proposition to be audacious and an affront to the propriety expected of courts by the community. As I see it a court cannot be party to an applicant disguising his true income for tax purposes by accepting that some higher level of income is the reality for the purpose of assessing damages in his favour. 148 The fact of the BESA s.275 application is no answer to these applications. The applicants have every right to bring their own case, however, it does seem to me that the outcome of the BESA test case provides a valuable indication that the formula adopted by QBA and the circumstances and implementation of the resumptions, was acceptable in the contemporaneous industrial milieu. It emerged relevantly unscathed from the mediation process. 149 In my view the claims of unfairness as to the circumstances and mode of resumption of the applicants' runs must fail. Thus the claims for loss of their runs, severance/retrenchment pay and pay in lieu of notice are rejected. LOSS ON SALE OF VEHICLE 150 Mr Dewdney sold his truck for $3,000, he asserts it was worth $5,000 and claims $2,000 as his loss on the sale of the vehicle. No acceptable valuation evidence was tendered. The evidence as to the September 1992 value of Mr Dewdney's vehicle is far from compelling. I find no unfairness, in the material before me arising from the failure of QBA to provide additional compensation to him in respect of his truck, I am not able, on the evidence, to reach the view that it was sold at a loss let alone able to quantify a loss. 151 Mr Drennan on the other hand had acquired a new truck in May 1991 at a cost of $28,469. He was given a "trade in" of $6,500 which he received in cash on account of relinquishing a vehicle which he thought had been worth $6,000 back in November 1989. It appears that he entered into a hire purchase or lease agreement under which he was required to pay 60 payments each of $730 over 5 years. 152 His evidence is that before purchasing the truck he was informed by Mr Begley, a representative of QBA, to the effect that, on account of his prospects, he would not be out of pocket from the transaction. As Mr Begley did not give evidence that of Mr Drennan is not refuted. 153 Under those circumstances it seem to me that the contract under which Mr Drennan performed his work was unfair in that it made no provision for compensation to him in respect of loss on his truck in the circumstances of resumption of his run. I vary the contract in order to overcome that unfairness. 154 He sold the truck in February 1993 for $15,000 the depreciation value for tax purposes then being $18,170. He claimed $10,732 as being his loss. 155 Mr Goot , as an alternative to his submission that the claim should be rejected, argues that if Mr Drennan is entitled to compensation in relation to the truck it should be in the sum of $4,299 being calculated by subtracting from the purchase price both the "trade in" amount and its depreciated value as at February 1993. I do not accept that the "trade in" amount should be subtracted and, accordingly, on that approach I would award $10,799. 156 I vary that contract by inserting the following clause: Upon resumption of this run QBA shall pay Mr Drennan the sum of $10,799 as compensation for loss incurred in respect of his truck. 157 I order the payment of that amount. 158 Interest would normally run on such a verdict, however, in the present case it seems to me that it should run at Supreme Court rates from the day Mr Drennan's application herein was lodged that being the first time he had made a personal claim upon QBA. I so order. 159 Mr Dewdney's application is dismissed. 160 In the absence of agreement I will hear the parties as to costs. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.