Agricultural investors Phil Feitelson and Jacques Vorster have failed in a five-year pursuit of poultry Bartter Enterprises for allegedly misleading them by staying silent about the thought it was giving to closing its Steggles processing factory in Ipswich.
Their company PJEV Pty Ltd had an initial win by quickly entering default judgment when the time expired for Bartter to file a notice that it intended to defend the $9.5mn claim in the Supreme Court in May 2019.
The processor successfully had the default judgment set aside and went on to eventually snatch victory when Chief Justice Helen Bowskill ruled against them following a three-day trial in Brisbane.
By way of background, PJEV had been investigating the $9.75mn acquisition of a broiler chicken production farm at Donnybrook north of Caboolture not far from the broiler farms they already operated – to supply Bartter’s competitor, Inghams – at Elimbah.
Broiler farms raise chickens from hatchlings – a few hours or a few days old – to table weight, before they are trucked off to be processed.
They are dependant on having reliable supply contracts with a nearby processor like Bartter who supplies its product to consumers under the Steggles and Lilydale brands.
The processor supplies the chicks, feed and medical supplements and is responsible for trucking the birds in and out to and from the grower’s poultry sheds.
The chicken farmer provides the land and sheds – with the requisite government and local government approvals – and equipment, labour and oversight for growing healthy chickens and in return receives a fee per fattened bird delivered.
PJEV’s 2016 Donnybrook deal was not conditional on receiving a new processing contract with Bartter or an assignment of the seller’s existing one, but it was something the pair claimed to have been depending upon.
After agreeing the purchase price and entering into a call option deed for the farm’s purchase, Vorster had a 5 to 10 minute phone conversation in August 2016 with state manager Mr Rapa about a number of things.
It was not in dispute that Rapa said Bartter would be unlikely to refuse an assignment of the Donnybrook broiler contract as he and Feitelson appeared to be suitable, experienced growers.
The pair were sufficiently familiar with the processor contract to not require any legal advice with respect to the right reserved to the processor to terminate same on three months notice if it closes its processing plant.
They went ahead to exercise the call option and nominated PJEV – a company they incorporated specifically for that purpose – as buyer for the deal that completed in November 2016.
Bartter consented to the assignment of the seller’s processor contract for the remaining two-years of its term but in August 2017, the company received notice terminating it to coincide with the closure of the Steggles processing plant in Ipswich in January 2018.
A termination notice stating “we have long tried to avoid this decision” was taken by the investors to mean that the closure decision had been in the works for some time.
Their lawsuit alleged Bartter had engaged in misleading or deceptive conduct contrary to the provisions of the Australian Consumer Law by failing to disclose something so significant that Vorster had a reasonable expectation of being informed of it in August 2016.
Its claim was for the loss it incurred by having gone ahead with the Donnybrook acquisition (a “no transaction” case) and alternatively, its loss of profit over the 12-month period during which it had no processor revenue until such time as it managed to secure a contract with Inghams from the start of 2019.
The chief justice was most immediately concerned with what precisely had been said by Rapa in his conversation with Vorster bearing in mind the former had no knowledge then of any closure decision and had told Vorster that approval of any processor contract assignment had to come from CEO/owner Simon Camilleri.
She observed that the contract term and its assignment appeared to be a low priority for discussion in his brief conversation with Rapa.
Having satisfied himself Bartter would see no conflict given his other dealings with Inghams and that no major upgrades were required at the farm, Vorster raised the grower contract only to request Bartter supply him with a letter of intent to approve its assignment, to satisfy their financier.
His claim to have been told by Rapa that Bartter would also grant a five year extension of the grower contract was rejected by the judge. She accepted Rapa would not have given that assurance without the paperwork in front of him to see if it included a renewal provision.
Chief Justice Bowskill accepted the evidence of the Camilleri brothers that no decision had been made to close the Steggles plant until July 2017.
There was no evidence it was probable as at the date of the Rapa conversation that the Ipswich plant would close in or about 2017 but because closure had been considered, it was as a possibility.
Bartter was not though obliged to have shared its internal high-level, confidential considerations with a potential assignee – who had a commercial relationship with its competitor – when it had not even done so with its manager Mr Rapa.
The court concluded – even if a breach had been made out – that PJEV had not established reliance on it to complete the Donnybrook because by its own “self-assessment”, it had concluded any plant closure was “highly unlikely”.
In any event, because PJEV had not been incorporated until after the Rapa discussion in August 2016, it could not contend that it relied on anything that occurred before then.
PFJV Pty Ltd v Bartter Enterprises Pty Ltd [2024] QSC 114 Bowskill CJ, 6 June 2024
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