Bachour Enterprises Pty Ltd v Munzer (No 3)

1. [1]

   HER HONOUR: The plaintiff seeks orders for the adoption of a referee's report, an award of damages based on that report, and consequential costs orders.

2. [2]

   I gave judgment in this matter on 13 December 2024: Bachour Enterprises Pty Ltd v Munzer [2024] NSWSC 1601. I gave a further judgment in respect of costs on 13 February 2025: Bachour Enterprises Pty Ltd v Munzer (No 2) [2025] NSWSC 30. This judgment assumes familiarity with my earlier judgments.

Adoption of referee’s report

1. [3]

   Drawing on my judgment in The Owners - Strata Plan No 89074 v Ceerose Pty Limited [2024] NSWSC 1494, as referees are not officers of the Court, their reports have no legal consequence unless and until they are adopted by the Court: Xuereb v Viola (1989) 18 NSWLR 453 at 465-6 (Cole J). Once the referee’s report is to hand, r 20.24(1) of the UCPR provides:

2. [4]

   In Chocolate Factory Apartments Pty Ltd v Westpoint Finance Pty Ltd [2005] NSWSC 784, McDougall J distilled into 15 principles the approach to be taken when determining whether to adopt or reject a referee’s report: at [7]. As McDougall J later noted in Harris v Morabito Holdings Pty Ltd [2018] NSWSC 912, these 15 points are not to be approached as a checklist, the application of which will provide in all cases an answer to the exercise of the discretion; they provide a general guide as to how the adoption of a referee’s report should be approached: at [13]. Of these 15 principles, the following are pertinent to the issues raised by the defendants, from Chocolate Factory at [7]:

3. [5]

   In Woolf v 52 Birriga Road Pty Ltd [2012] NSWSC 921, Beech-Jones J also observed at [29]:

4. [6]

   These observations have particular resonance in this case, where the quantum of the amounts in issue is modest, being in the order of some $300,000.

5. [7]

   Applying these principles to the case at hand, I note that the referral was made by the agreement of the parties, when the defendants were represented by counsel. It was then considered that it would be more cost effective for a referee to assess the profit earned by a ‘charcoal chicken’ shop from when the first defendant, Simon Munzer, re-took possession of the shop in October 2022 until the plaintiff re-gained possession of the shop in February 2025.

6. [8]

   The referee was Fiona Bateman, who is an experienced accountant. She undertook the assigned task by analysing:

7. [9]

   In her report, Ms Bateman observed that, although the plaintiff and Mr Munzer were operating the same business but at different points in time, the plaintiff reported sales of $3,273 a day while Mr Munzer reported sales of only $1,528 per day. This prompted Ms Bateman to examine bank statements and Tyro statements. Ms Bateman formed the view that Mr Munzer had, by and large, not reported cash sales. As a consequence, Ms Bateman considered that she was not able to rely on the trading sales declared by Mr Munzer, as they did not show a proper amount for the cash received in the business.

8. [10]

   Given this initial observation, Ms Bateman then proceeded to estimate profit for the relevant period on three bases.

9. [11]

   First, Ms Bateman combined the profits enjoyed by the plaintiff – when it operated the shop for 76 days – with Mr Munzer's profits reported in his financial reports for the subsequent period in which he operated the shop. By this method, the shop produced daily profits of $280. Ms Bateman considered that these results were the “minimum” but could be used.

10. [12]

    Second, Ms Bateman calculated the profits using the sales generated by the plaintiff and the expenses apparent from both the plaintiff and Mr Munzer’s financial statements. This resulted in daily profits of $480 a day.

11. [13]

    Third, Ms Bateman combined the figures from the first and second method. This resulted in daily profits of $380 a day. Ms Bateman considered this to be the most reasonable position. The plaintiff agrees and asks the Court to award damages based upon this method.

12. [14]

    Mr Munzer opposes the adoption of Ms Bateman’s report on, essentially, three bases.

13. [15]

    First, Mr Munzer submitted that my primary judgment was wrong. Mr Munzer said he has found more evidence, which will prove the case which he sought to advance at trial. He will appeal. Whilst I note Mr Munzer's perspective, and his right of appeal, this submission is not of great assistance in the particular task presently at hand.

14. [16]

    Second, and more relevantly, Mr Munzer submitted that Ms Bateman was wrong. Mr Munzer tendered a folder of financial records in support of that submission. However, on examination, the relevant financial information in those financial records was likely captured in Mr Munzer’s financial statement and tax returns. Mr Munzer was unable to suggest that it had not been, and did not appear to know. Beyond this, there was no particular reason proffered as to why Ms Bateman's analysis was incorrect, or that there was something relevant that she should have taken into account but did not.

15. [17]

    Third, Mr Munzer relied on his personal circumstances. Whilst I empathise, those circumstances are not relevant to the task at hand, being whether to adopt Ms Bateman's report.

16. [18]

    Having read Ms Bateman’s report, I am satisfied that Ms Bateman has attended to the assigned task by applying her professional skills and accounting experience. I can see from reading her report how she has gone about it. Ms Bateman has approached the task in a logical and straightforward manner. She has done so clearly and transparently. I see no reason not to adopt the report, and will do so.

Damages

1. [19]

   The next question is what order, if any, should be made to award damages to the plaintiff based on Ms Bateman’s report. The plaintiff had earlier informed the Court that it elected to seek an award of damages, rather than an account of profits.

2. [20]

   The general measure of contractual damages is the amount, so far as money can provide, necessary to put the plaintiff in the position they would have been if the contract had been performed: Koufos v C Czarnikow Ltd (The Heron II) [1969] 1 AC 350; Wenham v Ella (1972) 127 CLR 454 at 460 (per Barwick CJ); Burns v MAN Automotive (Aust) Pty Ltd (1986) 161 CLR 653; [1986] HCA 81. This has been described as the only measure of consequential losses for breach of contract: Cessnock City Council v 123 259 932 Pty Ltd (2024) 418 ALR 304; [2024] HCA 17] at [117]. Assessing such damages requires the Court to compare the actual position of the party who sustains a loss by reason of the breach to what that party’s position would have likely been in a counterfactual scenario in which the contract was performed: Brighton Automotive Holdings Pty Ltd v Honda Australia Pty Ltd (No 2) [2024] VSC 262 at [74] (per Matthews J).

3. [21]

   Here, the breach of contract is that Mr Munzer did not honour the fact that he had sold the business to the plaintiff. Mr Munzer changed his mind and re-entered the shop, without the knowledge or consent of the plaintiff. Mr Munzer thereafter excluded the plaintiff from the shop. Mr Munzer proceeded to operate the business as if it was his own when, in fact, it belonged to the plaintiff. After these proceedings were commenced, Mr Munzer continued to operate the business under an interlocutory regime.

4. [22]

   The measure of contractual damages is the money which the plaintiff would have earned if it had been left to operate the business uninterrupted by Mr Munzer’s re-appearance. Based on Ms Bateman’s report, the damages are $316,428.

5. [23]

   A question quite fairly raised by the plaintiff's counsel, given the fact that Mr Munzer is self-represented, is whether this figure should be discounted. The plaintiff submitted that it should not be discounted, given that Mr Bachour had worked in the business for some years before buying it. Second, the plaintiff had, in fact, generated greater sales revenue than Mr Munzer, according to the financial statements. The daily profit rate settled upon by Ms Bateman itself involved a discount, as she had averaged the plaintiff's sale revenue with Mr Munzer’s reported sales, which were much less.

6. [24]

   To this, I think, should also be added another observation made by Ms Bateman. She inspected the premises a week after the plaintiff regained possession. Ms Bateman observed that a number of items of equipment that had formed part of the sale were now missing or damaged. The missing items totalled some $23,580 and the damaged items totalled $46,950. Ms Bateman observed that there was very little stock on site, and that the premises were dirty and cockroach infested. She considered that the condition of the premises was extremely poor, filthy and in need of paint and repair. This, together with missing and damaged equipment, meant that the shop was not in a condition to operate the business. Ms Bateman considered that revenue loss would continue until the problems with the shop premises had been rectified. As a consequence, Ms Bateman was of the view that it may take some time for the business to redevelop the level of custom that it had enjoyed in October 2022.

7. [25]

   Mr Munzer made no submission on whether the figure calculated by Ms Bateman should be discounted, beyond submitting that it was too high.

8. [26]

   Given Ms Bateman’s observations, together with the two matters raised by the plaintiff, I do not consider it appropriate to discount the figure arrived at by Ms Bateman. While the plaintiff does not seek an additional award of damages in respect of the missing items of $23,580 or the damaged items of $46,950, the loss of these items of equipment (that the plaintiff paid for) affects the plaintiff nonetheless. Further, it is likely that there will be, to use Ms Bateman's words, "a ramp up" phase for the plaintiff, now that it has taken over the operation of the business. That is, as a consequence of the way that Mr Munzer has run the shop since October 2022, there will be a dip in the weekly sales calculated by Ms Bateman, which is, effectively, a discount inflicted on the plaintiff going forward. No further discount should be applied. In these circumstances, I consider that the appropriate award of damages is $316,428.

Costs

1. [27]

   The remaining questions are the costs of the referee, the costs incurred by the plaintiff in providing the referee with the relevant material, and the costs of the plaintiff’s motion for the adoption of the referee’s report. As the plaintiff has effectively thereby obtained an award of substantial damages, I consider that Mr Munzer should pay these costs.

2. [28]

   Finally, the plaintiff now seeks its costs of the proceedings on an indemnity basis from the date of its Calderbank letter of 7 June 2023. I considered this in my costs judgment of 13 February 2025, but came to the view it was too soon to decide whether the plaintiff had done better than its Calderbank offer. I gave the plaintiff liberty to apply once the referee's report was available and when it was known whether that report would be adopted. The plaintiff submitted today that it had now done better than its Calderbank offer.

3. [29]

   I continue to struggle with this. The Calderbank offer made by the plaintiff was that Mr Munzer could keep the business but needed to refund the purchase price to the plaintiff and pay the plaintiff's costs of the proceedings to that point in time. As a consequence of my judgment, the plaintiff now keeps the business and Mr Munzer keeps the purchase price. Mr Munzer is obliged to pay the plaintiff’s costs of the proceedings and will now also be obliged to pay damages of some $316,000. The outcome for the plaintiff is effectively the ‘flip-side’ of its Calderbank offer. It is still not obvious to me that the plaintiff has done better than its Calderbank offer, as I am effectively comparing ‘apples and oranges’. In those circumstances I am not prepared to make an indemnity costs order.

4. [30]

   For these reasons I make the following orders:

   1. (1)

      Order that the report of referee Fiona Bateman dated 12 March 2025 be adopted in full.

   2. (2)

      Judgment against the first defendant in the sum of $316,428.

   3. (3)

      Vary order 2 made on 13 February 2025 such that the plaintiff's costs of the proceedings include the costs of the reference, legal costs incurred in relation to the reference, and the costs of the plaintiff's motion filed on 27 March 2025.