“THE costs of this litigation dwarf the cost of involving lawyers in late 2009 - it is obviously too late for the parties to this litigation but it’s a salutary lesson to others”.
So said District Court Judge Jeremy Curthoys in October 2013 when ruling on the bitter legal stoush between now disqualified WA Senator and ex-farmer Rod Culleton and his one-time friend, farming neighbour and ex-Wesfarmers director Dick Lester.
Judge Curthoys was critical of the agreement drafted by Mr Lester to underpin a lease and purchase deal to sell Mr Culleton part of his property, Rathgar, located on the north side of Williams in the WA Wheatbelt, on or about December 16, 2009.
“Neither party sought advice from a lawyer,” he said.
Mr Culleton has described the extended legal battle over Rathgar against Mr Lester as being “personal” compared to his many other legal fights.
But the bankruptcy decision handed down by the Federal Court before Christmas has now all but ended his brief, but feisty and highly controversial political career.
On Wednesday, Senate President Stephen Parry issued formal notice to Mr Culleton saying the former One Nation member had been officially disqualified from federal parliament due to the court’s bankruptcy ruling.
Senator Parry also stated that a letter had been sent to the Governor of WA saying a new vacancy existed in the state’s federal political representation.
That advice was necessary after the bankruptcy ruling against Mr Culleton on December 23, triggered by the long-running legal battle involving the former Senator’s company Elite Grains, against Mr Lester’s company Balwyn Nominees for Dakin Farms.
A typically defiant Mr Culleton has since vowed to fight against the bankruptcy decision and issued a statement this week saying, “I am solvent and proof of that has been filed and evidence before the court”.
He said Senator Parry’s letter was also premature and should be withheld or if not withdrawn, pending the outcome of an appeal.
But the 21-day stay period allowed at the Federal Court’s December 23 bankruptcy ruling was only in respect to any other proceedings under the sequestration order.
In other words, Mr Culleton has been afforded some legal breathing space to help gather his affairs in better order - but the bankruptcy ruling still stands.
He has already been listed on the federal parliament’s website as being a former Senator and one of two vacancies currently, along with Bob Day of Family First in SA.
It will now be up to the High Court to determine how the vacancies are filled, based on its decision from the matter, referred by the Senate, testing on their legal and constitutional eligibility to be candidates, at the time of last year’s federal election.
Mr Culleton has repeatedly claimed that Mr Lester has only spent $1m to pursue the $280,000 debt over Rathgar, to try and claim the Intellectual Property (IP) rights to his revolutionary Grain Keg horse feed invention and business that operated on his Williams farm.
He sought to expand that business via a $13.2m move to acquire more land, in buying-up Mr Lester’s property in late 2009 and early 2010.
Mr Culleton even issued a statement on Facebook this week claiming his farm invention’s financial success was sabotaged by the combined actions of the ANZ Bank and Mr Lester.
But Mr Lester said the repeated accusation by Mr Culleton that he only pursued the legal action over the past five and half-years to claim the Grain Keg’s IP was, “not the truth”.
He said he was “only interested in the money” and if Mr Culleton had no money to repay his debts, as ruled by the court, he would be interested in alternative payment methods.
“Rod Culleton’s saying he’s solvent and if he is, he should pay his debts,” he said.
“My only interest is to be repaid the debt that’s owed to me – but I’m interested in the IP if he has no money and I believe that he has no money.”
Mr Lester said he was notified by Mr Culleton’s legal representatives - ahead of the Federal Court hearing held before Christmas last year - that a sum of money was being held in trust.
But he said at the time of writing that letter, on about December 20 last year, they were not in a position to advise; who owned the money; whether it had been cleared into that account; and an amount wasn’t specified.
Mr Culleton also had an opportunity to specify what monies were being held in trust, at the time of the December 23 hearing when he was ruled bankrupt, he said.
The court ruled he was bankrupt for the long-standing debt of $280,000, owed to Mr Lester’s company Balwyn Nominees.
But where and how did the bitter, long-running legal stoush between these two men all start?
In happier days, they were friends and farming-neighbours at Williams in WA’s south-eastern Wheatbelt, about 200 kilometres from Perth.
Despite knowing of Mr Culleton’s background - where the family’s wool-buying business had gone into forced administration in the 1990’s, leaving debts to many other farmers and local businesses in the region - Mr Lester took his neighbour as he found him.
Mr Culleton has staunchly defended himself by blaming any debt linked to the demise of the Culleton’s wool-buying business on the wool reserve price scheme’s collapse.
Given the relatively straightforward experience of previous business dealings - and that his farm was going on the market for sale anyhow - Mr Lester entered into negotiations with Mr Culleton to sell his property in late 2009 and wrote up an agreement after believing they’d reached an agreed price of $13.2m.
He felt his neighbour wasn’t in an immediate position to acquire the entire farm but believed he was a hard worker, physically and mentally, and the Grain Keg concept was a solid business model with strong earning potential, to underpin the transaction.
Mr Culleton’s issues with the ANZ Bank and its purchase of the Landmark loans book, that he’s blamed for the demise of his businesses due to depriving it of access to capital, and then cited as a core motivation for entering parliament at last year’s election under the banner of Pauline Hanson’s One Nation, were yet to play out.
In a cautious move, Mr Lester offered to enter into a leasing and purchase agreement whereby the two farmers would adopt a gradual, year-by-year approach, to advancing talks and understandings, on the overall farm-purchase.
A rental cost of 5 per cent per annum was to be added to the final property purchase price of $13.2m, which Mr Lester considered was equal to a reasonable return on farming property in that region of WA.
The October 2013 court judgment showed that the agreement to lease and purchase the farm property was for one year commencing on March 1, 2010 and ending on February 28 the following year, for total rental of $500,000, payable quarterly and in advance.
It said the $13.2m transaction would see $6.5m change hands after the first 12-months, for part of the property and then $6.7m a year later, for the balance.
“In the event that Rodney and Ioanna (Mrs Culleton) have difficulty in meeting the settlement proceeds of $6.5 million on 28 February 2011 and $6.7 million on 28 February 2012, the parties have agreed: to exercise their best endeavours; to be just and faithful to one another; to negotiate in good faith,” the agreement said.
Mr Culleton paid half of his first quarter payment - $62,500 - to Mr Lester and then took possession of the property, according to the court ruling, on March 1.
But within two weeks of that date, the two men were at odds.
The legal claim also dealt with rising tensions over a contractual dispute about payment methods for oats harvested by Mr Lester in 2009-10 and sold to Elite Grains, which mixed the grains to on-sell for horse-feed.
According to the October 2013 court decision, Mr Lester harvested the oats between December 2009 and January 2010 and placed them into silos and a storage stack on Rathgar.
Conditions for the sale of the oats to Elite Grains were confirmed in writing, which the court accepted.
The court document said Elite Grains was to lift the oats as required and weigh each one at the public weighbridge in Williams and maintain detailed log books of each load and then forward a 'Recipient Generated Tax Invoice' on a weekly basis to Mr Lester, which detailed the amount of oats lifted during that week.
However, as the oats gradually disappeared from the bunker storage, and the invoice documentation failed to arrive, it’s believed Mr Lester became increasingly anxious.
In the end, the court found Mr Lester had successfully established a claim for payment of $48,604.55 for slightly over 294 tonnes of oats at $165 per tonne, as ordered in the final judgment, including GST.
The court judgment also outlined intricate details of how the leasing and sale arrangement turned sour, and the events of March 15, 2010, when the Culletons met with Mr Lester to backpedal on the deal.
Two meetings took place on that day - one that started in the morning and one in the afternoon, where Mr Culleton delivered a letter to his then business associate which indicated the deal was off.
“We regretfully inform you that under the current agreement, at this point in time, we are unable to proceed with the leasing arrangement for Rathgar,” he wrote.
“As discussed, we are unable to attract support from the bankers over and above our east coast ventures at this point in time.”
Mr Culleton’s letter asked for the $67,500 already paid to be put down as full and final payment for various business related debts, including for the oats - totalling $29,438.52 - leaving a credit balance of $38,061.48 also for oats.
“We wish you all the very best in your endeavours in the future,” it concluded.
The Judge found that lack of finance was the reason why the Culletons did not proceed with the lease and purchase of Rathgar.
He also rejected their evidence about what happened at the meetings on March 15 - but accepted Mr Lester’s.
The next day, March 16, Mr Lester on behalf of Balwyn Nominees, wrote to the Culletons saying, “I have no alternative but to accept (your) letter as rescission of our arrangements - all matters in respect to this are now at an end”.
“In accordance with our Agreement to Lease and Purchase dated 16 December 2009 and signed by us all on 19 December 2009, your lease of my property actually commenced on 1 March 2010,” he wrote.
“I note that your letter of rescission is dated 15 March 2010 and therefore the lease has already been running for half a month.
“Part of this amount of $67,500 paid as rent will be held as rental for this period.
“While all lease payments are at an end as of today, the balance of the amount of $67,500 will be accepted as payment in lieu of one month's notice of termination.”
The judgement said the Culletons did not respond to that letter until five days later and accepted that the lease and purchase agreement had been terminated but denied that Balwyn Nominees was entitled to “retain the whole $67,500 paid by way of rent, and not even give a credit for outstanding invoices for oats”.
“You will appreciate that $67,500 is a lot of money for you to receive for essentially nothing,” the reply said.
Initially, Mr Lester continued pursuing his neighbour for the money he believed was owed to him but it was not forthcoming.
So, like many others in the local farming district, he eventually gave up, moved on, shut the door and did his best to forget about his dealings with Mr Culleton.
But four months later in about July 2010, it’s believed Mr Lester received an official letter from legal representatives working for Mr Culleton which tried to claim he was owed more than half a million dollars.
It said unless that alleged debt was repaid within days, he’d be dragged before Grain Trade Australia’s (GTA) dispute resolution committee which is considered a quasi-court.
Not being a member of GTA, Mr Lester felt he had three available options to tackle the threatened legal challenge.
One would be to call Mr Culleton’s bluff and ignore the letter’s threat, he could attend the GTA dispute committee hearing in Sydney which would entail having to pay for legal representation there, or he could take legal action of his own.
So, after contemplating the letter’s gravity, Mr Lester filed his own legal action in late 2010 in the District Court which launched the claim that’s now seen his former friend and one-time business associate found to be disqualified from the Senate.
The claim’s first hearing was held in April 2013 and judgment handed down in October that same year by Judge Curthoys which awarded 6pc interest on the base damages sum of $205,000, calculated from March 2010 through to judgment.
That ruling did not make Mr Culleton bankrupt but it was a debt that if repaid, would have ended the matter.
Mr Lester issued a creditor’s petition against Mr Culleton in October as part of his ongoing legal actions to recover the debt.
He’s also defended various appeals on the matter, believing some of them have had no legal merit whatsoever, and late last year outside court in Perth, described Mr Culleton as a “serial litigant”.
On credibility findings, Judge Curthoy’s judgment said at any point where their evidence differed, he preferred Mr Lester’s evidence to that of Rodney and Ioanna Culleton who was also listed as a party to the claim.
“Lester gave his evidence in a direct and honest manner,” he said.
“He admitted where his recollection was not strong and made appropriate concessions consistent with someone who was endeavouring to tell the truth.
“I find that Mr Culleton was endeavouring to give his evidence in a manner that best suited his interests from time to time.
“I find that Mrs Culleton's evidence was flawed - she had a poor recall of events.”
Mr Lester was a non-executive director of Wesfarmers for 13 years until 2008 and is considered an experienced hard-nosed business man with property dealings and well-respected member of the WA agricultural community.