The Supreme Court in South Australia has ordered directors of Bloody Mary Group to pay partners over $380,000 after they pocketed lucrative rebate deals with major brewers.
In 2016 business partners Brett Viney and Matthew Mitchell bought the Windmill Hotel for around $1.4 million in a venture with father and son Michael and Nicholas Crouch.
The purchase included previously established rebates from Carlton & United Breweries (CUB), Asahi and Coopers for taps at the pub, guaranteeing minimum volumes sold for each, and reportedly worth $160,000, $30,000 and $21,375 (respectively).
The pub’s sale arrangement saw the monies paid into the account of Viney and Mitchell’s corporate entity, Bloody Mary Group (BMG), and not to the Windmill Hotel. BMG has at times been a significant operator in Adelaide, holding the storied Archer Hotel and Naracoorte’s Kincraig Hotel, but these both went into administration.
The Windmill struggled, making significant losses, and it was not until a year into the partnership the Crouches discovered the existence of the rebates, in financial statements.
Nicholas Crouch was in fact a law student at the time, and after an unsuccessful meeting in December 2017 to garner an explanation from BMG, the men produced a statement of claim against their partners, citing a duty to not make any secret profits from the joint venture.
In their defence, BMG argued the Crouches were simply negligent in failing to appreciate the existence of the rebates.
Court proceedings also revealed the existence of another rebate agreement, made with Treasure Wines in 2017, from which BMG was being paid $100,000.
Having never made a profit, the four men eventually sold the Hotel for more than $400k less than they had paid, and the Couches continued their pursuit for compensation.
The Court has now issued its verdict, finding the Couches had not been directly informed of the existence of any of the rebate agreements, that they were “deceived or misled”, thus BMG had engaged in misleading and deceptive conduct and breached consumer law.
Supreme Court Justice Sam Doyle went further in his judgement to discredit testimony given by the defendants.
“In my view, Mr Viney’s evidence as to his reasons for not disclosing the [Treasury Wine Estates] agreement to the Crouches was untruthful.”
The Court awarded $383,609.14 in damages to the plaintiffs, but stopped short of granting the further claim for breaches of the hotel shareholder agreement.
