Adaz v Castleway [No 2]
[2020] VSCA 293
•20 November 2020
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2019 0014
S APCI 2019 0024
| ADAZ NOMINEES PTY LTD (ACN 006 228 119) as trustee for the RADO NO 2 TRUST and others according to the attached schedule | Applicants/Cross-respondents |
| v | |
| CASTLEWAY PTY LTD (ACN 131 870 481) as trustee for the CASTLEWAY TRUST and another according to the attached schedule [No 2] | Respondents/Cross-applicants |
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| JUDGES: | WHELAN and McLEISH JJA and RIORDAN AJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 6 October 2020 |
| DATE OF JUDGMENT: | 20 November 2020 |
| MEDIUM NEUTRAL CITATION: | [2020] VSCA 293 |
| JUDGMENTS APPEALED FROM: | [2017] VSC 578; [2017] VSC 755; [2018] VSC 624; [2019] VSC 14 (Robson J) |
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APPEAL – Application to adduce further evidence – Further evidence in possession of applicant – Further evidence discovered before hearing of appeal but not raised – Further evidence not significant – Application refused.
APPEAL – Application to make further submissions with respect to alleged error in Court’s reasons – No error in reasons – Trial judge entitled to accept relevantly unchallenged evidence.
CONTRACT – Breach of terms implied by law – No pleading alleging damage – Damages claim arguably premature – Declaration of breach made and matter remitted to trial division for assessment of damage.
CONTRACT – Whether amount of service fee ordered by trial judge should be reduced by allowance for personal expenses – No proposed ground of appeal which raised issue.
INTEREST – Whether interest payable at penalty rate under s 58 of the Supreme Court Act 1986.
INTEREST – Amount overpaid as a result of decision of trial judge overturned on appeal – What rate of interest payable on overpaid amount.
COSTS – Trial judge ordered each party to pay their own costs of trial – No error in exercise of discretion established.
COSTS – Each party partially successful on appeal – Each party to bear their own costs of appeal.
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicants/Cross-respondents | Mr R Garratt QC with Ms F Cameron | Maddocks |
| For the Respondents/Cross-applicants | Mr G Golvan QC with Mr B Mason | Kyriacou Lawyers |
WHELAN JA
McLEISH JA
RIORDAN AJA:
On 7 August 2020, the Court published its reasons in Adaz Nominees Pty Ltd v Castleway Pty Ltd,[1] and indicated that it would make the following orders:
[1][2020] VSCA 201 (‘Court of Appeal Reasons’).
Proposed grounds of appeal
1. Construction —error in construction of Schedule 2 of the PDSA — ‘taxable profit’…’as per income tax returns’. Leave to appeal granted and appeal allowed. [72]-[77], [92] 2. Construction — error in treating the PDSA as ambiguous or contradictory,. Leave to appeal granted and appeal allowed. [75]-[77], [92] 3. Construction — error in construing the PDSA as a profit sharing agreement. Leave to appeal refused. [93] 4. Implied terms — error in implying term (as a matter of law or fact) re ‘normal business activities’. Further submissions to be heard. [79], [94]
[136]-[147]
5. Construction — error in not giving effect to the agreement re the calculation of TPC Group Profit for the 2008 Financial Year’. Leave to appeal refused. [95] 6. Error in disallowing: accountancy, legal and director’s fees. Leave to appeal granted and appeal allowed. [81]-[92] [96]-[100] 7. Error in not adopting in full the report of the special referee. Leave to appeal granted and appeal allowed in relation to the judge’s conclusion concerning
cl 10.1 of the PDSA, otherwise leave refused.[96]-[100] 8. Error re the $20 million donation. Further submissions to be heard. [136]-[147] 9. Error re order 8(a). Leave to appeal granted and appeal allowed. [163]-[164] 10. Introduced Projects — error in finding that 14 of the 16 assets listed at [100] of the October 2017 Reasons were ‘Introduced Projects’ within the meaning of the PDSA. Leave to appeal granted, and appeal allowed in relation to Hillcrest Park and Alma Road, otherwise appeal dismissed. [172]-[176], [204]-[211], [221] Notice of contention
1. Construction — uncommercial and unreasonable results. Contention rejected. [72]-[77] 2. Construction — minutes dated 17 June 2008. Contention rejected. [78] 3. Implied terms — terms implied by law. Contention accepted. [136]-[147] 4. Introduced Projects — re-opening case. Contention rejected. [212]-[220]
Proposed grounds of cross-appeal
1.
Introduced Projects — error in finding must be a ‘project’ in relation to ‘land’.
Leave to appeal granted. Appeal dismissed.
[172]-[179], [221]
2. Introduced Projects — error in relation to ‘make aware’. Leave to appeal granted. Appeal dismissed. [172]-[179], [221] 3. Introduced Projects — error in failing to find the letters dated 5 May 2015 and 22 June 2015 made the board of the TPC Group ‘aware’ of the project; Leave to appeal granted. Appeal dismissed. [178], [221] 4. Introduced Projects — error re Kawana Waters. Leave to appeal granted. Appeal dismissed. [184]-[185], [221] 5. Introduced Projects — error re IBIS Care Retirement Home. Leave to appeal granted. Appeal dismissed. [190]-[198], [221] 6. Introduced Projects — error re ‘property element’. Leave to appeal granted. Appeal dismissed. [190]-[198], [221] 7. Conspiracy re $20 million donation — error in failing to find conspiracy. Leave to appeal granted. Appeal dismissed. [151]-[159] 8. Breach of duty re $20 million donation — error in failing to find breach of duty. Leave to appeal granted. Appeal dismissed. [151]-[159] 9. Construction — error re invoices for the undisputed Service Fees. Leave to appeal granted and appeal allowed. [235]-[250] 10. Interest pursuant to s 58(1) of the SCA. Further submissions to be heard. [235]-[250] 11. Interest pursuant to s 60(1) of the SCA. Leave to appeal refused. [235]-[250] 12. Interest pursuant to s 60(1) of the SCA. Leave to appeal refused. [235]-[250] 13. Interest pursuant to s 60(1) of the SCA. Leave to appeal refused. [235]-[250]
The further hearing was adjourned to 6 October 2020 for the purpose of receiving submissions in relation to the form of the orders, and the following matters:
(a) What relief should be granted consequent on the majority’s finding that the TPC Group breached the implied terms that Castleway and the TPC Group were each obliged to do all such things as were necessary to enable the other party to have the benefit of the PDSA, and not to hinder or prevent the fulfilment of the purpose of the expressed promises made in the PDSA (‘the terms implied by law’).[2]
[2]Ibid [139]-[140].
(b) What Service Fees were payable for the financial years ending 2014, 2015 and 2016? In the course of argument, an issue arose as to whether those amounts should be adjusted to allow for claimed personal expenses.
(c) Issues with respect to interest payable on the following amounts:
(i)The undisputed components of invoices for Service Fees for the financial years ending 2014, 2015 and 2016, which the Court has found were payable under cl 3.3(e) of the PDSA.[3]
(ii)Amounts in respect of Service Fees for the same three years which were the subject of invoices only after disputes in relation to the fees were resolved in the Trial Division.[4]
(iii)Interest in respect of the amount which the TPC Group overpaid in compliance with orders made by the trial judge which this Court has determined should be set aside.
(d) Costs.
[3]Ibid [250].
[4]Ibid [228].
Further, by summons dated 14 September 2020 which was returnable on 6 October 2020, the TPC Group applied:
(e) for leave to make further submissions regarding the correctness of paras 209 to 211 of the Court of Appeal Reasons; and
(f) for orders pursuant to rr 64.13, 64.35 and 64.36 of the Supreme Court (General Civil Procedure) Rules 2015 (‘the Rules’) to admit further evidence as contained in the affidavit of Philip Jones sworn 14 September 2020.
We shall first deal with the applications by summons and then each of the other issues in order.
Application for leave to make further submissions
Background
By its further amended statement of claim dated 27 May 2016, the TPC Group sought:
A declaration that none of the projects [asserted to be Introduced Projects by Castleway] is an ‘Introduced Project’ within the meaning of the Property Development Services Agreement between the parties dated 7 December 2010 (PDSA).
By its second further amended defence and counterclaim dated 19 July 2017, Castleway Pty Ltd (‘Castleway’) and Mr Keeghan sought:
A Declaration that each project [asserted to be Introduced Projects by Castleway] is an Introduced Project within the meaning of the PDSA.
Robson J delivered reasons on 5 October 2017,[5] in which he:
[5]Re Adaz Nominees Pty Ltd [No 2] [2017] VSC 578 (‘October 2017 Reasons’).
(g) identified in para 100, the 16 ‘disputed projects’ and the grounds for the TPC Group’s contentions that each of the projects were not Introduced Projects within the meaning of the PDSA;
(h) noted that Castleway and Mr Keeghan bore the burden of proof[6] on the question of whether Mr Keeghan had made the TPC Group aware of the development opportunities of the projects;[7]
(i) resolved the issues raised by the parties and each of the TPC Group’s contentions with respect to the 16 disputed projects;[8] and
(j) concluded that, of the 16 disputed projects, the IBIS Care Retirement Home, and the Kawana Waters project were not introduced by Mr Keeghan, leaving a balance of 14 projects.[9]
[6]Ibid [141].
[7]Ibid [118].
[8]Ibid [93]–[142].
[9]Ibid [127], [141]–[142].
In subsequent submissions dated 6 December 2017, the TPC Group submitted that the Court should not make declarations with respect to the remaining
14 projects because the evidence of Mr Keeghan (in particular, para 71 of his witness statement) should be rejected with respect to those projects on the ground that it had been rejected with respect to the Kawana Waters project.
Robson J delivered further reasons on 22 October 2018,[10] in which he rejected the TPC Group’s submission with respect to Introduced Projects and proposed to make declarations with respect to the 14 disputed projects, stating:
In my October Reasons, I ruled on whether or not certain projects were an ‘Introduced Project’ for the purpose of the PDSA. Mr Garratt submitted that it would be desirable for me not to make declarations as to which projects were or were not an ‘Introduced Project’ but rather give rulings on the proper construction of the definition of ‘Introduced Project’. Mr Golvan submitted that it would reduce potential for further disputes if I made the declarations sought.[11]
…
Accordingly, I propose to make the declarations sought. I have already expressed my view on the proper construction of an ‘Introduced Project’ in the October Reasons.
I do not consider it necessary to revisit those reasons.[12]
[10]Re Adaz Nominees Pty Ltd [No 5] [2018] VSC 624 (‘October 2018 Reasons’).
[11]Ibid [111].
[12]Ibid [113]–[114].
On 31 January 2019, Robson J made final orders and declarations including the following:
The Court declares that each of the projects listed in paragraph 100 of the October Reasons is an ‘Introduced Project’ for the purposes of that term’s definition in the PDSA, save for:
(a) the IBIS Care Retirement Home investment; and
(b) the Kawana Waters project.
By ground 10 of the application for leave to appeal dated 18 February 2019, the TPC Group contended:
The primary judge further erred at paragraph [113] of the October 2018 Reasons in finding that 14 of the 16 assets listed at [100] of the October 2017 Reasons were ‘Introduced Projects’ within the meaning of the PDSA.
By its reasons delivered 7 August 2020, with respect to ground 10, this Court proposed orders granting leave to appeal and allowing the appeal in relation to Hillcrest Park and Alma Road, and otherwise dismissing ground 10.[13]
[13]Court of Appeal Reasons [221].
The TPC Group’s submissions
Counsel for the TPC Group now submits that this Court should reconsider its reasons for dismissing the balance of ground 10 for the following reasons:
(k) This Court erred in finding that the trial was conducted on the basis that the only issues with respect to the Introduced Projects were those identified in para 100 of the October 2017 Reasons (‘the first contention’).[14]
[14]Ibid [203].
(l) This Court erred in stating at para 210 of its reasons that Mr Keeghan was not challenged on para 71 of his witness statement, because he was challenged with respect to the projects introduced under the PIPQ agreement[15] (‘the second contention’).
[15]For a summary of the PIPQ agreement see Court of Appeal Reasons [181].
(m) Robson J and this Court erred in not rejecting ‘Mr Keeghan’s general assertion as proof in fact of his having first “made the TPC Group aware” of all the projects’ because it was gainsaid by the ‘evidence and the findings regarding the PIPQ agreement’. The ‘general assertion’ refers to the evidence of Mr Keeghan and, in particular, para 71 of his witness statement dated
19 December 2016, which stated:
Neither Mrs Rado, Mr Lee, nor anyone else associated with them, introduced any projects to TPC Group at any time. I was responsible for introducing to the TPC Group, and its predecessor, all the projects introduced to the group from 2002. Some projects were acquired prior to 2002. I use the term ‘introduced project’ because, at my instigation, I investigated and identified appropriate development opportunities on behalf of the TPC Group for the purpose of acquisition, development and/or management and disposal. Subsequently, Castleway, pursuant to the PDSA, as the Manager, continued to develop, manage and in some cases dispose of the projects which I introduced prior to 2010 including the projects identified in Annexure B of the PDSA, which were held by a TPC Group company as at 1 July 2007.
(‘the third contention’).
(n) It was not necessary to challenge para 71 of Mr Keeghan’s witness statement because Castleway and Mr Keeghan’s case was that they ‘had “introduced” the projects merely by listing them in correspondence to the TPC Group’. This contention was consistent with the following re-examination of
Mr Keeghan by counsel for Castleway and Mr Keeghan:
What criteria did you adopt to make the decision as to whether an introduced property should be included on that list, what property you regarded as an introduced property should be included on that list?---If it was a project that I had developed and managed or Castleway had developed and managed.
During the PDSA?---Of course, yes.
And had you developed and managed each of those projects during the PDSA?---Yes, I’d managed all these projects during the course of the PDSA and developed and sold and settled a lot of the projects during the PDSA and before the termination of the PDSA there is quite a few there, it looks like 16, that are incomplete, which was still to be completed at the end of the termination of the PDSA.
(‘the fourth contention’).
Conclusion
The first contention is misconceived. This Court did not make the finding as asserted. Paragraph 203 of this Court’s reasons recorded the submissions of Castleway and Mr Keeghan.
We reject the second contention for the following reasons:
(o) The statement in para 210 of this Court’s reasons was limited to the 12 projects that remained after this Court found that Castleway had failed to establish that four of the 16 projects were Introduced Projects within the definition in the PDSA.[16] The fact that para 210 related only to the 12 projects was apparent from the text of the Court of Appeal Reasons itself, as is evident in the following extract:
[16]Court of Appeal Reasons [206]-[207].
The TPC Group contends more generally that Castleway and
Mr Keeghan failed to prove that they had introduced any of the
16 projects to the TPC Group. Putting to one side the PIPQ projects and the IBIS retirement home investment, this complaint now concerns 12 of the projects.In his witness statement dated 19 December 2016, Mr Keeghan stated as follows:
[Paragraph 71 of Mr Keeghan’s witness statement was then set out]
Mr Keeghan was not challenged on this evidence. It was not put to him that he had not introduced the 12 projects. It had not been pleaded that Castleway had not introduced the 12 projects. The trial judge’s recording of the TPC Group’s position with respect to each of the disputed projects does not include a contention that Castleway had not introduced the 12 projects.
We reject the TPC Group’s contention with respect to these 12 projects.[17]
(p) Counsel for the TPC Group concedes that it was not put to Mr Keeghan that he had not introduced the 12 projects, and does not contend that the evidence in para 71 of Mr Keeghan’s witness statement was otherwise challenged with respect to the 12 projects.
[17]Ibid [208]–[211] (emphasis added).
With respect to the third contention, counsel for the TPC Group made similar submissions as to why Mr Keeghan’s evidence should be rejected on the hearing of this appeal, and again on this application. We did not and do not consider that the fact that, on the whole of the evidence, Mr Keeghan’s evidence was not accepted with respect to the projects introduced under the PIPQ agreement,[18] leads to the conclusion that the trial judge, or this Court, should not accept the evidence with respect to the other 12 projects.[19]
[18]For the reasons that the projects introduced by PIPQ were excluded see Court of Appeal Reasons [184]–[185].
[19]This Court upheld the appeal with respect to two projects and allowed 12 projects as Introduced Projects under the PDSA, see Court of Appeal Reasons [208]–[211], [221].
In reaching this conclusion, we were fortified by the fact that Mr Keeghan’s evidence at para 71 of his witness statement was not challenged or contradicted by the TPC Group with respect to any of the 12 relevant projects.[20]
[20]Court of Appeal Reasons [208]–[211].
The fourth contention appears to be that Castleway’s case with respect to the Introduced Projects relied solely on the fact that it listed the projects in correspondence to the TPC Group, and that therefore, the factual question of whether Mr Keeghan and Castleway made the TPC Group relevantly aware of the projects was not an issue in the proceeding. We reject this contention for the following reasons:
(q) As noted in paras 5 and 6 above, both parties sought declarations in the proceeding as to the status of each of the disputed projects for the purpose of finally resolving the question of which of them were Introduced Projects under the PDSA.
(r) As noted in para 7 above, in the October 2017 Reasons, Robson J resolved the issues raised by the parties on the pleadings and found that 14 projects were Introduced Projects under the PDSA.
(s) As noted in para 8 above, the TPC Group resisted declarations as to the remaining 14 projects, and submitted as follows:
(i) Robson J had rejected each party’s preferred construction. In particular, the TPC Group submitted that:
the Court has not found that any of the alleged Introduced Projects was in fact an Introduced Project (and the Plaintiffs’ submission at trial was that none is). The Reasons, and the evidence adduced at trial, do not permit a definitive answer to be given to enable the parties to resolve this factual question in respect of a number of the alleged Introduced Projects, including the Tynong Quarry Option.
(ii) The factual question was not satisfactorily addressed by the evidence, in particular, para 71 of Mr Keeghan’s witness statement for the reason set out in the third contention.
(t) As noted in para 9 above, Robson J rejected these submissions and made the declarations sought by Castleway with respect to 14 projects.
In our opinion:
(u) the re-examination of Mr Keeghan, referred to in para 13(d) above, is consistent with the fact that Mr Keeghan’s position on the factual question was that he was solely responsible for the introduction of projects;
(v) it was open on all the evidence at trial, and in light of the issues raised for determination, for Robson J to conclude the factual question and make the declarations in favour of Mr Keeghan and Castleway with respect to
12 projects; and
(w) it has not been shown that Robson J was wrong to do so.
Accordingly, the application for leave to make further submissions regarding the correctness of paras 209 to 211 of the Court of Appeal Reasons will be refused.
Application to admit further evidence
In the alternative, the TPC Group applies for leave to adduce the following further evidence:
(a)An email of 28 September 2007 to Mr Keeghan, in which Mr Duster of Oliver Hume Real Estate Group stated:
I havebooked [sic] dinner at Kingsleys for you and i in Brisbane net [sic] Tuesday night.I need a couple of ours [sic] with you on Wednesday morning to show you Bowen Hills.MD.
(b)An email of 4 October 2007 to Mr Keeghan, in which Mr Duster:
(i) forwarded an email of 4 October 2007 to Mr Duster, in which Mr Evans of Oliver Hume Real Estate Group attached:
(A)a document entitled ‘Oliver Hume Research’ with respect to
11 Abbotsford Road, Bowen Hills, Queensland (‘Bowen Hills’);(B)a promotional brochure for the auction of that property on
5 October 2007; and
(C) photos of the property; and
(ii) stated:
Hi Ged. This is the detail and photos of the property we are going to try and buy at auction at 11am tomorrow morning at Bowen Hills. The agent says we can get $200,000 rent but I think it is a lot less than that ie maybe $130,000 to $160,000 pa. I will do the bidding over the phone and pull out at $2,100,000.
If successful I will put it in the name of Bellbird Park P/L. Regards Michael Duster.
PS I am confirming in the morning that it only has a local heritage listing and not a state one.
(collectively ‘the Further Evidence’).
Background
The emails comprising the Further Evidence relate to a property purchased by Bellbird Park Developments Pty Ltd as trustee for the Bellbird Park joint venture (‘Bellbird Park’) for $1,825,000 pursuant to a contract dated 5 October 2007.
The TPC Group holds a 50 per cent interest in Bellbird Park via the eighth applicant/cross-respondent, Tynong Pastoral Co Pty Ltd. The other shareholders in Bellbird Park are Pinot Melbourne Pty Ltd, an entity controlled by Mr Duster
(25 per cent interest), and Bob and Fiona Hand (25 per cent interest held jointly).
Mr Duster and Mr Hand were both real estate agents and directors of Oliver Hume Real Estate Group in or around 2007.
The Further Evidence was discovered on a file containing Mr Keeghan’s emails on the TPC Group’s server in the following circumstances.
By letter dated 26 June 2017 to Mr Keeghan, Mr Lee (a director of the TPC Group) requested that Mr Keeghan return all TPC Group documents, records and electronic devices on or before 30 June 2017.
On about 30 June 2017, the TPC Group’s IT consultant (Mr Mackay) removed Mr Keeghan’s access to the TPC Group’s server.
After 30 June 2017, Mr Lee, Mrs Nancy Rado and Mr Stephen Rado (directors of the TPC Group) did not review Mr Keeghan’s emails held on the server.
On 27 May 2019, the TPC Group filed proceeding S ECI 2019 02312 against Castleway and Mr Keeghan seeking declaratory relief in relation to questions arising as to the calculation of the 2017 ‘Service Fee’ and the ‘Termination Adjustment’ payable under the PDSA (‘the New Proceeding’).
By emailed letter dated 11 December 2019 to the solicitors for Castleway and Mr Keeghan, the solicitors for the TPC Group alleged that Mr Keeghan had retained a computer which included his emails from 2010 onwards. The letter relevantly stated:
2.1Your email letter states that the Defendants have complied with their obligations pursuant to the PDSA to return all Manager Information to the TPC Group. To like effect are paragraphs 8 and 9 of Mr Keeghan’s Affidavit of Documents sworn on 16 October 2019 (but not filed or served until 21 October 2019) and paragraphs 12 and 13 of
Mr Keeghan’s Supporting Affidavit.2.2We enclose emails between Allan McKay of AXCEDA and
Mr Keeghan in April 2017, which show that Mr Keeghan had copies of all emails from 2010 onwards available on his home computer, which is referred to as ‘TPC20’. We understand from Mr McKay that TPC20 was a computer that Mr Keeghan used at home, despite being owned by SR Consolidated Pty Ltd. We understand that TPC20 was not returned to the TPC Group by Mr Keeghan, and is still being accessed, as recently as at 11.09pm on 9 December 2019. Although Mr Keeghan’s password was changed after 30 June 2017 and he has not accessed the TPC Group’s system since, the archive folders of emails from 2010 onwards and any emails cached locally on TPC20 would remain accessible to Mr Keeghan on TPC20.2.3As far as we can see, Mr Keeghan’s emails from 2010 onwards are in the Defendants’ possession. Our clients reserve all of their rights in relation to your clients’ breach of the PDSA by failing to return all Manager Information to the TPC Group.
2.4The Defendants must make discovery of all documents relevant to this proceeding from those emails in their possession, and as you will see from the enclosed orders, our clients propose an order that the Defendants also file a supplementary affidavit of documents.
On or about 18 October 2019, in response to a request by Mr Stephen Rado, Mr Mackay advised there was approximately 100GB of data in Mr Keeghan’s inbox and sent items on the TPC Group server. Mr Jones of Maddocks (the solicitors for the TPC Group) deposed that: ‘On this basis, the TPC Group did not review all of Mr Keeghan’s emails.’
On 18 July 2019, Robson J ordered the parties to make discovery in the New Proceeding by 18 October 2019.
By letter dated 25 September 2019 to the solicitors for the TPC Group, the solicitors for Castleway and Mr Keeghan relevantly sought discovery of the following:
any and all emails, letters or other communication, relating to Bowen Hills, between any combination of:
a.any employee, agent or subcontractor of Raine & Horne Commercial, Brisbane North;
b. any other real estate agent;
c. Gerard Damian Keeghan … .
By affidavit of documents in the New Proceeding sworn on 18 October 2019, Mr Lee deposed as follows:
In making a reasonable search as required by Rule 29.01.1 of Chapter I of the Rules of the Supreme Court, the TPC Group also did not search Gerard Keeghan’s emails held on the TPC Group’s systems. I am informed by Alan Mackay of AXCEDA IT Consultants and believe that there is approximately 100GB of data in Mr Keeghan’s inbox and sent items. Given the number of documents involved, and given that most of the relevant correspondence Mr Keeghan would have had would have been copied to or sent to me, Stephen Rado, Nancy Rado, Jamie Bartels, Shearyn Lai, Michael Skinner and/or Anthony Taylor, those emails have not been reviewed. I am also informed by Mr Mackay and believe that emails between Mr Keeghan and the valuers Mr Keeghan appointed in 2017 have been extracted from the TPC Group’s systems, which are approximately 334MB, and he is arranging for those documents to be provided to the TPC Group’s solicitors.
On 12 December 2019, Robson J ordered that the TPC Group file and serve a supplementary affidavit of documents in the New Proceeding by 31 January 2020.
As a result, Mr Mackay extracted over 200,000 emails from Mr Keeghan’s inbox and sent items folders on the TPC Group server for the period 2006 to 2016.
Ms Styles of Maddocks (the solicitors for the TPC Group) reviewed these emails from around January 2020. In late February or early March 2020, while reviewing a USB containing some 31,975 emails extracted by Mr Mackay, Ms Styles discovered the Further Evidence.
By email of 24 March 2020 to junior counsel for the TPC Group (copied to senior counsel and Mr Jones), Ms Styles attached the Further Evidence and stated:
[T]he first two attached emails suggest that Michael Duster introduced Bowen Hills to Ged (for purchase by Bellbird Park Developments Pty Ltd).
…
These emails have not been included in discovery, but could be relevant if we decide to amend down the track.
The appeal in this proceeding was heard on 26 and 27 March and 8 April 2020. Reasons for judgment were published on 7 August 2020.
By email of 21 August 2020 to junior counsel (copied to Mr Jones), Ms Styles stated:
I also note, for completeness, that in light of the decision re the PIPQ Agreement, we need to consider the position re 11 Abbotsford Road, Bowen Hills (as per my emails from March, just before I went on leave). We didn’t have any evidence in relation to that being introduced by anyone other than Ged in the original proceeding, but from documents obtained from Ged’s emails (but not yet discovered in the new proceeding because they were not relevant to pleaded issues), there is an argument that it falls within the PIPQ Agreement.
The TPC Group’s submissions
Counsel for the TPC Group submitted as follows:
(x) Bowen Hills was one of the disputed projects identified by Robson J in para 100 of his October 2017 Reasons.
(y) In para 13(q) of the further amended statement of claim, the TPC Group:
(i) pleaded with respect to Bowen Hills that it ‘denies that it was made aware of these projects by the Defendants or either of them during the term of the PDSA’; and
(ii) particularised that plea relevantly by noting that Bowen Hills was a property ‘owned by Bellbird Park Pty Ltd’ which was ‘the subject of a joint venture agreement between the TPC Group and that company’.
(z) In the second further amended defence and counterclaim, Castleway and
Mr Keeghan pleaded that:
(i) the TPC Group ‘wrongly denies that it was made aware of those projects for the purposes of acquisition, development or management prior to the termination of the PDSA’; and
(ii) each project listed in paras 12, 13 and 14 of the TPC Group’s statement of claim was an Introduced Project within the meaning of the PDSA.
(aa) The non-discovery of the Further Evidence is consistent with the fact that Castleway and Mr Keeghan’s case with respect to Introduced Projects was limited to a construction point.
(bb) As a result of the failure by Castleway and Mr Keeghan to discover the documents constituting the Further Evidence, the Court should make no declaration with respect to Introduced Projects for the following reasons:
The discovery below, and accordingly the evidence before the trial judge, was plainly incomplete on the fundamental issue of the circumstances of introduction of the alleged Introduced Projects. The Respondents should not be entitled to benefit from their own non-compliance with the orders for discovery below, to make a claim for relief on appeal on an evidentiary basis that they did not make below.
Castleway and Mr Keeghan’s submissions
Counsel for Castleway and Mr Keeghan submitted as follows:
(a)The Further Evidence was obtained from the TPC Group’s possession and their attention was drawn to the documents from at least January 2020.
(b)As Castleway and Mr Keeghan believed these documents were already in the TPC Group’s possession, their discovery was not required pursuant to r 29.01.1(4) of the Rules.
(c)The TPC Group was aware of the existence and the alleged significance of the Further Evidence to the question of Introduced Projects before the hearing of the appeal, and it was sent to the TPC Group’s counsel, who did not raise the issue at the appeal. Accordingly, it would be unjust to allow a tactical decision not to raise an issue at the first available opportunity to later challenge the appeal decision.
(d)The mere fact that Mr Keeghan arranged to meet with an estate agent to view a property in Queensland is not evidence that the agent was therefore responsible for introducing the property. It is a completely different case from the projects introduced by PIPQ.
(e)The Further Evidence is not inconsistent with Mr Keeghan’s unchallenged evidence and the Court’s findings on appeal.
The law with respect to admitting fresh evidence after judgment
The leading case on the consequence of a failure to disclose relevant evidence in a party’s possession until after judgment is the High Court decision in Commonwealth Bank of Australia v Quade.[21] The principles established by that decision have recently been summarised by the Full Court of the Federal Court in Clifton (Liquidator) v Kerry J Investment Pty Ltd, as follows:
In Quade the High Court declined to set out any general rule to determine when a new trial might be ordered where there was misconduct on the part of the successful party as a result of which relevant evidence in that party’s possession remained undisclosed until after judgment. Rather the Court said that in such a case the answer to that question depends upon an assessment of what will best serve the interests of justice either particularly in relation to the parties or more generally having regard to the administration of justice. The Court also observed that in determining whether the matter should be tried afresh, it is necessary to consider a variety of possibly competing factors, including:
(1) the degree of culpability of the successful party;
(2) any lack of diligence on the part of the unsuccessful party; and
(3)the extent of any likelihood that the result would have been different if the order had been complied with and the non-disclosed material had been made available. In relation to this requirement there must at least be a real possibility that that is so.[22]
[21](1991) 178 CLR 134, 141-2.
[22](2020) 379 ALR 593, 643-4 [181] (Besanko, Markovic and Banks-Smith JJ), citing Commonwealth Bank of Australia v Quade (1991) 178 CLR 134.
Conclusion
We consider that the application should be dismissed for the following reasons:
(a)The Further Evidence has been in the possession of the TPC Group at all times. Apart from the fact that there was a voluminous quantity, there is no explanation as to why the TPC Group did not examine the material until after Robson J made orders on 12 December 2019 to provide supplementary discovery.
(b)After the Further Evidence was discovered and provided to senior and junior counsel, the issue of the Further Evidence was not raised during the three days of the hearing of this appeal. The only explanation given was that the TPC Group’s solicitor did not consider the relevance of the Further Evidence and presumably, neither did counsel. The hearing of the appeal should not be some ‘preliminary skirmish’ at which the appellants were at liberty to withhold an argument until after the publication of reasons.[23]
[23]Hsiao v Fazarri [2020] HCA 35, [53] (Keifel CJ, Bell and Keane JJ).
(c)The decision not to seek to rely on the Further Evidence may be unsurprising because the relevance of the Further Evidence is not immediately apparent, for the following reasons:
(i)the Further Evidence is consistent with the undisputed evidence that the property was purchased jointly with the directors of Oliver Hume Real Estate Group; and
(ii)it was never pleaded or argued that a property would not be an Introduced Project if the TPC Group was made aware of it by
Mr Keeghan after communications with a real estate agent.
(d)There is no similarity between a property that may be introduced by a real estate agent, and a property introduced to the TPC Group under the PIPQ agreement. Accordingly, we do not consider that the TPC Group has demonstrated any real possibility that, if the Further Evidence had been made available, the result at trial or on appeal would have been any different.
(e)We do not consider that Castleway and Mr Keeghan were culpable in any non-disclosure of the Further Evidence, for the following reasons:
(i) The Further Evidence was in the possession of the TPC Group, as would have been known by Mr Keeghan. Accordingly, pursuant to r 29.01.1(4)(a) of the Rules, Castleway and Mr Keeghan were not obliged to discover the Further Evidence.
(ii) The TPC Group has failed to establish that the Further Evidence was in the possession of Castleway and Mr Keeghan after 30 June 2017. The evidence in this regard is no more than a conclusion asserted in correspondence between solicitors.
(iii) We are not satisfied that, on the basis of the pleadings, the relevance of the Further Evidence would have been apparent to Castleway and Mr Keeghan or their solicitors.
Accordingly, the application to admit the Further Evidence will be refused.
What relief should be granted consequent on the majority’s finding that the TPC Group breached the terms implied by law?
In summary, under clause 3 of the PDSA, the time for payment of the Service Fee is relevantly as follows:
(cc) after finalisation of the annual financial statements and taxation returns for the TPC Group, the nominated accountant was to calculate and report the Service Fee to the TPC Group and Castleway (‘the Service Fee Report’);
(dd) either party could give the other party a Dispute Notice within 10 days;
(ee) Castleway could submit an invoice within 14 days of provision of the Service Fee Report; and
(ff) subject to provisions relating to undisputed amounts, the Service Fee was payable:
(i)if no party gave the other party a Dispute Notice, within 30 days after receipt of Castleway’s invoice; or
(ii)if either party gave a Dispute Notice, within 30 days after the dispute was resolved.
At the time of the filing of the second further amended defence and counterclaim on 19 July 2017, and the time of the publication of the October 2017 Reasons, the 2017 Service Fee was not then payable because the nominated accountant had not reported the Service Fee under cl 3 of the PDSA.
With respect to the $20 million donation, Robson J determined, in summary, as follows:
1.The PDSA was properly to be construed as limiting the expenses to be taken into account in calculating the TPC Group Profit under the PDSA to expenses relating to the TPC Group’s normal business activities. Alternatively, a term was to be implied to the same effect.
2.By reason of this construction, or implied term, the donation of $20 million was not to be treated as an expense of the TPC Group when calculating the TPC Group Profit for the purpose of calculating the Service Fee under the PDSA.[24]
[24]Court of Appeal Reasons [7].
Accordingly, although the trial judge noted that Castleway and Mr Keeghan relied on terms implied by law,[25] it was not necessary to further consider this claim. Further, because the nominated accountant had not reported the Service Fee, the ‘missing claim for damages would have been premature at the time of trial’.[26]
[25]October 2017 Reasons [74].
[26]Court of Appeal Reasons [134].
By email of 22 August 2018, the nominated accountant provided the Service Fee Report, which was calculated on the basis that the $20 million donation was added back ‘in accordance with commentary provided by the Honourable Justice Robson’.[27]
[27]Ibid [130].
By Dispute Notice dated 29 August 2018, the TPC Group disputed the Service Fee Report on the basis it had wrongly added back the $20 million donation to the TPC Group Profit.[28]
[28]On 8 April 2020, senior counsel for the TPC Group stated that the purpose of the Notice of Dispute was to avoid the Service Fee Report being deemed as agreed and to protect the TPC Group’s position in this appeal: Court of Appeal Reasons [134] n 65.
The TPC Group did not pay the Service Fee in the Service Fee Report on the basis that Robson J had found that ‘Castleway is not entitled to payment until the notices of dispute are resolved’.[29]
[29]October 2017 Reasons [189].
On 27 May 2019, the TPC Group filed the New Proceeding against Castleway and Mr Keeghan seeking declarations with respect to Service Fee and other amounts payable for the financial year 2017.[30]
[30]On 1 March 2016, the parties had agreed that the dispute notice procedure in cl 9 of the PDSA would no longer apply, so that all disputes could be tried in litigation, see Court of Appeal Reasons [223].
On 7 August 2020, the principal reasons of this Court were published. The majority found that the $20 million donation was a breach of the terms implied by law.[31] The majority noted that, while Castleway and Mr Keeghan had made a claim for breach of the terms implied by law, the pleading did not make a clear claim for damages founded upon such breach. The majority stated:
As at the time of the trial, and when the October 2017 Reasons were delivered, the nominated accountant’s report for the 2017 financial year had not been provided. That report was provided after the October 2017 Reasons, and the nominated accountant did calculate the Service Fee without the deduction of the $20 million donation in accordance with what was said to be ‘the commentary’ of the trial judge.[32]
[31]Court of Appeal Reasons [139]–[140].
[32]Ibid [134].
Accordingly, the majority concluded:
There is then an issue as to how proposed grounds of appeal 4 and 8 and contention 3 are to be dealt with as a consequence of our conclusions, especially in the light of the nominated accountant’s report (which did not deduct the donation) and the separate pending proceeding concerning the 2017 financial year. In the circumstances, as indicated, we will hear the parties further on that issue.[33]
[33]Ibid [147].
On 21 August 2020, senior counsel for the TPC Group informed the Court that it would instruct the nominated accountant to amend its 2016-17 Service Fee Report to reflect the Court of Appeal’s construction of the PDSA with respect to the effect of the $20 million donation on the calculation of the Service Fee.[34]
[34]Transcript of Proceedings, Adaz Nominees Pty Ltd v Castleway Pty Ltd and Castleway Pty Ltd v Adaz Nominees Pty Ltd (Supreme Court of Victoria, S APCI 2019 0014 and S APCI 2019 0024, Riordan AJA, 21 August 2020) (RM Garratt QC).
The TPC Group’s submissions
On behalf of the TPC Group, it was submitted that the Court should not enter judgment for damages in favour of Castleway on the appeal for the following reasons:
(gg) An appeal must be from a judgment or order made in the exercise of civil jurisdiction. Errors in reasons which are not reflected in a dispositive order are not amenable to appellate correction. The appellate power is to be exercised for the correction of error.
(hh) Robson J made no error in not entering judgment in favour of Castleway for damages for the following reasons:
(i)the pleading did not seek damages for breach of the terms implied by law; and
(ii)Castleway and Mr Keeghan did not ask for judgment to be entered in favour of Castleway for damages for breach of the terms implied by law.
(ii) Accordingly, there is no proper basis for entering judgment for damages in favour of Castleway on appeal.
Castleway and Mr Keeghan’s submissions
On behalf of Castleway and Mr Keeghan, it was submitted that the Court should enter judgment for damages in favour of Castleway on the appeal for the following reasons:
(jj) The claim for damages for breach of the implied terms was pleaded in its prayer for relief in paras O(x) and OB(iii) of the second further amended defence and counterclaim. In any event, the powers of the Court of Appeal under r 64.36 of the Rules extend to making any amendment, giving any judgment and making any order which ought to have been given or made, to ensure that justice is done in the case.
(kk) This Court identified significant errors in the trial judge’s findings, particularly with respect to the breach of the terms implied by law.
(ll) The TPC Group would have the Court penalise Castleway for not seeking damages in January 2019, which would have been inconsistent with the trial judge’s finding and would have been premature before the nominated accountant’s report of the Service Fee.
(mm) There is no uncertainty about the value of the damage sustained by Castleway, being the reduction in the 2016-17 Service Fee by $8 million.
(nn) The Court should be satisfied that Castleway is not double-dipping because of the stated intention by the TPC Group to seek to amend the nominated accountant’s report.
Conclusion
Rule 64.36 of the Rules relevantly provides as follows:
(1)Without limiting Rule 64.12, on an application for leave to appeal or an appeal, the Court of Appeal has the same powers and duties as to amendment or otherwise as the court or tribunal that made the decision the subject of the application for leave or the appeal.
(2) The Court of Appeal has power—
(a) to draw inferences of fact;
(b)to give any judgment and make any order which ought to have been given or made; and
(c) to make any further or other order as the case may require.
…
(7)Without limiting Rule 64.12, the powers of the Court of Appeal under this Rule may be exercised notwithstanding that—
(a)no application for leave to appeal, appeal, cross-application for leave to appeal or cross-appeal has been commenced in respect of any particular part of the decision the subject of the application for leave to appeal or the appeal or by any particular party to the proceeding in the court or tribunal that made the decision; or
(b)any ground for allowing the application for leave to appeal or the appeal or for affirming or varying the decision the subject of the application or appeal is not specified in an application for leave to appeal, a notice of appeal, a cross-application for leave to appeal or a notice of cross-appeal.
There is no doubt that the powers of the Court of Appeal extend to amending pleadings, including the prayer for relief, to include any ‘missing’ claim for damages consequent on the pleaded breach of the terms implied by law, and to make orders to facilitate the fair resolution of the real issues in dispute.[35]
[35]Maloney v Commissioner for Railway (1978) 18 ALR 147, 151 (Jacobs J); Bauer Consumer Media Ltd v Evergreen Television Pty Ltd (2019) 367 ALR 393, 455-6 [250] (Burley J).
According to the Court of Appeal Reasons, the trial judge erred in making the following declaration in para 5 of the orders made on 31 January 2019:
The Court declares that the charitable donation of $20 million paid by the First Defendant by Counterclaim, Adaz Nominees Pty Ltd to Rado Family Foundation Pty Ltd, as trustee for the Rado Family Foundation, in the
2016-2017 financial year is not entitled to be treated as an expense of the TPC Group when calculating the Service Fee payable under the PDSA for the
2016-2017 financial year.[36]
[36]See Court of Appeal Reasons [72]–[80] (Whelan JA and Riordan AJA).
On the basis of the trial judge’s declaration, the $20 million donation could not have been a breach of the terms implied by law because it would not form part of the calculation of the Service Fee and the donation could not have given rise to damages for a breach.
Accordingly, Robson J did not consider what orders would have been appropriate consequential on the finding of a breach of the terms implied by law.
As noted in the Court of Appeal Reasons, an award of damages at the time of the October 2017 Reasons may have been premature,[37] and the TPC Group did not submit that the failure to plead a claim for damages for breach of the terms implied by law had resulted in any prejudice.
[37]Ibid [135].
The current position is as follows:
(a)The Service Fee Report entitles Castleway and Mr Keeghan to a Service Fee calculated before any deduction for the $20 million donation.
(b)Castleway and Mr Keeghan have a counterclaim in the New Proceeding to recover the Service Fee as calculated in the Service Fee Report.
(c)On the basis of the Court of Appeal Reasons, the Service Fee Report would require, among other things, a recalculation to take into account the
$20 million donation.(d)It appears likely that the damages consequential on the breach of the terms implied by law will equate to the extent to which the Service Fee is reduced as a consequence of the $20 million donation.
(e)However, unless and until the TPC Group is successful in amending the Service Fee Report, or otherwise resisting Castleway and Mr Keeghan’s claim based on the Service Fee Report, Castleway and Mr Keeghan may have suffered no damage by reason of the breach of the terms implied by law.
In the circumstances, it is proposed to declare that, by the making of the $20 million donation, the TPC Group breached the terms implied by law in the PDSA. The proceeding will be otherwise remitted to the Commercial Court for the assessment of damages.
Whether the amount of the Service Fees payable for the financial years ending 2014, 2015 and 2016 should be adjusted to allow for the claimed personal expenses
The draft orders submitted by the parties each contained declarations of the amount of the Service Fee payable for the financial years ending 30 June 2014, 2015 and 2016. The respective figures diverged by $6,227.43 for the 2014 financial year, $602.80 for the 2015 financial year, and $1,135.20 for the 2016 financial year.
In their draft orders, Castleway and Mr Keeghan described the relevant items as being adjustments ‘as listed in para 14 of the report of the Special Referee’. Paragraph 14 of that report made adjustments for personal accounting expenses, expenses relating to an estate dispute, cab charge and car hire expenses for Mrs Rado, and an adjustment relating to a change in shareholding.
The parties’ written submissions on the draft orders did not address these divergences, which in total amount to the modest sum (in the context) of $7,965.43. In oral submissions, counsel for the TPC Group explained that the amounts in dispute were ‘personal expenses’ of the Rado family which had been the subject of a concession before the Special Referee.[38]
[38]Our attempts to reconcile the divergences in the respective draft orders with the adjustments in para 14 of the Special Referee’s report were unsuccessful, but we proceed on the basis put by counsel for the TPC Group in oral submissions that the divergences concern the ‘personal expenses’ of the Rado family which were the subject of the concession before the Special Referee.
The orders made by Robson J on 31 January 2019 included separate declarations of the ‘correct amount’ of the Service Fee for each of the 2014, 2015 and 2016 financial years. In each case the amount declared expressly included as a separate item the adjustments in para 14 of the Special Referee’s report.
The concession made by the TPC Group before the Special Referee, which resulted in the adjustments made by Robson J insofar as they concerned the personal expenses, was a concession made by reference to the issue of whether the expenses were ‘normal business expenses’. As we have found, that was not the relevant issue. The concession was expressed by the Special Referee to be, not only that the expenses were not normal business expenses, but also that they were personal and ‘not related to the operation of a business’.
There was no proposed ground of appeal which expressly raised the issue of these personal expenses.[39] Further, proposed ground six specifically addressed the adjustments Robson J had made in his declarations by disallowing expenses, listing relevant categories of expense which were the subject of complaint. The personal expenses were not listed in that proposed ground. No specific reference was made to the issue of the adjustments for the personal expenses, which had been the subject of the concession before the Special Referee, in the TPC Group’s written case or in the submissions put to us on the substantive hearing. The issue only became apparent in the course of submissions on the orders when trying to identify the source of the divergences in the respective figures.
[39]By para 8(b) of the orders of 31 January 2019, Robson J made a declaration concerning similar expenses in the financial year ending 2017, which likewise was not challenged in the appeal.
It seems to us to be possible, if not likely, that arguments might have been made by Castleway and Mr Keeghan concerning these personal expenses if the issue had been raised before it emerged in the course of argument on the proposed orders. In the circumstances, we do not consider that the TPC Group can raise this issue now, and the amounts ordered should continue to reflect the adjustments for personal expenses.
Issues with respect to interest
Various issues arise as to the interest payable in respect of various amounts paid in connection with the Service Fees for the financial years ending 2014, 2015 and 2016. The amounts are of three kinds:
(oo) the undisputed components of invoices for Service Fees for the financial years ending 2014, 2015 and 2016, which the Court has found were payable under cl 3.3(e) of the PDSA;[40]
[40]Court of Appeal Reasons [250].
(pp) amounts in respect of Service Fees for the same three years which were the subject of invoices only after disputes in relation to the fees were resolved in the Trial Division;[41] and
(qq) interest in respect of the amount which the TPC Group overpaid in compliance with orders made by the trial judge which this Court has determined should be set aside.
The undisputed components of invoices for Service Fees for the financial years ending 2014, 2015 and 2016, which the Court has found were payable under cl 3.3(e) of the PDSA
[41]Ibid [228].
The parties are in agreement that interest accrues on the undisputed Service Fee amounts paid on three invoices:
(rr) invoice served on 3 April 2017 in respect of the financial year ending 2014 in the amount of $1,196,956.20 (including GST);
(ss) invoice served on 3 April 2017 in respect of the financial year ending 2015 in the amount of $4,593,037.90 (including GST); and
(tt) invoice served on 4 July 2017 in respect of the financial year ending 2016 in the amount of $8,881,985.20 (including GST).
The parties also agreed that interest is to be calculated as accruing from 30 days after receipt of each invoice, namely from 4 May 2017 in the case of the first two invoices, and from 4 August 2017 in respect of the third. The amounts were paid on 28 November 2018.
Two issues are in dispute in relation to these three payments. The first is whether the rate of interest should be that for which the PDSA provided in cl 3.7, or whether it ought to be the penalty interest rate pursuant to s 58 of the Supreme Court Act 1986 (‘the Act’). The second issue is whether interest is to be calculated on the amounts paid inclusive or exclusive of GST.
As to the rate of interest, the TPC Group submitted that cl 3.7 of the PDSA should apply according to its terms. That clause provides that if ‘the TPC Group defaults in payment of any monies due under this clause 3’, interest is payable ‘upon demand … at the rate of 2 per cent higher than the current ANZ 90 day Bank Bill Swap Rate … on the amount in default from the time it fell due until amount has been paid in full’. This would amount to a rate of 3.9 per cent per annum in respect of the financial years ending 2014 and 2015, and 3.92 per cent per annum in respect of the financial year ending 2016.
Section 58 of the Act relevantly provides as follows:
Interest to be allowed when debts or sums certain recovered
(1)If in a proceeding a debt or sum certain is recovered, the Court must on application, unless good cause is shown to the contrary, allow interest to the creditor on the debt or sum at a rate not exceeding the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 … from the time when the debt or sum was payable (if payable by virtue of some written instrument and at a date or time certain) or, if payable otherwise, then from the time when demand of payment was made.
...
(3)A debt or sum payable or a date or time is to be taken to be certain if it has become certain.
The purpose of this provision was recently explained in Carbone v Melton City Council, in the following terms:
The statutory power to award interest has a twofold beneficial purpose. First, to compensate a party who has been obliged to take proceedings to recover a money sum and who in the meantime has been kept out of moneys which could otherwise have been used or upon which interest could have been earned. Secondly, to encourage the early resolution of litigation. In AJ Lucas Drilling Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd, this Court stated that s 58 should not be given a narrow meaning and that its beneficial purpose should be given a broad application.[42]
[42](2020) 60 VR 539, 549 [44] (Tate and Kyrou JJA) (citations omitted) (‘Carbone’).
Where the requirements of s 58(1) are satisfied, as they are here, a plaintiff is prima facie entitled to an award of interest unless good cause to the contrary can be demonstrated, the onus in that respect lying on the defendant.[43]
[43]Ibid [57].
In our opinion, the fact that the parties agreed on a contractual rate of interest to be imposed in respect of late payment under cl 3 does not constitute ‘good cause to the contrary’ in the circumstances of this case. The general terms of cl 3.7 do not address the specific context in which a party is compelled to resort to litigation in order to recover an amount due under the agreement. That is the subject matter of s 58. No injustice is caused by applying the interest rate for which s 58 provides in those circumstances. As was found in the different circumstances which arose in Carbone, Castleway was kept out of money which the TPC Group was obliged to pay and which it could otherwise have used to its benefit, until it commenced proceedings to enforce recovery. The purpose of s 58(1) is to provide redress in those very circumstances.[44]
[44]Ibid [95].
Interest in respect of these payments should therefore be paid at a rate pursuant to s 58(1), which the parties agree is 10 per cent per annum.
The second question concerns GST. The TPC Group submitted that the Service Fee amounts payable under cl 3 of the PDSA were calculated on a GST exclusive basis, and that it is this amount which is ‘due under this clause 3’ and to which the parties agreed interest would apply. Clause 8.4(a) of the PDSA stated that ‘[u]nless otherwise expressly stated, all amounts payable under [the PDSA] are expressed to be exclusive of GST’. The TPC Group submitted that Castleway has not been ‘kept out’ of the GST amount, and has refused to clarify whether it remitted GST following service of its invoices in 2017, rather than after the invoices were paid in November 2018.
Castleway and Mr Keeghan submitted that: (a) Castleway’s management services constituted a taxable supply and that the Service Fees therefore attracted GST; (b) this constitutes a debt or sum certain on which interest can accrue under s 58(1); and (c) the question as to whether or not Castleway was kept out of its money as a result of having remitted GST before the amounts were paid is irrelevant.
It is not in doubt that the obligation to pay the Service Fees under the PDSA was an obligation to pay the amount, together with any GST payable in respect of that amount. Clause 8.4(a) of the PDSA needs to be read in full. It provided:
Unless otherwise expressly stated, all amounts payable under this Agreement are expressed to be exclusive of GST. If GST is payable on a Taxable Supply, the amount payable for that Taxable Supply will be the amount expressed in this Agreement plus GST.
Section 58 of the Act requires interest to be allowed on the ‘sum certain recovered’ by judgment in the proceeding. No onus lies on the party to whom the amount was due to prove that it was out of pocket, or to disprove an allegation that it was not out of pocket, as a result of performing taxation obligations in respect of some or all of that amount. If the party obliged to pay was in a position to prove that the payee was not out of pocket, that matter might be a relevant circumstance in the exercise of the Court’s discretion to depart from the rate prescribed by the section on the grounds of ‘good cause … to the contrary’. However, that is not this case. Castleway recovered the relevant sums by judgment in the proceeding, which included GST, and ought to have interest on that total sum.
The position is analogous to that in respect of income tax as described by Vickery J in Hodgson v Amcor Ltd:
On its proper construction, in my opinion, s 58 requires interest to be allowed on the ‘sum recovered’ by judgment in the proceeding, not some lesser sum paid following payment according to law of sums due to the ATO. The sum recovered in the proceeding, in this case is the Judgement Sum, free of any deductions which take into account a tax liability.[45]
[45][2012] VSC 205, [54] (emphasis in original).
The parties have agreed that, on the above conclusions, the following relevant amounts are payable by way of interest in respect of the undisputed Service Fees:
(uu) in respect of the financial year ending 2014, interest of 10 per cent per annum accruing on $1,196,956.20 for a period of 574 days, resulting in interest of $188,233.66;
(vv) in respect of the financial year ending 2015, interest of 10 per cent per annum accruing on $4,593,037.90 for 574 days, resulting in interest of $722,302.40; and
(ww) in respect of the financial year ending 2016, interest of 10 per cent per annum accruing on $8,881,985.20 for 482 days, resulting in interest of $1,172,908.73.
The total interest in this category is therefore $2,083,444.79.
Amounts in respect of Service Fees for the same three years which were the subject of invoices only after disputes in relation to the fees were resolved in the Trial Division
The parties have agreed that, as a result of the orders made by the trial judge, disputed Service Fee amounts for the financial years ending 2014, 2015 and 2016 were awarded to Castleway in the total amount of $426,835.76 (inclusive of GST), and that those amounts were paid on 28 November 2018. Payment of those amounts followed the issuing of invoices by Castleway for Service Fees for the three years in question on 29 October 2018, after the trial judge delivered his reasons. As mentioned, the amounts were paid on 28 November 2018, which was within the period required by the invoices.
Castleway and Mr Keeghan submitted that this amount (or a lesser amount after offsetting the repayment considered further below) attracted interest under s 58(1) of the Act. They submitted that interest accrues on the disputed component of the Service Fees from 19 July 2017, when the second further amended defence and counterclaim was filed.
In our opinion, interest should not be awarded on these amounts. No valid invoice was issued for the amounts in question until October 2018, and the amounts were then to be paid within the time stipulated by the PDSA. It was not until the issuing of the invoices that these amounts became payable. In the circumstances, it is not necessary to decide whether the amounts were recovered as a result of the proceeding or whether, if so, interest under s 58 ought to be paid. The short answer to Castleway and Mr Keeghan’s submission is that the amounts were duly paid consistently with the PDSA.
Interest in respect of the amount which the TPC Group overpaid in compliance with orders made by the trial judge which this Court has determined should be set aside
As a result of this Court’s decision, it transpires that the TPC Group overpaid amounts in respect of the financial years ending 2014, 2015 and 2016. The total amount of the overpayment is $286,703.13 (inclusive of GST). The parties accept that there should be an order that the amount determined by the Court to be the amount of the overpayment be repaid with interest.
The TPC Group submitted that the overpaid amount should carry interest at the same rate as is allowed to Castleway on the undisputed Service Fee amounts which, on its primary submission, would be the penalty interest rate. Castleway submitted that interest should be calculated according to a reasonable commercial rate, which it says is presently about 2 per cent per annum.
The position regarding repayment of the judgment sum following an appeal was recently articulated by this Court in Leeda Projects Pty Ltd v Zeng [No 2].[46] The Court explained:
As to interest, it is plain from the decision of this Court in Meerkin & Apel v Rossett Pty Ltd [No 2], that interest calculated at the penalty interest rate would not be appropriate. The effect of that decision was summarised in MLC Nominees Pty Ltd v Daffy [No 2], in the following terms:
The issue of a successful appellant’s entitlement to interest on a judgment sum repayable following an appeal was considered by this Court in Meerkin & Apel v Rossett Pty Ltd [No 2]. In that case, the Court held that where a judgment for debt or damages is set aside on appeal after being complied with, the appellant is entitled, by way of restitution, to interest on the judgment sum paid in accordance with the primary judge’s orders. In Meerkin & Apel it was accepted that the rate of interest payable by a respondent to a successful appellant was not the penalty rate referred to in ss 58 or 60 of the Supreme Court Act 1986, but a rate calculated to restore to the appellant ‘the fruits of the judgment’ and to do justice between the parties — a ‘restitutionary rate’.[47]
[46][2020] VSCA 244 (‘Leeda Projects [No 2]’).
[47]Ibid [13] (Tate, Kaye and McLeish JJA) (citations omitted).
The authorities show that the present is not an occasion for the application of the penalty rate in s 58 of the Act. An amount was paid by order of the Court which has subsequently been found not to have been payable. That calls for ‘a restitutionary rate’, quite unlike the situation where a party has been compelled to resort to litigation in order to obtain amounts owing to it.
Castleway and Mr Keeghan are correct to point out that the rate of 2 per cent per annum was applied in both Leeda Projects [No 2] and in MLC Nominees Pty Ltd v Daffy [No 2].[48] The fact that a restitutionary rate was considered to be 2 per cent per annum in other cases is not determinative. In oral submissions, the TPC Group submitted that if Castleway was awarded interest in respect of the undisputed Service Fee amounts at the contractual rate, then the repayment should be governed by interest at that same rate.
[48][2018] VSCA 10, [7] (Beach and McLeish JJA).
In our view, there is force in this submission. The parties can be taken to have agreed upon the time value of money for the purpose of payment of the Service Fees when they settled upon the rate in cl 3.7 of the PDSA. Although that rate was expressed to apply only in the case of late payment by the TPC Group, rather than where an overpayment was refunded by Castleway, in our opinion, the provision provides an appropriate guide to the restitutionary rate that should be applied in the latter context in this case.
It will therefore be ordered that Castleway pay restitutionary interest of
3.9 per cent per annum on the overpayment amount of $286,703.13 (inclusive of GST), accruing from the date of the overpayment, being 28 November 2018, to the date of judgment, being 20 November 2020, for 723 days in total, such interest totalling $22,148.41.
Costs
Castleway and Mr Keeghan sought to have this Court set aside the trial judge’s order that there be no order as to the costs of the trial. Proposed grounds 14 to 16 of the cross-appeal were directed to that subject. It was contended that the trial judge had erred in exercising the costs discretion and that a House v The King[49] error was established.
[49](1936) 55 CLR 499, 504–5 (Dixon, Evatt and McTiernan JJ).
As a result of the appeal, significant aspects of the trial judge’s disposition of the case have been set aside. In the circumstances, no purpose would be served in revisiting the trial judge’s reasons for ordering that there be no order as to the costs of the trial. Leave to cross-appeal on grounds 14 to 16 will be refused.
It is then necessary to consider the orders that should be made in respect of the costs of the trial and the appeal (including the cross-appeal).
The parties both submitted that they succeeded at trial, and on the appeal, and that costs should follow the event in each case. In our view, the true position is that both parties have had mixed success. Castleway and Mr Keeghan were successful in respect of the $20 million donation. However, they were unsuccessful in sustaining their construction of sch 2 of the PDSA. They were also largely unsuccessful in relation to disputed expenses. They were unsuccessful in respect of the three disputed Introduced Projects.
Nothing is gained in this case by seeking to quantify each side’s success, either in dollar terms or in terms of issues won and lost. In litigation involving multiple issues of fact and law, and in which very little has been left behind by the combatants, neither side has had overall success.
The same applies to the appeal (including the cross-appeal). The TPC Group succeeded in displacing the trial judge’s construction of sch 2, and in relation to two Introduced Projects. However, Castleway and Mr Keeghan clawed back much of that success, perhaps more, through their notice of contention regarding the
$20 million donation. The ultimate consequence of that success remains for determination in the pending proceeding regarding the consequences of that donation for the Service Fee in the financial year ending 2017.
In our view, given the mixed results of both parties throughout the litigation, there should be no order as to the costs of the trial or of the appeal (which includes the notice of contention), or of the cross-appeal.
The summons dated 14 September 2020 was a distinct matter, and we consider that costs in relation to it should follow the event. The TPC Group should pay Castleway and Mr Keeghan’s costs of and incidental to the summons to be assessed, in default of agreement, on the standard basis.
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SCHEDULE OF PARTIES
S APCI 2019 0014
| ADAZ NOMINEES PTY LTD (ACN 006 228 119) (AS TRUSTEE FOR THE RADO NO 2 TRUST) | First Applicant |
| CORTEK DEVELOPMENTS PTY LTD (ACN 004 997 773) | Second Applicant |
| ASPHALT ROADS PTY LTD (ACN 005 374 247) | Third Applicant |
| ROADING GROUP PTY LTD (ACN 097 993 292) (AS TRUSTEE FOR THE RADO INVESTMENT TRUST NO 2) | Fourth Applicant |
| ROADING INVESTMENTS PTY LTD (ACN 104 325 797) (AS TRUSTEE FOR THE RADO INVESTMENT TRUST NO 3) | Fifth Applicant |
| LOOILLA PTY LTD (ACN 092 067 322) (AS TRUSTEE FOR LOOILLA TRUST) | Sixth Applicant |
| BELLONIC PTY LTD (ACN 092 015 828) (AS TRUSTEE FOR BELLONIC TRUST) | Seventh Applicant |
| TYNONG PASTORAL CO PTY LTD (ACN 060 828 364) (AS TRUSTEE FOR TYNONG PASTORAL UNIT TRUST) | Eight Applicant |
| PARTNERS IN PROPERTY PTY LTD (ACN 120 760 125) | Ninth Applicant |
| TYNONG PROPERTY DEVELOPMENTS PTY LTD (ACN 081 950 647) (AS TRUSTEE FOR AMARCO SERVICES TRUST) | Tenth Applicant |
| TYNONG PROPERTY DEVELOPMENTS PTY LTD (ACN 081 950 647) (AS TRUSTEE FOR AMARCO SERVICES TRUST) | Eleventh Applicant |
| and | |
| CASTLEWAY PTY LTD (ACN 131 870 481) (AS TRUSTEE FOR THE CASTLEWAY TRUST) | First Respondent |
| GERARD DAMIAN KEEGHAN | Second Respondent |
S APCI 2019 0024
| CASTLEWAY PTY LTD (ACN 131 870 481) (AS TRUSTEE FOR THE CASTLEWAY TRUST) | First Cross-applicant |
| GERARD DAMIAN KEEGHAN | Second Cross-applicant |
| and | |
| ADAZ NOMINEES PTY LTD (ACN 006 228 119) (AS TRUSTEE FOR THE RADO NO 2 TRUST) | First Cross-respondent |
| CORTEK DEVELOPMENTS PTY LTD (ACN 004 997 773) | Second Cross-respondent |
| ASPHALT ROADS PTY LTD (ACN 005 374 247) | Third Cross-respondent |
| ROADING GROUP PTY LTD (ACN 097 993 292) (AS TRUSTEE FOR THE RADO INVESTMENT TRUST NO 2) | Fourth Cross-respondent |
| ROADING INVESTMENTS PTY LTD (ACN 104 325 797) (AS TRUSTEE FOR THE RADO INVESTMENT TRUST NO 3) | Fifth Cross-respondent |
| LOOILLA PTY LTD (ACN 092 067 322) (AS TRUSTEE FOR LOOILLA TRUST) | Sixth Cross-respondent |
| BELLONIC PTY LTD (ACN 092 015 828) (AS TRUSTEE FOR BELLONIC TRUST) | Seventh Cross-respondent |
| TYNONG PASTORAL CO PTY LTD (ACN 060 828 364) (AS TRUSTEE FOR TYNONG PASTORAL UNIT TRUST) | Eight Cross-respondent |
| PARTNERS IN PROPERTY PTY LTD (ACN 120 760 125) | Ninth Cross-respondent |
| TYNONG PROPERTY DEVELOPMENTS PTY LTD (ACN 081 950 647) (AS TRUSTEE FOR AMARCO SERVICES TRUST) | Tenth Cross-respondent |
| AGNES CRAWFORD RADO | Eleventh Cross-respondent |
| IAN ARTHUR LEE | Twelfth Cross-respondent |
| STEPHEN RADO | Thirteenth Cross-respondent |
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