Adventure Golf Systems Australia Pty Ltd v Belgravia Health and Leisure Group Pty Ltd
[2017] VCC 185
•22 March 2017
| IN THE COUNTY COURT OF VICTORIA | Revised (Not) Restricted Suitable for Publication |
AT MELBOURNE
COMMERCIAL DIVISON
GENERAL LIST
Case No. CI-16-00958
| ADVENTURE GOLF SYSTEMS AUSTRALIA PTY LTD | Plaintiff |
| v. | |
| BELGRAVIA HEALTH & LEISURE GROUP PTY LTD | Defendant |
---
JUDGE: | His Honour Judge Anderson | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 6-8 March 2017 | |
DATE OF JUDGMENT: | 22 March 2017 | |
CASE MAY BE CITED AS: | Adventure Golf Systems Australia Pty Ltd v Belgravia Health & Leisure Group Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2017] VCC 185 | |
REASONS FOR JUDGMENT
---
Catchwords: Fiduciary obligations – Adventure golf course designed and constructed by the plaintiff on land occupied by the defendant pursuant to an agreement with Parks Victoria – Golf course to be managed and operated by the defendant – Defendant to pay the plaintiff a share of the net green fees – Whether joint venture gave rise to a fiduciary obligation to ensure that the interests of the plaintiff were protected by the defendant in the lead up to the expiry of the agreement with Parks Victoria.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S. W. Stuckey of Counsel | Kinross-Smith & Co Lawyers |
| For the Defendant | Mr P. S. Noonan of Counsel | HWL Ebsworth |
HIS HONOUR:
1Adventure Golf is an advanced version of “mini-golf”. In about 1993, two engineers Rodney Webb and Lawrence Ulph joined with a builder Colin Brown to establish Adventure Golf Systems Australia Pty Ltd (“AGS”) to design, construct and operate an adventure golf facility at Wallington on the Bellarine Peninsula.
2In about 1996, they were approached by the CEO of Sports Australia Pty Ltd to construct an adventure golf facility at Chirnside Park where the company operated a golf driving range. Subsequently, Sports Australia Pty Ltd changed its name to Belgravia Health and Leisure Group Pty Ltd (“Belgravia”). The facility was known as Maroondah Adventure Golf (“Maroondah”). The facility was constructed by AGS at its own cost which it recouped from payments by Belgravia of 50% of the Maroondah green fees.
3In about 1997, Belgravia requested AGS to establish a further adventure golf facility (“the Dingley facility”) on a property at Dingley where Belgravia operated a nine hole golf course (“Spring Park”). Belgravia occupied the property comprising Spring Park and the Dingley facility (“the Dingley site”) pursuant to a Management Agreement with Parks Victoria (“Management Agreement”). The Management Agreement had been varied by a later agreement on 8 July 1999 (“the Variation Agreement”).
4Belgravia and AGS had executed a written agreement in relation to Maroondah. However, AGS commenced constructing the facility at the Dingley site without a written agreement. The parties did not finalise a written agreement until the Dingley facility was about 80% complete.
5The written agreement was executed in 2000 (“the Dingley Agreement”). The relevant terms of the agreement included:
a.AGS was to design and construct an adventure golf facility comprising 37 holes, 18 outdoors and 19 indoors, together with a club house;
b.the term of the Dingley Agreement was aligned with the Variation Agreement (which expired on 17 November 2010), but which had an option for a further 5 year term;
c.if Belgravia chose to take up the option for a further 5 year term of the Variation Agreement, AGS might “elect to continue the Dingley Agreement”;
d.Belgravia was to pay AGS 45% of “net green fees” from the Dingley facility;
e.“net green fees” would be calculated after deducting:
i.“any increase in rental as set out in the Variation Agreement”; and
ii.“any charges levied in respect of water supply and consumption”.
6The construction of the Dingley facility was completed by AGS and the facility was operated by Belgravia. The parties held regular meetings (about monthly) to discuss issues relating to the maintenance and operation of the Dingley facility.
7By letter dated 3 October 2005, Belgravia notified AGS of its intention to deduct, by instalments, increases in rental for the Dingley site charged by Parks Victoria totalling $21,205. Belgravia, over the next 5 months, deducted amounts totalling $9,542.24 from AGS’s share of the green fees from the Dingley facility.
8In 2006, Belgravia commenced deducting water charges. After discussion between the parties, Belgravia offered, by letter dated 30 November 2006, to cap AGS’s annual share of the water cost at $8,999, which was said to be 45% of the actual cost of $19,999. This offer was accepted by letter from AGS’s solicitors to Belgravia dated 10 September 2007.
9In 2010, Belgravia exercised the option to renew the Variation Agreement with Parks Victoria for a further 5 year term to 17 November 2015. AGS elected to continue the Dingley Agreement.
10In 2011, Belgravia offered to sell the operations at Chirnside Park comprising Maroondah and the driving range (“the Maroondah site”) and at the Dingley site (the Dingley facility and Spring Park) to AGS. AGS agreed to purchase the Maroondah site but not the Dingley site. The Dingley Agreement continued.
11In 2014 and 2015, there were discussions between AGS and Belgravia representatives about the future of the Variation Agreement between Belgravia and Parks Victoria which was due to expire in November 2015. Parks Victoria had indicated in 2009 that, after the expiry in 2015, Parks Victoria (as a public authority) would be “required to offer an Expression of Interest (EOI) for the site”.
12In May 2015, AGS and Belgravia discussed making a submission to Parks Victoria with a view to securing an extended arrangement for the parties at the site. However, during the period leading up to November 2015, Belgravia refused to respond to phone calls and emails from AGS.
13Parks Victoria, in a letter to Belgravia dated 8 October 2015, indicated that it would consider a “short term arrangement” with Belgravia in relation to the Dingley site. Rather than discussing this matter with AGS, Belgravia allowed the Variation Agreement to expire. With the concurrence of Parks Victoria, Belgravia continued to occupy the Dingley site and to operate the Dingley facility. AGS regards Belgravia’s conduct as having breached “fiduciary obligations” it owed to AGS.
14Subsequently, Belgravia alleged that by a “mistake”, in calculating AGS’s share of the net green fees of the Dingley facility, Belgravia had failed to deduct amounts due for additional rent and water charges it had paid to Parks Victoria. Belgravia claimed rental and water charges relating to the whole of the Dingley site (including the Spring Park golf course), and not simply the part of the Dingley site upon which the Dingley facility was located.
15AGS submitted that, if it were established that deductions were not made by Belgravia as a result of a “mistake”, that it would not be appropriate for the Court to order restitution by AGS, for the following reasons:
a.AGS had changed its position. AGS had not been aware of the terms of the Management Agreement or Variation Agreement with Parks Victoria or of the rental or water charges imposed at various times. If Belgravia had deducted the sums it now claims, during the period prior to 2011, it is likely AGS would have acquired the Dingley site as well as the Maroondah site;
b.in any event, the rental and water charges should be limited to those charges relating to the Dingley facility and not to the whole of the Dingley site.
16A further claim was made by Belgravia for damages resulting from AGS’s alleged failure to carry out regular remodelling works to the Dingley facility, as required by clause 12 of the Dingley Agreement. Belgravia abandoned this claim during the trial.
17The issues for determination in the proceeding are:
a.whether the Dingley Agreement came to an end upon the expiry of the Variation Agreement on 17 November 2015;
b.whether Belgravia owed AGS fiduciary obligations in 2015 which required it to only enter into an arrangement with Parks Victoria for the continuation of Belgravia’s occupation of the Dingley site which allowed the Dingley Agreement to continue for the period of Belgravia’s continued occupation;
c.whether Belgravia breached its fiduciary duties, and if so, what relief (if any) should be granted;
d.whether Belgravia made a mistake, when it failed to make any further deductions from AGS’s share of green fees, than those made for additional rental in 2005-2006 and those made for water charges in 2006-2008;
e.if a mistake were made, whether restitution should be ordered, and if so in what sum, or whether AGS had changed its position after receiving payments with limited deductions from Belgravia, which would make it appropriate to refuse relief.
Termination of the Dingley Agreement
18Clause 6 of the Dingley Agreement provided as follows:
“This Agreement shall continue to have effect for and so long as SA occupies the Site in accordance with the Management Agreement. In the event that SA chooses to take up the Option then AGSA may elect to continue this Agreement for the term of the Option. In the event that SA assigns its rights under the Management Agreement during the term it may do so only subject to the assignee of the Management Agreement also accepting an assignment of this Agreement”
19By clause 6, the Dingley Agreement would “continue to have effect for and so long as SA [Sports Australia, now Belgravia] occupies the site [the Dingley site] in accordance with the Management Agreement [between Sports Australia and Parks Victoria]”.
20Clause 6 provided that the Dingley Agreement might “continue…for the term of the option” for a further period of five years from 17 November 2010, as provided for in the Management Agreement (as varied by the Variation Agreement).
21Pursuant to clause 6, AGS elected to continue the agreement for the five year term of the option. Accordingly, the Variation Agreement and the Dingley Agreement were due to expire on 17 November 2015.
22Recitals A, B and C of the Dingley Agreement provided as follows:
“A. SA occupies and operates a site known as “Spring Park Golf Course” (“the Site”) at Lot 52, Centre Dandenong Road, Dingley pursuant to a Management Agreement dated 9 October 1997 (“the Management Agreement”) from Parks Victoria (“Parks Victoria”) or any superseding agreement.
B.The Management Agreement is for a term of ten years commencing upon the 18th day of November 1995 varied by agreement of 8 July 1999 (“the Variation Agreement”) to be for a term of fifteen years (“the Term”) and contains an option for one further term of five years (“the Option”) such option only able to be exercised by Parks Victoria.
C.This Agreement expires at the expiration of the Term or if exercised the expiration of the term of the Option and any further renewal of the Management Agreement”.
23Recital C seems to contemplate that the term of the Dingley Agreement would “expire” on the happening of one of the following:
a.“the expiration of the term” of the Variation Agreement (17 November 2010); or
b.“the expiration of the term of the option” (17 November 2015); or
c.“any further renewal of the Management Agreement”.
24The last option seems to be foreshadowed by recital A, which recites that Sports Australia will occupy the Dingley site pursuant to:
a.“the Management Agreement”; or
b.“any superseding agreement”.
25The expression “any superseding agreement” may include, not only the Variation Agreement which had been executed by Sports Australia and Parks Victoria on 8 July 1999, but also “any further renewal of the Management Agreement”. This alternative was not, however, expressly referred to in clause 6 or any of the other operative clauses in the Dingley Agreement.
26In a letter dated 18 November 2009 from Parks Victoria to Belgravia, Parks Victoria stated what would happen at the end of the Variation Agreement, as follows:
“If Belgravia obtains the 5 year term under Clause 34, once expired, Parks Victoria is required to offer an Expression of Interest (EOI) for the Site. If Belgravia wishes it could enter the EOI process, along with any other interested party(s) who may wish to apply”.
27AGS was aware that this was the attitude of Parks Victoria. Nevertheless, in late 2014 and early 2015, AGS and Belgravia worked together towards the goal of persuading Parks Victoria that Belgravia (and through it, AGS) should continue to occupy the Dingley site until the expression of interest process was concluded, and so that they might position themselves to have a good chance of succeeding when the future operation of the Dingley site was put out to a competitive tender process.
28Mr Ulph said that in the latter part of 2014, he spoke to Belgravia’s Operations Manager, John Urquart about how to approach Parks Victoria regarding the continued occupation of the Dingley site after November 2015.
29On 31 March 2015, Michael Graham of Belgravia wrote to Parks Victoria about Belgravia’s “planning for 2016 and beyond” as it “would like to get an understanding of the terms of the next contract period so as to prepare an attractive offer to Parks Victoria” for Spring Park and the Dingley facility.
30The letter continued:
“We believe the existing facilities require substantial capital improvements and for us to plan for these improvements we would like to receive an indication of the tenure options for the next contract period. We would also like to know when the next EOI process is likely to commence”.
31On 22 April 2015, Mr Ulph wrote by email to the new CEO of Belgravia, Nick Cox, and to Mr Graham, as follows:
“With November fast approaching, our strategy for the lease at Spring Park [Dingley] needs to be progressed. Having spoken to Michael, I understand that Parks Victoria is not very responsive to an early submission. We also understand from speaking to Stuart and our inspections, the facility is in great need of attention.
I would like to organize a meeting to discuss our latest options and how we should move forward to ensure that we have a sound strategy for dealing with the November deadline.
The discussion needs to address:
•Assessment of the facility to ensure it meets the handover criteria of the lease
•Post re-lease upgrade and maintenance plans
•Revenue projections
•Shareholder returns
Please advise if you agree that a meeting is appropriate and suggest a venue and time. We can attend a meeting either on site at Spring Park or at Belgravia Head Office”.
32AGS’s directors met Mr Cox and Mr Graham, at Belgravia’s office on 7 May 2015 to discuss “how to approach Parks Victoria to extend the lease” of the Dingley site. It was agreed that Mr Graham would prepare a proposal.
33AGS developed a document of possible improvements which might be made to the Dingley facility. This was emailed to Belgravia on 8 May 2015, and commenced with the following statement:
“Given the current state of the facility Adventure Golf Systems Australia P/L (AGSA) proposes to conduct a full audit of the condition of each adventure golf hole including its playability. With our current knowledge of the courses (Creek and Chasm) we believe there are significant opportunities to refurbish/upgrade the facility, and a list of possible improvements is as follows…”
34Apparently the parties had agreed to meet again in June. However, this did not happen and emails by Mr Ulph to Mr Graham on 5 July, 16 July, 31 July, 25 August and 9 September 2015, and some phone calls, were essentially ignored by Belgravia.
35On 14 August 2015, Damian Gorman from Belgravia wrote to Parks Victoria. The email noted that –
a.after the current lease expired on 17 November 2015, that “no further options for extensions are available”;
b.Parks Victoria intended to “go through an EOI process prior to appoint a new operator”;
c.“the EOI process could take up to 12 months to complete”;
d.Belgravia “intends at this stage to participate in the EOI process”;
e.“in the interim period until an operator is selected…Belgravia…is keen to come to a suitable arrangement with Parks Victoria to continue to manage” Spring Park and the Dingley facility;
f.“The preferred option for the Belgravia Group P/L is to have the current lease terminate on the 17 November 2015 and enter into a new separate management arrangement for 12 months or what other period agreed to by the parties to continue to operate the facility on behalf of Parks Victoria”;
g.“In order to progress discussions prior to the expiration of the current lease, I consider it would be beneficial to both parties if we could meet to discuss the potential new interim management arrangements”.
36Belgravia met with Parks Victoria on 8 October 2015. Mr Cox, Gary Cole and a consultant (Peter Watkinson) met with Tim Shepherd and Meredith Kidd from Parks Victoria. Ms Kidd’s notes of the meeting record:
“• potential new agreement for the S.T. [short term];
• ST arrangement whilst preparing competitive process a possibility?;
• Belgravia ideas?”
37Ms Kidd expanded on the discussion with Belgravia in an internal Parks Victoria email sent on 14 October 2015, in which she said, “Tim and I recently met with Belgravia Leisure to discuss a short term extension (1-2 years) to their management agreement over Spring Park golf course prior to running a competitive EOI process. I attach a letter we’ve sent this afternoon for your info and file”. This was the letter from Parks Victoria to Belgravia dated 14 October 2015.
38On 11 October 2015, an internal Belgravia email prepared by Mr Cole, recorded:
“Nick and I met with Parks Victoria on Friday to discuss our contract at Spring Park. The meeting went well and they will write a letter to us shortly confirming that our current Management Agreement will terminate on 17th November 2015. This is good news as it will mean we will be able to write to AGSA and confirm the termination of the agreement that exists between us. I’m not sure if you will draft this up or our lawyers but wanted to let you know that this is something we will need to do in the next week.
Parks Victoria are very happy to negotiate a new agreement with us to manage the Spring Park Golf Course and the Dingley Village Adventure Golf effective from 18th November”.
39On 14 October 2015, Parks Victoria wrote to Mr Cox at Belgravia, as follows:
“I confirm that the term of the Management Agreement between Parks Victoria and Belgravia Health & Leisure Group Pty Ltd over the Spring Park Golf Course expires on 17 November 2015.
I seek your advice regarding the intentions of Belgravia Health & Leisure Group Pty Ltd regarding a potential new short-term arrangement over the golf course, prior to a competitive allocation process being undertaken by Parks Victoria.
Please contact Meredith Kidd, Senior Commercial Services Officer…”
40Mr Cox distributed the Parks Victoria letter internally within Belgravia, with the following comment:
“Letter from Parks Vic attached. Let’s strategize before responding and/or sending to AGSA”.
41On 20 October 2015, Mr Cox of Belgravia sent the Parks Victoria letter dated 20 October 2015 to AGS, together with the following letter:
“Please find enclosed a letter we have just received from Parks Victoria confirming that the Management Agreement between Parks Victoria and our Company in relation to the above facility expires on 17 November 2015. Consequently, in accordance with clause 6 of the above agreement, our agreement ceases to operate on that date.
The letter indicates a competitive allocation process is now being undertaken by Parks Victoria and the future in relation to the facility appears uncertain. Nevertheless, I want to thank you for our association over recent years”.
42The letter provoked a response from AGS’s solicitors on 20 October which read in part as follows:
“Our client considers that it is in a joint venture relationship with Belgravia Health & Leisure Group Pty Ltd (“Belgravia”) under the agreement of 9 October 1997 Belgravia has with Parks Victoria, the variation to that agreement of 8 July 1999 and our client’s agreement with Belgravia in 2000. The legal consequence of that conclusion is that the relationship between Belgravia and our client is a fiduciary one requiring that Belgravia, in operating under the agreements it has with Parks Victoria, not do anything which jeopardises our client in a situation where Belgravia might otherwise have been able to act to its own advantage. In other words, if Belgravia has an opportunity to exercise a power to the detriment of our client but also an opportunity not to do so, it ought to pursue the latter course and respect the equitable obligations imposed in a fiduciary relationship”.
43On 11 November 2015, Belgravia wrote to Parks Victoria noting that:
a.the “current agreement…expires on the 17th November 2015 and there is no ability for further extensions”;
b.Parks Victoria intended “conducting an expression of interest process sometime during late 2016”;
c.“in the interim in accordance with our discussions we are willing to manage the course and facilities on a short-term month-to-month arrangement until you have concluded your process and determined a longer-term management solution”.
44On 23 December 2015, Ms Kidd at Parks Victoria made a file note of a telephone call to Mr Cox of Belgravia. It included the statement, “Will send to solicitor to get options to consider – 12 monthish tenure for interim”.
45On 24 December 2015, AGS’s solicitors wrote to Belgravia stating that, “our client considers that [Belgravia’s] obligations continue during the holding over period which prevails at the moment, in particular to continue to account to our client for the due proportion of the revenue your company continues to receive from the site”.
46Belgravia responded to AGS’s solicitors on 5 January 2016, stating:
“I confirm that the management agreement with Parks Victoria expired on 17/11/15. Consequently, the Facility Agreement also expired at that time. From that date there are no longer any legal relations between your client and our company. This is the unambiguous intended result of the agreement in this matter. The contracts do not allow in any way for a holding over arrangement of any sort. In any event they cannot be resurrected.
Our company is now, at the request of Parks Victoria, assisting on behalf of Parks Victoria in managing the site on a month by month basis the duration of which is uncertain but expected to be short. Also the nature and extent of remuneration has not yet been at all determined. Parks Victoria will be seeking tenders from the public for the management of the facility at a time to be solely determined by it. We have no control over this process whatsoever.
In view of the above there is no basis upon which your client can expect any further payments to be made to it under the defunct Facility Agreement. We consider that matter at an end”.
47On 4 March 2016, AGS issued the Writ in the proceeding.
48On 13 April 2016, Parks Victoria wrote to Belgravia as follows:
“Thank you for your letter dated 11 November 2015 proposing Belgravia Leisure’s short term management arrangement for the Spring Park Golf Course (Course) following the expiry of the Management Agreement between Parks Victoria and Belgravia Health & Leisure Group Pty Ltd on 17 November 2015.
The arrangements proposed have been incorporated into the enclosed draft for your review and comment. Parks Victoria proposes a two year term to provide the parties with certainty regarding management arrangements for the Course until 17 November 2017.
As previously discussed, I confirm that it is still Parks Victoria’s intention to run a competitive selection process during 2016/2017 for the long term lease of the Course beyond November 2017”.
49A “Deed of Extension and Variation of Management Agreement” was enclosed with the letter. The agreement noted in recital D that, “The parties have agreed to vary the Management Agreement on and from the Variation Date and subject to the terms set out in this Deed”.
50The deed defined:
a.“Management Agreement” as including the Variation Agreement;
b.“Variation Date” as meaning 18 November 2015.
51Annexure A to the deed provided that the “term of the Management Agreement is extended for a further 2 years from 18 November 2015 until 17 November 2017”, upon certain terms and conditions including Belgravia retaining “all revenue” earned by the operations on the site except for $10,000 plus GST per month to be paid to the “Minister for Environment, Climate Change and Water”, who was to succeed Parks Victoria as the relevant contracting party.
52Subsequently, Belgravia and Parks Victoria entered into negotiations. Apparently, no document has been executed although Belgravia remains in occupation of the Dingley site.
53By its Statement of Claim, AGS pleaded the following matters:
a.“the term of the Management Agreement expired on or about 18 November 2015”;
b.“Parks Victoria agreed to allow [Belgravia] to remain in occupation and control of the [Dingley site];
c.Belgravia “obtained that benefit in its capacity as a fiduciary under the [Dingley] agreement”;
d.Belgravia “has, since 18 November 2015, remained in occupation of the [Dingley] site and in accordance with the terms of the Management Agreement”.
54Notwithstanding the pleading, AGS’s counsel Mr Stuckey did not seriously contest in his final submissions that the Management Agreement had expired on 17 November 2015. The use of the phrase “holding over”, by Belgravia in its discussions with Parks Victoria both before and after 17 November, and by AGS in its statement of claim, assumed the expiry of the contractual relationship although Belgravia remained in occupation.
55Nevertheless, it is apparent from the dealings between the parties during the relevant period that:
a.AGS made known to Belgravia in late 2014 and in 2015 that it wanted Belgravia to negotiate a further arrangement with Parks Victoria, both initially for the short term until the expression of interest process was concluded and, in the longer term through the expression of interest process;
b.Belgravia discussed these matters with AGS, including at the meeting on 17 May 2015;
c.Belgravia appeared to be cooperating with AGS with the view to achieving common goals, from which both would derive some benefit;
d.Belgravia apparently changed its mind and, probably deliberately, failed to respond to emails and phone calls from AGS;
e.from at least as early as August 2015, Belgravia was seeking to negotiate on its own behalf with Parks Victoria and without taking account of the interests of AGS;
f.from about 8 October 2015, Parks Victoria had indicated that it was amenable to the continued occupation by Belgravia of the Dingley site until the expression of interest process was complete;
g.Belgravia was aware, prior to the expiration of the Management Agreement on 17 November 2015, that Parks Victoria was willing to accommodate Belgravia with an arrangement of the kind Belgravia and AGS had been discussing at their meeting on 17 May 2015;
h.Belgravia deliberately delayed telling AGS that Parks Victoria were positively considering allowing Belgravia to remain in occupation;
i.in the pre-expiry period, Belgravia attempted to persuade Parks Victoria to allow the term of the Management Agreement to expire and for any ongoing occupation to be pursuant to a separate arrangement;
j.when, in April 2016, Parks Victoria proposed the execution of a deed extending “the term of the Management Agreement…for a further 2 years from 18 November 2015 until 17 November 2017”, Belgravia sought to persuade Parks Victoria not to enter into an arrangement which, arguably, might have enabled AGS to continue to derive the benefit of sharing 45% of the green fees from the Dingley facility.
56Belgravia’s counsel, Mr Noonan conceded that Belgravia’s interests were not served by it agreeing to an extension of the term of the Management Agreement, as opposed to allowing the agreement to expire on 17 November 2015. The internal Belgravia email dated 11 October 2015 described the termination of the Management Agreement on 17 November as “good news as it will mean that we will be able to write to AGSA and confirm the termination of the agreement that exists between us”.
57Mr Noonan referred to financial records of Belgravia which demonstrated that the continuation of the Dingley Agreement with AGS would have been detrimental to Belgravia, as the following table shows:
Years Adventure Golf income Payable to AGS (45%) Belgravia’s net profit 2012-2013 $444,358 $197,654 $78,539 2013-2014 $462,745 $206,877 - $10,738 2014-2015 $536,200 $240,584 $52,836 2015-2016 $621,637 $107,646 (to November 2015) $180,505
58The table shows that, although the income from the Dingley facility was increasing year by year, AGS was benefiting from its fixed percentage of income whereas Belgravia’s profits were marginal. However, after the expiry of the Dingley Agreement, Belgravia received a financial windfall.
59The question as to whether Belgravia is entitled to retain that windfall depends on the issue of whether Belgravia had a fiduciary relationship with AGS, or whether it was entitled to ignore AGS’s interests and simply pursue its own interests in its dealings with Parks Victoria over the continued occupation of the Dingley site.
Did Belgravia owe fiduciary obligations to AGS?
60AGS alleged in its statement of claim that, “Under the Agreement the Plaintiff and the Defendant owed each other fiduciary obligations whereby they:
(a)could not act solely with regard to their own interests in respect of the control and operation of the facility;
(b)could not allow a situation to arise whereby their interests were in conflict with their duties under the Agreement;
(c)could not derive any benefit that, under the Agreement, was to be obtained if at all for their joint benefit;
(d) could not pursue, obtain or retain for themselves any collateral advantage in relation to the facility of the Agreement without the knowledge and informed assent of the other”.
61In his final submissions, Mr Stuckey submitted that, in late 2015 when Belgravia was negotiating with Parks Victoria about the future of their relationship regarding to the Dingley site, Belgravia’s fiduciary obligations to AGS required Belgravia to only pursue its continued occupation of the Dingley site in circumstances where AGS would continue to enjoy the benefits of the Dingley Agreement in relation to the Dingley facility.
62Mr Stuckey submitted that Belgravia was “precluded from seeking to take for themselves the benefit of any further contract with Parks Victoria, that could be fairly described as a renewal, without acknowledging [AGS’s] entitlement to a share of the revenue”.
63Mr Stuckey submitted that this obligation arose:
a.generally, from the nature of the “joint venture” arrangement between AGS and Belgravia;
b.specifically, as the parties had anticipated in the Dingley Agreement that the arrangement between AGS and Belgravia might continue, if Belgravia remained in occupation of the Dingley site beyond November 2015 pursuant to an agreement with Parks Victoria.
64a. “joint venture” arrangement: In the High Court decision of United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1 (“United Dominions”), the plurality (Mason, Brennan and Deane JJ) said at pages 10-11 that, “The term “joint venture” is not a technical one with a settled common law meaning. As a matter of ordinary language, it connoted an association of persons for the purposes of a particular trading, commercial, mining or other financial undertaking or endeavour with a view to mutual profit, with each participant usually (but not necessarily) contributing money, property or skill…The term is, however, apposite to refer to a joint undertaking or activity carried out through a medium other than a partnership: such as a company, a trust, an agency or joint ownership. The borderline between what can properly be described as a “joint venture” and what should more properly be seen as no more than a simple contractual relationship may on occasion be blurred”.
65United Dominions concerned different joint ventures. One was described as the “shopping centre venture”. As the plurality said at page 11, “In the present case, it is apparent that the relationship between the participants in the shopping centre venture was a fiduciary one at least from the time when the formal agreement was executed. Under the agreement, the participants were joint venturers in a commercial enterprise with a view to profit. Profits were to be shared. The joint venture property was held upon trust. The participants indemnified the managing participant (S.P.L.) against losses. The policy of the joint enterprise was ultimately a matter for joint decision. Apart from the absence of any reference in the agreement to “partnership” or “partners”, the relationship between the participants under the agreement exhibited all the indicia of, and plainly was, a partnership”.
66Mr Stuckey submitted that in the present case, “This relationship [between AGS and Belgravia] has many [emphasis added] of the indicia of a partnership and it has gained the criteria of property being made over by one to another to use for their mutual benefit and it is…a collaborative relationship of the sort that requires the parties to act, at least where the agreement doesn’t let them act in their own interests, for their mutual interest”.
67I shall return to discuss this submission. At this stage, it is appropriate to consider the qualification mentioned by Mr Stuckey, of what is provided in the Dingley Agreement as to what the parties may or may not do.
68b. the relationship between the parties provided for in the Dingley Agreement: In United Dominions, at page 11, the plurality said that “whether or not the relationship between joint venturers is fiduciary will depend upon the form which the particular joint venture takes and upon the content of the obligations which the parties to it have undertaken”. In the present case, this involves a careful analysis of the terms of the Dingley Agreement.
69Mr Stuckey relied upon clause 6 of the Dingley Agreement which provides that, “This Agreement shall continue to have effect for as long as [Belgravia] occupies the [Dingley] site in accordance with the Management Agreement”.
70Mr Stuckey submitted that clause 6 must be read in the light of recitals A, B and C of the Dingley Agreement. Recital A recorded that Belgravia occupied and operated the Dingley site “pursuant to a Management Agreement…or any superseding agreement” (emphasis added). Recital B provided for the extension of the term of Belgravia’s occupation of the Dingley site, by the exercise of an option for a “further 5 year term”. Recital C provided that, the “agreement expires” on the happening of one of three events:
a.the “expiration of the term” of the Management Agreement;
b.the “expiration of the term of the option”;
c.the expiration of “any further renewal of the Management Agreement”.
71Mr Stuckey submitted that, in late 2015, Belgravia was seeking to enter into a “superseding agreement” or a “further renewal of the management Agreement” which, as a consequence, would extend the expiry date of the Dingley Agreement. In these circumstances, the agreement contemplated that Belgravia would act only for the “mutual advantage” of itself and AGS.
72The parties referred to a number of further provisions in the Dingley Agreement, as follows:
a.“The relationship between the parties is not that of partnership, employment or agency. Nothing in this Agreement shall be construed to give either party any right to enter into any commitments or incur liabilities on behalf of the other” (clause 21);
b.“This agreement supersedes all prior agreements, arrangements and undertakings for the [Dingley facility] between the parties and constitutes the entire…agreement between the parties” (clause 22);
c.AGS was obliged “at its cost [to] design construct and landscape” the Dingley facility (clause 1 and Recital D);
d.the Dingley facility comprised “a 37 hole adventure golf facility of eighteen holes internal and nineteen holes external in accordance with the planning applications plans and specifications attached to this agreement” (clause 1);
e.the “internal” part of the adventure golf facility was housed in a “building”. The building apparently included a “clubhouse component” to be used by Belgravia for the Spring Park 9 hole golf course (clause 3(g));
f.AGS was obliged to “attend to facility upgrades and major maintenance” of the Dingley facility (clauses 2 and 12);
g.Belgravia was obliged, “at its cost [to] manage, promote, operate and market” the Dingley facility including responsibility for “administration and management” and “all minor maintenance” (clauses 3, 4, 5 and 11);
h.generally, “the property” in the Dingley facility was “retained” by AGS and could be “removed” by AGS at the “expiration of this Agreement” (clause 16);
i.if the Management Agreement with Parks Victoria were breached by Belgravia before the expiry of that agreement, requiring Belgravia to vacate the site, at AGS’s option, Belgravia would be obliged to either pay compensation to AGS or assign the Management Agreement to AGS (clause 7);
j.AGS was permitted to “assign or transfer its rights and obligations pursuant to this Agreement” (clause 13);
k.if Belgravia “assigns its rights under the Management Agreement…it may do so only subject to the assignee of the Management Agreement also accepting an assignment of this Agreement” (clause 6);
l.clause 4 of Schedule D which provided a basis for adjusting AGS’s “share of aggregate green fees” to “maintain the previous … proportional profit of [Belgravia] as a proportion of total site revenue in the event of any material increases in operating costs of the site … resulting from events beyond the control of [Belgravia]”.
73The Dingley Agreement provided for the respective financial obligations of each of the parties, including:
a.“the revenue arising out of the operation of the…facility shall be shared between the parties” (recital F);
b.AGS was to receive “45% of net green fees” after deduction from the “aggregate” fees from the Dingley facility rental increases and water charges (clause 1 of Schedule D);
c.each of the parties was to “contribute to the management, maintenance, operation and development of the [Dingley] facility in the manner set out in this Agreement” (recital G). There are many such provisions in the agreement;
d.AGS’s was responsible, “at its cost”, to construct the Dingley facility (clause 1), although Belgravia was to “contribute $106,000 towards the cost of the clubhouse component of the building” (clause 3(g));
e.Belgravia was to arrange or contribute to the completion of certain other matters associated with the construction and upgrade of the Dingley facility (as well as the management and operational costs) (clause 3, 4 and 5).
74There are other specific provisions in the Dingley Agreement requiring the parties to “collaborate”, or otherwise to have regard to the interests of the other party, including the following by way of example:
a.AGS must “advise [Belgravia] upon maintenance of this facility” (clause 2(b));
b.AGS must “attend monthly management meetings in respect of the [Dingley] facility” (clause 2(e)). Belgravia had an obligation to “convene and report to” such meetings (clause 4(e));
c.AGS must “provide such reasonable assistance as [Belgravia] may require” in developing the facility’s annual business plan (clause 2(f)), budget (clause 2(g)) and marketing plan (clause 2(h));
d.AGS “must participate in joint promotions” of the facility (clause 2(i));
e.Belgravia must attend to its management, operational and maintenance responsibilities “in such a manner as not to detract from” the facility (clauses 2(d) and (e));
f.Belgravia must supply various management and operational documents to AGS, including “an annual marketing plan” (clause 4(a)), “an annual budget” (clause 4(b)), “monthly operating report” (clause 4(e)) and “additional reports” (clauses 4(i) and 5(i));
g.if Belgravia were “compelled to vacate the [Dingley] site as a consequence of events beyond its control…where possible [Belgravia] should act to protect the interests of AGSA” (clause 7(c));
h.Belgravia cannot, without the consent of AGS, develop at the Dingley site “further mini golf or adventure golf facilities or other uses likely to diminish the attraction of the [Dingley] facility” (clause 17).
75I have previously examined the provisions of the Dingley Agreement in relation to its term, and the relationship of that term to the term of the Management Agreement, and by inference, the Variation Agreement. The term of the Management Agreement was extended by the Variation Agreement from 10 to 15 years, with the option of a further 5 years. The option is exercised if Belgravia “chooses to take up the option”. AGS may then “elect to continue the [Dingley] agreement for the term of the option”.
76Accordingly, the Dingley Agreement would terminate on 17 November 2010 (the 15 year term of the Variation Agreement) unless both Belgravia and AGS decide to “continue” the agreement; Belgravia by choosing to take up the option to extend the Management Agreement, and AGS by electing to continue the Dingley Agreement. There is no suggestion that either party, in separately exercising these rights, need take account of the interests or wishes of the other.
Conclusions on the issue of fiduciary obligations
77In my view, it would be inappropriate to conclude that, in relation to the Dingley Agreement, the parties owed to each other general fiduciary obligations as suggested by AGS, or that in the months leading up to November 2015, Belgravia was required to take account of the interests of AGS in relation to any arrangements for Belgravia’s continued occupation of the Dingley site.
78I reach these conclusions for the following reasons:
a.the Dingley Agreement was executed in 2000. It was to have an operation at least until 17 November 2010. In fact, as a result of the exercise of the option in the Variation Agreement by Belgravia, AGS was able to extend the Dingley Agreement for a further five years;
b.beyond 17 November 2010, AGS would not have been able to claim compensation, if Belgravia’s actions had constituted a breach of the Management Agreement, requiring it (and AGS) to vacate the Dingley site;
c.the terms of the Dingley Agreement provided some certainty to the parties’ financial arrangements. There was a lengthy period for AGS to recover the cost of designing and constructing the Dingley facility. It gave the parties an end date. They apparently allowed the Dingley facility to run down as the expiry date of November 2015 approached;
d.although recitals A and C of the Dingley Agreement appeared to foreshadow the possibility of a “superseding agreement” or a “further renewal” of the Management Agreement, this was not reflected in clause 6, or any other provision of the Dingley Agreement;
e.from Belgravia’s perspective, the expiry of the Dingley Agreement meant that it no longer had the burden of paying 45% of the net green fees to AGS;
f.the Dingley Agreement required the parties to co-operate for their joint financial benefit. The obligations of each party were specified in some detail which suggests that, in the absence of such provisions, there were not to be fiduciary responsibilities by one party to the other;
g.the Dingley Agreement expressly stated in clause 21 that, “The relationship between the parties is not that of partnership, employment or agency” (the relationships which ordinarily involve fiduciary obligations);
h.the Dingley Agreement in fact has few of the “critical features” or “indicia” of a partnership or other arrangements by which fiduciary relationships are created. Clause 21 provided that, “Nothing in this Agreement shall be constructed to give either party any right to enter into any commitments or incur liabilities on behalf of the other”;
i.the Dingley Agreement provided in recital F that, “Revenue arising out of the operation of the [Dingley] facility shall be shared between the parties”. However this was to be done “in the manner set out in this Agreement”;
j.otherwise, the “features” of the relationship, the High Court identified in United Dominions as exhibiting “all the indicia of a partnership” are largely absent in the Dingley Agreement. If present, the obligations are defined by the parties in specific provisions;
k.Belgravia and AGS were “joint venturers in a commercial enterprise with a view to profit”; revenue was to be shared although not expenses (save for some rental and water charges), and there was no profit sharing;
l.there was no property held on trust. The Dingley site was occupied by Belgravia pursuant to the Management Agreement and the Variation Agreement. Property in the Dingley facility was “retained” by AGS subject to certain specified qualifications;
m.no party was “indemnified against loss”. There were mutual obligations and an allocation of risk as in most commercial agreements, but nothing more;
n.the “policy of the joint venture” was not a “matter for joint decision”. The parties had specific obligations in respect of each other; to regularly meet, to advise, to provide information and documents, to assist and to participate in joint activities.
79In my view, the relationship was one which did not, in any relevant sense, create fiduciary obligations. By November 2015, the Dingley Agreement had run its course and the parties were each entitled to pursue whatever suited their individual interests without obligation to the other. In the circumstances, AGS’s claim must fail and Belgravia shall be entitled to judgment on the claim.
80If AGS’s claim had been successful, the relief it sought (for there to be an accounting of AGS’s share of the green fees received by Belgravia) would seem to have been appropriate.
Whether Belgravia mistakenly made payments to AGS after failing to deduct rental and water charges
81By its counterclaim, Belgravia claims that, “Between 2000 and November 2015, [Belgravia] paid 45% of the green fees to [AGS] without making any deductions for…any increase in rental as set out in the Variation Agreement; and…any charges in respect of water supply and consumption…and thereby paid [AGS] $619,178.13 in excess of the amount due to [AGS] under clause 1 of Schedule D of the [Dingley] Agreement”.
82Belgravia claimed that the sum was paid to AGS “due to a mistake of fact, namely a mistake in the calculation of the amount for the purposes of clause 1 of Schedule D”.
83Clause 1 of Schedule D of the Dingley Agreement provides as follows:
“1. SA shall pay AGSA a share of green fees calculated as 45% of net green fees. Net green fees shall be calculated as aggregate adventure golf green fees from which shall be deducted:
(a)any increase in rental as set out in the Variation Agreement; and
(b)any charges levied in respect of water supply and consumption”.
84Belgravia did not seek to deduct rental increases under the Variation Agreement until October 2005. On 3 October 2005, Belgravia sent a letter to AGS claiming that it was entitled to deduct increases in rental charged by Parks Victoria from the commencement of the Variation Agreement in July 2009.
85Belgravia claimed that the “overall increase” in rental from 1999-2000 to 2004-2005 was $21,295, although the correct calculation was $21,205. Belgravia informed AGS that this sum would be recovered by it from AGS’s “share of the Adventure Golf income [the green fees] from” the Dingley facility by monthly deductions of $2,366.11.
86Belgravia also gave notice that it intended, pursuant to clause 1(b) of Schedule D, to deduct “from the net Adventure Golf income any charges levied in respect of water supply and consumption for the facility [with] effect from 18 November 2005”. Belgravia said that, at that stage, the “exact cost of water provision is unknown” and it was “attempting to ascertain indicative costs from Parks Victoria”.
87The April 2006 report of “AGSA Payment”, month by month from July 2005, records the following deductions from AGS’s share of the green fees:
Month Deduction Amount October 2005 “Monthly deduction regarding Annual Rental – 1 of 9 deductions” $2,356.11 November 2005 “Monthly deduction regarding Annual Rental – 2 of 9 deductions” $2,356.11 December 2005 “Monthly deduction regarding Annual Rental – 3 of 9 deductions” $2,356.11 January 2006 “Monthly deduction regarding Annual Rental – 4 of 9 deductions” $2,356.11 February 2006 “Adjust Annual Rental Deduction ($2,356.11 - $2,385.56) x 4 months” $117.80 Total $9,542.24
88The March 2007 and March 2008 AGSA Reports showed the following deductions for water related charges:
Month Deduction Amount July 2006 “Water Rates - $6,179.05 – 45%
Usage 13/2 – 17/5/06
Service charge 1/4/06 – 30/6/06”$2,780.57 December 2006 “Water Rates - $6,415.60 – 45%
Usage 11/8/06 – 13/11/06
Service charge 1/10/06 – 31/12/06”$2,887.02 March 2007 “Water Rates - $5,936.80 – 45%
Usage 13/11/06 – 16/02/07
Service charge 1/01/07 – 31/03/07”$2,671.56 September 2007 “Water account
16/2/07 – 15/05/07 $1,978.30 – 45%”$890.24 February 2008 “Water account – Spring Park
15/5/07 – 9/8/07 $93.20
9/8/07 – 7/11/07 $2,122.85 – 45%”$997.22 89On 30 November 2006, Belgravia’s then CEO, Adrian Johnston wrote to Mr Ulph at AGS in relation to “the matter of water charges at the Dingley site”, which had been discussed between the parties at a “recent meeting”.
90The letter stated as follows:
“The matter of Water charges at the Dingley site has also been discussed. As you are aware we are committed to increased responsibilities in relation to meeting water charges as of November last year. The contract is very clear that AGSA and Belgravia Leisure share the charges 45% : 55% and it is agreed that this share of charges was agreed at the time of execution of the contract. It is contended that the Parks Victoria Lease charge to Belgravia Leisure was increased significantly as a result of the Adventure Golf development and that the water charge was seen as a component of this total agreement. In the spirit of the relationship between the parties Belgravia Leisure is prepared to cap the total cost to which AGSA will be exposed. Taking effect as at 1 January 2007, the annual AGSA share of water cost will be capped at $8,999 (being 45% of $19,999)”.
91Discussions apparently continued for some time. On 10 September 2007, AGS’s solicitor wrote to Geoff Lord, the Managing Director of Belgravia, as follows:
“The apportionment of Dingley water rates and usage – to resolve this matter our clients confirm their acceptance of Mr Johnston’s offer to cap their share of water cost at $8,999.00 with effect from 1 January 2007”.
Evidence of a mistake
92By its counterclaim, Belgravia alleged that it made “a mistake” in the calculation of net green fees it paid to AGS “between 2000 and November 2015”. Belgravia said that it had mistakenly failed to make deductions for “any increase in rental” and “any charges in respect of water supply and consumption”.
93The only evidence of a “mistake” was given by Christine Slattery, a senior accountant who has been employed by Belgravia since 2001.
94Ms Slattery gave evidence, in relation to the “rental” deductions, of the following matters:
a.part of her responsibilities included preparing a report to be sent to AGS each month setting out the amount AGS would be receiving from the Dingley facility;
b.the statement was derived from a report received from the Dingley site “outlining what the income for the month was”;
c.apart from the statement from site, Ms Slattery had no “access to broader documents regarding the relationship” between AGS and Belgravia;
d.where the monthly statement showed “a monthly deduction for annual rental”, Ms Slattery made the deduction “under instructions from, I believe it was the CEO [Adrian Johnston] and the golf area manager [Dean Rattle]…that did instruct me to do these deductions…and to add them to the…monthly statement”;
e.the deductions continued for approximately “four months…four lots of deductions”. Ms Slattery did not know why they stopped “or any instructions that it should not be charged”.
95Mr Slattery’s evidence of the deductions for “water” was as follows:
a.Ms Slattery was “instructed to add in [the water] deduction based on [the quarterly invoice for] water rates received from South East Water for “the Dingley site”;
b.deductions for “water” charges were made on occasions between July 2006 and February 2008;
c.around April 2008, Ms Slattery “handed over the [Dingley site] …accounting work to another accountant”. Ms Slattery instructed the new accountant, Rahul Gupta, “on what I had previously done with the reporting and expected that he would do the same thing”;
d.Ms Slattery was not involved in supervising Mr Gupta’s work or the handover of his responsibilities to another accountant when Mr Gupta left his position in December 2008;
e.Ms Slattery did not know “why the water was not charged after” April 2008;
f.Ms Slattery had obtained from Parks Victoria two documents setting out the water accounts for which Belgravia was charged by Parks Victoria. One document set out the “Parks Victoria charges” and the other detailed the “water usage”.
96Ms Slattery said that Belgravia was involved in managing a number of golf courses, swimming pools, health clubs and stadiums. Ms Slattery was responsible for approximately 25 different accounts. At certain times, these accounts included the Dingley site. Occasionally, she might take over an account whilst someone was on leave.
97Ms Slattery agreed that by reason of the number of “different operations” Belgravia was involved in, and the “long period of time”, she did not “have a specific recollection about any of the transactions”. Ms Slattery had no recollection of the deductions for “rental” included in the statement she prepared and sent to AGS.
98Ms Slattery gave evidence that Mr Johnston and Mr Rattle were no longer employed by Belgravia. At the conclusion of Ms Slattery’s evidence, Mr Noonan said he did not propose to call any other witnesses. I raised with Mr Noonan whether he wished to reconsider his position in view of the following matters:
a.the evidence of Ms Slattery on the issue of “mistake”;
b.the evidence of the availability of other Belgravia witnesses including Mr Johnston and Mr Rattle.
99After the proceeding was stood down for some time, Mr Noonan reaffirmed that he did not propose to call further witnesses.
100In the circumstances, I do not consider that Belgravia has satisfied the onus of proof it bore to establish that no deductions for rental increases or water charges had been made (apart from those recorded between 2005 and 2008) as a result of a mistake. This conclusion was reinforced by the absence of any reasonable explanation being given for the failure by Belgravia to call other witnesses, including Mr Johnston or Mr Rattle, whom Ms Slattery believed had instructed her to make the deductions for “rental” in 2005-2006. I can infer that the evidence of these witnesses would not have assisted Belgravia’s case.
101Mr Stuckey submitted that “Ms Slattery has no recollection of anything relating to these payments and would not have had such knowledge at the time. The decisions and directions came from those above her. Her evidence laid no basis for a conclusion that there was a mistake of any sort”.
102Mr Stuckey further submitted that:
a.“the mistake and its causal nature must be distinctly proved”;
b.“There had been no meaningful attempt on the part of the Defendant to prove any mistake”;
c.“The Defendant was plainly aware of the rights it now contends for. It asserted them and unilaterally exercised them. It even re-considered them and adjusted its deductions”;
d.“The Defendant was not otherwise a company that failed to advance and assert its own interests. Why it stopped asserting and exercising them is unknown”;
e.“there is no shortage of possible reasons for the failure to deduct amounts”.
103Mr Noonan submitted that weight should be given to the evidence of AGS’s directors that “Belgravia’s executives were insisting on the payment of rent and water charges; and there was no agreement to cease the deduction of rent and water charges”. In those circumstances, Mr Noonan submitted, it is unlikely Belgravia’s executives would have “decided to stop deducting the rent and water charges whilst telling AGSA the opposite”.
104Mr Noonan submitted that it was appropriate to infer “that Belgravia’s mistake of fact arose out of the coinciding handovers of the Spring Park accounts file which occurred in and after April 2008, and/or knowledge of the area managers and/or chief executive officers (as appropriate) as to Belgravia’s entitlement to make deductions under the [Dingley] Agreement”.
105I am unpersuaded by Mr Noonan’s submissions and accept those made by Mr Stuckey. I do not accept that the facts referred to by Mr Noonan justify the drawing of the inferences he suggests. There is an absence of evidence, in circumstances where Belgravia bears the onus of proof and chose to call no further evidence.
106In David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 (“David Securities”) at page 368, the plurality (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ) was not prepared to accept the trial judge’s finding that the relevant payment was made under a mistake (of law), stating that, “we are not satisfied the evidence warrants the drawing of such an inference”.
107In David Securities, the trial judge’s finding was made “in the context where he considered that moneys paid under a mistake of law were not recoverable”. The High Court, having reached a different view on the relevant legal principles, considered that the matter should be remitted to the trial judge for reconsideration.
108The issue in the present case is whether the failure to deduct the rental increases or water charges arose from a mistake. It is suggested that this was a mistake of fact resulting from an administrative oversight. There is no suggestion that Belgravia made a mistake of law. In my view, no mistake has been established.
Deductions permitted to be made by Belgravia under the Dingley contract
109Belgravia’s entitlement to deduct amounts from the net green fees of the Dingley facility arises pursuant to clause 1 of Schedule D of the Dingley Agreement. That clause was inserted after the Variation Agreement had been entered into by Sports Australia with Parks Victoria on 8 July 1999.
110The Variation Agreement included clauses which increased the fees that had been payable under the Management Agreement for the Dingley site (clause 17(a)) together with “an additional $8,000 per annum” in respect of the Dingley facility (clause 31). Both fees would be renewed annually (clause 17(b)).
111As a matter of construction of clause 1 of Schedule D, Mr Noonan submitted that:
a.“any increase in rental as set out in the Variation Agreement” applied not only to the rental increases constituted by the “additional $8,000 per annum” applicable to the Dingley facility, but also to the rental increase for the Dingley site overall;
b.“any charges levied in respect of water supply and consumption” also applied to the Dingley site overall and were not restricted to water charges which related to usage for the Dingley facility.
112Mr Stuckey made the following submissions:
a.clause 1 of Schedule D “deals with the calculation of ‘net green fees’ for the adventure golf course, which are calculated as the gross adventure golf green fees less certain amounts”;
b.therefore, “one would expect any deduction to be an expense that related to the generating of the adventure golf green fees”;
c.as regards the “rental” increases deduction, “the deductions are identified as ‘any increase in rental as set out in the Variation Agreement”;
d.however, “the Variation Agreement makes no mention of rent at all. Presumably the reference has been loosely drawn and reference is intended to be to management fees”;
e.“the literal plain language does not identify any increase in rent at all”;
f.the “natural construction of the expression [“increase in rental as set out in the Variation Agreement”] is to the increases in the management fees for the adventure golf course (whose net fees are being calculated) and not to increases in the fees for the 9 hole golf course, whose fees are not being calculated”;
g.as regards the “water charges”, the clause in the Schedule “does not refer to the Variation Agreement in relation to water charges”;
h.however, clause 1 should be construed as referring to water “charges in the same differentiated way” as “rental increases”;
i.“it makes no commercial sense for the term ‘water charges’ to be construed as referring to all water charges [Belgravia] is liable for”;
j.“some words of limitation must be inferred or it could refer to water charges at every facility [Belgravia] operated”;
k.the water charges must be “simply those relevant to the task at hand: calculating the net adventure golf fees”.
113It is also appropriate to take account of the following further matters:
a.until the discovery process in the present proceeding, AGS did not have access to the Management Agreement or the Variation Agreement;
b.only Belgravia had knowledge of how the “rental” (management fees) were charged by Parks Victoria and how water usage was recorded and charged for the Dingley site;
c.by clause 31 of the Variation Agreement, Belgravia was to be charged “an additional $8,000 per annum” commencing 3 years “after the opening date” of “the Adventure Golf course” [the Dingley facility]. This was a (rental) increase (to be reviewed annually) specific to the Dingley facility and not to the Dingley site overall.
114In these circumstances, I consider that the construction advanced by Mr Stuckey is to be preferred. As regards increases of rental, the words in clause 1(a) have no meaning without reference to the Variation Agreement. That does not refer to “rental”. It is clear from the context, however, that the parties were generally referring to the payments made by Belgravia to Parks Victoria to occupy the Dingley site.
115However, as clause 1 of Schedule D of the Dingley Agreement related to the calculation of AGS’s share of the “net green fees” from the Dingley facility, and the Variation Agreement specifically provided for an “additional $8,000 per annum for management fees” in respect of the Dingley facility, I consider that the proposed deduction for rental increases related to the $8,000 management fee and any revisions of that fee. Further, the fee itself would not become payable until the expiry of three years after the “opening date” of the Dingley facility.
116What is meant by the words “any charges levied in respect of water supply and consumption” in clause 1(b), is also not clear on a plain reading. In my view, a similar conclusion is appropriate in this matter as for the construction of clause 1(a), and the words “water supply and consumption” should be limited to the charges relating to the Dingley facility and not to the whole of the Dingley site.
117The following are my reasons for this conclusion:
a.clause 1 of Schedule D related to the calculation of AGS’s share of the “net green fees” for the Dingley facility, and the appropriate deductions to be taken into account;
b.the deduction for “rental increases” clearly applied to the additional charge of $8,000 per annum specifically relating to the Dingley facility. It is likely therefore that the “water charges” deduction would have a similar limitation;
c.it is unlikely that the parties intended the water charges to be deducted, to be those relating to any other site apart from Dingley. I note that the monthly payment statements sent by Belgravia to AGS recording deductions of water charges are net income statements for both the Maroondah and Dingley sites;
d.apart from the Dingley facility, the Dingley site contained a nine hole golf course operated by Belgravia with no reference to AGS. On the other hand, AGS had direct responsibilities, for major maintenance and course development, which would significantly impact on the operation of the Dingley facility;
e.it is likely that the water requirements for the Dingley facility would be substantially less than the requirements of a nine hole golf course;
f.separate metering of the water usage for the different operations on the Dingley site was unlikely to have created significant difficulties.
Defence of “change of position”
118Even if payments were made by a mistaken failure to make appropriate deductions, Mr Stuckey submitted that, “In this case the payments were made in the aftermath of the dispute that came before the deductions stopped. Thereafter the ‘non-deductions’ continued for many years. The Plaintiff made major commercial decisions on the apparent state of financial returns, and did so in its dealings with the Defendant. It is respectfully submitted that it is not unjust for the Plaintiff to retain the sums where it has passed up commercial opportunities in the belief that its return on its investment was as it appeared”.
119Mr Noonan referred to clause 24 of the Dingley Agreement which provides that, “Any delay or omission on the part of either party to exercise or avail itself of any right, remedy, power or privilege hereunder does not operate as a waiver of any breach or default by the other party”. He submitted that, therefore, “any delay or failure by Belgravia to deduct rental increases and water charges, has not waived its entitlement to recover these amounts from AGSA”.
120Mr Noonan submitted that, “AGSA’s evidence rose no higher than that it might have considered purchasing the Spring Park facility [emphasis added]. However, given the contrary evidence that the requirement to manage the golf course was the primary impediment, the only available conclusion is that there was no material reliance on the question of the water and rent charges. Similar the water and rent charges would not have affected AGSA’s ability (if true) to improve the running of the business and should not be considered a factor”. Mr Noonan submitted that, “In considering whether the parties changed their position, the Court should look at all the circumstances rather than direct self serving assertions of reliance”.
121Each of AGS’s directors gave evidence that, if they had been aware that Belgravia would be claiming the additional amounts for rental and water charges, they would probably have purchased the right to occupy the Dingley site when it was offered to AGS by Belgravia’s CEO Mr Johnston in 2011. AGS had been offered both the Dingley site and the Maroondah site. AGS had proceeded with the purchase of the Maroondah site from Belgravia, but had declined the offer to purchase the Dingley site.
122In an affidavit affirmed on 17 October 2016, Mr Webb stated that AGS “considered both sites and opted to buy the rights to the Maroondah site only. Had [AGS] been aware of the additional costs that [Belgravia] now seeks to recover in relation to the [Dingley] facility, it might have also taken over the [Dingley] facility. [AGS] was aware that there would be financial improvements to be made at both sites and in comparing the financial return for the facility with buying the rights to the facility, additional expenses of the magnitude sought in [Belgravia’s] Amended Defence and Counterclaim could have tipped the decision in favour of buying the rights to operate the [Dingley] facility also. Had [Belgravia] sought to pass those costs on [AGS] may well have exercised its rights differently”.
123When each of AGS’s directors gave evidence they said that if they had known that, if they did not purchase the right to occupy the Dingley site, AGS would have made significant deductions for rent and water charges from AGS’s share of the net green fees, they would had opted to purchase the Dingley site.
124Mr Webb said that he “would’ve taken over Spring Park” [the Dingley site] if he had been aware that Belgravia was going to continue to deduct those sums. Mr Webb said that he was confident that AGS would have been able to “do a lot better” than Belgravia as the Dingley site was poorly run, with a “distinct lack of maintenance [and] the poor choice of maintenance people”.
125Mr Webb said that in relation to the Maroondah site, AGS “subsequently demonstrated” that it could “do a lot better than Belgravia”. He said, “The figures there are appreciably better on both the mini golf and on the driving range”.
126In cross-examination, it was suggested to Mr Webb that in his affidavit affirmed in October 2016, he had said that, had Belgravia “sought to pass those costs [of the rental and water charges] on, [AGS] may well have exercised its rights [in regard to purchasing the Dingley site] differently”, because he “can’t equivocally say that it would’ve made a difference”. Mr Webb replied, “I would’ve taken them over; I’m unsure of the other two directors”.
127Mr Ulph said that, “The financial return of Dingley would have been very compromised from our point of view if those charges had been imposed on us. We believed that we could have improved the performance of Dingley Village adventure golf substantially had we been operating it, so I think there’s every chance that my thoughts at the time would have been quite different in terms of whether to take over Dingley or not…The difference would have been to potentially purchase it. I was somewhat reluctant to operate a golf course because I had no experience in that, but I think we’d shown that we had enough business nous that probably we could have done it and I would have considered doing it”.
128In cross-examination, Mr Ulph said AGS had decided not to purchase the Dingley site based on the information about “financial performance of the site” provided by Belgravia. Mr Ulph said that AGS’s “remuneration base” from the Dingley facility “versus what it would have been if these costs had been pushed through, would have been substantially different. So yes I believe as a person in business, I would easily have made a different decision”.
129Mr Brown said that, when the decision to purchase Maroondah and not Dingley was made, it was considered by the AGS directors that “it would be easy to run the [golf driving] range at Maroondah”, although they thought “the golf course [at the Dingley site] was too hard to run”.
130Mr Brown said that if he had the knowledge that AGS would be paying the additional costs, “I would have wanted to run it [Spring Park golf course] knowing that we would be able to make it profitable and the figures that they showed us said that it was marginal”.
131In cross-examination, Mr Brown conceded that if AGS had purchased the Dingley site from Belgravia that AGS “would have been obliged to pay 100 per cent of the water costs” rather than only paying 45%. Mr Brown said that, at that stage, the water costs were unknown and that was a concern particularly as “there was a drought happening”.
132Recently, Mr Brown had become aware of what Belgravia was paying for water at that time. If that had been known in 2011, “we would have factored that in and it would have been less than our anticipated figure so that would have made it more profitable for us and we would have run it”.
133The application of the relevant legal principles to the facts of this case is not an easy matter. In David Securities at page 384, the plurality said that payments made under a mistake of law or fact “should be prima facie recoverable [although] a defence of change of position is necessary to ensure that enrichment of the recipient of the payment is prevented only in circumstances where it would be unjust”.
134The judgment continued that, “the defence of change of position is relevant to the enrichment precisely because its central element is that the defendant has acted to his or her detriment on the faith of the receipt”. The judgment referred to the fact that in other jurisdictions overseas where the defence operates, “the common element in all cases is the requirement that the defendant point to expenditure or financial commitment which can be ascribed to the mistaken payment [as opposed to the defendant having] simply spent the money received on ordinary living expenses”.
135In David Securities, the High Court did not have before it factual findings from the trial court which would have enabled it to apply these principles. The High Court reconsidered the issue in Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd [2014] HCA 14 (“Hills Industries”). The principles enunciated by the High Court in Hills Industries were applied by the Court of Appeal in Southgate Pty Ltd v Vescovi [2015] VSCA 117.
136In Hills Industries, the High Court applied the defence to circumstances where the “detriment” could not be readily quantified. Nevertheless, the High Court held that the defendants had “suffered an irreversible detriment when they decided, on the faith of the receipt of the payments made to them by [the plaintiff], not to pursue their legal remedies” against their client and the companies he controlled. The client had fraudulently induced the plaintiff to make the payments to the defendants, who had no knowledge of the fraud.
137The client and his companies had trading accounts with the defendants. The defendants believed the payments made by the plaintiff were to reduce the indebtedness of the client’s companies to the defendants for goods previously supplied. After receiving the payments, one defendant “withdrew a threat of legal action and recommenced trading” with the companies, and the other defendant “agreed to file consent orders setting aside default judgments supporting garnishee orders against [the companies and their directors], and resumed trading”.
138In the present case, if a relevant mistake had been established, Belgravia would, prima facie, be entitled to recover the payments made to AGS in excess of its contractual entitlement to the net green fees after the appropriate deductions.
139AGS says however, that it had suffered an “irreversible detriment on the faith of the receipt of the payments made by Belgravia”, because it would have entered into an agreement with Belgravia in 2011, as it had in relation to the Maroondah site, for the acquisition of the Dingley site.
140I consider that, if a mistake were established, the defence of change of position would fail. I consider that this conclusion is a consequence of the following findings:
a.it is likely that the directors of AGS would have given the purchase of the Dingley facility more serious consideration, if the return to AGS from its share of green fees had been significantly reduced by deductions for rent and water charges;
b.however, it is uncertain whether Belgravia would have offered the Dingley site for sale (or at the price it did) if its income from the Dingley facility had, for a number of years, been substantially more;
c.under the Dingley Agreement, rental and water charges would be deducted in calculating AGS’s share of the net green fees. After taking over the Dingley site, although AGS would then be entitled to the whole of the income, the payment of rental and water charges would be its sole responsibility;
d.in 2011, the Dingley Agreement only had approximately four more years to run;
e.the Dingley facility, and likely Spring Park as well, were “in great need of attention in 2015” and required “substantial capital improvements”. No evidence was adduced to demonstrate the financial viability of AGS operating the Dingley site, particularly with the likelihood that its occupation of the Dingley site would terminate in November 2015, or soon thereafter;
f.although the Maroondah site, after being taken over by AGS, apparently operated more profitably than under Belgravia, it is difficult on the evidence to validity make any comparison with what would have been likely with the Dingley site;
g.in these circumstances, it is difficult to form any concluded view as to the likelihood that AGS would have purchased the Dingley site, or if it had, whether that would have had a better financial outcome than continuing with the Dingley Agreement for a further four years or so.
Quantum of the counterclaim
141In his final submissions, Mr Noonan set out the calculation of the quantum of the counterclaim. The calculations were based on the following assumptions:
a.because of a limitation of actions defence, Belgravia is “only entitled to recover amounts it has incurred between 4 March 2010 [6 years before the issue of the writ] and 17 November 2015 [the date the Dingley Agreement terminated]”;
b.the figures used for the calculation of rent and water charges included all included rent and water charges in respect of the whole of the Dingley site, and not simply those related to the Dingley facility;
c.the water charges were capped at the figure of $8,999 from 1 January 2007, as agreed by Belgravia’s offer dated 30 November 2006 and AGS’s solicitors acceptance on 10 September 2007;
d.AGS was “required to pay 45% of the increased rent and water supply and consumption charges”.
142Upon the conclusions I have reached in relation to issue of mistake, Belgravia’s counterclaim would fail. If Belgravia succeeded on the issue of mistake, but my view of how clause 1 of Schedule D should be interpreted were correct, the calculation of the amount to which Belgravia is entitled would require recalculation, probably on the basis of further evidence.
Proposed orders
143The following proposed orders follow from my conclusions:
a.judgment for the defendant against the plaintiff that the plaintiff’s claim be dismissed;
b.judgment for the plaintiff against the defendant that the defendant’s counterclaim be dismissed.
144I will hear further from the parties in relation to the question of costs.
- - -
Certificate
I certify that these 35 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 22 March 2017.
Dated: 22 March 2017.
Carla Cianfaglione
Associate to His Honour Judge Anderson
1