Allen v Wilson
[2023] ACTSC 10
•27 January 2023
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Allen v Wilson |
Citation: | [2023] ACTSC 10 |
Hearing Dates: | 12-15 September 2022, 12 October 2022 |
DecisionDate: | 27 January 2023 |
Before: | McWilliam AsJ |
Decision: | (1) Judgment is entered for the plaintiffs. (2) On the claim for indemnity arising from payments made under the guarantee to Namadgi Pty Limited dated 30 May 2016, the third defendant is to pay the first and third plaintiffs jointly the sum of $103,767.68, plus interest on the said amount in the sum of $9,094.01. (3) On the claim for contribution under the guarantee dated 30 May 2016, the first and second defendants are jointly liable to pay the sum of $51,883.84 plus interest in the sum of $3,458.11 to the first plaintiff and third plaintiff. (4) Any payments made to the first and third plaintiffs by: (a) the third defendant under Order 2, or (b) the first and second defendants under Order 3, reduce the liability of the other to the first and third plaintiffs by the same amount as the payment made by that defendant. (5) On the claim arising out of the loan agreement executed on 11 November 2016, the first and second defendants are liable jointly and severally to pay the sum of $2,354 plus interest in the sum of $1,463.83 to the first plaintiff. (6) In addition to the payments to be made under orders 2, 3 and 5 above, the first and third defendants are to pay equitable compensation as follows: (a) $9,950 to the first plaintiff, and (b) $11,500 to the second plaintiff. (7) The defendants are to pay the plaintiffs’ costs of the proceedings. (8) If any party notifies the Court that an alternative costs order is sought within 7 days of the publication of these reasons, order 7 is stayed pending further order. |
Catchwords: | CONTRACT – JOINT VENTURE – where funds advanced for property development – whether joint venture existed – whether a contribution to a joint venture was by loan – whether a loan agreement executed after funds were advanced was enforceable – where joint venture did not contemplate events which have occurred – whether court should make equitable adjustment EQUITY – GUARANTEE – contribution – where principal borrower defaulted on a loan and lender called on guarantee – where defendants were joint guarantors but did not contribute to repaying the lender – whether a right of contribution and indemnity arose for the amounts paid |
Legislation Cited: | Court Procedures Rules 2006 (ACT) |
Cases Cited: | Bakers Investment Group (Australia) Pty Ltd v Caason Investments Pty Ltd [2014] VSC 598 Breusch v Watts Development Division Pty Ltd (1987) 10 NSWLR 311 United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1 |
Parties: | John Thomas Allen (First Plaintiff) Allegro Financial Pty Ltd (Second Plaintiff) Allegro Beach Pty Ltd (Third Plaintiff) Kevin Wilson (First Defendant) Justin Wilson (Second Defendant) Burra Unity Pty Ltd (Third Defendant) |
Representation: | Counsel C McKeown (Plaintiffs) K Pattenden (Defendants) |
| Solicitors HWL Ebsworth (Plaintiffs) Gabbedy Milson Lee (Defendants) | |
File Number: | SC 459 of 2018 |
McWilliam AsJ:
Mr John Allen and Mr Kevin Wilson had known each other for about 15 years. They had dreams of developing residential property in a particular property market in Queensland. Mr Allen was a mortgage broker who was able to supply some money. Mr Wilson was a builder and former mortgage broker, able to supply the skill. Land was purchased, but ultimately, they could not get the finance together to proceed with the different developments they had planned. Mr Allen now claims he and two associated corporate plaintiffs, Allegro Financial Pty Ltd (Allegro Financial) and Allegro Beach Pty Ltd (Allegro Beach) are owed money.
The plaintiffs claim they loaned or guaranteed money (or both) to the three defendants, being Mr Wilson, his brother Justin Wilson (referred to hereafter as Justin to avoid confusion), and an associated family trust company, named Burra Unity Pty Ltd (Burra Unity). Either Kevin Wilson or Justin has been the director of Burra Unity at various times.
Mr Wilson disputes any loan. He claims the money was provided by Mr Allen pursuant to a joint venture which failed. As a result, he says the moneys provided are part of the losses of the joint venture and he is not liable to repay them to the plaintiffs. This case requires the Court to unravel what happened and to work out what the various legal arrangements between the two men and their associated corporate entities were.
The plaintiffs’ claim
Proceedings were commenced on 10 October 2018. However, the case evolved during the hearing and ultimately, the plaintiffs relied upon a Further Amended Statement of Claim filed in Court with leave on 12 October 2022. Mr Allen is the first plaintiff and sole director and shareholder of the second and third corporate plaintiffs.
It is claimed that in about March 2016, there was a verbal agreement between the first plaintiff, Mr Allen and the first defendant, Mr Wilson. The nature of the alleged agreement was that Mr Wilson would build or cause to be built a residence upon a block of land owned by Mr Allen, namely Lot 485, 5-7 The Peninsula, Banksia Beach, Queensland (Lot 485).
In return, Mr Allen would provide monetary advances to Mr Wilson to purchase the land next door, being Lot 486, 9-11 The Peninsula, Banksia Beach, Queensland (Lot 486) and for other commercial activities.
The development of the land on Lot 485 was to be in accordance with certain building plans agreed upon by Mr Allen and Mr Wilson.
It is alleged to be a term of the oral loan agreement of March 2016 that Mr Allen would make payments at the request of Mr Wilson. There is no pleaded allegation about when those advances were to be repaid.
In accordance with that pleaded oral agreement, Mr Allen claims to have made various advances or payments at the request of Mr Wilson amounting to the sum of $260,695.24.
With part of the monies advanced, Burra Unity exchanged contracts for the purchase of Lot 486. In order to complete the purchase by 31 May 2016, a loan was required. It was provided on 30 May 2016 from a financier named Namadgj Pty Ltd (Namadgi) described by the parties as the “Namadgi loan”. The Namadgi loan was for $600,000, which included the balance of the purchase moneys for Lot 486 and the first 3 months’ capitalised interest payments in advance. The term of the loan was limited to 6 months.
The Namadgi loan gives rise to the first cause of action pleaded by the first and third plaintiffs. The first and third plaintiffs plead that, along with the Wilson brothers, they jointly guaranteed the loan from Namadgi to Burra Unity. On 12 October 2016, when the term of the facility was about to expire and (inferentially) when the interest payments had started to become due and payable, Namadgi called on the guarantee and later issued a default notice, following which Lot 486 was sold. Mr Allen and the third plaintiff collectively paid $103,767.68 to Namadgi, and the balance of the loan was paid out with the proceeds of sale of the property. They claim $51,883.84 from the other two guarantors, being 50% of the sum paid, on the basis that each guarantor is liable to contribute equally to making good the guarantee.
Mr Allen then says that in November 2016, Mr Wilson asked him to make a further advance of $2,354.80. He refused to do so unless Mr Wilson, his brother and Burra Unity signed what was said to be a written loan agreement that acknowledged the sums that had already been advanced by Mr Allen at the request of Mr Wilson.
Mr Allen asserts that it was agreed between him and the three defendants as follows:
(a)a Deed would be drawn up witnessing such an agreement;
(b)The Deed would operate retrospectively in the sense that it referred to payments already made by Mr Allen to the defendants;
(c)The Deed would fix a date for repayment of the total owing, being the payments already made and the new advances to be made after the execution of the Deed;
(d)The Deed would bind all three defendants because the monies already paid and those to be advanced were to facilitate commercial activities involving all three defendants.
Mr Allen then says the plaintiffs and the defendants executed a Deed of Agreement dated 17 August 2016. The recitals included that the lenders were the first and second plaintiffs and the borrowers were the three defendants, that the amount of the “loan” to the borrowers was $265,000 (defined in the document as the “borrowed sum”), and that such sum was to be repaid 185 days from the date of the Deed of Agreement, with interest to accrue at the rate of 10% per annum until the sum was repaid.
The second cause of action is based upon that document evidencing the “loan” to the three defendants. Following demand made on 25 January 2018, it is claimed that no payments have been made to any of the plaintiffs by any of the defendants. Mr Allen and Allegro Financial seek repayment of the entirety of the borrowed sum together with interest.
The defendants’ defence and counter-claim
The defendants admit there was an oral agreement in March 2016 concerning the development of residential dwellings on Lot 485 and Lot 486, but they say the terms of the agreement were very different.
In their Second Amended Defence and Counterclaim, the defendants allege the arrangement (which they describe as the “Banksia Joint Venture Agreement”) was as follows:
(a)Mr Allen would fund the construction of residential dwellings on Lots 485 and 486, with Lot 485 to be a single dwelling and Lot 486 to be a duplex;
(b)Mr Wilson would provide his building licence and labour at no cost to Mr Allen;
(c)The works were to be conducted in accordance with plans agreed upon by Mr Allen and Mr Wilson;
(d)Upon completion of the development, Lot 486 would be sold and Mr Allen’s funding of the construction costs of both Lot 485 and Lot 486 would be repaid from the sale proceeds;
(e)Lot 485 would be transferred to Mr Allen for nominal value and be his share in the profit of the venture;
(f)Mr Wilson would be entitled to the profits from the sale of the residential development on Lot 486.
The defendants plead a second joint venture agreement between Mr Allen and Mr Wilson in April 2016, in relation to the development of a site on Benabrow Avenue, Bellara (the Bellara Joint Venture). The terms of that agreement were that Mr Allen and Mr Wilson would contribute equally to the purchase and development of the site and share equally in the profit from the development of that site. They created a corporation called Freedom4All Pty Ltd, which was to be the landholding entity for the Bellara property and in which Mr Allen and Mr Wilson were each 50/50 shareholders.
Initially, there was a claim by the defendants for breach of the agreement relating to the Bellara Joint Venture. That claim, along with a claim for breach of the Banksia Joint Venture agreement, was dismissed with costs on the final day of hearing. I have included a reference to it because the defendants’ case is that amounts totalling $260,695.24 were provided to the first and third defendants for the purposes of both the Banksia Joint Venture and the Bellara Joint Venture. They say that the amounts were capital contributions to those joint ventures, and cannot be claimed from the defendants (individually or collectively) as a debt.
In relation to the claim for contribution towards satisfying a coordinate liability arising out of the joint guarantee, the defendants deny that they are indebted in the manner claimed, but in the alternative, say that Mr Allen and Allegro Beach Pty Ltd are only entitled to claim 50% of the monies paid to satisfy the liability, pursuant to the equity of contribution.
Issues for determination
From these pleadings, the following issues emerge for determination:
(a) Whether the defendants are liable to repay the moneys paid in respect of the guarantee of the Namadgi loan (Issue 1);
(b) Whether a joint venture agreement existed between Mr Allen and Mr Wilson (Issue 2);
(c) Whether the Deed of Agreement signed in November 2016 but dated August 2016 is valid and enforceable for the $260,695.24 claimed (Issue 3);
(d) The consequences flowing from the above findings (Issue 4); and
(e) Whether interest is payable (Issue 5(a)) and costs (Issue 5(b)).
Issue 1: Are the Defendants liable to Mr Allen and Allegro Beach as joint guarantors of the Namadgi loan?
This claim was not properly pleaded by reference to the correct plaintiffs and amounts payable until midway through the final hearing. The defendants argued the pleading still does not name the correct plaintiffs because although Mr Allen was a joint guarantor, it was Allegro Beach who paid the monies for which he is claiming contribution.
Equitable principles applying to a claim for contribution
In McLean v Discount and Finance Ltd (1939) 64 CLR 312, Starke J referred at 341 to the equitable principle relied upon by Mr Allen and Allegro Beach here, as follows:
…whenever a surety has been required to pay the principal debt or liability or more than his just share or proportion of the debt or liability, then he is entitled to contribution from his co-sureties in respect of the excess. The equity arises from the fact that the parties are co-sureties of the same principal debt or liability… (citing Dering v Earl of Winchelsea (1787) 1 Cox 318).
The proportions or the “just share” is equal as between the joint guarantors or co-sureties, as explained in Burke v LFOT Pty Limited [2002] HCA 17; 209 CLR 282 at [38] (references omitted, emphasis added):
Both common law and equity give a person the right to obtain contribution to a payment made by that person in discharging "a common obligation" that is owed by that person and others. In determining whether there is "a common obligation", the traditional test is whether the liability of each party "is of the same nature and to the same extent”. … [T]he equitable principles now cover the field. Those principles are based on the equitable doctrine of equality. When a person pays more than his or her share of a common monetary obligation, the payment pro tanto discharges the obligation of all who owe the common obligation. In accordance with the maxim that equality is equity, equity requires the common burden to be shared equally so that none of those owing the common obligation will pay more than his or her share of the burden. An order of contribution prevents the injustice that would otherwise flow to the plaintiff by the defendant being enriched at the plaintiff's expense in circumstances where they have a common obligation to meet the liability which the plaintiff has met or will have to meet.
Both cases were cited more recently in Lavin v Toppi [2015] HCA 4; 315 ALR 366 where a detailed discussion of coordinate liabilities and the right to contribution in equity was undertaken by the High Court at [36]-[54].
As between a guarantor and the principal debtor, a party who has made payments under a guarantee may, as a general rule, recover from the principal debtor the amount so paid by him. In Sunbird Plaza Pty Ltd v Maloney [1988] HCA 11; 166 CLR 245, Mason CJ stated at 254:
Once default has occurred, the party having the benefit of the guarantee can call on the guarantor to honour his promise before calling on the principal contracting party to perform his obligation, but the guarantor, having honoured his promise, can hold the principal contracting party to account by virtue of the doctrine of subrogation. …
Do the general principles operate here?
The evidence (the Loan Facility Agreement executed by the relevant parties) established that:
(a)Burra Unity was the borrower on the Namadgi loan, for the principal amount of $600,000.
(b)There were four guarantors of that loan: Mr Allen, Allegro Beach Pty Ltd, Mr Wilson and Justin.
Justin’s involvement was clearly only to facilitate his brother’s commercial endeavours. The evidence was that at the time, Mr Wilson had a bad credit rating and could not be a director of a company. Justin was initially the director of Burra Unity and was therefore required to personally guarantee the loan made to it. However, he had no involvement in the daily operation of Burra Unity or the development of Lot 486 that the loan was taken out to finance.
Mr Robert Gunning, a director of Namadgi, gave evidence that Burra Unity did not repay the loan on time (when the termination date specified in the finance agreement expired) and Namadgi called upon the guarantee on 12 October 2016. The call upon the guarantee was admitted by the defendants.
Mr Allen paid $37,588.35, as evidenced by his affidavit and the Westpac bank statement in evidence, made up of 4 separate payments on the following dates:
a. 13 October 2016 $8,054.00
b. 11 November 2016 $8,663.00
c. 1 December 2016 $9,513.04
d. 30 December 2016 $11,358.31
Counsel for the defendants pointed out that the bank statement was in the name of Allegro Financial, not Mr Allen individually. Because the pleading only names Mr Allen as solely paying the above amounts, the defendants submitted they are not liable to contribute.
In the reply to the defence, filed 23 August 2022, it is pleaded that both Mr Allen and Allegro Financial contributed to the call on the guarantee by Namadji. Further, Allegro Financial was the corporate trustee, of which Mr Allen was the sole director and shareholder. The guarantee given to Namadgi was Mr Allen’s personal surety, but it is clear he used Allegro Financial to do his bidding in that regard. Appreciating that the creation of a corporate structure results in a separate legal personality, I accept that Allegro Financial paid the money on Mr Allen’s behalf, with his consent and indeed, at his sole direction. On doing so, Mr Allen incurred a liability to Allegro Financial.
Mr Allen was the person to whom Namadgi was entitled to look for payment. Mr Allen caused the payment to be made with funds to which he would otherwise have been able to use at his sole discretion and control. The fact that Mr Allen caused money to be taken from a bank account that was not in his individual name in order to satisfy his personal liability to Namadgi under the guarantee does not then mean that he cannot look to recover the contribution under the guarantee.
The evidential onus does not require the plaintiffs to prove there was a transfer by Mr Allen of money from a bank account in his personal name, before it may be accepted that Mr Allen has paid his personal contribution and is entitled to recovery under the guarantee. The claim is poorly pleaded, but it would be somewhat artificial to require Allegro Financial, a company which acts solely through Mr Allen, to first formally seek repayment of the monies listed from Mr Allen personally before Mr Allen may then lawfully recover from the defendants. The accounting records of Allegro Financial which may have recorded the arrangement between the individual and the corporate entity he controlled were not in evidence. I accept Mr Allen is ultimately the person who has suffered the loss, even though the claim should have pleaded that the loss was his present personal liability to repay Allegro Financial.
If I am wrong about that, I would have given leave to Mr Allen and Allegro Financial to amend their claim to seek the amounts claimed by Mr Allen personally, in the same manner as the claim was amended during the trial to add the third plaintiff, Allegro Beach, when it was established that it was the correct corporate entity who was the guarantor and paid part of the amount called upon under the guarantee. Any prejudice for such an amendment would have been able to be remedied by costs.
In December 2016, Namadgi issued a default notice which triggered the sale of Lot 486. Allegro Beach paid $66,179.33 on 5 March 2017.
The property was sold on 29 June 2017 and the settlement statement in evidence records that the Namadgi loan was paid out on that date, with a cheque for $604,935.93. The defendants did not dispute that the money paid to Namadgi was properly payable under the guarantee. The evidence of the director of Namadgi established that the lending occurred through a broker and the repayment arrangements were plainly at arm’s length.
There was nothing to take this case out of the ordinary application of the general principle referred to above. It is clear that the liability of the Wilson brothers was of the same nature and the same extent as the liability of Mr Allen and Allegro Beach, and that the money has been paid as claimed.
The collective liability of the guarantors was the amount paid to discharge the debt by the first and third plaintiffs, namely: $103,767.68. The share of each guarantor is a quarter of that sum. Accordingly, each was liable to contribute $25,941.92.
If that contribution (being each guarantor’s share) is subtracted from the amounts each of the first and third plaintiffs actually paid, the first and second defendants are jointly liable to pay the sums that were paid in excess of $25,941.92. That means they are jointly liable to pay $11,646.43 to Mr Allen, and $40,237.41 to Allegro Beach.
Further, Burra Unity as the principal borrower is also liable to indemnify Mr Allen and Allegro Beach. Accordingly:
(a)Burra Unity is liable to pay the entire amounts paid by the plaintiff guarantors; that is: $37,588.35 to Mr Allen and $66,179.33 to Allegro Beach. That will discharge the co-contributor liability of the Wilson brothers that has been found above.
(b)If the Wilson brothers pay Mr Allen and Allegro Beach the amounts specified above by way of contribution, Burra Unity remains liable to pay the $51,883.84 shortfall, (being $25,941.92 to each of Mr Allen and Allegro Beach). Burra Unity would also then be liable to repay the Wilson brothers if they pay Mr Allen and Allegro Beach, although that is outside the scope of the proceeding.
Issue 2: Was there a joint venture in respect of Lots 485 and 486?
For reasons that follow, the evidence establishes that a joint venture was created between Mr Allen and Mr Wilson from April 2016, when Lot 486 was purchased. Before dealing with the evidence that leads to that conclusion, it is helpful to start with an understanding of what constitutes a joint venture. Fundamentally, it is “a joint undertaking for mutual commercial gain” being words used by Crennan J in Gibson Motor Sport Merchandise Pty Ltd v Forbes [2005] FCA 749 (Gibson) at [81] and repeated in Thompson v White [2006] NSWCA 350 (Thompson) at [94]. The joint venture extended to the pair’s corporate entities, being Allegro Financial and Burra Unity. The venture did not extend to Allegro Beach. Nor did it extend to Justin, whose only involvement was essentially to provide his brother with the benefit of his good credit rating when third party financiers were involved, which extended to his becoming a director of Burra Unity, and assisting his brother’s endeavours by guaranteeing the financial obligations of Burra Unity or his brother.
Principles for determining whether a joint venture exists
The creation of a joint venture was described in concise language in United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1 (United Dominions) at 10 as follows (emphasis added):
The term "joint venture" is not a technical one with a settled common law meaning. As a matter of ordinary language, it connotes 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. Such a joint venture (or, under Scots' law, "adventure") will often be a partnership. 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. Thus, where one party contributes only money or other property, it may sometimes be difficult to determine whether a relationship is a joint venture in which both parties are entitled to a share of profits or a simple contract of loan or a lease under which the interest or rent payable to the party providing the money or property is determined by reference to the profits made by the other.
In Gibson, Crennan J referred at [80] to a number of recognisable or common characteristics of joint ventures. Without the list below being taken either individually or in combination as matters necessary or sufficient to constitute a joint venture (a point made in Thompson at [94]), the features include:
(a)Participants hold proprietary interests in the assets of the joint undertaking, often, but not necessarily, as tenants in common.
(b)Participants exercise joint control of the undertaking.
(c)Participants contribute to the joint undertaking, not necessarily equally; such contributions may be disparate.
(d)Participants enjoy rights and assume obligations, which are often several and calculated by reference to ownership of shares and/or contributions made.
(e)Participants have a joint (or community of) interest in the performance of the undertaking’s purpose.
(f)Participants associate in the undertaking for mutual commercial gain, which can be mutual profit.
Because the plaintiffs in this case have pleaded a loan and not a joint venture, it is helpful to further explain that the provision of funds by way of a loan does not necessarily exclude the existence of a joint venture. In Thompson, Tobias JA (with whom Ipp and McColl JJA agreed) said this at [104] (emphasis added):
It was further submitted that Mr and Mrs White had advanced in excess of $300,000 by way of loan to the project, which told against it being a joint venture as those funds were not contributed as capital. In my view, his Honour correctly (at [85]) determined that the fact that those funds were advanced to Thompson by way of loan did not exclude them as a contribution to the joint venture. As his Honour observed, the joint venture structure required funds to be provided by way of loans and to be discharged from the gross proceeds of sale of the Seaforth property before the profit of the venture was calculated. This is consistent with the observation in the passage from the joint judgment of United Dominions … that each participant in a joint venture usually, but not necessarily, contributes money, property or skill. There is no reason in principle why the contribution of money must be by way of capital rather than by way of loan.
Mr Allen’s evidence
Mr Allen bought Lot 485 separately and before any communications with Mr Wilson. That purchase settled on 2 February 2016. He owned Lot 485 and intended to build a single house on it. He always expected to pay for his own home on Lot 485.
Mr Allen and Mr Wilson discussed a potential opportunity for Mr Wilson to buy the lot next door, being Lot 486. Mr Wilson said that if he could build three houses at once (being the duplex on Lot 486 and the single house on Lot 485), he could capitalise on the costs for the labour and that would create a huge saving.
Mr Wilson told Mr Allen that he would build a single house for Mr Allen on Lot 485 if Mr Allen would help him with the deposit and the funds to buy Lot 486. He is said to have told Mr Allen that they could “square everything up” in November 2016.
Mr Allen understood that as part of Mr Wilson building the house on Lot 485 “at cost”, Mr Allen was to pay for the building materials for the construction of Lot 485, and other aspects necessary for the construction of the premises on Lot 485, such as development applications.
The intention was that during the period from exchange of contracts on Lot 486 to completion of the purchase, Mr Wilson would get a development approval for the construction of a duplex on Lot 486. They believed this would increase the value of the land, and Mr Wilson could use that added value to secure the finance necessary to complete the purchase.
Mr Allen did not intend to benefit or share in the profits from the development of Lot 486. The benefit to him was the building of his house next door at cost.
Mr Allen paid a total of $16,000 in two separate amounts as the deposit for the purchase of Lot 486, with the last of those payments occurring on 8 April 2016.
Mr Wilson’s evidence
Mr Wilson’s view was that the original joint venture was “Lot 485 and Lot 486”. His evidence of the oral conversation they had was to the following effect:
(a) Mr Allen wanted Mr Wilson to build his house on Lot 485.
(b) Mr Allen invited Mr Wilson to Queensland to look at the area. Mr Wilson suggested they purchase the block next door, and that he would build a duplex on that.
(c) Mr Wilson said that if Mr Allen could fund it, he could build all three, constructing the house on Lot 485 at cost and then taking the profit from selling the duplex, and Mr Allen could get whatever funds he initially put in paid out of the sale of the duplex.
He disagreed with the characterisation of the arrangement as him helping Mr Allen with Lot 485 and Mr Allen helping Mr Wilson with Lot 486, but the two were not actually that far apart in what they thought the agreement was.
Conclusions from the evidence
It is sufficiently clear there was mutual assent to a joint undertaking which was manifested in the purchase of Lot 486, in the name of Burra Unity but with a deposit initially provided and then funds guaranteed by Mr Allen. The facts establish that there was an association of persons, primarily between Mr Allen and Mr Wilson, who in turn brought in their corporate vehicles and in Mr Wilson’s case, his brother. The parties became associated for a particular purpose, namely the development of Lots 485 and 486. There was a mutual commercial gain to be obtained, in that Mr Allen would achieve a built dwelling on land he owned at cost price, and Mr Wilson would receive the net profit from the development of Lot 486.
Although the parties did not put it in writing, from the evidence set out above, there was agreement:
(a)As to ownership of assets:
(i)Mr Allen was always to own Lot 485.
(ii)Mr Wilson or his associated corporate entity (Burra Unity) was to purchase Lot 486.
(b)As to contributions to the venture:
(iii)Mr Allen was going to contribute money, as follows:
1. Provision of capital in terms of funding the construction costs and purchase of materials for Lot 485;
2. Provision of money for the deposit on the purchase of Lot 486 (to be repaid from the gross proceeds of sale when Lot 486 was sold and therefore properly described as a loan); and
3. Provision of money (again to be repaid from the gross proceeds of sale) for the construction of a duplex on Lot 486 either from his own resources or with the assistance of a construction loan.
(iv)Mr Wilson was to contribute his skill by constructing a single dwelling on Lot 485 at cost and a duplex on Lot 486.
(c)As to timing:
(v)Lot 486 was to be developed by Mr Wilson at the same time as Lot 485 to achieve economies of labour, time and materials, thus achieving a profit.
(d)As to what would occur when the venture was complete (that is, when the development of Lots 485 and Lot 486 had been carried out):
(vi)Lot 485 would be retained by Mr Allen, who would end up with the benefit of a built house for cost price.
(vii)Lot 486 would be sold (for profit), at which point:
1. Mr Allen’s expenses for any funds that he put into Lot 486 would be repaid to him, and
2. The remainder of the profit from the sale of Lot 486 would be kept by Mr Wilson.
It will be apparent from what I have said about construction on Lot 486 that there is some ambiguity. At the time that contracts were exchanged for Lot 486, there was either no communication or a miscommunication about who would fund the construction of Lot 486. In part, that was because the pair anticipated that funding or finance would come through from somewhere. Either Mr Allen believed he would have access to funds (of $650,000) from a different development, or Mr Wilson believed that “everything [would] be sweet by November” and/or that a construction loan could be obtained through an increase in the value of the property by obtaining a development approval for a duplex on Lot 486 before then.
The evidence conflicts but I have not found it necessary to resolve the conflict because no one pleaded any fiduciary duty or breach of any joint venture agreement found in respect of Lots 485 and 486. The only real issue is whether there was one. There is sufficient certainty about the mutual assent between the two individuals and their associated entities, their common purpose and community of interest, and their respective contributions to find that the endeavour, properly characterised, was a joint venture. There is also sufficient certainty about Mr Allen’s contribution so far as Lot 486 was concerned. The money he was to contribute was on a basis that it would be repaid after Lot 486 had been developed and sold, as was the case in Thompson. That is, part of Mr Allen’s contribution was a loan.
Finally on the question of the joint venture, the evidence established that the parties gave no consideration to what would happen if the construction of the duplexes on Lot 486 did not proceed. That is, they did not discuss, nor impliedly make any provision for, who would bear the burden of any moneys lost or any liabilities if the joint venture did not result in an end product (being the duplex to be sold on Lot 486).
Issue 3: Is the Deed of Agreement signed in November 2016 valid and enforceable for the $260,695.24 claimed?
The November 2016 Agreement is a written document titled “Deed of Agreement” and dated 17 August 2016, between Mr Allen and Allegro Financial as “Lender” and Mr Wilson, Justin and Burra Unity as the “Borrower”. The date of the document is referable to a date when Mr Allen paid $170,000 over to the defendants, following the taking out of a personal loan from a private lender, Ms Rhonda Fleming.
It states as follows:
RECITALS:
The loan from the Lender to the Borrower is set out based upon the following terms:
CAPITAL
The sum of $265,000 will be lent from the Lender to the Borrower on the day on which this agreement is signed.
INTEREST
The loan is given to the Borrower on the basis of a 185 day loan term. Interest rate of 10% per annum will be applicable. The interest is calculated on a daily basis.
PAYMENT OF DEBTS
The payment of the loan will be required in full on the day in which the agreement ends.
TIME AND ATTENTION
The loan is to be for a maximum of 185 days. At this time if the loan is not repaid in full interest will continue at the agreed rate above and then legal action will be commenced to recover the money lent. This is unless both parties come to a mutual agreement for an extension of the time of the loan. The interest repayments will be made on a quarterly basis with the first payment falling due at 150 days from the initial drawdown. All payments from the Burra Unity account are personally guaranteed by Kevin Wilson and Justin Wilson.
Burra Unity Pty Ltd as trustee for the Burra Unity Family trust which is the registered proprietor of a property at Banksia Beach known as 9-11 The Peninsula Banksia Beach QLD 4507 and of a property at Coombs known as [a specified address in Coombes] (Hereinafter referred to as “The Properties”). It is agreed by both parties that on transfer of the funds to the borrower’s account the borrower agrees to allow a second registered mortgage to be placed over the property in the case of a default in payment of the loan as per the agreement sign all required paperwork to facilitate the registration of a caveat or mortgage in the case that the mortgage needs to [be] registered to recover monies.
There then follow the details for two bank accounts. The first states that “[t]he loan settlement amount is to be paid in full into the nominated account listed below”. The bank account details are those of Burra Unity. The second states “[t]he repayment of the loan is to be made in full to the nominated account listed below”. The details for repayment are to the bank account of Allegro Financial. The document has been signed by Mr Allen (for himself and separately on behalf of Allegro Financial), Mr Wilson (for himself and separately on behalf of Burra Unity) and Justin.
The individual parties gave to the Court their version of what happened after Lot 486 was purchased and leading up to this document being signed in November 2016. There was much evidence about the Bellara Joint Venture and how that had disintegrated by November 2016, and each had disappointments in money they thought they would have access to or funding arrangements they thought would come to pass.
The first and second plaintiffs’ position
Mr Allen’s evidence established that, from 30 January 2016 (being the date that he paid an initial holding deposit of $1000 over Lot 486) to 2 November 2016, he and the second plaintiff, Allegro Financial, provided various sums totalling $260,695.24. Following the evidence adduced at the hearing, that figure was broken down as follows:
(a) Lot 485: $170,000
(b) Lot 486: $24,720.80
(c) Bellara Joint Venture: $20,993.02
It is unnecessary to break those sums down further as Mr Wilson accepted both the fact of payment by Mr Allen and Allegro Financial, and what the two plaintiffs claimed the various amounts were paid for.
Mr Allen’s evidence of the surrounding circumstances bringing about the November 2016 Agreement was as follows:
(a)In November 2016, Mr Wilson was at a point where he could not pay his rent and $2,354.80 was owing.
(b)Refinancing of the Namadgi loan had been unsuccessful.
(c)Mr Allen agreed to help Mr Wilson pay his rent if Mr Wilson agreed to sign a loan document for the expenses that Mr Allen had already contributed to the project.
(d)Mr Allen went through the expenses with Mr Wilson, and Mr Wilson then sent through a document reflecting repayment of the amount rounded to $265,000.
(e)They agreed to backdate the document to the day on which Mr Allen paid the $170,000 to Mr Wilson for construction costs he believed were for Lot 485.
Mr Allen signed the document on 11 November 2016 and paid Mr Wilson’s rent the same day. He did not appreciate that the document he signed did not actually state the money to which the document referred had already been provided, instead stating that a loan would be provided. His evidence was that he was under extreme pressure and he made a mistake about what the document he signed meant.
The defendants’ position
Mr Wilson tells a different story. His evidence was that Mr Allen had borrowed money ($170,000 in August 2016) from a woman named Rhonda Fleming to proceed with construction for Lot 485 while they were still attempting to obtain a construction loan for Lot 486. Mr Allen told Mr Wilson that he needed to show a document to Ms Fleming to give her comfort that the loan she had provided to Mr Allen was secure. Mr Wilson said he then edited a document he had earlier created for Mr Allen to document the personal loan from Ms Fleming. He suggested the document be dated by reference to the payment of $170,000.
In affidavit evidence, Mr Wilson said that there was no loan to be advanced by Mr Allen and the loan agreement he signed “is not an accurate reflection of the agreement or state of affairs between Mr Allen [and] any of the Defendants.”
However, in the witness box, Mr Wilson appeared to resile from the position. He said that he was expecting Mr Allen to advance $265,000 to proceed with the construction of the duplex on Lot 486. The November 2016 Agreement reflected that expectation. Mr Wilson’s explanation was that by then, they had received indicative approval from a separate lender (La Trobe Financial) for the balance of the funds for the project. Mr Wilson said that Mr Allen was expecting money to come from a different project, which would then be paid over to finance the construction on Lot 486. There was before the Court a document dated 26 August 2016 from La Trobe Financial. However, it did no more than confirm that La Trobe Financial was prepared to proceed with an application for finance made by Burra Unity, subject to a formal loan approval process for a loan amount of $1,112,000. There was nothing to suggest that this process was still proceeding, or had expired, as at November 2016.
Mr Wilson was challenged on the evidence about his expectation of an advance from Mr Allen of $265,000. It was put to him that he never followed up or “chased” the loan moneys he was apparently expecting as a result of that document being signed. Mr Wilson then said that he was following up with Mr Allen throughout November as to whether he had secured the funding to advance. There was no record of any follow up in evidence (text message, email, letter, or any reference to following up in Mr Wilson’s affidavit) and Mr Wilson was a little vague in the witness box as to how he followed up.
Mr Wilson’s evidence in that regard was entirely inconsistent with his earlier statement in his affidavit about the “loan agreement”:
… Mr Allen did not lend any amount of money to any Defendant and I did not make any promise to repay funds. The nature of the agreement between Mr Allen and I was that Mr Allen would fund our joint venture to develop property and Mr Allen would receive a return on his investment, firstly in the form of repayment of funds put into the joint venture in respect of Lot 486 and then for future developments, 50% of the profits. In retrospect I now realise the preparation of the loan agreement by Mr Allen was an attempt by him to misrepresent the state of affairs in the joint venture. No funds were advanced in respect of the loan agreement.
I formed the view that Mr Wilson’s evidence in the witness box was a recent invention, opportunistically created to match the words of the loan agreement that was actually signed. His affidavit evidence was closer to the mark – that in asking Mr Wilson to sign the loan agreement, which had interest payable at 10%, Mr Allen was attempting to get a benefit that had not been agreed between the parties at the beginning, and thus remedy the consequences of a failure to properly protect his interests when the parties entered into the joint venture.
Justin gave evidence that he effectively signed the November 2016 Agreement because his brother asked him to. He did not receive any money from either of the plaintiffs at any point.
Conclusions from the evidence
The loan agreement does not operate as a contract binding the defendants to repay a $265,000 loan for moneys already provided at 10% interest. First, the terms of the document do not contain any such obligation. They do not say that the moneys have already been loaned and are to be repaid. There is no pleaded claim for rectification or mistake. The parties each gave evidence that they reposed trust in each other in signing the loan agreement, but when that relationship has broken down, the court is left with giving effect to the clear words that appear on the agreement that was signed, acknowledging that it is plainly not the full extent of the agreement between the parties.
Second, even if the Court were to construe the document in such a way as to cover the money that had already been provided, the defendants relied on the principle of past consideration being no consideration. I may not have accepted that submission, because Mr Allen paid Mr Wilson’s rent of $2,354.80 after the ‘loan’ document was executed. Support for the finding that the obligation was valid and enforceable may be found, by analogy, in Breusch v Watts Development Division Pty Ltd (1987) 10 NSWLR 311 (see 314 and 317), where the NSW Court of Appeal held a guarantee, which was provided in respect of money that had already been loaned as well as further sums to be advanced, was a guarantee covering the entire amount.
However, that leaves the first difficulty. It is one thing to construe ambiguous wording in a contract in favour of a particular result when the surrounding circumstances reveal the objective intention of the parties. It is quite another to rewrite the terms of the contract so that it says what it should have said. Mr Allen’s communicated intention that the loan agreement address the sums he had provided in the past is insufficient.
The result is that Mr Allen and Allegro Financial cannot enforce the November 2016 Agreement save as to $2,354.80, which sum was established as being borrowed by Mr Wilson personally from Mr Allen after the 2016 November agreement was signed. The evidence was that it was paid by Mr Allen directly to the rental agent for the property where Mr Wilson lived. Given its purpose was entirely unrelated to the joint venture that I have found, that loan is not affected by the findings about the joint venture.
Regrettably for Justin, as he has personally guaranteed repayment of that amount, he is liable to pay that sum in the event that his brother does not.
Issue 4: What consequences flow from the above findings?
The above findings do not deprive the November 2016 agreement entirely of relevance to the joint venture and the ultimate outcome of this case. The evidence established that what Mr Allen thought was being recorded was effectively an acknowledgement that he had contributed approximately $265,000 which he believed was to be returned to him after a period of time, and that was consistent with the spirit of the original agreement. It serves to confirm that what Mr Allen was contributing to the joint venture with regard to the expenses for Lot 486 was a loan. This was also confirmed by Mr Wilson’s evidence set out in [72] above that the parties’ joint intention was that Mr Allen would receive the repayment of funds put into the joint venture (insofar as they related to expenses solely attributable to Lot 486).
Here, the defendants pleaded a joint venture. That case has been accepted, but it remains to deal with the consequences of that factual finding. It arises indirectly on the pleadings, but the issue was properly before the Court because the defendants pleaded the joint venture and defended the claim on the basis that no money was payable to the plaintiffs under that joint venture arrangement. Those material facts depend on a finding at law that the losses of the joint venture should lie where they fall. Matters of law do not need to be pleaded unless they would catch an opponent by surprise.
That outcome was disputed by the plaintiffs, on the basis that under the loan agreement, the monies were to be repaid. The plaintiffs’ pleading was silent on whether equity should intervene if the defendants’ characterisation of the relationship between the parties was accepted, but counsel for the plaintiffs did briefly address it in closing submissions, arguing that if the Court found a joint venture without also finding an enforceable loan agreement, the outcome would be “inequitable”. No further assistance was provided.
Neither party advocated precisely for the findings that have been made above. The issue would perhaps have been given closer consideration by the parties if a reply dealing with a claim for equitable adjustment or an accounting in the event that a joint venture was found had been filed. The reply that was filed only pleaded that the defendants used the funds advanced by the plaintiffs for purposes unknown and other than for the Lot 485 and 486 project and the Bellara joint venture. As the plaintiffs did not specifically plead by reply any claim in equity, it is understandable why the defendants did not address any potential for adjustment. However, that does not mean the defendants were in the dark about the issue. The defendants equally did not address the consequences for the joint venture they pleaded if the court found the existence of a loan within the joint venture, rather than either a loan or a joint venture.
There are examples where the courts have considered a situation arising at law when the facts are established, even though it has not been directly pleaded. They include United Dominions (at 5) where Gibbs CJ considered the existence of a partnership, when the agreement was pleaded as a joint venture and Bakers Investment Group (Australia) Pty Ltd v Caason Investments Pty Ltd [2014] VSC 598 at [543], where a joint venture had not been pleaded, but the defendant denied the existence of a joint venture and the Court addressed the question.
At its core, this was a fight between two individuals over money provided by one for a purpose that never materialised and whether the recipients have to pay any money back. The financial ramifications of the findings that have been made require consideration, otherwise only a partial resolution of the dispute will be provided. Merely making a finding about how to characterise the agreement between them would not deal with whether one owes money to the other, particularly where the finding is one which accepts both a joint venture and Mr Allen’s contribution to it by way of a loan, although not in the terms of the written loan agreement that was later signed by the defendants.
In The Commonwealth of Australia v Amann Aviation Pty. Limited (1992) 174 CLR 64 at [31], it was said that mere difficulty in estimating damages does not relieve a court from the responsibility of estimating them as best it can. Here, the Court had the precise evidence by which any equitable adjustment would be made, and the Court also had an admittedly faint submission from the plaintiff as to intervening to redress inequity. The problem was more that the parties did not, in arguing the case, descend into the applicable principles for any adjustment in equity, as applied to the joint venture in the terms that were found.
There was clearly more that each party could have said on the point of any equitable adjustment to be made if the monies loaned were found to be part of the joint venture agreement as opposed to a stand-alone contract. Ultimately, I formed the view that a further hearing was not required to give the parties the opportunity to submit further on determining the appropriate relief in light of the factual findings that have been made. In doing so, I took into account:
(a) whether each party was, or should have been, aware of the issue potentially arising for determination, such that procedural fairness requirements had been met;
(b) the interest in finality of litigation;
(c) the proportionality of the litigation, given the amount in question, balanced against the extra expense that would be incurred by a further hearing;
(d) the fact that the evidence necessary to determine the point was already before the Court and not contested by the defendants; and
(e) the possibility that if a further hearing were to take place, arguments might arise about figures not presently in dispute, such as how $170,000 provided by the first and second plaintiffs was spent (discussed below).
What follows is an attempt to most fairly or justly resolve the totality of the dispute between the parties.
Applicable principles
Joint venturers are entitled to the repayment of their capital contributions to the abortive joint venture: see Muschinski v Dodds (1985) 160 CLR 583, where Deane J said at 618 (emphasis added):
Both common law and equity recognize that, where money or other property is paid or applied on the basis of some consensual joint relationship or endeavour which fails without attributable blame, it will often be inappropriate simply to draw a line leaving assets and liabilities to be owned and borne according to where they may prima facie lie, as matter of law, at the time of the failure. Where there are express or implied contractual provisions specially dealing with the consequences of failure of the joint relationship or endeavour, they will ordinarily apply in law and equity to regulate the rights and duties of the parties between themselves and the prima facie face legal position will accordingly prevail. Where, however, there are no applicable contractual provisions or the only applicable provisions were not framed to meet the contingency of premature failure of the enterprise or relationship, other rules or principles will commonly be called into play.
Deane J went on to state, relevantly to the circumstances here, the underlying rationale for an adjustment based in equity at 619-620 (emphasis added, citations and references omitted):
The prima facie rules respectively entitling …a contractual joint venturer to a proportionate repayment of his or her capital contribution on the … collapse of the joint venture are properly to be seen as instances of a more general principle of equity. That more general principle of equity can also be readily related to the general equitable notions which find expression in the common law count for money had and received … . Like most of the traditional doctrines of equity, it operates upon legal entitlement to prevent a person from asserting or exercising a legal right in circumstances where the particular assertion or exercise of it would constitute unconscionable conduct …
His Honour then dealt with the circumstances in which the principle operates (emphasis added):
The circumstances giving rise to the operation of the principle were broadly identified by Lord Cairns LC, speaking for the Court of Appeal in Chancery, in Atwood v Maude, supra, at p 375 where “the case is one in which, using the words of Lord Cottenham in Hirst v Tolson [1850] EngR 313; (1850) 2 Mac & G 134; 42 ER 52, a payment has been made by anticipation of something afterwards to be enjoyed [and] where ... circumstances arise so that future enjoyment is denied”. Those circumstances can be more precisely defined by saying that the principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do (cf Atwood v Maude at pp 374-5 and per Jessel MR, Lyon v Tweddell (1881) 17 Ch D 529 at 531).
These principles may be applied in an appropriate case to commercial joint ventures: Galati v Deans [2021] NSWSC 1094 (Galati) per Ward CJ in Eq at [912] citing Liquor National Wholesale Pty Ltd v Redrock Co Pty Ltd [2007] NSWSC 392 at [42] per Brereton J. In Galati, Ward CJ in Eq went on at [913] to state:
As I earlier considered in Australian Building & Technical Solutions Pty Ltd v Boumelhem; Boral Australia Ltd v Boumelhem; Boumelhem v Jones (2009) 2 ASTLR 336; [2009] NSWSC 460 (Boumelhem) (citing West v Mead [2003] NSWSC 161), the prerequisites for imposing such a trust are as follows (at [50]-[53]): first, there must be both a joint relationship or endeavour, in which expenditure is shared for the common benefit in the course of and for the purposes of which an asset is acquired; second, the substratum of that joint relationship or endeavour must have been removed or the joint endeavour prematurely terminated “without attributable blame”; and, third, it must be unconscionable for the benefit of those monetary and non-monetary contributions to be retained by the other party to the joint endeavour.
To this I would perhaps add the caution that equity is not authorised “to reshape contractual relations into a form the Court thinks more reasonable or fair where subsequent events have rendered one side’s situation more favourable”: Tanwar Enterprises Pty Limited v Cauchi [2003] HCA 57; 77 ALJR 1853 at [37], quoting McArthur v Stern (1986) 5 NSWLR 538 at 503.
Should an adjustment in equity be made here?
Here, a joint venture has been found and the agreement was not framed to meet the contingency of premature failure of the enterprise, or responsibility for losses.
On the evidence before the Court, the collective expenses of the joint venture were $217,388.80. That amount includes:
· $170,000 paid by Mr Allen to Mr Wilson (through the corporate vehicle they set up) ostensibly for the building contract of Lot 485. If it was money paid in advance for a building contract that did not proceed (Mr Allen did not sign the contract), then the equitable notion underlying the claim for money had and received does seem apt. However, Mr Wilson gave evidence that the money was in fact used for both Lots 485 and 486. He said it was used for fees for architects and consultants and commitment fees across both projects.
· $24,720.80 for expenses Mr Allen paid that he said (and it was not disputed) were solely attributable Lot 486.
· $21,450 for advanced building and design software ($9,950 paid by Mr Allen, $11,500 paid by Allegro Financial).
· $1,218 in ASIC expenses.
During the hearing, I expressed a real concern about how the $170,000 was spent. The defendants submitted that there is no claim made for unjust enrichment against the corporate entity who received the funds, being Tranquillity Homes Canberra Pty Limited, nor any other pleaded impropriety against Mr Allen or Burra Unity. The reply to the defence pleads that the defendants used funds advanced by the plaintiffs for purposes unknown and other than for “these ventures” but there was no clear allegation that Mr Wilson or any of the defendants had improperly diverted the funds. Had the claim been pursued with any vigour, that would have been a significant factor in any equitable remedy now under consideration. I therefore make it clear that the description above about the $170,000 being used for the expenses of the joint venture is what the parties agreed, not what I have found. For the purposes of what follows, there is no attributable blame.
That leaves the question whether it would be unconscionable for the benefit of the monetary contributions to be retained by Mr Wilson or his associated entities. There is a great dissimilarity or inequity in capital contributions at the time of the failure of the joint venture and the circumstances as they stand are that Mr Allen has contributed hundreds of thousands to a property in which he never legally had any interest during the joint venture (he did partly own Lot 486 for a brief period after the events in question).
There is a particular difficulty because Lot 486 has been sold and as far as I could discern, the contributions made by Mr Allen have in large part been dissipated. However, subject to that rather large barrier, there is unconscionability in allowing Mr Wilson or Burra Unity to retain the benefit of Mr Allen’s monetary contributions. Ultimately, the entirety of the expenses of the joint venture should not lie where they presently fall (with Mr Allen and his associated entities).
Of the $260,695.24 claimed, $20,993.02 was established as being in relation to the Bellara joint venture between the parties. It is not properly claimable in equity in relation to the joint venture that has been found. A further $22,313.42 was for expenses that were clearly not properly attributable to the joint venture for Lots 485 and 486. Such monies might have been recoverable if an enforceable loan agreement had been established or some other cause of action pleaded such as money had and received, but that is not the case.
While Mr Wilson may have benefited in a variety of ways, the only expense that I can see where it may be said that Mr Wilson as the licensed builder has “retained” a benefit is the building and design software purchased. The circumstances envisaged by the parties were not that Mr Allen or Allegro Financial would pay for Mr Wilson’s tools of trade. It would be unconscionable for him to retain the benefit of the software without compensating Mr Allen and Allegro Financial.
Other matters relevant to the question of whether an equitable remedy is available or appropriate is that there has been some adjustment of losses, through the findings as to contribution with regard to the Namadgi loan. That was an agreement covering a specified expense of the joint venture. No part of the Namadgi loan was for Lot 485 and the defendants have been found to be collectively responsible for returning to Mr Allen and Allegro Beach the entirety of the sum that was guaranteed under the Namadgi loan.
Secondly, although not in writing, the parties expressly agreed that 100% of Mr Allen’s contribution to Lot 486 would be repaid to him – that is, he would not share in the profit of Lot 486 at all but he would ultimately bear no expense for it either. Conversely, Mr Wilson was ultimately not getting any benefit or share of Lot 485.
Taking all those matters into account, there is justification for a modest adjustment through an equitable remedy that gives effect to a proportionate refund of the capital contributions in circumstances where there is no real property over which a constructive trust might attach. It is limited to the expenses of the joint venture expended by Mr Allen and Allegro Financial for which it would be inequitable for Mr Wilson “to retain the benefit”. An adjustment of $21,450 (being the total of the sums advanced by the plaintiffs in respect of building and design software) is appropriate, in the proportions in which they were paid: $9,950 by Mr Allen, and $11,500 by Allegro Financial.
Issue 5(a): Interest
Mr Allen
Mr Allen has been successful in establishing a claim in contribution against the Wilson brothers, and an entitlement to indemnity in respect of Burra Unity. Collectively, the liability amounts to $37,588.35. Interest was claimed. In light of the findings above, it is appropriate to award interest at the rate provided for by the Court Procedures Rules 2006, from the date that the demand for contribution under the guarantee was made, being 22 January 2018, up to the date of judgment. An amount of $9,081.14 will be awarded.
In respect of the loan of $2,354.80 to Mr Wilson, interest is payable at the rate of 10% specified in the agreement from 11 November 2016 to the date of judgment. An amount of $1,463.83 will be awarded.
Although an equitable adjustment has been made in Mr Allen’s favour for $9,950 upon conclusion of the joint venture, because of the circumstances in which Mr Allen was found to be entitled to that remedy, I am not persuaded there is a just foundation for the discretionary award of interest.
Allegro Financial
For the same reasons, no interest will be awarded for the adjustment of $11,500 in favour of Allegro Financial.
Allegro Beach
Apparently through oversight, Allegro Beach made no prior demand at all in respect of the guaranteed monies that it had paid and was not even a party to the proceedings until part way through the hearing. Pre-judgment interest on the sum of $66,179.33 will only arise from the date Allegro Beach made the demand or claim, in respect of the funds paid by it, being 12 October 2022. Accordingly, an amount of $12.87 will be awarded.
Issue 5(b): Costs
As to costs, both the cause of action arising from the Namadgi loan and the cause of action arising from the November 2016 Agreement have been successful (albeit to a much more limited extent than that claimed). On the usual basis that costs follow the event, I will order that the defendants pay the plaintiffs’ costs. If any party seeks a different costs order, they are to notify the Court within seven days of the making of orders below.
Orders
The working out of the orders is difficult, given the number of parties, their overlapping liabilities and the different causes of action. While it would have been preferable to enter judgment in a particular amount for each of the plaintiffs, for clarity, I have framed the orders in terms of amounts payable.
In accordance with the above reasons, the orders of the Court are as follows:
(1) Judgment is entered for the plaintiffs.
(2) On the claim for indemnity arising from payments made under the guarantee to Namadgi Pty Limited dated 30 May 2016, the third defendant is to pay the first and third plaintiffs jointly the sum of $103,767.68, plus interest on the said amount in the sum of $9,094.01.
(3) On the claim for contribution under the guarantee dated 30 May 2016, the first and second defendants are jointly liable to pay the sum of $51,883.84 plus interest in the sum of $3,458.11 to the first plaintiff and third plaintiff.
(4) Any payments made to the first and third plaintiffs by:
(a) the third defendant under Order 2, or
(b) the first and second defendants under Order 3,
reduce the liability of the other to the first and third plaintiffs by the same amount as the payment made by that defendant.
(5) On the claim arising out of the loan agreement executed on 11 November 2016, the first and second defendants are liable jointly and severally to pay the sum of $2,354 plus interest in the sum of $1,463.83 to the first plaintiff.
(6) In addition to the payments to be made under orders 2, 3 and 5 above, the first and third defendants are to pay equitable compensation as follows:
(a) $9,950 to the first plaintiff, and
(b) $11,500 to the second plaintiff.
(7) The defendants are to pay the plaintiffs’ costs of the proceedings.
(8) If any party notifies the Court that an alternative costs order is sought within 7 days of the publication of these reasons, order 7 is stayed pending further order.
| I certify that the preceding one hundred and eleven [111] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Associate Justice McWilliam. Associate: Date: |
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Amendments
3 February 2023 Under the heading “Counsel” at page 2 of the judgment, replace “K Pattenden” with “C McKeown”.
Under the heading “Counsel” at page 2 of the judgment, replace “C McKeown” with “K Pattenden”.
At paragraph [70] of the judgment, line 3, replace “Lot 286” with “Lot 486”.
At paragraph [70] of the judgment, line 7, replace “Lot 286” with “Lot 486”.
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