Baillie v Swanlane Pty Ltd
[2000] VSC 185
•4 May 2000
| SUPREME COURT OF VICTORIA | |
| PRACTICE COURT | Not Restricted |
No. 5132 of 2000
| ROBYN ALICIA BAILLIE (AS TRUSTEE OF THE JONES INVESTMENT TRUST) | Plaintiff |
| v. | |
| SWANLANE PTY. LTD. AND OTHERS | Defendants |
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JUDGE: | BEACH, J. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 3 MAY 2000 | |
DATE OF JUDGMENT: | 4 MAY 2000 | |
CASE MAY BE CITED AS: | BAILLIE v. SWANLANE PTY. LTD. & ORS. | |
MEDIUM NEUTRAL CITATION: | [2000] VSC 185 | |
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CATCHWORDS: Company appointment of receiver – Drastic nature of remedy – Appointment not justified.
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiff | Mr. J. Kaufman Q.C. | Charles File |
| For the First and Second Defendants | Mr. N. Magee Q.C. with Mr. P. Lacava | Howe Wilkinson & Lowry |
HIS HONOUR:
This is an application by Robyn Alicia Baillie who is the trustee of the Jones Investment Trust (the Jones Trust) to have a receiver appointed of the assets and undertaking of the first defendant Swanlane Pty Ltd.
The Jones Trust was created in January 1994. Its trustee then was Christopher Thomas Jones (Jones).
In late 1997 Jones and Gary Raymond Hemming (Hemming) entered into an agreement to purchase a building at 135-137 Swanston Street, Melbourne, for the sum of $1,725,000. They had originally paid $280,000 to the owner of the building for an option to purchase the building. When they entered into the contract they paid a deposit of $172,500. The building was to be bought in the name of a company called Devcor Pty Ltd.
In addition to paying the option fee and the deposit Jones and Hemming had paid miscellaneous expenses in relation to the acquisition of the building totalling $47,500. Their total investment in the building to that point, therefore, was $500,000.
It is unnecessary for present purposes to determine which of the two men provided that sum.
In late 1997 Hemming on his own behalf and on behalf of Jones approached a builder, John Reginald Dwyer (Dwyer) with a view to the three parties entering into a joint venture to redevelop the building. At that time Dwyer carried on business through his company Craftsmen Contractors Pty Ltd (Craftsmen).
Dwyer agreed with the proposal and in due course a joint venture agreement was prepared in relation to the proposed redevelopment.
The parties to the joint venture agreement were Zullaphella Pty Ltd, a company controlled by Dwyer (Zulla), the Jones Trust and Chapel Street Holdings Pty Ltd, a company controlled by Hemming (Chapel Street).
It was agreed that Zulla would have a 60 per cent interest in the venture, the Jones Trust a 20 per cent interest and Chapel Street a 20 per cent interest. The agreement also acknowledged that interests associated with Chapel Street had provided $500,000 in respect of the project and that on completion of the project that sum would be repaid to it.
Although an appropriate joint venture agreement was prepared it was never executed by the parties. The evidence before me, however, is to the effect that the parties pursued the venture in accordance with the terms of the unsigned agreement.
Under the joint venture agreement there was an obligation upon Zulla to raise the necessary finance to complete the joint venture and to arrange for and supervise the building works. Chapel Street on the other hand was to arrange and supervise the subdivision, marketing and sale of the units to be constructed on the site. Zulla contributed the sum of $800,000 by way of a loan to the joint venture.
At some stage Swanlane Pty Ltd (Swanlane) was incorporated to act as the trustee for the joint venture. Its sole director is Dwyer.
To enable the purchase of the building to be completed and the redevelopment to be carried out Swanlane borrowed the sum of $4,200,000 from the National Australia Bank. The moneys advanced by the bank to pay for the actual redevelopment as distinct from the purchase of the building was not to be paid over in a lump sum but was to be advanced in stages as the project proceeded and only upon the production of a certificate of approval from a quantity surveyor.
Having arranged the finance for the purchase and development, Swanlane was then substituted for Devcor as the purchaser of the building.
In due course Dwyer obtained quotations from builders for the redevelopment. However, as the quotations he obtained were of such a nature that if accepted would have resulted in a loss to the joint venturers, it was decided by them that Dwyer's own company Craftsmen would redevelop the building on a cost plus basis.
In due course work commenced on the conversion of the building into 37 units. The units were to be sold off the plan as the work proceeded. As is common in this State, Craftsmen ran into problems with union associated with the building industry, in particular the CFMEU. There were delays in carrying out the work and significant cost over-runs. One example of the delays was a 6 week delay which occurred because the unions considered deposits of pigeon droppings on the building to be a health and safety issue.
Sales of the units commenced in June 1998 and were completed at the end of September 1998. The 37 units were sold for a total of $6,250,000. The redevelopment was completed in late 1999 and settlement of the sale of the last of the units was effected in December 1999.
However, on 15 October 1999 Jones died. On 9 November 1999 his widow Michelle Gay Jones was appointed administrator of his estate. In due course Mrs Jones appointed the plaintiff Robyn Alicia Baillie to be the trustee of the Jones Trust.
Since early this year Mrs Jones has been seeking an accounting from Swanlane in respect of the project. At this stage that has not occurred. It was for that reason that the plaintiff instituted this proceeding, seeking the appointment of a receiver of the assets and undertaking of Swanlane. However, at the outset of the hearing of the application counsel sought an order amending the plaintiff's originating motion to now seek the appointment of a receiver for, "the purpose of accounting for the income received and expenses paid or payable on the joint venture between the plaintiff, the second defendant and the third defendant and the distribution of the income and assets thereof."
That application was opposed by counsel for the first and second-named defendants (there being no appearance on the part of the third defendant) on the ground that the evidence relied upon by the plaintiff does not justify the making of any order against the first defendant.
In my opinion that is no sound basis for refusing the application and I propose to and do grant it.
In his affidavit of 1 May 2000 filed in opposition to the plaintiff's application, Dwyer has sworn that to date he has been unable to do a detailed accounting of the joint venture until such time as the accounts of Craftsmen for the project have been finalized, the position with the bank has been determined, and an amount of stamp duty which is in dispute has been repaid.
He has sworn, however, that as he has now obtained an opinion from an independent building consultant as to the profit margins which it would be reasonable to add to the actual cost of the building works, he is now in a position to prepare the final accounts and make them available to Mrs Jones. He has sworn that he hopes to be able to do that within three weeks.
During the course of submissions counsel for the plaintiff was critical of three payments which had been made from the proceeds of sale of the units. Two payments of $80,000 and $61,362 respectively were made to Chapel Street, and a payment of $800,000 was made to Zulla. Those payments were made to those companies in accordance with the terms of the joint venture agreement.
Apart from the sum of $1,362, the two payments made to Chapel Street represented project management fees. The sum of $1,362 represented the refund of an airfare to a director of Chapel Street. The sum of $800,000 paid to Zulla was the repayment to it of the amount it had advanced to the project in the first instance.
In National Australia Bank Ltd and Ors v Bond Brewing Holdings Ltd and Ors (1991) 1 V.R. 386 the Full Court emphasized the caution which must be exercised in considering an application to appoint a receiver of the assets and undertaking of a company. At p.540 of the judgment the court stressed that the remedy being drastic should be allowed only under pressing circumstances.
In my opinion there are no pressing circumstances in this case which would justify the making of the order originally sought by the plaintiff, or the making of the order now sought by the plaintiff.
In my opinion there is no evidence which demonstrates that the first defendant has dealt with the proceeds of the sale of the units other than in an appropriate fashion.
Whilst I can understand the desire of Mrs Jones to recover whatever sum the Jones Trust is entitled to from the joint venture, that of itself is no justification for appointing a receiver to Swanlane.
The application is dismissed. I order that the plaintiff pay the first and second defendant's costs of the application, including costs reserved.
MR KAUFMAN: If Your Honour pleases, there was a second amendment to the proceedings sought and that was an order that the first-named defendant forthwith pass its accounts, that was in 3A, Your Honour, and Your Honour hasn't dealt with that.
HIS HONOUR: Yes, I have it here. What do you say concerning that application, Mr Magee?
MR MAGEE: That should be dismissed, Your Honour, for the same reasons just announced by Your Honour. These accounts are going to be produced in the ordinary course and the notion of passing accounts at the moment, Your Honour, is really inconsistent with what Your Honour has just said, in my submission, and it should be dismissed.
HIS HONOUR: Yes, thank you.
What I propose to do is to reserve to the parties liberty to apply. The originating motion will, of course, be amended pursuant to the order I have made to include such an application .
MR KAUFMAN: Thank you, sir.
HIS HONOUR: If it should happen that the accounts are not provided within the three week period or thereabouts, as stipulated by Mr Dwyer, then it would be open to the plaintiff to make a further application to the court pursuant to the leave reserved.
MR KAUFMAN: Thank you, sir .
MR MAGEE: If Your Honour pleases.
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CERTIFICATE
I certify that this and the 5 preceding pages are a true copy of the reasons for judgment of Beach, J. of the Supreme Court of Victoria delivered on 4 May 2000.
DATED this 4th day of May 2000.
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