Boyded Industries Pty Ltd v Bitannia Pty Ltd

[2008] NSWSC 1256

CITATION:	BOYDED INDUSTRIES PTY LTD v BITANNIA PTY LTD & ORS [2008] NSWSC 1256
HEARING DATE(S):	10-11/11/2008
JUDGMENT DATE :	28 November 2008
JURISDICTION:	Equity
JUDGMENT OF:	Bryson AJ at 1
DECISION:	Order that judgment be given for the defendants with costs.
CATCHWORDS:	CONTRACT - construction of written agreement - Parties to Joint Venture (Partnership) owned and operated Belmore Hotel - purchased Albion Hotel Cootamundra for dominant purpose of controlling and transferring poker machine entitlements - Albion Hotel purchased with funds of partnership - Boyded owned 2/3 share of partnership and registered proprietor of 2/3 share as tenant in common of both hotels - by 2 contemporaneous agreements (1) Boyded sold its share in real property and partnership at Belmore to three companies (2) dissolved partnership and released assets to new partners being Bitannia (continuing partner) and those three ocmpanies - neither document specifically mentioned Albion Hotel - HELD Albion Hotel passed on general disposition of partnership assets. Decision on non-standard contract documents.
CATEGORY:	Principal judgment
CASES CITED:	Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 Equuscorp Pty Ltd v Glengallen Investments Pty Ltd 218 CLR 471 Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 Prenn v Simmonds [1971] 1 WLR 1381 Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165
PARTIES:	Boyded Industries Pty Limited - Plaintiff Bitannia Pty Limited, Beneera Pty Limited, Besure Pty Limited & BXMAS Pty Limited - 1st - 4th Defendants
FILE NUMBER(S):	SC 1909/2008
COUNSEL:	A Hatzis - Plaintiff A Scotting - Defendants
SOLICITORS:	Gwynne Thompson - Plaintiff JPR Legal Pty Limited - Defendants

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRYSON AJ

Friday 28 November 2008

1909/2008 BOYDED INDUSTRIES PTY LTD v BITANNIA PTY LTD & ORS

JUDGMENT

1 HIS HONOUR: These expedited proceedings concern entitlement to beneficial ownership of the Albion Hotel at Cootamundra. Boyded the plaintiff and Bitannia the first defendant made a written Joint-Venture Agreement on 29 April 1997. This was not the only joint-venture between Boyded and Bitannia (and perhaps others) which owned and conducted hotel businesses.

2 The basal asset of the partnership was the freehold title of the hotel at Belmore. Registered freehold title was held by Boyded and Bitannia as tenants in common in shares, in the same proportions as their shares in the business. The terminology used in the Joint-Venture Agreement does not differentiate in any clear way between freehold ownership of the hotel and other business assets; the business and its assets and affairs are spoken of in general terms, and the Agreement confers entitlement to proceeds of sale when there is any winding up or dissolution. The effect of the Joint-Venture Agreement is that each party held its share in the freehold as tenant in common on trust for the purposes of the Joint-Venture Agreement.

3 The agreement described itself as a Joint-Venture Agreement and the relationship has the substance of a partnership. According to clause 3.1 the parties had already agreed to purchase what was referred to as "the Business" in shares, 33 1/3 percent by Bitannia and 66 2/3 percent by Boyded. The business was defined by clause 1.1 thus: "Business" means the licenced hotel business known as the ‘Belmore Hotel’ and situated at 383 Burwood Rd, Belmore, together with any other business acquired by the parties.” Clause 3.2 provided:

3.2 The profits of the Business shall belong to the parties in the same proportions as their equity in the Business (as mentioned in Clause 3.1 above). The parties shall also bear the income and capital losses (if any) of the Business, in the same proportions.

4 Clause 4 of the Joint-Venture Agreement conferred on each party pre-emption rights if the other party wished to sell or otherwise dispose of its share or any part of it. Clause 6 provides in considerable detail for the procedure to be followed if the affairs of the business were to be wound-up or the agreement were to be otherwise terminated. Clause 6.4 provided for application of proceeds from the sale of the business to meeting obligations and finally (clause 6.4.4) to the parties in proportion to their shares in the business.

5 Clause 10 relates to a loan of $4 million which Boyded was to obtain, to be secured by a mortgage over "the freehold of the business" and by "company charges over the parties with respect to the business". Bitannia was to provide the services of Mr W. M. Waugh to undertake day to day management and control of the business. Mr William Waugh died in July 2004. Clause 16.1 provided "this agreement is based upon mutual confidence and friendly cooperation."

6 The business was carried on for some years, evidently with success. In 2002 Bitannia and Boyded purchased the freehold of the Albion Hotel at Cootamundra. Title was taken as tenants in common in the same shares as those in which the Belmore Hotel was held. This purchase was paid for with money belonging to the partnership under the Joint-Venture Agreement, without outside finance. The dominant element in the commercial motivation for acquiring the Albion Hotel was that entitlements to 11 poker machines were attached to owning the Albion Hotel. The partners wished to take opportunities offered by State legislation for transfer of poker machine entitlements. In fact three entitlements were transferred to the Belmore Hotel.

7 The dominant motivation of obtaining control of the poker machines at the Albion Hotel, and of transferring them as and if there were opportunities (which has already been carried out in part) give the Albion Hotel something of the character of an investment ancillary to operating the Belmore Hotel. Otherwise the connection is one of ownership; managing and operation tasks for the Albion Hotel were very different from and far simpler than those required by the Belmore Hotel.

8 On 18 February 2005 parties to this litigation entered into two written agreements. By the Sale Agreement, a contract for sale of land, Boyded agreed to sell its two thirds share in the Belmore Hotel to the second, third and fourth defendants. Bitannia was not a party to the Sale Agreement. The second defendant Beneera was the purchaser as to 41 2/3%, the third defendant Besure as to 12 1/2 percent and the fourth defendants Bxmas as to 12 1/2 percent shares; as tenants in common in the aforesaid shares, a total of 66 2/3%, which was Boyded’s share in the Joint Venture. The price was $15,867,460; this figure is two thirds of $23,801,190, and it was contended that this calculation is significant. The contract contained clauses appropriate to the sale of a freehold hotel with the hotel business as an inclusion, with provisions dealing with the liquor licence, gaming machine entitlements and many other matters appropriate for the sale of a hotel business. Its overall character is a contract for the sale of an interest in land.

9 Also on 18 February 2005 the parties entered into the Partnership Dissolution Deed. Boyded and all four defendants were parties to this document. The Recitals were these:

RECITALS

A Boyded and Bitannia are partners (“the Partners”) in a business trading under the name “Belmore Hotel” (“the Partnership”), which owns and operates the Belmore Hotel located at 383 Burwood Road, Belmore NSW (“Business”).

B The Partnership commenced on or about 29 April 1997 (“Commencement Date”). There is a joint venture agreement entered into between the Partners dated on the Commencement Date (“JV Agreement”). Unless expressly dealt with by the JV Agreement, the Partnership is governed by the provisions of the Partnership Act 1892 (NSW) and any terms implied by conduct or agreed orally.

C Boyded and the New Partners intend to enter into an asset sale agreement to record the sale of Boyded’s share of the Partnership and Business to the New Partners upon the terms and conditions set out in the business asset sale agreement, a copy of which is annexed to this deed (“Sale Agreement”).

D The Partners now wish to dissolve the Partnership in accordance with the terms of this deed and the Sale agreement.

10 The Sale Agreement referred to in Recital C is the contract for the sale of Boyded’s freehold to the New Partners. The second, third and fourth defendants were defined in clause 8 DICTIONARY as New Partners, all four defendants were defined as Continuing Partners and Retiring Partner means Boyded. The language of this document is appropriate for an arrangement which dissolved the existing partnership or Joint-Venture Agreement and brought it to a complete end, and ended all interests in its business and assets which Boyded had.

11 By clause 1 Bitannia waived its pre-emptive rights. Clauses 2, 3, 4 and 5 were:

2 DISSOLUTION
Upon the completion of the Transactions, the Partnership carried on by the Partners is hereby declared to have been dissolved by mutual consent of the Partners on the Settlement Date and the Business shall from that date be carried on by the Continuing Partners.
3 SALE AGREEMENT

3.1 The New Partners shall acquire the Retiring Partner’s share in the Partnership and the Business in accordance with and pursuant to the terms set out in the Sale Agreement.

3.2 The New Partners shall pay to the Retiring Partner the Purchase Price on the Settlement date in consideration of the Transactions.

3.3 The Retiring Partner accepts the Purchase Price in full discharge and satisfaction of all rights conferred upon it in the event of the dissolution of the Partnership.

4 PARTNERSHIP ASSETS
4.1 On and from the Settlement Date, the Continuing Partners shall be at liberty to:
(a) assume legal and beneficial control of and interest in, and collect, all the assets of the Partnership; and

(b) demand, sue for, recover, receive and to give full and effectual receipts and discharges for all debts and effects of, due owing or belonging to the former Partnership; and

(c) settle all accounts relating to the Business and to compound for or release any debts or claims belonging to it and institute any actions or other proceedings for compelling payment or delivery of them.


4.2 The Retiring Partner agrees to do any reasonable act or thing to give effect to the rights of the Continuing Partners under clause 4.1.

4.3 The Retiring Partner will have no further claim against the Continuing Partners for the revenue, assets and capital of the Partnership at and after the Settlement Date.

12 Clause 5 related to partnership liabilities and included:

5.1 The Continuing Partners shall be responsible for payment of all debts and liabilities of the Partnership as at the Settlement Date.

Clause 5 went on to provide an indemnity for Boyded Industries and for notification to suppliers, and in clause 5.3 provided:

5.3 The Continuing Partners will have no further claim against Retiring Partner for the losses and deficiencies of capital in the Partnership at and after the Settlement Date.

13 Clause 6 deals with confidentiality, and in clause 7 there are a number of general provisions.

14 The definitions in the Dictionary include: “Purchase Price” means the purchase price set out in the Sale Agreement. “Settlement Date” means the settlement date set out in the Sale Agreement.

15 Neither document expressly mentioned the Albion Hotel. There are no express or clear terms which deal with that hotel. That is the source of the conflict. The most important issue is whether there is an assignment which carries with it the freehold of the Albion Hotel; or any other interest in the Albion Hotel.

16 Boyded’s claims are rather complex but central to them is the contention that on its true meaning in effect, the Partnership Dissolution Deed does not deal with ownership of the Albion Hotel, which is not affected by that document. The Statement of Claim suggests that it was also claimed that if the Albion Hotel is included in the assignment of "the Retiring Partner’s share in the Partnership and the Business" that is the result of a mistake and Boyded Industries is entitled to rectification. However the plaintiff’s counsel did not press the rectification case in final address. Much of the evidence was admissible only on the rectification case. Neither party gave evidence of any event which I could regard as an agreement or shared understanding or meeting of the minds about what their agreements were to contain before the documents themselves were prepared and entered into, or of any mistaken departure from a shared understanding.

17 The defendants’ position is that the New Partners have acquired Boyded’s share in the business, and have the benefit of a full discharge and satisfaction of all rights conferred on Boyded in the event of a dissolution; this carries with it entitlement to the freehold and all other rights associated with the Albion Hotel at Cootamundra, just as much as it carries the liquor in the cellar at Belmore, the bar stools, the glasses and the carpets. Transfer of registered legal title under the Torrens system is an entitlement of the Continuing Partners which they have claimed that the Court should enforce.

18 What is referred to in clause 3.1 as "the Retiring Partner’s share in the Partnership and the Business" is to be established by evidence of what were in fact assets of the partnership and the business; a question of fact. There can in my opinion be no doubt that the assets of the partnership and the business included the Albion Hotel, the freehold and the business conducted there, including the reversion of the lease (and it was leased; the partners did not actually conduct the business there themselves). The Joint-Venture Agreement contemplated in its terms clause 1.1 definition of Business that the parties might acquire another business. When they bought the Albion Hotel there was a business there; the partners acquired the hotel, the licence, the business and the poker machine rights and paid with partnership money. They leased out the hotel, but used their control to transfer some of the poker machine rights to the Belmore Hotel. They accounted for the rent as income in the partnership accounts. There is no other conclusion available than that the freehold and business at Cootamundra were partnership assets. If the partnership had been dissolved according to the terms of the Joint Venture Agreement, the provisions of clause 6 about sale and distribution of proceeds after payment of obligations would clearly have extended to the hotel at Cootamundra.

19 The meaning of a written agreement is determined according to the objective meaning of the words used, not according to what the parties subjectively understood they were doing. Evidence is admissible to identify the subject matters with which they were dealing, and to resolve ambiguities; and (it would seem) evidence is admissible to show whether there are ambiguities. Counsel did not refer to authority which has a close bearing on the construction of these documents. Construction must be governed by the terms of these documents, and the principles involved are indicated by authorities to which counsel referred.

20 DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 429 (Stephen Mason and Jacobs JJ) shows the relevance of surrounding circumstances which are mutually known facts to identify the meanings of descriptive terms; and also shows that the genesis and aim of the transaction may be proved so as to exclude a strict reading which would make the transaction futile. The genesis and the aim referred to must be understood by all parties to the transaction.

21 Statements of the law as now understood begin with Prenn v Simmonds [1971] 1 WLR 1381, referred to in DTR Nominees, and Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989.

22 In Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 352 Mason J made an important restatement of the significance of precontract events for interpretation of a contract in writing. As there shown, what is considered is the objective framework of facts within which the contract came into existence and not the actual intentions of the parties.

23 Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 is a striking instance of the force which surrounding circumstances may have.

24 In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 the High Court of Australia restated, with references to authority, the objective approach to determination of the rights of contracting parties and the force of the event of signing a contractual document: see 180-182. This was clearly stated again in Equuscorp Pty Ltd v Glengallen Investments Pty Ltd 218 CLR 471 at 483-484 [33-35].

25 Mr Kieran Turner was the principal witness about relevant events for Boyded. He has university qualifications in business and accounting and he has family associations with principal figures in the Group of which the plaintiff is a part. He was employed as an accountant by Auswild & Co, Chartered Accountants who did some relevant accounting functions during 2001-2002, and he was employed as a property manager by the Rossfield Boyded Heartland Group of companies in February 2003 and onwards. He had some part when in 2004 Mr William Waugh retained UBS Investment Bankers for preliminary steps to review a public listing of various hotel interests including some hotels owned by the Group, with an Initial Public Offering entity which would own many hotels. Mr Turner gives in evidence a list of six hotels associated with the Group which were to be included; one of these is the Belmore Hotel; the list does not include the Albion Hotel. This proposed listing did not proceed as a result of decision made by Mr Ashton Waugh after his father’s death in July 2004. The practical position of control or influence over affairs of Bitannia passed to Mr Ashton Waugh, Mr William Waugh's son.

26 Mr Turner's evidence is that during consideration of the UBS float in 2004 it was proposed that the Belmore Hotel Belmore be sold to the public listed entity in the float for $23.8 million. To Mr Turner's recollection the Albion Hotel did not form part of the float proposal. In my opinion consideration given to the float, which did not take place, and to the transactions which were contemplated with the proposed publicly listed entity do not assist in understanding of intentions of the parties to the transaction now in question. The circumstances of the sale in the float would have been utterly different to a dissolution, or similar transaction, between Joint-Venturers and disposition of an interest in the Joint-Venture.

27 There had been consideration in 2003 of another possible sale, and what was under consideration included selling both the Belmore Hotel and the Albion Hotel together as a package for $24,827,000. The price of the Sale Agreement of $15,867,460 for a two thirds interest implies a value for the thing sold of $23,801,190; and counsel contended that the value attributed to what was sold was about $1 million lower than had been under consideration in 2003 in the IPO, leading to what counsel said was the natural inference, in a rising market, that the lower attributable value meant that the Albion Hotel was to be excluded. Counsel also contended that evidence shows that the price struck at $23.8 million was based on discussion of the price in the UBS float process in 2004, and the lower value implied from the price in the Sale Agreement supports the contention that only one of the two hotels was intended to be the subject of the Sale Agreement.

28 Mr Turner’s account on affidavit of conversations with Mr Ashton Waugh preliminary to the preparation of the agreements now in question. (copy p 347 of Blue 1, whole page).

43. On one occasion after a meeting at UBS, following Waugh’s death, Ashton Waugh approached me after the meeting in the foyer of Governor Phillip Tower. We had a conversation in words to the following effect: -

AW: I am no longer a seller, I am in the business of running hotels, that’s what we do, we will buy you out of your pubs for the same prices as in the float. I have got a buyer for the Mount Druitt, El Cortez and Milperra. I will buy the other three.

KT: The family are sellers.


I believe the conversation took place some time in the latter half of 2004. Ashton appeared disgruntled with the whole process of the proposed Float, I recall him saying that he was upset at having to continually pay parking costs and make weekly trips into the city.

44. I communicated Ashton Waugh’s offer to the Group and to the Webb family immediately thereafter.
After the board meeting I rang Ashton Waugh and had a conversation with him, in the words to the following effect:

KT: We are sellers at the prices in the Float.

AW: I think you are selling out too early, you should stay in, they’re good businesses. We can grow it.

KT: No we’re out. I will get Gail Howard to contact your people or you can speak to Gail Howard.

45. Ashton Waugh organised a meeting in late 2004 with a man I now know to be Robbie Singh. Singh represented a person described to me as an Asian investor named Irene lee. I understood Ms Lee to be a potential buyer of the Milperra, Mount at an El Cortez hotels.
Preparation of sale agreements
47 I then contacted Gail Howard and instructed her to prepare contracts for the sale of the El Cortez, Mount Druitt and Mill Para hotels.

29 On 9 December 2004 Mr Joe Ryan wrote to Mr Tony Allen referring to the Belmore Hotel and two other hotels, and among other things he said (Blue 1, 172): "As discussed I confirm that the prices of the hotels, as advised by Ashton Waugh, as follows:

1. Belmore Hotel: $23.8 million
2. …
The contract for sale do not reflect the total sale prices, as the total of the hotel properties is not being sold in each transaction.
I note that the sale prices of the shareholdings in the hotels are as follows:
1. Belmore Hotel: $15.87 million
2. …

30 Later in the letter he refers to "The final prices of the shareholdings being sold".

31 These references to what was then the intended transaction do not tend to confirm that there was any error. The shift from reference to "the prices for the hotels, as advised by Ashton Waugh" to "the sale prices of their shareholdings in the hotel" is significant. The only shareholding under consideration was membership of the Joint-Venture.

32 Mr Turner's evidence shows that in his concept the business in hand was the sale of three hotels, the Belmore Hotel, the Blue Cattle Dog Hotel and the Billabong Hotel. He referred to them in communications with Ms Gail Howard solicitor then of Abbott Tout Solicitors. He says the draft contracts were prepared and issued to Mr Joe Ryan, who then and now acted for Bitannia and interests associated with it. The documents in evidence do not deal in detail further with any proposal to sell the Billabong Hotel, or the Blue Cattle Dog Hotel. In Miss Howard’s understanding she was instructed to act on the sale of the Belmore Hotel and she prepared a contract accordingly. The Partnership Dissolution Deed was prepared by another solicitor Mr Fong who has not given evidence. The draft agreements relating to dissolution of the partnership of the Belmore Hotel (and also agreements relating to a partnership in the Billabong Hotel) were sent to Mr Ryan for review and comment by Mr Fong on 28 January 2005. The Partnership Dissolution Deed and the Sale Agreement were executed and exchanged on 18 February 2005.

33 Mr Turner's evidence accepted at its highest would show that his discussions with Mr Ashton Waugh were of the most general kind, and that they related in completely general terms to the sale of the Belmore Hotel and did not go to any detail whatever relating to what was to happen to the Joint-Venture or partnership, and did not deal with the introduction of the second, third and fourth defendants. The documents drafted by solicitors at Abbott Tout Solicitors and sent to Mr Ryan were, as their terms show, produced by much fuller consideration of what in detail was involved in the transaction than had been the subject of conversations with Mr Ashton Waugh of which Mr Turner's evidence speaks. Obviously, concerns relating to disposing of partnership assets and bringing the partnership to an end required attention that had not had been given to them in those conversations. Before exchange of contracts each party was represented by solicitors, who had both skill and time to give appropriate attention to the terms on which their clients would be bound by the documents, and to obtain any appropriate instructions and to give any appropriate advice. The evidence does not show the emergence of any mistake or misunderstanding in that process. It is likely that with the time and attention available, the full meaning and effect of the proposed documents was considered and understood.

34 It cannot possibly have escaped the attention either of lawyers or of whomever on the part of the parties gave instructions before the documents became binding, that all the assets of the partnership were being dealt with. There are few signs that the Albion Hotel received any particular attention; there are some signs. The small extent of explicit reference to the Albion Hotel relates principally to a message which Mr Joe Ryan received from his financing bank, which proposed to take security over property including the Albion Hotel, and was concerned that no other security interest should exist. When Ms Howard learned, from seeing this communication, of the involvement of the Albion Hotel, her concern, appropriately, was to ensure that her client Boyded was appropriately protected against obligations relating to it.

35 Mr Keiran Turner’s evidence is that after settlement occurred in April 2005 he contacted Mr Philip Johnson who had a part in the company then charged with management, and sought an accounting for rent and outgoings and inspections of files, which were refused, and refusal was supported by disclosure of counsel's opinion that the Albion Hotel had passed as a partnership asset. Mr Ryan maintained Bitannia’s position in exchanges of correspondence between solicitors in 2007. In the course of this correspondence Mr Ryan stated a fully and carefully reasoned position, supported by disclosure of counsel's opinion.

36 In my opinion there is no evidence of any pre-contract conversation which establishes a shared common intention in a clear way. The foundational facts for a rectification claim have not been shown; that is, that there was some shared understanding of what the parties agreed to, and departure from it by some mistake or accident.

37 In the plaintiff's case counsel referred to a number of circumstances as showing that there was no shared intention to dispose of Boyded’s interest in the Albion Hotel. There is a marked disparity between the way which the Belmore Hotel was dealt with, with a formal contract of sale in writing, the usual conveyancing practices were followed, a formal completion and transfer; and yet the Albion Hotel was disposed of by general words which dealt with it in the same way as other assets of the partnership. This could well have been dealt with in other ways, but I do not see any marked anomaly having regard to the structure of the transaction in which all consideration which passed was attributed to the price paid for Boyded’s two thirds interest in the freehold of the Belmore Hotel which was sold to companies which were not parties to the Joint-Venture, and also having regard to the great disparity in the values of the two hotels. No doubt a great deal of valuable property passed under the general words in the dissolution deed; everything that the partnership owned.

38 One effect of the Partnership Dissolution Deed was to free Bitannia from the entitlement of Boyded to have Britannia’s one third interest in the two freeholds treated as a partnership asset.

39 In the Partnership Dissolution Deed there are provisions appropriate for an assignment by Boyded of all its interests and claims relating to partnership assets. However a search for actual words of assignment leads only to clause 3.1, which refers to and adopts the assignment of the business in the Sale Agreement, which is an assignment to the second, third and fourth defendants and not to Bitannia. The Partnership Dissolution Deed should be understood as confirming and completing the assignment of all of Boyded’s interest in the Business; and to know what that is it is necessary to examine the provisions of the Sale Agreement. The provisions of the Partnership Dissolution Deed have the effect of a further assurance of that assignment. Bitannia is given the benefit of the further assurance; it is not in express terms given an assignment.

40 The plaintiff's counsel contended that Recital A shows clearly what was defined as the subject matter of the Partnership Dissolution Deed; it clearly shows that the subject matter was what was defined as the Business by its being mentioned in Recital A, and that was owning and operating the Belmore Hotel located at 383 Burwood Rd Belmore, New South Wales. Counsel contended that this is what is referred to as the Business when that expression is found elsewhere in the Partnership Dissolution Deed. It was submitted that when the document is construed as a whole expressions used in the Recitals inform understanding of expressions elsewhere in the document. This observation was directed to the expressions the Partnership and the Business which are used throughout the Partnership Dissolution Deed.

41 Counsel contended that the reading he put forward is reinforced by the terms of Recital C, as the Sale Agreement and the Business with which it deals is the Belmore Hotel alone.

42 In the Sale Agreement on the first page under the heading MEANING OF TERM the property is stated as: “The land, the improvements, all fixtures and the inclusions, but not the exclusions.” “Land” is given this meaning:

2/3 RD SHARE IN HOTEL OWNERS “BELMORE HOTEL”
383 BURWOOD ROAD BELMORE, NSW 2192
(and title references follow)

The inclusions are stated as: "Other: the Business Asset”

43 “Business Asset” is an expression defined in the Special Conditions, Annexure A to the Sale Agreement. Clause 1.1 contains a number of definitions including these related definitions:

Business means the business known as Belmore Hotel carried on in the Licensed Premises by the Business Asset vendor;
Business Asset means the Business Asset vendor’s right, title and interest in the following assets situated New South Wales used in or forming part of the Business:
(a) the Business Records;
(b) the Material Contracts;
(c) the Goodwill;
(d) the Furniture, fixtures and equipment;
(e) the Licence;
(f) the Liquor Act Poker Machine Permits;

44 Counsel contended that the Sale Agreement provides and provides only for the transfer of assets relating to the Belmore Hotel at Belmore. It refers to the sale of a business in terms apt only for the sale of the business at Belmore. The references to the business and the business asset are not in terms apt to extend to another hotel which had been leased out, and was being operated by a lessee and generating rent.

45 In my opinion the meaning and effect of the Sale Agreement in its own express terms shows that the real property which was sold and the Business assets included in the sale related only to the business at Belmore. The words used in the Sale Agreement are not apt for a sale of a share in a partnership under the Joint-Venture Agreement. They do not refer to the Joint-Venture Agreement, nor to my reading to they refer to the partnership under it.

46 The definitions speak as if Boyded was the owner, that is the sole owner of the business "known as Belmore Hotel carried on in the licensed premises by the business asset vendor". There is no overt acknowledgement in the terms of the Sale Agreement that Boyded was not the sole owner of the business asset but had no more than a two thirds interest in a partnership which was the owner of the business. This might have given trouble if there had not been a contemporaneous Partnership Dissolution Deed. When attention is concentrated solely on the meaning and effect of the Sale Agreement, the terms I have mentioned show that it relates and relates only to real property and the business located at Belmore.

47 This reasoning is reinforced in a number of ways by incidental references in the Sale Agreement. For example stock is defined in a way which refers to stock "located at the property" which can only be at Belmore (clause 1.1). References in Schedules to stock, gaming machine entitlement, liquor licence and employees reinforce this reading. In my opinion, if the Sale Agreement is considered on its own, it does not affect any interest in the Albion Hotel. This view conforms to my understanding of Recital C in the Partnership Dissolution Deed.

48 Plaintiff's counsel contended that the earlier transactions and the way in which the two hotels were dealt with in the earlier proposed transactions form factual matrix or objective circumstances surrounding the transaction which reinforce what, in his submission, the document plainly intended.

49 In my opinion consideration given in 2003 to the WAM transaction and in 2004 to the UBS float are not parts of the factual matrix of the Sale Agreement or of the Partnership Dissolution Deed. The relevant factual matrix in my opinion included the relationship of the vendor Boyded with Bitannia under the Joint Venture Agreement, which established what was the business known as the Belmore Hotel carried on in the licensed premises by the business asset vendor, the definition of "Business" and hence of the Business Asset in the Sale Agreement . The assets of the Joint-Venture are also part of the factual matrix. However discussions and considerations and shared intentions of the parties about earlier ventures for disposing of one or both hotels in earlier years, which did not lead to enforceable contracts and which are in no sense continued or incorporated in the Sale Agreement are not part of the factual matrix of the Sale Agreement. Even more clearly they are not part of the factual matrix of the Partnership Dissolution Deed. They are too remote in time in circumstance to be so, and in any event the purchasers in the Sale Agreement did not participate in them.

50 The plaintiff's counsel contended that it appears, as I understand it from the circumstances I have mentioned, that objectively the clear purpose and intent of the transaction was to effect the sale of Boyded's interest in the Belmore Hotel as partnership property. What counsel referred to as "the transaction" was the two documents taken together.

51 In answer to the defendants’ contention that the Partnership Dissolution Deed speaks in terms of dissolution of the partnership and governs the ownership of all property owned by the partnership plaintiff's counsel contended that it should be understood overall from the documents that the intention of the parties objectively viewed at the time of the disposition was that Boyded agreed to sell the partnership property meaning the Belmore Hotel, but not the Albion Hotel which was also partnership property. The scope of the partnership was altered. As the responsibilities of the parties to each other in respect of the Belmore Hotel were ended it was apposite to speak of a dissolution of the partnership. Counsel contended that the words of the dissolution deed reflected careful choice of words and reflected an intention to deal with an alteration in the scope of the partnership after any part of the partnership property was sold.

52 The plaintiff's counsel contended that the work of conveying interests in property directly is left by the Partnership Dissolution Deed to the effects of the Sale Agreement.

53 Submissions from both parties were directed to the relationship between the Recitals and the operative clauses of the Deed. In my opinion there is no significant anomaly between the recitals and the operative clauses of the Deed. There would be an anomaly if the recitals in some way indicated that the subject matter of the Deed was limited to dealing with the Belmore Hotel at Belmore. To my reading Recital A does not have any force to limit the subject matter to the Belmore Hotel and not to partnership generally. It was literally true that Boyded and Bitannia were partners in a business trading under the name Belmore Hotel; the business and the partnership did own and operate the Belmore Hotel. The partnership is spoken of in an undifferentiated way. There is nothing in Recital A which tends to exclude any asset not being the Belmore Hotel from the subjects under consideration.

54 These observations can be made even more clearly of Recital B which identifies the partnership under consideration with the partnership under the Joint-Venture Agreement, and does so in an unqualified way, without any indication of differentiation among parts of the Joint Venture or of its assets or affairs. Recital C is entirely correct and cannot be debated. In my opinion there is no room to suppose that Recital C sets a context to which the whole of the document and any other provision in it is to be subjected. If it did there would be a conflict between Recital C and operative parts; and the operative parts should prevail. However I see no such conflict. Recital D is altogether unqualified in its statement of a wish to dissolve the partnership, again without any indication of dividing the partnership or dissolving it less than completely.

55 An anomaly of the Partnership Dissolution Deed and in my view the high point of Boyded's position is that apart from clause 3.1 there are no words of express assurance or transfer of ownership of partnership assets; clause 3.1, by adopting the Sale Agreement, extends only to what the Sale Agreement disposes of, and only to disposition to the New Partners, not to Bitannia.

56 However the provisions of the Deed clause 3.1 taken in their entirety, and many taken singly, cannot be given effect unless the partnership is brought to a complete end and its assets are all disposed of. Clause 1 and clause 3.1 deal only with the subject of the Sale Agreement; their language clearly shows this limitation. Elsewhere in the Dissolution Deed this limitation is not expressly incorporated, but the Deed speaks in terms which are highly general. Clause 3.3 does something which the Sale Agreement does not do - fully discharge and satisfy Boyded's rights conferred upon it in the event of a dissolution of the partnership. The Sale Agreement could not do this, as Bitannia was not a party to it. Clause 4.1 gives the Continuing Partners legal and beneficial control of and interest in all the assets of the partnership, and by clause 4.3 the Retiring Partner is to have no further claim to the revenue, assets and capital. There is no qualification. There is no limitation or division about the indemnities and other assurances given to Boyded by clause 5. There is an "entire understanding" provision in clause 6.7 which states that "there are no express or implied conditions …".

57 I am of the opinion that overall the terms of the Partnership Dissolution Deed mean that it brought the partnership to a complete and final end. Continuation of the partnership in some form and as to some asset, the Albion Hotel or anything else, is altogether inconsistent with its terms.

58 The later behaviour of the parties is not in my opinion available to aid the construction of these documents. For example, evidence was given by Mr Ware about a meeting he had with Mr Ashton Waugh and Mr Joe Ryan on 24 October 2005. Mr Ware produces an e-mail which he sent on 26 October 2005 reporting on this meeting to Mr Turner. A number of subjects were mentioned as having been discussed. The relevant matter is:

Pokie licences:
Albion – AW concedes, reluctantly, its 1/3 them 2/3 us.

59 Mr Ware does not give direct evidence of what was said. The note is a business record, and also a contemporaneous note of the conversation. I admitted it because Mr Ware was entitled to give his evidence by reference to it, even if he does not remember the event. It is obviously greatly compressed, and it speaks about poker machines entitlements and not about ownership of the hotel. Mr Ashton Waugh does not dispute Mr Ware's evidence about this. It is no more than the bare bones of evidence that Mr Ashton Waugh said any particular thing, and could have little weight. In any event, it cannot be resorted to for construction of the documents. There is much behaviour the other way; the defendants behaved as if they were in complete control of the Albion Hotel, did not respond to an enquiry by Mr Turner and dealt with the hotel without reference to Boyded, to the extent of consenting to transfer of the lease and to waiver of rent; and Mr Johnson on their behalf told the accountants preparing accounts and tax returns that the Albion Hotel belonged to the defendants not to Boyded and Bitannia. Some tax returns were drafted which reflect another view; they only deal with an early period, and evidence does not establish whether or not the drafts were signed or adopted. If this chapter in the evidence were opened, it would not lead to any clear conclusion. In my opinion it could not be opened, except on rectification with which I need not deal.

60 The effects of the Partnership Dissolution Deed include that it brings about a dissolution of the partnership. As Recital C says, the Dissolution Deed records the sale of Boyded's share of the partnership and business to the New Partners. In the ordinary course a dissolution would bring about an entitlement to realisation of assets, taking of accounts and distribution of proceeds in accordance with the Joint-Venture Agreement. However the provisions of the Deed bring about what those things would have achieved all at the one moment. The partnership is dissolved, the New Partners acquire the Retiring Partner’s share in the business, the Continuing Partners are to assume the legal and beneficial control of and interest in and are to collect all the assets, the Retiring Partner accepts the purchase price (that is, the purchase price for the sale of its two third interest in the other contract) in full discharge and satisfaction of all rights on dissolution and is to have no further claim for the revenue, assets and capital of the partnership. There is no expression in the Deed which is consistent with continuation of part of the partnership relation. The meaning and effect of the document is that whatever is referred to as "the Retiring Partner’s share in the partnership and the business" and does not pass to the new parties is assigned to the Continuing Partners. All these results flow on settlement of the sale of the two thirds interest in the Belmore Hotel.

61 My Orders are:

Give judgment for the defendants with costs.

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