Caple v Wilson

[2016] VSC 704

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL COURT

S CI 2014 00222

BETWEEN:

NICHOLAS JOHN EDWARD CAPLE & ORS (according to the attached Schedule)	Plaintiffs
v
ANTON JOSEPH WILSON & ORS (according to the attached Schedule)	Defendants

AND BETWEEN:

ANACOTT STEEL PTY LTD (In Liquidation) (ACN 135 155 234) (formerly MIDER @ FRANKLIN STREET PTY LTD) & ORS (according to the attached Schedule)	Plaintiffs by Counterclaim
v
CHOICE PLANNING PTY LTD (ACN 103 233 343) & ORS (according to the attached Schedule)	Defendants by Counterclaim

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JUDGE:	ROBSON  J
WHERE HELD:	Melbourne
DATE OF HEARING:	7, 8, 9, 10, 14, 15 and 16 November 2016
DATE OF JUDGMENT:	5 December 2016
CASE MAY BE CITED AS:	Caple v Wilson
MEDIUM NEUTRAL CITATION:	[2016] VSC 704

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CONTRACT – Joint venture – Ascertainment of the parties to a joint venture and the obligations of the joint venture parties – Failure of joint venture party to account for profits of the joint venture – Claims on loans – Interest claimed on loans – Transfer of assets to defraud creditors – Fiduciary duties owed between joint venturers.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr I D Martindale QC with Mr M J Garrett	Diakon Faigen
For the Defendants	Anton Wilson in person.  No appearance for the corporate defendants.

TABLE OF CONTENTS

Introduction.......................................................................................................................... 1

The project............................................................................................................................ 2

Caple seeks an accounting of stage two......................................................................... 13

Who were the parties to the stage two agreement?...................................................... 20

What were the terms of the joint venture agreement?................................................. 22

How much did Caple agree to advance?....................................................................... 25

What amount did the parties agree as the amount of the management fee?........... 26

How much was the stage two profit?............................................................................. 30

Disputed item 1 — sales revenue................................................................................... 31

Disputed item 2 — management fee.............................................................................. 32

Disputed item 4 — interest on the Choice loans.......................................................... 32

Disputed item 4 — interest on related entity loans..................................................... 32

Was the transfer of lot S3 from Mider@Franklin to Grand8 at an undervalue?....... 33

Credit of Wilson................................................................................................................. 34

Was the transfer of lot S3 voidable under s 172 of the Property Law Act 1958?...... 35

Were any of the transfers otherwise done in breach of fiduciary duty?................... 36

Counterclaim...................................................................................................................... 37

Relief. 37

Rate of interest................................................................................................................... 45

Schedule of parties............................................................................................................ 49

HIS HONOUR:

Introduction

1. This matter concerns a dispute between Nicholas Caple (Caple), the third plaintiff and Anton Wilson (Wilson), the fifth defendant, and companies under their control in relation to a property development at 243–263 Franklin Street, Melbourne (‘the project’), that was developed in three stages into residential units and retail shops.

1. Wilson is a property developer.  Wilson conducts his business through companies.  At this stage, I will refer to the defendant parties as Wilson until it becomes necessary to introduce the relevant companies.  Caple is also a property developer.  He also acts as a mortgage broker organising funding for property developers.

1. Wilson and Caple were good friends and had known each other for many years prior to entering into an agreement to develop stage two of the project in 2010.  Caple had arranged finance for Wilson over many years for his many building developments.  Caple also arranged finance and provided finance from his own resources for the development of stage one (referred to as either stage 1 and stage 1A loans depending on the repayment obligations).  It is alleged that some of the stage 1A loans, and interest thereon, remain outstanding.

1. The dispute relates to the development of stage two of the project.  The land for stage two was owned by Wilson’s company Mider@Franklin Street Pty Ltd (Mider@Franklin).  Stage two of the project was to be developed by Wilson’s company Mider Pty Ltd (Mider). 

1. Stage one of the project had begun in 2009 and after the success of the presales for stage one, Wilson decided to develop stage two concurrently with stage one.  In March 2010, Caple and Wilson agreed that Caple would provide finance to enable stage two of the project to proceed concurrently with stage one. 

1. Caple says that he agreed to lend up to $3 million for the stage two development.  Wilson says Caple agreed to lend whatever was necessary up to the time construction finance was provided by a bank.  They both agreed that the profit on stage two would be divided equally between them.  They both agreed that Wilson could charge a management fee of $800,000 (although as discussed below, there is dispute as to the terms on which the management fee could be charged), and that the land contributed by Wilson would be costed at $6 million for the purposes of calculating profit/loss of stage two. 

1. The construction of stage two was completed by the end of 2012 and secured lenders were paid off by the end of February 2013.  Caple has not had all the loans he made to stage two repaid.  Caple has not been paid any share of the profit on stage two.

1. Caple says that the agreement constituted a joint venture between him and Wilson, whereby they would share the profits of the development of stage two equally.  Wilson denies that he and Caple made a joint venture agreement and contends that the agreement was merely for Caple to lend moneys to Wilson to enable the development on the basis, inter alia, that they would share the profits of stage two equally.

1. Further, Wilson says that the agreement was not between himself and Caple but between their respective companies, as these were the entities carrying out the project, and who were lending, receiving, and repaying money used for the project.

1. For the reasons that follow, I find that the agreement is between Wilson and Caple, and is a joint venture agreement and that Wilson has failed to repay all the loans made by Caple and has not paid Caple his half share of the profit.

The project

1. In 2008, Wilson purchased vacant land at 243–263 Franklin Street, Melbourne for $6.5 million.  The land purchase was effected by Mider@Franklin, a company Wilson incorporated for the purpose of the 243–263 Franklin Street development.  Wilson was the sole director of Mider@Franklin.  Mider@Franklin is now in liquidation.  It and other defendant companies relevant to this matter have changed their names.  For convenience, the parties have agreed to use their original names and I have referred to them likewise.

1. Wilson proposed developing the land in three stages. Stage one involved the construction of some 92 units to be sold for student accommodation.  The units were mainly one-bedroom studio apartments.  Wilson sold the units off the plan primarily in Australia and Singapore, as well as other countries.

1. Stage two was to be a further tower of some 168 units for student accommodation.  Stage three was to be a 67-room hotel with some retail lots.  The plan for stage three was later changed to more student units due to the popularity of stage one.

1. In late 2009, Wilson began selling stage one units ‘off the plan’ and financed the marketing and other pre-construction costs himself.

1. Wilson proposed to obtain construction finance from a major financial institution to carry out the construction of the buildings.  Evidence was given that typically a lender would require a certain percentage of the units to be pre-sold before making finance available.  The percentage required for stage two, for example, was that pre-sales should be 120 per cent of the amount to be loaned before advances would begin to be made.

1. Thus, under this approach, the developer was required to obtain pre-construction finance from another source to finance the planning, design, pre-sale marketing and all other necessary tasks before building could commence.

1. Initially, the NAB had provided finance for the purchase of the three lots secured by a mortgage over the 243–263 Franklin Street property.  St George provided construction finance for stage one for $23 million in early 2010.  The St George finance facility was used to pay out NAB, and St George took a first mortgage over the land.

1. Before construction began of either stage one or two, Caple says that over a period of time, in early 2010, he had discussions with Wilson about entering into a joint venture to develop stage two.  The pre-sales of stage one had been very successful and Caple says that Wilson proposed that Caple provide pre-construction finance for stage two so that stage two could be developed in conjunction with stage one.  Wilson being unable to finance the pre-construction of stage two as his funds were tied up with stage one.

1. Caple said that he spoke with Wilson almost daily.  Caple said that they were having coffee in Albert Park when the subject of the joint venture was first raised.[1]  They discussed bringing forward stage two, due to the prevailing market conditions (the successful pre-sales for stage one). 

   [1]Transcript of hearing, Caple v Wilson (7 November 2016) T92, L27–30.

1. Caple said that when he and Wilson drove to Bairnsdale, they discussed bringing forward stage two.  Wilson told Caple that he wasn’t in a financial position to fund that process.[2]  Caple said that Wilson asked whether he was interested in being involved in funding the initial equity requirements to launch the pre-construction pre-sale process of stage.

   [2]Transcript of hearing, Caple v Wilson (7 November 2016) T95, L28–30.

1. Caple said that he had available a maximum of $3 million that he could contribute to the project.  Caple said that he made clear his limit was $3 million and ‘we’ felt would be enough to get us through the pre-construction phase of the project.’[3]  Caple said that pre-construction phase ends when the construction funder takes over.

   [3]Transcript of hearing, Caple v Wilson (7 November 2016) T98, L17–19.

1. Caple said that Wilson said that he was happy to proceed on that basis.  Caple said Wilson said that ‘we’ can use your $3 million and if we need further funds we can source them from other third party lenders.’[4]  Caple said that Wilson mentioned Yarrmu as being a possible third party lender they could approach for funds if necessary, as Yarrmu had lent to Wilson previously.

   [4]Transcript of hearing, Caple v Wilson (7 November 2016) T99, L24–26.

1. Caple said that Wilson proposed for Caple to inject $3 million, Caple’s return on that would be 50 per cent of the profit of the project and interest on his funds while invested.[5]  Caple said that it went without saying that he would get his money back.

   [5]Transcript of hearing, Caple v Wilson (7 November 2016) T100, L6–10.

1. Caple, when prompted by counsel, said that Wilson proposed a 15 per cent interest on his advances.

1. Caple was asked whether he would get 50 per cent share of profits even if he had to go to another lender for pre-construction money.  Caple said that it was agreed his only role was to put in up to $3 million and to assist in arranging the construction finance.[6]

   [6]Transcript of hearing, Caple v Wilson (7 November 2016) T102, L3–6.

1. Caple said that Wilson proposed that Wilson be paid a project management fee to perform his role in managing stage two.  Wilson proposed a set rate of $800,000.  Caple said that this sum was not the product of negotiation.  Caple said that he was happy for Wilson to be paid that amount.[7]

   [7]Transcript of hearing, Caple v Wilson (7 November 2016) T102.

1. Caple said that they did not discuss which company would perform the project management role.  Caple said that they did not talk about the division of profit, however in the calculation they agreed that the land value being used in the profit and loss statement at the end of the day would be $6 million.  Caple said that Wilson proposed that amount and that Caple agreed without negotiation. 

1. Caple was asked whether this agreement was reached over a number of conversations.  Caple said he recalled the trip to Bairnsdale being the time when they had a fair bit of time together and ‘they thrashed things out and agreed on those broad terms.’[8]

   [8]Transcript of hearing, Caple v Wilson (7 November 2016) T103, L21–21.

1. On 10 April 2010, Mider@Franklin and Mider entered into the Building Development Agreement for the development of stage two.  Wilson described Mider as his ‘mothership’ company that he used for most of his development projects.  Mider is now in liquidation.

1. Caple said that the first advance for stage two was made on 16 April 2010.  In recalling the dates of advancements and repayments, Caple relied on a table prepared by both Ms Megan Stevens (Stevens) an accountant who worked for Caple, and Ms Gina Hutchinson (Hutchinson), a bookkeeper who worked for Wilson.

1. Despite the pleadings filed on behalf of Wilson, Wilson agreed that he had made a joint venture agreement with Caple.  Wilson agreed on the terms as Caple had said in his evidence, save that Caple had agreed to fund all the moneys required for stage two other than the construction finance.  Wilson said that they discussed that this would probably be $3 million and he hoped it would be less but that Caple agreed to provide all the finance required save for the construction finance.  Wilson said that they agreed that the profit would be split after paying back all the costs.

1. St George Bank provided the construction finance for both stages one and two.  For stage one construction financing was approved on 22 March 2010.  The construction financing was varied on 15 December 2010.  St George Bank agreed to provide the finance for stage two on 15 December 2010.

1. Caple was shown an email from Wilson’s solicitors, Burke & Associates Lawyers Pty Ltd (Burke), to Caple dated 4 May 2010 that attached a draft building development loan agreement and a draft loan agreement.  Caple says that he recalls receiving these from Burke but does not recall the date he received them.  Caple said that his recollection is that he had received a draft prior to making the first advance on 16 April 2010.[9]

   [9]Transcript of hearing, Caple v Wilson (7 November 2016) T105.

1. Caple said that he looked at the document and noted the management fee of $800,000 and also that his required contribution to the project was stated to be some $5.2 or $5.7 million.[10]

   [10]Transcript of hearing, Caple v Wilson (7 November 2016) T106, L22.

1. Caple said that he telephoned Burke and told him that he would not sign the loan agreement and told him that he had not agreed to lend so much money in his discussions with Wilson.

1. Caple says that he does not recall Burke’s exact response but believes Burke said that he would need to discuss that with Wilson.[11]

   [11]Transcript of hearing, Caple v Wilson (7 November 2016) T107, L10.

1. Caple says that he spoke to Wilson after and told him that he could not commit to this amount of money because he did not have this amount of money to commit.  Caple could not recall Wilson’s response.

1. Wilson said that there were several drafts of the loan agreement prepared by his solicitor Burke.  Caple said that after he spoke with Burke he did not receive another draft.

1. Caple was shown the Building Development Agreement sent to him by Burke that had been signed by Wilson on behalf of Mider as the developer and on behalf of Mider@Franklin as the land owner.  Caple noted that it provided for Mider being paid a development fee of $800,000.  Caple was taken to the loan agreement which referred to a management fee calculated by a percentage.  Caple said that he did not discuss this term with Burke.

1. Caple was asked whether he discussed that term with Wilson.  Caple merely said he recalled that at the time that they agreed on a flat figure of $800,000 and no percentage of any cost to be in addition to that.

1. Under cross-examination, Wilson said that the commitment sum of $5,276,289, referred to in Burke’s draft loan agreement, was probably obtained from his estimate of how much finance would be needed in addition to the construction loan from the major financer.  Wilson was unable to explain why the draft specified that there was no partnership or agency.  Wilson agreed that his agreement with Caple was a joint venture.  Wilson claimed that the draft agreement would have to be modified to reflect the agreement he had with Caple.[12]

   [12]Transcript of hearing, Caple v Wilson (10 November 2016) T359.

1. Galvin Constructions was engaged as the builder of stage one and stage two.  Galvin commenced the construction of stage one between June and September 2010.  Galvin commence construction of stage two on 27 January 2011.

1. On 10 November 2010, Wilson and Caple applied to the St George Bank for construction finance for stage two.  The application stated that ‘Nicholas is a silent equity partner in stage two of this development - Infinity 88.  Nicholas is prepared to personally guarantee this facility.’[13]    

   [13]Court Book (‘CB’) 103.

1. On 11 November 2010, Caple and Wilson flew to Singapore.  During the trip, Caple and Wilson discussed their agreement and Wilson made handwritten notes of their discussion.[14]  Wilson confirmed that he and Caple travelled to Singapore together and discussed the principle terms of their joint venture agreement.  Wilson agreed that he brought with him the typed document showing the projected expenses and profit of stage two.[15]  Wilson said that the handwritten notes on the typed document were made by him probably while they were in the lounge. 

   [14]CB 114.

   [15]CB 114.

1. The typed document records the ‘project manager’ cost as $800,000.  Wilson agreed that this was a reference to the project management fee that he had previously agreed with Caple.

1. Wilson agreed that he made notes of what he agreed with Caple but says that at the time they had been drinking.

1. Wilson noted:[16]

(A) Neeko [Caple] to still mezz fund to $,3,000,000.  Thus current proposal expects $2,090,000 to go to $2,650,000 this provides $350,000 to Mider as funds.

[16]CB 114.

1. Wilson also sent to Caple an email of 17 November 2010 dealing with the trip to Singapore.  The email said:[17]

Please see the following notes as per out [sic] PLANE meeting

1-  Your current cash contribution is $2,093,000 into stage 2 bank account.  Another $560k is required over the next 3 weeks which will take you to $2,653,000.  That leaves circa $350k for Mider to draw.  Which would then take you to your maximum capacity of $3 million in funds contributed

[17]CB 112.

1. As mentioned, construction of stage two began on 27 January 2011 after the construction financing was approved on 15 December 2010.  A term of the financing was for Caple and Wilson to give a personal guarantee of the Westpac construction loan for stage two.

1. On 31 January 2011, Caple advanced to Wilson (Mider) $100,000, making his total contribution to stage two at that time, $2,933,000.  I shall call the loans made at the direction of Caple ‘the Choice loans.’

1. On 22 February 2011, Caple signed a guarantee and indemnity in favour of the St George Bank for $33,200,000.[18]

   [18]CB 124A.1–124A.3.

1. In August 2011, the builder of stage one and stage two, Galvin Constructions, went into administration.  At that stage it had not finished stage one and, as mentioned, had also commenced stage two.  St George suspended its agreement to provide financing of the construction of stage one and stage two.  Stage one had almost been completed; stage two had reached some six floors. 

1. In September 2011, Maxcon was engaged to complete stage one and complete stage two.  Maxcon agreed to complete stage one for some $1,178,705.34 and to accept payment from the proceeds of stage one.[19] 

   [19]Caple said in evidence in chief that Maxcon was to be paid from the proceeds of stage 1, whereas the written opening submissions of Caple said that the loan may have been repayable from Stage 1 proceeds but Maxcon agreed to wait until stage two completion.

1. On 21 November 2011, Caple paid Maxcon $271,000 to complete stage one and to put greater equity into the project to convince the Bank to resume construction financing for stage two.  On 22 December 2011, Caple paid Maxcon a further sum of $300,000 for the same purpose.  Caple’s contribution to stage two was thus: $2,933,000 + $571,000 = $3,504,000.

1. On 22 November 2011, stage one was completed and the permit of occupancy was issued.

1. On 4 January 2012, St George, now the Bank of Melbourne, approved new constructing finance  for stage two.  Stage two was completed on 30 November 2012 when the permit of occupancy was issued.  In order for the Bank to reapprove the construction finance, the Bank wanted the joint venturers to invest more equity in the project, an additional $1.859 million was required to be injected.  The Bank also required the stage one finance facility to be repaid.  

1. Caple said that the Bank accepted as equity the payment of $571,275 that he paid directly to Maxcon.  Wilson said that the Bank required him to leave in lock-up accounts $1,288,039 that was otherwise due to him from the proceeds of stage one.

1. On 12 January 2012 Caple sent an email[20] to Wilson discussing stage two project and the additional equity requirement caused by the collapse of Galvin.  Caple suggested that Caple and Wilson each pay half of what was required.  Caple says that at this time he did not know about the stage one proceeds being held in a lock-up account.  In the email he says that they should assume the change of builders will require an additional $1.5 million, and as he has already contributed an additional $571,275, he had $178,000 more to contribute and Wilson is to contribute $750,000 (to come from ‘Don and his mate’).  Wilson did not request Caple to contribute the additional $178,000.

   [20]CB 143.

1. On 27 April 2012, Wilson had sent to Caple a statement of income and expenses for stage two that forecast a profit of $13, 997,384.[21]

   [21]CB 147–8.

1. On 5 June 2012, Wilson approached the Bank of Melbourne to permit a sale of equity in stage two to Maximum Capital.  Wilson informed the Bank that some of Caple’s equity in stage two was to be transferred to Maximum Capital.[22]  Wilson did not suggest that Caple knew of this approach to the Bank.  Wilson did not explain why he referred to Caple’s equity as 25 per cent.

   [22]CB 153B.

1. Stage two units had been sold off the plan.  By the end of February 2013, the sale of all but several units and a shop had settled.  The secured lenders had been repaid.  Sufficient moneys had been received to repay the Choice loans.  The Choice loans were not repaid, however.

1. Some further settlements of the units occurred in 2013.  By July or August 2013 five units in stage two were transferred by Wilson out of Mider@Franklin to another company controlled by Wilson, Mider@City Pty Ltd (Mider@City) (the fourth defendant).

1. Caple’s claims against Wilson relate to both stage one and stage two of the development.  As to stage one, Caple made two categories of loans to Wilson called the ‘stage 1 loans’ and the ‘stage 1A’ loans.  These loans were not specifically earmarked for use on stage one, but were so referred to as they were to be repaid from stage one profits.  However, in view of the collapse of Galvin, Caple accepted that these loans may not be repaid at the completion of stage one.  Caple says that Wilson required the stage 1 loans to pay tax, school fees and everyday business expenses. 

1. The stage 1 loans were described ‘double up’ loans.  Caple claims that Wilson agreed to repay the loans upon the completion of stage one of the project which was estimated to be November 2011.  Caple claims that Wilson agreed to repay twice the sum of the loan and interest on the initial loan amount of at least 15 per cent.  The stage 1A loans were made from 10 May 2011 to 25 November 2011.  There was no ‘double up’ on the stage 1A loans.  Interest on the initial loan amount was repayable at 15 per cent. 

1. Before stage two was completed, Caple and Wilson raised finance over stage two to take some money out of the project.  In June 2012, Caple was paid $2.3 million to repay the stage 1 loans.

1. As the stage two project drew to a close, Caple made many attempts to get an accounting of the project from Wilson.  I will deal with these attempts shortly, but first it is necessary to explain the role of the accountants employed by Wilson and Caple.  Wilson’s accountant was Hutchinson and Stevens was the accountant of Caple.  Stevens kept an Excel spreadsheet showing the loans advanced by Caple to stage one and stage two.  As indicated above, stage 1 loans were divided into stage 1 — the double up loans; and 1A loans, which were interest only loans.  The stage 2 loans were applied to stage two.  The loans were made from three companies controlled by Caple:  Choice Planning Pty Ltd, Choice Financial Pty Ltd and Newcape Superannuation Fund (a fund controlled by Caple and his wife Christina Pearl Caple).

1. The spreadsheet was sent back and forth between Stevens and Hutchinson to ensure the loan records of Wilson and Caple corresponded.

1. Wilson also produced, from time to time, statements of income and expenses relating to stage two that calculated a budgeted net profit before tax. 

1. I now turn to the attempts by Caple to get an accounting of stage two from Wilson.  Caple did not need an accounting of stage one, nor did he seek one, as he was only a lender to that project.

Caple seeks an accounting of stage two

1. While Caple was seeking an accounting from Wilson, Caple did receive several payments from Wilson.  On 21 January 2013, Caple received from Wilson $1.2 million.  He received the last payment of $315,000 on 17 July 2013.  Caple received in all five payments totalling $4,115,000.  Wilson agreed that this was an accurate record of the payments.  After this last repayment was made, Caple says the principle of $521,782.60 remained outstanding with respect to the stage 1A loans and the principle of $1,293,779 remained outstanding in respect of the stage 2 loans. 

1. During cross-examination, Wilson agreed that he received some $5.4 million from the same borrowing against stage two that was used to pay Caple $2.3 million.  Wilson was unable to satisfactorily explain why Caple received less than he did.  Wilson agreed that he did not tell Caple that he received more than Caple did.  Caple said that he did not know that at the time Wilson received more than he did from this loan.

1. On or about 1 February 2013, Caple met with Wilson to get an accounting of the stage two project.  Wilson produced an income and expenses form  forecasting a net profit before tax of $7,164,106.[23]  Caple says he expressed concern to Wilson, as the profit projected was only half that Wilson had initially projected when inviting Caple to enter the venture with him. 

   [23]CB 202 (attached to an email from Wilson to Caple of 25 March 2013).

1. Caple says that three items concerned him that were shown on the statement:  interest of $1,201,794 payable to Max Cap Int (Maximum Capital); interest of $3,300,00 payable to Choice (Caple, or his companies); and interest of $3,180,000 payable to Mider (Wilson).  Caple says that he queried those amounts.  He told Wilson that the Maximum Capital loan was not used for stage two as far as Caple was aware.  Caple said that the interest payable to both Choice and Mider were much higher than he thought they should be.

1. The statement showed an expense of $900,000 as interest referable to the land that had been valued at $6 million for the purpose of calculating the profit on stage two.  Caple queried why interest was being charged in relation to the land. 

1. Caple said he did not receive an adequate explanation for the three items of interest.  Caple said that he left the meeting ‘disgruntled.’  Caple noted that the administration fee was $800,000 as they had agreed.

1. Wilson agreed with Caple’s account of the meeting.  Wilson says that Caple was angry.  Wilson said that he offered Caple the opportunity of going through the books with Wilson’s accountant Hutchinson.  Wilson said that he said that Caple could send the accounts to an accountant and that if Wilson’s calculation was wrong he would pay for the accountant.  Wilson did not put this to Caple when Caple was cross examined by Wilson.

1. On 8 February 2013, Wilson repaid a further $1 million on the Choice loans.  On 24 February 2013, Wilson repaid a further $300,000 on the Choice loans.

1. On 14 March 2013, Caple emailed Wilson asking for a ‘one page summary of the project as it currently sits.’[24]

   [24]CB 195.

1. On 22 March 2013, Wilson emailed Caple attaching a spreadsheet of the payments (‘in and outs’) of the Choice loans.[25]  Wilson informed Caple that he was not sure of Caple’s payout as per the attached spreadsheet as it did not take account of any selling costs of the unsold apartments.  Caple said that he did not know why Wilson mentioned selling costs as the spreadsheet was a record of loans and repayments.[26]

   [25]CB 197.

   [26]Transcript of hearing, Caple v Wilson (8 November 2016) T182–183.

1. On 25 March 2013,[27] Wilson informed Caple he had not updated the statement he showed him on 1 February 2013.  Wilson said that Caple had refused to take a copy of the statement with him on 1 February 2013 when offered by Wilson and attached to his email of a copy of the statement he showed Caple on 1 February 2013.

   [27]CB 201–202.

1. On 5 April 2013, Wilson repaid a further $300,000 on the Choice loans.

1. On 1 May 2013, Wilson emailed Caple telling him, in effect, that his money would be coming soon.[28]  

   [28]CB 212.

1. On 7 May 2013, Wilson emailed Caple telling him that only two flats and one shop remained to settle in stage two.[29]  Wilson also offered to meet Caple the following Thursday to give Caple a full debriefing.  They did not meet.

   [29]CB 213.

1. In May 2013 Caple says that Wilson led him to believe that they could raise money to repay some of Caple’s loans by using the residual Franklin Street land, lot S3 (earmarked for the stage three development), as security.  On May 8 2013 Caple emailed Wilson telling him he had found a lender who would advance $1.5 million or 50% of the value of lot S3.[30]

   [30]CB 216.

1. On 10 May 2013, Wilson applied for a new planning permit for stage three to allow the construction of residential units and retail shops as in stages one and two.  The use he applied for fell within the permissible uses for the relevant zoning.  Wilson said he was extremely confident that he would receive the new permit.[31]

   [31]Transcript of hearing, Caple v Wilson (10 November 2016) T455, L16–22.

1. On May 28 2013 Wilson told Caple that ‘Unfortunately I cannot use my residual land as security for the advancement of funds.’[32]

   [32]CB 224.

1. On 22 July 2013, Caple asked Wilson for a meeting ‘to discuss where we are at.’[33]  The meeting did not eventuate.

   [33]CB 234.

1. On 20 August 2013, an amended planning permit was issued for stage three, changing the use from a hotel to residential apartments.[34]

   [34]CB 235–242.

1. On 25 August 2013, Wilson received an internal market appraisal of the value of the five units that remained unsold in stage two for $145,000 to $159,000 from James Aldinger of Mider.[35]

   [35]CB 243.

1. On 26 August 2013, Caple requested from Wilson an update on settlements.  Wilson agreed to meet,[36] but the meeting did not take place.

   [36]CB 244–247.

1. On 27 August 2013, Wilson received an internal appraisal from James Aldinger for lot S3, being the remaining land held by Mider@Franklin to be used in stage three, for $1,050,000 to $1,150,000.

1. On the same date Wilson also received appraisals from Opteon for the five unsold stage two units for $265,000 to $270,000 per unit.[37]

   [37]CB 249–292.

1. Caple and Wilson had planned to meet on August 28 and then August 29, 2013 but Wilson postponed the meeting.  Caple requested Wilson to email an update and to meet thereafter.[38]

   [38]CB 294–296.

1. On 31 August 2013, Wilson transferred to Mider@City titles to the five unsold stage two units.  The consideration was some $150,000 on average for a total of $750,000.  No payment was made by Mider@City for the units.  Caple was not aware that the five units had been transferred.  Wilson also transferred from Mider@Franklin to Grand8@Franklin Pty Ltd (Grand8) lot S3 for $1.88 million, although no money was paid by Grand8, as discussed below.  Caple was not aware that lot S3 had been transferred by Wilson to Grand8.

1. Grand8 was another company controlled by Wilson that he proposed to use as the special purpose vehicle for the development of stage 3.  Grand8 is the fourth defendant.

1. On 2 September 2013, Wilson offered to meet Caple,[39] but the meeting fell through. 

   [39]CB 314.

1. On 24 September 2013, Caple sent Wilson an email saying that he had now been waiting three weeks for Wilson to send him an outline of his plan to pay Caple the funds owed to him.  Caple demanded a meeting.[40]  Wilson responded saying that any meeting would be ‘premature due to the project not being finalised.’[41]

   [40]CB 322.

   [41]CB 322.

1. On 2 October 2013, Wilson sought to borrow on the security of the five units then held by Mider@City and the retail shop held by Mider@Franklin.  Wilson said that the ‘rough value’ of the units was $300,000 each, and that they sell for $325,000.  Wilson said that the value of the shop was roughly $350,000.[42]

   [42]CB 324.

1. On 7 October 2013, Wilson was advised that he would receive $1,050,000 on the security of the five units.[43]  Wilson transferred the moneys raised on the security of the units to companies controlled by him.  No payment was made to Mider@Franklin.

   [43]CB 325.

1. On 7 October 2013, Caple emailed Wilson complaining that Wilson had refused to meet to discuss their situation.[44]  Caple again asked for an update of the project and estimated timing of his funds being paid.  He said that it was now six weeks since Wilson had promised him this information.

   [44]CB 345.

1. Caple said that he was sick and tired of chasing Wilson.  Wilson responded saying that he would update Caple on settlement status at the end of the month — Thursday 31 October 2013.[45]  On 31 October 2013, Wilson did not provide an accounting but merely said that no settlements had occurred and that he would email again on 15 November 2013.[46]

   [45]CB 344.

   [46]CB 353.

1. In November 2013, Caple attended his solicitor who carried out title searches on the joint venture properties.  The solicitor advised Caple that all the units in stage two had been transferred, and the stage three land had also been transferred away from Mider@Franklin.

1. Thus, even though all units of stage two had been transferred and despite the many requests from Caple, Wilson failed to provide any accounting to Caple of the stage two joint venture with Caple.  The last accounting had been in February 2013, even though unsatisfactory.

1. On 10 February 2014, Wilson emailed Chris Mason requesting a valuation as of 30 June 2013 of lot S3, known as 263 Franklin Street.[47]  Wilson described the land, saying there was no building on the site, and told Mason it had an expired planning permit for a hotel of 67 rooms, no residential permit in place and ‘POTENTIAL MASSIVE ENVIRONMENTAL CLEAN UP’, ‘THE SITE IS LOCATED IN an ARCHELOGICAL [sic] POTENTIAL ZONE’.  Wilson added,

As discussed, these risks I feel make the site worth $1,000,000.  I’ll send over some Environmental comment too.  Most likely category ‘B’ which is quite expensive to remove and unknown.

[47]CB 505D.

1. Wilson did not tell Mason that, before June 2013, Wilson had applied for a permit to construct units on lot S3, nor that he had subsequently received the permit.

1. Subsequently, Wilson received from Mason a valuation of lot S3 for $1,000,000.[48]  Mason said in respect of the zoning, ‘A retail use with first floor dwelling is considered permissible.’  The report said:[49]

As at the date of valuation, the land is cleared and vacant, however due to its former use as a commercial car yard there are a number of associated contamination issues.  As a result the property does present a greater level of cost for redevelopment in order remit any ground contamination.

[48]CB 505–519.

[49]CB 503.

1. Caple called Mr Rohan (a valuer from Charter Keck Kramer), who valued the land as at 30 June 2013 at $2.75 million.  Mr Rohan had allowed for contamination removal of $47,000.  He said that in his experience developers expect some level of contamination and ‘will view contamination or remediation costs as a development expense rather than a contributory factor to land acquisition;’ that is, a cost that ‘would be incurred after land acquisition.’[50]  Mr Rohan said that the majority of developers view environmental remediation as a development cost in the same manner as demolition or consultant costs.  

   [50]Transcript of hearing, Caple v Wilson (9 November 2016) T318, L23–29.

Who were the parties to the stage two agreement?

1. The plaintiffs’ primary contention is that the joint venture agreement was between Caple and Wilson personally.  In the alternative, the plaintiffs allege that the joint venture agreement was between Caple, Choice Planning and Choice financial (the Choice parties) of the one part and Wilson, Mider@Franklin and Mider (the Mider parties of the other part.

1. I have already set out the background discussions to the agreement between Caple and Wilson.  There is no dispute that Caple and Wilson orally agreed on the terms of the venture.  Both Caple and Wilson were aware that each carried on their business activities through companies.  Caple knew that Mider provided management services.  Caple knew that Mider@Franklin was to build stage two.  Wilson knew that Caple lent money through Choice Planning and Choice Financial.

1. There is no evidence, however, that in making the agreement, any reference was made to any company under the control of the joint venturers.  Although I find that it was well understood that each party would use corporate vehicles in carrying out their obligations, there was no agreement that bound any company to carry out any of the obligations that Caple and Wilson agreed to.  

1. The plaintiff’s pleadings and written submissions assert a right of Caple to be paid his share of the profits.  However, the corresponding obligation is not articulated:  who is obliged to pay the profits? This section proceeds on the basis that this obligation falls on Wilson, as only he and Caple are parties to the agreement.  Given that the identity of the corporate vehicle was unknown at the time of the agreement, the obligation could only be phrased as one requiring Wilson to ‘cause’ the profits to be paid to Caple.

1. A number of cases with analogous facts have found that a joint venturer has breached contractual obligations in failing to pay profits to another joint venturer.

1. In Ravinder Rohini Pty Ltd v Krizaic,[51] two individuals made an oral agreement for a joint venture, with profits to be shared equally.  The profits were not paid.  The work of the joint venture was undertaken in the name of a corporate entity controlled by one party, but was ‘prosecuted by’ the individuals involved.[52]  The property was held by the company, however it was envisaged that it would be transferred elsewhere during the venture.

   [51](1991) 30 FCR 300 (‘Krizaic’).

   [52]Krizaic, 303.

1. In Krizaic Wilcox J found that the two individuals were bound by the agreement but the company was not.  While the parties contemplated use of a corporate vehicle, it was not clear what that vehicle would be.[53]  His Honour held that the contract personally required the director to ‘cause’ his company to do certain acts.  The lack of clarity as to the role and identity of corporate entities was immaterial, as Wilcox J said:[54]

… I do not overlook the point made by counsel that [the individual joint venturers] never determined what legal entity would be used to carry out the redevelopment… I do not think that it matters that this logistical question was unresolved.  There was a firm agreement that each man would have a fifty-fifty interest.  If they could agree about a fifty-fifty interest in a corporate owner or in a unit trust, well and good.  If not, each would be entitled to insist upon a 50 per cent interest in the land…

[53]Krizaic, 309-10 (Wilcox J).

[54]Krizaic, 310 (Wilcox J).

1. Wilcox J held that the defendant was liable for breach of contract in failing to cause the profits to be paid. An individual who is party to such an agreement is in breach by failing to cause his or her corporate entity to pay the profits.

1. In United Dominions Corporation Ltd v Brian Pty Ltd,[55] three parties formed a joint venture.  One party granted a mortgage of venture property to another, without the knowledge of the third joint venture party (the plaintiff).  The mortgage was enforced and its effect was to prevent the plaintiff from accessing the profits of the property.

   [55](1985) 157 CLR 1 (‘UDC v Brian’).

1. The High Court found that the parties owed fiduciary duties to one another.  Mason, Brennan and Dawson JJ held that the plaintiff need not seek a constructive trust:  it needed only to ‘assert against [the mortgagee joint venturer] its entitlement to its share of the surplus proceeds of sale under the joint venture agreement.  [The mortgagee] cannot resist that claim ... by relying upon the [mortgage].’[56]  The joint venture party was entitled to rely on the contractual agreement to insist on payment of its share of profits.  

   [56]UDC v Brian (1985) 157 CLR 1, 14 (Mason, Brennan and Dawson JJ).

1. Accordingly, I find that as alleged that there was a joint venture agreement and that agreement was between Caple and Wilson personally.  Caple is entitled to rely on the contractual agreement with Wilson to insist he be paid his share of the profits.  Wilson, in failing to cause Mider@Franklin to pay the profits, is in breach of the agreement with Caple.

What were the terms of the joint venture agreement?

1. I find that there were terms of the joint venture agreement as follows.

1. That Wilson would undertake the stage two project that involved the construction and sale of 168 residential units and one retail unit (the project).

1. Caple would arrange up to $3 million of finance for the initial stages of the project until construction finance was obtained from a bank.

1. That interest would accrue on advances of stage two advances made to the project and (as subsequently agreed) the interest rate would be a rate of 15 per cent per annum.

1. Wilson admits that as the lots in the stage two development were sold, the proceeds of sale would be applied to repayment of the Bank finances, and insofar as the cash flow of the stage two development permitted it, in repayment of amounts provided by Caple, or alternatively Choice Planning, Choice Financial, to fund the stage two development.[57]

   [57]Amended defence to amended claim and amended counterclaim of 16 December 2015 (the amended defence and counterclaim), [16].

1. I also find that it was implicit in the joint venture agreement that the principal amount of the project advances by Caple, including interest, would be repaid after the Bank loan was discharged (and any other secured creditors had been repaid) from the proceeds of the sale of the units.

1. I find that it was a term of the agreement that Wilson would pay or cause to be paid to Caple half the profits of the project.

1. I find that it was agreed between Caple and Wilson that in the calculation of the net profit of the project:

(a)       the value of the stage two land would be a cost of the project and (as subsequently agreed between Wilson and Caple) that value attributed to the land would be $6 million; and

(b)      a development fee would be a cost of the stage two development and (as subsequently agreed between Wilson and Caple) the amount of the fee would be $800,000 (this issue is discussed further below).

1. I do not accept the evidence of Wilson that Caple agreed to provide all finance necessary for stage two other than the construction finance obtained from bank lenders for the construction and development of stage two.  I do not accept the evidence of Wilson that the $800,000 was subject to variation and was to cover all the internal costs of Mider attributable to stage two (this issue is discussed further below).

1. The joint venture agreement was in all respects a partnership, save that Caple and Wilson had no authority to bind each other as they would if their relationship was governed by the Partnership Act 1958 (Vic).

1. Caple contributed money and his financial skills in arranging finance for the project.  Wilson contributed the land and his skills in managing the development of stage two.[58]  They both guaranteed the construction finance.  They both did this with a view to sharing the profits of the venture.

   [58]Transcript of hearing, Caple v Wilson (8 November 2016) T211–212.

1. In these circumstances the joint venture agreement imposed fiduciary duties on Wilson who, in carrying out the development of stage two for their mutual advantage, had to subordinate his separate interests and those of the companies he controlled to the joint interests of him and Caple.[59]

   [59]Gibson Motor Sports v Forbes (2006) 149 FCR 569, [12] (Finn J).

1. Caple also contends that the stage two land and therefore the units created by the development of the land which were held by Mider@Franklin until sold were held on trust for the parties to the joint venture.

1. Caple referred to News v ARL,[60] where Burchett J said:

[T]hat where property committed to a joint venture is vested in the name of a particular participant, rather than in the joint names of all, that participant holds the joint venture asset for all the joint venturers. 

[60](1996) 58 FCR 447, 545E citing Chan v Zacharia (1984) 154 CLR 178, 180–1.

1. In this case, the assets were held by Mider@Franklin and were effectively under the control of Wilson.  Under the joint venture agreement, there was no suggestion that stage two assets were held on behalf of the joint venturers.  Rather, the agreement was that the Wilson would apply the stage two assets solely to produce a profit for the joint venture.  Accordingly, Wilson was under a fiduciary duty to not permit the use of those assets other than for the purpose of the joint venture.  Despite the fiduciary duty, I do not accept that the assets that Wilson was going to use in the joint venture were assets that were held on trust for Wilson and Caple.

How much did Caple agree to advance?

1. I find that Caple agreed to advance up to a maximum of $3 million.  I accept the evidence of Caple that this was the agreement.  His evidence is supported by the following evidence.  

1. The email of 17 November 2010 confirms the discussions on the flight to Singapore that Caple’s maximum contribution was $3 million.[61]  Caple contributed $2,993,000 before the collapse of Galvin.[62]  After the collapse of Galvin, Caple’s advance of a further $571,275 was treated as stage 2 loans.[63]  After the collapse of Galvin, Caple advanced a further $521,782.00 in stage 1A loans which were not part of the stage two agreement.[64]  

   [61]CB 112–114.

   [62]CB 128.

   [63]CB 149–152.

   [64]CB 190D.

1. When further equity was required to be put into stage two after Galvin collapsed, Caple and Wilson sought to make equal contributions.  Caple treated the payments of $572,275 that he paid to Maxcon as part of his half share, and Wilson agreed to use funds held in a lock-up account from stage one. 

1. The important aspect of these transactions is that Wilson did not suggest that it was Caple’s obligation under the joint venture agreement to finance all loans required in addition to the Bank construction loan as Wilson contends was the agreement.  Wilson’s conduct in swearing a statutory declaration of 8 February 2012[65] that was filed with the Bank was not consistent with his allegation that Caple agreed to provide all loan funding to carry out stage two save for the Bank construction loan.

   [65]CB 145.

1. I accept that the funds that Caple advanced over and above the $2,933,000 were not advanced pursuant to the original agreement between the parties, but arose out of the unforeseen collapse of the builder and the fact that the development would have been stalled, partially completed, if the Bank could not be convinced to reinstate the construction finance.  It must be recalled, that Caple had given a personal guarantee at this stage on the Bank loans.  Caple’s actions in lending more money were not driven by the original joint venture agreement but by a desire to see the project completed and to avoid financial disaster to himself through his guarantee to the Bank.

What amount did the parties agree as the amount of the management fee?

1. I find that the agreed management fee was $800,000.

1. Caple gave evidence that this was the agreement.[66]  I accept his evidence.  It was not disputed by Wilson.  Caple’s evidence is supported by the following.

   [66]Transcript of hearing, Caple v Wilson (7 November 2016) T102, L10.T 102.10.

1. The email of 17 November 2010, setting the elements of the joint venture, stated the fee was $800,000.[67]  The handwritten note also identifies the fee at $800,000.

   [67]CB 112–113.

1. The spreadsheet of 1 February 2013 stated the management fee was $800,000.[68]  At the top of the spreadsheet shown to Caple by Wilson were the words ‘subject to confirmation.’  Wilson asserted that they had previously agreed that the management fee was not set in stone and that ‘any out of pocket from the “mothership” was to be picked up as well.’[69]  Wilson said that the words ‘subject to confirmation’ gave Wilson the scope to include any normal head office costs and any spikes in head office costs of Mider in the management fee.[70]  This alleged conversation was not put to Caple by Wilson when Wilson cross-examined Caple.

   [68]CB 202.

   [69]Transcript of hearing, Caple v Wilson (10 November 2016) T434.

   [70]Transcript of hearing, Caple v Wilson (10 November 2016) T434.

1. Wilson said that he assumed that the fees had to be confirmed by his accountant.  He had told his accountants to ‘pick up any extra costs out of Mider’ and include these in the management fee, above the $800,000.[71]

   [71]Transcript of hearing, Caple v Wilson (10 November 2016) T434.

1. The Building Development Agreement dated 14 April 2010 that was sent to Caple by Burke in May 2010 specifies that the management fee would be $800,000.  Caple did notice this provision and that it matched with what he agreed.

1. Wilson called Mr Secatore as an expert accountant to give evidence as to the profit of the joint venture. 

1. Prior to Mr Secatore being retained to calculate the stage two profit, Wilson’s accountants, Black & Krantz, had purported to calculate the stage two profit.  Black & Krantz did not use the agreed fee of $800,000.  Rather, Black & Krantz took the actual expenses incurred by Mider in the relevant years and then sought to allocate a proportion of those fees to stage two.[72]

   [72]CB 404–409.

1. Black & Krantz prepared a consolidated profit and loss statement for stage two that showed the management fee as $3,600,217.26 and a profit of $1,009,503.61, and forwarded the same to Wilson on 8 March 2015.[73]  Black & Krantz prepared a further consolidated profit and loss statement for stage two that showed a management fee of $3,450,217.26 and a loss of $3,518,694.29 that was forwarded to Wilson on 26 March 2015.[74]  Black & Krantz were not called to explain these calculations of the management fee.

   [73]CB 385–387.

   [74]CB 396.1–398.

1. Mr Secatore gave three different versions of the profit or loss of stage two.  

1. Scenario 1 used a purported deed of variation of the Building Development Agreement.  The deed of variation was purportedly made on 30 June 2010 between Mider@Franklin and Mider as to what fee Mider was entitled to charge Mider@Franklin for managing stage two.   

1. The deed recites the Building Development Agreement of 14 April 2010.  The Building Development Agreement was expressed to be an agreement between Mider@Franklin as the landowner and Mider as the developer.  In effect, the agreement provides for Mider to build the Franklin Street development on the land of Mider@Franklin.

1. Under the Building Development Agreement, the landowner is liable for the ‘project costs.’  Clause 7.3 defines the ‘project costs’ that are expressed to include the ‘Development Fee’ but excludes taxes imposed on the parties and the internal administration costs of Mider.

1. The ‘Development Fee’ is defined to mean $800,000 plus GST.  As mentioned, the Building Development Agreement was purportedly signed on 14 April 2010.  The deed of variation was purportedly executed on 30 June 2010 and purports to amend the Building Development Agreement as follows. 

1. The deed amended the definition of the ‘project costs’ by including the internal administration costs of Mider.  Secondly, by the deed, the parties agreed that a margin of 23 per cent would be applied to all costs falling within the project costs and would be charged by the developer (Mider) to the landowner (Mider@Franklin).

1. The consequence of the amendment would mean that the administration fee charged by Mider to Mider@Franklin would be 23 per cent of all building costs, financing costs, marketing costs, internal costs of Mider and the $800,000 development fee.  

1. Black & Krantz calculated the internal costs of Mider attributable to stage two as $5,269,737.78.[75]  If the development fee of $800,000 is added, Mr Secatore calculated that the management fee would be $7,465,771.32.  Mr Secatore overlooked the construction and finance costs for which a fee of 23 per cent was also to be charged.  This would have added at least some $5 million, making the management fee payable to Mider well over $12 million.

   [75]Exhibit P23.

1. In circumstances where the parties had agreed that the administration fee would be $800,000, the suggestion that Wilson could unilaterally increase it to over $12 million is ridiculous.

1. Scenario 2 used the calculations of Black & Krantz with some adjustments for superannuation and accounting fees.  Using this method Mr Secatore calculates a management fee of $3,372,944.53.

1. Scenario 3 used the $800,000 as agreed.

1. Wilson conceded that the management fee was $800,000 ‘in the early days’[76] and ‘originally.’[77]  Wilson agreed that the management fee was still $800,000 when he and Caple flew to Singapore in November 2010.  The fee was still $800,000 in February 2013 when Wilson presented the spreadsheet to Caple showing the anticipated profit from the project.

   [76]Transcript of hearing, Caple v Wilson (10 November 2016) T327, L8.

   [77]Transcript of hearing, Caple v Wilson (10 November 2016) T434, L20.

1. Wilson did not plead the deed of variation in his defence.  Wilson did not suggest that Caple ever knew about the deed of variation.  There was no suggestion by Wilson that Caple ever agreed to the deed of variation.

1. I find that under the joint venture agreement the management fee was $800,000 and Mider or Wilson was not entitled to charge the project any further costs relating to the management of the project.

How much was the stage two profit?

1. Caple’s expert, Mr Lipson, calculated the stage two profit as $14,933,000. 

1. Mr Lipson calculated that figure on the assumption that the Choice loans could have been repaid at the end of February 2013 when the bulk of the units sold had been settled and the secured creditors paid off.  The construction costs had been met from the moneys borrowed from the secured creditors.  At that stage Mider@Franklin received some $11 million after the secured creditors were paid off.  This sum was well in excess of the moneys owed to Choice.

1. As the Choice loans had not been repaid at the end of February 2013, interest was still running.  Mr Lipson proceeded on the basis that the interest payments were no longer an expense of the project but an expense that Mider@Franklin had to bear in its own right.  Mr Secatore chose December 2014 as the date at which the interest expense attributable to the project ought to have been calculated.  Mr Secatore did not dispute that the Choice loans could have been repaid at the end of February 2013.

1. As discussed above, the joint venture agreement provided that the loans should be repaid when funds from the project were available to do so.  I find that the Choice loans ought to have been repaid at the end of February 2013 and that accordingly Mr Lipson’s calculation proceeds on the correct basis that interest on the Choice loans should cease to be an expense of stage two at the end of February 2013.

1. Mr Lipson made some adjustments to his original calculation as a result of his conferring with Mr Secatore.  Mr Secatore also made some concessions.  There remained, however, four areas of contention.

Disputed item 1 — sales revenue

1. Mr Lipson includes the sale proceeds of the five units transferred by Wilson to his company Mider@City.  Mr Secatore includes the value at which they were transferred to Mider@City.

1. According to Mr Lipson, the sales revenue for the five units that were initially sold in or around May 2010 was $1,465,500.  The units did not proceed to settlement.  They were subsequently sold in 2014 and 2015 for a sales value of $1,380,000.  The difference between the initial sales revenue of $1,465,500 and the actual sales revenue of $1,380,000 was a decline of $65,500 or 5.8 per cent.  Mr Lipson says that the actual sales revenue is a strong reflection of what the revenue would have been if the original sales had been settled.

1. In my opinion, the preferable view is that Wilson transferred the units within his companies.  The transfer was a matter entirely within Wilson’s control but has no bearing on what income is to be treated as part of the income of stage two.  The parties agreed that the sale proceeds of the units would be income of stage two.  The calculation of the joint venture profit is an accounting exercise.  The fact that Wilson moved the units from one company he controlled to another, has no bearing on the calculation of the joint venture profit.  The transfer was not a proper commercial transaction.  No money changed hands.  The units were undervalued.

1. Wilson said that it was his practice to park the assets to enable the special purpose company owner to be wound down.  Wilson treated the transfer of the assets accordingly.  In evidence he sought to justify the value they were transferred at by explaining that they were transferred at the same time as a ‘one line’ transfer.  I do not consider the transfer of the units within Wilson’s company group had any consequence for the calculation of the profit of stage two.

1. Mr Lipson has ignored the transfer in calculating the profit of the joint venture, and he was entitled and obliged to do so.

Disputed item 2 — management fee

1. Mr Secatore held to his view that the management ought to be calculated under the deed of variation (even though his calculation was shown to be in error as it did not include the 23 per cent margin on construction and finance costs).

1. As discussed above, I have found that under the joint venture agreement the profit of stage two was to include a management fee of only $800,000.

Disputed item 4 — interest on the Choice loans

1. I have already found that in calculating the profit on stage two interest on these loans should cease to be included beyond the end of February 2013.

Disputed item 4 — interest on related entity loans

1. Mr Secatore included as an expense of stage two interest purportedly due by Mider@Franklin to a company controlled by Melinda Wilson (Wilson’s wife) called MaeMae Property Group Pty Ltd (MaeMae).

1. The loan is recognised in a loan deed dated 30 June 2009 between MaeMae and Mider.[78]  The loan is $3,541,351.56 commencing 30 June 2009.  The recital states that the lender had previously loaned and the borrower had previously accepted the loan.  The deed provided that the lender had previously borrowed the loan for ‘the purpose of undertaking development and constructions of residential properties at Franklin Street, Melbourne.’  The end date of the loan was ‘upon the sale and settlement of the last of the Properties in stage two of the Franklin Street Development Project being undertaken by the lender.’[79]  Wilson said that he thought that the money was borrowed to buy the Franklin Street land (including the stage two land).

   [78]CB 69.4.

   [79]CB 69.12.

1. As mentioned, MaeMae was incorporated the day before the deed was dated and the deed said that the moneys had been previously lent.  MaeMae did not open a bank account until 28 December 2011.[80]  Wilson accepted that MaeMae did not have cash of its own.  Wilson accepted that the Franklin Street land was probably funded by the previous project in Swanston Street for which the special purpose vehicle was Plough Harrow.  Caple submits that as MaeMae was not incorporated until 29 June 2010, that it has no involvement in the Swanston Street project.

   [80]CB 69.16–19.

1. Wilson did not call any evidence to confirm that moneys were actually lent by MaeMae to Mider@Franklin or Mider to be used on stage two.  Wilson did not call his internal accountant or anyone from Black & Krantz who could have confirmed the alleged transaction that the deed seeks to record.  This is despite Wilson being aware that the experts were at issue over this alleged cost of stage two.

1. I find that Mr Lipson was correct to ignore the alleged MaeMae loan.

1. These were the issues that related to the calculation of the profit of stage two.  Thus I find that the stage two profit was $14,933,000. 

Was the transfer of lot S3 from Mider@Franklin to Grand8 at an undervalue?

1. Caple alleges the transfer was at an undervalue and that no amount was paid by Grand8 to Mider@Franklin for the transfer.

1. I have already discussed the facts relating to the valuation of lot S3 and the circumstances of its transfer.  I accept the valuation of Mr Rohan.  I accept the evidence of Mr Rohan concerning the relevance of possible contamination.  I find that Wilson deliberately exaggerated the contamination in order to induce his valuer Mason to find that the $1,088,000 was a fair and reasonable value for the lot.

1. I find that Wilson misled the valuer by not informing him that he had applied for a new permit to allow construction of residential units. 

1. When Wilson was preparing for this trial in January 2015, evidence was adduced of a series of emails between Wilson and his lawyer Burke and between Wilson and his accountants that infer that Burke had identified a problem that Grand8 had not paid for lot S3.  The emails also infer that Wilson then sought assistance from his accountants to raise a series of book entries to seek to establish that Grand8 would be treated as if it gave consideration for the transfer.[81]  The final email from Tim Hinh (Hinh) to Onofrio Raffaele (Raffaele) (both accountants at Black & Krantz) includes a letter from Burke in which Burke enclosed a draft affidavit for Raffaele (presumably to use in this case) and in which Burke says he needed help on several matters including ‘how the payment for the 5 apartments and the stage three land will be treated in accounts as no cash had been paid?’.[82]  

   [81]CB 370–375.

   [82]CB 375.

1. Despite Wilson knowing that this was an issue in the trial, as it was raised in the plaintiffs’ claim, he called no evidence to establish any consideration was provided by Grand8 for the transfer.

1. Further, earlier, Burke had emailed Hinh and Raffaele saying, ‘Guys, we need to know how the sale of stage 3 land to Grand 8 and the sale of the five apartments to Mider@City will be treated in the accounts when done, given no cash payment.’[83]

   [83]CB 380.

1. I am satisfied that Wilson knowingly transferred lot S3 at an under value.  

Credit of Wilson

1. I do not accept the credit of Wilson, where he disagreed with the evidence given by Caple.  Wilson’s evidence was inconsistent with contemporary records.  In particular, in the notes made on the trip to Singapore in November 2010, Wilson in his own hand accepted that Caple had agreed to lend up to $3 million and no more. 

1. Further, the draft loan agreement forwarded to Caple in May 2010 purported to fix the contribution of Caple to a fixed sum stated as some $5.2 or $5.7 million.  Caple gave evidence that he immediately contacted Burke, Wilson’s solicitor, who drafted the loan agreement to inform him that he had only agreed to lend up to $3 million.  Wilson did not call Burke to rebut that evidence.  One of the emails relating to the preparation of the accounts for the relevant companies is from Wilson informing his accountants that ‘the ”round robin” won’t quite work.’[84]

   [84]CB 396.1.

1. By itself the last remark is of little weight, but in the context where accounts were being prepared for use in this case and Burke had identified that no moneys were paid for the five units or for lot S3, the inference arises that Wilson and his accountants were trying to create some sort of ex post facto transactions to justify the transfer of lot S3 and the five units where no cash payments were made.  Wilson did not seek to rebut the inference.

1. Accordingly, I find that the transfer of lot 3 was for an under value and for which no consideration was paid.

Was the transfer of lot S3 voidable under s 172 of the Property Law Act 1958?

1. Section 172(1) provides:

Save as provided in this section, every alienation of property made whether before or after the commencement of this Act, with intent to defraud creditors, shall be voidable at the instance of any person thereby prejudiced.

1. Subsection (3) provides that the section does not extend to any property alienated for valuable consideration and in good faith or upon good consideration and in good faith to any person not having, at the time of alienation, notice of the intent to defraud creditors.

1. The High Court held Marcolongo v Chen[85] that the expression ‘intent to defraud’ in the section means intent to delay, hinder or otherwise defraud as was provided in the precursor to s 172 found in the Statue of Elizabeth.  Also the High Court held that the relevant intention may be inferred if the natural consequence of the transaction is to delay hinder or otherwise defraud creditors.  The intention need not be the sole purpose of the debtor.  The intention may exist along with a genuine intention to dispose of property.

   [85](2011) 242 CLR 546.

1. The five units and the lot S3 were transferred when Wilson was well aware that Mider@Franklin was indebted to the Choice companies.  At the time of the transfers there was no ground for Wilson believing that stage two had been other than profitable and the loans could be repaid.  In February 2003, Wilson had shown Caple a profit and loss statement for stage two showing a profit of some $7 million.  On the other hand, the actions of Wilson infer that Mider@Franklin had been stripped of whatever cash it had under the guise of the deed of variation which permitted over $12 million to be transferred to Mider. 

1. Wilson called no evidence from his accountants, lawyer or bookkeepers to rebut the inference that Mider@Franklin had been cleaned out by Wilson.  It would have been a simple matter to produce bank statements showing what the resources of Mider@Franklin were.

1. Also, Wilson said that he did not agree that he could pay the Choice loans in February 2013 even if he wished, inferring the profits had already been syphoned off at Wilson’s behest.

1. Accordingly, I infer that the natural consequence of Wilson’s actions in transferring the five units and lot S3 for no real value were to hinder, delay or otherwise defraud the relevant Choice companies that had outstanding loans to Mider@Franklin.

Were any of the transfers otherwise done in breach of fiduciary duty?

1. For the reasons expressed above, Mider@Franklin had no obligations to Caple.  It had obligations to the Choice companies.  The question of breach of fiduciary duties to Caple by Mider@Franklin do not arise.  I do not consider that there was any breach of fiduciary duty by Wilson to Caple in transferring the five units to Mider@City.  As discussed above, the sale proceeds had to be taken into account in calculating the stage two profit whichever of Wilson’s companies made the sale.

1. The sale of the lot S3 was not relevant to the calculation of the profit on stage two.  The land was valued at $6 million for the purpose of the accounting calculation.

1. I am not satisfied that the transfers referred to constituted a breach of fiduciary duty by Wilson to Caple.

Counterclaim

1. Wilson alleges by counterclaim that in breach of the stage two agreement, Caple, Choice Planning or alternatively Choice Financial refused or failed to contribute funds required in addition to the bank finance for stage two.

1. This plea is based on Wilson’s claim that the amount Caple agreed to provide was not limited to $3 million but extended to all finance to carry out stage two in addition to the bank finance.

1. As it is I have found that this was not the agreement between Wilson and Caple.

1. Accordingly, this claim is dismissed.

1. Further, Wilson claims that stage two made a loss according to the terms of the agreement between him and Caple and that Caple has not paid his share of the loss.  As I have found that stage two made a profit, this claim is dismissed.

Relief

1. The cases discussed above, in considering the nature of the joint venture, have also considered whether a party can be held liable in equity for breach of fiduciary duties.

1. In Krizaic,[86] Davies J held that the ‘duty to account for one-half of the profit … arose from the fiduciary duty which existed between [the individuals].  Such a duty existed notwithstanding that the work of the joint venture had come to an end.’[87]

   [86]Krizaic.

   [87]Krizaic, 303 (Davies J).

1. Wilcox J also found that fiduciary duties made the defendant’s company liable, despite not being a party to the joint venture agreement.  The company was a third party in receipt of property (profit) with actual knowledge, as the defendant was the ‘mind’ of the company.[88]  While the claim was pleaded only in contract, Wilcox J considered that the pleaded facts also disclosed breach of fiduciary duty.[89]  The individual defendant was liable in contract, and his company liable in equity.[90]

   [88]Krizaic, 312 (Wilcox J).

   [89]Krizaic, 314-15 (Wilcox J).

   [90]Krizaic, 318 (Wilcox J).

1. The decision of Wilcox J in Krizaic indicates that a company can be liable even where it is not a party to the joint venture agreement, but its director is a party.  

1. The obverse principle can be seen in Gulf Pacific Pty Ltd v Londish,[91] where it was held that the director can be liable in equity where the joint venture agreement only binds his or her company.

   [91][1992] FCA 502 (‘Gulf Pacific’).

1. In that case, two corporate entities entered into a joint venture agreement.  Wilcox J held that the companies were in a fiduciary relationship.  One company bought out the interest of the other, without informing it of an impending sale of the venture at a higher value.  Wilcox J held that the defendant company was liable for breach of fiduciary duty, along with the director of that company.  His Honour held that:[92]

Given his participation in all aspects of the matter, [the director] must be held personally liable for the loss sustained by [the plaintiff company]. To apply the distinction drawn by Lord Selborne L.C. in Barnes v Addy, 251-252, [the director] was not a mere stranger acting as the agent of the fiduciary in a transaction within his legal powers; he assisted [his company] in its breach of fiduciary duty ‘with knowledge in a dishonest and fraudulent design.’

[92]Gulf Pacific, [67] (citations omitted).

1. The UK Court of Appeal decision in Ross River Ltd v Waveley Commercial Limited is to the same effect.[93]  In analogous circumstances to the facts in question, the director of a company involved in a joint venture was held to have breached his fiduciary duties in ‘causing’ or ‘procur[ing]’ the company to apply joint venture profits to improper purposes.[94] 

   [93][2013] EWCA Civ 910 (‘Ross River’).

   [94]Ross River,[110], [116].

1. In this case Wilson owed fiduciary duties directly to Caple (as well as contractual obligations) and his failure to pay Caple his half share of the profits was a breach of those duties.  The fiduciary obligations of joint venturers will ordinarily prevent one party from applying venture property for his or her own ‘collateral purposes’ without the knowledge and consent of the other joint venture party.[95]  That occurred in this case when Wilson retained the profits for his own purposes, rather than paying them to Caple as required.

   [95]UDC v Brian (1985) 157 CLR 1, 13 (Mason, Brennan and Dawson JJ); GM & AM Pearce & Co Pty Ltd v Australian Tallow Producers [2005] VSCA 113, [39]-[40] (Warren CJ), [90] (Chernov JA).

1. I propose to make the following orders:

(a)       Declare that the net profit of stage two was $14,933,000. 

(b)      That the fifth defendant (Wilson) pay to the third plaintiff (Caple) the sum of $7,466,500 being 50 per cent of the net profit on stage two.

1. Caple seeks an order that Wilson pay to Caple compound interest with yearly rests at the rate of 5 per cent per annum on the sum of $7,466,500 from 30 June 2015 up to and including the date of judgment.  Caple says that the date of 30 June 2015 is the date on which Wilson should have accounted to Caple for the net profit of stage two as this is the date that the five units were on sold to third parties and, as the profit of the sale is to be included in the profit and loss calculations for stage two, it is an appropriate date to designate as the end date of stage two.

1. Although Wilson owed Caple fiduciary duties similar to that of partners in a partnership, the obligation to pay half the profits was a contractual bargain.  Nevertheless, the breach of the contract involved not only Wilson failing to pay Caple half the profit of stage two but Wilson retaining half the profits for his own uses.  I am able to infer that Wilson used the moneys that ought to have been paid to Caple in developing stage three of the project.  I am also able to infer that Wilson as a property developer has continued to profit through the wrongful retention of the money that ought to have been paid to Caple.

1. Further, I am satisfied that Wilson’s failure to account to Caple for Caple’s share of the profit was a deliberate ploy to enable him to use Caple’s moneys for his own benefit.  Wilson’s actions in not paying Caple his share of the profit of stage two and keeping Caple’s share and using it for his own benefit was a breach of Wilson’s fiduciary duty to Caple.

1. Under s 60(1) of the Supreme Court Act 1986, on application in any proceeding for the recovery of debt or damages, the Court must, unless good cause is shown to the contrary, ‘give damages in the nature of interest at such rate not exceeding the rate for the time being fixed under s 2 of the Penalty Interest Act 1983 as it thinks fit from the commencement of the proceeding to the date of the judgment over and above the debt or damages awarded.’

1. In Talacko v Talacko,[96] Kyrou J, as he then was, discussed the principles relevant to determining whether or not the statutory rule should be applied or some other form of interest.  In Kirk v Kirk,[97] Macaulay J identified the relevant principles from Talacko as follows:[98]

The court has inherent equitable jurisdiction to award interest when the interests of justice so demand, including in circumstances where money has been withheld or misappropriated by a fiduciary. The right to interest in equity exists independently of statute.’[99] So, the court’s equitable jurisdiction is not limited by s 60 of the Supreme Court Act 1986 (Vic);[100]  

Traditionally, in fixing the rate of interest, equity broadly distinguished between two classes of case. In cases involving a breach of trust or misconduct, the fiduciary was charged interest at the mercantile rate of five per cent per annum. In all other cases, the defaulting fiduciary was charged interest at a rate of four per cent per annum. More recently, however, the courts have departed from the fixed interest rates of four and five per cent’;[101]  

In some circumstances, it will be appropriate for the court to award compound interest’,[102] to ensure that no profit remains in the defaulting fiduciary’s hands. Citing Boehm AM in Southern Cross Commodities Pty Ltd (in liq) v Ewing[103], this may, and normally will, occur where the defaulting fiduciary has used the money for his own commercial purposes, and also is guilty of fraud or serious misconduct.

An award of compound interest should ordinarily be considered only in cases where the defaulting fiduciary is being compelled to disgorge a gain’;[104]  and

Although the decision to award simple or compound interest is discretionary, to be determined on the facts of each case,[105] the court’s power to award compound interest is not at large, and there must be features in each case justifying a departure from the normal rule for simple interest.[106]  There must be evidence of an actual gain by the defaulting fiduciary or an evidentiary foundation upon which any gain may be assumed.[107]

[96][2009] SC 579 (‘Talacko’).

[97][2015] VSC 173 (‘Kirk’).

[98]Kirk, [39].

[99]Talacko [2009] VSC 579, [10], citing Hungerfords v Walker (1989) 171 CLR 125, 148 and Wallersteiner v Moir (No 2) [1975] QB 373, 388, 397, 406.

[100]Talacko, [11].

[101]Talacko, [12], citing, Hagan v Waterhouse (1991) 34 NSWLR 308 and Murdocca v Murdocca (No 2) [2002] NSWSC 505.

[102]Talacko, [15], citing Hagan v Waterhouse (1991) 34 NSWLR 308, 393; see also Harris v Digital Plus Pty Ltd (2003) 56 NSWLR 298, 367–9 (Heydon JA).

[103](1988) 14 ACLR 39 (‘Ewing’).

[104]Ewing [16], citing Fico v O’Leary [2004] WASC 215 (11 October 2004) [280].

[105]Australasian Annuities Pty Ltd (in liq) (recs and mgrs apptd) v Rowley Super Fund Pty Ltd [2015] VSCA 9 [320] (Garde AJA).

[106]Talacko, [25].

[107]Talacko, [25].

1. Kyrou J held that the Court’s ‘inherent equitable jurisdiction’ allowed it to ‘award interest when the interests of justice so demand, including in circumstances where money has been withheld or misappropriated by a fiduciary.’[108] This is such a case. Equity’s jurisdiction is not affected by s 60(2) of the Supreme Court Act 1986 (Vic), which otherwise applies the standard penalty rate in an action for damages, including equitable damages.[109]

   [108]Talacko, [10].

   [109]Talacko, [9].

1. The purpose of an award of interest at equity was said by Kyrou J not to be one of punishment.  Rather, it is an award made ‘in order to restore to the innocent party the benefit derived by the defaulting fiduciary from his or her use of property.’[110]

   [110]Talacko, [14] citing the English case of Wallersteiner v Moir (No 2) [1975] QB 373, 388.

1. These principles relate to an award of interest generally.  Caple appears to meet these criteria. The further question is whether simple or compound interest is appropriate.

1. So far as an award of compound interest is sought, Kyrou J adopted the principle stated in Southern Cross Commodities Pty Ltd (in liq) v Ewing:[111]  a defaulting fiduciary ‘may, and normally will, be charged with compound interest with yearly rests not only where he has used the money for his own commercial purposes, but also where he has been guilty of fraud or serious misconduct.’[112] 

   [111](1987) 11 ACLR 818.

   [112](1987) 11 ACLR 818, 843.

1. Citing Hagan v Waterhouse,[113] Kyrou J held that ‘[c]ompound interest is awarded in order to ensure that no profit remains in the hands of the defaulting fiduciary.’[114]  This is consistent with the principle next noted by Kyrou J, citing the decision in Fico v O’Leary for the proposition that ‘an award of compound interest should ordinarily be considered only in cases where the defaulting fiduciary is being compelled to disgorge a gain.’[115]  Simple interest, conversely, was said to be the appropriate award ‘where equitable compensation is assessed by reference to the innocent party’s loss.’[116]

   [113](1991) 34 NSWLR 308, 393.

   [114]Talacko, [15].

   [115]Talacko, [16]; see Fico v O’Leary [2004] WASC 215, [280].

   [116]Talacko, [16].

1. While the summary of principles provided by Kyrou J is accurate in the main, the principle that compound interest ought only to be awarded in order to disgorge a gain is more contestable.  It has been rejected by a decision of the NSW Court of Appeal and by the learned authors of Interest Awards in Australia.[117]  It is said in the latter text that to restrict an award of compound interest to situations requiring the defendant to disgorge a gain ‘confuses the award of interest that operates to perfect disgorging awards … with the award of interest to perfect compensatory awards.’[118]  That is, compound interest may be required to do justice between the parties whether the award is one which disgorges profits or is purely compensatory.

   [117]Harrison v Schipp [2001] NSWCA 13, [125]-[131]; Dr James Edelman and Derek Cassidy, Interest Awards in Australia (LexisNexis Butterworths, 2003), 65 [3.6].

   [118]Dr James Edelman and Derek Cassidy, Interest Awards in Australia (LexisNexis Butterworths, 2003), 65 [3.6].

1. The restriction to situations of disgorgement of profit is made somewhat difficult by virtue of the rule of equity ‘whereby it is presumed that a plaintiff wrongfully deprived of money would have made the most beneficial use of it.’[119]  If such a presumption operates, there ought to be no bar to compound interest in compensatory awards.  Such a bar would frustrate justice being done between the parties.

   [119]Biala Pty Ltd v Mallina Holdings Ltd (No 4) (1993) 13 WAR 11, 84.

1. In any event, it appears that an award of equitable damages in this matter could properly be said to be an award which requires disgorgement of gains; the gains were the profits made in the venture, retained by Wilson and then used for his own commercial purposes.[120]  That gain was made at the expense of Caple and Wilson must account for that gain.  In such circumstances, the Court is entitled to infer that ‘business as usual’ would have resulted in Wilson putting that gain ‘to a profitable use.’[121]  Equitable fraud is established here and, as a result, the Court may exercise its discretion to award compound interest.

   [120]Cf the claim made in Fico v O’Leary [2004] WASC 215, [280], which is more properly characterised a compensatory claim and where simple interest was awarded as a result, in preference to compound interest.

   [121]Southern Cross Commodities Pty Ltd (in liq) v Ewing (1987) 11 ACLR 818, 848.

1. One brief note must be added to this conclusion.  Counsel for Caple stated that there was no need to prove an equitable cause of action in order for equity to award compound interest.  That is, an award of compound interest at equity could be added to a common law claim (for breach of contract).

1. As I have found that there was an equitable breach by Wilson of his fiduciary duties, it does not fall for determination in this matter whether such argument should be accepted.  However I note that there is no authority which provides for equity to award compound interest following from a common law claim. 

1. The cases awarding compound interest at equity do so after a finding of breach of an equitable obligation.  They differentiate the rates of interest based on the type of equitable obligation breached.  

1. While compound interest is available at common law in some instances,[122] there is no suggestion that this matter falls within that category. Moreover, interest on recovery of a debt is governed by s 58(1) of the Supreme Court Act 1986 (Vic), which sets the applicable interest rate as that under the Penalty Interest Rates Act 1983 (Vic).

   [122]See Hungerfords v Walker (1989) 171 CLR 125.

Rate of interest

1. At what rate ought the interest be awarded at equity?  In Talacko, Kyrou J made the following comment:[123]

Traditionally, in fixing the rate of interest, equity broadly distinguished between two classes of case.  In cases involving a breach of trust or misconduct, the fiduciary was charged interest at the mercantile rate of five per cent per annum.  In all other cases, the defaulting fiduciary was charged interest at a rate of four per cent per annum.[124] 

[123]Talacko, [12].

[124]See Re Dawson (deceased); Union Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd [1966] 2 NSWR 211, 218-19; Re Tennant; Mortlock v Hawker (1942) 65 CLR 473, 507-508.

1. However, his Honour noted that recent cases had been more flexible in setting the applicable rate.[125]  Kyrou J quoted the following passage from McKearney J in Hagan v Waterhouse:[126]

I think that the volatile range of fluctuations in interest rates in recent times ought to be taken into account in applying to these changed conditions the policy of the Court which was settled in times of greater monetary stability.  Since then a fundamental change has resulted from financial deregulation and its consequential uncertainties.  I consider that it is no longer appropriate to apply a policy fixing a settled mean rate of interest, but rather that the mercantile rate should reflect the reality of the market place as it exists under a regime not in contemplation at the time of the foregoing pronouncement of judicial attitudes.

[125]Talacko, [12].

[126](1991) 34 NSWLR 308, 393.

1. In Talacko, Kyrou J cited Murdocca v Murdocca (No 2) as an instance of the more flexible approach.[127]  His Honour characterised the facts of that case as based on ‘a personal equitable obligation to transfer money’,[128] with an award of interest at the rate specified in the relevant court rules.

   [127][2002] NSWSC 505.

   [128]Talacko, [13].

1. In this case, Caple has sought compound interest at a rate of five per cent.  That is in line with the ‘traditional’ award noted by Kyrou J.  In light of that submission, there is little reason to consider whether an award departing from that rate is required.

1. I am satisfied that the awarding of compound interest in this case is justified.  The interests of justice deserve it.  As discussed above, the failure of Wilson not to pay Caple his share of the profit of stage two involved more than a mere failure to pay a debt.  It also involved Wilson using those moneys in his own business ventures in breach of his fiduciary duty to Caple.

1. As for the rate, it must be remembered that Caple was in the business of lending money and Wilson was in the business of borrowing money for his projects.  The pair agreed on a rate of 15 per cent for Caple’s loans to stage two.  Macaulay J awarded a compound rate of 5 per cent in Kirk where there had been a breach of fiduciary duty by the defendants.

1. Accordingly, I propose to make the order sought by Caple as to compound interest.

1. Choice Financial seeks the following order.  That the first defendant Mider@Franklin pay the first plaintiff Choice Financial the sum of $898,196.02 in outstanding principal and interest as at 15 November 2016, and interest of $243.26 per day from 15 November 2016 to and including the day of judgment.

1. There was no dispute between the parties on the amount owed by Mider@Franklin to Choice Financial.  Leave was given for Mider@Franklin to be sued despite being in liquidation.  There was no appearance for Mider@Franklin.[129]  The loan balances owed by Mider@Franklin to Choice Financial were reconciled on and agreed to between the accountant for Mider@Franklin, Hutchinson and the accountant for Choice Financial, Stevens.

   [129]Leave was given for Mider@Franklin not to appear.

1. I propose to make the order sought by Choice Financial.

1. Choice Financial seeks an order that Mider pay Choice Financial the sum of $2,885,010.18 in outstanding principal and interest as at 15 November 2016, and interest of $751.57 per day from 15 November 2016 to and including the day of judgment.

1. Leave was given for Mider to be sued despite being in liquidation.  There was no appearance for Mider.[130]  The loan balances owed to Choice Financial by Mider were reconciled on and agreed to between the accountant for Mider, Hutchinson and the accountant for Choice Financial, Stevens.

   [130]Leave was given for Mider not to appear.

1. The loans to Mider@Franklin and repayments to Choice Financial were reconciled on and agreed to between the accountant for Mider@Franklin, Hutchinson and the accountant for Choice Financial, Stevens.

1. Caple seeks an order that the Court declare that by causing Mider@Franklin to transfer to the third defendant Mider@City the land described in the titles to the five units, Wilson breached the fiduciary duties owed to Caple as parties to the joint venture between them in relation to stage two.

1. As discussed above, I am satisfied that the transfers were at an undervalue.  I am satisfied that in making the transfers Wilson breached his fiduciary duty to Caple.  As it is the units were sold and the sale proceeds taken into account in calculating the profit of stage two.  I see no purpose in making the declaration sought.

1. Caple seeks an order that the Court declare that Mider@City held title to each of the five units on constructive trust for Caple and Wilson as equitable tenants in common.

1. As discussed above, the assets of Mider@Franklin were not joint venture assets held on trust for the joint venturers.  The joint venture agreement was based on a promise by Wilson to pay Caple half the profits of stage two.  The venture did not involve the assets of Mider@Franklin being held on trust for the joint venturers.

1. I decline to make the order sought.

1. Caple seeks an order that the Court declare that the transfer from Mider@Franklin to the fourth defendant Grand8 of the land S3 is voidable pursuant to s 172 of the Property Law Act 1983.  For the reasons given above, I propose to make the declaration sought.

1. For the reasons given above, I dismiss the counterclaim of Wilson.

1. I direct that the parties bring in short minutes of the appropriate orders.

1. I will hear the parties on costs and any other orders as to interest.

Schedule of parties

CHOICE PLANNING PTY LTD (ACN 103 233 343)  First Plaintiff

CHOICE FINANCIAL PTY LTD (ACN 101109 353)  Second Plaintiff

NICHOLAS JOHN EDWARD CAPLE  Third Plaintiff

ANACOTT STEEL PTY LTD (in liquidation) (ACN 135 155 234)
(formerly MIDER @ FRANKLIN STREET PTY LTD)  First Defendant

TELDAR PAPER PROPERTY GROUP (in liquidation) (ACN 101 879 734)
(formerly MIDER PTY LTD)  Second Defendant

KELLER ZABEL (in liquidation) (ACN 164 372 490)
(formerly GRAND8 @ FRANKLIN STREET PTY LTD)  Third Defendant

CHURCHILL SCWARTZ PTY LTD (ACN 145 728 123)
(formerly MIDER @ CITY PTY LTD)  Fourth Defendant

ANTON JOSEPH WILSON  Fifth Defendant

ANACOTT STEEL PTY LTD (in liquidation) (ACN 135 155 234)
(formerly MIDER @ FRANKLIN STREET PTY LTD)  Plaintiff by Counterclaim

NICHOLAS JOHN EDWARD CAPLE  First Defendant by Counterclaim

CHOICE PLANNING PTY LTD (ACN 103 233 343)     Second Defendant by Counterclaim