Chen v Seasons Development Group Pty Ltd
[2020] VCC 1264
•20 August 2020
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-19-03918
| JING CHEN | Plaintiff |
| v | |
| SEASONS DEVELOPMENT GROUP PTY LTD | Defendant |
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JUDGE: | HIS HONOUR JUDGE COSGRAVE | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | On the papers | |
DATE OF RULING: | 20 August 2020 | |
CASE MAY BE CITED AS: | Chen v Seasons Development Group Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2020] VCC 1264 | |
REASONS FOR RULING
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr B Mason | K&L Gates |
| For the Defendant | Juris Cor Legal |
HIS HONOUR:
1On 30 June 2020, I heard applications in this matter while sitting as the Commercial Division Duty Judge. The dispute arose from a joint venture project between the plaintiff and defendant to develop approximately 40 units at a property located at 17 Poplar Street, Box Hill. It appeared that about 25 units had been sold and the sale proceeds totalled approximately $16 million. In addition, it seemed that four units were allocated to the defendant or persons associated with the defendant. A number of units had been, and were continuing to be, rented out. Hence, there was rental income being earned in addition to the income generated from the sales of the units.
2The application before me was made pursuant to Rule 52.01 of the County Court Civil Procedure Rules 2018 (Vic) to appoint a person to conduct an account of the joint venture. The main issues in dispute were the identity of the appointee and who should bear the costs of the appointment.
3The defendant’s first choice was Mr Shen. He was a chartered accountant, a tax agent, and a member of the Australian Association of Company Directors. He offered business advisory services and business development strategies. The material which accompanied his curriculum vitae suggested he focussed on asset protection and estate planning strategies. A colleague at the same firm, Ms Peng, said that she was a tax and advisory expert who helped a wide range of businesses through the business cycle of planning, structuring, and growth.
4The plaintiff’s suggested nominees were Messrs Stone, Jackson and Blakeley. Stone and Jackson had backgrounds in forensic accounting, the former most recently at Korda Mentha and the latter at Ernst & Young. Blakeley was a registered liquidator and chartered accountant. He said that he had assumed control of a variety of businesses and managed the affairs of companies with the aim of either restructuring them or selling them. He also claimed extensive experience in the areas of property and construction. This was an advantage in the present case. While the plaintiff was content to have any of its suggested nominees, she favoured Blakeley because his charge-out rates were a little cheaper than the others.
5The plaintiff in this application relies upon an affidavit of Samuel Rappensberg sworn 17 August 2020. Amongst other things, the affidavit summarises the hearing conducted before me on 30 June 2020, including the findings I made in giving judgment. I accept the summary set out at paragraphs 10–12 inclusive of the affidavit.
6The deponent says that on 17 July 2020, he sent a letter to Blakeley of FTI Consulting enclosing various documents to enable him to prepare a fee estimate for review by the parties.
7Rappensberg said that on 24 July 2020, he received an email from Blakeley in which Blakeley recommended that the parties consent to him contracting an accountant or firm of accountants to prepare the financial statements contemplated in Item 1 of the schedule to the orders I made on 30 June 2020. He said that any such financial statements would be subject to his ultimate oversight and review. Blakeley said that while he and the staff who would assist him in the matter were all qualified as chartered accountants, FTI Consulting did not normally provide or perform general accounting services such as those required in the preparation of formal accounts. Blakeley suggested that having a third party firm undertake this work would be more cost-effective, would bring further capability, independence, and an additional layer of review to the process, and would also introduce a qualified third party who might be able to have an ongoing role in a cost-effective manner.
8On 29 July 2020, Rappensberg emailed Blakeley confirming that the plaintiff was content for him to proceed on the basis set out in his email.
9Later the same day, Rappensberg received an email addressed to Blakeley from the defendant’s solicitors in which the defendant objected to the course of action proposed by Blakeley.
10On 30 July 2020, Rappensberg sent a further email to Blakeley in which he asked that he perform all the tasks contemplated by the court orders without assistance from third parties.
11On 5 August 2020, Rappensberg received another email from Blakeley in which he said that, upon further review of the information and consideration of broader issues, he repeated his request and recommendation that FTI Consulting be permitted to outsource and/or obtain specialist advice to the extent deemed necessary in addressing the preparation of formal accounts as required by the court orders.
12On 6 August 2020, Rappensberg contacted both Owain Stone at Korda Mentha and Campbell Jackson at Ernst & Young to check whether each of them was still available to undertake the tasks set out in the schedule to the court orders. Both confirmed that they remained available. Stone noted in his email that Korda Mentha would require the production of the necessary books and records of the joint venture including (but not limited to) the general ledger and/or cash book, ATO/GST returns, bank statements, invoices (both sales and expenses), and any documents relating to employees and consultants.
13Rappensberg said that on 10 August 2020, he received from the defendant’s solicitors a letter which was marked “without prejudice save as to costs”.
14On 12 August 2020, Rappensberg sent the defendant’s solicitor a letter in which he proposed that the defendant consent to either:
(a) Blakeley engaging a third party firm of accountants to assist in the preparation of the formal accounts; or
(b) Stone or Jackson being appointed in substitution for Blakeley.
15Rappensberg set out reasons in support of each option. The letter noted the parties’ overarching obligations to endeavour to resolve issues efficiently and cost-effectively. It opined that both options were reasonable, sensible, and cost-effective courses to adopt, which would avoid unnecessarily inconveniencing the court and reduce the time and cost involved in their respective clients returning to court for further directions. The letter asked that the defendant consent to one of the options by noon on 14 August. If there were no response, the plaintiff would contact the court seeking orders from the court.
16Rappensberg received no response from the defendant’s solicitors and accordingly contacted my associates by email on 17 August 2020.
17On the afternoon of 18 August 2020, the defendant’s solicitors emailed to my chambers some submissions and a minute of proposed orders. The submissions canvassed a number of matters:
(a) the unsuitability of Blakeley;
(b) the substitution of Shen for Blakeley;
(c) the costs charged by Shen;
(d) the costs associated with the appointment of Blakeley.
18The defendant contended that Blakeley was unsuitable for the role of conducting the account because he and/or his firm were not able to produce the financial accounts needed as part of this work.
19The defendant argued that Shen should replace Blakeley because he had suitable qualifications to undertake the work required including the creation of financial accounts. Further, he had provided accounting and consulting services for more than 20 construction and real property projects each valued at more than $20 million.
20The defendant noted that the rates charged by Shen and his firm were markedly lower than those of the other potential appointees.
21The defendant submitted that the plaintiff should have made more detailed enquiries about Blakeley before submitting his name to the court. It argued that the parties had incurred significant costs due to “the Plaintiff’s insistence on appointing Mr Ross Blakeley”. It also said that the parties incurred unnecessary additional costs as the plaintiff refused the defendant’s offer in its without prejudice letter of 10 July 2020. The defendant said the court should vacate minutes 4 and 7 of the orders dated 1 July 2020 and award the defendant the costs of both summonses and the replacement of Blakeley.
22After considering the options proffered by the plaintiff, I agree that Blakeley should be replaced. In my view it is preferable to have one person (and firm) responsible for all the work to be performed in taking an account of the joint venture. It promotes a greater sense of accountability when one individual is appointed and becomes responsible for the whole of the work. This option also eliminates the possibility of demarcation disputes arising about who was responsible for the performance of particular aspects of the work.
23The next issue is the identity of the replacement. On 30 June 2020, the parties argued the merits of the possible appointees for the role of conducting an account of the joint venture. At that time, I determined that, in the circumstances of this case, appointees with experience as liquidators or forensic accountants were preferable to those who were involved in more mainstream accounting, including the provision of advice regarding such matters as business development, tax and estate planning.
24In contending that Shen should replace Blakeley, the defendant is effectively asking me to sit in appeal on my earlier decision and reconsider it. I do not propose to adopt that course. The rationale which guided my views on 30 June 2020 remains valid. Accordingly, I consider that the choice is between Stone and Jackson. Both have the experience in forensic accounting which will be helpful in reconstructing the financial history of the joint venture and taking the account of the joint venture. Because his fees are lower, I have decided that Stone will replace Blakeley.
25In relation to the question of costs, again I will not sit in appeal on my own orders and reverse the costs orders already made. The defendant maintains that the parties incurred significant costs due to the plaintiff’s insistence in appointing Blakeley. I make two comments about this. First, at the hearing on 30 June 2020, both parties made submissions about their preferred appointee. The plaintiff did not insist upon Blakeley. She was content with any of her choices but favoured Blakeley on the grounds of expense. Secondly, it is not clear to me that the issue with Blakeley and FTI has caused the parties to incur significant cost. The issue was capable of simple resolution with a few emails or phone calls.
26I note in passing that the defendant asserts the parties incurred unnecessary additional cost by rejecting the without prejudice offer in the defendant’s letter dated 10 July. I have not seen that without prejudice letter and am entirely ignorant of its contents. Accordingly, I cannot form any view about the reasonableness of the plaintiff’s conduct regarding its assumed rejection of the defendant’s offer.
27In relation to the issue of the costs of the present application, I consider that in circumstances where the plaintiff made a reasonable request and the defendant failed to respond in a timely manner, the defendant should pay the costs of the application on an indemnity basis.
28Parties have important obligations under the Civil Procedure Act2010 (Vic) (“the Act”). The Act introduced the overarching purpose as well as a range of obligations upon parties and their legal representatives. The Act was designed in part to change and improve the way in which civil litigation was conducted. The parties and the court are to facilitate the just, efficient, timely, and cost-effective resolution of the real issues in dispute. In exercising and interpreting its powers, the court must give effect to the overarching purpose.
29The overarching obligations created in sections 16–26 of the Act apply to parties and their legal representatives in relation to the conduct of any aspect of a civil proceeding in court. Included among the overarching obligations are the obligation to cooperate in the conduct of a civil proceeding, to use reasonable endeavours to resolve the dispute, and to ensure that costs are reasonable and proportionate.
30In my view, the circumstances of the case were such that once the issue with Blakeley materialised, there were only two options available and both were reasonable. For the defendant to say and do nothing promptly in the face of an express request by the plaintiff was unjustified, unreasonable, and contrary to the purpose and intent of the Act. As a result, the plaintiff was forced to make what should have been an entirely unnecessary application to the court. This required the plaintiff to expend resources in preparing the application for the court and caused the court to devote time and energy to the application instead of dealing with other work more worthy of its attention.
31When the defendant later filed material in response to the plaintiff’s application, it sought to have the court reconsider the essential basis of the decision made on 30 June 2020. The sole purpose of the current application should have been to determine what was to be done regarding the situation with Blakeley. It was not an opportunity to reargue the initial application. The defendant’s actions in seeking to do otherwise were improper and contrary to established law. Rather than act promptly and cooperatively to address the issue, the defendant was slow to act, uncooperative, and inappropriate in seeking to reagitate matters which had only recently been determined.
32In conclusion, I make the following orders:
(i) Orders 1–3 inclusive of the orders made in this matter on 1 July 2020 are vacated.
(ii) Pursuant to rule 52.01(1) of the County Court Civil Procedure Rules 2018 (Vic), Owain Stone of Korda Mentha is appointed to take an account of the joint venture between the plaintiff and defendant for the development of a residential apartment complex at 17 Poplar Street, Box Hill, including to perform the tasks specified in the schedule to these orders.
(iii) In the first instance, the defendant on behalf of the joint venture shall pay Mr Stone’s costs of performing the account of the joint venture referred to in Order (ii) above.
(iv) Until further order, or the parties otherwise agree, any of the defendant’s bank statements which the defendant provides to Mr Stone for the purposes of performing the account of the joint venture referred to in Order (ii) above are not to be disclosed to any person other than the plaintiff’s legal representatives and Mr Stone’s colleagues.
(v) Reserve liberty to the parties to apply by email to the Commercial Division Registry ([email protected]) for further directions upon giving reasonable notice to all other parties
(vi) The defendant shall pay the plaintiff’s costs of and incidental to this application made on the papers, such costs to be taxed forthwith on an indemnity basis in default of agreement.
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