Creggan Holdings Pty Ltd as trustee for the Gwendoline Trust v Rizzi as trustee for the Boston Investment Trust [No 4]
[2024] WASC 421
•21 NOVEMBER 2024
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: CREGGAN HOLDINGS PTY LTD AS TRUSTEE FOR THE GWENDOLINE TRUST -v- RIZZI AS TRUSTEE FOR THE BOSTON INVESTMENT TRUST [No 4] [2024] WASC 421
CORAM: ARCHER J
HEARD: 6 NOVEMBER 2024
DELIVERED : 21 NOVEMBER 2024
FILE NO/S: CIV 1670 of 2020
BETWEEN: CREGGAN HOLDINGS PTY LTD AS TRUSTEE FOR THE GWENDOLINE TRUST
First Plaintiff
GRANT STREET PTY LTD AS TRUSTEE FOR THE SECOND JOHN THOMPSON SUPERANNUATION FUND
Second Plaintiff
AND
RICCARDO RIZZI AS TRUSTEE FOR THE BOSTON INVESTMENT TRUST
Defendant
RICCARDO RIZZI AS TRUSTEE FOR THE BOSTON INVESTMENT TRUST
Plaintiff by counterclaim
CREGGAN HOLDINGS PTY LTD AS TRUSTEE FOR THE GWENDOLINE TRUST
GRANT STREET PTY LTD AS TRUSTEE FOR THE SECOND JOHN THOMPSON SUPERANNUATION FUND
Defendant by counterclaim
Catchwords:
Application for adoption of account - Account largely adopted
Legislation:
Nil
Result:
Account adopted in part
Category: B
Representation:
Counsel:
| First Plaintiff | : | J Moore & W B Macdonald |
| Second Plaintiff | : | J Moore & W B Macdonald |
| Defendant | : | In person |
| Plaintiff by counterclaim | : | In person |
| Defendant by counterclaim | : | J Moore & W B Macdonald |
Solicitors:
| First Plaintiff | : | Roe Legal Services |
| Second Plaintiff | : | Roe Legal Services |
| Defendant | : | In person |
| Plaintiff by counterclaim | : | In person |
| Defendant by counterclaim | : | Roe Legal Services |
Case(s) referred to in decision(s):
Cheng v Lam [No 2] [2021] WASCA 196
Cheng v Lam [No 4] [2020] WASC 175
Creggan Holdings Pty Ltd as trustee for the Gwendoline Trust v Rizzi as trustee for the Boston Investment Trust [2022] WASC 6
Creggan Holdings Pty Ltd as trustee for the Gwendoline Trust v Rizzi as trustee for the Boston Investment Trust [No 3] [2023] WASC 65
ARCHER J:
Introduction[1]
[1] The first part of this introduction largely reproduces what I wrote in Creggan Holdings Pty Ltd as trustee for the Gwendoline Trust v Rizzi as trustee for the Boston Investment Trust[No 3] [2023] WASC 65 (Creggan [No 3]).
In 2018, a successful business relationship between two men broke down. What followed was years of acrimony and litigation. The litigation has been tortuous. These reasons deal with whether to adopt two registrar's reports on the taking of an account between the parties, following a seven‑day trial and numerous interlocutory disputes. Except for any costs disputes, these reasons should finally end the litigation, at least at first instance.
The director of the plaintiffs (Mr Thompson) and the defendant (Mr Rizzi) worked together for over 20 years. Mr Thompson has an accounting qualification. Mr Rizzi is, among other things, a builder. Through different corporate entities, they developed several properties. They worked well together and made money.
Around 2018, disputes arose between Mr Thompson and Mr Rizzi in relation to a development they were undertaking at 3 Sarich Way, Bentley (Property). Those disputes led to these proceedings.
Following a trial in September and October 2021, I delivered judgment on 14 January 2022. I found for the plaintiffs and made orders.
The form of my orders was largely agreed between the parties. In particular, both sides wanted an account to be taken before a registrar as to their respective entitlements relating to the purchase, development and sale of the Property.
Regrettably, the taking of the account was not straightforward. It is unnecessary to detail why. The learned registrar delivered her interim account on 14 December 2023 (Interim Account). There was then a further delay, largely due to the time it took for the Property to be sold. The registrar delivered her final account on 22 October 2024 (Final Account).
The matter was listed before me on 6 November 2024 to hear from the parties as to whether the accounts should be adopted in whole or in part.
The parties agreed that the registrar had made one error, in apparently including GST in the calculation for the project management fee.[2] The parties agree that GST should not be included in this amount and agree that the project management fee should be $143,263.
[2] Interim Account Annexure A.
The plaintiffs otherwise submitted that the accounts should be adopted.
Mr Rizzi disputed allowances made by the registrar in relation to electricity and cleaning costs, the relocation of Mr Rizzi's building materials, and works done under a contract of sale. He also submitted that the scope of the accounts was too narrow. In particular, he submitted that an allowance should have been made for rent of a display suite at the Property. He further objected to the plaintiffs' use of expert evidence in relation to fit‑out costs.
During the hearing, the parties raised the possibility of resolving by consent the allowance for the electricity and cleaning costs. I gave the parties leave to file a minute of consent orders if they were able to agree. The next day, they filed such a minute.
For the reasons that follow, I do not accept any of Mr Rizzi's remaining objections.
The issues
The issues are:
1.Should I adopt, vary or reject the Interim Account and the Final Account in relation to:
a.the relocation of Mr Rizzi's building materials?
b.the works done under a contract of sale?
c.the fit‑out costs?
2.Was the scope of the accounts too narrow? In particular, should an allowance have been made for rent of the display suite?
3.Did the plaintiffs' use of expert reports in relation to the fit‑out costs lead to an error in the allowance for these costs?
4.Should I make the consent orders in relation to the electricity and cleaning costs?
The legal principles to be applied, and the proper approach to be taken, to whether to adopt an account are well‑established. They were helpfully summarised by Tottle J in Cheng v Lam [No 4].[3]
[3] Cheng v Lam [No 4] [2020] WASC 175 [16] ‑ [19], and implicitly endorsed by the Court of Appeal in Cheng v Lam [No 2] [2021] WASCA 196 [51].
Specific allowances in dispute
Relocation of Mr Rizzi's building materials
Mr Rizzi objects to the inclusion in the Final Account of $15,321.08 for the relocation of his building materials which had been stored on the Property.[4]
[4] Defendants [sic] Submissions for Special Appointment filed 3 November 2024 (Mr Rizzi's 2024 Submissions) [11].
On 15 April 2024, I made an order that those costs be included as an adjustment in favour of the plaintiffs, and gave reasons.[5]
[5] See order 1(a) of my orders of 15 April 2024 and ts 1097. The contract of sale (dated 16 January 2024) referred to in that order is annexed to the affidavit of John Guest Thompson filed 3 April 2024 and the conditions precedent are on page 27 of that affidavit.
The registrar did not err in making that adjustment in accordance with my order.
Works done under a contract of sale
Mr Rizzi objects to the allowance for the costs of works done by the person managing the sale of the Property to meet a condition in a contract of sale for the Property.[6]
[6] The condition was in a contract of sale dated 4 April 2022, which is annexure AJM‑9 to the affidavit of Andrew John Mason filed 7 November 2022. The relevant condition is on page 68 of that affidavit.
Mr Rizzi asserts that the works were unnecessary and did not increase the value of the Property.[7]
[7] Mr Rizzi's 2024 Submissions [14].
The appropriateness of including these costs in the account does not turn on whether the works increased the value of the Property.[8]
[8] Unlike the fit-out costs - see Creggan Holdings Pty Ltd as trustee for the Gwendoline Trust v Rizzi as trustee for the Boston Investment Trust [2022] WASC 6 [186].
In an earlier judgment in these proceedings,[9] I explained why I found it was appropriate for the costs of the works to be included in the taking of the account. In short, the manager was contractually bound to do the works until the contract was varied.
[9] Creggan [No 3] [86] ‑ [90].
In [64] ‑ [71] of the Interim Account, the registrar explained why she considered that the costs should be allowed in full. Her reasons reveal no error of principle, misapprehension of the evidence or unreasonableness in fact finding. I am satisfied that the registrar did not make an error in allowing these costs.
Further, to the extent the objection relates to any costs incurred by the manager in the Final Account, Mr Rizzi did not object to those costs in the taking of the Final Account. In my view, it would be inappropriate to permit him to object now. A reference is not to be treated as a 'warm‑up for the real contest'.[10]
[10] Cheng v Lam [No 4] [18(b)].
Accordingly, I do not accept that the registrar erred in allowing the costs of those works.
Scope of the accounts - rent of the display suite
Mr Rizzi asserts that the Interim Account should have made an allowance for rent of the display suite used exclusively by the plaintiffs.[11]
[11] Mr Rizzi's 2024 Submissions [9].
This was not an issue raised at the trial. Further, Mr Rizzi did not seek to have this included in the taking of the account. Mr Rizzi was represented when the orders for the account were made on 14 January 2022, and the orders were largely made by consent.[12] Mr Rizzi was also represented at times during the process of taking the account. Mr Rizzi was aware of his right to seek to have additional matters included in the taking of the account, and exercised that right by adding numerous items to the matters to be considered.[13]
[12] See Creggan [No 3] [4] ‑ [8] and the transcript of 14 January 2022.
[13] Interim Account [18].
When I put this to Mr Rizzi during the hearing, he submitted that, when he was represented, it was not raised by his lawyers by oversight. He submitted that, when he was representing himself, he did not raise it because it was only on the fourth day of the trial that it became an issue, 'when the pleadings were changed from subdivision to the sale'. He said that the trial was stressful, and it was an oversight on his part.[14]
[14] ts 1117.
When I reminded Mr Rizzi that the sale of the Property had been included as alternative relief in the original pleading, Mr Rizzi did not dispute this. He then said, however, that the plaintiffs did not disclose documents for that alternative. Even assuming this could logically explain his failure to ask that rent be included in the account, I do not accept that the plaintiffs failed to discharge their discovery obligations. In any event, Mr Rizzi conceded he had not made an application for further and better discovery.[15]
[15] ts 1117.
Further, and in any event, the trial concluded in October 2021. On 14 January 2022, after delivering judgment for the plaintiffs, I made orders for an account to be taken. There were numerous hearings before the registrar (and me) between that time and the delivery of the Interim Account, including a two‑day hearing before the registrar in August 2023. If Mr Rizzi wanted to make a claim for rent of the display suite, he had ample time within which to do so.
Again, a reference is not to be treated as a 'warm‑up for the real contest'.[16] In my view, the registrar did not err in failing to make an allowance for rent of the display unit in circumstances where neither party sought that an allowance be made for this.
[16] Cheng v Lam [No 4] [18(b)].
Mr Rizzi also submits that I 'limited the scope of the Account to those items beneficial to the Plaintiff[s] only'.[17] This is inaccurate. In any event, as noted above, Mr Rizzi was aware of his right to seek to have additional matters included in the taking of the account, and exercised that right.
[17] Mr Rizzi's 2024 Submissions [13]. See also ts 1118.
For the same reason, I reject Mr Rizzi's submission that the Final Account 'does not include multiple other items which would normally be included in an Accounting Reconciliation of a commercial partnership'.[18]
[18] Mr Rizzi's 2024 Submissions [12]. See also ts 1118.
The plaintiffs' use of expert evidence in relation to the fit‑out costs
Mr Rizzi objects to the plaintiffs' use of two expert reports. His submission appears to be that the plaintiffs used a report which said that the property had a value of $9,950,000 (Geers Report) to justify their case that the fit‑out increased the value of the Property, in circumstances where a report from a Mr Loughnan had valued the Property at $5,600,000 (Burgess Rawson Report).[19]
[19] Mr Rizzi's 2024 Submissions [15] ‑ [18].
Mr Geers was asked to provide an expert opinion on the following:[20]
1.Has the fit out of 3 Sarich Way increased the value of the [Property] as at the date of inspection of the land; and
2.If so, by how much.
[20] Affidavit of Chris Geers filed 28 July 2023 (Geers Affidavit), annexure CG‑1 [2.2].
The Geers Report answered those questions as 'yes' and '$1,950,000'.[21]
[21] Geers Affidavit, annexure CG‑1 Executive Summary [1.0].
The plaintiffs adduced the Burgess Rawson Report, with other reports,[22] in relation to the manager's application[23] for approval to sell the Property for $8 million.
[22] See the Plaintiffs' Submissions for Directions Hearing filed 5 September 2023 [17].
[23] By letter filed 29 August 2023.
The purpose of the Burgess Rawson Report was to assess the current unencumbered market value of the Property.[24] It did not consider whether the fit‑out had increased the value of the Property. Nor did it consider, if it had increased the value, the amount of the increase.
[24] Affidavit of William Bowie MacDonald filed 29 August 2023, annexure WBM‑3 [1.1].
It was open to Mr Rizzi to seek to adduce expert evidence in the taking of the account.[25] He did not do so.
[25] Order 1 of my orders of 21 June 2023. See also ts 809 ‑ 818, ts 866, and ts 876 ‑ 878.
It was a matter for the plaintiffs to determine how they would seek to prove that the fit‑out increased the value of the Property and, if this was proved, the amount of the increase.
I therefore reject Mr Rizzi's objections to the plaintiffs' use of the two reports. In any event, Mr Rizzi's submissions do not appear to allege any error on the part of the registrar. For completeness, I observe that I do not consider that the registrar made any error in relation to the fit‑out cost, still less an error of the type required. The registrar's reasons are coherent and logical.[26]
[26] See Interim Account [40] ‑ [56].
Allowances agreed - electricity and cleaning costs
The one matter the parties resolved by consent was in relation to the electricity and cleaning costs. Mr Rizzi pointed out that some of those costs could be attributed to the display suite, which was used by the plaintiffs for their own purposes (at least in part).
The minute of consent orders filed by the parties was that, in relation to the listed electricity expenses (which excluded those that were incurred before the display suite was built) and the listed cleaning expenses, the plaintiffs would bear 55% of the costs and Mr Rizzi would bear 45% of the costs.
I am satisfied that this is an appropriate allocation[27] and would make these orders.
[27] See the Plaintiffs' Submissions Pursuant to the Orders of Registrar Griffin on 11 August 2023 filed 25 August 2023 [12] ‑ [15] and [17] ‑ [18], ts 536 ‑ 537, ts 970 and Interim Account Annexure D item 945.
Conclusion
I would make orders in terms of the minute of consent orders in relation to the electricity expenses that were incurred after the display suite was built and the cleaning expenses.
I would adjust the Project Management fee to $143,263.
I am otherwise satisfied that the Interim Account and Final Account should be adopted.
I will hear from the parties as to the orders to be made, including whether the question of costs should be dealt with by me or by the learned registrar. I observe that my preliminary view is that the registrar should deal with the costs of the accounts.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
ADR
Associate to the Honourable Justice Archer
21 NOVEMBER 2024
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