Hoy v Hurst-Meyers (No 2)
[2022] ACTSC 58
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Hoy v Hurst-Meyers (No 2) |
Citation: | [2022] ACTSC 58 |
Hearing Date(s): | 21, 22, 25 March 2022 |
DecisionDate: | 30 March 2022 |
Before: | Elkaim J |
Decision: | See [74] |
Catchwords: | CIVIL LAW – DEBT OR LIQUIDATED DAMAGE – where the plaintiff seeks a declaration that the plaintiff is no longer a partner in a partnership with the first and second defendant – where the plaintiff seeks a declaration that the partnership is dissolved – where the plaintiff seeks an order that the first and second defendant pay the plaintiff for his contributions made during the partnership – residential contract for sale of land – whether the contract is enforceable |
Legislation Cited: | Partnership Act 1964 (ACT) s 48 |
Cases Cited: | Hoy v Hurst-Meyers [2022] ACTSC 57 Hurst-Meyers v Public Trustee and Guardian for the ACT [2018] ACTSC 61 |
Parties: | G R Hoy ( Plaintiff) R G Hurst-Meyers (First Defendant) RHM Industries Pty Ltd (Second Defendant) |
Representation: | Counsel A Costin ( Plaintiff) Self-Represented (First Defendant) Self-Represented (Second Defendant) |
| Solicitors Elringtons Lawyers ( Plaintiff) Self-Represented (First Defendant) Self-Represented (Second Defendant) | |
File Number(s): | SC 383 of 2019 |
Elkaim J
The plaintiff says that the defendants are indebted to him in the sum of $200,000. He wishes this sum to be paid to him, together with interest.
The plaintiff has also asked for declarations concerning the termination of a Partnership Agreement.
The dispute between the parties revolved around two documents: a Residential Contract (for sale of land) signed in July 2016 and a Partnership Agreement made in August 2016. The defendants referred to the Residential Contract as a Contract of Sale.
The plaintiff’s case was that the parties were only bound by the Partnership Agreement; the defendants’ case was that both documents were intrinsically linked and one could not be enforced without the concurrent enforcement of the other.
As will be seen below, I am satisfied that the only enforceable agreement that ever existed between the parties was the Partnership Agreement.
The plaintiff’s claim is described in an Originating Claim and a Statement of Claim, both filed on 31 July 2019. The Defence to the claim was filed on 13 August 2020. I note an earlier Defence had been struck out (on 24 March 2020). The current Defence was filed in court with the leave of McWilliam AsJ on 13 August 2020. Her Honour no doubt took the view that its form was the best that could be hoped for.
The Amended Defence, and Counterclaim, unfortunately do not follow the “normal” rules of pleadings, so it is a little difficult to identify the issues between the parties.
The Reply, filed on 1 September 2020, does assist in defining the issues, but some vagueness remains.
The plaintiff filed two affidavits in support of his claim. The first is his own, affirmed on 24 September 2020. The second is that of his solicitor, Mr Mitchell Evelyn, affirmed on 30 April 2020.
The orders made by McWilliam AsJ on 13 August 2020 included a timetable for the filing of evidence by the parties. The defendants did not file any affidavit evidence. After an allocated hearing date in October 2021 was vacated the defendants were given another chance to file evidence. They did not do so.
On 22 July 2021 the first defendant appeared before McWilliam AsJ when he mentioned his intention to call a Mr Craig Poole as a witness. The orders made on that day did not excuse him from having to file evidence. Nevertheless, because he had given notice and because the evidence of Mr Poole was to be very limited I allowed him to call Mr Poole.
The first defendant also seemed to think that the contents of a “red folder” constituted his evidence. The folder in fact had been part of a Defence and Counterclaim that had been struck out. A good deal of the folder was made up of material that was contained within the plaintiff’s evidence. To that extent I allowed him to refer to the folder. I also permitted him to tender some other material in the folder notwithstanding that he had not followed the directions as to the filing of evidence.
The first defendant represented both himself and his company, the second defendant. I afforded him the latitude that a self-represented person will always attract. Nevertheless, I did endeavour to keep him on track. His cross-examination, in particular of the plaintiff, meandered through a number of irrelevant topics and was interspersed with comments and submissions.
The topics that the first defendant canvassed in his cross-examination of the plaintiff, and in his submissions, but which did not rely on any evidence put before the Court, included the following:
(a)That a Ms Kerry Ward had made an error in inserting a particular date in the Residential Contract. Not only was there no evidence from Ms Ward, but the assertion was simply made from the bar table.
(b)An amount of $200,000 listed in one of the versions of the above contract as a deposit was the subject of discussion with “other people”.
(c)The circumstances in which Mr Poole came to hear about the $200,000 deposit. In submissions the first defendant said that he had been leaning on his car talking to the plaintiff on the telephone and the plaintiff said, “put in a deposit of $200,000”.
(d)Delays in processing a subdivision of land in Adelaide were caused by a number of actions brought against the first defendant by the Tenants’ Union in the ACT.
(e)The plaintiff had settled a claim arising from the death of his wife for the sum of $1 million.
As a general statement it was very clear that the first defendant was particularly concerned to convey to the Court a sense of his perceived injustice at the actions of the plaintiff in suing him and not waiting for the profits that he (the plaintiff) would achieve if the development at the core of the dispute was allowed to proceed.
The first defendant said that he had not put on affidavit evidence because he was unfamiliar with the workings of the Supreme Court. While I accept that his knowledge of court processes might be limited, I do not accept that he was unaware that he ought to put on evidence and that affidavit evidence was appropriate. I note that in one of the proceedings that he has been involved in, and which he referred to, he represented himself and relied on a number of affidavits: Hurst-Meyers v Public Trustee and Guardian for the ACT [2018] ACTSC 61 at [53] and [55]. He told me that Mr Whybrow of counsel represented him in those proceedings. This was patently incorrect.
At one stage the first defendant asked me to recuse myself from the hearing because he believed that I was biased. I refused to do so and gave separate reasons at the time: see Hoy v Hurst-Meyers [2022] ACTSC 57.
My reasons were stated briefly in order to continue with the hearing. I would add here that I did my best to assist the first defendant to put his case forward.
The first defendant seems to have misinterpreted my re-wording of his questions, or my comments on his questions, as an indication of me having made up my mind on particular matters, but in particular the enforceability of the Residential Contract.
I endeavoured to assure him that I had not decided any issues and would not do so until the whole of the case, including his submissions, had been completed.
It is also relevant for me to note the following here: after the completion of the evidence, I adjourned the matter at the request of the first defendant because he wished to prepare written submissions. Rather than do so however he approached the Court of Appeal for a stay of the hearing. His application was refused, and the matter continued before me with oral submissions.
The plaintiff’s affidavit sets out the background to the entry into the Partnership Agreement. It is a tale of the triumph of friendship over commercial sense. I have no doubt that the plaintiff and first defendant were very good friends when the partnership came into being. I also accept that the first defendant provided the plaintiff with considerable emotional support following the death of the latter’s wife in October 2015.
I also, as a general observation, find it difficult to accept the plaintiff was as “amateur” a participant in the business relationship between the parties as he endeavoured to put forward. I do however accept that the plaintiff generally followed the lead, if not the instructions, of the first defendant in their commercial dealings.
Although the parties’ credit is not determinative of this matter, I do note that I had a concern about the plaintiff’s evidence concerning his solicitor, Mr Evelyn, conveying to him requests from the first defendant to have a meeting to discuss resolution of the dispute. His evidence was contradicted by Mr Evelyn although perhaps not to the extent suggested by the first defendant.
The defendants sought to impugn the plaintiff’s credit by tendering a text message sent by the plaintiff on 10 November 2017 (Exhibit 5). The suggestion was that the plaintiff was not as devastated and vulnerable as he suggested when the Residential Contract was signed in July 2016. The text message certainly describes some unseemly aspirations but can have no probative value in assessing the plaintiff’s emotional well-being well over a year earlier.
The first defendant made another attempt to attack the plaintiff’s credit in an email he sent following the hearing. He wrote:
Furthermore Mr Hoy requested the return of the $200,000 deposit, so that he would go into another real estate apartment venture with a prosecuted criminal who was ultimately jailed for the largest corporate tax fraud in Australian history which was explained to the Supreme Court during the preliminary hearings of this matter.
I ignored this attack as I did everything else the first defendant asserted without evidence. I did however read all the emails he sent following the hearing and took them into account to the extent, which was limited, that they were genuine submissions on the evidence.
The Partnership Agreement is dated 18 August 2016. The parties to the agreement are the first defendant (Mr Ralph Hurst-Meyers), the second defendant (RHM Industries Pty Ltd), the plaintiff (Mr Gavin Hoy) and Assured Holdings Australia Pty Ltd. The first defendant is the sole director of the second defendant (‘RHM’). The plaintiff is the sole director of Assured Holdings Australia Pty Ltd (‘AHA’).
The Partnership Agreement was drafted by the first defendant. It lacks almost every hallmark of a carefully constructed legal document designed to govern the rights and liabilities of the partners. Some of it seems to be almost an expression of a stream of consciousness. Other parts have perhaps been “lifted” from what might have been perceived as a reliable template. Parts of it have clearly not been understood. An example is the Indemnification clause at page 25 which the first defendant seems to believe protected him from a breach of the Partnership Agreement asserted by the plaintiff.
The partnership had a name “R-G Partners”. Its purpose was to be “Business & Property Development”. The development referred to a property at 28 Corn Street, in the Adelaide suburb of Old Reynella. The property had originally been owned by the first defendant’s mother and had been purchased by him from the Public Trustee. The development envisaged the subdivision of this property with construction to be undertaken on some of the lots.
The partnership was to remain in existence until terminated pursuant to the Partnership Agreement.
The plaintiff alleges that he was entitled to withdraw from the partnership. Under the heading of Capital Contributions and the subheading of Gavin Robert Hoy, the Partnership Agreement states that the plaintiff’s contribution is to be $200,000 and also that:
Gavin Robert Hoy has the right to withdraw from this agreement and partnership at any stage and his investment of $200,000 being returned to Gavin Robert Hoy in full with no charges and/or penalties applied to this decision. In this circumstance, Gavin Robert Hoy will be paid all interest and fees that he would have earned from his former fund.
Under the heading “Withdrawal of Capital” the following is stated:
Gavin Robert Hoy has the right to withdraw from this agreement and partnership at any stage and his investment of $200,000 will be returned to Gavin Robert Hoy in full with no charges and or penalties applied to this decision. Gavin Robert Hoy will also be paid any interest and fees he would have otherwise earned in his former fund. This right is understood and as agreed to by all parties.
The Partnership Agreement also includes this clause:
Voluntary Withdrawal of a Partner
Any partner will have the right to voluntarily withdraw from the Partnership at any time. Written notice of intention to withdraw must be served upon the remaining Partners at least three (3) months prior to the withdrawal date.
The voluntary withdrawal of a Partner will result in the dissolution of the Partnership.
A Disassociated Partner will only exercise the right to withdraw in good faith and will act to minimise any present or future harm done to the remaining Partners as a result of the withdrawal.
The “former fund” referred to in the above clauses is a savings account held by the plaintiff with ANZ Bank which was earning a variable, but compounding, interest rate between 1.2 per cent and 1.8 per cent per annum.
The plaintiff contributed the $200,000 by way of three payments, as follows:
(i)$179,000 on 19 August 2016.
(ii)$1,000 on 28 September 2016.
(iii)$20,000 on 19 October 2016.
Each of the amounts was paid into an account held by the first defendant and came from the “former fund”.
Following the payment of the above funds the plaintiff had little or nothing to do with the development. In September 2017 the plaintiff told the first defendant that he wished to leave the partnership. This seems to have been acknowledged by the first defendant who sent a text to the plaintiff, on 15 September 2017, stating:
I’m seeing my legal people next week and they’ll draw up the withdrawal papers based on our Partnership Agreement and I’ll send it to you. You sign and date it and send it back to me then I’ll do the same, and we’ll get the funds to you.
On 22 September 2017 the first defendant sent this text to the plaintiff:
My people have drawn up the withdrawal papers but one of the clauses says that you’ll be reimbursed whatever interest and fees your funds came from and they want this information to incorporate it in the release form. Can you please email me this?
On 1 November 2017 the first defendant sent the plaintiff a text message stating:
All on schedule for your 200k.
Despite assorted promises, the $200,000, or any other amount, has not been paid to the plaintiff. The most recent acknowledgement of the debt seems to have been in an email sent by the first defendant to the plaintiff on 6 May 2019. The email reads:
Please don’t worry. I am working on a solution and will return your investment as per our agreement.
Turning now to the Residential Contract. It was signed by the plaintiff on 19 July 2016, and by the first defendant the following day. The first defendant submitted that this contract extinguished the plaintiff’s entitlement to the $200,000 and also gave rise to an obligation upon the plaintiff to pay damages to the defendants.
The contract was at the core of the first defendant’s response to the plaintiff’s action. It occupied the majority of the cross-examination of the plaintiff and also the defendants’ submissions.
The plaintiff acknowledged that he signed a Residential Contract on 19 July 2016. It relates to the sale of a property at 28 Corn Street in the suburb of Old Reynella in Adelaide. The sale price is $250,000.
The copy signed by the plaintiff, and exhibited to his affidavit at ‘GH 5’, makes no provision for any deposit to be payable. In addition, Annexure A to the contract states:
This contract is subject to the Plan of Division for the within described land being accepted for deposit by the Registrar General of Land Titles Office on or before 26th day of September 2016.
No plan of division has ever been accepted. The first defendant endeavoured to suggest that the deadline (26 September 2016) had been extended. He produced no evidence to this effect. The plaintiff denied there had been an extension. I do not accept there was any mutual extension of the date.
The plaintiff says that he signed the Residential Contract on the basis that “at most that it was a written record intended to ‘reserve’ Lot 6 of the development for me, and that the intention was that the land and any improvements on it would be sold to somebody else, on the open market, after Ralph and I had developed it with my investment”.
The Defence and Counterclaim, to the extent that they are capable of being understood, assert that the “Contract of Sale” and the Partnership Agreement are part of a single “overriding agreement”. Further, the Partnership Agreement “was subsequent and subordinate to the Contract of Sale”.
The Residential Contract relied upon by the defendants is different to that signed by the plaintiff. It is to be found at annexure GH 6 to the plaintiff’s affidavit. Most notable is the inclusion of a deposit of $200,000 and the presence of the signature of a vendor, apparently inserted on 20 July 2016.
The inclusion of the deposit sum was the subject of Mr Poole’s evidence. Mr Poole said that he was present when the first defendant signed the contract. He witnessed his signature. Mr Poole gave the following evidence:
MR HURST-MEYERS: And also, Mr Poole, do you recall my comments on you signing that document, regarding a $200,000 figure?‑‑‑That – that, I remember, yes.
HIS HONOUR: Yes. What do you remember?‑‑‑I seem to remember he said that the fella put in 200,000 as deposit and I think it was 600,000, wasn't it, going to be, or four.
Sorry?‑‑‑That he'd put 200,000 deposit and had to sign it to accept that he'd put a 200,000 deposit.
I have no reason to reject Mr Poole’s evidence. But there are limits to what can be derived from the evidence. Under cross-examination Mr Poole said he did not know the name of the person who was paying a deposit and he did not hear any person ask the first defendant to insert a deposit sum of $200,000.
Mr Poole’s evidence is as consistent with the first defendant simply stating, of his own initiative, that the plaintiff was to pay a deposit of $200,000 as with the plaintiff asking him to insert that amount as a deposit. In summary, Mr Poole’s evidence does not assist either the plaintiff’s or the defendants’ respective cases.
The plaintiff says that prior to the receipt of the Defence and Counterclaim he had never seen the latter copy of the contract. It had never been sent to him following execution by the vendor. It had never been the subject of any claim for completion or asserted breach of its terms.
The discrepancy between the two Residential Contracts, and more significantly, the acknowledgements by the first defendant of his debt to the plaintiff, by texts and emails, as set above, and his intention to pay the $200,000, together with the absence of any attempt to rely upon or enforce the Residential Contract, all combine to lead me to the conclusion that the Residential Contract was never part of the legal relationship between the parties.
When the lack of a subdivision having been accepted, as required by Annexure A of the Residential Contract, is added into the facts, it is yet more apparent that the Residential Contract is unenforceable against the plaintiff. The first defendant made the point that the date for acceptance had been unrealistic and the parties had agreed to extend it. However, the subdivision has still not occurred and it cannot be suggested that there has ever been an agreement for an extension to some date in the future, let alone at all.
There is another powerful factor against the enforceability of the contract. After the plaintiff signed the contract, he returned it as an attachment to an email sent on 19 July 2016. The email states:
Ralph,
I have attached the agreement.
So, as I understand things, this will not be “acted upon”, as I don’t have the funds presently to both by the land and fund the construction costs.
I agree with your summary of the dealings below, with the parachute clause, and in addition contractual arrangements that lock-in the total construction costs to $150 k.
Thanks so much for this opportunity, to make something for my future with the funds that have come as a result of Kate’s passing.
Thanks,
Gavin
This email both confirms the plaintiff’s position that the Residential Contract was never to be treated as a completed agreement between the parties and that his involvement in the project was to be by way of the financing of construction on one of the lots, but did not include the purchase of the lot.
I agree with the first defendant that any development in which there is to be a building necessarily involves appropriate ownership of the land beneath the building. But this does not mean that an investor is obliged to purchase the land and that his or her involvement cannot be limited to the construction of the building.
In addition, it is notable that the Partnership Agreement, under the heading Capital Contributions, says that the first defendant is to contribute $250,000 for block 7 and the plaintiff is to make a capital contribution of $200,000 of which “$150,000 will be allocated for the build at block 7……”. This allocation of funds is consistent with the plaintiff’s case, and entirely inconsistent with the first defendant’s assertion that the plaintiff’s contribution was to be towards the purchase of land.
The first defendant’s argument that the development simply did not make sense unless the land was to be purchased by the plaintiff is simply untenable.
The Residential Contract has probably never been enforceable, certainly in the terms suggested by the first defendant. I do not accept that he filled in the deposit amount in accordance with the wishes of the plaintiff. I think he probably added the figure in to suit his own purposes and without consultation with the plaintiff. The Residential Contract, certainly in the form asserted by the first defendant, was never the subject of agreement between the parties.
The first defendant relied on the first page of an email that he received from a solicitor on 21 April 2020 (Exhibit 4). Reliance on this document was an extraordinary, yet typical, tactic of the first defendant to try to persuade the Court that the Residential Contract was enforceable. The first defendant suggested that the highlighted words in the document reflected the enforceability of the contract and were the opinion of a well-known authority on contract law. The highlighted words, in fact the whole email, were nothing of the sort. The email, sent on 21 April 2020, is from Ms Kate Phillips of Meyer Vandenberg lawyers, to the first defendant. It was apparently sent following a phone call on the previous day. The relevant paragraph reads:
Your instructions
I understand that you have requested our advice in the context of ACT Supreme Court proceedings in relation to a Partnership Agreement with the purchaser, Mr Hoy. I had asked that you provide me with a copy of the statement of claim or originating application, so that I had some context in order to understand what it is you are responding to. I have not been provided with a copy of the statement of claim or originating application. However, from our discussions I understand that you are seeking advice as to whether the contract for sale of 28 Corn Street, Old Reynella SA dated 19 July 2016 (Contract) is enforceable and whether there is some right or obligation under the Contract that could be used as leverage to achieve a favourable outcome in the proceedings.
The intent of the tender was to show that the contract was enforceable, because this is what was stated in the highlighted words. Of course the email says no such thing. The highlighted words are contained in his instructions to the solicitor and the quoted passage is posing the question of whether or not the contract was enforceable. The balance of the email was not tendered and in particular any opinion provided by the solicitor was not tendered.
The tender of the limited part of the document, together with the highlighting of certain words only, were a further example of the first defendant clutching at straws in his vain attempt to assert the enforceability of the Residential Contract. Similar to the first defendant’s assertions that he had no knowledge of the need for affidavits, and that Mr Whybrow had acted for him in the proceedings mentioned above, the tender of Exhibit 4 raised a distinct impression of attempts at deceit on the part of the first defendant. I will not reach that final conclusion however because the allegation was never squarely put to the first defendant.
Another document that the first defendant highlighted is an email exchange between him and a real estate agent, Ms Kerry Ward (Exhibit 6) on 18 July 2016. It was relied upon to suggest that the plaintiff was purchasing one of the blocks to be subdivided. The email does not state what was suggested and moreover, the agreements said to be attached are not included in the tender.
I therefore intend to ignore the Residential Contract. The Defence and Counterclaim must fail.
Returning now to the Partnership Agreement, it clearly envisages the withdrawal by the plaintiff and his entitlement to the return of the $200,000. In addition, as stated above, this entitlement was frequently acknowledged by the first defendant.
The first defendant submitted that the partnership remained in existence. He tendered a “Deed of Settlement” dated 5 March 2019. He said the contents of this document, which is Exhibit 1, supported this proposition. The deed is an attempt to settle the differences between the parties. It cannot be read as an extension of the Partnership Agreement. It has no relevance to the current dispute.
The plaintiff submitted that, if successful, he should receive a verdict against both defendants on the basis of a joint and several liability. I think this is the correct approach having regard to the fact that they are the “other side” of the partnership to the plaintiff and clearly the side that was agreeing to refund the money if requested.
I asked the plaintiff to prepare a schedule of the interest claimed. A figure of $67,221.28 was proposed made up of interest at 1.8 per cent from 19 August 2016 until 15 September 2017 (when the plaintiff endeavoured to withdraw from the partnership) and then at 7 per cent to date. The 7 per cent is derived from s 48(1)(d) of the Partnership Act 1963 (ACT).
I am not satisfied, as required by the above section, that the partnership business continued following the plaintiff’s withdrawal. I think the proper approach is to continue the interest at 1.8 per cent to the present.
I note that the plaintiff’s affidavit, at [102] refers to an interest rate of 1.2 per cent up to 1.8 per cent. However, this is compounding interest. My use of the higher figure of 1.8 per cent per annum takes into account that my calculation is of simple interest. I will adopt the plaintiff’s calculation of interest up to 15 September 2017 of $3,814.03 and then add continuing interest to date at 1.8 per cent of $16,328.16. The total interest figure is $20,142.19.
The plaintiff sought a declaration that the partnership has been terminated. This is an obvious consequence of the plaintiff’s withdrawal from the partnership agreement, as triggered by the clause quoted in [34] above. The plaintiff did not pursue the making of a declaration in final submissions. I do not intend to make any declaration.
I make the following orders:
(i)Verdict and judgment for the plaintiff against the defendants, jointly and severally, in the sum of $220,142.19.
(ii)The defendants, jointly and severally, are to pay the plaintiff’s costs of the proceedings.
| I certify that the preceding seventy-four [74] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Justice Elkaim. Associate: Date: |
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