Hydedale Pty Ltd & Anor v Robert Luxmoore Pty Ltd & Ors
[2008] VSC 321
•2 September 2008
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
No. 5765 of 2001
BETWEEN:
| HYDEDALE PTY LTD ACN 007 126 052 and MARK GROVES | Plaintiffs |
| v | |
| ROBERT LUXMOORE PTY LTD ACN 009 484 968 & ORS | Defendants |
By original proceeding
AND BETWEEN
| ROBERT LUXMOORE PTY LTD ACN 009 484 968 | Plaintiff by counterclaim |
| v | |
| HYDEDALE PTY LTD ACN 007 126 052 and MARK GROVES and JUDITH MARY GROVES | Defendants by counterclaim |
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JUDGE: | BYRNE J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 12, 13, 14, 18, 19, 20, 21, 22 August 2008 | |
DATE OF JUDGMENT: | 2 September 2008 | |
CASE MAY BE CITED AS: | Hydedale Pty Ltd v Robert Luxmoore Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2008] VSC 321 | |
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CONTRACT – joint venture agreement – terms of agreement – whether plaintiff was equity venturer in certain property development – whether plaintiff to share in receipts on a 50/50 basis or a one-third two thirds basis– questions of fact – damages for repudiation
PRACTICE and PROCEDURE – Duty of counsel to identify and to present argument on points in issue
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J Brett | Efron & Associates |
| For the Defendant | Mr SL Tatarka | Goldhirsch & Schnider |
HIS HONOUR:
Mark Stephen Groves, the secondnamed plaintiff, has a background in the building industry. In 1985 he met the thirdnamed defendant, Simon Robert Youngman Reed, who was then working for Kings Parking. The two men, together with Mr Reed’s brother-in-law, carried out a number of property development projects, through a company Spire Properties Pty Ltd. Broadly speaking, Mr Groves was concerned with building work; Mr Reed with property and marketing and the brother-in-law with finance. The arrangement between the three men was that they would share any proceeds equally. This enterprise continued until 1990 when Spire Properties collapsed.
Thereafter, Mr Reed and Mr Groves decided to continue their association but, in order to quarantine their new projects from the creditors of Spire Properties, they did so using a corporate structure. Mr Groves’ company was the firstnamed plaintiff, Hydedale Pty Ltd, of which he is sole director. Hydedale carried on business under the business name MSG Project Management Services and was sometimes referred to in evidence under that name. Mr Reed’s company was the firstnamed defendant, Robert Luxmoore Pty Ltd (“Luxmoore”). He held only 49% of the share capital of Luxmoore with the remaining shares held as to 50% by his father, the secondnamed defendant, Robert Reed, and the balance by other family members. The fourthnamed defendant, John Lachlan Charles McInnes, Mr Robert Reed’s accountant, was and is a director of Luxmoore. Other directors were Mr Simon Reed and his father who was at the time the chairman of its board of directors. Ultimate control of Luxmoore was therefore exercised by Mr Robert Reed. Nevertheless, it seems that Luxmoore was intended, as between Mr Groves and Mr Reed at least, to be the corporate vehicle for Mr Reed’s property development activities.
Another company which, although not a party to this proceeding, was much mentioned in the evidence, was RS Pty Ltd, a company under the control of Mr Robert Reed and his wife Sally Reed. Mr Simon Reed was a director of RS. RS was the trustee of the Reed Family Trust No. 2, a discretionary trust whose potential beneficiaries included Mr Simon Reed and other members of the Reed family. Mr Robert Reed and his wife, as appointors under the trust deed, controlled the activities of the trust.
I was told that Mr Robert Reed is now deceased and that no relief is sought against him or his estate.
It is alleged in the statement of claim that, following the collapse of Spire Properties, there was made in or about 1991 an agreement between Mr Groves and his company Hydedale, or one of them, on the one hand, and Luxmoore, Mr Robert Reed, Mr Simon Reed and Mr McInnes, on the other, to source, evaluate and, if appropriate, develop a number of projects.[1] They agreed, too, that, if any project proceeded, Mr Groves and or Hydedale would be entitled to 35% of any profits or earnings in respect of that project. The defence[2] admits an agreement at that time but alleges that it was between the plaintiffs, Hydedale and Mr Groves, on the one hand, and Luxmoore, on the other, whereby the plaintiffs would receive only a one-third share of only project management fees received by Luxmoore from the projects which were undertaken.[3]
[1]Statement of claim para 3.
[2]Defence para 1.
[3]Defence para 1.
Insofar as there was a conflict of evidence between Mr Groves and Mr Reed as to the terms of this agreement, it will be observed that the events occurred over 17 years ago and that the two men dealt with each other on a fairly informal basis and without much documentation. Their recollection of the events has, inevitably, been much affected by the passage of time and by the way the agreement was implemented with respect to various projects in which they engaged. The matter is further complicated by the fact that many of the Luxmoore documents appear to have been destroyed or water damaged in the long period of time before the proceeding was commenced on 11 May 2001. The trial was by witness statement but the witness statements filed on behalf of the defendants were not in a form which would normally be expected of a person giving evidence-in-chief. They were replete with conclusions, summaries of statements and mere allegations which were more appropriate for a pleading rather than evidence. They were, however, not objected to and I must do the best I can with them.
It is clear enough, however, that the agreement made in 1991 was that the two men, Mr Groves and Mr Simon Reed, would pursue development opportunities which they might discover or which might otherwise come their way. They had no financial capacity to conduct a project themselves, so that any project would require the assistance of a financial institution or perhaps an investor. Mr Groves said that the agreement evolved over some years but that a fundamental feature from the outset was that the two men would share equally whatever they managed to receive from the projects. Late in 1991, he said, this was modified so that he was to receive only one-third. It was apparent, too, that this arrangement might be varied to suit the particular requirements of a given project. Notwithstanding the uncertainty as to its date, I shall refer to this agreement as “the 1991 agreement”. The principal area of difference between the accounts given by the two men was as to whether the share for Mr Groves or his company was to be of project management fees received by Luxmoore, as Mr Reed contended, or of any benefit recovered, as Mr Groves said. I would resolve this conflict in favour of Mr Groves. It is altogether consistent with the informality of the dealings between the two men that they would have used the type of expression which he said was used. For reasons which will appear[4] I consider that Mr Groves is a more reliable witness. They would share whatever they managed to achieve from any project which they undertook. The distinction, however, is not of significance. As will be seen[5], they never undertook any project for any reward other than fees for services rendered.
[4]See para [63] below.
[5]The only project in which they might have been developers was Malvern Mews in which, I find, neither they nor their companies had an equity interest. See para [49] below.
It is clear that the 1991 agreement was made between Hydedale and Luxmoore. I reject any suggestion that Mr Reed or Mr Groves was speaking on his own behalf when he negotiated its terms. Nor is there any basis for concluding that Mr Robert Reed or Mr McInnes were contracting parties.
With the possible exception of the Malvern Mews project, the venturers did not themselves undertake any development in the four years that they worked together. In the other projects, they participated as consultants and were paid fees as such. Generally speaking, this was achieved through Luxmoore. Luxmoore would invoice the developer and receive payment. Hydedale would, in turn, invoice Luxmoore for its one-third share and, in most cases, it was paid.
On 15 May 1995 Mr Groves was told by Mr McInnes, who was then the chairman of the board of Luxmoore, and Mr Simon Reed, that the 1991 agreement was terminated forthwith. No reason was given. As pleaded, this is said by Hydedale to amount to repudiation of the agreement which Hydedale accepted.[6]
[6]Statement of claim para 8.
Hydedale then claims damages for breach of contract under two heads:
(1)moneys to which it was entitled in respect of the six projects which were then not finally completed. This entitlement is said to extend to consultancy fees received and, in the case of the Malvern Mews project, also to any profit earned upon the development.
(2)loss of income which it might have earned under the 1991 agreement, had reasonable notice of termination been given.
These claims were pressed against Luxmoore and Mr Simon Reed only.[7]
[7]Counsel said that no contract was alleged against Mr McInnes.
There is an alternative claim for $368,200 as a fair and reasonable sum for the work performed by the plaintiffs on the Malvern Mews project.[8] This claim was explained by counsel for the plaintiffs as arising only if the Court should find that the 1991 agreement did not exist. This situation does not arise, if only because it was admitted on the pleadings that it did exist, the issue being as to its terms.
[8]Statement of Claim para 9 particular (b).
The claims of Hydedale with respect to the Malvern Mews project were also pleaded against all of the defendants as claims for damages for promissory estoppel,[9] for misleading and deceptive conduct[10] arising out of four alleged representations and for breach of fiduciary duty. [11]
[9]Paras 16F – 16I
[10]Paras 16A – 16E and 17A These were abandoned at trial T616-8
[11]Paras 17B - 19
Luxmoore also brought a counterclaim against Hydedale, Mr Groves and his wife Judith Mary Groves, but it was not pressed and I need say nothing more about it.
Another aspect of this case is that the defence includes pleas based on the Limitation of Actions Act 1958. Virtually nothing was said at trial for or against these pleas but I was told that they were not abandoned.
The Claims in Contract
It is common ground that the 1991 agreement was determined at the time of the 15 May conversation. On behalf of Luxmoore it was put that the 1991 agreement was terminable at will so that no question of repudiation or damages for breach arises. Nevertheless, it appeared to be accepted by Luxmoore that Hydedale was entitled to recover its unpaid share of fees received by Luxmoore in respect of projects covered by the 1991 agreement and that this extended to fees received after termination, provided that the work was done before termination, and notwithstanding that the quantum of the fees had been agreed after termination. Counsel for Hydedale took the matter further. He argued that, in addition, his client was entitled to fees earned in respect of work performed after termination, that is, work to which Hydedale made no contribution. This, he said, arose from the 1991 agreement under which the parties agreed to share whatever they received from each project.
There was no argument before me as to the legal aspects of these claims. Perhaps it was assumed that the principles were clear. I, too, will content myself with a mere statement of the legal principles which I shall apply to this aspect of the case.
Hydedale contended, but did not plead, that it was a term of the 1991 agreement that it could be terminated only upon reasonable notice. It was suggested that 12 months was reasonable but this also was not pleaded, nor was any evidence led to support this contention. As I have mentioned, Luxmoore’s position was that it was terminable at will by either party.
The 1991 agreement was not terminable at will in the sense that Luxmoore contended. At any given moment, so long as the agreement continued, the parties had carried out work in the furtherance of the venture for which no reward had been received. I instance the many projects which the two men had evaluated or worked on but which came to nothing. This they did under the 1991 agreement in the expectation that the work would be rewarded by the receipt of income from other successful projects. The law would not, in these circumstances, permit either party just to walk away with the as yet unrealised proceeds, as the Luxmoore contention would have it. The relationship between Hydedale and Luxmoore was akin to a partnership which, although terminable at will, must be wound up. So too, in this case, if the termination of the 1991 agreement left some projects uncompleted, Hydedale was entitled to continue with these projects until completion. I put to one side whether this entitlement with respect to a given project might be determinable by notice: this did not occur. In fact, the entitlement of Hydedale to continue the incomplete projects was denied to it on 15 May 1995 and this amounted to a repudiatory breach of the 1991 agreement. Upon acceptance by Hydedale of this repudiation the 1991 agreement came to an end insofar as it was executory. Accrued rights under it were not affected.[12] The parties before me accepted that these accrued rights included that of Hydedale to its share of fees received by Luxmoore after termination provided that they were for work previously performed. Hydedale’s claim to these accrued entitlements constitutes the first head of damages sought.
[12]McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 477, per Dixon J.
In addition, Hydedale is entitled to damages for the loss of its contract which, in money terms, represents its agreed share of the fees received by Luxmoore for work performed after termination which share Hydedale would have received under the 1991 agreement had it not been terminated, after allowance is made for any costs which Hydedale would have incurred in earning them. When I refer to work in this context, I do not refer simply to project management work, but to the work which Luxmoore, as well as Hydedale, was to perform in terms of the 1991 agreement. Under this agreement Hydedale was entitled to a share in the fruits of Luxmoore’s work and vice versa. This second head of damages must, of course have regard to the question what fees would have been distributable had the agreement not been summarily terminated and, in turn, what fees would have been received and distributed had proper notice of termination been given. These are matters to which I shall return when I deal with this head of damages for Luxmoore’s breach of contract.[13]
[13]See paras [67]ff below.
With respect to Hydedale’s entitlement under the first head of damages in respect of the six projects, all except one, Malvern Mews, were agreed between the parties or involved relatively modest sums. It is convenient that I deal now with these five projects before the Malvern Mews project.
(i) Mowbray Waters
This was a residential subdivision by a developer, Vincent Lai. It is agreed that Hydedale is entitled to $5,500 for its share of unpaid fees.
(ii) The Lakes
This was a residential subdivision in respect of which Luxmoore received $4,000 project management fees for work done in November 1995. This fee became payable in some way as a result of the receipt by the developer of a government grant. Hydedale seeks one-third of this sum pursuant to the 1991 agreement. The work was done after termination. The issue raised at trial was whether the grant was obtained as a consequence of work done by Mr Groves or by an employee of Luxmoore, Michael Trowell. Mr Groves said that he was involved in the application for the government grant together with an administrative employee of Luxmoore, Wendy Joy Hamill. This was not disputed. Mr Reed said, however, that the application had to be resubmitted as a consequence of some government amendment and that the reapplication was undertaken by Mr Trowell. I find that the basic work was performed by Mr Groves so that the entitlement of Hydedale to the share has been made out. Hydedale is entitled to $1,333.
(iii) Flinders Gate
This project involved a car park in Flinders Street which was purchased by Mr Lai in February 1993. There were some tenancy works carried out by Hydedale as builder and for which it was paid about $10,000. This was not shared with Luxmoore but it was not suggested that this was done otherwise than by agreement with Luxmoore.
In this proceeding I am concerned with certain monthly payments which Mr Lai agreed to make to Luxmoore. These were payments of $5,000 made for each of the months January, February and March 1995 for work which included project management. Luxmoore agrees that Hydedale should receive one-third of these fees, that is, $5,000.
In April 1995 and thereafter the monthly fee was reduced to $2,000 and paid to Luxmoore at this rate until Mr Lai sold the building in October 1995. The total fees paid to Luxmoore during this period were said to be $12,387.10 of which Hydedale seeks its one-third share. The issue here was whether the work for which these fees were paid fell within the 1991 agreement.
Mr Reed said that it did not because the work was merely car park revenue management. This is supported by Mr Lai’s fax of 21 March 1995 in which he directs Luxmoore to cease capital works as from April. The evidence, however, shows that, after March, Mr Lai required Luxmoore to do more than merely manage revenue. Mr Groves said that prior to termination he was part of a management team for the Flinders Gate project. The activities of this team included, in addition to revenue management, all aspects of the running of the car park. In a project of this kind, it is unreal in the context of the 1991 agreement, to attempt to draw a fine line between the activities undertaken by way of project management and other associated activities. The fees received after April were part of the receipts of Luxmoore as a consequence of the activities of the venturers under the 1991 agreement. I agree that Hydedale is entitled to its share of them. In this case the fees up to mid-May, total $3,000. Hydedale is entitled to $1,000.
(iv) Hendra Distribution
This was an industrial complex development undertaken by Mr Lai. The involvement of Hydedale and Luxmoore in the project dates from 1993 and work was done in the furtherance of the development in 1994 and 1995. Payment was made to Luxmoore for work done to the end of 1994 and Hydedale has received its share of this.
In his fax of 19 June 1995 to Luxmoore, Mr Lai agreed two fees which were to be payable to Luxmoore. The first, a management fee of $2,000 per month was to be payable for the six months from January to June 1995, a total of $12,000. The second fee was a fixed project management fee of $56,000. This was to be payable at the rate of $7,000 per month over eight months commencing June 1995, but, for some reason, Mr Lai reduced the fee to $28,000 and was billed and paid at the rate of $3,500 per month over the eight month period. Ms Hamill, however, said that the work was undertaken from September and, according to the Luxmoore receipts records the first of these $3,500 payments was received on 14 September 1995.
Hydedale claims its share of the $12,000 management fee up to June 1995. In his opening summary, counsel said that Hydedale also sought its share of the $28,000 project management fee which was payable over eight months of the financial year 1996. But in his outline of closing address the amount for which the share is sought is of a total of $42,000. In his oral address counsel said that the claim is for a share of fees paid in respect of this project between January and May 1995. This would amount to only $10,000. Counsel for Luxmoore accepted that Hydedale had an entitlement to the share of five of the monthly management fee payments of $2,000, that is, for the months January to May 1995. I consider that this was a proper concession. There is no entitlement to the fee for the month of June which was, of course, after termination. The amount of Hydedale’s entitlement is therefore $3,333.
This leaves the monthly payments of $3,500 for project management in respect of the months from June 1995. I have mentioned that counsel for Hydedale sought a share of the $28,000 fee. In closing address counsel for Luxmoore said that these fees were for project management work performed, not by Hydedale or Mr Groves, but by its employee, Michael Trowell. Accordingly, Hydedale is not entitled to a share. Alternatively, if it is entitled to one-third under the 1991 agreement this entitlement should be reduced to nil by deducting the charge-out costs of Mr Trowell plus his travelling costs.
I interrupt myself at this point to say something about the engagement of Mr Trowell for this affects not only the present claim and that in respect of the Lakes project, but also the more substantial Malvern Mews claim. As between Mr Reed and Mr Groves, their respective areas of responsibility were clear. Mr Groves looked after construction matters and project management; Mr Reed looked after property, marketing and sales. In the background, however, was Mr Robert Reed of whose area of expertise I know nothing. Mr Robert Reed effectively controlled Luxmoore and, as will be seen, he was able to and did in fact invest money in the only project in which Luxmoore and Hydedale could be said to have been acting as principals rather than as consultants. This was the Malvern Mews project, of which more later.
The matter presently under consideration is rendered a little more obscure by the fact that neither Mr Robert Reed nor Mr Trowell gave evidence. In the case of Mr Robert Reed this was for the very good reason that he is deceased. In the case of Mr Trowell no reason was offered.
In 1994 the Luxmoore Hydedale venture appears to have been going well. They had a number of consultancy retainers from Mr Lai and there was an expectation of steady fee income in the future. At the same time they were preparing for the Malvern Mews project in which they had a greater involvement. By August 1994 a planning permit had been obtained for this project and there was every prospect that it would go ahead. At this time, there was a discussion between Mr Groves and Mr Simon Reed about engaging a full-time project manager for this project and that, although he would be employed by Hydedale, his costs should be included as costs of the project. This would have the effect of reducing the profit of the development and therefore be shared by all equity partners.
But it did not work out this way. The selection of the candidate for the job was not given to Mr Groves and the project manager was to be employed by Luxmoore. It is not clear why this was so. Mr Groves said that Mr Simon Reed told him that this was the decision of “the syndicate”. The decision was confirmed by Mr Robert Reed and Mr McInnes. Mr Simon Reed in his witness statements does not challenge this account. The syndicate at this time must be a reference to Mr Robert Reed whose company RS had entered into a joint venture with Breaver representing a number of investors. In any event, Mr Trowell commenced work on 1 February 1995 at the Wellington Parade premises from which both Luxmoore and Hydedale carried on their businesses. Hydedale moved its activities from these premises to Clifton Hill shortly thereafter. From that time until 15 May 1995 Mr Groves continued to be responsible for the project management activities of the projects which were in hand but much of the detail was carried out by Mr Trowell, especially with respect to the Malvern Mews project. It is not difficult to see the insertion of Mr Trowell in these circumstances as a potential cause of disquiet for Mr Groves, especially as Mr Trowell was employed by the Reed interests. I accept Mr Groves’ account of the events leading to the employment of Mr Trowell.
This, then leaves the question as to how the cost of Mr Trowell’s employment should be treated as between Luxmoore and Hydedale. It will be recalled that Mr Groves’ suggestion was that he be engaged for the Malvern Mews project and that his cost be built into the construction cost of the project. The unilateral decision of Luxmoore not to follow this course meant that his cost might be seen either as a cost of Luxmoore whose employee he became and paid out of the Luxmoore share, or that he should be treated as a cost of the venture so that his cost would effectively be borne by Luxmoore and Hydedale in the agreed shares. A third possibility is that his cost should be borne by Luxmoore from own its share. Nothing was in terms discussed or agreed between the two men about this. A fourth course was advanced on behalf of Luxmoore: since Mr Trowell was employed to carry out work which would have been carried out by Hydedale, Hydedale alone should bear the cost. This, I think, ignores the circumstance in which he came to be employed. Luxmoore made the relevant decisions for its own benefit; it must bear its share of the burden. The proper disposition of Mr Trowell’s cost should be that it be a cost of the venture, to be paid in the first instance by Luxmoore. The surplus fees received should then be distributed between Hydedale and Luxmoore by paying to Hydedale its one-third.
I return now to the Hendra Distribution project and to the contention of Luxmoore that Hydedale should receive no share of the project management fees when the actual work was carried out by Mr Trowell after the termination of the 1991 agreement. The consequence of my analysis of where the costs of Mr Trowell should fall is that such part of them as reflects his involvement in the Hendra Distribution project should be deducted from the $28,000 and, of the balance, Hydedale is entitled to its usual one-third share. In 1995-6 Mr Trowell’s salary package was about $110,000, that is, $9,170 per month. Ms Hamill, who was responsible for the Luxmoore accounts and other administrative matters, estimated that 59% of his time was spent on the Malvern Mews project so that 41% must have been spent on other Luxmoore projects, that is, $3,760 per month. Mr Groves disagreed with this assessment. In his opinion, Mr Trowell would be expected to spend 30% of this time on the Malvern Mews project and the balance on other Luxmoore projects. I do not know how much of Mr Trowell’s time was applied to the Hendra Distribution project. It is, however, likely that there would be very little , if anything, leftover for the venturers after the appropriate part of his salary and on-costs was met. I find that Hydedale has not demonstrated that there were any fees available for distribution under the 1991 agreement.
(v) Yarra Gardens
This project was for the development of residential units by an overseas investor. The entitlement of Hydedale was agreed to be a share of $30,000 which had been withheld to cover a possible claim. Its entitlement was agreed to be 22.22% of this, that is , $6,667.
(vi) The Malvern Mews Project
The site in question was 2 – 3 hectares fronting the Princes Highway near Burke Road, East Malvern on which had been constructed for many years Chitty’s Wood Yard. The project was therefore initially known as the Chitty project until it was thought desirable to give it the more genteel name of Malvern Mews.
Between 1991 and 1993 Mr Groves said that he and Mr Reed explored the possibility of developing the site as appropriate for a number of fast food outlets, as they had had experience with this type of development in Tasmania during their time with Spire Properties. Mr Groves said that their discussions about this project were on the basis that they would share equally in the profits. In May 1992 Luxmoore offered $5,000 to the owner of the land for a 12 month option to purchase it for $2.75 million. It seems that this option offer was accepted by the owner and the $5,000 paid, but it does not appear where the $5,000 came from. By early 1993 the fast food project was facing difficulties and the two men were considering the use of the land for high density apartments.
At this time, too, Napier Thomas Mantesso Architects (“NTM”) prepared a design of the proposed building for planning purposes at a reduced fee which was paid by Luxmoore. It was agreed that, if the project proceeded, NTM would be retained as the project architect.
The principal issues at trial with respect to this project were as to whether Mr Groves or his company was an equity partner and whether his interest was equal to that of Mr Simon Reed or his company.
At this point there is significant uncertainty. The option was extended and an application for a planning permit was made in the name of RS. Why this was so is unclear. It is likely that, at this stage, Joseph Lai, the brother of Mr Vincent Lai, was interested in providing funds for the project.
The planning application was refused by the City of Malvern and an appeal to VCAT was brought by RS. There is in evidence a memorandum dated 10 February 1994 from Mr Simon Reed which is concerned with raising $70,000 to fund the extension of the option and the appeal to VCAT. This fund is referred to in the document, as “punt money”, perhaps because there was no certainty that it would produce the hoped for result. There was some debate as to who produced this document. Although Mr Groves said that he had no hand in it, I accept the evidence of Ms Hamill that he drafted the document and that she typed it. Her evidence of the detail of this was compelling. In any event, it is clear that Mr Groves saw the document soon after it was prepared and participated in discussions regarding it. The case proceeded on the basis that the proposal contained in the documents was adopted.
The memorandum shows that in February 1994, seven men were interested in pursuing the appeal. They were Mr Groves; Mr Simon Reed; his brother, Angus Reed, who was a real estate agent; his father, Mr Robert Reed; Nigel Sharp, a real estate agent associated with Mr Angus Reed; David Marshall, a financier; and Mr Joseph Lai. The funds for the appeal were to be provided as to 50% by Mr Lai and 25% by Luxmoore. There is no provision in terms for a contribution by Mr Simon Reed or his father. It may be that the share of one or other or both of them was provided by Luxmoore. The remaining 25% was to be provided in equal shares by Mr Angus Reed, Mr Sharp, Mr Marshall and Mr Groves. This puts Mr Groves’ investment at 6.25% or $4,375 of the sum then required. His share was in fact contributed by Hydedale.
This document is significant inasmuch as it supports Mr Groves’ contention that he was more than a mere consultant in the development. But it does not in terms lend any support for his contention that he and Mr Simon Reed were to be equal partners in it. The document also contains a suggestion that he, with Mr Sharp, Mr Angus Reed and Mr Marshall, may not participate in the development even if it were to proceed following a successful appeal.
The appeal was heard in February 1994 and on 13 May the Tribunal determined to allow the appeal and direct a planning permit to issue to RS. The permit was varied in August 1994 permitting the development of 122 residential units.
Shortly thereafter there was executed a joint venture agreement dated 24 August 1994. This is really the first firm statement of the structure established for the conduct of the development. The agreement recites that the option had been granted on 16 November 1992 and twice extended. The optionee is RS or its nominee. A new company, Malvern Mews Pty Ltd, was appointed trustee of the project. The joint venturers were RS as to 30% and, as to 70%, Breaver Pty Ltd which was the vehicle for the investors. The agreement contemplates that the option will be assigned by RS to Malvern Mews Pty Ltd with a provision that, if the assignment is ineffective, Luxmoore will hold the option on trust for Malvern Mews Pty Ltd. This may have been inserted because the parties were then aware that Luxmoore might in fact be the optionee. Clause 18.1 speaks of the construction costs which are not to exceed $7 million and of the projected development cost of $11,956,192,[14] which was an estimate of cost prepared by Luxmoore.[15] In the event that the cost should exceed this projected development cost, RS was to fund the excess.[16] Breaver is required by cl 10 to procure funding for the project. Luxmoore was appointed project manager and was given marketing responsibilities for the residential units.[17] This joint venture agreement is a significant document, not only because it establishes the legal regime for the development, but also because it is clear that neither Luxmoore nor Hydedale was to share in the profits which may be earned upon the sale of the units following construction.
[14]Schedule 6.
[15]Clause 1.1(u)..
[16]Clause 9.4.
[17]Clause 11.
Mr Groves was very much involved in the discussions with the investors which led to this joint venture agreement. He prepared the invitations to tender for the design and construction work which are referred to in the joint venture agreement. He prepared the feasibility studies which led to the projected development cost which was included in the agreement.[18] He read the joint venture agreement as it passed through its various drafts. He also drafted correspondence with NTM regarding architectural matters and costs. He is also shown to have been present at strategic management meetings on 22 November 1994 and on 20 February 1995. I am satisfied from this material that he was well aware of the financial and legal structure of the development. In particular, he was aware of and did not dissent from the facts that the joint venturer representing the Reed interests was RS and that neither he nor Hydedale was an equity partner. I conclude from this that he accepted that the benefit from the venture which he expected to receive was a share in the fees to be earned by Luxmoore and not a share in the development profit as well. Neither he nor Hydedale was an equity partner in the project.
[18]See cl 18.1.
There remains the issue whether the share of Hydedale in the fees to be received by Luxmoore was to be 50%, as Mr Groves claims, or one-third, as Luxmoore contends.
Mr Groves maintains that the basic agreement between Mr Simon Reed and himself was for an equal division of “whatever we managed to achieve” from the projects undertaken. It mattered not whether these proceeds took the form of lump sum fees, as in the case of Flinders Gate or of fees calculated by reference to the development profit, as in the case of Yarra Gardens. It is not surprising, after all these years, that he was unable to recall the specific conversations where this was said. He merely said that it was often discussed and accepted. He pointed to certain feasibility studies for projects where the project management fees and the development management fees were separately identified and were of an equal sum. The difficulty with this evidence was that, at a very early stage, the basic shares were changed to one-third/two-thirds so that, thereafter, a departure from this unequal share would be the exception. Mr Simon Reed said that the arrangement throughout the period, at least after the collapse of Spire properties, was that the shares were one-third/two-thirds.
I was then invited to form a view as to the reliability of these two witnesses generally. It was pointed out by counsel for Luxmoore that Mr Groves had changed his account under cross-examination and that there was no real explanation for the 35% share which is asserted in his pleadings. On the other hand, a powerful attack was directed to the credit of Mr Simon Reed. This was directed to his conduct with respect to the NTM debacle to which I shall later refer, to his evasive letter of 13 July 2000 in which he speaks of “the group” not exercising the option, and to his refusal for many years to pay to Hydedale the modest sums which are now accepted to have been owing.
Notwithstanding these matters, I am not satisfied that the two men agreed expressly or impliedly that their shares in the Malvern Mews project were to be equal or that such an inference should be drawn from their dealings. I conclude that the entitlement of Hydedale in respect of this project was as to one‑third only of the fees earned by Luxmoore.
The amount of fees earned by Luxmoore from stage 1 of the project was $288,000. There was some uncertainty as to whether the fees received were $280,000 as Ms Hamill and Mr Simon Reed said. I prefer to rely upon the receipt records which show that a further payment of $8,000 was made on 15 August 1995.
Practical completion of stage 1 was achieved on 19 February 1996. The fees for stage 1 were received on various dates from 15 August 1995 to 5 March 1996, all after termination. It is clear, however, that much of the work had been carried out by Hydedale before termination. The evidence of Mr Groves of the number of hours he invested in this project makes it clear that the majority of these fees were for this pre‑termination work and that the staging of the payments reflected the cash-flow generated by the project rather than the time of the work. Nevertheless, I can well understand that significant project management work was required during the construction phase of stage 1. Mr Groves accepted that about a third of Mr Trowell’s time would have been applied in the project in the year 1996. This represents about $35,000 of his salary package. I deduct this from the $288,000 fees received, leaving $253,000 for distribution. The share of Hydedale would, therefore, be $84,333.
On behalf of Luxmoore, it is said that a further deduction from this should be made for the sum paid to NTM to extricate Luxmoore from its contract with these architects. The sum paid to NTM out of stage 1 was $97,635. This requires me to consider what was called at trial the NTM debacle.
It will be recalled that in 1993 NTM provided architectural services to Luxmoore for the purposes of obtaining the planning permit. For these a fee was agreed on the basis that NTM should have the role of project architect if the project went ahead.
When the design and construct tenders were called for in June 1994, NTM was nominated as the project architect to be retained by the builder. At a meeting of the strategic project management group on 22 November 1994 there was discussion about reducing the construction costs. Both Mr Simon Reed and Mr Groves were shown as present in the minutes. It was there decided to invite tenders from builders to design and construct the project without a nominated architect in the expectation that this might produce a cost saving of 5% to 9%.
NTM soon learnt of the second round of invitations to tender and on 23 November protested that it had the right of retainer. Mr Groves was then faced with the task of encouraging the second round tenderers to adjust their prices to include NTM as architect or of agreeing with NTM a price for it to withdraw its assertion of the right of retainer. The second round tenders were received in February 1995 including one from Segarnet Pty Ltd. Negotiations proceeded through January and February 1995 in an attempt to resolve the NTM position, but without result.
On 12 April 1995 a letter of intent from Luxmoore signed by Mr Simon Reed was sent to Segarnet awarding the design construct contract to it. Mr Groves said he was unaware of this until after the event. It was not suggested to him that he had any role in the sending of this letter. Counsel for Luxmoore put to him that this was a matter within his area of responsibility and that he must have known that the letter was sent. He agreed with the first proposition but denied the second. Mr Simon Reed said nothing as to the circumstances in which he came to send the letter.
It is obvious enough that the decision to send the letter of intent was an ill-advised one. NTM reacted strongly by letter dated 19 April, asserting its rights. There was now little that Luxmoore could do but to buy out NTM at the best price which could be negotiated. A meeting on 28 April was unable to resolve the matter and the dispute passed into the hands of the lawyers. A resolution unfavourable to Luxmoore was negotiated under which it had to pay $117,635 to NTM and $4,976 legal fees.
In his witness statement Mr Simon Reed blames Mr Groves for this debacle, but in very general terms, omitting the fact that he, Simon Reed, was involved in the November decision to call for the second round tenders and, more importantly, in sending the letter which provoked the dispute. Doubtless he presented the same misleading picture to his father who, on learning of the debacle, was very angry. Mr Simon Reed in this way successfully diverted the blame for his own act to his long-time business associate, Mr Groves. It seems likely that this was the reason for the summary termination of the 1991 agreement, and the consequent stress imposed on Mr Groves, the financial disadvantage to his company and, ultimately, this litigation. It reflects no credit on Mr Simon Reed. It causes me to conclude that he is a man who is capable of distorting the facts to suit his own interests. In a conflict between the testimony of Mr Groves and him, I am inclined to prefer the evidence of Mr Groves unless other evidence points elsewhere.
In these circumstances, Luxmoore is indeed bold to seek to reduce the entitlement of Hydedale to its share of fees for the Malvern Mews project by deducting the amounts paid to NTM. I reject its contention that such a deduction should be made. The entitlement of Hydedale in respect of stage 1 remains at $84,333.
Hydedale also seeks a share of the profits earned from stage 1 of this project. I have already concluded that it is not an equity partner so that this claim must fail. It must fail, too, because any profit was earned, not by Luxmoore, but by RS. It must fail, also, because the evidence shows that there was in fact no profit derived from stage 1. I accept the evidence of Mr McInnes that RS suffered a loss of $86,989.
Stage 2 of the Malvern Mews project was conducted under a different joint venture agreement, the details of which are of no present concern. The evidence shows that Luxmoore received $120,000 in fees for this stage and that RS received a distribution of profit of $449,347 in September 1998. I am not persuaded that Hydedale has any entitlement to these fees. For practical purposes, the project management work in the design and construction of this stage are remote in time from the termination and were not contributed to by Hydedale. For reasons already discussed, Hydedale has no entitlement to any part of the development profit earned by RS from stage 2.
In summary, the entitlement of Hydedale under the first head of damages is as follows:
Mowbray Waters
5,500
The Lakes
1,333
Flinders Gate
6,000
Hendra Distribution
3,333
Yarra Gardens
6,667
Malvern Mews
84,333
$107,166
The second head of damages raises particular difficulties. It involves an assessment of the value of the bargain which Hydedale lost by reason of Luxmoore’s repudiation of the 1991 agreement. This in turn requires me to form a view as to the prospect that the agreement would have continued and for what length of time and producing what distributable fees.
Unfortunately, these matters were not addressed on behalf of Hydedale. What was put was that in the two financial years 1994 and 1995 its net taxable income was $125,935 and $175,589 respectively. In the year after termination its tax return showed a loss of $71,048, and in the following year it enjoyed a net taxable income of $195,669. It was then said that the loss of income in 1995 was attributable to the Luxmoore repudiation. In that year Mr Groves had to apply himself to building up a business to replace that which Luxmoore’s repudiatory conduct had denied him. The amount claimed is $256,677.
This analysis was criticised as simplistic by counsel for Luxmoore. Accepting that the 1991 agreement was terminable on some notice, he submitted that Mr Groves would have been fully occupied with the on-going projects during the notice period. He then would have had to re-establish his business, so that he and Hydedale would have found themselves in the same position as that in May 1995, the only difference being that it would have been some months later. He added, too, that there was a good deal of double counting in the Hydedale claim.
To my mind, there is much force in the contentions of counsel for Luxmoore. It appears from the evidence that there were in the first months of 1995 serious difficulties in the relationship between Mr Groves and the Reeds. Mr Groves spoke of feeling that his role was being downplayed and, with the arrival of Mr Trowell, he had good reason for anxiety as to his long-term future with them. In my assessment, his future role was likely to be reduced and probably limited to a few projects only. I accept that no witness directly addressed the question of the value of Hydedale’s bargain in this way. Equally, there was little, if any, evidence offered as to it by Hydedale, the party which bears the onus of proof. It seemed to be implicit that Hydedale expected that things would have continued with Luxmoore indefinitely. Doing the best I can in the circumstances, I conclude that reasonable notice of termination would be three months. That is sufficient for Luxmoore to put in place a project management team to replace Hydedale and for Hydedale to go into the marketplace to re-establish its business during that notice period in the spare time available after performance of its own contractual obligations under the 1991 agreement.
It is not altogether clear what projects Hydedale would have worked on in this period. It still had a role in the Malvern Mews project, but with the winding down of the work for Mr Lai from late 1994 or early 1995, there were not many projects on foot in the three month period to August 1995. There were Flinders Gate and Hendra Distribution from which monthly fees were received from Mr Lai. The evidence showed that these fees were at the total rate of $4,000 per a possibility that a further $3,500 was payable for each of the months June, July and August 1995.[19] In addition there were the Lakes and Malvern Mews projects. Since I have found that Hydedale is entitled to its share of fees from the Lakes project and from stage 1 of the Malvern Mews project, there is little left to distribute. On the evidence before me there would be $22,500 fees received for work done in the three months from May 1995 on projects other than Malvern Mews. This would yield to Hydedale $7,500. An examination of its tax returns does not show many expenses whose amount is work related. I would therefore allow $7,000 under this head.
[19]See para [29] above.
The total damages for breach of contract are, therefore, $114,166.
The Punt Money Loan
It will be recalled that in February 1994, Hydedale contributed $4,375 as punt money to the cost of the VCAT appeal in accordance with the proposal contained in the memorandum of 10 February.[20] Hydedale claims this sum as a loan to one or other of the defendants[21] But at trial this claim was directed to Luxmoore only. This money was to be refunded to the contributors in the event that the appeal was successful and the project proceeded, but the contributor did not continue in the project.
[20]See para [43] above.
[21]Statement of claim, paras 10-12.
The position adopted by the defendants was that the Malvern Mews project, as then envisaged, did not proceed. I am satisfied that the requirement that the project proceed was in fact satisfied. The Malvern Mews residential development proceeded to its completion. Two of the members of the February 1994 syndicate, at least, obtained the benefit of the planning permit which enabled the project to go ahead. Apart from Mr Simon Reed and his father, none of the seven contributing members was involved in the project when it finally got underway. Luxmoore appears to have derived a benefit from the permit inasmuch as it passed the option to RS for reward and ultimately to Malvern Mews Pty Ltd. Furthermore, Luxmoore obtained benefit from its role as project manager under the August 1994 joint venture agreement. In accordance with the direction contained in the memorandum Hydedale paid its contribution to Luxmoore. In the circumstances, I treat that company as being the loan debtor with the obligation to make repayment where appropriate. It is clear that Mr Groves or his company did not proceed as equity partners in the development.
In the circumstances, I will order that Luxmoore, pay to Mr Groves the sum of $4,375.
The Representations Claims
It follows from discussion with counsel for the plaintiffs at trial that the representations are relied upon only as a basis for the plaintiffs’ claim in damages for promissory estoppel.[22] The case here is that Mr Simon Reed and Mr McInnes on behalf of Luxmoore made promissory representations in reliance upon which Mr Groves and Hydedale acted to their detriment in circumstances where it would be unfair or unconscionable to permit Mr Reed or Mr McInnes or Luxmoore to resile from them. No question, then, arises as to their falsity; it is that I should in equity treat them as bound to honour these promises.
[22]Statement of claim, paras 16F – 16I.
I raised with counsel at the outset how the plaintiffs’ case was advanced by this cause of action. If I am satisfied that the representations were made, there is abundant consideration moving from them to support a finding that the representor was contractually bound. I did not receive a satisfactory answer. I said, therefore, that I look forward to receiving legal argument on these matters. It did not happen. I remain uncertain as to the utility of this plea.
There were four representations alleged. The first two, referred to in the statement of claim as the “On-going Involvement Representation” and the “35% Share Representation” respectively, were said to have been made by Mr Simon Reed in or about March 1991. In terms, these representations amount to no more than an embellishment upon the terms of the 1991 agreement as pleaded in paragraphs 1 and 3 of the statement of claim. In essence, Mr Reed is said to have represented to Mr Groves that, if he carried out the work of sourcing and evaluating likely development projects without payment, he or his company would be engaged in “project management and other administrative and managerial capacities” in any project which commenced and that he would receive fees equivalent to 35% of the profits and earnings on each such project.[23] It will be seen that these were the terms of the 1991 agreement alleged by the plaintiffs together with a further promise, which may be implicit in the allegation, that Hydedale had a retainer right to perform work. I assume that the plaintiffs would now have the representations read 33⅓% instead of 35%. With this adjustment, these are the basic terms of the 1991 agreement which the parties accept to have been entered into. A possible departure from this is to be found in the alleged representation that what was to be shared were “profits and earnings”. I have accepted Mr Groves’ evidence that what was said in 1991 was that he and Mr Simon Reed would share whatever they managed to achieve from each project.[24] As things turned out, the only benefits which they received in the projects mentioned in evidence were fees paid to Luxmoore. Of those which were earned prior to termination, Luxmoore has paid Hydedale its one-third share of all except those for which I will order that this share be paid. In the circumstances, this claim in promissory estoppel amounts to nothing.
[23]Statement of claim, para 13A.
[24]See para [7] above.
The third representation is called the “New Employee Representation”. It is said to have been made in September 1994 regarding the pending employment by Luxmoore of Mr Trowell for project management work. It will be recalled that the manner in which this was handled was a cause for concern to Mr Groves who feared that this might be a step in the direction of diminishing or even eliminating his role in the construction side of the Luxmoore developments.[25] The representation is said to have been made by Mr Simon Reed when he assured his business associate that the employment of Mr Trowell would not cause arrangements between them to change.[26] I accept that words to this effect were said. But in this context, they were nothing more than an attempt to soothe Mr Groves’ concerns. At this stage, the 1991 agreement was still on foot. The representation adds nothing to it.
[25]See para [35] above.
[26]Statement of claim, para 13E.
The final representation, the “Malvern Mews Representation”, was said to have been made by Mr Simon Reed in about February 1995.[27] According to his evidence, Mr Reed agreed with him when he sought confirmation that they were are still splitting whatever they should get out of the Malvern Mews project 50/50. This cannot be correct. I have found that it had been long agreed that all receipts were to be shared on a one-third two-thirds basis. I find that the suggested representation was not made.
[27]Statement of claim, para 13G.
It is not necessary that I take this cause of action further and I will not burden this judgment by so doing. I will, however, observe in leaving it, that having regard to the damages which I will award under or for breach of the 1991 agreement, the plaintiffs have shown no reason for equity to award any further relief.
Breach of fiduciary duty
The final claim is for breach of fiduciary duty.[28] I am satisfied that the relationship between Mr Groves and Mr Simon Reed and their respective companies was that of fiduciaries. In paragraph 18A of the statement of claim a number of breaches of this duty are alleged against the defendants. They are particularised under seven paragraphs of which I was told at trial that the first and third were not pressed.
[28]Statement of claim, para 17B – 19.
Particular (ii) is that the defendants failed to render an account of the profits or earnings from the projects which were undertaken. This was, at trial, limited to the Malvern Mews project.[29] It is common ground that no accounts were rendered for this project. Whether this constitutes a breach of the fiduciary duty, as opposed to a contractual duty, may be doubted. It goes nowhere, however, because the plaintiffs have suffered no loss and the defendants enjoyed no benefit from this. Hydedale will receive judgment for the amount to which it is entitled under the 1991 agreement. No further loss has been demonstrated.
[29]T619.
Particulars (iv), (v) and (vi) extend to all of the projects in which Hydedale and Luxmoore were engaged. It is said, incorrectly, that the defendants (perhaps this should be Luxmoore only) completed these projects and retained all of the profits for themselves without paying the plaintiffs; that they failed to account to the plaintiffs and, further, that they, or it, deliberately chose to do so in order to keep the profits without paying any part to the plaintiffs. This is indeed an extravagant allegation. I have found that some proceeds of some projects were not distributed as required by the 1991 agreement. The plaintiffs will receive judgment for these sums. I cannot see any benefit to anyone in characterising these defaults in terms of this plea.
The allegation which was most pursued at trial is that contained in particular (vii).
The defendants transferred to a company controlled by them or some of them, RS Proprietary Limited, a profit-bearing interest in the Malvern Mews project.
The point here is that the option to purchase the site in 1992 was acquired by Luxmoore[30] and that it appeared as an asset on the Luxmoore balance sheet in the years to 1996. In 1997 it disappeared as did a substantial loan liability. In the same year the assets of RS were increased.
[30]See para [40] above.
It appears from the memorandum of 10 February 1994 that the seven contributors, who did not include RS, were contributing punt money required for the extension of the option and for the acquisition of the planning permit which would add value to the option.[31]
[31]See para [44] above.
A few months later, in August 1994, in the joint venture agreement, RS asserts that it owns the option and agrees to transfer it to Malvern Mews Pty Ltd for the purposes of the joint venture development. It will be recalled that there is in cl 8.4 of this agreement a hint that the title of RS to the option may be uncertain.[32] It is likely that the option was exercised and that the cost of this was provided by Breaver as part of the projected development cost.[33]
[32]See para [48] above.
[33]See para [48] above.
The joint venture agreement refers in its recitals to a number of agreements concerning the option, but none was produced. No search of the title to the land was in evidence. It may be that the title was transferred from the original owner direct to Malvern Mews Pty Ltd.
The date and circumstances in which the option passed from Luxmoore to RS are unclear. Mr McInnes, who was a director of Luxmoore and whose firm acted as accountant for the joint venture as well as for Luxmoore and RS, was unable to shed any light on this. It may have been done because Mr Robert Reed wanted to channel any profits through the discretionary trust. He was, after all, the controller of both Luxmoore and RS and was likely to be providing funds and guarantees for the project. Mr Simon Reed did not offer any explanation at all. It may be that this was because, in these matters, he deferred to his father.
Mr Groves said that he did not know that RS came to hold the option until after it had happened. I have found that he was involved in many of the events leading to the joint venture and afterwards.[34] I infer that he was aware prior to the execution of the joint venture agreement that the option had passed to RS and there is no evidence that he made any protest. He is shown in the 10 February 1994 memorandum as an uncertain equity partner in the development and I have found that neither he nor Hydedale was an equity partner in the project. In these circumstances, I conclude, on the balance of probabilities, that it suited the 7 February 1994 venturers, Mr Groves included, that the project be undertaken by the Reed interests without the equity involvement of the others. That this was achieved through RS rather than through Luxmoore was not a matter of importance to them.
[34]See para [49] above.
It follows from this that the transfer of the option to RS was not a breach of any fiduciary duty owed to the plaintiffs. In terms of particular (vii) set out above, it is not correct to say that “the defendants transferred to a company controlled by them or some of them, RS Pty Ltd, a profit bearing interest in the Malvern Mews project”. RS was a company controlled only by Mr Robert Reed. There was no transfer of any profit sharing interest in the project; no such interest existed prior to the execution of the joint venture agreement in August 1994 which set the project in train. The claims for breach of fiduciary duty must fail.
The Limitations Defences
It is at this point that I raise my voice in a cry of complaint. In their defence, the defendants plead the Limitations of Actions Act in respect to a number of paragraphs of the statement of claim.
·Para 1 In 1991 the parties entered into the 1991 agreement.
·Para 3 The terms of the 1991 agreement.
·Para 4 The allegation, no longer pressed, that it was a term of the 1991 agreement that the defendants would render an account on completion of each project.
·Para 6 The allegation, no longer pressed, that the defendants failed to render these accounts.
·Para 9 By reason of the wrongful repudiation by the defendants on 15 May 1995 the plaintiffs have suffered loss and damage.
·Para 13A Mr Simon Reed in March 1991 made the first two representations to the effect of the 1991 agreement.
·Para 13G Mr Simon Reed in February 1995 made the fourth representation to the effect that receipts from the Malvern Mews development would be shared on a 50/50 basis.
The defence does not identify the cause of action which is said to be statute barred nor when it arose. The pleas are in similar terms to that of which para 3 is an exemplar:
3.2 further, they say that insofar as paragraph 3 thereof contains any cause of action founded upon the allegation that the Plaintiffs would be entitled to 35% of earnings made or received by or on behalf of the Plaintiff and/or the Defendants (including any profits or earnings received by or through any related or associated entity of the Defendants or any investment vehicle of the Defendants), then such cause of action is statute-barred by virtue of the operation of the provisions of the Limitation of Actions Act 1958 (Vic); and
3.3 further, they say that insofar as paragraph 3 thereof contains any cause of action founded upon the allegation that the Plaintiffs would be entitled to 50% of earnings made in respect of the Malvern Mews project, then such cause of action is statute-barred by virtue of the operation of the provisions of the Limitation of Actions Act 1958 (Vic).
The proceeding was initiated on 11 May 2001 so that, assuming a limitation period of 6 years, a cause of action arising before 11 May 1995 would be barred.
The plaintiffs in their reply merely assert that the writ was issued within six years after each cause of action arose and further, that time began to run from the date of the amendment of the statement of claim.[35]
[35]Reply, para 2.
At trial, apart from intermittent references to the fact that claims were “subject to the statutory limitations”, nothing positive was said about these defences by counsel for the defendants. In his final address on the last day, counsel for the plaintiffs observed that nothing had been said about these defences but that, since passing references to them had been made during the trial, he took it that they had not been abandoned. He then asserted three answers to them.
·The cause of action in respect of the distribution of fees received by Luxmoore did not arise until the fees were agreed and received by Luxmoore.
·The statute has no application to claims for breach of fiduciary duty.
·There is “a written acknowledgement of that debt” in the witness statement of Ms Hamill. It is not clear where this is made and what debt is acknowledged.
These matters were not pleaded and no argument was addressed for or against them. Counsel for the defendants, having some days previously said that he would say something about these defences, made no mention of them in his final address other than to observe on occasions that the defence was raised, or at all in his address in reply.
My complaint is that, in adversarial litigation in this court, it is for the parties to identify and argue the contentions which they want the court to decide. While the pleadings should, and do, identify the issues, it so often happens that they contain a large number of matters which turn out not to be pressed. Such was the case with the plaintiffs’ claims in this case. In the defence the limitations pleas were expressed in general terms and did not specify the provision relied on, the cause of action which is said to be barred or the facts relied on. It is for counsel to highlight, develop and present submissions as to fact and law on the issues that they consider important; it is not for the judge to conduct an enquiry into matters which the parties do not choose to deal with. It may be that, in a given case, they do not do so by agreement or for some other good reason. In this case, for example, there is something to be said for the contention that the cause of action in contract arose on 15 May 1995 when the 1991 agreement was repudiated. I could well imagine, too, an argument which fixes this date as the date of receipt of the fees by Luxmoore or on the date that Hydedale invoiced Luxmoore for its share. It may be that there is something to be said for the proposition that, in the circumstances of this case, time runs from the amendment. I express no view about these matters. On any of these views the defence would not succeed. The difficulty is that the pleas in the defence do not make it clear how the defence is put and this deficiency was never remedied by oral argument, or otherwise. If this was because counsel took the view that the defence had no prospect of success, it was clearly his responsibility to make this clear; if not, he should have presented argument in support of it.
In the circumstances, I decline to entertain the defences based on the Limitation of Actions Act.
Conclusion
It follows from what I have written, that the firstnamed plaintiff, Hydedale, has established an entitlement to $114,166 damages for breach of contract and to $4,375 in respect of the loan. I will hear counsel further as to the terms of the orders to be made to give effect to these conclusions and as to costs.
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