IMO Geopec Pty Ltd
[2019] VSC 128
•7 March 2019
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
GENERAL LIST
S ECI 2019 00336
IN THE MATTER of an application by GEOPEC PTY LTD (ACN 112 042 501)
BETWEEN:
| GEOPEC PTY LTD | Plaintiff |
| v | |
| NAUMOVSKI INVESTMENTS PTY LTD | Defendant |
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JUDGE: | Ierodiaconou AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 26 February 2019 |
DATE OF RULING: | 7 March 2019 |
CASE MAY BE CITED AS: | IMO Geopec Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2019] VSC 128 |
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CORPORATIONS – Dissolution of partnership – monies held on trust by accountant – dispute over payment out of surplus trust monies – monies paid into Court – s 69 Trustee Act 1958
CONTRACT – Whether inference can be drawn from deleted words – Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544 – Gee Dee Nominees Pty Ltd v Ecosse Property Holdings Pty Ltd [2016] VSCA 23
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr N Evans, solicitor | Aptum Legal |
| For the Defendant | Mr Colman |
HER HONOUR:
Geopec Pty Ltd Limited (‘Geopec’) has made an application for payment out of funds held in Court. The amount of funds is approximately $80,700. Geopec seeks payment of the total sum. The defendant, Naumovski Investments Pty Ltd (‘Naumovski Investments’) seeks payment of half the funds.
For the reasons below, I find that Naumovski Investments is entitled to half the funds. The other half of the funds should go to Ugrinovski Investments Pty Ltd (‘Ugrinovski Investments’). It did not make an application for payment of funds. However, as discussed below, the same person stands behind both that company and Geopec.
The background to these monies being paid into court includes history of a litigious dispute between former partners, Mr Robert Ugrinovski and Mr Vlado Naumovski. It is necessary to briefly set out some of the background.
Background
On 13 June 2015, Mr Naumovski and Mr Ugrinovski executed a Heads of Agreement on behalf of themselves and their respective associated entities in settlement of Supreme Court of Victoria proceedings numbers S ECI 2014 00088 and S ECI 2014 00189 (‘Heads of Agreement’).
The recitals in the Heads of Agreement (‘HoA’) dated 13 June 2015 provide some further background.
1.The First Plaintiff (Naumovski) and the First Defendant (Ugrinovski) in proceeding S ECI 2014 00088 (Naumovski Proceeding) conduct a property development and investment business through several corporate entitles, including the second to ninth defendants in proceeding S ECI 2014 00189 (Ugrinovski Proceeding)…
…
7.In September 2014, Naumovski commenced the Naumovski Proceeding in which he claims, inter alia, oppression and breach of directors' duties against Ugrinovski pursuant to Points of Claim dated 27 November 2014 (the Claim). Ugrinovski commenced the Ugrinovski Proceeding alleging, inter alia, oppression pursuant to the Points of Defence and Counterclaim dated 17 December 2014 (Counterclaim) (together, the Proceedings).
8.Naumovski and Ugrinovski on their own behalf and on behalf of their respective private companies and trusts have agreed to settle the Proceedings on the following basis and subject to full terms being drafted and agreed upon.
…
10.It is acknowledged that the entities referred to herein are not intended to be an exhaustive list of the entities that represent the interests and relationships of Naumovski and Ugrinovski.
The HoA was approved and given effect to by orders of Almond J dated 24 July 2015. Clause 15 of the HoA and Paragraph 2 of the orders state:
2.The Group pay [Mr Naumovski] and/or nominee $2.7m cash on the Settlement Date (as defined in the HOA). Such cash is to come from the bank accounts of the Group, with each bank account contributing to the payment in proportion to the account balances that the accounts bear to one another as at 12 June 2015. If the Group or any one account does not have adequate cash in hand at the time of settlement, the Plaintiff [Mr Ugrinovski] shall pay any shortfall to [Mr Naumovski].
In the orders of Almond J dated 24 July 2015, the ‘Group’ is defined as the ‘second to ninth defendants’ in that proceeding. Geopec was the sixth defendant in that proceeding. In the HoA, the Group is defined to include an additional three entities: Evla Properties Pty Ltd, Dalbe Properties Pty Ltd, The Dalbe Trust and the Elva Trust Partnership.
Almost two years later, on 22 May 2017, Mr Ugrinovski and his associated entities entered into a settlement implementation deed with Mr Naumovski and his associated entities (‘Settlement Implementation Deed’).
On 2 June 2017, a Deed of Dissolution was entered into by Geopec, Ugrinovski Investments and Naumovski Investments (‘Partnership Dissolution Deed’). In the deed:
(a) ‘Partnership’ is defined to mean ‘the partnership between Partner 1 and Partner 2 to carry on the Business[1] as set out in the Partnership Deed’.[2]
(b) ‘Partner 1’ refers to Ugrinovski Investments as trustee for the Ugrinovski Investment Trust.
(c) ‘Partner 2’ refers to Naumovski Investments as trustee for the Naumovski Investment Trust.
[1]The term ‘Business’ is defined as ‘the property development and investment business conducted by the Partnership’.
[2]The ‘Partnership Deed’ is defined as ‘the agreement entitled “Partnership Deed” between Partner 1 and Partner 2 entered into on or around 19 June 2006’.
Paragraphs A–D of the recitals in the Partnership Dissolution Deed dated 2 June 2017 state:
A.On 19 June 2006, Partner 1 and Partner 2 entered into a Partnership Deed to carry on the Business as a Partnership.
B.On 19 June 2006 the Partnership appointed [Geopec] as its agent to manage the Business under the direction of the Partnership.
C.The Partners wish to dissolve the Partnership on the terms and conditions contained in this Deed.
D.Upon satisfaction of the obligations of Partner 1 and Partner 2 respectively and which are contained in this Deed, the Partnership will be dissolved effective from the Completion Date.
On the same date, namely 2 June 2017, Naumovski Investments and Ugrinovski Investments executed an Irrevocable Direction addressed to ShineWing Australia (‘ShineWing’). ShineWing was the accountant for the partnership and associated companies. As will be discussed below, ShineWing was directed to hold and pay monies in respect of GST liabilities.
The Group accounts did not have sufficient monies to meet the payment of $2.7 million as per clause 15 of the HoA and paragraph 2 of the orders of Almond J dated 24 July 2015. The orders referred to above and the HoA provided that Mr Ugrinovski pay the shortfall, and a dispute arose concerning that. By further orders made on 22 August 2018, Almond J ordered that Mr Ugrinvoski pay Mr Naumovski the shortfall - $760,698 plus interest. This amount was paid on or about 31 August 2018.
On 22 October 2018, ShineWing advised via email to the solicitors of Geopec that there was $80,695.15 remaining in its trust account after debts owed to the Australian Taxation Office were paid in full (‘the Funds’). The email from ShineWing stated, amongst other things:
BASs have been processed by the ATO and full debt including the interest and penalties have been paid.
There is $80,695.15 remaining in our trust account.
My understanding was that the funds remaining should be disbursed 50% to Naumovski and 50% to Ugrinovski. Is that okay/correct? So I can send you a cheque for 50% of the balance being $40,347.57
On the same date, the solicitor for Geopec responded to ShineWing’s email stating that all of the monies should be paid to Geopec. Further email correspondence ensued. ShineWing ultimately engaged solicitors who indicated by letter dated 14 November 2018 that they would pay the monies into Court unless both Ugrinovski Investments as trustee for the Ugrinovski Investment Trust and Naumovski Investments as trustee for the Naumovski Investment Trust provided a joint direction. They did not.
ShineWing paid the Funds into Court on 12 December 2018 pursuant to section 69(1) of the Trustee Act 1958, which states:
Payment into court by trustees
(1)Trustees or the majority of trustees having in their hands or under their control money or securities subject to a trust may pay the same into court; and the same shall, subject to rules of court, be dealt with according to the orders of the Court.
On 29 January 2019, Geopec filed its originating motion in this proceeding seeking payment out of the Funds. It relies upon an affidavit sworn on 22 January 2019 by Mr Ugrinovski.
Mr Ugrinovski deposes that he is (now) the sole director of Geopec in this proceeding.
Geopec’s submissions
Geopec’s key submissions are as follows.
Geopec says ShineWing held the Funds on trust for it. It says that the parties intended this by reason of the scheme under the HoA that was in effect until the Partnership Dissolution Deed. Therefore it says that it is entitled to all of the Funds.
Geopec refers to clause 15 of the HoA. Geopec says that following litigation, Mr Ugrinovski ultimately had to top up the $2.7 million payable to Mr Naumovski from his own money in circumstances where there was insufficient money in the Group accounts. It says that there was insufficient monies partly because provisional taxation monies had been taken out and given to ShineWing to be held in trust for payment to the Australian Taxation Office. Geopec says that if Mr Naumovski was paid any of the Funds then he would be receiving monies additional to the agreed payment of $2.7 million. In other words, he would be double dipping. Geopec says that this is clearly not what was intended by the nature of the carve up of the assets prescribed by the HoA. In addition, Mr Ugrinovski would end up bearing the weight of the provisional tax payment.
Geopec says that clause 15 of the HoA is paramount, and should prevail to the extent there is inconsistency with the other settlement documents. Geopec says that there cannot be a circumstance arising from the partnership dissolution that is inconsistent with clause 15. Geopec refers to clause 1.4(a) of the Settlement Implementation Deed which is a paramountcy clause which provides that if there is any inconsistency between the Settlement Implementation Deed and the Partnership Dissolution Deed,[3] the orders made on 24 July 2015 and 4 November 2016 prevail to the extent of the inconsistency. This includes paragraph 2 of the consent orders made on 24 July 2015, which, as above, is reflected in clause 15 of the HoA.
[3]Annexure B to the Settlement Implementation Deed contains a draft of the Partnership Dissolution Deed.
Geopec says that the taxation liability was indeterminate at the time when the monies were paid to ShineWing. It says that the Irrevocable Direction was executed to ensure that the money was given to ShineWing to pay the ATO and to avoid any dispute about the application of the monies paid to ShineWing. Geopec says that the monies were held on trust by ShineWing for Geopec as the beneficiary, and that this is consistent with the fact that, by this point, the partnership had already dissolved.
Geopec refers to the second paragraph of clause 1(c)(i) of the Irrevocable Direction. This paragraph has been struck out by the parties by handwriting. It provided that in the event the actual GST liability was less than the provisional GST liability, 50% of the amount would be refunded to Naumovski Investments and 50% would be refunded to Ugrinovski Investments. Geopec says that an inference should be drawn from this being struck out, and from the purpose served by the document in the settlement scheme, that there should not be a 50% split of the Funds. Rather the Funds should go to Geopec.
Geopec says it was the client of ShineWing. The Trust Account Authority Letter on ShineWing letterhead is signed by Geopec. It gave ShineWing the authority to hold the monies and return the balance to Geopec.
Geopec refers to the Partnership Dissolution Deed that was executed on the same day as the Irrevocable Direction and contemplates survival of the trustee. It names Geopec as the nominee of the trustee. The partnership dissolved, and as a result of the dissolution, Mr Naumovski relinquished his equitable interest in the trustee. However, Mr Ugrinovski did not.
Clause 2.1(a) of the Partnership Dissolution Deed provides for various assets to be transferred to Mr Naumovski. As for the bank accounts of the various entities, Mr Naumovski says that the Partnership Dissolution Deed provides that Mr Naumovski got the cash in the bank account of the entity which was allocated to them. So the scheme was to divide certain assets and otherwise everything stayed where it fell. Accordingly, Naumovski Investments should not get monies that are to be returned to Geopec because its assets stayed with Mr Ugrinovski’s entities.
Geopec says the relevant question is what the parties intended would happen to the funds paid to ShineWing. What did the parties intend on dissolution of the partnership?
Naumovski Investments’ submissions
Naumovski Investments’ key submissions are as follows.
Naumovski Investments says that the monies are held on trust for it and Ugrinvoski Investments in fact, in law, and by the intention of the parties. It says it is entitled to 50% of theFunds.
Naumovski Investments says that the monies were paid to Shinewing by Geopec when they were nothing more than partners of the trust. It says that the argument that the money reverted to Geopec once the partnership dissolved has no merit.
Naumovski Investment relies on the Irrevocable Direction. Clause 1.1(a) says that the monies are held ‘on trust for the parties jointly and severally’. The parties are Naumovski Investments and Ugrinvoski Investments.
As to the deletion of the second paragraph of clause 1(c)(i) of the Irrevocable Direction, Naumovski Investment says that it does not compromise its claim. It says that it does not evidence that there is any agreement that the surplus funds should revert to Geopec. It says that the clause was deleted as a reservation of rights, not a compromise, and there could be multiple reasons for the deletion. For instance, Naumovski Investments says it may be entitled to 100% of the Funds. There is no evidence before the Court concerning the deletion of the paragraph from which an inference should be drawn.
As to the Trust Account Authority Letter, Naumovski Investments says it was not asked to sign the letter and did not in fact sign it, so nothing can be raised against it concerning the letter.
Naumovski Investments concedes that part of the reason why there was a shortfall that Mr Ugrinovski had to pay (in respect of the $2.7 million paid to Mr Naumovski) was because Geopec had set aside money for ShineWing. It accepts that had the monies been in the Geopec account, Mr Urginovski would not have had to pay them himself. It is also conceded that Mr Naumovski received the shortfall monies. However, Naumovski Investments’ entitlement to the Funds is an entitlement independent of clause 15 of the HoA because clause 15 does not inquire as to why a shortfall may come into existence.
In addition, the Partnership Dissolution Deed does not make an allowance for the potential tax refund. As an example, clause 2.1(c) specifically refers to what Geopec may keep post dissolution and does not deal with it.
Clause 5.3(a) of the Partnership Dissolution Deed requires Ugrinovski Investments and Naumovski Investments to keep Geopec indemnified for all claims made against it in its capacity as nominee of the partnership. Naumovski Investments says that it would be a peculiar result if it did not have the benefit of the refund yet still had obligations to indemnify Geopec for GST liabilities. That is, that Naumovski Investments had an obligation going forward but not the benefit.
Naumovski Investments refers to the letter from ShineWing’s lawyers dated 14 November 2018. Clause 1.3 of that letter explicitly states that the Funds were paid to ShineWing’s trust account from the bank account of the partnership, not from Geopec’s own funds. The letter also states that the Trust Account Authority Letter is a mechanical one which does not impact or change the beneficial entitlement to the Funds, which is clearly identified in the Irrevocable Direction.
Applicable Principles
In Toll (FGCT) Pty Limited v Alphapharm Pty Limited, the High Court stated:
It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.[4]
[4](2004) 219 CLR 165 [40].
In Gee Dee Nominees Pty Ltd v Ecosse Property Holdings Pty Ltd, McLeish JA reviewed the principles concerning the construction of words deleted from a standard or common form agreement, and stated:
The preparedness of the courts to have regard, at least to some extent, to parts of a contract which have been struck out but which remain legible, for the purpose of construing the operative language of the instrument, is explicable as a departure from the general rule prohibiting recourse to pre-contractual negotiations. Words struck from the actual instrument may justifiably be seen as still forming part of that instrument, albeit not intended to have operative effect. Importantly, any third party dealing with the contracting parties, such as an assignee or security holder, is in as good a position as the court in having regard to the struck out words. In these ways, little violence, if any, is done to the objective theory by taking those words into account in interpreting the contract.
None the less, it is clear that the existing authorities do not allow immediate resort to be had, when construing a contract, to words struck out in a contract.
…
it is plain that the authorities regard struck out language as secondary, even if not strictly extrinsic, material. As such, it is used as an aid to construction without forming part of the language being construed. So, the possible exception permitting evidence of actual intention … operates only to rebut reliance on evidence of surrounding circumstances where admissible as an aid to construction.
The most recent Australian authority appears to be the decision of the Western Australian Court of Appeal in A Goninan & Co Ltd v Direct Engineering Services Pty Ltd [No 2].It was there held that deleted words or clauses in a standard or common form agreement may at least be referred to as an aid to construing ambiguous words or an ambiguous clause in the concluded agreement. That approach is consistent with a number of both older and more recent cases … It is the approach which should be applied in the present case.[5]
[5][2016] VSCA 23 (McLeish JA) [94]–[98] (citations omitted).
This issue was not challenged in the appeal to the High Court. Nettle J stated:
It is permissible to have recourse to words and clauses deleted from a standard form or common form agreement, but which remain legible on the face of the document, for the purposes of construing ambiguous language in the executed agreement.[6]
[6]Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544 [73] (citations omitted).
Analysis
For the reasons that follow, I find that Naumovski Investments is entitled to half of the Funds and Ugrinovski Investments is entitled to the other half.
Monies were held by ShineWing on trust for Naumovski Investments and Ugrinovski Investments. This is evident from the Irrevocable Direction. They, not Geopec, are the parties to the Irrevocable Direction. Clause 1(a) clearly provides that the monies are to be held ‘on trust for the parties jointly and severally until disbursed in accordance with the directions’. Accordingly, once ShineWing had paid the GST liability to the ATO and thus disbursed the monies in accordance with the directions, it was no longer obliged to hold the monies excess to that on trust. Indeed, save for a joint direction from the parties, it was obliged to return them to the parties.
Clauses 1–3 of the Irrevocable Direction dated 2 June 2017 state:
1.By executing this document, each party unconditionally and irrevocably direct ShineWing to:
(a)hold the amount of $288,000 (‘Provisional GST Liability’), which has been paid to ShineWing from the bank account of the entity known as The Trustee for Naumovski Investment Trust & The Trustee for Ugrinovski Trust ABN 15 837 046 630 (‘Geopec’) on or about the date of this document, on trust for the parties jointly and severally until disbursed in accordance with the directions set out in this document;
(b)as soon as practicable after the date of this document, and in any event by no later than the date being 45 days after the date of this document, calculate the actual GST liability of Geopec for the period up to and including the date of this document (‘Actual GST Liability’), and provide its calculations together with drafts of all relevant GST returns to the parties;
(c) subject to clause 2:
(i)within 10 business days of providing the parties with such calculations and draft GST returns, and having regard to any comments provided by either party in relation to such calculations or returns (and Naumovski and Ugrinovski authorise ShineWing to determine any disagreement between the parties in relation to such returns in its absolute discretion), finalise and lodge such returns with the Australian Taxation Office ('ATO') and pay the Actual GST Liability to the ATO on behalf of Geopec; and
in the event the Actual GST Liability, once determined, is less than Provisional GST Liability, refund 50% of the amount by which the Provisional GST Liability exceeds the actual GST Liability (‘GST Excess’) to Naumovski and 50% of the GST Excess to Ugrinovski within 5 business days of the date on which the Actual GST Liability is paid to the ATO, and
2.Notwithstanding clause 1(c), but subject to ShineWing having complied with the direction given in clause 1(b), ShineWing may, at any time and in its absolute discretion, pay the entire amount of the Provisional GST Liability to the ATO on behalf of Geopec without any liability to either Naumovski or Ugrinovski.
3.For the avoidance of doubt, the directions given by Naumovski and Ugrinovski in clause 1 are irrevocable and cannot be revoked, withdrawn, varied, amended or waived without the prior written consent of Naumovski and Ugrinovski.[7]
[7]Emphasis added.
I cannot accept Geopec’s submission that I should draw from the striking out an inference that there was agreement that any excess monies be returned to it. In contradistinction to the cases referred to above, this case does not concern the interpretation of an ambiguous clause. Rather, Geopec submits that an inference should be drawn of a new and additional agreement that is part of the Irrevocable Direction. Moreover, the struck out clause is not an aid to construction. The parties’ intentions cannot be discerned from the struck out paragraph, even if read in the context of the surrounding scheme of the dissolution of the partnership. There is no evidence as to why it was struck out. There may be any number of explanations for the striking out. For instance, perhaps the clause was considered to be unnecessary given the direction in clause 1(a) that the monies were being held on trust for the parties jointly and severally.
For clarity, I shall refer below to the entity named in clause 1(a) of the Irrevocable Direction as ‘the entity known as the trustee for Naumovski Investment Trust and the Trustee for Ugrinovski Trust ABN 15 837 046 630 (‘Geopec’)’ as the ‘Geopec Trustee Company’. It is a different entity to the plaintiff in this proceeding, being Geopec Pty Ltd ACN 112 042 501.
I cannot accept Geopec’s submission that because clause 1(a) refers to the monies being paid to ShineWing’s bank account from the Geopec Trustee Company, the monies should be returned to Geopec. That would be inconsistent with the wording in clause 1(a) that the monies were held on trust for the parties jointly and severally. Consistent with clause 1(a), ShineWing’s letter of 14 November 2018 states that the Funds were paid into its accounts ‘from the bank account of the partnership, not from Geopec Pty Ltd’s own funds’.
For the same reasons, I do not accept Geopec’s submission that because clause 1(c) provides that the GST liability is to be paid by Shinewing to the ATO on behalf of the Geopec Trustee Company, the monies should be returned to Geopec. As discussed above, they are different entities.
I reject the submission that the Trust Account Authority Letter signed by Mr Ugrinovski on behalf of Geopec overrides the Irrevocable Direction. Whilst it states that after payment, ShineWing will ‘forward the balance of the account to me/us/other’, and that appears to be Geopec, the letter is simply a template one, or as referred to in the letter from ShineWing’s solicitors, a ‘mechanical one’. It is not even dated. It is signed by an entity which is not a party to the Irrevocable Direction. It is inconsistent with clause 3 of the Irrevocable Direction which states that it ‘cannot be revoked, withdrawn, varied, amended or waived without the prior written consent of Naumovski and Ugrinovski’. Naumovski Investments says there was no such consent. The Trust Account Authority Letter does not override the Irrevocable Direction.
Turning now to the submissions made by the parties concerning the HoA. Paragraph 9 of the recitals states:
9.The intent of the settlement is to sever the interests and the relationships of Naumovski and all of his companies and trusts and Ugrinovski and all of his companies and trusts.
Consistently with that, the terms of the deed then deal with the division of assets. Clause 15 of the HoA provides for a cash payment to Mr Naumovski.
Geopec’s steadfast position is that but for the Funds being held by ShineWing, they would have been available in the Geopec bank account at settlement, and therefore available to pay Mr Naumovski as part of the $2.7 million settlement payable under clause 15. As they were not, Mr Ugrinovski then had to pay the monies himself. Therefore, it is said that Mr Ugrinovski has no claim on the Funds and they should be returned to Geopec, otherwise Mr Naumovski would be double dipping.
There are a number of fundamental problems with Geopec’s submission. Firstly, the obligation to pay Mr Naumovski arising from clause 15 is an obligation on the ‘Group’, as defined in the HoA and referred to above. Then, if there is a shortfall, there is an obligation on Mr Ugrinvoski to pay it.[8] This obligation on Mr Ugrinovski to meet any shortfall is simply part of the wider settlement between Mr Naumovski and Mr Ugrinovski and their various entities. It is not contingent upon the reasons as to why there might be a shortfall and nor were the Court’s subsequent orders that he pay that shortfall. Accordingly, the fact that the monies were being held by ShineWing is immaterial to Mr Ugrinovski’s obligations to meet the shortfall.
[8]In Ugrinovski v Naumovski [2018] VSC 437 [60] Almond J held that it was clearly open for the Court appointed independent counsel to construe the reference to the Group ‘as a collective reference to the bank accounts of the several entities comprising the Group’.
Further, clause 15 of the HoA is an agreement for a cash payment to Mr Naumovski personally. The monies held by ShineWing are not on trust for him in his personal capacity. Rather, they are on trust for Naumovski Investments (and Ugrinvoski Investments).
The entitlement that Naumovski Investments has to the Funds held by ShineWing is a separate entitlement that arises from the Irrevocable Direction independently, and is separate to the HoA. This is not inconsistent with the carve up of assets in the HoA because the notion of double dipping is predicated on the incorrect assumption that there is no separate right arising from the Irrevocable Direction.
For completeness, I do not find there to be any inconsistency between clause 15 on the one hand and the Irrevocable Direction, or indeed the Partnership Dissolution Deed on the other hand.
Turning now to the Partnership Dissolution Deed. As discussed above, ‘Partner 1’ is defined as Ugrinovski Investments as trustee for the Ugrinovski Investment Trust and ‘Partner 2’ is defined as Naumovski Investments as trustee for the Naumovski Investment Trust. Clauses 2.1(b) and 2.1(c) state:
Partner 1 and Partner 2 acknowledge and agree that the Partnership Assets shall be transferred in the following manner:
(b)On the Completion Date, Partner 2 shall transfer and assign its beneficial interest in the following Partnership Assets to Partner 1 and/or nominee so that Partner 1 and/or nominee shall hold the full beneficial interest in such Partnership Assets free from any Encumbrances: Chisholm House, Northlake Shopping Centre and its rights, title and interest in all rental bonds, monies held by real estate agents, unpaid rent and other monies due to the Nominee as at the Completion Date in relation to Chisholm House and Northlake Shopping Centre, and Partner 2 shall disclaim all interest in such Partnership Assets.
(c)Immediately following the dissolution of the Partnership at Completion, the Nominee shall hold full legal title to the following Partnership Assets free from any Encumbrances on trust for Partner 1 and/or its nominee and not as nominee for the Partnership: Chisholm House, Northlake Shopping Centre and all rental bonds, monies held by real estate agents, unpaid rent and other monies due to the Nominee as at the Completion Date in relation to Chisholm House and Northlake Shopping Centre.
I do not consider that either of these clauses applies to the monies held by ShineWing. They reflect agreement as to the allocation of the various assets.
It is common ground that the partnership was dissolved, as anticipated by clause 3 of the Partnership Dissolution Deed, which states:
On and subject to Completion, the Partners agree that the Partnership is automatically dissolved and the Partnership Deed is automatically terminated with effect on and from the Completion Date on the terms set out in this Deed.
Clause 5.3 of the Partnership Dissolution Deed states:
(a)Subject to clause 5.3(b), Partner 1 and Partner 2 indemnify the Nominee and keep the Nominee fully indemnified against all Claims made against the Nominee in its capacity as nominee of the Partnership (whether arising before or after Completion) which have been or might be taken or made against the Nominee by any person, including a Partner but excluding any Claim made against the Nominee in relation to GST payable by the Partnership in respect of the period after Completion.
(b)The liability of Partner 1 and Partner 2 under clause 5.3 is several and not joint and several, with each Partner's liability limited to 50% of the total amount of all such Claims.
Naumovski Investments submitted it would be peculiar if there was an ongoing obligation to continue to indemnify the Nominee (Geopec) but it did not obtain the benefit of the surplus monies held by ShineWing. The obligation for the indemnity in respect of GST is for the period up to Completion (i.e. the partnership dissolution). This would oblige each partner to contribute 50% for a shortfall for that period. I do not consider this really answers the question of how the Funds should be allocated. Obligation does not always equate with benefit. In this case, the Irrevocable Direction answers the question.
Conclusion
I propose to make the following order.
(a) The following sums be paid from Common Fund No. 1 and debited to Account No 83021:
(b) To Ugrinovski Investments Pty Ltd, by payment to its solicitors an amount equal to half of the balance of the said Account, but subject to the retention of a sum sufficient to cover any taxation liability.
(c) To the defendant, by payment to its solicitors an amount equal to half of the balance of the said Account, but subject to the retention of a sum sufficient to cover any taxation liability.
The defendant serve a copy of this order upon ShineWing Accountants within 14 days.
I will give the parties an opportunity to make submissions on the proposed form of order and costs.
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