J S Heap Constructions Pty Ltd
[2008] NSWDC 113
•26 June 2008
CITATION: J S Heap Constructions Pty Ltd [2008] NSWDC 113 HEARING DATE(S): 23/6/08 - 24/6/08
JUDGMENT DATE:
26 June 2008JURISDICTION: Civil JUDGMENT OF: Rolfe DCJ DECISION: See paragraph 29 of Judgment CATCHWORDS: Limitation Act 1969 (NSW) - Joint Venture Agreement - Claim for share in proceeds of sale of lots in subdivision held to be statute barred - Claim for failure to pay share of profits in joint venture held not to be statute barred - Consideration of financial records and separate claim not pleaded - Claim for failure to share profits not made out LEGISLATION CITED: Limitation Act 1969 (NSW) PARTIES: J S Heap Constructions Pty Ltd (Plaintiff)
Ralph Douglas Williams (1st Defendant)
Lindsay Ruth Williams (2nd Defendant)FILE NUMBER(S): 5500/06 COUNSEL: C A Evatt with M Rollinson (Plaintiff)
B C Kasep (Defendants)
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JUDGMENT
1 The plaintiff in these proceedings, J S Heap Constructions Pty Ltd, was an experienced developer of residential sites.
2 The defendants were the owners of vacant land at Coughlan Rd, Blaxland, NSW.
3 On 26 September 1995 the plaintiffs and the defendants entered into the Joint Venture Agreement (Exhibit A, Annexure “D”).
4 Recital 2 of the Joint Venture Agreement recorded that the defendants’ land was “subject to an approval for subdivision into twenty two lots”. Recital 3 recorded the object of the Joint Venture Agreement as “ the development of the residential lots and to define between (the plaintiff and the defendants) their respective rights and interests”.
5 Under clause 2.1 the parties agreed to be joint venturers for the purpose of carrying out the “works” which was defined in clause 1.1(b) of the Joint Venture Agreement as:
“1.1(b) ‘the works’ means the construction and completion of the subdivision of the land into twenty two lots in accordance with the approval and all works and the like associated therewith;”
6 Clause 2.2 of the joint venture agreement provided:
“2.2 the joint venture shall be deemed to have commenced on the commencement date and shall continue until the completion of the works and the distribution of the net profits (or adjustment of losses) to the joint venturers and shall be a venture restricted to the carrying on and carrying out of the works and nothing in this agreement or otherwise should be construed as constituting any joint venture with a partner or agent or representative of any party hereto or to create any trust or partnership between or amongst the joint venturers.”
7 “Commencement date” was not defined but the court infers the parties intended it to be the date of the Joint Venture Agreement.
8 Allan Maxwell Ross is a chartered accountant who has been a director of the plaintiff since 2002. Mr Ross has also done accounting work for the plaintiff and is familiar with its records.
9 Mr Ross’s evidence in Exhibit A with reference to “the works” as defined above was that the development was completed after all 22 lots were sold and transferred to purchasers. He said the last lot was transferred in 1999.
10 Up until his death on 1 January 2002, John Stratford Heap was the sole director of the plaintiff. After Mr Heap’s death, Mr Ross had some informal discussions with the first defendant and a Miss Natalie Newton about accounting matters. However, Mr Ross’s evidence (Exhibit A, para 9) was that “no official, agreed joint venture accounts were ever prepared”.
11 Although Mr Ross is a qualified accountant the financial material which he sought to annex to his affidavit in the form of annexures “B” and “C” was rejected by the court because it was not admissible.
12 On 15 November 2006 the plaintiff commenced these proceedings against the defendants. The plaintiff’s claim was brought under the Joint Venture Agreement. Specifically, the plaintiff pleaded its case as follows:
5. The defendant (sic) has wrongfully refused and neglected to pay to the plaintiff the plaintiff’s profit in accordance with the (joint venture agreement) in consequences whereof the plaintiff has suffered loss and damage.”“4. It was a term of the (joint venture agreement) that the profits would be distributed upon the sale of each lot and after the payment of the associated disbursements. Clause 3.6 and 3.7 of the (joint venture agreement).
13 The plaintiff claimed damages of $271,315.97. Particulars of that claim were set out in the statement of claim but no affidavit evidence prepared by the plaintiff was adduced to support the plaintiff’s claim. In the end, in order to have a case in chief, the plaintiffs tendered nearly the whole of the affidavit of the first defendant Mr Williams and the documents exhibited thereto (Exhibits B and C respectively).
14 Clause 3.6 of the joint venture agreement provided as follows:
“3.6 Upon completion of the sale of each lot, and after payment of agent’s commission and legal costs and disbursements relevant to the sale, the proceeds of the sale shall be used as follows:
A. in reduction of development borrowings from the National Australia Bank;
B. When such borrowings have been repaid then in reduction of principal and interest (principal to be repaid first) on advances made by the first party under clause 3.2.1.
C. (i) When moneys owing under A and B have been repaid then in payment to the second party of all moneys due to each lot already settled (i.e $50,000.00 as referred to in clause 3.5 on each lot settled); when outstanding amounts have been paid then $50,000.00 per lot settled;
(iii) balance as to 45% to the first party and 55% to the second party (less any moneys owing under clause 3.3 to be paid out of the second party’s share to the first party)”.(ii) payment of any moneys owing on development costs;
15 Clause 3.7 of the joint venture agreement provided as follows:
“3.7 Without limiting or detracting from the order of payments set out in clause 3.6 hereof any profit or loss arising out of this joint venture shall be shared as to 45% to the first party and 55% to the second party.”
16 Mr Kasep of counsel appeared for the defendants. He submitted that the plaintiff’s claim was statute barred. In this respect the defendant pleaded s 14(1)(a) Limitation Act 1969 (NSW) in paragraph 5 of its defence. Section 14(1)(a) provides as follows:
“ 14 General
(a) a cause of action founded on contract (including quasi contract) not being a cause of action founded on a deed.”(1) An action on any of the following causes of action is not maintainable if brought after the expiration of a limitation period of six years running from the date on which the cause of action first accrues to the plaintiff or to a person through whom the plaintiff claims:
17 The Joint Venture Agreement was clearly not a deed . In this respect Mr Kasep submitted that, based on evidence that settlement of the last lot occurred on 8 February 1999, insofar as the plaintiff’s claim in contract against the defendant was made in reliance on and asserted a breach of clause 3.6C(iii), it was clearly statute barred by 31 December 2005 at the latest, that being at least six years after any moneys were due to be paid to the plaintiff on the sale of the last lot in the subdivision.
18 Since the statement of claim was filed on 15 November 2006 Mr Kasep’s submission is clearly correct and it is accepted by the Court.
19 Mr Evatt and Mr Rollinson appeared for the Plaintiff. As a result of the Court’s rejection of Mr Ross’s evidence referred to above they were driven to rely on Mr William’s affidavit evidence which, as I said earlier, was tendered by the plaintiff in its case in chief. Mr Williams also gave oral evidence. When he gave such evidence, Mr Williams impressed me as an honest man who gave his evidence truthfully. I therefore accept it.
20 Mr Williams said that he and Mrs Williams purchased the land at Blaxland in 1977 and lodged a development application for it in April 1995 with the Blue Mountains City Council. The application was to subdivide the land into twenty two lots and construct dwellings on each lot. The development in this application was referred to as Stage 1. Although the council initially refused the application the defendants took the matter to the Land and Environment Court which allowed their appeal and granted consent for the development.
21 Mr Williams said that the Joint Venture Agreement dealt with Stage 1 only. After it was signed, the “works”, as defined, began on Stage 1. These works were completed on 8 February 1999 when the sale of the last of the 22 lots occurred. The last sale is recorded in the account transactions document at page 62 of Exhibit C.
22 There are further account transactions recorded in the document at p. 63 of Exhibit C. This is an MYOB document prepared by Mr Williams which discloses that on 5 April 2001 payments were made to Sydney Water and CLM Excavations in the respective amounts of $33,002.50 and $23,101.12 for work done by those contractors in relation to the construction of a water pump station on the development site. Mr Williams said the work was completed in 1999 but neither contractor got around to sending an invoice to the joint venture parties until 5 April 2001. Up until then, although Mr Williams said he was aware of what the amount of the invoice was likely to be (because he had seen quotations), he did not know the actual amount owed by the joint venturers to Sydney Water and CLM Excavations until the invoices were delivered in April 2001.
23 Given that the joint venturers incurred the expenditure in April 2001 referred to above, the Court has to consider whether the plaintiff’s claim against the defendants said to arise out of a breach of clause 3.7 of the Joint Venture Agreement could be statute barred.
24 The final determination of the profit or loss arising out of the joint venture could not have occurred prior to 5 April 2001. Neither could the distribution of net profits or adjustment of losses envisaged under Clause 2.2 have occurred, either. In this respect, clause 3.4 of the Joint Venture Agreement provided that all costs and expenditure had to be taken into account in calculating the profit or loss of the joint venture. The earliest such calculation could have occurred therefore was 5 April 2001. Since the plaintiff filed its statement of claim within six years of that date the plaintiff’s claim in respect of a breach of clause 3.7 is therefore not statute barred.
25 Under clause 3.4 the plaintiff had an obligation to keep proper records of all costs and expenditure associated with the joint venture. I am satisfied on the basis of Mr William’s evidence that the plaintiff did not do that. As Mr Williams makes clear in his affidavit, Exhibit B, he went to some trouble to try to obtain source documents from the plaintiff in relation to contractor payments which it had made and to date these have not been provided. The inference the Court draws is that the plaintiff’s records are in disarray. Without being critical of the executors of Mr Heap’s estate, most likely this is connected with his unfortunate illness and death. The Court therefore concludes that the plaintiff is in breach of its obligation to keep proper records of all costs and expenditure associated with the Joint Venture Agreement. In this respect, it is a little difficult to see how the defendants could therefore be in breach of clause 3.7. In any event, the plaintiff bears the onus of establishing a breach of clause 3.7 and has not discharged the onus.
26 To discharge the onus, counsel for the plaintiff relied on Mr Williams’ evidence. However, at its highest, Mr William’s evidence in Exhibit B is only a commentary on various components of schedules which were prepared on behalf of the plaintiff. In this respect, although counsel for the plaintiff relied on what Mr Williams said in paragraph 64 of Exhibit B in terms of his calculation of the plaintiff’s profit share in an amount of $177,066.31, Mr Williams did not say in his evidence that this amount was still owing to the plaintiff nor did he make any admission to that effect.
27 Attached as schedule A to Mr Williams’ affidavit (Exhibit B) was a table showing moneys paid by the plaintiff pursuant to clause 3.3 of the Joint Venture Agreement. Counsel for the plaintiff seized on the amount of $41,190.45 shown in Schedule A and asked Mr Williams if that amount had been paid to the plaintiff. Mr Williams said it had not been paid because the plaintiff had never made available proper records and there had never been any final profit and loss accounts prepared for the joint venture, notwithstanding his efforts to bring this about. I am satisfied his efforts were fruitless because of the plaintiff’s failure to keep accurate records. Mr Williams said that he had offered to pay the plaintiff $41,190.31 but the plaintiff had rejected it. Neither counsel objected to this evidence. The court infers that it was no more than an offer of settlement made by the defendants to the plaintiff which the plaintiff rejected. Although at one point in his evidence in chief when being examined by Mr Evatt Mr Williams said the amount of $41,190.31 was owing he then said in cross examination there was no certainty that in fact the defendants owed this amount to the plaintiff and his calculation was at best a guess and could be wrong. In any event no demand had ever been made by the plaintiff on the defendants for payment of this amount. I am therefore not satisfied that it is owed to the plaintiff. In addition, the calculation of the amount of $41,190.31 was one of a number of interest calculations which Mr Williams had made concerning the defendants’ obligation to pay the plaintiff interest on loan facilities. That obligation was governed by Clause 3.3 of the Joint Venture Agreement. No claim was made by the plaintiff against the defendants arising out of a breach of clause 3.3. Had such a claim been made, most likely it would have been statute barred.
28 Counsel for the plaintiff also sought to rely on the letter written by Mr Williams to Mr Heap dated 8 August 2001 (Exhibit E, Annexure ‘A’) as evidence that money was owed by the defendants to the plaintiff. The letter shows nothing more than, first, an attempt on the part of Mr Williams to sort out various items of income and expenditure. Secondly, there are certain references in the letter to Stage 2 of the development. Mr Williams’ evidence was that Stage 2 had nothing to do with “the works” as defined in the Joint Venture Agreement. Notwithstanding, because of the financial assistance he and Mrs Williams had received from Mr Heap, Mr Williams said he was contemplating giving Mr Heap a share of some of the profit from Stage 2 but the matter did not progress due to Mr Heap’s ill-health and untimely death. In those circumstances, there is nothing in the letter of 8 August 2001 which the plaintiff can rely on to support its cause of action.
29 The plaintiff’s case therefore fails. The Court’s orders are:
1. Verdict and judgment for the defendants.
2. Direct the exhibits be returned.
Costs should follow the event on the ordinary basis but I will entertain submissions if either party wishes to make a submission that a different order should be made.
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