Keith Smith Pty Ltd v Stephen Hinchy Pty Ltd; Keith Owen Smith and Glenda Kay Smith as Trustees for the Smith Family Trust v John Anthony Prior and Karin Jacqueline Prior as Trustees for the Prior Unit Trust; Keith...
[2002] QSC 203
•19 July 2002
SUPREME COURT OF QUEENSLAND
CITATION:
Keith Smith Pty Ltd v Stephen Hinchy Pty Ltd & Ors; Keith Owen Smith and Glenda Kay Smith as Trustees for the Smith Family Trust v John Anthony Prior and Karin Jacqueline Prior as Trustees for the Prior Unit Trust & Ors; Keith Owen Smith and Glenda Kay Smith as Trustees for the Smith Family Trust v 7 Day Family Health Centres Pty Ltd as Trustee of the Telform Unit Trust [2002] QSC 203
PARTIES:
KEITH SMITH PTY LTD ACN 010 648 441
(applicant)
v
STEPHEN HINCHY PTY LTD ACN 010 385 127
(first respondent)
TJH MEDICAL PTY LTD ACN 010 825 537
(second respondent)
JOHN PRIOR PTY LTD ACN 010 949 343
(third respondent)
KEITH OWEN SMITH and GLENDA KAY SMITH AS TRUSTEES FOR THE SMITH FAMILY TRUST
(applicant)
v
JOHN ANTHONY PRIOR and KARIN JACQUELINE PRIOR AS TRUSTEES FOR THE PRIOR UNIT TRUST
(first respondent)
CENTREPOINT SURGICAL SUPPLIES PTY LTD
ACN 010 441 773 AS TRUSTEE FOR THE HINCHY PROPERTY TRUST
(second respondent)
TIMOTHY JOHN HACKETT and JAYNE SHIRLEY HACKETT AS TRUSTEES FOR THE TJH UNIT TRUST
(third respondent)
KEITH OWEN SMITH and GLENDA KAY SMITH AS TRUSTEES FOR THE SMITH FAMILY TRUST
(applicant)
v
7 DAY FAMILY HEALTH CENTRES PTY LTD
ACN 072 876 727 AS TRUSTEE OF THE TALFORM UNIT TRUST
(respondent)FILE NO/S:
SC No 6091 of 2002
SC No 6092 of 2002
SC No 6093 of 2002DIVISION:
Trial
PROCEEDING:
Applications
ORIGINATING COURT:
Supreme Court at Brisbane
DELIVERED ON:
19 July 2002
DELIVERED AT:
Brisbane
HEARING DATE:
12 July 2002
JUDGE:
White J
ORDER:
1. In each application the application be dismissed.
2. In each application the applicant pay the respondent’s(s’) costs to be assessed on the standard basis.
CATCHWORDS:
PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PRACTICE UNDER RULES OF COURT – OTHER MATTERS – leave to withdraw application – whether appropriate to dismiss application when it is made unnecessarily
PROCEDURE – COSTS – GENERAL RULE – COSTS FOLLOW THE EVENT – COSTS OF WHOLE ACTION – GENERALLY – where applicant seeks leave to withdraw application – consideration of whether applications were likely to succeed – applicant liable for respondent’s costs on standard basis
Uniform Civil Procedure Rules 1999, r 304(2)
Masters v Cameron (1954) 91 CLR 353,COUNSEL:
SC No 6091 of 2002
Mr G Allen for the applicant, Keith Smith Pty Ltd (ACN 010 648 441)
Mr PJ Favell for the second and third respondents, TJH Medical Pty Ltd (ACN 010 825 537) and John Prior Pty Ltd (ACN 010 949 343)
Mr P Hackett for the first respondent, Stephen Hinchy Pty Ltd (ACN 010 385 127)
SC No 6092 of 2002
Mr G Allen for the applicant, Keith Owen Smith and Glenda Kay Smith as Trustees for the Smith Family Trust
Mr PJ Favell for the first and third respondents, John Anthony Prior and Karin Jacqueline Prior as trustees for the Prior Unit Trust and Timothy John Hackett and Jayne Shirley Hackett as Trustees for the TJH Unit Trust
Mr P Hackett for the second respondent, Centrepoint Surgical Supplies Pty Ltd (ACN 010 441 773) as Trustee for the Hinchy Property Trust
SC No 6093 of 2002
Mr G Allen for the applicant, Keith Owen Smith and Glenda Kay Smith as Trustees for the Smith Family Trust
Mr PJ Favell for the respondent, 7 Day Family Health Centres Pty Ltd (ACN 072 876 727) as Trustee of the Talform Unit TrustSOLICITORS:
SC No 6091, 6092 and 6093 of 2002
Anderssen & Co Solicitors for the applicants, Keith Smith Pty Ltd (ACN 010 648 441), Keith Owen Smith and Glenda Kay Smith as Trustees for the Smith Family Trust, Keith Owen Smith and Glenda Kay Smith as Trustees for the Smith Family Trust
Hogan Besley Boyd for the respondents, TJH Medical Pty Ltd (ACN 010 825 537), John Prior Pty Ltd (ACN 010 949 343), John Prior and Karin Jacqueline Prior as Trustees for the Prior Unit Trust, Timothy John Hackett and Jayne Shirley Hackett as Trustees for the TJH Unit Trust, 7 Day Family Health Centres Pty Ltd (ACN 072 876 727) as Trustee of the Talform Unit Trust
SC No 6091 and 6092 of 2002
Drakos and Co Solicitors for the first and second respondents, Stephen Hinchy Pty Ltd (ACN 010 385 127), Centrepoint Surgical Supplies Pty Ltd (ACN 010 441 773) as Trustee for the Hinchy Property Trust
WHITE J: There are three applications before the Court. After some hours of discussions after the applications had been called on for hearing, Mr G Allen, who appeared for the applicants, sought leave to withdraw the applications pursuant to r 304(2) of the Uniform Civil Procedure Rules 1999 with the respondents to each application being ordered to pay the applicants’ costs. The respondents, represented by Mr P Favell and Mr P Hackett, opposed leave and submitted that the applications should be dismissed because they were misconceived and that the applicants should pay the respondents’ costs.
The parties to these applications are medical practitioners, their spouses and trusts and companies associated with them.
Until 12 May 2002, Keith Smith conducted a medical practice through his company, Keith Smith Pty Ltd, with three other medical practitioners, Stephen Hinchy through Stephen Hinchy Pty Ltd, Timothy John Hackett through TJH Medical Pty Ltd and John Prior through John Prior Pty Ltd. These companies were members of the Browns Plains Medical Group which constituted the partnership. It was the subject of a partnership deed, the most recent of which was dated 17 June 1991.
The partnership was provided with services by the Talform Unit Trust which was formed on 5 April 1989. The Trust had 100 units which were held equally by Barbara Hinchy, the Hackett Family Trust, Karin Prior and the Smith Family Trust. The trustee of that unit trust is 7 Day Family Health Centres Pty Ltd. The services which were provided by the unit trust to the partnership were governed by a service agreement.
The partnership conducted its business from two medical surgeries which were owned equally by unit trusts related to each of the medical practitioners, the Smith Unit Trust, the Hinchy Property Trust, the Prior Unit Trust and the TJH Unit Trust. The premises where the businesses were conducted were rented to the 7 Day Family Health Centres Pty Ltd as Trustee of the Talform Unit Trust. The Talform Unit Trust paid rent to each of the owners and in turn charged the partnership for use of the premises.
On 5 April 2002, a notice pursuant to s 35 of the Partnership Act of intention to dissolve the partnership was served upon the solicitors for the applicants. The date for the dissolution of the partnership was extended until 12 May 2002 to enable a mediation to take place.
On 30 April 2002, the medical practitioners, with the exception of Dr Hinchy who was undergoing medical treatment, participated in a mediation with the assistance of their solicitors. At the conclusion of the mediation heads of agreement were signed on behalf of the Smith parties, the Hackett parties and the Prior parties. The agreement was subject to ratification by the Hinchy parties and that has subsequently occurred.
It is unnecessary to address the issues between the parties which led to the dissolution of the partnership.
The heads of agreement incorporated some paragraphs in a letter of offer dated 18 April 2002 from the applicants’ solicitors, without setting them out but with, in some cases, variations. The document stated “These heads of agreement are made for the purpose of resolving a dispute between the partners and associated entities involved in the Browns Plains Medical Group.” Relevantly it provided that:
· The partnership be dissolved on 12 May 2001 and the parties associated with Keith Smith vacate the premises that day.
· The remaining partners to pay to Keith Smith the sum of $50,000 which included any money due to Keith Smith Pty Ltd by way of partnership funds or capital or current account. If there was a shortfall neither Keith Smith nor his company were to be liable.
· Agreement to certain terms in the letter of 18 April 2002, namely,
- Arrangements for determining the valuation of the land and fixed assets set out in para 1 with agreed variations.
- Matters relating to the Talform Unit Trust set out in paras 2 – 5 subject to variations including that the unit holders were to contribute to the liabilities first and the partnership accountants were to be instructed to prepare a valuation of the Keith Smith unit in the unit trust based on market value.
- Other sundry provisions in para 8 except (d) relating to taking patient records, giving staff a choice to leave, the release of guarantees and notice to his patients of Keith Smith’s new address.
· A deed to be entered into by the parties “which deed shall contain all the final terms and mutual release of obligation to the other parties in respect of securities and any claims of any nature which one party may have against the other.”
· The restraint clause in the partnership agreement was not to apply.
· Each party to pay that party’s own costs.
· The parties to take necessary steps for the assignment of insurance policies.
In the extensive correspondence which followed the execution of the heads of agreement the Smith interests, through their solicitors, have strenuously maintained that the heads of agreement was and is a binding agreement. Nowhere in the respondents’ correspondence is there a similar clear assertion, but neither was the agreement repudiated. Once the accountants started examining the records of the practice to give effect to the heads of agreement there appeared to be less value than the parties had expected. By letter dated 22 May 2002, the Smith interests’ solicitors required commitment to the heads of agreement and the execution of certain documents or at least amendments consistent with the terms of the agreement. Legal proceedings were mentioned. The response from the respondents’ solicitors was not repudiatory but neither was there a clear commitment to the heads of agreement. But there was a commitment to resolution.
The three applications were filed and served on 3 July. They seek a declaration about the dissolution of the partnership and the appointment of a receiver and manager in Application No 6091; the appointment of statutory trustees (a single individual trustee contrary to s 38(3) of the Property Law Act 1974) for the sale of the two parcels of real estate used by the medical practice at Browns Plains and Woodridge in Application No 6092; and the removal of the trustee of the service trust pursuant to s 80(1) of the Trusts Act 1973 and its replacement with Mr David Cranstoun, an accountant, in Application No 6093.
The respondents submit that the heads of agreement fell within the first class of agreement discussed in Masters v Cameron (1954) 91 CLR 353 at 360:
“Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiations shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller and more precise but not different in effect …”
The applicants have not contended to the contrary. Their position is that the respondents’ conduct has been repudiatory.
The respondents contend that the relief sought in the applications is inappropriate in the events which have occurred since the execution of the heads of agreement and that the appropriate course if litigation was to be embarked upon was to seek specific performance of the agreement. It is unnecessary to decide that issue. More relevant is to consider whether the relief sought in the applications was likely to have been granted.
A declaration that the partnership was dissolved is unnecessary because it terminated on 12 May 2002. The partnership accountants have analysed the books and concluded that the partnership has no assets. There is no clear dispute about the accounts. It would be an onerous and unnecessary exercise to take accounts now.
So far as the application for the appointment of statutory trustees for sale is concerned, the Smith interests agreed to sell their interest in the two parcels of land for market value, the determination of which is provided for in the heads of agreement and which is a usual method.
The order sought for the removal of the trustee of the Talform Unit Trust is unnecessary. There is no suggestion that the trustee is acting improperly. The Talform Unit Trust ceased to provide services upon the dissolution of the partnership.
It is unlikely that the relief sought would have been granted because a reasonably satisfactory process was underway to give effect to each of these matters. No doubt the Smith interests were becoming frustrated at the time it was taking to sort out the financial detail and suspicion was abroad that the respondents were looking for a better outcome. Having chosen to bring these applications nothing persuades me that leave to withdraw them ought to be given. They should be dismissed.
The applicants in each of Application No 6091, 6092 and 6093 of 2002 must pay the respondents’ costs of and incidental to each application to be assessed on the standard basis.
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