Kinney v Acadia Bay Pty Ltd
[2004] WASC 34
KINNEY -v- ACADIA BAY PTY LTD & ORS [2004] WASC 34
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2004] WASC 34 | |
| Case No: | CIV:2561/2003 | 25 FEBRUARY 2004 | |
| Coram: | ROBERTS-SMITH J | 25/02/04 | |
| 8 | Judgment Part: | 1 of 1 | |
| Result: | Application for interlocutory injunction granted | ||
| B | |||
| PDF Version |
| Parties: | BEVERLEY ANN KINNEY ACADIA BAY PTY LTD GEMBROOKK PTY LTD (ACN 008 870 291) CHALKFARM PTY LTD (ACN 009 212 088) PLUMBEACH PTY LTD (ACN 009 175 179) DAKIN NOMINEES PTY LTD (ACN 008 816 297) ARTSHEEN PTY LTD (ACN 009 120 521) NEW BROOME PTY LTD (ACN 009 212 640) BARRINGTON PARTNERS (A FIRM) |
Catchwords: | Practice Interlocutory injunction Partnership Deed of dissolution Valuation of partners' entitlements Valuation to be "final and binding" Method of valuation disputed Whether open to challenge Whether interlocutory injunction to prevent publication of valuation lies |
Legislation: | Nil |
Case References: | Legal and General Life of Australia Ltd v A. Hudson Pty Ltd (1985) NSWLR 314 Channel Tunnel Group Ltd v Balfour Beatty [1993] 1 All ER 664 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
ACADIA BAY PTY LTD
GEMBROOKK PTY LTD (ACN 008 870 291)
CHALKFARM PTY LTD (ACN 009 212 088)
PLUMBEACH PTY LTD (ACN 009 175 179)
DAKIN NOMINEES PTY LTD (ACN 008 816 297)
ARTSHEEN PTY LTD (ACN 009 120 521)
NEW BROOME PTY LTD (ACN 009 212 640)
First Defendants
BARRINGTON PARTNERS (A FIRM)
Second Defendant
Catchwords:
Practice - Interlocutory injunction - Partnership - Deed of dissolution - Valuation of partners' entitlements - Valuation to be "final and binding" - Method of valuation disputed - Whether open to challenge - Whether interlocutory injunction to prevent publication of valuation lies
(Page 2)
Legislation:
Nil
Result:
Application for interlocutory injunction granted
Category: B
Representation:
Counsel:
Plaintiff : Mr R J Nash
First Defendants : Mr D J Martino
Second Defendant : Mr P C Blackman
Solicitors:
Plaintiff : Nash Clavey
First Defendants : Allens Arthur Robinson
Second Defendant : Tottle Partners
Case(s) referred to in judgment(s):
Legal and General Life of Australia Ltd v A. Hudson Pty Ltd (1985) NSWLR 314
Case(s) also cited:
Channel Tunnel Group Ltd v Balfour Beatty [1993] 1 All ER 664
(Page 3)
1 ROBERTS-SMITH J: By originating summons filed on 19 December 2003, the plaintiff Beverly Ann Kinney claims a number of declarations as to the proper construction of cl 19 of a partnership document described as a Blue Seas Pearling Co Deed of Partnership ("the Partnership Deed"). That clause relates to the manner in which the assets of the partnership are to be valued for the purposes of identifying that amount or the entitlements generally of a retiring partner. It is not for present purposes necessary to detail either the provisions of that clause nor the different interpretations which have been canvassed or are intended to be canvassed.
2 The present application is an application for an interlocutory injunction by the plaintiff's chamber summons dated 19 February 2004. The injunction sought is that until judgment, the second defendants be restrained, whether by themselves, their servants, agents or otherwise, from completing or publishing a valuation pursuant to cl 19.2(b) of the deed of partnership.
3 The chamber summons is supported by the affidavit of Mr Nash sworn 19 February 2004 and he also relies upon his own affidavit sworn 3 February 2004 and the affidavit of the plaintiff sworn in support of the originating summons on 18 December 2003.
4 It is necessary to mention that there is also on foot a chamber summons for orders to permanently stay the proceedings, that having been issued on 16 January this year and the hearing of which has been adjourned to a special appointment on 15 March 2004.
5 The Partnership Deed contains an arbitration provision in cl 17 which stipulates that:
"All disputes which arise in relation to the interpretation of this deed or to any breach of the partners' covenants or otherwise relating to the partnership shall be referred to a single arbitrator in accordance with the provisions of the Commercial Arbitration Act 1985, and the arbitrator will have full power to dissolve the partnership if he thinks fit."
6 As I have mentioned, cl 19 deals with the dissolution of the partnership which includes notice being given by one partner of a desire to retire, the clause enabling the remaining partners to continue in the partnership.
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7 Clause 19.1 sets out the entitlements in broad terms of the retiring partner. Clause 19.2 provides that the value of a retiring partner's share is to be a sum mutually agreed upon between the continuing partners and the retiring partners or, failing agreement, a sum determined in the way then set out in that clause, which concludes with the phrase:
"The value determined by the partnership's accountants as at the date of the event whose determination will be binding and final and the provisions of clause 17 will not apply to any purported dispute as to valuation".
8 There are then further provisions in cl 19 going to the calculation of the partner's interests and payments thereof.
9 The matter has been on foot for some time for reasons which are not particularly before me. The accountants (the second defendant) published a draft report on 21 November 2003 and that is apparently what has given rise to the dispute by the applicant in particular about the manner in which or the methodology by which those accountants have proceeded to perform their valuation of the partnership assets and finances. It is anticipated that the final report will be published within the next week or so.
10 Mr Nash for the applicant says that creates a substantial degree of urgency so far as his client is concerned because once the valuation is published, it will, by the operation of cl 19, at least arguably become final and binding upon the parties, even if his client's contention that the wrong methodology has been used is correct. His submission accordingly is that his client is entitled to apply for the declaration sought in the substantive proceedings prior to the publication of the valuation to ensure that it is prepared ultimately in accordance with the Partnership Deed.
11 In substance, therefore, his position as he puts it is that if the second defendants were permitted to publish the valuation, then the plaintiff would have lost the rights she would otherwise have had to obtain a declaration from this court which would then have guided and indeed confined the method of the valuation.
12 Mr Martino for the first defendants says on the other hand that the application is misconceived and that is principally because the law is that when parties agree that an accountant's or valuer's determination is to be final and binding, then they have agreed that their only remedy, (absent fraud or collusion), is for damages for negligence as against the valuer if the valuer gets it wrong.
(Page 5)
13 Mr Nash's submission is that there is arguably only one period in which the applicant has an opportunity to seek to ensure that the valuation is conducted in accordance with what his client contends is the proper methodology required by the partnership deed and that is, as he says, arguably prior to the publication of the valuation.
14 The first consideration to which I turn my mind is the question whether damages would be an adequate remedy. It seems to me on the face of it that damages would not be an adequate remedy if the interlocutory relief sought were not granted. I say that because it is the amount which is to be paid to the plaintiff which is in dispute and which would be determined, on the face of it at least, by the valuation.
15 The plaintiff's position following publication of the valuation, and presumably payment out in accordance with it, would have to be reliant upon the obtaining of a further valuation undertaken in accordance with what the plaintiff would say was the correct methodology. There would be obvious difficulties in the way of that.
16 So far as the balance of convenience is concerned, again as I apprehend it, I would see that as going in favour of the applicant. The matter has been ongoing for some time and although for that very reason it is obviously desirable to reach a degree of finality as soon as reasonably possible, it seems to me that the plaintiff would suffer greater prejudice were the injunction not to be granted than the defendants and in particular the first defendants would suffer if it were to be granted.
17 The question I think really falls to be determined on the issue of whether or not there is a serious question to be tried and this I think in turn falls to be examined at two levels. The first is as to the dispute relating to methodology. There is enough in the material before me to indicate that there is and has been an ongoing dispute of a substantial nature between the parties for some little time as to how the valuation ought properly to be conducted in accordance with cl 19. In that respect, it seems to me from what I have seen of the materials that there is room for argument on both sides and of course it is a significant issue to the parties because it goes to the determination of the plaintiff's entitlements on dissolution of the partnership. In that respect, therefore, I am of the view that there is a serious issue to be tried.
18 The second level is a threshold issue which is whether or not the matter ought to be, or is, capable of challenge at all. I am mindful that in dealing with this issue on this application, I am not making a final
(Page 6)
- determination of it but am only making a determination for the purposes of the particular application. I say that particularly because I appreciate that the defendants' application for a permanent stay has yet to be argued.
19 The authorities in relation to the effect of valuation clauses in which the decision of the valuer is expressed to be final and binding were canvassed by McHugh JA in Legal and General Life of Australia Ltd v A. Hudson Pty Ltd (1985) NSWLR 314 and particularly up to and at page 335. His Honour in the Court of Appeal was considering a lease in which there was a valuation clause which provided that the decision of the valuer was final and binding. McHugh JA reached the conclusion that, in short, where the contract provides that the decision of the valuer is final and binding on the parties, a mistake as to the process of valuation, as distinct from a mistake of the kind which shows that the valuation is not in accordance with the contract, is not sufficient to avoid the valuation. As his Honour pointed out at 335:
"It will be difficult, and usually impossible, however, to imply a term that a valuation can be set aside on the ground of the valuer's mistake or because the valuation is unreasonable. The terms of the contract usually provide, as the lease in the present case does, that the decision of the valuer is 'final and binding on the parties'. By referring the decision to a valuer, the parties agreed to accept his honest and impartial decision as to the appropriate amount of the valuation. They rely on his skill and judgment and agree to be bound by his decision. It is now settled that an action for damages for negligence will lie against a valuer to whom the parties have referred the question of the valuation if one of them suffers loss as the result of his negligent valuation: Sutcliffe v Thackrah [1974] AC 727; Arenson v Arenson [1977] AC 405. But as between the parties to the main agreement the valuation can stand even though it was made negligently. While mistake or error on the part of the valuer is not by itself sufficient to invalidate the decision or the certificate of valuation, nevertheless the mistake may be of a kind which shows that the valuation is not in accordance with the contract. A mistake concerning the identity of the premises to be valued could seldom, if ever, comply with the terms of the agreement between the parties. But a valuation which is the result of the mistaken application of the principles of valuation may still be made in accordance with the terms of the agreement. In each case the critical question must always be: Was the valuation made in accordance with the terms of a
(Page 7)
- contract? If it is, it is nothing to the point that the valuation may have proceeded on the basis of error or that it constitutes a gross over or under value. Nor is it relevant that the valuer has taken into consideration matters which he should not have taken into account or has failed to take into account matters which he should have taken into account. The question is not whether there is error in the discretionary judgment of the valuer. It is whether the valuation complies with the terms of the contract."
20 The observations made by his Honour in that case clearly distinguish between a situation in which the error or mistake or difference is said on the one hand to flow from a mistake in the valuer's process of valuation in accordance with the contract, as against a situation in which the approach of the valuer is said not to be in accordance with the contractual requirements at all.
21 In the first situation there is no remedy as between the parties, although there may be a remedy as against the valuer. In the latter case, it seems to me, there would be a remedy in that the parties concerned would be entitled to seek a declaration that the valuation was not conducted in accordance with the requirements of the contract itself and was accordingly invalid and not binding.
22 The question therefore in the present case becomes whether or not there is a serious question to be tried in this respect. I accept the proposition advanced by Mr Martino on behalf of the second defendants that if the position were that the plaintiff could not seek a remedy as against the first defendants after publication of the valuation, then the very same reasons of public policy which have led the courts to that conclusion in terms of general principle must necessarily apply by parity of reasoning to the situation prior to the publication of the valuation.
23 I am, however, of the view that the sort of error or mistake which the plaintiff seeks to identify or have identified for the purposes of the valuation and to which she seeks to have the valuer adhere involves matters which go to the question whether or not the valuation would be in accordance with the requirements of the contract.
24 That being so, it seems to me a significant point of departure from Legal and General and in that situation there is in my view a serious issue to be tried in that regard.
25 I would accordingly grant the application for an interlocutory injunction but I would do so, having regard to the preparatory
(Page 8)
- observations I made, only until 15 March and the hearing of the special appointment.
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