Maunchest Pty Ltd v Bickford J
[1995] FCA 227
•6 APRIL 1995
CATCHWORDS
CONTRACT - nature of agreement to purchase and develop house property - claim of monetary limit on costs of project for purpose of calculating notional profit not consistent with pleadings and evidence - evidence of witness as to terms of agreement not reliable - agreement as contended for by applicant not consistent with agreement as pleaded by applicant nor with evidence.
TRUSTS - claim for equitable interest in fund in accordance with terms of express trust.
JOINT VENTURE - agreement constituted a joint venture - community of interest in performance of agreement - mutual purpose to develop and sell land jointly owned to achieve a profit to be shared equally - possibility of loss not contemplated - no agreement to share losses - benefit and burden - equity to enforce equitable contribution of one-half of net loss.
Cummings v. Lewis (1993) 41 FCR 559 - Appl.
Maunchest Pty. Limited and Maunchest Consultancy Services Pty. Limited v. John Bickford and Noosa Hub Pty. Limited and Philip Gregory Jefferson
No. NG808 of 1992
Cooper J., Brisbane, 6 April, 1995
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION No. NG808 of 1992
MAUNCHEST PTY. LIMITED
(A.C.N. 002 622 479) and MAUNCHEST
CONSULTANCY SERVICES PTY. LIMITED
(A.C.N. 064 333 419)
Applicants
JOHN BICKFORD
First Respondent
NOOSA HUB PTY. LIMITED (A.C.N. 010 204 789)
(In Liquidation) and PHILIP GREGORY JEFFERSON
Second Respondents
JUDGE MAKING ORDER: Cooper J.
WHERE MADE: Brisbane
DATE OF ORDER: 6 April, 1995
MINUTES OF ORDER
THE COURT ORDERS THAT:
The application of Maunchest Pty. Ltd. (In Liquidation) and Maunchest Consultancy Services Pty. Ltd. be dismissed.
The applicants pay to the respondent Noosa Hub Pty. Limited (In Liquidation) its costs of and incidental to the application fixed in the sum of FIVE THOUSAND DOLLARS ($5,000.00).
The FIVE THOUSAND DOLLARS ($5,000.00) paid into court by way of security for costs be paid to Messrs. Bickfords, solicitors for Noosa Hub Pty. Limited (In Liquidation) in discharge of the order for costs.
The accretions on the said sum, if any, be paid to the depositor of said sum.
The parties have liberty to apply.
THE COURT DECLARES THAT:
Maunchest Pty. Ltd. (In Liquidation) was a joint venturer with Noosa Hub Pty. Ltd. (In Liquidation) in the development and sale of a house property at 10 Partridge Street, Torquay, Queensland.
Maunchest Pty. Ltd. (In Liquidation) is obliged to contribute the sum of $3,276.14 to the loss incurred by Noosa Hub Pty. Ltd. (In Liquidation) for the benefit of the joint venture and upon the payment of the loss by Noosa Hub Pty. Ltd. (In Liquidation) it shall be entitled to recover from Maunchest Pty. Ltd. (In Liquidation) the sum of $3,276.14 or prove in the winding up of Maunchest Pty. Ltd. (In Liquidation) for the said amount.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION No. NG808 of 1992
MAUNCHEST PTY. LIMITED
(A.C.N. 002 622 479) and MAUNCHEST
CONSULTANCY SERVICES PTY. LIMITED
(A.C.N. 064 333 419)
Applicants
JOHN BICKFORD
First Respondent
NOOSA HUB PTY. LIMITED (A.C.N. 010 204 789)
(In Liquidation) and PHILIP GREGORY JEFFERSON
Second Respondents
CORAM: Cooper J.
PLACE: Brisbane
DATE: 6 April, 1995
REASONS FOR JUDGMENT
The original applicant was Maunchest Pty. Ltd. ("Maunchest"). On 16 May, 1994 Maunchest was ordered to be wound up by the Supreme Court of Queensland. At the time of the filing of the original application, Maunchest was the trustee of the Simpson No. 1 Family Trust ("the Simpson Trust"), which trust was created by Deed of Settlement dated 6 July, 1983.
On 19 April, 1994 the original appointer under the Simpson Trust deed, Mr. John Kemp, resigned the office of appointer under the deed and nominated Mr. Ventry Gray as his successor. On 28 April, 1994 Mr. Gray, in his capacity as appointer, removed Maunchest as trustee of the Simpson Trust and appointed Maunchest Consultancy Services Pty. Limited ("Maunchest Consultancy") as trustee of the said trust. Maunchest, by deed of assignment dated and executed 5 May, 1994, transferred to
Maunchest Consultancy "as incoming trustee of the Simpson Trust all its right title and interest in and to the monies payable to Maunchest as outgoing trustee of the Simpson Trust by Noosa Hub and the right to assume the conduct and control of the Federal Court proceedings to enforce payment thereby in its own name as Applicant in its capacity as trustee of the Simpson Trust."
On 19 May, 1994 Maunchest Consultancy sought and obtained leave to be joined as an applicant in the within proceedings and to file a second amended statement of claim.
By its original application filed 30 October, 1992 Maunchest sought :-
"1.An order that the second respondent account to the applicant for the net proceeds of sale of the property situate at and known as 10 Partridge Street, Torquay referred to in paragraph 2 of the Statement of Claim.
2.An order that the second respondent pay to the applicant a sum equal to one half of such net proceeds of sale.
3.Damages.
4.Interest from the date on which the second respondent received into his hands the net proceeds of sale of the said property until judgment at 15 per centum per annum.
5.Costs."
A claim against the first respondent, the solicitor for the second respondent, was struck out by Drummond J. on 7 July, 1993.
The second respondent referred to in the original application was Mr.
Philip Jefferson, the liquidator of Noosa Hub Pty. Limited ("Noosa Hub"). By its original statement of claim filed 30 October, 1992, Maunchest pleaded :-2.On or about 7 September 1990 Noosa Hub Pty Limited ("Noosa Hub") for valuable consideration contracted to acquire and hold and did acquire and did thereafter hold legal title to one undivided one half share in the fee simple estate in the property situate at and known as 10 Partridge Street, Torquay ("the property") upon trust for Maunchest.
.....
4.In or about August 1992, the property was sold and the net proceeds of sale were paid into the hands of Jefferson as liquidator of Noosa Hub. Jefferson still retains in his hands all or part of the net proceeds of the sale of the property.
Particulars
On or about 5 August 1992 the property was sold by the mortgagee of the property exercising power of sale under the mortgage. The amount of the net proceeds of sale and the date on which such net proceeds were paid into the hands of Jefferson are all unknown to Maunchest but particulars thereof will be provided if necessary after discovery.
5.On or before 20 August 1992 Jefferson knew of the trust referred to in paragraph 2.
.....
7.Maunchest has demanded of Jefferson that Jefferson account to Maunchest for the gross proceeds of sale of the property and pay to Maunchest a sum equal to one half of the net proceeds of sale of the trust property.
Particulars
Letters from Maunchest (G.A. Simpson) to Bickford dated 19 August 1992, 1 September 1992 and 17 September 1992.
.....
11.Alternatively, Jefferson has wilfully failed and refused to account to Maunchest for the gross proceeds of sale of the property and to pay to Maunchest a sum equal to one half of the net proceeds of sale of the property or any part of that sum."
The facsimile transmission of 12 September 1990 referred to in paragraph 2 of the original statement of claim was tendered in part into evidence as Exhibit 7. On its face the facsimile is stated as comprising six sheets; only the first page was tendered as an exhibit. The first page of the fax of 12 September stated :-
"TO:MAUNCHEST PTY LTD DATE: 12 Sept 1990
as Trustee for Simpson
No. 1 Family Trust
ATTENTION: Gavin Simpson
FAX NO:02 908 2036
049 421 463FROM: Pat Brodie
NO. OF PAGES (incl. this one): 6 (six)
IF TRANSMISSION IS FAULTY PLEASE TELEPHONE US IMMEDIATELY
PARTRIDGE STREET LAND
Thank you for transfer of $11000-00 being your share of purchase costs of land at Torquay.
I confirm Noosa Hub Pty Ltd is holding this property on a 50/50 basis for the two family trusts
I have enclosed a copy of the title which is held by our solicitors LESTER & GAYLER 12 Bideford St Torquay
As you are aware I have prepared plans which will be ready for council this week.
Plan as discussed follows:
Regards,
MAUNCHEST PTY LTD DATE: 12 Sept 1990
As Trustee for Simpson
No. 1 Family Trust
ATTENTION: Gavin Simpson
I confirm that the land at 10 Partridge Street, being Lot 20 on R.P. 96661, Torquay purchased in the name of NOOSA HUB PTY LTD in the name of Audax Constructions has been purchased jointly with yourself on a 50/50 basis and as such will not be sold without advising you of the outcome and distribution of nett proceeds on the 50/50 basis.
Yours faithfully,
PATRICK J. BRODIE."
On 19 August, 1992 Maunchest, by Mr. Gavin Simpson, wrote to Mr. Bickford, the solicitor for the liquidator a letter to which was attached a copy of the fax of 12 September, 1990, and a letter from Noosa Hub to Maunchest of 2 August, 1991. The letter of 19 August, 1992 stated in part :-
"I am advised that these documents make it clear beyond argument that from the time the land was acquired Noosa Hub held an equal one half share upon trust for Maunchest (which in turn held it upon trust for the Simpson No. 1 Family Trust). This is why Maunchest paid 50% of outgoings on the land - obviously not what an unsecured creditor, with no interest in the land would do.
Consequently I hereby notify you that if the liquidator persists in refusing to recognise Maunchest's entitlement to 50% of the proceeds of the sale of the land, legal proceedings will be instituted and costs on an indemnity basis will be sought against the liquidator personally on the grounds that this persistent refusal to recognise Maunchest's beneficial entitlement in the face of this evidence is perverse and legally indefensible. (It will be no answer that he is a liquidator, because he has now been given irrefutable documentary evidence and has no basis for continuing to refuse to recognise Maunchest's rights).
See Fountains Selected Meats (Sales) Pty Ltd -vs- International Produce Merchants Pty Ltd (1988) 81ALR397 at 401. For a case where costs were awarded against receivers personally. See Knight -vs- F.T. Special Assets Ltd (1992) 66ALJR 560. There is no difference between receivers and liquidators in this respect.
I also point out that Maunchest is entitled to a one half share in the property free of any mortgage which it did not authorise.
If this means that Maunchest is entitled, as against Noosa Hub, to the whole of the net proceeds of sale (after payment of the unauthorised mortgage debt) then the liquidator and creditors of Noosa Hub are entitled to nothing because Noosa Hub was a Trustee which acted in breach of trust.
Would you please send me a copy of the statement prepared showing the receipt and allocation of the gross proceeds of sale of the land. I point out that as a Trustee guilty of deliberate breach of trust, Noosa Hub is liable to account on the basis of willful [sic] default.
See, Jacobs Law of Trust in Australia, 5th edition page 616 to 617."
The letter from Noosa Hub of 2 August, 1991 included the comment :-
"We will have final costs on Partridge Street next week so will forward that information shortly."
On 25 August, 1992 Mr. Simpson again wrote to the liquidator's solicitors a letter which included :-
"2.My letter dated 19 August 1992 does not constitute ALL the facts matters and circumstances which support Maunchest Pty Limited's claim, but it does constitute the essential documents. The other facts matters and circumstances are:
(a)My oral evidence of telephone conversations with Mr Brodie during which we discussed the purchase of the property in the name of Noosa Hub Pty Limited as trustee as to 50% for Simpson Family Trust interests. These conversations antedated the documents of which I have sent you copies. These documents accurately reflect what Mr Brodie and I agreed.
(b)accounting records of payments I made to meet 50% of the outgoings on the property attributable to Simpson Family Trust interests in the property. These records will substantiate the fact that I did pay the 50% of the outgoings attributable to the share in the property held by the Simpson Family Trust interests."
On 1 September, 1992 Maunchest by Mr. Simpson, again wrote to the liquidator's solicitors a letter which in part said :-
"1. When I was dealing with Brodie over the purchase of the property at 10 Partridge Street, he spoke to me in terms of having ample financial resources to meet, without difficulty, all the commitments which he undertook as part of our deal. I believe that he did have the financial capacity and we dealt with one another on that basis.
.....
3. Up until now, I have attempted to reply promptly to your correspondence and in particular those deadlines which you insist on incorporating in all your letters. The consequence of my doing so was that
in one respect I may have given you the wrong impression. My arrangement with Brodie was that I would pay $11,000, approximately, for a half-share in the land and I authorised Brodie to use $10,000 which he was holding for me as my contribution to the subsequent outgoings on this property. I paid the $11,000 from Newcastle on 7 September 1990. Brodie would raise the finance to develop the land and meet all the expenses in connection with holding and finance to the property, as well as undertaking the erection of the building (having access to the $10,000 I had provided for that purpose). These outgoings included all rates, any taxes, any continuing insurance premiums and other expenses related to the maintenance of the property, as well as the cost of the finance, to develop the property. I personally, did not thereafter in fact make any recurrent payment of any share of current rates or other expenses associated with the property, payment of all of these was the responsibility of Brodie.
4. The consequence of our arrangement was that when the property was sold, the net proceeds of sale, (after deduction of all monies owing under the mortgage) would then be equally divided between Brodie and the Simpson No 1 Family Trust."
In an affidavit filed 30 October, 1992 in support of the application Mr. Simpson deposed :-
"2.Prior to 7th September 1990, I had known Patrick Brodie of Noosa Hub Pty Limited (`Noosa Hub') for approximately twenty (20) years. On or about 7th September 1990, I [sic] telephone conversation with Brodie to the following effect:-
Brodie:`I have found this site at Torquay. It is a good site. I can get it for $22 000 but I can't afford to buy it by myself at present. We could build a house on it which we could sell at a good profit. Are you interested?'
Simpson:`I will go 50-50 with you. I will sent [sic] you $11 000 as my half share. My interest will be in the name of Maunchest Pty Limited as trustee for the Simpson No.1 Family Trust.'
Brodie:`Good. That is fine by me. Send the money to account 034 136-100460 at Westpac Bank Pialba for the credit of D A Atchison trading as Audax Constructions. I will send you a fax confirming or [sic] arrangements.'
3.I thereupon remitted $11 000 to Brodie by telegraphic transfer that day. Hereto annexed and marked `A' is a copy of facsimile transmission I sent to Ken Walton, the manager of the Westpac Bank
at Newcastle. Hereto annexed and marked `B' is a copy of a facsimile transmission I received from Brodie dated 12th September 1990."
On 25 March, 1993 Noosa Hub Pty. Limited (in liquidation) was joined as a second respondent. On 7 June, 1993 an amended statement of claim was filed which pleaded new paragraphs 2A and 5A :-
"2A.The following were terms of the contract:-
(a)Legal Title to the land would be held by Noosa Hub alone upon trust as to one undivided one-half share therein for Maunchest.
(b)Maunchest would contribute $11,000 towards the original purchase price of the deed and Noosa Hub would contribute the balance.
(c)Following purchase of the property Noosa Hub would at its expense erect a dwelling on the land and from its own resources pay all holding costs, construction costs and financing costs.
(d)The property would be sold as soon as may be after the dwelling was completed.
(e)The net proceeds of the sale of the property allowing for acquisition and selling expenses and principal moneys invested in the property would be divided between Maunchest and Noosa Hub equally.
Particulars
Terms (a) Maunchest's under Term (b) were partly express the balance of Term (b) was implied as a necessary consequence of the express part. Term (c) was express so far as the obligation to erect was concerned and the balance was implied from the express terms and the facts that Maunchest was to have no say in, knowledge of, or any other involvement in, the design, construction, financing or marketing of the property. Terms (d) and (e) were express.
.....
5A.In the premises Noosa Hub and Jefferson are liable to account to
Maunchest for one-half of the net proceeds of sale of the property calculated (with approximate figures) as follows :-
Gross Proceeds of Sale $127,500.00
Less
Legal fees on purchase 375.00
Stamp duty on purchase 270.00
Title Office fees on purchase 72.00
Principal sum borrowed by
Noosa Hub on mortgage 84,500.00
Legal fees on sale of land 400.00
Marketing fee on sale of land 400.00
Agent's commission on sale of
land 3,638.00
89,755.00
Net proceeds of sale $37,845.00
One-half payable to Maunchest (approximately) $18,922.00"
On 7 July, 1993 the proceedings against the liquidator personally were struck out.
By its second amended statement of claim filed by leave on 19 May, 1994, the applicants pleaded in paragraph 2A :-
"2AThe following were terms of the contract:
(a)Legal title to the land would be held by Noosa Hub alone upon trust as to one undivided one-half share therein for Maunchest.
(b)Maunchest would contribute $11,000.00 towards the original purchase price of the land and Noosa Hub would contribute the balance.
(c)Following the purchase of the land Noosa Hub either would itself erect or would permit another enterprise associated with the said P. Brodie to erect (in either case without any
costs to Maunchest) a dwelling on the land and Noosa Hub would out of its own resources pay all holding costs incurred in connection with the ownership of the land. The cost of erection of the dwelling would be borrowed on mortgage of the property and if Noosa Hub itself erected the dwelling, its profit on the construction would be paid out of the monies borrowed on mortgage.
(d)The property would be sold as soon as may be after the erection of the dwelling was completed.
(e)The net proceeds of sale of the property (allowing for acquisition and selling expenses, and the repayment of the principal sum borrowed on mortgage to finance erection of the dwelling) would be divided between Maunchest and Noosa Hub equally.
Particulars
Term (a) was express.
Term (b) was party [sic] express and partly implied as a necessary consequence of the express part.
Term (c) was express insofar as Noosa Hub undertook to erect or procure the erection of a dwelling on the land and the balance was implied from the express terms, and the facts that Noosa Hub or other enterprises associated with the said P. Brodie was or were in the building industry in Torquay and that Maunchest was to have no say in, knowledge of, or any other involvement in the design, construction, or financing of the dwelling or marketing of the property.
Terms (d) and (e) were express."
After pleading the assignment of the monies to Maunchest Consultancy, paragraph 5A is pleaded :-
"5A.In the premises Noosa Hub is liable to account to Maunchest Consultancy Services for one-half of the net proceeds of sale of the property calculated as follows:
Gross proceeds of sale $127,500.00
Less:
Legal fees on purchase $ 375.00
Stamp duty on purchase $ 270.00
Titles Office fees on
purchase$ 72.00
Amounts borrowed on
mortgage$85,000.00
Legal fees on sale $ 1,002.50
Marketing fee on sale $ 400.00
Agent's commission on sale $ 3,637.50 $ 90,757.00
NET PROFIT (50% - $18,372.50 $36,743.00"
In his evidence in chief Mr. Simpson gave the following evidence as to the agreement with Mr. Brodie on behalf of Noosa Hub :-
"Would you tell his Honour what was said on that occasion, as best you can recall, and taking it steadily - as best you can the words that were uttered by you and by Mr Brodie concerning the property at Torquay which you know is the subject of the claim in these proceedings?---Your Honour, on the - in an evening on or about that date I received a telephone call from Pat Brodie which we exchanged the usual pleasantries. He always referred to me as Simpson and I always referred to him as Brodie. In fact, everybody called Brodie Brodie. We talked about family and - and that sort of thing, and then he moved to explain to me why he had called me, and that he had a business proposition to put to me regarding a piece of land that he either had or was securing, or something of that nature - I cannot recall exactly the words - and on which he had a desire to build a house. He had an agency for a company called Force 10 which was a modular housing construction method developed as cyclone proof housing for Queensland. In the course of that conversation Brodie stated to me that it was difficult for him to do this thing by himself and that he would like me to be - become part of it. The essence of that deal was that I would subscribe - or Maunchest Proprietary Limited would subscribe $11,000, being the half value of the land which I understood to be above 18,000 or approximately 22, and that in return Brodie would obtain a mortgage from - I cannot recall exactly, but I think Suncorp - I think - within which bounds of that mortgage he could purchase the frame pack from Force 10, erect the building, complete it entirely, meet mortgage outgoings and costs, and do all of those things; that the total contribution by Maunchest Proprietary Limited was to be $11,000; that Brodie's margins of construction, and I fully expected him to - to have those margins in, and/or profits that he might make upon his men would come from within that $80,000 - in other words, the $80,000 was there for Brodie's facility; that he would manage all things pertaining to it; that I, or Maunchest, or acting on behalf of Maunchest, would have no need to be involved in it, particularly in the distances and things like that. I mean, there was no necessity for me anyway to it, and that we would share in the net proceeds of sale between what it sold for and selling costs, and this $80,000. I
asked Brodie what would it sell for. His response was he estimated $150,000, and that it would also be an advantage to him to have another Force 10 home in the area, as he had the Force 10 agency. And he also had a construction company ability which I understood to be Audax Constructions. Well, I agreed to the proposition and he then asked me to forward to him quickly an amount of $11,000, which I did the next day, I think it was. I don't have the facsimile, but I requested the National Australia Bank in Newcastle, where the company's account was held, to fax to Brodie's interests this $11,000. And that's essentially what happened in that conversation."(Emphasis added)
In his cross-examination, Mr. Simpson claimed that the sum of $80,000.00 to be obtained by Noosa Hub by way of mortgage loan was to cover all costs of construction of a dwelling on the land including all holding and interest charges under the mortgage. He swore that the agreement between himself and Mr. Brodie was for a half share of the net proceeds of sale after deducting the legal and other costs of purchase, the principal sum invested in the construction of the house fixed at $80,000.00 and the costs of sale. All other costs of the venture were to be borne by Noosa Hub. For example, he gave the following evidence in cross-examination :-
"All right, and also you say from the moneys borrowed from the bank, Mr Brodie had to pay the builder's margin, as it were; his profit in the job, is that correct?---No, he was the builder.
I understand that, but you have said that from the $80,000 interest had to be paid?---Yes, sir.
The council fees, etcetera, had to be paid?---Yes, sir.
And any margin that Mr Brodie had in the job as the builder, his profit in constructing the house, was also to be paid from that $80,000?---But that was to himself.
Yes, to himself from that $80,000?---Yes, sir.
Right. So, how much was it going to cost to actually build the house?---I don't honestly know, because as - are you asking me as to what Brodie might have informed or estimated to myself or - - -
Well, when you had your discussions with Mr Brodie back in September 1990, did he tell you how much the house would cost or did you know how much the house itself would cost?---Brodie didn't tell me what it would cost to build the house. He said that he could do all these things within the $80,000. For my own part, professionally, I considered that it was totally feasible and achievable to complete the proposition as he had put it to me.
I see.And that is paying his margin?---Yes.
And did you know what that margin might have been?---No, sir, I did not.
Would you agree or do you know from your own experience as a building consultant, that a 20 per cent margin would have been a reasonable margin?---Depends entirely upon - are you saying 20 per cent across the frame pack and construction costs, or what precisely, please, are you asking of me?
20 per cent on the cost of the construction of the house. That is what a builder would work on, is not it?---No. Builder's margins will run anywhere from 7 percent to 20 per cent or greater, in cases. Generally, between 7 and 20.
I see.Well, did you discuss specifically with him what the builder's margin would be, completed?---No, sir, I did not.
You did not. All right. So, you did not know how much the actual construction cost was going to be, did you?---No, sir, I did not.
You did not know what the interest rate was going to be, charged by the bank?---No, sir; it was not my concern.
You did not know what the council fees would be for the lodgment of the plan and their work?---Not precisely, but I knew they'd be minimal.
All right.And you did not know what the builder's margin might be?---No, sir, I did not.
And none of that was discussed with you in September 1990?---No, sir, it was not.
In fact, it was a very general discussion, was not it, in September 1990?---When you say `general', can you - - -
Well, it was just a general discussion in the sense that he rang you and said he has bought the land, he intends to build a house on it, and do you want to go in with him on the deal?---Yes, in an overall - - -
And split - sorry, I cut you off, but - and split the profits at the end?---In
all overall context, but with conditions inside as relating to the split of profit, because there were commercial advantages to Mr. Brodie.
I see, and that condition that you speak of was that he would only borrow for - $80,000 or $85,000 would be the amount which would cover all costs associated with the construction of the house?---Yes sir; that's exactly what he informed me."
The respondent liquidator did not call Mr. Brodie as a witness. Mr. Brodie resides in Guam. I allowed into evidence parts of a written recording of an interview by telephone of Mr. Brodie by Mr. James Craig, an employee of the liquidator of Noosa Hub. That material, in the absence of Mr. Brodie as a witness, would not found a sufficient or reliable basis to make any finding adverse to the claim now made by Mr. Simpson on behalf of Maunchest Consultancy.
The claim, as finally put by senior counsel for Maunchest Consultancy, was one for an equitable interest in a fund in accordance with the terms of an express trust whereby Maunchest paid $11,000 on the mutual understanding of Mr. Simpson and Mr. Brodie that the money would be used for a limited express purpose and would result in a designated share of a fund ascertainable in a particular way being paid to Maunchest at a future date. It was submitted that Noosa Hub was intended to hold one-half of the net proceeds of sale of the land and house calculated in accordance with paragraph 5A of the second amended statement of claim in trust for Maunchest as trustee for the Simpson Trust. This trust, in respect of part of the proceeds of sale, was to arise irrespective of what was in fact the ultimate cost of construction of the house and irrespective of what the real costs of holding the land and servicing the borrowings may prove to be.
The respondent contended that the agreement was a simple joint venture agreement whereby Maunchest and Noosa Hub agreed to acquire the land on a 50/50 basis, to develop the land by building a house on it, and, by selling it off to make a profit to be shared equally.
In order to determine what was agreed in the telephone call on or about 7 September, 1990 it is necessary to set out my findings as to the background circumstances which existed at that time.
I find that :-
(a)The contract to purchase the land at 10 Partridge Street, Torquay was entered into by Noosa Hub pursuant to a written contract of sale signed by Mr. Brodie on behalf of the company on 10 February, 1990.
(b)On 11 May, 1990 Suncorp Building Society approved a loan to Noosa Hub in the sum of $85,000.00 for an initial period of six months "to assist with the payment for land/construction of a dwelling" situated at 10 Partridge Street, Torquay.
(c)On 23 July, 1990 the purchase of the land by Noosa Hub was completed and title to the land was thereafter registered in the name of Noosa Hub.
At the time that Mr. Brodie telephoned Mr. Simpson, Noosa Hub was the owner of the land and had owned it for more than a month. Noosa Hub had in place a mortgage with Suncorp Building Society for an advance of $85,000.00 or an offer from that leading institution to advance to it $85,000.00 to be secured by first mortgage over
the land and to be supported by the personal guarantees of Mr. and Mrs. Brodie as directors of Noosa Hub. On the material before me it is not possible to make any finding as to whether or not Noosa Hub had prior to the conversation between Mr. Brodie and Mr. Simpson executed a mortgage in favour of Suncorp Building Society or drawn against it. However, it is clear that the facility was available to Noosa Hub.
Unless Mr. Brodie consciously set out to mislead Mr. Simpson, which has not been suggested by the applicants, it is highly improbable that Mr. Brodie would have said to Mr. Simpson "I have found this site at Torquay. It is a good site. I can get it for $22 000 but I can't afford to buy it by myself at present." as Mr. Simpson deposed to in his affidavit of October, 1992. Indeed, in his evidence in chief Mr. Simpson admits the possibility that Mr. Brodie told him that Noosa Hub had already obtained the land.
Because Noosa Hub had at that time acquired the land and paid for it and had a finance facility with Suncorp Building Society for an amount of $85,000.00 in place, the likelihood is that Mr. Brodie offered Mr. Simpson a half share in the project for a payment of $11,000.00 which Mr. Brodie represented was a half share of the costs of acquiring the property. In this context the likelihood is that Mr. Brodie mentioned the availability of the Suncorp mortgage facility in a sum of $85,000.00 to fund the development and advised Mr. Simpson that plans for the residence were being prepared. This is consistent with the first section of the copy facsimile of 12 September, 1990 where it states :-
"Thank you for transfer of $11000-00 being your share of purchase costs of land at Torquay.
I confirm Noosa Hub Pty Ltd is holding this property on a 50/50 basis for
the two family trusts.
I have enclosed a copy of the title which is held by our solicitors LESTER & GAYLER 12 Bideford St Torquay.
As you are aware I have prepared plans which will be ready for Council this week.
Plan as discussed follows:"
The copy of the title and the copy of the plans referred to in the facsimile have not been produced by the applicants to either the liquidator or the court.
I am satisfied that in offering to Mr. Simpson a chance to participate in the project, Mr. Brodie did say the words or words to the effect of "We could build a house on it which we could sell at a good profit. Are you interested?" and that Mr. Simpson said "I will go 50-50 with you" or words to that effect.
Because Mr. Brodie had already organised the finance facility for $85,000.00 from Suncorp Building Society and because Mr. Brodie's company had the building licence, I find that the common understanding was that Mr. Brodie, through Noosa Hub trading as Audax Constructions, would be responsible as a practical matter to see to the construction of the house and the financing of it. This again is consistent with Mr. Simpson's evidence in chief. However, I am not persuaded that there was any agreement that Maunchest would be paid half of a notional profit calculated by deducting $85,000.00 and the costs of sale from the sale price of the completed house and land package. It may well be that Mr. Brodie and Mr. Simpson thought that the mortgage loan, together with other resources available to Mr. Brodie, would be sufficient to enable
the house to be completed in accordance with the plans Mr. Brodie submitted to Mr. Simpson (as per the facsimile of 12 September, 1990) and to the Council and to pay the holding charges. But the nature of the agreement between them was that the land would be held on a 50/50 basis for the two family trusts and the net proceeds of the sale of a house and land would be split 50/50. In the context, net meant net of the costs of improving the land to the condition in which it was sold and the costs of sale. The costs of building the house including holding and financing costs were always, I find, going to be recouped from the proceeds of sale when the joint investment was realised. The conversation between Mr. Brodie and Mr. Simpson focused on two matters: the first was the acquisition of a half share in the land held by Noosa Hub, the second was the equal division of the profit which both confidently expected to make on re-sale.
I find that no consideration was given to the possibility of any loss being incurred on a re-sale of the developed land; both parties confidently expected that there would be a profit. In this context, I do not accept that there was any agreement that cost of the improvements or holding charges, if they exceeded $85,000.00, were to be borne by Noosa Hub or that any actual loss was to be borne by Noosa Hub alone. Further, the second part of the facsimile of 12 September, 1990 contemplates that there would be consultation between Mr. Brodie and Mr. Simpson as to the outcome and distribution of profits on any proposed sale before the property, after development, was sold by Noosa Hub. This agreement to consult clearly gave rise to the letter of Noosa Hub of 2 August, 1991 to Mr. Simpson which says "We will have final costs on Partridge Street next week so will forward that information shortly". This letter was put forward by Maunchest to the liquidator as evidence of its entitlement to participate in the proceeds of sale. The
content of the letter has no relevance to Maunchest's entitlement unless the final costs of the project were relevant to the ascertainment of any entitlement. This letter was written, I find, after the final inspection of the house by the Hervey Bay City Council on 18 June, 1991. One may reasonably infer that the information is to enable Maunchest and Noosa Hub to work out a sale price which will cover all of the costs incurred to date and return an acceptable profit.
The suggestion that there was an $80,000.00 or $85,000.00 limit for the purpose of calculating a notional profit to enable a payment to be made to Maunchest was never advanced by Mr. Simpson on behalf of Maunchest until the first amended statement of claim filed 7 June, 1993. Even then it comes in not as a clear statement of obligation or as an agreed term, but as an item included in the calculation of the profit under the heading "Principal sum borrowed by Noosa Hub on mortgage." This was after the liquidator had filed an affidavit on 11 March, 1993 showing that the actual cost of construction and interest charges incurred would result in no net profit being made for distribution.
The claim that the deductions from the proceeds of sale would be limited to "the repayment of the principal sum borrowed on mortgage to finance erection of the dwelling" was only clearly made in the second amended statement of claim filed 19 May, 1994 as paragraph 2A(e) which contractual term is said to be an express term. In paragraph 2A(c) of that pleading it is alleged that Noosa Hub was to erect "a dwelling on the land and Noosa Hub would of its own resources pay all holding costs incurred in connection with the ownership of the land. The cost of erection of the dwelling would be
borrowed on mortgage of the property..." This term is alleged to be an implied term arising by implication from the fact that Noosa Hub undertook to erect or procure the erection of a dwelling on the land. This is to be contrasted with paragraph 2A(c) of the first amended statement of claim of 7 June, 1993 which makes no reference to any borrowings on mortgage and merely asserts that "Noosa Hub would at its own expense erect a dwelling on the land and from its own resources pay all holding costs construction costs and financing costs." (Emphasis added). The obligation of Noosa Hub as pleaded in the paragraph is alleged to be implied from the circumstances pleaded, namely the express term to erect the dwelling and from "the facts that Maunchest was to have no say in, knowledge of, or any other involvement in, the design, construction, financing or marketing of the property."
The claim of a limit of $80,000.00 does not appear in the facsimile of 12 September, 1990, nor in the letters of 19 August, 1992, 25 August, 1992 and 1 September, 1992.
The assertions in the later pleadings and in the oral evidence of Mr. Simpson that the entirety of the costs of construction, holding costs and financing costs together with a builders profit to Noosa Hub were to be covered by and limited to an advance of $80,000.00 from Suncorp Building Society to Noosa Hub and secured by mortgage over the land as express terms agreed to by Mr. Brodie, are totally inconsistent with the pleadings in their various forms and with the claims as made in the letters.
In the letter of 25 August, 1992 Mr. Simpson claimed that he relied on
"accounting records of payments I made to meet 50% of the outgoings on the property attributable to Simpson Family Trust interests in the property. These records will substantiate the fact that I did pay the 50% of the outgoings attributable to the share in the property held by the Simpson Family Trust interests." Such records do not exist because in the letter of 1 September, 1992 Mr. Simpson admits that after the payment of the $11,000.00, Maunchest did not make any recurrent payment of monies on account of rates or other expenses associated with the property as these were to be paid by Mr. Brodie using in part $10,000.00 owed by Mr. Brodie to Mr. Simpson as Maunchest's contribution to these outgoings. That Maunchest was a contributor to the outgoings was inconsistent with the pleadings in their various forms and was in fact abandoned on trial when Mr. Simpson said :-
"Well, is it your case that you put in 11,000 cash and 10,000 in credit or you put 11,000 and the 10,000 there has nothing to do with it?---The 10,000 has got nothing to do with the deal that Brodie and I had in regard to this property but because he had the 20 and, essentially, to all intents and purposes used money that he should not have touched, and he didn't have the ability to give me the 20 but, under great pressure, he said that he would have the ability to pay 10 - in my facsimile to him later, I made the point to him that, okay, I'll send up 30 but this - you've got to make this 10 to pay the 40 to Baumgartners, otherwise that purchase for the company goes out the thing. And it was then up to me to fight to get this other 10 back from him. I had lent money to Mr Brodie for personal reasons back in the early 1980s when he was in quite some difficulty and was going through considerable marriage problems and things like that, as a personal loan for no specific purpose, just as a personal loan. And he did repay it, late, albeit considerably late, but I did get it back. And my faith in Brodie, as a friend, was such that, whilst he had embarrassed me terribly, by making use of this money which had been sent to his trust account to pay the Baumgartners, there was little that I could do apart from tell him of my disappointment and be angry about it. But, failing that, would be to have taken it to a matter of law and that I did not do."
The only reference made by Mr. Simpson in his correspondence with the liquidator as to deducting money secured by the mortgage from the sale price on the disposal of the house and land is in paragraph 4 of the letter of 1 September, 1992. There he says :-
"The consequence of our arrangement was that when the property was sold, the net proceeds of sale (after deduction of all monies owing under the mortgage) would then be equally divided between Brodie and the Simpson No. 1 Family Trust."
This paragraph makes no mention that as he asserted in his oral evidence all holding and finance costs were to be covered by and included in the advance under the mortgage and paid from such advance - the letter in fact asserts that these monies were to be provided from other sources to be contributed to from funds of both parties - and more importantly makes no mention that the deduction was limited to the sum of $80,000.00 advanced as a principal sum for the purpose of erecting the dwelling.
I do not accept the evidence of Mr. Simpson as reliable.
I am satisfied that Mr. Simpson has said whatever he believed was necessary to maximise his return from the proceeds of sale. The claim in the letter of 19 August, 1992 as to an unauthorised mortgaging of the land by Noosa Hub could not be satisfactorily explained by Mr. Simpson in evidence. It has all the hallmarks of an attempt to lead a liquidator, who was not present when the arrangements were entered into between Mr. Brodie and Mr. Simpson, to the view that the mortgage to Suncorp Building Society was unauthorised and in breach of trust and that Maunchest's share of the net profit was to be ascertained as the difference between the purchase price of the land and the costs of sale on the one hand and the sale price of the land received on the other without reference to the mortgage debt. Such a result would, upon investigation,
have required a conclusion that Noosa Hub, for no explicable reason, made a gift to Maunchest of one-half the cost of the improvements to the land. Such a claim, for obvious reasons, was not persisted in and the claim was next made on the footing of a joint investment in which Maunchest had jointly contributed to the outgoings of the venture. This was subsequently abandoned.
In the result the most reliable indication as to what was agreed was the facsimile of 12 August, 1990 and the letter from Noosa Hub to Mr. Simpson of 2 August, 1991 set against the factual background of Noosa Hub's acquisition of the land and its arranging of finance prior to Mr. Brodie's approach to Mr. Simpson with an offer to participate in the project Noosa Hub had then embarked upon.
For the above reasons I reject the evidence of Mr. Simpson as to the entitlement of Maunchest to participate in the proceeds of sale on the basis most recently contended for by its counsel.
I turn to the calculation of the net profit, if any, in accordance with the agreement between Maunchest and Noosa Hub in the terms I have found.
Although the applicants questioned the accuracy of the books of Noosa Hub and the allocation of costs by Mr. Brodie to the cost of the house property at 10 Partridge Street, Torquay, I am satisfied that the proper cost of construction was $109,612.15. Mr. Jefferson, the liquidator, has not relied upon Mr. Brodie's figures. Rather, the liquidator has calculated the total cost by reference to the invoices rendered for work done and
material supplied for the house construction. Although many of the invoices were unpaid at the time of the order for winding up of Noosa Hub was made, conformably with the agreement between Maunchest and Noosa Hub, the costs of construction are to be recouped from the proceeds of sale, as are the costs of the sale, before any net profit is identified for division between the two investors.
The interest charges and expenses were monies payable under the mortgage, were part of the cost of construction of the dwelling and were to be recouped out of the proceeds of sale. There is no dispute that the interest paid or accrued and the penalty costs under the mortgage totalled $19,244.72.
There is no dispute that the costs of sale totalled $5,195.40.
The house and land were sold for $127,500.00.
The relevant calculation is as follows :-
Sale Price$127,500.00
Less(i) Cost of construction $109,612.15
(ii)Interest and mortgage
costs 19,244.72
(iii)Sale costs 5,195.40 $134,052.27
($6,552.27)
There is no net profit available for distribution. This disposes of the applicants' principal application.
The Noosa Hub by an amended notice of motion filed 30 April, 1993 sought the following relief :-
"1. A declaration that the Applicant was a joint venturer in respect of the purchase and development of land at 10 Partridge Street, Torquay in the State of Queensland more particularly described as Lot 20 on Registered Plan No. 96661 County of March Parish of Urangan;
2. A declaration that the Applicant is a debtor of Noosa Hub Pty Ltd (in liquidation) in the sum of $1,766.61."
In my opinion the arrangement between Maunchest and Noosa Hub constituted a joint venture between the two. Firstly, both associated together to hold the land in equal shares and to mutually make the land available for the purpose of development and sale. Secondly, although the building work was to be done or organised by Noosa Hub, the development was a common undertaking and was to be paid for from a common fund created by the sale of the land and improvements committed to the venture. Thirdly, the undertaking was to generate a mutual profit to be shared equally between the co-venturers. There was, as between Maunchest and Noosa Hub, a community of interest in the performance of their agreement. The mutual purpose of their association was to develop and sell land jointly owned by them to achieve a profit to be shared equally. (See Cummings v. Lewis (1993) 41 FCR 559 at 588-589).
In the instant case there was no agreement between the parties to share the losses, if any, of the venture in any particular proportion or at all. As I have found, the parties only contemplated a profit being made, the possibility of a loss did not enter into their contemplation. The case has been argued before me by all parties on the basis that the relationship between Maunchest and Noosa Hub was not a partnership. Therefore, in
order to make Maunchest liable for half of the loss incurred Noosa Hub must show either a co-ordinate liability on the part of Maunchest for the cost of the construction of the house or an equity to enforce equitable contribution. (Cummings v. Lewis at 590-599).
Noosa Hub did not purport to contract on the joint account of itself and Maunchest in acquiring the goods and services necessary to build the house, nor did it purport to undertake a joint liability under the mortgage as between it and Suncorp Building Society. Those obligations were all undertaken by Noosa Hub on its own account to the knowledge of Maunchest for the benefit of both Maunchest and Noosa Hub. The obligations undertaken by Noosa Hub were a burden undertaken for the benefit of both as a means to achieve a common end. There thereby arose an equity to enforce equitable contribution to the extent of one half of the loss of $6,552.27.
Noosa Hub is therefore entitled to a declaration that Maunchest is obliged to contribute the sum of $3,276.14 to the loss incurred on the venture by Noosa Hub, and, upon Noosa Hub paying the loss, to receive payment from Maunchest of that sum.
It is unlikely that the declaration will be of any value to Noosa Hub, Maunchest now being in liquidation.
The respondent is entitled to its costs which have been limited by Drummond J. on 7 July, 1993 by order made pursuant to Order 62A to a maximum of $5,000.00. In order to avoid the need to tax costs which I am satisfied would exceed $5,000.00, I intend to fix the respondent's costs in the sum of $5,000.00.
THE COURT ORDERS THAT:
The application of Maunchest Pty. Ltd. (In Liquidation) and Maunchest Consultancy Services Pty. Ltd. be dismissed.
The applicants pay to the respondent Noosa Hub Pty. Limited (In Liquidation) its costs of and incidental to the application fixed in the sum of FIVE THOUSAND DOLLARS ($5,000.00).
The FIVE THOUSAND DOLLARS ($5,000.00) paid into court by way of security for costs be paid to Messrs. Bickfords, solicitors for Noosa Hub Pty. Limited (In Liquidation) in discharge of the order for costs.
The accretions on the said sum, if any, be paid to the depositor of said sum.
The parties have liberty to apply.
THE COURT DECLARES THAT:
Maunchest Pty. Ltd. (In Liquidation) was a joint venturer with Noosa Hub Pty. Ltd. (In Liquidation) in the development and sale of a house property at 10 Partridge Street, Torquay, Queensland.
Maunchest Pty. Ltd. (In Liquidation) is obliged to contribute the sum of $3,276.14 to the loss incurred by Noosa Hub Pty. Ltd. (In Liquidation) for the benefit of the joint venture and upon the payment of the loss by Noosa Hub Pty. Ltd. (In Liquidation) it shall be entitled to recover from Maunchest Pty. Ltd. (In Liquidation) the sum of $3,276.14 or prove in the winding up of Maunchest Pty. Ltd. (In Liquidation) for the said amount.
I certify that this and the preceding twenty-six (26) pages are a true copy of the reasons for judgment herein of his Honour Justice Cooper.
Date:6 April, 1995
Associate
Counsel for the Applicants: Mr. R. Bain QC
Solicitors for the Applicants: Wellner & Chittenden
Counsel for the Respondents: Mr. R. Oliver
Solicitors for the Respondents: Bickfords Solicitors
Date of Hearing: 19 May, 1994
Place of Hearing: Brisbane
Date of Judgment: 6 April, 1995
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