McNaughton and Willebrandt and Anor

[2012] FamCA 149

FAMILY COURT OF AUSTRALIA

MCNAUGHTON & WILLEBRANDT AND ANOR [2012] FamCA 149

FAMILY LAW - ACCRUED JURISDICTION – CONTRACTS – Terms of the agreement – Findings of credit. 

INTERVENER: Mr McNaughton

RESPONDENT: Mr Willebrandt

RESPONDENT COMPANY: C Pty Ltd

FILE NUMBER: BRC 6353 of 2009

DATE DELIVERED: 16 March 2012

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Bell J

HEARING DATE: 6 to 7 February 2012

REPRESENTATION

COUNSEL FOR THE INTERVENER: Ms McMillan of Senior Counsel and Mr Middleton of Counsel appearing for the Intervener

SOLICITORS FOR THE INTERVENER: Schultz Toomey & O’Brien

COUNSEL FOR THE RESPONDENT AND

RESPONDENT COMPANY:

Mr Burridge of Counsel appearing for the Respondent and the Respondent Company

SOLICITORS FOR THE RESPONDENT

AND RESPONDENT COMPANY:

Butlers Barristers & Solicitors

Orders

1. The respondent/defendant, Mr Willebrandt, do cause to be paid to the applicant/plaintiff, Mr McNaughton, 25 per cent of the gross sale price of C Pty Ltd.

2. The application in relation to the issue of costs and the presentation of a draft Order be adjourned to Chambers to a date to be fixed.

3. Submissions in relation to costs to be provided within fourteen (14) days of the date hereof and a reply seven (7) days thereafter.

IT IS NOTED that publication of this judgment by this Court under the pseudonym McNaughton & Willebrandt and Anor has been approved by the Chief Justice pursuant to s 121(9)(g) of the Act.

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRC 6352 of 2009

Mr McNaughton

Intervener

And

Mr Willebrandt

Respondent

And

C Pty Ltd

Respondent Company

REASONS FOR JUDGMENT

1. Initially this Court’s jurisdiction was excited by an application made by Ms Willebrandt against Mr Willebrandt for property settlement.  This application was made in 2010.

2. Subsequent thereto, Mr McNaughton sought leave to intervene in the matter.  Mr McNaughton is the son of Ms Willebrandt (the wife) from a previous relationship.

3. The parties are South African. 

4. Mr McNaughton was granted leave to intervene on 28 January 2010.  He filed a statement of claim, and then a defence was filed by Mr Willebrandt (hereinafter referred to as the defendant).

5. For ease of reference despite the matter commencing in the Family Court with the husband as respondent in those proceedings, this is a matter between the original parties’ step-son as intervener and plaintiff in his claim against the respondent and defendant, Mr Willebrandt and the respondent and defendant company, C Pty Ltd.

6. The original matter was part-heard when, in December 2010, consent orders were entered into settling the claim by the wife against the husband.

7. An order was made by consent that 25 per cent of any sale proceeds from the sale of the land and the improvements owned by C Pty Ltd more of which anon, be retained and held in a trust account of the intervener ie. McNaughton’s solicitors. 

8. At the time, C Pty Ltd was a private company which at the relevant time had as the directors the wife and the defendant.  Subsequently the wife was removed as a director in June 2011, and a consent order was made providing for the plaintiff to receive an amount of $262,500 and an amount of $36,941 representing 25 per cent of the proceeds from the sale.  An amount of $625,000 was retained by the solicitors for the defendant Mr Willebrandt, representing the difference between 25 per cent net and 25 per cent gross.  This will become evident at a later stage (this sale went off).

9. A statement of claim was filed and delivered on 31 August 2011, and the trial which was set down on 3 November 2011, was adjourned as a result of the illness of the one of the counsel.

10. After this matter was heard, I have had put before me something in excess of 60 pages of submissions in relation to both the plaintiff McNaughton and the defendant Willebrandt. 

11. To me, it comes down to the following; it is not in dispute that the defendant controlled C Pty Ltd who was the owner of a property known as L Motel.  L Motel towards the end of 2004 appears to be in some trouble.  The defendant, who was residing in the same home as the plaintiff in 2004 and 2005 in South Africa, offered to the plaintiff a position as manager of the L Motel and that this would indirectly assist him in migrating to Australia.

12. There has been some dissent as to whether in fact the plaintiff needed a job, or whether he decided to immigrate to Australia.  To put it plainly, he received an offer, he accepted such offer and he immigrated to Australia.

13. There is no dispute between the parties that an agreement was made between the parties in 2004 (Annexure “A” to the plaintiff’s affidavit filed 15 January 2010) and that was as follows:

    “Agreement between [Mr Willebrandt] and [Mr McNaughton] relating the [sic] operational responsibilities, control and profit sharing aspects of [L Motel] [… H Street, Town E], Queensland, Australia, [postcode]

    1[Mr McNaughton] will take over complete operational control for the running of [L Motel] on his arrival in Australia in 2005 and beyond, for this he and his family will receive the following

    aA base salary of AUD 1000 per week (to be reviewed periodically)

    bFree Restaurant Food and Accommodation for him and his family as long as they continue to fulfil their responsibilities

    cA 25% share on all profits over the 12 month average cost to income ratio for [L Village] for the year 2004

    dAfter a period of 3 years a 25% share of [L Motel] will be transferred over to[Mr McNaughton]

    2[Mr McNaughton] will fund and have operational control with a 50% profit share with [Mr Willebrandt] also having 50% for the following separate lines of business

    aInternet Café

    b[Tutoring business]

    c[Early childhood program business]

    3By signing this agreement [Mr Willebrandt] confirms he will not sell [L Motel] while [Mr McNaughton] or family are fulfilling their responsibilities as defined in this agreement

    The above is confirmed and agreed to by

    [Mr Willebrandt]  [Mr McNaughton]

    Owner[L Motel]      

    Witness [Ms Willebrandt]  Witness [Mr B]

    On this day 4-10-2004 in […], South Africa”

14. Subsequent thereto the plaintiff came to Australia on a tourist visa and during such time as he was in Australia, he examined some of the financial records and it appeared to him as though there were debts owing by the defendant company C Pty Ltd to the defendant Willebrandt, and as he says this debt was probably in excess of what the defendant had told him what the defendant company was worth ie. $2 million.  Whilst the plaintiff was residing in Thailand, awaiting permission to immigrate, he received a further document which is Annexure “C” to the plaintiff’s affidavit filed 15 January, 2010 which, without any extra added to it, was according to the defendant the agreement entered into between himself and the plaintiff and the defendant company C Pty Ltd and the plaintiff. 

15. Upon his receiving the document the plaintiff concedes that he did in fact incorporate or write into such document the handwritten addition which appears at the bottom of Annexure “C” to the plaintiff’s affidavit hereinbefore referred to, and is in the following terms:

    “…

    The 25% is exempt from any debt or loan account with [C Pty Ltd]

    i.e. 3 years = 25% debt free interest in [L Motel]”

16. This, in my opinion, is the crux of the matter and the crux of the matter has been accepted by Counsel for both sides as being whether the handwritten interlineation of the plaintiff became part of the agreement, was adopted by the defendant, was repudiated by the defendant or was his conduct such that he could not be said to have other than accepted the terms of the agreement as including the (debt free) insertion.

17. It is trite to say that on occasions I have been criticised by the shortness of my judgments and lack of adequate reasons.  In this case this judgment will, notwithstanding the fact that enormous amounts of costs have been involved, be exceptionally short.  Because, in my opinion the crux of the matter is what were the terms of the agreement?  None of the terms of the agreement are in issue save the interlineation which was inserted by the plaintiff whilst he was in Thailand.

18. So it comes down to this – whose evidence do I accept?  The evidence of the plaintiff is that in fact the defendant knew of the insertion and consequently he and C Pty Ltd should be responsible for transferring to the plaintiff the 25 per cent interest in C Pty Ltd free of debt.  I think it is quite clear that as the parties have in effect agreed that the measure of damage if the plaintiff succeeds, is 25 per cent of the sale price of the property.  Whether net or gross is for me to determine.

19. What evidence is there to support the allegations of the plaintiff that in fact the agreement was as contained in the 2004 agreement (see above) and the 2005 agreement as amended by himself (see above)?  He was to receive insofar as the first of the agreement was to be concerned (see 1(d)):

    “After a period of 3 years a 25% share of [L Motel] will be transferred over to [Mr McNaughton]” (the plaintiff)

20. I note there is a variation and/or explanation to the agreement of 2005.  This is as follows (see (4)):

    “after a period of three years since starting work 25% of Company i.e. 25% of the issued shares ($1) each will be allocated to him if he is still in the Business on condition that these shares are non-negotiable cannot be sold or pledged, and forfeited by him leaving the business”

    [my underlining]

    This transfer took place in 2008.

21. I emphasise that the only question for my determination is whether in fact the 25 per cent share was to take into consideration debts owing by the defendant company C Pty Ltd to any person or debt free, or then as I have emphasised above the cost associated with the sale.

22. Regrettably, this is a question of with whom the truth will probably lie.  I have said on many occasions that I am desperate to avoid findings of credit against parties since generally in this Court they have an ongoing relationship between each other.  Obviously in this case there will not be and I am put in the position of having to determine with whom the truth will probably lie.

23. I am of the opinion that support for the allegations of the plaintiff that in fact the 25 per cent was to be debt free is contained basically in the evidence of the defendant.  It is quite clear on the evidence that the defendant viewed C Pty Ltd as himself.  I need not go into the details of the evidence.  I do not believe that it would be suggested by the defendant’s counsel or anybody acting on behalf of the defendant, that he other than looked at the company as himself.

24. I accept that the defendant told the plaintiff that the company C Pty Ltd was debt free, but he says when he said that he says that: “as well apart from what the company owed me”.

25. It is alleged and denied by the defendant that in fact the variation was brought to his notice by his then wife, the mother of the plaintiff.  He denies this but however, having seen him and having seen the mother of the plaintiff who gave evidence in the original property settlement, I am of the belief that she was telling the truth and that it was brought to his attention.  I note that she says that upon bringing to his attention this document as amended, he did not in any way express any concern.

26. Further, on page 43 of the transcript of the 7 February 2012 the following took place:

“[Mr Willebrandt], you told my client was debt-free.  You told my client it was debt-

free, didn’t you? ---Debt-free?

Yes?---Debt-free?

Debt-free?---Course, apart from what they owe me.

Well, you didn’t say apart from what it owes me; you said debt-free?---Yes, well I actually meant – I meant loan accounts, bank accounts and this is my own account and if I like to I could say you don’t have to pay.

Correct.  And that’s, in fact, what you told him; it was debt-free?---And I had no intention of doing it either.

It was debt-free and you’re going to get 25 per cent of the debt-free company?---Well, I’m sorry if he-if I-used the wrong words, but we had no bank loan.

A lot of people are sorry too, [Mr Willebrandt], that you’ve used the wrong words.  It might have saved a lot of time.”

[my underlining]

1. On the face of it, to me it appears clearly that the defendant did tell the plaintiff that C Pty Ltd was debt free and I emphasise his reply to Middleton of Counsel where he says:

   “Yes, well I actually meant – I meant loan accounts, bank accounts and this is my own account and if I like to I could say you don’t have to pay.”

   And further when it was put more strongly and clearly to him by Middleton in the following terms:

   “It was debt-free and you’re going to get 25 per cent of the debt-free company?---Well, I’m sorry if he-if I-used the wrong words, but we had no bank loan.”

2. Further matters convinced me of the claim of the plaintiff, see anon.  It was necessary for the plaintiff in his endeavour to get to Australia to receive some business sponsorship.

3. The company known as Company O, which was an immigration company, was employed to assist the plaintiff’s immigration to Australia and on the 13 March 2005 a letter was written to a person known as Ms A of Company O in the following terms:

   “Dear [Ms A].

   Re;-Reply your letter, DIMIA requesting further supporting documents. 11 March 2005 [Mr McNaughton].

   I, the undersigned wish to state that I am the sole owner of all shares in [C Pty Ltd], owners of [L Hotel, Town E].

   Since inception I have solely finianced [sic] the company up to date and I am prepared to continue and meet all necessary debts incurred and to finance all expansion works that I consider appropriate in the future

   The company does not have any mortgage or bank loans.

   Yours faithfully,

   [Mr Willebrandt]”

   I note this refers only to no mortgage or bank loan.

4. There has been a submission made by Burridge of Counsel that it is quite clear that this was a case of an elderly man who is 96 years of age being taken advantage of by the plaintiff who was a much younger man.  I do not accept that having viewed the male defendant in the witness box, notwithstanding that he is somewhat halt and has trouble with hearing, his vision is excellent, he is able to read without glasses as far as I could see, and his intelligence and his ability to comprehend the questions in my opinion did not hinder in any way.

5. Finally, I emphasise the email which on the 21 April 2009 was forwarded from the defendant to a Mr F (see Annexure “T” to the plaintiff’s affidavit filed 30 June 2010), in which the defendant says:

“…Real worry, when manager ([Mr McNaughton]) was spoken to 4 years ago.  I signed a slip Setting down Wage and shares in 3 year I told him co has no debt we work on cash basis On his insistence added word shares to be debt free.  I never considered Mortgage as debt. He now demands his shares to be free of co debts.”

1. What could be more damning I would have thought for the defendant’s case than this document, admittedly written some four years subsequent to the coming into existence of the agreement, but corroborating what was said by the plaintiff and corroborating what the plaintiff said the defendant had told him.  I note that the defendant denies the email and I do not accept his denial.

2. The shares were transferred in accordance with the agreement to the plaintiff in 2008. 

3. Burridge of Counsel submits that the agreement as amended on 29 April 2005 was not a contract and since it (as amended) was not adopted by the defendant therefore is not avoid.  However at paragraph 15 of his submissions he says; “there must be some external manifestation of amendment by word spoken or act done” [my underlining].  I have set out supra those acts done by the defendant.

4. What more can I say other than I accept unreservedly the evidence of the plaintiff and then in those circumstances I am of the view that the plaintiff’s claim has been made out, and it appears to have been agreed between the parties that damages, if awarded, would be quantified by there being 25 per cent of the net of any sale of the property of the company.  I understand a further contract is in existence.  I have not been informed as to whether this contract has gone off. 

5. Consequently, I order that the defendant do cause to be paid to the plaintiff

   
   

   25 per cent of the gross value of the company C Pty Ltd.  However, as orders have been made relating to “part payment”, I will request the presentation of a draft order.

6. I must further add that as a result of the decision I have come to in relation to the terms of the agreement, that the question of estoppel, the question of the Trade Practices Act notwithstanding there has been no consent being given by the Minister, is of little import and I do not consider that it is necessary for me to investigate those matters (see paragraph 51 etc. of his submissions). 

7. I infer from both McMillan’s and Burridge’s submissions, that in fact the issue of costs will have to be heard and naturally of course I will hear the parties in relation to the question of costs.

I certify that the preceding thirty-seven (37) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Bell delivered on 16 March 2012.

Associate: 

Date:  16 March 2012