Moran v DJ Moran Nominees Pty Limited

[2007] NSWSC 1258

CITATION:	Moran v DJ Moran Nominees Pty Limited [2007] NSWSC 1258
HEARING DATE(S):	1 November 2007
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Bergin J
EX TEMPORE JUDGMENT DATE:	1 November 2007
DECISION:	Plaintiff's motion is dismissed with costs.
CATCHWORDS:	Construction of agreement - no matter of principle.
PARTIES:	Shane Moran - first plaintiff Kerry Lyn Jones - second plaintiff DJ Moran Nominees Pty Limited - defendant
FILE NUMBER(S):	SC 50202/2006
COUNSEL:	J Stoljar/JK Taylor - plaintiffs AJ Meagher SC/KM Richardson - defendant
SOLICITORS:	S Moran & Co - plaintiffs Johnson Winter & Slattery - defendant

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IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

BERGIN J

1 NOVEMBER 2007

50202/06 SHANE MORAN & ORS v D J MORAN NOMINEES PTY LIMITED

JUDGMENT

1 This is an application brought by the plaintiffs, Shane Moran and Kerry Jones, for costs of these proceedings and costs of the Motion seeking costs of the proceedings.

2 The history to the proceedings has been set out in a chronology which details the history prior to the commencement of proceedings. The first plaintiff was employed with the Moran Health Care Group of companies and was appointed as the Chief Executive Officer of that group in 1991. For reasons that I do not know, the first plaintiff's employment was terminated with that group in 2001.

3 A discretionary trust known as the Moran Family Trust (the Family Trust) had been established under which the two plaintiffs, being brother and sister, were discretionary beneficiaries. The defendant, D J Nominees Pty Limited (Nominees) is trustee of the Family Trust and also of a unit trust known as the Moran Unit Trust (the Unit Trust). The Family Trust holds 62 units in the Unit Trust.

4 On 28 August 2002, amendments were made to the Family Trust Deed excluding the plaintiffs as beneficiaries to whom distributions could be made. A couple of months later, the first plaintiff sought access to records of the Unit Trust and from that date, until commencement of these proceedings, the first plaintiff had not achieved access to any documents pursuant to his requests.

5 On 18 December 2006, the proceedings were commenced and the Commercial List Summons contained a Schedule seeking various documents. That Schedule was in the following terms:

1. Deed constituting the Moran Unit Trust (“ MUT ”) dated 15 November 1983 and any deed or other document which directly or indirectly amends or supplements the said Deed;

2. Any deed or other document which directly or indirectly amends or supplements the Deed constituting the Moran Family Trust (“ MFT ”) dated 16 August 1993;

3. Minutes of Meetings of Directors of the defendant and any resolutions made from November 2001 to date;

4. Minutes of Meetings of Members of Doug Moran Holdings Pty Limited (ACN 008 586 114) (“ Holdings ”) and any resolutions made from November 2001 to date;

5. All documents recording or otherwise relating to the issue of units in the MUT from November 2001 to date;

6. All documents recording or otherwise relating to the payment of any dividends or other distributions from the MUT and the MFT from November 2001 to date;

7. The asset register of the MUT or such other document(s) which would enable the plaintiffs to identify the assets of the MUT, including without limitation the asset register(s) of Holdings and any wholly owned subsidiary of Holdings;

8. The asset register of the MFT or such other document(s) which would enable the plaintiffs to identify the assets of the MFT;

9. Details of all loan accounts of the MUT and Holdings, including without limitation all notes and explanations of those accounts as well as identification of the borrower, the amount borrowed, the applicable interest rate and repayment terms;

10. Details of any mortgages granted over property of the MUT, including without limitation any real property of which Holdings is the registered proprietor;

11. All documents recording or in respect of the defendant’s dealings with trust property under the MUT and MFT from November 2001 to date;

12. Financial statements and management accounts (including audited accounts if available) of:

(a) the MUT;
(b) the MFT;

(c) the defendant;

(d) Holdings; and

(e) Moran Health Care Group Pty Ltd,
from 1 July 2001 to date (save for the account statements sent under cover of the letter from Moran Health Care Group Pty Ltd to the first plaintiff dated 27 February 2004 and the letter from Nominees to S Moran & Co dated 6 May 2005);


13. Any legal opinion or advice in relation to the rights, duties and/or powers of the defendant as trustee of the MUT or otherwise relating to the MUT generally provided during the period from November 2001 to date;

14. Any legal opinion or advice in relation to the rights, duties and/or powers of the defendant as trustee of the MFT or otherwise relating to the MFT generally provided during the period from November 2001 to date;

15. Without limiting paragraphs 13 and 14 above, any legal opinion or advice as to the power, if any, of the defendant to remove the first plaintiff and/or the second plaintiff as beneficiary or discretionary object under the MFT and/or beneficiary or unitholder under the MUT.

16. Any brief to counsel prepared for the purposes of obtaining the legal opinion or advice referred to in paragraphs 13, 14 or 15 above.

6 As can be seen from pars 7 and 8 of that Schedule, the plaintiffs were seeking the asset registers of the Unit Trust, the Family Trust and the company, Doug Moran Holdings Pty Limited (Holdings) and any wholly owned subsidiary of Holdings. Holdings was not a defendant to these proceedings. After the proceedings were commenced, the defendant, Nominees, wrote to the plaintiffs indicating that it would provide certain documents to them. There had previously been some controversy about whether the plaintiffs were entitled to copies of documents, however the defendant indicated that it would provide copies of documents. Withheld from the plaintiffs, was information and documents relating to the subsidiary companies and also some legal opinions as referred to in pars 13 to 15 of the Schedule to the Summons.

7 On 3 April 2007, the defendant provided the documents to the plaintiffs. The proceedings were listed for hearing on 27 and 28 August 2007. There had been some preliminary unresolved skirmishes in relation to privileged documents and the plaintiff served a Notice to Produce on the defendant seeking the production of the documents referred to in pars 13 to 15 of the Schedule to the Summons at the hearing.

8 The parties were able to reach a settlement of their differences and on 27 August 2007, they asked the Court to make orders and note various agreements that had been reached. On that day, the orders that were made by consent, included the order in par 1 of the Short Minutes of Order, with notation of the matters in pars 2, 3 and 4 of the Short Minutes and directions in pars 5 and 6 of those Short Minutes. Those Short Minutes had attached to them the Schedule. It is appropriate that I set out in full those Short Minutes and Schedule. They are as follows:

1. ORDER that the hearing listed to commence on 27 August 2007 be vacated.

2. NOTE the following agreements between the plaintiffs and the defendant -

(a) the defendant agrees to provide to the plaintiffs within twenty-one days of the date hereof the documents described in the schedule to these Short Minutes of Order ( Schedule );
(b) the defendant agrees:
(i) to cause Doug Moran Holdings Pty Limited ( Holdings ) and Moran Health Care Group Pty Limited ( MHC Group ) to have the consolidated statutory accounts of those entities for each financial year ending 30 June audited within six months of the end of the relevant period, and subject to (d) below, agrees to provide copies of those audited accounts (inclusive of the audit report) to the plaintiffs within twenty-one days of the date on which the relevant audit opinion is given; and
(ii) in respect of the accounts of Holdings for the financial year ending 30 June 2006, the defendant agrees to provide to the plaintiffs by 31 October 2007:
(A) a copy of the audited accounts (inclusive of the audit opinion) of Holdings for the financial year ending 30 June 2006; and
(B) a schedule or schedules listing each of the assets of Holdings as at 30 June 2006 and its value as recorded in the books of account of Holdings as at that date.
(c) the defendant agrees to prepare annual balance sheets and profit and loss accounts for the Moran Unit Trust within six months of the end of each financial year ending 30 June and subject to (d) below, agrees to provide copies of those accounts to the plaintiffs within twenty-one days of their being completed and adopted;
(d) if the directors of the defendant reasonably form the view that the provision of any information in accounts or other documents to the plaintiffs will involve the disclosure of material which is commercially confidential having regard to any businesses undertaken by the plaintiffs or in respect of which the plaintiffs are interested which are competitive with any business undertaking in relation to the Moran Unit Trust, then they may mask such information and must advise the plaintiffs of the fact of and the reasons for such masking at the time the document is provided;
(e) the defendant agrees to provide to the plaintiffs copies of any determination or decision made by it acting as trustee of the Moran Unit Trust as to the application, distribution or payment of any income of that trust (including without limitation copies of any Trust Determinations made pursuant to clause 10 of the Moran Unit Trust Deed) within 21 days of the end of each financial year;
(f) the matters contained in paragraphs 2(a)-(e) above do not derogate from any rights the plaintiffs have under the trust deeds of the Moran Family Trust or the Moran Unit Trust, or at law (including under the Corporations Act 2001 (Cth)), to have access to or copies of the books and records of the defendant or to trust documents or information in respect of the Moran Family Trust or the Moran Unit Trust.

3. NOTE the further agreement between the plaintiffs and the defendant that the documents referred to in paragraphs 2(a), (b), (c) and (e) above are provided upon the condition that the plaintiffs use them and their contents for the following purposes only -

(a) to inform them, their spouses and their financial and legal advisers as to the conduct of the defendant as trustee of the Moran Unit Trust and the Moran Family Trust (including any such conduct in relation to the wholly owned subsidiaries of the defendant) and to obtain legal and financial advice in relation to that subject and their rights as members of the defendant and as unit holders in or beneficiaries of those trusts and for the taking of any action in consequence of receiving such advice; or
(b) for any other purpose which is the subject of the prior written agreement of the defendant, that agreement not to be unreasonably withheld.

4. NOTE the further agreement between the plaintiffs and the defendant -

(a) If the material referred to in the Schedule is supplied in accordance with the agreement contained in paragraph 2(a) above, the following orders will be made by consent:
(i) Proceedings dismissed;
(ii) No order as to costs.
(b) If material referred to in paragraph 2(a) above is not supplied in accordance with the agreement contained in paragraph 2(a) above, all costs are reserved.


5. DIRECT that the proceeding be listed for further directions on 21 September 2007.

6. DIRECT that the parties have liberty to apply on two days’ notice.
SCHEDULE


1. Consolidated statutory accounts of Doug Moran Holdings Pty Limited ( Holdings ) for the financial years ended 30 June 2000 to 30 June 2005.

2. Details of any salaries, directors fees or other moneys paid by Holdings and Moran Health Care Group Pty Limited ( MHC Group )) to any of Doug Moran, Greta Moran, Linda Conin, Peter Moran, Barbara Moran and Mark Moran or any of their related entities in the year ended 30 June 2006.

3. A schedule or schedules listing each of the assets of Holdings as at 30 June 2005 and its value as recorded in the books of account of Holdings as at that date.

4. A schedule listing the loan accounts of Holdings as at 30 June 2005 which (except in relation to the balance of loans to and from subsidiaries) includes details of the borrower, the amount borrowed, the applicable interest rate and repayment terms.

5. Consolidated statutory accounts of the MHC Group for the financial years ended 30 June 2002 to 30 June 2005.

9 The parties expressly reserved a fall back position in relation to costs if the material referred to in the Schedule to the Short Minutes was not supplied in accordance with the agreement referred to in par 2(a) of those Short Minutes.

10 The plaintiffs claim that the defendant has not provided the material in par 3 of the Schedule and submit that what has been provided is material that does not enable the plaintiffs to identify each of the assets and their value. The plaintiffs also submit that the Schedule that was agreed to be provided was a Schedule listing each of the assets of Holdings. It is necessary, therefore, to look at what was provided because the defendant submits that it has provided exactly what was required.

11 The material said to be that which par 3 required, is made up of part of the documents in exhibit JR1 between pars 93 and 105, and exhibit 1 which is Holdings’ financial report for the year ended 30 June 2005.

12 Exhibit 1 included the Statement of Financial Position which set out the assets as follows:

Note	2005	2004
Current Assets	$	$
Cash assets	11,442	82,190
Receivables	5	2,792,159	1,046,061
Other	6	36,800	41,025
Intangibles	7	40,320	1,469
Total Current Assets	2,880,721	1,170,745
Non Current Assets
Other financial assets	8	97,988,012	78,502,012
Receivables	0	5,903
Land and Buildings	20,326,019	20,753,860
Plant and equipment	9	1,365,482	1,642,431
Intangible assets	10	0	52,581
Total Non Current Assets	119,679,513	100,956,787
Total Assets	122,560,234	102,127,532

13 Page 93 of exhibit JR1 is headed “Schedule Listing Assets including Loan Accounts of Doug Moran Holdings Pty Limited as at 30 June 2005”. That schedule included the following:

Current Assets

Cash assets $11,442

Receivables $2,792,159 (See Note 5)

Loans to related parties	$ Nil	(after provision)
Deposits	$ 250
Other (Related Company)	$1,824,325
Loans to related entities	$ 967,584
Total current receivables	$2,792,159

14 If one compares the current assets in the Statement of Financial Position, with the Schedule referred to above, and takes into account the notes referred to in the Statement of Financial Position, some of the "assets" are listed in categories rather than individually. Without descending into the detail of the values that have been ascribed to them in the records of Holdings which appear in exhibit JR1, in particular at page 105, there is a figure of reasonably high value attributed to "art works". There is no break-down of the individual pieces or nature of the art work, but simply the description "art works". There is other material within the records of Holdings, that refer to things such as "carpets" with a value, and "furnitures" with values. There are some items that are identified individually including a lawn mower and some motor vehicles.

15 The preliminary question for consideration in this application is the construction of what the parties intended by par 3 of the Schedule to the Short Minutes. Mr Meagher SC, for the defendant, submitted that the context in which par 3 of the Schedule appears, leads to the irresistible conclusion that what has been produced is compliant with the requirement. First of all, Mr Meagher refers to the note in par 2(a) of the Short Minutes requiring the defendant to provide all of the material in the Schedule within 21 days. He submitted that having regard to that short time frame it would not be reasonable to assume that the parties intended anything other than the production of documents within the possession of Holdings. He also emphasised par 1 of the Summons that was filed in December 2006, which sought an order that the defendant provide to the plaintiffs copies of documents "in the possession, custody or power" of the defendant. He submitted that those two aspects of the context would persuade the Court that what was intended by these parties in par 3 of the Schedule was for the defendant to produce its documents, not that it was to pursue an investigative phase to produce documents that would be created from the documents that the defendant had in its custody, possession or control.

16 A further context to which Mr Meagher referred was the reference in par 2(b)(ii)(B) of the Short Minutes. Emphasis was placed on the opening words, "in respect of the accounts of Holdings", and it was submitted the wording of par 3 of the Schedule was analogous. In other words, what the parties intended was that the defendant would provide the documents held by "Holdings". As can be seen from the above, Holdings accepted that part of its financial records did not comply with the accounting standards and that this was to be rectified promptly.

17 Mr Stoljar, for the plaintiffs, submitted that par 3 of the Schedule has two limbs, the first being that there is a schedule or schedules to be provided to the plaintiffs listing each of the assets of Holdings as at 30 June 2005. He submitted that the second limb of par 3 is to deal only with the value that was in the books of account of Holdings as at 30 June 2005. Mr Stoljar accepted that such a construction of the paragraph would require some investigative work and it would be necessary for the investigator to find out what art work made up the totality of the description "art works" in the documents produced and then to list them individually.

18 Mr Meagher submitted that this analysis demonstrates the nonsensical or futile nature of such an investigation. There is no individual value for individual items of art in Holdings' records. The document that has been produced, as I have said, lumps all those assets into the one category of “art works”. Mr Meagher submitted that it would be futile for the listing of the individual assets because there are no individual values available in the records of the Holdings. He submitted that there would be little or no utility in going back to 2005 then trying to ascribe a value to individual assets at that time when they are not recorded in the Records of Holdings as at 30 June 2005.

19 If one reads the paragraph without its context, it is possible that minds might reasonably differ, but if one puts par 3 of the Schedule in context of the nature of the proceedings, that is, seeking the documents from the defendant, Holdings, and the matters within the Short Minutes, it seems to me that commercial commonsense should prevail to lead to the irresistible conclusion that what the parties intended was that the documents that Holdings had in its possession, custody or power listing its assets and their values as at 30 June 2005, was what was to be produced by the defendant.

20 Having regard to the documents referred to above that have been produced, I am satisfied that the defendant has complied with its obligation under par 3 of the Schedule and thus, cl 2(a) of the Short Minutes. The consequence is that par 4(b) has not been triggered because the pre-requisite has not been satisfied.

21 Both sets of counsel have addressed me on the discretion if I were to find that there had been a breach and whether, in all the circumstances, to exercise my discretion to make a costs order and have referred me to all the relevant authorities on the topic. However, it is my view that I should not embark on any judgment that is unnecessary. Accordingly the plaintiffs’ motion is dismissed with costs.

22 I order that the documents produced on subpoena by Greta Richmond Moran pursuant to a subpoena dated 8 October 2007 and received in the exhibits office on 23 October 2007, be returned to Mrs Moran. For ease of process I will provide those documents to Mrs Moran's solicitor who, I understand, is the instructing solicitor for the defendant's counsel.

23 These proceedings are dismissed. I make no order as to costs. All future directions hearings are vacated in this matter. I am grateful to counsel for their submissions.

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