Murray & Anor v Gudic Investments Pty Ltd & Ors
[2007] VSC 550
•20 December 2007
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
No. 7014 of 2001
| MARIA MURRAY AND PETER GUDIC (Who Sue as the Executors of the Estate of SLAVKO GUDIC, deceased) | Plaintiffs |
| v | |
| GUDIC INVESTMENTS PTY LTD (ACN 073 129 861), LUIGI GUDIC, JUTTA GUDIC, JOSEPH BORG, LISA BORG AND GUDIC PTY LTD (ACN 006 326 843) | Defendants |
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JUDGE: | HARPER J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 7 DECEMBER 2007 | |
DATE OF JUDGMENT: | 20 DECEMBER 2007 | |
CASE MAY BE CITED AS: | MURRAY v GUDIC INVESTMENTS PTY LTD | |
MEDIUM NEUTRAL CITATION: | [2007] VSC 550 | |
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PRACTICE AND PROCEDURE – Appeal from Master – Application to strike out for want of prosecution – Sufficiency of pleading in statement of claim – Allegation of partnership agreement.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr I. Percy with Mr P. Clarke | Peter G. Arnheim & Associates |
| For the Defendants | Mr R. Garrett QC with Mr G. McCormick | Hall & Wilcox |
HIS HONOUR:
This proceeding was commenced by issue of a writ on 6 August 2001. The then plaintiff was Slavko Gudic. He was a widower, his wife Klara having died on 21 May 1995. But unfortunately he was himself very close to death when this litigation began. He died on 16 August 2001, 10 days after the writ was issued.
The present plaintiffs, who are two of Slavko’s children, are the executors of his estate. The individual defendants are also related – to each other and to the plaintiffs. The first of them, Jutta Gudic, is the widow of one of Slavko’s sons, Luigi Gudic, who died on 22 July 2005 while a defendant to this proceeding. His estate has now been joined in his stead. A third defendant, Lisa Borg, is the daughter of Luigi and Jutta, and therefore Slavko’s granddaughter. Her husband, Joseph Borg, is another defendant. The fifth and final defendant is a company, Gudic Pty Ltd. The plaintiffs allege that it has one shareholder, Jutta, but that Luigi was a shareholder until his death.
The plaintiffs claim that their father and Luigi were partners. The business of the partnership, as the plaintiffs allege, was that of property development. But if the pleadings accurately represent the position, the partnership was a loose one in every sense: in its terms, in the way it went about its business, and in the way it kept its accounts. The result is a morass through which the parties have been struggling since the proceeding began.
There must be doubt about whether the continuation of that struggle is in anybody’s interest. Familial relationships have no doubt already been damaged, perhaps irreparably. After more than six years of litigation, the area of disputation is as wide as ever. And there are obvious practical difficulties flowing from the deaths of Slavko and Luigi. Coming to correct conclusions of fact will be problematic. In short, there is at best only a remote prospect of the expenditure on this litigation being proportionate to its outcome.
As long ago as 21 November 2005, the Chief Justice delivered judgment on an application by the defendants for orders seeking a permanent stay of the proceedings on the basis that they were an abuse of process. Alternatively, the defendants asked that the proceedings be dismissed for want of prosecution. Her Honour dismissed both applications. She nevertheless had this to say:
That disposes of the summons for the moment, save to make some general observations in relation to the proceeding. It is a proceeding that has been on foot since 2001. Three of the key parties appear now to be deceased. It behoves the solicitors on both sides, in my view, to place their respective houses in order and to obtain instructions, to go to court and obtain appropriate directions and to set in place a timetable that will facilitate the prompt expedition of this proceeding. It also seems to me to be a proceeding which calls out for mediation at an early opportunity. I make these observations without in any way expressing a view as to the strength or weakness of the cases on either side. These are observations that I make and I will in due course provide a copy of these reasons on the court file and they may be of assistance to a master who may come subsequently to direct the proceeding. It also seems to me to be a proceeding that would be much assisted by management in the civil management list before one of the masters in the current manner.
Nothing on the Court file indicates that the parties have acted upon the Chief Justice’s suggestions. There is no timetable in place. So far as I know, no mediation has been held. On the other hand, management of the proceeding was inhibited by the indisposition for a period of some 10 months between May 2006 and February 2007 of the Master who had its conduct. An application for particular discovery, made by summons filed on 13 October 2005 was, on 8 May 2006, at about the beginning of the period of the Master’s indisposition, adjourned to a date to be fixed. It has never been called on for hearing, in part at least because the Master has taken the view that the statement of claim must first be put in order.
The matter comes before me on appeal from the Master. On 16 November 2007, he granted the plaintiffs leave to file an amended statement of claim by 23 November, and dismissed the defendants’ application to have the proceeding dismissed for want of prosecution.
More than six years have now passed since the issue of the writ, and the parties are still arguing about the way the plaintiffs have pleaded the causes of action upon which they rely. This is at least in part because the partnership agreement they seek to propound was amorphous. Nothing was in writing. No date can be put upon the conversations which are alleged to have resulted in the agreement, save that they took place in 1992. It is not alleged that anyone who was then present is still alive.
The partnership itself, if there was one, commenced in 1992 and, according to the statement of claim, continued until Slavko died. The name by which the partnership traded is not revealed, perhaps because their was none. The two partners had equal shares, but different responsibilities. Slavko provided the capital. It seems that Luigi did the rest. As pleaded, the discussions from which the partnership agreement arose were simply that father and son “would, as equal partners, buy and develop properties, including subdivisions, for resale at a profit … Slavko said in substance that he would provide the necessary funds or security to enable funds to be borrowed from time to time. When each project was completed, any capital contributions made by Slavko would be repaid before any sharing of profits.”[1]
[1]Eighth Amended Statement of Claim, particulars to paragraph [13].
It can thus be seen that, as pleaded, the agreement did not attribute any responsibility to Slavko for anything other than the provision of capital. The responsibility for choosing the land to be bought and the means by which, when bought, it was to be developed, seems to have rested upon Luigi. What is certain is that, as pleaded, the agreement – if it was to form, and then operate, a partnership – is strikingly lacking in specificity.
In these circumstances, what has come down to the plaintiffs as constituting the partnership, may be a distortion of reality. Or it may not. But the possibility is that in fact Slavko simply agreed to provide from time to time financial assistance to his son Luigi, with whom he was then very close, on condition that he receive in return a share of any profits attributable in the particular instance to the employment of that assistance. In other words, it is possible that the agreement was for nothing more than ad hoc assistance as occasion required. That assistance would be rewarded with a share of the profits of the particular transaction which it helped realise; and any capital contribution would of course be made good. But there was, on this hypothesis, no thought of an ongoing partnership.
The proof of the pudding lies in the eating. If upon what they know of the evidence the plaintiffs can plead a case in which Luigi is constantly looking to his father for financial accommodation, and his father is responding positively – and seeking his quid pro quo in accordance with the plaintiff’s version of the 1992 agreement; and if the statement of claim, drawn upon proper instructions, were to allege that an entity began trading on the two men’s behalf with a partnership name, with partnership books of account and tax returns, and the distribution of its profits equally between them as equal partners – then acceptance of the existence in fact of the alleged partnership and resultant cause of action would be open. But the burden of proof is on the plaintiffs; and if the statement of claim includes none of these indicia of partnership, then the alternative hypothesis of an ad hoc arrangement becomes attractive, if not compelling. Much more importantly, a statement of claim without the relevant indicia does not tell the defendants what case it is that they must answer.
In its present form, the statement of claim is strikingly deficient. It pleads that during its existence the partnership bought and sold land. The first instance given is of the Court House Hotel in Footscray (which I shall designate as property No 1). One would expect, based on the partnership agreement as it is described in the pleading, an allegation that the hotel was bought by Slavko and Luigi, using capital provided by the former. But according to the statement of claim, it was purchased on 15 October 1992 by Luigi and Jutta with two others, Vele and Josephine Meskovski. It is not alleged that Slavko contributed anything.
The second instance is of the purchase on 25 August 1993 of the Barleycorn Hotel site in Collingwood (property No 2). Again, there is no reference to Slavko as a purchaser; again, the purchasers are said to have been Luigi and Jutta, together with Vele and Josephine Meskovski. It is alleged that Slavko contributed to the purchase price; but only in an amount of $20,000 out of a total of $270,000.
The third instance concerns land at 34 Fenwick Street Clifton Hill (property No 3). It is said to have been purchased in 1994 by Luigi and Jutta. There is no allegation of any involvement by Slavko.
The land at 132 Perry Street, Collingwood (property No 4) is the subject of the fourth instance. It was, it is alleged, purchased by Gudic Investments Pty Ltd. The date of purchase is not alleged, but according to the statement of claim the purchaser became registered as proprietor on 23 April 1996. That was a company, voluntarily deregistered on 25 March 2005, of which Luigi and Jutta were the directors. By a variation of the partnership agreement about which the statement of claim is entirely silent, it somehow became (it is alleged) “the corporate entity for one or other transactions for and on behalf of the partnership”.[2]
[2]Eighth amended statement of claim, paragraph 8.
This is an allegation that cannot stand by itself. It states a conclusion from unpleaded facts. On its face, the company is associated with Luigi (who, it is true, is alleged to have been Slavko’s partner) and Jutta (about whom no relevant allegation is made). The fact remains that the company could not become “the corporate entity for one or other transactions for and on behalf of the partnership” unless Slavko, as one of the (alleged) partners agreed to it assuming that role. There is, however, no allegation to that effect. It follows that the bald assertion of its role as a corporate entity for partnership transactions cannot itself be a statement of material fact. For the same reason, it cannot amount to a link in a chain of material facts that make out a cause of action.
This transaction is one of only two in which Slavko is, in the statement of claim, alleged to have been involved – not through the company, but by providing security in the sum of $288,000 over property he owned with Klara in Glanville, South Australia. It is worthy of note that the security does not seem to match the value of the land. The price paid by Gudic Investments Pty Ltd is not disclosed in the pleading; but, having been subdivided into two units, each was sold for $50,000 - a total of $100,000.
The statement of claim does not allege anything from which one could conclude that it was the plaintiffs’ case that this transaction was profitable. In other words, there is no suggestion that it generated funds from which further partnership endeavours might be financed. Still less could one conclude that it gave rise to profits which might be –or were - misused by the defendants, or any of them.
The next in the series of impugned transactions is that in which Luigi and Jutta allegedly purchased a property at 70 Sherwood Road Eaglemont (property No 5). Again, neither the date of purchase nor the purchase price is given, but it is alleged that Luigi and his wife became registered as proprietors on 25 March 1997. It is further claimed that the price was met out of “accumulated profits and/or capital of the partnership and without Slavko’s consent.”
It will be appreciated that, although the statement of claim has thus far pleaded, in chronological order, five separate transactions, not one of them is alleged to have generated a profit, and only two are alleged to have involved Slavko. It follows that a bald assertion that the purchase price of 70 Sherwood Street was financed by recourse to accumulated profits and/or capital of the partnership is, as a pleading, unsatisfactory. It is not a pleading of a material fact but a stated conclusion from unpleaded facts.
The next transaction pleaded concerns land (property No 6) somewhere in Studley Road (wherever Studley Road is; the location/suburb is otherwise not revealed). This, as the statement of claim would have it, was another joint purchase. Gudic Investments was involved, as was a company called Savianne Design and Building Pty Ltd. The sale took place on 12 February 1997. The purchase price was $130,000. the property was later subdivided, and each company acquired one lot. Gudic Investments sold Lot 2 on 10 March 1999 for $440,000. The statement of claim does not allege that Slavko made any contribution – or, if he did, that that contribution was refunded as the partnership agreement allegedly required. For that matter, the statement of claim does not allege that, if the contribution was not refunded, Slavko complained about the breach.
On the facts as pleaded, this transaction – like that involving the Court House Hotel, the Fenwick Street property, and the Eaglemont property - is wholly consistent with the hypothesis that Slavko became involved in Luigi’s property developments not through a partnership agreement but only when and if asked by Luigi to become involved.
The same is true of the next transaction pleaded in the statement of claim. No. 8 Probus Street Ivanhoe (property No 7) was, according to that pleading, purchased on 1 May 1998 for $92,000 and sold on 30 June 2000 for $205,000. The part, if any, played by Slavko is not the subject of any allegation.
The pattern continues with “the land situate at Candlebark Court Rosanna (property No 8). In this case the purchaser was said to have been Gudic Investments, although Lisa Borg and her husband Joseph were on 19 September 2000 registered (as joint proprietors of one equal undivided third share) with the company being registered on the same day as the proprietor of the other two shares. The property was later subdivided into Lots 1 and 2, and Lisa and her husband acquired Lot 1 while Lot 2 was sold by the company on 29 May 2003 for $577,500. The original purchase price is not revealed. I restate for the sake of emphasis that Slavko is not alleged to be a part of any of this.
Two properties remain as being the subject of this aspect of the proceeding. Of these, one - at Gum Court Apollo Bay (property No 9) – is, according to the statement of claim, in exactly the same position as that at 70 Sherwood Road Eaglemont. The same comments apply to both.
The final property is known as 18-26 Yambla Street Clifton Hill (property No 10). Gudic Investments became the registered proprietor of this land on 6 April 2000 after paying $340,000 for the privilege. So far as the pleading reveals, Slavko contributed nothing, received no refund of anything, and made no complaint about anything. As with other acquisitions, the only connection between the transaction and the partnership is that which comes through the allegation that the company, in which Slavko had no interest, was the partnership’s “corporate entity”. The plaintiffs would, it seems, have one assume that the mere participation of the company in any property dealing necessarily involved the partnership as well. That is an assumption that I cannot make.
In my opinion, the statement of claim, in its allegations concerning the ten properties discussed above, gets nowhere near an adequate pleading of any cause of action. Yet it is the plaintiffs’ eighth formal attempt to achieve this end, with other drafts also being produced. According to the defendants, a total of 20 versions have been produced. Be that as it may, the plaintiffs have had opportunity enough. In my opinion, the Master ought not to have granted leave to replead the paragraphs in question. Paragraphs 8, 9 and 13-53 of the eighth amended statement of claim will be struck out. Leave to replead them is refused.
To this extent, the appeal from the Master is allowed. After all this time and effort, the plaintiffs have failed to produce a statement of claim which reveals the case that the defendants have to answer. In its present form, the statement of claim does not reveal what Slavko contributed. It does not reveal what he got back. It discloses nothing upon which an account of profits could be based. There has been discovery of documents, but the plaintiffs have not profited from this – or at least not sufficiently. There is no realistic prospect that either further discovery, or further particulars, or both, will fill the innumerable gaps that presently exist in the case as pleaded.
There has been further delay since the Chief Justice refused the defendants’ application to strike out the statement of claim for want of prosecution. Those delays, however, have not in any relevant sense been the responsibility of the plaintiffs. I therefore do not accede to the defendants’ renewed application for orders that her Honour previously declined to make.
The plaintiffs’ claims in relation to the Royal Hotel and Slavko’s wages can go forward by way of a statement of claim restricted to those claims. In the meantime, however, the matter must go to mediation. If the mediation does not succeed in reaching a final settlement, then an amended statement of claim must be filed and served within two weeks of its conclusion (or, if the mediation concludes on Friday 7 March, by Thursday 20 March). Failing compliance with this order, the entire proceeding will be struck out.
I order that the parties, by themselves or by representatives with authority to agree on their behalf to a compromise of this proceeding, attend a mediation of the matters remaining in dispute in this proceeding. Such mediation is to be held no later than Friday 7 March 2008. The cost of the mediation shall in the first instance be borne by the estate. The mediator shall be agreed between the parties or, failing agreement, be chosen by the Court.
Further directions will be required if the proceeding is not settled by 7 March. I will for this reason require the parties to appear before me at 9.30 on Thursday 20 March to inform me of the success or otherwise of the mediation, and discuss such directions as may be necessary or appropriate. There will be liberty to apply in the meantime.
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