NES Holding Company Pty Ltd v Marshall

[2018] WADC 137

JURISDICTION     :   DISTRICT COURT OF WESTERN AUSTRALIA

IN CHAMBERS

LOCATION:   PERTH

CITATION:   NES HOLDING COMPANY PTY LTD -v- MARSHALL [2018] WADC 137

CORAM:   DEPUTY REGISTRAR HEWITT

HEARD:   1 OCTOBER 2018

DELIVERED          :   22 OCTOBER 2018

FILE NO/S:   CIV 1442 of 2018

BETWEEN:   NES HOLDING COMPANY PTY LTD

Plaintiff

AND

ROBERT JOHN MARSHALL

HELEN VERONICA MARSHALL

First Defendants

ANDREW VAUGHAN BLAKE

Second Defendant

Catchwords:

Practice and procedure - Whether appropriate for the plaintiff to pursue the defendants for obligations owed to the plaintiff and another jointly and severally - Observations of the trustee status of parties - Turns on its own facts

Legislation:

Nil

Result:

Adjourned for a further party to be added

Representation:

Counsel:

Plaintiff	:	Mr A P Hershowitz
First Defendants	:	In person
Second Defendant	:	In person

Solicitors:

Plaintiff	:	K & L Gates
First Defendants	:	Not applicable
Second Defendant	:	Not applicable

Case(s) referred to in decision(s):

Nil

DEPUTY REGISTRAR HEWITT:

1. In this action the plaintiff sues to enforce the terms of a deed of settlement between itself and others and the defendants and others under the terms of which the parties and others set out to disentangle themselves from their involvement in a unit trust known as the 29 Wellington Street Unit Trust.  Relying on the terms of the deed the plaintiff has sued the defendants for failing to perform certain of the provisions of the deed and has brought a summary judgment application seeking a judgment in respect of some, but not all, of the claims arising from the alleged breach.

2. The defendants are unrepresented and clearly at a disadvantage in presenting their defence to this application.  Paramount amongst their difficulties is their failure to comprehend the fact that the execution of a deed is not a step in negotiation but a final irrevocable step providing the framework under which the dispute between the parties has been agreed to be settled.

3. Without going into the details of the claim an interesting point has been raised.  The application is brought by NES Holding Company Pty Ltd as trustee of the Johnson Property Trust.  The terms upon which the plaintiff relies are contained in par 2 of the deed of settlement as follows:

   2.Settlement

   2.1Settlement

   (a)In consideration for the transfer of each of NES and C Johnston's Units in accordance with clause 3.2(a) Marshall and Blake must pay to NES and CJohnson $128,571, being the Asset Value less the Mortgage Amount (Balance Owing) in accordance with clause 2.2.

   (b)The parties acknowledge that the Mortgage Amount is owed to the mortgagors of the Mortgage.  Marshall and Blake must, on the Settlement Date, deduct it from the Asset Value and procure that it is paid to those mortgagors, pursuant to the restructure of the Mortgage and the Guarantee contemplated in clause 2.4.

   (c)All actions which are required to occur in accordance with this Deed on the Settlement Date are taken to have occurred simultaneously.

   2.2Payment of Settlement Amount

   By close of business on the Payment Date, Marshall and Blake must pay to NES and C Johnson, by electronic funds transfer to a bank account nominated by them:

   (a)$29,687.40, being repayment of the loan made pursuant to clause 2.4(b);

   (b)the Balance owing;

   (c)any other amounts owing to NES and CJohnson as determined by the Audit, or as otherwise agreed between the parties, and

   (d)interest on the total amount owing pursuant to clauses 2.2(a) to 2.2(c) (inclusive), accruing at the Interest Rate,

   together, the Settlement Amount.

   2.3Delayed payment

   (a)Without prejudice to any other rights NES and CJohnson may have at law or under this Deed, if Marshall and Blake fail to pay the total Settlement Amount by close of business on the Payment Date, Marshall and Blake must pay to NES and CJohnson interest on the total unpaid amount, accruing at the Delayed Interest Rate, until the Settlement Amount is paid in full.

   (b)The interest accruing in accordance with clause 2.3(a) must be paid by the last Business Day of each calendar month in which any part of the Settlement Amount remains unpaid, by electronic funds transfer to a bank account nominated by NES and CJohnson.

   2.4Mortgage and Guarantee

   (a)Marshall and Blake must effect a restructure of the Mortgage and Guarantee as soon as possible so that NES, CJohnson, BJohnson, Lisa Michelle Johnson and any related entities are fully released from all obligations and Liabilities in connection with the Mortgage and Guarantee.

   (b)NES will lend $29,687.40 to Marshall and Blake to pay Private Mortgage's fees in connection with the restructure, and will pay this amount directly to Private Mortgage within 3 Business Days of the Settlement Date.

   (c)Marshall and Blake must notify BJohnson and CJohnson of the restructure of the Mortgage and Guarantee within 2 Business Days after it has occurred (Notice).

   (d)Until such time as the restructure of the Mortgage and Guarantee is completed in accordance with this clause 2.4, Marshall and Blake must indemnify NES, CJohnson, BJohnson, Lisa Michelle Johnson and any related entities against all Liabilities arising from or connected with the Mortgage and Guarantee.

   2.5Audit

   (a)Marshall and Blake must procure the Unit Trustee appoints Neil Pace of Moore Stephens (WA) Pty Ltd as auditor of the Unit Trust (Auditor) within 5 Business Days of the Settlement Date, and must confirm to BJohnson and CJohnson once this has occurred.

   (b)The Auditor must be appointed to conduct the Audit, and the scope of the Audit shall be to:

   (i)review the financials for the period from incorporation to 30 June 2017;

   (ii)verify the underlying transactions during each year, by reference to bank records and supporting documents, so as to determine whether or not the financials properly reflect the transactions during each year as well as the assets and liabilities at each year end;

   (iii)ensure transactions properly reflected the substance of operations of the unit trust; and

   (iv)report on any transactions that may be inappropriate.

   (c)Marshall and Blake must:

   (i)cause the Unit Trustee to co‑operate fully and promptly with the Auditor's requests for documents and information; and

   (ii)authorise the Auditor to provide the results of the Audit to BJohnson and CJohnson.

   (d)The Auditor's fees for conducting the Audit will be borne by the parties in these proportions:

   (i)Marshall and Blake: 4/7 proportion of fees; and

   (ii)BJohnson: 3/7 proportion of fees.

   2.6Indemnity

   (a)Each of Marshall, Blake and Dawnray jointly and severally indemnity NES and CJohnson against all Liabilities which either of them may pay, sustain or incur as a direct or indirect result of any breach or non‑performance of this Deed by any of Marshall, Blake or Dawnray, including the costs of recovering all amounts due in connection with this Deed.

   (b)This indemnity is a continuing obligation and continues after the parties' other obligations under this Deed terminate.

4. Those terms require the payment of the nominated sums to the plaintiff and to Cameron Ashley Johnson in his own right and as trustee of the CAJ Physiotherapy Trust, that being the effect of the abbreviated names applied to each under the provisions of preamble 4 and 5 appearing on the first page in the deed of settlement.

5. The immediate question raised by the defendants was why Cameron Ashley Johnson is not a party to this action.  In answer counsel for the plaintiff has referred me to par 1.2(b) (the second (b) in the paragraph) of the deed.

   (b)any agreement, representation, warranty or indemnity in favour of two or more parties (whether those parties are included in the same defined term or not) is for the benefit of them jointly and severally, and

6. The argument advanced by counsel is that the provision provides the entitlement created by the settlement deed is joint and several and may be pursued by either of the parties entitled in their own name without the need for the other party to be joined.  I have my doubts.  It seems to me that there is a real possibility that a judgment in favour of the plaintiff against the defendants might not extinguish the claim by Cameron Ashley Johnson.

7. The provisions of r 18.4 of the Rules of the Supreme Court 1971 are relevant, however those rules simply provide that a party with a joint entitlement to the subject of matter of an action must either be made or a plaintiff or if he is not agreeable to that course a defendant and in either case be bound by the decision of the court.  In order to escape the effect of such provision it is necessary then to regard the application of the plaintiff as being based on his several entitlement to enforce the terms of the deed.  That creates a further concern in my mind because the other entitled party is described as Cameron Ashley Johnson in his own right and as a trustee of the CAJ Physiotherapy Trust.  The effect therefore of the decision by the plaintiff to pursue its claim against the defendants purely in its own name must therefore, it seems to me, have the effect of creating NES Holding Company Pty Ltd, itself involved in its capacity of a separate trust, as a trustee in the CAJ Physiotherapy Trust.  The CAJ Physiotherapy Trust must have rules concerning the installation and replacement of trustees and it seems to me that what has been achieved in the present action namely the replacement of the existing trustee with NES Holding Company Pty Ltd as a trustee will not accord with the requirements of that document.

8. All of these matters are clouded in doubt and I have no certainty in regard to the answers to any of them.  I am sure however that is there appears to be no sensible reason why Cameron Ashley Johnson should not be a party to this action and application and a real possibility that his presence before the court is required to ensure that all the issues in this action are finally determined by whatever decision is handed down.

9. Accordingly, I am of the view that Cameron Johnson should be a party to the action and summary judgment application which should be amended accordingly.

I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.

AC
COURT OFFICER

22 OCTOBER 2018