Norgard v Abco Holdings Pty Ltd
[2001] WASC 324 (S)
NORGARD -v- ABCO HOLDINGS PTY LTD & ANOR [2001] WASC 324 (S)
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2001] WASC 324 (S) | |
| Case No: | CIV:1211/2000 | 9 NOVEMBER 2000, 26 & 27 MARCH 2001, 25 MARCH 2002, 28 MARCH 2002, 4 APRIL 2002 | |
| Coram: | PARKER J | 28/11/01 | |
| 16/04/02 | |||
| 12 | Judgment Part: | 1 of 1 | |
| Result: | Specific performance ordered | ||
| A | |||
| PDF Version |
| Parties: | ROSS STEWART NORGARD ABCO HOLDINGS PTY LTD (ACN 009 350 298) M J PASSMORE NOMINEES PTY LTD (ACN 008 837 554) |
Catchwords: | Partnership Dispute between partners Deed of Settlement Provision for sale and transfer of partner P's interest to partner A Provision that if A "fails to settle" within stipulated time P may elect to cancel the sale and transfer Purported election Whether A "failed to settle" Whether election valid Counterclaim by A for specific performance Delay Readiness and willingness of A to perform |
Legislation: | Nil |
Case References: | Nil Nil |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
DECISION : 16 APRIL 2002 FILE NO/S : CIV 1211 of 2000 BETWEEN : ROSS STEWART NORGARD
- Plaintiff
AND
ABCO HOLDINGS PTY LTD (ACN 009 350 298)
First Defendant
M J PASSMORE NOMINEES PTY LTD (ACN 008 837 554)
Second Defendant
Catchwords:
Partnership - Dispute between partners - Deed of Settlement - Provision for sale and transfer of partner P's interest to partner A - Provision that if A "fails to settle" within stipulated time P may elect to cancel the sale and transfer - Purported election - Whether A "failed to settle" - Whether election valid - Counterclaim by A for specific performance - Delay - Readiness and willingness of A to perform
(Page 2)
Legislation:
Nil
Result:
Specific performance ordered
Category: A
Representation:
Counsel:
Plaintiff : Mr D W Thompson
First Defendant : Mr E Leech
Second Defendant : Mr D Rawlinson
Solicitors:
Plaintiff : Phillips Fox
First Defendant : Edwin Leech
Second Defendant : David Rawlinson
Case(s) referred to in judgment(s):
Nil
Case(s) also cited:
Nil
(Page 3)
1 PARKER J: I delivered a reserved decision in this matter on 28 November 2001.
2 By order made at the instigation and with the agreement of the parties the hearing had not dealt with all issues of relief the subject of Abco's counterclaim. Only its claim for an order for specific performance was dealt with. Claims for other relief, especially damages, were deferred. By the reserved decision inter alia Abco's claim for specific performance succeeded.
3 The parties were to come back before me to settle the form of orders. They did not do so. Instead, on 17 December 2001 Abco filed an application for leave to re-amend the amended defence and counterclaim. It transpires that the primary point of the proposed amendment would directly affect the sum payable by Abco to Passmore on settlement. This was an issue directly related to specific performance. It was the reason why the parties had not been ready to settle the form of orders following the delivery of the reserved decision.
4 The parties were not ready to argue the merits of this application before the vacation, and neither party was anxious to have it heard in the first week following the vacation on a date I could make available. Each party preferred to wait until I returned from leave. The application came to be listed before me, therefore, on 25 March 2002, the first day convenient to the parties following my return from leave.
5 In an extempore decision delivered on 25 March 2002 I allowed one of the two amendments sought by Abco. Before the amendment, by par 44 of the re-amended defence and counterclaim Abco had claimed that the balance of the purchase price payable by it on settlement was $430,000. I allowed this figure to be amended to $1,005,000. While this appears to be against Abco's interest, in the circumstances that is not the case.
6 Under the Agreement in issue between the parties, as appears in detail in the primary reasons, in settlement of a partnership dispute between Abco and Passmore, Abco agreed to pay to Passmore the sum of $480,000, of which $50,000 was paid by way of deposit, leaving a balance of $430,000 to be paid at Settlement, ie the sum originally claimed in par 44. In addition, however, by cl 5 of the Agreement Abco was also to repay all amounts owing by the partnership to Bankwest and secure a discharge of Bankwest's mortgage and any other encumbrances over the assets of the partnership. Passmore's 50% share of this liability,
(Page 4)
- which in this way Abco had agreed to discharge, represented the difference between the figure of $430,000 as originally pleaded in par 44 and the amended figure of $1,005,000. As this amended figure was relevant to further claims for relief which were yet to be litigated between the parties and did not materially affect the evidence that had been led on the primary hearing, I allowed the amendment.
7 That had consequences, however, relevant to the form of orders for specific performance. By General Condition ("GC") 5(2), which was incorporated into the Agreement, it was provided that the purchaser, ie Abco, could deduct from "the balance of the Purchase Price payable on settlement", "compensation" at a prescribed rate on that balance in a case where "for any reason attributable to the Vendor, settlement is not effected on or within 3 Business Days after the Settlement Date". Abco claimed that on my findings in the primary reasons this provision applied and its effect, especially if calculated on $1,005,000 rather than $480,000, was to substantially reduce the amount it was to pay Passmore on settlement.
8 While Passmore contended that these issues should be deferred and dealt with in the context of the remaining claims for relief, leaving settlement to proceed in the meantime on the basis that Abco should pay the $430,000 in full and discharge the liability to Bankwest without any deduction which might be found to arise from GC 5(2), that appeared to me an impractical and unjust approach. It was clearly preferable to determine the amount payable by Abco on settlement and incorporate this in the order for specific performance.
9 Passmore further contended that if Abco was to succeed on its claim to make a deduction under GC 5(2), it was provided by that condition that the deduction was to be "in full settlement of any claim the Purchaser may have against the Vendor arising from that delay". Hence, in Passmore's submission, Abco could not have the benefit of a GC 5(2) deduction and also succeed on its yet to be considered claim for damages. It is to be noted that on Abco's submission settlement should have occurred at the end of January 1999 but remains outstanding today. Hence, a deduction calculated at the penalty interest rate prescribed, which is 12%, over this extended period, on $1,005,000, would be to Abco's very significant advantage.
10 These developments highlight, of course, the difficulties that can arise when issues are tried separately, rather than the whole action.
(Page 5)
11 Faced with these difficulties I was not prepared to consider final orders for specific performance until the matters now ventilated could be properly considered. It was also apparent that Abco was, by this stage, under some time pressure because continuing delay in achieving settlement was threatening the finance arrangements pursuant to which it expected to settle.
12 At a resumed hearing on 28 March 2002, Abco abandoned its claim to further relief beyond that of specific performance and the issues ancillary to that. It sought to obtain orders to give effect to an order for specific performance, however, which entitled it inter alia to deduct from the sum it had to pay Passmore at settlement, compensation pursuant to GC 5(2), calculated on $1,005,000 at the penalty interest rate of 12% per annum for which the Agreement provided.
The "Balance of the Purchase Price payable on settlement"
13 On the basis of that abandonment of Abco's further claims to relief, the parties argued the question whether, on the true construction of the Agreement, for the purposes of GC 5(2) "the balance of the Purchase Price payable on settlement" was $430,000 or $1,005,000 as now claimed by Abco.
14 In respect of this issue in my view the correct figure is $430,000. In reaching this conclusion I am mindful that the Agreement is unusual in a number of respects. It comprises written terms which, with irrelevant amendments, were originally proposed by Passmore in settlement of proceedings for the dissolution of the partnership. An element of the Agreement involved the transfer to Abco of the share and interest of Passmore in the partnership. This in turn involved the transfer to Abco of Passmore's interest in the real estate owned by the partnership on which the partnership business was conducted. By cl 6 of the Agreement there were incorporated an identified number, but not all, of the conditions contained in the "Law Society and REIWA 1998 Joint Form by General Conditions for the Sale of Land". This incorporation was subject to three exceptions stipulated in cl 6(a), cl 6(b) and cl 6(c) of the Agreement. GC 5 was one of the conditions so incorporated. Not incorporated was the definition clause in the Joint Form of General Conditions. These incorporated conditions were applied by cl 6 "to the sale and transfer described in this offer".
15 The relevant express provisions of the Agreement in essence provide as follows –
(Page 6)
- • By cl 1, Abco agreed to pay Passmore $480,000, and, "subject to the other provisions herein", Passmore agreed to "sell and transfer to Abco" Passmore's share and interest in the partnership".
• By cl 2, Abco agreed to pay Passmore a deposit of $50,000 within two business days after acceptance.
• By cl 3, "Settlement shall occur 60 days after acceptance".
• By cl 4, "At settlement Abco … shall pay to Passmore … the balance of the purchase price, namely $430,000 and subject to the other provisions herein Passmore shall sell and transfer to Abco … the whole of Passmore's share and interest in the partnership …".
• By cl 5, "At settlement Abco … shall at its own cost and expense pay and repay all amounts owing by the partnership to Bankwest and discharge the Bankwest mortgage and any other encumbrances over the assets of the partnership".
16 It is in the context of these express provisions that the question arises, under the incorporated GC 5(2), what is meant by "the balance of the Purchase Price payable on settlement". This is in the context of a deduction of compensation "from the balance of the Purchase Price payable on settlement". General Condition 5(1) uses somewhat similar terminology and does not offer any clearer insight into the intention. In a wider context GC 4(4), which was also incorporated, provides that "the Purchaser shall pay at settlement to the Vendor … the balance of the Purchase Price subject to Conditions 5(2) … and other moneys payable by the Purchaser on settlement in exchange for a Registrable Transfer of the Land …". It is to be noted that this distinguishes between "the balance of the Purchase Price" and "other moneys payable by the Purchaser on settlement", a distinction also found in GC 5(1).
17 There is an obvious awkwardness about the application of these conditions, which were drawn to deal with a transfer of land, to an agreement which deals with one partner buying out the partnership interest of the other partner, especially when that transaction also involves a transfer of land.
(Page 7)
18 Nevertheless, I can only read cl 1, cl 3 and cl 4 as providing for a purchase price of $480,000. The "balance of the Purchase Price" payable "at settlement" is identified by those express words in cl 4 to be $430,000, after account is taken of the $50,000 deposit required by cl 2.
19 It seems to me that, in addition to providing for the payment of this purchase price, by the phrase "subject to the other provisions herein", which appears in both cl 1 and cl 4, and by cl 5, Abco separately undertook to pay to Bankwest the amounts necessary to discharge the Bankwest mortgage and any other encumbrances.
20 The moneys necessary to discharge these partnership debts pursuant to cl 5 were not moneys payable by Abco to Passmore at settlement under the scheme of cl 1 to cl 4. They were not included in "the balance of the Purchase Price" in cl 4. They are regarded by the Agreement, in my view, as a distinct obligation undertaken by Abco, to which it is to attend quite independently of Passmore, as part of the overall Agreement.
21 As GC 5(2) is incorporated by reference into this agreed scheme, it appears to me that "the Purchase Price" to which it refers must be the agreed sum of $480,000, and "the balance of the Purchase Price payable on settlement" must be the sum of $430,000 for which cl 4 makes express provision.
22 Of course the Agreement could have been differently framed so as to attract penalty interest to all sums to be paid by Abco on settlement but that is not the way cl 1 to cl 5 are drawn. Had that approach been taken, however, the parties may well have made a provision different from GC 5(2). This is because cl 5 requires Abco to discharge all amounts owing to Bankwest. This requires the discharge of the whole debt, not just Passmore's nominal half interest. Were GC 5(2) to apply to it, it would appear that penalty interest would be attracted to the whole of the partnership debt, not just half of it, which would be a strange result indeed.
23 This sufficiently expresses the reasons which persuaded me on 28 March 2002 to hold that any deduction to which Abco might be entitled under GC 5(2) should be calculated on the sum of $430,000, not on the sum of $1,005,000.
(Page 8)
General Condition 5(2)
24 Following a further adjournment to allow the parties to prepare more detailed submissions on other aspects of the meaning and effect of GC 5(2), the hearing was continued on 4 April 2002. The terms of GC 5(2) are:
"(2) If for any reason attributable to the Vendor, settlement is not effected on or within 3 Business Days after the Settlement Date, the Vendor must allow to the Purchaser on settlement compensation at the Prescribed Rate on the balance of the Purchase Price payable on settlement calculated from and including the Settlement Date but excluding the date upon which the settlement is in fact effected, in full settlement of any claim the Purchaser may have against the Vendor arising from that delay. The Purchaser may deduct the amount of compensation from the balance of the Purchase Price payable on settlement. The Purchaser's right to compensation under this Condition is conditional upon the Purchaser being ready willing and able to complete the purchase at the Settlement Date, but if the Purchaser is not, the Purchaser's right to compensation under this Condition commences from the day upon which the Purchaser is and continues to be so ready willing and able to complete the purchase and the Purchaser has given Notice in writing to the Vendor or the Vendor's Representative of that fact."
25 The first issue raised between the parties is the meaning in this context of "the Settlement Date". Clause 3 of the Agreement provided for settlement to occur 60 days after acceptance of the offer. As detailed in the primary reasons this was 1 January 1999. Settlement did not take place "on or within 3 Business days after" that date. That failure to settle at that time was not attributable to Passmore which, on the evidence, was "ready willing and able" to complete the sale at that time. General Condition 5(2) had no application to that situation. By GC 5(1) Abco was required, therefore, to pay to Passmore penalty interest at 12% per annum on the balance of the purchase price namely $430,000. While GC 5(1) also refers to other moneys payable on settlement, in the context of cl 1 to cl 5 and GC 4(4) I do not read them as referring to the distinct obligation of Abco to discharge the partnership debt to Bankwest under cl 5. In my view they refer to any incidental moneys payable by Abco to Passmore on
(Page 9)
- settlement, such as on an adjustment of rates and taxes and the like. It should be said that Passmore does not contend otherwise. The period for which that penalty interest is payable, in my view, terminates on 28 January 1999. The reason for this is explained by what follows.
26 Settlement not having occurred on 1 January 1999 or within 3 business days of that date for a reason not attributable to Passmore, as detailed in the primary reasons Passmore took no action in respect of the default. The reason for this, no doubt, was that cl 24 expressly provided for further remedies if Abco "fails to settle within 90 days". These remedies provided for the cancellation of cl 1 to cl 4, the superseding of a number of other clauses of the Agreement, and provided for the winding up of the partnership by a Receiver. As detailed in the primary decision, Abco was eventually ready willing and able to settle on 28 or 29 January 1991, ie within the 90 days contemplated by cl 24. It remained ready to settle thereafter as detailed in the primary reasons. Passmore did not settle on 28 or 29 January 1999 for reasons "attributable to" it, within the meaning of GC 5(2). It has not been prepared to settle since then. The reasons for this and the circumstances that followed are detailed in the primary reasons. In these circumstances I would regard Passmore's entitlement to payment of penalty interest pursuant to GC 5(1) as having terminated on 28 January 1999.
27 Abco contends, however, that for the purposes of GC 5(2), "the Settlement Date" should also be regarded as the 29 January 1999. Abco submits in effect that the Agreement should be understood to have contemplated two settlement dates, 60 days after acceptance (pursuant to cl 3) and 90 days after acceptance (pursuant to cl 24). It submits on this basis that GC 5(2) applies also to the failure of Passmore to settle on 29 January 1999 by virtue of cl 24 of the Agreement.
28 I am not persuaded by this argument. As more exhaustively considered in the primary reasons, settlement was to occur 60 days after acceptance of the offer. That was "the Settlement Date" for the purpose of GC 5, and also for the directly related GC 4; cf cl 6(b) of the Agreement. In my view, cl 24 is not providing for a second contractual Settlement Date, but provides for a distinct and further remedy if settlement does not occur in accordance with cl 3, and the default continues until the expiry of 90 days after the date of acceptance of the offer.
29 For these reasons, in my view, GC 5(2) has no application to the failure of Passmore to settle on Friday 29 January 1999 or within 3 Business Days of that date, or more accurately of Sunday 31 January
(Page 10)
- 1999 which was the actual date for the purposes of cl 24. That is because the "Settlement Date" within the meaning of GC 5(2) was, and remained, 1 January 1999. On that date and during the period "within 3 Business Days after that" date, settlement did not occur, but this was for reasons "not attributable to" Passmore. Hence, GC 5(1), and not GC 5(2), applied to that default.
30 It is on this basis, in my view, that Abco's claim to be entitled to deduct compensation from the balance of the purchase price pursuant to GC 5(2) fails.
31 Were I to prove wrong in this respect, the present case affords further difficulties in the application of GC 5(2). It is not necessary for me to finally deal with these but some findings of fact and other observations should be recorded in case this issue is taken further.
32 Were it the case, contrary to the view I have formed, that GC 5(2) applied in this case to entitle Abco to deduct compensation as claimed from 3 February 1999 (ie, 3 business days after 31 January 1999), it is Abco's submission that on the true construction of GC 5(2) the compensation is to be calculated from 3 February 1999 until settlement actually occurs. It is yet to occur. Passmore submits otherwise. In effect it contends that Abco's entitlement to compensation ceases when, or during any period that, the reason for the continuing failure to settle is not attributable to Passmore. I have no need to deal with the construction issue on which this difference turns.
33 In the primary reasons I have already made a number of factual findings relevant to the issue whether at any time following 3 February 1999 it might be concluded that the continuing failure to settle was not attributable to Passmore; see in particular [109] to [114]. I do not wish to vary those findings.
34 It is clear, as Passmore submits, that at any time from 3 February 1999 Abco could have instituted proceedings to resolve the dispute and obtain an order for specific performance. The findings adverted to explain the circumstances in which Abco came to make its formal claim for specific performance in its counterclaim in these present proceedings on 19 May 2000. In particular, it was Passmore which, virtually immediately after the failure to settle within the 90 days contemplated by cl 24 of the Agreement, sought to pursue legal proceedings to vindicate its position. But these efforts were rendered pointless by procedural deficiencies. Passmore's proceedings were allowed to lapse. Passmore
(Page 11)
- indicated it would take fresh proceedings, but that did not eventuate. From about July 1999 until 24 February 2000 neither party instituted proceedings, each being prepared to stand off and await developments while the Receiver conducted the partnership. On 24 February 2000 the Receiver instituted these proceedings as it was necessary that something be done to resolve the dispute. Passmore had been influential in persuading the Receiver to do so. Both Passmore and Abco were parties to the Receiver's proceedings and, in the ordinary course of them, pursuant to procedural directions, Abco came to file its defence and counterclaim on 19 May 2000.
35 Throughout this period Passmore remained unprepared to settle. Its position was unchanged. While Abco could have acted earlier to force Passmore's hand, it remained the case in my view that from 3 February 1999 to 19 May 2000 the failure to settle was attributable to Passmore's continuing refusal to do so. Passmore contends this is inequitable because of Abco's failure to act; both parties were delaying. I do not see, however, that in the context of the application of GC 5(2), inequity is a relevant or the determinative issue. The issue is contractual. While I refrain from expressing a view on the construction and application of GC 5(2) in these circumstances, if Abco's entitlement to deduct compensation should turn on whether the failure to settle during this period was "attributable to" Passmore, it would be my finding that it was, notwithstanding that Abco also failed to act in that period to seek appropriate relief to overcome Passmore's continuing failure to settle.
36 There was also an issue whether throughout this period Abco remained ready willing and able to settle. This is dealt with in the primary reasons, particularly at [125] to [130]. While there were some factual changes as detailed in those paragraphs, it remained the case as recorded in my finding at [130] that Abco remained ready willing and able to settle to 19 May 2000, and thereafter.
37 The submissions of the parties focussed firstly on the period to 19 May 2000 for the reasons indicated. Thereafter the litigation to resolve the dispute took its course. There is no aspect of the course of the proceedings, in my finding, in which undue delay or prevarication could be attributed to either party. It remained the case, however, that, throughout the period until the reserved decision was given on 28 November 2001, Passmore remained unprepared to settle and, as far as the issue has been ventilated before me, Abco remained ready willing and able to settle. I would make similar findings in respect of the period from 19 May 2000 to 28 November 2001, as for the period to 19 May 2000.
(Page 12)
38 Since the delivery of the reserved decision on 28 November 2001 events have taken a number of turns. They have not been sufficiently ventilated before me, however, to enable findings as to whether the continuing failure to settle was attributable to Passmore or whether Abco was ready willing and able to settle throughout that period.
39 I would add, should it prove relevant, that on the evidence before me I would have fixed a period of 60 days from the date of the order within which settlement was to be effected pursuant to an order for specific performance.
40 It should also be noted that the parties were not able to refer me to any authorities on the operation of provisions such as GC 5(2) in a context such as the present.
41 One further matter was dealt with. As noted at [117] in particular of the primary reasons, during the Receiver's management of the business he has made capital repayments from partnership funds to Bankwest of some $100,000 with the consequence that Abco's obligation pursuant to cl 5 of the Agreement has been reduced by that $100,000 since the failure to settle at the end of January 1999. I dealt with this in the context of the discretion whether to grant specific performance at [118]. I concluded that in the result Abco would not gain any advantage because of this lessening of the quantum of its contractual obligation because, in general terms, there would be a corresponding reduction in any damages to which it was entitled in the proceedings.
42 The abandonment of Abco's claim for damages in the circumstances noted earlier in these supplementary reasons warrants a revisiting of this repayment by the Receiver. As the repayment was made from partnership funds the practical effect will now be that, should settlement occur, Abco will have gained an advantage, equal to one-half of the amount of the repayment, as against Passmore. For this reason the amount payable by Abco to Passmore on settlement should be adjusted by adding a sum equal to one-half of the amount of any repayment made by the Receiver to Bankwest since the end of January 1999. On the evidence, that would require an additional $50,000 to be paid by Abco to Passmore on settlement.
43 The parties should bring in minutes, or an agreed minute, to give effect to the primary reasons and these supplementary reasons.
0