Norwood Hall Pty Ltd v Eighty-Fifth Macorp Nominees Pty Ltd
[2000] VSC 70
•7 March 2000
SUPREME COURT OF VICTORIA Not Restricted
COMMERCIAL & EQUITY DIVISION
COMMERCIAL LIST
No. 7340 of 1999
F5093
| NORWOOD HALL PTY LTD (ACN 007 303 111) & ORS | Plaintiffs |
| v | |
| EIGHTY-FIFTH MACORP NOMINEES PTY LTD (ACN 069 222 680) & ORS | Defendants |
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JUDGE: | Warren J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 3 March 2000 | |
DATE OF JUDGMENT: | 7 March 2000 | |
CASE MAY BE CITED AS: | Norwood Hall Pty Ltd & Ors v Eighty-Fifth Macorp Nominees Pty Ltd & Ors | |
MEDIUM NEUTRAL CITATION: | [2000] VSC 70 | |
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Order 52 – order for the taking of accounts – non‑compliance by accountants with court order – acquiescence by defendants' solicitors – status of report – payment of costs of the report
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiffs | Mr G.L. Rice | Voitin Walker Davis |
| For the First, Second, Fourth, Fifth, Sixth and Eighth Defendants | Mr S. Whelan QC with | A.P. Kelly & Associates |
| For the Third and Seventh Defendants | Mr R. Moore | Mills Oakley |
| For the Ninth Defendant | Mr M. Kowalski | McMahons |
HER HONOUR:
The dispute between the plaintiffs and the defendants relates to a joint venture agreement for the development of "airspace" on the southern side of Toorak Road, South Yarra at South Yarra Station. The immediate matter concerns an order for the taking of an account relating to the joint venture agreement.
The plaintiffs allege in their statement of claim that on about 20 September 1995 the first, second and third plaintiffs entered into an agreement with the first, second and third defendants referred to generally as "the unit holders' agreement". The agreement related to a unit trust the trustee of which trust was alleged to be South Yarra Railway Redevelopment Corporation Pty Ltd. The plaintiffs allege that the purpose of the relevant parties entering into the unit trust deed and the unit holders' agreement was to facilitate a joint venture for the redevelopment of the South Yarra Station and the southern area adjacent thereto. The plaintiffs allege that arising from the agreements the second and third defendants owed various duties to the plaintiffs including a fiduciary duty.
The plaintiffs allege, further, that in about September 1997 the corporation entered into an agreement with the Public Transport Corporation for the redevelopment of the South Yarra Railway Station. Subsequently building contracts were entered into with other parties. Ultimately, the plaintiffs allege that some of the defendants breached the terms of the unit holders' agreement by including various development costs in the building contract that were not in fact development costs and exceeded the true amount of the development costs. There were allegations also of fees paid for facilitating the development. The plaintiffs allege that extensive moneys were paid to various parties including the defendants most of which payments breached the terms of the unit trust deed or the unit holders' agreement or, alternatively, the duties owed by some of the defendants to the plaintiffs. As a consequence, the plaintiffs claim damages in excess of $800,000. In the prayer for relief to the statement of claim the plaintiffs seek injunctive relief against some of the defendants with respect to the transfer or encumbrance of development rights for the South Yarra Railway Station and, relevantly for present purposes, an order for the taking of accounts in respect of South Yarra Railway Redevelopment Corporation Pty Ltd as trustee of the unit trust.
The proceeding came before Gillard J in the Commercial List on 3 December 1999. On that occasion counsel for the plaintiffs informed the learned judge that the proceeding was concerned essentially with a joint venture agreement. It was further stated to the court that the parties agreed that there should be a taking of accounts essentially for the purpose of auditing the joint venture before the matter proceeded much further in the Commercial List. On 3 December 1999 Gillard J was provided by the parties with a minute of proposed orders and after discussion between counsel the form of orders were made by consent. The relevant orders made by Gillard J were:
"(3)An account be taken of all transactions and dealings of South Yarra Redevelopment Corporation Pty Ltd (ACN 068353837) ('SYRRC') in relation to the redevelopment of the South Yarra Railway Station and the southern area referred to in paragraph 21 of the statement of claim) including but not limited to:
(a) All moneys paid to any of the parties by SYRRC;
(b) All moneys paid to any of the parties by another party to this proceeding;
(c) All moneys paid to any party by Abigroup Contractors (Southern) Pty Ltd ('Abigroup');
(d) All moneys paid to Abigroup by any of the parties;
(e) All moneys loaned or credit facilities provided to SYRRC;
(f) All moneys paid by any of the parties to any third party.
(4) All accounts required by this order shall be taken by an accountant who is either a partner of, in the employ of Pitcher Partners to be nominated by the managing partner of the said firm or such other independent accountant as the parties may agree upon;
(5) The accountant so appointed shall inform the parties of the amount of the fees to be charged with respect to the taking of such accounts before proceeding therewith;
(6) The fees for the accountant for taking such accounts shall be borne by SYRRC. SYRRC shall pay the amount of such fees to the accountant before he or she proceeds to take the accounts;
(7) The parties shall provide such accountant with reasonable access to all relevant books of account and other records reasonably requested by him or her within a reasonable time of such request and shall provide timely and full response to any reasonable enquiry made by the accountant of the parties;
(8) The accountant shall file the report in the court by 29 February 2000;
(9) That the fees for the accountant taking the said account be costs in the cause."
By letter dated 9 December 1999 the solicitors for the plaintiffs wrote to the nominated accountant retained to conduct the taking of accounts, Pitcher Partners, advising of their appointment pursuant to the order of Gillard J but specifically informing the accountants that they were to undertake and audit an investigating accountant's report on the affairs of South Yarra Railway Redevelopment Corporation Limited. By further letter dated 17 December 1999 the plaintiffs' solicitors wrote again to Pitcher Partners providing information to the accountants with respect to the case of the plaintiffs. Neither of the letters of 9 or 17 December 1999 were copied to the defendants' solicitors. Subsequently, on 23 December 1999 Pitcher Partners wrote to the plaintiffs' solicitors requesting that "the parties" vary their instructions in relation to the taking of accounts. The letter of Pitcher Partners dated 23 December 1999 expressed the view that the orders made by Gillard J were "too broad for us to be able to achieve". As a consequence the accountants sought the approval of "the parties" to vary the accountants' instructions to read as follows:
"Pitcher Partners are to investigate and comment on the appropriateness of the accounting for the transactions referred to in the statement of claim of the plaintiff and in the letter of Voitin Walker Davis to Pitcher Partners of 17 December 1999".
The letter went on to estimate fees of $15,000 and seeking payment prior to commencement of their report. The letter finished with the observation that the accountants awaited confirmation by the parties of the proposed terms of reference in order that they may "commence the investigation".
The letter of Pitcher Partners dated 23 December 1999 was received by the plaintiffs' solicitors on 4 January 2000. On that day, 4 January 2000, the solicitors for the plaintiffs faxed copies of the letter of Pitcher Partners dated 23 December 1999 to the defendants' solicitors. The letter was forwarded under cover of a facsimile transmission referring to the forwarding of the Pitcher Partners letter "for your information" and requesting advice in relation to the payment of the fees of the accountants. There is no dispute among the defendants that the letter of Pitcher Partners dated 23 December was forwarded to the various defendants' solicitors on 4 January 2000.
On 7 February 2000 Pitcher Partners released a draft report. The defendants' solicitors were immediately concerned about the contents of the draft report and wrote complaining to Pitcher Partners that the draft report did not comply with the order of Gillard J made on 3 December and alleged that the report reflected bias against the defendants. Thereafter debate ensued between Pitcher Partners and the defendants' solicitors. Ultimately the matter came before me including a summons by the third defendant seeking that the orders of Gillard J made by consent on 3 December 1999 be set aside, that the report of Pitcher Partners be removed from the court file and that the plaintiffs pay the costs of Pitcher Partners.
Thereafter the defendants refused to assist Pitcher Partners any further with respect to the preparation of their final report. The accountants proceeded to prepare a final report and accordingly, under cover of a letter dated 29 February 2000 Pitcher Partners submitted their report to the court. The defendants allege that the final report contains adverse findings with respect to the various positions of the defendants.
Having had the opportunity to consider the affidavits and the exhibits thereto it can be readily comprehended that the defendants are dissatisfied with the outcome of the report of Pitcher Partners. Nevertheless a number of observations must be made. Firstly, Pitcher Partners were retained following orders made by consent before Gillard J. Secondly, although the defendants were not party to the letters from the plaintiffs' solicitors to Pitcher Partners dated 9 and 17 December 1999 they nevertheless were provided with a copy of the letter from Pitcher Partners to those solicitors dated 23 December 1999. The letter from Pitcher Partners specifically refers to the earlier letter from the plaintiffs' solicitors dated 17 December 1999. It also refers to the nature of the instructions that had been given to Pitcher Partners and sought to vary the terms of the task of the accountants. Notwithstanding the receipt of the letter from Pitcher Partners dated 23 December 1999 by the defendants' solicitors on 4 January 2000 the defendants sat on their hands and took no step to intervene in the matter at that time.
The defendants complain that Pitcher Partners have embarked upon a course that they were not ordered to do. Notwithstanding their complaint the fact remains that the defendants acquiesced to the course embarked upon by Pitcher Partners. In my view upon receipt of the letter of Pitcher Partners dated 23 December 1999 on 4 January 2000 the defendants ought to have been alerted to the accountants embarking upon a different course to that contemplated by the consent orders.
It is conceded by the plaintiffs that the report by Pitcher Partners goes beyond the ambit of the orders made by Gillard J on 3 December 1999. However, the plaintiffs urge that subject to necessary and consequential variations to the consent orders the report should remain as a court ordered report on the basis that the defendants only sought to demur from it when they received the draft report which gave them the hint that Pitcher Partners may make findings against them.
Against this background the first to eighth defendants seek to have the report of Pitcher Partners removed from the court file on the basis that it did not comply with the order made by Gillard J on 3 December 1999. The plaintiffs concede that the Pitcher Partners' report did not comply with the orders made by Gillard J and does, in any event, warrant a variation to the orders previously made. It follows that all parties agree that the report of Pitcher Partners did not comply with the orders made by Gillard J.
After giving the course of correspondence close consideration I am satisfied that the conduct of the plaintiffs' solicitors up until the time of the forwarding on 4 January 2000 of a copy of the letter of Pitcher Partners dated 23 December 1999 was unfortunate. A far more desirable course would have been for those solicitors to have kept the defendants' solicitors fully informed, in particular, to have provided those solicitors with copies of their letters of 9 and 17 December 1999. However, that did not occur. The change in the nature of the report was different to that contemplated by the consent orders and ought have been brought back to court for further order. Nevertheless, upon the defendants' solicitors receiving the facsimile transmission on 4 January 2000 from the plaintiffs' solicitors they ought to have been alert to the fact that there had been communications between the plaintiffs' solicitors and Pitcher Partners that on their face did not or potentially did not accord with the orders made by consent by Gillard J on 3 December 1999. So much ought to have been apparent from the statements of Pitcher Partners in their letter of 23 December 1999 as to the course they proposed to embark upon. In fact, the defendants' solicitors by their conduct acquiesced to the course contemplated by Pitcher Partners and the plaintiffs' solicitors. It can be reasonably inferred that if they had appreciated or investigated the matter they would have realised that Pitcher Partners were embarking upon a course never contemplated by the defendants' solicitors at the time they consented to the orders made by Gillard J on 3 December 1999.
I cannot determine whether Gillard J would have made orders encompassing a report of the nature in fact prepared by Pitcher Partners. It appears from the transcript of the relevant day that the learned judge made the orders he did on the basis that they were submitted to him to be made by consent. I am now faced with the reality of a report that goes beyond the orders contemplated by Gillard J. Clearly it is a report that the defendants would never have agreed to being prepared in the first place. Weighing all these matters up I am satisfied that the report of Pitcher Partners should be removed from the court file. Secondly, there is the question of the status that the report should have hereafter. The report cannot be regarded in my view as a report ordered by the court for the taking of accounts. Rather it is a report to which the defendants bear hostility and will doubtlessly seek to challenge at trial. On the other hand it could be reasonably anticipated that the plaintiffs will seek to rely upon the report of Pitcher Partners at trial. That ultimately is a matter for the plaintiffs but if they seek to call Pitcher Partners and rely upon the report such witness would become a witness for the plaintiff.
The third matter to be considered is the cost of the report by Pitcher Partners. Gillard J made orders on 3 December 1999 that the costs of the report would be "costs in the cause". In light of the circumstances that have developed, in particular, on the one hand the conduct of the plaintiffs' solicitors up until 4 January 2000 and the conduct of the defendants' solicitors between 4 January and 7 February 2000 the I consider that question of who should pay the costs of the Pitcher Partners report ought be reserved pending the use if any of the report at trial. Accordingly, I will order that the order for costs of the report made by Gillard J be vacated and substitute therefore a different order reserving costs.
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