Paterson v Seamore Pty Ltd
[2011] VCC 1217
•28 June 2011
| IN THE COUNTY COURT OF VICTORIA | Revised |
Not Restricted
AT MELBOURNE
COMMERCIAL LIST
GENERAL DIVISION
Case No. CI-09-05727
| HELEN PATERSON | Plaintiff |
| v | |
| SEAMORE PTY LTD | Defendant |
| and by Counterclaim | |
| SEAMORE PTY LTD | Plaintiff by Counterclaim |
| v | |
| HELEN PATERSON | Defendant by Counterclaim |
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| JUDGE: | HIS HONOUR JUDGE SHELTON |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 18, 19 and 20 May 2011 |
| DATE OF JUDGMENT: | 28 June 2011 |
| CASE MAY BE CITED AS: | Paterson v Seamore Pty Ltd |
| MEDIUM NEUTRAL CITATION: | [2011] VCC 1217 |
REASONS FOR JUDGMENT
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Catchwords: Claim for monies loaned – intention to create legal relations – intention to create joint venture – novation – time for repayment of money loaned – Edwards v Skyways Ltd [1964] 1 WLR 349 – Maxwell & Anor v Moorabool Developments Pty Ltd & Anor [2004] VSC 392 – Darmanin v Cowan [2010] NSWSC 1118 – Tolhurst v Associated Portland Cement Manufacturers (1900) Ltd [1902] 2 KB 660 – Ogilvie v Adams [1981] VR 1041.
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | In person | |
| For the Defendant | Ms J Treleaven | Russell Kennedy |
| HIS HONOUR: |
1 In this proceeding, the plaintiff claims to be entitled to ownership of a lengthy list of machinery and equipment on a property owned by the defendant at 45 Reserve Road, Don Valley (“the property”). The plaintiff alleges that the defendant refuses to return this machinery and equipment to her.
2 At the commencement of the hearing, it became apparent that there may be an overlap of evidence and matters in dispute in this proceeding and Proceeding No 5987 of 2009 in the Supreme Court where the plaintiff is Yarra Valley Spring Water Pty Ltd (in Liquidation) (Controller appointed) (“YVSW”) and the defendants are the plaintiff in this proceeding and her son, James Paterson. There is also a counterclaim in the Supreme Court proceeding in which the plaintiff in this proceeding is the plaintiff by counterclaim and the defendants are YVSW and Richard William Hack (“Hack”), a director of the defendant in this proceeding.
3 The plaintiff sought an adjournment of her claim in this Court pending the outcome of the Supreme Court proceeding which was to be heard on 31 May 2011. This seemed a sensible course to adopt, and I so ordered.
4 There is also a counterclaim in this proceeding which has no connection with the Supreme Court proceeding and I determined to hear it.
5 The defendant’s claim is for the sum of $139,332.80 for monies lent by it to the plaintiff. This sum is particularised as follows:
Date Payment to Reference Amount 13/08/03 Holding Redlich Helen Paterson Loan Legals $5,000.00 08/10/03 Holding Redlich Helen Paterson Loan Legals $8,184.66 Russell Kennedy
26/11/03 Cost for Holding Redlich $25,000.00 Trust Account
03/12/03 Russell Kennedy Invoice 200870 $3,971.90 03/12/03 Brian Ward Partners Helen Paterson Loan Legals $14,666.05 18/08/04 Russell Kennedy Invoices 210563, 1009804 and $9,955.66 9209008 24/08/04 Hausler & Associates Helen Paterson Loan Legals $2,145.00 25/02/05 Russell Kennedy Invoices 216883, 218313 and $6,601.68 219629 28/02/05 Hausler & Associates Yarra Valley Spring Water Pty $3,707.00 C/- Russell Kennedy Ltd 27/05/05 Russell Kennedy Invoices 1010554 and 223922 $10,136.70 01/06/05 Chris Anderson Cash advance for forensic $3,000.00 exam 10/06/05 Russell Kennedy Invoice 225327 $4,441.50 03/11/05 Russell Kennedy Part payment of invoices $7,000.00 10004539, 10001437 and
22670002/05/06 Russell Kennedy Invoices 1004539, 10009011, $9,961.57 10009853 and 10017152
TOTAL $139,332.80 6 The plaintiff does not dispute these payments were made by the defendant. The only matter in issue is her liability to reimburse the defendant for these payments.
7 It is necessary to give some background as to why the defendant made these payments.
Background
8 Hack and his wife, Margaret, are the sole directors of the defendant. Hack is also its company secretary. Hack was brought up and lived in Queensland and in the 1980s there, became acquainted with one of the plaintiff’s sons and her sister. He moved to Melbourne with his family in January 2004 and lived for some months in a caravan at the back of the plaintiff’s house at Aspendale. He came to know the plaintiff quite well.
9 Meanwhile, in mid-2003, Hack was approached by the plaintiff and two of her sons seeking his assistance to fund a venture to purchase the property and to develop a spring water extraction and bottling business there. It seems they were aware Hack had access to funds for investment. It was agreed that the defendant would purchase the property to run the proposed business. A new company was formed, YVSW. Hack, the plaintiff and two of her sons were the directors of YVSW and they each held twenty-five per cent of the shares in YVSW either personally or through a corporate entity. The existing spring water business of the plaintiff and her two sons was sold to YVSW. In addition, there was a loan agreement between YVSW and the defendant, a charge over YVSW in favour of the defendant and a five-year lease of the property from the defendant to YVSW.
10 At about this time, Hack became aware through discussions with the plaintiff that she was involved in a complex legal proceeding in the Supreme Court in relation to her late husband’s estate (“the proceeding”). The plaintiff alleged that there had been mismanagement of the estate by its executors. A number of solicitors had acted for the plaintiff in the proceeding. Hack stated that he discussed the proceeding with the plaintiff and that she asked him for assistance in funding the proceeding. She conceded that she was unable to fund it herself at that time. The solicitors then acting for the plaintiff were Holding Redlich and it will be noted in the table above that the sum of $5,000 was paid to that firm on 13 August 2003. Hack stated that the plaintiff said that she would repay the defendant the monies loaned from her earnings – at the time she was working as a painting contractor. He stated that this conversation took place in August 2003 in the plaintiff’s car as they were going to a meeting at Holding Redlich. The advice received was not favourable to the plaintiff. Hack states the plaintiff was not happy with the advice received from Holding Redlich and wished to obtain an independent opinion. He then arranged for Michael Main of Russell Kennedy to act on behalf of the plaintiff and it was agreed that the fees of Russell Kennedy would be paid by the defendant and repaid on the same basis as those of Holding Redlich. A meeting was held at Russell Kennedy between Main, the plaintiff and Hack on 8 October 2003.
11 Soon after the meeting on 8 October 2003, Hack states that the plaintiff told him that Holding Redlich was owed over $20,000. He stated he needed some assurance from the plaintiff that she would be able to repay him this sum if the defendant advanced it and she indicated that she was prepared to give the defendant security for the loan monies over her shares in YVSW. Hack states that the defendant did not proceed to obtain the security offered by the plaintiff since the defendant already had a charge over YVSW and that he was of the view that the security offered added nothing further to this. Hack states that the defendant would never have agreed to pay the plaintiff’s legal costs if she had not promised to repay the money.
12 By mid-2008, the defendant was wanting to part ways with the Paterson family and its entities. Accordingly, by an agreement dated 20 June 2008, a company associated with the Paterson family, Cool Change Natural Spring Water Pty Ltd (“Cool Change”), contracted with Hack and his entities to purchase the property and his shares in YVSW for the sum of $4.1 million.
13 The plaintiff, as I apprehend her position, bases her defence to the counterclaim on three grounds:
(i) There was no intention to create legal relations; (ii) The payments were made towards a joint venture; (iii) The debt is that of YVSW and not that of the defendant. 14 I turn to deal with each of these defences.
Intention to Create Legal Relations
15 The onus is on the defendant to show that there was no intention to create a legally enforceable agreement. This onus is a heavy one. In Edwards v Skyways Ltd [1964] 1 WLR 349, at 355, Megaw J stated:
“In the present case, the subject-matter of agreement is business relations, not social or domestic matters. There was a meeting of minds – an intention to agree. There was, admittedly, consideration for the company’s promise. I accept the propositions of counsel for the plaintiff that in a case of this nature the onus is on the party who asserts that no legal effect was intended, and the onus is a heavy one.”
16 In Maxwell & Anor v Moorabool Developments Pty Ltd & Anor [2004] VSC 392, at paragraph 258, Habersberger J followed Megaw J, and confirmed that a heavy onus was placed on a party contending that there was no intention to create a legally enforceable agreement.
17 In certain circumstances where the parties are related or social and domestic relations are involved, the courts have been prepared to find that there was no intention between the parties to create legal relations. In Darmanin v Cowan [2010] NSWSC 1118, Ward J stated, at paragraphs 204 to 209:
“The Cowans deny that the arrangement reached between them in relation to the occupation of their land was one which was intended to be legally binding.
The arrangement was clearly reached in a social context, between friends. The very dependency Mr Crossland relies upon for the undue influence claim is predicated on there being a close domestic or social relationship.
There is a rebuttable presumption (being a presumption of fact) that arrangements or agreements made in such a context are not intended to have legal force. The rationale or justification for making an assumption that there is no intention to create legal relations in such a situation is that, at the time of making the alleged promise, the parties would not have regarded their arrangements in terms of legal consequences.
The presumption that, due to the nature of the relationship between the parties, they did not intend to create legal relations, has been applied beyond the family context to other social and domestic arrangements (for example, Coward v Motor Insurer’s Bureau [1963] 1 QB 259; Buckpitt v Oates [1968] 1 All ER 1145; Parker v Clarke (at 292)).
In Teen Ranch Pty Ltd v Brown (1995) 87 IR 308, Handley, JA (p 310) indicated that family, social, and domestic arrangements do not normally give rise to binding contracts because the parties lack the necessary intention, referring to Balfour v Balfour [1919] 2 KB 571.
Aitkin LJ in Balfour v Balfour (at 578), gave as an ordinary example of the situation where an agreement between parties does not result in a contract within the legal meaning of that term the situation where there is an offer and an acceptance of hospitality. … .”
18 Here there was a close social relationship between the plaintiff and her family and Hack. However, Hack gave evidence that the plaintiff on several occasions indicated that she would repay the monies advanced on her behalf in due course and there is no suggestion on his part that the monies advanced were to be a gift. The plaintiff did not give direct evidence that the monies were advanced as a gift and her reliance upon the defences that there was an intention to create a joint venture, or that YVSW was responsible for the debt, is not consistent with the monies having been advanced as a gift.
19 In the circumstances, in my view, the plaintiff has clearly not discharged the heavy onus placed upon her.
Intention to Create a Joint Venture
20 In her Amended Defence to Counterclaim dated 23 February 2011, the plaintiff asserts that there was a joint venture between her and the defendant “in relation to a ground water licence which both of them intended to use in a business of bottling and selling spring water under the business registered YVSW”. I agree with the submission of Ms Treleaven, who appeared for the defendant, that the meaning of this is unclear. In Particulars of this pleading, the plaintiff states:
“At no stage through any of these meetings or discussions did I ask Hack for any loans of money to pay for the legal costs nor did he express that the money paid for legal fees to date was a loan. It was simply made very clear that he would get 25 per cent of any payout from the litigation that he was currently funding.”
21 The Particulars continue:
“It was not until a meeting with Hack and Main on 28 October 2003 that the first mention of security was brought up by Main, as to how could I repay Hack in case the litigation failed. It was at this meeting that the suggestion of my 25 per cent shareholding in our new business, Yarra Valley Pty Ltd, be used as security.”
22 In a statement made by the plaintiff on 9 May 2011 pursuant to an order made by his Honour Judge Ginnane on 3 May 2011, the plaintiff stated:
“During these discussions it was agreed that in exchange for funding the Supreme Court Matter, Richard Hack would get a 25 per cent share in any benefit we were to get upon the successful outcome of the Supreme Court matter … Richard Hack agreed to ‘take a punt’ on the successful outcome of the Supreme Court Matter as it was to cost around $150,000 to see it to its conclusion.”
23 The following is an extract from the transcript of the plaintiff’s cross- examination:
“Q: Mrs Patterson, you offered the defendant a share of the outcome
of the litigation, is that correct?---A: Yes. Q: Is it correct you offered that?--- A: Yes, Your Honour. Q: And you did that because you were looking for a way in which you
could repay Mr Hack for his assistance, weren’t you?---A: Yes.”
24 From the above, although reference is made to a ground water licence in the pleading, it appears that the joint venture alleged related to the proceeding only.
25 Hack denied that the defendant had entered into a joint venture with the plaintiff, although he said it was discussed in general terms. At the meeting with Holding Redlich on 8 October 2003, consideration was given to an opinion from counsel that the plaintiff’s case was hopeless. Hack stated that this position did not change subsequently when Michael Main of Russell Kennedy became involved. It would seem most unlikely for the defendant to become involved in taking an interest in the outcome of the proceeding and investing funds to this end while obtaining negative advice as to the outcome of the proceeding. Further, the offering of a charge over her shares in YVSW by the plaintiff is inconsistent with her assertion that she and the defendant were engaged in a joint venture. Main confirmed that the plaintiff told him at a conference on 28 October 2003 that she had offered Hack security over her shares in YVSW.
26 I conclude that the plaintiff and the defendant did not enter into a joint venture.
Is it the Debt of YVSW?
27 The plaintiff conceded under cross-examination that she had offered a share in the outcome of the proceeding to the defendant. This is consistent with the liability being that of the plaintiff to repay the defendant for monies loaned. Again, the offer to charge her shares in YVSW is consistent with the plaintiff being responsible for payment of the defendant.
28 The plaintiff, in support of her assertion that YVSW, and not she, is liable for repayment of the monies advanced by the defendant, relies upon documentation forwarded by Hack to Richard Paterson, the plaintiff’s son, at YVSW dated 6 August 2007 enclosing what is stated to be “a full reconciliation” of monies which Hack states was owing to him and entities associated with him. As indicated, he was at this stage wishing to extricate himself and his entities from the relationship with the plaintiff and her family and this eventually led to the agreement with Cool Change of 20 June 2008.
29 The 6 August 2007 letter contains seven items with amounts against them. One of these is “Helen Paterson Loan”. The sum stated against this item is $149,779.70 (this sum was later adjusted to the sum claimed, $139,332.80). There are schedules to the letter for each item which set out in detail how the sums against each item are calculated. Significantly, each of the schedules is headed “YVSW – Business” except the schedule headed “Helen Paterson Loan”.
30 The plaintiff stated that she considered that the debt to the defendant had been “put into Yarra Valley Spring Water” even though YVSW obtained no benefit from the advance of funds by the defendant. When pressed on the point that YVSW did not obtain any benefit from the advance of funds, she stated:
“But we’re all directors of Yarra Valley Spring Water, and were quite happy to loan in, it didn’t matter, the company was quite happy to take on that loan.”
31 Under cross-examination, Hack confirmed that Richard Paterson had requested from him a comprehensive summary of monies claimed by him and entities connected with him, and the documentation in issue was provided in response.
32 The proceeding concerned a dispute over the estate of the plaintiff’s deceased husband and had no connection with YVSW. Hack was a director of and shareholder in YSVW and stated that he never agreed that the monies advanced to the plaintiff by the defendant were repayable by YVSW since that company had derived no benefit from the monies advanced.
33 The legal position is clear. An obligation, such as the plaintiff’s obligation to repay the monies loaned to it by the defendant, cannot be assigned, as alleged here, to YVSW, without the consent of the creditor, here the defendant. In Tolhurst v Associated Portland Cement Manufacturers (1900) Ltd [1902] 2 KB 660 at 668, Collins M R stated:
“A debtor cannot relieve himself of his liability to his creditor by assigning the burden of the obligation to someone else; this can only be brought about by the consent of all three, and involves the release of the original debtor.”
34 As explained by Windeyer J in Olsson v Dyson (1969) 120 CLR 365 at 388-389, to effectively assign an obligation, a new contract or “novation” is necessary which extinguishes the obligations under the old contract and imposes obligations on a new debtor. The creditor must be a party to such novation. Hack denied that any such novation took place and there was no evidence before me of any such novation.
35 I reject the plaintiff’s defence that her obligation to repay the defendant had been assigned to YVSW.
No Demand for Payment
36 Hack stated in evidence that there was no agreement between him and the plaintiff as to when she was to repay the monies loaned by the defendant. The plaintiff stated that she had never received any demand for repayment from the defendant. This does not defeat the defendant’s claim. In Ogilvie v Adams [1981] VR 1041, at 1043, Fullagar J stated:
“… Where there is a loan of money simpliciter (i.e. with nothing at all said
as to repayment), the money is repayable instanter. … .”
Conclusion
37 The plaintiff has no defence to the defendant’s counterclaim for monies loaned to the plaintiff. There will be judgment for the defendant on the counterclaim against the plaintiff for the sum of $139,332.80.
38 I will hear from the parties on the question of interest, costs, the further hearing of the plaintiff’s claim and the outcome of Supreme Court proceeding number 5987 of 2009 and its relevance to the proceeding before me.
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