PQR v Secretary, Department of Justice and Regulation

[2017] VSC 517

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST

S ECI 2015 000385

ADAZ NOMINEES PTY LTD (ACN 006 228 119) as trustee for The Rado No 2 Trust and others according to the Schedule	Plaintiffs
v
CASTLEWAY PTY LTD (ACN 131 870 481) as trustee for The Castleway Trust and another according to the Schedule	Defendants

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JUDGE:	ROBSON J
WHERE HELD:	Melbourne
DATE OF HEARING:	28 August 2017
DATE OF RULING:	28 August 2017
CASE MAY BE CITED AS:	Re Adaz Nominees Pty Ltd (No 1)
MEDIUM NEUTRAL CITATION:	[2017] VSC 517	First revision:  9 October 2017

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PRACTICE AND PROCEDURE – Consideration of separate hearings or split trial – Risk of cross-examining the same witness twice on issues of credit – Appropriateness of all issues of credit being heard at the same time – Consideration of meaning of ‘objective’ intention.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr R M Garratt QC, with Ms F R Cameron	Maddocks
For the Defendants	Mr G H Golvan QC, with Mr B G Mason	Kyriacou Lawyers

HIS HONOUR:

1. I have before me an application by the plaintiffs that certain paragraphs of the defendants’ Second Further Amended Defence and Counterclaim (SFADCC) not be heard at this stage of the trial. 

1. The paragraphs that the plaintiffs are objecting to concern the fact that shortly before the end of the financial year ending 30 June 2017, the plaintiffs made a $20 million gift to a charity established by the plaintiffs and controlled by the plaintiffs, or related companies, (the donation).  When this transaction was discovered by the defendants, they amended their counter claim to allege, amongst other things, that the donation was made for the purpose of, or a purpose of, depriving Castleway Pty Ltd of $8 million as part of the service fee owing for the 2016–2017 financial year.

1. Prior to the trial, on a directions hearing on 28 July 2017, the parties put forward a draft order agreeing that paragraphs 60BS to 60BW of the SFADCC relating to the donation would not be heard and determined as part of the trial I am presently hearing.  Mr Garratt, one of Her Majesty’s Counsel, for the plaintiffs, contends before me, and I think it is implicit in the transcript that he also argued at the directions hearing, that despite the agreement as to what was to be excluded from the hearing before me, further paragraphs relating to the donation should be excluded from the SFADCC for hearing at this stage.  For example, Mr Garratt argued paragraph 60BO should be excluded from the hearing at this stage.  Paragraph 60BO provides:

It was the intention and purpose of Mrs Rado, Mr Lee and Mr Rado, as directors of ADAZ Nominees, to pass the Donation Resolution and to make the Donation so as to significantly reduce the Service Fee otherwise properly payable to the First Defendant under the PDSA are in breach of the PDSA:

(a)       in breach of the PDSA;

(b)knowing that an essential commercial purpose of the PDSA was to enable the First Defendant to provide property development services to the TPC Group by procuring, developing and/or managing properties owned by the TPC Group to achieve an optimum profitable development outcome in consideration of the First Defendant being paid a Service Fee and/or Commission by the TPC Group based on a share of the TPC Group Profit (or TPC Group Loss) in each relevant financial year calculated in accordance with Schedule 2 of the PDSA; and

(c)       knowing that the charitable donation of $20 million:

(i)is not an expense of the TPC Entities incurred in their normal business activities; and

(ii)is not an expense which may reduce the taxable income per the income tax returns of the TPC Group Entities and associated entities set out in Annexure A to the PDSA and for the purpose of calculating the Service Fee payable by the TPC Group to the First Defendant under the PDSA for the financial year ending 30 June 2017.

1. At the directions hearing on 28 July 2017, it was resolved that paragraph 60BO was to remain to be determined in the present hearing.  The plaintiffs now seek that paragraph 60BO and other paragraphs relating to the donation not be heard at this stage.  It was argued at the directions hearing on 28 July 2017 that it was the defendants’ intention to seek to establish the ‘objective’ intention and purpose of Mrs Rado, Mr Lee and Mr Rado in making the donation, as set out in paragraph 60BO.  I understood that to mean that the defendants would not seek to establish Mrs Rado, Mr Lee and Mr Rado’s actual intention by cross-examination of those witnesses, but the court would be asked to infer what their intention was based on the surrounding circumstances.

1. In my view, such an approach misconceives what the law means by ascertaining a person’s intention.  When one is looking at the intention of a person’s actions and conduct, as distinct from making an agreement, the law is seeking to establish their actual intention, and may do so by drawing inferences from their actions and conduct.  What is being ascertained, however, is the person’s actual subjective intention.

1. Objective intention is a term the law uses in construing contracts (written, oral or by conduct); it requires a hypothetical reasonable observer to discern from the words used in a written document, the language used in conversation and by the conduct of the parties, on an objective basis, what the presumed intention of the parties to the contract was.  The law does not permit the parties to give evidence of their actual intention, because the test is one of objectively discerning what was agreed.

1. Mr Golvan, one of Her Majesty’s Counsel, for the defendants, told me that the defendants intend to challenge the credit of Mr Lee.  Mr Golvan says that Mr Lee has given conflicting evidence in his affidavits as to his state of knowledge concerning the effect of the donation on the service fee payable to Castleway Pty Ltd.  In the earlier affidavit, apparently Mr Lee says he did know the donation would affect Castleway Pty Ltd’s service fee, and in the other he says that he was mistaken in his earlier affidavit and that he did not know of the impact it would have.

1. I have also been informed that the credit of Mrs Rado will be challenged in relation to the background facts to this case.  The relevance of this issue might be questioned, but it is apparently an issue whether Mrs Rado previously agreed to a profit share agreement with Mr Keeghan, whereby he was to share 50 per cent of the profits of the TPC group of companies and whether he was subsequently asked to rescind that agreement to assist the Rado family in the forthcoming divorce proceedings between Mrs Rado’s daughter Tania, and Mr Keeghan.

1. At the beginning of the trial, I was informed that the parties had agreed, and that the judge at the directions hearing accepted, that the trial would be split and that at the first stage the trial would consider the issues other than quantum, which would be left to be determined at another time.  Although split, there is only one trial and the trial may be heard in different stages. 

1. Within the trial the court may make tentative findings, and inform the parties of any such findings, which may assist the parties in the subsequent part of the trial, but those findings are not binding until the court makes final orders.  Occasionally this is done in common law actions, where liability is determined and then quantum.  Due to difficulties of splitting the trial, however, issues may not be decided separately.  Often credit issues may arise where different information has been provided to the doctors in assessing the damage as well as on the question of liability.

1. In my opinion, it is not appropriate, in a trial of a proceeding, to allow the credit of the same witness to be raised more than once at different stages of the trial.  I think it would be inappropriate to allow cross-examination of Mrs Rado about her credit on the agreement to split the profits 50/50 with Mr Keeghan and then return to the issue of her credit at a later stage of the trial, after some preliminary findings may have been given, on whether, in making the donation, she had the intention and purpose of, in effect, depriving Castleway Pty Ltd of $8 million.

1. Further, I consider that there is the potential for Mrs Rado’s credit to be challenged if the issues raised in paragraph 60O and earlier on the donation were to remain for determination at this stage of the trial and then subsequently, when paragraphs 60BS to 60BW on the donation are dealt with at a later stage of the trial.

1. Mr Garratt has suggested this dilemma be solved by excluding from the issues to be heard at this stage of the trial the issues going to the conduct of Mrs Rado, Mr Lee and Mr Rado in making the donation pleaded in paragraph 60BO and earlier, which were to be heard at this stage of the trial. 

1. Mr Golvan has resisted that application, saying that cross-examination on the matters pleaded in paragraph 60BO and related paragraphs will be short, the facts are not much in dispute, and there is no need to defer the hearing of paragraph 60BO and the other paragraphs from the SFADCC that Mr Garratt seeks to delete. 

1. In my opinion, the pleadings in paragraph 60BO and earlier dealing with the donation, must be heard at the same time as the pleadings in paragraphs 60BS-60BW that also deal with the donation.  Accordingly, if Mr Golvan informs the court that his clients wish to pursue the allegations raised in paragraph 60BO and earlier of the SFADCC at this stage of the trial, then all the pleadings on the donation to the Rado Family Foundation, should be heard at the same time as the issues I am currently hearing.

1. I therefore propose to adjourn the trial briefly to allow the defendants to give to the plaintiffs particulars of the pleadings in paragraph 60BS to 60BW, and then continue the trial on all issues save quantum.