Rushton (Qld) Pty Ltd v Rushton (NSW) Pty Ltd

DISTRICT COURT OF QUEENSLAND

CITATION: Rushton & Anor v. Rushton & Anor [2001] QDC 193
PARTIES: RUSHTON (QLD) PTY LTD
ACN 079 140 364
AND
SENMEAD PTY LTD
ACN 053 308 008
Plaintiffs
v
RUSHTON (NSW) PTY LTD
ACN 079 164 202
First Defendant
AND
RUSHTON (SA) PTY LTD
ACN 079 164 177
Second Defendant
FILE NO/S: D5024 of 1999
DIVISION: Civil Jurisdiction
PROCEEDING:
ORIGINATING Brisbane
COURT:
DELIVERED ON: 20 July 2001
DELIVERED AT: Brisbane
HEARING DATE: 17, 18, 19, December 2000, and 21, 22, 23, 24, 25, 30 & 31
May 2001, 25 June 2001
JUDGE: Judge Forde
ORDER: Judgment for the plaintiff in the sum of $7,293.79
Judgment for the first defendant in the sum of $15,000.00
CATCHWORDS: CONTRACT – licence agreement – dissolution of
partnership – “amounts owed or owing” – “debts” – “claims”
construction of agreement – ambiguity – parol evidence rule
– books of account evidencing agreement – rectification
Airwork (NZ) Ltd v Vertical Flight Management Ltd. (1999) 1
NZLR 641 at 650-651
ANZ v Westpac (1988) 164 CLR 662 at 673
Australian Broadcasting Commission v Australian
Australasian Performing Right Association (1973) 129 CLR
99
Bank of New Zealand v Baker (1926) NZLR 462 at 489
Bishop’s Gate Insurance Ltd v Commonwealth Engineering
(NSW) Pty Ltd (1981) 1 NSWLR 429
Bunting Cabinets Pty. Ltd. v Halperin (1986) 4 SR (WA) 75
at 79
Buttle v Allan as Official Liquidator of Buttle & Co
Shareholders Ltd (In Liquidation) 1994 1 NZLR 396 at 404
Cachia v Isaacs (1995) 3 NSWLR 366 at 377
Caldwell v Treloar (1982) 30 SASR 202 at 208-9
Earthworks and Quarries Ltd. v F.T. Eastment & Sons Pty.
Ltd. (1966) VLR 24 at 29;
Re Nicholls Pty Ltd (1982) 7 ACLC 76 at 83
Coca Cola Financial Corporation –v- Finsat International &
Ors (1996) 3 WLR 849, 855-6
Codelfa Constructions Pty Ltd v State Rail Authority of NSW
(1982) 149 CLR 337 at 352;
In re Hall & Barker (1879) 9 Ch 538 at 545:
Hely-Hutchinson v Brayhead Ltd (1968) 1 QB 549
Lifesavers Australasia Ltd v Frigmobile Pty Ltd (1983) 1
NSWLR 431
Locke v Dunlop (1888) 39 Ch D 387
McLaren v Waikato Regional Council (1993) 1 NZLR 710 at
725.
In Re Moss (1905) 2 KB 307
Music Masters Pty Ltd v Minelle (1968) Qd R 326 at 330
Nosic v. Zurich Australian Life Insurance Ltd. (1997) 1 Qd.
R. 67 at 78.
Phillips v Ellinson Brothers Pty Ltd (1941) 65 CLR 221 at
234
Phillips Fox (A firm) v Westgold Resources NL BC20000
1543
Quainoo v NZ Breweries (1991) 1 NZLR 161 at 165
Standard Chartered Bank of Australia Ltd v Antico and
Others (1995) 131 ALR 1 at 123
Trident General Insurance Co Ltd v McNiell Bros Pty Ltd
(1988) 165 CLR 107
Underwood Son & Piper v Lewis (1894) 2 QB 306 at 310
Webb v Stanton (1883) 11 QBD 518
Winks v W.H. Heck and Sons Pty Ltd (1986) 1 Qd R 226 at
236
COUNSEL: L. Bowden for Plaintiffs R. Perry for Defendants
SOLICITORS: Bennett & Philp for Plaintiffs
Macrossans for Defendants
Introduction

In this action the plaintiffs, Rushton (Qld.) Pty. Ltd. and Senmead Pty. Ltd.
hereinafter referred to as the first and second plaintiffs respectively claim the sum
of $132,008.82 being monies due and payable by the first and second defendants,
Rushton (N.S.W.) Pty. Ltd. and Rushton (S.A.) Pty. Ltd. respectively, for valuation
services supplied by the plaintiffs to the defendants. Exhibit 11 is a summary of the
original claim including interest. The claim is made pursuant to a document
entitled “Rushton Group Equity Holders Agreement” (hereinafter called the “Equity
Holders Agreement”). The plaintiffs were partners in the Queensland Partnership
and the defendants were partners in the New South Wales Trading Partnership
together with the plaintiff Senmead Pty. Ltd. and carried on the business of
providing valuation services. The parties agreed to participate in a co-ordinated
national valuation services business using the name “Rushton” in order to provide
valuation services across Australia and in Papua New Guinea. The said Agreement
was dated 1st September, 1997. Licence agreements were entered into between the
parties.
One purpose of the Equity Holders Agreement was that the relevant parties to same
would refer valuation work originating within their particular state or territory to a
party to the Agreement who was authorised by it to provide valuation services
within its area. It was intended that all Rushton valuation work in Queensland for
example, would be carried out by the plaintiffs. Clause 14 of the said Equity
Holders Agreement provided as follows:

“14. Interstate Work and sharing of resources

14.1 The Group Partners and the Licensees agree:
(1) that any work within a Territory is to be undertaken by
the person holding the Name Licence for that Territory
subject to the exceptions set out in the clause;

(2) that a fee equal to 10% of the amount billed for work performed by a Licensee will be payable to the person who introduces the work where RGPL (Rushton Group Pty. Ltd.) of another Group Partner or Trading Licensee introduces work to be Carried out in another Licensee’s Territory.”
(3) fees for joint projects which require work to be done is
(sic) more than one Territory, will be shared in proportion to the hours assigned before commencement of the work to each of the Licensees who are involved in completing the Project. If the Licensees cannot after negotiating in good faith agree upon the allocation of the work for a joint project the Licensee who obtained that work is entitled to carry out the whole of the work even those parts which involve work outside their Territory.

(4) the terms for secondment of staff between Licensees
must be agreed before the secondment commences.”

Pleadings

The parties to the Equity Holders Agreement included the plaintiffs and the
defendants, Rushton (Vic.) Pty. Ltd., Rushton Group Pty. Ltd. (“RGPL”), Michael
Holzberger and Peter George Rogan, the principals of the Queensland and the New
South Wales Trading Partnerships respectively. Mr Holzberger entered into the
said agreement both as a shareholder in RGPL and in his personal capacity. Mr.
Rogan entered into the said Agreement in his capacity as trustee of the Peter George
Rogan Trust and in his personal capacity. The defence in para. 3 of Fourth Further
Amended Defence and Counter Claim (“the Fourth Defence”) alleges that the first
defendant was the agent of the Goodwill Partners and in that capacity entered into
the said Agreement with the PGRT Trustee in partnership. In fact, paragraph 5 of
the Fourth Defence states:

“5. As to paragraph 6 the defendants:

(a)

admit that the agreements listed were entered into on 1 September 1997;

(b)

admit that pursuant to the name sublicence agreement the Second Plaintiff and Rogan, in their capacity as partners in the Goodwill Partnership, granted to the First Defendant a sublicence to carry on the business in New South Wales and the Australian Capital Territory under the Rushton name;

(c)

admit that pursuant to the goodwill licence agreement the Second Plaintiff and Rogan, in their capacity as partners in the Goodwill Partnership, granted to the First Defendant a licence to carry on the valuation business in New South Wales and the Australian Capital Territory by utilising the Non Name Goodwill;
(d) say further that:
(i)         it was a term, implied by law, of the agreements that the First Defendant entered into the said agreements in its capacity as agent of the NSW Trading Partnership;
(ii)        the First Defendant conducted the valuation business in New South Wales as agent of the NSW Trading Partnership; and
(iii)       the First Defendant did not conduct the business in its own right.”

Paragraph 7 of the Third Further Amended Statement of Claim (“the Third Claim”)
alleges:
“In the alternative to paragraph 6 hereof, the Rushton business in New South Wales was conducted by Rushton (NSW) being a partnership consisting of each of the first defendant, the second defendant and the plaintiff, Senmead Pty. Ltd.”
Paragraph 6 of the Fourth Defence goes on to admit paragraph 7 of the Third Claim
on the basis that (Rushton N.S.W.), the first defendant is one and the same as the
NSW Trading Partnership. Such partnership also included the second plaintiff. The first defendant seeks indemnity or contribution from it on that basis (para. 25(g) and
(h) of the Fourth Defence).
Mr Holzberger and Mr Rogan were the principals involved in the negotiations both
for the Equity Holders Agreement and also the subsequent agreement to sell certain
interests of Mr Holzberger’s companies including the first plaintiff to certain
entities in which Mr Rogan had an interest. The latter agreement was called the
Sale of Business Interest Agreement (the “Sale Agreement”) and is dated 22nd
October, 1999. The defendant was not a signatory to the said Sale Agreement but
was to receive benefits thereunder. The purpose of the said Sale Agreement, I find,
was to dismantle the national valuation service structure which had been set up by
the Equity Holders Agreement.
Pursuant to the Equity Holders Agreement, the plaintiffs at the request of the
defendants performed valuation services for various of the defendants’ clients. The
relevant invoices appear in paragraph 10 of the Third Claim. The total of the
invoiced amounts was $170,869.45. The amount sought was altered to $132,008.82
to allow for the balance outstanding after payment pursuant to an order for
summary judgment (para. 12 Third Claim). An application to set aside that order
was foreshadowed in the course of the trial. In the pleadings both sides refer to the
invoiced amounts being net of the 10% fee to which the parties were entitled
pursuant to clause 14.1(2) of the Equity Holders Agreement. There is a dispute also
about the liability of the defendants to pay fees in relation to the State Transit job
(invoice 4829). The latter raises the secondment issue referred to in paragraphs 8
and 8A of the Third Claim and para. 8 of the Fourth Defence.
The subject invoices were dated from July to October 1999, and rendered to the
defendant after 30th June, 1999. The plaintiffs contend that the defendants are liable
to the plaintiffs for all debts incurred after 30th June, 1999. The basis of the claim is
that until the invoices were rendered no debt was owed by the defendants. The
partner carrying out the work would send an invoice to the referring partner less
10%. The partner introducing the work received the 10%. Pursuant to these
arrangements, the defendants in this case rendered accounts to their clients who had
been referred to the plaintiffs. The defendants have been paid the full amount of the
accounts including their 10% fee. The plaintiff’s invoices, as discussed, have not
been paid. The defendants admit in paragraph 9 of the Fourth Defence that the
invoiced amounts were nett of the 10% fee to which the NSW Trading Partnership
or the first defendant was entitled pursuant to Clause 14 of the Equity Holders
Agreement. The defendants contend that such invoices were part of the settlement
(apart from the sum of $7,293.79) under the said Sale Agreement to that extent –
that they were debts “owed or owing” as at 30th June, 1999. Invoices rendered after
30th June, 1999 go to make up the sum of $132,008.82. The parties agree that the
sum of $124,715.03 related to work carried out by the plaintiff before 30th June,
1999. The sum of $7,293.79 is the amount referable to work done after 30th June,
1999.
The defendants have disputed the first plaintiff’s right to the amounts ordered to be
paid on the summary judgment application (para. 10 of the Second Defence). The
pleadings have been amended since to add the second plaintiff. Section 50 of the
Property Law Act 1974 (Qld) is relied on in any event by the plaintiffs to avoid the

lack of joinder (of the second plaintiff) at the time of the summary judgment
Sale Agreement

The said Sale Agreement provided as follows:

“4. Purchase Price

4.1 Amount
The price payable for the Interests is $1,450,000.
4.2 Acknowledgment
The parties acknowledge the following:

(a) the Purchase Price includes all amounts owed or owing by the Partnerships and the Companies to the Sellers for the period up to 30 June 1999, and, subject to completion, the Sellers have no further entitlement to any distribution, profit or loss, claim or dividend of whatsoever kind from any of the Partnerships and Companies for the period ending 30 June 1999 or for the period up to and including Completion;
(b) the Purchase Price includes all debts owing for the period ending 30 June 1999 by the Partnerships and Companies to any member of the Sellers and the Sellers shall have no further claim in relation to these debts;
(c) the Purchase Price includes all or any of the assets (including the goodwill of Rushton Group Partnership but expressly excluding any goodwill associated with the trading of the Business in Queensland and Papua New Guinea) of the Partnerships and Companies and is also in consideration of the transfer of the Business Name under clause 9; and
(d) prior to Completion all trading between the parties shall be performed in accordance with the Equity Holders Agreement.”

In pleading to paragraphs 14 and 15 of the Third Claim, the defendants plead in
their Second Defence:

“12.(a)

Say that on 22 October 1999 an agreement described as the Sale of Business Interest Agreement (“the Sale Agreement”) was entered into between the following parties:
The First Plaintiff
The Second Plaintiff
The Second Defendant
Holzberger
Rogan
Rushton (VIC) Pty Ltd

(b)

Deny that Rogan was acting on behalf of the First Defendant on the basis that he executed the Sale Agreement on his own behalf and in his capacity as Trustee of the Peter George Rogan Trust only;

(c)

Say further that the Second Plaintiff entered into the Sale Agreement in all its capacities, including that of partner in the NSW Trading Partnership;

(d)

Admit that by the Sale Agreement the Plaintiffs and Holzberger sold their interests, as that term is defined in the Sale Agreement, together with all rights attached to them, in, inter alia, the NSW Trading Partnership to the Second Defendant, Rogan and Rushton Vic Pty Ltd;

(e)

Deny that the NSW Trading Partnership was dissolved on and from 30 June 1999 on the basis that the Sale Agreement could not, as a matter of law, effect a retrospective termination of the partnership;

(f)

Say that, in the premises, the NSW Trading Partnership continued as a partnership up until the date of completion of the Sale Agreement on 6 December 1999;

(g)

Say that as a matter of law the dissolution of a partnership does not affect the liability of the partners for debts incurred by the partnership;

(h)

Say that the debts referred to in paragraph 15 of the Further Amended Statement of Claim were in respect of valuation work performed for the NSW Trading Partnership as alleged in paragraph 8 hereof;

(i)

Deny that the First and/or Second Defendants are indebted to the Plaintiffs as alleged on the grounds set out in paragraphs 13 and 14 below:
(j) Otherwise deny any allegations”.
and

“13.(a)

The particulars of the alleged debt provided by the Plaintiffs show that work to the value of $124,715.03 for which the Defendants are alleged to be indebted was conducted prior to 1 July 1999;

(b)

on 21 and 22 October 1999 at meetings at the offices of Freehill Hollingdale and Page in Melbourne, during the negotiations leading up to the execution of the Sale Agreement, Holzberger, on behalf of the First Plaintiff and/or the Second Plaintiff represented to and/or orally agreed with Rogan, on behalf of the Defendants that:

(i)

the purchase price paid to the Plaintiffs and Holzberger by Rogan, the Second Defendant and Rushton (Vic) Pty Ltd would include the value of all work performed by the Queensland Partners for, inter alia, the NSW Trading Partners up to and including 30 June 1999, including un-invoiced work in progress and invoiced work;

(ii)

upon completion of the Sale agreement the Plaintiffs would release the Group Partners, the Goodwill Partnership, the NSW Trading Partnership, the First Defendant, RGPL, Mepeka Pty Ltd and Edward Rushton (BNZ) Ltd from any and all liability in respect of all work performed by the Plaintiffs for, inter alia, the NSW Trading Partners up to and including 30 June 1999, including un-invoiced work in progress and invoiced work;

(c)

acting in reliance on the representations and induced thereby;
(i) the Second Defendant executed the Sale Agreement; and
(ii) the Defendants allowed the Second Plaintiff to execute the Sale agreement in its capacity as partner in, and on behalf of, the NSW Trading Partnership;

(d) in the premises the Plaintiffs are estopped from:

(i) denying the matters set out in sub-paragraph (b) above;

(ii)

asserting terms of the Sale Agreement contrary to the matters pleaded in sub-paragraph (b) above;
(e) In the premises neither:

(i)

the First Defendant in its capacity as agent of the NSW Trading Partnership; nor
(ii) the Defendants trading in partnership
are liable to the Plaintiffs for the amounts claimed for work
conducted prior to 1 July 1999.”

and
“14.(a) The Sale Agreement was executed by the parties set out in paragraph 12(a) in the belief that it embodied the oral agreement and/or terms set out in paragraph 13 above;
(b) Clause 4.2 of the Sale Agreement provides as follows:
‘4.2 Acknowledgment:
The parties acknowledge the following:

(a)

the Purchase Price includes all amounts owed or owing by the Partnerships and the Companies to the Sellers for the period up to 30 June 1999, and subject to completion, the Sellers have no further entitlement to any distribution, profit or loss, claim or dividend of whatsoever kind from any of the Partnerships and Companies for the period ending 30 June 1999 or for the period up to and including Completion;

(b)

the Purchase Price includes all debts owing for the period ending 30 June 1999 by the Partnerships and Companies to any member of the Sellers and the Sellers shall have no further claim in relation to these debts;

(c) The Defendants say that:

(i) the proper construction of the phrase ‘all amounts owed or owing by the Partnerships and the Companies to the Sellers for the period up to 30 June 1999’ in clause 4.2(a) includes un-invoiced work in progress and invoiced work;
(ii) further or in the alternative the proper construction of the phrase ‘all debts owing for the period ending 30 June 1999’ in clause 4.2(b) includes un-invoiced work in progress and invoiced work;
(iii) further or in the alternative the proper construction of the word
‘claim’ in paragraph 4.2(a) of the Sale Agreement includes a
claim for un-invoiced work in progress and/or invoiced work;
(iv) the proper constructions referred to above are based upon:

(1) the construction of the clause in the context of the
Sale Agreement as a whole; and/or
(2) the negotiations of 21 and 22 October referred to in
paragraph 13 above.

(d) In the event that the clauses cover only invoiced work up to 30 June 1999 (which is denied) the Defendants say that:

(i) the Sale Agreement was drawn up and executed under a mutual mistake of fact;
(ii) further or in the alternative, the Plaintiffs, by Holzberger, knew that the Defendants, by Rogan, believed that the written agreement contained the terms of the oral agreement as set out above in paragraph 13(b);
(iii) in the premises the Plaintiffs are estopped from denying the matters set out in paragraph 13 above.”

The defendants seek to set-off by way of counter-claim the sum of $203,466.00.
That sum represents the group expenses payable by the plaintiffs to the first
defendant for the financial years ended 30th June 1998 and 1999 and the period
from 1st July 1999 until the completion of the Sale Agreement on 6th December
1999. Although the plaintiffs contest payment for all but the $15,000.00 those
figures have been agreed as follows:

to 30.6.98 $180,000.00

to 30.6.99 $40,000.00

1.7.99 - 6.12.99

$15,000.00 __________ $235,000.00 =========

Question of Construction

The parties contend that the Court should simply interpret the Sales Agreement
without reference to any extrinsic evidence. They seek different interpretations.
The plaintiffs contend that the partnership between the parties dissolved as from the
30th June 1999 (para 15(1)). It is further contended that the defendants are liable to
the plaintiff for all debts incurred after 30th June 1999. Reliance is placed upon
clauses 4.2(a) and (b). It is conceded that if the language of the document is
ambiguous or susceptible of more than one meaning, then evidence of the
surrounding circumstances is admissible in the interpretation of the document but is
not admissible to contradict the language of the document if it has a plain meaning:
Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337
at 352; Quainoo v NZ Breweries (1991) 1 NZLR 161 at 165. Mason J. at p. 352 of
the Codelfa case stated:
“… evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plaint meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed”.
In other words, the evidence is admissible to establish the factual matrix of event
surrounding the execution of the agreement. The general principles of construction
applicable are conveniently set out in McLaren v Waikato Regional Council (1993)
1 NZLR 710 at 725. The latter case applied the proposition referred to above. Both
Codelfa and Quainoo were applied in Airwork (NZ) Ltd v Vertical Flight
Management Ltd. (1999) 1 NZLR 641 at 650-651. Codelfa was also applied by McPherson J.A. in Nosic v. Zurich Australian Life Insurance Ltd. (1997) 1 Qd. R.
67 at 78. Having referred to the principle from Codelfa above, McPherson J.A.
stated:
“In applying these principles the first question to be considered here is whether the language of the contract is ambiguous or susceptible of more than one meaning. As to that, there can be little doubt. Few words or phrases are susceptible of only one meaning: Marr Contracting Pty Ltd. v. F.A.I. Insurances Ltd (1988) 5 A.N.Z. Insurance Cases 60-854, at 75,343. … the next question is whether there is admissible evidence to show that that indirect indirect sense, as it may be called, was the meaning which the relevant expression bore in the present context. To refer once again to what was said by Mason J. in Codelfa (at 352):
‘It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extend to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification.’
If the language in the written agreement is open to two or more constructions, an
interpretation will be preferred which will avoid consequences which appear to the
Court to be capricious, unreasonable, inconvenient or unjust even though that is not
the most grammatical construction: Locke v Dunlop (1888) 39 Ch D 387 and
Australian Broadcasting Commission v Australian Australasian Performing Right
Association (1973) 129 CLR 99 at 109 per Gibbs J. I find that cl. 4 of the Sale

Agreement is ambiguous.
The plaintiffs’ argument on the construction point

As alleged in paragraph 13 of the Fourth Defence, a substantial part of the hours
claimed in this action for valuation work occurred prior to 30 June 1999 viz.
$124,715.03. The plaintiffs contend that clause 4 uses the expression “amounts
owed or owing” and is broader and intended to cover money other than debts
strictly so called. In support of its submission, reference is made to the second part
of clause 4.2 (a) which speaks of “distribution, profit or loss, claim or dividend of
whatsover kind”. It is submitted that the word “amount” was intended to cover
such possibilities and that the word “debts” is narrower and describes the pure
trading relationship between the parties. The plaintiffs contend that the phrase
“amounts owed” adds nothing to the interpretation but is apt to describe the amount
of money once owed but now repaid. It is pleaded in the Fourth Defence that the
words “amount owing” or “claim” are wide enough to include uninvoiced works in
progress as at 30th June, 1999
It is submitted by the plaintiffs that the word “owing” should be construed as
meaning that the relevant debt or amount must be legally payable as at 30 June
1999. Reference was made to the decision In Re Moss (1905) 2 KB 307. A
mortgagor agreed to indemnify the surety against any sums which he might be
called upon to pay under his covenants with the mortgagee. No part of the principal
money was repaid and the mortgagor became bankrupt. The mortgagee proved in
the bankruptcy for the principal money less an amount under a policy of insurance
on the mortgagor’s life. The surety claimed, under the agreement to indemnify, to
prove for the estimated amount of his liability to the mortgagee for future interest and premiums. It was held that the surety was not entitled to prove under either
head including the claim for interest. Darling J. at 314 stated:
“In my opinion, money can only be said to be due in a legal sense when it can be recovered in an action, and it is impossible to say that there can be anything due under this security when no money can be recovered by any legal process”.
The plaintiffs’ counsel submits that the debt must be legally payable as at the 30
June, 1999 even though it may not be due in the sense that the time for its
repayment has expired. In my view an amount owing as a claim is not necessarily a
debt within the meaning of clause 4.2. Reference is made to two other cases in this
respect by the plaintiff: Bank of New Zealand v Baker (1926) NZLR 462 at 489 and
Quainoo v New Zealand Breweries (1991) 1 NZLR 161 at 171. In the former case,
Smith mortgaged his interest in land to the Bank of New Zealand to secure banking
accommodation including an overdraft. It was held that as Smith was bankrupt as
at the date of the demand by the bank on the defendant, there were no moneys due,
owing, or payable by Smith to the bank at the time of making such demand. In
Baker’s case Sim J. discussed In Re Moss and commented at 491:
“But whether or not the debt in the present case can be said to be “due” from Smith when he became bankrupt it was, at any rate, a debt “owing” by him until released by an order of discharge.”
In Re Moss was not followed in Quainoo v New Zealand Breweries on the point
that where In Re Moss it was suggested that a guarantee of principal “due”
terminates on adjudication, then it was wrong. The Court of Appeal stated that
“adjudication does not mean that the bankrupt’s indebtedness has come to an end.
It merely changes the means by which the creditors can recover payment. At 171-2,
The following passages appear:
“No doubt a debt can be said to be owing before it becomes due, but once it has ceased to be owing it can never become due… We can see no reason to think that in these circumstances a debt may “remain owing”, as Baker has held that it is, but is not “due” even if but for the bankruptcy or winding up it would be due – as here, when demand was made. Just as there are circumstances in which it may be appropriate to describe a debt as owing but not yet due, so there are other circumstances in which the two words mean exactly the same. A debt for which the time for payment has passed is both due and owing… .So construed, this guarantee necessarily includes the debt which was owing when Uhuru Enterprises went into liquidation and which became due when demand was subsequently made upon the liquidator.”
This passage was applied in Buttle v Allan as Official Liquidator of Buttle & Co
Sharebrokers Ltd (In Liquidation) (1994) 1 NZLR 396 at 404 (Court of Appeal);
Standard Chartered Bank of Australia Ltd v Antico and Others (1995) 131 ALR 1
at 123.
In accord with these authorities, the plaintiff submits that the word “owing” means
owing in a legal sense. If there was an arrangement where, once the account was
rendered that a month or some other period to pay same was allowed, then it is
arguable that the account was not due for payment until a month after it was
delivered. It was submitted that the word “owing” means that a bill has been
rendered even if it is not due because it is only payable after a certain period has
expired or if the debtor has paid the defendant. The nature of the valuation was
such that until it was completed, an invoice would not be sent. There were
obviously contracts on foot as at 30th June, 1999 which were reflected in the
plaintiffs’ accounts as work in progress.
It was further submitted that had the phrase used been “due, owing or accruing” the
word “accruing” may have covered a debt which though not presently payable,
would become payable in the future by reason of a present obligation: Webb v Stanton (1883) 11 QBD 518 and Music Masters Pty Ltd v Minelle (1968) Qd R 326
at 330. The latter case referred to the former case for that proposition. The parties
in the present case have chosen not to distinguish in the Sales Agreement, the
character of the work done and for which accounts had been rendered as at 30 June,
1999 and work in progress at that date. No mention has been made of the latter
class. It becomes a question of determining whether the phrases “amount owed or
owing” or “claim” encompass “work in progress”.
Prior to determining this question, it is necessary to look at the character of the
work undertaken by the plaintiffs for the defendants.
Objective Background Facts
The company, Rushton Group Pty. Ltd. was used as a co-ordinator for the
partnerships’ finances and operations. In the Equity Holders Agreement it is
referred to as “RGPL”. Pursuant to clause 13 of the Equity Holders Agreement, the
individual participating Rushton companies were required to contribute to the cost
of the operation of RGPL and the Group partnership overall in proportion to the
turnover or gross fees for the business conducted in their respective territories in
each previous financial year. The plaintiffs and the defendants were required to
make contributions to RGPL. RGPL used the first defendant’s facilities for these
purposes. Clause 13 also provided that there would be an annual accounting by
each of the entities to RGPL for its overall national operating expenses.
The plaintiffs did more work on referral from the defendants than the reverse
position. The result of this was that the defendants were liable to the plaintiff for a
greater amount of fees than the plaintiffs were to the defendants. As at 30 June, 1999, the amount owing was $320,538.11. That figure did not include unbilled
work or work in progress as at 30 June, 1999 (para. 7 of the affidavit of Mr.
Stewart). I accept that one reason for the determination of the national partnership
arrangements was this imbalance and the failure of the defendants to pay the fees
more punctually. Mr. Rogan was responsible for the payment of the fees by
Rushton (Vic) and the defendants.
The first defendant was not a party to the Sales Agreement which purported to
terminate the Equity Holders Agreement. The Fourth Defence pleads that the first
defendant was a partner in the N.S.W. Trading Partnership under the Equity
Holders Agreement. It is admitted in para. 6 that the first defendant is one and the
same as the NSW Trading Partnership The defendants further plead that the
partnership continued up until the completion of the Sale Agreement on 6th
December, 1999. The first defendant is a member of that partnership and is liable
for its debts. Paragraph 13(b) is a recognition of that liability of the NSW Trading
Partnership under the Sale Agreement. The first defendant did receive a benefit
from the Sales Agreement in that the Purchase Price included all amounts owed or
debts owing by the Partnerships and the Companies to the Sellers for the period up
to 30 June 1999”. Third parties can enforce contracts made for their benefit:
Trident General Insurance Co. Limited v. McNiell Bros. Pty. Ltd. (1988) 165
C.L.R. 107. In attempting to enforce these rights as members of that partnership,
the partners are bound by findings in this case.
The plaintiffs had carried out work for the defendants prior to 30 June, 1999, but as
at that date not all invoices were rendered in respect of work done before that date.
All of the amounts which are part of the present claim were invoiced by the plaintiff to the defendant after 30 June, 1999. It seems that at a meeting on 5th July, 1999,
most of the invoices were approved in relation to this claim.
Clause 6.1 of the Equity Holders Agreement provided for the value of Work in
Progress as at June 30 1997. Such value was also to be applied in calculating the
notional profits from the business of Edward Rushton Pty. Ltd. The Sales
Agreement made no such provision in relation to work in progress as at 30 June,
1999, as between the plaintiffs and the defendants. Solicitors were involved for
both parties in the drafting of the agreement. It is inconceivable that the uninvoiced
work was not considered to be covered by the final document.
Legal Principles
The plaintiffs contend that the work in progress cannot, pursuant to clause 4.2(b),
amount to a debt as between a valuer and the valuer’s client as the valuer is
instructed to produce a valuation. In other words, the client could not be expected
to pay a valuer for work done in attempting to value property and that the right to
payment depends upon the proper conclusion of the valuation. That position is to
be contrasted with work done by a solicitor: In re Hall & Barker (1879) 9 Ch 538 at
545:
“If a man engages to carry a box of cigars from London to Birmingham, it is an entire contract, and he cannot throw the cigars out of the carriage half-way there, and ask for half the money… In my opinion, in the case of a solicitor there is not an implied contract of that kind. It bears no fair relation to the doctrine of entire contract. It is a series of services which, though nominally in relation to one matter, is no reality in relation to a succession of matters, and it is not within the doctrine of entire contract, because it is not within the mischief of it.”

And at 546:
“We have done so much work; there is a convenient break in the
business, up to which time we have made up our bill of costs; please
to pay us up to that time, and when the outstanding matters are
concluded, which we hope will be shortly, we will send in a further
bill.”

The nature of a contract to provide a valuation is more in the nature of an entire
contract: Phillips v Ellinson Brothers Pty Ltd (1941) 65 CLR 221 at 234:
“If the contract be indivisible and not severable, then nothing can be recovered under the contract unless it be completed according to its terms or a new contract is made or is to be implied from the acts of the parties giving rise to new rights.”
The decision of Phillips v Ellinson Brothers ibid. has been applied in Earthworks
and Quarries Ltd. v F.T. Eastment & Sons Pty. Ltd. (1966) VLR 24 at 29; Re
Nicholls Pty Ltd (1982) 7 ACLC 76 at 83; Bunting Cabinets Pty. Ltd. v Halperin
(1986) 4 SR (WA) 75 at 79; Phillips Fox (A firm) v Westgold Resources NL
BC20000 1543 a decision of the Full Court of Western Australia 4 April, 2000 at
page 5. In Re Nicholls, the manner in which the parties dealt with each other by
adoption of a modified mode of performance of the agreement without altering the
terms regulating their rights and liabilities was regarded as relevant by the Court.
No such arrangements seem to exist in the present case except the delay of payment
to the plaintiffs until the defendants were paid by the client (para. 46 of Mr.
Holzberger’s affidavit sworn 30 November, 2000. The defendants contend that
there is a difference between the arrangements involving the defendants and a client
on one hand and the defendants and the plaintiffs on the other. That may be correct,
but the fact is that the amount of fees payable to the plaintiffs by the defendants
crystalized upon the presentation of the invoice. By way of comparison, the
defendants were entitled under the Equity Holders Agreement to some 10% commission of the amount billed not just works in progress. That arrangement
continued after the signing of the Sales Agreement (clause 4.2 (d)).
A party might sue on a quantum meruit if the evidence warranted the conclusion
that the contract had been determined, or that the parties had treated the contract as
at an end or rescinded. Neither of those events has occurred in the present case at
least until completion of the Sale Agreement in December, 1999. In fact, clause 4.2
(d) of the Sale Agreement envisaged the continuation of the Equity Holders
Agreement up to completion. It is unlikely that a valuer would be paid for doing
research preliminary to providing a valuation. In the absence of agreement, the
services of a valuer are paid for on the presentation of the valuation. It is not a
series of services, but a service to provide a valuation.
A similar service can be provided by a solicitor who undertakes to complete an
action to finality: Underwood Son & Piper v Lewis (1894) 2 QB 306 at 310.
The contract is an entire contract in those circumstances: see also Cachia v Isaacs
(1995) 3 NSWLR 366 at 377; Caldwell v Treloar ( 1982) 30 SASR 202 at 208-9.
“… all debts owing… ”
A debt can be defined as a sum of money due from one person to another: “A
Concise Law Dictionary” 5th Ed. by Osborn. “Owing” can be described as follows:
‘The word “indebted” describes the condition of a person when there is a present debt, whether it be payable in praesenti or in futuro, and I think that the words” all debts owing or accruing” mean the same thing. They describe all debita in praesenti, whether solvenda in future, or solvenda in praesenti. The material question which has been argued before us is this: does the meaning go further, and does it include debts which may hereafter arise? If they may hereafter arise, it is possible also they may not hereafter arise, and it would require explicit words to include such future possible debts’: Webb v Stenton (1883) 11 QBD 518 at 529, CA, per Fry L.J.
Application of the principles to the present case
The plaintiffs had carried out valuations for the defendants for a couple of years.
There is no evidence placed before the court that the plaintiffs have ever claimed on
a quantum meruit basis during the course of the relationship for valuation services
as distinct from expenses such as accommodation. In other words, there was no
agreement which would detract from the general principle that a contract for a
valuation is an entire contract. Even then, given the arrangements between the
plaintiffs and the defendants in the present case, the amount of the account,
although owing, was not due according to the defendants until thirty (30) days after
the monies were recovered by the defendants from the client (Exhibit H to the
affidavit of Mr. Holzberger sworn 30 November, 2000). The plaintiffs contend that
this period was reduced to fourteen (14) days and then to eight (8) days. That
period may not be an issue for contention if the defendant has in fact received
payment for all of the subject invoices since the date of the Sales Agreement (22
October, 1999). In other words, the principal question for determination in this case
remains whether work in progress as at 30 June, 1999, is included in the expression
“amounts owing” or “a claim” as provided for in clause 4.2(a) or “debts owing” as
provided for in clause 4.2(b) of the Sales Agreement.

All of the invoices which are the subject of this action were rendered or billed after
30 June, 1999. Could it be said that any monies were due or were a debt owing or a
claim prior to the presentation of the invoices? There were no interim bills presented prior to 30 June which related to valuation services and which related to
the present claims. There was no provision for works in progress made in the Sale
Agreement. The nature of a valuation was that until the valuation was completed
one could not be expected to pay for same. Until the amount of the account was
known or demanded, how could it be said that any sum was a debt owing Most of
the subject invoices were not approved until a meeting on 5th July, 1999 as part of
the final administrative procedures which existed at the time.
Given the extensive pre-contractual meetings between the parties and their
professional advisors over many days, it is difficult to overcome the presumption in
the present case that the written agreement embodied the intention of the parties. In
legal parlance there can be little doubt about what a debt owing is. On the facts of
this case, I find that work in progress up to 30 June, 1999, were not part of the
“debts owing” within the meaning of clause 4.2 (b) of the Sale Agreement. I am
satisfied that the term “amounts owed or owing” or by way of a “claim” pursuant to
clause 4.2(a) included uninvoiced works in progress as at 30th June, 1999. Looking
at the objective facts work in progress can sit comfortably within that description,
particularly for accounting purposes given that the partnership, was coming to an
end. I find that when the terms of the Sale Agreement were being negotiated in
October, 1999, invoices had been rendered for the work done up until 30 June.
Work done prior to that date fell within the definition of “amounts owed or owing”
up to 30th June. The Sellers had no further right to claim such amounts. It is
conceded by the defendants that they are liable to pay for work done post 30th June.
That amount, as referred to is $7,293.79. One has to distinguish “debts owing”.
That distinction, I find, was meant to reflect any entitlement which the plaintiffs had as at 30th June, 1999 to make a claim for work done by them up until that date,
whether invoiced or not.
Rectification Claim by Defendants – Alternative Relief
Rectification is sought of the Sale Agreement. The defendants rely on this claim in
the event that the construction point is not in their favour. In that event, any prior
oral agreement of the parties is admissible. Such an agreement was not admissible
in aid of the construction point (Codelfa at 352). It is also proper, in the
circumstances, to have regard to the pre-contractual negotiations and statements of
the parties for the purpose only of identifying “the objective framework of facts”
within which the contract came into existence, and to the parties presumed intention
in this setting”: Nosic op.cit.78 per McPherson J.A. In view of the manner in which
the case was argued, it is necessary to deal with both clause 4.2 (a) and (b) in this
respect. Paragraph 14(c) of the Third Defence pleads that “all amounts owed or
owing” or “debts” or “claim” include un-invoiced work in progress and invoiced
work up to 30th June, 1999. It is perhaps convenient to deal with this claim for
rectification now in the event that the construction put upon clause 4.2 is erroneous.
Background Evidence Intention
It is convenient to look at the evidence of each of the witnesses for the plaintiffs
both by way of affidavit and also oral evidence. As a general observation, the
paragraphs of the affidavits which were ruled as inadmissible in December, 2000,
appear at paragraphs 136 and 137 of the transcript. Those paragraphs have not been
considered in these reasons. However, it must be remembered that in the course of the trial, counsel did touch upon matters raised in those paragraphs, as the earlier
ruling was overtaken by subsequent amendments to the pleadings which raised the
question of evidence of surrounding circumstances and rectification.
Mr. Holzberger
Mr. Holzberger, as state manager and state director of the plaintiffs’ trading
operations in Queensland, was involved in the discussions leading up to the Sale
Agreement in October, 1999. In paragraph 10 of his affidavit filed on 18 April,
2000 (the “first affidavit”), Mr. Holzberger deposes to the arrangements between
the participating Rushton companies whereby each contributed to the cost of the
operation of RGPL and the group partnership overall in proportion to the turnover
(gross fees) for the business conducted in their respective territories in each
previous year. This arrangement was pursuant to clause 13 of the Equity Holders
Agreement. It should be noted that there was a single set of accounts for the overall
operation up to 1998. Exhibit 30A is an attempt to reconcile those accounts. There
is no evidence that any such expenses were actually paid by any entity to RGPL or
the first defendant for the financial years ended 30th June, 1997 and 1998. Rather
the relevant entity was debited with the amount and it was recorded as income to
eg. the first defendant (Exhibit 62) and a credit to the first plaintiff’s Loan Account.
The sum of $78,700.00 is referred to in that context as an example.
It is common ground, and Mr. Holzberger deposes in paragraph 21 of his first
affidavit that the plaintiffs are not entitled to claim for any amounts invoiced prior
to 30th June, 1999 but which remain unpaid. He contends that the defendants are
liable to pay the value of any invoice delivered after 30th June, 1999, even though
the work or some of it may have been done before this. It is not disputed that the value of the work done prior to 30th June, 1999 as reflected in invoices delivered
after that date is $124,715.03. The total amount of the invoices claimed is
$132,008.82. This means that the sum of $7,293.79 relates to work done post 30th
June 1999.

Counter Claim
Alleged Agreement 22nd October, 1998

This issue was discussed in detail on day 4 of the trial. Mr. Holzberger gave
evidence that there was an agreement made with Mr. Rogan that the best basis of
doing a reconciliation exercise was that after all of the accounts had been gone
through that there should be a set off between the fees that the plaintiffs were owed
by the defendants as opposed to the money that was owed back for group expenses
or contributions (254.50;256.50). The purpose of this, according to Mr.
Holzberger, was that as the NSW partnership did not have surplus cash, then the
plaintiffs could continue to fund the group operations out of New South Wales by
leaving in that entity the fees owing which it would otherwise have to pay the
plaintiffs and thereby provide working capital and contribute to group costs (255.1).
To that extent, such group expenses, I find, would be extinguished by way of set-
off, no attempt was made by the defendants to pay for fees but rather to let the debt
be extinguished. It is suggested by the defence that the recording of debts in the
loan account was to meet banking requests (para. 52 submissions Ex. 91A). The
evidence referred to is not inconsistent with the agreement to set off as being
convenient for the parties in their dealings.
This approach of leaving the fees unpaid is supported in part by Exhibits 30 and
30C, the latter being a refined version of Ex.30B. These accounts do not show a direct set-off as between the plaintiffs and the defendants but are rather a
rationalisation of the dealings between the various entities of the Rushton. I accept
the evidence of Ms. O’Hara on this aspect. However, this reconciliation supports
the contention of the plaintiffs in part as pleaded in paragraph 10 of the Fourth
Reply and Answer. I am satisfied that the evidence of Stewart relative to Exhibit
30C supports that contention in part. The balance of $29,268.60 is clearly not the
result of a set off as between the defendants and the plaintiffs solely. Other entities
are involved in that process (Exhibit 30C).
It is pleaded by the plaintiffs in paragraph 14 of the Fourth Reply and Answer that:
“By the sale of the business interests agreement and in particular clause 4.2 thereof, it was agreed that the above off setting arrangements be terminated as at 30th June, 1999.”
The entries in relation to group expenses for the years ended 30th June, 1998 and
1999 are consistent with some type of set off, but not necessarily so. Mr. Stewart.
contends that the entries are consistent with the set off arrangements, whilst Ms.
O’Hara says that subject to proper disclosure under the relevant accounting
standard (Exhibit 84), it is consistent with accounting practice but not necessarily
of any agreement. I am satisfied that the notes which are part of Exhibit 62 are
sufficient disclosure by the plaintiff at least for internal purposes. In that event, the
accounting standard has been complied with. Ms. O’Hara and Mr. Rogan denied
that any set-off was part of any agreement but merely reflected the requirements of
the bank. I reject their evidence in this respect that it was merely to satisfy the
bank. N.S.W. needed to be funded as there was a shortage of cash. It was unable to
pay the plaintiffs in accordance with the Equity Holders Agreement (Cl.13.2).
The plaintiffs also rely on a letter from Mr. Holzberger to Mr. Rogan dated 12th
January, 1999 (Exhibit 31), to confirm the arrangements about fee splits and group
costs (261.1-261.15). The figure of $29,268.00 is mentioned. As previously
discussed, this involved other states and was not confined to the NSW trading
partnership. Mr. Holzberger said that no objection was raised by Mr. Rogan to this
proposal. In a reply dated 28th May, 1999 (Exhibit 58), Mr. Rogan confirms an off
set arrangements at least in relation to fees for services provided. The phrase on
page 2 which states “… we offer an off-set of jobs undertaken in the Queensland
territory, with the funds received on these jobs payable to Queensland in payment
of outstanding debts owed”, seems to refer to fees rather than group expenses.
There seems little doubt that the indebtedness of the defendants to the plaintiffs was
increasing as time went on: Exhibit A and B to the affidavit of Mr. Stewart (Exhibit
5)and Exhibit 32 being a fax from Mr. Holzberger to Mr. Rogan dated 15th April,
1999. The attachment which is headed “Interstate Debts” seems to support a set
off arrangement on a national basis including NSW and QLD. The calculation of
the new sum of $308,810.30 is consistent with the evidence of Mr. Holzberger that
there was an set-off arrangement. Exhibit 33 para. 2.2 seems to support that
position as well. Reference is made by Mr. Holzberger in this note to the arbitrators
that the Licence Holders Agreement, group costs should be apportioned to each of
the individual states and balanced off against outstanding fee splits from NSW.
Counsel has not referred to any such provision. In fact, clause 13.2 of the Equity
Holders Agreement requires payment by the 13th of each month. This did not
occur. There is no evidence to support any such payment as distinct from recording
entries which reflected such indebtedness. Given the cash shortage facing the
defendants (Rogan 656.57), it made sense to extinguish any debt by way of set-off any amounts owing by way of fees against group expenses owing by a particular
state. The fact that the defence had not formulated the counter-claim until pleaded
in April, 2001, also reflects adversely on the genuineness of the claims pre-July,
1999.
For the year ended 30th June, 1997, the accounts were prepared as a single set of
accounts on a national basis. For the year ended 30th June, 1999, the General
Ledger Detail (Exhibit 34) certainly supports a set off arrangement between the first
defendant and the plaintiffs. Exhibit 66 is another example of adjustments being
made to take into account group expenses as between the different entities (492.1-
50). Mr Stewart prepared these accounts based on Accounting Standard AAS 6. In
Exhibit 40, the group expenses appear in the first plaintiff’s accounts as an expense.
For taxation purposes this is not surprising. The transaction should be so recorded.
Mr. Stewart confirmed that that figure was mirrored in the first defendant’s
accounts (496.4-9). It does not detract from the proposition that for internal
purposes contra adjustments occurred to reflect the net liability of the first
defendant to the first plaintiff. I am satisfied that, there was a off set of group
expenses owed by the plaintiffs to the first defendant as against fees owed by the
defendants to the plaintiffs, which extinguished the debt for group expenses
notwithstanding Mr. Rogan’s denial. Mr. Hanley confirmed that the loan accounts
were also to be subsumed in the purchase price (747.1). The diary note being
Exhibit “U” to the affidavit of Mr. Bennett also supports that approach. The loan
account for the year ended reflected the net position after taking into account the
group expenses. This was never challenged by the defendants’ employees
according to Mr. Stewart (499.20-30). On this aspect, I accept Mr. Stewart’s and
Mr. Holzberger’s evidence at p.254.50-60 as it seems on the books of account that this was the way in which the parties dealt with each other. For example, no
cheque was ever drawn for the $78,700.00 or any lesser sum said to be owing to the
first defendant for group costs (Mr. Holzberger 271.58). This course of conduct is
to be compared with what occurred in Re Nicholls Pty Ltd. (1982) 7 ACLR 76 at
83:
“It was quite consistent with such an agreement and constituted a modification affecting the operation but not altering the rights and obligations otherwise created by such an agreement. Alternatively, the manner in which the company short cut, as it were, the accounting procedures by forwarding nett premiums instead of going through the longer accounting process, is to be regarded as the adoption of a modified mode of performance of the agreement between the parties without altering the terms regulating their rights and liabilities (see Phillips v Ellinson Bros Pty Ltd (1941) 65 CLR 221 at 244 per Williams J; Electronic Industries Ltd v David Jones Ltd (1954) 91 CLR 288).
The set off arrangements between the parties modified the performance of their
obligations under the Equity Holders Agreement. It became relevant also to
determine what was intended pursuant to clause 4.2 of the Sale Agreement.
Defence counsel submits that the terms of clause 4.2 establishes a release only in
respect of any liability in the Rogan group to the Holzberger Group. The release “is
one way and not mutual”. The liability reflected in the accounts included, I have
found, the set-off arrangement. Mr Stewart, it is conceded in para. 44 of the
defence submissions included such a liability in determining the final quantum of
the loan account as at 30 June, 1999. I have accepted evidence that a separate
agreement existed in this respect. The accounts I find, reflected that the separate
agreement is not contrary to anything contained in clause 4.2. Consistent with that
finding, the plaintiffs fail in respect of all uninvoiced work in progress as at 30th
June as submitted by the defence in paragraphs 38-50 of the written submissions. It made sense consistent with Mr. Hanley’s evidence, which I accept, that the parties
wanted finality in their past dealings, as at 30th June, 1999.
There was no attempt to exclude the right to set-off group expenses under the Sale
Agreement. The parties were at liberty to set-off in the circumstances: Coca Cola
Financial Corporation v. Finsat International & Ors (1996) 3 WLR 849 at 855-6.
The figure now agreed for group expenses for the period ending 30th June, 1998 to
$180,000.00 for the period ending 30th June, 1999 it is $40,000.00 neither of these
claims were made before action. Amendments were made to subsequent pleadings,
of the defendants on 11th April, 2001. The indebtedness of the defendants to the
plaintiffs for fees owing was growing in early 1999. The plaintiffs had not been
paid for two years (Mr. Holzberger 93.15). The increasing indebtedness of the
defendants to the plaintiffs was one factor which, I am satisfied, led to the
negotiations to effectively dissolve the national partnership (Exhibit 1 para.18).
Meetings were held in August, 1999 and October, 1999. The finding that the group
expenses were taken into account in determining the indebtedness as at 30th June,
1999, leads to the further finding that the plaintiffs are liable only for the group
expenses between 1st July, 1999, and 6th December, 1999, which are agreed at
$15,000.00. The group expenses prior to 1st July, 1999, I find, were extinguished
by the Sale Agreement. Given these findings, it is unnecessary to deal with the
estoppel argument raised by the plaintiffs in the Fourth Amended Reply and

Answer.
Meeting 5th August, 1999 at the offices of Michell Sillar in Sydney:

Present at that meeting were Mr. Stewart, the plaintiffs’ accountant, Mr. Philp, the
plaintiff’s solicitor, Mr. Holzberger and Mr. Reichenberg, the defendant’ solicitor at
that time. Exhibit B (also Exhibit 62) to Mr. Stewart’s affidavit was presented at
that meeting. Exhibit B is a letter dated 4th August, 1999, and the financial
statements for the Rushton (NSW) Partnership for the year ended 30th June, 1999.
Those statements were prepared for the sole purpose of the negotiations (p.3). Mr.
Rogan did not object to the accounts as being inaccurate according to Mr.
Holzberger (272.15-7).
In a letter faxed from the plaintiffs’ solicitors to Ms. Kilkenny who was employed
by the defendants then solicitors Freehills, a new sub-clause 2(b) was suggested
under the heading “Acquisition”:
“If there are any amounts outstanding as invoiced by any of the Holzberger Group to the business or any part thereof on and from 1 July 1999 which have fallen due for payment but which have not been paid as at the completion date then the Rogan Group agrees to have such invoiced but unpaid amounts paid to the Holzberger Group at the Completion Date… the intention of the agreement between the parties being that no rights of the Holzberger Group in that regard will merge in the settlement of either of this Heads of Agreement or any subsequent agreement contemplated by clause 2.3(b).”
It was suggested by Mr. Philp in that letter that clause (b) should be deleted and
replaced with a clause releasing the plaintiffs from any liability and the buyer
giving an indemnity to the seller for any liability arising after the date of the
agreement. According to Mr. Holzberger, his position has not changed. As

nothing could be resolved by way of correspondence, a further meeting was called.
Meetings 21nd and 22nd October, 1999, Melbourne:

Present during the meetings were Mr. Holzberger, Mr. Stewart and the plaintiffs’
solicitor Mr. Bennett. Mr. Stewart performed accounting services for both the
plaintiffs and the first defendant. On behalf of the defendants those present were
Mr. Rogan, Mr. Reichenberg, Ms. Kilkenny, Mr. Hanley and some other persons,
who, for present purposes are not relevant. Discussion took place in relation to the
partnership dealings and how to dissolve the partnership. Throughout the course of
the negotiations, whether the plaintiffs were buyers or sellers, it was suggested by
the parties that billings by Queensland post 30th June, 1999, would be paid as they
fell due. According to Mr Holzberger, Mr. Rogan suggested that it was covered in
the agreement (Exhibit 1 para.39).
The reason that the plaintiffs were willing to become buyers, according to
Mr.Holzberger was that the sellout figure was not fair as far as he was concerned.
There was a threat by Mr. Rogan to appoint a receiver. Mr. Rogan admitted that he
said this but was not serious about the threat. Mr. Holzberger in evidence (280.48),
stated that on 21st October, when his interests were willing to purchase, Mr. Rogan
raised the question that all of the invoices that had not been sent by Victoria to
NSW and because that would be part of the agreement any invoices sent after 1
July, 1999 only had to be paid. Victoria had not sent invoices for some two years
and he thought that as they were valued at some $500,000.00, Mr.Holzberger was
unwilling to pay that amount later. By 21st or 22nd October, 1999, the value of the
invoices were known according to Mr. Holzberger (281.8-10) but he had no idea
about Mr. Rogan’s invoices. Mr. Holzberger contended (94.10) that as at 30th June,
1999, the defendants owed the plaintiffs the sum of $320,538.11 (Exhibit B to Mr. Stewart’s affidavit; 95.7-10). This figure was not included in the claim but was
considered as part of the price paid by the defendants. In effect, it was written off
(94.35). The present claim relates only to invoices delivered after 30th June, 1999.
In a diary note (Exhibit 25 being Exhibit C to Ex.1), Mr. Holzberger noted as being
agreed to be included in the heads of agreement “we to roll in all O/s money to
Qld<30 June & all profit share for NSW. All billing from Qld >30/6 to be paid
under normal terms.”

Mr. Holzberger believed that clause 4.2 of the said Sale Agreement came as a result
of the correspondence between his solicitors with Freehills after the 5th August
meeting. Clause 4.2 was in that form throughout the discussions in Melbourne.
Mr. Holzberger stated that the clause reflected the agreement (315.35-44).
According to Mr. Holzberger, works in progress were not discussed at the meeting
on 5th August, or in Melbourne on 21st and 22nd October, 1999 (314.48-53). The
quantum was discussed on 24th in Hobart (315.55-60). It is convenient, at this stage
to look at the various drafts:

Drafts leading to the Sale Agreement

By a facsimile dated 9th August, 1999, from the plaintiffs’ solicitors to the then
solicitors for the defendants, Freehills, reference was made as to what Mr. Philp
believed the agreement was to contain and what the purchase price represented.
The following appears in that fax:
“What was agreed to be sold was primarily my client’s interest in the New South Wales business for the $1.625 million. Additionally the New South Wales business would pay Queensland for all invoices billed as and from 1 July 1999 as and when they fell due. The Holzberger interests for their part would adopt the $1.625 million as the figure for any of their respective rights accrued as at 30 June. The Rogan interests would also completely take out any liabilities of any of the Holzberger interests.
There therefore needs to be a new sub-clause (b) (with a consequent re-lettering of the current sub-paragraphs) to read “If there are any amounts outstanding as invoiced by any of the Holzberger Group to the business or any part thereof on and from 1 July 1999 which have fallen due for payment but which have not yet been paid as at the completion date then the Rogan Group agrees to have such invoiced but unpaid amounts paid to the Holzberger Group at the Completion Date. If there are any amounts so invoiced by the Holzberger Group to the business and which have not yet fallen due for payment at the Completion Date then the Rogan Group will ensure that the business pays such amounts as and when they do fall due, the intention of the agreement between the parties being that no rights of the Holzberger Group in that regard will merge in the settlement of either of this Heads of Agreement or any subsequent agreement contemplated by clause 2.3(b).”
Mr. Bennett, the plaintiffs’ solicitor, prepared a draft Sale Agreement and gave it to
Mr. Holzberger on 27th August, 1999. On 28th August, 1999, Mr. Holzberger sent
it to Mr. Rogan (Exhibit 43). Clause 5 of the draft contained the following clause:
“5.1 The Parties acknowledge that:

(a)

The Price includes the Outgoing Parties’ share in and entitlement to all of the assets of the Rushton NSW Partnership, the Rushton Goodwill Partnership and the Rushton Group Partnership and any profits made by those businesses to 30th June 1999;
(b) The Parties remain liable for and must pay each other for
fees rendered in the course of the businesses in the
period after 30 June 1999.
(c) The Outgoing Parties remain entitled to one half of the
businesses referred to in Clause 6.1(a) for the period
from 1 July 1999 to Completion.

Schedule 2 to that draft made no mention of work in progress carried out by the
plaintiffs. The purchase price did refer to the liabilities due from the Rushton
NSW Partnership to the plaintiffs. The sum was $143,339.00 and related to the
period ending 30th June, 1999. That figure appeared in the Balance Sheet of the
first defendant as a loan made by the first plaintiff (Exhibit 62). Exhibit 62 was
prepared by Mr. Stewart for the purposes of the parties’ meeting in August. It was
prepared on figures available from Excel spreadsheets kept by the first defendant
on computer records. Mr. Stewart gave evidence (163.30-38), that the figure of
$143,339.00 represented the fee splits, the costs incurred by NSW on behalf of
QLD, and the opening balance of the previous year. I accept his evidence on that
point. The work in progress carried out by Queensland was not part of the figure
according to Mr. Stewart. It was only reflected in the Queensland balance sheet as
a current asset of $391.571.00 (163.50-60). That entry, in my view, could be seen
as evidence that the work in progress was an amount owing which would only
crystalise as a debt upon the presentation of an invoice and allowing whatever the
agreed time to pay was. Conversely, it was open to regard Queensland’s share of
Group expenses as part of the net amount in the loan account (Exhibit 2 which is
part of Exhibit 5).

Exhibit 44 is the next relevant draft. By a fax dated 7th September, 1999, Freehills
referred to Exhibit 43 and replied with a proposed new clause 3A:
“3A.1 Purchase Price
(a) The purchase price is $1,625,000;

(b) The parties acknowledge that the purchase price includes the following:
(1) all amounts owed or owing by the Business to any member
of the Holzberger Group up to and including 30 June 1999:
(2) all profit/loss entitlements, accrued, owed or owing by the
Business to any member of the Holzberger Group;
(3) all assets of the Business;
(4) … .

Clause 3A.2 of Exhibit 44 dealing with the apportionment of the purchase price
referred only to “Payment of agreed liabilities due from the Rushton NSW
Partnership - $… ”.
Exhibit 45 is a draft forwarded by the plaintiffs’ solicitors on 9th September, 1999 to
Freehills. It accepted the new clauses 3A.1 and 3A.2. It also accepted Clause 5
which read as follows:
“5. Payment of ongoing liabilities
The parties acknowledge that:

(a) the parties remain liable for all fees rendered in the usual course of business in the period after 30 June 1999;
(b) prior to Completion all trading between the parties shall be performed in accordance with the EHA;
(c) the Holzberger Group shall not be entitled and shall have no claim in relation to profits of the Business after the Effective Date.”

Mr. Holzberger conceded that, absent a clause reflecting the protection given by
clause 5(a), he had no entitlement to any claim for uninvoiced work undertaken
prior to 30 June: (T. 337.10-340.40; 343.8-344.22). The defence seek to rely on
this as establishing some difference between clause 5 and clause 4.2 (a) and (d).
Exhibits 28 and 46 are similar in relation to clause 4.2 of the final Sale Agreement
except in relation to clause 4.2(c) which is not relevant for present purposes.
Exhibit 28 was the draft sent by Freehills on 20th October, 1999 and Exhibit 46 was
the final Sale Agreement. The merger of clauses 3A.1(b) (1) and (2) supports the
view that “amounts owed or owing” was capable of being referred to as a “claim”
in the ensuing sentences. It was not confined to profits or losses. To be contrasted
to this is the term “debt” which has been discussed earlier in these reasons. Work
in progress, for example, was not recorded as a debt owing by the defendants in the
books of account of the plaintiffs. It could, however, be regarded as a claim, and for which the defendants are not liable if it arose during the period ended 30th June
1999.
It would be of some assistance at this point to look at the diary notes kept by Mr.
Bennett in relation to the meetings in Melbourne on 21st and 22nd October, 1999.
Mr. Bennett gave evidence that he could not recall any discussion of trading debts.
He could not recall discussions between the parties in terms of paragraphs 51-52 of
Mr. Rogan’s affidavit. Mr. Stewart could not recall any discussion about work in
progress or group costs at the meetings on 21st and 22nd October (paragraphs 14-16
of his affidavit). In cross examination (164.46), he stated that he had no
recollection of any discussion about clause 4.2 of the Sale Agreement. In evidence
in chief, he denied that the allegations set out in paragraph 13(b)(i) and (ii) of the
Fourth Defence were discussed (464.27-40) The main points of paragraphs 51-52
were that Mr. Rogan alleged that he and Mr. Holzberger agreed:
1. that the work undertaken prior to 1 July 1999, where the final report had been delivered to the client were clearly jobs that were included in the sale price. If a job was not complete prior to 30th June, 1999, then the amount that would be paid would be calculated on the proportion of time spent after 1 July 1999 and would be payable by the first defendant.
2. that only those amounts for work in progress up to 30th June, 1999 would be caught up in the purchase price.
Exhibit 24 is a diary note which was recorded by Mr. Bennett. It related to when
the Holzberger Group was to be the purchaser and not the seller as it turned out.
There was a discussion of the issue of the current trading debts. Holzberger was
concerned that Mr. Rogan was going to bill up a lot of work done before 30 June but which had not been billed. Mr. Holzberger proposed in a meeting with Mr.
Stewart and Mr. Bennett that:

“(a) If the report to the client was delivered prior to 1 July 1999

then it is not a post 30 June 1999 debt.
(b) If the report was delivered after 30 June 1999 then payment
would be made on interstate debts for the number of days spent
on the project after 30 June 1999 calculated at an average daily
rate for that period.”

Mr. Rogan increased the purchase price by $200,000.00 when he became the
purchaser. The reason that he gave for this was that Queensland was owed more
money by New South Wales than Victoria. Because of this imbalance, the price
was increased. The relevant figure in that regard was for fees owed by New South
Wales. In relation to work commenced prior to 30th June, but not completed, the
figure was some $70,000.00 according to Mr. Rogan (643.20-50). He was not sure
the extent of the work which was pre-June 30.
To some extent the statements of Mr. Rogan (Paras. 51-52) are supported by the
diary notes as they reflect the intention of Mr. Holzberger. In other words, that the
purchaser would only be liable for work carried out after 30th June, 1999, and that
work in progress prior to 30th June, 1999, therefore, would be caught up in the
purchase price. It is suggested by the defence that Mr. Holzberger did not limit
such an intention to when he was the purchaser. The ambiguous nature of the
evidence at 426 is unhelpful to the plaintiffs. Neither Mr. Stewart nor Mr. Bennett
was able to recall works in progress being discussed. The intention of the Sale
Agreement was to finalise the indebtedness between the parties as at 30th June,
1999. Support for this view comes from Mr. Ian Hanley who was present on 22nd
October. He is a partner with BKR Walker Wayland, Chartered Accountants and was acting for the defendants at the material time. He indicated to all present that
there was a need to have a clear cut off date to finalise the arrangements between
the parties (para. 11 of Exhibit 9). The parties were aware that the time sheets
showed when the work had been performed (Exhibits 12-19). Mr. Hanley deposed
that he had “a clear recollection of firmly telling Phil Holzberger that the increase in
the purchase price by $200,000.00 was to cover everything up to 30 June 1999
including work done and any disputed issues in respect of that period.” I accept the
evidence of Mr. Hanley. He gave his evidence in a clear and concise manner and
was able to refer to his notes when necessary. He was adamant that the issue
relating to work done “was an important part to the finalising of the understanding
between the parties”(746.16-20). His evidence can be confirmed to some extent by
his diary note (part of Exhibit 9; 743.10-14;744.5-15).
In this respect, I accept also the evidence of Mr. Rogan at 695.20-30; 727.11-30;
730.10-20). His evidence is supported by Ms. Kilkenny (paras.7 and 8 of Exhibit
8). She confirmed that Mr. Bennett stated that the purchase price would include
invoiced amounts where the valuation report had been completed prior to 30 June,
1999 notwithstanding when that invoice was delivered. She further stated it was
agreed that work done prior to 30 June, 1999, but invoiced after that date was
discussed and agreement reached that amounts owing for work completed on
valuations prior to 30 June, 1999 was part of the sale price. Her evidence is
supported by the diary note made by Mr. Bennett (Exhibit 24). I accept her
evidence. Mr. Holzberger supported that construction of clause 4.2 when he was
the purchaser (426:30-40). It supports an intention on both sides that “all amounts
owed or owing” included work done for the period up to 30th June, 1999, even
though an invoice had not been delivered. To that extent, it removed the uncertainty which might arise by uninvoiced work in progress. I am satisfied that
as a matter of construction and/or as reflecting the intention of the parties that
paragraphs 14(c)(i) and/or 14(c)(iii) of the Third Defence has been established.
As has been agreed between the parties, the amount of work carried out post 30th
June, 1999, was $7,293.79.
Rectification – the legal principles
The plaintiffs submit that to make out a case for rectification, clear and strong
evidence is required: Bishop’s Gate Insurance Ltd. v. Commonwealth Engineering
(NSW) Pty Ltd (1981) 1 NSWLR 429. The need for such evidence was referred to
also by Thomas J. in Winks v. W.H. Heck and Sons Pty Ltd (1986) 1Qd.R.226 at
236. The court is entitled to look at the conduct of the parties both before and after
negotiation of the agreement to determine common intention: Winks ibid. at 238.
The following passages of Thomas J. in Winks at 237 are apposite:
“ A mistake by a party in reading or interpreting such a written agreement (which fails to embody the true agreement of the parties) will not deprive him of the remedy of rectification unless there is a distinct abandonment of the old understanding so that the new agreement is to be taken as the contract irrespective of what might have been earlier agreed… But it is equally plain that had the parties intended the written agreement to be the formal recor of their oral agreement, the plaintiff could have had it rectified so as truly to represent the oral agreement, and an error in law on the part of one of the parties in interpreting the meaning of the written agreement would be beside the point. Such an error of law would not preclude the plaintiff from obtaining rectification.
An attempt was made in the present case to show that the vendor had read and understood the agreement and that he adopted it as the bargain. However, his evidence leaves it perfectly clear that he adopted it as something that he believed to represent the earlier agreement and it is equally clear that his fundamental error was in believing that it do so. The correction of an error of this kind is the main object of the remedy of rectification.”.
Kneipp J. stated at 231:
“The questions are what was the real contract between the parties, and what were their beliefs as to the effect of the written contract; and evidence which is probative of those issues is admissible”.
His Honour continued by citing with approval the passage from In Re: Butlin’s
Settlement Trusts (1976) Ch. 251 at 260-261:
“… rectification is available not only in a case where particular words have been added, omitted or wrongly written as the result of careless copying or the like. It is also available where the words of the document were purposely used but mistakenly considered that they have a different meaning from the correct meaning as a matter of true construction. In such a case, which is the present case, the court will rectify the wording of the document so that it expresses the true intention… ”
His Honour referred to the further passage from Butlin’s Settlement ibid. p.261
when he stated:
“… a document may be rectified ‘notwithstanding that the mistake arose, not in omitting, or using words intended, or not intended, to be included, but in ascribing the wrong interpretation to words intended to be used’ ’’.
In applying the above principles, it is open to the court in the present case to order
rectification. If it were necessary, I would order rectification of the Sale Agreement
in terms of paragraphs 14 (c)(i) and 14(c)(iii) of the Fourth Defence.
.

State Transit Authority Job (invoice 4829)

The invoice for this transaction is part of Exhibit 19. It is part of the plaintiffs’
claim for $132,008.82. The defendants had obtained the contract to do valuation
work for the State Transit Authority on or about 14th May, 1999. It was unable to
carry out all of the work itself. The deadline was 9th July, 1999. The fee quoted
was $32,000.00. The valuation was to be done on both operational and non-
operational properties owned by the Authority. A contract was offered to the plaintiffs to carry out part of the work. Mr. Holzberger gave evidence that he was
in the Auckland office with Mr. Neil Hemmings when a call was received from Mr.
John Nelson. Mr. Hemmings held the position of National Marketing Manager.
Mr. Hemmings told Mr. Holzberger that NSW was having difficulties resourcing
the particular job. Mr. Holzberger agreed to help. John Nelson was instructed to
deal with Geoff Pyman from Queensland. Mr. Nelson was the NSW manager for
Land and Building and Director of Operations (Ex. 78). Mr. Pyman was a
registered valuer for both Queensland and New South Wales. Mr. Holzberger, it
seems, was also a partner in the NSW operation. The claim by the plaintiffs in
relation to this claim is $10,934.10. It relates substantially to the pre-30th June,
1999 period. It is not in dispute that the first defendant has been paid for all of the
work done. The plaintiffs claim for work done under the Equity Holders
Agreement, as a separate agreement or alternatively on an unjust enrichment basis..
Mr. Holzberger stated that Mr. Hemmings agreed that the plaintiffs would receive
the entire fees for this project without the deduction of the usual 10%. The work
was to be carried out by Mr. Pyman and two other Queensland employees.
Clause14.1(4) of the Equity Holders Agreement provided as follows:

“(4) the terms for secondment of staff between Licensees
must be agreed before the secondment commences.”

Mr. Holzberger said that he had joint control of the NSW operation and other

entities as a partner (49.20). Mr. Rogan controlled the other half. The plaintiffs
plead that the secondment was requested by Mr. Hemmings on behalf of the first
defendant and/or the New South Wales trading partnership. The question is
whether Mr. Hemmings had the requisite authority to bind the defendants as
members of that trading partnership. It is interesting to note that in the discussion about other invoices, Mr. Hemmings seems to be involved in many of these (53.20-
6610). Mr. Holzberger believed him to be the senior marketing person for New
South Wales. This evidence is in conflict with the organizational chart (Ex. 78) and
the evidence of Mr. Rogan and Mr. Pyman. The terms of the engagement were
agreed between Messrs. Holzberger and Mr. Hemmings who sold most of the jobs
in Sydney according to Mr. Holzberger. Mr. Pyman, whose evidence I accept,
stated that he spoke to Mr. Hemmings on a number of occasions about jobs to be
done in NSW. Mr. Hemming’s would get the work in, deal with the client and then
pass it onto John Nelson who organised the jobs. In a lot of cases they would talk
to Mr. Pyman. That evidence is consistent with Mr. Hemming’s involvement with
the jobs the subject of the plaintiffs’ claim. Mr. Nock handed the relevant file to
Mr. Pyman when he requested it. Mr. Nock was the NSW Manager and Director
for Operations. He was not called and no explanation was given for this. I readily
infer that he knew that Mr. Hemmings had given the job to Queensland. Mr.
Pyman held the position also of National Manager for Land and Buildings Division

of the Rushton Group in 1999. I am satisfied that Mr. Hemmings had the necessary
apparent authority to bind the defendants by way of a separate agreement: Hely-
Hutchinson v. Brayhead Ltd. (1968) 1 Q.B. 549 at 583.
Ratification

When Mr. Rogan learned of the detail of the State Transit Authority job, he rang
Mr. Holzberger and told him to stop. Mr. Holzberger refused. After a day or so of
commencing the job, Mr. Pyman received a call from Mr. Rogan who said that he
would speak to Mr. Holzberger. When he next spoke to Mr. Rogan, on or about
29th or 30th June, 1999, Mr Pyman said that Mr. Rogan said, “look, you accepted the
job, you push on with it but make sure you meet the deadline”(587.50). I am satisfied that this was sufficient ratification of the job: Life Savers Australasia Ltd. v
Frigmobile Pty Ltd. (1983) 1 NSWR 431; “Commercial Law Commentary and
Materials” First Edition 1999 by Pearson and Fisher para. 4.2.4.2; Bowstead on
Agency 15th Ed. P.66.
Unjust Enrichment
Despite the further written submissions of the defendants on 16th July, 2001, leave
is granted to add paragraph 15A of the Third Claim. The question has been
litigated and the defence have called evidence on the topic in so far as quantum is
concerned. The plaintiffs say that the defendants have been paid for the State
Transport Authority job. That is not in dispute. In order to establish unjust
enrichment, four questions should be answered (The Action in Unjust Enrichment
to recover the proceeds of a tort” by Gething (1995) Torts Law Review 123 at127:
1. Was the defendant enriched?
2.    Was it at the plaintiff’s expense?
3.    Was there an “unjust” factor, in the sense of circumstances
which the law recognises as requiring the enrichment to be given up?
4.    Were there nonetheless facts which require restitution to be withheld?
In my view, the first three questions should be answered “yes” and the last question
“no”. These questions are consistent with the elements of the action in ANZ v.
Westpac (1988) 164 CLR 662 at 673. The defence argues that there was a breach
of fiduciary duty owed by the plaintiffs to the defendants. The second plaintiff was
a party involved for each side. In light of the above findings, there has not been
established any breach of fiduciary duty which should deprive the plaintiffs of the right to sue for the monies owing as a result of the State Transport Authority job. In
fact the attitude of the defence in this respect has been somewhat indefensible. One
only has to look at the letter of appreciation from Mr. Hemmings to realise this (part
of Ex.19 and dated 9th July, 1999). In view of the interpretation of Clause 4.2, the
result of this finding seems somewhat academic. I find that the evidence of Mr.
Purcell is somewhat unhelpful. He was not asked to do the work in the time frame
required. The defendants’ representatives approached Mr. Holzberger. Given the
findings about the arrangements between the parties, the plaintiffs are entitled to
the whole of the amount claimed.
Effect of the Summary Judgment
Part of the State Transit Authority job was done post 30th June, 1999. It was part of
the sum relating to the summary judgment given and is over and above the said
$10,934.10. At the time consent orders were made on the summary judgment, the
parties were unaware that the second plaintiff ought to be a party. It seems to be
common ground that that judgment ought to be set aside and the matter considered
in light of the joinder of the appropriate party. There is the separate question of
indemnity being sought by the defendants against the second plaintiff in relation to
the plaintiffs’ claim. What has to be added to the sum of $7,293.79 is the amount of
the summary judgment less any monies paid under that order.
The order made by consent on 8th May, 2000 and relevant to the present issues
provided as follows:
“THE ORDER OF THE COURT BY CONSENT IS THAT:
1. The defendant pay to the plaintiff pursuant to Rule 292(2) of the UCPR the sum of $40,603.25 comprised of $38,050.63 for claim and $2,552.62 for interest to today.
THE ORDER OF THE COURT BY CONSENT IS THAT:
2.           The defendant pay the plaintiff’s costs of and incidental to the application for summary judgment and other relief, to be assessed.
3.           There be a stay of execution but only as to the sum of $30,020.13; being part of the aforesaid judgment, such stay to remain in place until judgment herein consequential upon the trial of the action or further or earlier order and provided that there be execution of the balance sum of $10,583.12 for a period of 14 days from today.
THE COURT DECLARES BY CONSENT THAT:
4.           The judgment aforesaid given in respect of the following claims or part hereof, made by the plaintiff herein:

(a)

those claims in respect of the plaintiff’s invoices to the defendant numbered 4814, 4837, 4854, 4856, 4857, 4859, 4869, 4886, 4887, 4888, 4892 and 4893 (being those invoices which the defendant concedes are due and payable to the plaintiff in full or which have not been contested by the defendant), being in total the sum of $19,597.68;

(b)

the claim which is only partially disputed namely invoice number 4829 which the plaintiff claims in the sum of $26,615.03 and which, based on the defendant' affidavit material, is admitted by the defendant in the sum of $18,452.95, such judgment being given for the latter sum, the balance, if any, to be determined by the trial judge.

THE COURT DIRECTS BY CONSENT THAT:
5. In respect of all the other claims made by the plaintiff (including the balance of the plaintiff’s claim on invoice 4829 not satisfied by the judgment herein) which are not the subject of the above judgment, that the defendant (without any admission by the plaintiff), have leave to defend such claims in whole or as to the balance thereof, upon the trial of these proceedings.”

The total amount ordered to be paid was $40,603.25. The amount paid was
$10,583.12 leaving a balance of $30,020.13. In relation to invoice 4829, the further
amount claimed by the plaintiffs is $10,934.10. This formed part of the figure of
$132,008.82 which was the claim in the action. There was no attempt to try to
relate any part of that sum to the post 30th June,1999 period. Therefore, the amount
of $30,020.13 remained due and owing.
A further order by consent was made on 18th July, 2000. Paragraph 3 of the earlier
order of 8th May was deleted and so the new figures, as agreed, are:
1.          The first defendant has paid the further sum of $3,842.22 and the
sum of $211.26 interest.
2.          A stay of execution relates to the balance of $26,177.91.
Consistent with the submissions of counsel that further submissions are necessary,
the following orders seem appropriate:
1     The judgment is formally set aside
2     Judgment to be entered for the plaintiffs against the defendants will
include the sum of $26,177.91 and the sum of $7,293.79 making a total
of $33,471.70.
3     The stay of execution is removed in relation to the sum of $26,177.91
Submissions were not made in detail in relation to these figures and liberty to apply
shall be given to clarify any error. There seems to be little point in changing the
position in relation to the sums paid of $10,583.12 and $3,842.22. The defendants
can adjust any further sums payable by taking into account the sums paid to date by
the first defendant. No submissions were made on this point. To be set off against any judgment obtained by the plaintiffs is the sum of $15,000.00 being the group
expenses for the period from 1st July, 1999 to 6th December, 1999.
Indemnity Claim by defendants against the second plaintiff, Senmead Pty. Ltd.
In the Fourth Defence, the counter-claim pleads (para. 25) that the defendants are
entitled to contribution from the second plaintiff as a member of the partnership.
Clause 6 of the Partnership Deed (Ex. 88) provides as follows:
“Partnership Expenses
All liabilities and expenses in relation to the Partnership Business must be paid out of the income or capital of the Partnership. If the assets of the Partnership are insufficient to meet the liabilities and expenses of the Partnership, those expenses or liabilities must be paid by the Partners in the proportions set out in the Equity Holders Agreement or if that Agreement is silent in relation to the way in which the expense or liability is to be apportioned between the Partners it must be paid by the Partners in the proportions set out in Item 5 of the Schedule.”
Schedule
“

Partner Interest of the Partner in column 1
Total interests in the partnership
1000 units
Senmead Pty Ltd 333 units
Rushton (SA) Pty Ltd 333 units
Rushton (NSW) Pty Ltd 334 units

”

It is only in the event that the assets are insufficient to meet the liabilities and
expenses of the Partnership that the partners are required to contribute one-third
each. It would seem that Clause 13 of the Deed would only be relevant if the
partners could not meet the liability under clause 6. It was submitted by the defence
(para. 68) that the partnership profits and assets were purchased by the Rogan group and presently there are, therefore, no partnership profits and assets from
which to meet any liability. This was not disputed by the plaintiffs’ counsel. This
aspect was not the subject of detailed evidence. It may be the a tracing exercise is
necessary as obviously the second plaintiff continues to exist. The practical
consequence would have been that the second plaintiff, Senmead Pty. Ltd. would
contribute by virtue of its being a partner and the income and capital could be
utilised to pay any liabilities or partnership expenses arising out of the trading
partnership. In effect, this would mean that the second plaintiff would be required
to indemnify the defendants for one-third of any claim which the plaintiffs succeed
in proving in this action. The plaintiffs rely on the fact that the second plaintiff
was not a partner after 1st July, 1999. They contend that the partnership was
dissolved retrospectively as a result of the Sale Agreement. It follows from that
proposition that the second plaintiff would not be entitled to any income after that
date.87. In fact, Mr. Holzberger continued to be paid a salary from 1st July, 1999,
until the completion of the contract on 6th December, 1999 (734.15). Mr. Rogan
stated that Mr. Holzberger insisted that his salary of $30,000.00 per annum continue
until completion. Mr. Rogan stated that upon payment of the cheque on settlement,
the partnership ended. I accept that position. Although the parties had
retrospectively made arrangements to finalise the financial position as at 30th June,
1999, the partnership continued in a practical sense until completion. Clause 4.2(d)
of the Sale Agreement provided that “prior to completion all trading between the
parties shall be performed in accordance with the Equity Holders Agreement”. The
parties continued to trade with one another and to incur debts. The second plaintiff
I find was entitled to fees for work done. It did not operate in a vacuum. As pointed out in the defence submissions (para. 66), Section 38 of the Partnership Act
1892 (NSW) provides that:
“After the dissolution of a partnership… the other rights and obligations of the partners continue, notwithstanding the dissolution, so far as may be necessary to wind up the affairs of the partnership, and to complete transactions begun but unfinished at the time of the dissolution… ”
Therefore, any retrospective dissolution as suggested cannot allow the second
plaintiff to avoid its ongoing obligations.
I find that the obligations of the second plaintiff continued after 30th June, 1999. It
is declared, therefore, that the second plaintiff is liable to contribute one-third of
any sums and costs awarded against the defendants together with one-third of the
defendants’ solicitor/client costs incurred in defending the claim.
Section 52 of the Trade Practices Act (C’W) 1974
The defendants rely on this section in relation to alleged false representations made
prior to entering into the Sale Agreement. In light of the findings in favour of the
defendants on that point, it is unnecessary to deal with it further.
PROPOSED ORDERS

1. That there be judgment in the action for the plaintiffs against the
defendants in the sum of $7,293.79 together with interest at the rate of nine
(9) per centum from 22nd December, 1999 to the date of judgment.
2.           The judgment given on 8th May, 2000 and as varied on 18th July, 2000 for
the plaintiff against the first defendant is set aside and judgment will be
given for the plaintiffs against the first and second defendants in such
further sum subject to further submissions.
3.          That the stay of execution on the sum of $26,177.91 be removed.
4.           That there be judgment on the counter-claim for the first defendant against
the plaintiffs in the sum of $15,000.00 together with interest at the rate of
nine (9) per centum from 25th January, 2000 to the date of judgment.
5.           It is ordered that the second plaintiff do contribute one-third of such sums
awarded against the defendants in the action and one-third of the
defendants’ costs as from 11th April, 2001.
6.           It is further ordered that the second plaintiff do contribute one-third of the
defendants’ solicitor/client costs from 11th April, 2001.
7.           Liberty to apply is given in relation to the appropriate orders and quantum
on the summary judgment application and costs including costs of the
action.

CITATION:	Rushton & Anor v. Rushton & Anor [2001] QDC 193
PARTIES:	RUSHTON (QLD) PTY LTD ACN 079 140 364 AND SENMEAD PTY LTD ACN 053 308 008 Plaintiffs v RUSHTON (NSW) PTY LTD ACN 079 164 202 First Defendant AND RUSHTON (SA) PTY LTD ACN 079 164 177 Second Defendant
FILE NO/S:	D5024 of 1999
DIVISION:	Civil Jurisdiction
PROCEEDING:
ORIGINATING	Brisbane
COURT:
DELIVERED ON:	20 July 2001
DELIVERED AT:	Brisbane
HEARING DATE:	17, 18, 19, December 2000, and 21, 22, 23, 24, 25, 30 & 31 May 2001, 25 June 2001
JUDGE:	Judge Forde
ORDER:	Judgment for the plaintiff in the sum of $7,293.79 Judgment for the first defendant in the sum of $15,000.00
CATCHWORDS:	CONTRACT – licence agreement – dissolution of partnership – “amounts owed or owing” – “debts” – “claims” construction of agreement – ambiguity – parol evidence rule – books of account evidencing agreement – rectification
Airwork (NZ) Ltd v Vertical Flight Management Ltd. (1999) 1 NZLR 641 at 650-651 ANZ v Westpac (1988) 164 CLR 662 at 673 Australian Broadcasting Commission v Australian Australasian Performing Right Association (1973) 129 CLR 99 Bank of New Zealand v Baker (1926) NZLR 462 at 489 Bishop’s Gate Insurance Ltd v Commonwealth Engineering
(NSW) Pty Ltd (1981) 1 NSWLR 429 Bunting Cabinets Pty. Ltd. v Halperin (1986) 4 SR (WA) 75 at 79 Buttle v Allan as Official Liquidator of Buttle & Co Shareholders Ltd (In Liquidation) 1994 1 NZLR 396 at 404 Cachia v Isaacs (1995) 3 NSWLR 366 at 377 Caldwell v Treloar (1982) 30 SASR 202 at 208-9 Earthworks and Quarries Ltd. v F.T. Eastment & Sons Pty. Ltd. (1966) VLR 24 at 29; Re Nicholls Pty Ltd (1982) 7 ACLC 76 at 83 Coca Cola Financial Corporation –v- Finsat International & Ors (1996) 3 WLR 849, 855-6 Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 352; In re Hall & Barker (1879) 9 Ch 538 at 545: Hely-Hutchinson v Brayhead Ltd (1968) 1 QB 549 Lifesavers Australasia Ltd v Frigmobile Pty Ltd (1983) 1 NSWLR 431 Locke v Dunlop (1888) 39 Ch D 387 McLaren v Waikato Regional Council (1993) 1 NZLR 710 at 725. In Re Moss (1905) 2 KB 307 Music Masters Pty Ltd v Minelle (1968) Qd R 326 at 330 Nosic v. Zurich Australian Life Insurance Ltd. (1997) 1 Qd. R. 67 at 78. Phillips v Ellinson Brothers Pty Ltd (1941) 65 CLR 221 at 234 Phillips Fox (A firm) v Westgold Resources NL BC20000 1543 Quainoo v NZ Breweries (1991) 1 NZLR 161 at 165 Standard Chartered Bank of Australia Ltd v Antico and Others (1995) 131 ALR 1 at 123 Trident General Insurance Co Ltd v McNiell Bros Pty Ltd (1988) 165 CLR 107 Underwood Son & Piper v Lewis (1894) 2 QB 306 at 310 Webb v Stanton (1883) 11 QBD 518 Winks v W.H. Heck and Sons Pty Ltd (1986) 1 Qd R 226 at 236
COUNSEL:	L. Bowden for Plaintiffs R. Perry for Defendants
SOLICITORS:	Bennett & Philp for Plaintiffs Macrossans for Defendants
Introduction

“14.	Interstate Work and sharing of resources
14.1	The Group Partners and the Licensees agree: (1) that any work within a Territory is to be undertaken by

(a)	the Purchase Price includes all amounts owed or owing by the Partnerships and the Companies to the Sellers for the period up to 30 June 1999, and, subject to completion, the Sellers have no further entitlement to any distribution, profit or loss, claim or dividend of whatsoever kind from any of the Partnerships and Companies for the period ending 30 June 1999 or for the period up to and including Completion;
(b)	the Purchase Price includes all debts owing for the period ending 30 June 1999 by the Partnerships and Companies to any member of the Sellers and the Sellers shall have no further claim in relation to these debts;
(c)	the Purchase Price includes all or any of the assets (including the goodwill of Rushton Group Partnership but expressly excluding any goodwill associated with the trading of the Business in Queensland and Papua New Guinea) of the Partnerships and Companies and is also in consideration of the transfer of the Business Name under clause 9; and
(d)	prior to Completion all trading between the parties shall be performed in accordance with the Equity Holders Agreement.”

(1)	the construction of the clause in the context of the Sale Agreement as a whole; and/or
(2)	the negotiations of 21 and 22 October referred to in paragraph 13 above.

to 30.6.98	$180,000.00
to 30.6.99	$40,000.00
1.7.99 - 6.12.99	$15,000.00 __________ $235,000.00 =========

(b)	The parties acknowledge that the purchase price includes the following:
(1) all amounts owed or owing by the Business to any member of the Holzberger Group up to and including 30 June 1999:

(a)	the parties remain liable for all fees rendered in the usual course of business in the period after 30 June 1999;
(b)	prior to Completion all trading between the parties shall be performed in accordance with the EHA;
(c)	the Holzberger Group shall not be entitled and shall have no claim in relation to profits of the Business after the Effective Date.”

Partner	Interest of the Partner in column 1 Total interests in the partnership 1000 units
Senmead Pty Ltd	333 units
Rushton (SA) Pty Ltd	333 units
Rushton (NSW) Pty Ltd	334 units

[2001] QDC 193

20/07/2001