Sobey v Sobey (Ruling No 2)
[2015] VSC 548
•8 October 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S CI 2011 03588
| ANDREW SOBEY | Plaintiff |
| v | |
| GEOFFREY SOBEY | First Defendant |
| JENNIFER SOBEY | Second Defendant |
| JAMES SOBEY | Third Defendant |
| CAVERNDALE PTY LTD (ACN 086 924 950) | Fourth Defendant |
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JUDGE: | ALMOND J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 10 August 2015 |
DATE OF RULING: | 8 October 2015 |
CASE MAY BE CITED AS: | Sobey v Sobey & ors (Ruling No 2) |
MEDIUM NEUTRAL CITATION: | [2015] VSC 548 |
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UNDERTAKING – Undertaking to roll over members account balance in superannuation fund – Proper construction of undertaking – Whether undertaking included implied reference to a specific amount – Whether breach of undertaking.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr C Northrop | Harwood Andrews Lawyers |
| For the Defendants | Mr P Caillard | Nevett Ford |
HIS HONOUR:
In this proceeding the plaintiff Andrew Sobey sues his parents, his brother James, and the trustee of the family superannuation fund Caverndale Pty Ltd (“Caverndale”) in a family dispute involving farming land and assets. The detailed facts of that dispute are outlined in my judgment in Sobey v Sobey & Ors [2014] VSC 373.
Following the breakdown in family relations which gave rise to the proceeding, various caveats were lodged on behalf of Andrew.
On 16 November 2011, pursuant to an application made by summons in the proceeding, Habersberger J made orders for the removal of the caveats to facilitate the completion of the sale and the distribution of the proceeds of sale of some of the properties.
The orders were made on the giving of undertakings by the defendants, which included an undertaking given by the fourth defendant, Caverndale, in its capacity as trustee of the Caverndale Superannuation Fund (“Fund”).
Caverndale, by its counsel, undertook, among other things
‘…to roll over the plaintiff’s members account balance in the Caverndale Superannuation Fund to such regulated Superannuation Fund as may be nominated by him’.
The plaintiff contends that Caverndale is in breach of this undertaking and seeks an order that Caverndale
‘…forthwith roll over the remainder of the plaintiff’s members account balance, being $113,398.45, in the Caverndale Superannuation Fund to such regulated superannuation fund as may be nominated by the plaintiff…’.
Background facts
The facts relevant to the current application are as follows.
The Fund was established by trust deed dated 28 June 1999 and varied by trust deed dated 10 September 2007.[1] The beneficiaries of the Fund include, relevantly, the plaintiff and his parents (the first and second defendants).
[1]Outline of submissions on behalf of Geoffrey Keith Sobey, Jennifer Mary Sobey, James Stuart Sobey, and Caverndale Pty Ltd dated 17 July 2015 (“Defendants’ Submissions”), [2]; Affidavit of Arthur Paul Stephens sworn 17 June 2014 (“Stephens Affidavit”), [3], [5]; the Deed is exhibited as APS-1 to the Stephens Affidavit and the Variation Deed is exhibited as APS-3.
Caverndale is, and was, at all relevant times, the trustee of the Fund.[2]
[2]Defendants’ Submissions, [2]; Stephens Affidavit, [4]; Schedule 1 to the Deed is exhibited as APS-1 to the Stephens Affidavit.
By a deed of contribution dated 27 June 2007 (“Contribution Deed”), the first and second defendants contributed certain land in specie to the Fund.[3]
[3]Defendants’ Submissions, [3]; Stephens Affidavit, [4]; the Contribution Deed exhibited as APS-2 to the Stephens Affidavit.
In the course of the caveat removal application in November 2011 Caverndale, by its counsel, gave the undertaking to roll over the plaintiff’s member account balance.
At some time in February 2012, the amount of $50,970.55 was rolled over from the plaintiff’s members account in the Fund to a regulated superannuation fund nominated by the plaintiff.[4]
[4]Defendants’ Submissions, [4]; Stephens Affidavit, [9]; Affidavit of Richard Peter Anderson sworn 27 May 2014 (“27 May Anderson Affidavit”), [15]; cf Hearing transcript 57:19-26.
The trial of the proceeding took place during January and February 2014.
Plaintiff’s submissions
The plaintiff contends that $113,398.45 remains to be rolled over into the plaintiff’s nominated regulated superannuation fund. This contention is premised on the assumption that the plaintiff’s entitlement is $164,369.
In support of this contention, counsel for the plaintiff relies on the following:
(a)A letter dated 23 September 2011 (“September 2011 Letter”) from Nevett Ford Lawyers, the solicitors for the defendants, to Harwood Andrews, the solicitors for the plaintiff, relevantly stating as follows:
‘If the dispute between our clients has not been resolved my client proposes distributing the proceeds as follows … Rolling over your client’s members benefit in the Caverndale Superannuation Fund as per his request E$165,000.00’;[5]
[5]Outline of submissions on behalf of Andrew Geoffrey Sobey dated 3 August 2015 (“Plaintiff’s Submissions”), [2]; 27 May Anderson Affidavit, [3]; the letter is exhibited as RPA-4 to the 27 May Anderson Affidavit.
(b)A statement made by counsel for the defendants when the issue was before Habersberger J on 10 November 2011 as follows:
‘the proceeds from the sale, in round terms $2 million, will be applied not only to those borrowings that I have identified but also to the $165,000 odd which is the plaintiff’s entitlement to the superannuation fund and that will be rolled over at his direction …’;[6]
(c)Various other statements and references (made to the Court by counsel for the defendants at trial) to the effect that the plaintiff had a credit balance of $160,000 in his members account in the fund;[7]
(d)Evidence given by Mr Bruce Mackley, the Sobey family accountant, during the trial that the plaintiff’s superannuation entitlement was approximately $160,000;[8] and
(e)A member’s statement produced by the Fund for the year ending 30 June 2011 showing the plaintiff’s members account balance at $164,370.[9]
[6]Trial transcript 12.21-25.
[7]27 May Anderson Affidavit, [11]; Trial transcript 574:7-18, 578:25-579:13.
[8]27 May Anderson Affidavit, [12]; Trial transcript 463:15-17, 497:24-31.
[9]Plaintiff’s Submissions, [2]; Affidavit of Richard Peter Anderson sworn 15 May 2014 (“15 May Anderson Affidavit”), [6]; the financial statements are exhibited as RPA-15 to the 15 May Anderson Affidavit.
Defendants’ submissions
The defendants contend that Caverndale has paid the plaintiff his full entitlement to superannuation in the Fund and that the undertaking has been discharged.
In particular, the defendants contend that no breach has occurred as:[10]
(a) the undertaking given by Caverndale did not refer to a specific amount;
(b)the statements and assertions referred to by the plaintiff in support of his contention that his members account balance should be more than $50,970.55, including statements made by counsel for the defendants at trial, were ‘vague’ and did not create a legal entitlement to any particular amount; and
(c)Habersberger J made no determination (i) as to the amount payable or (ii) to the effect that the transferors [Geoffrey and Jenny Sobey] should lose the benefit of the in specie transfer of land made pursuant to the Contribution Deed.
[10]Defendants’ Submissions, [15]-[17].
The defendants rely upon the evidence of their solicitor, Arthur Paul Stephens. In an affidavit sworn in opposition to the application, Mr Stephens deposes that:[11]
[11]Stephens Affidavit, [7]-[11].
(a) following the hearing before Habersberger J, he was advised by Mr Mackley that the estimate he (Mr Mackley) had provided of the plaintiff’s members account balance in the Fund was based on treating the land contributed in specie by Geoffrey and Jenny Sobey as an unsegregated asset within the Fund;
(b) he asked Mr Mackley to calculate the plaintiff’s members account balance on the basis that the land was a segregated asset;
(c) during a telephone conversation with Mr Mackley he expressed his view to Mr Mackley that it was an error to treat the land as an unsegregated asset in the Fund, given the terms of the Contribution Deed, and that he was seeking specialist advice;
(d) Mr Mackley calculated the plaintiff’s members account balance based on the land being a segregated asset at $50,970.55 and provided that figure to Mr Stephens; and
(e) this amount was rolled over by Caverndale to the superannuation fund nominated by the plaintiff.
The defendants also rely on evidence given orally by Mr Stephens under cross-examination on his affidavit to the effect that the letter ‘E’ before the amount of $165,000 in the September 2011 Letter meant ‘Estimate’ and that as at 10 November 2011 (the date of the giving of the undertaking), the plaintiff’s ‘members balance … had not been quantified’.[12]
[12]Hearing transcript 18.6, 21.3-4, 25.10 - .28.
Further, the defendants rely on statements made by counsel for the defendant at trial which reveal that there was a debate or a difference of opinion between the solicitor for the defendants and the family accountant as to whether the plaintiff’s entitlement was in the order of $50,000 or in the order of $161,000.[13]
[13]Defendants’ Submissions, [21]-[22]; Trial transcript 677:13-31, 678:8-20.
The defendants submit that it is evident from the drafting of the Contribution Deed that the in specie contribution of land benefitted the transferors (i.e. Geoffrey and Jenny Sobey) in equal shares and was made on the basis that it would be a segregated asset.[14]
[14]Defendants’ Submissions, [6]-[7].
The Contribution Deed provides, relevantly, that Caverndale
‘… accepts the transfer of the land as an in specie contribution to the fund and will allocate a half interest in the land to each of [the first and second defendants’] member accounts’[15]
[15]Defendants’ Submissions, [6] (emphasis added).
The defendants contend that the plaintiff’s members account could not benefit from this in specie transfer of land and that the contrary view is based on a mistaken accounting treatment being a failure to treat the land as a segregated asset in the Fund.
Disposition
It is common ground that the giving of an undertaking to the Court is a serious matter and must be strictly complied with. As a corollary of that seriousness, and in recognition of the potential for serious consequences arising out of any breach, parties should be held to account only for what they have clearly undertaken to do and no more.
In this case, the fourth defendant undertook to roll over the plaintiff’s members account balance in the Fund (to a regulated superannuation fund nominated by the plaintiff).
The undertaking is silent as to the amount of the account balance; there is no incorporation by reference to any document or formula from which the account balance can be ascertained. There is no evidence to suggest that the (unsigned) financial statements of the Fund as at 30 June 2011 relied on by the plaintiff at the hearing of the application had been finalised by the time the undertaking was given.[16] Though various dollar amounts were referred to by counsel for the defendants in the lead up to the giving of the undertaking it is significant that no ascertained amount was incorporated in the undertaking. All parties were represented by counsel. Had the fourth defendant intended to undertake to roll over a specific amount, presumably it would have done so. The fact that no amount was specified tends to corroborate the evidence of Mr Stephens that the precise amount of the plaintiff’s entitlement had not been quantified at the time the undertaking was given.[17]
[16]Exhibit RPA-15 to the 15 May Anderson Affidavit.
[17]Hearing transcript 21.3-4.
In my view, the undertaking must be construed in its context as an undertaking to roll over the plaintiff’s members account balance once it had been ascertained.
For present purposes, statements made by counsel for the defendants at trial (in January and February 2014) must be disregarded. They do not aid in the construction of an undertaking which was given several years before (in November 2011).
In my view, there is no reason why the fourth defendant should be bound by any of the other estimates and approximations referred to at other times. I accept that the legal practitioners representing the defendants were working from unsettled figures and estimates. It is obvious that at least some of the legal practitioners, including counsel, were at various times acting on the basis that the plaintiff’s members account balance was in the order of $160,000 but this does not elevate the undertaking to an entitlement to a particular or minimum amount.
Having undertaken to roll over the plaintiff’s members account balance in the Fund, the fourth defendant, in its capacity as trustee of the Fund, was obliged first to ascertain or cause to have ascertained the plaintiff’s members account balance in the Fund and, having done so, to then roll over that balance.
It can be inferred, and I do infer, that the fourth defendant has determined that the plaintiff’s members account balance is reflected in Mr Mackley’s alternative calculation performed on the assumption that the land is to be treated as a segregated asset. That calculation resulted in a figure of $50,970.55, which had been provided by Mr Mackley to the solicitors for Caverndale. It was that amount that Caverndale rolled over into the plaintiff’s nominated regulated superannuation fund.
On its face, that conduct is consistent with the undertaking given to the Court on 16 November 2011. It reflects an acceptance of the view that the calculation of the plaintiff’s members account balance should be arrived at on the assumptions implicit in the accountant’s alternative calculation. There is no suggestion that Caverndale as trustee has acted capriciously by acting on that basis. In the circumstances, I am not satisfied that Caverndale is in breach of the undertaking or that Caverndale should (at least at this stage) be ordered to roll over $113,398.45 to such regulated superannuation fund as may be nominated by the plaintiff.
Putting aside the present question as to the scope of the undertaking, it is evident that there remains a difference of opinion between the parties as to the plaintiff’s members account balance in the Fund. This was not one of the issues raised for determination at the trial nor was it squarely addressed in the prosecution of this application. The plaintiff did not seek to adduce any expert evidence to aid resolution of the question. Indeed, the plaintiff objected to an attempt by the defendants to do so.[18] One inexpensive solution to avoid further litigation may be for the parties to jointly appoint a suitably qualified independent expert and to agree to be bound by the outcome of the expert’s determination.
[18]The plaintiff’s objection was upheld.
The plaintiff’s summons must be dismissed. Unless persuaded otherwise I propose to order that costs follow the event.
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