Sululola v Mbachilin
[2019] VCC 1959
•12 December 2019
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-18-05511
| ALADE ABIODUN SULULOLA | Plaintiff |
| v | |
| GODWIN IKPI MBACHILIN | Defendant |
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JUDGE: | HIS HONOUR JUDGE MACNAMARA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 14, 15, 16, 17, 18 and 25 October 2019 | |
DATE OF JUDGMENT: | 12 December 2019 | |
CASE MAY BE CITED AS: | Sululola v Mbachilin | |
MEDIUM NEUTRAL CITATION: | [2019] VCC 1959 | |
REASONS FOR JUDGMENT
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Subject: Contract
Catchwords: Alleged oral sale of units in unit trust; whether unenforceable due to lack of writing; whether contract unenforceable due to lack of clean hands; counterclaim for relief by allegedly selling unit holder; whether partnership or joint venture agreed to; rights to compensation or account
Legislation Cited: s18 Australian Consumer Law; s126(1) Instruments Act 1958; s41, s53(1)(a) and (c), s55 Property Law Act 1958
Cases Cited:Hardoon v Belilios [1901] AC 118; Niche Logistics Pty Ltd v Bluestar Global Logistics (Aust) Pty Ltd [2018] VCC 491 [107]-[126]; Pledge v Roads & Traffic Authority (2004) 205 ALR 56; CPT Custodian Pty Ltd v Commissioner of State Revenue; Commissioner of State Revenue v Karingal 2 Holdings Pty Ltd (2005) 224 CLR 98; Charles v Federal Commissioner of Taxation (1954) 90 CLR 598; Costa & Duppe Properties Pty Ltd v Duppe [1986] VR 90; Commissioner of Stamp Duty (Qld) v Livingston [1965] AC 694; Adamson v Hayes (1973) 130 CLR 276; DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) (1982) 149 CLR 431; Pipikos v Trayans [2018] 92 ALJR 880; Meshumar v Otmy [2018] 97 NSWLR 615; Oughtred v Inland Revenue Commissioners [1958] Ch 383; [1958] Ch 678; [160] AC 206; DHN Food Distributors Ltd v London Burrough of Tower Hamlets [1976] 3 All ER 462; Baloglow v Konstanidis [2001] NSWCA 451; Halloran v Minister Administering National Parks and Wildlife Act 1974 [2007] 229 CLR 545; Tanwar Enterprises v Cauchi [2003] 217 CLR 315; Kation Pty Ltd v Lamru Pty Ltd (2009) 257 ALR 336; Meyers v Casey (1913) 17 CLR 90; Rhodes v Badenach [2000] TASSC 160
Judgment: 1. Within fourteen days of this date, the parties must bring in short minutes to give effect to these reasons; 2. Costs reserved
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms A Wilson | DCA Lawyers |
| For the Defendant | Mr L Hogan | AJH Lawyers |
HIS HONOUR:
Background
1 The plaintiff, Dr Sululola, and the defendant, Dr Mbachilin, are both medical practitioners who were born and qualified in Nigeria. They met for the first time in the British Virgin Islands in approximately 2008. (Transcript (“T”) 60, Line (“L”) 30 to T61-L2)
2 Dr Sululola was introduced to Dr Mbachilin by a friend of his, Dr Tine, who comes from the same hometown in Nigeria as Dr Mbachilin. (T61, L3-5)
3 Dr Sululola arrived in Australia in the middle of 2010, entering on what is colloquially described as a “457 Visa”. This visa required him to work for four years for his sponsoring employer. (T53, L26-30) He was sponsored by a medical clinic known as the “Elmwood Medical Centre”, whose principal was a Mr Craig Ford. (T54, L1-6)
4 Dr Sululola held the customary medical qualifications of Bachelor of Medicine and Bachelor of Surgery from the University of Lagos. These qualifications entitled him to practise in Australia after passing certain exams and completing a limited practice registration period to be served at the Elmwood Medical Centre. During this period, Dr Sululola required supervision from a Fellow of the Royal Australian College of General Practitioners. (T54, L8 - T55, L6)
5 Dr Sululola was also sponsored for his permanent residency, which he said he obtained six months after arrival. The sponsor once again was the Elmwood Medical Centre. Dr Sululola gained restricted registration to practise in 2012 after passing certain examinations. He was admitted by the college as a Fellow in June 2012, two years after his arrival in Australia. (T55-56)
6 The Elmwood Medical Centre is situated in Wodonga. Dr Sululola said that he was “well-received in the community and that I wanted to stay back in Wodonga to work and serve the community”. (T57, L3-4) He identified vacant land at 21 Middleton Crescent, Wodonga. Following consultation with his accountant, Mr Ishwar Shrestha of AWL Accounting in Sydney, he determined to purchase this property.
7 For the purposes of the acquisition, he bought or incorporated a proprietary company, “Repheka Pty Ltd” (ACN 162 243 307), which was appointed trustee of a unit trust entitled the “Repheka Fixed Unit Trust”, the initial holder of all of the units in which was Dr Sululola himself. (T57, Court Book (“CB”) 72-100)
8 Meanwhile, Dr Mbachilin had arrived in Australia as early as 15 July 2008. He had been sponsored for visa purposes by another medical clinic, namely “Cairns 24 Hour Medical Centre”. Dr Mbachilin started work within two weeks of his arrival. (T360)
9 In July 2010, Dr Mbachilin moved from Cairns to a clinic at Deer Park in metropolitan Melbourne, after working for two years in far north Queensland. At a petrol filling station in Ballarat Road (presumably in Deer Park), Dr Mbachilin met Dr Sululola and his family. The two doctors it seems were both having their cars refuelled.
10 According to Dr Mbachilin, Dr Sululola told him that he (Dr Sululola) had just arrived in Australia and was working in Wodonga. Dr Sululola said that conditions for international practitioners were better in the country than in the city, and urged Dr Mbachilin to consider relocating. (T361)
11 Eventually, two years later in 2012, Dr Mbachilin acted on the advice he says he received from Dr Sululola, and relocated to Wangaratta, where he worked at the “Ovens and King Medical Centre”. (T361, L30 - T362, L2)
12 After their meeting, according to Dr Mbachilin, he received a number of visits at his residence in Melbourne from Dr Sululola. With Dr Mbachilin relocated to Wangaratta, a 45 minute drive from Wodonga, the two families met “almost every fortnight or weekly”. (T362, L19)
13 The Ovens and King Medical Centre merged with another centre located in Wodonga known as “Gateway Health”, leading to Dr Mbachilin working three days in Wangaratta and two days in Wodonga. Eventually, Dr Mbachilin moved to Wodonga to work at Gateway Health in December 2012 to January 2013.
14 Whilst Dr Mbachilin was born and reared as a Catholic, his wife, Sonia, is a Pentecostalist. As a result, Dr Mbachilin and his family attend a Pentecostal church known as “the New Life Church” in Wodonga, where Dr Sululola also worshipped. (T363)
15 Aside from meeting at Sunday worship, the two also frequently met at church fellowship evenings held at 7.00pm on Wednesday evenings, lasting for an hour or perhaps an hour and a half. After 2013, the two families saw one another “almost every day”. (T364, L20-23)
16 Following completion of the purchase of the vacant land at Middleton Crescent, a Transfer of Land under s45 of the Transfer of Land Act 1958 was lodged for registration on 9 April 2013 in dealing AK277181M, the price being $235,000. The transferee was Repheka Pty Ltd. (CB 2288-2289)
17 Repheka Pty Ltd borrowed $211,500 from the Bank of Queensland to fund the purchase. (CB 1017) Dr Sululola was required to execute financing documents, both on behalf of Repheka Pty Ltd and as guarantor himself. (T60, L21-24)
18 In early 2014, according to Dr Sululola, Dr Mbachilin was sacked from his job at Gateway Health, which Dr Sululola felt was unfair. (T62, L23-30) Dr Sululola said that he interceded on behalf of his friend, Dr Mbachilin, with this employer at the Elmwood Medical Centre. The owner agreed subject to Dr Sululola undertaking Dr Mbachilin’s supervision. (T63, L1-15)
19 Dr Sululola said, “I stopped working at Elmwood Medical Centre end of July 2014” (Ibid, L26-27)
20 Dr Mbachilin gave a more graphic description of the departure. He said that sometime in June 2014, Dr Sululola called him to his room stating:
“Elmwood have sacked him. And they gave him five minutes … and call the police to walk him out. So he ran out of the premises, and then asked me to take his plaque – RACGP plaque [presumably Royal Australian College of General Practitioners] – and take it to his house.” (T368, L20-30)
21 According to Dr Mbachilin, when he finished work that evening he called at Dr Sululola’s residence and found him and his wife in distress. “We all prayed together, and then I left”. (T369, L7-9)
22 Dr Sululola’s summary dismissal from the Elmwood Medical Centre seems to have derived from the proprietors becoming aware that the doctor was planning to establish his own separate practice. In August 2014 Dr Sululola established his own clinic known as the “Alpha Medical Centre” at 256 Beechworth Road, Wodonga. (T63, L19-24) The Centre operated from leased premises. (T65, L15-17) The operating entity for the practice was a company called, Damani International Pty Ltd (“Damani”). (Ibid, L9-12) Damani has been incorporated as early as 2010. (T67, L22-23, CB 2278)
23 Dr Sululola said he remembered the first few months at the Alpha Medical Centre as, “not easy”. (T66, L17-18) He worked nine to five at the Alpha Medical Centre and then every Friday night he travelled to Melbourne to work on Saturdays and Sundays at a medical centre in Union Road, Ascot Vale; 9.00am to 5.00pm on Saturday and 9.00am to 3.00pm every Sunday. (Ibid, L20-24) He said it took 3½ hours to travel between Wodonga and Ascot Vale. (T66, L31–T67, L1-2) Dr Sululola had to work these long hours because:
“there was a struggle to pay … the salary of staff and … there was no patient from start and we have to keep things going until things now normalise.” (T68, L15-18)
24 He said that when things began to “stabilise”, which I took to mean the operating losses at Beechworth Road were staunched, he said, “I made the decision to start to build.” (Ibid, L19-20)
25 According to Dr Sululola, Dr Mbachilin, “showed interest … when I said I was thinking about building the practice, he asked me if he could be part of it.” (T70, L4-6) He said he showed Dr Mbachilin a valuation of the land at Middleton Crescent at $270,000. According to Dr Sululola, Dr Mbachilin felt it would be inappropriate to approach their arrangements in this way because they were “brothers”. (Ibid, L11-17) Dr Sululola says he told Dr Mbachilin, “I will just calculate all the interest I have … paid so far, the cost of the land. So I divided it … that was how [$]36,000 [was calculated].” (Ibid, L20-22) Thirty-six thousand [dollars] represents one-half of [$]72,000 which according to Dr Sululola was the deposit which he [or perhaps one of his companies] had paid and half of the interest outlaid. (T71, L1-6) Dr Sululola produced three pages of handwritten calculations reflecting these matters in his own writing. (CB 2071‑3) Dr Mbachilin agreed that the first of those three pages was shown to him by Dr Sululola but, “that’s all”. (T378, L8-12)
26 Dr Mbachilin gave a slightly different account of these initial discussions. He said that when the clinic at 256 Beechworth Road was being opened, the two doctors asked their pastor to attend and say prayers for the enterprise. On that occasion, according to Dr Mbachilin, the pastor asked Dr Sululola if the two doctors were in partnership, to which Dr Sululola replied, “Yes”. (T372, L24-29)
27 On 15 January 2015, according to Dr Mbachilin, Dr Sululola came to his house after Sunday Service. Uncharacteristically, the Sululolas came without their children. Dr Sululola described the difficulties he had in operating the Alpha Medical Clinic and told Dr Mbachilin:
“So he wants me and him to join forces to start afresh. What he meant was, we’ll approach a bank and get a loan, and view the clinic and operate together as partners.” (T373, L13-17)
28 Dr Mbachilin said that he had $200,000 in savings which he “wanted to form a super account”, viz to stand as retirement savings. (Ibid, L18‑31) The following week, according to Dr Mbachilin, Dr Sululola came to his house again, “and said, look, he has a company.” (T374, L8-11) Dr Mbachilin said he thought this odd, “The initial discussion [was] there was no company.” (Ibid, L10-11) There then followed, as Dr Mbachilin narrated the story, some two meetings at a nearby campus of Charles Sturt University and another at the campus of Wodonga TAFE in January and early February of 2015. (Ibid, L27-31)
29 On Dr Mbachilin’s account, Dr Sululola described a practice structure whereby:
“myself and him would be the Principal of the clinic, and then we will employ more doctors who will be generating funds for us. And we will expand from one clinic to another.” (T375, L12-15)
30 Dr Mbachilin said there was no discussion as to how Dr Sululola’s company would fit into this structure. (T375, L24 – T376, L2) Dr Mbachilin said that Dr Sululola said, “we are going to be sharing all the expenses and the profit and everything together fifty-fifty.” (T376, L28-30) The upshot then was that Dr Mbachilin provided Dr Sululola with a cheque for $36,000. (T377, L20-22) Asked as to the demeanour of Dr Sululola in these meetings, Dr Mbachilin said, “The first meeting I saw frustration in him. Him and his wife.” (T378, L29-30) He was speaking here of the meeting he described on 15 January 2015 at the Mbachilin residence. (T379, L1-2) Following the payment of the $36,000, according to Dr Mbachilin, “Each time … the bank deducts the interest from his [Dr Sululola’s] account, he sends the information to me and I pay the money into his account.” (Ibid, L18-21)
31 Minutes of the Repheka Fixed Unit Trust record that on 17 April 2015, at a meeting of the corporate trustee and unit holders, Repheka Pty Ltd as trustee accepted an application for units and transfer of units in the trust, resulting in the allotment and transfer to Dr Mbachilin of some five fully paid-up $1 units. (CB 132-135) The result was to leave Dr Sululola with five of those units, and Dr Mbachilin with a like number. (CB 136-139)
32 Dr Sululola’s bank records show the $36,000 outlay by Dr Mbachilin as having been received on 1 April 2015. Dr Mbachilin is shown as guarantor in a facility arrangement for the Bank of Queensland to provide a loan facility of $516,175.50 to Damani, Dr Sululola’s company. (CB 141-208) The documents provided in the Court Book seem to be file copies and are undated and unsigned.
33 It seemed to be common ground, however, that at about this time Dr Sululola and his company obtained an augmented facility to build the new medical centre at Middleton Crescent, Wodonga, and Dr Mbachilin joined in guaranteeing that facility. According to Dr Sululola, the document was signed around November 2015. (T76, L8-11)
34 The construction of the new medical centre at Middleton Crescent began in December 2015 (Ibid, L25-26), with the building permit issued on 21 October 2015. (CB 220) Dr Sululola said that the Bank of Queensland loan facility provided 90 per cent of the price of construction exclusive of GST. In the result, therefore, it was necessary for Repheka Pty Ltd or, by extension, Drs Sululola and Mbachilin to fund some 20 per cent of the contract price: half being GST and the other half being the unfinanced portion of the construction price. (T76, L29 – T77, L6)
35 Dr Sululola said that payments to the builder were made by his transferring money into Dr Mbachilin’s account with Dr Mbachilin making the payment. Dr Sululola explained that this was done because “he [Dr Mbachilin] didn’t want anybody to know what he was doing … I should keep it secret, he doesn’t want anybody to know”. It is not obvious how routing the money through Dr Mbachilin’s account would have contributed to the objective of keeping Dr Mbachilin’s involvement in the project a secret.
36 A number of text messages are reproduced in the Court Book for the period July to August 2015. (CB 796-7) These were messages from Dr Sululola to Dr Mbachilin seeking reimbursement for half of various outlays which he made at this time. (T79-80) These requests for reimbursement extended both to amounts deducted by the bank, presumably for interest and other charges, and also for items such as council rates. These exchanges indicated that the doctors were operating on a “50/50” basis. (T81, L14)
37 Meanwhile, construction was proceeding at Middleton Crescent. Counsel agreed that the total construction cost was $669,266.73 inclusive of GST of $60,842,43. (T83) The amount financed by the Bank of Queensland was $538,000 (Ibid), leaving an amount of $131,266.73 to be otherwise financed. (T84) The invoices were raised by the builder. The financed amounts were paid directly by the Bank of Queensland, and the other amounts were paid in the manner already described. (T85)
38 With the new medical centre complete in July 2016, it was necessary to rollover or refinance the Bank of Queensland facility. A representative of the bank sent an email to Drs Sululola and Mbachilin on 14 July 2016, explaining that the bank would:
“prepare the [finance] documents based on 12 months interest only … we can review in 12 months time (by next June) so you may make a lump sum reduction as discussed.” (CB 476)
39 An earlier email, on 7 July 2016, explained that the amounts owing on the construction facility loan were $538,000 and, upon rollover, some $749,500 would be owing for principal and interest for a 12 month facility. (CB 477) The documents for the “rollover” were forwarded by the bank under cover of a letter of 19 July 2016. (CB 479 ff)
40 The new financing document provided for Dr Mbachilin’s company, Lobi International Pty Ltd, to join as guarantor. This was the first time that that company was part of the financing arrangements. (CB 484)
41 A new account was established with the Bank of Queensland in the name of Repheka Pty Ltd. (T88, L28-31) According to Dr Sululola, what was envisaged was that he and Dr Mbachilin would pay in an average of $2,000 each month which would meet the approximately $3,000 interest liability to Bank of Queensland with the rest left over to pay council rates and other expenses. (T89, L4-12)
42 Dr Sululola said that the handover of the new clinic took place on the last Friday of July 2016. (T89, L16-19) He was not invited to the handover ceremony. Rather, he was informed and the ceremony took place at a time when he had patients’ appointments booked. (T389-390) The handover date took place a couple of weeks after the building contractor had completed his work because there were further items yet to be done including car parking, fencing and signage. (T488-489)
43 For the period until the handover of the new medical centre, the parties shared expenses. It may be necessary hereafter to consider precisely what expenses were shared, and as between the doctors what reimbursements had been made.
44 In late June 2016, discussions commenced as to the legal structure of the practice which was to be carried on at Middleton Crescent. Dr Sululola advised Dr Mbachilin that his accountant was Ishwar Shrestha of accounting firm AWL. (CB 441) Colin S Gillespie, solicitor of Albury, New South Wales, had been retained by Dr Mbachilin. He sent an email to the doctors regarding “Medical Practice Structure” on the afternoon of 29 June 2016. He inquired as to the financial statements of the unit trust for stamp duty purposes and suggested the following legal structure:
·Repheka Trust would lease the premises to a practice management company-trustee or alternatively to the doctors.
·The shares/units in the practice management company-trustee would be held either by Godwin [Mbachilin] and Alade [Sululola], by their wives or by a combination of husbands and wives or by the doctors’ family discretionary trusts.
·The practice management company-trustee would employ support staff and office equipment.
·The two doctors would pay the practice management company-trustee a regular fee for its services.
·The two doctors would each receive the fees they individually generate. They would not pool the fees and then divide them.
45 According to Mr Gillespie, the objective of this proposal was “to maximise accounting flexibility for income tax purposes.” And also “to keep various assets and liabilities separate as far as possible – asset protection for the doctors.” He conceded that any bank borrowings would necessarily require the doctors to give guarantees and there would be no choice on this subject. (CB 442)
46 Dr Sululola responded by an email later the same evening thanking Mr Gillespie for his suggestions. He stressed:
“Repheka Pty Ltd was set up to buy the Landed property and to build the structure at 21 middleton crescent, wodonga [capitals omitted in the original]. [only structure and no business]
…
Dr Godwin [Mbachilin] have access to Bank of Queensland and he can request the details of the transactions made so far.”
47 Dr Sululola said Alpha Medical Centre was an entirely different entity “operating on its own and not as Repheka Pty Ltd.” He said he discussed with Dr Mbachilin the latter’s obtaining advice from an independent and experienced accounting firm, “and then Dr Godwin [Mbachilin] can buy 50% shares of the business.” The doctor suggested the parties might then sign a partnership agreement. Dr Sululola’s email concluded:
“3. The plan is that the proposed joint business will operate from the jointly owned property at 21 middleton crescent, wodonga and then lease will be paid to the property to offset the loan taken from the back [sic, scil “bank”].
4. I will discuss with Dr Godwin [Mbachilin] as regards choosing the independent accounting firm like WilliamBuck (sic) to commence the evaluation of the business asap once he is ready.” (CB 444)
48 On 2 July 2016, Dr Mbachilin signed two documents, one being an application for shares in the company Repheka Pty Ltd seeking allotment of 10 $1.00 ordinary shares and the second being a consent to act as director. (CB 447-448) Neither of these documents appears to have been acted upon in that there was no allotment of shares in Repheka to Dr Mbachilin, nor does he appear to have been appointed as a director of that company. Mr Gillespie sent an email to Dr Sululola noting that his client, Dr Mbachilin, held neither shares nor directorship in Repheka. He submitted the documents just described, “with a view to making Dr Mbachilin a director and shareholder of the company …” (CB 449) Accountant, Mr Ishwar Shrestha of AWL, sent an email to Mr Gillespie on 6 July, stating that he would require instructions from the two doctors “about the name of Practice Management Trust and Trustee company where both person or their family hold 50% interest together (sic).” He said:
“… we will also proposing to setup a new company for trading company under Alpha medical trading name. We will also need the proposed name for that company. [F]or your information, we have enclosed structure that going to be effective for the practice and building.” (CB 450)
49 The “structure” was depicted in diagrammatic form in a document headed
“Alpha Medical
Parties to the transactions”
with a dozen or more boxes or squares. The structure depicted a Practice Management Unit Trust at the centre, a company carrying on business as Alpha Medical Centre and a series of ownership entitlements splitting 50 per cent/50 per cent as between the two doctors. (CB 452) Mr Gillespie said that he noticed there was a registered business name, “Alpha Medical Centre, Wodonga”. He said, “I take it from what you say that the only company in existence at present is Repheka?” (CB 453)
50 Mr Shrestha replied, “we will update Repheka’s shareholding and directorship changes as minutes. [A]ll we waiting is to finalise on setting up Practice management trust with corporate trustee and a trading company to attached with “Alpha Medical Centre, Wodonga (sic).” (CB 456)
51 Once again, on 6 July, Mr Gillespie emailed Mr Shrestha inquiring whether an “off-the-shelf” company and an “off-the-shelf” unit trust would do for the practice management unit trust. He continued:
“Just a thought bubble – is it better for Alpha to hold the lease of the premises? I am not sure what the tax implications are but, from my point of view, I am just wondering what legal right the doctors have to occupy the building? Or perhaps they personally should have the lease?” (CB 459)
52 Mr Shrestha responded by an email logged at 3.38pm stating he had spoken to Dr Sululola who said he would provide the accountant with the name of the practice management trustee and trust name and Mr Shrestha would then “advise you accordingly”. (CB 463)
53 Later in the afternoon, Mr Gillespie responded, asking Mr Shrestha if he had “a depreciation schedule for Alpha as at 30 June 2016” and inquiring whether Dr Sululola had a solicitor. (CB 467)
54 Following the handover ceremony which Dr Mbachilin missed attending, according to Dr Sululola, he [Dr Mbachilin] arrived from Elmwood at 6.30pm to 7.00pm and was shown around the Middleton Crescent premises. Dr Sululola said he identified the room which he was going to take and asked Dr Mbachilin to make his selection, to which Dr Mbachilin replied, “Oh, we have to have a chat.” (T91, L24 – T92, L1) According to Dr Sululola, Dr Mbachilin invited him out into the car park and said, “Oh, I won’t be joining you.” Asked why, according to Dr Sululola, Dr Mbachilin said, “Oh, I've been sponsored for permanent residence. … I want to continue to work there [presumably Elmwood] until it [presumably the permanent residence] has been approved.” (T92, L5-11) Dr Mbachilin then, according to this account, asked Dr Sululola to bear with him and give him some months to get things settled. Dr Sululola said he complained that there had been no agreement made and was told, “give me some time, I will get back to you”. (Ibid, L13-22) Dr Sululola said he pressed Dr Mbachilin to come to an agreement but Dr Mbachilin kept evading him. (T93, L4-9) Dr Sululola was clear that there was no agreement as to the “structure”. (T94, L2-5)
55 Dr Mbachilin agreed that he and Dr Sululola discussed their joint future on the evening of the handover date. He said the conversation took place at the door, not out in the car park. On Dr Mbachilin’s account, asked when he was ready to start (presumably working in the new practice) he said that he was “looking at between eight to 12 weeks.” According to Dr Mbachilin, Dr Sululola began describing the efforts that he and his wife had made distributing flyers, to which Dr Mbachilin replied, “What has this got to do with my coming here?” (T502, L18-28) Dr Sululola, on Dr Mbachilin’s account, said, “If I'm going to come I [Dr Mbachilin] have to buy 50 per cent of his [Dr Sululola’s] share. Repheka has a building, he has his own business, you know, which he had never discussed with me before.” (T503, L2-5) Dr Mbachilin said that Dr Sululola insisted that before he could join the practice, “I have to buy into his own company, Damani – 50 per cent shares of Damani, before I can come in.” (Ibid, L21-22) Dr Mbachilin said that he had never previously had a discussion with Dr Sululola about buying into anything other than the building and items of equipment such as computers and server. (T503, L26-31) Dr Mbachilin denied refusing to leave Elmwood Medical Centre before being granted his permanent residency. (T507)
56 With effect from 1 August 2016, Damani (which, it will be recalled, was the company which owned and operated the practice known as the Alpha Medical Centre) entered into a lease with a company known as Specialist Diagnostic Services Pty Ltd (apparently part of the Dorevitch Pathology Group) letting part of the Middleton Crescent premises as an approved pathology collection centre for a term of 12 months, with an option to renew for a period of three years. The rental payable was $20,000 per year plus GST. (CB 2290-2293)
57 According to Dr Sululola, the negotiations with Dorevitch entailed a promise to increase the rental which it would pay Damani by $15,000 per annum for each additional medical practitioner operating from the centre. The collection facility, according to Dr Sululola, would “open three mornings a week, … Monday, Wednesday and Friday, just for a few hours”. (T158, L23-24) It will be seen that upon this understanding of things, the rental was fixed, not by reference to square metres or comparable rates, but by the number of pathology referrals which might be expected to be made. (T159, L1-14)
58 There appears to have been no “head lease” between Repheka and Damani. Damani was paying rent to Repheka, and Dorevitch was paying rent on the sub-lease to Damani. (T161, L22-29) As will appear, the quantum of that rent and the appropriateness of the sum is a matter in dispute in this proceeding.
59 The amounts owing to the Bank of Queensland relative to the facility which it had granted Repheka to finance the establishment of a clinic for Alpha Medical Centre at Middleton Crescent, were repaid by deductions from an account in the name of Dunamis Medical Pty Ltd, a company controlled by Dr Sululola, which apparently had previously been used for the operation of a venture at Chiltern but, by that time, was inoperative.
60 Dr Sululola said that he paid rental on behalf of Damani into the Dunamis Medical Pty Ltd account to enable payment by direct deduction by the Bank of Queensland, meeting the instalments payable under the Repheka facility. Dr Sululola said he arranged affairs in this way because he said he did not have access to the Repheka account. (T163-164, CB 2351-2356)
61 On the face of it, the rental payments by Damani were simply aligned with the amounts which the Bank of Queensland deducted on a monthly basis. Other expenses, such as rates, insurance and maintenance were, according to Dr Sululola, met by Damani. (T165)
62 As an element of the discussions between the two doctors as to practice structure, they considered how to value the Alpha Medical Centre practice. Dr Mbachilin sent a text to Dr Sululola on 7 July 2016:
“Companies to value includes
1 Crowe Howart [scil Horwath] international
2,McMastersaccountants,Solicitors, Financial planners.
3,BMT Value
4, William Buck” (sic) (CB 818)
63 Dr Sululola replied:
“Ok . I will call all of them today and we will go for the cheapest. (sic)” (CB 819)
64 Mr Gillespie emailed Dr Sululola on 21 November 2016 stating:
“I understand you wish to proceed with a valuation of your medical practice before finalising the paperwork to implement the new practice structure with my client Dr Mbachilin.
I believe you are wanting to engage Crowe Horwath for your valuation?
…” (CB 555)
65 Mr Gillespie provided the contact details for Mr Nathan Timosevski, described as “Principal – Corporate Finance” of that organisation. (Ibid)
66 Mr Timosevski sent an email to Dr Sululola on 6 October enclosing his company’s engagement letter. This was revised so as to include Dr Mbachilin as one of the persons requesting the valuation, and presumably becoming liable for the valuation fees with Dr Sululola. (CB 578-580)
67 As at 21 November 2016, a draft report had been prepared with Crowe Horwath requiring a signed engagement letter before providing it. (CB 577, T106, L7-12) This led to an exchange of texts between the doctors. Dr Sululola texted Dr Mbachilin, “Valuation is completed but we need to pay”, to which Dr Mbachilin replied, “Yes Nathan called me and said he had sent 5 copies to you.He also came verbal advice to you Forward the valuation report to me. Cheers. (sic)” (CB 828, T106, L17-26)
68 Dr Sululola said that Dr Mbachilin was concerned that he (Dr Sululola) had inappropriately influenced the outcome of the report. Dr Sululola said he told Dr Mbachilin that he (Dr Mbachilin) should review the preliminary or draft report and then raise any concerns which he had. (T106, L28 – T107, L13)
69 The final report was prepared. Dr Mbachilin refused to pay any part of the fee, and so it was paid entirely by Dr Sululola in the sum of $5,500. (T109, L3-7) Mr Gillespie, Dr Mbachilin’s solicitor, sent an email to Mr Timosevski of Crowe Horwath stating:
“Dear Nathan,
We understand that Doctor Sululola will be paying your fees.
In passing, I should point out the following:
As I have mentioned before, we do not believe that an acquisition of goodwill is involved in the proposed joinder of the doctors' practices.
Even if there is alleged to be goodwill, it is felt that there may be problems with the instructions you have been given such as the fact there are not three nurses in the practice, there is one part-time nurse; if Chiltern figures are included that would be incorrect as Doctor Mbachilin does not wish to be involved in Chiltern; although the Alpha Medical Centre website refers to 2 employed doctors one is solely at Chiltern and the other is no longer employed; etc.
Even if it is alleged that there is some situational goodwill created by the construction of the brand-new medical centre, it is noted that Doctor Mbachilin funded half the construction and is currently paying half the bank interest without yet having the benefit of occupation and income generation from the site.
Regards,
Colin S Gillespie. Solicitor BSc LLB” (CB 586)
70 This email was dated 24 November. On 21 November, Mr Gillespie had sent another email to Mr Timosevski, which stated inter alia:
“Although I initially contacted you on behalf of my client Dr Godwin, we subsequently formed the view that a valuation of Dr Sululola's practice was irrelevant to the proposed arrangement between them. We believe the only matter of relevance is the written down value of certain chattels owned by Dr Sululola or his companies and I passed that view on to you when we spoke on the telephone.
However, the indications were that Dr Sululola still wanted a valuation before putting arrangements in place (it may, for example, help with capital gains down the track?). My client was anxious to move things along …
Dr Mbachilin does not believe he has engaged your services.” (CB 587)
71 Another medical clinic in Wodonga, known in 2016 as the United Medical Centre, was located within a shopping centre precinct and, depending on whose account one accepts, was located either 40 metres from the Middleton Crescent clinic, or five minutes’ walk from there. One of the practitioners employed at that centre, in late 2016, was Dr Aresh Nazari. Dr Nazari received an email on 16 December 2016 from Mr Stephen Burke, who was the principal and chief executive of the United Medical Chain, stating:
“This practice is being sold as per your discussions with Henry, but settlement will occur on the 23rd December 2016.” (Exhibit A)
The “Henry” referred to was a pharmacist who conducted his enterprise within the precinct of the United Medical Centre. His full name was Henry Anyanwu. (T325, L15)
72 In a later email on the same day, Mr Burke stated that he was “working … to compile handover and informing the buyers of their responsibilities of patient medical records and results post 23 December”. (T173, L13-15)
73 Mr Burke wrote a letter dated 22 December 2016 “To Whom it May Concern”, advising of the closure of United’s practice on 23 December and Dr Nazari’s termination. The letter continued:
“Dr Nazari will have access to the patient database for review of records and results if required by contacting the new owner of the practice. Dr Nazari has been advised of the buyer’s details if contact is required.” (Exhibit A)
74 Deborah Jackson of NDA National Insurance Pty Ltd, Dr Nazari’s indemnity insurer, sent an email dated 16 December 2016 to Ines Ramic, the practice manager at the United Medical Centre in Wodonga, stating inter alia:
“the new owners have the responsibility to ensure that any results, or health information that is received is actioned.” (Exhibit A)
75 Dr Nazari said that when he enquired of Henry as to the identity of the purchaser, “Henry said he wants to stay, … anonymous”. (T175, L26)
76 Nevertheless, Dr Nazari had one or two telephone conversations with the anonymous buyer. According to Dr Nazari, “I could tell from the accent … he is from … Nigeria.” (T176, L3-6) This conversation took place on 16 December 2016. (Ibid)
77 The anonymous caller was, according to Dr Nazari, “trying to convince me to stay there working there”. (T176, L16-17)
78 Dr Nazari did not take up the offer of employment. He accepted an offer of employment at the Alpha Medical Centre made by letter dated 10 December 2016 over the signature of Dr Sululola. (CB 1617) He commenced working at the Alpha Medical Centre on 16 January 2017. (T176, L25-26) The delay, according to Dr Nazari, was “awaiting provider number and … paperwork by the Department of Health”. (T177, L26-27) Dr Nazari said he preferred the offer from the Alpha Medical Centre than staying at the United Clinic because of some of the difficulties he had experienced whilst working at United previously. (T178-9)
79 The purchaser of the former United Medical Centre was a company called “Whitebox Rise Medical Centre Pty Ltd”, a company controlled by Dr Mbachilin and his wife. (T429, L14-15) Dr Mbachilin and his wife are the directors of the company, and Dr Mbachilin holds or owns the units in the unit trust. (Ibid, L16-17)
80 Whitebox Rise Medical Centre Pty Ltd entered into an agreement to purchase the medical practice from United, with settlement scheduled for 23 December 2016. (Exhibit H) The copy contract put into evidence includes photocopies of execution by the parties, but is undated. The agreement provides for personal guarantees from Dr Mbachilin and Mr Henry Anyanwu, the pharmacist already referred to.
81 At the time of the purchase, Dr Mbachilin remained in his employment at the Elmwood Medical Centre, which did not terminate until December 2018. (T428, L13-14) Whilst Dr Mbachilin did not, as at December 2016, (or, indeed, at any time) have an unrestricted right to practise in Australia, there would have been no illegality in his carrying on practice at the former United Clinic and “Whitebox Rise” because the statutory requirement for supervision did not necessitate the supervisor being present or carrying on practice in the same location as Dr Mbachilin. (T117, L21 – T118, L3)
82 Whitebox Rise is the name of the locality or suburb of Wodonga in which the shopping complex containing the former United Clinic is situated.
83 According to Dr Mbachilin, on 26 February 2017, Dr Sululola rang Dr Mbachilin in the morning and called at Dr Mbachilin’s house at Killara (a suburb of Wodonga), and came to that house with his wife. On Dr Mbachilin’s account, Dr Sululola told him that he, Dr Sululola, had “put his life in danger by supervising [Dr Mbachilin]. He [had] put himself and his family’s life in danger … by supervising me”. (T404, L22) This meeting in February did not feature at all in Dr Sululola’s account of events. He described a meeting on 26 March, to which I will refer presently. He said he believed the substantive negotiations between him and Dr Mbachilin took place in March and not in February, as Dr Mbachilin narrated the story. (T266, L23-30) Dr Mbachilin’s account of Dr Sululola’s alleged statement that supervising Dr Mbachilin had placed the lives of Dr Sululola and his family in danger was not put to Dr Sululola in cross-examination. There was no explanation for this omission. Dr Mbachilin said that Dr Sululola then asked if the Mbachilins were taking out a loan to build their house and how that would affect the borrowings from the Bank of Queensland. (T405, L8-13). According to Dr Mbachilin, he wound things up by saying, “Sululola, go and meet your lawyer to meet my lawyer to advise us”. (Ibid, L17-18) There was no settlement of their differences; no settlement had been discussed. (T405, L15‑16)
84 According to Dr Sululola, he met Dr Mbachilin at one of the Church Fellowship meetings in early 2017:
“I ask him, ‘You’re not doing valuation. What is it that you want to do’, after one of the meetings. ‘Do we just go our separate ways? You bought your building. What … do we do?’ So after that, he greeted me the way he greeted – ‘Okay, okay, my brother. All right. … Don’t worry, we will settle, let everything go.” (T122, L23-29)
85 Dr Sululola sent Dr Mbachilin an email headed “Payment” and addressed “Chief Goodo”. The email began:
“As discussed regarding our amicable settlement.
I have credited your account with a total of $5615.95 which represent your part payment to the following itemised (sic);
…
Total cost of A + B + C + D = $11,231.90.
Half of the cost = $5615.95 [paid into your account tonight].” (CB 592)
The various items related to equipment for the practice including desks and chairs, a sign and window blinds.
86 According to Dr Sululola, on Sunday 26 March 2017, he and his wife “decided to try and settle the case”, and called on Dr Mbachilin at his residence. (T131, L8-13). According to Dr Sululola, Dr Mbachilin admitted that he had purchased the former United Medical Centre, renamed Whitebox Rise Medical Centre. (Ibid, L14-18) Dr Sululola said, “Then we concluded, at the end of the meeting, that everyone should go their way”, and that Dr Sululola would refund to Dr Mbachilin all of Dr Mbachilin’s contributions. (Ibid, L20-24) Units in the unit trust were to be re-transferred to Dr Sululola with proper documentation. (T131, L25- T132, L3) Dr Sululola said he then returned to his own residence and “calculated all the money that he [Dr Mbachilin] had contributed … to the unit trust to the construction of the facilities at 21 Middleton Crescent. And I totalled that, and I emailed that to him with … payment of 20,000 as a first payment, which he received”. (T132, L4-9)
87 At 11.45am on the same day, Dr Sululola sent Dr Mbachilin the following email under the heading “Refund of land and building cost”. (CB 598) The email stated:
“AS Discussed regarding our amicable solution regarding the Project [Land/building]
I have paid $20,000 into your account this money which represents part payment of the refund.
The balance of $60,278.565 + Interest [paid on building from august (sic) 2016 till date via BOQ] will be paid back very soon.
The breakdown on the amount are as (sic) follows;
1.$43,711.94 was paid by you to be part of the Land ownership on 26/6/15. [This includes the interest, rates, architect cost, 5% cost contribution to the land].
2.$13,184.90 was total interest paid + rates prior to building commencement [of which $6592.45 was your contribution.
3.$599,483.50 was the cost of building [external and building] —
– 10% deposit = $59,948.35 – each person contribution = $29,974.175
– Total GST = $59,948.35 – each person needs to claim $29,974.175 [via the ATO]
The total paid by you =
Building = $29,974.175 + $6592.45 [interest + rate prior to commencement of building]
{total = $36,566.625]
Land = $43,711.94 [all interest + rates + architects]
Total — Land + Building = $80,278.565 …”
88 These refund arrangements, assuming they were comprehensive and accurate, would not deal with the guarantee liability which Dr Mbachilin and his company had undertaken. I asked Dr Sululola what was being done about that and he replied, “Ah, the release of the guarantor, I’ve spoken to my, ah, solicitor at that time, who advised that I should work out that and he will sign a deed and then [sic, scil of] release”. (T133, L27-30) Dr Sululola said, “I contacted the bank and the bank agreed to release once we’ve done our settlement” (T134, L3-5), though he agreed that contact had not been made before 26 March 2017. (Ibid, L6-7)
89 On 29 March, Dr Mbachilin called at Dr Sululola’s house early in the morning, asking Dr Sululola to sign a document styled “WRIG-30”, Work Performance report for international medical graduates with limited or provisional registration. The form was on the letterhead of the Medical Board of Australia and the Australian Health Practitioner Registration Agency (AHPRA). (CB 2135-2151) Dr Sululola said he was pressed by Dr Mbachilin to sign it quickly. Dr Sululola was on the point of departing for work. He resisted signing it there and then and, on his account, said “I will get back to you”. The form had been completed in Dr Mbachilin’s handwriting. (T135, L6-27)
90 Dr Sululola said that he ultimately did not sign the form because he discovered that it had been post-dated so as apparently to report upon a period of supervision ending 30 September 2017. He said that he altered the reporting period on the form so that the reporting period terminated on 30 March 2017. The relevant period is described on the form as “assessment period” and is rendered by placing numbers in boxes in the day/month/year format. The copy of the form to be found in the Court Book has obviously been overwritten in the relevant boxes and, in its present form, shows an assessment period terminating “30/03/2017”. (T136, L1-11, CB 2135) A later page in the “WRIG‑30” form has the reporting practitioner indicate “what level of supervision” would the reporting practitioner consider appropriate for Dr Mbachilin. The relevant boxes filled in as “level 4 supervision” in handwriting which it is common ground is Dr Mbachilin’s. Level 4 is the least intense form of supervision. (T137, L30-31, CB 2141) According to Dr Sululola, Dr Mbachilin had previously been subject to level 3 supervision. (T138, L2-3) Dr Mbachilin said that at the time he submitted the “WRIG-30” document for Dr Sululola’s signature, he was subject to level 4 supervision and therefore the document as submitted was correct on this point. (T413, L3-6) Dr Mbachilin said the writing in the other boxes on the form was Dr Sululola’s. (T413, L18-21) Dr Mbachilin said the alterations or overwriting in the assessment period boxes were not done by him. (T414, L10-15)
91 According to Dr Mbachilin, he expected to receive the signed “WRIG‑30” document when he and Dr Sululola met at Fellowship that Wednesday evening, 29 March 2017. When Dr Sululola handed him a sealed envelope that evening, he assumed that this was the signed form. (T535, L25-31) When Dr Mbachilin opened the envelope on arrival home, he told his wife, “Why is this guy doing all these things? This is a betrayal”. (T536, L1-3) That morning, Dr Sululola had sent an email to Dr Mbachilin stating inter alia:
“The total amount of $20,000 was paid into your account this morning as part of the money for Land and Building.
The balance to pay to you is $40,278.585 plus interest accrue (sic) till date from hand over of building in august 2016 till date.
A cheque will be issue (sic) regarding the balance and all transfer documents will be signed.” (CB 599)
92 That evening at 6.00pm, Dr Sululola sent a further email to Dr Mbachilin under the heading “Refund of land/building cost”. That email stated:
“As discussed regarding amicable settlement
The total amount paid into your account till date = $40,0000 by Electronic fund transfer.
The total of $20,000 paid via EFT into your account on 26/3/17 and another $20,000 paid into your account via EFT on 26/3/17.
The total cost on building and land = $80,278.565.
Total about paid into your account so far = $40,000 was at 9am on 29/3/17 via EFT,
The balance left = [$80,278,565 - $40,000] = $40,278,565.
The total interest paid on loan from handover till date by both = $22,900 i.e. from August ending 2016.
Half [50%] is paid by you = $11,450.00
Total balance of money to be paid to you = $40,278,565 + $11,450.00 =$51,698,565.
2 cheques with amount of;
- $30,000
- $21,698
will be handed over to you tonight [29/3/17] so that the transfer documents can be signed.” (CB 600)
93 Dr Sululola had not signed the “WRIG‑30” form either on 29 March or perhaps the following day when Dr Sululola was at work seeing a patient. Dr Mbachilin, according to Dr Sululola, telephoned him, asking “Why didn’t you sign the form? Why didn’t you sign? I’m coming there now.” Dr Sululola said that he declined to sign because the document was post-dated, and according to Dr Sululola, Dr Mbachilin “banged the phone”, and that was the end of the conversation. (T139, L26-T140, L1) On 9 August 2017, Mr Gillespie, Dr Mbachilin’s solicitor, emailed the Bank of Queensland stating, “We would be grateful if you would please confirm in writing that Dr Mbachilin and Lobi International Pty Ltd [the doctor’s company] are no longer subject to the guarantees they gave in respect of Repheka Pty Ltd’s borrowings.” The following day, an officer of the Bank of Queensland replied, “I can confirm that Dr Mbachilin & Lobi International Pty Ltd are no longer providing guarantees for the commercial property facility.” (CB 687-8) This email exchange was under the heading “Rollover Repheka Fixed Unit Trust”. It would seem that the termination of the guarantee liabilities of Dr Mbachilin and his company arose from a “rollover” of the secured loan facility so that the original loan was paid out and replaced by a new loan which was not subject to guarantees by the doctor and his company.
94 Meanwhile, following the exchanges on 29 March, Dr Sululola received no signed unit transfer documentation. (T143, L24-29) On 19 April, Mr Gillespie sent an email to Dr Sululola noting that Dr Sululola had submitted documents to Dr Mbachilin seeking a transfer of units and releases. Mr Gillespie continued:
“A settlement along the lines you are suggesting cannot take place until Dr Mbachilin and his company are released from all liabilities to Bank of Queensland.
This will require that you re-finance the Bank of Queensland debt solely into your name and the name of your company or companies.”
Later in the letter, Mr Gillespie said:
“There are various other matters that need to be addressed but the cessation of Dr Mbachilin’s exposure to the Bank of Queensland, an exposure which has benefited you, is fundamental to any settlement.”
Mr Gillespie concluded:
“Please direct all future communications regarding Dr Mbachilin to me.” (CB 621)
95 Several weeks later, Dr Sululola contacted the Australian Health Practitioner Registration Agency seeking to be relieved of his responsibility as supervisor for Dr Mbachilin. An email from AHPRA stated, “Please be advised that we have actioned your request”. (CB 2169) Dr Sululola said, in light of the position taken by Dr Mbachilin’s solicitor restricting communications with Dr Mbachilin, Dr Sululola could not realistically carry out his duties as supervisor. (T146, L17-27)
96 Mr Gillespie wrote to Mr Panagiotopoulos, Dr Sululola’s solicitor, in an email of 28 April 2017 in the following terms:
“Any settlement will need to include at least the following types of provisions:
1.Dr Sululola his family trust and Repheka be given a set period of time to re-finance the BOQ loan so that Dr Mbachilin and his family trust are no longer liable to BOQ.
2.Dr Sululola pay to Dr Mbachilin the amount Dr Mbachilin has paid towards purchase of the land, construction and fitting out the building and surrounds, furnishings, outgoings, and interest and fee payments to BOQ (“the sums”) save that Dr Mbachilin may elect to receive one half the rent referred to below in lieu of interest, fees and outgoings.
3.If re-finance is not completed within the time allowed, the property shall be put on the market for sale by private treaty at a price and a period of time and with a nominated agent set out in the deed of settlement.
4.If not sold within that period, the property be auctioned with no set reserve.
5.Dr Sululola or his nominated entity enter into a lease with Repheka at market rent so that the premises are an attractive purchase for a purchaser and so that the sale is the sale of a ‘going concern’ for GST purposes.
6.Dr Sululola pay to Dr Mbachilin one half the rent from the date of occupation to the date of settlement of the sale or the date of settlement of the BOQ re-finance.
7.Upon sale, Dr Mbachilin shall be paid the greater of:
a. One half the proceeds of sale, or
b. ‘the sums’.
8.Income tax returns and BAS statements be prepared to the satisfaction of the parties’ accountants covering the period up to completion of the sale or re-finance and the deed specify who is to receive the benefit of any carry forward losses and specify how any tax obligations are to be divided.
9.There be mutual releases & indemnities (conditional on satisfaction of the deed’s requirements) including that Dr Sululola be responsible for any capital gains tax, GST or stamp duty implications.
10.Transfer of the unit in the Unit Trust is only to take place upon completion of all of the above.
Please seek instructions.” (CB 2164)
97 According to Dr Mbachilin, the “WRIG‑30” form was held up and not signed by Dr Sululola, pending Dr Mbachilin’s execution of the unit transfer document. (T419-20). In the face of this impasse, Dr Mbachilin said he contacted AHPRA, stating, “My supervisor is no longer interested to supervise me, so they just say that I should get another supervisor who was ready to supervise me …” (T418, L10-21) The matter had already been broached before Dr Sululola contacted AHPRA on the same subject on 27 June. Dr Mbachilin had not taken any steps to refund the monies paid directly into his account by electronic transfer by Dr Sululola under cover of the emails quoted above. However, he did not immediately present the two cheques delivered to him on 29 March 2017. Rather, he presented them for payment on 3 August. He took this step, he said, on the advice of his solicitor, “to see whether there’s actually money in this account”. (T578, L6-15) Dr Mbachilin denied the suggestion during cross-examination that he presented the cheques on that day because he had been advised the previous day that he and his company were no longer liable as guarantors for the Bank of Queensland loan. (Ibid, L16-21) According to Dr Mbachilin, his solicitor gave no explanation as to why he should in August present the cheques for payment when they had remained unpresented until then. (T579, L4-20) The cheques were unpaid because they had been stopped in early April by Dr Sululola.
98 The doctors had a further meeting at the Quest Hotel in Albury sometime in August, convened by two doctors, Dr Onari and Dr Razak, who were apparently mutual friends of the two doctors. (T424) According to Dr Mbachilin, he was invited by Dr Sululola to speak first. He said he was “very calm”. He continued, “we are Christians, so it was a very peaceful meeting”. Dr Mbachilin said at the conclusion of the meeting, Dr Sululola declined to agree to any settlement because, according to Dr Sululola “there’s no trust”, and the meeting terminated. (T426) According to Dr Sululola, however, Dr Mbachilin was “just all rowdy, just screaming”. (T153, L11) However, according to Dr Sululola, following the initial unpleasantness, the atmosphere of the meeting “improved”, (Ibid, L29-30) and the parties agreed to “go apart”, letting the transfer be done “amicably”. (T152, L9-11) It was to be left to the solicitors to settle. (Ibid, L16‑17)
99 In fact, no settlement has been reached or implemented.
This proceeding
100 Solicitors acting for Dr Sululola commenced this proceeding by filing a writ on 12 December last year.
Plaintiff’s claim
101 In his Amended Statement of Claim (referred to hereafter simply as the Statement of Claim), Dr Sululola rehearsed the establishment of the Repheka Unit Trust with Repheka Pty Ltd as trustee and the initial holding of all issued units in the trust by Dr Sululola. He then referred to the purchase by Repheka of the property at 21 Middleton Crescent. Dr Sululola alleged that on or about 17 April 2015, Dr Mbachilin “had an intention of practising medicine at the same location in Wodonga as” Dr Sululola, and on or about 17 April 2015, Dr Mbachilin received a transfer of half of the units in the Repheka Unit Trust. Repheka, the trustee, it was said “made improvements” to the Wodonga property “with the intention of constructing a building to allow [Dr Sululola and Dr Mbachilin] to practise medicine at the property”. It was said “the relationship between” the doctors “subsequently deteriorated” and Dr Mbachilin either refused to, or was unable to, practise medicine from the property.
102 It was said that there was a meeting between the two doctors and their wives on 26 March 2017, at which the two doctors “made an oral agreement for transfer of the units from [Dr Mbachilin to Dr Sululola]” on terms that Dr Sululola was to pay Dr Mbachilin a total of $91,698 “representing total costs incurred by [Dr Mbachilin] in respect of the property”, and Dr Mbachilin would provide signed transfers of units in the trust in favour of Dr Sululola. The terms of the Agreement were said to have been summarised in an email sent by Dr Sululola to Dr Mbachilin at 5.56pm on 29 March 2017. Part payments totalling $40,000 were said to have been made on 26 and 29 March 2017, and Dr Sululola’s wife delivered to Dr Mbachilin at his residence cheques for the balance of $51,698 and transfer documents which Dr Mbachilin “wrongfully and in breach of the Agreement … did not sign”, which refusal was persisted in. The cheques for $51,698 were cancelled, but Dr Mbachilin retained the $40,000 paid to him by direct credit. Dr Sululola, it was said, remained willing and able to perform his obligations under the Agreement and relief was sought by way of an order of specific performance, with a transfer by Dr Mbachilin of units in the trust for a payment of $51,698 or, alternatively, restitution or equitable compensation for the $40,000, damages, interest, costs and further or other relief. (CB 4-7) Alternative relief by way of specific performance was also sought entailing a transfer of units in the unit trust “in return for repayment of the costs incurred by [Dr Mbachilin] in respect of the [Middleton Crescent] Property”.
Defence and Counterclaim
103 By his Further Amended Defence and Counterclaim dated 11 October 2019, Dr Mbachilin alleged that “on or about 12 January 2015” the two doctors and Repheka entered into an agreement referred to as the “Joint Venture Agreement”, whereby the two doctors and Repheka would “operate and build a medical centre together on the Property purchased by [Repheka]”. The two doctors would “practise medicine together at the medical centre”. Repheka would obtain a mortgage from the bank “to build the medical centre”. The two doctors would share equally the expenses associated with the building and the operation of the medical centre and would equally share the income and/or profits generated from the medical centre and any other benefits. This agreement was alleged to have been reached orally during a conversation at Dr Mbachilin’s previous residence at 47A Thomas Mitchell Drive, Wodonga.
104 Next, according to the Further Amended Defence and Counterclaim, Dr Mbachilin was issued with half the units in the unit trust and paid Dr Mbachilin the sum of $36,000 “as consideration for 50% interest in the Trust”. This sum, it was said, “represented half of the total expenses incurred by [Repheka] according to [Dr Sululola] and calculated by [Dr Sululola] for the period between around March 2013, to around early April 2015”. These sums included the costs of establishing the trust, council rates, costs of “briefing the builders” and interest payments to the Bank of Queensland for its loan to finance the acquisition of the land.
105 These monies were said to have been “contributed to the operation and building of the medical centre … to give effect to the Joint Venture Agreement”. The two doctors equally shared the costs associated with operating and building the medical centre “since around early 2015” and the building of the medical centre was completed “in or around July 2016”.
106 Dr Mbachilin admitted he was “unable to practise medicine” from the property and that Dr Sululola “precluded” him “from operating and practising medicine at the medical centre on the Property”. He said that “in or around July 2016”, Dr Sululola told Dr Mbachilin that should he wish to practise medicine from the property, his company, Lobi International Pty Ltd, “must purchase shares in [Dr Sululola’s] company Damani International Pty Ltd … and be an equal shareholder in Damani”.
107 With Dr Mbachilin refusing to purchase shares in Damani, Dr Sululola was said to have informed Dr Mbachilin that he no longer needed to pay council rates on the property until he practised medicine there and purchased shares in Damani.
108 Dr Mbachilin was said to have paid half of the expenses associated with the building and operation of the medical practice with a number of particular outlays referred to, and that Dr Sululola continues to operate the medical practice “to the exclusion” of Dr Mbachilin.
109 According to the Further Amended Defence and Counterclaim, Dr Mbachilin paid interest payments “towards the commercial mortgage to Bank of Queensland … until November 2018”.
110 Dr Mbachilin denied that Dr Sululola attended Dr Mbachilin’s residence on 26 March 2017 or that any settlement was reached.
111 According to the Further Amended Defence and Counterclaim, Dr Sululola visited Dr Mbachilin’s then residence “to make enquiries in relation to [Dr Mbachilin’s] mortgage application pertaining to the building of” his house, raising queries as to the potential impact that loan application might have on the commercial mortgage between Repheka and Bank of Queensland.
112 Dr Mbachilin was said to have requested Dr Sululola to “ask his solicitor to speak to [Dr Mbachilin’s] solicitor, to resolve any issues”.
113 The email received by Dr Mbachilin on 29 March 2017 at 6.00pm was dispatched, it was said “in circumstances where there was no agreement or discussion in relation to the transfer” of the unit.
114 Alternatively, Dr Mbachilin said that if any agreement had been made on 26 March 2017, it did not comply with various requirements laid down by clauses 23 to 27 of the Trust Deed “as to the method and price for transfer of units in the trust and [was] not enforceable”. Any such agreement arose or would have arisen in circumstances where Dr Sululola was the sole director of the Trustee, Repheka, and the only other unit holder of the Trust, and where he had “refused or neglected to allow [Dr Mbachilin] despite requests since at least July 2016 to be registered as a director and shareholder of the Trustee” and where Dr Sululola had not provided accounts or financial statements for the trust to Dr Mbachilin. Further, it was said that any such agreement also arose in circumstances where Dr Sululola, without informing or obtaining consent of Dr Mbachilin, had leased the property to a third party, namely Specialist Diagnostic Services Pty Ltd via Dr Sululola’s company, Damani International Pty Ltd. These matters, it was said, meant that Dr Sululola “was involved in a continuing breach of trust or breach of his duty”, and because of Dr Sululola’s conduct, “it would be inequitable to enforce the Agreement”.
115 The Further Amended Defence and Counterclaim next asserted that any oral agreement made on or around 26 March 2017 was not enforceable against Dr Mbachilin and no action could be brought to enforce it against him, because he held a present entitlement to an equitable interest in the assets of the trust. Reference was made to s126(1) of the Instruments Act 1958 and s51(1)(a) and (c) of the Property Law Act 1958.
116 Dr Mbachilin admitted receipt of $40,000 by two bank transfers but said that these payments by Dr Sululola were made “unilaterally and independently of any agreement” between the doctors.
117 Dr Mbachilin agreed that he had called on Dr Sululola on the morning of 29 March 2017 seeking the latter’s signature on the AHPRA form, and that Mrs Sululola called at Dr Mbachilin’s residence advising that the AHPRA form would be signed only if Dr Mbachilin signed documents transferring his 50 per cent units in the trust to Dr Sululola or his nominee – which Dr Mbachilin refused to do. Dr Sululola refused to sign the AHPRA form, leaving Dr Mbachilin to contact AHPRA and Dr Mbachilin was “forced to stop practising medicine” and “did not receive any income for approximately 6 months from 30 March 2017”. Dr Mbachilin said that on the evening of 29 March 2017, the two doctors attended a Fellowship meeting and Dr Sululola passed an envelope to Dr Mbachilin including Minutes, Application for Units, Units Certificate, Register of Unit Holders and an unsigned letter to the trustee. It was said Dr Mbachilin refused to execute these documents.
118 Dr Mbachilin agreed that on 11 April 2017 Dr Sululola had provided a draft Deed of Settlement signed by him, Repheka and Damani, which Dr Mbachilin did not sign.
119 Presumably, as at 11 October 2019, Dr Mbachilin “practised medicine from Whitebox Rise Medical Centre”. This was said to be “due to the fact that [Dr Sululola] has prevented [Dr Mbachilin] to operate and practise medicine at the medical centre”. Dr Sululola, it was said, has thereby breached the Joint Venture Agreement.
120 According to the Further Amended Defence and Counterclaim, whilst Dr Mbachilin has been a unit holder in the trust since around April 2015, Dr Sululola has, at all material times, been the sole director and secretary of the trustee Repheka, and the sole shareholder and controller of that company at all material times. Whilst it was said that Mr Mbachilin and Dr Sululola equally shared the expenses associated with building and operating the medical centre, in breach of the Joint Venture Agreement, Repheka and Dr Sululola, in his capacity as sole director and controller of Repheka, “denied, precluded and continues to preclude [Dr Mbachilin] from practising medicine” at the centre “together with [Dr Sululola]”.
121 It was said that Repheka had “not distributed any income and/or profits generated from the medical centre to [Dr Mbachilin]” or “any other benefits”. By reason of these matters, it was said, Dr Mbachilin has suffered loss and damage.
122 Alternatively, it was said that Dr Sululola and Repheka represented to Dr Mbachilin that if he shared equally in the expenses associated with the building and operation of the medical centre, and obtained a mortgage from the bank to build the medical centre, the two doctors “would then operate the medical centre together … [and] practise medicine together on the Property and equally share the income and/or profit … and any other benefits”.
123 Dr Mbachilin was said to have been induced to assume this. The representations were said to have been made “on or about 12 January 2015 at 47A Thomas Mitchell Drive, Wodonga”. Dr Mbachilin was said to have acted upon this representation or induced assumption by making various outlays which were detailed.
124 It was said that Dr Sululola and Repheka “intended” for those outlays to be made by Dr Mbachilin “in reliance on the representations or induced assumptions”.
125 Contrary to these representations or induced assumptions, it was said that Repheka and Dr Sululola “denied, precluded and continue to preclude” Dr Mbachilin from operating from the medical centre, and failed or refused to distribute income, profits or other benefits to Dr Mbachilin.
126 It was said that Dr Mbachilin had suffered further detriment by Dr Sululola and Repheka’s “failing to comply with the representations or induced assumptions” because of his “loss of income and/or profits he would have received from the medical centre” and by “incurred rent from leasing Whitebox Rise Medical Centre from 1 October 2017 `to date, viz 11 October 2019”.
127 According to Dr Mbachilin, in his Further Amended Defence and Counterclaim, Dr Sululola and Repheka had not acted to avoid the detriment to him “by fulfilling the assumption or expectation created by the representations or induced assumptions or offering compensation” to Dr Mbachilin.
128 Therefore, it is said that Repheka and Dr Sululola “have acted unconscionably” and are estopped from denying that they are liable to pay Dr Mbachilin $378,758.70 plus interest, or such other sum by way of compensation as may be determined. They are said to be obliged to permit Dr Mbachilin to:
“(i) operate the medical practice;
(ii) practise medicine on the Property; and
(iii) obtain any incomes and/or profits generated from the medical centre and any other benefits …”
and account for and distribute equally the income and/or profit generated from the medical centre in favour of Dr Mbachilin.
129 In the alternative, the Further Amended Defence and Counterclaim alleged that Dr Mbachilin “in trade or commerce in his capacity as sole director of Repheka … and in his personal capacity” had engaged in misleading or deceptive conduct contrary to s18 of the Australian Consumer Law [constituted by Schedule 2 of the Competition and Consumer Act 2010].
130 The representations referred to earlier were repeated as items of alleged misleading or deceptive conduct, which were said in fact to be misleading or likely to mislead or deceive, and which were relied upon by Dr Mbachilin. His various outlays were once again alleged, and these outlays were said to constitute loss or damage suffered by Dr Mbachilin.
131 Alternatively, there was an application for an injunction against Repheka under the terms of the Australian Consumer Law, requiring it to permit Dr Mbachilin to operate and practise medicine at the centre and to receive an equal distribution of income and profit.
132 By way of relief, there was a demand for damages of $378,758.70. Alternatively, specific performance of the Joint Venture Agreement, damages pursuant to the Australian Consumer Law of $378,758.70, an injunction under that law, interest, costs and further or other relief.
133 The Counterclaim was brought against Dr Mbachilin, his wife and Repheka.
Reply and Defence to Counterclaim
134 In his Reply, Dr Sululola denied that there was a Joint Venture Agreement and said, even if there had been, it would have been on terms different from those pleaded. Reference was made to emails from Dr Mbachilin’s solicitor Mr Gillespie on 4 July 2016 and 14 September 2016. It was said that any purported joint venture “was not intended to be binding between the parties”, (CB 58) and if there were any rights created by the alleged Joint Venture Agreement, they were “subsequently abandoned by the parties” (CB 59) or alternatively “merged” with the settlement agreement alleged in the Statement of Claim.
135 Dr Sululola admitted receipt of $36,000 which he said had been taken into account in reaching the settlement figure alleged to have been agreed on in the Statement of Claim.
136 Dr Sululola denied that he had “precluded” Dr Mbachilin from operating and practising medicine at the property. As to the “WRIG-30”, Dr Sululola said he was precluded from signing it within six weeks of its due date and was therefore not able to sign the post-dated document. The doctor provided explanations as to certain outlays pleaded by Dr Mbachilin.
137 By way of Defence to Counterclaim, the defendants to the Counterclaim repeated as positive allegations, and they denied the existence of an equitable estoppel or misleading or deceptive conduct under the Australian Consumer Law.
Conclusion
138 The case pleaded by way of Counterclaim is far more elaborate than what is to be found in the Statement of Claim. It is convenient, therefore, to turn first to the Counterclaim.
A Joint Venture Agreement?
139 Ms Wilson submitted that I should find that no Joint Venture Agreement of the type alleged was in fact agreed upon between the parties. Mr Hogan, on behalf of Dr Mbachilin, unsurprisingly contended the opposite. He said [in Closing Submissions [58]]:
“The better view is that the arrangement between Dr Mbachilin and Dr Sululola, including the entity Repheka, is that there was agreement that, for investment of 50% of the costs of building the practice, together solely with equipment necessary to operate the practice (which was subsequently discussed during the build), Dr Mbachilin [would] own and operate the practice with Dr Sululola”.
140 This arrangement, he said, was “structured through the medium of the unit trust that Dr Sululola had established and sought Dr Mbachilin’s buy-in … . The trustee owned the land on which the centre was built. But the deal was broader than simple land ownership” (Ibid, [59]). According to Mr Hogan, Dr Sululola admitted at T259, L12-16, that he did not mention to Dr Mbachilin the necessity to pay more money later to buy into an operating entity. This, according to Mr Hogan, was because this was no part of the “deal” on which the doctors had agreed (Ibid, [61]). According to Mr Hogan, the doctors talked about buying equipment in subsequent discussions, but this was “very different to buying 50% of a business valued by reference to its income and good will” (Ibid, [62]). Mr Hogan said, “despite denials, it should be found that Dr Sululola approached Dr Mbachilin in early 2015 in respect of Middleton Crescent. In his keenness to have Dr Mbachilin’s money – necessary to get the build started – Dr Sululola agreed that Dr Mbachilin would, for his investment, be part of the business, that is, both landholding and operations. Dr Mbachilin then purchased the units and paid costs. There was no agreement that his partnership depended upon “buying half of the shares in Damani International Pty Ltd” (Ibid, [66]).
141 Mr Hogan said that the doctors’ subsequent conduct was supportive of this view of events. The doctors both signed as guarantors to Repheka’s loan, as did their associated entities, Damani International Pty Ltd and Lobi International Pty Ltd. According to Mr Hogan, “Structure material from July 2016 provided by Dr Sululola’s own accountant, also contemplated operations in a form consistent with the keep own income, share other income operational structure said by Dr Mbachilin to have been agreed”. (Ibid, [67])
142 Mr Hogan noted that Dr Mbachilin “even filed forms in respect of operating himself from Alpha Medical Centre, in its then current location, as an ‘area of need’”. (Exhibit 1 and Ibid, [68]). (I believe the reference may in fact be to Exhibit “I” – for India - which is an email exchange between Dr Mbachilin and the Department of Health and Human Services dated February 2016).
143 According to Ms Wilson on behalf of Dr Sululola:
“The highest that it can be put is that there was an expectation that both doctors would practise from the Property once the new medical centre was constructed. However, there was uncertainty as to the structure that the practice would take, what [Dr Mbachilin] would have to pay to be part of it, and when [Dr Mbachilin] would commence. In any event, [Dr Mbachilin] ultimately decided not to commence practising from the Property because he did not want to jeopardise his permanent residency application”. (Outline of Closing argument [22])
144 Ms Wilson also noted that Dr Mbachilin’s original Defence and the Amended Defence and Counterclaim said that the Joint Venture Agreement was made on or about 12 January 2014, but the Further Amended Defence and Counterclaim filed 16 October 2019 said that it was on 12 January 2015 (Ibid, [23]). Ms Wilson noted evidence by Dr Mbachilin that the Joint Venture Agreement was indeed made in 2015, this time nominated as on Sunday, 15 January (T469, L22-29; T472, L29-T473, L4). She said, however, that according to his evidence, this agreement was made when both doctors worked at Elmwood Medical Centre (T481, L2-6). She said this was impossible because Dr Sululola had been terminated from Elmwood in July 2014 (Ibid, [25]). She also noted Dr Sululola’s evidence, unchallenged on this point, that in the period September 2014 to March 2015 he did locum work in Ascot Vale and therefore could not have been in Wodonga on a Sunday in January 2015 (Ibid, [26]). She said, in any event, 12 January 2014 was a Sunday, whilst 12 January 2015 was a Monday, and 15 January 2015 was a Thursday (Ibid, [27]). Accordingly, said Ms Wilson, whilst the evidence suggested that a Sunday discussion between the parties occurred in January 2014, it was “not credible” that they discussed joint venture at that stage because no transfer of units occurred until April 2015, and construction of the centre at Middleton Crescent did not commence until December 2015. Therefore, she said, any discussions in January 2014 “would have been of a preliminary nature only” (Ibid, [28]).
145 Ms Wilson said that Dr Mbachilin had a tendency to overstate matters, so that at the opening of Alpha Medical Centre at 256 Beechworth Road in August 2015 Dr Mbachilin described the doctors’ pastor attending to bless the new centre and being told by Dr Sululola that the two doctors were in partnership (T372, L23-30; T470, L21-26). She noted that in August 2014 Dr Mbachilin was still working at Elmwood and had not purchased units in the unit trust. She continued with a review of the course of events as narrated earlier in these reasons.
146 In this case, it is plain that the parties did enter into a contractual arrangement whereby, for an outlay of funds, Dr Mbachilin became entitled to and had vested in him half of the units in the Repheka Fixed Unit Trust. The question is whether a wider arrangement between the doctors existed, as is alleged on behalf of Dr Mbachilin. According to Professor Carter, in his work Carter on Contract:
“The concept of ‘contract’, as an agreement which is capable of giving rise to rights enforceable in a court of law, necessarily involves the conclusion that the agreement is sufficiently complete and certain. An agreement which is incomplete or uncertain, since it cannot be enforced, does not count as a contract. In any given case there may in fact be elements both of uncertainty and incompleteness. There is, however, a difference between terms which must be agreed (and expressed with sufficient clarity) – sometimes termed ‘essential terms’ – and terms which should, as a matter of prudence, be included in a contract. This is a contrast between what it is necessary for the parties to agree and what may be desirable.” ([04-001] 10,021 Service 37)
Later, in the same paragraph, Professor Carter states:
“There are very few terms which must be regarded as inherently essential. Indeed, the techniques of term implication, being designed both to ensure that agreements do not regularly fail for incompleteness and to supply terms to which parties would have agreed had they directed their minds to the matter, generally prevent agreements from failing. Perhaps, as an abstract matter, only three matters are essential:
1. agreement on parties;
2. agreement on subject matter; and
3. agreement on consideration and price.” (Ibid, 10,022)
147 The professor also remarked:
“In a commercial agreement the further the parties have gone with the arrangement, and acted on the basis that a contract was agreed, the more ready are the courts to infer an intention to contract on the terms agreed, and if necessary to imply any reasonable term so as to give effect to their intentions. Moreover, where a contract which is prima facie incomplete has been largely performed by one or both parties, the agreement may be upheld, by the implication of terms in order to avoid the injustice which might arise if a party who had performed were unable to enforce the contract.” ([04-020] 10,025 Service 37)
148 According to the Counterclaim, the parties to the Joint Venture Agreement were the two doctors and Repheka, with the doctors equally sharing the income and/or profits generated from the medical centre “and any other benefits”, yet the evidence shows that the legal structure for the venture and the identity of the parties was never finally resolved almost eighteen months after the agreement was said to have been made, and over a year after the transfer of units to Dr Mbachilin, his solicitor raised the structural issues (see above [44]). He entertained the possibility that “a practice management company” might be interposed between Repheka and the doctors as tenant, with that interposed company having a shareholding structure controlled by the two doctors, their families or discretionary trusts, with the interposed company hiring administrative staff and the doctors paying the practice management company fee for services, and the two doctors receiving and retaining the fees which they themselves rendered, and not pooling their fees.
170 Mr Hogan also drew attention to the payment of further interest for Repheka’s loan during March and thereafter which he said was not consistent with the parties having reached agreement in March. Yet, it is clear that by 30 March any agreement that they might have made had broken down. Further payments by Dr Mbachilin after that time could be regarded as consistent with his seeking to maintain his position as a unit holder and perhaps the holder of other entitlements as against Dr Sululola. The same might be said for his failure until August to attempt to have the $51,698 cheques collected for payment.
171 Mr Hogan also noted the evidence of Dr Sululola at T134, L2-9 about contacting the Bank of Queensland relative to releases of guarantees and his statement that the bank advised the release would occur “once we’ve done our settlement”. According to Mr Hogan, the issue of release of guarantees was first canvassed with the bank on 19 April 2017 (CB 621). He said, “the inference: the settlement had not been done and agreement had not been reached by that stage” (Ibid, [19](d)), which is doubtless true given that the parties agree that they had fallen into dispute by the end of March.
172 Again, in light of the breakdown between the parties at the end of March, it is difficult to attach too much significance to Mr Gillespie pressing for provision of accounts and related material relative to the Repheka Fixed Unit Trust in the Period April – July 2017 (Ibid, [19](f)).
173 Mr Hogan accurately observed that the issue of guarantee liability to Bank of Queensland was not dealt with or considered at all until Mr Gillespie raised it in April 2017. This is, however, consistent with the two doctors having simply forgotten about it and done a deal which failed to advert to the issue. Had the matter of the guarantee not sorted itself out by the “rollover” of the Bank of Queensland facility, it might be that even in the absence of an express oral term the law might have implied a term requiring Dr Sululola to procure release of the guarantee liability of the Mbachilin interest or at least indemnify him. Given that this issue has in the events that have occurred turned out to be moot, it is unnecessary to say more about it. Mr Hogan also referred to Dr Mbachilin’s evidence of the abortive August meeting sponsored by friends of the protagonists, Drs Onari and Razak. Once again, Dr Sululola asserted an agreement was reached, whilst Dr Mbachilin gave the opposite account. That the parties would renew negotiations in August is not inconsistent with their having previously agreed upon the terms some months previously, with one of the parties “repenting” of the deal then done.
174 In my view, the parties did agree, in March, to the retransfer of the units in the Repheka Fixed Unit Trust to Dr Sululola or his nominee against repayment to Dr Mbachilin of the outlays which he had made.
175 The Statute of Frauds provision 126(1) of the Instruments Act 1958 provides:
“An action must not be brought to charge a person upon a special promise to answer for the debt, default or miscarriage of another person or upon a contract for the sale or other disposition of an interest in land unless the agreement on which the action is brought, or a memorandum or note of the agreement, is in writing signed by the person to be charged or by a person lawfully authorised in writing by that person to sign such an agreement, memorandum or note.”
176 Crucial to the operation of this section is a finding that the agreement alleged to have been made in March could be characterised as a “contract for the sale or other disposition of an interest in land”. Ms Wilson, on behalf of Dr Sululola, contended that this section had no application because the subject matter of the “amicable settlement” was constituted by units in a unit trust. The units, she said, did not constitute interests in land and she relied on the decision of the High Court of Australia in CPT Custodian Pty Ltd v Commissioner of State Revenue; Commissioner of State Revenue v Karingal 2 Holdings Pty Ltd (2005) 224 CLR 98. In that case, two companies were assessed as liable for land tax on the basis of their holding of units in the unit trust which was owner of the land being assessed. The High Court reversed a determination in favour of the Commissioner made by the Victorian Court of Appeal. The court considered a contention by the Commissioner that the hallmark of any unit trust was: “that, unlike shareholders with respect to the property of the company, unit holders do have beneficial interests in the assets of the trust … .” (2005) 224 CLR 98, 113 [29]. Their Honours noted a finding by Dixon CJ and Kitto Taylor JJ in a joint judgment in Charles v Federal Commissioner of Taxation (1954) 90 CLR 598, 609), that the unit trust before the court there conferred: “… a proprietary interest in all the property which for the time being [was] subject to the trust of the deed”. The Court, in CPT determined that the conclusions quoted from Charles’ case depended upon the particular terms of the deed before the court there (2005) 224 CLR 98, 115-6 [36]).
177 The upshot, I think, is that whilst CPT does not establish the proposition that a unit holder in a unit trust has no direct interest in the trust’s assets, this being dependent on the terms of the particular trust deed, it rejects the proposition that merely because the relevant trust is constituted by what is popularly described as a “unit trust”, the unit holder is to be taken to have an interest in land, the subject of the trust. Since Dr Mbachilin relies upon the operation of s126, it was for him to establish that the units in question should be characterised for the purposes of the section of the Instruments Act as “interests in land”. The argument that in the case of the present Repheka Fixed Unit Trust, Dr Mbachilin, as a unit holder, held an interest in land is stronger under the relevant trust deed than it was in CPT. Clause 46 of the deed establishing the trust provides:
“Each unit holder will be presently entitled to their share of income & assets of the trust fund, if any, at all times. Each unit holder will have an immediate and indefeasible vested interest in their share of income and capital.” (CB 87)
Clause 2 of the deed defines the expression “trust fund” as including:
·the initial sum;
·monies, investments and property paid or transferred to and accepted or acquired by the trustee or held on its behalf subject to the trust;
·the amounts paid for any units issued to unit holders;
·the proceeds of any sale of investments or property;
·any investments and property from time to time;
·the money, investments and property of every description representing the trust fund. (CB 79)
178 In Costa & Duppe Properties Pty Ltd v Duppe the course of determining that a unit holder in the unit trust there under consideration had sufficient interest in real estate forming part of the trust fund to lodge a caveat under s79 of the Transfer of Land Act 1958, Brooking J (as he then was) said:
“If there is a proprietary interest in the entirety [of the trust fund] there must be a proprietary interest in each of the assets of which the entirety is composed.” ([1986] VR 90, 96)
179 This analysis was pressed upon the High Court in CPT in support of the view that the unit holders ought to be regarded as having a beneficial interest in the land subject to the relevant trust deed. Their Honours were unpersuaded. They referred to the well-known decision of the Judicial Committee of the Privy Council in Commissioner of Stamp Duty (Qld) v Livingston [1965] AC 694, where their Lordships were required to rule upon a contention by the Commissioner that, for succession duty purposes, a beneficiary in an unadministered deceased estate should be regarded as having an interest in the assets constituting the estate. Their Lordships, affirming the decision of the majority of the High Court of Australia, held that the beneficiaries should not be regarded as having an interest in the underlying assets. The Court in CPT did not distinctly disagree with the conclusion of Brooking J in Duppe, that the unit holder had a caveatable interest, but by reference to Livingston’s case, expressed scepticism in the absoluteness of the statement made by his Honour and quoted above. ((2005) 224 CLR 98, 114 [31]-[32]) They quoted with approval a statement by Nettle J, the primary judge in CPT, whose judgment had been reversed by the Court of Appeal, in which his Honour contrasted the situation of a simple trust, on the one hand, and a trust such as the unit trust before the Court, which included what his Honour described as trustees’ “powers of disposition and transposition”, which led him to conclude that the unit holders should not, under such a complex trust arrangement, be regarded as having a beneficial interest in the underlying assets. ((2005) 224 CLR 98, 116 [37], quoting (2002) 51 ATR 190, 205)
180 The present trust deed includes elaborate provisions for, to use the language of Nettle J, “disposition and transposition”. Clause 55 of the trust deed (CB 89‑90) gives wide powers to the trustee, including powers of investment, disposal, borrowing, mortgaging and so forth. As to termination and vesting, clauses 101 to 105 (CB 97) provide similar wide powers to the trustee at the point of termination, as well as imposing duties. At termination, the trustee is required by clause 103 to “sell, call in and convert the trust (property) fund into money, pay all the trust debts, and upon the unit holders providing an executed release to the trustee, the trustee must then distribute the net proceeds of assets (capital) of the fund to the unit holders.” The analogy between the role then being discharged by the trustee and the personal representative of the unadministered deceased estate referred to in Livingston’s case is clear enough. Clause 104 of the deed authorises distributions in specie by the trustee, but the power to make a distribution in specie is vested as a discretion in the trustee, not granted to the unit holders as a right. In the present case, the trust fund consisted, it would seem, overwhelmingly of the real estate constituted by the land and buildings being the medical centre in Middleton Crescent. Nevertheless, the trust deed established not a simple trust but rather, to use the language adopted by Nettle J, a “complex unit trust”. The nature of the trust estate established is dictated by the terms of the trust deed, rather than by the assets which happen at a particular time to constitute the trust fund.
181 In light of these considerations, I reject the contention that a transfer of a unit or units in the Repheka Fixed Unit Trust would constitute a sale or disposition of an interest in land so as to engage, in the present transaction, s126 of the Instruments Act 1958.
182 Mr Hogan also placed reliance on behalf of Dr Mbachilin on s53(1)(a) and (c) of the Property Law Act 1958, which provides:
“(1) Subject to the provisions hereinafter contained with respect to the creation of interest in land by parol—
(a) no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by his agent thereunto lawfully authorized in writing, or by will, or by operation of law;
…
(c)a disposition of an equitable interest or trust subsisting at the time of the disposition must be in writing signed by the person disposing of the same, or by his agent thereunto lawfully authorized in writing or by will.”
183 Section 55 of the Act provides inter alia:
“Nothing in the last two preceding sections shall—
…
(d) affect the operation of the law relating to part performance.”
184 For the same reason that I have concluded that s126(1) of the Instruments Act is inapplicable so, too, is s53(1)(a) of the Property Law Act.
185 Mr Hogan noted that there was no requirement for the operation of s53(1)(c) that the equitable interest in question should be in realty. He referred to Adamson v Hayes (1973) 130 CLR 276. Ms Wilson said that the decision of the High Court of Australia in DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) (1982) 149 CLR 431 established the principle that “a transfer by the legal and beneficial owner is not a disposition of a subsisting equitable interest”. She also referred to Meagher, Gummow and Lehane's Equity: Doctrines & Remedies, (5th ed, LexisNexis Australia, 2014) [7 – 120]. In DKLR, a company owning land requested an associated company to act as trustee for it on the terms of the declaration of trust. The directors of the first company resolved the proposed trustee would hold only the legal estate in the land and that the first company would not part with the beneficial ownership. The proposed trustee executed the declaration of trust, declaring that it would hold the land upon trust absolutely for the first company. The first company then transferred the land to the trustee company. Ms Wilson referred, in her Outline of Submissions, to the judgment of Brennan J (as he then was) at [8]. She handed up a photocopy of the judgments from the Commonwealth Law Reports, which do not include numbered paragraphs. The judgment of Brennan J was the last contained in the report and on the face of it would not appear to be likely to have been designated as paragraph [8].
186 I have not identified the precise passage in his Honour’s judgment, which is relied upon in support of this proposition. However, I am unable to perceive how it could apply to the present state of facts. The assets, being the units in the unit trust are, by their very nature, pieces of equitable property. Since their existence is not recognised by the Common Law, whilst they might have a beneficial owner, it is difficult to see how they can have a “legal” owner.
187 Ms Wilson contended that despite s53(1)(c) of the Property Law Act, the oral agreement between the doctors could be treated as enforceable by reason of the “part performance” exception provided for by s55 of the statute. The only acts of part performance which she relied upon were the payment of instalments paid against the price which was said to have been agreed upon between the doctors. Mr Hogan, however, contended that the mere payment of money without more cannot constitute part performance of a contract so as to take it outside the ambit of a Statute of Frauds provision such as s53. He referred to the decision of the High Court in Pipikos v Trayans [2018] 92 ALJR 880. In that case, their Honours reaffirmed long established authority to the effect that the acts of part performance relied upon to invoke the doctrine must be unequivocally referable to some such contract as is alleged to have been made orally, and the acts of performance relied on in that case being payments of a number of sums of money did not meet the requirement of unequivocal referability because they could be seen as reflective of a number of other quite different forms of arrangement between the parties. It follows that payments of money without more cannot be effective acts of part performance. See also Meshumar v Otmy [2018] 97 NSWLR 615 per Robb J. The argument based on part performance must therefore be rejected.
188 More pertinently as to the application of s53(1)(c), is ss(2) of that section, which provides:
“(2) This section shall not affect the creation or operation of resulting, implied or constructive trusts.”
the learned editors of Meagher, Gummow and Lehane’s Equity Doctrines and Remedies (5th ed) consider, at some length, the operation of this exclusion from s53 by reference to the decisions at the trial, Court of Appeal and House of Lords levels in the case of Oughtred v Inland Revenue Commissioners [1958] Ch 383; [1958] Ch 678; [160] AC 206. Having examined the various speeches in the House of Lords and the judgments below, the learned editors state at [7]-[195]:
“It cannot be said, therefore, that Oughtred v Inland Revenue Commissioners defines the effect of s23C [of the Conveyancing Act 1919 the equivalent of s53 of the Property Law Act 1958 in Victoria] on an oral contract for the sale of an equitable interest in personalty. The better view is, it is suggested, that of Lords Radcliffe and Cohen: the contract gives rise to a constructive trust. It does not effect an assurance to the purchaser of the totality of the vendor’s interest. It follows that, by virtue of subs (2), writing is not required.”
189 They referred to DHN Food Distributors Ltd v London Burrough of Tower Hamlets [1976] 3 All ER 462 having been consistent with this view, though failing to provide further elucidation. I respectfully adopt this analysis which has been found in this work since its original edition since 1975.
190 Mr Hogan, on behalf of Dr Mbachilin, did not deny the existence of these principles. He said, however:
“The better view is that any such constructive trust would only arise at a later time – when the purchase price was paid. It was not. Even if the constructive trust did arise on making of the otherwise enforceable agreement, non-payment would (and did) defease it.”
191 As to the general proposition that an enforceable contract may give rise to a constructive trust so as to take the matter outside the operation of s53(1)(c), Mr Hogan referred to Baloglow v Konstanidis [2001] NSWCA 451 and Halloran v Minister Administering National Parks and Wildlife Act 1974 [2007] 229 CLR 545 [93].
192 In Halloran’s case, the question was whether claimants were entitled to compensation under land acquisition legislation as the owners of an interest in land whose interests had been divested or extinguished, where their entitlements to an interest in land were said to derive from dealings in units in unit trusts with no written conveyance to meet the New South Wales’ equivalent of s53(1)(c). At paragraph [72], in a joint judgment, Gleeson CJ, Gummow, Kirby and Hayne JJ, accepted that the relevant transaction vested land in a company as trustee for a property trust. Their Honours concluded that this occurred “at the time when that consideration was provided to Sealark”, the putative conveying party. The majority of the Court ultimately found that, since no stamp duty had been paid in accordance with the requirement of the Stamp Act, there was no entitlement to compensation under the statute.
193 Heydon J, at [93], [2006] 229 CLR 545, 573, held that the constructive trust arose as soon as the contract for transfer was made. Mr Hogan advocated the view that since the whole consideration had not been paid here and a substantial portion of it was the subject of a cancelled cheque, no constructive trust arose. Ms Wilson, however, submitted that the decision of the New South Wales’ Court of Appeal in Baloglow v Konstanidis [2001] NSWCA 451 entailed a finding of a constructive trust coming into existence upon a contract having been made with no money having changed hands and therefore with consideration on that side remaining unexecuted.
194 In Halloran’s case, the Court was divided. The majority and Heydon J reached different conclusions based upon a view as to the proper construction of the Stamp Act, rather than any fundamental difference between the majority and minority on the operation of the rules as to constructive trusts. The view which the majority in Halloran took as to the point at which a constructive trust arose was reflective of their view as to the particular complex arrangements which gave rise to it. Their Honours stated no general proposition that a constructive trust does not, as a matter of general principle, arise unless and until the consideration on behalf of the putative beneficiary is fully executed, as seems to be being submitted here. Indeed, in Tanwar Enterprises v Cauchi [2003] 217 CLR 315, 332-3 [53], in a joint judgment, Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ stated that in circumstances where there is an uncompleted contract for the sale of land, that the “entrance” of the purchaser is commensurate with the availability of specific performance. The purchaser in Tanwar failed to complete on the due date in circumstances where time was of the essence. Specific performance therefore was not available.
195 In the present case, I have heard no submissions as to whether time was of the essence. Since the presumption now is the equitable one, it is against time being of the essence: section 41 Property Law Act 1958. Moreover, there was no nominated date for completion. In any event, the failure to complete the contract was due to Dr Mbachilin’s refusal. There has been no termination of the contract or breach on the part of Dr Sululola of some fundamental term which would “defease” the agreement which I have found otherwise to be specifically enforceable. In an arrangement such as the one made, the reimbursement obligation, being the payment of the price for the units, would be concurrent with the obligation to transfer the units. Dr Sululola was not obliged to pay the price when Dr Mbachilin refused to effect the transfer of the units. The existence of this agreement therefore rendered Dr Mbachilin the beneficiary of a constructive trust and took the matter outside the operation of s53(1)(c) of the Property Law Act 1958.
196 It follows, therefore, that there is no effective “Statute of Frauds” defence to the claim for specific performance of the oral contract for the sale of the units which I have found to have been made between the parties.
197 In his closing submissions, Mr Hogan, on behalf of Dr Mbachilin, conceded that reliance on provision in the Trust Deed “restricting the price at which units are transferred within the unitholder group” was not relied upon [35]
198 Mr Hogan nevertheless contended that in any event it would be inappropriate and inequitable to order specific performance of this oral contract (Closing Submissions [47]-[55]). He alleged a raft of breaches of trust and he said Dr Sululola “alone had access to Repheka’s accounts and did not provide them to Dr Mbachilin” and had made a decision not to charge his company, Damani, “market rent for its use of Repheka’s property”. The benefits of the operation at the centre were derived by Dr Sululola’s company, Damani International Pty Ltd, and not by the unit trust (Ibid, [48]). According to Mr Hogan, Dr Sululola “as trustee director and/or joint venturer, held to himself all of the useful information relevant to disposition of units in the Repheka Fixed Unit Trust – accounts, Trust Deed, knowledge of activities.” He made no attempt to impart any of this information to Dr Mbachilin or to charge a market rent under a lease for a fixed term for the medical centre (Ibid, [51]). He said:
“Granting specific performance of the oral agreement would allow Dr Sululola not only to have had the benefit of an interest free loan from Dr Mbachilin to build the medical centre when that was clearly not the original 2015 agreement between them, it would lead to the position where consequences of potential breaches of trust are avoided by the actions of the person who is the directing mind of the trustee.” (Ibid, [54])
199 Responding to these matters, Ms Wilson said that there was no entitlement for a unit holder, even one holding 50 per cent of the issued units in the trust, to be appointed as a director of the trustee company or to be allotted shares in its capital. (Closing Submissions [73]). In any event, she said that Dr Sululola had expected and intended that Dr Mbachilin would be given these entitlements (T312, L23-T313, L4; Ibid, [74]). Thereafter, in July 2016, Dr Mbachilin had indicated that he did not wish to practise at the centre in the immediate future and negotiations had broken down by November (Ibid, [75]).
200 Ms Wilson did not deny a failure to provide financial statements for the unit trust to Dr Mbachilin. She said that these statements were not completed until September 2019 in response to subpoenas served on Dr Sululola’s accountant and tax returns were completed in June 2018. Again, she said this was in response to demands from Dr Mbachilin’s solicitor (Ibid, [76]-[86]).
201 I take the arguments on these matters urged on behalf of Dr Mbachilin as an invocation of the maxim that “Those who come to equity must come with clean hands.” According to the learned editors of Meagher, Gummow & Lehane’s Equity: Doctrines & Remedies, [5th Edition], this maxim is “colourful but imprecise”. Citing Kation Pty Ltd v Lamru Pty Ltd (2009) 257 ALR 336 at [148] [3-090], the learned editors state of the alleged “unclean hands” whose existence might call the maxim into effect, that if its relationship “to the cause of action relied on is direct, it is irrelevant. Mere general depravity is not enough” [3-115] 82.
202 The learned editors refer to the decision of the High Court of Australia in Meyers v Casey (1913) 17 CLR 90. The `unclean hands’ considerations might be regarded broadly as falling into two categories. The first category is constituted by benefits which Dr Mbachilin and his associates might have expected to derive from the broader “joint venture agreement” which the two doctors intended to make but which on the findings that I have made they never agreed upon. A failure to agree on those matters with a consequent failure by Dr Mbachilin to derive the anticipated benefit cannot be regarded as being the result of a default on the part of Dr Sululola. First, upon the findings which I have made, it was Dr Mbachilin who took the initiative in cancelling further negotiations and secondly because, since there cannot be a legally enforceable “agreement to agree”, a failure or refusal of a party to agree would generally not be regarded as a legal wrong. In the second category are contentions that the “deal”, even as far as it went, created rights in favour of Dr Mbachilin which were not respected. These matters are less easy to put to one side. As a unit holder in the Repheka Fixed Unit Trust as to 50 per cent, Dr Mbachilin had an obvious interest in, for instance, having the trust derive the best rental reasonably obtainable from Damani International or whatever entity carried on the medical practice at the centre. There seems to have been a suggestion that somehow or other the trustee should have “accounted” for rentals derived by way of sub-lease from the pathology service. Normally, what is derived by a tenant (here, Damani International) from a sub-tenant is unconditionally the tenant’s property. The fact that a tenant is given the opportunity to derive rental from sub-tenancies is something which should be reflected in the rental which the tenant ought to be expected to pay. A trustee for a lessor unit trust should exercise its discretion so as to allow sub-tenancies only when in all the circumstances it is in the interests of the trust estate to allow them. None of these considerations appears to have been given attention to here. The rental paid by Damani was aligned with Repheka’s liabilities to Bank of Queensland, rather than with the market. No written lease agreement was required from Damani which would be expected to deal with issues such as sub-tenancy. All these matters, however, occurred in a context where, as early as July 2016, Dr Mbachilin had indicated an unwillingness or inability to join Dr Sululola in practice at the medical centre and negotiations on the “joint venture” broke down completely in the following November. If a joint venture, as it would seem the parties originally contemplated, had gone forward, one might think that the venturers would have set the rental with a view to ensuring the best tax treatment for the derivation of income on the footing that the unit trust controlling the real estate would be controlled by the same persons who were principals of the medical practice, as Mr Gillespie suggested. For reasons already explained, this did not happen. Any sort of profitability for the medical centre was plainly in the future as at March 2017 when the agreement sued upon here was reached between the doctors. In the circumstances I do not believe that Dr Sululola should be regarded as having “unclean hands”, so as to bar him from the benefit of the remedy of specific performance. If I were wrong in this, the maxim is subject to an exception. According to Meagher, Gummow & Lehane:
“A plaintiff who has once been guilty of unclean hands need not be permanently debarred from equitable relief. One may, as it is picturesquely put, ‘wash one’s hands’; by, for example, showing that one’s misconduct ceased well before the suit, or that it occurred by accident and will not recur. The process of ‘washing’ may be achieved by the imposition of terms on the plaintiff.” [3-115]
203 The learned editors refer to a decision of Blow J in Rhodes v Badenach [2000] TASSC 160. I will return to this issue when I consider the terms upon which relief ought to be granted to Dr Sululola.
204 Specific performance was sought in the plaintiff’s prayer for relief in two forms. In the first, the transfer of units was required for the payment of a particular nominated sum of money. In the second, added by way of amendment, the alternative form of specific performance sought was for a transfer of the units “in return for repayment of the costs incurred by the defendant in respect of the property”. In my view, that is the preferable form of a decree for specific performance. The evidence appeared to disclose a situation where the two doctors agreed upon terms whereby they would “unwind” their relationship with Dr Sululola repaying the outlays made by Dr Mbachilin. I am not satisfied that the doctors agreed on any particular sum of money as being the appropriate amount. Rather, they agreed upon the principle that Dr Mbachilin should be repaid as to his outlays.
205 Given that the criticisms made of Dr Sululola’s conduct relative to the unit trust and the terms on which it made the clinic available to Dr Sululola’s company, Damani International Pty Ltd, are wholly or partially justified, with a consequent impact upon any profits which the unit trust might have derived had a more rigorous approach to leasing been adopted by the trustee which was under the sole control of Dr Sululola, it is appropriate, in my view, that Dr Sululola should be required to “wash his hands” at least to the extent of paying interest at an appropriate rate upon the purchase price which should be required to complete the reimbursement. In one sense it might be said that it is Dr Mbachilin’s refusal to complete the transaction which has deprived him of the use of this money. On the other hand, the criticism that specific performance would require him to settle as the price for relinquishment of his interest in the unit trust without even allowance for any interest for the period in which Dr Sululola has had the use of the money, has some force. In the circumstances, I believe it would be appropriate for Dr Sululola to be granted specific performance of the March oral agreement for the sale of the units subject to his payment as the price the amounts outstanding and not reimbursed of Dr Mbachilin’s outlay together with interest calculated from 26 March 2017 to date at an appropriate commercial interest rate. Given that this proceeding has been determined in favour of Dr Sululola, it would be inappropriate to award interest at the penalty rate provided for in the Penalty Interests Rates Act.
Disposition
206 There was evidence and there were some submissions on the question as to precisely what amounts were paid by Dr Mbachilin and ought to be reimbursed under the agreement which I have found had been made and which remain unreimbursed. If the parties remain unable to agree upon a figure, I believe I should hear further submissions on this point, together with submissions as to the appropriate interest rate to allow. It would be preferable if the parties could agree upon both these matters.
207 I have heard no submissions on the question of costs and so I will reserve them. I will direct the parties to bring in short minutes to give effect to these reasons.
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