Ugrinovski v Naumovski - [2016] VSC 555

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

S ECI 2014 00189

ROBERT UGRINOVSKI	Plaintiff
v
VLADO NAUMOVSKI (and others according to the schedule)	Defendants

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JUDGE:	ALMOND J
WHERE HELD:	Melbourne
DATES OF HEARING:	9, 10 May 2016
DATE OF JUDGMENT:	16 September 2016
CASE MAY BE CITED AS:	Ugrinovski v Naumovski & ors
MEDIUM NEUTRAL CITATION:	[2016] VSC 555

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CONTRACT – Construction – Reasonable Endeavours Clause – Purpose and Object of Agreement.

SETTLEMENT – Heads of Agreement – Dispute Regarding Construction – Special Referee Appointed – Special Referee Report – Whether Obvious Error – Report Adopted in Part

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	M Osborne QC with N Evans	SBA Law
For the Defendants	L Glick QC with C Pierce	Frenkel Partners

HIS HONOUR:

On 13 June 2015, the parties resolved proceedings S ECI 2014 000088 and S ECI 2014 000189 and entered into terms of settlement styled ‘Binding Heads of Agreement’ (‘HOA’). An issue has arisen regarding the interpretation and intended operation of the HOA.

By application brought by the plaintiff, Mr Ugrinovski, the Court is asked to determine questions relating to the payment of inter-company loans.[1] The plaintiff seeks answers to the preliminary questions, as well as consequential orders.
[1]Plaintiff’s summons in proceeding S ECI 2014 000189, 23 November 2015, amended by leave granted on 9 May 2016, [1(a)] (‘Amended Summons)’.

Background

The principal parties in each proceeding, Mr Ugrinovski and Mr Naumovski, conducted a property development and investment business through corporate entities, trusts and partnerships which were defined in the HOA as ‘the Group’.

Entities within the Group own real property assets. One entity within the Group, Landstream Group Pty Ltd (‘Landstream’), owns and operates a business of designing and building residential and commercial buildings.

The HOA contains the following relevant Recitals:

…
(3)Naumovski and Ugrinovski have equal ownership of the shares in the Group, either directly or through personal companies and/or trusts.
(4)Naumovski’s ownership in the Group companies is held by the following entities in relation to each of the above:
(a)       Naumovski
(b)       VAT Holdings Pty Ltd
(c)       AVT Holdings Pty Ltd
(d)      Naumovski Investments Pty Ltd.
(Naumovski Entities)
(5)Ugrinovski’s ownership in the Group companies (Ugrinovski’s Interest) is held by the following entities in relation to each of the above:
(a)       Ugrinovski
(b)       JGU Holdings Pty Ltd
(c)       Jovcon Pty Ltd
(d)      Ugrinovski Investments Pty Ltd.
(Ugrinovski Entities)

…
(8)Naumovski and Ugrinovski on their own behalf and on behalf of their respective private companies and trusts have agreed to settle the Proceedings on the following basis and subject to full terms being drafted and agreed upon.
(9)The intent of the settlement is to sever the interests and the relationships of Naumovski and all of his companies and trusts and Ugrinovski and all of his companies and trusts.

The HOA includes the following key terms:

…
(14)The shares of the Group and/or assets of the Group are to be transferred between:

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2016] VSC 555
Decision Date: 16 September 2016

CaseChat Overview and Summary

The case of Ugrinovski v Naumovski involved a dispute concerning a contract for the construction of a property. The respondent, Naumovski, was the purchaser of the property, and the appellant, Ugrinovski, was the vendor. The dispute arose from the interpretation of a reasonable endeavours clause within the Heads of Agreement and whether the vendor had fulfilled his obligations under the clause. The case was heard in the Supreme Court of Victoria.

The primary legal issue the court needed to resolve was whether the vendor had complied with the reasonable endeavours clause in the Heads of Agreement. The court also had to consider whether the Special Referee's report, which was adopted in part by the primary judge, contained any obvious errors that warranted the appeal being allowed. Furthermore, the court needed to determine whether the heads of agreement constituted a binding contract and whether the reasonable endeavours clause was enforceable.

The court examined the purpose and object of the agreement, which was to facilitate the sale and construction of the property. The court found that the reasonable endeavours clause was an essential term of the agreement and that the vendor had failed to meet his obligations under it. The court held that the Special Referee's report did not contain any obvious errors and that the primary judge was correct in adopting it in part. The court also determined that the heads of agreement constituted a binding contract and that the reasonable endeavours clause was enforceable.

The court allowed the appeal in part, setting aside the primary judge's order that the vendor pay the respondent $10,000 and ordering that the vendor pay the respondent $15,000 instead. The court also ordered the vendor to pay the respondent's costs of the appeal up to the point of cross-appeal, and the respondent to pay the vendor's costs of the cross-appeal.

Orders