Winton Partners Funds Management Pty Ltd –v- Gregory Hamilton Willoughby Lindsay-Owen

[2016] NSWSC 640

Supreme Court

New South Wales

Medium Neutral Citation:	Winton Partners Funds Management Pty Ltd –v- Gregory Hamilton Willoughby Lindsay-Owen [2016] NSWSC 640
Hearing dates:	9 May 2016
Decision date:	20 May 2016
Jurisdiction:	Equity - Commercial List
Before:	Hammerschlag J
Decision:	Plaintiff entitled to a declaration that it is entitled to remuneration of $5,070,263.83. Cross-claim dismissed.
Catchwords:	CONTRACT – construction of terms – where remuneration payable to the plaintiff under an Advisory Mandate Agreement is to be calculated by reference to the proceeds received from sale of certain fixed property – construction of meaning of “proceeds” – application of construction to facts
Cases Cited:	Electricity Generation Corporation v Woodside Energy Limited (2014) 251 CLR 640 Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 89 ALJR 990
Category:	Principal judgment
Parties:	Winton Partners Funds Management Pty Ltd (ACN 158 242 347) - Plaintiff / Cross-Defendant Gregory Hamilton Willoughby Lindsay-Owen - First Defendant / First Cross-Claimant Dairycorp Pty Ltd (ACN 007 093 898) - Second Defendant / Second Cross-Claimant
Representation:	Counsel: J.C. Giles SC with H. Mann - Plaintiff / Cross-Defendant R.S. Sheldon SC with C. Colquhoun - First and Second Defendants / First and Second Cross-Claimants   Solicitors: Gadens Lawyers - Plaintiff / Cross-Defendant Mills Oakley Lawyers - Defendants / First and Second Cross-Claimants
File Number(s):	2015/98573

Judgment

introduction

1. HIS HONOUR:   The issue in this case is the amount of remuneration which the plaintiff, Winton Partners Funds Management Pty Ltd (Winton), is entitled to receive under the terms of an Advisory Mandate Agreement (the Mandate), entered into with the defendants, Mr Gregory Lindsay-Owen and his company Dairycorp Pty Ltd (together DairyCorp), on 6 December 2014.

factual background

The joint venture

2. DairyCorp owned a substantial parcel of land at Schofields, which is in the local government area of Blacktown, New South Wales.

3. In 2010, DairyCorp entered into a written Joint Venture Agreement with Schofields Property Development Pty Ltd (Schofields), a developer of residential estates, to develop the land. At the same time, they entered into a Facility Agreement, under which Schofields was to make advances to DairyCorp. The Joint Venture Agreement provided for Schofields to acquire an escalating participating interest in the venture. The joint venture parties appointed a related company of Schofields, Villawood Management Pty Ltd (Villawood), to act as project manager. The Facility Agreement provided, relevantly, that if a participating interest was taken by Schofields, advances made by it would be deemed to be repaid. In other words, the arrangements provided for Schofields to convert its debt interest into equity in the joint venture. Schofields did convert, and ultimately, its participation interest was 40.6%.

4. At the time, DairyCorp owed the National Australia Bank (NAB) a significant amount of money secured by first mortgage over the land. The Joint Venture Agreement was subject to various conditions precedent including the refinancing of DairyCorp’s debt secured against the land, on acceptable terms. This occurred with NAB. The Joint Venture Agreement contained a provision (cl 15.6(d)) entitling Schofields to give notice requiring the parties to sell the land if DairyCorp defaulted in its obligations under the Joint Venture Agreement.

5. On 14 January 2014, the land was subdivided to create a new lot on the north-west boundary, apparently to enable Roads and Maritime Services (RMS) to purchase it for road construction purposes. The new lot has throughout been referred to by the parties as “the RMS land”. The RMS land was sold to RMS by written contract made on 23 May 2014 for $10,897,260 (inclusive of GST). Under the contract, completion was to occur on the 42nd day after the contract, but for reasons which are unexplained, completion only occurred on 23 February 2015. Immediately prior to completion of the sale, the debt owed by DairyCorp and secured over the land exceeded $22 million.

Problems arise

6. At some point during 2014, DairyCorp and Schofields fell out. There was litigation between them in this Court. DairyCorp was, by all accounts, under financial pressure, particularly with respect to repaying NAB.

7. Winton is a privately owned company which specialises in residential property development.

8. On 30 September 2014, Mr Lindsay-Owen was introduced to Winton’s Chief Executive officer, Mr Chris Meehan (by a Mr Iain Murray, a business acquaintance of Meehan), as a person who might be able to assist DairyCorp. Mr Lindsay-Owen maintained that Villawood was trying to back him into a corner so that he would default on the NAB loan, and they could then “steal the property” from him.

9. Endeavouring to assist DairyCorp, Winton made contact with NAB. Winton reported back to DairyCorp that it was unlikely that NAB would agree to an extension for repayment.

10. On 6 October 2014, Schofields gave DairyCorp notice under the Joint Venture Agreement requiring the land to be sold.

11. Subsequently, various proposals were made by Winton with a view to resolving DairyCorp’s difficulties with NAB and Schofields. By 27 November 2014 however, no solution had been achieved. Winton then proposed that it could be of assistance, given the acrimony between DairyCorp and Schofields, by being involved in the sale which was anticipated to result from Schofield’s notice.

12. Winton and DairyCorp then started to discuss the terms of what ultimately became the Mandate.

The Deed of Acknowledgement

13. On 3 December 2014, a mediation in connection with the proceedings brought in this Court by Schofields against DairyCorp took place. This resulted in the entry into, on 6 December 2014, between Schofields, DairyCorp and Winton of an instrument entitled ‘Schofields and Dairycorp Joint Venture Deed of Acknowledgement’ (the Deed of Acknowledgement) and the grant by DairyCorp to Winton of a Power of Attorney authorising Winton, amongst others, to do anything in connection with the joint venture and Deed of Acknowledgement.

14. In the Deed of Acknowledgement Mr Lindsay-Owen is referred to as ‘GLO’, and Winton as ‘WP’. The following are the presently materially relevant provisions of the Deed of Acknowledgment.

1.1    Definitions

Facility Agreement means the document entitled "Facility agreement", dated on or about 29 March 2010 and executed by GLO, Dairycorp and Schofields.

Intercreditor Deed means the document of that name, dated 30 April 2010 and executed by (amongst others) GLO, Dairycorp and Schofields (as amended from time to time).

Joint Venture Agreement means the document of that name, dated 29 March 2010 and executed by GLO, Dairycorp and Schofields.

NAB means National Australia Bank Limited (ABN 12 004 044 937).

NAB Debt means the First Creditor Debt secured by the First Securities (as each of those terms are defined in the Intercreditor Deed).

Non-RMS Land means that portion of the Land which is not RMS Land.

Proceedings means all litigation and other like proceedings commenced or continuing as at the date of this deed between some or all of the parties to this deed in relation to matters related to the Joint Venture and the ancillary arrangements in place for the purposes of the Joint Venture.

RMS Land means that portion of the Land the subject of an arrangement with Roads and Maritime Services (ABN 76 236 371 088) to sell for an amount of $10,897,260 (inclusive of GST).

Tender Process means the appointment of a sales agent to act on behalf of the Joint Venture for the purpose of running an open tender process and/or call for expressions of interest whereby offers to purchase the Non-RMS Land are sought.

Villawood means Villawood Management Pty Ltd (ACN 100 813 161).

1.2   Interpretation

In this deed:

(a)   headings are for convenience only and do not affect interpretation;

(b)   capitalised terms that are not otherwise defined in this deed have the meaning given to them in the Joint Venture Agreement;

3    Joint Venture Participation

(a)   The parties agree that:

(i)   Schofields has a Participating Interest of 40.67%; and

(ii)   the terms of the Joint Venture Agreement are otherwise unaffected by this deed and continue to apply and bind the parties to it including the existing default by GLO and Dairycorp under clause 11 of the Joint Venture Agreement.

(b)   In consideration of WP, Dairycorp and GLO not exercising any right to call for a payment in accordance with clause 4.4(b) of the Facility Agreement, Schofields agrees not to exercise its right to make a payment under clause 4.4(b) of the Facility Agreement.

(c)   Each of GLO and Dairycorp acknowledges and agrees that neither of them shall personally attend any meeting with, or communicate with, Schofields or Villawood or anyone engaged by either of them in relation to the Joint Venture or the Land and that all such attendances and communication will be conducted by WP.

4   Sale of the RMS Land

The parties acknowledge and agree:

(a)   that an agreement to sell the RMS Land to the Roads and Maritime Services (ABN 76 236 371 088) exists and the parties intend to perform all acts and execute all documents to enable concluding that sale as soon as possible;

(b)   Schofields is entitled to 40.67% of the proceeds of sale of the RMS Land net of GST payable on that sale, the costs of the sale process and Villawood's fee referred to in clause 12 (Schofields RMS Proceeds);

(c)   upon receipt of the Schofields RMS Proceeds, Schofields will apply those proceeds to reduce the NAB Debt in accordance with the requirements of the Intercreditor Deed; and

(d)   the Schofields RMS Proceeds paid to reduce the NAB Debt will at that time become part of the Second Creditor Debt (as that term is defined in the Intercreditor Deed) and the obligation of Dairycorp and GLO to repay the RMS Proceeds to Schofields will be secured by the Second Securities (as that term is defined in the Intercreditor Deed) and will be paid from GLO, Dairycorp and WP's share of the sale proceeds of the Non-RMS Land and, subject only to repayment of the NAB Debt, will be paid to Schofields at settlement of the sale of the Non-RMS Land.

5   Sale of the Non-RMS Land

(a)   The parties agree that, upon the sale of the Non-RMS Land, Schofields is entitled to receipt of proceeds equal to 40.67% of the sale price of the Non-RMS Land, net of GST payable on that sale, the costs of the Tender Process and Villawood's fee referred to in clause 12.

(b)   Subject to clause 5(c), the parties agree that the Land (other than the RMS Land) is to be sold in accordance with clause 15.6(d) of the Joint Venture Agreement as a result of the non-remedied default of Dairycorp under the Joint Venture Agreement.

(c)   Notwithstanding enforcement in accordance with clause 15.6(d) of the Joint Venture Agreement, Schofields has agreed to conduct the sale process for the Non-RMS Land as follows:

(i)   Schofields agrees to undertake the Tender Process without delay so as to enable the completion of the sale of the Non-RMS Land ;

(ii)   if, at any time up to 30 days prior to the close of the Tender Process, an offer on standard commercial terms and capable of acceptance, is received from a third party not related to or associated with any of the parties to this deed for an amount equal to or greater than the sum of $85 million plus GST less the total amount (inclusive of GST) paid on settlement of the RMS Land with a cash settlement occurring before 30 June 2015, then either Schofields or WP may, at its option, require the offer to be accepted. If either party makes this election the other parties to this deed agree to conclude the sale at that sale price and execute all documents and take all action necessary or desirable to enable the conclusion of that sale, provided that if more than one such offer is received, the election may only be made in relation to the highest such offer;

(iii)   subject to clause 5(c)(ii), if after the closing date of the Tender Process an offer on standard commercial terms and capable of acceptance, is received then Schofields may, in accordance with clause 15.6(d) of the Joint Venture Agreement, accept that offer and sell the Non-RMS Land. If an offer is accepted by Schofields in accordance with this clause 5(c)(iii) the other parties to this deed agree to conclude the sale at that sale price and execute all documents and take all action necessary or desirable to enable the conclusion of that sale; and

(iv)   subject to clause 5(c)(ii) the Non-RMS Land may not be sold prior to the Tender Process closing without the consent of both WP and Schofields (such consent which may be given or withheld in either party's absolute discretion).

(d)   The parties agree that none of GLO Dairycorp or WP (other than as referred to in clause 5(e) will have any involvement in the process of selling the Non-RMS Land other than that they agree to sign all documents and perform all other acts necessary or desirable to enable the sale to proceed and be concluded. GLO Dairycorp and WP agree that none of them will approach or communicate with any potential purchaser or agent in relation to the sale of the Non-RMS Land.

(e)   Schofields agrees that it will consult with WP in good faith in relation to the sale of the Non-RMS Land. Schofields will invite WP to any meetings with potential purchasers that arise out of the Tender Process.

6    Costs payable to Schofields

(a)   GLO and Dairycorp agree to pay Schofields the following amounts:

(i)   $2,384,205 on account of costs incurred by Schofields;

(ii)   $127,437 on account of interest paid by Schofields in April 2014 for and on behalf of GLO and Dairycorp; and

(iii)   59.33% of $257,262 to Schofields on account of Consultants’ fees paid by Schofields.

(b)   The amounts for payment referred to in clause 6(a) will be payable from GLO Dairycorp and WP's share of the sale proceeds of the Non-RMS Land and will be paid to Schofields at settlement of the sale of the Non-RMS Land.

10   NAB Debt

(a)   GLO and Dairycorp acknowledge and agree that they are responsible for 100% of the outstanding NAB Debt.

Meaning of “Land”

15. Clause 1.2(b) of the Deed of Acknowledgement incorporates capitalised defined terms in the Joint Venture Agreement. In cl 1.2 of the Joint Venture Agreement, “Land” is defined by reference to Certificates of Title folios which, it is common cause, comprehended both the RMS land and the non-RMS land.

The Mandate

16. On 6 December 2014, Winton and DairyCorp entered into the Mandate.

17. The entire text of the Mandate is set out in the Schedule to this judgment. For convenience, the critical provisions are set out immediately below.

The Parties agree that the Mandate is to enable Winton to undertake its role as attorney and agent for DairyCorp under clause 7 of the Deed of Acknowledgment and the Power of Attorney in relation to the exercise of Schofields’s right of sale of DairyCorp’s land at Schofields, NSW (“Property”) under the Deed of Acknowledgement, and that Schofields’s sale process is appropriately conceived, transparent and executed in such a way as to maximize the sale price achieved, to the extent that Winton is able to under the Deed of Acknowledgement.

…

Winton Remuneration:

DairyCorp agrees to pay to Winton or as Winton may direct in writing, the following from its share of the sale proceeds of the Property:

a)   Reimbursement of the Winton Contribution, plus a $100,000 introduction fee to Iain Murray as a first priority;

b)   20% of all proceeds above $12 million that are received by DairyCorp in relation to the sale of the Property.

For the avoidance of doubt the reimbursement of the Winton Contribution and the Iain Murray introduction fee are not subject to the $12 million hurdle and are to be paid as a disbursement irrespective of the final return achieved. The fees are quoted exclusive of GST and to the extent that GST is applicable.

Worked fee example:

Based on the above agreed remuneration structure, the sale proceeds based on $70m price, a c. 60% interest in the Property, and $24m debt balance (i.e. in c. 6 months time) on DairyCorp’s side of the Property, would indicatively be applied as follows:

•   $42m to DairyCorp and $28m Schofields

•   DairyCorp’s $42m to then be applied as follows:

o   $24m in repayment of the outstanding debt

o   [$1,901,713] to Villawood being [$2,664,276] in payment of amounts to Villawood required under clause 6 of the Deed of Acknowledgement less [$762,563] owing by Villawood to DairyCorp under clause 9 of the Deed of Acknowledgement

o   $400,000 in repayment of Winton’s legal expenses incurred and the Iain Murray fee

o   $12m to DairyCorp

o   $2.96m to DairyCorp and $0.74m to Winton - reflecting the ratio of 80 / 20 beyond $12m

The total proceeds to DairyCorp under this example equate to $14.96m

Subsequent transactions

18. As earlier mentioned, completion of the sale of the RMS land occurred on 23 February 2015. The figures which appear below have been extracted from the parties’ submissions and appear to agreed.

19. After settlement deductions, DairyCorp was entitled to a net balance of $9,227,151.50, which was paid over to NAB in reduction of DairyCorp’s debt of $22,944,317.28. After this payment, DairyCorp owed $13,717,165.78.

20. On 6 February 2015, the non-RMS land was sold to Stockland Development Pty Ltd for a total of $114,280,870.96 (including GST). Completion of the sale took place on 26 March 2015. After deductions and payment to NAB in full (the debt was then $13,717,165.78), there was $95,960,999.00 available for distribution to DairyCorp and Schofields. DairyCorp’s share (59.33%) was $56,993,660.71.

The dispute

21. It is common cause that where the Mandate refers to “proceeds”, this is a reference to net proceeds, and it is common cause that DairyCorp’s share of funds was distributed by Winton as follows:

DairyCorp share of funds:	$56,933,660.71
NAB	-$13,717,165.78
Schofields under cl 6 of the Deed of Acknowledgement	-$ 2,664,275.54
Schofields’ share of net RMS sale proceeds under cl 4(d) of the Deed of Acknowledgement	-$ 3,752,682.52
Schofields share of planning debt due under cl 9(a) of the Deed of Acknowledgement	$ 651,782.30
Iain Murray	-$ 100,000.00
Adjustments sub total	-$19,582,341.54
Proceeds	$37,351,319.17
DairyCorp	$12,000,000.00
80% to DairyCorp	$20,281,055.34
20% to Winton	$ 5,070,263.83

22. As will be observed, in reaching the figure for the proceeds received by DairyCorp, Winton deducted the actual NAB debt ($13,717,165.78) as it stood on completion of the sale of the non-RMS land.

23. It is common cause that no amount was payable in respect of the Winton Contribution.

DairyCorp’s position

24. DairyCorp took issue with this calculation.

25. It contends that the Mandate required that the proceeds received by DairyCorp are to be calculated by deducting the amount of the NAB debt as it stood prior to the repayment made on completion of the RMS land. In other words, it maintains that that repayment is to be ignored.

26. As I understand it, it argues that:

1. where the Mandate refers to “the sale of the Property”, this means the sale of, and only of, the non-RMS land;

2. where the Mandate refers to “the proceeds” of the sale of the property, this means the proceeds of the non-RMS land only; and

3. it follows that the proceeds are to be calculated as if the NAB debt had not been reduced, as it was, from the proceeds of the sale of the RMS land.

27. Put differently, it contends that the words “proceeds…in relation to the sale of the Property” are to be construed as if the NAB debt had not been partly repaid.

28. As to the precise amount of the NAB debt to be deducted, its primary contention is that because the Worked fee example refers to $24 million, that is the amount that must be deducted, even though the actual debt (ignoring the partial repayment) was $22,944,317.28. Its alternative contention is that the actual amount of the debt (ignoring the partial repayment), is to be deducted.

27. Under cl 4 of the Deed of Acknowledgement, Schofields was entitled to 40.67% of the proceeds of the RMS land which was to be applied to reduce the NAB debt, and repaid to Schofields out of the proceeds from the sale of the non-RMS land. In effect, Schofields agreed to lend its share of those proceeds back to DairyCorp, until disposal of the non-RMS land. Because DairyCorp’s contentions require the NAB debt to be deducted, ignoring the RMS land sale repayment, the reduction brought about by Schofields’ loan must also be ignored.

28. Hence, the respective outcomes on DairyCorp’s alternative scenarios are as follows:

SCENARIO A – NAB debt $24 million	SCENARIO B – NAB debt $22,944,317.28
DairyCorp share of funds:	$56,933,660.71	$56,933,660.71
NAB	-$24,000,000.00	-$22,944,317.28
Schofields under cl 6 of the Deed of Acknowledgment	-$ 2,664,275.54	-$ 2,664,275.54
Schofields’ share of net RMS sale proceeds under cl 4(d) of the Deed of Acknowledgement	$ 0.00	$ 0.00
Schofields share of planning debt due under cl 9(a) of the Deed of Acknowledgment	$ 651,782.30	$ 651,782.30
lain Murray	-$ 100,000.00	-$ 100,000.00
Adjustments sub total	-$26,112,493.24	-$25,056,810.52
Proceeds	$30,821,167.47	$31,876,850.19
DairyCorp	$12,000,000.00	$12,000,000.00
80% to DairyCorp	$15,056,933.97	$15,901,480.15
20% to Winton	$ 3,764,233.48	$ 3,975,370.03

Winton’s position

31. Winton argues that where the Mandate refers to the proceeds received by DairyCorp in relation to the sale of the Property, this means both the RMS and non-RMS land. In this regard, it relies principally on the definition of “land” in the Joint Venture Agreement, which is incorporated into the Deed of Acknowledgment. However, it puts that it is a distinction without a difference because even if the Property is only the non-RMS property, its calculation, in any event, incorporates the proceeds received by DairyCorp in relation to the sale only of the non-RMS land.

32. Winton points out that at the date of settlement of the non-RMS land, the RMS land had been sold, and the actual NAB debt was some $13 million. It puts that DairyCorp’s position does not accord with the plain meaning of the words of the Mandate, and that DairyCorp’s position is internally inconsistent because it only gives credit for the amount received for the RMS land, but ignores the reduction in debt achieved by the sale of the RMS land. It also points out that DairyCorp’s primary contention, based on the $24 million figure in the Worked fee example, allows for variation in all of the integers, except for the $24 million figure which is fixed, and does not accord with the prevailing fact at the relevant time.

33. It puts that the Worked fee example is nothing more than an example, and that the figure taken for the debt balance plays no significant role in the construction of the Mandate.

The relief sought

34. Winton seeks a declaration that the sum of $5,070,263.83, which it has paid to itself pursuant to the power granted under the Power of Attorney, was then due and payable to it pursuant to the terms of the Mandate.

35. Pending resolution of this dispute, Winton has appropriately paid the whole amount claimed by it as remuneration to its solicitors, who hold it in trust.

36. DairyCorp cross claims seeking payment of either $1,306,030.35 (being the difference between $5,070,263.83 and $3,764,233.48) or $1,094,893.80 (being the difference between $5,070,263.83 and $3,975,370.03) from the proceeds of the non-RMS land sale.

consideration

37. For the following reasons, I consider that Winton’s position is correct and DairyCorp’s untenable.

38. At issue is the meaning to be attributed to the words “proceeds…that are received by DairyCorp in relation to the sale of the Property”.

39. This involves a question of contractual construction.

40. As a commercial agreement, the meaning of the Mandate is to be determined by what a reasonable businessperson would have understood it to mean. It is to be construed by reference to the language used, the surrounding circumstances known to them, and the commercial purpose or object of the contract. Reference must be had to its entire text, context and purpose. It is to be construed so as to avoid making commercial nonsense or working commercial inconvenience: Electricity Generation Corporation v Woodside Energy Limited (2014) 251 CLR 640 at [35]; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 89 ALJR 990 at [47].

41. Whilst I agree with DairyCorp that the reference to “Property” in the phrase “proceeds in relation to the sale of the Property” is a reference to the non-RMS land only, I agree with Winton that the distinction is of no moment.

42. As to the meaning of “Property”, it is defined earlier in the Mandate, in the following paragraph (also quoted above):

The Parties agree that the Mandate is to enable Winton to undertake its role as attorney and agent for DairyCorp under clause 7 of the Deed of Acknowledgment and the Power of Attorney in relation to the exercise of Schofields’s right of sale of DairyCorp’s land at Schofields, NSW (“Property”) under the Deed of Acknowledgement…

43. This is a bespoke definition and is to be contrasted with the definition of land in the Deed of Acknowledgement and Joint Venture Agreement.

44. Leaving aside that an objective fact known to both Winton and DairyCorp at the time of the Mandate was that the RMS land had already been sold, cl 5(b) of the Deed of Acknowledgement makes it clear that the only land to be sold in accordance with cl 15.6(d) of the Joint Venture Agreement, that is, in exercise of Schofields’ right of sale, was the non-RMS land. There are other provisions in the Mandate consistent with the Property being the non-RMS land, for example, those providing for the remuneration to be due and payable on the day of settlement of the property, and recording that the final outcome to DairyCorp from the sale of the Property was subject to various market forces beyond the control of Winton.

45. However, there is a logical disconnect in DairyCorp’s contention that because “proceeds” means proceeds of the non-RMS land, the Mandate requires them to be calculated by assuming (contrary to reality) the existence of a debt, which at the time the proceeds are received, has been paid and no longer exists.

46. Even less does the Mandate require the calculation to be made on the double fiction that the NAB debt had not been reduced, and that it should be fixed at exactly $24 million.

47. The plain words of the Mandate require ascertainment of the net proceeds of the sale of the Property. No real constructional choice is required to be made.

48. Those words entitle Winton to remuneration of 20% of all proceeds above $12 million received by DairyCorp in relation to the sale of the non-RMS land. As is said above, the parties are agreed that “proceeds” means net proceeds. The simple reality is that the net proceeds of the sale of the non-RMS land received by DairyCorp on 26 March 2015 were $37,351,319.

49. The Worked fee example contains assumed integers for the purposes of enabling a hypothetical calculation to be made. These include the sale price and the date of sale. They are clearly not intended to be, nor could they be, precise. DairyCorp’s interest in the property was taken as an approximation. On DairyCorp’s submission, all integers, except the $24 million figure, are variable. There is nothing in the Mandate or the Worked fee example to justify this.

50. The commercial purpose and object of the Mandate was to enable Winton to act as DairyCorp’s agent and to monitor the sale process, and to use its best endeavours to ensure appropriate rigour was used in trying to get DairyCorp the best outcome. For this it was to be paid a proportion of the net proceeds after DairyCorp had taken the first $12 million. There is no suggestion that Winton did not perform.

51. There is significant tension between DairyCorp’s position that the debt figure must be fixed as it was prior to the RMS land sale, and the fact that at the time the Mandate was executed, all parties were operating under the assumption that completion for the RMS land would occur prior to the sale of the non-RMS land. This is clear from cl 4 of the Deed of Acknowledgement, which expressly provides that the Schofields’ share of the RMS land proceeds would be applied to reduce the NAB debt (cl.4(c)), and further regulates how that would impact Schofields’ rights to proceeds at the time of the RMS land settlement (cl.4(d)).

52. I do not consider that any reasonable business person in the position of the parties would have understood the Mandate to operate in the way DairyCorp suggests it does.

conclusion

53. Winton is entitled to the declaration which it seeks.

54. DairyCorp’s Cross-Claim is to be dismissed.

55. The parties are to bring in short minutes reflecting this outcome.

56. The exhibits are to be returned.

57. I will hear the parties on costs should it prove necessary.

**********

SCHEDULE

DairyCorp / GLO –Terms of Advisory Mandate

Outlined below are the terms for the advisory mandate (“Mandate”) under which Winton Partners Funds Management Pty Ltd ACN 158 242 347 (“Winton”) will act on behalf of DairyCorp Pty Ltd ACN 007 093 898 and Greg Lindsay Owen (together “DairyCorp”), in respect of its dealing with Villawood Properties Pty Ltd / Schofields Property Development Pty Ltd ACN 141 112 165 (“Schofields”) (“together Villawood”). (Winton and DairyCorp together shall be the “Parties”).

The parties acknowledge that DairyCorp, Schofields and Winton have entered into a Deed of Acknowledgement on or about the date of this Mandate (Deed of Acknowledgment). DairyCorp acknowledges that Winton played a key role in the resolution of the dispute between DairyCorp and Villawood in relation to their joint venture and the negotiation and finalisation of the Deed of Acknowledgment which documented the resolution of the dispute.

The Parties acknowledge that in additional to the appointment of Winton as attorney and agent for DairyCorp under clause 7 of the Deed of Acknowledgment, DairyCorp has appointed Winton as its attorney under a Power of Attorney dated on or about the date of this document (Power of Attorney).

The Parties agree that the Mandate is to enable Winton to undertake its role as attorney and agent for DairyCorp under clause 7 of the Deed of Acknowledgment and the Power of Attorney in relationto the exercise of Schofields’s right of sale of DairyCorp’s land at Schofields, NSW (“Property”) under the Deed of Acknowledgement, and that Schofields’s sale process is appropriately conceived, transparent and executed in such a way as to maximize the sale price achieved, to the extent that Winton is able to under the Deed of Acknowledgement.

Winton confirms that as part of the terms of the Mandate, it is prepared to assist in funding DairyCorp’s ongoing legal fees up to the limits noted below. The Parties agree that the following services will be provided by Winton for the duration of the Mandate term (“Services”):

Services:

1. Attorney and agent for Schofields

- Winton will act as DairyCorp’s attorney and agent under clause 7 of the Deed of Acknowledgement and under the Power of Attorney.

- DairyCorp agrees that it has no power or right to, and that it will not, direct Winton as to how to exercise the acts and omissions of Winton conferred on Winton under clause 7 of the Deed of Acknowledgement and the Power of Attorney.

- DairyCorp acknowledges that Winton’s powers are governed by and are limited by the Deed of Acknowledgement

Funding of legal Fees

- Winton’s intention is to limit future litigation costs by seeking agreement with Villawood in relation to the various matters in dispute and then progressing to an orderly sale in line with the points outlined below

- All commercial points to be agreed with Villawood will require the agreement of both DairyCorp and Winton

- Winton agrees to fund up to $300,000 of further legal fees for the current litigation against Villawood (“Winton Contribution”)

- The Parties agree that Winton has the right to instruct legal advisers in respect of all costs funded

- The Parties agree that Winton has the right to select legal advisers to carry out all works funded by Winton

2. Orderly Sale of the Property

- Winton will monitor the sale process undertaken by Schofields under the Deed of Acknowledgement to use its best efforts to ensure appropriate rigour is applied to the following:

• Seeking submissions from a range of national sales agent firms

• Advising on the best method of sale and structure of the sale campaign

• Designing a broad based national marketing and sales campaign appropriate print and online media

• Advising on the preparation of Information Memorandum and due diligence materials to present to potential buyers

• Helping to filter buyer interest and work with the ‘highest value’ candidates

• Negotiating terms of sale and relevant documentation

- DairyCorp acknowledges and agrees that it may or may not be possible for Winton to provide input on some or all or the Services and this will be based on the level of engagement achieved with Schofields under the Deed of Acknowledgement who may or may not be co-operative

- Winton agrees that in the exercise its power of attorney it will at all times act in the best interest of DairyCorp and be seeking to maximize the proceeds to be realized from the sale of the Property.

Winton Remuneration:

- DairyCorp agrees to pay to Winton or as Winton may direct in writing, the following from its share of the sale proceeds of the Property:

a) Reimbursement of the Winton Contribution, plusa $100,000 introduction fee to Iain Murray as a first priority;

b) 20% of all proceeds above $12 million that are received by DairyCorp in relation to the sale of the Property.

For the avoidance of doubt the reimbursement of the Winton Contribution and the Iain Murray introduction fee are not subject to the $12 million hurdle and are to be paid as a disbursement irrespective of the final return achieved. The fees are quoted exclusive of GST and to the extent that GST is applicable

Worked fee example:

- Based on the above agreed remuneration structure, the sale proceeds based on $70m price, a c. 60% interest in the Property, and $24m debt balance (i.e. in c. 6 months time) on DairyCorp’s side of the Property, would indicatively be applied as follows:

• $42m to DairyCorp and $28m Schofields

• DairyCorp’s $42m to then be applied as follows:

◦ $24m in repayment of the outstanding debt

◦ [$1,901,713] to Villawood being [$2,664,276] in payment of amounts to Villawood required under clause 6 of the Deed of Acknowledgement less [$762,563] owing by Villawood to DairyCorp under clause 9 of the Deed of Acknowledgement

◦ $400,000 in repayment of Winton’s legal expenses incurred and the Iain Murray fee

◦ $12m to DairyCorp

◦ $2.96m to DairyCorp and $0.74m to Winton - reflecting the ratio of 80 / 20 beyond $12m

- The total proceeds to DairyCorp under this example equate to $14.96m

- The Parties agree that the remuneration will be due and payable on the day of settlement of the sale of Property and are to be directed to be paid as a disbursement out of sale proceeds received by DairyCorp’s advisors

- The Parties further acknowledge and agree that Winton will apply its reasonable endeavors to the performance of the Services, however the effectiveness of Winton's involvement in the sale process will be directly influenced by the co-operation and engagement of Schofields and or its representatives, the terms of the Deed of Acknowledgement and the final outcome to DairyCorp from the sale of the Property is subject to various market forces beyond the control of Winton.

- The Parties agree that the fee structure above fairly reflects the efforts and commitment of Winton before and after the date of this Mandate and that any fees payable to Winton at the conclusion of the sale of the Property are due and payable in accordance with this agreement, irrespective of the level of engagement and involvement Winton is able to achieve in the process of selling the Property

- The fees shall be paid by or on behalf of DairyCorp to bank account Westpac Banking Corporation BSB: 032 040 Account Number: 211642.

Further Assurances:

Each Party hereby agrees, at its own expense, to take any further action and to execute any further document and/or instruments as the other Party may reasonably request to give effect to this Agreement and/or the Deed of Acknowledgment.

General:

This Mandate is governed by the laws of NSW and the Parties subject themselves to the jurisdiction of the Courts of that place.

This Terms of Mandate constitutes a binding agreement on the terms set out above.

The Parties obligations under this Mandate are subject to the terms of the Deed of Acknowledgement and in the event of an inconsistency between the terms of the Deed of Acknowledgment and the terms of this Mandate, the terms of the Deed of Acknowledgement will prevail.

Words not defined in this Mandate but defined in the Deed of Acknowledgement have the meaning given to them in the Deed of Acknowledgement.

This agreement may consist of a number of copies, each signed by one or more parties to the agreement. If so, the signed copies are treated as making up one document.

Decision last updated: 20 May 2016