Baker & Ors v Ambridge Investments Pty Ltd

Baker & Ors v Ambridge Investments Pty Ltd - [2011] VSCA 334 - VSCA 2011 case summary — Zoe

[158]

There is no doubt that Voukidis received the fax which included the 30 June 2000 [31 May 2000] balance sheet for Break Fast.[70] On or about 14 July 2000, a telephone discussion took place between Jacobs and Voukidis about the contents of the fax. Beside the reference in Jacobs' faxed letter to a request for information as to 'Joint Venture details - parties, equity participation etc' Voukidis noted in his handwriting, referring to the joint venture partners: 'Tod 10, Ambridge 25%, CV 25% and TB 40%' This accords with Jacobs' contemporaneous note of the same conversation which recorded: 'V Parties: Tod McGrouther 10% 300 K; Ambridge 25% 500K; Chris V 25%; Theo Baker 40%'.

Voukidis attempted to explain away this note by saying that they were notes he took which recorded what Jacobs was asking for in the event that 'we went down the path of a joint venture' however at that time, he continued 'we had pretty much knocked that on the head'. I do not accept this explanation of Voukidis. For some time Jacobs had been requesting Voukidis to provide him with the corporate nominees proposed by Baker and Voukidis to represent their interests in the Wellington Parade Joint Venture so that the joint venture agreement could be completed. For example, on 5 April 2000, Jacobs wrote to Voukidis by email asking him to 'advise of the joint venture parties to enable completion of the JV agreement'. This was repeated by Jacobs in a facsimile to Voukidis dated 13 July 2000. It was in response to this request from Jacobs that Voukidis supplied the information to Jacobs that McGrouther would be the fourth joint venture partner with a 10% interest; McGrouther's 10% interest would come from the interests in the joint venture held by Voukidis and Baker; resulting in the interests of the four parties to the joint venture being: McGrouther 10%; Ambridge 25%; Voukidis 25%; and Baker 14%.

When cross-examined on the fax of 13 July 2000 and its contents Voukidis admitted that he did not write back to Jacobs pointing to any error in the balance sheet. He said that there was 'no need because I spoke to him about it'. I do not accept that Voukidis had any such discussion with Jacobs.

I am satisfied that Voukidis did not challenge Jacobs on the basis on which the May 2000 balance sheet had been prepared. Indeed he accepted that treatment of the Break Fast accounts. This provided a signal to Jacobs to continue to have the Break Fast accounts prepared on the same basis, which he did. Further, in his conversation with Jacobs of 14 July 2000, Voukidis accepted without question that Ambridge held a 25% interest in the Wellington Parade Joint Venture.

This conduct amounts to an admission made by Voukidis, against the case which he now seeks to present, that Ambridge was in fact a joint venture partner with a 25% interest in the venture. Voukidis not only had the opportunity to correct the Break Fast accounts had he chosen to do so, given his professional qualifications as an accountant he had the knowledge to do so, and given his statutory obligations as a director of Break Fast he had the duty to do so, if in fact the accounts were incorrect.

Further, I am satisfied that in confirming the structure of the joint venture on 14 July 2000, Jacobs was representing the position of Ambridge and Voukidis was representing the position of himself, Baker and McGrouther. As such, the statement made by Voukidis to Jacobs amounted to an admission on the part of himself, Baker and McGrouther, that Ambridge held a 25% interest in the joint venture.[71]

[186]

I do not accept this explanation provided by Voukidis. Jacobs was copied into the email. Jacobs responded to Voukidis by saying that the accounts 'have/are being prepared' on the basis of an unincorporated joint venture with Break Fast as the manager. Jacobs also copied Rachel Lamport into his email. In this way, Voukidis was informed directly as to the basis on which the accounts of Break Fast had been and were then being prepared. Voukidis was also informed that this email from Jacobs had been copied to Rachel Lamport, and was likely to have been construed by her as an instruction as to the basis on which the Break Fast accounts were to be prepared by her firm.
However, Voukidis did not provide any counter instruction to Rachel Lamport that the accounts of Break Fast had been prepared and were to be prepared on the basis which is now maintained by the Defendants, namely that Break Fast was the operating company.
As events unfolded, as will be seen, neither Rachel Lamport nor any member of the firm Mason Carter prepared the taxation return for Break Fast for the year ended 30 June 2000.
Nevertheless, and in spite of the evidence of the email exchange which took place on 10 July 2001 between Rachel Lamport, Voukidis, Jacobs and Stanley being significant, neither Rachel Lamport nor anybody from her firm was called to give evidence on this matter in support of the explanation proffered by Voukidis. There was no explanation for this failure. I draw the inference that if she had been called by the Defendants, she would not have offered any evidence which could have assisted the case which the Defendants now advance.
I find that Voukidis left the instruction to Rachel Lamport as it had been provided to her by Jacobs on behalf of Ambridge in the third of the emails in the chain, that is that the Break Fast accounts had been prepared and were to be prepared on the basis of an unincorporated joint venture with Break Fast as the manager.
Voukidis was a practising accountant and a director of Break Fast. I am satisfied that he never took issue with Jacobs, Stanley or Ambridge as to the manner in which the Break Fast accounts and taxation returns were prepared for the company. These accounting records consistently showed Ambridge as having a direct interest in the Wellington Parade Joint Venture and were prepared consistently with the structure of an unincorporated joint venture, with Break Fast as the registered proprietor of the land and manager of the enterprise on behalf of the joint venture.
I do not believe the evidence given by Voukidis which was to the effect that the Wellington Parade Property was held by Break Fast on behalf of its shareholders, and each shareholder, namely Baker, Voukidis and Stanley, held their interests in those shares on behalf of the companies nominated by them, and that Ambridge, not being a shareholder, had no interest in the joint venture.[101]

[232]

[507] In what may be called the 'Nomination of Corporate Representatives Phase', Mr Baker and Mr Voukidis nominated their corporate entities, Career Path and C&O Voukidis to take up their respective shares, and Mr McGrouther nominated IMF for this purpose.

[508] Pursuant to the binding joint venture agreement which operated from mid July 2000, there existed an implied mechanism for the appointment of substitute parties by a process of nomination on the part of Baker, Voukidis and McGrouther in respect of their respective interests. The mechanism is to be implied from the conduct of the parties in undertaking this very process under the management of both Voukidis and Jacobs.

[509] Pursuant to this nomination mechanism, between December 2000 and mid February 2001 the parties to the joint venture, other than Ambridge, proceeded to nominate the corporate entities which were to hold the respective interests of Baker, Voukidis and McGrouther in the Wellington Parade Joint Venture. Careerpath was nominated by Baker to hold his 40% interest and C & O Voukidis was nominated by Voukidis to hold his 25% interest. This was done in communications with Jacobs prior to mid February 2001. Then in an exchange of emails between 8 and 12 February 2001. McGrouther nominated IMF to hold his 10% interest, and Voukidis advised Jacobs of the nomination.

[510] This did not give rise to any new or substitute agreement, or any variation of the binding joint venture agreement. The nomination of these corporate representatives was undertaken pursuant to a contractual mechanism which existed by implication under the binding joint venture agreement, as I have found it to be.

....

[515] In this case no agreement was brought about by the process of offer and acceptance. Nevertheless, by conducting the Wellington Parade Joint Venture consistently with the terms of the binding joint venture agreement which coalesced in mid July 2000, and following the nominations of Careerpath, C & O Voukidis and IMF by mid February 2001, consistently with the terms of that structure as it had been settled at that point, a contract of joint venture came into being....

[516] I find that the terms of the draft joint venture agreement provided by Stanley to Baker on 8 October 2002, which was executed by Ambridge and Break Fast, happens to record all of the terms of the binding joint venture agreement, the parties and their designated partnership interests, upon which the parties conducted their joint venture since mid July 2000, as it was developed by adding the corporate representatives for Baker, Voukidis and McGrouther in mid February 2001 pursuant to the contractual mechanism in place. The contract of joint venture continues in this form to this day.

[517] In terms of the express trust, upon the nominations of Baker and Voukidis, Break Fast appointed Careerpath, C & O Voukidis and IMF to hold the interests of Baker, Voukidis and McGrouther, alongside that of Ambridge, in the Wellington Parade Property.

[342]

(a) a fair minded lay observer having viewed the hearing of the proceeding prior to the appellants having given evidence might reasonably have apprehended that his Honour had prejudged the credibility of the appellants, including Baker, on the basis of conduct engaged in by Voukidis during the pre-trial stages of the proceeding: Tr1039, 25 - Tr1040, 14;

(b) having correctly identified the Briginshaw standard as the standard or proof for such a finding his Honour erred in applying that standard in that:

(i) there was no direct evidence before the Court that the documents in question had been fabricated either by the appellants or at all;

(ii) there was insufficient indirect evidence before the Court to support such a finding having regard to the seriousness and the gravity and consequences that his Honour found (J365-366) would flow from such a finding;

(iii) in reaching the conclusion his Honour relied on a finding, made in error, that the email in question was the first reference in writing to the structure in the terms which were contended for by the Appellants (J443) and in doing so failed to take into account other evidence to the same effect including:

(a) a letter of advice from Herbert Geer & Rundle Lawyers dated May 2002 received and paid for by Stanley: Exhibit D8

(b) the financial accounts of Break Fast (prepared by Jacobs and Stanley) which were consistent with Break Fast being an operating company and not a trustee:

(c) correspondence and documents provided to financiers (by Jacobs and Break Fast) on the basis of which Break Fast borrowed money which were consistent with Break Fast being an operating company and not a trustee:

(d) each of the tax returns of Break Fast, save one, which were all consistent with Break Fast being an operating company and not the trustee of an unincorporated joint venture.

(iv) In finding that the email was the first piece of correspondence in writing that referred to the structure contended for by the Appellants his Honour also failed to take into account that, on the appellant's case, the incorporated joint venture was oral and was settled on or before 24 November 1999 (D&C[7.1) as a reasonable alternative explanation for the absence of correspondence;

(v) his Honour gave too much weight to the fact (J444) that despite having produced hard copies of the email the applicants were unable to produce electronic copies of the email nearly seven years after the event, despite reasonable explanations from the appellants as to why;

(vi) erred in finding that Baker, Voukidis and Stanley signed a resolution which described Break Fast as manager of the joint venture (J463) without taking into account the evidence of Voukidis that he had personally applied Baker's electronic signature to the resolution prior to receiving Baker's email, in circumstances where there was no direct evidence to the contrary;

(vii) his Honour erred in finding that after 10 December 2002 the accounts of Break Fast continued to be prepared on the basis of an unincorporated joint venture as alleged by Ambridge (J453) in that:

(A) he placed too much weight on the fact that some of the accounts were headed 'As manager for the Wellington Parade Joint Venture': (J453) when others were not;

(B) he failed to take into account that all of the financial accounts of Break Fast, in substance, indicated that Break Fast was not a trustee of an unincorporated joint venture as alleged by Ambridge but was an operating company as alleged by the Appellants with assets and liabilities income and expenditure;

(C) failed to take into account the evidence of Jacobs that:

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Cases Cited (6)