Judgment - EX TEMPORE JUDGMENT
Revised and reissued 28 April 2020
Before the Court is an application by way of notice of motion seeking the separate and preliminary determination of certain claims in these proceedings. The application is brought under Uniform Civil Procedure Rules 2005 (NSW), r 28.2.
The first plaintiff in the proceedings, Gerard Camilleri, and the second plaintiff, Lauren Camilleri, are husband and wife. The proceedings arise out of business dealings between them and the first defendant, David Stuart Charles Kane. The second defendant, Total Excavation and Demolition Pty Ltd ("TED") is a company which was also involved in those dealings.
Relevantly, for the purpose of these proceedings, the dealings principally focussed on a project to develop a property at Dural in north-west Sydney. The Camilleris and Mr Kane are the registered proprietors of the property. Mr Kane holds an 80 per cent share and the Camilleris each hold 10 per cent.
As I have mentioned, the parties also had dealings with respect to TED. That company was incorporated in 2013. Mr Camilleri and Mr Kane each held half of the two shares on issue. Mr Camilleri and Mr Kane were also directors. But in October 2015, Mr Kane lodged an ASIC form notifying the purported removal of Mr Camilleri as a director and the purported transfer of his shareholding to Mr Kane.
Mr Camilleri, through his legal representatives, denied that he had resigned as a director or transferred his shareholding.
At around the same time the parties fell into a wider dispute, concerning the progress of the development more generally, and in particular their obligations to finance and complete it. In February 2016, Mr Camilleri commenced proceedings against Mr Kane in the Equity Division of this Court. After six months or so, however, the parties began to negotiate a settlement of the dispute which would see the proceedings being resolved.
Eventually in November 2016 the form of a deed, styled the Deed of Settlement and Release, was agreed between the solicitors acting for the parties. That Deed provided for payments to be made between the parties and for the transfer of the Dural property into the ownership of the Camilleris. It also provided for certain property to be transferred by TED to the Camilleris, and for Mr Camilleri to surrender his shareholding in the company.
The Deed provided, in the usual way, for it to be executed in counterpart form, and went on to provide that it would come into effect when both parties had executed and handed over their counterparts. Mr Kane executed a counterpart on behalf of himself and TED, and it was handed over by the solicitor acting for them on 14 November 2016, but the Camilleris did not execute their counterpart at that point.
On 5 December the solicitor acting for Mr Kane and TED wrote to the Camilleris' solicitor seeking to have them execute and return the Deed within two days. There was no immediate response to this request, but on 4 January the Camilleris' solicitor wrote back, raising an issue about alleged contamination of the property and seeking to introduce changes to the Deed to deal with that issue. The letter also stated that the Camilleris' position was that the Deed was not yet binding, because it had not been executed and returned by then.
So far as the evidence goes in these proceedings, there was no response to that letter. Then in March there was a change of solicitors by the Camilleris and a change of tack. On 10 March 2017 the Camilleris' new solicitor wrote to the solicitor for Mr Kane and TED, enclosing the Camilleris' executed counterpart of the Deed and asking that it be completed in accordance with its terms. There was no immediate response, but Mr Kane and TED ultimately took the position that the Deed, if it was ever binding, is no longer binding, and that resulted in the institution of these proceedings.
[2]
Relief claimed by the Camilleris
In their Amended Statement of Claim the Camilleris seek a declaration to the effect that the Deed and Release is valid and operative, and orders by way of specific performance of the Deed. Those orders include the transfer of Mr Kane's 80 per cent interest in the Dural land to the Camilleris, and that TED transfer to Mr Camilleri certain items of equipment referred to in the Deed. These are prayers 1 and 2 in the Statement of Claim.
In prayer 3 the Camilleris seek, "further or in the alternative", an order for an enquiry into the Camilleris' damages, and in prayer 4 they seek damages. In their Statement of Claim the Camilleris allege that they have suffered loss as a result of delay in carrying the provisions of the Deed into effect. In particular, they claim that they have lost the opportunity to sell the land for a higher price than it would fetch on the current market. If the Camilleris succeed in establishing that the Deed is valid and enforceable they will be entitled to recover such damages, in addition to the specific performance orders which they seek. But if the Deed is valid and enforceable but for some reason specific performance is not available then the Camilleris will be entitled to damages in lieu of specific performance, either at law or potentially under Lord Cairns Act (Supreme Court Act 1970 (NSW), s 68). I assume that prayer 3 is directed to the first type of damages claim, and prayer 4 is directed towards the second.
The Statement of Claim then goes on to claim relief in the alternative, based on the assumption that the Deed is not valid or enforceable. That relief is based on an allegation pleaded in the Statement of Claim that in or about November 2011 the Camilleris and Mr Kane entered into some sort of partnership or joint venture acquisition, renovation and then sale of the Dural property, with the proceeds to be divided among them in a particular fashion.
The prayers for relief seek declarations to this effect, together with orders imposing a constructive trust (or declaring a resulting trust) and for an accounting between the parties based on terms of the alleged agreement. The alternative prayers for relief also seek orders that TED repay an alleged loan and transfer to Mr Camilleri certain mechanical equipment referred to in the Deed, apparently on the basis that Mr Camilleri was, before the Deed was entered into, entitled to these items of equipment from TED.
Finally, there are prayers for relief for access to documents of TED and for orders that TED be wound up on various grounds, including on the just and equitable ground.
In their defence, Mr Kane and TED deny that the Deed is enforceable or binding upon them. They also resist the grant of specific performance. They also make an alternative claim of estoppel based on the conduct of the Camilleris and their legal advisers. The allegation is that, by reason of that conduct, the Camilleris are estopped from contending that the Deed is now valid and effective.
Mr Kane and TED also plead a defence to the alternative claims that are made in the Statement of Claim. They accept that a development agreement was made between the parties in or about November 2011, but allege that the terms were different from those alleged by the Camilleris. They have brought a cross-claim seeking declarations to that effect, and an accounts based on their version of the development agreement.
In effect, the Camilleris' application in their Notice of Motion is to have the Court order that their entitlement or otherwise to relief by way of specific performance, or other relief under the Deed, be dealt with as a preliminary question. As I understand it, to the extent that the Camilleris succeed in establishing that the Deed is valid and binding, then any damages for delay (or any damages which might be awarded if specific performance is not available for some reason) would be the subject of separate assessment. The form of the orders sought in the Notice of Motion does not exactly reflect this approach, but I propose to deal with the application on that basis and return to the precise form of any orders which may be made if it becomes necessary to do so in due course.
A separate hearing on this question would, of course, not only require the Court to deal with the validity of the Deed and the question whether there is any discretionary reason to refuse relief by way of specific performance, but also the estoppel defence, which has been put forward on behalf of Mr Kane and TED.
[3]
Whether a separate hearing should be granted?
Counsel for the Camilleris submitted that a separate hearing on these questions would have a relatively confined scope. Counsel submitted that the principal issues are legal ones. In particular, counsel submitted that the validity of the Deed depends essentially upon the legal construction which was placed on the terms of the Deed and the subsequent conduct between the parties, which are essentially matters of record.
Counsel acknowledged there might be some need to go into evidence from witnesses, perhaps for the purpose of establishing relevant parts of the factual matrix or to deal with the estoppel defence, but in counsel's submission, if that became necessary at all it would be a very limited exercise. Counsel suggested that it should be possible to complete the separate hearing in about one day. Counsel argued that, by contrast, the determination of the other issues raised by the alternative claims, defences and cross-claim would be lengthy and complicated. Resolution of those issues would involve exploring the factual circumstances in which the parties entered into in November 2011 and the subsequent development work undertaken by them pursuant to those arrangements.
Counsel also suggested that expert evidence might be required, in particular going to the valuation or costing of contributions made by the respective parties to the development. I am not sure of this latter point, because it seems to me that this might be dealt with by way of an accounting type procedure, rather than being dealt with by the Court itself, but I think counsel was correct to suggest that it would need to be done in some way at some point.
It is not possible to be precise about how long a determination of those alternative issues would take, but it appeared to be common ground between counsel that it would be several days at least of hearing time.
In my view it is clear that a trial on all issues would take significantly longer and cost significantly more than a trial of the separate hearing issue propounded by the Camilleris. I agree with the submission from counsel for the Camilleris that a trial on the validity and enforceability of the Deed will give rise largely to legal issues, and to the extent that it involves factual issues will only involve a limited set of facts surrounding entry into the Deed and the dealings between the parties concerning the execution and exchange of counterparts.
I think it is realistic to think that a hearing on these issues could be dealt with in one day, and possibly less. A separate hearing proposed by the Camilleris thus offers the prospect, if they are successful, of avoiding a considerable expenditure of time and money on preparing the alternative issues in the proceedings for trial, and conducting a trial on those issues, when they may never need to be determined.
In my view, a further factor in favour of the Camilleris' application is that their claim for specific performance of the Deed, like any claim for specific performance, is inherently urgent. Even if that hearing takes somewhat longer than one day there would still be a realistic prospect of dealing with it separately at some point in the next few months. A trial on all issues, which would probably require at least five days to be set aside, could not realistically happen this year.
I recently considered a separate hearing application in family provision proceedings in Choras v Farmakidis [2020] NSWSC 367. As I said in my judgment at [58], the pitfalls of separate hearings are well known, and the court approaches an application for such a hearing with caution, especially if it is contested.
One of the pitfalls to which I referred in Choras at [59] is that there may be problems with the formulation of the precise questions to be answered and the determination of the result which will follow, depending on how those questions are decided. This can create a particular difficulty where the separate questions involve facts that have to be assumed or agreed. It can also create a difficulty where the separate questions involve determining whether particular elements of a cause of action, or particular defences which have been pleaded to the cause of action, are made out. In such a case the parties may ultimately be left arguing afterwards about what the answers to the questions mean.
But as in Choras, there is no such difficulty in these proceedings. If the question is formulated in terms of the Camilleris' entitlement to relief based on the Deed then the Court will simply determine whether the Camilleris have any such entitlements. If they do, it will be unnecessary to go in to the alternative prayers for relief, which are quite independent. Any assessment of damages can take place in the ordinary way, after the transactions contemplated by the Deed have taken place (assuming that the Camilleris are found to be entitled to specific performance). If the Camilleris fail then their claims for relief based on the Deed will be dismissed. In either case the answer will be clear, and there will be no opportunity for further argument about the implications of the Court's decision.
As I said in Choras at [61], if there would be an overlap between the issues to be determined at the separate hearing and the issues to be determined at the main trial (if one eventuates) that can also be an objection to the making of a separate hearing order. Such an overlap raises the possibility of duplication and waste of costs. It can also mean that the Judge who decides the separate question cannot hear the trial (if one remains necessary).
As I have already pointed out, the claims based on the Deed and the alternative claims are quite distinct, both legally and factually. There is some common background but it is marginal. In my view a single hearing on all issues will only be slightly shorter than the aggregate hearing time if there were a separate hearing of the claims under the Deed and then those claims were unsuccessful and it was necessary to have a further final hearing on the alternative claims.
I accept that there is a possibility in the event of separate hearings that one or more of the witnesses might give evidence at both and there is a possibility that there could be challenges to credit at both trials. That possibility does not seem to me, having regard to the limited issues raised by the claims under the deed, to be a very likely one. In any event I think it unlikely to present any real procedural problem.
If I make an order for a separate hearing of the claims under the Deed, and the Camilleris fail so that a further hearing becomes necessary, then the judge who dealt with the separate hearing would not necessarily be allocated to conduct the further hearing. If a credit issue had arisen in the hearing of the claims under the Deed which made it inappropriate for the judge who heard that claim then to conduct the hearing on the alternative claims, that could readily be accommodated.
In the end, I think the resolution of the application is a matter of balancing the potential savings of time and costs to the parties if there is a separate hearing of the claims under the Deed and those claims succeed against the increased cumulative cost of two hearings if those claims were to fail. In my view the balance sufficiently favours a separate hearing to justify the making of such an order.
(Counsel addressed on the form of order and costs)
The orders of the Court are:
Order that there be a separate hearing as to whether the plaintiffs are entitled to the relief claimed in prayers 1 and 2 of their Amended Statement of Claim.
Order that that hearing take place before the hearing of any other claims for relief in the proceedings or any interlocutory steps associated with such claims for other relief.
The costs of the notice of motion filed 13 February 2020 be the plaintiffs' costs in the separate hearing.
I list the proceedings for directions before the Registrar in Equity on 6 May 2020.
[4]
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Decision last updated: 28 April 2020