Jericho Developments Pty Ltd v Garden Tower

Supreme Court of NSW|2006-06-21|Before: Gzell J

CITATION : Jericho Developments Pty Ltd v Garden Tower (NSW) Pty Ltd [2006] NSWSC 595

DECISION : Judgment for $35,810.14. Order defendant to direct solicitors to pay from moneys held in trust account under deed of release. Order the defendant to pay the plaintiff's costs.

CATCHWORDS : CONTRACTS - General Contractual Principles - Construction and Interpretation of Contracts - Whether plaintiff entitled to contributions under deed of release - Whether evidence of payment provided - Whether cause of action can be raised by amended summons - Whether defendant should be ordered to instruct its solicitor to pay plaintiff from moneys held in trust account under deed of release - Tacked on claim by amendment to summons for amount due under deed of settlement - No relationship to original claim for removal of caveat - Within the jurisdiction of Local Court - Such amendments to be discouraged - Consideration to transfer of proceedings to Local Court under the Civil Procedure Act 2005, s 146(1) or to deny plaintiff its costs

Supreme Court Rules 1970 LEGISLATION CITED : Uniform Civil Procedure Rules 2005 Civil Procedure Act 2005

Baldry v Jackson (1976) 2 NSWLR 415 CASES CITED : Global Custodians Ltd v Mesh [1999] NSWSC 624 ANZ Banking Group v Paul Stephen Fuller & Ors [2004] NSWSC 305

PARTIES : Jericho Development Pty Ltd - Plaintiff Garden Tower (NSW) Pty Ltd - Defendant

COUNSEL : Mr F Kalyk - Plaintiff A Gelbart - Defendant

SOLICITORS : Watson & Watson Solicitors Warren F Ball & Co Solicitors

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

3669/05 JERICHO DEVELOPMENTS PTY LTD v GARDEN TOWER (NSW) PTY LTD JUDGMENT

Nature of dispute 1 The plaintiff, Jericho Developments Pty Ltd, and the defendant, Garden Tower (NSW) Pty Ltd, entered into a deed on 5 May 1999 which purported to transfer from Jericho to Garden Tower, 5 of the 14 remaining units of which Jericho was registered proprietor at 11-27 Wyndham Street, Alexandria. 2 Disputes arose between the parties and proceedings were commenced in this Court. On 24 March 2003, Jericho, Garden Tower and other parties executed a deed of release that, amongst other things, provided that Jericho should execute transfers of the 5 units at stated values to parties notified by Garden Tower and Garden Tower released Jericho from all claims, present or future. The 5 units and their prices were listed in sch 1. 3 On 16 June 2005, Garden Tower placed a caveat on 4 of the other units registered to Jericho, claiming as its equitable interest a half interest in a joint venture with Jericho to construct the building. 4 On 27 June 2005, Jericho issued a summons out of this court claiming a declaration that Garden Tower had no interest in the 4 lots, an order for the removal of the caveat and damages. 5 On 30 June 2005, by consent, the court ordered Garden Tower to withdraw the caveat and pay Jericho's costs of its notice of motion. The balance of the proceedings was stood over. 6 On 14 July 2005, without objection, the court ordered Jericho to file and serve an amended summons, which it did on 12 August 2005. The amended summons sought an order that Garden Tower pay Jericho $48,422.78 pursuant to cl 7 of the deed of release together with damages and interest. Jericho no longer pursues its claim to interest. The deed of release 7 Clause 7 of the deed of release was in the following terms: "Garden Tower, Apanian and Harmouche agree to pay (a) to Jericho within 21 days of receipt of evidence of payment by Jericho: (i) any sums paid by Jericho between 5 May 1999 and the date of this Deed and any levis due to the date hereof on account strata levies including interest and other moneys paid or payable to the Owner's Corporation in relation to the units listed in Schedule 1 hereto. (ii) in relation to land tax, 5/14th of the land tax interest and penalties paid or payable by Jericho for land tax for the years ended 31st December 1999, 2000, 2001 and 2002. (b) All outstanding council and water rates in relation to the five units referred to in schedule 1 for the period from 5 May 1999 to the date of transfer of those units referred to in Schedule 1."

The enclosures to the letter of 27 March 2003 8 Jericho sent a letter of 27 March 2003 to the solicitors for Garden Tower who received it on 28 March 2003. It stated that strata levies of $14,699.40 had been paid on 18 April 2001, $9,456.50 had been paid on 10 May 2002 and $10,309.56 had been paid on 3 March 2003, a total of $34,465.46. 9 Garden Tower refused to pay this amount because it said the letter did not constitute evidence of payment by Jericho for the purposes of cl 7(a)(i) of the deed of release. 10 Jericho submitted that the statement in the letter was sufficient evidence of payment. I reject that submission. What was required by cl 7(a) of the deed of release was something more than a bare assertion by Jericho. It called for some documentation or other evidence of payment by Jericho. 11 The letter referred to attached invoices and evidence of receipt of payments. Warren Frazer Ball was the solicitor with the carriage of Garden Tower's defence. He swore an affidavit in which he acknowledged receipt of the letter but said that it did not contain any documents or invoices. 12 No notice had been served on Garden Tower requiring Mr Ball for cross-examination and he was not available for that purpose. 13 The letter was sent by George Esber, a director of Jericho. He was produced for cross-examination. He said he recalled including the enclosures with the letter of 27 March 2003 and it was not possible that he omitted to enclose them. A registered post receipt recorded that the posting was by way of a large envelope. 14 There was no response from Mr Ball on receipt of the letter on 28 March 2003 that the enclosures were missing. A notice to produce the original of the letter was not answered. Nor was there reference to missing enclosures in later correspondence. 15 It was put to Mr Esber in cross-examination that on 6 August 2004, Mr Ball wrote to Jericho's solicitors saying that he did not receive the letter of 27 March 2003, a proposition inconsistent with Mr Ball's affidavit. Mr Esber acknowledged that he was aware that the solicitors for Garden Tower had, at one stage, claimed that they had not received the letter. 16 I have had the advantage of observing Mr Esber in the witness box. I prefer his evidence to that of Mr Ball. It is, to a certain extent, corroborated by the need for a large envelope. It lacks the inconsistencies in the evidence adduced on behalf of Garden Tower on this issue. I find that the enclosures were sent to the solicitors for Garden Tower with the letter of 27 March 2006. The evidence of payment of $14,699.40 17 It was conceded that if I formed the view that the attachments accompanied the letter of 27 March 2003, Jericho had given evidence of payment of the strata levies paid on 10 May 2002 of $9,456.50 and of the strata levies paid on 3 March 2003 of $10,309.56. 18 It was claimed, however, that the enclosures did not establish the figure of $14,699.40 paid on 18 April 2001. It was conceded that the evidence of strata levy receipts tendered before me established that Jericho had paid this amount. It was argued, however, that no liability arose in Garden Tower prior to trial because of the failure to produce evidence of the payments with the letter of 27 March 2003. 19 The amount in question was made up of levies with respect to five units. The attachments included Local Court statements of liquidated claim with respect to the levies for each of those units together with garnishee orders in the amounts specified in the letter of 27 March 2003 that totalled $14,699.40. 20 In my view, the copies of the Local Court pleadings together with the garnishee orders constituted sufficient corroboration of the assertion that Jericho had paid the amounts in question to satisfy the requirement in cl 7(a)(i) of the deed of release. Those documents supported the statement that the amounts had been paid by Jericho and the inference to be drawn from them is that that assertion was correct. No cause of action 21 It was submitted that if evidence of the payment of the $14,699.40 had not been given to Garden Tower, the amended summons was invalid because there was no cause of action in existence when the amendment was made and, in any event, the amended summons related back to the original summons. No authority was cited for either proposition. 22 The Supreme Court Rules 1970, Pt 15 r 16 provided that a party might plead any matter notwithstanding that the matter had arisen after the commencement of the proceedings. In Baldry v Jackson (1976) 2 NSWLR 415, the Court of Appeal held that the word "matter" in that rule did not extend to a cause of action because the rules distinguished between a cause of action and a matter. The Court also held that an amendment, duly made, takes effect not from the date when the amendment is made, but from the date of the original document that it amends. The rule now finds its expression in the Uniform Civil Procedure Rules 2005, r 14.17. 23 However, the Supreme Court Rules 1970, Pt 20 r 1(3A) was inserted in 1995. Part 20 r 1(1) provided that the Court might, at any stage of any proceedings, on application by any party or of its own motion, order that any document in the proceedings be amended, or that any party have leave to amend any documents in the proceedings, in either case in such manner as the Court thought fit. Rule 1(3A) was in the following terms: "An order may be made, or leave may be granted, under subrule (1) notwithstanding that the effect of the amendment is, or would be, to add or substitute a cause of action arising after the commencement of the proceedings, but in such a case the date of commencement of the proceedings, so far as concerns that cause of action, shall, subject to rule 4, be the date on which the amendment is made."

Rule 4 applies where an application to amend is made after the expiry of a relevant period of limitation. 24 In Global Custodians Ltd v Mesh [1999] NSWSC 624, the plaintiff sought a declaration that it was entitled to inspect books of account relying upon what was referred to as the Speights' assignment which occurred before the commencement of the proceedings and the Greenlees' assignment which occurred after commencement but before the filing of an amended summons. The defendants submitted that the Greenlees' assignment did not support the relief sought. Young J observed that there was no doubt that the defendant's argument would have been correct before the introduction of the Supreme Court Rules 1970, Pt 20 r 1(3A). But his Honour did not have to decide the point as his judgment was based on the absence from the proceedings of a proper plaintiff. 25 The matter was considered by Master Malpass in ANZ Banking Group v Paul Stephen Fuller & Ors [2004] NSWSC 305. At [93] the Master said: "The inclusion of costs in the claim was also little argued. This submission was founded on the bare reference to the decision of Baldry v Jackson (1976) 2 NSWLR 415. It was not said that the plaintiff was otherwise disentitled to so claim this amount. The rules of the court have since been amended to address what was decided in that case. The present rules enable a party to rely on a cause of action arising after the commencement of proceedings (see Pt 20 r 1(3A)). I have not been addressed on any question of possible amendment. If there be a problem it may be capable of being cured by an appropriate amendment." 26 The rule now finds its expression in the Civil Procedure Act 2005, s 64(3). 27 In my view Master Malpass was correct in his conclusion that the provision overcomes both aspects of the decision in Baldry. 28 Even if, contrary to my finding, evidence of payment by Jericho was not given before 27 June 2005 but was given before the summons was amended on 12 August 2005, the amendment, contrary to the submission of Garden Tower, would have been good. In view of my finding that sufficient evidence of payment accompanied the letter of 27 March 2003, however, it is unnecessary for me to determine this issue. 29 In my view Jericho has established an entitlement to judgment for $34,465.46 paid by it in strata levies. Land tax 30 It was not in dispute that land tax assessments totalled $58,705.90 after instalments of $10,896.34 had been paid and that Garden Tower's obligation at 5/14th of the sum of these two amounts was $24,857.94. 31 Jericho conceded that $23,513.26 had been paid by Garden Tower and claimed the difference of $1,344.68. Garden Tower submitted that the concession was too low and Jericho had not established that it had paid more than its 9/14th share. 32 The land tax assessment was issued to Jericho. It was its obligation to pay the tax assessed. The purpose of the deed of release in cl 7(a)(ii) was for it to obtain contribution from Garden Tower at a specified rate of the tax, interest and penalties paid or payable by Jericho for land tax. 33 Evidence of the assessment was provided. Since no further penalties were claimed, it can be inferred that Jericho paid the balance of the land tax that was not paid by or on behalf of Garden Tower. No evidence was adduced on behalf of Garden Tower challenging the amount of the concession. 34 In my view, therefore, Jericho is entitled to an order for payment by Garden Tower of $1,344.68 with respect to land tax. Damages 35 The claim to damages was limited to costs incurred with respect to a sale that was not settled because the caveat prevented it. The costs were claimed in the amount of $1,100.00. Proof of this amount was set forth in a tax invoice addressed to ICN Properties Pty Ltd. While Mr Esber was also a director of that company, no evidence was adduced that Jericho had any responsibility with respect to the costs incurred by ICN. 36 The result is that Jericho has failed to establish any entitlement to damages.

Security 37 It was submitted that an order should be made directing Garden Tower to instruct its solicitors to pay to Jericho the amount of judgment to which it is entitled. It was submitted on behalf of Garden Tower that there was no security aspect to Jericho's claim and judgment in the ordinary form was appropriate. 38 Clause 14.3 of the deed of release provided for the retention by the solicitors for Garden Tower of $62,500.00 on account of any payment due to Jericho pursuant to the terms of the deed. Clause 14.3 was in the following terms: "The parties agree that of the sum of $125,000 held in the Warren F Ball Trust Account: (a) The sum of $62,500 is to be paid forthwith to Watson & Watson Trust Account in satisfaction of the payment of the costs referred to in clause 13(c). (b) The balance of $62,500 following the payment referred to in (a) held in the Warren Ball Trust Account is to be held firstly on account of any payment due to Jericho pursuant to the terms of this Deed and the balance for any payment due to other parties pursuant to clause 4 and clause 7(b)."

39 In my view it is appropriate for an order to be made directing Garden Tower to instruct its solicitors to pay from the $62,500.00 held in its trust account the amount of the judgment in favour of Jericho.

40 It was submitted on behalf of Garden Tower that because of the late tender of evidence an order for costs following the event should not be made and Jericho should be limited to costs of evidence filed in time. The submission was that the evidence would not have established an entitlement to the amount of $14,699.40. 41 For the reasons set forth above, that was not the case and I fail to see any reason for departing from the general rule that costs follow the event.

42 I will order Garden Tower to pay Jericho the sum of $35,810.14 pursuant to cl 7 of the deed of release. I will order Garden Tower to direct its solicitors to pay to Jericho from the $62,500.00 referred to in clause 14.3(b) of the deed of release the sum of $35,810.14. I will order Garden Tower to pay Jericho's costs. I direct the parties to bring in short minutes of orders accordingly. Amending equity proceedings 43 It will be apparent that the claim raised by the amended summons had nothing to do with the original relief for the removal of the caveat. The amendment raised a simple claim in contract in amounts appropriate to the Local Court. The tacking on of such claims to equity proceedings is to be discouraged. It should not happen again. 44 If it does, this Court may well give consideration to transferring the matter to the Local Court under the Civil Procedure Act 2005, s 146(1) or to penalising a plaintiff who does so by refusing an order for costs.

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