Jun International Property Pty Ltd v Australian Brothers Group Pty Ltd

Supreme Court of NSW|2021-12-10|Before: Parker J

Judgment

These proceedings arise out of a property development joint venture. The development has been completed and the property sold. Pursuant to orders made by the Court, a sum of $450,000, part of the proceeds of sale, is held by the defendants' solicitors in a trust account. The basic dispute between the parties is how that money is to be divided between them.
The joint venture participants were the plaintiff, Jun International Property Pty Limited ("JIP"), as to 35 per cent, and the first defendant, Australian Brothers Group Pty Limited ("ABG"), as to 65 per cent. The second defendant, ABG Group Pty Limited, was the manager of the joint venture. It was a party to the joint venture agreement but appears to have had no relevant financial interest in the joint venture itself. For convenience I will ignore it in the rest of this judgment.
There has already been an expert determination on some of the accounting issues between the parties. The determination was delivered in June last year.
There are competing applications by the parties before the Court. Initially the contest was about the effect of the expert determination on the parties' entitlements to the money held in trust. A notice of motion was filed on behalf of ABG seeking for $144,000 to be paid out to JIP and the balance to ABG, with the proceedings being dismissed. The response was a notice of motion filed on behalf of JIP seeking payment of $264,000. That notice of motion has effectively been superseded by a second notice of motion filed for JIP in January this year. The second motion is for leave to amend JIP's summons and for the $450,000 to remain in trust pending a further expert determination.

Cross-applications for release of monies held in trust

Where, in the course of proceedings, monies are paid into court (or, as here, ordered to be held on trust until further order), an order that monies be paid out to one or other of the parties may at first glance appear to be a substantive one. But I think that, generally speaking, is not strictly correct. The order for payment out merely reflects the parties' substantive rights.
In the usual case, those substantive rights are determined by the Court in the proceedings themselves. But the determination may be made by some other legal procedure. For instance, in Eden King Lawyers Pty Ltd v Makari [2022] NSWSC 296, monies were paid into court on account of fees claimed by a solicitor and the amount due was fixed by way of a separate assessment.
In the present case, the determination of the amount due likewise has not been, and will not be, undertaken by the Court. The effect of cl 20 of the JVA is that it is not open for the Court to do so; the amount owing must be fixed by agreement between the parties or by expert determination.
The critical question in the present case is therefore what the parties' rights are under the JVA, including any expert determination which has taken place in accordance with the terms of the JVA. It was common ground that cl 12 of the JVA requires an account to be taken, supplemented, in the case of dispute, with any necessary expert determination. Such an account takes into consideration the amounts already contributed by the parties and, in the usual way, results in a single amount either payable from JIP to ABG, or from ABG to JIP.
In the present case this final figure has not yet been determined for the purpose of cl 12. It is contended expressly on behalf of JIP that further accounting must be undertaken, both for the periods before and after 25 September 2019. ABG's position is that it is not open to JIP to go into transactions occurring before 25 September 2019, which were the subject of the audit. ABG's contention is that the determination prevents those matters from being reopened, whether expressly decided by Mr Peisley or not. But ABG's own case is that the figure resulting from Mr Peisley's determination requires adjustment to take account of sale proceeds shortfalls after 25 September 2019.
Thus on both parties' cases, Mr Peisley's determination is not a final determination of the amount owned under cl 12. It is not necessary to consider whether it is a final determination for transactions up to that date, and, whether if so, one or the other party could be required to make a payment based on the figure struck as at that date (cf Milevski v Paltos [2022] NSWSC 261 at [219]-[220]). Neither party invited me to consider that possibility.
The fact that the parties' ultimate entitlement or liability is determined as a single figure on the completion of all accounting processes does not, of course, mean that the parties cannot stipulate for payment of a sum of money to be paid on account. If they do so stipulate then the obligation will be enforceable, and the payment will then be taken into account in determining the amount ultimately due. This procedure is, of course, a familiar one in building contracts and is the foundation for the statutory procedure laid down in the Building and Construction Industry Security of Payment Act 1999. But neither party in the present case suggested that any provision of the JVA now requires any payment on account to be made by the other party, or that there has been any ad hoc agreement to this effect.
In the absence of agreement between the parties, this presented a difficulty for each of them in pursuing their applications to have monies paid out. The parties' final entitlements have not been determined. It is therefore not open to the Court to make orders for payment reflecting those entitlements.
In some cases it may be sufficiently clear that, even though the parties' final entitlements have not been determined, there is a sum of money to which one or other of the parties has no viable claim. Or the balance of convenience may dictate that monies be released to one of the parties despite the existence of a competing claim by the other party. But that was not suggested in this case. In the end each party contended that the whole sum should be retained in court, and appropriate undertakings have now been given for the payment of interest which will protect the parties to the extent that they are ultimately found to be entitled to the trust monies. In these circumstances, there is no good reason to make any order for payment out of any sum at this stage.

Amendment of summons

Counsel for ABG contended that the application to amend the summons should be refused. Counsel relied on sub-cl 20 of the JVA, which provides: A party must not commence or maintain any action, either legal or by arbitration, in relation to any dispute which arises in relation to this agreement unless that dispute has first been referred for determination under this clause 20.
The effect of cl 20(j) was, in counsel's submission, that fresh proceedings could not be brought until a determination had been made. The existing proceedings were spent. They should be dismissed.
As I have already stated, it was common ground between the parties that there was no entitlement to payment under cl 12 until the account was completed. To that extent, it would obviously not be open to the plaintiff to bring proceedings by way of enforcement of any expert determination until the determination had taken place. But it does not follow that there are no rights at all which are justiciable in the Court until a final figure is reached under cl 12.
The JVA does not expressly confer on JIP any right of security over the property which was the subject of the development. But a joint venture agreement is analogous with a partnership agreement. In equity, upon the termination of a partnership each partner retains a right to require the partnership property to be applied in satisfaction of the partnership liabilities. This right is now found in s 39 of the Partnership Act 1892 but that Act merely codified the pre-existing state of the law.
It seems to me that, by analogy, a joint venturer must have an equivalent right attaching to the joint venture property upon completion of the business of the joint venture, which lasts until the winding up of the joint venture (including any necessary accounting) has been completed. Neither counsel in the present case contended to the contrary. That right now attaches to the $450,000 as the traceable product of the realisation of unit 36.
It is not necessary for present purposes to determine whether that proprietary right is a caveatable one. In my view, even if it is not caveatable, it is sufficient to justify the continuation of the order for the $450,000 to be held in trust until the parties' final entitlements under cl 12 have been determined. That order is effectively an interlocutory injunction and the Court's power to make the order initially was never questioned.
Counsel for ABG may be correct in submitting that the claims raised on 10 December by counsel for JIP were belated. But there is no point in refusing the amendment and dismissing the proceedings if that will only result in JIP bringing fresh proceedings and making a fresh application to have ABG's solicitors continue to hold the $450,000 in trust until the parties' rights are finally determined. Clearly the preferable course is to permit the amendment and address the complaint by counsel for ABG about belatedness under the heading of costs, to which I now turn.

Costs

Counsel for JIP opposed any order as to costs. Counsel submitted that JIP, although not completely successful in the expert determination by Mr Peisley, nevertheless established an entitlement to a significant sum of money. Counsel submitted that JIP should have its costs; alternatively, costs should be determined at the end of the proceedings.
I have already concluded that JIP had an interest in the property the subject of the joint venture which JIP was entitled to protect by way of interlocutory injunction pending the determination of the amount ultimately due. That interest existed in April 2020 when the proceedings were commenced, and it continues to exist.
But the difficulty for JIP is the offer made by ABG's solicitors before the proceedings were commenced. Had that offer been accepted, JIP would have obtained the setting aside of the proceeds of unit 36 until the dispute between the parties was resolved. Although the parties' dispute is actually wider than that which was the subject of debate in March 2020, that has only been discovered subsequently. At the time the solicitors for JIP apparently accepted that the only dispute between the parties concerned the sum of $367,000 which was the subject of their letter of 11 March.
It is true that in the summons JIP sought further relief extending to the other unsold units. But that was not pressed and no such relief has been obtained. In substance, JIP obtained nothing more from the proceedings, at least up until the second notice of dispute was filed, which had not previously been offered by ABG's solicitors in their letter of 17 March.
For these reasons, I uphold ABG's claim for costs. I will order JIP to pay ABG's costs of the proceedings up to the service of the second notice of dispute on 31 January this year. Those costs will be assessable and payable forthwith to reflect the fact that the claim under the second notice of dispute is quite separate from the claim originally pursued by JIP. Costs incurred after 31 January will be the parties' costs in the continued proceedings on the amended summons.

Orders

The orders of the Court are: 1. order that the defendants' notice of motion filed 23 September 2021 be dismissed. 2. order that the plaintiff's notice of motion filed 16 November 2021 be dismissed. 3. Order, nunc pro tunc, that the plaintiff have leave to amend its summons in accordance with the amended summons dated 3 February 2022 and filed with the Court in error on that day. 4. Order that the plaintiff pay the defendants' costs of the proceedings, including the proceedings on the defendants' notice of motion filed 23 September 2021 and the plaintiff's notice of motion filed 16 November 2021, up to 31 January 2022, and that those costs be assessable and payable forthwith. 5. Order that the proceedings be listed for directions before the Registrar in Equity on a date to be arranged by the parties with my Associate.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 30 May 2022

At a glance

Court

Decision date

Before

Source

Judgment (7 paragraphs)

Parties

Cases Cited (2)