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William John Groves v Matt O'Connor & Associates Pty Ltd as trustee for the Matt O'Connor Family Trust - [2015] NSWSC 664 - NSWSC 2014 case summary — Zoe
These reasons decide the second round of litigation in this Court between the parties to the 2009 sale of a suburban accounting practice for $267,500. Continuing mutual distrust and failures to communicate largely account for the parties' combative responses to an otherwise unremarkable business transaction.
Introduction
In May 2009 William Groves and Mathew O'Connor were both accountants. That month Mr Groves sold an accounting practice he conducted in the Sydney suburb of Bella Vista ("the practice") to Mr O'Connor's family company, Matt O'Connor & Associates Pty Ltd (Associates). The sale led in late 2011 to Mr Groves commencing the present proceedings as plaintiff against Mr O'Connor and Associates ("the O'Connor parties") in the Equity Division of this Court.
The parties settled this first round of the litigation ("the March 2013 settlement") by deed dated 1 March 2013 ("the Deed"). At the same time they requested this Court to make consent orders and to note their agreement concluding the litigation. Justice Rein made the requested orders and notations on 4 March 2013 ("the 4 March 2013 orders").
But the dispute revived. Mr Groves now contends on his motion filed four months later, in July 2013 that the defendants, the O'Connor parties, did not perform the terms of the Deed and that he is now entitled to summary judgment against them under the terms of the Deed. The O'Connor parties dispute his contentions. The allegations on Mr Groves' motion are sufficiently complex that for convenience they were pleaded in Points of Claim and Points of Defence.
The 1 March 2013 Deed provided that the O'Connor parties would: (1) pay Mr Groves $100,000; and (2) deliver the goodwill of and transfer the records relating to certain clients of the practice. The Deed, clause 16 provided that in the event that these obligations were not met by the Deed's specified completion date, Mr Groves could apply for summary judgment for an agreed figure of $399,500. When Court orders were made giving effect to the settlement on 4 March 2013, the obligation to pay that is the subject of clause 16 was described in slightly different and less absolute terms: that the sum of $399,500 would have deducted from it (a) any part of the $100,000 Settlement Amount that had been paid, and (b) the "prescribed value" agreed by the parties under the Deed as attributed to each of the clients whose goodwill and records were to be transferred to Mr Groves in accordance with the Deed.
At what the O'Connor parties claim was completion on 1 May 2013 Mr O'Connor provided Mr Groves with a computer hard drive and various hard copy files in apparent conformity with the O'Connor parties' obligations under the Deed. Mr Groves anticipated on the completion date that certain client documents would be included with the electronic files delivered to him. He claims in these proceedings that his analysis after 1 May 2013 failed to locate these client documents either in electronic or paper form.
The parties' present dispute centred on the legal implications of two main factual questions: (1) were the full client documents that the Deed required the O'Connor parties to transfer to Mr Groves missing from the files the O'Connor parties actually provided Mr Groves on 1 May 2013; and (2) were the electronic files that were transferred, delivered to Mr Groves that day in an unreadable or unusable format?
Mr A. D'Arville of counsel appeared for Mr Groves and Mrs J. Whittaker of counsel for the O'Connor parties. The evidence in the proceedings occupied five days on 4, 5, 6, 11, and 12 August 2014. Oral closing submissions took place on 14 October 2014. Between the original May 2009 sale and this judgment Mr O'Connor left full time practice as an accountant and was admitted to practice as a solicitor and later as a barrister.
[2]
The Issues Reduce
On the third day of the trial, 6 August 2014, the Court informed the parties that they appeared only to be indirectly addressing the real issues in dispute. The issues they had up until then been contesting to a large extent involved a trial as to credit as to what each side had deposed was on the databases of information delivered on 1 May 2013 but without either party objectively testing the actual contents of the databases themselves.
To the Court this seemed a pointless exercise. The databases were available and with little extra work could have their contents directly verified. Why make findings about contentious data files merely on the basis of credibility of witnesses? The Court gave directions that day for the parties to exchange further information so they could directly verify what Mr O'Connor had, or had not, provided to Mr Groves on 1 May 2013 ("the exchange directions").
The exchange directions soon reduced the issues in dispute. As a result of inspections following the exchange directions Mr Groves accepted that many of the documents his motion had initially alleged the O'Connor parties had not given to him, had actually been provided. And the parties resolved their differences in respect of several of the disputed categories of files Mr Groves originally claimed not to have been delivered at completion: (1) certain signed client tax returns (referred to in throughout the case as "Issue 3(a)"); (2) the contact details of certain clients ("Issue 3(b)"); and (3) documents evidencing the post-sale notification of certain clients ("Issue 4(a)"). The costs consequences of these abandoned and otherwise resolved claims may have to be separately resolved after these reasons are available to the parties.
But apart from some general issues, four specific issues remain in dispute. Three of these specific issues relate to the alleged non-provision of client documents. The other specific issue is in relation to the inclusion of a non-current client within the March 2013 settlement. In relation to the alleged non-provision of client documents, Mr Groves maintained that some files were simply missing. He accepted that other files had been provided but claimed their electronic format made them unreadable and unusable.
The first of the four remaining specific issues (called in these proceedings "Issues 3(c) and 3(d)") involved the alleged non-transfer of what was called "WIP/Financial Information/Workflow Information" for particular clients ("the Workflow Files"). Mr Groves sought judgment against the O'Connor parties in the sum of $299,500 for the Workflow Files he alleged were still missing. The Deed and Rein J's Consent Orders had provided that certain amounts were the 'prescribed value' that should be attributed to particular clients according to an agreed formula, if summary judgment were to be entered. The $299,500 was the maximum claimable under the Deed for the alleged non-transfer of these Workflow Files.
The second of the remaining specific issues (called "Issue 3(e)") involved email records. Mr Groves accepts that email files generally were provided to him on 1 May 2013. But he contends that 161 emails from the period June/July 2012 were absent from those files. He seeks judgment for $71,547 for this category, again based on the agreed 'prescribed value' that was attributed to the clients, the subject of these missing emails.
The third remaining specific issue (called "Issue 3(g)") involved allegedly missing statutory records and financial statements for some 11 clients. Mr Groves seeks judgment for $33,082 based on the "prescribed value" that the agreed formula attributed to the clients related to these missing records.
The fourth remaining specific issue (called "Issue 4(b)") is of quite a different character. On this issue Mr Groves alleges that one of the selected clients under the Deed, Muscat Industries Pty Ltd ("Muscat") was a non-current client at the time of completion on 1 May. Mr Groves contends that as a result he is entitled to judgment for $3,392, being Muscat's prescribed value under the Deed.
The Court's findings about the factual background for deciding the remaining specific issues can conveniently be divided into three periods: (a) from the first sale of the practice to the March 2013 settlement; (b) from the March 2013 Settlement to 1 May Completion; and (c) from 1 May Completion until the filing of Mr Groves' present motion. What follows are the Court's findings covering the period prior to filing of the present motion.
1. (a) Sale of a Practice, the Litigation and the March 2013 Settlement
Until May 2009 Groves owned and administered the practice. That month Mr Groves sold the practice to Associates, which in a parallel agreement undertook to employ Mr Groves in the practice after the sale. Under their May 2009 sale contract Mr O'Connor guaranteed the performance of Associates' obligations as purchaser and as Mr Groves' employer.
Disputes arose between the parties as to their respective rights and obligations under the sale and purchase agreement and under the parallel employment agreement. In response Mr Groves initiated these proceedings by statement of claim on 22 June 2011. Mr Groves' claim in the proceedings was amended in early 2012 and Mr O'Connor then filed a cross-claim.
The claim and cross claim were set down for hearing before Rein J between 26 February 2013 and 1 March 2013.
As a result of their out-of-court negotiations the parties settled their claims on 1 March 2013 and by executing the Deed on that date. The Deed had the effect on its terms of unwinding much of the original sale and transferring client documents and goodwill back to Mr Groves.
The general scheme of the Deed was to facilitate the transfer of various clients of Associates back to Mr Groves to enable him to provide accounting services to them and thereby to earn accounting fees. The Deed gave Mr Groves the opportunity to choose these clients from a list that Associates was to provide. Once Mr Groves had made his choice, his chosen clients were defined under the Deed as the "Selected Clients".
The Deed was reasonably prescriptive about the transfer of client information from the O'Connor parties to Mr Groves. Under the Deed Mr O'Connor was referred to as "O'Connor", Associates as "the Company" and Mr Groves as "Groves".
The Deed's definitions of "Clients", "Records", "Selected Clients" and "Selection Method" play an important role in ascertaining the parties' obligations on the proper construction of the Deed. The definition of "Selection Method" is particularly important because in sub-clause (e) it contains in turn the definition of the "Prescribed Value" of a client. These definitions under the Deed are as follows:
"'Clients' means all of the Entities who at the date of this Deed are clients of the Practice apart from the Entities set out or referred to in the First Schedule to this Deed.
'Records' means originals and/or copies, in machine readable, printed, electronic or any other form, of all books, files, reports, records, correspondence, documents and other materials relating to each Selected Client in the Practice including time sheets and invoices rendered to each Selected Client including without limitation:
(a) all statutory records, documents and Deeds in the Company's possession relating to the Selected Client;
(b) all of the Selected Client's files, however kept by the Company;
(c) all archive files relating to the Selected Client; and
(d) all Work in Progress data and time entry data in relation to the Selected Clients, however kept by the Company.
'Selected Clients' means such of the Clients as are selected pursuant to the
Selection Method.
'Selection Method' means the following method:
(a) Within six (6) days of the date of this Deed the Company must give to
Groves a list of the Clients as at 1 March 2013. The list shall contain the
following particulars of each Client:
(i) full name;
(ii) suburb;
(iii) client code; and
(iv) the amount invoiced to the Client in the year ending 30 June 2012 for Accounting Work performed by the Company for the Client;
(b) The aggregate of Prescribed Values of the Clients listed must be no less than $299,500 inclusive of GST;
(c) The Company, up to the Completion Date, must give Groves reasonable access to the records of the Practice in respect of the Clients of the Practice listed in the Schedules to this Deed,
(d) Within 12 days of the date of this Deed, Groves must give notice to the Company of such Clients as Groves selects to be "Selected Clients". Groves may select such Clients as he in his discretion determines provided that Groves may not select Clients who together in aggregate have a Prescribed Value of in excess of $299,500 inclusive of GST plus or minus $2,000;
(e) For the purpose of this Deed the "Prescribed Value" of a Client shall be that amount equal to the amount inclusive of GST invoiced by the Company to the relevant Client for the financial year ending 30 June 2012 for Accounting Work; and
(f) In the event that Groves fails to make such a selection of Clients within 12 days of the date of this Deed of Clients whose Prescribed Value does not, in aggregate, total $299,500 inclusive of GST plus or minus $2,000 or Groves selects Clients whose Prescribed Value inclusive of GST in aggregate exceeds $299,500 inclusive of GST plus or minus $2,000 then the Company shall be entitled to specify, such further Clients as are required, together with the Clients selected by Groves, to ensure the Clients have a Prescribed Value in aggregate of $299,500 inclusive of GST plus or minus $2,000 or where the aggregate of the Prescribed Values of the Clients selected by Groves exceeds $299,500 inclusive of GST plus or minus $2,000 the Company may nominate such Clients which are not to comprise the Selected Clients such that the aggregate of the Prescribed Values of the Clients selected by Groves shall not exceed $299,500 inclusive of GST plus or minus $2,000"
By Deed, clause 4 the parties acknowledged and agreed that the Deed's recitals were correct. Those recitals were as follows:
"A. O'Connor is a director, and is the secretary, of the Company and is an employee of the Company.
B. The Company has agreed to convey and transfer the Selected Clients and the Goodwill to Groves.
C. O'Connor has agreed to guarantee the performance of the Company's covenants under this Deed.
D. The O'Connor Parties have agreed to release Groves from any Claims on the terms and conditions of this Deed.
E. Groves has agreed to release the O'Connor Parties from any Claims on the terms and conditions of this Deed."
Associates warranted that it entered the Deed as trustee of the O'Connor Family Trust: Clause 3. The O'Connor parties each guaranteed the performance of one another's obligations under the Deed, clauses 5 and 6.
By Deed, clause 7 the O'Connor parties gave a series of warranties concerning the Selected Clients, as defined and accepted that their respective rights and obligations were free of rights of set off as follows:
"7. The O'Connor Parties each acknowledge that their respective covenants and obligations under this Deed shall be free from any right of set-off, shall be absolute, unconditional and irrevocable and shall not be affected by any default, event of force majeure or other event or circumstances which otherwise would or might at law terminate or permit termination of their obligations under this Deed or any of its provisions, or excuse compliance with or performance of, or provide a defence to any proceedings to enforce, the obligations of the Company or O'Connor under this Deed."
The O'Connor parties submitted to a restraint, as follows, to preserve the Goodwill to be delivered under the Deed to Mr Groves:
"Restraint
8. The Company and O'Connor jointly and severally promise, agree and covenant with Groves that neither the Company nor O'Connor will engage in the Restrained Activities after the Determined Date as herein defined (if it occurs). After the Determined Date (if it occurs) the O'Connor Parties will not do anything which will or may derogate from the benefit Groves is to obtain from the Goodwill, the Selected Clients and the Records conveyed to him under this Deed."
Deed, clause 9 provides for the Sale and for warranties and special arrangements in respect of the Selected Clients. Importantly, in this clause the O'Connor parties gave warranties as to the records and clients of the practice. But clause 9 also defined the obligations as to what was to occur on the Completion date, "Groves will…take and acquire all of the Company's right title and interest whatsoever in the Goodwill, the Selected Clients, and the Records. The full text of clause 9 provides as follows:
"9. The O'Connor Parties warrant the Selected Clients are Clients of the Company and the Records are the property of the Company and/or are held by the Company on behalf of Clients and the O'Connor Parties have the right to deal with the Records in the manner set out in this Deed. The Company shall on the Completion Date pay the Settlement Amount and convey and transfer to Groves, and Groves will on the Completion Date take and acquire all of the Company's right, title and interest whatsoever in the Goodwill, the Selected Clients and the Records"
The Deed permitted Mr O'Connor to contact the Selected Clients for limited purposes such as billing and collecting payment of bills after before the Determined Date (a date explained in clause 14): clause 10. Perhaps reflective of the bitterness of the existing litigation between them the Deed, clause 12 contained mutual obligations not to denigrate the other.
Deed, clause 11 provided for Associates' right, title and interest in the Goodwill, the Selected Clients and the Records to be encumbrance-free on the "Determined Date" (a date explained in clause 14) as follows:
"11. The O'Connor Parties warrant that on the Determined Date the Company's right, title and interest in the Goodwill, the Selected Clients, the Records shall not be Encumbered in any manner whatsoever and without limitation will on the Determined Date deliver to Groves such documents as are required to cause the removal of the interests recorded on the Personal Properties Securities Register against the Selected Clients and the Records such that the Selected Clients and the Records will not be Encumbered."
The Deed provided (in clauses 13 and 14) by reference to the "Determined Date" for the proper transition of Selected Clients to Mr Groves and for a release. The Determined Date, defined in clause 14, becomes a watershed moment for the parties' obligations under clauses 13 and 14. It starts the clock for the O'Connor parties' best endeavours obligations to transition the Selected Clients from the Practice to Groves (clause 13):
"13. For the period beginning on the Determined Date and ending 90 days after the Determined Date, the O'Connor Parties must use their best endeavours at no cost to Groves to ensure so far as possible a proper transition of the Selected Clients from (he Practice to Groves and to ensure so far as possible that the Selected Clients as and from the Determined Date become Clients of Groves and without limitation do such things as are required:
(a) to facilitate a smooth handover and transition of the Accounting Work of each Selected Client from the O'Connor Parties to Groves as soon as reasonably practicable and as and when requested by Groves; and
(b) to, as and when requested by Groves, attend meetings with the Selected Clients as and when reasonably required by Groves to do so and send email or circular letters approved by Groves to the Selected Clients with Groves as Groves may reasonably request from time to time."
The "Determined Date" first appears defined in Deed, clause 14. It is nothing more than the date on which all the necessary acts for completion have actually occurred, whether or not on the date of Completion, and is contrasted with the date that judgment is entered under clause 16 ("the Judgment Date"), on the assumption that not all the individual requirements for completion have been fulfilled and that a clause 16 judgment must be entered instead. Clause 14 provides in full for Grove's releases as follows:
"Release
14. The Company is to deliver the Records of the Selected Clients (other than the archive files relating to the Selected Clients), transfer the Goodwill and the Selected Clients, and pay the Settlement Amount to Groves on the Completion Date. On the later of the date on which the Company delivers the Records of the Selected Clients and transfers the Goodwill and the Selected Clients to Groves and pays the Settlement Amount to Groves (the 'Determined Date') or the date on which judgment is entered in accordance with clause 16 (the 'Judgment Date'), Groves irrevocably and unconditionally releases and discharges the O'Connor Parties from any present, contingent or future Claims which Groves may have against the O'Connor Parties arising from, or in connection with the Issues in Dispute, whether directly or indirectly."
By clause 15 on the Determined Date or the Judgment Date, "whichever occurs", the O'Connor parties agree to the unconditional release of Groves from the O'Connor parties' future claims. Clause 15, which is reproduced below, is showing that O'Connor's releases are also contingent on the occurring of either the Determined Date or the Judgment Date:
"15. Upon the Determined Date or the Judgment Date, whichever occurs, the O'Connor Parties irrevocably and unconditionally agree to release and discharge Groves from any present, contingent or future Claims which the O'Connor Parties may have against Groves arising from, or in connection with the Issues in Dispute, whether directly or indirectly."
The Deed provided (in clause 16) a reasonably simple obligation for the entry of a judgment against the O'Connor parties in certain circumstances.
"16. In the event the Company does not deliver the Records of the Selected Clients and transfer the Goodwill and the Selected Clients to Groves and pay the Settlement Amount to Groves on or before 1 May 2013 (time of the essence) Groves may have judgment entered against the O'Connor Parties for $399,500, but not before 9 May 2013, and in the event that judgment is so entered, the O'Connor Parties' obligations under clauses 9 and 14 are thereby discharged."
The Deed provided (in clauses 18 and 19) for a bar to proceedings after completion.
"Bar to Proceedings
18. After the Determined Date or the Judgment Date (whichever occurs) this Deed may be pleaded as a full and complete defence by the O'Connor Parties to any Claims brought by Groves that arises out of the facts, matters and circumstances referred to in the Issues in Dispute.
19. After the Determined Date or the Judgment Date (whichever occurs) this Deed may be pleaded as a full and complete defence by Groves to any Claims brought by the O'Connor Parties that arise out of the facts, matters and circumstances referred to in the Issues in Dispute."
The Deed made provision (in clause 21) for further assurances.
"Further Assurances
21. Each party must take all necessary steps, execute all documents and do all other acts and things as may be reasonably requests in writing by another party to give effect of the provisions of this Deed, to be carried out as expeditiously as possible following the relevant request."
In clause 28 the Deed provided for the incidence of GST on the sum of $299,500 referred to elsewhere in the Deed as follows:
"GST
28. As the Deed effects a transfer of property for consideration despite the fact that consideration does not involve the payment of money by Groves for the transfer of property. The Sum of $299,500 referred to in this Deed is inclusive of GST. As the Deed effects a transfer of property for consideration despite the fact that consideration does not include the payment of money by Groves for the transfer of property the Company must deliver to Groves a tax invoice showing as the consideration for the transfer that amount equal to the aggregate of the Prescribed Values of the Selected Clients at the time the O'Connor Parties convey the items under clause 9."
Mr Groves was not able to assign the benefit of the Deed before the Determined Date: clause 29.
The First Schedule of the Deed identifies and gives content to the "Prescribed Value" of each client as defined earlier in the Deed under the definition of "Selection Method", sub-paragraph (e), being the amount inclusive of GST invoiced by Associates to each client for accounting work for the financial year ending 30 June 2012 (FY12). Schedule 1 sets out in detail the amount that Associates invoiced to each listed client in FY12, excluded from the sale: see the definition of "clients".
[3]
The 4 March 2013 Orders and Notation
Once the Deed was signed, the parties approached Rein J on 4 March. They submitted agreed orders to his Honour at a short hearing that day. The 4 March 2013 orders are shown in the Court's record as having been entered on 5 March 2013. These orders first provided in order 1, "The proceedings (consisting of the plaintiff's claim and the cross claim) are dismissed". Then in order 2 they provided "No order as to costs." This dealt with the proceedings. The parties then recorded an agreement in which they added to the Deed a procedural regime, overlapping with Deed clause 16, for the entry of judgment should the O'Connor parties fail to perform their obligations under the Deed. The Court made the orders, which the Court recorded, as follows:
"The Court NOTES the parties' agreement that:
3. In accordance with the Deed of Settlement dated 1 March 2013 (the 'Deed'), if the first and/or second defendants fail to perform their obligations under the Deed and, thereby, fail by 1 May 2013 to pay the Settlement Amount and convey and transfer to the Plaintiff the Goodwill, the Selected Clients and the Records (which terms are defined by the Deed), then on the plaintiff's application, Order 1 above will be set aside and, in lieu thereof there will be judgment in favour of the plaintiff against the first and second defendants for the sum of $399,500 (less any amount of the Settlement Amount paid and the Prescribed Value of Selected Clients conveyed and transferred by 1 May 2013).
4. That the plaintiff may only apply for the judgment referred to in paragraph 3 above on 2 days' notice after 1 May 2013 but such application must be made before 30 June 2013."
In the general issues in the proceedings Groves contends, and the O'Connor parties dispute, that the notations made in the 4 March 2013 orders have an operative effect on the parties' rights and obligations, including their rights and obligations under the Deed.
A transcript of the hearing before Rein J on 4 March 2013 was available (Exhibit G). The transcript of Monday 4 March 2013 shows that the orders finally made were not entirely by consent. Rein J assisted the parties in resolving some of their differences. The parties reported to his Honour that the Deed had been "agreed and signed on Friday night". But Mr Ilkovski for Mr Groves explained "We are here to hand-up terms. There is a just minor difference between us as to what those terms might be. Unfortunately there are competing versions." Both parties seemed to be looking to Rein J to resolve the difference, which his Honour did.
There was no disagreement between the parties about what became orders 1, 2 and 3 of the 4 March 2013 orders. Mr Reuben for Mr O'Connor said to the Court that there had been some changes to the drafting of (then proposed) order 3, but Mr Reuben did not appear to be disagreeing with any of these changes. Rather Mr Reuben explained to Rein J just how he thought (then proposed) order 3 worked, to make it clear that "in respect of any judgment that is to be entered into (sic) the event of default, that it will only apply less any amount of the settlement amount paid in the prescribed value of clients conveyed". He went on further to explain "we don't want to have any ambiguity in terms of what constitutes an event of default". And he further said "we think that they ought to be bound by that clause and I don't think they have a problem with it". Nothing was said on the other side which indicates that Mr Groves did "have a problem with it". The explanation given at the time seems to have been that order 3 was designed to reduce possible ambiguity in the operation of Deed clause 16.
Proposed order 4 received some attention on 4 March 2013. In the form in which it was handed up to his Honour, the date by which summary judgment had to be applied for was blank. There was a difference of view between the parties about what date that should be inserted in this order. The O'Connor parties wanted 30 May inserted. His Honour decided upon 30 June, as the date to be inserted into the final orders, on the basis that this was more realistic timeframe, one which would give the parties almost 8 weeks to sort out their remaining issues.
(b) From the March 2013 Deed to Completion on 1 May 2013
On 5 March 2013, and within the six days allowed under the definition of "Selection Method" in the Deed, clause 1, the O'Connor parties gave Mr Groves a list of clients of the practice as at 1 March 2013 for Mr Groves to choose from, showing each client's "Prescribed Value", namely the amount Associates invoiced to the client for accounting work for FY12. The aggregate of the Prescribed Values that the O'Connor parties supplied in the 5 March List was no less than the $299,500 that "Selection Method" paragraph (b) required.
The selection process contemplated by the Deed proceeded fairly cooperatively. On 5 March 2013 Associates provided Mr Groves with a list of clients to make his choice. Mr O'Connor's email to Mr Groves late on 5 March 2013 explains how he had collected for selection the list of clients who had previously been Mr Groves's clients. Mr O'Connor's 5 March email requests Mr Groves to make his selection and return it to Mr O'Connor by no later than 13 March 2013. This email also informed Mr Groves that Mr O'Connor had built a special stand-alone computer for Mr Groves to remotely access and review information about the listed clients. Mr O'Connor also pointed out the means by which Mr Groves could seek to remotely access this computer and he identified various computer programs that he had installed to assist Mr Groves' data perusal: the Work Flow data base, Soft Assist and Handisoft. The thrust of this and many other emails from the period assumed, what I find to be the fact, that Mr O'Connor was considerably more computer literate than was Mr Groves.
Access to the stand-alone computer was more convenient for Mr Groves on site, rather than trying to set up and use the remote access. Together with his wife Mrs Sonia Groves, Mr Groves attended Associates' office on the afternoon of Sunday 10 March 2013, for about 2 ½ hours. And he used the computer that Mr Groves had set up to analyse client files using the specially installed software, which had a limited life but a life sufficient to permit such inspection. Mr Groves brought his own hard drive on this occasion. Mr O'Connor assisted Mr Groves to copy some of the data onto Mr Groves' hard drive to take away. The process seemed to work quite well. Relations between Mr and Mrs Groves and Mr O'Connor on this occasion appeared to be quite friendly. Mr O'Connor again informed Mr Groves that Mr Groves was entitled to login remotely. They also discussed a number of particular files, which are not of present significance.
On 13 March 2013 Mr Groves communicated his right of selection from the client list the O'Connor parties had made available on 5 March. Mr Groves took full advantage of his Deed, clause 1 "Selection Method" sub-paragraph (d) rights, which limited him to selecting clients who together in aggregate had a prescribed value of $299,500 inclusive of GST, plus or minus $2,000. Mr Groves selected clients with an aggregate "Prescribed Value" of $301,486.66 inclusive of GST, a figure within the allowable $2,000 tolerance permitted under the Deed.
Mr Groves' client selection on 13 March occurred through the parties' lawyers. Messrs Toomey Pegg sent a schedule of the Selected Clients in an email that afternoon. The list indicated Mr Groves was making a selection in respect of clients for whom there was invoicing for FY12 and also in respect of some clients for whom there was no invoicing for that year.
The O'Connor parties contend that between 4 March and 12 March 2013 Mr Groves had access to the records to allow him to make and to undertake all necessary due diligence prior to making his selection and to prepare for completion. I accept that Mr Groves had access to Associates' client records between 5 March and 12 March 2013 to undertake such due diligence as he required before making his selection on 12 March, in accordance with Deed, clause 1, "Selected Clients" (c).
Completion was due to take place on or about 15 March (Deed, clause 1 "Completion Date"). But the parties conducted their mutual arrangements on the assumption completion would take place no later than 1 May 2013. These proceedings were conducted on the basis that it was mutually accepted that completion was planned to take place on 1 May 2013, despite what the Deed says.
At completion, as the Deed clause 9 provided, Associates was obliged to transfer records associated with the Selected Clients to Mr Groves and the other matters clause 9 required at completion. And after completion the O'Connor parties were required for a further 90 days to assist Mr Groves in the transition of the Selected Clients to Mr Groves, in accordance with Deed, clause 13, so Mr Groves would have the benefit of their custom.
On 25 April 2013 Mr O'Connor emailed Mr Groves explaining that they would be completing work with the practice on 30 April and foreshadowing his belief to Mr Groves, that "we anticipate that the Determined Date to be 1 May 2013 for final settlement and acceptance".
And in anticipation of the volume of records to be handed over on 1 May, on 30 April Mr O'Connor gave email advice to Mr Groves about the need to bring a portable hard drive with him on 1 May, because of the volume of data that would need to be copied. He pointed out that some of the data provided "is not possible to extract for only the Selected Clients. I considered its best to provide too much than not enough. As such I will provide you a confidentiality deed to sign." Mr O'Connor did provide a confidentiality deed to Mr Groves to sign the following day after Mr Groves had downloaded data onto a hard drive.
[4]
(c) Completion on 1 May 2013
The parties dispute many aspects of what happened at settlement on 1 May 2013. Mr Groves spent most of the day with his former solicitor, Mr Paul Chapman of Toomey Pegg solicitors, going through the Selected Client records at the Bella Vista office of Associates.
A summary of that day is as follows. When Mr Groves attended the Associates Office on 1 May 2013 he brought with him a "Seagate" hard drive, which he gave to Mr O'Connor so Mr O'Connor could download Associates electronic records for Mr Groves to take away in addition to the hard copy records. Mr O'Connor downloaded records onto this hard drive (that became Exhibit 1). On the day Mr Groves also examined some of the documents on the Seagate hard drive using a computer at Associates' office.
On the afternoon of 1 May 2013 Mr Groves left Associates' office with a car load of hard copy records and the soft copy material on his hard drive. Before leaving he signed in Mr Chapman's presence a document entitled "Receipt of Delivery of Records of Selected Clients" ("the 1 May Receipt") for the records he had taken and gave it to Mr O'Connor. At the same time Mr O'Connor gave him a bank cheque for $100,000, the agreed settlement amount under the Deed. It is unlikely, in my view that the O'Connor parties would have given over the $100,000 bank cheque or allowed Mr Groves to depart with any records if Mr Groves had not signed the 1 May Receipt.
I largely accept Mr O'Connor's fairly detailed account of what happened on 1 May 2013. He was in my view the more credible of the two witnesses about the events of this day at the office of the practice at Bella Vista. This is what happened.
Mr Groves, together with his solicitor Mr Chapman and his daughter Sonya Rosseter arrived at the office of the practice shortly after 10.30am on 1 May 2013. Mr O'Connor gave Mr Groves the completed list of records of the Selected Clients and a draft Confidentiality Deed. Mr Chapman asked Mr O'Connor to email the draft Confidentiality Deed to Mr Toomey, Mr Groves' then solicitor from Messrs Toomey Pegg, solicitors. This was done.
Mr O'Connor asked Mr Groves for the hard drive so Mr O'Connor could commence copying the data of the Selected Clients. But there was an initial problem with Mr Groves handing the hard drive over because of bank release document had not been obtained and Mr Groves wanted to inspect the records. Mr Groves sought to clear up the problem by getting his staff to enquire at the post office where the bank release document was. Meanwhile Mr Groves and his daughter left while all this occurred, returning shortly after 11.30am.
The list of clients was then formally handed shortly before 11.40am to Mr Groves and Mr Chapman. The boxes of hard copy records of clients were in boxes in the boardroom. Throughout the day Mr Groves and Mr Chapman went through the boxes in the boardroom and examined the files in them. I accept they pulled files out of boxes and looked through other loose files, sorted loose files and marked the master list with a pen. Mr O'Connor formed the opinion, reasonably in my view, that Mr Groves and Mr Chapman were checking the records held in the boardroom at the office to see whether they corresponded with the list of Selected Clients.
Shortly before midday Mr Groves asked Mr O'Connor whether he could set up his laptop computer and Mr O'Connor indicated he could use the office of one of the practice employees - Thuy Cao Xuan ("Thuy").
At about the same time Mr O'Connor gave to Mr Chapman, in Mr Groves' presence, the 1 May Receipt. I accept Mr O'Connor's evidence that when the 1 May Receipt was given to Mr Chapman and Mr Groves a conversation took place between them to the following effect:
"Mr O'Connor: This is a document I have prepared for acceptance of delivery of the records I would like William to sign it once he has taken delivery of all of the records and the settlement cheque.
Mr Chapman: "I don't see a problem with that provided William is happy that he has received all the Records of the clients and he accepts delivery then I will arrange for it to be signed."
But Mr Groves began to encounter problems in accessing the electronic data. Shortly after midday Mr O'Connor went in to Thuy's office and Mr Groves and he had a conversation to the following effect:
"Mr Groves: Matt. Can you show me how to access Handisoft data again? I'm not very computer literate.'
Mr O'Connor: Sure. And I'll show you what data I have prepared for you so far to be copied to your Hard Drive."
Throughout the next 10 to 15 minutes Mr O'Connor demonstrated how to operate parts of the software so Mr Groves could gain access to certain Selected Client files on the drives used within the practice. The detail of these instructions is not of present relevance.
But the conversation moved to email inboxes and outboxes. I accept that Mr O'Connor demonstrated to Mr Groves that Mr O'Connor had exported these and they were ready to be copied on to Mr Groves' hard drive. I accept Mr O'Connor's account that a conversation took place between himself and Mr Groves to the following effect whilst they were discussing these email boxes:
"Mr O'Connor: I have copied the emails I have of the current staff I haven't copied Kate or mine yet, but I can do this now if you want, when I copy the data to the hard drive I'm not sure whether you want our email boxes or not as it may not contain much communication between the clients you selected as Kate mainly does admin and works on Accolade and I rarely work much with those clients.
Mr Groves: I don't need those email boxes. I really just need Thuy's as she will be working with me and is familiar with the clients.
Mr O'Connor: Ok. I've given you the others anyway apart from Kate and my emails. If there are other staff the email boxes would be in archive on an old server or destroyed.
Mr Groves: No problems. Thank you Matt That is all I need. I really only need Thuy's email box."
In my view this explanation was enough for Mr Groves. He did not then anticipate he would want every email that had gone through Mr or Mrs O'Connor with respect to every Selected Client. But Mr Groves disputes that this conversation took place.
Mr Groves advances a number of reasons why Mr O'Connor's version of this conversation should not be accepted. But in my view these reasons are not persuasive. First, it is said that is difficult to envisage that what was in substance a variation to the Deed would not have been recorded by Mr O'Connor. But this overlooks that the conversation took place in the course of a fairly friendly exchange, when Mr O'Connor was already giving substantial assistance to the less computer literate Mr Groves. And Mr Groves seemed reasonably content not to put Mr O'Connor to any further trouble.
Secondly, it is said that the terms of the conversation do not reflect the reality of the documents, especially the statements that "Kate mainly does admin" and "I rarely work much with those clients". Mr Groves' case did show that Mrs O'Connor did more than purely "admin" tasks but not much more. So Mr O'Connor's words are really only perhaps a marginal overstatement. And Mr O'Connor did not deny working with these clients and the evidence shows that he did. But there were a large number of clients being transferred and the evidence does not demonstrate that Mr O'Connor's high-level estimate with the word "rarely" is wrong.
Thirdly, it is said that Mr O'Connor is taking an inconsistent position, as elsewhere in these proceedings he is arguing that any variation to the Deed is required to be in writing. Parties can take mutually inconsistent positions on legal issues in proceedings, provide it is understood, as it is here, that they are put in the alternative. That is the case here and does not affect the credibility of Mr O'Connor's testimony.
Fourthly, it is said that Mr Groves' evidence that the conversation did not occur was convincing and was not shaken in cross-examination. But overall Mr Groves' recollection of the events of this whole day was the less certain and the less convincing of the two. And relations between the parties at this stage were such that it is not unlikely that Mr Groves would have accepted Mr O'Connor's word on a matter like this, in the course of what was a massive transfer of files.
Finally, Mr Groves submits that Mr O'Connor's evidence is generally unreliable and that he should therefore not be accepted on this issue. Mr Groves is correct that there were some inaccuracies in Mr O'Connor's evidence about what have turned out to be relatively minor matters. The inaccuracies were not in my view intentional. Mr O'Connor did somewhat overstate in his affidavit that Mr and Mrs Groves never raised queries about deficiencies in the records provided before these proceedings were commenced but in my view Mr O'Connor readily conceded overstatement in his affidavit. And Mr O'Connor was accused of being "flippant" with the Court on one occasion. He came across more as exasperated (with the knowledge of a qualified solicitor by that time) with what he perceived as problems with the case against him and his credibility was not affected.
In contrast, Mr Groves' evidence had some significant changes of position. Initially Mr Groves said he did not check the contents of the hard drive he brought to the practice premises on 1 May 2013. But as these reasons later show he did do some checking which he admitted in the face of CCTV evidence. Mr Groves' withdrawal of so many of his allegations during the proceedings at least showed a preparedness to make allegations without thoroughly checking his facts.
Mr O'Connor says, and I accept, that by about late morning on 1 May he opened the Workflow_Groves data base and demonstrated to Mr Groves a number of search functions for him to gain information about the Selected Clients, including obtaining a list of the Selected Clients, accessing further information from the Client Record, printing reports and advanced reports, re-printing invoices from debtors, re-printing WIP attached to an invoice using advanced reports and printing a work flow report about standing jobs. How much of this Mr Groves actually understood was uncertain. Mr Groves did confess in evidence, as I have elsewhere inferred, that he is not particularly IT friendly.
But somewhere in the course of what was being demonstrated I accept Mr O'Connor's evidence that he and Mr Groves had a further conversation to the following effect, about the use of Microsoft Access 2010 with the data for the Selected Clients:
"Mr O'Connor: This is the workflow database I created for you. You may recall it from when you were working with me. It's the same one but upgraded, it's the same database you were using when you inspected the records on 1Q March 2013. I have copied all the Selected Clients data to this database and made the database a read only access as we discussed in [Mr] Ilkovski['s] Chambers on 1 March. You will need Office 2010 with Access to run it. Thuy knows how to use Soft Assist and the Workflow database and she is rather proficient in using both, if you would like to purchase any office equipment or Thuy's PC which has all the software licences on it. please let me know. This may assist you greatly.
Mr Groves: Ok. Thank you. I'm sure Thuy can help me. I don't need any office equipment or Thuy's computer as I am purchasing new computers. Thanks anyway."
Mr Groves also denied that he was told about Microsoft Access by Mr O'Connor. Again Mr Groves provided a number of reasons why the Court should infer that he was not told about the need to acquire Microsoft Access 2010 and why his version should therefore be preferred.
But I do not find these reasons persuasive. First Mr Groves submits that in the various emails Mr O'Connor sent referring to the "workflow database" they do not identify Microsoft Access 2010 as being necessary to open the file. But except until much later the emails also do not show Mr Groves asking for exactly what software was needed to open the files. It is quite inconsistent with the open tenor of Mr O'Connor's email correspondence that he would not have communicated information like this. He had gone to considerable trouble to provide remote access to Mr Groves during the inspection period before Mr Groves selected clients pursuant to the Deed mechanism, which is indicative of someone generous rather parsimonious with information. The absence of an email exchange about this issue is equally consistent with it having been communicated verbally as Mr O'Connor says and then not adverted to again.
Secondly, Mr O'Connor does not record in his own file notes the conversations that he told Mr Groves about using Microsoft Access 2010 to access the workflow database. In my in my view the explanation for this is that Mr O'Connor did not record the quite basic information he verbally communicated to Mr Groves. The use of Microsoft Access 2010 fell into this category.
Thirdly, Mr Groves says he did not hear about the Microsoft Access 2010 program until September 2013. But in my view Mr Groves was not sensitive to the nuances of software programs and probably did not take in what Mr O'Connor was saying to him. Because of his lesser expertise in the area Mr Groves is a generally less reliable reporter of what was said about software and IT issues than Mr O'Connor.
Finally, it is put that when Mr Groves did ask about how to open the file that Mr O'Connor and his solicitors did not respond. But the letter relied on to ground this submission was a lawyer's sent much later on 17 October 2013 after Mr Groves had filed the present motion and when open legal hostilities were underway. The O'Connor parties side was entitled to take the view by this time that given the legal process that was on foot any kind of helpful response to this letter might well be seen as some kind of admission against interest. No inference adverse to the O'Connor parties can be drawn from a non-response to this letter.
Work continued at the practice into the afternoon of 1 May. Mr O'Connor was becoming concerned that if the whole inspection process took place that day before anything was copied onto the hard drive that this may mean settlement would not take place within the day. So he initiated a conversation with Mr Chapman to the following effect:
"Mr O'Connor: There is no reason to delay further as it will take some time in copying all the data across. You can continue inspecting those records in the board room and I can get started on copying the data to the hard drive. Please give me that hard drive so the copying can start.
Mr Chapman: We don't want to commence delivery until we have checked that all records are provided. Once we accept delivery we accept the Determined Date is in effect.
Mr O'Connor: You can continue checking the records as it will take some time to copy the data to the hard drive. I'll start copying and if there is a problem it can easily be deleted, otherwise we will all be here until midnight."
Mr Chapman: I suppose if there is a problem with the Records then the hard drive data can be deleted. Ok."
I accept Mr O'Connor's evidence that it took about 4 hours to copy the data onto the hard drive and it was all completed by about 4.30pm. When this occurred Mr O'Connor informed Mr Groves of the completion. Mr Groves walked into Mr O'Connor's office and looked over his shoulder at the computer that Mr O'Connor was operating. Mr O'Connor showed him the following data had been copied onto the hard drive: the Y Drive data, the Z Drive data, the Soft Assist program.exe file for Mr Grove to install, the email folders, the Workflow_Groves data base and the BankLink data file.
After this demonstration had taken place Mr O'Connor had a further conversation with Mr Groves about whether Mr Groves was satisfied with what he had received to the following effect:
"Mr O'Connor: Are you happy with the data I have copied? Is there anything you are unsure of or require?
Mr Groves: Thank you. The data is fine. I don't need any further
information from you.
Mr O'Connor: I'll give you the hard drive shortly I just need to take some screenshots to attach to the Confidentiality Deed.
Mr Groves: Ok."
By now it was about 4.40pm. Mr O'Connor commenced taking screenshots of the hard drive to annex to the Confidentiality Deed to be signed. And a few minutes before 5pm Mr O'Connor gave Mr Groves the hard drive that Mr Groves took away with him. But before taking it away Mr Groves went into Thuy's office and himself inspected the hard drive for about 10 minutes from shortly before 5pm.
The records in the boardroom of the office remained there until the original National Australia Bank ("NAB") release document was delivered to the office on 1 May. This was a release from the NAB's fixed and floating charge over the assets of the practice. The original document was finally brought back to the office of the practice about 5.04pm. It was given to Mr Chapman a few minutes later. I accept Mr O'Connor's account that some further conversations then took place about the inspections that had just occurred. At about 5.17pm Mr Groves went into Mr O'Connor's office and a conversation between them took place to the following effect:
"Mr O'Connor: Have you inspected the hard drive? Have you inspected all the files in the board room? Are you happy with everything?
Mr Groves: Yes I have inspected the hard drive and I have inspected all the files in the board room. It appears everything is in order. I'll wait for my solicitor to let me know what to do next."
About a minute or two later Mr Chapman went into Mr O'Connor's office and they had a discussion to the following effect:
"Mr O'Connor: Bill has informed me he has checked the hard drive contents and has checked all the files in the board room. He says he is satisfied all files and documents are correct. I have given you the original NAB release document and you should have the original Kate O'Connor release document from earlier. Is there anything else?
Mr Chapman: Just the cheques now.
Mr O'Connor: I would like the Receipt of delivery signed once you have taken delivery of the all the records and at the same time we can hand over the cheques.
Mr Chapman: Ok. We will commence delivery."
As a result of this discussion between Mr Groves and Mr Chapman, Mr Groves commenced taking delivery of the records. They were all out of the board room by about 6pm and had been loaded into Mr Groves' vehicle.
It was at that point in the reception area and in Mr Chapman's presence that Mr Groves signed the 1 May Receipt. At the same time Mr O'Connor provided Mr Groves with the other documents also referred to in the 1 May Receipt, namely the bank cheque for $100,000 and the further cheque in the amount of $3,822.35 for Thuy's long service leave. The 1 May Receipt relevantly provided as follows:
"I, William John Mr Groves have accepted, in full and final settlement of the Settlement Deed between the parties dated 1 March 2013, delivery of the following:
1. The Records of the Selected Clients, pursuant to the definitions of the Settlement Deed, dated 1 March 2013, accompanied with the Scheduled attached and marked with the Letter 'A';
2. A bank cheque in the amount of $100,000.00;
3. A cheque in the amount of $3,822.5;
4. The portable hard drive containing soft copy of data of the Selected
Client Records. Extracts of screen displays are attached to the Confidentiality Settlement Deed signed by the parties..."
The 1 May Receipt was comprehensive. Apart from declaring that Mr Groves was accepting delivery "in full and final settlement of the Deed", it also listed other categories of documents received: a calculation of and tax invoice for Thuy's long service leave; a tax invoice for the transfer of the Selected Clients and for the $100,000; the original of the NAB release; a deed of release from Mrs Katrina O'Connor; and correspondence folders for many named Selected Clients. The 1 May Receipt attached "Schedule A", which listed all the Selected Clients and against each client in the first part of the Schedule were columns, full of entries, headed "File" (indicating the number of files per client), "Binder" (indicating the binder number in which each client file could be found), "Register" (indicating other client information), and "Extra" (providing space for commentary about each client's records). In the second part of Schedule A of the 1 May Receipt the paper files in some 17 Archive boxes for removal are identified by file name.
Mr Groves had gained general access to both the contents of the Seagate hard drive and the benefit of the advice of his solicitor, Mr Chapman, before he signed this 1 May Receipt late that day. He was initially reluctant to admit the degree of access that day to electronic files and that he used it. But I find he had as much access as Mr O'Connor says that he did. There is no entry on the 1 May Receipt indicating that he was protesting that he had insufficient opportunity to inspect the files being handed over either in hard copy or soft copy.
I accept Mr O'Connor's evidence that Mr Chapman refused to take delivery of the records until they were all checked by himself or Mr Groves. Mr Chapman did not give evidence to say otherwise. There was no dispute on 1 May about the adequacy or accuracy of the records provided, nor any dispute about the accessibility of data copied onto the hard drive or any issue raised about the completeness or accuracy of the records of the Selected Clients on the hard drive or the records in the board room.
Nor did Mr Groves raise any issue about the currency of any Selected Clients or make any reference to not being able to access the Workflow_Groves data base or Soft Assist or HandiSoft on the hard drive. Nor did Mr Groves complain about any deficiency or incompleteness in the data. Mr O'Connor says, and I accept, that he only first became aware of the Workflow_Groves data base inaccessibility issue when Mr Groves served an affidavit on the 26 November 2013 in support of his 1 July 2013 motion.
The Confidentiality Deed was also signed before Mr Groves left. It was included in the documents listed in the 1 May Receipt. I accept Mr O'Connor's evidence that the Confidentiality Deed was required because the entire contents of the office Y Drive and Z Drive were copied onto Mr Groves' hard drive, as Mr O'Connor could not just select only the data for each Selected Client.
The Confidentiality Deed is an unremarkable document recording an obligation of confidentiality over "information and records of clients of [Associates] other than the Selected Clients" that may be incidentally release to Mr Groves.
But in a matter that became controversial in the proceedings the first recital of the Confidentiality Deed recited the Deed, one component of the 1 March settlement, but did not also recite the 4 March 2013 orders. That first recital of the Confidentiality Deed was as follows:
"1. The Company and the Recipient are parties (inter alia) to a Deed, dated 1 March 2013 (the 'Settlement Deed'), pursuant to which the Selected Clients are conveyed and transferred to the Recipient in accordance with the terms of that Deed."
[5]
From Completion to filing the Motion - 1 May to 1 July
In the two months between 1 May and 1 July 2013 Mr Groves, banked the $100,000 cheque handed over on 1 May, commenced supplying accounting services to and billing the Selected Clients whose files he signed for in the 1 May Receipt and he co-operated with the O'Connor parties in approving a form of circular letter for the O'Connor parties to send out notifying the Selected Clients of the sale, as was required of them by Deed, clause 13. Mr Groves initially claimed in these proceedings that the O'Connor parties did not send these letters out but I am satisfied that from the evidence of the letters tendered that they did send out a substantial number of these to Selected Clients in about the first two weeks of May 2013. And once all these letters went out Mr O'Connor facilitated many of these clients making contact with Mr Groves by speaking with or emailing them. In conduct consistent with obligations under Deed, clause 13 Mr O'Connor emailed Mr Groves on 10 May 2013 offering his further assistance with the transition.
After 1 May Mr Groves made use of the records of the Selected Clients that he took away that day. He and a company associated with him, Groves Consultancy & Resolution Pty Limited generated no less than $278,243.96 inclusive of GST in gross revenue and work-in-progress (WIP) from providing accounting services to the Selected Clients. And at the time of the trial Mr Groves was continuing to use the client records of the Selected Clients to generate revenue in his own practice. This was revealed on subpoena (Exhibit 14) during the proceedings. Some of the work done was in June and July 2013. Mr Groves says various allowances should be made from this figure and that the correct figure should be $202,981.25. But it is substantial nevertheless and the precise figure need not be determined for present purposes.
No evidence was adduced as to the precise effect on Mr Groves' current earnings that the shortcomings in the delivery of the records of Selected Clients of which Mr Groves complains in these proceedings. Such evidence was of course not necessary for Mr Groves' claim in debt based on the Deed, clause 16.
On 1 July 2013 Mr Groves filed the present motion, which initially sought judgment against the defendants for $139,082. This was amended in January 2014 to a claim for $299,500. Then Points of Claim were filed on 25 February 2014. Subsequent pleadings were filed and closed by mid-2014.
This narrative of findings of the events before proceedings allows the Court first to deal with some general issues that the O'Connor parties have raised.
General issues - The Applicable principles of construction.
The General issues the O'Connor parties have fielded raise questions of the construction of the Deed and the 4 March 2013 orders.
Deed is a commercial contract. And given the way they were added to the parties' overall bargain, the agreements also noted in paragraphs 3 and 4 of the 4 March orders are in the same category. There are many appellate pronouncements as to how courts should construe commercial contracts. I am guided by the most recent of these, the High Court's decision in Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at [35] (Woodside) where the majority (French CJ, Hayne, Crennan, and Kiefel JJ) described the approach to construction of the commercial contract in the following way (omitting footnotes):
"[35] The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating", unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption "that the parties … intended to produce a commercial result". A commercial contract is to be construed so as to avoid it "making commercial nonsense or working commercial inconvenience"
In his dissenting judgment in Woodside, Gageler J compactly expressed the same idea at [53], as follows:
"Commercial parties contracting at arm's length are free to agree on terms
each considers to be to its own commercial advantage. The terms of their
agreement, however, are construed by a court to mean what reasonable
commercial parties in their position can be taken together to have meant."
This judgment does not call for any further discussion of the well-known principles of the construction of commercial contracts. The Deed is a reasonably well-crafted document. Despite the present disputes it is drafted in a way which generally conveys clear meaning and as these reasons show is capable of being construed in a way that defines the obligations of each party.
The Defendants raise a number of matters by way of general defence that the plaintiff's claims in debt on the Deed and the 4 March 2013 orders are not available for a number of reasons. It is convenient first to deal with these matters of general defence. Then these reasons will address the defendants' alternative contentions: that the plaintiff's claim fails because, assessed as a claim in debt, the plaintiff has no right to payment of the debt, because he has not established the necessary elements of the right to payment.
The General Defences
Mr Groves' claim is in debt on the Deed. The defendants have made clear in their pleadings and their submissions at trial that in their contention the claim should properly be brought only for damages for breach of contract, and not in debt. A disadvantage of this for Mr Groves as a plaintiff would be that he would have to prove the nature and extent of any losses caused by any breaches of contract that were established. Mr Groves' case did not attempt to do this. Many of the defendants' matters of general defence echo this theme in separate ways.
First, the defendants submit that Mr Groves' claim is barred by doctrines of election. The defendants say that properly construed the Deed and the 4 March Orders gave Mr Groves: (1) the right to payment of the $100,000 and the ability to build a viable accounting practice on the platform of the Selected Clients; and in addition, (2) the right to substitute for the right in (1), a right to obtain judgment for a sum of money if completion did not take place within the timeframe for which the Deed provided.
The defendants further submit that by banking the cheque for $100,000 and signing for the records on 1 May 2013 at the agreed time of completion and then subsequently servicing and billing the Selected Clients for gross fees and WIP of up to $278,243.96 inclusive of GST that Mr Groves has elected to accept completion under the Deed and therefore to confine his rights to sue on the Deed for damages for alleged breach of warranty or condition. In short, the defendants contend that it is not open to Mr Groves now to rely on the summary judgment provisions in the Deed.
The defendants put the argument another way. They submit that on the current motion Mr Groves is really seeking obtain what is overall an unjust result: to retain in their entirety the Selected Clients and all the records and goodwill associated with them; and to retain the benefit of the gross fees and WIP rendered in providing the accounting services to the Selected Clients and to preserve and maintain existing goodwill and rights to future revenue of the practice, including that attached to the Selected Clients by taking advantage of the restraint of trade included in the Deed clause 8, restricting the trading activities of the O'Connor parties after the Determination Date; and in addition to all of this, to obtain a court order that the O'Connor parties pay Mr Groves a sum of $299,500.
The Proper Construction of the Deed. The Defendants' principal contention requires the Court to construe the effect of Deed, and especially clauses 14 and 16 in context.
Clause 14 traces out the relationship between three important dates under the Deed, the "Completion Date", the "Determined Date" and the "Judgment Date" and the releases that the Deed will effect. The first sentence of clause 14 makes clear that the Completion Date is a date on which a triple obligation arises for Associates to (i) deliver the records of the Selected Clients, (ii) transfer "the Goodwill and the Selected Clients", and (iii) pay the Settlement Amount to Mr Groves.
But the clause also clearly contemplates that all of what is obliged to occur on the Completion Date may not actually occur on that day. The second sentence of clause 14 makes clear that the triple obligation of Record delivery, Goodwill and Selected Client transfer and delivery and the Settlement Amount payment, leading to an operative clause 14 release for the O'Connor parties, may occur on a date other than the Completion Date and the date when all those three obligations are actually performed will be called the "Determined Date".
The Determined Date has wider significance for the operation of the Deed. First, it is also the date which begins the clause 13 period of 90 days, during which the O'Connor parties must at no cost to Mr Groves, use their best endeavours "to ensure a proper transition of the Selected Clients from the practice to Mr Groves".
But the timing and objective of this clause 13 "proper transition" is critically important. It is to "ensure so far as possible that the Selected Clients as and from the Determined Date become clients of Groves" [emphasis added]. The "Determined Date" is the date from which Mr Groves can enjoy the financial benefits of having these clients.
This is achieved by machinery provisions to facilitate Mr Groves having the financial benefit of the clients by doing such things as Mr Groves required to ensure a smooth handover and transition of Selected Clients "as soon as reasonably practicable" and by attending meetings with and sending emails or circular letters to the Selected Clients "when reasonably required by Groves". Matching the control Mr Groves has of the business of the Select Clients' from the Determined Date, the O'Connor parties' clause 13 obligation to assist Mr Groves does not commence until the Determined Date is reached.
The Determined Date is one of the two important operative dates on which the Deed, clause 18 and 19 will provide a complete defence to the O'Connor parties (clause 18) and to Mr Groves (clause 19) to claims arising out of existing disputes; the other being the clause 16 "Judgment Date".
Under clause 14 the parties may look to either the Determined Date "or", at Mr Groves' option, the Judgment Date, to create the O'Connor parties' release, or under clauses 18 and 19 to create the mutual pleas in bar. The entry of judgment on the Judgment Date is crafted to fully cover all the same circumstances and consequences that would otherwise be sufficient to qualify as a Determined Date. The two dates were crafted to cover all possibilities: full performance of the triple obligation (clause 14), or less than full performance of the triple obligation (clause 16), "whichever occurs" (clauses 18 and 19).
Clause 16 also explains why the parties agreed to a form of completion occurring on 1 May. Clause 16 requires the Settlement Amount of $100,000 to be paid to Mr Groves by 1 May 2013, with time of the essence. Thus, unless the $100,000 had been paid by 1 May, Mr Groves would have been able to trigger the clause 16 right to have the entry of judgment against the O'Connor parties for $399,500.
But in addition to clause 14, clause 16 also reinforces that Mr Groves has a right of election. He "may have judgment entered against the O'Connor parties…" [emphasis added]. It is up to Mr Groves to elect, whether or not he regards clause 16 as being enlivened, by the circumstances it contemplates, "in the event that [Associates] does not deliver the records". If he contends that records have not been delivered, then he can move for judgment under clause 16.
Because they cover inconsistent circumstances, clauses 14 and 16 do present a clear choice to Mr Groves. He must decide, from 1 May whether he regards the triple obligation as having been wholly fulfilled or not. If he accepts it as fulfilled, then he can treat the Determined Date as having occurred and he gets the immediate benefit of the O'Connor parties' clause 13 assistance to ensure a "proper transition of the Selected Clients" to him; and, he gets the immediate benefit of a defence from action under clause 19; and, he gets an immediate right to assign the benefit of the Deed under clause 29. But if he does not accept the clause 14 triple obligation was fulfilled then he can move for clause 16 judgment. But until he gets that judgment he cannot treat the Determined Date as having passed by and accept the Selected Clients. And he cannot take the benefit of the O'Connor parties' clause 13 assistance nor can he exercise his clause 13 rights against the O'Connor parties. Nor can he enjoy anything else that is dependent upon the Determined Date passing. For example, he could not have the benefit of the clause 19 defence from action. Nor can he assign the benefit of the agreement.
The Deed would become unworkable if Mr Groves could take the benefits of both the Determined Date and the Judgment Date. Mr Groves could have the benefit of the transfer of the goodwill of a particular client, be able to require Mr O'Connor under clause 13 to send out letters to have that client fully transfered to him and then be able to obtain clause 16 judgment against the O'Connor parties for the client's non-transfer.
Moreover, when on that scenario would the clause 18 and 19 bars to action arise? They both make clear that only one of the Determined Date or the Judgment Date will occur. If the Determined Date occurs, or is treated as occurring then the bar to proceedings would spring up immediately.
Also it makes no sense for Mr Groves to be able to prevent under Deed, clause 8 the O'Connor parties from engaging in the Restrained Activities in relation to the Selected Clients upon the assumption that Mr Groves has the benefit of the Goodwill of these clients, whilst at the same time reserving the right to enter judgment because he does not have the benefit of that Goodwill.
There are also strong indications in clause 16 that it does not require the delivery of every possible client-related thing to Mr Groves for satisfaction of the clauses 14 and 16 triple obligation to occur. For example, read together clauses 13, 14 and 16 clearly contemplate that although the O'Connor parties will transfer "the Goodwill and the Selected Clients to Groves", nevertheless there will still be a clause 13 process over a further 90 days finally to perfect this transition. And to the extent that the clause 13 transition involves the O'Connor parties doing "such things as are required…to facilitate the smooth handover and transition of the Accounting Work", this could readily encompass calling for further correspondence or archived files that had, for example, at first not seemed to be directly relevant to a particular Selected Client, but could then be obtained "as and when requested by Groves". But clause 16 works in a practical way by requiring Mr Groves to make up his mind whether or not he has enough material to satisfy the clause 14 triple-obligation. If he believes he has not then he can choose to go down the Judgment Date path. And the Deed and 4 March orders give him time to make this assessment, two months from 1 May to 30 June.
As will be seen below, the Court concludes that the 4 March orders (3 and 4) are a binding variation to the terms of the Deed. But they make no difference to this analysis. The 4 March orders really only vary the clause 16 financial obligation to make it less punitive.
But given this analysis, the defendant's election argument is successful. The principles of election may be shortly stated. A person is said to have a right of election when events occur which enable the person to exercise an alternative or inconsistent right; essential to making an election is communication to the part affected by words or conduct of the choice thereby made and it is accepted that once an election is made it cannot be retracted; this is because the person effected is entitled to know where he stands and the person electing should not have the opportunity of changing his election and subjecting his adversary to different obligations; a person confronted with the choice between the exercise of alternative and inconsistent rights is not bound to elect at once; so long as the delay does not occasion prejudice to the other side; an election takes place when the conduct of the party is such that it would justifiable only if an election had been made one way or another; and, the person must know the facts giving the right to elect: Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 655, 656 per Mason J and Tropical Traders Ltd v Goonan (1964) 111 CLR 41. See also the Commonwealth v Verwayen (1990) 170 CLR 394 ("Verwayen") at 421, per Brennan J, at 422.
Here the face of the Deed and what was presented to Mr Groves on 1 May at the agreed date for the ceremony of completion, presented to him the choice between the inconsistent positions of treating the Determined Date as having taken place or not. And Mr Groves was legally advised throughout the period. If he were not to treat the Determined Date as having taken place then he would have had to wait until the Judgment Date to enjoy the benefits that would have otherwise have arisen on the Determined Date.
But he did not do that. Instead, he communicated in a number of different ways to the O'Connor parties that he regarded the Determined Date as having passed. But the following matters, the subject of earlier findings in these reasons, are consistent in my view only with Mr Groves communicating to the O'Connor parties that Mr Groves regarded the Determined Date as having been reached:
(a) signing the 1 May Receipt without any reservation, which receipt declared that the delivery that day was "in full and final settlement" of the Deed - a phrase importing a finality of rights: Murphy v Yolanda Nominees Pty Ltd (Supreme Court (Vic), Nathan J, 13 March 1992, unrep) ("Yolanda");
(b) Co-operating in the O'Connor parties' discharge of their obligations under Deed, clause 13, to send out circular letters to the Selected Clients;
(c) Providing accounting services to the Selected Clients and billing them;
(d) Taking and keeping the client Records of the Selected Clients and using them as part of his own accounting practice; and
(e) Banking the $100,000 cheque given over on 1 May 2013.
In my view by this conduct Mr Groves elected to treat 1 May 2013 as the Determined Date under the Deed.
As earlier indicated the 4 March 2013 orders do not alter this position. Accepting, as is explained below, that these orders were a variation to the Deed, all order 3 does is to alter the calculation of the amount of judgment that will be entered. It does not set up a regime of partial election because even order 3 operates on the basis that clause 16 is enlivened because of the failure to discharge the triple obligation defined in clause 14. It does not redefine what is the "Determined Date" or the "Judgment Date" under the Deed.
The Other General Defences. The defendants put a number of other general contentions. They contend that Mr Groves cannot rely upon the 4 March 2013 orders as having any operative effect on the basis of one or more species of estoppel. The defendants rely on the principles in Thompson v Palmer (1933) 49 CLR 507, Central London Property Trust Ltd v High Trees House Ltd (1947) KB 130 and Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387. The estoppel claim is based on Mr Groves' conduct in accepting all the benefits of the Deed, as if completion had occurred, and in particular, taking the benefit of the custom of the Selected Clients. But as Brennan J pointed out in Verwayen (at 421), election, estoppel and waiver are cognate concepts. In my view the Court's findings in relation to election mean it should not be necessary to consider separately these cognate doctrines.
The defendants field several arguments to support the conclusion that only the Deed and not the 4 March 2013 orders were binding on the parties. None of these are successful. But in any event these reasons explain the 4 March 2013 orders do not change the analysis.
First, the O'Connor parties rely upon estoppel by deed based on the 1 May Confidentiality Deed. They submit that the parties, including Mr Groves, all executed the 1 May 2013 Confidentiality Deed. Associates and Mr Groves were parties to this Confidentiality Deed, which (in Recital 1, see above), refers to the Deed without any mention of the subsequent notation in the Consent Orders. The defendants contend that the relief which Mr Groves now seeks, relying on the 4 March 2013 orders, would be an unjust departure from the terms and recitals of the Confidentiality Deed.
But in my view this argument gives too much significance to Recital 1 to the 1 May Confidentiality Deed. That Recital does not exclude the possibility of variations to the Deed, such as occurred on 4 March 2013.
The O'Connor parties also argue there was no consideration for a variation to the Deed, through the 4 March 2013 orders. But this argument is not persuasive. The transcript before Rein J clearly shows both sides received practical advantages out of orders 3 and 4 of the 4 March 2013 orders, including the reduction the litigation risk associated with its ambiguity. And they reduced their variation to written form in conformity with Deed, clause 24.
The O'Connor parties also contend that the construction of the agreement for which Mr Groves contends is penal in nature. The defendants say that any terms or conditions relied upon to found relief of the kind that Mr Groves now seeks are void as penalties: Andrews v Australia and New Zealand Banking Group Ltd Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205 and Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 666 are applicable.
But if Mr Groves had not elected to treat 1 May 2013 as the Determined Date, clause 16 as varied by the 4 March 2013 orders would not be objectionable as a penalty. One of the advantages of order 3 of the 4 March 2013 orders is to make the financial consequences of Mr Groves deploying the clause 16 Judgment Date option, markedly less penal in nature. Order 3 moulds the financial consequences closely to the non-delivery of particular Selected Clients.
Now the general defences have been addressed, it is not strictly necessary to deal with the specific issues related to Mr Groves' claim in debt on the Deed, because a remedy under Deed, clause 16 is not available to Mr Groves. He should have brought proceedings for damages for breach of Deed, clauses 9 or 14. But he has chosen not to do that. Accordingly, in my view his claim as constituted must fail.
But the Court will now very briefly deal with some of the additional facts concerning the four remaining specific issues that the defendants raised as to the merits of the plaintiff's claim in debt. The parties may wish to have some findings on these matters. But it has not been necessary to canvass in these reasons all the detail of the issues that no longer have to be decided between these parties.
[6]
Specific Issue One: The Workflow Files
Mr Groves' 8 November 2013 affidavit set out in an Excel spreadsheet the documents he had expected to receive on 1 May but could not find on the hard drive prepared by Mr O'Connor containing the files workflow_groves.accde.
Following the exchange directions Mr Groves did not continue pressing his claim that the files themselves had not been provided. But he maintained a claim that the format in which those documents had been provided made them inaccessible.
[7]
Accessing the files in workflow_groves.accde
The electronic files of the records of Selected Clients had been created using the database management program Microsoft Access 2010. Once the data was delivered to him at settlement Mr Groves says he was unable to open the files.
Mr Kris Cranfield, an IT technician, gave expert evidence about the procedure for accessing electronic files such as those delivered on completion. He explained that two broad options existed to open and use an Access 2010 file in 2013: a temporary fix and a more permanent solution. Mr Cranfield was an excellent witness and I accept his evidence in its entirety.
Mr O'Connor had created the files using Microsoft Access 2010. Mr Cranfield explained that a database, so created could not automatically be accessed using the 2013 version of the program. Mr Cranfield set out the different options to enable this.
The temporary fix would simply have involved Mr Groves purchasing a copy of the Microsoft Access 2010 program at a cost of approximately $230. The Court heard from Mr Cranfield and I accept that prior to April 2014 such a purchase would likely have been possible either in retail stores, or online. But using the Microsoft Access 2010 program would only have offered a temporary solution to the problem of opening Access 2010 files in 2013, a solution operating during the currency of Access 2010.
Such a solution was not without other problems. The parties disagreed about whether Microsoft Access 2010 was available to consumers when Mr Groves was attempting to access client files from the hard drive delivered in May 2013. The Court asked Mr Cranfield to make enquiries to determine whether Microsoft Access 2010 was currently (as at the time of hearing) available, and if not, whether it would have been available in May 2013.
Mr Cranfield spoke to his usual supplier and learned that Microsoft Access appeared to have been finally withdrawn from the market in about May 2014. Although the 2010 version of the program, Access 2010, initially presented as available through the website amazon.com, Mr Cranfield explained that this version would probably only be available to North American customers. What was described as a 'run time' version of Microsoft Access 2010 is nevertheless available online. But Mr Cranfield said it does not have full functionality, offering only limited database access. Finally, it was not clear how long Microsoft Access 2010 had been available for retail sale, even if it was still technically available to IT suppliers.
The second and more permanent solution involved purchasing the program Microsoft Access 2013 and engaging an IT contractor to reconfigure the files accessible from the delivered hard drive so that they would be able to operate with Access 2013. Mr Cranfield's opinion was that this would render the client field both readable and generally accessible using Access 2013. The program Access 2013 itself costs only $149 to purchase. But the substantial cost of this solution would be in reconfiguring the data to make it Access 2013 compatible: work only an IT specialist could perform.
An IT specialist could conduct what is called a "database compile upgrade" of what Mr Cranfield called the "back end" of the existing database to make it compatible with the 2013 version of Access. I accept Mr Cranfield's evidence that this process was both "pretty complicated" and potentially "quite expensive". The process would make the Access 2010 file readable and workable with Access 2013. But it would take significant time to reach that point of readability.
Mr Cranfield did not give an exact time frame or price for such work. But he noted that in his doing another job similar to what he expected would probably be involved here for Mr Groves, it had taken Mr Cranfield up to two weeks to conduct the reconfiguration. At an IT specialist's hourly charge out rate of $110, he said, and I accept that this work could potentially cost more than $8000.
[8]
Did Mr Groves know about the workaround for the files?
Mr Groves contends that Mr O'Connor should have conveyed to him that solutions, such as those discussed here, called 'workarounds', were available. The pre and post completion email correspondence between Mr Groves and Mr O'Connor frequently references the relevant "Workflow_database". But this correspondence does not specifically identify Microsoft Access - either 2010 or 2013 - as being necessary to open files on the workflow database.
Mr O'Connor maintains, and I accept, that before completion he told Mr Groves about Microsoft Access and its usefulness in opening the files on the workflow database.
In my view the responsibility then fell to Mr Groves to solve this issue, as the O'Connor parties had complied with supplying "machine readable" in conformity with the Deed's definition of "Records". They were readable by Microsoft Access 2010, which in my view was likely to be available based on Mr Cranfield's evidence. Mr Groves would have failed on this issue.
[9]
Specific Issue Two: Email Records
Mr Groves accepted that on 1 May 2013 the O'Connor parties provided email boxes for various email addresses in accordance with their Deed obligations. In particular they provided electronic copies of the email boxes for: (1) Thuy Cao Xuan; (2) Robin Lui; and (3) William Groves. It was common ground that sections of the email box for another employee, Jane Young were included among the transferred files. Mr Groves claims that emails in Ms Young's account pre-dating 3 December 2012 were still not available.
But Mr O'Connor's email boxes and those of his wife, Mrs Kate O'Connor, were not delivered at completion. The parties dispute whether in a pre-completion conversation they agreed that Mr and Mrs O'Connor's email boxes need not be provided. The Court has now found that this conversation did take place as Mr O'Connor has deposed.
Mr Groves' case was that the email records were deficient for many clients because Mr and Mrs O'Connor's email boxes had not been provided. Mr Groves contended he could only access emails to and from clients that passed through Mr and Mrs O'Connor's email account in one of two circumstances: either the email in question was copied to Thuy Cao Xuan, Robin Lui or Mr Groves; or copied to Jane Young's email address after 3 December 2012.
Exhibits B and M contain evidence of emails that did not comply with either of these circumstances and therefore were said not to be available to Mr Groves in the 1 May 2013 delivery of materials at completion. Mr Groves created Exhibit N from the emails database, in order to list what he says are the 161 emails that did not comply with either circumstance. The Exhibit N emails fall within the period June/July 2012.
Mr Groves maintained: that the conversation the O'Connor parties asserted never took place; and that Mr and Mrs O'Connor's emails formed part of the files to which Mr Groves was entitled at the 1 May completion. Mr Groves seeks judgment for $71,547 on the basis of the prescribed value of the Selected Clients affected by this category of email correspondence.
But this claim would have failed in any event. Without deciding the correctness of Mr Groves' construction of the Deed, that the O'Connor parties had an obligation to supply these emails, this claim is wholly answered by the Court's finding that Mr Groves agreed with Mr O'Connor on 1 May that his and his wife's email boxes need not be supplied on completion.
[10]
Specific Issue Three: Statutory Records and Financial Statements
Issue three was a claim for $33,082. Mr Groves originally claimed that the statutory records and financial statements for a number of clients were missing. By the end of the hearing that claim had been reduced to a claim for missing financial statements for 11 clients. These financial statements were said to be missing from the files the O'Connor parties provided on 1 May 2013. Any claim for missing statutory records was abandoned. The missing financial statements for the 11 clients included 4 clients with a zero Prescribed Value. Those 11 clients are identified in a table that is part of Exhibit 7. And Mr Groves' claim in respect of one client listed in Exhibit 7, the Joan Clements Superannuation Fund, was ultimately not pressed.
The O'Connor parties are prepared to acknowledge that the 11 client files may not have been transferred to Mr Groves. But the O'Connor parties' case is that they never held financial statements for the 11 clients so there was nothing to transfer on 1 May 2013. Mr Groves accepts that if Mr O'Connor never held these documents he was not required to provide them at completion.
On the final day of the hearing Mr O'Connor explained that he had reviewed various 'client events' data including in relation to the 11 clients. He further explained that his method of analysis of these records was that if no reference to minutes of a directors or members meeting appeared in his 'client events' data for a client, then he inferred that such records did not exist. On that basis, he said he was not required to provide such documents to Mr Groves. In my view given Mr O'Connor's methodical approach to electronic record keeping demonstrated in these proceedings, this is a reasonable inference. I infer that these records do not exist.
Mr O'Connor expressed frustration in attempting to locate the files for the 11 clients. He acknowledged "[I was] working on what information I have available to me in electronic form to attempt to prove some rubbish of a 2009 hard copy record that I don't have". He says, and I accept, he found nothing.
Mr Groves bears the onus of proof of showing that even if these financial statements were created, contrary to Mr O'Connor's practice, that the documents so created were not delivered to him. Given the number of claims Mr Groves has abandoned in these proceedings and the way that Mr Groves presented as a witness, I have no confidence in inferring that he is in a position to prove that any particular document was not delivered to him on 1 May 2013.
Mr Groves would have failed on this issue.
[11]
Specific Issue Four: The Non-Current Selected Client
Issue four concerned less than $4,000. Mr Groves claims the O'Connor parties breached the Deed by transferring to him Muscat, which was said to be a non-current client.
Under the Deed, 'Clients' was defined, as follows:
"All of the entities who at the date of this Deed are clients of the Practice apart from the Entities set out or referred to in the First Schedule to this Deed".
Mr Groves alleges that by including Muscat the selection process became flawed, so the O'Connor parties failed to transfer the Selected Clients in accordance with clause 14 on 1 May 2013.
It is not necessary to decide the merits of this construction of clause 14. Mr Groves fails on the facts.
Before the hearing, Mr Groves had requested that the O'Connor parties provide documentary evidence about several of the Selected Clients that the plaintiff believed to be non-current clients of the Practice. In his 27 March 2014 affidavit, Mr O'Connor set out work he had carried out including communicating with clients, to support his contention they were 'current' clients. But Muscat was not included among this evidence as a demonstrably "current" client. The evidence showed Muscat had ceased trading in October 2010.
The O'Connor parties' response to this claim was to say that although Muscat had ceased trading its ASIC deregistration did not take effect until 26 June 2013, which I find to be its actual date of de-registration. I accept Mr O'Connor's evidence that Muscat remained active on the O'Connor parties' ATO Portal until then, which was after the 1 May Completion Date. On 1 May, in my view, Mr O'Connor was still treating Muscat as a client. In contrast, Mr Groves had not at any time checked as at 1 May 2013 whether Muscat viewed Mr O'Connor as its registered tax agent.
Mr Groves sought an award $3,392 being the prescribed value of Muscat as a Selected Client. He fails for other reasons. But he would also have failed to prove Muscat was a non-current client.
[12]
Conclusions and Orders
The Court has found that due to his election Mr Groves is precluded from now seeking judgment under Deed, clause 16. The plaintiff's motion of 1 July 2013 should now be dismissed. Costs would normally follow the event. But there may be argument about costs. The four outstanding specific issues in these proceedings based on Mr Groves' debt claim have been the subject of limited findings.
The Court therefore orders and directs:
1. Direct the parties to bring in short minutes of order to give effect to these reasons;
2. List the proceedings for further argument either as to costs or as to the form of final orders at 9.30am on 22 June 2015, or at such other time as the parties may by agreement arrange with my Associate.
[13]
Amendments
05 June 2015 - plaintiff party in coversheet.
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: 05 June 2015
Parties
Applicant/Plaintiff:
William John Groves
Respondent/Defendant:
Matt O'Connor & Associates Pty Ltd as trustee for the Matt O'Connor Family Trust