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  • Unreported Judgment

Waller Projects Pty Ltd v FW Estate Pty Ltd

 

[2019] QSC 221

SUPREME COURT OF QUEENSLAND

CITATION:

Waller Projects Pty Ltd v FW Estate Pty Ltd & Ors [2019] QSC 221

PARTIES:

WALLER PROJECTS PTY LTD ACN 160 554 165

(Plaintiff)

v

FW ESTATE PTY LTD ACN 600 909 920

(First Defendant)

BREMHA PTY LTD ACN 133 642 458

(Second Defendant)

DG JIMBOOMBA DEVELOPMENTS PTY LTD ACN 609 512 183

(Third Defendant)

DOWLING YEPPOON PTY LTD ACN 152 346 926

(Fourth Defendant)

CRAIG ANTONY JOHN DOWLING

(Sixth Defendant)

NICOLA TRACEY DOWLING

(Seventh Defendant)

FILE NO/S:

BS No 6105 of 2019

DIVISION:

Trial Division

PROCEEDING:

Application

DELIVERED ON:

5 September 2019

DELIVERED AT:

Brisbane

HEARING DATE:

27 August 2019

JUDGE:

Bowskill J

ORDER:

In relation to the plaintiff’s application filed 13 June 2019 and the plaintiff’s cross-application filed 27 August 2019, the parties are to provide a form of order reflecting the orders proposed at [45] and [54] below.

CATCHWORDS:

EQUITY – EQUITABLE REMEDIES – INJUNCTIONS – INTERLOCUTORY INJUNCTIONS – where the plaintiff contends its sole director entered into an oral “General Agreement” with the sixth defendant (the sole director of the fourth defendant), on behalf of their respective families, to acquire and develop real estate jointly through a joint venture vehicle, the “QD Joint Venture” – where the plaintiff alleges that there was an opportunity for the QD Joint Venture to acquire land at Jimboomba, but steps to bring this about were unsuccessful – where the plaintiff alleges that the sixth defendant continued to negotiate with the vendor of the land by “secret negotiations” in breach of the QD Joint Venture agreement – where the first defendant subsequently became the registered owner of the land – where the plaintiff claims that this occurred “in secret” from it and alleges that the purchase was an opportunity diverted from the QD Joint Venture – where the plaintiff alleges that the first defendant and third defendant undertook a “secret development” of the Jimboomba land, culminating in the sale of the land to a third party – where the plaintiff claims that the sixth defendant, and the fourth defendant through the sixth defendant, acted in breach of the fiduciary duties owed under the General Agreement in relation to the QD Joint Venture, and claims an entitlement to half the proceeds of sale of the developed land – where the plaintiff applied for an interlocutory injunction restraining the defendants from paying out or distributing the proceeds of sale of the land until final determination of the plaintiff’s claim in these proceedings – where, in order to enable the sale of the property to proceed, consent orders were made for the proceeds of sale to be paid into a solicitor’s trust account, and later into court, and the application for an interlocutory injunction adjourned – where the defendants now seek an order dismissing the application, and for payment of the money out of court – where the defendants contend there is no risk of any dissipation or disposal of the relevant defendants’ assets, there is no value to the plaintiff’s undertaking as to damages, some of the defendants are at risk of suffering loss if the proceeds of sale remain in court, and there is prejudice to unrelated third parties – where the first and second defendants have offered undertakings not to diminish the combined value of their assets below an amount representing half the profits payable to the first defendant, pending further order of the court – whether the plaintiff has made out a prima facie case for the relief it seeks – whether, in any case, the balance of convenience favours the grant or refusal of the injunction

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – DISCOVERY AND INTERROGATORIES – DISCOVERY AND INSPECTION OF DOCUMENTS – PRODUCTION AND INSPECTION OF DOCUMENTS – GENERAL MATTERS – GENERAL PRINCIPLES – where the plaintiff brings a cross-application seeking production of various documents and disclosure of certain information by the defendants – where the defendants oppose parts of the application on the basis that disclosure has not yet been undertaken, the very broad range of documents sought, and that the inquiry as to certain information appears to be a fishing exercise – whether orders should be made in the terms sought by the applicant

Australian Broadcasting Corp v O’Neill (2006) 227 CLR 57

Generic Health Pty Ltd v Otsuka Pharmaceutical Co Ltd (2013) 296 ALR 50

Samsung Electronics v Apple (2011) 217 FCR 238

COUNSEL:

A Morris QC and L Jurth for the plaintiff

M Stewart QC and D Clarry for the defendants

SOLICITORS:

Direct access brief, through CI Legal Services Pty Ltd, for the plaintiff

Dowd & Co for the defendants

  1. [1]
    The plaintiff, Waller Projects Pty Ltd, contends that in about June 2011 there was a “General Agreement” entered into between Mr Quinn (the sole director of Waller Projects) and Mr Dowling (the sixth defendant and the sole director of the fourth defendant (Dowling Yeppoon Pty Ltd)) as to “the manner in which their respective families would join forces to acquire and develop real estate jointly”, on the basis that “the relationship between the parties would be as joint venturers giving rise to the usual fiduciary duties”, the relationship would be conducted through a joint venture vehicle, which would be structured and established for each project, and profits and losses of the joint venture would be divided equally.[1]  The plaintiff contends that in about October 2012,[2] the vehicles to give effect to this “General Agreement”, referred to in the statement of claim as the “QD Joint Venture”, were designated as Waller Projects, representing the interests of Mr Quinn’s family, and Dowling Yeppoon, representing the interests of Mr Dowling’s family.[3]
  2. [2]
    The plaintiff alleges that in early 2014 there was an opportunity for the “QD Joint Venture” to acquire certain land at Jimboomba for development purposes, and that steps were taken by Mr Quinn, in conjunction with Mr Dowling, to bring this about; which were unsuccessful.  The plaintiff further alleges that, by “secret negotiations” between May 2014 and December 2015, in breach of the QD Joint Venture agreement, Mr Dowling continued to negotiate with the vendor of the Jimboomba land to purchase the land. 
  3. [3]
    The first defendant, FW Estate Pty Ltd, was incorporated in July 2014.  Mr Dowling and, since July 2015, Mrs Dowling (the seventh defendant) are the directors of FW Estate.  In December 2015, FW Estate became the registered owner of the Jimboomba land.  This is said to have occurred “in secret from” Waller Projects, Mr Quinn and Mr Quinn’s family.[4]   It is alleged the purchase of the Jimboomba land was an opportunity of the QD Joint Venture that was diverted by Mr Dowling to FW Estate, to the exclusion of the QD Joint Venture, including Waller Projects as a co-participant.[5]
  4. [4]
    The third defendant, DG Jimboomba Developments Pty Ltd, was incorporated in November 2015.  Mrs Dowling is the director of DG Jimboomba Developments.  Its shares are held by the second defendant, Bremha Pty Ltd (a company of which Mrs Dowling is the director and Mr Dowling is the secretary), and an unrelated company, Jhato Pty Ltd,[6] both of which contributed money to the project.  In addition to Bremha and Jhato, there was another investor in the project, Action Estate Corp Pty Ltd, which contributed substantial funds.  The plaintiff alleges that, from about November 2015, FW Estate and DG Jimboomba Developments have undertaken a “secret development” of the Jimboomba land, pursuant to a “Development Agreement” between them.[7]
  5. [5]
    Further, it is alleged that in about August 2017, FW Estate sold a half interest in the Jimboomba development to an AV Jennings entity, for just under $20 million.[8]   In April 2019, FW Estate entered into a contract to sell the remaining half interest in the Jimboomba land to AV Jennings, for about $28 million.[9] 
  6. [6]
    In these proceedings, the plaintiff claims that by their various actions, in relation to the development of the Jimboomba land without reference to Mr Quinn or Waller Projects, Mr Dowling and Dowling Yeppoon (through Mr Dowling) acted in breach of the fiduciary duties owed under the General Agreement in relation to the “QD Joint Venture”.  Waller Projects claims relief including a declaration of entitlement to an equitable interest, pursuant to a constructive trust, in half the proceeds of sale of the Jimboomba land; an account; and/or an order for equitable compensation. 
  7. [7]
    On 30 May 2019 Waller Projects lodged a caveat over the land, to prevent the sale of the remaining half interest to AV Jennings.   On 11 June 2019 Waller Projects commenced this proceeding.  On 12 June 2019 FW Estate made an application to this Court (in proceeding BS 6161 of 2019) for removal of the caveat.  On 13 June 2019 Waller Projects applied for an interlocutory injunction restraining the defendants from paying out or distributing the proceeds of sale of the Jimboomba land, until final determination of Waller Projects’ claim in these proceedings.
  8. [8]
    So that settlement of the sale to AV Jennings could proceed, the defendants agreed to have the proceeds of sale paid into a solicitor’s trust account, on the condition the caveat was withdrawn.  Accordingly, on 19 June 2019 orders were made, by consent:
    1. In this proceeding, upon the undertaking of the defendants that they would cause the proceeds of sale to be paid to and retained in a nominated solicitor’s trust account, that the application for an interlocutory injunction be adjourned to a date to be fixed; and
    2. In proceeding BS 6161 of 2019, on undertakings that steps would be taken to remove the caveat, that the application was dismissed.
  9. [9]
    This reflected a commercial arrangement reached between the parties, which enabled the settlement of the sale to proceed, and adjourned the plaintiff’s application so that it could be brought back on for full argument in the event a commercial settlement of the dispute could not be achieved.
  10. [10]
    The sale of the remaining interest in the Jimboomba land to AV Jennings went ahead, and the proceeds of sale were paid into the solicitor’s trust account.  By a further order of the Deputy Registrar made on 22 July 2019, the money (some $23,696,127.95) was paid into court, where it remains.
  11. [11]
    The defendants sought an expert report from a forensic accountant, for the purpose of undertaking a review of the income received for, the quantum of expenses incurred on, and the total distributions to be paid in relation to, the project for development of the Jimboomba land.  A report dated 9 August 2019, from Mr Steven Ponsonby, was served on the plaintiff and later filed in this proceeding on 22 August 2019.  On the basis of that report, the defendants contend that a 50% interest in the profit derived[10] by the relevant defendant from the project is just over $6.5 million.  Accordingly, the defendants offered an undertaking, on behalf of the first and second defendants, not to diminish the combined value of their assets below that amount, pending further order of the court, in return for an order for the release of the funds paid into court by consent.
  12. [12]
    The plaintiff refused to agree to such an order, and so the defendants re-listed the plaintiff’s adjourned application, and now seek orders that the application be dismissed, and for the payment of the money out of court.
  13. [13]
    The plaintiff opposes any such orders; and has also brought a cross-application, seeking production of certain documents and information and delivery of the expert report in a different format.

Interlocutory injunction

  1. [14]
    The relevant principles are well established.  As articulated by Gummow and Hayne JJ in Australian Broadcasting Corp v O’Neill (2006) 227 CLR 57 at [65] (Gleeson CJ and Crennan J agreeing at [19]):

“The relevant principles in Australia are those explained in Beecham Group Ltd v Bristol Laboratories Pty Ltd [(1968) 118 CLR 618].  This Court (Kitto, Taylor, Menzies and Owen JJ) said that on such applications the court addresses itself to two main inquiries and continued [at 622-623]:

‘The first is whether the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief … The second inquiry is … whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted.’

By using the phrase ‘prima facie case’, their Honours did not mean that the plaintiff must show that it is more probable than not that at trial the plaintiff will succeed; it is sufficient that the plaintiff show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial.  That this was the sense in which the Court was referring to the notion of a prima facie case is apparent from an observation to that effect made by Kitto J in the course of argument.  With reference to the first inquiry, the Court continued, in a statement of central importance for this appeal:

‘How strong the probability needs to be depends, no doubt, upon the nature of the rights [the plaintiff] asserts and the practical consequences likely to flow from the order he seeks’.”

  1. [15]
    Further, in Samsung Electronics v Apple (2011) 217 FCR 238 at [67]-[68] the Full Court of the Federal Court said:

“As Sundberg J observed in Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth (2009) 81 IPR 339 at [15], when considering whether to grant an interlocutory injunction, the issue of whether the plaintiff has made out a prima facie case and whether the balance of convenience and justice favours the grant of an injunction are related inquiries.  The question of whether there is a serious question or a prima facie case should not be considered in isolation from the balance of convenience.  The apparent strength of the parties’ substantive cases will often be an important consideration to be weighed in the balance…

It may also be necessary to consider and evaluate the impact that the grant or refusal of an injunction will have or is likely to have on third persons and the public generally.”

  1. [16]
    The defendants argue the application for an interlocutory injunction, restraining the payment out of the proceeds of sale, ought to be dismissed because the plaintiff has not made out a prima facie case for the relief which it seeks; and, in any event, the balance of convenience favours the refusal of the injunction, in circumstances where there is no suggestion of the defendants being unable to meet any judgment should the plaintiff succeed; there is no evidence of the defendants or any of them dissipating assets or the like; the plaintiff’s undertaking as to damages is worthless; the defendants (or some of them) are at risk of suffering loss if the money is not released; and there are contractual obligations to third parties who will be prejudiced if the money is not released.  In addition, the first and second defendants have offered an undertaking not to diminish the combined value of their assets below $6.5 million, which is the amount they contend that, if the plaintiff succeeds, represents 50% of the profit of the project earned by the first defendant (on the basis of the report from Mr Ponsonby).
  2. [17]
    As to whether the plaintiff has shown a prima facie case, the defendants first submit that the only agreement alleged by the plaintiff is the “General Agreement”, pleaded in [7] of the statement of claim.  But the parties to that agreement are said to be Mr Quinn and Mr Dowling, on behalf of “their respective families”.[11]  The plaintiff, Waller Projects, and the first defendant, FW Estate, did not exist as at the date of the alleged General Agreement.  As pleaded in [9] of the statement of claim, those entities were later, in October 2012, nominated as the “vehicles to give effect to the General Agreement”.  Consequently, Waller Projects has no entitlement or right enforceable against any of the defendants, under the alleged “General Agreement”.
  3. [18]
    Further, the defendants contend that the plaintiff’s case, in terms of an alleged oral “General Agreement”, involving children of Mr and Mrs Quinn (but not Mr and Mrs Quinn themselves) with Mr and Mrs Dowling and their children, joining forces to acquire and develop real estate jointly, with such agreement giving rise to fiduciary duties, is commercially implausible (indeed, it is said to be “incredible” and that it “beggars belief”[12]).[13] 
  4. [19]
    In an affidavit filed on 13 June 2019 (CFI 3-5) Mr Quinn deposes, at [4]-[7], in terms not dissimilar to what is pleaded in paragraphs [6]-[8] of the statement of claim.[14]   Mr Quinn also says that in early June 2011 Mr Dowling and he agreed (in relation to this “General Agreement on the manner in which our respective families would join forces to acquire and develop real estate jointly”) that “such relationship would be conducted through a joint venture vehicle in the form of a Unit Trust in which the Dowling family would be issued 50% of the Trust Units and the Quinn family would be issued 50% of the Trust Units” (at [7]).  He says he provided Mr Dowling with a draft Unit Trust Deed and draft Shareholders and Unitholders Deed, “that outlined the basis upon which the QD Joint Venture would proceed” (at [8]). 
  5. [20]
    However, the draft shareholders’ and unitholders’ deed which is annexed (commencing at exhibits p 56):
    1. (a)
      makes no reference to the QD Joint Venture (nor, perhaps unsurprisingly, to Waller Projects or FW Estate, which entities did not exist at that time);
    2. (b)
      purports to be between an unnamed company, and companies called Dowling Developments Pty Ltd and Q Fabrics Pty Ltd (neither of which are parties to this proceeding);
    3. (c)
      states that it is in relation to “The Bellmere Unit Trust”;
    4. (d)
      is in relation to a specific Development (defined on p 62), of particular Land, located in Bellmere (p 63), between Participants (p 65), who are the Unitholders (p 66), namely Dowling Developments Pty Ltd and Q Fabrics Pty Ltd; and
    5. (e)
      expressly addresses the interests of the Participants, and how much they will each contribute (p 68) and the relationship between the Participants, being that of joint venturers, owing fiduciary duties to one another (p 69).
  6. [21]
    Mr Quinn goes on to say that Mr Dowling made handwritten amendments to the documents, and annexes the PDF showing those amendments (commencing at the exhibits p 99).  Among others, I note that a handwritten amendment is made to clause 22 of the draft trust deed, which had provided for amendments to be made orally; the handwritten amendment is to delete “oral”, with the notation “must be in writing, requisite consent, or deed.  (ORAL IS NOT ACCEPTED)” (p 105). 
  7. [22]
    It is uncontroversial that the Bellmere property development did not proceed.   It is clear, on the face of these documents, that they do not formally record an agreement in terms of the “General Agreement” alleged in [7] of the statement of claim. 
  8. [23]
    There was another project, involving the purchase of the Couran Cove Island Resort, which did proceed.  According to Mr Quinn, for this project, a company called Couran Cove Holdings Pty Ltd (CCH) was incorporated, of which Mr Dowling was the sole director.  CCH was the trustee of The CCH Unit Trust.  The unit holders were Dowling Yeppoon (as to 50%) and Waller Projects (as to 50%) (Mr Quinn at [15], and exhibits p 167).  A Shareholders’ and Unitholders’ Deed was entered into, between CCH, Dowling Yeppoon and Waller Projects (commencing at p 178).  Once again, this agreement was in relation to a specific Development (p 184) of particular Land (p 186), being the Couran Cove Resort (see also Mr Quinn at [15] and [16]).  The relationship between, and the rights and obligations of, the Participants (p 187), being Dowling Yeppoon and Waller Projects, in relation to the Couran project were expressly articulated in the Shareholders’ and Unitholders’ Deed.
  9. [24]
    It is in that context that the defendants submit that the pleaded oral “General Agreement” is inherently improbable, in a commercial context, because it is “inherently improbable that two commercial men would have tied themselves up so as to preclude each of them from doing any property development in the future whatsoever without any term being mentioned for the agreement unless they did it with the other”.[15]  The written agreements, or drafts, which are in evidence do not support the alleged “General Agreement”; indeed are entirely inconsistent with it.[16]
  10. [25]
    On the other hand, the plaintiff submits that it is not the plaintiff’s case that the “General Agreement” bound the parties to an exclusive arrangement, such that they could not operate independently of the alleged joint venture; “[b]ut when they do join forces for a development, that would be the nature of the relationship”.[17]  That is what the plaintiff contends occurred in this case, in relation to the Jimboomba property.  The plaintiff submits that, in circumstances where (on its case) Mr Dowling told Mr Quinn about the opportunity to purchase and develop the Jimboomba land (Mr Quinn at [18]); Mr Quinn took some steps towards bringing that about, including making an offer to the vendor, with the agreement of Mr Dowling (pp 336, 338 and 340); and when the vendor declined the offer put by Mr Quinn (p 347), there was an opportunity left open by the selling agent to pursue the negotiations further (pp 349, 352, 353); the Jimboomba land had become, or was the subject of, the alleged QD Joint Venture, with the consequence that it would be a breach of the fiduciary obligations alleged to be owed between “the parties” [remembering the issue raised as to who “the parties” to the General Agreement are, as opposed to the “vehicles” nominated to give effect to the General Agreement] for Mr Dowling, or an entity associated with him, to try to acquire the land separately from Mr Quinn or Waller Projects.
  11. [26]
    According to Mr Quinn, he sent an email to Mr Dowling on 2 May 2014, asking if he wanted Mr Quinn “to recast the offer to accord with” the selling agent’s thoughts (p 356); Mr Dowling did not respond to that email (Mr Quinn at [37]); and instead Mr Dowling proceeded to engage in “Secret Negotiations” with the vendor of the Jimboomba property (statement of claim at [28]).
  12. [27]
    No written agreement(s), of the kind drafted (in the case of the Bellmere project) or entered into (in the case of the Couran Cove project) were prepared in relation to the Jimboomba property. 
  13. [28]
    The defendants say no such agreement as the “General Agreement” was made; and deny the existence of the fiduciary obligations alleged to be owed by any of the defendants to Mr Quinn, his family or Waller Projects (defence at [6]-[9]).
  14. [29]
    After May 2014, Mr Quinn says he had “almost daily contact by telephone and/or emails mostly in relation to Couran but also in relation to the acquisition of additional properties for the QD Joint Venture” (Mr Quinn at [38]).  In the context of his affidavit, it appears Mr Quinn is referring to “almost daily contact” with Mr Dowling.  Despite this, Mr Quinn says that “[u]nbeknown to me, Dowling continued to negotiate the purchase of the Jimboomba Property after our communications of 2 May 2014” (Mr Quinn at [60]).   The defendants contend that it is likely Mr Quinn had known that FW Estate proceeded to buy and develop the Jimboomba land for a considerable time.  The defendants’ solicitor has expressly asked Mr Quinn when he became aware that Mr Dowling had proceeded with the purchase; but he has failed to respond.[18]  This is relied upon as reinforcing the inference.  A defence on this basis has not yet been pleaded by the defendants; but is plainly foreshadowed.
  15. [30]
    On what is currently before the court, I do consider the plaintiff’s case to be weak.  The picture painted on the material currently before the court is that, where Mr Quinn and Mr Dowling (through various entities) proposed to proceed with a particular property development, this was documented in written agreements.  The notion that there was between Mr Dowling, an experienced property developer, and Mr Quinn, an experienced commercial solicitor,[19] an oral “General Agreement” that they (or their families, or some of them) would acquire and develop real estate, bound by unarticulated fiduciary obligations preventing one from pursuing an opportunity to the exclusion of the other, in the absence of any written agreement to that effect, does seem unlikely.
  16. [31]
    But bearing in mind the relevant principles on an application such as this; and that this is not a case in which the interlocutory relief sought would, in effect, bring an end to the matter (such that it may be necessary to demonstrate a stronger case[20]); and that the proceeding is at an early stage, such that it cannot be ruled out that disclosure and the gathering of evidence from witnesses may alter the picture which is presently painted; I am not persuaded that the application for an injunction should be dismissed on the basis that no prima facie case has been shown.  The plaintiff does not have to show that it is more probable than not that it will succeed; it is sufficient to show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending a trial.
  17. [32]
    That leads to the next, related enquiry:  the balance of convenience.  The strength, or otherwise, of the plaintiff’s case is a relevant factor, amongst others, in determining where the balance of convenience lies.
  18. [33]
    In that regard, I am persuaded that the balance of convenience favours the refusal of the injunction.   In the circumstances of this case, having regard to what I have already said about the strength of the plaintiff’s case, and the following matters, I am persuaded that the inconvenience or injury which the plaintiff would be likely to suffer if the injunction is refused is outweighed by the injury which the defendants, and third parties, would suffer if the injunction were granted.
  19. [34]
    First, in a practical sense, the grant of the injunction in this matter essentially amounts to a freezing order.  There is, as submitted for the defendants, no evidence in this matter of any risk to the integrity of any prospective court processes, should the plaintiff ultimately succeed.  There is evidence that the net asset position of Bremha (including the $4 million it is said to be owed under the profit share agreement discussed below) is just over $9.5 million; a position which is anticipated to substantially improve if it is able to proceed with one of the projects outlined in Mr Dowling’s affidavit filed 21 August 2019.  FW Estate’s net position is more modest, consistent with it being a special purpose vehicle, at about $485,000.[21] But importantly, there is no evidence of any dissipation or disposal of assets, such as to give rise to a risk that the court’s processes will be frustrated.  In response to this point, senior counsel for the plaintiff referred to an allegation in the statement of claim that Mr Dowling impermissibly paid money from a bank account, which the plaintiff contends was the “QD Joint Venture Bank Account”, in February 2015.[22]  The defendants deny there was a “QD Joint Venture Bank Account”, and plead that the nominated account was in the name of CCH Services Pty Ltd (the company incorporated in relation to the Couran Cove project).  It is admitted that the pleaded amounts of $3,363 and $15,000 were paid out of this account, for expenses related to the Jimboomba development; but the allegations of misappropriation are otherwise denied.[23]  Whatever the issue may turn out to be, in relation to these payments, they do not in any way support an inference, on this application, of a risk of dissipating assets by the defendants or any of them.
  20. [35]
    Next, the evidence before the court supports the defendants’ submission that there is no value to the plaintiff’s undertaking as to damages.  In this regard, although such an undertaking is offered, on the evidence before the court, outlining the results of property and other searches in relation to Waller Projects; its current sole director, Mr Quinn; its sole shareholder, Mrs Waller; and its former sole director, Mrs Quinn; any such undertaking appears, essentially, worthless.[24]   In addition, there has been no response to at least five requests made by the defendants’ solicitor to Mr Quinn for financial information relating to Waller Projects and the other related persons.[25]  In those circumstances, I proceed on the basis of what appears to be the case on the evidence relied on by the defendants. 
  21. [36]
    For the plaintiff, it is argued that in so far as it is in a poor financial position, that is because it was a special purpose vehicle, incorporated solely for the purpose of participating in the alleged QD Joint Venture, and it has been “robbed” of a valuable project which would have brought in substantial profits.[26]  There is no similar argument that can be made in relation to Mr Quinn, Mrs Quinn and Mrs Waller.  In addition, senior counsel for the plaintiff argued that the undertaking as to damages has no significance in this case, because the issue is about preserving money which can be held in a trust account, generating interest.[27]  I do not accept that argument.  A substantial part of the moneys held in court are payable to third parties.  There is the prospect, on the evidence before the court, of at least some of the defendants suffering loss if the money remains in court.  On the evidence before the court, the plaintiff is not in a position to make good that loss, if it is ultimately unsuccessful at trial.
  22. [37]
    There is evidence that the defendants (or at least some of them, including Bremha, and Mr and Mrs Dowling), and other entities associated with Mr and Mrs Dowling, are at risk of suffering loss and damage, if the proceeds of sale of the Jimboomba property remain in court.   The details are set out in the affidavit of Mr Dowling, filed on 21 August 2019 (CFI 18), who deposes that there are currently a number of active projects in which he and Mrs Dowling are engaged as part of their ongoing property development and investment businesses; projects which were entertained by them in anticipation of receiving the Jimboomba land proceeds, in order to finance those ventures (see at [6]-[7]).  The imperilled projects detailed in Mr Dowling’s affidavit range widely in terms of the value of funds involved and required, but include a substantial project which, if able to proceed (for which Mr Dowling says he needs his (Bremha’s) share of the Jimboomba proceeds) would result in a valuable property being added to the Bremha balance sheet.   Whilst it may be right to say, as the plaintiff does, that the smaller projects could be undertaken utilising the cash at bank Bremha has,[28] that is not the case in relation to the larger projects outlined by Mr Dowling.  In the absence of a valuable undertaking as to damages, the potential for losses if these projects are unable to proceed weighs the balance of convenience in favour of the defendants.
  23. [38]
    Further, the evidence is that there is also prejudice to unrelated, third parties, if the proceeds remain in Court.  These include engineers, accountants and lawyers who provided work and services in relation to the Jimboomba development who have yet to be paid; and GST payable to the Australian Taxation Office.[29]  In addition, a substantial part of the proceeds is payable to the two joint venture partners who participated, with FW Estate and Bremha, in the Jimboomba development, pursuant to a profit share agreement made in October 2017:  Jhato Pty Ltd and Action Estate Corp Pty Ltd.[30]  Under clause 2.2 of this agreement FW Estate is obliged to pay the proceeds:
    1. (i)
      First, to Bremha and Jhato Pty Ltd (the “Partners”) until the Land Price ($8 million) has been paid.    Under this provision, $4 million is payable to each of Bremha (Mr Dowling’s company) and Jhato (an unrelated company).[31]
    2. (ii)
      Second, to Action Estate Corp Pty Ltd (the “Investor”), until repayment of its investment of $12,000,000 has been made. Action Estate is also, uncontroversially, an unrelated company.
    3. (iii)
      After that, one third to the Investor and the balance to Bremha and Jhato equally.
  24. [39]
    These amounts (and the amounts otherwise owing for unpaid project costs, as well as amounts payable to Mr and Mrs Dowling, and another company related to them) are referred to and reviewed in the report of Mr Ponsonby.  The plaintiff is highly critical of Mr Ponsonby’s report.  Among other things, it is said there is an artificiality to the inclusion of the $12 million payable to Action Estate as an expense of the project, reducing the overall profit figure; because the $12 million investment represented a capital contribution to the joint venture, which was immediately paid by way of profit distribution to each of Bremha and Jhato.  On the other hand, the defendants point out that, in Mr Ponsonby’s summary in appendix 3A to his report, it is clear the $12 million from Action Estate has been taken into account as revenue, that is, as a credit which has been appropriately factored into the calculation of net profit.
  25. [40]
    Whatever the correct accounting treatment may be, on the evidence before the court there is a contractual obligation to pay that sum of $12 million to Action Estate.   It is an unrelated, third party to this proceeding.  The money is, on the evidence, due and owing to Action Estate and Action Estate has made demand for payment of the outstanding sum.[32]  The same applies in relation to the payment of $4 million to Jhato (to which interest also applies).[33]  This strongly favours the refusal of the injunction restraining the distribution of the proceeds.
  26. [41]
    Lastly, the first and second defendants have offered undertakings not to diminish the combined value of their assets below $6,500,000, pending further order of the court.[34]  That figure represents 50% of the profit derived by Mr Dowling’s company(ies) from the Jimboomba project, according to the report from Mr Ponsonby.  Although in oral submissions this was put forward as an alternative, only to be considered if I was against the defendants in terms of their opposition to the application for injunctive relief, I consider it is a relevant part of the consideration of where the balance of convenience lies.  That is consistent with how the undertaking is addressed in the written submissions for the defendants (see at [31]).  The undertaking does provide some security for the plaintiff, in the event it is successful in the proceeding, in circumstances where it no longer has the benefit of the caveat; the undertaking is not inconsistent with the position put forward by the defendants, in particular that the intention is to utilise the funds presently held in court (to the extent they are payable to the defendants, or some of them) to invest in other projects which will increase the asset value of, particularly, Bremha; and it firmly weighs the balance in favour of the defendants.
  27. [42]
    The plaintiffs approached the hearing of its application on the basis that the defendants were seeking to have the proceeds of sale released to them on the basis of Mr Ponsonby’s report, which supports the proposition that the maximum value of the plaintiff’s claim, should it succeed, cannot be more than about $6.5 million.  The plaintiff contends that Mr Ponsonby’s report is unreliable, due to the reliance placed on information provided by Mr Dowling, and various other matters raised by a forensic accountant retained by the plaintiff, Mr Cook.[35] The plaintiff contended that the defendants “bear the onus of establishing that circumstances now exist which would persuade the Court to release the proceeds of sale”.[36] 
  28. [43]
    I accept the defendants’ submission that this mischaracterises the application before the court.  What is before the court is the plaintiff’s (previously adjourned) application for an interlocutory injunction, to restrain the payment out or distribution of the proceeds of sale of the Jimboomba property.  It is a matter for the exercise of the court’s discretion, if satisfied the plaintiff has shown a prima facie case, to determine where the balance of convenience lies, in determining whether that money should remain in court, or be paid out.
  29. [44]
    In the context of an interlocutory application such as this, the court is not in a position to, nor is it necessary to, make any findings about the strength or otherwise of the analysis undertaken by Mr Ponsonby.   What Mr Ponsonby’s report does do, however, is provide some evidence to demonstrate that the undertaking offered by the first and second defendants has a rational basis.  Whether, in the event the plaintiff is successful in its claim, the measure of loss and compensation is as reflected in that report, or otherwise, remains to be seen.  I have not determined this application on the basis of a finding that Mr Ponsonby’s report reflects the only possible measure of loss, in the event the plaintiff is successful.  I have determined the application for the reasons outlined above, on the basis that whilst I accept for present purposes the plaintiff has shown a prima facie case, I consider the balance of convenience favours refusal of the injunction, having regard to the lack of strength of the plaintiff’s case, that no valuable undertaking as to damages is available, the risk of loss to the defendants and prejudice to third parties, and that an undertaking which provides some security for the plaintiff has been offered.
  30. [45]
    For those reasons, I propose to order that:

UPON THE UNDERTAKING of the first and second defendants by their Counsel, by way of security to the Plaintiff, that they will not diminish the combined value of their assets below $6,502,000, until further order of this Court or the written consent of the plaintiff,

IT IS ORDERED THAT:

  1. The funds paid into Court by consent pursuant to the Order of the Deputy Registrar dated 22 July 2019, be released as directed by the solicitors for the defendants in writing to the Deputy Registrar.
  2. The application filed 13 June 2019 is dismissed.

Plaintiff’s cross-application

  1. [46]
    By cross-application, filed by leave on 27 August 2019, the plaintiff seeks production of various documents, and other information in relation to services provided in relation to the Jimboomba project, as well as production of the documents provided to Mr Ponsonby, and further copies of Mr Ponsonby’s report.
  2. [47]
    The cross-application defines the “Relevant Period” as from 1 July 2014 to date; defines “Principal Entities” as the first, second, third and fourth defendants, as well as Cusack Lane Nominees Pty Ltd (formerly the fifth defendant, but against which the proceedings have been discontinued); and defines “Related Entities” as Mr and Mrs Dowling (the sixth and seventh defendants), C&N Management Pty Ltd, Melissa Vincent, Jhato Pty Ltd and Jeremy Goh.  
  3. [48]
    Paragraph 1(a) of the cross-application seeks production of a broad range of documents in respect of each of the Principal Entities for the Relevant Period.  These are said to be documents requested in the letter from Mr Cook, the accountant retained by the plaintiff to review Mr Ponsonby’s report. 
  4. [49]
    Paragraph 1(b) of the cross-application seeks, in relation to each of the Related Entities, for the Relevant Period, a “detailed breakdown of all the services provided by the Related Entities to the Principal Parties [presumably, Entities]”.  Again, this is said to come from Mr Cook’s letter.
  5. [50]
    Paragraph 1(c) of the cross-application seeks “all documents that were provided by the Defendants to their expert witness”, Mr Ponsonby.
  6. [51]
    Paragraph 2 of the cross-application seeks an order for delivery of Mr Ponsonby’s report in hardcopy format (legible, in colour where that is how it is intended to be presented and “containing no smaller than 10 point font”) and electronic format, on a USB, in text searchable PDF.
  7. [52]
    The defendants opposed the orders sought in paragraph 1(a) and (b) on the basis that disclosure has not yet been undertaken; the range of documents sought in paragraph 1(a) is very broad, some of which may not even be within the rules relating to disclosure, many of which have already been provided with Mr Ponsonby’s report; and, further, that what is sought in paragraph 1(b) of the application is in the nature of interrogation, which appears to be a fishing exercise.  There is no opposition to providing the documents which were provided to Mr Ponsonby (paragraph 1(c)); and no opposition to providing a further hardcopy (in colour where it is in colour in the original), and a text searchable electronic copy, of Mr Ponsonby’s report (paragraph 2), where that has not already been done.  
  8. [53]
    The plaintiff submits that pleadings have closed; disclosure is the next step in any event, and it has simply identified particular classes of documents that are relevant to understanding and analysing Mr Ponsonby’s report.   The reason for pressing for the production of the documents now, is to enable the plaintiff, with the assistance of Mr Cook, to make a proper assessment of the contents of Mr Ponsonby’s report.  Returning to the application for an interlocutory injunction, the plaintiff submitted that it was premature to make the orders sought by the defendants, given the unsatisfactory state of Mr Ponsonby’s report, and before the plaintiff has had a proper opportunity, with the benefit of the documents requested, to assess it and respond.  I do not accept that.  I have determined the plaintiff’s application for the reasons outlined above.  I do not consider it premature to have done so.  It follows that I am not persuaded there is a basis to order production of the broad range of documents sought in paragraph 1(a), and the inquiry sought by paragraph 1(b), of the cross-application now.  Disclosure should take its course, and if it is the case that the plaintiff considers there is some deficiency in what has been disclosed, that can be agitated at a later date.
  9. [54]
    I will however make an order that the defendants deliver to the plaintiff copies of the documents which were provided to Mr Ponsonby (to the extent those documents are not annexed to Mr Ponsonby’s report) and that, to the extent it has not already been done, the defendants deliver to the plaintiff a hardcopy of Mr Ponsonby’s report in the same form as it was filed in the court (that is, legibly and in colour where that is how it was intended to be presented in the original).  I do not propose to make an order as to the font size of any part of Mr Ponsonby’s report.   The document which has been filed is perfectly legible as it is currently prepared, including the appendices.   A text searchable copy of the report, on a USB, should also be provided, if that has not already been done.
  10. [55]
    The parties are requested to provide a form of order reflecting the orders proposed at paragraphs [45] and [54] above.  I will hear the parties as to costs.

Footnotes

[1]  Statement of claim at [6]-[7].

[2]  Although October 2014 is pleaded in [9] of the statement of claim, it was acknowledged at the hearing that this is a typographical error, and it should be October 2012.

[3]  Statement of claim at [9].

[4]  Statement of claim at [29].

[5]  Statement of claim at [30].

[6]  Statement of claim at [34]; defence at [30].

[7]  Statement of claim at [35]-[36].

[8]  Statement of claim at [39]-[40]; defence at [36].

[9]  Statement of claim at [42]; defence at [1]; defendants’ submissions at [1].

[10]  Although the plaintiff claims a one-half interest in the proceeds of sale (statement of claim at [53]), the defendants plead that, even on the plaintiff’s own case, the plaintiff could only be entitled to a one-half interest in the profit earned by FW Estate (defence at [43]).

[11]  As particularised, “families” is said to comprise the children of Mr and Mrs Quinn (but not Mr and Mrs Quinn themselves) and Mr and Mrs Dowling and their children.  See the affidavit of Dowd (affirmed 27 August 2019) at exhibits p 11.

[12]  Defendants’ submissions at [21].

[13]  See generally the defendants’ submissions at [19]-[23].

[14]  In paragraphs [19]-[29], references to paragraph numbers or page numbers are to this affidavit.

[15]  Defendants’ oral submissions at T 1-8.

[16]  T 1-10 to 1-11.

[17]  Plaintiff’s oral submissions at T 1-30 to 1-31.

[18]  See the letter dated 14 June 2019 from the defendants’ solicitor to Mr Quinn (affidavit of Wilson, filed 18 June 2019 (CFI 5 in 6161/19), at [1]-[4], and exhibits p 2).  See also transcript of the hearing at T 1-7.

[19]  The court was informed Mr Quinn no longer holds a practising certificate, but remains a director of the incorporated legal practice, CI Legal Services Pty Ltd, which appears on the court record as the solicitors for the plaintiff (T 1-2, 1-6 and 1-7).

[20] Generic Health Pty Ltd v Otsuka Pharmaceutical Co Ltd (2013) 296 ALR 50 at [27].

[21]  Affidavit of Ryan, filed 21 August 2019, at [6].

[22]  Statement of claim at [10], [31] and [32].

[23]  Defence at [10], [28] and [29].

[24]  Affidavit of Wilson, filed 18 June 2019 (CFI 2 in 6161/19) at [10]-[26].

[25]  Affidavit of Wilson (CFI 2 in 6161/19) at [5]-[9] (as to four requests) and affidavit of Dowd, filed 21 August 2019, at exhibits p 12 (as to the fifth request); the issue was also referred to in the letter of 24 July 2019 (affidavit of Dowd, at exhibits p 3).

[26]  Plaintiff’s submissions at [25]-[26].

[27]  Transcript of the hearing at T 1-46.

[28]  See the balance sheet for Bremha, affidavit of Ryan, at exhibits p 5.

[29]  Affidavit of Dowling (CFI 20) at [13], [16]-[20].

[30]  Affidavit of Dowling (CFI 20) at [7]-[10], and exhibits pp 4-10; and affidavit of Johnson filed 2 September 2019.

[31]  T 1-52.

[32]  Affidavit of Dowling (CFI 20) at [9] and [10].

[33]  Affidavit of Dowling (CFI 20) at [7] and [8].

[34]  Affidavit of Dowd, at exhibits pp 11-14 (letter of 15 August 2019).

[35]  Affidavit of Quinn, filed 27 August 2019, annexing a report from Mr Cook.

[36]  Plaintiff’s submissions at [2], [9] and [29].

Close

Editorial Notes

  • Published Case Name:

    Waller Projects Pty Ltd v FW Estate Pty Ltd & Ors

  • Shortened Case Name:

    Waller Projects Pty Ltd v FW Estate Pty Ltd

  • MNC:

    [2019] QSC 221

  • Court:

    QSC

  • Judge(s):

    Bowskill J

  • Date:

    05 Sep 2019

Litigation History

Event Citation or File Date Notes
Primary Judgment [2019] QSC 221 05 Sep 2019 Plaintiff's application for an interlocutory injunction dismissed and defendants to be paid the disputed funds paid into Court (on the basis of an undertaking of the defendants not to diminish the combined value of their assets below $6,502,000); plaintiff's application for production of categories of documents allowed to the extent of documents briefed to an expert and otherwise dismissed: Bowskill J.

Appeal Status

No Status