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Alborn v Stephens

 

[2012] QCA 176

 

SUPREME COURT OF QUEENSLAND

 

PARTIES:

RICHARD MOLLISON ALBORN
(first appellant)
ALBORN FAMILY CORPORATION PTY LTD
ACN 080 955 595
(second appellant)
SHAYKAR PTY LTD
ACN 076 868 552
(third appellant)
v
RAY STEPHENS
(first respondent)
GLENYS MARGARET STEPHENS
(second respondent)
AS & L PTY LTD
ACN 087 729 048
(third respondent)

FILE NO/S:

Appeal No 11669 of 2011

SC No 7795 of 2006

Court of Appeal

PROCEEDING:

General Civil Appeal

ORIGINATING COURT:

DELIVERED ON:

26 June 2012

DELIVERED AT:

Brisbane

HEARING DATE:

21 May 2012

JUDGES:

Holmes and Fraser JJA and Philippides J

Separate reasons for judgment of each member of the Court, each concurring as to the orders made

ORDERS:

  1. Appeal is allowed.
  2. Judgment and orders at first instance are set aside.
  3. Submissions are to be provided within 14 days hereof as to the orders which should now be made.

CATCHWORDS:

APPEAL AND NEW TRIAL – APPEAL – PRACTICE AND PROCEDURE – QUEENSLAND – POWERS OF COURT – OTHER MATTERS – where the appellants were plaintiffs in an action for damages and compensation – where the appellants alleged the respondents had, in breach of agreements and fiduciary duty, asserted an entitlement to the third appellant company’s interest in two franchise businesses – where the respondents counter-claimed against the first appellant for a failure to account for the settlement proceeds of another action and for oppressive conduct constituted by a share issue in the third appellant – where the primary judge made findings of agreements to transfer the third appellant’s interest in each business to the respondents – where the finding in respect of the first business was upheld on appeal and the finding in respect of the second business set aside – where the proceeding was remitted to the primary judge for further findings – where the primary judge found in respect of the agreement in relation to the first business that there was no additional term requiring the first and second respondent to transfer their beneficial interest in shares of the third appellant – where the primary judge found oppressive conduct by the first appellant – where the primary judge found the first appellant had failed to account for settlement proceeds – where the primary judge found that the increase in value of the second business was entirely attributable to the first and second respondents’ skill and expertise from the time they took it over – where the primary judge refused to find that the respondents had used the second business to establish and maintain their own businesses – where the primary judge ordered the taking of an account in respect of the second business only up to the date of judgment – where the primary judge accepted what the first and second respondents had said as to hours worked and expenditure in attending conferences in relation to the second business – whether the primary judge erred in the findings or the orders made

Corporations Act 2001 (Cth), s 233

Advance Bank Australia Ltd v FAI Insurances Ltd (1987) 9 NSWLR 464, considered

Alborn & Ors v Stephens & Ors [2009] QCA 384, considered

Alborn & Ors v Stephens & Ors [2009] QSC 198, considered

Alborn & Ors v Stephens & Ors [2011] QSC 341, considered

ANZ Executors & Trustee Company Limited v Qintex Australia Limited [1991] 2 Qd R 360, considered

Re D G Brims and Sons Pty Ltd [1995] QSC 53, cited

Warman International Ltd v Dwyer (1995) 182 CLR 544; [1995] HCA 18, considered

COUNSEL:

A J H Morris QC, with K A M Greenwood, for the appellants

P J Dunning SC, with L J Nevison, for the respondents

SOLICITORS:

Londy Lawyers for the appellants

Buchanan Legal for the respondents

[1] HOLMES JA: The action giving rise to this appeal resulted in a judgment at trial which was the subject of an earlier, partially successful appeal.  The proceeding was remitted to the trial judge for further findings, which were made and are the subject of the present appeal.

The action

[2] The appellants (to whom I shall at times refer collectively as the Alborn interests) were the plaintiffs in an action for damages and compensation in which it was alleged, in essence, that the first and second respondents, Mr and Mrs Stephens, had appropriated assets of the third appellant, Shaykar Pty Ltd, and asserted an entitlement to conduct its businesses, carried on under franchises: a Subway store at Morayfield and a combined Subway and Baskin-Robbins ice-cream store at Clontarf.  It was alleged that they had done so in breach of agreements and in breach of fiduciary duties. 

[3] Mr and Mrs Stephens and their company, AS & L Pty Ltd, (the Stephens interests) counter-claimed, alleging, inter alia, that the Alborn interests had compromised a proceeding brought against the Subway franchisor (the Subway proceedings) and had failed to account for part of the settlement proceeds received for the benefit of Shaykar.  Mr Alborn, they pleaded, had caused shares to be issued in Shaykar to the detriment of the Stephenses for the purpose of funding the current proceeding against them; the share issue was oppressive to the Stephenses.  The Stephens interests claimed an accounting for the settlement proceeds and an order that Shaykar be wound up. 

The findings on the first trial

[4] The matter went to trial in 2009.  The primary judge found that there was an agreement between the first appellant, Mr Alborn, and his former wife as trustees of the Alborn Family Trust (later replaced by the company Alborn Family Corporation Pty Ltd), Mr Alborn’s nephew, Mr Brendan Alborn, and the latter’s partner, Ms McLintock (both of whom subsequently assigned their causes of action to Mr Alborn) and Mr and Mrs Stephens as trustees for the Stephens Family Trust.  The agreement was that they would acquire Shaykar, and Shaykar in turn would acquire the Subway businesses at Clontarf and Morayfield, although Mr and Mrs Stephens would be the franchisees and sublessees because of Subway’s requirement that natural persons fill those roles.  It was also agreed subsequently that Mr and Mrs Stephens would enter into a Baskin-Robbins franchise for the Clontarf store. 

[5] After Shaykar encountered financial difficulties, there were discussions between Mr Alborn and Mr and Mrs Stephens as to what should be done with the businesses.  The trial judge found that it was agreed between them that, as consideration for the transfer of the beneficial ownership of the Morayfield franchise from Shaykar to AS & L, the latter company would take over Shaykar’s debts in respect of the Morayfield store, the Stephenses would abandon any right to recover $40,000 lent to Shaykar, Mr Stephens would resign as director of Shaykar and Mr Alborn would take over the day-to-day responsibility for managing the Clontarf store on Shaykar’s behalf.  That set of findings as to the terms of what became known in the later stages of the litigation as the “Morayfield agreement” was upheld on appeal. 

[6] Shaykar continued to own and operate the Clontarf business, with Mr Alborn assuming its day-to-day management until 13 August 2000.  On that day, Mr Alborn closed the business; on the following day, Mr and Mrs Stephens took it over in order to meet their continuing obligations as franchisees.  The learned judge made findings of an agreement reached in relation to the Clontarf store which involved the transfer of Shaykar’s interest in it to AS & L for $100,000.  Her Honour did not address the counter-claim beyond saying that because of the result in the proceedings, it was not necessary to further consider it.

The first appeal

[7] The primary judge’s findings in relation to an agreement in relation to the Clontarf store were found, on the first appeal in this court, to have been made in error.[1]  Instead, it was concluded that the Stephens and Alborn interests had not reached any binding agreement for Shaykar to dispose of the Clontarf businesses or franchises.  Muir JA wrote the leading judgment, with which the other members of the court agreed.  He observed that on the findings made, the Alborn interests appeared to be entitled to a declaration that Shaykar was the beneficial owner of the Clontarf store and the franchise, with an account ordered of what was due from the Stephens interests to the Alborn interests.  However, it was desirable that the parties make submissions as to the form of the orders which should be made, identifying the required factual findings and the evidence to support them.  Some of the relief sought in the counter-claim (which had not been decided on its merits) remained relevant: the claim for an account of the proceeds of the settlement of the Subway proceedings and the claim for an order that Shaykar be wound up.  The claims of the Stephens interests might give rise to a setoff.  The proceeding, including the counter-claim, was remitted to the trial judge for hearing and determination in accordance with the reasons given in the judgment on appeal.

The findings on remittal

[8] On the remittal of the matter, the learned primary judge gave a further judgment in which it was declared that Shaykar was the beneficial owner of the Clontarf business and the associated franchises and was entitled to an account of the profits of the business from 14 August 2000 to the date of the judgment (18 November 2011), with a number of associated orders for the carrying out of the account of profits.[2]  That account was to be undertaken by an accountant, Mr Vincent, who had already, as joint expert appointed by the parties, produced a report valuing the businesses.

[9] The primary judge then turned to consider the counter-claim.  Her Honour expanded on the Subway proceedings: in them it had been claimed that the Subway franchisor had made misleading or deceptive representations, causing the plaintiffs to invest in the acquisition of a number of stores, including, in Shaykar’s case, the Morayfield and Clontarf stores.  The action had been settled for $1,500,000 ($1,000,000 to settle the claim and $500,000 in costs) which was paid to the trust account of the appellants’ solicitors.

[10] The learned judge observed that Mr Alborn had chosen not to give evidence and any measure of what he ought to have accounted to Shaykar was necessarily “somewhat rough and ready”[3].  Her Honour referred to Warman International Ltd v Dwyer[4] for the proposition that what was required in an assessment of profit was,

“not...mathematical exactness but only a reasonable approximation”,

the task being

“to determine as accurately as possible the true measure of the profit or benefit obtained by the fiduciary in breach of his duty”.[5] 

It was proper to infer, she said, that Mr Alborn could not have said anything that would have assisted his case in relation to what should be Shaykar’s proportion of the Subway settlement.  Since the Clontarf and Morayfield businesses were two of the ten in respect of which the claim was made against Subway, the primary judge assessed the part of the settlement ascribable to Shaykar’s loss at $100,000 for each of those businesses.

[11] The $100,000 attributable to the loss on the Clontarf business should, her Honour said, be set off against the loss Shaykar claimed against Mr and Mrs Stephens for that business.  In addition, Mr Alborn, as director of Shaykar, had a fiduciary duty not to claim all of the settlement monies for himself to the detriment of Shaykar; that was a matter which should form part of the taking of accounts, resulting in an order that Mr Alborn account to Shaykar for $100,000. 

[12] Mr Alborn had admitted to issuing shares in Shaykar to raise capital to fund the proceedings against Mr and Mrs Stephens and AS & L in relation to both the Clontarf business and the Morayfield business.  That was oppressive conduct, the primary judge found, enabling the court to make an order under s 233 of the Corporations Act 2001 (Cth).  Her Honour’s reasons for that conclusion began as follows:[6]

“The application of company funds to prosecute the claims of some of the persons interested in the company against other persons interested in the company is oppressive on the basis that it ‘is unfair and infringes the basal principle that ‘the powers, and the funds, of a company may be used only for the purposes of the company’: Re D G Brims and Sons Pty Ltd[7].”

In addition to Re DG Brims and Sons Pty Ltd, her Honour cited for that proposition, by way of footnote, Advance Bank Australia Ltd v FAI Insurances Ltd[8] and ANZ Executors & Trustee Company Limited v Qintex Australia Limited.[9]  She continued,

Consequently, it was oppressive conduct to raise capital for Shaykar for it to litigate not only claims it had an interest in, but also claims that it plainly did not have an interest in, but rather only Mr Alborn or Alborn Family Corporation had such an interest in, or in which it had no legitimate interest as they had no realistic prospect of success, such as the claims in respect of the Morayfield, Kallangur and Bribie Island franchises.”[10]

[13] The primary judge found that the increase in the capital value of the Clontarf business once the Stephenses had taken it over was attributable to their efforts, skill and expertise.  Consequently, Shaykar should be regarded as entitled to the market value of the business as at 14 August 2000, the date it was taken over by the Stephens interests.  From Shaykar’s entitlement – to an account of profits for the interval between 14 August 2000 and the date of judgment and the market value of the Clontarf business as at 14 August 2000 - should be deducted the cost of the Stephenses’ unpaid labour and the sum of $100,000, Shaykar’s share of the Subway proceedings settlement in respect of that store.  Mr Alborn was also to account to Shaykar for the sum of $100,000 attributable to the loss claimed by Shaykar in the Subway proceedings in respect of the Morayfield business.  After the account was taken, any surplus was to repay shareholder loans to Shaykar.

[14] Ordinarily, Shaykar would be entitled to the re-conveyance of the Clontarf business, but it was improbable, the learned judge considered, that Shaykar or Mr Alborn would be accepted as franchisee.  Consequently, her Honour ordered that upon payment of any amount owing by AS & L to Shaykar after the account was taken, the Morayfield and Clontarf businesses were to be transferred to the nominee of the Stephenses, while Shaykar was to be wound up.  The claim and counter-claim were otherwise dismissed. 

The refusal to find that the Stephenses had transferred their beneficial interest in Shaykar

[15] In the first judgment, the learned primary judge had not considered it necessary to deal with the counter-claim, and the Stephens interests did not cross-appeal against its resulting dismissal.  In the judgment of this court, it was considered that their failure to do so did not preclude its resolution, because:

“there was no point in the respondents appealing against an order which was not adverse to their interests until other orders in their interests were set aside”.[11]

The counter-claim was, in consequence, part of what was remitted.

[16] The learned primary judge in dealing with the remitted proceeding rejected an argument that as part of the Morayfield agreement Mr and Mrs Stephens had given up their interest in Shaykar.  That was not, she said, part of the findings at the trial or on appeal.  The Alborn interests relied in advancing that argument on a letter written by Mr Stephens, dated 3 May 2000.  It was part of an agreed bundle of documents tendered as a single exhibit at the commencement of the trial.  It appears to have been written by Mr Stephens in response to a threat to terminate the Baskin-Robbins franchise agreement for the Clontarf store.  In it, he said

“..I was always Franchisee of the store on behalf of Shaykar Pty Ltd. I left as a Director and shareholder of that Company in September 1999 and therefor [sic] have no responsibility for that Company or the store it owns and operates….All correspondence should be addressed to Rick Alborn.”

But her Honour did not consider that Mr Stephens’ statement that he had “left as a Director and shareholder” a sufficient basis on which to conclude that the Stephenses’ interest in Shaykar had passed to Mr Alborn.

[17] The appellants argued that the only basis on which the primary judge could have found it unnecessary to address the counter-claim in the original proceedings was that her Honour must have concluded that the Stephenses no longer held any interest in Shaykar, leaving Mr Alborn as the only shareholder, so that there was no point in granting the relief sought.  She could not consistently with that approach find that the Stephenses had not given up their beneficial interest in Shaykar’s shares.  And the observation by this court, set out at [15] above, could only have been the result of a conclusion that, under the Morayfield agreement, Mr and Mrs Stephens ceased to have any continuing interest in Shaykar; because had they retained any such interest, it would have remained worth their while to succeed on the counterclaim. 

[18] Although the primary judge’s original judgment did not include such a finding, it was submitted, it did not follow that all of the terms of the agreement had been set out in that judgment.  Even if it were not implicit in the judgment, once the counter-claim had been remitted for hearing and determination it became necessary, in determining whether the share issue was oppressive, to establish who the shareholders in Shaykar were.  The evidence supported the conclusion that it was a term of the Morayfield agreement that Mr and Mrs Stephens would cease to be beneficial shareholders in Shaykar.  The appellants pointed to the letter from Mr Stephens of 3 May 2000; the learned judge, they said, had not explained why she was not prepared to find that Mr and Mrs Stephens no longer had any beneficial interest in Shaykar’s shares, given the admission it contained.

[19] And, the appellants said, the thrust of the documented discussions preceding the Morayfield agreement had been that there would be a complete sundering of the Alborn and Stephens interests.  The original judgment in the proceedings had set out the text of a letter in which Mr Alborn’s solicitor asked questions and Mr Alborn’s responses were given.  The solicitor asked whether Mr Alborn was “keeping Shaykar” and transferring the Morayfield business to the Stephenses or whether the converse was happening.  He suggested the former “would be more likely to work”; if it were the course adopted, his second question was whether there was to be a transfer of shares.  Mr Alborn responded that he was “keeping Shaykar” and transferring the Morayfield business.  He went on to say in respect of the share transfer:

“Yes.  I will take control.  Yes transfer to AFC (Alborn Family Corporation Pty Ltd, the second appellant).  We have other shareholders who have approved this, Brendan Alborn and Karyn McLintock.”[12]

[20] In this regard, the appellants referred also to a series of emails, the contents of which were similarly set out in the original judgment, from Mr Alborn to Brendan Alborn and Ms McLintock, in which he made a number of statements emphasising the need to separate both them and the Stephenses from Shaykar’s difficulties. 

Discussion

[21] The attempt to discern, in either the original judgment or this court’s judgment on the first appeal, a finding that the beneficial ownership of the Shaykar shares had been transferred is ingenious but ultimately unconvincing.  The learned primary judge set out the four terms of the agreement between Mr Alborn and Mr and Mrs Stephens – that Mr Stephens would resign as director, that Mr Alborn would take over managing the Clontarf store on Shaykar’s behalf, that the Stephens would take over managing the Morayfield store, and that the Stephens would take over responsibility for Shaykar’s debts and give up their rights to the $40,000 lent to Shaykar.[13]  Her Honour went on to say,

“This was the consideration for the transfer of the beneficial ownership of the Morayfield franchise from Shaykar to AS & L.”[14]

[22] Those findings do not admit of the possibility of an additional form of consideration, the surrender of the Stephenses’ interest in Shaykar’s shares.  If the Alborn interests are correct in saying that the treatment of the counter-claim (whether by the primary judge or this court) was not logical absent the finding for which they contend, any such failure of logic was entirely independent of, and has no bearing on, the existing findings about the Morayfield agreement; it certainly cannot be used to construct a fresh finding.

[23] As to whether the primary judge should, in any event, have found in dealing with the remitted counter-claim that the interest in the shares had been transferred, it is to be noted that such a contention formed no part of the Alborn interests’ pleading (which it might have done, at least in the alternative) and that it was not put to Mr or Mrs Stephens that such a transfer had occurred.  Mr Stephens had no opportunity to comment on the letter of 3 May 2000, or to say whether it reflected the facts.  Mr Alborn’s correspondence with his solicitor expressing his intention that the shares be transferred to his company says that he has the approval of his nephew and his nephew’s partner for the transfer, but notably does not mention the Stephenses.  Mr Alborn’s emails, on which the appellants rely as evincing an intention to part ways, refer repeatedly to the need for Mr Stephens (and for Brendan Alborn and Ms McLintock) to resign as a director of Shaykar to avoid liability in that capacity, but contains no suggestion that the Stephenses should give up their interest in Shaykar’s shares.

[24] All of Mr Alborn’s correspondence relied on by the appellants is, of course, unilateral; none of it goes to show any communication to, let alone agreement on the part of,  the Stephenses, on the subject of a share transfer.  And as counsel for the Stephens interests pointed out, the contention that there was such a transfer of the Stephens’ beneficial interest is inconsistent with the appellants’ pleading in answer to the counter-claim: that when Shaykar raised capital in August 2008, Mr and Mrs Stephens, as shareholders of Shaykar, were able to take up the shares issue.  On the balance of the evidence, I do not consider that the learned primary judge made any error in declining to find that there had been a transfer of the Stephenses’ beneficial interest in their shares in Shaykar.

The oppression finding

[25] The learned judge’s finding of oppression is also disputed.  The basis on which oppression was pleaded was that shares were issued in Shaykar “to the detriment of the [Stephenses] and for the sole purpose of funding this proceeding”.  In their answer to the counter-claim, the appellants admitted that Mr Alborn caused Shaykar to issue shares for the purpose of raising capital to fund the costs of the proceedings, but said that all the shareholders, including the Stephenses, were given the same opportunity to take up the shares.  The only detriment to them, in consequence, was that the share issue would put Shaykar in a financial position to pursue the proceeding against them, which was not a detriment to them in their capacity as shareholders.  Apart from those admissions, there was no evidence at all about the capital raising or the application of the funds to the litigation. 

[26] The appellants made two points:  the first, that there was no evidence that the proceedings were conducted for the benefit of anyone other than Shaykar, and the second, that there was no evidence about what funds were applied to the litigation by Shaykar and how much was contributed by the other appellants.  The respondents argued, on the other hand, that it was oppressive to raise money to litigate the Morayfield agreement, a claim which had no real prospect of success.  The documentary evidence was against it, and Mr Alborn had not given evidence to support it.

Discussion

[27] The appellants’ first contention does not appear to be sound; their statement of claim contained claims by AFC and Mr Alborn alleging breaches of fiduciary duties by the Stephenses which caused them the loss of the value of their shareholdings and investments in Shaykar.  The second contention has more force.  There was simply no evidence as to how Shaykar’s funds were used, so that the finding that company funds had been used to litigate claims in which only Mr Alborn or Alborn Family Corporation had an interest is unsustainable.

[28] As the appellants pointed out, the cases cited by the primary judge – Re: D G Brims & Sons Pty Ltd,[15] Advance Bank Australia Ltd v FAI Insurances Ltd[16] and ANZ Executors & Trustee Company Limited v Qintex Australia Limited[17] - involved quite different forms of proposed or completed conduct; none entailed the use of company funds to sue on behalf of the company.  Brims involved, essentially, the use of company money to defend a dispute between shareholders; in ANZ Executors & Trustee Company Limited v Qintex, what was proposed was that subsidiaries assume responsibility for their parent company’s debt; in Advance Bank, the corporate funds were being spent to promote the re-election of directors.

[29] The complaint in the counterclaim was that the share issue was undertaken for the purposes of funding the proceedings at large; not that it was a share issue for the purpose of funding a particular claim, successful or unsuccessful.  What was thus pleaded was not capable of amounting to oppressive conduct.  Nor was the evidence, which was confined to the admission that the purpose of the fund-raising through the share issue was to fund the proceedings, sufficient to establish that the share-raising was directed to any use of corporate funds for other than corporate purposes.  The finding of oppressive conduct should be set aside.

The finding that Mr Alborn was liable to account for $200,000

[30] The next complaint was that there was no evidence to support the finding that Shaykar’s share of the settlement proceeds from the Subway proceedings was one-fifth of the total, or $200,000.  That conclusion was arrived at, the appellants said, in the absence of any accounting evidence or information about the operations of the Morayfield and Clontarf stores which had, in fact, been operating profitably and successfully. 

Discussion

[31] As the learned judge noted, the statement of claim in the Subway proceedings pleaded, by way of loss and damage resulting from the misrepresentations alleged, that Shaykar was “substantially worthless”.  That proposition sits oddly with the notion that it was running profitable and successful stores.  At the least, there is, given that pleading, every reason to suppose that the Subway franchisor did not settle the action on the basis that the Morayfield and Clontarf stores were profitable and successful.  There is, too, in the evidence, some incidental support for the learned primary judge’s conclusion.  Mr Stephens’ notes of a meeting of the shareholders of Shaykar on 20 December (presumably 2006), tendered without objection, record Mr Alborn as saying in respect of the Subway proceedings, “Shaykar is about 20 per cent of the total claim”.  In any event, given what was pleaded about Shaykar’s position, the primary judge’s finding that 20 per cent of the settlement proceedings should be regarded as attributable to its claim was a proper and reasonable approximation.

The finding that the increase in the business’ value was due to the Stephenses’ skill

[32] The next issue raised by the appellants was that there was no basis for the learned judge’s finding that the increase in the capital value of the Clontarf business, from the time the Stephenses took it over, was entirely attributable to their skill and expertise, the result of that reasoning being that her Honour found Shaykar’s entitlement limited to the market value of the Clontarf business as at 14 August 2000.  The appellants argued that the issue was not litigated, and no evidence had been adduced as to anything the Stephenses had done to increase the value of the business over the period, or the impact of any such activities.  Since the value of money had declined over the period, the finding was, in effect, that the business’ real value had fallen under the Stephenses’ management.  It was evident that the value of a franchise business must, at least in part, depend on the franchise brand; but those matters had not been recognised in the judgment. 

[33] To those contentions, the Stephens interests responded that the primary judge was peculiarly well placed to decide the issue.  The fact that Mr Alborn had chosen to abandon the Clontarf business in August 2000 was an indication that he, and through him, Shaykar, regarded the Clontarf store as valueless at that point.

Discussion

[34] In my view, the appellants are correct in saying that there was an absence of evidence about anything the Stephenses did which could support the finding; nor could it be assumed that other factors such as association with the Subway and Baskin-Robbins brands and products had not contributed to the increase in value  of the business.  There was, consequently, no basis to adopt 14 August 2000 as the date on which the market value of the Clontarf business should be assessed.  Instead, the value of the business as at the date of account (or earlier sale) should be adopted as the basis of Shaykar’s entitlement, with allowance for any contribution to that value which the account taker is able to establish as made by the Stephenses’ exercise of skill and expertise.

The failure to find that the Clontarf business was used to establish and maintain the Bribie business

[35] Another matter of complaint seemed to be something of an afterthought in the appellants’ submissions.  The notice of appeal asserted error in the primary judge’s “declining to find that the Clontarf business (being trust property) was used to establish and maintain the Kallangur and Bribie Island Subway businesses.” (The Kallangur and Bribie Island Subway businesses were other businesses operated by the Stephens interests.) That finding was sought at first instance together with a consequential declaratory order, also sought on appeal: that Shaykar was the sole beneficial owner of the Kallangur and Bribie Island Subway businesses and franchises as a result. 

[36] The appellants did not identify any basis in the evidence for the claim in respect of the Kallangur business.  In respect of the Bribie Island business, the learned judge found that since

“the net earnings of the Clontarf [businesses] were negative at the time of the purchase by AS & L of the Bribie Subway franchise...the Bribie Island business was not purchased using the profits of the Clontarf business.”[18]

[37] Here the appellant sought a rather less dramatic outcome than that proposed at first instance and in the notice of appeal: that the extent to which the existence of the Clontarf business had assisted AS & L in borrowing to acquire the Bribie business be taken into account.  That was based on a comment in Mr Vincent’s report: he had noted that AS & L purchased the Bribie Subway franchise, in part, through an increase in a business development loan with Westpac.  He regarded the capacity to obtain an increase in the Westpac facility as due to AS & L’s net asset base/earnings potential, to which the Morayfield and Clontarf franchise businesses contributed. 

Discussion

[38] What was sought at first instance – a finding that the Clontarf business was used to establish and maintain the Kallangur and Bribie Island Subway businesses so as to give rise to a declaration that Shaykar was the sole owner of both the latter - seems rather a different proposition from anything which could be gleaned from Mr Vincent’s very limited comment, or the more modest proposal now put by the appellants on the basis of it.  I do not think the learned judge made any error in declining to make the finding sought.

Other findings as to the basis of the account

[39] Other matters raised by the appellants concerned finer details of the taking of the account:  it was said, firstly, that it was not explained why the accounting should not continue beyond the date of judgment to the date on which the accounting was concluded; secondly, that the learned judge should not have accepted what Mr and Mrs Stephens reported to Mr Vincent as to the hours they had worked in the Clontarf store; and thirdly, that the learned judge’s conclusion that there was no reason to suggest conferences attended by Mr and Mrs Stephens should not be taken into account as legitimate business expenditure was drawn in the absence of evidence on the subject.  The second and third of those matters, it was contended, should have been left to Mr Vincent to evaluate as part of the accounting process.

Discussion

[40] As to the first issue, it is hard to discern a rationale for continuing the accounting process only up until the point at which judgment was given.  Counsel for the respondents did not argue that it was appropriate to stop then, and it does not seem that he sought that result at first instance.  The account should cover the entire period up to the point at which it is taken, or up to any earlier disposition of the Clontarf business. 

[41] Mr Vincent said under cross-examination that the figures he ultimately received from the Stephenses, after some discussion, were “not unusually low or high”.  (They were 20 hours per week for Mr Stephens up to 2006 and 15 hours in 2007; five hours per week for Mrs Stephens between 2000 and 2004 and in 2007, and seven hours per week in 2005 and 2006.)  The learned judge accepted the Stephenses as credible witnesses; she could properly make the finding that the figures they gave were the best estimate of the time they spent.  Similarly, her Honour’s acceptance that the costs of attending conferences (of which there appear, from Mr Vincent’s report, to have been some five Subway and Baskin-Robbins franchisee conferences across the businesses) is unexceptionable.  There is no reason that Mr Vincent’s views on those matters should be substituted for her Honour’s.

The way forward

[42] At the hearing of this appeal, the prospect of the parties’ providing further submissions as to the orders which should be made, in the light of the reasons now given, was raised with counsel and met with apparent acquiescence.  Given the imperative after two trials and two appeals of having this dispute finally resolved, that is the course which should be taken.  I would allow the appeal, set aside the judgment and orders at first instance and direct that submissions be provided within 14 days hereof as to the orders which should now be made.

[43] FRASER JA: I have had the advantage of reading the reasons for judgment of Holmes JA.  I agree with those reasons and with the orders proposed by her Honour. 

[44] PHILIPPIDES J: I agree with the reasons of Holmes JA and with the orders proposed.

 

Footnotes

[1] Alborn & Ors v Stephens & Ors [2009] QCA 384 at [84].

[2] Alborn & Ors v Stephens & Ors [2011] QSC 341.

[3] At [85].

[4] (1995) 182 CLR 544.

[5] At 558.

[6] Alborn & Ors v Stephens & Ors [2011] QSC 341 at [116].

[7] [1995] QSC 53 at 53 per Byrne J; see also Advance Bank Australia Ltd v FAI Insurances Ltd (1987) 9 NSWLR 464 at 493; ANZ Executors & Trustee Company Limited v Qintex Australia Limited [1991] 2 Qd R 360 at 370.

[8] (1987) 9 NSWLR 464.

[9] [1991] 2 Qd R 360.

[10] Alborn & Ors v Stephens & Ors [2011] QSC 341 at [117].

[11] Alborn & Ors v Stephens & Ors [2009] QCA 384 at [91].

[12] Alborn & Ors v Stephens & Ors [2009] QSC 198 at [54].

[13] At [60].

[14] At [61].

[15] [1995] QSC 53.

[16] (1987) 9 NSWLR 464.

[17] [1991] 2 Qd R 360.

[18] Alborn & Ors v Stephens & Ors [2009] QSC 198 at [42].

Close

Editorial Notes

  • Published Case Name:

    Alborn & Ors v Stephens & Ors

  • Shortened Case Name:

    Alborn v Stephens

  • MNC:

    [2012] QCA 176

  • Court:

    QCA

  • Judge(s):

    Holmes JA, Fraser JA, Philippides J

  • Date:

    26 Jun 2012

Litigation History

Event Citation or File Date Notes
Primary Judgment [2011] QSC 341 18 Nov 2011 -
Appeal Determined (QCA) [2012] QCA 176 26 Jun 2012 -

Appeal Status

{solid} Appeal Determined (QCA)