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Karma Waters Pty Ltd v Willowland Investments Pty Ltd[2005] QDC 200

Karma Waters Pty Ltd v Willowland Investments Pty Ltd[2005] QDC 200

[2005] QDC 200

DISTRICT COURT

CIVIL JURISDICTION

JUDGE ROBIN QC

No BD43  of 2005

KARMA WATERS PTY LTD

(ACN 108 271 496) AS TRUSTEE FOR THE KARMA WATERS UNIT TRUST

Plaintiff

and

 

WILLOWLAND INVESTMENTS PTY LTD

(ACN 102 510 396)

Defendant

BRISBANE

DATE 14/06/2005

ORDER

CATCHWORDS:

Uniform Civil Procedure Rules r 292 r 561 - plaintiff obtains summary judgment for the amount of that portion of a loan which was not repaid by the defendant on demand, which amount was paid into court under the Court Funds Act 1973 by a solicitor - plaintiff's application for payment out of moneys in court refused, as plaintiff failed to prove there were no other claimants - plaintiff contested counterclaim seeking contribution to legal costs which the plaintiff was obliged to pay within days of its own demand  under a "Framework Agreement", executed the same day as the Loan Agreement - Loan Agreement contained a provision excluding set-off - whether fairness might require a stay of any order under r 561 and/or s 8 of the Court Funds Regulation 1999 pending appeal as a matter of fairness, considered.

HIS HONOUR: It seems to me that there really is not an answer to the plaintiff's claim for judgment. In respect of the second part of the application for payment out of the money in court, I think there has been a failure to comply with Rule 561(2) and I must say that, in any event, the circumstances seem to me highly unsatisfactory. If I had felt constrained to make the second order sought, then I certainly would have accompanied it with a stay for the appeal period - or the period for making application for leave to appeal to the Court of Appeal - and thereafter until determination of the appeal and/or the application or the Court of Appeal makes an order.

...

HIS HONOUR: There are cross-applications before the Court. The plaintiff seeks judgment under Rule 292 and an order that moneys in Court be paid out to it in satisfaction of the judgment.

The defendant's cross-application seeks Mareva-type relief in respect of the funds in court which it is anxious not to have disbursed to the plaintiff for fear that its own counterclaim, if successful, would effectively be defeated because the money was gone.

There is the usual phenomenon encountered here of joint venturers who have fallen out seeking to raise doubts about the financial viability of each other.

Mr Thompson, for the defendant, has made it clear that if the plaintiff gave any appearance of being an entity of substance his client would not be so concerned and might be content simply to proceed with its claim.

The moneys in court were paid in by a solicitor, Mr Toogood, in an exercise which is unusual these days. They are there pursuant to the Court Funds Act of 1973 and have been, I think, correctly taken as being part of the District Court Suitors' Fund, having regard to Section 5.

The money paid into court on 21st of January this year was $172,544.00 which Mr Toogood's affidavit said he paid in pursuant to the provisions of Section 13(4)(e) of the Trust Accounts Act. That amount coincides exactly with the amount of the plaintiff's claim filed on the 7th of January this year with the exception that interest is claimed at a daily rate of $42.55 from the 23rd of September 2004.

That is the date of a demand made by the plaintiff for repayment of a loan of $600,000.00 which had been made to the defendant under a Loan Agreement of the 8th of March 2004.

On the same day the parties executed a so-called Framework Agreement which may have been anterior in the sense that by clause 2.1 thereof - "Immediately after the execution of this document the lender and the company will execute the initial loan agreement".

The parties were interested in a development which it seems depended on the outcome of the 'Springfield Litigation' which was dealt with in clause 6 of the Framework Agreement:

"6.  SPRINGFIELD LITIGATION

6. 1 Contributions

  1. (a)
    Karma Waters must contribute 50% of the costs incurred and to be incurred by the Company in connection with the Springfield Litigation.
  1. (b)
    For the avoidance of doubt, Karma Waters must pay the Company:
  1. (i)
    50% of the costs incurred by the Company to date in connection with the Springfield Litigation; and
  1. (ii)
    subject to clause 6.5, 50% of all costs (including court costs, barristers' fees, solicitors' fees, experts' fees and costs orders against the Company) incurred in the future by the Company in connection with the Springfield Litigation.

6. 2 Election

As a consequence of the Company having received an Opinion, Karma Waters may elect (by written notice to the Company) that it does not wish to proceed with the transactions contemplated under this agreement. Any notice given under this clause is irrevocable and must be given within 2 business days after the date that Karma Waters receives a copy of the Opinion from the Company.

6. 3 Notice

Within 10 business days after the execution of this document, the Company will notify Karma Waters of the costs of the Company has incurred in connection with the Springfield Litigation up to the date of this document.

6. 4 Payment

Karma Waters must pay the amount referred to in the notice given by the Company under clause 6.3 within 5 business days after receiving the notice.

6. 5 Costs

If Karma Waters provides a notice to the Company under clause 6.2 to allow costs incurred by the Company in connection with the Springfield Litigation up to the date of such notification. Such costs must be paid by Karma Waters to the Company within 5 business days after the date of such notification."

Both agreements were prepared by Blake Dawson Waldron Solicitors who turn out to have been the lawyers generating the costs referred to in clause 6. I took Mr Jackson, for the plaintiff, to describe them as the defendant's solicitors;

Mr Thompson indicates that it is at least obscure and that the firm may have been acting for both sides. As it happens, they may have done a rather better job for the plaintiff.

The defendant says that under clause 6 set out above, it has become entitled to payment of some $153,000 as the plaintiff's contribution towards clause 6 costs. Those ought to have been paid back in September 2004, one would think, having regard to clause 6.5 - if not earlier under the arrangements mentioned in clauses 6.2 and 6.3 (although one of the points the plaintiff makes in its reply and answer is that the defendant failed to meet the 10 business days' time limit in clause 6.3). It makes other objections to the defendant's claim for the costs contribution to the effect that even if the costs or some of them related to the Springfield Litigation, from some points of view, they do not do so within the meaning of the Framework Agreement. There seems to be a contention that some of the costs charged by the firm had nothing to do with the Springfield Litigation in any sense and also a claim that because there appears to have been no costs agreement what those solicitors may claim has to be determined by application of the Supreme Court scale.

The defendant's deponent says that this attitude now being evinced by the plaintiff is completely at variance with a series of assurances that the plaintiff's costs obligations were acknowledged. The defendant accepts that if the plaintiff persists in the same vein, there is no way in which it can obtain a quick Judgment on its counter-claim so as to achieve a complete resolution of the parties' financial issues arising out of the two agreements, which are clearly very closely related.

The plaintiff wishes to take advantage of its having a clear debt owing and also a provision preventing the defendant's  holding it up by reference to the counter-claim or anything like the counter-claim.

The Loan Agreement provides in clause 4.1:

"Repayment

The Borrower must repay the Loan on the earlier of:

  1. (a)
    15 Business Days after the date on which the Framework Agreement is terminated;
  1. (b)
    3 Business Days after the date on which the Borrower notifies the Lender that Springfield is not required to enter into the Land Sale Contract as a result of a determination of the Springfield Litigation; and
  1. (c)
    15 Business Days after the date on which the Lender notifies the Borrower that (as a consequence of the Borrower having received an Opinion) it does not wish to proceed with the transactions contemplated under the Framework Agreement. Any notice given by the Lender under this sub-clause is irrevocable and must be given within 2 Business Days after the date that the Lender receives a copy of the Opinion."

And in clause 5.1:

"How payments must be made

  1. (a)
    The Borrower must make each payment to the Lender under this document in Australian dollars by delivering an unendorsed bank cheque to the Lender at the place, or by direct transfer of cleared funds to the credit of the account, that the Lender nominates at least 1 Business Day before the payment is made.
  1. (b)
    The Borrower must make each payment to the Lender under this document without any set-off or counterclaim and (to the extent permitted by law) free and clear of, and without deduction or withholding for or on account of, any Taxes."

Mr Jackson has located authorities which tend to show the efficacy of provisions such as 5.1(b). Perhaps the most directly in point is Daewoo Australia Pty Ltd v. Porter Crane Imports Pty Ltd [2000] QSC 50. There is also Capital Finance Australia Limited v. Airstar Aviation Pty Ltd [2004] 1 QdR 122, The "Fedora" [1986] 2 Lloyd's Law Reports 441 and Coca-Coca Financial Corporation v. Finsat International Ltd [1998] QB 43.

In Daewoo in particular, White J offered counsel the opportunity to locate authorities to the effect that a provision like 5.1(b) was not effective to overcome setoffs under statute or in equity . Nothing was forthcoming. Mr Thompson has not been able to provide anything here either. He has reminded the court that authorities under the Trade Practices Act indicate that it is extremely difficult to oust its provisions by agreement. One is reminded principally of those cases in which provisions denying warranties and representations count for naught if conduct that infringes section 52 or some other provision is established.

This is not a case in which the defendant claims to have set aside any contractual arrangements. Here, the misleading and deceptive conduct, now said as well to give rise to an estoppel, is attributed to Mr Finn at times subsequent to the making of the agreements. There has been no opportunity for the court to go into any detail into factual matters, but there are serious suggestions here that the defendant has been "led on" and now faces being placed at a serious legal disadvantage by the plaintiff's insisting on its strict rights under the Loan Agreement.

Mr Thompson hasn't sought to make an argument today that it is somehow subsidiary to the Framework Agreement. His moral point focuses on the unfairness of it all, and I must say that is attractive to the court, but there seems no means - Mr Thompson has suggested none - of giving effect to it.

The Court Funds Regulation 1999 provides in section 8:

"Unless the Uniform Civil Procedure Rules provide otherwise, money that is secured within Court may only be paid, delivered, or transferred out of Court or be invested or sold under an order of the Court."

Rule 561 is:

"Disposal of money in court

561 (1) An application for payment out of court of money paid into or deposited in court in a proceeding must be served on all other parties.

  1. (2)
    A person who applies for payment out of court of money paid into or deposited in court in a proceeding must state whether the person is aware of a right or a claim made by another person to all or part of the money.
  1. (3)
    Unless these rules provide otherwise, money paid into or deposited in court must be dealt with under the Court Funds Act 1973."

In this case the plaintiff, in my view, has failed to comply with rule 561(2).

If the defendant is regarded as a person asserting a right or claim to all or part of the money in Court, it is in a position to protect its interest so far as it can by submissions to the Court. Mr Thompson made no assertions to the contrary.

In my opinion, the point of the rule, at least in a context like the present, is to permit the court to be satisfied there are no unknown claimants. Mr Jackson indicates he is prepared to state that from the Bar table. I do not regard that as sufficient. I think it ought to be established formally by proper evidence and, presumably, by affidavit.

In those circumstances, I am not prepared to make any order for payment out of court. If it were otherwise, and if the Court appeared to have no discretion in the matter of ordering payment out, I would, as already indicated, have thought it appropriate to accompany any order to that effect by a stay for the period allowed for an appeal to the Court of Appeal or the making of any application for leave to appeal to the Court of Appeal, and then until termination of those further proceedings or any order of the Court of Appeal. I think that is what the justice of the case requires.

In the circumstances, the defendant's cross-application need not be dealt with. It ought to be made clear that the defendant is not seeking to deprive the plaintiff of anything the plaintiff might be properly entitled to, assuming, of course, that the defendant's assertions about the costs are good.

When the plaintiff, some six months into the venture, during the course of which costs have doubtless been run up by the defendant, gave its notice of withdrawal, the defendant did repay the $600,000 loan amount as it was required to, with the exception that it withheld the sum equivalent to its claim for costs contribution.

So, there will be judgment for the plaintiff pursuant to Rule 292 for $172,544. I will adjourn the defendant's application to a date to be fixed.

...

HIS HONOUR: If the plaintiff prefers not to take out the order giving it judgment, then fair enough.

...

HIS HONOUR: The judgment will be for $172,544 for the claim and $11,646.72 interest, the judgment for interest being stayed until determination of the counter claim, or earlier order. I think the reserved costs should remain reserved, but I order that the defendant pay the plaintiff's costs of the application filed on 14th of April 2005, and of the action, so far as pursuit of paragraph 1 is concerned, but that the plaintiff pay the defendant its costs of the application so far as pursuit of paragraph 2 is concerned. The costs of the defendant's application, which I adjourn to a date to be fixed, are reserved.

And I further order that the parties comply with the times in the rules so far as the counter claim is concerned.

Close

Editorial Notes

  • Published Case Name:

    Karma Waters Pty Ltd v Willowland Investments Pty Ltd

  • Shortened Case Name:

    Karma Waters Pty Ltd v Willowland Investments Pty Ltd

  • MNC:

    [2005] QDC 200

  • Court:

    QDC

  • Judge(s):

    Robin DCJ

  • Date:

    14 Jun 2005

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Capital Finance Australia Ltd v Airstar Aviation Pty Ltd[2004] 1 Qd R 122; [2003] QSC 151
1 citation
Coca-Cola Financial Corporation v Finsat International Ltd (1998) QB 43
1 citation
Continental Illinois National Bank & Trust Co of Chicago v Papanicolaou [1986] 2 Lloyds Rep. 441
1 citation
Daewoo Australia P/L v Porter Crane Imports P/L t/a Betta Machinery Sales [2000] QSC 50
1 citation

Cases Citing

No judgments on Queensland Judgments cite this judgment.

1

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