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  4. Linwood Group Pty Ltd v Grange Warner Pty Ltd (No 2) - [2016] QDC 55

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Linwood Group Pty Ltd v Grange Warner Pty Ltd (No 2)[2016] QDC 55

Linwood Group Pty Ltd v Grange Warner Pty Ltd (No 2)[2016] QDC 55

DISTRICT COURT OF QUEENSLAND

CITATION:

Linwood Group Pty Ltd v Grange Warner Pty Ltd (No 2) [2016] QDC 55

PARTIES:

LINWOOD GROUP PTY LTD ACN 091 421 715

(Plaintiff)

v

GRANGE WARNER PTY LTD ACN 124 421 567

(Defendant)

FILE NO/S:

3061/14

DIVISION:

Civil

PROCEEDING:

Trial

DELIVERED ON:

17 March 2016

DELIVERED AT:

Brisbane

HEARING DATE:

On the papers

JUDGE:

Bowskill QC DCJ

ORDER:

Orders as per the attachment to these reasons.

COUNSEL:

P O'Brien for the Plaintiff

N Shaw for the Defendant  

SOLICITORS:

Crouch & Lyndon Lawyers for the Plaintiff

Porter Davies Lawyers for the Defendant

  1. [1]
    On 3 March 2016 judgment was delivered in relation to the plaintiff’s claim and the defendant’s counterclaim:   Linwood Group Pty Ltd v Grange Warner Pty Ltd [2016] QDC 32 (the reasons).
  2. [2]
    It was appropriate to give the parties time to consider the reasons, before making final orders.  Each party submitted a proposed draft order, together with submissions, which have been considered prior to making the final orders, which are set out below.
  3. [3]
    In so far as the orders were the subject of difference or dispute between the parties, the reasons for the orders made are as follows.
  4. [4]
    Special referees (order 3).   The defendant, in a draft order submitted at the end of the trial, proposed Andrew Heers and Mark William Pearce be appointed as special referees to take an account of the partnership, under r 527 of the Uniform Civil Procedure Rules (UCPR). This was reflected in the plaintiff’s draft order.  But in the more recent draft submitted by the defendant, only Mark Pearce was proposed to be appointed.  After seeking clarification from the parties about this, it was agreed that both Andrew Heers and Mark Pearce be appointed.
  5. [5]
    Interest on loan moneys (order 4(d)).  The plaintiff claimed interest on each of the advances up to $625,000, found to have been made under the loan agreement, at the rate of 8.5% from the date of the advance, to the date of repayment.  This was on the basis of clauses 3.1 and 3.2 of the loan agreement, and the definition of “base interest rate”, being 8.5% in the absence of an overdraft rate for overdrafts of $100,000 published by the lender’s (Linwood’s) bankers.
  6. [6]
    The defendant submits, firstly, that there is no “base interest rate”, because that applies “[s]hould there cease to be a published rate”, which was not the case here (rather, Linwood’s banker did not have an overdraft facility for amounts of $100,000).  I do not accept that argument.  As a matter of construction, the intent of the definition of “base interest rate”, in my view, is that 8.5% would be the default position.  
  7. [7]
    The defendant further submits that in any event, interest ought not be recoverable, given that the continued funding of the project by Linwood was “informal and mostly undocumented”, that it is “probable that there was no specific agreement” between the parties “that the partnership would pay interest” and that “it is probable that the written terms as to interest are not what was agreed between” Maurice Anderson and Michael Gafney.  The defendant says clause 2.3(e) of the partnership agreement should apply, making the loans interest free.
  8. [8]
    This issue is difficult to resolve.   On the one hand, in my view, it is reasonable to infer, from the written terms of the loan agreement, that the parties intended that interest would be payable on the moneys advanced by Linwood under that agreement.[1]On the other hand, as is addressed in the reasons, the circumstances undoubtedly changed, in terms of how and when the money would be advanced; when it would be repaid; and how long the project continued to go on.  The short point, however, is that there just was no evidence about how interest should be dealt with, in those changed circumstances.   Doing the best that I can in attempting to reconcile these positions, I propose to order that the plaintiff be paid interest on the advances totalling $625,000, at the rate provided for under the loan agreement of 8.5%, from the commencement of this proceeding on 8 August 2014, until the preparation of the draft account (in order to give some certainty as to the time frame).
  9. [9]
    Legal fees.  I refer to paragraph [89] of the reasons.  These fees are not recoverable under the loan agreement.  Although in an earlier draft order, the defendant had proposed these fees be dealt with as capital contributions, and the plaintiff has picked up on that in its proposed draft, that position is not maintained by the defendant in its later draft.  I cannot see how they can be so characterised – they are not contributions of capital to the partnership; but legal fees incurred by Linwood, in relation to its dispute with Grange Warner about the loans.  I make no allowance for these legal fees in the orders.
  10. [10]
    Interest on amounts to be accounted for by Linwood.  The defendant seeks an order that the plaintiff account for interest on the amounts referred to in paragraphs 74.2 and 74.4 of its counterclaim, under s 58 of the Civil Proceedings Act 2011.  The defendant’s counterclaim in respect of these two payments was expressly not for payment of a money sum, but for an accounting of those payments – that is, that rather than being dealt with in the partnership accounts as amounts properly paid out to Linwood, they be brought back into account as funds of the partnership.  There will be an accounting entry made to reflect the change.  In those circumstances, I do not see any basis to make an order for interest to also be paid, under s 58 of the Civil Proceedings Act 2011.
  11. [11]
    Costs (orders 5 and 6).  The plaintiff proposed an order for the defendant to pay 75% of its costs of the proceeding, calculated on the standard basis.  This was on the basis that, although the plaintiff’s claim was dismissed, it succeeded in obtaining a declaration that the monies were advanced to the partnership, and are repayable under clause 5.1(c) of the partnership agreement (in circumstances where the defendant had, at various times, denied the loan agreements, denied the advances were made, and in any event denied that they were appropriately characterised as loans, as opposed to capital contributions).  Further, it was submitted the plaintiff was largely successful in opposing the counterclaim, save as to two of the payments.   The plaintiff submitted that a costs order for each party, as to a percentage or otherwise, would increase the cost and complexity of the assessment of those costs.
  12. [12]
    The defendant, on the other hand, proposed orders that the defendant pay the plaintiff’s costs of the claims made in paragraphs 81 to 119 of the counterclaim (the parts abandoned on the morning of the trial) and that the plaintiff pay the defendant’s costs of the proceedings otherwise.
  13. [13]
    The starting point is rule 681 of the UCPR, which provides that, unless the Court orders otherwise, costs follow the event.  However, “the event” is not determined merely by reference to the overall result or outcome, but is to be determined by reference to “the events or issues, if more than one, arising in the proceedings”.[2]Further, as Muir JA has observed, “a party which has not been entirely successful is not inevitably, or even, perhaps, normally deprived of some of its costs”.[3]
  14. [14]
    Here, although the plaintiff has ultimately been unsuccessful in its claim, it is fair to say that in respect of one of the issues in the proceeding, the characterisation of the moneys advanced by it to the partnership, it has enjoyed success.  However, that must be balanced against the fact that the significant dispute between the parties was as to the plaintiff’s claim to an entitlement to be repaid those moneys without the taking of any account, in respect of which the plaintiff’s arguments were unsuccessful.   Its claim in relation to the service agreement was also unsuccessful.   In my view, the defendant is entitled to recover most, but not all, of its costs of the plaintiff’s claim.  I would regard 80% as a fair assessment.
  15. [15]
    In so far as the counterclaim is concerned, the defendant abandoned all but one of the issues before the trial commenced, on the basis that the defendant would pay the plaintiff’s costs of those issues.   In relation to the part that was pressed, it enjoyed partial success, in relation to 2 out of the 5 payments that were challenged.  In my view, the plaintiff is entitled to recover most, but not all, of its costs of the defendant’s counter-claim.  I would again regard 80% as a fair assessment.
  16. [16]
    On the basis that the “[h]onours were thus roughly evenly divided”,[4]and to avoid the costs of assessment, it might be thought that no order as to costs would be a fair way of dealing with this issue.  However, as I am not in a position to know whether that would be the case, in real terms, the orders made (orders 5 and 6) will reflect the views reached above.
  17. [17]
    Books and records as evidence of contents, and no receipts (orders 8 and 9).   The plaintiff proposed orders 8 and 9; the defendant opposes them.   Order 8 (that the books and records of the partnership shall be evidence of the matters contained in them) is one of the directions contemplated by rule 528(1)(b) of the UCPR.   Order 9 (that no payments shall be required to be verified by receipt) is contrary to rule 530(4) of the UCPR (which provides that payments over $250 are to be verified by receipt, unless the court otherwise orders). The defendant says that, since the books and records were maintained by Mr Gafney (Linwood), and may not have been seen by Grange Warner, these orders would be unfair; and the orders “might give the special referee the impression that he must take the books as conclusive, which is contrary to his role”.    The plaintiff submits that it would be lengthy, expensive and disproportionate to verify each and every payment over $250 by receipt for a period of approximately 9 years; and notes that to the extent either party wishes to contest an aspect of the account or a payment, that is permitted under the UCPR, and is dealt with in the orders (see orders 13 to 15).    In this regard, it is noted that rule 528(2) provides that “[i]f the court directs that the books and records of account are evidence of the matters contained in them, the parties have leave to take objections”.
  18. [18]
    In my view, in the circumstances of this case, orders 8 and 9 are appropriate.  Order 8 does not require the special referees to take the books and records as conclusive evidence.  As both rule 528(2), and order 13 contemplate, it is open to either partner to challenge any particular entry in the accounts.  Further to that, however, it is to be inferred in this matter that there has already been considerable analysis of the accounts, and that the disputed matters are those that were challenged in this proceeding.   As to the provision of receipts, keeping in mind the length of time over which this partnership was in place (from March 2007), and the nature of the partnership, the relationship between the partners, and the way that they transacted business (informally, mostly by verbal agreements, and without extensive paperwork) – at least up until things fell apart – I accept the plaintiff’s submission that to require receipts for every expense over $250 would be unreasonable.   There must be some pragmatism brought to bear, in bringing this matter to an end, especially in circumstances where the primary representative of Grange Warner has passed away.
  19. [19]
    Special referees’ task (order 12).   Order 12, proposed by the plaintiff, appears reasonable, and was not the subject of express opposition from the defendant.
  20. [20]
    Statutory trustees for sale.  The plaintiff had also proposed directions to the statutory trustees for sale, both in terms of payment of amounts received from settlements of sales, and for the provision of statements.   The defendant opposes the making of these orders, on the bases that this did not form any part of the relief sought in the proceeding, the orders are unnecessary, and questioning whether this court has jurisdiction in any event to give directions to trustees appointed by the Supreme Court.  I am not satisfied that there is a proper basis for this court to make the directions sought, and in the absence of further submissions and/or argument on this matter, I do not propose to make them.
  21. [21]
    The orders were otherwise uncontroversial.

DISTRICT COURT OF QUEENSLAND

 REGISTRY: BRISBANE

 NUMBER: 3061/14

Plaintiff: LINWOOD GROUP PTY LTD ACN 124 421 567 AS TRUSTEE FOR THE LINWOOD PROPERTY TRUST

 AND

Defendant: GRANGE WARNER PTY LTD ACN 091 421 715 AS TRUSTEE FOR THE GRANGE TRUST

ORDER

Before:Judge Bowskill QC

Date: 17 March 2016

THE ORDER OF THE COURT IS THAT:

  1. The plaintiff’s claim is dismissed.
  1. Pursuant to s 38 of the Partnership Act 1891 (Qld), the partnership between the plaintiff and defendant is dissolved.
  1. Andrew Heers and Mark William Pearce shall be appointed as special referees to take an account of the partnership pursuant to rule 527 of the Uniform Civil Procedure Rules 1999 (UCPR).
  1. The Court declares that:
  1. (a)
    the plaintiff advanced the sum of $625,000 to the partnership pursuant to the written loan agreement dated 29 April 2011;
  1. (b)
    the plaintiff advanced the sum of $411,400 to the partnership pursuant to clause 2.6(c) of the partnership agreement dated 15 March 2007;
  1. (c)
    these amounts, and interest on the amount in (a), are amounts due to the plaintiff from the partnership as loans under clause 5.1(c) of the partnership agreement;
  1. (d)
    interest shall accrue on the amount of $625,000 at the interest rate of 8.5% pa from 8 August 2014 (the date of commencement of this proceeding) until the date of preparation of the draft financial accounts in accordance with paragraph 10 below;
  2. (e)
    the plaintiff is liable to account to the partnership for the following sums, being the sums referred to in paragraph 74 of the amended defence and counterclaim filed 13 May 2015:
  1. (i)
    $83,600, being the amount referred to in paragraph 74.2; and
  2. (ii)
    $44,412.50, being the amount referred to in paragraph 74.4.
  1. The plaintiff shall pay 80% of the defendant’s costs of the plaintiff’s claim, assessed on the standard basis.
  1. The defendant shall pay 80% of the plaintiff’s costs of the defendant’s counter-claim, assessed on the standard basis.

THE COURT DIRECTS THAT:

Accounts

  1. The plaintiff and defendant shall provide the books and records of the partnership in their possession to the special referees within 14 days of the date of this order.
  1. The books and records of the partnership shall be evidence of the matters contained in them.
  1. No payments shall be required to be verified by receipt.
  1. The special referees are to prepare draft financial accounts of the partnership for the purpose of the final account referred to in order 3 above as at the date of this order and to provide a copy of the accounts to the plaintiff and the defendant.
  1. Each of the plaintiff and the defendant are to:
    1. (a)
      have reasonable access to the books and records of the partnership;
    2. (b)
      provide all reasonable and necessary assistance to the special referees for the purpose of preparing expeditiously the accounts of the partnership as at the date of this order; and
    3. (c)
      provide to each other copies of all correspondence sent to the special referees.
  2. The special referees shall:
    1. (a)
      calculate the total loans and interest owed to the plaintiff by the partnership pursuant to order 4;
    2. (b)
      ascertain whether there are any other liabilities owed by the partnership for the period from inception of the partnership to 10 March 2016;
    3. (c)
      ascertain and calculate the capital contributions of the partnership from inception to 10 March 2016;
    4. (d)
      prepare the balance sheet and profit loss statements for the partnership for the 2013/2014 financial year and each year thereafter until all partnership property has been sold; and
    5. (e)
      prepare and submit taxation returns for the 2013/2014 financial year and each year thereafter until all partnership property has been sold.

Further contentions

  1. Within 14 days of receipt of the draft partnership accounts in accordance with paragraph 10 above, each of the plaintiff and defendant are to provide to the special referees and the other party any written submission in respect of any contention as to variation or adjustment of the partnership accounts.
  2. The special referees will, within 28 days of the date that they provide the draft accounts to the parties in accordance with paragraph 10 above, make any variation or adjustment to the partnership accounts they consider should be made and provide to the parties the special referees’ final accounts.
  3. Any challenge to the special referee’s final accounts pursuant to Rule 532 of the UCPR must be made by application to the court which must be filed within 14 days of receipt of the final accounts, under paragraph 14 above.

Certificate of account

  1. The special referees shall file a certificate of the account of the partnership pursuant to rule 540 of the UCPR:
  1. (a)
    immediately after the determination of any challenge to the account under paragraph 15; or
  2. (b)
    immediately after the time allowed for the filing of any application in accordance with paragraph 15 if no such application is made.
  1. The account of the partnership the subject of the certificate is to be expressed as:
  1. (a)
    the sums to be paid out of partnership funds for the items referred to in clause 5.1(a) to 5.1(d) of the partnership agreement;
  2. (b)
    the sums to be paid into the partnership funds pursuant to the court’s declaration at paragraph 4(e) above;
  3. (c)
    any other sums that either the plaintiff or defendant are liable to pay into the partnership funds; and
  4. (d)
    a percentage division of any surplus funds in accordance with clause 5.1(e) of the partnership agreement.

Costs of the special referees

  1. The special referees’ fees and costs are to be borne out of the funds of the partnership.

Liberty to apply

  1. The parties and the special referees have liberty to apply upon 3 clear days’ notice in writing to vary these orders or for further orders.

Footnotes

[1]See the reasons at [82].

[2]Interchase Corporation Ltd (in liq) v Grosvenor Hill (Qld) Pty Ltd (No 3) [2003] 1 Qd R 26 at 60.

[3]Alborn v Stephens [2010] QCA 58 at [8].

[4]To adopt Muir JA’s phrase from Alborn v Stephens [2010] QCA 58 at [2].

Close

Editorial Notes

  • Published Case Name:

    Linwood Group Pty Ltd v Grange Warner Pty Ltd (No 2)

  • Shortened Case Name:

    Linwood Group Pty Ltd v Grange Warner Pty Ltd (No 2)

  • MNC:

    [2016] QDC 55

  • Court:

    QDC

  • Judge(s):

    Bowskill DCJ

  • Date:

    17 Mar 2016

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
Alborn v Stephens [2010] QCA 58
2 citations
Jump To
Cite 1 - [2010] QCA 58
Cite 2 - [2010] QCA 58
Interchase Corporation Limited v ACN 010 087 573 Pty Ltd[2003] 1 Qd R 26; [2001] QCA 191
1 citation
Jump To
Cite 1 - [2003] 1 Qd R 26
Linwood Group Pty Ltd v Grange Warner Pty Ltd [2016] QDC 32
1 citation
Jump To
Cite 1 - [2016] QDC 32

Cases Citing

Case NameFull CitationFrequency
Ure v Robertson[2017] 2 Qd R 566; [2017] QCA 201 citation
1

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