Alborn & Ors v Stephens & Ors (No 2) [2012] QCA 267

SUPREME COURT OF QUEENSLAND CITATION: Alborn & Ors v Stephens & Ors [No 2] [2012] QCA 267 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 DIVISION: Court of Appeal PROCEEDING: General Civil Appeal ORIGINATING COURT: Supreme Court at Brisbane DELIVERED ON: 28 September 2012 DELIVERED AT: Brisbane HEARING DATE: Heard on the papers 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. The appeal is allowed. 2. The judgment of Atkinson J delivered on 18 November 2011 and the orders of Atkinson J made on 6 December 2011 are set aside. 3. It is declared that the third appellant is and remains the beneficial owner of the following businesses and the franchises associated therewith (referred to in this order as “the franchise businesses”); namely – (a) the Clontarf Subway business and associated franchise (referred to in this order as the “Clontarf Subway Store”); and (b) the Clontarf Baskin Robbins business and -- 1 of 9 -- 2 associated franchise (referred to in this order as the “Clontarf Baskin Robbins Store”). 4. The respondents shall do all things necessary to make over, convey and transfer to the third appellant or its nominee, all of the right to, title and interest in, and the benefit of the franchise businesses. 5. Without limiting the scope of their obligations under paragraph 4 of these orders, the respondents shall, in the performance of paragraph 4 of these orders: (a) Do all things and sign all documents as the third appellant may reasonably request, to enable the third appellant to obtain and enjoy the full benefit of the franchise businesses including, without limitation, enabling the nominee of the third appellant to become: (i) the franchisee in respect of each of the franchise businesses; (ii) the tenant of the respective premises at which each of the franchise businesses is located; (iii) the employer of the employees at each of the franchise businesses; (iv) the lessee of any leased chattels (including all fixtures, fittings and equipment) at each of the franchise businesses; and (v) the vendor of the businesses conducted at each of the franchise businesses, if the appellants decide to sell them or any of them to third parties rather than continuing to operate them; (b) For those purposes, within fourteen days of the date hereof, furnish the third appellant with the following documents for each of the franchise businesses: (i) the latest franchise agreement in respect of each of the franchise businesses; (ii) copies of all correspondence between the respondents and the franchisor relating to the subsistence, continuation and operation of the franchise, including but not limited to the latest reports issued by the franchisors in relation to performance of the stores, which, in the case of the Clontarf Subway Store is known as a “Combo Report”; (iii) the lease agreement in respect of the premises from which each of the franchise businesses is conducted; (iv) copies of all correspondence between the respondents and the lessor relating to the -- 2 of 9 -- 3 subsistence, continuation and operation of the lease of the premises from which each of the franchise businesses is conducted; (v) the lease agreement in respect of any leased chattels (including all fixtures, fittings and equipment) at each of the franchise businesses; and (vi) copies of all correspondence between the respondents and the lessors relating to the subsistence, continuation and operation of such lease agreements; and (c) On a date and at a time to be nominated by the third appellant, upon not less than fourteen days’ notice to the solicitors for the respondents, deliver up to the third appellant possession of the franchise businesses, including the business premises at which the franchise businesses are conducted. 6. Until delivery of possession of the franchise businesses, the respondents: (a) shall continue to manage the franchise businesses in a proper and reasonable manner, and in compliance with the respective franchise agreements, leases and other agreements; and (b) shall pay any ongoing expenses incurred in respect of the franchise businesses including, without limitation, franchise fees, rent, lease payments, trade creditors and utilities. 7. Upon delivery of possession of the franchise businesses, the third appellant will pay to the respondents the value of any stock on hand at a price to be agreed or in the absence of agreement, determined by the Special Referee referred to in paragraph 11 of this order. 8. The respondents (and each of them) shall indemnify and hold harmless the third appellant in respect of all liabilities incurred by, through or in connection with the franchise businesses prior to delivery of possession. 9. The appellants (and each of them) shall indemnify and hold harmless the respondents (and each of them) in respect of all liabilities incurred by, through or in connection with the franchise businesses subsequent to delivery of possession. 10. The third appellant is entitled, in accordance with the succeeding provisions of this order, to an account of the profits received by the respondents (or any of them), directly or indirectly from the franchise businesses, from 14 August 2000 to the earlier of: (a) the date on which the respondents deliver up to the appellants possession of the franchise -- 3 of 9 -- 4 businesses in accordance with subparagraph 5(c) of this order; or (b) the date on which the account is finalised. 11. Paul Vincent (referred to in this order as “the Special Referee”) is appointed as special referee to take the said account in accordance with sub-rule 501(1)(a) of the Uniform Civil Procedure Rules 1999 (Qld). 12. In accordance with sub-rules 502(1) and (3) of the Uniform Civil Procedure Rules 1999 (Qld), the special referee shall: (a) not hold a trial; but (b) make such inquiries as he thinks fit to decide the questions in issue. 13. Without limiting the generality of sub-paragraph 12(b) of this order, or of the Uniform Civil Procedure Rules 1999 (Qld), the special referee: (a) may require the parties, or any of them, to furnish to him such documents and information as he thinks fit; (b) may receive written submissions from the parties, in such manner as he thinks fit; (c) may inform himself of any other fact, matter or circumstances, in such manner as he thinks fit; (d) shall make such allowance for unpaid personal exertions, skill and enterprise of the first and second respondents as he thinks fit, provided that the allowance for such personal exertions shall be consistent with the primary judge’s reasons for judgment published on 18 November 2011; and (e) shall not be bound by any books of account and records to the extent that he considers them to be erroneous or unreliable. 14. In accordance with rule 506 of the Uniform Civil Procedure Rules 1999 (Qld), the remuneration of the special referee shall be: (a) on such basis as the parties may agree with the special referee in writing; or (b) in default of such agreement, on such basis as may be fixed by the Registrar of this court. 15. The sum of $100,000 shall be deducted from any amount determined to be due to the third appellant upon the taking of the account. 16. The first appellant shall pay to the third appellant the sum of $100,000. 17. The claim is otherwise dismissed. 18. The counter-claim is otherwise dismissed. 19. The respondents shall pay one half of the appellants’ costs of and incidental to the appeal on the standard -- 4 of 9 -- 5 basis. 20. The costs of the proceedings at first instance shall be remitted to the primary judge for determination once the taking of the account of profits is complete. 21. Upon the giving of reasonable notice, the parties shall have liberty to apply to the primary judge with respect to any matter arising out of or incidental to: (a) these orders; or (b) the report of the special referee. CATCHWORDS: APPEAL AND NEW TRIAL – APPEAL – PRACTICE AND PROCEDURE – QUEENSLAND – POWER OF COURTS – OTHER MATTERS – where the Court made orders allowing the appellants’ appeal in part and setting aside the judgment and orders at first instance – where the Court ordered the appellants and respondents to provide submissions as to the orders relating to the disposition of a business and franchise and taking of an account – orders made Alborn & Ors v Stephens & Ors [2009] QCA 384, considered Alborn & Ors v Stephens & Ors [2012] QCA 176, 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: On 26 June 2012, this court allowed an appeal1 against a judgment which concerned the ownership and profits of a combined Subway and Baskin Robbins business conducted under franchises at a store at Clontarf. The trial judge had declared the third appellant, Shaykar Pty Ltd, to be the beneficial owner of the business and franchises, and found that it was entitled to an account of profits for the period over which the respondents had been in occupation of and conducted the business. Her Honour found that there had been oppressive conduct on the part of the first appellant in the management of Shaykar and, having made that finding, ordered the company’s winding up. The account was to be taken from the date on which the respondents had entered into possession of the business until the date of the judgment, the market value of the business was to be assessed as at the former date and, on payment of any amounts owing to Shaykar after the taking of the account, the business was to be transferred to the nominee of the first and second respondent. [2] The judgment of this court concluded that the finding of oppression was wrongly made, that assessment of the value of the business was properly undertaken as at the date the account was taken or any earlier sale, with allowance for any contribution made by the first and second respondent’s exercise of skill and expertise, and that the account of profits should continue to the date on which it was taken or at least to any earlier disposition of the business. The judgment and orders at first instance were set aside, but rather than making orders concerning the disposition of the 1 Alborn & Ors v Stephens & Ors [2012] QCA 176. -- 5 of 9 -- 6 business and franchises and the taking of the account, the court ordered the parties to make submissions in that regard. It did, at that stage, seem possible that the parties would agree on a way of resolving the fate of the Clontarf business which would maximise its return to Shaykar, and in turn to all the parties as they realised the value of their respective interests in the company. (One mooted outcome was that Shaykar would obtain an account of profits and the current value of the business, with its winding-up to follow by agreement.) [3] Those submissions have now been furnished and there is no concurrence as to how matters should proceed. The appellants demand that the business be re-conveyed to Shaykar, while the respondents seek orders which would effectively allow them to pay Shaykar out. There is no question but that Shaykar is the beneficial owner of the business and franchises and is entitled to a declaration to that effect; that was determined on the original appeal in these proceedings.2 It follows that it is entitled to the reconveyance of the business it seeks, whether or not that will prove the course of action of most benefit to it, and orders should be made accordingly. That result obviates the need for the market value of the business to be established. The account of profits to establish what is due to Shaykar for the period during which the respondents were in possession of the business should proceed from 14 August 2000 until the date on which the account is taken or earlier reconveyance. The appellants proposed a number of orders to facilitate Shaykar’s retaking of possession and control. Those orders, with some modifications, should be made to avoid further litigation. [4] The appellants enjoyed very mixed success on the appeal. In particular, they failed on arguments that the learned judge had wrongly refused to find a transfer of the Stephens’ beneficial interest in their shares in Shaykar and that there was no evidence for her finding that Shaykar was entitled to a one-fifth share ($200,000) of a settlement in earlier proceedings. Given those significant defeats, I would confine the costs order, so far as the appeal is concerned, to an order that the respondents pay one half of the appellants’ costs of the appeal. It was indicated in submissions that offers had been made which, depending on the outcome of the account of profits, might affect what order is made in respect of the proceedings in the trial division. That being the case, the question of who should bear the costs of the proceedings at first instance should be remitted to the primary judge for determination after the account of profits is taken. [5] I would make the following orders and declaration: 1. The appeal is allowed. 2. The judgment of Atkinson J delivered on 18 November 2011 and the orders of Atkinson J made on 6 December 2011 are set aside. 3. It is declared that the third appellant is and remains the beneficial owner of the following businesses and the franchises associated therewith (referred to in this order as “the franchise businesses”); namely – (a) the Clontarf Subway business and associated franchise (referred to in this order as the “Clontarf Subway Store”); and (b) the Clontarf Baskin Robbins business and associated franchise (referred to in this order as the “Clontarf Baskin Robbins Store”). 4. The respondents shall do all things necessary to make over, convey and transfer to the third appellant or its nominee, all of the right to, title and interest in, and the benefit of the franchise businesses. 2 Alborn & Ors v Stephens & Ors [2009] QCA 384. -- 6 of 9 -- 7 5. Without limiting the scope of their obligations under paragraph 4 of these orders, the respondents shall, in the performance of paragraph 4 of these orders: (a) Do all things and sign all documents as the third appellant may reasonably request, to enable the third appellant to obtain and enjoy the full benefit of the franchise businesses including, without limitation, enabling the nominee of the third appellant to become: (i) the franchisee in respect of each of the franchise businesses; (ii) the tenant of the respective premises at which each of the franchise businesses is located; (iii) the employer of the employees at each of the franchise businesses; (iv) the lessee of any leased chattels (including all fixtures, fittings and equipment) at each of the franchise businesses; and (v) the vendor of the businesses conducted at each of the franchise businesses, if the appellants decide to sell them or any of them to third parties rather than continuing to operate them; (b) For those purposes, within fourteen days of the date hereof, furnish the third appellant with the following documents for each of the franchise businesses: (i) the latest franchise agreement in respect of each of the franchise businesses; (ii) copies of all correspondence between the respondents and the franchisor relating to the subsistence, continuation and operation of the franchise, including but not limited to the latest reports issued by the franchisors in relation to performance of the stores, which, in the case of the Clontarf Subway Store is known as a “Combo Report”; (iii) the lease agreement in respect of the premises from which each of the franchise businesses is conducted; (iv) copies of all correspondence between the respondents and the lessor relating to the subsistence, continuation and operation of the lease of the premises from which each of the franchise businesses is conducted; (v) the lease agreement in respect of any leased chattels (including all fixtures, fittings and equipment) at each of the franchise businesses; and (vi) copies of all correspondence between the respondents and the lessors relating to the subsistence, continuation and operation of such lease agreements; and (c) On a date and at a time to be nominated by the third appellant, upon not less than fourteen days’ notice to the solicitors for the respondents, deliver up to the third appellant possession of the franchise businesses, including the business premises at which the franchise businesses are conducted. 6. Until delivery of possession of the franchise businesses, the respondents: (a) shall continue to manage the franchise businesses in a proper and reasonable manner, and in compliance with the respective franchise agreements, leases and other agreements; and -- 7 of 9 -- 8 (b) shall pay any ongoing expenses incurred in respect of the franchise businesses including, without limitation, franchise fees, rent, lease payments, trade creditors and utilities. 7. Upon delivery of possession of the franchise businesses, the third appellant will pay to the respondents the value of any stock on hand at a price to be agreed or in the absence of agreement, determined by the Special Referee referred to in paragraph 11 of this order. 8. The respondents (and each of them) shall indemnify and hold harmless the third appellant in respect of all liabilities incurred by, through or in connection with the franchise businesses prior to delivery of possession. 9. The appellants (and each of them) shall indemnify and hold harmless the respondents (and each of them) in respect of all liabilities incurred by, through or in connection with the franchise businesses subsequent to delivery of possession. 10. The third appellant is entitled, in accordance with the succeeding provisions of this order, to an account of the profits received by the respondents (or any of them), directly or indirectly from the franchise businesses, from 14 August 2000 to the earlier of: (a) the date on which the respondents deliver up to the appellants possession of the franchise businesses in accordance with subparagraph 5(c) of this order; or (b) the date on which the account is finalised. 11. Paul Vincent (referred to in this order as “the Special Referee”) is appointed as special referee to take the said account in accordance with sub-rule 501(1)(a) of the Uniform Civil Procedure Rules 1999 (Qld). 12. In accordance with sub-rules 502(1) and (3) of the Uniform Civil Procedure Rules 1999 (Qld), the special referee shall: (a) not hold a trial; but (b) make such inquiries as he thinks fit to decide the questions in issue. 13. Without limiting the generality of sub-paragraph 12(b) of this order, or of the Uniform Civil Procedure Rules 1999 (Qld), the special referee: (a) may require the parties, or any of them, to furnish to him such documents and information as he thinks fit; (b) may receive written submissions from the parties, in such manner as he thinks fit; (c) may inform himself of any other fact, matter or circumstances, in such manner as he thinks fit; (d) shall make such allowance for unpaid personal exertions, skill and enterprise of the first and second respondents as he thinks fit, provided that the allowance for such personal exertions shall be consistent with the primary judge’s reasons for judgment published on 18 November 2011; and (e) shall not be bound by any books of account and records to the extent that he considers them to be erroneous or unreliable. 14. In accordance with rule 506 of the Uniform Civil Procedure Rules 1999 (Qld), the remuneration of the special referee shall be: (a) on such basis as the parties may agree with the special referee in writing; or (b) in default of such agreement, on such basis as may be fixed by the Registrar of this court. -- 8 of 9 -- 9 15. The sum of $100,000 shall be deducted from any amount determined to be due to the third appellant upon the taking of the account. 16. The first appellant shall pay to the third appellant the sum of $100,000. 17. The claim is otherwise dismissed. 18. The counter-claim is otherwise dismissed. 19. The respondents shall pay one half of the appellants’ costs of and incidental to the appeal on the standard basis. 20. The costs of the proceedings at first instance shall be remitted to the primary judge for determination once the taking of the account of profits is complete. 21. Upon the giving of reasonable notice, the parties shall have liberty to apply to the primary judge with respect to any matter arising out of or incidental to: (a) these orders; or (b) the report of the special referee. [6] FRASER JA: I agree with the reasons for judgment of Holmes JA and the orders proposed by her Honour. [7] PHILIPPIDES J: I have had the advantage of reading the reasons for judgment of Holmes JA. I agree with the reasons of her Honour and with the proposed orders. -- 9 of 9 --