Fenborough Pty Ltd v Gardner & Anor [2007] QDC 94

DISTRICT COURT OF QUEENSLAND CITATION: Fenborough Pty Ltd v Gardner & Anor [2007] QDC 094 PARTIES: Fenborough Pty Ltd (Applicant/Defendant) AND Gardner & Anor (Respondent/Plaintiff) FILE NO: Maroochydore 77/07 DIVISION: Civil PROCEEDING: Application ORIGINATING COURT: Maroochydore District Court DELIVERED ON: 25 May 2007 DELIVERED AT: Maroochydore HEARING DATE: 18 May 2007 JUDGE: Judge J.M. Robertson ORDER: Application dismissed. Costs of and incidental to the application awarded to the plaintiff as agreed or as assessed on the standard basis. CATCHWORDS: Application for specific performance and declarations in relation to monies paid into court pursuant to s12(4) of the Trust Accounts Act 1973; whether application is for summary judgment in part on the counter-claim; whether there is a dispute as to the ownership of monies in court; proper construction of s12(4) Cases cited: Re Burman [1993] 1 Qd. R. 49 Legislation: Trust Accounts Act 1973 Uniform Civil Procedure Rules COUNSEL: Mr SRD Blaxland for the Applicant/Defendant Mr C Jennings for the Respondent/Plaintiff SOLICITORS: Geoff Lyons Solicitors for the Applicant/Defendant WHD Lawyers for the Respondent/Plaintiff 1 -- 1 of 6 -- [1] Before the court is a multi-faceted application by the defendants for orders that a business sale agreement between the parties be specifically performed; that the plaintiff provide further and better particulars of it’s claim, and declarations in relation to a sum of $180,688.31 paid into court on 13 April 2007. For reasons that will become apparent, the debate at the hearing of the application on 18 May 2007 focused on the money in court, and sensibly the parties agreed to a directions order which will ensure that this potentially complex litigation will progress expeditiously. The Background [2] The plaintiff company and the defendants as trustees were in partnership for some years conducting the business of Mortgage Choice franchises in Pine Rivers and on the Sunshine Coast. The partnership could only offer financial products to it’s clients which were available from the franchisor Mortgage Choice Limited. [3] On 28 November 2006 the plaintiffs agreed to purchase the defendant’s interest in the partnership for $375,000 (the business agreement). Clause 23A and 23B dealt with assignments of leases of business premises at Caloundra and Nambour, and a new lease of Caloundra, and if such assignments were not satisfied by the completion date (30 November 2006), the purchase price was to be paid in to the trust account of the defendant’s solicitors “until the provisions of Clauses 23A and/or 23B shall have been fully satisfied and discharged by the (defendants)”. [4] The business agreement was completed on 30 November 2006, and Clauses 23A and/or 23B had not been satisfied, so, by agreement of the parties, $180,688.31 was paid to the defendants and $180,688.31 was paid into the trust account of their solicitors. [5] On 12 February 2007, the plaintiff by it’s solicitor gave the defendants solicitor notice that the ownership of the money paid into trust was in dispute, such notice being given pursuant to s12(4) of the Trust Accounts Act 1973 (the TAA). 2 -- 2 of 6 -- [6] On 11 April 2007 the plaintiff commenced proceedings in this Court claiming, inter alia: “An order that an inquiry and account be taken for the purchase price paid by the plaintiff for the defendant’s share in the said partnership.” [7] On 13 April 2007, the defendant’s solicitor Mr Taylor paid $180,866.31 into Court and the dispute before me concerns the ownership of this money. The Money in Court [8] On 3 March 2007 the defendants filed a Defence and Counter-Claim and at the same time the application before me was filed. The defendants seek by the Counter-Claim orders inter alia: “A. An Order that the plaintiff forthwith specifically perform the purchase agreement referred to in the Statement of Claim and do all such actions and execute all such documents as may be necessary to complete the purchase agreement. B. A Declaration that the plaintiff has no proprietary right to or claim upon the sum of $180,688.31 being the money paid into Court by the first defendants on the 13th day of April 2007 pursuant to the provisions of the Trust Accounts Act (Qld) 1973 and as amended. C. An Order that the sum of $180,688.31, being the money paid into Court by the first defendants on the 13th day of April 2007 pursuant to the provisions of the Trust Accounts Act (Qld) 1973 and as amended, together with accretions thereon, be paid out to the first defendants as they may direct.” [9] Mr Blaxland concedes that the order sought in paragraph 1 of his client’s application is essentially summary judgment for specific performance in part on the counter-claim, and that, as a result of a combination of r292(1) and r181 UCPR, that application is premature because an application for summary judgment on a counter claim may only be brought after the filing of a reply and answer which is due on 23 May 2007. 3 -- 3 of 6 -- [10] The debate therefore focussed on the declarations sought in relation to the money in court. As Mr Jennings observed, orders of this nature could be made pursuant to r658; however it is not necessary for me to reach any final conclusion about that. [11] Section 12 of the TAA is (relevantly) in these terms: “(3) Within 14 days of demand in writing made by the person for whom or on whose behalf trust moneys have been received or are held by a trustee and to which the person is then entitled the trustee shall pay to the person entitled thereto the balance of the moneys to which that person is entitled or as that person may direct in writing unless … (4) Where, before the making of a payment pursuant to subsection (3), a trustee has received notice in writing from any person who was a party to the business, proceeding or transaction in respect of which the moneys were received that the ownership of the moneys is in dispute, the trustee shall not without the written consent of the parties make payment of any such moneys until such time as- … (b) the trustee is advised that legal proceedings have been commenced to determine the ownership of the moneys whereupon the trustee shall forthwith pay the moneys into the court in which the proceedings have been taken to abide the decision of the court;…” [12] For present purposes it can be assumed that, apart form an assignment of the Caloundra lease which has been with the plaintiff’s solicitors since 9 February 2007, the business agreement has been completed and that the Plaintiff has since 30 November 2007, operated the business to the exclusion of the defendants. [13] The defendants argue that the proceedings initiated by the plaintiff do not raise a bona fide dispute or any dispute concerning the ownership of the monies, which should therefore be paid out to them. The plaintiffs argue that the proceedings do raise a clear dispute about the ownership of the monies particularly relating to the method by which the purchase price was calculated. 4 -- 4 of 6 -- [14] The plaintiff’s claim in part seeks an order that an inquiry and account be taken for the purchase price paid by the plaintiff for the defendant’s share of the business. It alleges inter alia that the defendants have by their conduct prior to 30 November 2006 breached the fiduciary obligations contained in s15 and 16 of the partnership agreement; and since have breached restraint of trade conditions contained in the business agreement such that the purchase price paid by the plaintiff for the defendant’s interest in the partnership was excessive. The defendants dispute the plaintiff’s allegation that the purchase price was determined by reference to commissions. It has to be said that there are provisions in the partnership agreement which appear to govern very closely the way in which a retiring partner’s share is to be valued where the remaining partner intends to purchase the retiring partner’s share: 23.2, 23.3; and these provisions seem at least to provide support for the plaintiff’s pleading. [15] In any event, Mr Blaxland’s argument essentially is that as the plaintiff has no proprietary interest in the monies in court, as required by s12(4), and given that the plaintiff has got all it bargained for in purchasing the defendant’s share of the partnership business, it can have no basis for arguing that there is a bona fide basis for contending that “the ownership of the money is in dispute”. [16] I agree with Mr Jennings that Mr Blaxland’s argument proceeds on a misconstruction of s12(4). An analogous argument to that advanced by Mr Blaxland was rejected by Ryan J in Re Burman [1993] 1 Qd. R. 49. The case is factually different, but his Honour’s reasoning is apposite in this case. At page 55 his Honour said: “It was submitted by senior counsel for the respondents that the proceedings were not to determine the ownership of the money; there was no claim in detinue and there was no proprietary interest of either the vendor or the purchaser in the deposit. See Hastingwood Property Ltd v. Saunders Bearman & Anselm (a firm) at 123. But the meaning of the words “ownership of the moneys is in dispute” must be determined having regard to its context. Section 12(4) deals with a situation in which there is a transaction in respect of which moneys were received by a trustee (as defined in s. 4). If legal proceedings are commenced which will have the effect of determining which of the parties to 5 -- 5 of 6 -- the transaction will be entitled to be paid these moneys by the trustee, I consider that these are proceedings to determine the ownership of the moneys. Though neither of the parties will have a proprietary interest in the deposit, they will have the right to receive it from the trustee depending upon the court’s determination of the legal proceedings which have been commenced. The issue is not one as between the trustee and the parties, but one between the parties themselves.” [17] The relevant context here is that on the pleadings and material before me, there is a dispute as to the amount which the plaintiff agreed to pay for the defendant’s share of the business, which is based on disputed allegations of breach of both the partnership and business sale agreements and the calculation of the agreed purchase price by the parties. The business sale agreement and the partnership agreement are clearly linked and the ownership of the monies now in Court can only be determined by the legal proceedings now commenced. [18] The plaintiff’s application in paragraphs 2 and 3 must therefore be dismissed. [19] For the reasons identified, order 1 in the application was not actively pursued at this stage; however Mr Jennings fairly conceded that subject only to the issue about the mistaken name of the defendants company in the original lease, which appears to have been resolved, there appeared no good reason why his client would not sign and return the Caloundra lease assignment. [20] The plaintiff has succeeded on the only really substantial issue argued on the return date of the defendant’s application and is therefore entitled to it’s costs of and incidental to the application as agreed or assessed on the standard basis. 6 -- 6 of 6 --