Cappello & Anor v Scrivener & Anor (No 2)

1. [1]

   I gave judgment in this matter on 7 December 2020. [1] These reasons assume familiarity with that judgment. I will use the same abbreviations.

2. [2]

   The case concerns an oral agreement that Mr Cappello and Mr Scrivener agree they made on 20 August 2013 to share the profits arising from securing control of and on-selling, or developing, three contiguous parcels of land at Rouse Hill.

3. [3]

   The dispute between Mr Cappello and Mr Scrivener was purely factual and was as to whether their agreement was subject to what I have called the Sunset Condition; namely, that Mr Cappello find a purchaser for the combined sites by the Sunset Date.

4. [4]

   For the reasons that I summarised at [448], I found that the alleged Sunset Condition was not a term of the 20 August 2013 agreement.

5. [5]

   At [465], I found that:

6. [6]

   I concluded the judgment stating at [467]-[471]:

7. [7]

   There are three outstanding issues.

8. [8]

   The first is whether only Tuscany is liable to pay equitable compensation or whether Mr Scrivener is also so liable.

9. [9]

   The second is whether, in order to deal with a quantum issue, the defendants should have leave to re-open to tender documents produced by third parties on subpoena.

10. [10]

    The third is whether the defendants should pay any part of the plaintiffs’ costs on an indemnity basis.

Is Mr Scrivener personally liable to pay equitable compensation?

1. [11]

   During the trial, the focus of the dispute was whether the agreement made by Mr Cappello and Mr Scrivener in their conversation on 20 August 2013 was subject to the Sunset Condition.

2. [12]

   Now that a dispute has arisen as to whether Mr Scrivener, as well as Tuscany, is to pay equitable compensation to the plaintiffs, it is necessary that I decide which of the alternative cases propounded by Mr Cappello should be accepted. That is, was the partnership between Mr Capello and Mr Scrivener personally, or was it between their corporate entities, Tuscany and Shaka Holdings, or both? And, if the partnership was between the companies, is Mr Scrivener nonetheless liable for Tuscany’s failure to account for the profit made from the venture?

3. [13]

   As Mr Pritchard SC, who appears with Mr Rayment for the plaintiffs, submitted in their Amended Commercial List Statement, the plaintiffs’ pleadings were cast broadly to allow for the possibility that the Court would find that the partnership was between the companies, rather than the two men personally.

4. [14]

   Thus, in the List Statement, the plaintiffs alleged:

5. [15]

   Mr Cappello’s account of the 20 August 2013 conversation [2] included that:

6. [16]

   In Mr Scrivener’s account of the conversation, he made no mention of Tuscany or of any corporate entity that Mr Cappello might later use. [3]

7. [17]

   Mr Pritchard and Mr Rayment submitted that Mr Cappello’s statement, that it “might be a good idea to leave [his] name off things”, was a comment made “after the agreement had been reached”. That is not how I understood Mr Cappello’s evidence. Although the men had shaken hands at the point set out above, a fair reading of Mr Cappello’s account of the conversation is that leaving his name “off things” was part of the agreement.

8. [18]

   At [113], I found one aspect of the parties’ post-contractual conduct was:

9. [19]

   Mr Pritchard and Mr Rayment submitted that:

10. [20]

    I do not agree. I was merely recording that despite having denied suggesting on 20 August 2013 that Tuscany be used “as the company for our partnership” (as Mr Cappello had deposed), as a matter of fact, Mr Scrivener caused Tuscany to enter into the Due Diligence Deeds referred to. That suggested that Mr Cappello’s recollection of what was said about this on 20 August 2013 was correct.

11. [21]

    At [219]-[232], I made findings about the Information Memorandum that Mr Cappello caused to be prepared and which included the statement:

12. [22]

    I found that Mr Scrivener’s evident acceptance of the accuracy of that statement to be a factor, among many others, pointing to the conclusion that the alleged Sunset Condition was not a part of the 20 August 2013 agreement. [4]

13. [23]

    But those matters, when coupled with:

14. [24]

    But, assuming this is correct, and that it is Tuscany that is primarily liable to pay equitable compensation, the fact remains that it was Mr Scrivener who caused Tuscany not to honour Tuscany’s obligations.

15. [25]

    The defendants admit in their Commercial List Response that:

16. [26]

    The plaintiffs pleaded, and developed submissions to the effect that, assuming the partnership was between the two corporate entities, Mr Scrivener was accessorily liable; whether by reason of his involvement in Tuscany’s breach of fiduciary duty, or breach of trust.

17. [27]

    In those circumstances, Mr Pritchard and Mr Rayment submitted:

18. [28]

    Mr Studdy SC, who appeared for the defendants, did not on this application respond to those submissions save to submit that:

19. [29]

    It is true that I did not make findings about accessorial liability in the main judgment. That is one of the matters reserved for further consideration [6] and is being dealt with in these reasons. In that regard, I accept Mr Pritchard’s and Mr Rayment’s submissions.

20. [30]

    Mr Pritchard accepted that the submission at [28(b)] was correct.

21. [31]

    It follows that Shaka Holdings, but not Mr Cappello, is entitled to judgment against both defendants for the relevant amount.

Quantum

1. [32]

   It follows from my findings that the defendants are liable to pay Shaka Holdings 50% of the proceeds received by Tuscany from the sale of the three sites by 88 Rouse Land Pty Ltd.

2. [33]

   It is common ground that Shaka Holdings thus must receive half of:

3. [34]

   The remaining dispute concerns a further amount of $2,276,586.52 paid to 88 Rouse Land on completion.

4. [35]

   Mr Cappello referred to this sum in his affidavit of 18 October 2018. He said at [371]:

5. [36]

   Mr Studdy did not challenge this evidence in cross examination. Mr Scrivener did not refer to the sum in his affidavit evidence. He gave no evidence in chief concerning the funds received by Tuscany from the project. Indeed, the defendants served no evidence on quantum.

6. [37]

   Mr Pritchard took the matter up with Mr Scrivener in cross examination. The following exchange occurred:

7. [38]

   Mr Pritchard and Mr Rayment referred to the matter in their final submissions:

8. [39]

   At [428], I said:

9. [40]

   The question is whether I should find Tuscany did, in fact, receive half of that $2,276,586.52, namely, $1,138,299.26, such that the amount of equitable compensation the defendants should now pay to the plaintiffs should include an amount equal to half of that figure, namely $569,146.63.

10. [41]

    The defendants now seek to tender documents produced on subpoena by Oracle Estates Pty Ltd and Oracle Rouse Hill Pty Ltd between August 2019 and February 2020. The subpoenas were issued at the request of the plaintiffs.

11. [42]

    The defendants wish to submit that those documents contradict my tentative finding that Tuscany was entitled to half of the $2,276,586.52 and show that, in fact, Tuscany only received $385,072.04 of the $2,276,586.52; of which the Shaka Holdings’ share would be $192,536.02.

12. [43]

    Mr Studdy accepted that the defendants needed leave to reopen their case in order to tender the documents.

13. [44]

    The documents that the defendants seek to tender are:

14. [45]

    Although the documents in question were produced to the Court in response to subpoenas issued by the plaintiffs, they were available to be tendered by either of the parties. Save for whatever may be inferred from the statement by the defendants’ solicitor, Mr Balasubramanian, set out below, [7] there is no evidence before me as to if and when the documents came to the attention of the parties or their legal advisers.

15. [46]

    The principles upon which the Court acts when faced with an application to reopen are settled. Those principles are that:

16. [47]

    It is implicit in all the cases considering this question, that some explanation must be offered as to why the evidence sought to be deployed was not tendered at the appropriate time.

17. [48]

    The explanation offered on behalf of the defendants as to why the documents were not tendered during the hearing is contained in an affidavit sworn by Mr Balasubramanian, referred to at [45] above, as follows:

18. [49]

    I find it hard to accept this explanation for a number of reasons.

19. [50]

    First, the plaintiff’s opening submissions (prepared as long ago as 17 February 2020 in anticipation of an earlier hearing date) stated that “Tuscany appears to have received at least $9,262,937.95 from the venture” making clear that the parties were “contending for an entitlement to more than a one half share of $9.05m”.

20. [51]

    Second, Mr Cappello’s affidavit evidence referred to at [35] above and Mr Pritchard’s cross examination of Mr Scrivener referred to at [37] must have made clear to the defendant that the plaintiffs were contending for a share of the $2,276,586.52.

21. [52]

    Mr Balasubramanian’s somewhat opaque assertion that the defendants “would have tendered” the documents suggests that those advising the defendants had access to the documents during the hearing, gave consideration to tendering the them but decided not to do so because of an apprehension as to the amount the plaintiffs were seeking.

22. [53]

    As I have said, the defendants adduced no evidence on quantum. The defendants were very well represented at the hearing before me and I must assume that if, as appears implicit in Mr Balasubramanian’s explanation, consideration was given to the tender, the decision not to tender was taken deliberately, and after careful consideration.

23. [54]

    In oral submissions, Mr Studdy pressed only very faintly the explanation proffered by Mr Balasubramanian but submitted, rather, that it was for the plaintiffs to prove the quantum of their claim, that the documents were equally available to the plaintiffs and available to be deployed by Mr Pritchard during the passage of cross examination set out above.

24. [55]

    So much may be accepted. But it is also true that Mr Scrivener, as the sole director of Tuscany and one of the signatories to the 88 Rouse Land Unit Trust financial reports, must know what amount Tuscany received and could have deposed to the true position.

25. [56]

    However, the documents sought to be tendered are few in number and in my opinion clearly show that Tuscany did not receive half of the $2,276,586.52 but, rather received only $385,072.04 from that sum.

26. [57]

    That is made clear from the “Bank Register” which shows that:

    1. (1)

       the 88 Rouse Land Unit Trust received the $2,276,586.52 on 17 July 2015 as “Tian Tong Sale - balance on settlement”;

    2. (2)

       funds were paid from that sum between 21 July 2015 and 2 November 2015, leaving a nil balance at 30 November 2015;

    3. (3)

       the only “profit distributions” made occurred on 2 November 2015, being $385,072.04 to Tuscany and $386,390.99 to Oracle Insight Pty Limited; and

    4. (4)

       all other payments were on account of interest to an outside lender, and principal and interest repayments to Tuscany and Oracle Insight.

27. [58]

    The “Partner Distributions” document shows that the total amount received by Tuscany was $9,286,132.04, calculated as follows:

28. [59]

    Consistent with this, the 88 Rouse Land Unit Trust Financial Statements state that the “beneficiaries distribution” was to Oracle Rouse Hill Pty Ltd as to $11,115,671 and to Tuscany as to $9,286,132. The notes to the accounts state that Tuscany’s “share of profit” and “drawings” are the same amount.

29. [60]

    These documents show that the tentative conclusion that I reached at [428] of the judgment, [16] was not correct. Tuscany received only $385,072.04 from the $2,276,586.52 that 88 Rouse Land Pty Ltd received on completion.

30. [61]

    Despite the concerns I have about the explanation given for the defendants’ failure to tender the documents at the hearing, it would be, in my opinion, an affront to justice for me to order that Tuscany and Mr Scrivener pay Shaka Holdings more than half of the amount that Tuscany actually received at the completion of the venture. To do so would be to proceed in the face of the facts as they are now shown to be.

31. [62]

    Accordingly, I grant the defendants leave to reopen to tender the documents.

32. [63]

    The amount of equitable compensation payable by the defendants to Shaka Holdings should be calculated on that basis.

Indemnity Costs?

1. [64]

   The defendants accept that they must pay the plaintiffs’ costs of the proceedings.

2. [65]

   The plaintiffs sought an order for indemnity costs from 28 November 2019 based upon an offer of compromise served by email that day from the defendants’ then solicitor, Mr Grant Butterfield. Mr Butterfield has since died.

3. [66]

   There was a debate as to whether the plaintiffs had proved that this offer of compromise had been received by Mr Butterfield; although it was agreed that a latter offer in the same amount had been received.

4. [67]

   However, as I have concluded that the order for equitable compensation should be made in favour of Shaka Holdings only, and as the offer of compromise was made by both plaintiffs, that is, Mr Cappello and Shaka Holdings, the provisions of Uniform Civil Procedure Rule 42.14(1) are not engaged. [17]

5. [68]

   Mr Pritchard accepted this, in terms [18] . Accordingly, the plaintiffs cannot show an entitlement to indemnity costs for the purposes of Uniform Civil Procedure Rule 42.14(2)(b).

Conclusion

1. [69]

   The parties should now confer and agree on the orders necessary to dispose of these proceedings.