In the matter of GPM Constructions Pty Ltd – Oreb v GPM Constructions Pty Ltd

1. [1]

   These proceedings were concerned with disputes arising out of a deed of settlement and release made on 5 June 2019 (the Deed of Settlement). The parties to the Deed of Settlement were the plaintiffs, Mr Peter Oreb (Mr Oreb) and Enter Building Group Pty Ltd (Enter Building) and the defendants, Mr Gregory Stockley (Mr Stockley), GPM Constructions Pty Ltd (the Company), and GPM Marine Constructions Pty Ltd (GPM Marine). The Deed of Settlement was intended to resolve earlier disputes that had arisen between the plaintiffs and the defendants concerning the affairs of the Company and a partnership between Mr Stockley and Mr Oreb (the Partnership). The Partnership was also a party to the Deed of Settlement.

2. [2]

   The Company and the Partnership were the vehicles whereby Mr Oreb and Mr Stockley engaged jointly in a marine construction business and a residential construction business. Mr Stockley and Mr Oreb were the only members of the Partnership and the only directors of the Company. Each held 50% of the issued shares of the Company. The Partnership owned plant and equipment and buildings used by the Partnership and the Company in the course of a joint marine construction and residential construction business. There was no written partnership agreement or shareholders agreement.

3. [3]

   After approximately 19 years of combined operations by the Company and the Partnership, the parties ultimately resolved to separate the business of the Company and the Partnership into two separate businesses. Mr Oreb, through Enter Building, was to assume the conduct of the residential construction business and Mr Stockley, through GPM Marine, was to assume the conduct of the marine construction business. Mr Stockley was to acquire Mr Oreb’s shares in the Company and Mr Oreb was to resign as a director. The Deed of Settlement provided for the preparation of settlement accounts and distribution of the accrued profits, after adjustments, was to be effected after the settlement accounts were prepared. Completion was to occur on 30 June 2019.

4. [4]

   Several discrete disputes arising out of the Deed of Settlement led to the commencement of proceedings in the Corporations List of the Equity Division by Mr Oreb and Enter Building against the Company and Mr Stockley. GPM Marine was subsequently added as a defendant in the proceedings.

5. [5]

   By their further amended originating process filed on 24 June 2020, Mr Oreb and Enter Building sought, in substance:

6. [6]

   By their second amended cross-claim, Mr Stockley, the Company and GPM Marine relevantly sought:

7. [7]

   The proceedings were fixed for hearing before me on 23 and 24 June 2020. By the time of the hearing, the width of the disputes between the plaintiffs and the defendants arising out of the Deed of Settlement had been narrowed significantly. In an endeavour to resolve the remaining issues, I heard argument in relation to each dispute separately. In the course of argument, I indicated provisional rulings in relation to each dispute. Ultimately, following discussion between counsel for the parties, all disputes were resolved either by agreement or as a result of the provisional rulings that I gave in the course of argument. Orders were then made in accordance with the resolution of the disputes as set out in the Appendix to these reasons.

8. [8]

   That left the question of the costs of the proceedings. Without hearing any argument, I indicated a provisional view that I thought it may be appropriate to make no order as to costs. However, while that was acceptable to the defendants, the plaintiffs indicated that they wished to seek an order for costs. I therefore gave directions for written submissions on the question of costs and heard detailed oral argument on 21 July 2020 following consideration of the written submissions. In order to explain the questions raised concerning costs, it is necessary to say something about the disputes between the parties.

Access to Documents

1. [9]

   The bulk of the dispute in terms of time and effort concerned access to documents of the Company and the parties took me at considerable length through detailed correspondence that passed between the solicitors for the parties prior to the commencement of the proceedings. To put into context the dispute as to access to documents it is necessary to have regard to cl 9 of the Deed of Settlement. By cl 9, the parties agreed that, as at the Completion Date (as defined), Mr Oreb and Mr Stockley would be entitled to receive a full copy of the books and records of the Company and that, in the event that such books and records had not been provided, they would be provided by the Company after 30 June 2019 upon request made. The clause also provided for the sharing of information and books and records relating to projects tendered by the Company in relation to the “Agreed Jobs” (as defined) and relating to the Outstanding Retentions or insurance refunds received by Mr Oreb, Mr Stockley or the Company.

2. [10]

   On 13 June 2019, Gillis Delaney, who were acting for Mr Oreb, wrote to Hunt & Hunt, who were acting for Mr Stockley. Gillis Delaney said that Mr Oreb was having continued difficulties in obtaining access to information that would enable settlement under the Deed of Settlement to proceed on 1 July 2019. Gillis Delaney asserted that the failure to provide the information would have a substantially detrimental impact upon ensuring that the matter would settle on 1 July 2019. They asserted that the matter would not be able to settle until the information was provided and Mr Oreb’s accountant and forensic accountant had had the opportunity to consider information that might have an impact on the settlement figures.

3. [11]

   Hunt & Hunt responded by email on the same day saying that the allegation of lack of information was “vague in the extreme”. Hunt & Hunt said that they had provided a completion checklist upon which Gillis Delaney had not commented and asserted that their client was not concealing information. Gillis Delaney responded by a letter emailed later on the same day saying that Mr Oreb had requested details of recent progress claims or an explanation as to why the progress claims had not resulted in invoices being raised.

4. [12]

   On 25 June 2019, Gillis Delaney responded to an email from Hunt & Hunt dealing with various matters. Hunt & Hunt replied on the same day saying that Mr Stockley was concerned that Mr Oreb was concentrating “on peripheral items that do not relate to completion under the [Deed of Settlement]”. The letter asserted that, if Mr Oreb did not adhere to the terms of the Deed of Settlement and continued “to obfuscate and delay completion on the basis of irrelevant pretexts”, Mr Stockley would commence proceedings to enforce the terms of the Deed of Settlement.

5. [13]

   On the following day, 26 June 2019, Gillis Delaney sent an email to Hunt & Hunt saying that they had instructions to make an urgent application seeking access to all books and records of the Company unless Mr Stockley would confirm by 1 pm on 27 June 2019 that such access would be given prior to 30 June 2019. The email asserted that, under the terms of the Deed of Settlement, Mr Oreb was entitled to a full copy of all books and records of the Company, which would include all correspondence of staff and directors up to 2 July 2019.

6. [14]

   Hunt & Hunt responded on 27 June 2019, saying that Mr Stockley and the chief financial officer of the Company had confirmed that all books and records had been made available to Mr Oreb. Gillis Delaney responded later in the day denying that Mr Oreb had been provided with all books and records as he was yet to receive “a proper disclosure of the books and records of the Company”. Gillis Delaney inquired when they could expect the documents. Hunt & Hunt responded still later that day by letter saying that Mr Stockley had confirmed that Mr Oreb already had access to the books and financial records of the Company. The letter asserted that Mr Stockley and the Company’s accountant had complied with all proper requests for information both from Mr Oreb and his accountant. The letter asserted that Mr Oreb was using his position as a director “for his own self-interest” and was not discharging his duties for the benefit of the Company.

7. [15]

   Settlement, as contemplated by the Deed of Settlement, took place on 2 July 2019. On 15 July 2019, Gillis Delaney wrote to Hunt & Hunt observing that, under the Deed of Settlement, Mr Oreb was to be paid a dividend calculated in accordance with the Deed of Settlement on 2 July 2019 and the agreed dividend could only be paid partially as there were insufficient funds in the Company for the payment to occur. Gillis Delaney requested a full copy of all books and records of the company in accordance with cl 9.1 of the Deed of Settlement. They asserted that, unless they were made available by 5 pm that day, Mr Oreb would seek “declaratory relief”.

8. [16]

   Gillis Delaney followed up with a further letter on 16 July 2019 asserting that Hunt & Hunt appeared to be proceeding in the mistaken belief that the books and records were limited to some financial documents. The letter asserted that such records included all correspondence and that the non-disclosure of key correspondence and documents would be the subject of an application to the Supreme Court. Hunt & Hunt responded on 16 July 2019 asserting that they and their clients, as well as the Company’s accountant, were “perplexed by the constant allegations” that documents had not been provided to Mr Oreb. Hunt & Hunt invited Gillis Delaney to “commence your application to the Supreme Court tomorrow or cease these threats”. Hunt & Hunt asserted that Mr Stockley would then cross-claim and “commence his own fishing expedition and seek punitive damages”.

9. [17]

   On 17 July 2019, Gillis Delaney wrote again to Hunt & Hunt asserting that it was “the uncontroversial position” that Mr Oreb had been requesting books and records for quite some time and that no such records had been produced. The letter then set out the basis upon which Mr Oreb was entitled to the records. The letter asserted that “relief will be sought” unless Mr Stockley immediately agreed to provide the relevant information. Attached to the letter was a schedule containing eight different categories of document.

10. [18]

    Hunt & Hunt replied on 17 June 2019 asserting that Mr Oreb and his forensic accountant had had full access to the financial information of the Company. The letter asserted that Mr Oreb was continuing to make vague allegations about concealment of documents but that neither he nor Gillis Delaney had provided any proof that that had occurred. Hunt & Hunt said that Mr Stockley maintained that Mr Oreb was acting “out of malice” in pursuing such allegations, that it was nothing more than a “fishing expedition” and that Mr Oreb was attempting to evade the provisions of the Deed of Settlement.

11. [19]

    Gillis Delaney replied on 19 July 2019 asserting that Mr Oreb was entitled “to unfettered access to ALL books and records of the Company as he considers appropriate”. The letter asserted that Mr Oreb should be provided “unfettered access”.

12. [20]

    On 24 July 2019, Gillis Delaney wrote again to Hunt & Hunt saying, relevantly:

13. [21]

    The next correspondence to which I was taken to was a letter from Gillis Delaney to Hunt & Hunt of 19 September 2019. Relevantly, the letter asserted that Hunt & Hunt’s clients had in their possession documentation and bank records relating to payments and contracts that Mr Oreb was entitled to receive. The letter requested the provision of a detailed summary of all payments made or payments received after 2 July 2019 in respect of all Agreed Jobs, asserting that such information was being withheld. The letter attached an “updated schedule of all outstanding books and records of the Company” that had been requested and had not been provided. The attached schedule had 17 categories of documents.

14. [22]

    Hunt & Hunt replied on 19 September 2019, asserting that the requests were “vague, too wide-ranging, unreasonable and akin to a fishing expedition”. The letter asserted that Mr Oreb had no basis for requesting any information “post 2 July 2019 when he ceased to be a director”. The letter said:

15. [23]

    On 25 October 2019, Gillis Delaney sent an email to Hunt & Hunt referring to the “Completion Accounts” that had been forwarded the previous day. The letter said that Mr Oreb’s accountant had reviewed the accounts and required certain information to finalise his review. The letter set out 18 items of information. The letter then sought a response to further queries raised by Mr Oreb’s accountant.

16. [24]

    Hunt & Hunt replied by email confirming that the Company would not be providing the information and asserting that it was not the role of Mr Oreb’s accountant to conduct an audit or forensic investigation into the accounts prepared by the Company’s accountant. The email asserted that it would be up to the independent expert provided for in the Deed of Settlement to determine what information was required to resolve “the disputed items”. The email requested that Mr Oreb provide “any disputed items” before the deadline provided for in the Deed of Settlement, namely, 7 November 2019.

17. [25]

    On 29 October 2019, Gillis Delaney wrote again to Hunt & Hunt confirming that they had instructions to commence proceedings and were presently finalising an application to the Supreme Court. The letter said that the application would concern the requested documents that had been the subject of previous correspondence and also those recently requested by Mr Oreb’s accountant in response to the Completion Accounts. The letter asserted that the failure to provide “any books and records of the Company to [Mr Oreb] (other than some previous MYOB records)” made it impossible for Mr Oreb and his accountant to make an assessment as to whether any of the items or calculations in the draft Completion Accounts were accurate. The letter invited Hunt & Hunt’s clients to agree by 12 noon on the following day that Mr Oreb would be given unfettered access to the books and records of the Company and confirmed that the “continued refusal to give access” would be relied upon in seeking costs against Hunt & Hunt’s clients “on an indemnity basis”. Hunt & Hunt replied on 29 October 2019 asserting that their client was confident that the Court would agree that Mr Oreb either already had most of the information or was seeking the information for improper purposes not related to the calculation of the final dividend.

18. [26]

    Proceedings were commenced by originating process filed in the Corporations List on 4 November 2019. In the originating process as originally filed, Mr Oreb and Enter Building sought access to some 42 categories of documents of the Company. Following the commencement of the proceedings, negotiation between the parties led to a very substantial reduction of the categories that were in dispute. Further discussion during the course of the hearing led to an additional reduction of the dispute.

19. [27]

    Ultimately, the only category that was in dispute concerned emails that were records of the Company. Such emails fairly clearly fell within the description of “the books and records of the Company”. I indicated that I did not consider that there was any evidence that would justify declining to provide copies on the ground that to do so would be burdensome for the Company. However, the parties accepted that emails of a private nature that might have been intermingled with books and records of the Company should not be the subject of copying in accordance with cl 9.1(a). Accordingly, the Company was afforded the opportunity of detailed examination of its email database in order to exclude emails of a personal or private nature that had been intermingled with emails relating to the affairs of the Company.

20. [28]

    As I have said, by cl 9.1(a) of the Deed of Settlement, the parties acknowledged and agreed that Mr Oreb and Mr Stockley would be entitled to receive a full copy of the books and records of the Company. The response by Mr Stockley and the Company to Mr Oreb’s claim to be given copies of the emails was that, as a matter of discretion, the Court should decline to order specific performance of any obligation created by cl 9.1(a). It is not entirely clear that cl 9.1(a) creates an obligation that is capable of an order of specific performance. Nevertheless, it is clearly an acknowledgement by the Company that Mr Oreb was entitled to receive a full copy of its books and records, which clearly includes all emails maintained by the Company. On the third day of hearing, an affidavit by Mr Stockley was proffered on behalf of the Company as evidence of the burdensome nature of the obligation, such that the Court should not order specific performance of any obligation created. Much of the affidavit was rejected as inadmissible.

21. [29]

    The plaintiffs have provided a schedule of the categories of documents sought in the originating process as filed. That schedule was subsequently amended and concessions were made and agreements reached. The schedule indicates that some categories were agreed and that other categories were not pressed. The terms of some categories were varied by agreement. It is well nigh impossible to make an assessment of the precise extent of the success or otherwise achieved by the plaintiffs in relation to the documents. Clearly enough, they have been successful in relation to significant numbers of categories and did not press other categories. Nevertheless, it is clear enough that the plaintiffs achieved a significant measure of success in relation to the categories of documents.

Clause 2.1

1. [30]

   The first question of construction involved cll 2.1(j) and 2.1(k) of the Deed of Settlement. Under cl 1.1, the term “Oreb Agreed Jobs” means the residential construction jobs listed in Annexure A to the Deed of Settlement and the term “Stockley Agreed Jobs” means the marine construction jobs listed in Annexure A. By cl 2.1(j), Mr Stockley was to be entitled to the profits and payments received and was to be liable for expenses incurred in relation to the Stockley Agreed Jobs and Mr Oreb was to be entitled to the profits and payments received and was to be liable for expenses incurred in relation to the Oreb Agreed Jobs. Clause 2.1(k) provides that, if the Company should pay or has paid any of those expenses, Mr Stockley would reimburse the Company for those expenses relating to the Stockley Agreed Jobs and Mr Oreb would reimburse the Company for those expenses relating to the Oreb Agreed Jobs. However, the expenses referred to in cl 2.1(j) were not to include wages for office staff and lease payments of the Company that were to be paid by the Company up to 30 June 2019. The question of construction concerned the phrases “all expenses incurred in relation to”, and “the expenses relating to”, the Oreb Agreed Jobs or the Stockley Agreed Jobs, as the case may be.

2. [31]

   Mr Oreb contended that standing or indirect charges and expenses should not be included. However, the fact that cl 2.1(k) expressly excludes wages for office staff and lease payments, which would on their face appear to be indirect or standing charges, indicates that the phrase “all expenses incurred in relation to” Agreed Jobs would include indirect and standing charges, so long as those charges can fairly be characterised as being incurred in relation to either Oreb Agreed Jobs or Stockley Agreed Jobs.

3. [32]

   I indicated a view that it was necessary to engage in a detailed examination of all expenses incurred by the Company in order to determine whether or not they can fairly be said to relate to either Oreb Agreed Jobs or Stockley Agreed Jobs. For example, the profit and loss account of the Company for the period 1 July 2018 to 30 June 2019 includes some expenses that could not be said to relate to the Oreb Agreed Jobs, such as tugboat expenses. There may well also be expenses in the profit and loss statement that could clearly be said not to have been incurred in relation to the Stockley Agreed Jobs. The fact that there is an account to be taken, which expressly excludes the Stockley Agreed Jobs and the Oreb Agreed Jobs, does not alter that conclusion. There are two different regimes adopted by the parties to the Deed of Settlement involving the exclusion from the general taking of account of the Agreed Jobs.

Clause 4.2

1. [33]

   The second question of construction concerned cl 4.2 of the Deed of Settlement, which relevantly provided that the Company was to account to each of Mr Oreb and Mr Stockley for 50% of the Outstanding Retentions, as and when such Outstanding Retentions are received. “Outstanding Retentions” is relevantly defined as retentions payable or which become payable to the Company for work carried out by the Company prior to 29 March 2019, where such Retentions have not been paid to the Company prior to 1 July 2019. One might assume, from the overall structure of the Deed of Settlement that there would be no accounting until after the payment of the final completion dividend in accordance with Annexure C to the Deed of Settlement. However, no evidence was adduced to indicate any reason why the language of cl 4.2 should not be given its clear unequivocal meaning, namely, that “Outstanding Retentions” were to be accounted for as and when they were received. I therefore indicated a view that the plaintiffs’ contention was correct.

Clause 10

1. [34]

   The next question concerned the requirement of cl 10 of the Deed of Settlement and cll 5.1 and 10 of Annexure C. Clause 10 of the Deed of Settlement provided that Mr Oreb and Mr Stockley were to be entitled to set up and conduct their new businesses in any entity they chose in respect of any work that may include the Agreed Jobs if those can be novated, whether that has occurred before or after the date of the Deed of Settlement. However, Mr Oreb was required to comply with the restrictions in cl 10 of Annexure C. Clause 10(b) of Annexure C relevantly provided that Mr Oreb must not use or create any business or trading name identical or substantially similar to the names “GPM Constructions” and “GPM Construction Pty Ltd” and Mr Oreb and Enter Building must ensure that it and its employees, agents and assigns do not make any representations that it is associated with such business or trading names.

2. [35]

   Clause 5.1 of Annexure C relevantly provided that, after the date of the Deed of Settlement, the Company assigned and transferred to Mr Oreb or his nominee the right, title and interest of Mr Oreb in or arising out of the residential contracts, which might include the Oreb Agreed Jobs, and Mr Oreb or his nominee accepted the assignment and transfer and assumed all of the obligations of the company in or arising out of the assigned residential contracts. If any of the residential contracts could not be assigned for any reason, the Company was to hold the benefit of the contracts on trust for Mr Oreb and his nominee. Clause 5.2 provided reciprocal provisions in relation to Mr Stockley and marine contracts.

3. [36]

   The cross-claim asserted that Mr Oreb was in breach of those provisions in so far as there had been no novation of the contracts and the contacts were performed, so far as the other parties were concerned, by the Company. I indicated a view that there was no breach of those provisions. In any event, that claim has now been abandoned.

Documents retained by the plaintiffs

1. [37]

   The Company claims that there were several archive boxes retained in the premises at Barcoo Street, Roseville, which were occupied by the Company prior to completion of the Deed of Settlement. The evidence as to the archive boxes is less than satisfactory. Neither Mr Oreb nor Mr Stockley gave evidence. However, employees of each of them gave evidence. Ms Drake on behalf of the cross-claimants indicated that she had not seen the boxes since Mr Stockley and his staff vacated the Barcoo Street premises. Ms Tulich gave evidence on behalf of the cross-defendants that she searched for the archive boxes and could not find them.

2. [38]

   I indicated that the appropriate relief would be to order Mr Oreb, who is now the owner and occupier of the Barcoo Street premises, to deliver up such of the archive boxes as are in his possession or custody and to require him to file an affidavit stating which of the archive boxes in question, if any, is presently in his possession or custody and when he last had possession or custody of any of the relevant archive boxes.

Costs

1. [39]

   Overall, while the plaintiffs have achieved a measure of success the plaintiffs have not been totally successful. The defendants, in their cross-claim, have been unsuccessful. However, the question of the claims made in the cross-claim has not been fully litigated. Clearly enough, the parties have reached a compromise in many respects.

2. [40]

   I do not consider that the conduct of the defendants prior to the commencement of the proceedings is such as to warrant an order for indemnity costs. However, on balance, the plaintiffs have been significantly more successful than the defendants. I consider that the appropriate order is that the defendants pay 85% of the plaintiffs’ costs of the originating process and the cross-claim. The alternative would be to endeavour to order costs on an issue by issue basis. However, that is likely to result in unnecessary further costs. For that reason, a percentage of the total costs is a preferable course.