Rockdale West Newsagency v Kumar [2010] NSWSC 71 (12 February 2010)

Last Updated: 17 February 2010

NEW SOUTH WALES SUPREME COURT

CITATION:
Rockdale West Newsagency v Kumar [2010] NSWSC 71


JURISDICTION:


FILE NUMBER(S):
2008/00280107

HEARING DATE(S):
12 February 2010

JUDGMENT DATE:
12 February 2010

EX TEMPORE DATE:
12 February 2010

PARTIES:
ROCKDALE WEST NEWSAGENCY PTY LTD (ACN 111 173 507) (first plaintiff/ first cross-defendant)
Chiman VASRAM (second plaintiff/ second cross-defendant))
Satendra KUMAR (first defendant/ second cross-claimant))
Amita KUMAR (second defendant/ first cross-claimant)

JUDGMENT OF:
Bryson AJ

LOWER COURT JURISDICTION:
Not Applicable

LOWER COURT FILE NUMBER(S):
Not Applicable

LOWER COURT JUDICIAL OFFICER:
Not Applicable



COUNSEL:
C VASRAM (second plaintiff / second cross-defendant in Person)
Amita KUMAR (second defendant/ first cross-claimant in Person)
ROCKDALE WEST NEWSAGENCY PTY LTD (ACN 111 173 507) in liquidation (first plaintiff/ first cross-defendant) (Ms A CHAU for Liquidator)

SOLICITORS:
---


CATCHWORDS:
PARTNERSHIP - Accounts _ Partnership or joint venture in suburban newsagency governed by home-made written agreement - Partnership assets held through vehicle of company - Plaintiff to be manager but left after six months with agreed drawings unpaid - defendants partners provided finance, took over and conducted the business for four years until company wound-up for unpaid debt - Plaintiff claimed accounts and other claims - HELD on the facts there were not sufficient prospects of a result favourable to the plaintiff to justify ordering accounts to be taken.

LEGISLATION CITED:


CATEGORY:
Principal judgment

CASES CITED:


TEXTS CITED:


DECISION:
Upon the amended statement of claim I give judgment against the second plaintiff and in favour of the defendants on claims 6, 6A and 6B with costs.
On the amended cross-claim I give judgment for the cross-defendants.



JUDGMENT:

- 10 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION


BYRSON AJ

Friday, 12 FEBRUARY 2010

2008/00280107 ROCKDALE WEST NEWSAGENCY PTY LIMITED v SATENDRA KUMAR and AMITA KUMAR

JUDGMENT

1 HIS HONOUR: When these proceedings were called on for hearing earlier today the parties did not appear and I made some orders which would have disposed of the proceedings. However, they later appeared. It seems there has been some misunderstanding about the listing arrangement and I vacate the orders which I made earlier.

2 These proceedings relate to the affairs of a joint venture which conducted the newsagency business at Rockdale West. The parties to the joint venture were Mr Vasram on the one side and Mr and Mrs Kumar on the other. The newsagency business was owned, at least on the face of things visible to the public, by Rockdale West Newsagency Pty Limited which was the tenant of shop premises, but the substance of the matter was that the company was the vehicle through which the joint venturers or partners carried on the business. Mr Vasram caused the company to be formed and, according to its share register, he was the majority shareholder.

3 However, (and Mr Vasram does not at all seem to be able to come to terms with this) the shareholding really had nothing to do with the substantial interests in the joint venture and its assets. From the point of view of the joint venturers, the company is a nominee only.

4 When the proceedings were commenced the company and Mr Vasram were the plaintiffs and the Kumars were the defendants. In their cross-claim the position is reversed and the company is one of the cross-defendants.

5 The company went into liquidation by order of this Court on 30 July 2009. This brought about a stay of the proceedings insofar as they involve the company, under s 471B of the Corporations Act. There has been no order setting aside or varying the stay and the liquidators’ solicitor attended before me and pointed out that their position is that they do not consent to the Court proceedings and that they hold to the view that the stay applies. Of course, this view is correct.

6 The stay limits the claims which could be determined now. I can only address and decide claims made by the individual parties and claims made against the individual parties, not claims in which the company is itself involved.

7 The agreement between the individuals is dated 20 December 2004; it was witnessed by a solicitor but its terms suggest it was prepared or very largely prepared by the parties themselves. Its heading describes it as "Loan Agreement" but it obviously goes much further than that according to its terms.

8 Mr Vasram took the initiative in locating and purchasing the business and in involving the Kumars whose position, at least from his point of view, was that they were participating by providing finance. The agreement does not use the expression "joint venture" and at one point refers to the parties as "partners". It is not important finally to classify their relationship but it was either a partnership or some relationship very close to that.

9 The agreement contains provisions about the beneficial ownership of the newsagency business. Cl 1 provides to the effect the business is to be in the name of the Kumars "until such time as Chiman (Mr Vasram) pays up his share of the loan of the business.” This could be thought to mean that the Kumars were only to be the legal owners but that is shown not to be correct by reading the terms of Cl 2: "After the loan is paid off then the newsagency business shall be in the ratio 3:1 (three parts to Chiman and one to Satendra and Amita)"; then there are figures which restate this.

10 A central aspect of the parties' relationship, and one which Mr Vasram (who presented in his case himself unrepresented) did not ever fully come to grips with is that he does not have a beneficial interest in the newsagency business until the loan is paid off. The loan referred to should be understood from other material in the document and also from evidence about previous negotiations which identified what was being spoken of, as the finance which the Kumars were to obtain, apparently by borrowing from a bank.

11 The contemplation when the document was drawn up was that they were to obtain $700,000. They actually obtained $600,000 and the other $100,000 was obtained by vendor finance which had to be paid off in a short time. Mr Vasram throughout the case directed criticism at the Kumars not having raised the full $700,000 and at the need to rely on some vendor finance which, by his account, he met by negotiating with the vendor. I regard this as an irrelevant criticism. The document can be just as well applied to finance actually obtained as to the contemplated amount and there cannot really have been any adverse impact on the venture from some of the finance being sought from the vendor, except for the relatively minor respect that the vendor finance had to be paid off fairly quickly.

12 Another provision of the document provides that Mr Vasram was to work on $60,000 per annum salary initially "until the loan is paid off, it is a target within five years of the business". This shows contemplation that the payment of loans could take up to five years; during which Mr Vasram would not be entitled as one the owners of the business itself to share in any profit.

13 Events did not turn out as contemplated by Cl 4 because Mr Vasram left his position working in the business and in effect managing it on or about 30 June 2005, a little more than six months after taking over. It is his case that he did not draw all of the drawings provided for during that period or, I understand, any of them because the business did not generate enough cash flow or profit to allow him to do so and indeed some other money had to come in.

14 After he left the business, he has not had any part in management, which he has left to the Kumars. His main participation since then, so far as I can gather from the evidence, has been to beset the Kumars with problems as they endeavoured to conduct the joint venture business which he had left.

15 There are a number of other provisions, including one which would ultimately, in some way which the document does not spell out, impose on Mr Vasram the burden of $525,000 plus some other costs of the loan while the Kumars were ultimately responsible for $175,000. Clause 6 shows contemplation that finally there would be an accounting in which three-quarters of the burden of the capital cost would be set against or charged against Mr Vasram.

16 There are other provisions which despite signs of amateurism in their drafting show clearly contemplation that the business would be run only to generate cash to repay loans and that only when that had been done would it be run on the basis of three parts of ownership and of profit for Mr Vasram.

17 Clause 9 provides for the Kumars to be paid 25 per cent of the net profit but, on a whole reading of the document, I understand this to refer to the situation after the loan repayment period.

18 For Mr Vasram to have any prospect that settlement of accounts of the joint venture would produce a positive result for him it is necessary for him to establish that at some time the loan was paid off and he got an entitlement to profits.

19 In the amended statement of claim there are a number of claims involving the company which I pass over. In claim 6 there is a claim for the accounts of the business to be taken, claim 6A a claim that the defendant pay the outstanding salary - referring to the employment up to 30 June 2005; and in claim 6B a claim for damages for breach by the defendant of the agreement.

20 I can dispose of claim 6A briefly. The entity liable to pay Mr Vasram for his money for salary while he stayed there is the joint venture. He can only get that paid when and if the accounts are taken. In relation to the size of the loans burden incurred it could only be a small item. In any event, it is payable by Mr Vasram and by the Kumars out of the joint venture. There is no reasonable basis on which it could be seen as a debt incurred solely by the Kumars. Unless and until the accounts of the whole venture are settled, all liabilities brought into account and all payments into account, there is no recourse for Mr Vasram with respect to the non-payment of that salary.

21 It is noteworthy that when he himself was running the business and controlling the flow of funds he did not raise enough money to give the salary to himself.

22 With respect to claim 6B, breach of the agreement, Mr Vasram when I asked him what breach of agreement he was alleging went into a disquisition about what he claimed were difficulties in getting information and accounts from the Kumars. He did not at any point specifically identify any breach of agreement by them or referrable to the document of 20 December 2004. He was never able to make what he claimed here coherent.

23 To my mind, the substantial question is whether there is sufficient prospect of a favourable result for Mr Vasram from the process of taking accounts for the Court to go to the length of placing the Kumars under the burden of embarking on an inquiry into events in the business from December 2004 onward until the joint venture came to an end (as it must be taken to have done) on 30 July 2009 when the company was wound up and any of these parties lost control of the premises, the lease, and the business, which for practical purposes passed to the liquidator, so that the business lost its value as a partnership asset.

24 The Kumars do not wish for accounts to be taken, they do not acknowledge any liability to Mr Vasram and Mrs Kumar told me most earnestly that she wished the litigation would come to an end. She said that in connection with the cross-claim, and did not press me to award any remedy of the kinds claimed in the cross-claim. There was little of the cross-claim to consider, having regard to the stay of proceedings.

25 Mr Vasram refers not only to the salary entitlement but to various other contributions that he says he made at different times in the later history of the venture when his position with the Kumars had become quite combative. Some remarkable events are narrated, including strange events relating to appointment and removal of directors of the company, and remarkable difficulty in practical arrangements about obtaining a renewal of the lease.

26 All of this, however, even if the moneys which he claims he should have received and the moneys he claimed he expended, were found on accounting to go to the credit of Mr Vasram, would be drowned out by the large burden of payment of debt three-fourths of which was to be charged against him. Taking accounts in the Court, in an inquiry before an Associate Justice, is an elaborate and expensive exercise that would involve all the parties in many attendances, and this is something which should not be undertaken unless there is some good and substantial reason to suppose that some good in the administration of justice could be achieved by setting out to do so. The overwhelming likelihood is that most of the liability would end up in Mr Vasram's lap where, according to the document of 20 December 2004, it belongs.

27 Mr Vasram had no entitlement to share profit until the finance is repaid. He has given no substantial evidence that it has been repaid. He made many assertions before me that it should have been repaid, that there should have been large enough proceeds of the business to pay it but there is no evidence that it has been. Nor, I should add, if it is significant (and I do not think it is) is there evidence that there have been enough proceeds so it should have been paid, and no support on the evidence for an inference that in some way the Kumars have failed massively in the disposition of funds which they received. There is no substantial basis for finding any such thing has happened.

28 In oral submissions to me Mr Vasram, talking beside the point, made references to accounts furnished by the Kumars and to his critiques of particular items in them. I think he may not have drawn the appropriate distinction between accounts of the company and accounts of the joint venture. However that may be, he did not put into evidence either the document he spoke of as accounts by the Kumars or his list of critiques, leaving me only to hear what he asserted without evidence to act on. In any event, if his critiques were made out they would not show the critical matter, actual payment of the finance debt.

29 The Kumars bore all the debt burden to see to repayment out of the joint venture funds after Mr Vasram left in June 2005, including repaying the vendor finance. The task has been complicated by various interventions by him, none of which can have been useful to the affairs of the joint venture as he beset them with problems which a co-operative approach would not have generated. I have sympathy with the Kumars' position and with Mrs Kumar's expressed wish not to have accounts taken but to bring the litigation to an end.

30 In these circumstances I am not prepared to order an accounting; there is no real proof of any misconduct on the part of the Kumars, notwithstanding many adverse assertions made by Mr Vasram in his submission before me.

31 Mr Vasram claimed that attempts were made by the Kumars to sell the business and statements made in the course of those attempts in some way supported his position; in my opinion they do not. Profit statements made in connection with proposed sale could not be taken or reasonably understood to allow for repayments of interest or capital debt. Mrs Kumar explained the figures she used by reference to the figures which Mr Vasram had given two or more years before on the purchase. This was not a very good source, but there is no reason to think what she was saying was not truly her source for the figures.

32 At various points in the evidence there are references to a controversy about a policy on Mr Vasram's life. This is not the subject of any claim for remedies in the amended statement of claim and was not referred to when Mr Vasram made an outline to me of the case which he put before me today.

33 The life policy is referred to in the document of 20 December 2004. It was to be transferred to the Kumars who were to become the legal owners of it, but the document, as a whole, makes it clear that this was a security arrangement, the nature of which was that the policy was mortgaged or charged to the Kumars for their protection against Mr Vasram's liability for three-quarters of the finance: the charge over the policy gave them protection if he should die before the contemplated course of events had worked out. Happily no such event has happened.

34 The provisions in the agreement, particularly Cl 15, make it clear that after protection of the Kumars and payment of a bonus referred to, which they have never become entitled to, the balance of the policy money was to be returned to Mr Vasram's family, putting the clear fingerprint of a mortgage or mere security on the transfer. There is nothing in the document about who was to pay the premiums and evidence shows that after a time they ceased to be paid and the policy was forfeited.

35 Although it is not truly an issue before me for adjudication, I will record that because the arrangement was no more than a security and because there is no express promise by the Kumars to pay the premiums I regard it as obvious that the responsibility for keeping alive the life policy which he was pledging to the Kumars continued to lie with Mr Vasram, and he has no ground for complaint about their not having taken up what was essentially his task of paying the premiums.

36 For the reason I have stated, the parts of the claims which are not subject of the stay on liquidation will be dismissed.

37 At the hearing before me Mrs Kumar appeared in person and unrepresented. However, at earlier stages of litigation, the Kumars were represented by legal advisors and for this reason they are entitled to recover an order for costs of that legal representation.

38 The order is: Upon the amended statement of claim I give judgment against the second plaintiff and in favour of the defendants on claims 6, 6A and 6B with costs.

39 On the amended cross-claim I give judgment for the cross-defendants.

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LAST UPDATED:
16 February 2010