New South Wales Supreme Court CITATION : OZYIGIT & ORS v. KAYMAZ & ORS [2005] NSWSC 589 HEARING DATE(S) : 14 to 17 June 2005 JUDGMENT DATE : 17 June 2005 JURISDICTION : Equity JUDGMENT OF : Hall J at 1 DECISION : See paragraphs 41-43 LEGISLATION CITED : N/A CASES CITED : N/A PARTIES : AYDIN OZYIGIT & ORS v. KURT ATTILA KAYMAZ & ORS FILE NUMBER(S) : SC No. 3419 of 2005 Plaintiff: B. Burke COUNSEL : Defendant: R. Horsley Plaintiff: Carters Law Firm SOLICITORS : Defendant: Meyer Solomon & Associates LOWER COURT JURISDICTION : IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION HALL, J. FRIDAY 17 JUNE 2005 No. 3419 of 2005 AYDIN OZYIGIT & ORS v. KURT ATTILA KAYMAZ & ORS JUDGMENT 1 HIS HONOUR: The plaintiff, by summons filed on 9 June 2005, seeks declaratory and other relief arising from certain property dealings with the defendants. 2 In paragraph 1 of the summons, a declaration is sought with respect to a property known as 25 Beatrice Street, Auburn, namely, that the property constituted an asset of the partnership between the first plaintiff, Aydin Ozyigit and the defendants (referred to as "the Partnership"). Alternatively, the plaintiffs claim a declaration that the property constituted an asset of the partnership between the plaintiffs and the defendants (described as "the alternative Partnership"). 3 Similar alternative relief is sought with respect to another property known as 21 Beatrice Street, Auburn. 4 The plaintiffs claim interlocutory relief that the defendants take all necessary steps to ensure that:- (a) the sale of the property 21 Beatrice Street, Auburn from the second plaintiff (CPM Holdings Pty. Limited) and the first defendant (Kurt Kaymaz) to Chammas Group Pty. Limited be completed in accordance with terms of sale in a contract of sale dated 8 February 2005 and a notice to complete dated 27 May 2005; and (b) upon completion of the sale of the property known as 21 Beatrice Street, Auburn the proceeds of sale be paid as follows:- BAllance of purchase due $665,757.00 Auburn Council $205.80 Sydney Water $207.75 Carters Law Firm $3,500.00 ANZ Banking Group Limited $452,316.79 $ 456,230.34 Net proceeds of sale: $209,526.66 To be paid as follows: The plaintiffs or as they may direct $104,763.33 The defendants or as they may direct $11,763.33 Funds to be held in trust by Carters $93,000.00 Law Firm on behalf of the plaintiffs and the defendants pending resolution of the dispute between them 5 On an interlocutory application such as the present, the Court should grant the minimum relief necessary to preserve the status quo pending the final determination of the plaintiff's claim. The above interlocutory relief is broad in its terms. I will return to the form of relief appropriate for a case such as the present later in the judgment. Salient facts 6 The plaintiff relies upon the affidavit of Aydin Ozyigit sworn 10 June 2005. The affidavit provides:- (a) A very brief history of property dealings between the first plaintiff and the defendants. (b) The purchase, sale of 21 and 25 Beatrice Street and the disposition of the sale proceeds from the sale of 25 Beatrice Street. (c) The sale of 21 Beatrice Street due to be completed this week. 7 Mr. Ozyigit is the sole director of CPM Holdings Pty. Limited. He states that in his dealings with "the Kaymaz family" profits have always been split 50:50 between that family and himself or his company. Properties have been bought by a person or company nominated by the Kaymaz family to hold the property as to one half and Mr. Ozyigit has nominated a person or company to hold the other half. This arrangement operated with respect to 25 Beatrice Street (Mr. Ozyigit nominated SA Property Holdings Pty. Limited) to hold one half and the Kaymaz family nominated the first defendant (Kurt Kaymaz) as to the other half. 25 Beatrice Street 8 25 Beatrice Street, Auburn was purchased on 8 August 2003 by S.A. Property Holdings Pty. Limited (of which Aydin Ozyigit was Director) and Kurt Kaymaz had a 25% share and at the date of completion Errol Kaymaz held a 25% share. The sale of 25 Beatrice Street was completed on 21 April 2005. Mr. Ozyigit says Mete Kaymaz, without authority to give cheque directions, gave the solicitors, Sayan & Associates, acting on the sale, such directions without his knowledge. 9 The distribution of sale proceeds on 25 Beatrice Street were:- (a) a total of $468,030.08 was available to the alleged partnership; (b) from that amount $420,893.26 was paid to the Kaymaz family interests; (c) $47,136.82 was paid to SA Property Holdings Pty. Limited; (d) the plaintiff claims, therefore, that the defendants were overpaid $234,015.04 (the difference between $420,893.26 and $186,878.22). 10 Mr. Ozyigit acknowledged that he would have been required to pay $93,000 out of the sale proceeds to "various members of the Kaymaz family in satisfaction of amounts I or my companies owed them" (paragraph 16 of his affidavit). The difference between $234,015.04 (the alleged overpayment) and the amounts admitted as owing ($93,000) is $141,015.04. 11 The amounts shown in the settlement sheet as paid by Sayan & Associates to Kaymaz family interests were:- 4. E.A. Kaymaz $7,946.63 5. K.A. Kaymaz $7,946.63 … 7. M. & M. Kaymaz $20,000.00 8. K.A. Kaymaz $11,000.00 … 12. Transturn International $225,000.00 13. Transturn International Pty. Limited $145,000.00 14. K.A. Kaymaz – interest on late settlement $4,000.00 21 Beatrice Street 12 21 Beatrice Street was purchased by the second plaintiff (CPM Holdings Pty. Limited) and Kurt Attila Kaymaz (first defendant). 13 In a letter dated 30 May 2005, Meyer Solomon & Associates, solicitors for Kurt Kaymaz and Errol Kaymaz (as co-owner) stated that the set off of $98,000 claimed by the second plaintiff:- "… is not part of the Contract of Sale and is a private arrangement between your client and CPM Holdings Pty. Limited. Our clients were not aware of the details of that private arrangement at the time the Contract of Sale was entered into …" 14 In a letter from Carters Law Firm, Mr. Ozyigit acknowledged that the amount of $98,000 (which included an amount of $84,000 referred to in paragraph 23 of this judgment) was his own personal debt. 15 In a "without prejudice" letter of 8 June 2005 to Meyer Solomon & Associates, Carters proposed the balance of settlement monies after deduction of mortgage and rates and legal fees of $209,526.66 be paid and held in trust. 16 The defendants opposed the interlocutory relief sought. They contended:- (a) that no partnership had existed, as claimed. They maintained that the plaintiffs had not previously contended or asserted that a partnership had existed prior to the present proceedings. (b) that the evidence indicated that a variety of legal relationships existed between different members of the Kaymaz family and various entities associated with the plaintiff entities. 17 The defendants tendered a number of documents including Exhibits 2 and 5. I deal with each below. Exhibit 2: Deed of Acknowledgement of Debt of $138,250 – December 2003 18 This Deed was entered into between SA Property Holdings Pty. Limited and Aydin Ozyigit and Errol Allan Kaymaz and Kurt Attila Kaymaz in December 2003. The Deed recited:- • That SA Property Holdings Pty. Limited was indebted to Errol Allan Kaymaz in the sum of $138,250. • The agreement of SA Property Holdings Pty. Limited to pay from the proceeds of the sale of its 50% share of 25 Beatrice Street the sum of $138,250 to Errol Allan Kaymaz. • The 50% share of CPM Holdings Pty. Limited in the property 21 Beatrice Street would be applied to meeting the debt of $138,250 if the proceeds of 25 Beatrice Street were insufficient. • There would be a charge over SA Property Holdings Pty. Limited's share of 25 Beatrice Street in favour of Errol Allan Kaymaz. 19 Both Kurt and Errol Kaymaz were signatories to this Deed. Deed of transfer of shares 20 On 22 December 2003, a Deed for Transfer of Shares was entered into between CPM Holdings Pty. Limited, Mete Kaymaz, Errol Kaymaz and Kurt Kaymaz. This Deed was linked to the Deed of Acknowledgement of Debt for recital "F" refers to the transfer of Errol Kaymaz's shares in CPM Holdings as occurring at the same time as the Deed of Debt is signed. 21 Under the Deed of Transfer of Shares, Errol Kaymaz was to transfer his 40% share in CPM Holdings to Aydin Ozyigit but company's 75% share in 21 Beatrice Street of CPM was offset by an agreement recorded in clause 4 involving a split in relation to 21 Beatrice Street as follows:- • CPM's share (75%) reduced to 50%; • 25% to Errol Kaymaz; • 25% to Kurt Kaymaz. 22 This increased the Kaymaz holding in the property to a 50:50 split with CPM. Deed re purchase of unit by Mr. Ozyigit 23 On 11 February 2005, a Deed was entered into whereby in consideration of the amount of $84,000 being credited on account of Aydin Ozyigit concerning the purchase of a unit in 11-17 Beatrice Street, Auburn, Chammas Group Pty. Limited (the purchaser of 21 Beatrice Street) "shall be credited with … $84,000" towards the purchase price payable by Chammas Group Pty. Limited for the latter property. This Deed accordingly allowed Chammas Group an offset or credit of $84,000 with respect to Ozyigit's own purchase from Contemporary Development Australia Pty. Limited – which had a common directorship with Chammas Group. The defendants' affidavit evidence 24 On 16 June 2005, the defendants filed in Court the affidavit of Errol Allan Kaymaz sworn 15 June 2005. Mr. Errol Kaymaz is the third defendant and the brother of the first defendant, Kurt Kaymaz, and states that the second defendant, Mete Kaymaz is his father. 25 The affidavit establishes the following additional matters:- • Mete Kaymaz opened a real estate office in 2001 conducted by Transturk International Pty. Limited trading as Civic Property Marketing. It was wholly owned and run by Mete Kaymaz. • Aydan Ozyigit (first plaintiff) and Mete Kaymaz have been friends for more than 25 years and have worked in the same real estate office in the past. • According to Errol Kaymaz, his father had lent money to the first plaintiff under oral agreements made between them. • In August 2002, Mete Kaymaz transferred the business of Civic Property Marketing (CPM) to CPM Holdings Pty. Limited, the shares of which were held as follows:- Ayden Ozyigit five shares Director and Company Secretary L. Kaymaz four shares Company Secretary Mete Kaymaz one share Director • Mete Kaymaz was the holder of the real estate licence for the company. • The profits of that business would be split 50:50 between the first plaintiff and Errol Kaymaz. • Errol Kaymaz worked in CPM until September 2003 when he ceased working due to disagreements with the first plaintiff about the management of the company. • Financial adjustment were made which are said to have been reflected in Exhibits 2 and 5 in the present proceedings. • In relation to the amount of $138,250 admitted as owing in the Deed of Acknowledgement of Debt (Exhibit 2), this was to be partly paid upon the settlement of 76-78 Auburn Road, Auburn and from the 50% share owned by S.A. Property Holdings Pty. Limited in respect of 25 Beatrice Street, Auburn. • $60,000 was paid to Errol Kaymaz from the settlement of 76-78 Auburn Road, Auburn with respect to the debt of $138,250 (leaving a balance owing of $78,250.) 26 In accordance with Exhibit 6 (dated 15 September 2004), the first plaintiff acknowledged indebtedness to Mete Kaymaz in the sum of $70,300. 27 Errol Kaymaz claims that his father made several attempts to contact the first defendant concerning the distribution of the monies from the settlement of the sale of 25 Beatrice Street. 28 The affidavit contains evidence in relation to items in the settlement sheet for 25 Beatrice Street and, in particular, commentary upon several of the cheques issued in the list of cheques numbered 1 to 14 in the settlement sheet (annexure A to the affidavit of Aydin Ozyigit sworn 10 June 2005). It is unnecessary to refer specifically to all items. I note:- (a) a cheque for $11,000 was said to constitute repayment of a personal loan from Kurt Kaymaz to the first plaintiff; (b) the cheque for $225,000 to Transturk International Pty. Limited is said to have represented a repayment to Ugur Kaymaz out of the proceeds of sale that Kurt Kaymaz received in respect of an option fee of $225,000 (referred to in paragraph 27 of the affidavit.) (c) The amount of a cheque for $145,000 to Transturk International Pty. Limited referred to in item 13 is said to be made up of a number of items particularised in paragraph 31 including rent, repayment of a loan by Mete Kaymaz, monies said to be owing to Errol Kaymaz for commission, GST paid by Mete Kaymaz in respect of 76-78 Auburn Road, Auburn, interest said to be owing to Mete Kaymaz, a 50% consultancy fee for sale of off-plan units at another property and a 50% consultancy fee in respect of sale of a shop at Whalan. This is a separate item for rent said to be owing in respect of the first plaintiff's occupation of 21 Beatrice Street, Auburn in the amount of $20,000 (tiem 7) (d) In paragraph 38 of the affidavit, Errol Kaymaz claims that a total amount of $239,359.70 is owing to him. However, close examination of the individual items reveals that that sum is incorrect. The amount of $98,000 includes the amount of $84,000 referrable to the first defendant's purchase of the unit from Contemporary Developments. The sum of $104,000 is not a debt but represents the half share on the sale of 21 Beatrice Street. It is said, on behalf of the plaintiffs, that on analysis when allowance is made for such items something of the order of $12,000 only could be alleged, on the evidence on this application, an outstanding debt. 29 In relation to amounts now said by the defendants to be outstanding, I note that on the settlement of 21 Beatrice Street on, as recently as, 21 April 2005, there was no claim for any of the items referred to in 28(d) above nor was any deduction made, notwithstanding the significant deductions that were in fact made on the settlement of 25 Beatrice Street. As noted earlier, an amount of $47,136.82 was paid to S.A. Property Holdings Pty. Limited from the sale proceeds. 30 In his affidavit, Errol Kaymaz disputes the existence of any form of partnership as alleged by the plaintiffs in the present proceedings. Analysis (a) An agreement for purchase, possible development and re-sale 31 In relation to the two properties purchased in the year 2003, 25 Beatrice Street was purchased jointly between the Kaymaz family members, as earlier discussed, together with S.A. Property Holdings Pty. Limited. The property 21 Beatrice Street was purchased in the names of CPM Holdings Pty. Limited and Kurt Kaymaz. The shareholding interest in CPM Holdings has been noted earlier. 32 It is clear on the evidence on this interlocutory application that what might be termed the "Ozyigit entities" and the Kaymaz family members joined together to acquire both properties for possible development and, in due course, resale (whether developed or not) with a view to profit. Whether the arrangement between them was in law a partnership as alleged by the plaintiffs, a joint venture or some other form of legal relationship is not a question which I have been able to resolve on the conflicting evidence. Nor would it be appropriate on an interlocutory application such as this to do so. It is plain, however, that there was some form of agreement in respect of the properties involving their joint acquisition and possible development with a view to profit-making. The relevant shares in the property do reflect a 50:50 interest in both properties of the relevant interests associated with the plaintiff and the Kaymaz family members with an equal split of profits on re-sale. There is a serious issue to be tried that an agreement that had that effect was entered into. 33 The first plaintiff contends that the sale proceeds of the sale of 25 Beatrice Street were unauthorised. Errol Kaymaz claims that his father Mete Kaymaz endeavoured to contact the first plaintiff before the distributions were made, in effect, asserting that there was some form of authority given or operating. This, however, is another issue of fact which I am unable to resolve on this interlocutory application. I consider there is a serious issue to be tried on this question. It is the plaintiff's contention that an amount of $420,893.26 was in breach of the agreement between the parties, paid to the benefit of the Kaymaz family and only $47,136.82 was paid to S.A. Property Holdings Pty. Limited. In the Summons, an order is sought by the plaintiffs that the defendants account to the alleged partnership for all profits and benefits derived directly or indirectly through their involvement in the partnership, or what is termed the alternative partnership. The sale proceeds re 21 Beatrice Street 34 In relation to the property 21 Beatrice Street, the net proceeds were $209,526.66. The sale is to proceed upon the basis that the purchasers are to be credited with $84,000 in respect of the first plaintiff's purchase of the home unit from Contemporary Developments. That sum is to be brought into account in determining the balance of monies owing to CPM Holdings Pty. Limited in respect of its 50% share or interest in that property. 35 The balance, after allowance for the amount of $84,000, is the amount of $125,526.66. The defendants seek to have that amount divided as follows:- To Kurt Kaymaz or as he may direct $52,381.67 To Errol Kaymaz or as he may direct $52,381.67 To CPM Holdings or as it may direct $20,763.32 Total $125,526.66 36 On the other hand, the plaintiff claims that the major portion of the amounts otherwise payable to Kurt and Errol Kaymaz should be placed in a trust account pending final determination of the issues in the proceedings. The question is what does the balance of convenience require pending a final determination of the proceedings. 37 On 15 June 2005 I made an order that the amount of $125, 526.66, representing the net proceeds of sale, be paid into the trust account of Carters Law Firm upon completion of the sale as an interim measure in order to permit the sale to be completed. 38 The remaining question is whether the amount of $125,526.66 should remain in that trust account pending the final hearing of the Summons or whether there should be an order for payment out of any or all such monies and, if so, to whom. 39 The defendants seek payment out of the amount set out in paragraph 35. The plaintiffs oppose any such payment out and seek instead the release of the balance of the 50% share of CPM of the net proceeds of sale of $104,763.33, namely, $20,763.33 (after allowance for the amount of $84,0000 earlier referred to). 40 Based on the further submissions of the parties made on 16 June 2004 on this question, the positions of the parties may be summarised as follows:- (a) The defendants say that the plaintiffs claim an equal share in the net proceeds of the sale of 25 Beatrice Street of $185,000 less approximately $93,000 admitted for the purpose of this application as having been due to Kaymaz family members leaving a net entitlement from the sale proceeds of $92,000. (b) The defendants claim that that amount of $92,000 should be reduced by $21,655.43 being the sum of items 9 and 14 on the settlement sheet, Annexure "A" to Mr. Ozyigit's affidavit sworn 10 June 2005. (c) The defendants contend that the amount of $20,763.32 due to S.A. Property Holdings Pty. Limited should not be paid out of the trust fund made up of the proceeds of sale of 21 Beatrice Street. Counsel for S.A. Holdings stated that the company did not object to $12,400 (being the first three amounts in paragraph 38 of Mr. Errol Kaymaz's affidavit) being held. However, this concession was made notwithstanding his instructions that these amounts had in fact already been paid. (d) I do not consider that the amount to be held in the trust account should be reduced by the amount of $21,655.43 referred to in (b) above. There is little information about these amounts in evidence. I also have regard to and take into account the concession made by S.A. Property Holdings referred to in (c) above in striking a fair balance. 41 Accordingly, I order by way of further interlocutory relief:- (a) The amount of $92,000 of the total of $104,763.34 due to Kurt and Errol Kaymaz ($52,381.67 x 2, see paragraph 35) be held in trust pending final or such further order of the Court and the balance of $12,763.34 be paid out to them in equal amounts. (b) The amount of $12,000 of the total balance of the proceeds due to S.A. Property Holdings Pty. Limited ($20,763.32 - see paragraph 35) be held in trust pending final or other order of the Court and the balance of $8,763.33 be paid to that company 42 I make orders in accordance with paragraphs 41(a) and (b) above, subject to any further submissions which the parties may wish to make after the above calculations have been examined by them. Accordingly, I grant liberty to any party to apply within the next seven days. 43 I will hear the parties on costs of this interlocutory applications. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.