Zambito Pty Limited v Buradoo Pty Limited [2011] NSWSC 284

Supreme Court New South Wales

Medium Neutral Citation: Zambito Pty Limited v Buradoo Pty Limited [2011] NSWSC 284 Hearing dates: 4 & 5 April 2011 Decision date: 11 April 2011 Jurisdiction: Equity Division - Commercial List Before: Hammerschlag J Decision: Plaintiff's claim dismissed with costs Catchwords: Contract - Implied Agreement - Whether a contract of loan is to be inferred from the circumstances Cases Cited: Integrated Computer Services Pty Ltd v Digital Equipment Corp Aus Pty Ltd (1988) 5 BPR 97 326 Albion Hotel Pty Ltd v The Commissioner of Taxation of the Commonwealth of Australia (1965) 115 CLR 78 Category: Principal judgment Parties: Zambito Pty Limited - Plaintiff Buradoo Pty Limited - Defendant Representation: Counsel: C. Harris SC [Plaintiff] R. Glasson [Defendant] Solicitors: Matthews Folbigg Pty Ltd - [Plaintiff] Verekers Lawyers - [Defendant] File Number(s): 2009/326117

Judgment

BACKGROUND

The parties and entry into of the joint venture 1The plaintiff (or "Zambito") is a company with 150 ordinary shares on issue. One hundred are held by members of the Morabito family and 50 are held by the Zamattia family. Its directors are Frank and Sam Morabito and Bruno Zamattia. 2Yean Street Pty Ltd ("Yean Street") is a company which, until 20 April 2005, owned the land known as Lot 16 Anglewood Estate ("the land") at the corner of Yean Street and Burradoo Avenue, Burradoo, near Bowral in the Southern Highlands region of New South Wales. 3Yean Street was owned and controlled, in equal shares, by Zambito and Mainland Civil Developments Pty Ltd ("Mainland"). Yean Street was the vehicle used by Zambito and Mainland for a joint venture to develop 20 cluster homes on the land. There was apparently a Deed of Trust under which Yean Street held the land for their benefit, but the instrument is not in evidence. 4In 2004, Zambito and Mainland decided that the land should be sold and Anthony Zamattia was given authority to negotiate on behalf of Zambito with Mainland to achieve this. 5Sometime thereafter, Anthony Zamattia told Frank and Sam Morabito and Bruno Zamattia that a company associated with Reed Constructions was interested in buying the land. Later still, Anthony Zamattia told them that Reed Constructions was interested in doing a joint venture with Zambito to develop the land. After this, Anthony Zamattia was advised to retain solicitors, as Sam Morabito put it, "to act on our behalf in the transaction". He says that he recalls having a conversation with Anthony Zamattia in the presence of Frank and Bruno Morabito, on several occasions, prior to the execution of any documents to the following effect: SAM: Anthony, however the JV is structured and whatever you do, you have to protect the land asset of Zambito. If you want to get Terry Grace [of TressCox] involved that is fine, get whatever advice you need to protect our land and spend whatever money is necessary to make sure that the money owed to Zambito is protected. ANTHONY: I know that money is owed to Zambito and it will contribute the money to the JV. We will do whatever is necessary to protect that money. 6TressCox Lawyers ("TressCox") were instructed to prepare a joint venture deed with Reed Taylor Pty Ltd ("Reed Taylor"). They were also instructed to act on the sale of the land. 7On 20 December 2004, TressCox produced a draft joint venture agreement between Zambito, as trustee for the Zambito Trust (representing the Zamattia and Morabito interests) and Reed Taylor. This arrangement was, however, not proceeded with and a different structure was adopted. 8The structure chosen was a unit trust with the joint venture vehicle being the trustee. 9At all material times Reed Taylor was represented by Verekers solicitors. Negotiations took place between TressCox and Verekers. 10On 11 January 2005 Mr Green of Verekers commented on the draft Trust Deed produced by TressCox. Amongst others they suggested the inclusion of a start-up pro forma balance sheet once the contract for sale of the land was finalised. 11On 13 January 2005 Verekers wrote to TressCox. The letter included the following: RE: JOINT VENTURE AGREEMENT DEVELOPMENT SITE - LOT 16 DP270382 "ANGLEWOOD ESTATE" I refer to my letter of 11 January 2005 and with particular reference to clause 19 of the Trust Deed, advise that I have had further discussions with my client and am instructed that the Project was brought to my client on the basis that:- 1. The joint venture entity (JVE) would purchase the development site. 2. The JVE would borrow, from a third party financier, funds sufficient to complete the purchase an amount for all intents and purposes expected to be 60% of the purchase price, which amount would provide external funding sufficient to cover GST, stamp duty on the purchase, relevant establishment costs and half the purchase price. Such half the purchase price is the amount which my client understands is to flow to your client's existing joint venture partner so that is in effect taken out of the development. 3. The remaining half of the purchase price which in real terms my client understands will flow to the nominee of Anthony Zamattia would ultimately be reflected in a loan account in the books of the JVE as payable to the relevant nominee of Anthony Zamattia. (emphasis added). 12On 19 January 2005 TressCox wrote to Verekers, the letter included the following: Our client will agree to the inclusion of a balance sheet. The balance sheet must include the medium/long term asset of the loan account in debit by Reed Taylor Pty Ltd and the liability to Zambito of the loan account in credit. Both loan accounts need to be treated as equity contributions to the Joint Venture. (emphasis added). 13By Deed of Settlement made on 21 December 2004, the Zambito Trust was established with Jainti Pty Ltd ("Jainti") as trustee. The specified beneficiaries under the trust include Frank Morabito and Bruno Zamattia and any corporation of which either is a director or a shareholder. Jainti has four ordinary shares on issue of which each of Frank Morabito, Sam Morabito, Bruno Zamattia and David Zamattia hold one. Frank and Sam Morabito and Bruno and David Zamattia are directors. 14On 20 January 2005 the defendant (or "Buradoo") was incorporated to be the vehicle for the joint venture with Reed Taylor. Buradoo's directors are Derry Hill, John Taylor, Sam Morabito and Anthony Zamattia. Derry Hill, John Taylor and Geoffrey Reed are directors of Reed Taylor. 15By Deed ("the Trust Deed") made on 25 January 2005 the Anglewood Development [Unit] Trust ("the trust") was established with Buradoo as trustee. The trust has two units on issue, one of which is held by Jainti and the other by Reed Taylor.