PLAINTIFF ASKS FOR HIS SHARE OF PROFIT BASED FROM THE ORAL AGREEMENT MADE BY HIM AND THE DEFENDANT
Cappello & Anor v Scrivener & Anor [2020] NSWSC 1748 (7 December 2020)
This case involves an oral agreement between first plaintiff and first defendant concerning proposed consolidation and possible development of three adjoining sites where the plaintiff claims that he is entitled to half of the profit made by the defendant.
Facts:
The first plaintiff, Mr John Cappello, is a licensed real estate agent and property developer. He is the sole director and shareholder of the second plaintiff, Shaka Holdings Pty Ltd. The first defendant, Mr John Scrivener, is a property developer based in Queensland. He is the sole director and shareholder of the second defendant, Tuscany Corporation Pty Ltd.
On 20 August 2013 Mr Cappello and Mr Scrivener made an oral agreement to share the profits arising from securing control of and on-selling or developing three 5-acre contiguous parcels of land at Rouse Hill. Neither Mr Cappello nor Mr Scrivener made a note of their conversation. Neither confirmed to the other their understanding of the agreement by way of letter, email or at all.
Mr Cappello contends, he and Mr Scrivener agreed to form a partnership or joint venture in relation to the three sites and agreed to share equally the expenses and profits arising from securing, on-selling or developing the sites
While Mr Scrivener contends that the agreement was subject to a condition that Mr Cappello finds a purchaser for the combined sites “prior to the expiry of the [due diligence] period”; that is, in the events that happened, by 28 February 2014.
Mr Scrivener secured financial assistance from a third party, Oracle Estates Pty Ltd. On about 17July 2015, the Oracle/Tuscany jointly owned company sold the three sites to a Chinese developer, Tian Tong (Australia) Pty Ltd, for $37 million.
Mr Cappello claims to be entitled to, in effect, half of that profit.
Issue: Is Mr. Cappello entitled to the profit?
Analysis:
Mr Cappello contributed equally to costs and expenses. Mr Cappello indeed asserted that his arrangement with Mr Scrivener included an agreement that expenses be shared equally.
The court is persuaded that the first of Mr Scrivener’s asserted conditions was not a part of the 20 August 2013 agreement, and as the court finds, there was no breach by Mr Cappello of the other condition relied on Mr Scrivener, the court finds that there was a partnership between Mr Cappello and Mr Scrivener of the kind for which Mr Cappello contends.
There was of course no fully documented and carefully drafted commercial agreement in place between Mr Cappello and Mr Scrivener. The agreement was oral and, in any event, Mr Cappello was entirely vulnerable to Mr Scrivener and Tuscany abusing the trust he placed in them with respect to his share in the rights to control the Development Sites.
Mr Cappello was not a director or shareholder of Tuscany and there was never any suggestion he would be. Mr Scrivener had sole control of Tuscany and the commercial opportunities which arose from the agreement of the parties that the partnership be conducted on the basis that Tuscany held the partnership assets and Tuscany be the party entering into relevant due diligence deeds, option deeds and project management agreements, always in the context of 50% of the expenses and Boon option fee being paid by Mr Cappello as a partner.
Conclusion: Mr Cappello is entitled to equitable compensation.
