In the recent decision of Forza Marketing Pty Ltd v Sie [2023] NSWSC 658 the Court considered what happened when a business arrangement fell apart, in part due to their being no written agreement in place. This case served as another reminder of the value of getting thorough legal advice before committing yourself to a business.
Two families operated a motel in Cooma together until their relationship deteriorated.
Family A owned the land the motel was operated and leased it to one of their companies. They had bought the land in a state of disrepair and refurbished it.
Family B had assisted Family A over the years, and came to assist with the motel. Importantly, they did not enter into a written agreement about the arrangement. The Court found the arrangement was defined by “uncertainty, if not confusion”.
The parties broadly had in mind that Family B would buy the motel but, over time, the situation became more complex.
Family B operated a separate business using an EFTPOS machine. That business included providing rental accommodation and other services, also in Cooma. Family B accepted payments via the EFTPOS machine for that business from time to time. From time to time Family B also used the EFTPOS machine to accept payments in relation to the motel.
After a while Family A stopped payments being made to Family B for their work, apparently (though this was not documented) on the basis that these “non-payments” would be credited against any eventual purchase price.
Family A accused Family B of misappropriating funds and pulled out of the proposed sale. A little later they evicted Family B from the land the motel was on.
The dispute crystallised into being about which family owed the other family money, and why.
Without any documents to help, the Court had to consider what the parties legal relationship was.
The Court found the relationship was not a partnership, not a joint venture, and not an equitable relationship. It was a “loose, consensual arrangement whose terms were implied”.
Family B argued they should get the deposit they paid for the purchase, and the “non-paid” invoices; a total of around $105K.
Family A claimed, among other things, the various payments made through the EFTPOS machine. With a lack of evidence about whether the payments were for the motel or for Family B’s other businesses, the Court found it would be fair if Family B had to repay around half of the EFTPOS payments.
Orders were made that the Family B pay Family A around $132K, and the Family B pay Family A around $105K.
The Court invited submissions on costs but suggested an appropriate order may be that each party bear their own.
Without wishing to be flippant or disrespectful, each party might also bear their own regrets about failing to document their arrangement.
If you are considering entering into a business arrangement but don’t know where to turn, protect yourself from outcomes like this by reaching out to Stipe Vuleta.
If you have ant questions or concerns please contact Stipe Vuleta on 02 6188 3600