Acquaintances intent on establishing a brothel in a Gold Coast industrial estate have come unstuck as a result of different interpretations of a DIY agreement for the venture.
In an argument that went all the way to the Court of Appeal, each had a different interpretation of their “falling out”, the term used in the paperwork as the trigger for a valuation to determine the buyout price to be paid by one to the other.

Craig Leach – a former federal police officer who discovered the Bundall warehouse site but was barred from obtaining a licence – invited confrère Paul Ross, to head the operation on a promise from Ross to pay for half its value as determined by a “licensed valuer”.

That understanding was recorded in an agreement they prepared and signed in August 2004.

The 2/37 Upton St business was up and running – under the name Utopia in Paradise – by December 2005.

A difference between them occurred about a year later when Ross revealed a confidential undertaking given to the licensing authority, to have no business association with Leach.

Leach – whose intention had been to eventually obtain a licence so he could operate with Ross in partnership – sued Ross in January 2009 for his share of set up costs for the red light establishment. That resulted in a $170k cash settlement from Ross.

The business valuation lawsuit was filed by Leach in May 2010, claiming “up to $600k” for his half share and pointing to January 2009 – the date of the earlier lawsuit – as the “fall out” date.

Ross and his company Babes in Paradise P/L, countered that the relevant “falling out” had occurred in December 2006: a point in time when its turnover and value was far lower.

Justice Jean Dalton expressed “strong reservations” about the credit worthiness of both parties who had been “vague and careful with their evidence” in order to avoid admitting any breach of prostitution laws.

She nevertheless concluded – because the parties continued their relationship according to their original agreement until the January 2009 suit was filed – that was the time when the “falling out” occurred.

The appeal against that decision was dismissed and Ross was ordered to pay Leach’s costs of the four day trial and the appeal. The judgment does not reveal the precise amount Ross must cough up to payout Leach’s half share.

Ross v Leach [2014] QCA 126 Muir and Gotterson and Morrison JJA 30/05/2014


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