ACI Operations Pty Ltd v Tallant

THE COURSE OF THE PROCEEDINGS 12The proceedings were commenced by a statement of claim filed on 12 April 2011, to which the defendants filed a defence on 24 May 2011. 13The plaintiff (a former employer of the first defendant, Mr Tallant) filed an amended statement of claim, with the leave of the court, on 28 February 2013. 14By operation of rules of court, the parties are taken to have joined issue on the amended statement of claim and the defence. The defendants have filed no defence other than the one they filed on 24 May 2011. 15At the time the proceedings were set down by the registrar for final hearing today (that is, on 21 September 2012) the defendants were represented by a solicitor and counsel. 16At the time the Registrar set the proceedings down for final hearing, he made directions designed to facilitate the preparation of a court book in an orderly manner, and for the filing and service of written notice of objections to affidavits, and of outlines of submissions. 17The defendants have neither filed nor served any notice of objections. Nor have they filed or served outline submissions. They have left preparation of the court book to the solicitors for the plaintiff. 18The defendants did file affidavits in the proceedings in the middle of last year. Each of them, separately, swore an affidavit on 18 June 2012. In their absence, the plaintiff has tendered extracts from those affidavits as admissions against interest.

THE FACTS 19The plaintiff is an affiliate of the Owens-Illinois group of companies, the business of which includes that of a multinational packaging manufacturer. The plaintiff manufactures glass bottles and jars for beverages, spirits, food and sauces. It maintains a manufacturing plant in Penrith. 20The first defendant was employed by the plaintiff between September 2003 and 30 March 2010 or thereabouts. 21Between 18 May 2004 and the time of his dismissal on 30 March 2010, or thereabouts, he served as the "Machine Maintenance Manager" of the plaintiff, in the Machine Maintenance Department at the plaintiff's Penrith plant. In that position, he was responsible for the maintenance and repair of plant and equipment. 22The evidence adduced at the final hearing, today, demonstrates that, between 17 January 2006 and 16 March 2010 or thereabouts, the first defendant, acting in concert with his wife (the second defendant), caused the plaintiff to pay a total of $917,699 to a business name registered with ASIC in the name his wife. Through that business name, "NBL Engineering Services" ("NBL"), they induced the plaintiff to pay that sum of money for goods not supplied, and services not rendered, to the plaintiff. 23The defendants' dishonest conduct came to the plaintiff's attention on 16 March 2010 when the first defendant, claiming to be responding to rumours of rorting circulating on the workshop floor, made a disclosure to his immediate superior, within the plaintiff, of his connection with NBL. 24Officers of the plaintiff and its accountants interviewed both the defendants on 25 March 2010. Transcripts of their interviews were recorded, and have been admitted into evidence today. 25In their interviews, the defendants maintained that NBL had supplied goods and services to the plaintiff as invoiced, and they made representations of fact about the conduct of NBL's business. Those representations led, not unnaturally, to further enquiries on the part of the plaintiff. 26In a number of respects, not necessary to detail, the representations made by the defendants have been demonstrated to be false. 27The evidence of the plaintiff is to the effect that the defendants' assertions that goods and services were supplied to the plaintiff, as invoiced, cannot be verified independently of the defendants. The defendants' assertions are of a nature which, despite the best endeavours of the plaintiff to expose them to critical scrutiny, appears to be unverifiable. 28The first defendant's modus operandi, within the administrative structure of the plaintiff, demonstrates an awareness of weaknesses in the security system of the plaintiff then in place. He personally procured NBL's registration with the plaintiff as a supplier. He personally generated an internal requisition for work, and caused the plaintiff to issue a purchase order, in favour of NBL. 29Between 23 March 2006 and 1 March 2010 or thereabouts the defendants caused "NBL" (themselves by another name) to submit 151 tax invoices to the plaintiff for payment. As an officer of the plaintiff the first defendant, personally, approved those invoices for payment. 30The tax invoices of NBL disclose no connection between the defendants and NBL. The only address for NBL recorded in the invoices is a post office box. The only contact numbers for NBL are a mobile phone number and, sometimes, a fax number. The items of work allegedly done, and the goods allegedly supplied, are described in the invoices in terms that are so generic that they cannot be corroborated or investigated independently of the defendants. 31The documentation of NBL submitted to the plaintiff is in a form that bears some similarities with documentation produced by the defendants, in the course of the plaintiff's investigations of NBL, said to represent the provision of goods by NBL's principal supplier, a company named "Lyal Investments Pty Ltd". 32The plaintiff's investigations have revealed that there is a company of that name, but it has never had a connection with the defendants and documentation produced by the defendants, supposedly from the company, records a false ABN number.

THE PLAINTIFF'S CLAIMS FOR RELIEF 33The case the plaintiff seeks to make has been set out in detailed outline submissions which have, for convenience, been marked as "exhibit P2". Leaving aside a few clerical errors, the case sought to be made out by the plaintiff in those written submissions has been made out. 34The plaintiff pleads entitlements to relief against the defendants which invoke Common Law, Equitable and statutory jurisdiction. It is not necessary to deal with them all. 35The case can be appropriately dealt with by reference to the plaintiff's claims at Common Law and in Equity. 36In a case such as the present, where: (a) the wrongful conduct alleged against the defendants is in substance a misappropriation of property; (b) that property takes the form of money; and (c) the relief claimed is not proprietary in nature, but is limited to a claim for a money judgment, quantification of the amount of any judgment, according to the imperatives of the different jurisdictions, may be similar. 37That is so, notwithstanding the customary focus of the Common Law jurisdiction on an assessment of the relief to be granted at the time the cause of action accrues (Johnson v Perez (1988) 166 CLR 351 at 355-356, 367, 371 and 380), and the contrasting focus of the Equity jurisdiction on an assessment of the relief to be granted at the time orders are to be made: Greater Pacific Investments Pty Ltd (In Liq) v Australian National Industries Ltd (1996) 39 NSWLR 143 at 154B; Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 212 CLR 484 at 500-502 [38]-[44] and 504 [50]. 38Because a money judgment is in contemplation in these proceedings differences between these two perspectives can be accommodated by an award of interest: Hungerfords v Walker (1989) 171 CLR 125 at 148; Civil Procedure Act 2005 NSW, s 100. 39The object of an award of damages for breach of contract is generally, so far as money can, to compensate the innocent party for loss caused by a breach of contract, and to put that party back in the position it would have been but for the breach: Wenham v Ella (1972) 127 CLR 454 at 460; Robinson v Harman (1848) 154 ER 363 at 365. 40The object of an award of equitable compensation, in a case such as the present one, is generally to require a defendant, against whom a plaintiff has established an equity, to restore the plaintiff's property to it, as is in good conscience required: Maguire v Makaronis (1997) 188 CLR 449 at 469-470; Re Dawson (deceased) [1966] 2 NSWR 211; 84 WN (Pt 1) (NSW) 399. Different considerations may apply where equitable compensation is to be assessed without reference to restoration of property : Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 212 CLR 484 at 499-504 [36]-[50]; Cobeam Palmer Ltd v Stock Affiliates Pty Ltd (1968) 122 CLR 25 at 33. 41The object of a judgment, at Common Law, for moneys had and received is to recognise the obligation of a defendant not to detain the plaintiff's money, but to restore its value to its rightful owner: ANZ Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662 at 673; Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 at 524-525 [14]-[15], 529-530 [25]-[28], 539-540 [62]-[64], 551 [90], 554-555 [100] and 589-590 [202]- [203]. 42The different jurisprudential perspectives of the Common Law and Equity jurisdictions can, in the factual setting of the current proceedings, result in a similar outcome, both as between those jurisdictions and vis-a-vis the defendants. 43The plaintiff's case against the first defendant can be, most conveniently, dealt with on the basis of a Common Law claim for damages for breach of his employment contract and a claim for equitable compensation arising from breaches of fiduciary duty. At the core of analysis of both types of claim for relief is the fact that, factually, it is not inappropriate to describe the first defendant's conduct as constituting a course of conduct involving misappropriation of moneys of the plaintiff. 44The measure of damages to be awarded at Common Law, and the measure of compensation to be awarded in Equity, are, on the facts of this case, the same. The plaintiff is entitled to a judgment for $917,699, taking as the time of assessment of that amount the respective times at which moneys were misappropriated. That time for assessment having been selected, the plaintiff seeks, and should be awarded, interest under s 100 of the Civil Procedure Act 2005 NSW, as well as costs. 45Of the several ways that the plaintiff's case against the second defendant is advanced, the most direct, it seems to me, is via a Common Law claim for moneys had and received. The money paid out by the plaintiff was paid to a bank account of which the second defendant was the named account holder. 46She received the plaintiff's money in circumstances in which no consideration passed from her, or anybody else, to the plaintiff. She received it in circumstances in which she must have known that it had been misappropriated by her husband, and she had no entitlement to retain it. In the face of the plaintiff's demand for repayment, she has no entitlement to retain it. 47The plaintiff's alternative claims against the second defendant include a claim for knowing receipt under the first limb of Barnes v Addy (1874) LR 9 Ch App 244 at 251 (Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at 140-141 [111]-[113], 142 [115], 155 [147] and 159 [158]), grounded upon her husband's breach of fiduciary duties and, inter alia, the observations of the Court of Appeal in Kalls Enterprises Pty Ltd (in liq) v Baloglow [2007] NSWCA 191; 63 ACSR 557 at [157]-[159] about the availability of such a Barnes v Addy claim arising out of a breach of fiduciary duty. Cf, Black v S Freedman & Co (1910) 12 CLR 105 at 109 (a tracing case). 48Again, the appropriate measure of relief to be granted against the second defendant does not differ depending on whether it is assessed upon an exercise of Common Law or Equitable jurisdiction. It is appropriate, in the circumstances, that the plaintiff be granted a judgment for the same amount (namely $917,699), with an award of pre-judgment interest, as is to be awarded against the first defendant. Costs here also follow the event as against the second defendant. 49Before entering any judgment against either of the defendants, an opportunity will be allowed to the plaintiff to make submissions about the amount to be awarded in its favour for pre-judgment interest, and about the basis upon which any costs order should be made. 50Given that the defendants have not participated in the final hearing, there remains a possibility that they might, at some future time, apply to have the Court's judgment set aside pursuant (for example) to rule 36.15 or rule 36.16 of the Uniform Civil Procedure Rules 2005 NSW. 51Should such an application be made it would have to be considered on its merits. However, for the benefit of the defendants, I draw to attention that, in the ordinary course, any application that might be made for the setting aside of a judgment such as that to be entered in these proceedings may need to be supported by evidence explaining the defendants' non-appearance at today's hearing, the availability of an arguable defence on the merits to the case pleaded against the defendants in the amended statement of claim, and their delays in the conduct of that defence: Vacuum Oil Pty Co Ltd v Stockdale (1942) 42 (NSW) 239 at 243-244; 59 WN (NSW) 188 at 190-191.

ADDENDUM (16 April 2013) 52Having received evidence directed to the calculation of interest under s 100 of the Civil Procedure Act 2005 NSW and the bases upon which any costs order should be made, I make the following orders: (1) Order that judgment be entered against the defendants for the sum of $1,287,641.71, inclusive of interest under s 100 of the Civil Procedure Act 2005 NSW. (2) Order that the defendants pay the plaintiff's costs of the proceedings: (a) up to and including 20 December 2012, on the ordinary basis; and (b) thereafter, on the indemnity basis. (3) Order, subject to further order, that exhibit P2 (the document dated 13 April 2013 entitled "outline of the plaintiff's submissions") be retained with the Court file. (4) Subject to order 3, order that exhibits and subpoenaed material may be returned forthwith; any exhibits returned must be retained intact by the party or person that produced the material until the expiry of the time to file an appeal, or until any appeal has been determined.

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. Decision last updated: 17 April 2013