Australian Super Developments Pty Ltd v David Wellesley Marriner & Ors

Australian Super Developments Pty Ltd v David Wellesley Marriner & Ors - [2015] VSC 315 - VSC 2015 case summary — Zoe

[11]

[3] The issues raised on the appeal and cross-appeal were complex. The complexity was, for the most part, a product of overworked and sometimes ambiguous pleadings, and the failure of the parties at trial to address what became important issues on appeal. The way in which the trial was conducted made the resolution of the issues unusually difficult for the trial judge.

[4] In essence, the dispute between the parties raised two overlapping issues. First, ASD claimed that Marriner had induced or procured payments of bond moneys expended in breach of a trust of which ASD was the beneficiary. It was alleged that the bond moneys were held on a Quistclose[8] trust in favour of ASD. It was also alleged that some of the bond moneys were held on a solicitor's trust by ASD's solicitors, Wallace & Wallace ('Wallaces'). ASD failed on these issues at the trial and cross-appealed.

[5] On the cross-appeal, the Quistclose trust claim failed, as did ASD's contention that Marriner procured or induced a breach of that trust by Mr Peter Jephson, the company secretary of ASD ('Jephson'). The one area on the cross-appeal in which ASD achieved a measure of success was in relation to funds held on a solicitor's trust by Wallaces. The Court concluded that the trial judge erred in holding that Wallaces were not liable for payments made in breach of the solicitor's trust.

[6] Thus, the real issue on the cross-appeal became whether Marriner was, or his associated companies were, liable for a breach of trust which occurred as a consequence of directions given by Jephson to Wallaces to disburse the money to third party creditors, or for a payment of $80,000 which Marriner directed Wallaces to pay to WS Group. The trial judge stopped short of reaching any conclusion on that issue, having erroneously found that there was no breach of the solicitor's trust by Wallaces.

[7] The Court concluded that it would be unfair to both sides to reach any conclusion on that issue, for the reasons expressed in paragraph 164 of the judgment. Instead, this part of the case was remitted for determination by a judge in the trial division.

[8] Secondly, ASD claimed that an expenditure limit of $4.7 million, which was imposed on Marriner as Chief Executive Officer and Director of ASD, was exceeded by him to the extent of $824,890, without ASD Board approval. The capital expenditure claim succeeded in part at the trial.

[9] There were 35 grounds of appeal relating to ASD's claims and two grounds of appeal relating to the trial judge's dismissal of Marriner's counterclaim. Grounds 1 to 17 related to the capital expenditure claim. Marriner's main arguments on appeal related to that claim. Although Marriner succeeded in having the trial judge's order requiring him to pay $412,113 as compensation for expending money in excess of the limit set aside, his success was, to a significant extent, based on an argument about the effect of the alleged expenditure cap, which was not advanced at trial.

[10] Marriner also appealed against the decision of the trial judge rejecting various defences raised by him at trial (grounds 18 to 35). On appeal, the Court concluded that Marriner's reliance on cl 11(b) of an agreement made on 19 October 2001 as a release from liability failed. However, Marriner also relied upon the conduct of ASD in the period leading to that agreement. He alleged that ASD had failed to disclose an intention to sue him or his companies to recover the bond moneys, as well as an amount equal to the excess capital expenditure. These affirmative defences relied upon a complex web of facts and inferences. Unfortunately, the trial judge failed to provide adequate reasons for rejecting the defences.

[11] The Court remitted these issues for determination by a trial division judge. The same course was adopted in relation to the appeal against the trial judge's dismissal of the counterclaim made by Marriner (grounds 36 and 37), which was based on the same or similar facts and matters as those relied upon by him as affirmative defences to ASD's capital expenditure claim.

[12] The question of the liability of Marriner companies, Goldworthy Pty Ltd, Laguna Australia Pty Ltd, and Stage Design Pty Ltd for the breaches of trust committed by Wallaces (including the applicability of any defences and related counterclaims), and the liability for the costs of the hearing before the trial judge, were also remitted for determination by a trial division judge.[9]

[20]

C.2 Marriner's liability as to $80,000

[38] It is clear on the undisputed findings of Byrne J, and the reasons of the Court of Appeal, that on 22 May 2001 Mr Marriner personally directed Wallace & Wallace to pay $80,000 of the third tranche funds to a third party, namely the WS Group, which was a breach of trust. ...

[39] ... The Court of Appeal made clear that Mr Marriner's liability for the $80,000 should be considered. There is no reason for Mr Marriner not to be liable for the unauthorised instruction to use ASD's funds to pay a debt owed by one of his companies. ...

...

[43] The fact is that Mr Marriner breached both the first and second limbs of Eaves v Hickson: he knowingly induced or directly procured a breach of trust which resulted in $80,000 of ASD's money being paid to a third party who had no claim as against ASD for the money. Mr Marriner is submitted to be liable to pay damages on that basis.

C.3 Marriner's liability for the balance

[44] As discussed above, the balance of the third tranche was disbursed on directions given by Mr Jephson to Wallace & Wallace. On Mr Jephson's instructions, $86,500 was paid to Mr Marriner's family solicitors in Colac for the purchase of land in Victoria by Goldworthy, and the balance of $686,700 was paid to creditors of Mr Marriner's companies to discharge debts for which ASD was not liable. ...

...

[66] In these circumstances, the Court should infer that Mr Marriner authorised Mr Jephson to disburse the funds (save for the $80,000 which was the subject of his personal direction) knowing of "circumstances which indicated the facts to a honest and reasonable person". That test, set out by the Court of Appeal at [162], is submitted to have been easily satisfied. Subject to any possible defences or offsetting counterclaims there should on the basis of the submissions set out above be judgment against Mr Marriner for the whole of the third tranche amount of $853,200. As ASD has already received as a settlement $350,000 from Wallace & Wallace it will agree not to enforce the judgment against Mr Marriner to that extent.

(emphasis added)[16]

[28]

MR O'BRYAN: ... So they [Wallace & Wallace] were innocently in breach of trust, which is not an answer unfortunately for them because it doesn't matter whether a trustee is innocently in breach of trust, the trustee is in breach of trust, it's strict liability, so they were strictly liable in respect of their breach of trust, and of course they were proceeded against, Your Honour, and settled for an amount which of course we must credit and we do credit towards our claim against the Marriner interests. I think it is $350,000.

HER HONOUR: I think you have noted that in your written submissions. I read that somewhere.

MR O'BRYAN: Yes. It is connected a little bit with Mr Bick's so-called all or nothing defence, but we will come to that in due course, Your Honour. We say yes, of course we give credit for $350,000 but that still leaves us out of pocket $503,000 because it was a total of 853 plus interest over a very long period of time, et cetera.

So, Your Honour, paragraph 48 [of the Further Amended Statement of Claim], in the event that Wallace & Wallace are unable to account for the 853, then Marriner knowingly induced and assisted LQ Management to commit a breach of trust and is liable to compensate. That's the first limb of the claim.

Then the claim against Wallace & Wallace themselves, Your Honour, commences next. You will see the subheading above paragraph 49.[19] Further and in the alternative, when those moneys went into the Wallace & Wallace trust account they were impressed with the trust, so there's the solicitor's trust pleaded in [paragraph] 49. That is the solicitor's trust, Your Honour, the one pleaded in [paragraph] 49, which the Court of Appeal found existed and had been breached.

Then in [paragraph] 50, February 2001 upon receiving the trust money Wallace & Wallace owed various duties in their capacity as trustee. I don't need to take Your Honour through the duties of care because this is all now by-the-by. That complaint, as it were, has been resolved by the settlement between us and Wallace & Wallace.[20]

[34]

[23] For the reasons which follow, I have found that ASD has made out its claim that Mr Marriner knowingly induced or procured the innocent breach of trust by Wallace & Wallace in paying the sum of $80,000 to WS Group on or about 22 May 2001. As that payment was directed by Mr Marriner personally, and did not purport to be undertaken on behalf of any associated company, there is no basis for fixing any of them with responsibility for procuring or inducing that breach of trust. Nor was any associated company a knowing recipient of those funds. Furthermore, as there was no clear evidence as to what the $80,000 paid to WS Group related to, save for general assertions that the money was spent on Laguna Quays and was legitimately incurred, I have rejected the Marriner parties' defence that because the monies were spent on the resort ASD was benefited, and I am not satisfied that there is any proper basis for commensurately reducing the loss suffered by ASD.

[24] I am not satisfied that ASD has made out its case in respect of the balance of the third tranche bond monies that Mr Jephson directed Wallace & Wallace to pay [i.e., $773,200], including the sum of $86,500 that he directed be paid to the trust account of Larkins McCarthy, solicitors, in Colac.

[25] I have also dismissed all of the affirmative defences and counterclaims brought by the Marriner parties. For the reasons set out below, I am not satisfied that Mr Marriner relevantly suffered from a special disadvantage in his dealings with ASD and was the subject of unconscionable conduct. Nor am I satisfied that ASD made the representations contended for by the Marriner parties and thereby engaged in misleading and deceptive conduct or that ASD was estopped by representation from acting as it did. It follows that the agreements made between the parties are effective according to their terms, with the result that ASD is not disentitled from making the bond monies claim and the Marriner parties are precluded from bringing the claims they now seek to make.[23]

[87]

46 The claim for the $80,000 that was paid out in breach of the solicitor's trust was not the subject of a separate plea against either Wallace & Wallace or Mr Marriner. Rather, it was, in each case, part of the rolled-up claim brought in respect of the third tranche funds. The Court of Appeal, in its remitter, identified the claim for the $80,000 as a separate issue for determination. But, in a pleading sense, it was an integral part of both the claim for the third tranche bond monies of $853,200 brought against Wallace & Wallace, and also the similar claim for knowingly inducing or procuring the breach of the solicitor's trust brought against Mr Marriner. No amendment was made to the pleadings following the settlement with Wallace & Wallace. Thus, the Marriner parties contend that ASD has received the sum of $350,000 from Wallace & Wallace in respect of claims based on the disbursement of the third tranche funds (which included the disbursement of the sum of $80,000 at Mr Marriner's direction on 22 May 2001), and to permit ASD to now recover a further $80,000 from Mr Marriner in respect of the same cause of action would amount to 'double recovery'. That is, while the Marriner parties accept that under the remitter decision ASD has established an entitlement to a judgment for $80,000, they contend that no order by way of judgment should be made giving effect to that entitlement. They argue that in circumstances where ASD has already received $350,000 from Wallace & Wallace in respect of claims based on the disbursement of the third tranche funds (including the $80,000 disbursed on 22 May 2001), it should not receive a further $80,000 from Mr Marriner in respect of the same facts. That is to say, at least initially, the Marriner parties did not contest that ASD has established an entitlement to a judgment against Mr Marriner for the sum of $80,000 but they say that if there were to be any recovery against Mr Marriner in respect of the $80,000, it would offend the principle against double recovery.[52]

[130]

MR BICK: ... If Your Honour ultimately concludes that it's necessary for us to apply for leave to reopen our case, well, then we do, and our learned friend Mr O'Bryan said, "In reality that's what they're doing".

HER HONOUR: Well, no application has been made and I don't see how that would arise unilaterally from the court. No submission has been made that I should even give consideration to reopening. Mr O'Bryan said no application is made so he's not requiring one to be made and you're not making one. So that seems to be the end of that point, doesn't it?

MR BICK: No, Your Honour. That overstates the position we took, but if I haven't made it clear I'll make it clear now. We don't believe that it's a matter where we require leave to reopen because the parties chose to put their agreement before the court in a non-evidentiary form, but if we do need to reopen then in the alternative we'll apply - we do apply, sorry.

MR O'BRYAN: Your Honour - - -

HER HONOUR: That's a different submission to the one that you made before you sat down this morning.

MR BICK: No, with respect, Your Honour, I would submit that's not right, but let me make it quite clear. Order 1 of our summons seeks leave to file, serve and rely on the affidavit of Mr Pergl. That was the application I endeavoured to make this morning. My learned friend says that's, in effect, an application for leave to reopen. My submission this morning as I intended to make it, and thought I had made it, was if we need leave to reopen then we apply for it, but I made primary submissions, I would hope, forcefully that no leave was required.

Because the document we seek to rely on was never intended to form part of the evidence in the case, rather, it was intended to record an agreement between the parties the court was invited to act on, and should act on, which Your Honour correctly and accurately summarised. And it remains our primary position this is not a situation where we need to apply for leave to reopen our case. It's simply to put before the court that which the trial judge had before him, both parties being bound by the way in which they conducted the trial in that regard and every other regard for that matter.[79]

[176]

110 The Marriner parties contend that it was not unreasonable for them to reject the Calderbank offer. First, they maintain they had a good argument that, on the remitter, they would effectively have the benefit of the $350,000 paid by Wallace & Wallace. In other words, they say that ASD would have to recover more than that sum before an order for costs would be made against the Marriner parties. I note, however, that in their solicitors' response to the Calderbank letter dated 16 October 2012, which sought to explain 'why, in our [i.e., Merkin & Apel's] view, [the Marriner parties'] rejection of the Offer is an entirely reasonable position', the solicitors for the Marriner parties never advanced that argument as a reason for, or in support of, their clients' rejection of the offer. Secondly, they say it was likely that the Marriner parties would receive a favourable costs order, representing a significant sum. As yet, the Marriner parties have not sought to recover the costs they were awarded by the Court of Appeal but they are said to be substantial, and in the order of $315,468,[124] which when discounted to 80% would equal approximately $252,374.[125] Thirdly, in their response to the Calderbank letter, the solicitors for the Marriner parties outlined the reasons why they contended it was reasonable for them to reject the offer. Importantly, they were of the view that ASD could not establish that Mr Marriner knowingly induced or immediately procured, or was the instigator of, the breaches of the solicitor's trust in relation to the third tranche bond monies. But they recognised that the narrower case, concerning the direction given by Mr Marriner to Mr Penridge about the $80,000, may have better prospects. Further, they said that even if ASD did succeed on this narrower case, they did not agree that ASD would be entitled to receive a full indemnity costs order. The solicitors for the Marriner parties said they were of the view that in circumstances where there are a multiplicity of issues and mixed success has been enjoyed by the parties:

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