CURETON v BLACKSHAW SERVICES PTY LTD AND ORS

CURETON v BLACKSHAW SERVICES PTY LTD AND ORS - [2002] NSWCA 187 - NSWCA 2002 case summary — Zoe

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COUNSEL : C J Birch SC/A F Fernon - Appellant M J Slattery QC/R D Marshall - Respondents SOLICITORS : Grahame W Howe & Co - Appellant Henshaws - Respondents CATCHWORDS : EVIDENCE - cross-examination - trial Judge's refusal to allow further cross-examination on credit - incriminate witness - credit findings - Evidence Act 1995, s128 - INTEREST - compound interest - quarterly rests - Supreme Court Rules 1970, Schedule J - commercial rates of interest Evidence Act 1995 LEGISLATION CITED : Supreme Court Rules 1970 Trade Practices Act 1974 (Cth) Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 Alemite Lubrequip Pty Ltd v Adams (1997) 41 NSWLR 45 Attorney-General v Alford 4 De G M & G 843; (1855) 43 ER 737 Briginshaw v Briginshaw (1938) 60 CLR 336 Burdick v Garrick (1870) 5 LR Ch App 233 Devries v Australian National Railways Commission (1993) 177 CLR 472 Hungerfords v Walker (1989) 171 CLR 125 CASES CITED: Jervis v Berridge (1873) LR 8 Ch App 351 Jones v Foxall (1852) 15 Beav 388; (1851) 51 ER 588 O'Sullivan v Management Agency Music Limited [1985] QB 428 Re Tennant Mortlock v Hawker (1942) 65 CLR 473 Rosenberg v Percival (2001) 75 ALJR 734 Southern Cross Commodities Pty Ltd (In Liquidation) v Ewing (1987) 11 ALR 818 Vyse v Foster (1842) 8 Ch App 309; (1874) LR 7 HL 318 Wallersteiner v Moir (No 2) [1975] QB 373 Warman International Ltd v Dwyer (1995) 182 CLR 544 DECISION : 1 The appellant to file and serve on or before 5 July 2002 proposed short minutes of order to reflect these reasons for judgment; 2 If the appellant's short minutes are not agreed the respondent to file and serve on or before 10 July 2002 short minutes of order to reflect the reasons for judgment; 3 The appeal stood over for mention before Sheller JA at 9.30 am on Friday, 12 July 2002 for the making of orders disposing of the appeal; 4 Liberty to the parties to apply in Chambers if agreement on the short minutes is reached before 12 July 2002.

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CURETON v BLACKSHAW SERVICES PTY LTD & ORS The defendant appealed against the judgment of Palmer J given on 4 July 2001. His Honour awarded damages to the third plaintiff against the defendant in the amount of approximately $201,700 and to the fourth plaintiff against the defendant in the amount of approximately $50,130. His Honour awarded compound interest on damages for breaches of fiduciary obligations claimed by the plaintiffs at quarterly rests and at rates set out in Schedule J to the Supreme Court Rules 1970. From 1987 to 1992 the defendant was employed as office manager and in-house accountant for the corporate plaintiffs. He was also a director of each of them for the majority of that period. In broad terms the plaintiffs alleged that the defendant, over a period which began in early 1989 and continued until 1992, misappropriated money which belonged to one or other of the companies or their superannuation funds. Further, the plaintiffs alleged that an agreement referred to as the Cureton Agreement apparently made between the second plaintiff (managing director and controller of the other plaintiffs) and the defendant should be declared void and of no effect. The defendant had filed a defence at trial alleging an oral agreement made between himself and the plaintiffs for his employment. A letter was said to have acknowledged the Cureton Agreement, which was varied from time to time, and purported to confirm the defendant's entitlement to a percentage profit share of the Group's businesses and a percentage of the growth in value of the assets of the business. The defendant challenged the trial Judge's findings as regards the legal effect of the Cureton Agreement. At first instance, as an introduction to dealing with the various matters in dispute between the parties, the trial Judge made findings about the credit of the second plaintiff and the defendant. Palmer J's credit findings attracted eight grounds of appeal. The primary matter appealed against was the trial Judge's decision to refuse to allow the defendant's counsel, after more than a day of cross-examination, further to cross-examine the second plaintiff on matters going to his credit. The defendant claimed that, the trial Judge having concluded that the determination of the issues in the case depended essentially upon the credit of the second plaintiff and the defendant, there was a miscarriage of justice in refusing to permit continued cross-examination about the second plaintiff's credit. The cross-examination was directed to the second plaintiff's failure to disclose assessable income. By contrast, when concluding that he could not accept the defendant as a witness of truth, Palmer J took into account the fact that he had not lodged personal tax returns since 1980 and had failed to provide the ANZ Bank with Group financial statements from 1987 to 1992. The majority of the grounds of appeal are expressed as error in the trial Judge's findings of fact. A further ground was based on the awarding and calculation of compound interest. The defendant claimed that compound interest should not have been awarded and further submitted that Schedule J rates should not have been applied. HELD (per Sheller JA, Meagher JA and Beazley JA concurring)

It is unusual that the cross-examination of the second plaintiff on his failure to disclose assessable income was precluded. Section 128 of the Evidence Act 1995 enabled the trial Judge to require the witness to give evidence if he was satisfied that the interests of justice required it even if the evidence might tend to incriminate the witness under Australian law. He was further empowered to cause the witness to be given a certificate in respect of the evidence. The interests of justice in this context should be construed broadly and would permit questions to be put to credit, particularly where credit was important and where the credit of the chief witness on the other side was to be impugned for conduct similar to that to be tested in cross-examination. However, the trial Judge was entitled to form the view that the cross-examination would not assist him. There was no miscarriage of justice which would entitle the defendant to a new trial because the cross-examination of the second plaintiff was stopped when it was; Pt51 r23 of the Supreme Court Rules 1970.
The trial Judge was entitled to prefer the evidence of the second plaintiff over that of the defendant. His Honour's credit findings disclose no appealable error.
The trial Judge's decision not to accept the defendant's evidence as to how the Cureton Agreement and letter came into existence was within his discretion. The acceptance of the second plaintiff's account of how the letter came into existence necessitated a finding that the letter amounted to no more than an attempt to obtain from the second plaintiff a signed admission that an earlier employment contract had been made. It was not itself a valid and operative contract; compare Jervis v Berridge (1873) LR 8 Ch App 352 at 359; Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309.
The evidence to which the trial Judge referred was amply sufficient to support the conclusion that the defendant had breached his fiduciary duties by misappropriating the funds of the plaintiff companies. Part of the plaintiffs' entitlement was to bring to account any profit that the defendant had made or should be presumed to have made from the money he received on account of his breaches. A charge of interest and, if appropriate, compound interest for the period he had the money was a method for determining the appropriate compensation. However, compound interest should not be awarded as a form of punishment; see Burdick v Garrick (1870) 5 LR Ch App 233; Wallersteiner v Moir (No 2) [1975] QB 373.
The use of the Schedule J rates extended beyond simply compensating the plaintiffs, and effectively punished the defendant. If compound interest was to have been awarded the appropriate interest rate was the commercial rate.
No explanation was given by the trial Judge for deciding to make the award of compound interest on quarterly rests or to adopt other than commercial rates of interest. There was no evidence that the loss suffered by the plaintiffs exceeded the amount made by the defendant in order to warrant an order for compound interest.

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Blackshaw Services Pty Limited (Blackshaw), Jack Hicks (Mr Hicks), Hinemoa Pty Limited (Hinemoa), Hicks Holdings Pty Limited (Hicks Holdings), Hinemoa (Properties) Pty Limited (Properties) and Hinemoa (Sales) Pty Limited (Sales) brought proceedings in the Equity Division of the Court against William H Cureton (Mr Cureton). Mr Hicks was at all material times the managing director and a shareholder of the other plaintiffs and controlled their activities. Blackshaw sought equitable compensation, Hinemoa sought exemplary damages, equitable compensation and interest and Hicks Holdings sought damages or equitable compensation and interest. 3 From 27 February 1987 to 21 May 1992 Mr Cureton was employed as office manager and in-house accountant for the corporate plaintiffs. He was a director of each of them from 8 November 1987 until 5 May 1992. In broad terms the plaintiffs alleged that Mr Cureton over a period which began in early 1989 and continued until 1992 misappropriated money which belonged to one or other of the companies or their superannuation funds. Further to that the plaintiffs alleged that an agreement referred to as the Cureton Agreement apparently made, confirmed or varied by the signing on 20 April 1990 by Mr Hicks of a letter, should be declared void or of no effect. 4 Mr Cureton filed a defence alleging an agreement made between himself and the plaintiffs between 31 October 1985 and February 1987 for his employment. This was said to have been entered into orally between him and Mr Hicks on behalf of himself and the other plaintiffs and acknowledged by the letter dated 20 April 1990. Thereafter it was allegedly varied from time to time. Defences were filed dealing with the particularised misappropriations. Mr Cureton filed a cross-claim against the six plaintiffs alleging, amongst other things, breaches of express and implied terms of the Cureton Agreement. Various items of damage were claimed including damages under the Trade Practices Act 1974 (Cth). 5 Palmer J heard the proceedings and on 4 July 2001 gave judgment. On the plaintiffs' claim damages were awarded for Hinemoa against Mr Cureton in the amount of $201,706.16 and for Hicks Holdings against Mr Cureton in the amount of $50,132.01. There was judgment for the cross-defendants on the cross-claim. Mr Cureton has appealed relying upon twenty-five grounds to which two grounds, 7A and 7B were added by leave and without objection. I do not propose to set out the grounds of appeal. The substance of the appeal sufficiently emerges from the submissions urged upon us in writing and during the oral hearing. 6 With the exception of grounds 7, 7A and 7B, which go to the disallowance of cross-examination, and ground 25 which goes to the awarding and calculation of compound interest, the grounds are expressed as error in the primary Judge's findings of fact and ignore the limits of appeal to this Court on such grounds. It is necessary again to cite the well-known passage of Brennan, Gaudron and McHugh JJ in Devries v Australian National Railways Commission (1993) 177 CLR 472 at 479: "More than once in recent years, this Court has pointed out that a finding of fact by a trial judge, based on the credibility of a witness, is not to be set aside because an appellate court thinks that the probabilities of the case are against - even strongly against - that finding of fact. If the trial judge's finding depends to any substantial degree on the credibility of the witness, the finding must stand unless it can be shown that the trial judge 'has failed to use or has palpably misused his advantage' or has acted on evidence which was 'inconsistent with facts incontrovertibly established by the evidence' or which was 'glaringly improbable'." (citations omitted) 7 In Rosenberg v Percival (2001) 75 ALJR 734 at 740 McHugh J said: "[38] Wherever the boundary of review lay, in the circumstances of this case, the Full Court could not set aside the trial judge's finding on the bare ground that he did not give sufficient weight to matters that the judges of the Full Court thought assisted the patient's case." 8 For the most part the written submissions in support of these grounds of appeal proceeded on the basis that the appeal was a re-trial on the evidence before Palmer J.

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Reasons for Judgment at first instance 9 Palmer J usefully summarised the issues between the parties as follows: "4 The plaintiffs' Statement of Claim has undergone a number of amendments, most of them during the course of the trial. By their Fourth Further Amended Statement of Claim the plaintiffs claim, in broad outline, as follows. 5 The Third Plaintiff [Hinemoa] claims repayment of the sum of $29,500 said to have been misappropriated in March 1989 by Mr Cureton from a superannuation fund of which the Third Plaintiff was trustee. 6 The Fourth Plaintiff [Hicks Holdings] claims repayment of various amounts totalling $19,407 debited to a loan account of Mr Cureton in the books of the Fourth Plaintiff, those amounts being alleged to have been paid to Mr Cureton or for his benefit without the knowledge and consent of the Board of the Fourth Plaintiff or of Mr Hicks. 7 The First Plaintiff [Blackshaw] claims repayment of amounts totalling $19,012.31 charged to the First Plaintiff by Mr Cureton in respect of services said to have been rendered by staff of Mr Cureton's accountancy practice, those payments being alleged to have been procured by Mr Cureton without the knowledge and consent of the Board of the First Plaintiff and Mr Hicks. 8 The Third Plaintiff claims repayment of amounts totalling $16,973.25 said to have been paid from the funds of the Third Plaintiff for CCH subscriptions, a life insurance premium and other minor matters for the benefit of Mr Cureton, those payments being alleged to have been procured without the knowledge and consent of the Board of the Third Plaintiff and Mr Hicks. 9 In respect of all of these payments, the plaintiffs claim that Mr Cureton is liable to account as a fiduciary in that at the times of the payments he was not only an employee but also a director of the relevant plaintiffs and a sole signatory to the Group's bank account. 10 By his defence Mr Cureton alleges that all of the payments to him or for his benefit said to have been unauthorised were in fact made with the full knowledge and consent of Mr Hicks, as the controller of the plaintiff companies. He says further that it was part of the terms of his contract of employment with the plaintiffs that his CCH subscriptions and subscriptions to professional services and journals would be paid for by his employer. 11 By his cross claim, Mr Cureton seeks to enforce certain terms of an oral contract of employment which he said was made in February 1987 between him and Mr Hicks on behalf of all the corporate plaintiffs and on Mr Hicks's own behalf. Mr Cureton says that the relevant terms of the oral contract were varied by an agreement in writing dated 20 April 1990 signed by Mr Hicks on his behalf and on behalf of the corporate plaintiffs. The relevant terms are said to provide that in addition to his salary and other employee benefits Mr Cureton would be entitled to a certain share of the profits before tax of all of the business operations of the Group and a certain share of the increase in value of the assets of the Group. 12 The plaintiffs deny that an oral contract of employment containing the terms alleged by Mr Cureton was made in February 1987. Further, by their Fourth Further Amended Statement of Claim they say that if a contract containing the alleged terms was made in February 1987 it was procured by breach of fiduciary duty on the part of Mr Cureton. In respect of any contract made or varied by the letter dated 20 April 1990 signed by Mr Hicks, they say that that contract or variation was procured by Mr Cureton in breach of fiduciary duty or by unconscionable conduct." 10 Palmer J expressed his conclusions as follows: "153 There will be judgment for the Third Plaintiff against the Defendant in the sum of $29,500, being the amount transferred in March 1989 to the Defendant's superannuation account with National Mutual. As the payment was obtained by the Defendant in breach of fiduciary obligations, the breach was not minor or of a technical nature, and the amount so obtained has been invested for the Defendant's benefit, compound interest should be awarded at the rates specified in Schedule J to the Supreme Court Rules 1970 calculated on quarterly rests from 15 March 1989: see Hungerfords v Walker (1990) 171 CLR 125, at 148; Schipp v Cameron (unrep. SCNSW 12 October 1998, Einstein J). 154 There will be judgment for the Fourth Plaintiff against the Defendant in the sum of $19,407, being the total amount debited to the Defendant in his loan account with the Fourth Plaintiff. As payments debited prior to 25 November 1991 were not procured by the Defendant in breach of fiduciary duty, simple interest only on such amounts will be awarded at the rate specified in Schedule J calculated from the dates upon which the relevant amounts were debited to the Defendant's loan account. As the two payments of $6,000 debited on 25 November 1991 and 10 April 1992 were obtained by the Defendant in breach of his fiduciary obligations, the breach was not minor or of a technical nature and the Fourth Plaintiff has been deprived of the use of that money in its business, compound interest should be awarded at the rate specified in Schedule J calculated on quarterly rests from the dates upon which the amounts respectively were debited. 155 There will be a declaration that the Defendant is liable to account to the First Plaintiff in respect of all profits derived by the Defendant from the provision of services rendered to the First Plaintiff by the Defendant's staff, after making all just allowances in favour of the Defendant. I will hear the First Plaintiff further as to whether, and if so on what basis, it claims that an enquiry as to those profits is justified. 156 There will be judgment for the Third Plaintiff against the Defendant in the sum of $16,973.25, being the total of amounts paid from the funds of the Third Plaintiff for the benefit of the Defendant. As those payments were obtained by the Defendant in breach of his fiduciary obligation, the breach was not minor or of a technical nature and the Third Plaintiff has been deprived of the use of those monies in its business, compound interest should be awarded at the rates specified in Schedule J calculated on quarterly rests from the dates upon which the amounts were debited to the account of the Third Plaintiff. 157 There will be judgment for the Plaintiffs on the Defendant's cross claim." 11 The orders made reflected that the claim by Blackshaw, the first plaintiff, was not pressed further and I need not concern myself with it. There was no cross-appeal. The amounts recovered of $201,706.16 by Hinemoa and $50,132.01 by Hicks Holdings each included interest. It will be necessary to return and consider how the interest was calculated. 12 According to the trial Judge the background facts were as follows. Mr Hicks was a carpenter and joiner by trade. In 1962 he commenced a small business manufacturing and installing elevator car superstructures. Over time other partners joined him and the venture prospered. By 1978 the business was carried on by a group of companies, the "Elevator Cars Group". Hinemoa was Elevator Cars Pty Limited and carried on the manufacture and installation of elevator cars. It was also the trustee of the Elevator Cars Superannuation Benefit Fund. Hinemoa Sales, then Elevator Cars (Sales) Pty Limited, was the sales company and Properties, then Elevator Cars (Properties) Pty Limited, owned the real estate upon which the factory and other office premises of the business were situated. Blackshaw provided administrative services to the group. Hicks Holdings held half the shares in the other companies in the group. The other shares were held by the Hicks Family Settlement Trust, of which Mr Hicks was the trustee. 13 In 1978 Mr Hicks met Mr Cureton who was carrying on practice as an accountant. They became good friends. In 1984 Mr Cureton was Mr Hicks's best man at his second marriage to Loretta. In 1983 Mr Cureton was appointed the accountant for Mr Hicks, for Loretta and for the family company Hicks Holdings. In April 1985 Mr Cureton was appointed external accountant to the Elevator Cars Group supplanting another firm of accountants. On 1 November 1985 Mr Cureton sold his accountancy practice to the firm of Bowie Wilson Miles & Co (Bowie Wilson). Mr Cureton continued as a full time employee of Bowie Wilson. Mr and Mrs Hicks and the Elevator Cars Group all became clients of that firm. 14 In late 1986 or early 1987 Mr Hicks and Mr Cureton had discussions as a result of which on 27 February 1987 Mr Cureton commenced employment with the Elevator Cars Group as in-house accountant and office manager. Palmer J observed that the discussions at that time, which were said to have resulted in a contract of employment in terms alleged by Mr Cureton, had been a central issue in the case. 15 In November 1987 Mr Hicks and Loretta divorced. Mr Cureton was involved in working out a restructuring of the Elevator Cars Group to fund the divorce settlement. A substantial part of the settlement funds came from Mr Hicks's superannuation entitlement in the Elevator Cars Superannuation Benefit Fund. Mr Cureton devised a procedure whereby Mr Hicks's employment with Elevator Cars Pty Ltd (Hinemoa) was terminated and his superannuation entitlement thereupon paid to him. Mr Hicks was re-employed by Blackshaw. As part of the restructure Mr Cureton was appointed a director of each of the companies in the group on 8 November 1987. He had previously been employed by Elevator Cars Group but, on and from 8 November 1987, was employed by Blackshaw. 16 As an employee of the Elevator Cars Group Mr Cureton was primarily responsible for the financial structure and financial requirements of the group. In particular, he was charged with the responsibility of ensuring that the financial records were duly kept, financial statements were prepared, tax returns furnished, and other statutory returns lodged. From the very start of his employment he involved himself in far more than the financial and accounting requirements of the group. He became involved in office administration, employees' housing assistance loans, superannuation, workers compensation, plant and equipment purchases and performance reviews, industrial relations, management of the group's real estate holdings, implementation of management systems in the factories and monitoring overall production. 17 Palmer J observed: "22 Unfortunately, Mr Cureton's attention to his other duties was at the expense of his primary responsibility as the in-house accountant of the Group, that is, the production of proper financial records for the companies in the Group, including the preparation of balance sheets and profit and loss accounts as at the end of each financial year, and the preparation and lodgement of taxation returns for each company in the Group. He did not produce any balance sheets or lodge any tax returns for any company in the Group for the years ended 30 June 1987, 1988, 1989, 1990 and 1991. This became a matter of increasing concern to Mr Hicks and the Group's bank, the ANZ Bank, where the Group had a substantial overdraft account." 18 On 20 April 1990 Mr Hicks was due to depart on an overseas trip. A short time before he was to board his plane, Mr Cureton arrived at the airport and presented to him a letter addressed from Mr Hicks to Mr Cureton. The letter purported to confirm Mr Cureton's entitlement to a percentage of profit share of the Group's businesses and a percentage of the growth in value of the assets of the business, terms which Mr Cureton said were agreed between himself and Mr Hicks in early 1987 as part of his contract of employment. Mr Hicks signed the letter. His signature was witnessed by a friend of his. The accounts given by Mr Hicks and Mr Cureton of what was said on this occasion were in dispute. 19 By late 1991 the relationship between Mr Hicks and Mr Cureton had soured. Mr Hicks was annoyed that Mr Cureton had never produced balance sheets or lodged Tax returns for the Group companies since he began employment in 1987. In November 1991 relations became increasingly strained when Mr Hicks approached his solicitors to determine whether the affairs of the Group were in order and was informed that no Australian Security & Investment Commission returns or income tax returns had been lodged for the Group since 1987. 20 On 12 March 1992 Mr Cureton and Mr Hicks attended a meeting at the ANZ Bank with Mr Bickerton, the manager responsible for the Group's bank account. Mr Bickerton was critical of Mr Cureton's failure to provide financial statements for the Group to the bank at any time since 1987 despite his frequent promises to the bank in that respect. Mr Hicks criticised Mr Cureton's performance. Mr Cureton regarded his integrity as under question. The meeting ended when Mr Cureton departed abruptly. 21 On 21 April 1992 Mr Cureton attended a meeting with Mr Hicks, Mr Hicks's solicitor, Mr Cahill, and Mr Klein, a chartered accountant. Mr Hicks accused Mr Cureton of stealing money from the Group. Mr Cureton was informed that Mr Klein was going to take over as accountant for the Group. On 5 May 1992 Mr Cureton tendered his letter of resignation as a director of the Group companies. 22 Palmer J said: "The determination of the issues in this case depends essentially upon the credit of Mr Hicks and Mr Cureton."

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His Honour pointed out there were no contemporaneous records of the conversations between Mr Hicks and Mr Cureton in late 1986 and early 1987 which gave rise to Mr Cureton's contract of employment. There were no contemporaneous records of various conversations between them whereby Mr Cureton said that Mr Hicks was informed of his intention to borrow money from the Group. Nor were there any contemporaneous records of conversations between them pursuant to which Mr Cureton said that he obtained the benefit of a sum of $29,500 remaining to the credit of the Group's superannuation account in November 1987. There were no other witnesses to any of these conversations. 23 Accordingly, as an introduction to dealing with the various matters in dispute between the parties, Palmer J made findings about the credit of Mr Hicks and Mr Cureton. He explained in detail his reasons for those findings. Palmer J found that Mr Hicks was a person of hot and volatile temper, given to moments of generosity but liable to repent of his generosity on later reflection. He was not a man of innate dishonesty or unreliability. On the other hand, Palmer J's impression of Mr Cureton's credit was most unfavourable. In summary, he could not accept Mr Cureton as a witness of truth. He was not prepared to accept his evidence where it was improbable, unsupported by contemporaneous records, or contrary to evidence given by Mr Hicks which was inherently probable. I should say, with due respect, that such an approach to the evidence can lead to error. There may be good reason for a judge to approach the evidence of a witness with a degree of caution, perhaps considerable caution, bearing in mind evidence about the witness's credibility and credit worthiness. Even proven liars may give truthful evidence which is inconsistent with the evidence of other apparently more credible witnesses. There is a danger that such evidence may be wrongly rejected because of the application of a pre-determined formula such as that stated in the judgment.

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Grounds 7A and 7B were directed to alleged error in applying s128(5) of the Evidence Act 1995. 25 The matter arose in this way. Mr Hicks was called to the witness box shortly after the luncheon adjournment on 18 June 2001 the first day of the trial. His evidence in chief was substantially on affidavit so that cross-examination by Mr Feller of counsel, who appeared for Mr Cureton at the trial, began not very long afterwards. It continued until the court adjourned, presumably at 4 pm. After the interposition of another witness the cross-examination began again at about 11.15 am on 19 June and continued for the rest of the day. On Wednesday, 20 June, when the hearing resumed at about 10 am the cross-examination continued. Shortly after 10 am and fairly early in the morning hearing, Mr Hicks was shown a bundle of photocopies of documents and asked to look through them carefully. He said the handwriting was not his but Mr Laxton's handwriting. Mr Laxton was a previous office manager and a shareholder and director of the Group. The following cross-examination took place: "Q. Do you know what it is? A. What I think it is, and it is a long time ago, that it was to do with purchasers, I think it was to do with purchasers. Q. You have to excuse me for asking you this, isn't the document before you relating to distribution of cash to you and Mr Hosey and Mr Laxton for the period leading up to 1984 when Mr Laxton left the group? A. If you are referring to cash, we were in the business where we were dealing with probably four or five different companies and as far as cash was concerned all the money that came in from our clients was in the form of a cheque. Q. It is the case, isn't it, that you haven't been making full and frank disclosure to the taxation department of all the receipts for the business? A. To the best of my knowledge we have. Q. Do you recall you and Mr Laxton received payments of cash from the sale of materials including scrap metal, these amounts being pocketed by you and not to the company? A. There is no way this sort of money could come from the proceeds of scrap metal. Q. Did you sell scrap metal? A. Yes I did. Q. In fact there were a number of large forty-four gallon drums which were kept in the yard of the factory premises? A. Which factory? Q. The Elevator Cars factory? A. There was scrap metal there. Q. Scrap metal was in the nature of aluminium? A. Yes, and stainless steel. Q. That was sold periodically to scrap metal dealers? A. It was. Q. That was a source of cash for you? A. For a short period of time, yes I did do it. Q. That was cash you pocketed and forgot about it? A. That's exactly right. Let me take it a step further, one of the conditions when we finished one of our projects, we had to clean up the site and it was brought back and I think, probably I think on three occasions, I sold scrap metal and I did put that cash in my pocket but after that period of time I decided I didn't want to do it anymore so I didn't and as far as I am concerned it was a form of recycling. I was instructed to put it in the bin and as far as I was concerned it went into the dump. Q. The cash you pocketed was never accounted for in the company's financial returns? A. No it wasn't. Q. You knew that - "

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Mr Hicks said: "No, I don't choose to give answers" and when asked "You refuse?" he said "I object to that." The transcript continued: "HIS HONOUR: What I am now considering is whether I should require Mr Hicks to give the evidence in the interests of justice pursuant to subsection 5(c) of s128 because if I come to the conclusion that the interests of justice are not served by requiring him to answer, that is the end of the matter. I would like to hear from you, Mr Feller, why the interests of justice require me to direct Mr Hicks to answer the question. IN THE ABSENCE OF THE WITNESS (Mr Feller outlined questions he proposed asking Mr Hicks regarding continuation of practice of selling scrap metal for cash without making disclosure during the period Mr Cureton was there.) HIS HONOUR: It seems to me it does not go to any matter in issue, at best it can only go to credit and it is not of such consequence, I must say, in view of the other exploration of credit that has taken place over the last two or three days that it is going to assist me materially. I don't think the interests of justice require that this evidence be given and this issue be explored any further and I so rule." 29 His Honour ruled first that this line of cross-examination was not going to assist him materially and second that he did not think the interests of justice required that the evidence be given and the issue explored any further. 30 It was submitted on behalf of Mr Cureton that, the trial Judge having concluded that the determination of the issues in the case depended essentially upon the credit of Mr Hicks and Mr Cureton, there was a miscarriage of justice in refusing to permit continued cross-examination about Mr Hicks's credit. The cross-examination was directed to Mr Hicks's failure to disclose assessable income. By contrast, when concluding that he could not accept Mr Cureton as a witness of truth, Palmer J took into account the following: "34 Mr Cureton carried on practice for many years as an accountant and as a registered tax agent. However, he has not lodged any tax returns for himself since 1980 despite earning assessable income throughout that period which required him to lodge returns. His explanation for his failure to file his own tax returns in the period prior to commencing employment with the Elevator Cars Group in 1987 was that he was distracted from that task by severe difficulties which his daughter was experiencing in her relationship with a man of bad character. Nevertheless, he seems to have been able to devote himself throughout this period to his practice as an accountant. 35 From 1987 onwards, Mr Cureton devoted himself not only to his practice but also to his management duties with the Elevator Cars Group. He did not suggest that difficulties in his personal life interfered with the performance of those duties. His failure to file his tax returns from 1987 to the present time was attributed to ' pressure of…a personal and business nature' . He said that once these proceedings had been concluded he hoped to be able to place his tax affairs in order. 36 I find Mr Cureton's explanation of his failure to lodge tax returns for the last twenty years and his statement of intention to rectify his failure entirely unconvincing in the light of his repeated false statements and broken promises to the ANZ Bank in respect of his failure to provide the bank with the Group financial statements from 1987 to 1992: see paragraphs 47-54 below." 31 There was extensive cross-examination of Mr Cureton about his failure to file income tax returns. This included the following questions by the trial Judge: "HIS HONOUR: Q. I am trying to understand this, and your evidence has been that you hadn't filed a tax return since 1980, is that right? A. No - yes, I think I said that. Q. Is that right? A. Yes. Q. You gave some evidence about personal difficulties but didn't elaborate. I would like to know what the personal difficulties were that prevented you, for a period of at least seven years, to file your tax returns until the time you commenced your employment with the Hicks group? A. That related to major ones related to a physical situation my daughter got into with a man of bad history - he was a drug addict and there was ongoing pressures in relation to that matter. He had a bad history, it was necessary for our family to have a series of apprehended violence orders against him, to move the family around New South Wales and to adopt a posture of taking on a second family. That matter was ongoing and has continued and he is currently in gaol. There were very serious problems in relation that that. My daughter on one occasion attempted suicide, was hospitalised and it was an extremely, very difficult time for us. There were break ins into our house, threats of violence and it was these matters and the documentation of them that I showed to the taxation representatives when they came to see me recently. I have acquainted Mr Feller with it in principle but I haven't shown him that file. I am quite prepared to show it to his Honour." 32 Unfortunately, the bundle of photocopied documents shown by Mr Feller to Mr Hicks were not marked for identification. This may indicate that they were never shown by Mr Feller to Palmer J. At the hearing of the appeal Mr Cureton's counsel tendered an affidavit made by Mr Cureton on 13 May 2002 which was received without objection on this point. Mr Cureton said that he had given certain instructions to his counsel for the purpose of cross-examining Mr Hicks about cash monies Mr Hicks had previously received from the Elevator Cars business and which had not been accounted for either for the business accounts or for taxation purposes. He deposed: "4. At about the time that negotiations were taking place with Mr Kevin Laxton for Mr Hicks to acquire his interest in the Group, Mr Hicks came to visit me. 5. Mr Hicks handed to me a small loose leaf bound ledger book containing groups of ledger pages, copies of four of which are exhibited to me and marked 'A1' - 'A4' respectively. 6. At the time of giving these to me, Mr Hicks said: ' I want you to keep these. I've just taken them from Laxton's office. He doesn't know about it yet.' 7. I said: ' What are they'. He replied: ' These are the record of cashies that we were splitting. These are monies that we received from jobs and materials not put through the books. For instance, we sell materials, such as ply wood, to people who come and see us off the street.' 8. I said: ' Are these the company's records? ' He said: ' No. ' 9. I looked at the documents, and noted that they appeared to record a master and summary of transactions (which are annexures A1 and A4) with separate supplementary records for each of Mr Laxton, Mr Hosey and Mr Hicks. The records for Mr Laxton and Mr Hosey are annexures A2 and A3. Mr Laxton was previously an equal shareholder and director of the Group with Mr Hicks, and the Group's office manager. He left the Group in about April 1985. Mr Hosey was the senior factory employee until he left to start a business in opposition to Mr Hicks. 10. All of these records were then retained by me in my office until the 13 August 1992. At that time, I returned the transaction records for Mr Hicks, being pages 45-58 to his then solicitors, Needs Chan and Monahan, but I did not keep a copy. 11. The master ledger (annexure A1), appears to record monies received during the period 21 August 1980 to 21 March 1985. The document has five columns, being the date, 'particulars' of monies received, a column bearing the heading '10%', a column bearing the heading '20%' and a balance column. It appears to me that the percentage columns (being columns 3 and 4), represent percentages Mr Hosey was entitled to of different classes of the moneys recorded until 12 December 1980 when he appears to receive a full 20% of receipts (see page 4 of annexure A1). After 12 December 1980, there are no further entries in column 3 except for 1 item of $100 on page 13 of annexure A1. This item appears to be a payment to Roy Peat, a then employee of the Group. 12. The balance column, records the cumulative total of those monies received until entitlements of Mr Hosey, Mr Laxton and Mr Hicks are periodically calculated. An example of one calculation is recorded on page 2 of annexure A1, when the balance of $5,345.18 was apportioned between the 3 men and the balance column returned to $0. 13. These allocations continued up to 21 March 1985, being the last entry recorded in the document. 14. I have prepared a summary of the allocations recorded in Annexure A1. That schedule is exhibit 'B' to this affidavit. This summary records a total sum of $69,530.18 was allocated over the period of the ledger. $28,039.45 was allocated to each of Mr Hicks and Mr Laxton and $13,145.28 was allocated to Mr Hosey. 15. Annexures A2 and A3 appear to me to represent ledger cards kept for Messrs Laxton and Hosey respectively. There are 5 columns being the date, particulars of the transactions, debits, credits and balance. These appear to be running accounts of draw downs by each of these persons, in anticipation of the distribution from the allocations recorded in Annexure A1. 16. Annexure A4 appears to me to be summaries of A2, A3 and the ledger card I previously had for Mr Hicks, of the entitlements of Mr Hosey, Mr Laxton and Mr Hicks and amounts drawn down in advance thereof for periods to 30 June 1982, 28 February 1983 and a further undated period. 17. I was unaware that such sales continued after Mr Laxton left and after I joined the Group until Mr Hicks came to my office at Elevator Cars. I do not recall precisely when this occurred other than I had been employed at Elevator Cars for some time. Mr Hicks placed a bundle of cash notes and a cheque on my table. He said: ' What will I do with this? ' I said: ' What's it for? ' He replied: ' For the sale of scrap metal. ' 18. Mr Hicks then said: 'Scrap metal that was placed in the factory's bins which are offcuts from the factory work and returned from jobs were sold to scrap merchants and have not previously been accounted for. I take the bins to the weigh bridges and then to the scrap metal dealers where I'm paid. ' 19. I said: ' These monies must be accounted for through the company. In addition, from your own point of view, it will be a disaster if ever the scrap metal people get a visit from the Tax Department and your dealings come to light. ' 20. An example of the weigh bridge dockets and scrap metal merchants invoices are exhibit 'C'. The weigh bridge docket is dated 30 May 1989. The invoice is dated 17 December 1987. On the last page of annexure 'C', it appears to record a sum of $5,500 being received for scrap metal." 33 The Court raised with counsel what precisely had been put to the trial Judge by Mr Feller in seeking to go ahead with the cross-examination. A document was produced and marked exhibit 'A' which was described as a statement as to what was said by Mr Feller to Palmer J at the relevant transcript reference. It was as follows: "I wish to take Mr Hicks through the ledger cards which I have shown him and have him explain them. I want to suggest to him that the cards record a course of conduct which he was knowingly involved in over a number of years with Mr Laxton and Mr Hosey and that the effect of these transactions was to obtain income from the sale of scrap metal or other materials which was not disclosed to the Taxation Department. I also want to canvass with him the circumstances in which he made Mr Cureton aware of these transactions and the extent to which these transactions continued after Mr Cureton was there." 34 With due respect to him, counsel was unable to give us any adequate explanation about the documents. The so-called master ledger, annexure A1, which was difficult to decipher appeared to show the following possible dealings with scrap: · 20 November 1980 $586.80; · 5 December 1980 $83.50; · 6 December 1981 $745.00; · 9 December 1982 $802.35; · 15 December 1983 $1,198.80; and

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· 21 December 1983 $180.30. 35 As would no doubt be expected in a double entry system of accounting, items appearing in the master ledger are also found in the ledger cards kept for Mr Laxton and Mr Hosey respectively. In the affidavit Mr Cureton said that the master ledger appeared to record monies received during the period 21 August 1980 to 21 March 1985. It is doubtful whether the amounts recorded are all receipts. Some seem to be small amounts described as "MBF" and others appear to be regular items of car expense, apparently outgoings rather than receipts. It is true that from time to time the totals are broken up or assigned by reference to the signs "10%" and "20%". There are separate documents headed with the names of Mr Hosey, Mr Hicks and Mr Laxton which have totals of what are described as charged items and underneath them percentage entitlements with a calculation that shows the difference. 36 It is unknown to what extent if at all the trial Judge was taken to this bundle of documents and had them explained to him. Nothing in the transcript or exhibit A suggests that he was. 37 I find it unusual and troubling that the cross-examination of Mr Hicks should have been stopped. Section 128 enabled the Judge to require the witness to give evidence if he was satisfied that the interests of justice required that the witness do so even if the evidence might tend to incriminate the witness under Australian law. He was further empowered to cause the witness to be given a certificate in respect of the evidence. The interests of justice in this context should be construed broadly and would permit questions to be put going to credit, particularly where credit was important and where the credit of the chief witness on the other side was to be impugned for conduct similar to that to be tested in cross-examination. 38 However, on the material before us I think the trial Judge was entitled to form the view that the cross-examination would not assist him. Mr Hicks had conceded that he had sold scrap metal without disclosing the income to the taxation authorities. The documents to be shown to him had been written not by him but by someone else. Palmer J found him to be inexperienced in dealing with financial analysis at anything beyond an elementary level. Cross-examination on accounts written by someone else could easily have been unfair. If Palmer J was not shown the documents, he was not in the same position in which counsel now wishes to put us for ruling on the requirements of the interests of justice or the helpfulness of the cross-examination proposed. We should not consider those questions on material different from that provided to Palmer J. If, on the other hand, Palmer J was shown the documents I think it would have been quite reasonable for him to conclude that any cross-examination of Mr Hicks on them would not have been helpful. 39 In any event for the most part the rejection of Mr Cureton's evidence was based on Palmer J's findings about his credibility. Those findings are barely challenged. I am not satisfied that there was any miscarriage of justice which would entitle Mr Cureton to a new trial because the cross-examination of Mr Hicks was stopped when it was; Pt51 r23 of the Supreme Court Rules 1970.

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Mr Cureton did not suggest that difficulties in his personal life interfered with the performance of his duties with the Elevator Cars Group. His failure to file his tax returns from 1987 to the time of the trial was attributed to "pressure of … a personal and business nature." The trial Judge treated Mr Cureton's explanation of his failure to lodge tax returns for the last twenty years and his statement of intention to rectify his failure entirely unconvincing in light of his repeated false statements and broken promises to the ANZ Bank in the context of his failure to provide the bank with the Group financial statements from 1987 to 1992. The trial Judge gave more detail of this. He said: "47 Further, I take into account the fact that Mr Cureton deliberately and repeatedly lied to the ANZ bank manager about the state of preparation of the Group's financial accounts. On 13 April 1988, as the bank manager's diary discloses, Mr Cureton told the bank manager that balance sheets up to 30 June 1987 were in their final stages and should be available within three or four weeks. That was completely untrue. There was no prospect of the balance sheets for 30 June 1987 being available in that time or for a considerable period of time. 48 On 31 August 1988 Mr Cureton told the bank manager that the balance sheets and accounts for 30 June 1987 were now available, but those figures were only of historical interest as the balance sheets and accounts for the Group to 30 June 1988 would be available within the next few weeks. Those statements, likewise, were false. 49 On 3 March 1989 Mr Cureton told the bank manager that he expected to have the balance sheets and financial statements for the Group in respect of the year ended 30 June 1988 available by no later than 17 March 1989. That statement was false. 50 On 16 March 1989 Mr Cureton again told the bank manager, untruthfully, that the balance sheets for the Group were all but completed. 51 On 19 May 1989 the bank manager's diary records the following: ' Expressed, once again, anguish for not yet receiving balance sheets as promised. Once again [Cureton] advised of many delays, however, pinned him down for a review on 2.6.89, at which time balance sheets will be tabled and discussed.' 52 On 2 June 1989 Mr Cureton failed to keep the appointment with the bank manager, without prior explanation. 53 On 3 October 1989 Mr Cureton told the bank manager that the financial accounts would be complete in four or five days time. On 13 December 1990 he said that the balance sheets for the Group would be available on 28 February 1991. On 2 July 1991 he wrote to the bank advising that the balance sheets for the Group would not be completed until 31 July 1991. All of these promises to provide balance sheets by a certain date were made without any expectation on Mr Cureton's part of being able to fulfil those promises. 54 At a meeting which took place on 12 March 1992 between the bank manager, Mr Bickerton, Mr Hicks and Mr Cureton, Mr Cureton stated that the Australian Tax Office was well aware of the fact that the Group had filed no tax returns since 1987. He said that the ATO had given him until 31 March 1991 to forward completed returns and that he was of the opinion that the tax owing was minimal and that only a small fine was payable." 41 There was no documentary evidence that Mr Cureton had advised the ATO of the Group's failure to lodge returns. Mr Cureton admitted that it would have been a false statement if he had said that tax owing would be minimal and only a small fine would be payable and denied having made such a statement to the bank manager. However, that statement was recorded in the bank manager's diary note. The trial Judge accepted that Mr Cureton made it. He was satisfied that Mr Cureton deliberately made that false statement in order to protect his own position. This was a damning evidentiary indictment of Mr Cureton's probity. I do not discern in Mr Cureton's submissions to this Court any credible attack on what the trial Judge said about Mr Cureton's behaviour to the ANZ bank manager. It is substantially borne out by the bank manager's diary records. 42 It is submitted on behalf of Mr Cureton that he was open in acknowledging his failure to lodge tax returns and that no sufficient account was taken of bank records that the Group accounts were in excellent standing and that Mr Cureton was able to satisfy the manager of the ANZ bank of the financial stability of the Group. None of this deals with the critical question of whether the trial Judge was justified in bringing into account Mr Cureton's deliberate and repeated lies to the bank manager. Clearly he was. What weight his Honour gave to them was a matter for him. 43 Mr Cureton submitted that the trial Judge made an erroneous finding of fact that he had not approached the relevant authorities concerning his failure to lodge taxation returns. Whatever may be the significance of the business card of an investigation officer I can well understand his Honour having difficulty in accepting that, if Mr Cureton had disclosed to the Tax Agents' Registration Board that he had filed no tax returns since 1980, there would be no record of that disclosure and no action taken by the ATO to ensure he paid the applicable penalties. It was appropriate for his Honour to take account of the matters that told against there being any such agreement and take account of Mr Cureton's track record of lying.

[25]

Mr Hicks's credit 44 Mr Cureton relied on a list of matters to suggest that his Honour's finding that Mr Hicks was not a witness of innate dishonesty or unreliability was contrary to the evidence. It was said that Mr Hicks made allegations about Mr Cureton, serious in themselves, which he was unable to sustain, that he challenged the authenticity of the 20 April 1990 letter, a challenge he later withdrew, his apparent criminal behaviour in relation to dealing in cash money and failing to disclose such matters to the ATO, his knowing and deliberate execution of false minutes and annual returns and his allegations concerning Mr Cureton's acquisition of a car. These allegations brought ripostes from the respondents' counsel, all of which I have no doubt were thoroughly ventilated during submissions to the trial Judge. In a case such as the present the trial Judge had a great advantage over this Court in weighing their significance. Importantly and in particular, as will be seen, nothing that was put persuades me that it was not open to his Honour to conclude, as he did, that it was inherently improbable that Mr Hicks agreed to employ Mr Cureton in February 1987 upon the terms as to profit share and asset growth share which Mr Cureton alleged. Palmer J was entitled to accept Mr Hicks's evidence. 45 The trial Judge found Mr Hicks to be somewhat inclined to exaggeration with a sense of grievance and betrayal. This led him on 21 April 1992 to accuse Mr Cureton of stealing money when there was no evidence to support that accusation at that time. He was incensed that Mr Cureton had failed to prepare the financial statements for the Group for some five years and had failed to lodge income tax returns for the Group for that period despite frequent assurances not only to Mr Hicks but to the ANZ bank. He accepted at the trial that the accusation he made was unjustified on the evidence he then had. His Honour acknowledged that Mr Hicks had on probably three occasions sold for cash quantities of scrap metal and put the cash in his pocket. He admitted to having signed directors' minutes relating to the tabling of accounts for the Elevator Cars Group at a time when those accounts, which should have been prepared by Mr Cureton, were not in existence. The minutes had obviously been back-dated when Mr Hicks signed them. His Honour took these matters into account. As I have already said, Mr Hicks's impression on Palmer J was that he was a person of hot and volatile temper not a man of innate dishonesty or unreliability. Palmer J considered him inexperienced in dealing with financial analysis at anything beyond an elementary level. His Honour said: "It is possible that in the course of explanations which may have been given from time to time by Mr Cureton Mr Hicks may not have understood fully what was being explained and at a later time may have come to believe that he had not had any relevant explanation about those matters at all. I have to take this into account in determining whether his denials of the explanations said to have been given to him by Mr Cureton as to the matters in dispute should be accepted."

[28]

Mr Hicks is said to have responded: "That's acceptable". 48 Mr Cureton said they discussed other matters relating to his employment. He told Mr Hicks that he would act as general manager of the Group and otherwise look after the administration of the Group and its financial affairs including the preparation of accounts. He would work twenty hours per week for a salary of $500 per week and would continue to operate his accountancy practice at Caringbah. He said that he expressly stipulated that if he needed to use staff from his accountancy practice to help him in carrying out his duties for the Elevator Cars Group he would charge the Group for those services. Mr Cureton said that Mr Hicks accepted those terms. 49 Mr Hicks denied that any conversation took place between Mr Cureton and him in which it was agreed that Mr Cureton would be entitled to any form of profit share in the Group's business. He said that in late 1986 he had a conversation with Mr Cureton in which Mr Cureton suggested that the Group's then internal accountant was not performing his job satisfactorily and that it might be best if he, Mr Cureton, started working in the Group's office two and a half days a week in order to do the job that the present accountant was trying to do. Mr Cureton made it clear that he would continue to work in his accounting practice for the rest of the week and wanted $500 per week for the time which he would spend in working in the office of the Elevator Cars Group. Mr Hicks agreed to those terms. 50 There was no dispute that Mr Cureton in fact continued to conduct his own accounting practice while he was employed by the Elevator Cars Group. He maintained a separate office and employed his own staff in that practice. 51 Palmer J found that there was no contract made in late 1986 or early 1987 between Mr Cureton and Mr Hicks on behalf of any of the corporate plaintiffs and on his own behalf which contained the terms Mr Cureton alleged as to a share in the profits of the businesses and a share in the growth in value of their assets. His Honour gave the following reasons for so finding: "72 First, even in the light of the friendship between Mr Hicks and Mr Cureton since 1978, the alleged terms of the agreement were extremely generous and highly uncommercial. Mr Cureton was being paid approximately $50,000 a year as a full time employee of Bowie Wilson. The work which had been doing for the Elevator Cars Group as an employee of Bowie Wilson was being billed at around $20,000 per year. By the alleged agreement Mr Cureton was to receive approximately $25,000 per year from the Elevator Cars Group for a twenty hour week, and he was to be entitled to carry on his own accounting practice as well. In addition and for no further consideration than the services he was already to perform for $500 a week, he was to receive 20% of the pre-tax profit of an obviously successful business and 20% of the growth in the value of the assets of that business, all back-dated to take effect as at 31 October 1985, when he sold his practice to Bowie Wilson. 73 That back-dating was said to be in consideration of the contribution which Mr Cureton had made to the success of the Elevator Car Group since that time, but in respect of work for which, as an employee of Bowie Wilson, he had already charged at the rate of $20,000 per annum. 74 If the contract included a term that Mr Cureton was entitled to the profit share ' no matter what the circumstance of my departure are', then Mr Cureton could have left his employment with the Group after only a week and still would have been entitled to a share of profits and asset growth for the last fifteen months, as consideration for services for which Bowie Wilson had already been paid. 75 Mr Hicks struck me as a man capable of spontaneous generosity to his friends. Nevertheless, he also gave me the impression of a man very much aware of the value of money and shrewd in business, though not overly sophisticated. On Mr Cureton's own evidence, Mr Hicks had been offering to sell him a 25% interest in the businesses as an inducement to him coming to work for the Group. Yet, according to Mr Cureton, Mr Hicks suddenly agreed without demur, in effect, to give Mr Cureton 20% of the value of the businesses and to pay him in addition a generous remuneration for his part-time work. 76 In my view, even in the light of his friendship with Mr Cureton, it is highly improbable that Mr Hicks would have agreed to such an unrealistically generous remuneration for Mr Cureton's services even before Mr Cureton had commenced employment with the Group and before the benefits of that employment had been tested. 77 Second, Mr Cureton emphasised that the profit share terms of the agreement were of critical importance to him for the protection of himself and his family. He said that the profit share as ' the major consideration' in his decision to leave the security of his employment with Bowie Wilson and that he was seeking that the profit share agreement be legally binding. Yet he did not make any contemporaneous record of the agreement with Mr Hicks. He did not seek to clarify or formalise its terms in writing and to have those terms acknowledged by Mr Hicks or the Elevator Cars Group at any time prior to 20 April 1990, in circumstances to which I will come shortly. 78 He says that he did not do so because he trusted Mr Hicks as a friend. I do not think that that is a sufficient explanation. If the agreement had in truth been made in the terms which Mr Cureton alleges, Mr Cureton must have realised that no matter how trusting and close his friendship with Mr Hicks might be in February 1987, the passage of time could blunt memories or affections, Mr Hicks could die suddenly leaving Mr Cureton with no evidence of the agreement, or Mr Hicks could simply change his mind as to remunerating the Group's in-house accountant so handsomely if he found out that that accountant had failed to lodge his own tax returns since 1980. 79 Mr Cureton was diligent in procuring various payments to himself or for his benefit from the Group funds during his employment. He was diligent in instructing solicitors to prepare a will for Mr Hicks in October 1987 under which Mr Hicks left him a substantial bequest. In the light of those circumstances and having seen Mr Cureton at length in the witness box, I am not prepared to accept that he was so careless of his own financial interests in February 1987 as not to have obtained contemporaneous evidence of such an important agreement made with Mr Hicks if, in truth, that agreement had been made. 80 Third, even though it must have been obvious in February 1987 that it was possible that Mr Cureton would continue to work for the Group for many years, perhaps ten or twenty years, so that when he came to retire his percentage of the growth in value of real estate assets pursuant to the alleged agreement would be the difference between a then current valuation and a valuation as at a date perhaps many years earlier, no attempt was ever made by him to procure a valuation of those real estate assets as at 31 October 1985 or as at any other date. 81 Fourth, if a 20% share of the substantial pre-tax profits of the Group was in fact payable to Mr Cureton on completion of the Group's annual financial accounts, there would have been a powerful financial incentive for Mr Cureton to complete those accounts promptly. He never completed any financial accounts for the Group throughout the whole of the period of his employment. No payments were made to him after any financial year expressly on account of his profit share pursuant to the alleged agreement pending the finalisation of the financial accounts. 82 Fifth, when Mr Cureton's employment with the Group was terminated in May 1992 he left careful notes for Mr Klein, the accountant who succeeded him, in order to assist Mr Klein to prepare the financial accounts for the Group for the years ended 30 June 1987, 1988, 1989, 1990 and 1991, those being the accounts which Mr Cureton himself should have finalised. 83 If, as Mr Cureton alleges, the Group companies had a substantial liability to him for his share of profits in each of those years and his share of growth in assets up to the time of his resignation, it was clearly necessary to bring his liability to Mr Klein's attention so that the financial accounts for the Group would truly and fairly reflect their financial position. Yet Mr Cureton made no mention of this liability in his notes to Mr Klein. Instead, he referred to his profit share and asset growth share claims only in a document which he provided to his own solicitors headed 'Points for discussion - without prejudice'. 84 For those reasons it is inherently improbable, in my view, that Mr Hicks agreed to employ Mr Cureton in February 1987 upon the terms as to profit share and asset growth share which Mr Cureton alleges. Having regard to inherent probabilities, to the demeanour of Messrs Hicks and Cureton in the witness box, and to their character as it emerges from other relevant circumstances, I accept Mr Hicks's evidence that he did not enter into an agreement with Mr Cureton in the terms alleged." 52 I have set out at length the trial Judge's reasons for the conclusion he reached. In the concluding part of para 84 his Honour said he had regard to inherent probabilities, to the demeanour of Messrs Hicks and Cureton in the witness box and to their character as it emerged from other relevant circumstances. Those considerations aside, the five reasons identified and explained by the trial Judge on their face strongly support the conclusion he came to. 53 In the written submissions on the appeal various matters were raised on behalf of Mr Cureton. It was said that the trial Judge had erred in failing to consider the inherent likelihood of such an agreement. Mr Laxton, who was responsible for the administration side of the business, had held a share in the business. Mr Hicks conceded he had no ability to operate a business without the assistance of proper administration and two others had come and gone after Mr Laxton. There was the need to encourage Mr Cureton to work for him so that he would offer him an attractive package that would tie his remuneration to the success of the Group. The Group was incurring losses despite his Honour's finding to the contrary. Mr Cureton worked long hours, he was not a party to a profit sharing scheme enjoyed by other employees and did not receive directors' fees. Further, he was the only staff member to operate a loan account through Hicks Holdings. Neither these matters together nor individually carry much weight in favour of a conclusion that there was a binding employment agreement which, according to Mr Cureton, entitled him to take 20 per cent of the profits and growth in assets from the date when he sold his practice to Bowie Wilson, the share of profits to be calculated before tax, and to remain entitled to the benefits no matter what the circumstances of his departure were. On Mr Cureton's own evidence he had agreed to carry out the job of general manager and otherwise look after the administration of the group and its financial affairs including the preparation of the accounts for a salary of $500 per week working a twenty hour week. He would continue to operate his practice from Caringbah.

[29]

The letter of 20 April 1990 54 The letter was printed in Mr Cureton's hand. It was addressed to himself and signed by Mr Hicks on 20 April 1990 in the presence of a friend of his. It began "Dear Bill". The text of the letter was as follows: "This letter is to reflect our arrangements and is being signed by me prior to my departure today in the event of anything occurring that would prevent the formal implementation on my return, as you have not been able to implement the final details & other aspects of the rearrangement of my family and personal affairs so far, for reasons I understand & accept. As from 31st October 1985 you are entitled to twenty per cent (20%) of the profits before tax of all the business operations of the Elevator Cars Group of companies and my holding company and family trust, such profit to be on a consolidated basis each year, including capital profits. You are also entitled to 20% of the growth in the assets of the above including goodwill from that date. For clarification as the property known as 69 Blackshaw Avenue is in my name solely now, that property and the rental or other business thereof forms part of the above. You are aware that in my will I have directed that in the event of my death, the business operations (but not any real estate) it is my wish, be devised and transferred equally to you & Mark Le Fevre. The right to the benefits above is due to you under all circumstances (including your leaving the Group for any reason whatsoever, to be calculated to that date). The benefits are also due to your estate in the event of your death calculated to that date. The profits are to be calculated on the normal accountant basis used to prepare our financial statements. The growth in assets is to be based on actual realisations or where a valuation basis is required, on a value to be agreed between us or our executors or in the event of a dispute by a valuer nominated by the President of the Real Estate Institute of NSW. Any benefits due to you are to be paid within a reasonable time on demand. I acknowledge that as arranged you have written this letter for my consideration and signature." 55 To the extent that the letter purported to record or reflect an existing employment agreement on the terms set out in the second and third paragraphs it is fatally flawed because Palmer J had found that no agreement had been made on such terms. If the reference in the fourth paragraph to the will is a reference to the will in evidence, to which I will return, Mark Le Fevre was not a beneficiary. The reference to the will was out of place in a group of three paragraphs which are followed by the words "The right to the benefits above is due to you under all circumstances (including your leaving the Group for any reason whatsoever, to be calculated to that date)." 56 It is curious that nowhere in the letter was mention made of any service that Mr Cureton was to perform in return for these benefits which he was to retain, according to his case, even if he resigned shortly after the letter was handed to him. It is equally curious that Mr Hicks signed it if it did not represent some arrangement between the parties. It appeared to evidence an earlier oral agreement. 57 Mr Cureton gave evidence that in April 1990 a few days before Mr Hicks was to depart for a holiday to Gallipoli, he said to Mr Hicks: "I'm concerned that you are about to travel overseas and we have never formalised our agreement that I am to receive 20% of the profits and 20% of the growth in the Group's assets. I am worried that if anything happens to you there is nothing in writing to protect me and my family."

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Mr Cureton said that shortly afterwards he showed Mr Hicks a pencilled draft of a document which he had prepared and discussed it with him. The document was to exactly the same effect as the letter which Mr Hicks signed a few days later. The draft is not in evidence. According to Mr Cureton, after he had discussed the draft with Mr Hicks, Mr Hicks said: "That's okay. Write it out in final form and I'll sign it." 58 Mr Cureton took a final form of the document to Mr Hicks at the airport just before Mr Hicks was to board his plane. He said that Mr Hicks read the document and signed it in the presence of a friend who had been asked by Mr Cureton to witness the signature. Mr Hicks never questioned any aspect of the document before signing it. 59 Mr Hicks strongly denied that he had any discussion about the document before being shown it for the first time just as he was about to board his plane. He said that just as he was about to walk into Immigration Control Mr Cureton arrived and said : "I want you to have a look at this". Mr Cureton gave him a handwritten document which he read. When he had finished reading it he said: "This is a bit bloody rough putting this on me now when I am just about to board the plane". Mr Cureton said something like "No, I am serious". Mr Hicks responded: "There's not much point in this, Bill. Your interests are looked after in my will. What do you expect me to do? Step on an unexploded ordinance?" According to Mr Hicks, Mr Cureton said: "Jack, this is just a document to tidy things up if you don't get back. When you get back we can talk about entering into a permanent agreement. The arrangements set out in this letter are only to apply in the event of your death whilst overseas." Mr Hicks said that he replied: "Okay Bill, I will sign this just in case the plane crashes and I die." 60 The language of the letter suggests that it was intended to reflect the parties' arrangements for the event of "anything occurring that would prevent the formal implementation on my return, as you have not been able to implement the final details & other aspects of the rearrangement of my family and personal affairs so far, for reasons I understand and accept." 61 The trial Judge did not accept Mr Cureton's evidence as to how the letter came into existence. Mr Cureton admitted that he knew about Mr Hicks's intended holiday at least two weeks in advance of the departure date and that at that time he made up his mind that he wanted an agreement in writing signed by Mr Hicks. Nevertheless, he left the signing of the letter which contained terms deserving of careful consideration by Mr Hicks to a time only minutes before Mr Hicks was due to pass through Immigration Control to board his plane. The trial Judge was satisfied that this was deliberate on the part of Mr Cureton. It was done in order to deprive Mr Hicks of the opportunity of considering the letter carefully. Palmer J said: "91 A small exchange in Mr Cureton's cross-examination on this aspect of the evidence is illustrative of the impression which he made on me that he had manufactured the evidence which he gave as to his discussions with Mr Hicks about the letter prior to 20 April. He was asked why he had not had the draft which he said he had discussed with Mr Hicks typed up in Elevator Cars' office prior to Mr Hicks's departure. He said that he would not have had the Group's office staff type out a personal arrangement. He was asked: 'Q. You could have had it typed in your own office [ie the office of his accountancy practice], couldn't you? A. Who by? Q. You had staff, the same staff you were charging to the plaintiffs? A. They weren't over there in the office that day. Q. How do you know that now? A. Well, how do I know that now? How do you know that now? I can't recall what staff were there but would not have had…" 62 The trial Judge accepted Mr Hicks's account of what happened which he said was supported by the terms of the first paragraph of the letter, obscure though it was and probably deliberately so. It referred to "arrangements" rather than to an agreement made in precise terms at a precise time. Mr Cureton said that when he raised the matter with Mr Hicks a short time previously he had referred to formalising "our agreement that I am to receive 20% of the profits and 20% of the growth in the Group assets". He said that Mr Hicks responded "You know what the agreement is". In his Honour's opinion, if that conversation had taken place it would have been natural and expected that Mr Cureton would have referred in the first paragraph of the letter to "our agreement" rather than to "our arrangements". 63 Amongst the material in evidence was an unexecuted form of will dated 6 October 1987 by Mr Hicks. By cl 2 he appointed "my friend" Mr Cureton to be the executor and trustee and by cl 4 he gave and bequeathed "unto my friends" Mr Cureton and another employee, Russell McKay "in equal shares as tenants in common all shares held by me in Hicks Holdings Pty Limited provided that they shall cause Hicks Holdings Pty Limited and Elevator Cars (Properties) Pty Limited to convey unto my trustee the real estate now known as 62 Blackshaw Avenue Mortdale" to be held upon trusts set out in cl 5 of the will. The terms of this will are significant when one comes back to look at what was alleged to have happened on 20 April 1990. Palmer J said: "95 In that will Mr Hicks left to Mr Cureton half of his shares in Hicks Holdings, which owned about 50% of the shares in the operating companies of the Elevator Cars Group. The gift was subject to a proviso that the real estate held by Hicks Holdings and by another Group company be transferred to Mr Hicks's executors upon trust for another beneficiary. Accordingly, under the will Mr Cureton was to receive 25% of the value of the businesses operated by the Elevator Cars Group, excluding their real estate assets. 96 Mr Cureton was fully aware of the terms of the will; it was he who had given instructions to Mr Hicks's solicitors to draw it. Mr Cureton had had a copy of this will in his possession since October 1987. The only copy of the will which could be found had not been executed by Mr Hicks and Mr Hicks himself was unsure whether he had executed it. 97 I accept Mr Hicks's evidence that Mr Cureton said to him at the airport that the letter was 'just a document to tidy things up if you don't get back. When you get back we can talk about entering into a more permanent agreement. The arrangements set out in this letter are only to apply in the event of your death whilst overseas.' 98 The reference in the letter to 'our arrangements' and to Mr Hicks's will together with Mr Cureton's statement that the letter was 'just a document to tidy things up if you don't get back' no doubt called to Mr Hicks's mind the October 1987 will which had conferred upon Mr Cureton a share in the Elevator Cars Group business. It was for this reason that Mr Hicks did not protest violently at the terms of the letter when it was shown to him; those terms did not come 'out of the blue' - there had been discussions between himself and Mr Cureton along the lines of the letter in 1987 in the context of Mr Hicks's will. That was why Mr Hicks said to Mr Cureton: 'There's not much point in this, Bill. Your interests are looked after in my will.' 99 I accept Mr Hicks's evidence that he felt that Mr Cureton was imposing on him by presenting the letter to him very shortly before Mr Hicks was due to depart, but that he was willing to sign the letter out of friendship to Mr Cureton, believing that the matter was subject to discussion on his return. At that time the relationship between the two men was still good. I accept that Mr Hicks then regarded Mr Cureton as a good and trusted friend. 100 Although Mr Hicks at this time still regarded Mr Cureton as a trusted friend, Mr Cureton himself must have known that that trust and confidence would come to an end inevitably and, possibly, soon. Mr Cureton knew, but Mr Hicks did not know, that the ANZ Bank was becoming increasingly insistent on the production of the balance sheets and financial statements for the Group which Mr Cureton had been promising for years but had failed to deliver. Mr Cureton knew, but Mr Hicks did not know, that the Australian Taxation Office would probably follow up Mr Cureton's failure to lodge tax returns on behalf of the Group and that the amount of unpaid tax and fines would probably be substantial. Mr Cureton knew, and Mr Hicks did not know, that since 1980 Mr Cureton had failed to file his own tax returns and that he had not been a registered tax agent for a considerable time before he joined the employment of the Elevator Cars Group. 101 I am satisfied that in April 1990 Mr Cureton had become apprehensive that if all of these shortcomings and failures on his part became known to Mr Hicks, Mr Hicks's trust and confidence in him both as a friend and as an employee would very quickly turn to hostility, and that there would be no prospect at all of any provision being made for him in Mr Hicks's will, nor would there be any prospect of obtaining Mr Hicks's agreement that he be entitled to a share in the profits of the businesses or a share in the growth in value of their assets. Mr Cureton knew that a will could be revoked but a contract could not. He therefore determined to exact from Mr Hicks some form of contractual acknowledgment of these 'entitlements' in a form which would not arouse Mr Hicks's suspicions and in circumstances when Mr Hicks would be 'off guard'." 64 If Mr Hicks's account was the true account of what happened and there was no previous agreement between the parties which embraced the matters described in the letter, the letter amounted to no more than an attempt to obtain from Mr Hicks a signed admission that such a contract had been made. It was not itself a valid and operative contract; compare Jervis v Berridge (1873) LR 8 Ch App 351 at 359; Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 at 318 and 330. Mr Cureton's evidence was that the letter was to formalise "our agreement". According to Mr Hicks he was told it was a temporary arrangement in case he did not return from his holiday. For these reasons the contractual claim must fail. It is, I think, unnecessary to refer to principles of unconscionability which proceed on the assumption that the letter was effective to create a contract between the parties. The same can be said of an argument that Mr Cureton was in breach of a fiduciary duty to Mr Hicks in obtaining his signature to the document. Both arguments proceed on an assumption which was not made good.

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Mr Cureton said that Mr Hicks said: "Okay, that's fair." 67 Mr Hicks denied that this conversation took place. He said that he agreed at that time to Mr Cureton becoming a member of the fund because he was quite agreeable to Mr Cureton to receiving "a little bit of super". However, he said that he never discussed with Mr Cureton transferring the balance of $29,500 remaining in the fund account after the payment out of Mr Hicks to Mr Cureton or for his benefit. His Honour accepted the evidence of Mr Hicks and gave the following reasons: "117 It is unlikely that Mr Hicks said to Mr Cureton in November 1987 that Mr Cureton should have all of the balance remaining in the superannuation account because all of the other members of the fund had left and were not entitled to payment of their balances. The fact was that as at November 1987 two of the members of the fund were still employed by the Group; one left some time prior to February 1989, while the other remained in the employment of the Group after February 1989. 118 Next, I consider it to be entirely improbable that less than a year after Mr Cureton became the in-house accountant for the Group, on a part-time basis, Mr Hicks would be prepared, in effect, to make a gift to him of $29,500 by way of superannuation benefits. 119 Further, if Mr Hicks had consented to the transfer of that superannuation benefit to Mr Cureton, one would have expected that Mr Cureton would have taken pains to document the transfer of benefit appropriately in the course of documenting the other transactions which were given effect on 2 November 1987 in order to pay out Mr Hicks's superannuation benefit. No documentation recording the alleged transfer of benefit to Mr Cureton in November 1987 exists. 120 Finally, it is worthy of note that Mr Cureton's alleged suggestion that a similar superannuation contribution should be made in favour of Mr Hicks was never implemented." 68 The sum of $29,500 remained in the fund after November 1987. It was held in a dedicated ANZ bank account of Hinemoa in favour of National Mutual Life Insurance. Mr Cureton was sole signatory of the account. In early 1989 he drew a cheque dated 24 February 1989 on that bank account in the amount of $29,500 in favour of National Mutual Life Insurance. On 15 March 1989 he caused that cheque to be paid to the credit of his superannuation account with a fund entitled "Blackshaw Services Pty Ltd Superannuation Fund" held with National Mutual. 69 Mr Cureton said that on 24 February 1989 Mr Hicks and he had a meeting with a representative of National Mutual Life at which they signed the forms necessary to transfer the $29,500 from the Elevator Cars Superannuation Benefit Fund to the Blackshaw Services Superannuation Fund with National Mutual for the exclusive benefit of Mr Cureton. Mr Cureton said that he had earlier told Mr Hicks: "I want to move my money in the Elevator Cars Super Fund to National Mutual's equity fund for better returns, long term growth and insurance cover." Mr Hicks was said to have agreed. 70 At the meeting with the National Mutual representative the documents necessary to effect the transfer were, according to Mr Cureton's affidavit evidence, completed in the handwriting of the National Mutual representative and executed by Mr Hicks, Mr Cureton and Blackshaw at the same time. Mr Cureton said that at the same time a cheque for $29,500 was given to the National Mutual representative. 71 In cross-examination Mr Cureton conceded that the only page of the documentation effecting the transfer from one fund to the other which made reference to a contribution of $29,600 (the cheque was in fact for $29,500) was not signed by Mr Hicks and was filled out in the handwriting of Mr Cureton. 72 A minute of a meeting of directors of Blackshaw held on Sunday, 5 March 1989 at Mr Hicks's home records that: "It was resolved to approve the deed of adoption with the National Mutual Simple Super, the common seal to be affixed by Mr W H Cureton, Director, and Mr Jack Hicks, Secretary, and the other documents to be completed. [emphasis added]"

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The minute was signed by Mr Hicks. 73 Mr Hicks said that he could recall having a discussion with Mr Cureton about the National Mutual superannuation fund documents and that a National Mutual representative may have been present. He recalled that he had to sign some documents but that the matter was unremarkable. He said he did not realise that Mr Cureton was seeking to transfer $29,500 from the Elevator Cars Superannuation Trust Fund into the National Mutual Trust Fund for his own benefit. 74 Palmer J did not accept Mr Cureton's evidence. His Honour said: "127 …In my opinion, what is likely to have happened is that Mr Cureton and Mr Hicks were attended by a representative of National Mutual on 24 February 1989 and that Mr Cureton and Mr Hicks on that occasion signed a document entitled 'Deed of Adoption', but only in the capacity as officers of Blackshaw Services who were authorised by the 'Participating Employer' for the purpose of supplying National Mutual with information required to facilitate the administration of the fund. 128 I am satisfied that on a later occasion, probably at the 5 March 1989 meeting at Mr Hicks's home, the seal of Blackshaw Services was affixed to the deed of adoption and counter-signed by Messrs Hicks and Cureton as director and secretary respectively. Thereafter Mr Cureton himself filled out that part of the relevant documentation which notified National Mutual that the sum of $29,600 was to be transferred from the Elevator Cars Superannuation Fund into the National Mutual Superannuation Fund for the benefit of Mr Cureton. 129 The cheque effecting the transfer (for $29,500) was probably then drawn by Mr Cureton, dated the same date as the Deed of Adoption which had been dated 24 February 1989 by the National Mutual representative, and the completed documentation was then transmitted to National Mutual. 130 This sequence of events accords with the fact that it was not until about 15 March 1989 that the cheque for $29,500 was presented. It accords with the terms of the resolution of Messrs Hicks and Cureton as directors of Blackshaw Services as recorded in the minute dated 5 March 1989." 75 Palmer J accepted Mr Hicks's evidence that when this documentation was executed Mr Cureton did not expressly inform him that its effect would be to transfer for Mr Cureton's benefit $29,500 from the superannuation fund of the Group to a superannuation fund held by National Mutual. 76 Palmer J said: "132 As at the time of this transaction Mr Cureton was a director of the trustee of the Elevator Cars Group Superannuation Fund [Hinemoa] and a sole signatory to the Group's bank account. He was clearly in a fiduciary relationship to [Hinemoa]. By means of documents effecting the transfer of funds to National Mutual which he signed or executed as an officer of [Hinemoa] he was deriving a benefit for himself. As a fiduciary, he was not entitled to derive such a benefit unless he had made full and frank disclosure to Mr Hicks, as the only other director of [Hinemoa], of the benefit which he was to receive by the transaction. 133 Mr Cureton has failed to discharge the onus of satisfying me that he made such disclosure. 134 In arriving at this conclusion I do (sic not) omit to take into account the fact that Mr Hicks said in his affidavit evidence and repeated in the witness box that he had discovered the 24 February 1989 payment of $29,500 to National Mutual in June or July 1992 and was upset by it. Notwithstanding such discovery, in January 1993 Blackshaw Services, through an employee, Mrs Collath, executed a National Mutual request form for the roll over into another superannuation fund of the benefit of Mr Cureton's superannuation account. There was no protest by Blackshaw Services or by [Hinemoa] at that time that the funds had been transferred into Mr Cureton's account with National Mutual without authority. 135 I note that the roll-over request form does not refer to the amount standing to the benefit of Mr Cureton's account in the National Mutual Superannuation Fund. It may be that Mr Hicks is mistaken in his recollection as to when it was that he discovered the amount of the payment which had been made to National Mutual for Mr Cureton's benefit. It may be that at the time that the roll-over form was received Mrs Collath believed that it related to a relatively small amount which had been contributed by Mr Cureton to his superannuation benefits at the rate of $113 per month. 136 Whatever be the explanation as to why the roll-over request form was signed by Mrs Collath, I am not persuaded that execution of that form by Blackshaw Services in January 1993 outweighs in Mr Cureton's favour the inherent probabilities and the weight which I give to Mr Hicks's evidence in favour of the conclusion which I have reached, that is, that the payment of $29,500 to National Mutual for the benefit of Mr Cureton was made without Mr Hicks's knowledge and consent. 137 [Hinemoa] remains the trustee of the Elevator Cars Superannuation Fund. The Trust has been inactive for some years but has not been wound up. [Hinemoa] is still entitled to recover for the benefit of that fund any amount which has been wrongly paid out of the fund. Mr Cureton is, in my judgment, liable to account as a fiduciary to [Hinemoa] for the sum of $29,500 withdrawn by him from the Elevator Cars Superannuation Trust Fund in 1989." 77 In grounds 14, 15 and 16 of the notice of appeal Mr Cureton claimed that Palmer J had erred in finding the transfer was in breach of Mr Cureton's fiduciary duties and failed to consider or give sufficient weight to particular facts, erred in failing to find that the respondents were estopped from denying the validity of the payment and in finding that Mr Cureton failed to disclose to Mr Hicks the payment of the surplus funds in breach of his fiduciary relationship. The facts said not to have been taken into account were:

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(f) the presence of the surplus funds in the superannuation account to which no one else, and particular Mr Hicks and his wife, had an entitlement. 78 In the written submissions it was said that Mr Hicks did not maintain his denial of the original conversation with Mr Cureton and said in his oral evidence no more than he could not recall such a conversation. The oral evidence in cross-examination was as follows: "Q. What I am suggesting to you is you told Mr Cureton that he could become a member of the Elevator Cars Superannuation Fund and take the benefit those amounts of money which were not at that point allocated to anyone else? A. No, I have no recollection of that. Q. By saying you have no recollection of it do you mean you don't know whether or not you did say that? A. I don't recall ever saying that. Q. Is it possible you said that? A. No, I don't think it is. Q. Do you unequivocally deny having said that? A. I can't answer that to be honest. Q. You may have said it? A. No, I don't believe I did. Q. You are not sure? A. I am not sure." 79 Cross-examination which exploits the legitimate doubts of honest witnesses is of little assistance in determining whether the evidence being challenged is true. I have no doubt that to the best of Mr Hicks's recollection he never told Mr Cureton that he could have the benefit of the surplus amounts in the superannuation fund. The trial Judge heard the evidence. It was open to him to conclude that Mr Hicks denied the conversation and to accept this denial. 80 Some point was made that the two remaining employees in the fund had no entitlements to such funds. This does not seem to me to be of any significance. In cross-examination Mr Cureton accepted (see Black Book 332) that at the time of the alleged conversation in late 1987 there were credit balances in the names of two employees, one of whom according to the trial Judge left in February 1989 and the other of whom remained thereafter. 81 Mr Cureton submitted that the gift was not improbable. The funds "had to go somewhere". It was said that there was evidence of various documents including minutes, variations to the rules and other documents that Mr Cureton prepared and that Mr Hicks and Loretta Hicks signed so that Mr Cureton could become a member of the fund. No further superannuation monies were paid to him until 1989. 82 The plaintiffs submitted that Mr Cureton stealthily prepared and presented documentation in relation to staff superannuation so as not to alert Mr Hicks to knowledge that Mr Cureton was going to receive the funds. Everything was documented except the payment to him of $29,500 contrary to the provisions of the deed. The National Mutual forms were signed by Mr Hicks only on one page. That page did not mention a transfer to Mr Cureton of $29,500. In fact according to his own evidence Mr Cureton by means of a salary sacrifice was able after 1988 to direct $1,000 per month to his own superannuation fund with National Mutual. 83 In cross-examination Mr Hicks was shown a letter from the National Mutual Superannuation to Mr Cureton dated 19 May 1989. He was asked whether he had looked through documents attached to the document he had signed. He agreed he had been shown the documents (Black Book 1 147). The following cross-examination took place: "Q. And at the time that you were shown the documents by Mr Cureton, did you place your signature on two of the documents? A. I did. Q. And the documents which were shown to you by Mr Cureton had writing on them; did they not? A. Obviously. Q. Yes and by that I mean they had been filled in? A. Yes. Q. They were in the same form as they are now? A. To the best of my knowledge, yes. Q. Having read those documents, you were content to place your signature on two of them? A. That's correct. SLATTERY: I object. I don't think the witness has agreed to the proposition that he read the documents at the time and this question contains the assumption that he did. He has read them now. HIS HONOUR: I think the witness' answers will stand Mr Slattery. SLATTERY: Certainly your Honour just in case this is being put as in effect what is agreed to. HIS HONOUR: I understood him to assent to the proposition that he recalls that the documents at the time that they were presented were in the same form as they are now. SLATTERY: I thought he had said that so far as the later documents were concerned he could not dispute they were in the same form as they are now. It is subtle but perhaps an important difference. HIS HONOUR: What is the purpose of your rising? SLATTERY: To in effect object to this question to the extent it unfairly contains the assumption that he read all the documents which is the way the question appears to have been framed. HIS HONOUR: I am not going to reject the evidence given. One will have to make of it what one can make of it eventually, if anything." 84 It is submitted on behalf of Mr Cureton that Palmer J's finding that Mr Hicks did not see the reference to $29,500 in the National Mutual documentation was contrary to this evidence of Mr Hicks which was not clarified in re-examination. On a fair reading of the transcript I would not regard it as an admission by Mr Hicks that he had "read those documents". 85 This part of his Honour's conclusions depends upon findings of fact that he made. The written submissions on behalf of Mr Cureton take issue with minor detail. The fact is that for reasons he gave the trial Judge did not accept that Mr Cureton had Mr Hicks's express agreement to take the $29,500 for himself. On its face it was a breach of trust and was not properly recorded anywhere. There is no reason to reject the trial Judge's findings. 86 Mr Cureton submitted that Mr Hicks and Hinemoa were estopped from denying the validity of the $29,500 payment to him. However this claim was based upon the alleged representation by Mr Hicks to Mr Cureton that he could retain the surplus funds for his benefit. The trial Judge rejected that evidence. Accordingly, it is unnecessary to consider an estoppel based upon it.

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Loan account claim 87 Between 1 July 1989 and 21 May 1992 Mr Cureton drew cheques on the bank account of Hicks Holdings in cash in the names of third parties or for items related to his personal expenditure. These drawings totalled $19,407. Mr Cureton admitted that he drew the amounts and that they should be debited to his loan account with Hicks Holdings. Mr Hicks said that none of the payments was drawn nor were they debited to Mr Cureton's loan account with his knowledge and consent. Palmer J did not accept that the evidence of the absence of Mr Hicks's knowledge and consent was inherently probable, except in respect of the two last payments, one by a cheque for $6,000 drawn on 25 November 1991 and another by a cheque for $6,000 drawn on 10 April 1992. These were larger than any previous drawings by Mr Cureton. 88 Mr Cureton's concession that the amounts should have been debited to his loan account with Hicks Holdings meant that he accepted that the amounts were repayable. It was not suggested that they were to be set off against an existing credit in his loan account. If the amounts were borrowed without authority or permission they were repayable forthwith and Hicks Holdings was entitled to equitable compensation for loss of the use of the money. Palmer J seems to have proceeded on this basis. 89 By 25 November 1991 the relationship between Mr Hicks and Mr Cureton was severely strained. By that time Mr Cureton was in the habit of making notes for himself as to Mr Hicks's discourtesies towards him. Once such note was dated 25 November 1991 and recorded an incident which occurred on that day. However, his evidence on affidavit was that he had sought express permission from Mr Hicks before drawing a cheque in his own favour for $6,000 on 25 November. Palmer J said: "58 In cross examination he said at first that he did not ask Mr Hicks about that cheque, then he said that he did make such a request. When pressed as to the time of that request he said that he could not recall the specific date '…but I had arrangements with him after about a year or so that because the accounts were not being prepared, etc., that I be allowed to draw down to a loan account similar to how he was running in anticipation of profits'. He said that he had no recollection of a conversation with Mr Hicks, to which he deposed in his affidavit, to the effect that when he informed Mr Hicks of his desire to draw down $6,000 on 25 November 1991 Mr Hicks said: 'That's fine'. A few moments later he said that he did have a recollection of seeking permission from Mr Hicks shortly prior to or at the time of drawing down the payment. His evidence in this respect was contradictory and entirely unconvincing." 90 By 10 April 1992 the relationship between Mr Cureton and Mr Hicks was extremely hostile and was shortly to end. At a meeting with Mr Bickerton of the ANZ bank on 12 March 1992 Mr Cureton had left abruptly when he believed that Mr Bickerton and Mr Hicks were questioning his integrity. Nevertheless, according to Mr Cureton, less than a month later he asked Mr Hicks for permission to draw down from the Group funds another $6,000 in his favour, and Mr Hicks said simply: 'That's fine'. Palmer J said that that evidence was so improbable in the light of the state of the relationship between Mr Hicks and Mr Cureton at that time that he could not accept it. He went on to say that Mr Cureton's demeanour when giving the evidence left him satisfied that he was not telling the truth. 91 So far as that part of the loan account made up of debits before 25 November 1991 Palmer J accepted as probable Mr Cureton's evidence that at regular intervals he and Mr Hicks sat down together and discussed how cheques drawn by Mr Hicks and by Mr Cureton on Hicks Holdings' account should be apportioned as between company expenses and personal expenses to be debited to their respective loan accounts. The trial Judge accepted that from a relatively early time in Mr Cureton's employment by the Group there was an agreement by Mr Hicks, either express or implied from his conduct, that Mr Cureton would be entitled to debit relatively small amounts to a loan account with Hicks Holdings. Palmer J said: "141 However, a drawing by Mr Cureton of $6,000 to be debited to his own account was much larger than any of his previous drawings. A drawing of such a large amount was not within the scope of the agreement between Mr Hicks and Mr Cureton to which I have referred. That Mr Cureton himself appreciated this is evident from the necessity which he felt to give false evidence that he had obtained Mr Hicks's express prior consent to the two payments of $6,000 … 142 In my opinion, Mr Hicks drew those two cheques for $6,000 knowing very well that his employment with the Elevator Cars Group was soon to come to an end and that if he sought permission to make those payments in favour of himself Mr Hicks would refuse that permission. In those circumstances, I infer that he resolved to extract what he could from the funds of the Group before his authority to sign cheques as a sole signatory was terminated. 143 What Mr Cureton did in drawing the cheques and paying them to his own account he did while he was in a fiduciary relationship with [Hicks Holdings] as its director and in the exercise of a fiduciary function as a sole signatory on its bank account. He could not retain the benefit of those payments unless they had been made with the fully informed prior consent of Mr Hicks as the only other director of [Hicks Holdings], or had been subsequently ratified by Mr Hicks after such disclosure by Mr Cureton. No such consent or ratification was ever obtained. In my judgment Mr Cureton is liable to account to [Hicks Holdings] as a fiduciary for the two payments of $6,000." 92 Palmer J based these findings of fact on views he had formed about Mr Cureton's evidence after hearing him give it. Mr Cureton's written submissions failed to deal with his claim that, in the case of the two withdrawals of $6,000, which were larger than any previously made, he had sought and obtained Mr Hicks's permission. On the evidence before him Palmer J was clearly entitled to reject what obviously Mr Cureton regarded as an essential condition of the money being drawn from Hicks Holdings' bank account. The appeal against these findings must be rejected.

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Personal payments 93 Cheques were drawn upon the bank account of Hinemoa to pay for items of expenditure of a nature which was clearly personal to Mr Cureton. These included subscriptions for legal publications and a payment to MLC Life Limited. Mr Hicks said the payments were made without his prior knowledge and consent. Mr Cureton said that the payments were a term of his contract of employment agreed orally between him and Mr Hicks in 1986 and 1987. Mr Hicks denied that he agreed with Mr Cureton that such personal payments would be made as part of Mr Cureton's remuneration. 94 The amounts paid for subscriptions to CCH totalled $14,455. Palmer J was satisfied that Mr Cureton did not expressly inform Mr Hicks at the time of their discussions in late 1986 or early 1987 that he wished CCH or other library subscriptions of such a magnitude to be paid to him as part of his remuneration. His Honour was satisfied that if he had done so Mr Hicks would have agreed in light of the fact that Mr Cureton had reserved to himself the right to carry on his private accountancy practice and would clearly be using his library as much for the benefit of that practice as for the benefit of the Group - very likely more so. 95 Palmer J thought it probable that Mr Hicks would have agreed if he had been asked that the Group pay for various small items of professional education such as subscriptions to the Institute of Public Affairs and to the Centre for Professional Development. However, his Honour found that he was not asked. He thought that Mr Cureton believed that it was a fair thing that these expenses should be paid for his benefit by the Group, and as a signatory to the Group's bank account he took it upon himself to make those payments without asking Mr Hicks. The amounts so paid did not appear in any loan accounts which were discussed between Mr Hicks and Mr Cureton. The payments were never ratified by Mr Hicks. They were procured from the funds of Hinemoa by Mr Cureton while in the fiduciary relationship with Hinemoa. His Honour held that Mr Cureton must account for the payments as a fiduciary to Hinemoa. 96 The appellant submitted there was no evidence that these payments to the Institute for Public Affairs or to the Centre for Professional Development were for his benefit and claimed that if they were for the benefit of the Group even though he derived personal benefit there could be no breach of a fiduciary relationship. The written submissions say nothing which suggest that the findings made by the trial Judge were not open to him. This part of the appeal should also be rejected.

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Compound interest 97 Palmer J, in giving judgment for Hinemoa against Mr Cureton in the sum of $29,500 being the amount transferred in March 1989 to Mr Cureton's superannuation account with the National Mutual, said that as the payment was obtained by Mr Cureton in breach of fiduciary obligations, the breach was not minor or of a technical nature and the amount so obtained had been invested for Mr Cureton's benefit. Accordingly in his Honour's opinion compound interest should be awarded at the rate specified in Schedule J to the Supreme Court Rules calculated on quarterly rests from 15 March 1989. 98 As the two payments of $6,000 debited on 25 November 1991 and 10 April 1992 were obtained by Mr Cureton in breach of his fiduciary obligations, the breach was not minor or of a technical nature and Hicks Holdings had been deprived of the use of that money in its business, Palmer J awarded compound interest at the rate specified in Schedule J calculated on quarterly rests from the dates upon which the amounts respectively were debited. 99 In giving judgment for Hinemoa against Mr Cureton in the sum of $16,973.25, being the total of amounts paid from the funds of Hinemoa for the benefit of Mr Cureton, Palmer J said that as those payments were obtained by Mr Cureton in breach of his fiduciary obligation, the breach was not minor or of a technical nature and Hinemoa had been deprived of the use of those moneys in its business. As such compound interest should be awarded at the rate specified in Schedule J calculated on quarterly rests from the dates upon which the amounts were debited to the account of Hinemoa. 100 The relevant claims by Hinemoa and Hicks Holdings were for equitable compensation. In Warman International Limited v Dwyer (1995) 182 CLR 544 the High Court said at 559: "Ordinarily a fiduciary will be ordered to render an account of the profits made within the scope and ambit of his duty ( Phipps v Boardman [1967] 2 AC at 127 per Lord Upjohn). Of course, if the loss suffered by the plaintiff exceeds the profits made by the fiduciary, the plaintiff may elect to have a compensatory remedy against the fiduciary. That election will bind the plaintiff ( Kendall v Marsters (1860) 2 De G F & J 200 [45 ER 598])." 101 The plaintiffs' claims were more than claims for the restitution of the money which Mr Cureton had taken in breach of his fiduciary obligation to the plaintiff concerned and put to his own use. Part of that entitlement was to bring to account any profit that Mr Cureton had made or should be presumed to have made from the use of the money. A charge of interest and, if appropriate, compound interest for the period he had the money was a method for determining the appropriate compensation. 102 In Ford and Lee, Principles of the Law of Trusts, 3rd ed (1996) the editors say in para 17140: "….compound interest will be awarded where the trustee ought to have obtained compound interest and where the trustee has obtained compound interest. A compensation claim may show that the trustee was required to invest in a security bearing compound interest but failed to do so: Re Barclay [1899] 1 Ch 674; Public Trustee v Merry [1934] NZLR 934. Then an award of compound interest in a compensation claim reflects the restitutionary measure of loss. Where the trustee has misapplied the trust fund compound interest is awarded because the trustee is presumed to have received compound interest, or perhaps as a device of equity to minimise the possibility that any profit can remain in the trustee's hands: President of India v La Pintada Compania [1985] AC 104 per Lord Brandon at 116, the misconduct of the trustee being seen as so gross as to warrant it: Gordon v Gonda [1955] 1 WLR 885 at 896 per Evershed MR; compare Southern Cross Pty Limited v Ewing (1987) 91 FLR 271; Hagan v Waterhouse (1991) 34 NSWLR 308 at 393; Alemite Lubrequip Pty Ltd v Adams (1997) 41 NSWLR 45 at 46..." 103 In Hungerfords v Walker (1989) 171 CLR 125 at 148, Mason CJ and Wilson J said: "Equity courts have regularly awarded interest, including not only simple interest but also compound interest, when justice so demanded, eg, money obtained and retained by fraud and money withheld or misapplied by a trustee or fiduciary: La Pintada [1985] AC 104 at 116." 104 Such interest is not awarded as a punishment. In Burdick v Garrick (1870) 5 LR Ch App 233 an agent who was a solicitor held a power of attorney from his principal to sell the principal's property and invest the proceeds in the principal's name. The agent received moneys under the power and paid them into his own bankers to the general account of his firm. Vice Chancellor Stuart had ordered an account at the suit of the principal's widow and administrator on the ground that the agent had mixed the money of his principal with his own. It was directed that in taking the account half yearly rests should be made and the agent charged with interest at £5 per cent on the half yearly balances found to have been in their hands. On appeal at 241-2 the Lord Chancellor Lord Hatherley said: "I cannot, however, think the decree correct in directing half-yearly rests, because the principle laid down in the case of the Attorney-General v Alford 4 De G M & G 843; (1855) 43 ER 737 appears to be the sound principle, namely, that the Court does not proceed against an accounting party by way of punishing him for making use of the Plaintiff's money by directing rests, or payment of compound interest, but proceeds upon this principle, either that he had made, or has put himself into such a position as that he is to be presumed to have made, 5 per cent, or compound interest, as the case may be. If the Court finds it is stated in the bill, and proved, or, possibly (and I guard myself upon this part of the case), if it is not stated but admitted on the face of the answer, without any statement on the bill, that the money received has been invested in an ordinary trade, the whole course of decision has tended to this, that the Court presumes that the party against whom relief is sought has made that amount of profit which persons ordinarily do make in trade, and in those cases the Court directs rests to be made. But how does the case stand here? There is no charge made in the bill of any employment of this money which would produce compound interest; there is an admission in the answer that one of the trustees, being engaged with his co-partner in a solicitor's business, has paid into the common account of the firm portions of this fund. But then it must not be forgotten that a solicitor's business is not such a business as I have described; it is not one in which they could make compound interest on the money embarked, or in which half-yearly rests, or yearly rests, as the case may be, would be made in making up the account. A solicitor's profit arises from the time and the labour which he bestows upon cases in which he is engaged. There is nothing like compound interest obtained upon the money employed by a solicitor. On the contrary, he is out of pocket for a considerable period by those moneys which he expends, and upon which he receives no interest for, possibly, three or four years. It appears to me, therefore, that no case arises here in which you could say that a profit has been made, or necessarily is to be inferred, and consequently that there was an error committed in directing compound interest." 105 At 243-244 Giffard LJ said: "All that this Court can do as against a Defendant in such a case as this by way of penalty is to make him pay the costs of the suit. The question of interest clearly depends upon the amount which the person who has improperly applied the money may be fairly presumed to have made. If he has applied it to his own use, I think it is quite right to say that he ought never to be heard to say that he has made less than 5 per cent, and that that is a fair presumption to make; but if you seek to go further than that, and to charge him with more than 5 per cent, you must make out a case for that purpose. In this case there is no statement made in the bill having that object. There is an admission in the answer that the solicitor having an account at his bankers, this money went into his account. Consequently, there being neither proof nor presumption that compound interest was made, in my opinion compound interest ought not to be charged." 106 In Wallersteiner v Moir (No 2) [1975] QB 373 to which Mason CJ and Wilson J referred in Hungerfords v Walker, Lord Denning MR cited Jones v Foxall (1852) 15 Beav 388 at 391; (1851) 51 ER 588 at 589; Attorney-General v Alford at 851 and 741, Burdick v Garrick and Vyse v Foster (1872) 8 Ch App 309 at 333; (1874) LR 7 HL 318. His Lordship remarked: "Those judgments show that, in equity, interest is never awarded by way of punishment. Equity awards it whenever money is misused by an executor or a trustee or anyone else in a fiduciary position - who has misapplied the money and made use of it himself for his own benefit." 107 His Lordship quoted from Burdick v Garrick the statement by Lord Hatherley that the court presumes that the party against whom relief is sought has made that amount of profits which persons ordinarily do make in trade, and in these cases the court directs rests to be made. Lord Denning continued: "The reasons is because a person in a fiduciary position is not allowed to make a profit out of his trust; and, if he does, he is liable to account for that profit or interest in lieu thereof. In addition, in equity interest is awarded whenever a wrongdoer deprives a company of money which it needs to use in its business. It is plain that the company should be compensated for the loss thereby occasioned to it. Mere replacement of the money - years later - is by no means adequate compensation, especially in days of inflation. The company should be compensated by the award of interest. That was done by Sir William Page Wood VC (afterwards Lord Hatherley) in one of the leading cases on the subject, Atwool v Merryweather (1867) LR 5 Eq 464n, 468-469. But the question arises: should it be simple interest or compound interest? On general principles I think it should be presumed that the company (had it not been deprived of the money) would have made the most beneficial use open to it: cf Armory v Delamirie (1723) 1 Stra. 505. It may be that the company would have used it in its own trading operations; or that it would have used it to help its subsidiaries. Alternatively, it should be presumed that the wrongdoer made the most beneficial use of it. But, whichever it is, in order to give adequate compensation, the money should be replaced at interest with yearly rests, ie, compound interest." 108 At 397 Buckley LJ said: "It is well established in equity that a trustee who in breach of trust misapplies trust funds will be liable not only to replace the misapplied principal fund but to do so with interest from the date of the misapplication. This is on the notional ground that the money so applied was in fact the trustee's own money and that he has retained the misapplied trust money in his own hands and used it for his own purposes. Where a trustee has retained trust money in his own hands, he will be accountable for the profit which he has made or which he is assumed to have made from the use of the money. In Attorney-General v Alford at 851, Lord Cranworth LC said: 'What the court ought to do, I think, is to charge him only with the interest which he has received, or which it is justly entitled to say he ought to have received, or which it is so fairly to be presumed that he did receive that he is estopped from saying that he did not receive it.' This is an application of the doctrine that the court will not allow a trustee to make any profit from his trust. The defaulting trustee is normally charged with simple interest only, but if it is established that he has used the money in trade he may be charged compound interest: see Burdick v Garrick, at 241, and Lewin, Trusts, 16th ed (1964), p226, and the cases there noted. The justification for charging compound interest normally lies in the fact that profits earned in trade would be likely to be used as working capital for earning further profits. Precisely similar equitable principles apply to an agent who has retained moneys of his principal in his hands and used them for his own purposes: Burdick v Garrick ." 109 At 406 Scarman LJ noted that the principle on which equitable interest is awarded was stated by Lord Hatherley in Burdick v Garrick and said: "The question whether the interest to be awarded should be simple or compound depends upon evidence as to what the accounting party has, or is to be presumed to have done with the money. As Lord Hatherley LC said in Burdick v Garrick : 'the court does not proceed against an accounting party by way of punishing him for making use of the plaintiff's money by directing rests, or payment of compound interest, but proceeds upon this principle, either that he has made, or has put himself into such a position as that he is to be presumed to have made, 5 per cent, or compound interest, as the case may be.' Dr Wallersteiner was at all material times engaged in the business of finance. Through a complex structure of companies he conducted financial operations with a view to profit. The quarter million pounds assistance which he obtained from the two companies in order to finance the acquisition of the shares meant that he was in a position to employ the money or its capital equivalent in those operations. Though the truth is unlikely ever to be fully known, shrouded as it is by the elaborate corporate structure within which Dr Wallersteiner chose to operate, one may safely presume that the use of the money (or the capital it enabled him to acquire) was worth to him the equivalent of compound interest at commercial rates with yearly rests, if not more. I, therefore, agree that he should be ordered to pay compound interest at the rates, and with the rests, proposed by Lord Denning MR and Buckley LJ." 110 Mr Cureton submitted that in making his findings of breach of fiduciary duty, Palmer J should have required stronger evidence of such a breach than that which was available to him. Reliance was placed upon Briginshaw v Briginshaw (1938) 60 CLR 336 at 362. However, the evidence to which Palmer J referred was amply sufficient to support the conclusion he came to that there was a breach of fiduciary duty. It was submitted that the proceedings were delayed and the $29,500 was placed by Mr Cureton into the National Mutual fund and cashed shortly before the trial. The sum obtained by Mr Cureton from the National Mutual was, it appears, from the benefit payment report a retirement benefit of $60,343.32. The point was made that the verdict in favour of Hinemoa of $201,706.16 included an amount of compound interest on $29,500 which exceeded the amount actually earned by Mr Cureton. The principal and interest awarded in respect of the $29,500 misappropriated, was said to total $136,959. 111 Mr Cureton further submitted that Schedule J rates should not have been used. Comparison with a table of "commercial rates" exhibited suggested that the schedule rates were significantly higher for any relevant period than the "commercial rates". Practice Note No 73 issued by Gleeson CJ on 21 February 1992 states that when computing interest for the purposes of s94 of the Supreme Court Act "subject to any evidence adduced" it may be taken that the rate of interest that is appropriate to guide the court in respect of any period mentioned in column 1 of Schedule J is the rate percent yearly mentioned in column 2 of that schedule beside that period. The plaintiffs had asked for Schedule J rates to be used. They submitted that the $29,500 withdrawn in 1988 could have been treated as notionally invested in the fund until the date of judgment and interest awarded at the rate payable on that investment. But to use the Schedule J rates was to punish Mr Cureton not simply to compensate the plaintiffs. If compound interest was to be awarded the appropriate rate was the commercial rate. 112 Mr Cureton submitted that where there was evidence of gains received that was the appropriate way of bringing them into account. There was such evidence in relation to the superannuation claim. A question arose as to whether compound interest should have been awarded on the non-superannuation fund moneys in the absence of specific evidence about any gains which were reaped by Mr Cureton. It was further submitted that quarterly rests were not appropriate if commercial rates of interest were to be applied. 113 In Hagan v Waterhouse (a decision approved by this Court in Alemite Lubrequip Pty Ltd v Adams at 47) at 391-393 Kearney J outlined the development in the immediate period up until 1991 of the court's approach to the rates at which interest should be awarded. His Honour quoted a passage from the judgment of Dixon J in Re Tennant Mortlock v Hawker (1942) 65 CLR 473 at 507-8 about the changes in monetary conditions which had led to judicial movements first to reduce and afterwards to raise the rate of interest allowable. Dixon J said: "Experience of the marked fluctuations in interest rates has rather confirmed the policy of the court in fixing for its purposes a rate which over a long period represents a fair or mean rate of return for money." 114 Kearney J said that he considered that it was no longer appropriate to apply a policy fixing a settled mean rate of interest, but rather that the mercantile rate should reflect the reality of the market place as it exists under a regime not in contemplation at the time of earlier pronouncements of judicial attitudes. He referred to the policy of the court, evinced in the Practice Notes as to interest before judgments in proceedings for recovery of money, which was to adopt rates reflecting commercial rates of interest applicable from time to time since January 1974; see now Schedule J to the Supreme Court Rules inserted in 1990. 115 In dealing with compound interest, Kearney J proceeded on the basis of the proposition stated in Southern Cross Commodities Pty Limited (In liquidation) v Ewing (1987) 11 ALR 818 at 843: "….that a trustee may, and normally will, be charged with compound interest with yearly rests not only where he has used the money for his own commercial purposes but also where he has been guilty of fraud or serious misconduct."

[45]

His Honour referred also to O'Sullivan v Management Agency Music Limited [1985] QB 428. 116 No explanation is given by Palmer J for deciding to make the award on quarterly rests or to adopt other than commercial rates of interest. 117 Mr Slattery's answer to Mr Cureton's reliance upon the actual amount of profit earned from the National Mutual fund was to say that a plaintiff may elect to have the compensatory remedy against the fiduciary but that is a matter for the plaintiff. In this case the plaintiffs chose a remedy of equitable compensation and it was not to the point to say that more or less might have been obtained from any other form of remedy. But in the present case there was no evidence that the loss suffered by either of the plaintiffs exceeded the amount made by Mr Cureton up to the time that the $29,500 together with interest earned on it was paid to him. 118 In my opinion, to the extent that compound interest should have been awarded, it should have been based upon relevant commercial rates of interest calculated on yearly rests from the relevant dates. There was material to suggest that commercial rates were significantly higher than the rates in annexure J. During the period until the date of withdrawal of the $29,500 from National Mutual the amount recoverable should have been limited to the total payout made to Mr Cureton. Thereafter until date of judgment Hinemoa was entitled to compound interest calculated at commercial rates on yearly rests. 119 Accordingly, the appeal succeeds only on the question of compound interest. I would anticipate that the parties should be able to agree upon the appropriate amounts of damage to be substituted for those that Palmer J ordered to take account of what I have said. If this cannot be achieved, the question should be referred back to the Equity Division. Otherwise, the appeal fails and should be dismissed. To take account of the degree of its success on the appeal, the appellant should be ordered to pay 75 per cent of the respondents' costs of the appeal.

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