Custom Coaches (Sales) Pty Ltd v Frankish

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2530/02 CUSTOM COACHES (SALES) PTY LIMITED v PETER ALAN FRANKISH & ORS JUDGMENT 1 HIS HONOUR: These are proceedings in which the plaintiff alleges that it has suffered serious defalcations at the hands of the first defendant, who was previously its financial controller. The method by which the defalcations were effected were by raising invoices in favour of a firm called "Robinsons" for consulting work relating to a venture in China in which the plaintiff did intend to participate. However, the evidence shows that no such firm existed; that an ABN given on its invoices was false; and that the telephone and fax numbers shown were not connected. The only relevant Robinson was the second defendant, a woman who is described in the evidence as "the girlfriend" of the first defendant. The evidence shows that the first and second defendants had a joint bank account into which hundreds of thousands of dollars were paid from the plaintiff's account by direct transfer. Additional amounts were obtained by the first defendant by cheque made out in favour of Robinsons and the cheques have been met, although it is not established by what means they were negotiated. 2 The third defendant is the first defendant's wife. The evidence in addition shows that the first defendant purchased one piece of real estate as co owner with the second defendant and another piece of real estate as co owner with the third defendant. Both purchases were made in the period during which the defalcations were occurring, leading to the suggestion that embezzled funds may have been used in the purchase of those properties. Appropriate interlocutory relief has been granted to ensure that those properties are held in statu quo until that matter is further investigated. The third defendant appeared and consented to that relief in respect of the property in which she is interested. 3 The plaintiff now moves for final relief against the first and second defendants ("the defendants"). The plaintiff on 3 May 2002 commenced these proceedings by issuing a statement of claim against all three defendants and at the same time took out a motion for immediate relief. The statement of claim bore a note to the defendants that they were:

"… liable to suffer judgment or an order against you unless the prescribed form of notice of your appearance is received in the Registry on or before the date of hearing fixed by the notice of motion which is served upon you with this statement of claim." By orders made that day the plaintiff was granted short term Mareva relief and the notice of motion was made returnable on 7 May 2002. Both statement of claim and motion were served on all three defendants. By orders made on 7 May 2002 the Mareva relief was extended, the proceedings were stood over to 14 May 2002 and it was noted that in the event that the defendants failed to appear on that occasion the plaintiff intended to move the Court "for such judgment or other relief as it may then be entitled to". A copy of those orders was served on the defendants. In my view by reason of the provisions of Part 17 r 2(a) and Part 7 r 3(d) of the Supreme Court Rules 1970 ("the SCR") the defendants were both in default, so that the plaintiff was entitled to move against them for final relief under Part 17 r 9 of the SCR. Served with all the foregoing material, the defendants have been have never appeared. 4 When the matter again came before me, after some discussion, counsel indicated that, rather than move for relief solely under Part 17 r 9, they wished also to move for relief under Part 13 r 2 in respect of parts of the plaintiff's claim which are firmly established. An appropriate affidavit under Part 13 r 2(1)(b) founding that relief was brought forward, in addition to the detailed material as to how moneys had been extracted from the plaintiff's account and how a large part of them had gone into the defendants' joint bank account. On 15 May 2002 I allowed an amended notice of motion to be filed claiming final relief under Part 13 r 2, so that the plaintiff might claim final relief under that rule as well as under Part 17 r 9. I did not require this amended notice of motion to be served on the defendants, who have been notified that the plaintiff will move for final relief against them, and who, served with all the aforementioned documents, have at no stage appeared in answer to them. 5 The reason for relief being sought under Part 13 r 2 in respect of the plaintiff's claims for money had and received and for a declaration of trust in respect of moneys paid into the first and second defendants' joint bank account is that the plaintiff cannot yet be certain that it has identified all moneys which have been dealt with in one or both of these ways. To prevent any risk of a possible defence arising that those causes of action have merged in a judgment, I think it more prudent to give them judgment in respect of the fully proven amounts by way of satisfaction of part of their claims under Part 13 r 2 and this I propose to do. Those amounts total $328,851.10. I also propose to award the plaintiff interest in the sum of $5,723 which is calculated on the whole of the moneys proved to have been abstracted from the mid point of the period during which they were abstracted. I think this a reasonable way to calculate the interest to be awarded in all the circumstances. Equally, I propose to declare that the moneys in the defendants' joint bank account are held upon trust for the plaintiff to the extent of $274,962.10, the total of the amounts shown to have been received into that account by direct transfer from the plaintiff's account. 6 It is already clear on the evidence that more money was abstracted from the account than is comprehended in the judgment that I shall enter. There is at least one further sum of some $9,000 in respect of which there is evidence. There well may be further sums as yet unidentified. Initially, counsel for the plaintiff asked me to make some form of final order in respect of those moneys, perhaps a declaration that there were further moneys beyond the $328,000 odd that had been received by the defendants to the use of the plaintiff, an order for an inquiry before a Master as to the amount of those moneys, and an order that, upon the amount being certified by the Master, there be judgment for that amount for the plaintiff. 7 However, I do not propose to follow precisely that course. The Court of Appeal has recently indicated in Meehan v Glazier Holdings Pty Ltd [2002] NSWCA 22 at [31] and [32] that, in the ordinary course, an order should not be made for the entry of judgment for an amount to be, but as yet not, certified by the Master. Instead, the matter should be brought back to the Court upon further consideration for determination as to what should occur as a result of the Master's certificate. But it is not only after final orders that an inquiry by a Master may be ordered. It is plain from the terms of Part 48 r 2 of the SCR that the making of any inquiry may be ordered by the Court at any stage of proceedings. This rule derives from r 223 of the Consolidated Equity Rules of 1902, as well as from English rules in force at the time of the making of the SCR, and has been part of the practice of this Court for at least a century. Rather than make some inchoate final order, it is my view that the better course is to order appropriate inquiries by a Master at this stage without proceeding to final orders beyond those that I propose to make under Part 13 r 2. The inquiry should comprehend what additional amounts beyond $328,000 odd have been abstracted; whether more than $274,000 odd of the moneys abstracted were paid into the joint account of the defendants; and whether any moneys of the plaintiff were used in the acquisition or otherwise in respect of the pieces of real property that the first defendant holds in co ownership with the second and third defendants respectively. 8 The matter can then be brought back to the Court for further consideration. An order for further consideration is appropriate after a judgment by default entered on a motion as well as judgment after a trial: 1 Daniell's Chancery Practice (7th ed, 1901) 942; 1 Seton's Judgments and Orders (7th ed, 1912) 181 - 182; Bennett v Moore (1876) 1 Ch D 692; Brassington v Cussons (1876) 24 WR 881; Gatti v Webster (1879) 12 Ch D 771. The orders that I should make at this time additional to that for inquiries before a Master are to grant leave to the plaintiff to file a motion to proceed before the Master under Part 49 r 2 returnable on Thursday, 6 June 2002 and for further consideration. 9 I am asked for an order for the costs of the proceedings to date against the defendants. Certainly, so far as the proceedings have now culminated in the final orders made under Part 13 r 2, there can be no doubt that the plaintiff is entitled to that order. Although some of the costs incurred as against the defendants relate to portions of the proceedings which are still ongoing, I do not think those costs greatly exceed the costs necessarily involved in obtaining the final orders that have been obtained. In any event, the defendants have not at any stage appeared in answer to any of the numerous documents served upon them or sought in any way to justify their actions or oppose what is sought by the plaintiff. In those circumstances, I think the simple and proper course is to order that the first and second defendants be ordered to pay the plaintiff's costs of the proceedings as between the plaintiff and the first and second defendants up to and including today.

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