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[2009] QSC 400
General information, not legal advice.
Supreme Court of Queensland
2009-12-11
McMurdo J
Original judgment source is linked above.
[1] The plaintiff, Mr Duhs, applies to have the first defendant, Mr Pettett, punished for contempt. The case is that Mr Pettett failed to comply with orders made by White J in these proceedings on 16 July 2009. Before going to those orders, and Mr Pettett's response to them, it is necessary to summarise the preceding events.
[2] Mr Duhs paid two amounts totalling $2,700,000 to Mr Pettett. He paid $2,000,000 on 2 September 2004 by a cheque payable to "Kea-Watt & Associates Trust Account" and the balance by a cheque on 14 January 2005. The terms upon which these payments were made have not been established within these proceedings or otherwise. Yet as I will discuss, a final judgment has been entered in favour of Mr Duhs against Mr Pettett in that sum of $2,700,000.
[3] On any view however, the payments were made so that Mr Pettett could make some investment on behalf of Mr Duhs. When his money was not returned as he believed it should have been, Mr Duhs commenced these proceedings seeking the sum of $2,700,000 on a variety of legal bases. In his claim filed on 23 December 2008,[1] Mr Duhs claimed firstly the "taking of all necessary accounts and enquiries as to the dealing by" Mr Pettett and two of his companies who were joined as defendants with money which had been paid to Mr Pettett. He claimed a declaration that one or more of the defendants held title to any investment made with those monies on a resulting or constructive trust for Mr Duhs. He claimed damages for fraud in the sum of $2,700,000 or alternatively damages for breach of fiduciary duty in the same sum. He claimed a declaration that there was no contract between the plaintiff and any of the defendants and in consequence an order that those defendants "make restitution to the plaintiff", again in that sum. Lastly he claimed damages in that sum as against Mr Pettett for "unconscionable conduct at law" and against the other defendants upon the same basis and pursuant to the Trade Practices Act 1974 (Cth).
[4] On 25 November 2008 an order was made requiring Mr Pettett to swear an affidavit "providing details as to the respondents' knowledge of the investment of the sum of $2,700,000 by the applicant". In an affidavit sworn in December 2008, Mr Pettett expressly declined to say what had happened to the funds in his hands on the basis that "such information may make me liable to a civil penalty".
[5] Mr Duhs applied for summary judgment. On 6 May 2009 Applegarth J dismissed that application,[2] but effectively conditional upon a payment into court by Mr Pettett of 20 per cent of the amount of the claim, i.e. $540,000. Applegarth J said:
"[38] Pettett declines to reveal what has become of the money. He does not say that the money has been lost through misappropriation by a third party to whom it was entrusted. An uninformative reference is made by Pettett to continuing attempts to recover funds that were "invested through Mr Jay Rick in the Hoffman Bank". Despite being invited to verify this assertion with further evidence, and given an opportunity to do so, there is no evidence, apart from Pettett's bald assertion in paragraph 31 of his affidavit, that the moneys were so invested. Duhs has told Morris that the sums invested secured a development at Rathdowney, and he forwarded documents to Morris in which there are account transactions in 2005 and 2006 styled "Rathdowney Development... investment income; interest". Pettett's affidavit confirms Duhs evidence about the payment of about $70,000 in interest. However, he says nothing about the ownership or value of the Rathdowney development, and the use of Duhs funds.
[39] In circumstances in which Pettett declined to disclose in paragraph 3 of his December 2008 [affidavit] what has become of Duhs' funds and in his April 2009 affidavit has not been forthcoming with details, I am not in a position to conclude that the sum has been lost through a misguided investment, misappropriation or some other cause. Pettett has not relied on any material to say that the sum invested cannot be recovered in whole or in part. Pettett describes the funds that were invested as Duhs' funds, rather than his own.
[40] In circumstances in which Pettett does not swear or submit that an order of the kind sought would frustrate the litigation, I am disposed to make an order under UCPR 298. The position might have been different if Pettett had provided evidence that the investment, or a substantial part of it, had been lost and that there was no prospect of recovering it."
[6] Parts of that affidavit of Mr Pettett of April 2009, referred to by Applegarth J, are presently relevant. Mr Pettett there swore as follows:
"22. Following this meeting and later in September 2004 an amount of $2,000,000.00 (AUD) was placed into an account known as Kea Watt & Associates Trust Account, being a bank account controlled by me.
(a) Duhs indicated that he wished me to arrange for the conversion to euros of a further $700,000 (AUS);
(b) Duhs asked me to provide him with a list of overseas private placement programs into which he and Mrs Allen could place their money;
(c) Duhs requested that I prepare the necessary documentation for him to do this;
(d) I informed Duhs that he could invest his money with Mr Emmerson (as he had done in the past) and I told him that I (though my company) was presently in a program operated by a Mr Rick (in association with the Hoffman Bank);
(e) Duhs said to me that he didn't want to invest in the same program as Mrs Allen or in the program operated by Mr Emmerson and said that Mrs Allen was not to be informed of this;
(f) I was asked by Duhs to meet with Mrs Allen and him at the Kawana Waters Hotel at Kawana in January 2005.
(a) Duhs again indicated that he wished me to arrange for the conversion to euros of a further $700,000 (AUS);
(b) Duhs said that he wanted the amount of $2,700,000 to be placed in the same program operated by a Mr Rick (in association with the Hoffman Bank) as used by me;
(c) I produced documents for Duhs to sign to permit the investment of the money as requested.
Exhibited hereto and marked with the letters "TP9" are copies of the documents signed by Duhs at that meeting.
[7] Mr Pettett failed to pay $540,000 or any part of that amount into court. In consequence, on 19 June 2009, judgment was entered in favour of Mr Duhs against Mr Pettett in the sum of $2,700,000 and $152,382.32 for interest, with costs.
[8] On 16 July 2009 Mr Duhs made an ex parte application for a freezing order, which was granted that day. Mr Pettett was ordered not to remove from Australia or in any way deal with or diminish the value of his Australian assets up to an unencumbered value of $2,700,000. The presently relevant paragraphs of the order are as follows:
"7. For the purposes of this order, the Defendant's assets include:
7.1 all of the Defendant's assets, whether or not they are in his name and whether they are solely or co-owned;
7.2 any asset which the Defendant has the power, directly or indirectly, to dispose of or deal with as if it were his own (the Defendant is to be regarded as having such power if a third party holds or controls the asset in accordance with the Defendant's direct or indirect instructions).
8.1 to the best of his ability inform the Plaintiff's solicitors, Ferguson Cannon of Maroochydore ("the Plaintiff's solicitors"), in writing of all of the assets of the Defendant in Australia and elsewhere, giving their value, location and details (including any mortgages, charges or other encumbrances to which they are subject) and the extent of the interest of the Defendant in the assets;
8.2 swear and serve on the Plaintiff's solicitors an affidavit, disclosing full details of the facts and matters within the knowledge of the Defendant and/or information concerning the disbursement, location and whereabouts of the Plaintiff's monies in the sum of $2,700,000.00 ("the Plaintiff's monies"), including the name and address of all persons and entities who have had and/or now have the Plaintiff's monies or any part thereof and exhibiting thereto all documents in the possession, custody or control of the Defendant relating to the whereabouts of and/or the application of the Plaintiff's monies;
8.3 provide forthwith to the Plaintiff's solicitors a written authority signed by the Defendant directed to the Defendant's banks and financial institutions directing them to provide all relevant information in relation to the application, distribution and present whereabouts of the Plaintiff's monies."
[9] It is alleged that Mr Pettett failed to comply with the orders in paras 8.1 and 8.2. It is convenient to discuss first his response to the latter order. He was required to swear and serve an affidavit "on or before the return date" which was 28 July 2009. Mr Pettett did swear an affidavit which was filed and served by that date and which purported to comply with para 8.2 of the order. Mr Duhs' case is that the order required the affidavit to be true and that this affidavit was false. The first proposition is not contested.
[10] His affidavit relevantly included the following:
"41. I have always acknowledged receiving $2,700,000.00 from the Plaintiff but say that it was at his and his advisor Betty Allen's direction and on their instructions and as their agent that I caused the money to be invested as is deposed to in paragraphs 24, 29 and 31 of my affidavit sworn in these proceedings on 24 April 2009 (CFI 16).
(a) Letter from Stormwind Pty Ltd to Alliance International SA dated 20 January 2005;
(b) Account transaction Kea-Watt & Associates (Bahamas) Ltd Euro Account for the period 1 July 2001 to 30 June 2007;
(c) Account transaction Alliance International SA US Dollar Account for the period 1 July 2001 through 30 June 2007.
The signatory of the letter on behalf of Stormwind Pty Ltd, Mr Hendy, is the manager of my affairs in Hong Kong.
In accordance with the Plaintiff's instructions to me the sum of $2,000,000.00 received from the Plaintiff on 2 September 2004 was converted to €852,000.00 and credited to Kea-Watt & Associates (Bahamas) Ltd's account on 10 September 2004.
The sum of $700,000.00 received from the Plaintiff on 14 January 2005 was converted to €308,000.00 and credited to the account of Kea-Watt & Associates (Bahamas) on 15 January 2005.
On 18 January 2005 €1,160,000.00 were debited from
Kea-Watt & Associates (Bahamas) Ltd account and credited in USD$1,490,000.00 to Alliance International SA's
The effect of these transactions was to reduce the investment of Alliance International SA then held in the Hoffman Banks Enhancement Program under the facilitation of Mr Rick by USD$1,490,000.00 and credit the account of FAA Ltd, the company owned and operated by the Plaintiff, with that amount."
[11] In para 42 he referred to pages 76 to 79 of an exhibit. Page 76 was a copy of what purported to be a letter from Storm Wind Ltd to "Alliance International S.A." for the attention of Mr Pettett, dated 20 January 2005. Signed by a Mr Hendy as a director, the letter was in these terms:
"I hereby acknowledge and confirm that, effective this date, Alliance International S.A., as represented by your kind self, and FAA Ltd., as represented by Mr. Henry W. Duhs of Australia, now hold a fully-paid participating interest of US$560,000 and US$1,490,000, respectively, in the Hoffmann Bank's Enhancement Program under the facilitation of Mr Ricks."
[12] It is to be noted that Mr Duhs was said to hold an interest through the company FAA Ltd and that this interest was said to be "fully paid". The letter was dated two days after the event referred to in para 46 of the affidavit, which was said to be the debit of €1,160,000 from an account in the name of a company called Kea-Watt & Associates (Bahamas) Ltd and the crediting of the US dollar equivalent to an account of Alliance International SA.
[13] Page 77 of that exhibit was in the form of a printout of an accounting record entitled "account transactions Kea-Watt & Ass. (Bahamas) Ltd Eur" for the period from 1 July 2001 through 30 June 2007. It contains an entry for €852,000 on 10 September 2004, the "payee" being "FAA Ltd (Duhs & Allan)". There is an entry in the same terms on 15 January 2005 for €308,000. There is an entry on 18 January 2005 showing the payee as "Alliance Inter SA (USD)" for a negative amount of €1,160,000. Then there are monthly entries from 18 September 2005 showing, in each case, an amount of minus €6,730 again referrable to "FAA Ltd (Duhs & Allan)". The page which Mr Pettett exhibited showed transactions only to January 2007.
[14] Pages 78 and 79 were another apparent printout from an accounting record, this time headed "Account Transactions Alliance Inter S.A. (USD)". Relevantly there was an entry on 18 January 2005 for USD$1,490,000 for which the "payee" was "FAA Ltd (Duhs & Allan)".
[15] These documents were apparently consistent with Mr Pettett's evidence in the affidavit. The effect of that evidence was that Mr Duhs' funds had been paid to an account kept by Kea-Watt & Associates (Bahamas) Ltd, a company different from the second respondent to the proceedings and apparently incorporated in the Bahamas, and from there paid to a bank account kept by Alliance International SA. Mr Pettett referred to an "account" of each of those companies. Especially in the context of this being an affidavit responding to para 8.2 of the order, the effect of the evidence was that each was a bank account.
[16] In truth, none of Mr Duhs' funds was paid to or through such accounts. This is established by an affidavit filed on behalf of Mr Duhs on 16 September 2009, sworn by an employee of Suncorp-Metway Ltd. Exhibited to that affidavit are copies of relevant bank statements for account number 330021210 from 30 August 2004 to 29 April 2009. The account is in the name of Mr Pettett "T/F Kea-Watt & Ass Trust A/C". The opening balance on 30 August 2004 was $3,235.83. There was a deposit on 2 September 2004 of $2,000,000, the depositor being shown on the statement as Mr Duhs. There is a further deposit of $700,000 on 14 January 2005 which, it is now agreed, was Mr Duhs' other payment. These were the only substantial deposits to the account over these years. There is no debit to the account which at all corresponds with the transactions described in Mr Pettett's affidavit filed 28 July. The closing balance (as at 29 April 2009) was an overdrawn amount of $1.90.
[17] On 4 November 2009 Mr Pettett swore a further affidavit which included this evidence:
"3. By way of clarification, paragraphs 41 to 47 of my affidavit sworn on 27 July 2009 in these proceedings evidence the transaction which gave effect to Mr Duhs' company FAA Ltd, being credited with an investment in the Hoffman Bank's enhancement program of USD $1,490,000. This occurred without an actual transfer of the Australian dollar amounts out of the account with Suncorp styled "Mr T F Pettett T/F Kea-Watt & ASS Trust A/C Suncorp - BSB 484-799 account 330021210 ("Suncorp account") but rather by FAA Ltd being credited with that amount in Alliance International SA's account, Alliance International SA being the company that held the investment in the enhancement program.
[18] Mr Pettett thereby confirmed what in any case was established by the
Suncorp-Metway bank statements, which was that none of Mr Duhs' funds was disbursed as he had sworn in his affidavit of 28 July. The effect of his November affidavit was that Mr Pettett, through FAA Ltd, was able to make this investment in the so called Hoffman Bank's enhancement program by not using Mr Duhs' money but rather by some means which had the result that Mr Duhs was obliged to reimburse him, and that he progressively exercised this right of reimbursement by his operation of the Suncorp-Metway Ltd account over the years.
[19] At this hearing there was an argument as to proper construction of para 8.2 of the order. In particular there was an argument as to what was meant by the expression "the Plaintiff's monies". Now depending upon the application by Mr Pettett of the monies received by him, there could have been a point reached where the funds or part of them were no longer able to be described as the plaintiff's monies. However, the order, on my interpretation, required the disclosure of information within Mr Pettett's knowledge about the passage of the funds, without this being limited to a time when the funds were in all respects the property of the plaintiff. The expression "the Plaintiff's monies" defined the funds by describing them as they were when they were paid to Mr Pettett. And as already noted, upon any view the funds were paid to Mr Pettett to be applied by him on behalf of Mr Duhs. As Applegarth J said, this was not a loan to Mr Pettett. In his hands, the funds were held for Mr Duhs and at least at that point, they were "the Plaintiff's monies" on any interpretation of the order.
[20] How did Mr Pettett disburse those monies? He did not do so as he represented in his affidavit of 28 July. Rather the disbursements, as to their amounts and dates, are disclosed by the bank statements of Suncorp-Metway Ltd. That information, of course, was not provided by Mr Pettett. It follows that it has been established, beyond reasonable doubt, that Mr Pettett failed to comply with para 8.2 of the order.
[21] Nor is his November affidavit a belated compliance with the order. He has there said how he did not disburse the funds. He has not disclosed all information within his knowledge concerning disbursements which he did make. The details of those disbursements are not obviously irrelevant to Mr Duhs. They are of potential relevance in identifying Mr Pettett's assets and also property into which Mr Duhs might hope to trace. At least two of those disbursements are substantial. On 16 September 2004 there was a withdrawal of $352,142.67 described as "telegraphic Trf foreign currency Ser". On 15 September 2005 there was a withdrawal of $381,133.16.
[22] It is also alleged that Mr Pettett breached para 8.1 of the order in several respects. Mr Pettett was required to disclose details of "all of the assets of the defendant", a term which was defined as "all of the defendant's assets, whether or not they are in his name and whether they are solely or co-owned..."
[23] The first particular of a breach of this order is that Mr Pettett failed to disclose the true balance of the Suncorp-Metway account as at 5 December 2008. However, the order required him to disclose his assets as at the time that he provided the disclosure. As to the Suncorp-Metway account, he said that the funds had been fully used. That is confirmed by the bank statements. This particular is not made out, as counsel for Mr Duhs appeared to accept.
[24] The next particular is that he failed to disclose the balance of an account with Heritage Building Society. It is conceded on behalf of Mr Pettett that he failed to do so within the time required by the order. However, he subsequently volunteered this information, without Mr Duhs or his lawyers being aware of the account. It is accepted that this information, although provided late, is sufficient.
[25] The next particular is that he failed to disclose "the assets of the Trevor Pettett Family Trust and any interest in those assets, contingent or otherwise". The trust deed of that trust is in evidence. The present trustee is Tolteca Pty Ltd. By cl 2 of the Trust Deed, the income of the trust fund is to be paid, applied or set aside in whole or in part as the trustee shall think fit and for the benefit of all or any one or more of the "general beneficiaries" and in such proportions as the trustee in its absolute discretion should determine. Income which is not so applied or set aside is to be held in trust for the so called "primary beneficiaries" as tenants in common in equal shares who shall be deemed to be presently entitled to that income. As to the capital of the trust fund, it is to be held upon trust on the vesting date for such of the general beneficiaries and in such proportions as the trustee may in its absolute discretion determine. The primary beneficiaries are defined as the persons set out in the fifth schedule to the trust deed, where only Mr Pettett's name appears. The general beneficiaries are defined to mean the parties set out in the sixth schedule, who is Mr Pettett, as well as "his spouses, his grandparents, parents, brothers and sisters, children, grandchildren and remoter issue..." and entities associated with him. Accordingly, the entitlement to the income or the capital of the trust fund is entirely dependent upon the exercise of the trustee's discretion. Therefore, on the face of the trust deed, Mr Pettett has no present entitlement to any part of the assets of the trust, as distinct from a right in equity to the due administration of the trust.[3] Counsel for Mr Duhs appeared to argue that nevertheless I should conclude, necessarily according to the standard of beyond reasonable doubt, that the position is otherwise in relation to this trust because of Mr Pettett's ability to dictate the exercise of the trustee's discretion by a provision of the trust deed whereby Mr Pettett is able to appoint a new trustee. But that does not entitle him to require that new trustee should act according to his direction. I am not satisfied, beyond reasonable doubt, that Mr Pettett's control over the affairs of this trust is such that he has the power, directly or indirectly, to dispose of or deal with the trust assets as if they were his own.[4]
[26] Next it is alleged that Mr Pettett exercised sufficient control over a company called Starzz Pty Ltd as to make its assets his assets. Ultimately that particular was not pressed.
[27] The next particulars are to the same effect in relation to Tolteca Pty Ltd and Tiamo Pastoral Pty Ltd. Mr Pettett was a director of each but there is evidence that he resigned on or about 10 July 2009. It is argued for Mr Duhs that he did so deliberately to avoid the impact of the order. The immediate answer to that is that this pre-dated the order. He has not been a shareholder at any time. The new director is a Mr Popp who lives in Madrid. It is said that it should be inferred that he could not and does not control the companies from that distance. The argument also relies upon a letter of 27 July 2009 from an accountant to Mr Pettett in relation to Tiamo Pastoral Pty Ltd. The letter begins by saying that the accountant had been asked to report on the loss suffered by that company as a result of its inability to engage labour to harvest any crops or retrieve timber from November 2008. The letter records that for some years the accountant had acted upon information from Pettett in preparing financial statements for his "various entities" including this company. This evidence would found a reasonable suspicion that Mr Pettett does have the power to dispose or deal with the assets of these companies as if they were his own. However, more must be proved. I am not satisfied, beyond reasonable doubt, that it is established that the assets of either company are within this description.
[28] Lastly there were two further companies, described as European Bamcorp and European Financial Holdings, about which the same case was alleged in the particulars. However, there is no evidence to support that case.
(a) was and remains in contempt of para 8.2 of the order of 16 July 2009, in that he has not sworn and served on the plaintiff's solicitors an affidavit disclosing full details of the facts and matters within his knowledge and/or information concerning the disbursement, location and whereabouts of the plaintiff's monies in the sum of $2,700,000 as deposited to Suncorp-Metway Limited account number 330021210;
(b) was in contempt of para 8.1 of that order in that he failed to inform the plaintiff's solicitors of an asset constituted by the credit balance in Heritage Building Society account number 10041877 on or before 28 July 2009.
[30] I will hear submissions and any relevant evidence as to punishment for each contempt.
[1] The proceedings having been commenced by an Originating Application on 25 November 2008.
[3] Kennon v Spry (2008) 238 CLR 366 at 394 [77], 408 [125].
Duhs
Pettett & Ors
(2008) 238 CLR 366