Duxbury v Pierce

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website.

REASONS FOR JUDGMENT 1 The issue for determination in this judgment is the assessment of the quantum of the loss suffered by the applicants within the meaning of s 82 of the Trade Practices Act 1974 (Cth) ("the Act") occasioned by the respondents' breach of s 52 of the Act. 2 This judgment should be read together with: · the initial judgment dealing with the liability of the respondents: Duxbury v Pierce [2009] FCA 367; and · the appeal judgment dealing with the liability of the respondents concerning the first applicant: Duxbury v Pierce [2009] FCAFC 164. 3 As a result of the initial judgment combined with the appeal judgment, on 18 December 2009, the Court varied its order of 21 April 2009 so as to make declarations of breach of s 52 of the Act by the respondents in respect of each applicant. The Court also ordered: 1. The first respondent is liable to the applicants for the loss suffered as a result of the conduct referred to in the declarations… 2. The second respondent is liable to the applicants for the loss suffered as a result of the conduct referred to at [15] of the amended statement of claim.

general principles 4 Under s 82 of the Act a person who suffers loss or damage by the conduct of another person in contravention of s 52 may recover from that other person the amount of the loss or damage caused by that other person. Pursuant to s 87(1), the Court may also make such orders as it thinks appropriate against the person who engaged in the contravening conduct in order to compensate, in whole or in part, for the loss or damage. Pursuant to s 87CC, the Court may apportion liability between the two respondents having regard to the extent of responsibility for the loss, unless the Court considers that a concurrent wrongdoer intended to cause the loss or did so fraudulently; see s 87CC(1)(a) and (b). 5 As I & L Securities Pty Limited v HTW Valuers (Brisbane) Pty Limited (2002) 210 CLR 109 shows, the loss can be recovered: · even if the contravening conduct is merely a cause of the loss (at [57] per Gaudron, Gummow and Hayne JJ); and · whether or not the contravention was intentional (at [42] per Gaudron, Gummow and Hayne JJ). 6 Under the initial judgment and orders and pursuant to the consequent appeal judgment and varied orders, the liability of the respondents to the applicants has been established. No issues remain to be determined other than to examine whether the applicants actually incurred a loss by reason of the contravening conduct and, if so, to assess that loss. As Gleeson CJ said in I & L Securities at [20]: …once the amount of the loss or damage suffered by contravening conduct is established, then that is the amount which, pursuant to s 82, a plaintiff has a right to recover. 7 The Court now deals with the losses claimed by each applicant in accordance with the declaration and orders made in this proceeding.

The first applicant - Mr Duxbury 8 If the respondents had not made the representations referred to in the Court's orders dealing with liability, Mr Duxbury would not have invested in the joint venture. 9 On 17 February 2004, Mr Duxbury paid EVP Holdings Pty Ltd ("Holdings") $50,000 for his initial investment in the EVP Windsor joint venture. He made further payments of $1,500 on 20 April 2004 and $48,500 on 21 April 2004. As well as his initial payments, he paid the following sums to EVP Windsor Pty Ltd by way of additional working capital: · 20 May 2004 - $30,000; · 9 June 2004 - $10,000; and · 3 August 2004 - $5,000. These further payments were made on the basis of representations the subject of the Court's declarations. 10 Mr Duxbury received no return on the contributions he made to EVP Windsor Pty Ltd. Also, when EVP Recruitment Pty Ltd ("Recruitment") was placed into administration and, ultimately, liquidation, Mr Duxbury incurred further loss. Mr Duxbury paid $13,150 to the liquidator to assert his interest in Recruitment, as the liquidator was pursuing all the EVP joint venture companies for alleged loss totalling over $700,000. 11 Mr Duxbury borrowed $160,000 from a bank to finance his investment. He opened an account on 11 February 2004 for the purpose of investing in the EVP venture. He was never in a position to reduce the loan. He has incurred interest as a result in the sum of $58,898.30. 12 Apart from costs and the interest which may be awarded in any final order on the amount ordered to be paid under s 82, I find that Mr Duxbury is entitled to $217,048.30 from the respondents. That is subject to the issue of apportionment which is dealt with at [26] to [31] below in these reasons for judgment.

the second applicant - mr kinnane 13 As with Mr Duxbury, if the respondents had not made the representations referred to in the Court's orders, Mr Kinnane would not have invested in the joint venture. 14 By 9 June 2004, Mr Kinnane had paid $140,000 to the first respondent for his investment in the EVP IT & T Sydney joint venture. Compensation for this loss falls solely at the feet of the first respondent. Between September 2004 and January 2005, Mr Kinnane made further payments by way of additional working capital contributions. These amounted to $28,486.00. For the same reason as did Mr Duxbury, Mr Kinnane also paid the liquidator of Recruitment $13,150. Mr Kinnane also claims reimbursement of tax payments which were not made because the financial position of Recruitment was unsound. 15 The collapse of Recruitment had its genesis in the conduct of the respondents. The taxation payments which Mr Kinnane caused to be made amounted to $13,862. 16 Accordingly, Mr Kinnane is entitled to a total of $195,498.00 from the first respondent. That is putting aside the question of costs, interest and proportionate liability (apart from the initial $140,000). 17 As against the second respondent, subject to costs, interest and issues of proportionate liability, Mr Kinnane is entitled to the sums of $28,486, $13,150 and $13,862. That is a total of $55,498.

The blakiston interests 18 If the respondents had not made the representations referred to in the Court's declaration and orders on the liability issue, the third, fourth and fifth applicants would not have invested in the joint venture. 19 On 26 August 2004, the Blakiston Family Trust (of which the Blakiston brothers were trustees and of which the fifth applicant is now trustee) paid $200,000 to Recruitment as part payment of the capital for a half share in EVP Executive (Brisbane) Pty Ltd ("Brisbane"). They received no distribution of profits nor did any company with which they were associated. For reasons identical to those of the first two applicants, the Blakistons paid a further $13,150 to the liquidator of Recruitment. There was no distribution from the liquidation. But for the conduct of the respondent, Mr Glenn Blakiston would not have incurred any liability for unpaid taxes. As a consequence, he currently owes the Australian Taxation Office the sum of $48,826 (plus penalties and interest) less a notional refund of $5,000. 20 The Blakistons also incurred interest on a bank loan to finance purchasing their shares in Brisbane. The loss is in the order of $15,660. Additionally, Mr Glenn Blakiston incurred $8,855 in connection with the administration of Brisbane. 21 The claim for compensation for the loss of the initial $200,000 is only made against the first respondent. The Blakiston interests are entitled to that sum, subject to the, $15,660 and $8,855, referred to above. The total is $281,491. 22 As against the second respondent the third, fourth and fifth applicants are entitled to $70,831, subject to issues of apportionment, interest and costs.

The sixth applicant - mr eaves 23 If the respondents had not made the representations referred to in the Court's orders and declarations on liability, Mr Eaves would not have invested in the joint venture. 24 On 5 November 2004, Mr Eaves caused his family trust to pay $220,000 as part payment of the capital for a half share in EVP Info Tech (Brisbane) Pty Ltd. He contributed a further $50,000 approximately for working capital of which he claims $35,792.72 only. He received no contributions or distribution of profits. Like the previous mentioned applications he paid $13,150 to the liquidator of Recruitment. As with the Blakiston interests he incurred taxation liability as a result of the contravening conduct of the respondents in the sum of $15,600 and $8,690 in payments for administrative costs arising out of the liquidation of Recruitment. 25 Mr Eaves is entitled to recover $293,232.72 from each respondent, subject to questions concerning apportionment, liability and interest.

Apportionment 26 Part VIA of the Act permits the Court to apportion liability for economic loss caused by conduct which contravenes s 52. Section 87CB(3) defines a "concurrent wrongdoer" as "one of 2 or more persons whose acts or omissions…caused, independently of each other or jointly, the damage or loss that is the subject of the claim". Section 87CB(5) provides that: For the purposes of this Part, it does not matter that a concurrent wrongdoer is insolvent… 27 Under s 87CD the Court is to apportion liability to pay for the loss incurred by the applicants, considering what is just having regard to the extent of each respondent's responsibility for the loss. 28 The liability of a concurrent wrongdoer is not excluded where, as set out in s 87CC(1), the concurrent wrongdoer: · intended to cause the loss or damage to the subject of the claim, or · fraudulently caused the loss or damage to the subject of the claim. 29 The applicants submit that the respondents should both be excluded under s 87CC(1)(a) as they intended to cause the relevant loss. The applicants rely on what they say was a deliberate campaign of mis-statement and overstatement of the EVP group's performance and the prospect of the proposed joint ventures. They also refer to the respondents' concealment of the poor financial position of the EVP group and the second respondent's bankruptcy. They also refer to the second respondent's falsification of the books of Holdings and Recruitment at the end of 2004. 30 The declarations made by the Court include the following matters relevant to the current discussion concerning the respondents: · they failed to disclose the imminent or likely insolvency of Holdings and Recruitment; · they failed to disclose the sequestration of the second respondent's estate at the time it occurred or reasonably promptly thereafter; · they altered the financial accounts of Holdings or EVP so as to create the impression of an improved asset position; · they presented altered accounts as true accounts to the administration of Recruitment. 31 Given the above declarations, it is not going too far to say that the concurrent wrongdoers intended to cause the loss claimed. They are therefore excluded as concurrent wrongdoers for the purposes of Part VIA and should be liable for all of the loss caused by their acts in accordance with the analysis in these reasons for judgment of the particular losses incurred by the applicants.

Orders for payment of loss 32 Apart from any orders for costs or interest, the Court will order: · The first respondent pay the first applicant $217,048.30. · The first respondent pay the second applicant $195,498.00. · The first respondent pay the third, fourth and fifth applicants $281,491.00. · The first respondent pay the sixth applicant $293,233.72. · The second respondent pay the first applicant $217,048.30. · The second respondent pay the second applicant $55,489.00. · The second respondent pay the third, fourth and fifth applicants $70,831.00. · The second respondent pay the sixth applicant $293,232.72.

Costs 33 There is no reason why costs should not follow the event. The respondents should pay the costs of the applicants. An order will be made accordingly.

Interest 34 The respondents should pay the applicants a sum by way of interest reflecting the commercial rate. That is the better view of the authorities dealing with s 51A(1) of the Federal Court of Australia Act 1976 (Cth) ("the Federal Court Act"). 35 Section 51A of the Federal Court Actprovides that, "unless good cause is shown to the contrary", the Court should order the payment of interest at such rate as the Court or the Judge thinks fit, on the whole or any part of the money, for the whole or any part of the period, between the date when the cause of action arose and the date as of which the judgment is entered. 36 The usual practice is now to adopt a commercial rate; see EMCL Pty Ltd v Esanda Finance Corporation Ltd [1999] FCA 978 at [62] per Tamberlin, Sundberg and Dowsett JJ. I have evidence before me as to the commercial rate of interest at the times relevant to this proceeding. That rate is 6.5%. The Court will make an order for interest pursuant to s 51A of the Federal Court Act accordingly. I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Marshall.