Fatimi Pty Ltd v Bryant & 2 Ors

Compensatory damages 57 The judge found that if Fatimi had prosecuted its writ of execution to a conclusion the land would have been sold by the Sheriff "no earlier than mid-November 1995, and probably later than that", and that it would have received net proceeds of sale of the land of $149,380. 58 But Fatimi had turned also to a statutory demand and winding-up. Further, the Bank was moving towards winding Rylegrove up. On the assumption that there had not been the sale and transfer of the land, therefore, there were two questions. Would Fatimi have proceeded with its winding-up summons and caused Rylegrove to be wound up, so that it would in any event have received a dividend in the winding-up rather than the $149,380? Would the Bank have filed a summons to wind Rylegrove up and caused it to be wound up, with the same result? It was not Fatimi's case that its dividend would have been greater if the winding-up had not been complicated by the prior sale and transfer of the land. But it was accepted that, although not prominent, its case included that these were questions as to past hypothetical events and that, if they were not answered in the negative, it lost a chance of receiving the $149,380 rather than a dividend in the winding-up. 59 The judge accepted that, if it had had a completely unfettered choice, Fatimi would have levied execution on the land rather than wound Rylegrove up. But Fatimi did not have an unfettered choice. His Honour thought that it would have been apparent to Fatimi that if it had discontinued its winding-up summons it was likely that the Bank would file a summons to wind Rylegrove up and would ensure that notice was given to the Sheriff whereby, pursuant to s 570 of the Corporations Law , the process of execution did not proceed. Further, his Honour thought that it would have been apparent to Fatimi that discontinuance would leave it without an entitlement to its costs of the summons. Thus the judge concluded that - "173. … there is a very real possibility, though I cannot say it is more likely than not, that Fatimi, faced with the prospect of the Commonwealth Bank winding-up Rylegrove if Fatimi did not wind Rylegrove up itself, would have chosen to go ahead with its own winding-up application, so as to preserve its position concerning costs." 60 His Honour continued, perhaps not entirely consistently in the first limb - "174. In summary, if the transfer of the land had not taken place, it is likely that either Fatimi would have wound up Rylegrove itself, or else an application by Fatimi to discontinue its winding-up proceedings would have resulted in the Commonwealth Bank ensuring, under s 570 of the Corporations Law , that Fatimi's execution against the land went no further." 61 The judge found that if Fatimi had not wound Rylegrove up it was likely that the Bank would have issued a winding-up summons by the end of September 1995, that in that event Fatimi would have been precluded pursuant to s 471B of the Corporations Law from proceeding with execution against the land without the leave of the Court and that there was no reason for leave to have been granted, and that - "158. … it seems to me likely that, if Fatimi had not sought and obtained the winding-up of Rylegrove, but rather had tried to recover its judgment debt through execution, the Commonwealth Bank would have succeeded in winding-up Rylegrove, no later than mid-March 1996. If the Bryants did not seek to delay the making of the winding-up order, the Commonwealth Bank would have succeeded in winding-up Rylegrove by mid-November 1995. It is to take account of the prospect of the Bryants trying to drag out the procedures for winding-up, notwithstanding their lack of real basis for doing so, that I have made the finding that the Commonwealth Bank would have succeeded in winding-up Rylegrove no later than mid-March 1996." 62 The judge said - "165 In my view, even if Fatimi had sought to continue with execution against the land, and had been able to receive the proceeds of execution before the Commonwealth Bank obtained a winding-up order against Rylegrove, the Commonwealth Bank would still have obtained its winding-up order against Rylegrove within six months of Fatimi receiving those proceeds of sale. Thus, Fatimi would have had to have put back into the liquidation fund the execution proceeds it had received. That this would have happened, if Fatimi had endeavoured to levy execution against the land, is a sufficient reason why Fatimi would have suffered no damage, even if there had been a conspiracy to injure of the type which it alleges." 63 There was therefore a combination of reasons for the conclusion that, but for the sale and transfer of the land, Fatimi would still have received a dividend in the winding-up rather than the $149,380. It would have decided to proceed with the winding-up summons rather than prosecute its writ of execution. If it had chosen to prosecute the writ of execution, the Bank would have stepped in and either it would have been prevented from levying execution or it would have had to give back the proceeds of execution. The judge's findings were generally in terms of likelihood, but the finding in para [165] last set out was not so qualified. 64 Fatimi submitted that the judge failed to assess and value its lost chance of receiving the $149,380 rather than a dividend in the winding-up, and that he should have awarded "substantial damages" for the loss of the chance. It pointed to the judge's description of a decision to proceed with the winding-up summons as no more than "a very real possibility", and focussed on the Bank stepping in. It submitted that the amount of the Bank's statutory demand was not great, that there was not the same prolonged and bitter contest between Mr Bryant and the Bank, and that although resistance from Rylegrove could be anticipated there was a significant possibility that "when all avenues of opposition had been exhausted a deal with the Bank would have been done". Thus, it said, a lost chance lay in Fatimi deciding to prosecute its writ of execution and a deal between Rylegrove and the Bank leaving it able to do so. 65 This seems to me to be quite unreal. The Bank had served a statutory demand the time for compliance with which would expire shortly after 7 September 1995, and there was no reason for it to hold back. Mr Bryant's litigious history encompassed the Bank, which had made him bankrupt in March 1995, and the support for doing a deal sought to be found in an earlier settlement with the Bank was illusory: the settlement was a pragmatic concession by the Bank, with no compromise by Mr Bryant, and there was no reason for the Bank to concede any part of its $43,695.36. Nor can the assertion that in the last resort Rylegrove would have paid in order to avoid a winding-up, an assertion made without the benefit of evidence from any of the Bryants, be reconciled with the fact that it did not pay Fatimi in order to avoid a winding-up notwithstanding Mr Bryant's claim that the land was worth over $300,000. 66 The only conclusion reasonably available, in my opinion, is that if Fatimi had discontinued its winding-up summons and endeavoured to levy execution on the land the Bank would have filed its own winding-up summons and, within the period found by the judge, Rylegrove would have been wound up. So far as Fatimi submitted that Rylegrove would have applied to set aside the Bank's statutory demand, and thereby prolonged the prosecution of the Bank's winding-up summons so that the period would have been longer and the relation back would not have caught the proceeds of execution, Rylegrove had the opportunity but did not so apply (perhaps because for once it was recognised that there were no grounds and nothing to be gained); even if the period found by the judge were extended, a winding-up by mid-May 1996 or even later would have sufficed. But I do not think successful levying execution on the land was an option. The Bank knew of the land and the possibility of execution. It would surely have filed its winding-up summons well before mid-November. Fatimi would have been prevented from levying execution. 67 When there is added to this that commercial considerations directed Fatimi to a prompt and reasonably certain winding-up of Rylegrove, and that it could not sensibly have relied on a deal between Rylegrove and the Bank as the key to its prosecuting or keeping the proceeds of its writ of execution, in my opinion there was no possibility that, absent the sale and transfer of the land, Fatimi would have received the $149,350 rather than a dividend in the winding-up. 68 The judge did not address the valuation of a lost chance, but his references to likelihood must been seen in the light of this negligible prospect of Fatimi benefiting from a levy of execution on the land. His Honour did not exclude a decision by Fatimi to prosecute the writ of execution. But in relation to the Bank stepping in and what would then follow his Honour's references to likelihood were really a findings of inevitability, reflected in the language of para [165]. There was no lost chance to be valued. That, no doubt, is why his Honour did not address its valuation. 69 As a late submission, Fatimi suggested that it had suffered loss because the most likely course of events was that Fatimi would have received the proceeds of execution but had to give them back to the liquidator, so that it lost the use of the money and thus the benefit of interest earned by investment or of non-payment of interest on borrowings. For the reasons I have given, I do not think that Fatimi would have received the proceeds of execution. In any event, there was no evidence of what would have been done with the money, and any benefit may well have been off-set by additional costs. The suggested suffering of loss was not litigated at the trial, and can not now be raised. Exemplary damages 70 It was not in dispute that, if the tort of conspiracy were made out, exemplary damages could be awarded if warranted in the circumstances. Since the tort of conspiracy requires proof of pecuniary loss, Fatimi did not make out the tort. 71 Where the plaintiff has a complete cause of action without proof of loss, exemplary damages can be awarded. That is illustrated by Cousins v Wilson (1994) 1 NZLR 463. The plaintiff sued in trespass. He did not prove loss, but was awarded nominal damages and exemplary damages. See also Johnston Terminals & Storage Ltd v Miscellaneous Workers, Wholesale and Retail Delivery Drivers & Helpers Local Union (1995) 61 DLR (3d) 741 (no damages proved, but breach of statute actionable per se and nominal damages plus exemplary damages awarded); Cash & Carry Cleaners Ltd v Delmas (1973) 44 DLR (3d) 315 (no damages proved, but injunction to restrain further trespass granted and exemplary damages awarded). 72 It is otherwise, however, when proof of loss is an ingredient of the plaintiff's cause of action. In XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1985) 155 CLR 448 at 468-9 Brennan J said - "Exemplary damages are parasitic on compensatory damages, the plaintiff being unable to recover exemplary damages if he is not the victim of the behaviour which attracts the exemplary damages: per Lord Devlin in Rookes v Barnard [(1964) AC 1129 at 1227]. A single cause of action provides the foundation of a judgment awarding, in an appropriate case, exemplary damages as well as compensatory damages. When a plaintiff's claim for compensatory damages has been satisfied in full, however, he no longer has a cause of action that can support an award of compensatory damages to which an award of exemplary damages can attach." 73 Lord Devlin's reference to the victim of the behaviour is, with respect rather Delphic, see McGregor on Damages , 17th ed, para 11-033. Brennan J used it to support the parasitic nature of exemplary damages, which is to be understood in the light of his Honour's subsequent remarks. If exemplary damages can not be obtained when a plaintiff's claim for compensatory damages has been satisfied in full, despite the single cause of action under which exemplary damages could also be awarded, they equally can not be obtained when the plaintiff's claim for compensatory damages has failed. If there is no host, there can not be a parasite. 74 Perhaps unsurprisingly, there is a dearth of local authority. Fatimi relied on two New Zealand cases. In Donsellar v Donsellar (1982) 1 NZLR 97 the plaintiff claimed exemplary damages following assault and battery. Under the accident compensation regime of the Accident Compensation Act 1972 (NZ) ("the Act") proceedings for damages for personal injury were barred. It was held that, while compensatory damages could not be obtained, exemplary damages could be obtained. The reasoning was (see in particular Richardson J at 109) that rights of action were left intact and the Act was concerned with remedies. The plaintiff still had a cause of action, damages meant compensatory damages, and so the plaintiff could bring proceedings for exemplary damages. It was later held that exemplary damages for negligence in circumstances falling within the accident compensation scheme were also available, see McLaren Transport Ltd v Somerville (1996) 3 NZLR 424 at 431 (a recent consideration of such damages is A v Bottrill (2003) 1 AC 449). A cause of action in negligence requires proof of loss, but on the same reasoning a plaintiff still has a cause of action even though compensation for the loss can not be recovered, and so can bring proceedings for exemplary damages. Fatimi's reliance on these cases was misplaced, since they were not concerned with exemplary damages when the plaintiff had not proved loss as a necessary ingredient of his cause of action. 75 The Bryants submitted that awarding exemplary damages in the absence of compensatory damages would be inconsistent with the principle that exemplary damages should be awarded if, but only if, the sum awarded as compensation is inadequate to punish the defendant, deter the defendant and others from similar conduct and mark the Court's disapproval of the conduct: Amalgamated Television Services Pty Ltd v Marsden (No 2) (2003) 57 NSWLR 338. I do not think that a strong point. If consistently with the principle exemplary damages can be awarded where the plaintiff obtains nominal damages, there would be much the same consistency with the principle if damages were awarded although the plaintiff did not obtain compensatory damages. 76 The point is more fundamental. Whatever be the extent of availability of exemplary damages (see recently the differing views in Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298 on availability for equitable wrongs), the civil law is not directed to punishment, deterrence and disapprobation for its own sake. As was said by Lord Reid in Cassell & Co Ltd v Broome (1972) AC 1027 at 1086, in a passage often cited including by Heydon JA in Harris v Digital Pulse Pty Ltd at [345], awarding a plaintiff more than compensatory damages is "highly anomalous" because "[i]t is confusing the function of the civil law which is to compensate with the function of the criminal law which is to inflict deterrent and punitive penalties". The anomaly is entrenched, and must be accepted. But for a civil law remedy there must be a civil wrong. Tortious and statutory civil wrongs have elements to be made out. Unless they are made out there is no civil wrong and, specific statutory provision aside, the civil law has no business in imposing punishment or in deterring and expressing disapprobation. Deserving punishment or occasioning deterrence and disapprobation is not a civil wrong. 77 The point was concisely made by McIntyre J, speaking for the majority of the Supreme Court of Canada, in Vorvis v Insurance Corporation of British Columbia (1989) 58 DLR (4th) 193 at 206 - "It must never be forgotten that when [punitive damages are] awarded by a judge or a jury, a punishment is imposed upon a person by a court by the operation of the judicial process. What is it that is punished? It surely cannot be merely conduct of which the court disapproves, however strongly the judge may feel. Punishment may not be imposed in a civilized community without a justification in law. The only basis for the imposition of such punishment must be a finding of the commission of an actionable wrong which caused the injury complained of by the plaintiff." 78 As a corollary, a plaintiff who has a cause of action against a defendant can not rely on unrelated outrageous conduct on the defendant's part as a basis for exemplary damages: see Guaranty Trust Co of Canada v Public Trustee (1978) 87 DLR (3d) 417 at 421-2. In Waddams, The Law of Damages , 2nd ed, (1991) , para 11.390 the learned author says of this case that - " … once the connection between compensation and remedy is lost, as it is by the acceptance of the concept of exemplary damages, there is no strictly logical reason why exemplary damages should not be awarded whenever conduct comes to light which the court considers worthy of punishment. It is irrelevant from the point of view of the purposes of exemplary damages whether they happen to go into the pocket of one plaintiff or another, but this would open the door to actions by informers who had no connection with the conduct complained of. It is submitted, therefore, that the courts are on sound ground in insisting that the punishable conduct must be wrongful vis-à-vis the plaintiff and that the plaintiff cannot attach a complaint of conduct that is not wrongful in this sense to an entirely unrelated cause of action." 79 Punitive damages have been quite prominent in the United States of America. In a work devoted entirely to the subject, Redden, Punitive Damages (1980), it is said (at para 4.2) that to recover punitive damages a plaintiff "must establish that he has sustained actual damages", with discussion thereafter whether the actual damages must be "measurable" or may be nominal. The American Restatement Torts 2d, (1977) para 908 includes - "Although a defendant has inflicted no harm, punitive damages may be awarded because of, and measured by, his wrongful purpose or intent, as when he unsuccessfully makes a murderous assault upon the plaintiff, who suffers only a momentary apprehension. In all these cases, however, a cause of action for the particular tort must exist, at least for nominal damages. … Compensatory damages in a trifling amount and substantial punitive damages in the same verdict are not necessarily inconsistent. It is essential, however, that facts be established that, apart from punitive damages, are sufficient to maintain a cause of action. Thus a nonharmful unauthorized dealing with an other's chattel, if not amounting to a dispossession, does not give rise to a cause of action and the fact that it was done with a bad motive is immaterial. On the other hand, in torts like malicious prosecution that require a particular antisocial state of mind, the improper motive of the tortfeasor is both a necessary element in the cause of action and a reason for awarding punitive damages." 80 Amongst the cases cited in the supplement is Kirkbride v Lisbon Contractors Ltd 521 Pa 97 (1989), in which it was said at 101 - "Since punitive damages are an element of damages arising out of the initial cause of action, if that cause of action is dismissed the punitive damages which are incident to actual damages cannot stand … . If no cause of action exists, then no independent action exists for a claim of punitive damage since punitive damages is only an element of damages." Statements in various jurisdictions to the same effect are abundant, for example Rhoads v Heberling 306 Pa Super 35 (1982) at 44; Carey v After The Gold Rush 715 P 2d 803 (1986) at 807; White v Moses Taylor Hospital 763 F Supp 776 (1991) at 792-3; White v Hansen 813 813 P 2d 750 (1991) at 752; Brandy v Flamboyant Investment Company Ltd 772 F Supp 1538 (1991) at 1543-4. 81 Principle, supported by this guidance from elsewhere in the common law world, leads to the conclusion that where Fatimi did not make out a cause of action for conspiracy, exemplary damages can not be awarded.

Orders 82 The appeal should be dismissed with costs. 83 McCOLL JA: I agree with Handley JA. **********

Last Modified: 05/07/2004 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.