(g) Mr Green continued to share the litigation funding after he left Diosta in September 2003 in accordance with the arrangements which he said were made.
37 In the long run, the decision depends upon whose evidence is accepted. Some inroads were made on Mr Green's credit involving disputed diary notes. I do not accept Mr Green's evidence about these notes. Some of the evidence of Mr Duncan I do not accept, one part being that he wanted the $40,000 in advance because he did not know if he would be able to find Mr Green if the appeal succeeded. There was no ring of truth about that evidence. I accept the evidence of Mr Green as to the agreement made.
38 I should say that even if the agreement were in the terms set out by Mr Duncan, it was never terminated. There was notice requiring payment by a particular time and payment was not made then. There was then a further letter which changed the time. Mr Green responded to that letter, albeit out of time. No notice of termination was given. Mr Duncan said in evidence that he regarded the refusal of Mr Green to pay to be a repudiation. If he did, he gave no notice of acceptance. None of this really matters in view of the decision to which I have come.
Trust Claims
39 In par 33 of the Further Amended Statement of Claim, it is pleaded that Diosta held the proceeds of the Monopoly litigation as to one half on trust for the plaintiff. The whole of the case of the plaintiff in this Court depends upon that being found.
40 The Monopoly judgment moneys and interest were received by the solicitors for Diosta and paid to Diosta on 3 February 2005. Mr Duncan knew of this, although he told Mr Green otherwise. The moneys were paid into the general account of Diosta, not into its trust account. Something was made by Mr Kunc about this, but I think it shows no more than the simple fact that for whatever reason, Mr Duncan had decided that Mr Green was to get nothing from the proceeds of the litigation.
41 The question is whether the agreement in terms established by Mr Green did more than create a debt due by Diosta to him when the litigation was successfully concluded: was it the intention of the parties that the proceeds of the litigation be held by Diosta as to 50 per cent on trust for Mr Green: Walker v Corboy (1990) 19 NSWLR 382 at 386. There is no doubt there was a debt. The decision of the Chief Industrial Magistrate's Court determined that. The question is whether Mr Green had a beneficial interest in the fund represented by the judgment moneys, interest and costs received from Monopoly, so that Diosta was required to keep the fund separate, or to hold Mr Green's share in a separate account and not mix it into the general funds of Diosta: Henry v Hammond [1913] 2 KB 515 at 521.
42 It is a difficult question, but I consider the language used by the parties sufficient to conclude that the intention was that the plaintiff had a 50 per cent interest in the fund, so that on receipt by Diosta of the fund, that proportion was held by Diosta in trust for the plaintiff. I do take into account the last part of the conversation, namely, "Your letter of employment would cover you as to moneys owed if we win", but that does not take away from the agreement already reached. The obvious intention of the parties when Mr Green agreed to fund 50 per cent of litigation funds was that he would be entitled to 50 per cent of the fruits of the litigation and that interest would be held for him. Mr Green accepted that the franchise fee was payable on so much of the judgment sum as represented commission but I do not think this weakens his case.
Distributions of the Proceeds and Tracing Claim
43 $246,028.46 was paid into the general account of Diosta on 3 February 2005. On any basis, one half of that amount belonged to Diosta but subject to any franchise fee payable. That, however, did not mean there was an entitlement to pay the whole of the fund into the general account and mix it with other money. On the following day, separate payments of $6,000 and $16,000 were made to Mr Duncan, the purpose stated in the account ledger in Exhibit 9 being to repay loans which had been made by Mr Duncan to Diosta and which loans also appear in the accounts. On 9 February 2005, $90,000 was paid by Diosta to Mr Duncan and he invested this on deposit with the Commonwealth Bank of Australia "pending settlement with Green". While that amount could be taken to have been paid out of the share to which Mr Green was entitled from the settlement moneys which had been paid to Diosta, the other payments in accordance with ordinary principles would have been taken to have been paid by Diosta out of the funds which were its own: Re Hallett's Estate (1880) 13 Ch D 696. The wording "pending settlement with Green" does not sit well with the evidence of Mr Duncan that he considered the agreement was ended when Mr Green refused to pay the $40,000.
44 The amount placed on deposit with the Commonwealth Bank was repaid with interest on 9 February 2006 and paid into the Diosta general account. Before that was done, the Diosta account had only about $5,000 in it. It would follow that if those funds can be identified as the share of Mr Green, then as no other deposits of any significance were received until 20 April 2006, nearly all the payments between those dates must have been payments out of trust funds. $10,120 was paid in on 20 April 2006 for commission on a sale. Those moneys were those of Diosta.
Tracing Claim
45 There were some payments made to Mr Duncan, but where those payments ended up, the evidence does not establish, so that no tracing claim could apply. There is a tracing claim made in respect of $30,000 which was paid on 24 June 2005 to the "Duncan Super Fund". Mr Duncan said that fund was still in existence. The only evidence relating to the trust is in Exhibit D, which comprises the financial and reports for the period 1 July 2004 to 30 June 2005. Those accounts show that Diosta was the trustee of that fund at the relevant time. For tracing to be successful, the trustee of the superannuation fund would have to be joined. If it is still trustee Diosta cannot be joined without leave and there is no evidence as to any other trustee. That claim for tracing must fail. For the same reason claims to trace payments made to PA Duncan Consulting Pty Ltd must fail as it is not a defendant. More important is the fact there is no evidence the moneys paid remain in any account of that company or of Mr Paul Duncan.
Barnes v Addy
46 I have found that a trust existed. But to make Mr Duncan liable under the first limb of Barnes v Addy, he must have received and become chargeable with trust funds. To become chargeable, he must have had notice of the trust: Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at [112]. On the inadequate material in Exhibit 9, it is not possible to hold that any payment made by Diosta to Mr Duncan after receipt of Monopoly moneys was of trust money as opposed to funds of Diosta in the account, at least until the Commonwealth Bank Deposit moneys were paid back into the account in February 2006. No submissions were made that there should be some order for a detailed accounting in accordance with the principles established in Re Hallett's Estate. The moneys which were paid to the Duncan Super Fund were not paid to Mr Duncan.
47 I find that the moneys received from the Commonwealth Bank on repayment of the deposit were trust moneys held by Diosta for Mr Green, or to which he was beneficially entitled. Withdrawals of $10,000 and $20,000 from the account on 9 February 2006 and 10 April 2006 respectively were then withdrawals of trust funds. Smaller amounts of $2,129.00, $2,825.66 and $2,580.24 were also paid to Mr Duncan as expenses and for the same reason would be trust funds held for Mr Green. While I have found the terms of the agreement against Mr Duncan, I also allowed evidence of his version of events to be admitted on the question of intention and knowledge. However, in the case of knowledge it is knowledge of the facts which bring the trust into existence not knowledge of the legal conclusion which results from those facts which matters and in any event I do not accept Mr Duncan's evidence of intention. I find that Mr Duncan had knowledge. He is chargeable with the sums of $10,000 and $20,000 and the smaller sums totalling $7,534.90. The three figures amount to $37,534.90.
48 Mrs Duncan never received any money, so there can be no Barnes v Addy claim against her. Mr Paul Duncan did receive some money. It is possible that he may have received trust funds, as he received a number of payments after the Commonwealth Bank moneys were placed back into the account, but there is no evidence at all that he had notice of the trust and he was not asked anything about this. In so far as moneys were paid to his company it is not a defendant so no claim of knowing receipt arises.
Barnes v Addy - Knowing Assistance
49 The only pleaded claim as to knowing assistance appears to be in par 37 of the Further Amended Statement of Claim and is against the first defendant only. That paragraph is as follows:
"37 The first defendant caused to be paid, from the bank account of Diosta, other than to the plaintiff amounts of money from the from the [sic] proceeds of the litigation against Monopoly to which the plaintiff was and is entitled, and thereby assisted, counselled and procured the breach by Diosta of the trust upon which it held those amounts of money and its trust and fiduciary duty to the plaintiff."
50 I do not understand how this claim can be made as against the first defendant as distinct from Diosta. What Mr Duncan did so far as these payments were concerned, he did in his capacity as a director of Diosta and his actions were those of the company: Black v Smallwood (1966) 117 CLR 52 at 61. Signing a cheque on the company account is not knowing assistance by a director. In any event, whatever may be said of the payments made by Diosta it could not be said that Mr Duncan assisted with knowledge "in a dishonest and fraudulent design" on the part of Diosta in making payments of what appear for the most part to be ordinary business expenses of Diosta.
Conversion
51 I have set out the pleaded claims. If there were any claim in conversion it could I think be only against Diosta. The payment of money from the Diosta account was the act of the company not the act of Mr Duncan: O'Brien v Dawson (1942) 65 CLR 18. In addition assuming moneys in a bank account can be goods the subject of a conversion claim this cannot be relevant to a mixed fund. The conversion claim fails.
Deceit
52 I have set out the pleaded claim. There are two problems with this claim. The first is that any false representation was that of Diosta not of Mr Duncan. The second is it is not established that the statement of Mr Duncan that the plaintiff would receive one half of the commission if he put up one half of the costs was false when it was made. It was not put to Mr Duncan that he intended the plaintiff to act upon this representation when there was no intention of honouring the obligation under it. What was put was that later on Mr Duncan decided to deprive Mr Green of his entitlement.
53 I should add that in spite of the argument of Mr Brezniak, I would conclude that if there were torts they were those of Diosta not Mr Duncan. While the law on this aspect is difficult, and O'Brien v Dawson (at 32) may not cover the whole of the field, there is a difference between direct torts such as trespass to land and direct conversion of goods and the conduct in respect of which complaint is made here. That does not mean that the general principle does not apply. There is a detailed discussion in Root Quality Pty Ltd v Root Control Technologies Pty Ltd (2001) 77 ALR 231. It is not necessary to decide this but my view is that for a director to be personally liable for torts of a company of which he is a director those acts must be such as to take them outside any ordinary conduct which could reasonably be attributed to the company.
Trade Practices Act Claim
54 While this s 75B claim under the Trade Practices Act 1974 (Cth) is alleged against all defendants, no conduct is alleged or proved against either the second or third defendants which could relate to this claim. I turn to the claim against the first defendant.
55 It was not argued by the defendants that if representations were made then they were not made in trade or commerce. However, there is no doubt the plaintiff's claim was based on s 75B of the Act yet no misleading or deceptive conduct of Diosta was pleaded. That would be essential to such a claim although of course it is not necessary to join the company as a defendant to get relief under s 75B.
56 There was considerable discussion of the pleading problems during submissions. In the long run Mr Brezniak said at T173 that the representation of Diosta relied upon was that alleged against Mr Duncan in par 41 of the Further Amended Statement of Claim, namely the false representation which I have discussed. This was articulated as the claim although par 41 had been deleted from the particulars for the Trade Practices Act claim in par 43.1. While this is almost incomprehensible I think it desirable to try to deal with it without placing too many procedural difficulties in the path of the plaintiff. Thus I proceed on the basis that it is alleged that in representing to the plaintiff that if he contributed 50 per cent of the costs of the Monopoly litigation he would be entitled to 50 per cent of the fruits of the litigation Diosta engaged in conduct which was false and misleading and the first defendant aided, abetted, counselled and/or procured that contravention by Diosta. This was of course a representation as to future conduct. But as I have previously pointed out, there is no evidence that at the time the representation was made it was thought to be false or misleading or that there was no intention to honouring it. Subsequent action or conduct was not representational conduct. It was never claimed except in final submissions, that the action of Diosta in continuing to accept payment on account of costs amounted to some representation by silence upon which Mr Green relied in continuing to make payments. The Trade Practices claim fails.
Conclusion
57 The plaintiff is entitled to judgment against the first defendant for $37,534.90 together with interest on the separate sums from the date of receipt. The claims against the second and third defendants fail and should be dismissed. The parties should agree on the interest.
Costs
58 As the second and third defendants succeed they should have their costs. The plaintiff has succeeded in part against the first defendant. I will have to hear submissions on costs but as the same solicitors acted for all three defendants it is desirable there be some overall result avoiding complicated assessments.