Kathleen Jeanne Furlong & Mark Andrew Leishman (a bankrupt) v Wise & Young Pty Ltd, Defined Properties Investment Pty Ltd & Wyse and Young International Pty Ltd; Wise & Young Pty Ltd, Defined Properties Investment Pty Ltd & Wyse and Young International Pty Ltd v Kathleen Jeanne Furlong, Gilbert Innes Leishman, Design by Kaka Pty Ltd as trustee for Kathleen Leishman Investment Trust, GIM Investments
The history of this complex series of claims and cross-claims centres on the various "Bramco" companies started by Mr Gilbert Leishman, which encountered financial difficulty in late 2013 (primary judgment [29]-[31]).
The Leishman family made contact with Mr Dimitriou and the Defendants to help rectify the financial situation (primary judgment [32]). Following various meetings, including one on 13 January 2014, Mr Dimitriou's companies began to restructure the Bramco entities as Bramco Group International Pty Ltd (BGI) and take over control of the business via BGI and his own company DPI (primary judgment [35]-[37]).
However, contrary to what was promised by Mr Dimitriou, although through the Defendants and BGI he effectively took control of the Bramco companies, he never prepared any tax returns or BAS statements (primary judgment [238]) never provided invoices to the Bramco entities to make them liable for fees (primary judgment [236], [241]) and did not keep adequate books and records (primary judgment [277]).
I found that the Bramco entities' trading funds were to be held by DPI as trustee for the benefit of BGI and Mr Gilbert Leishman as beneficiaries (primary judgment [261]). I found that BGI was the entity which generated all of the revenue of the companies and was the entity established for the very purpose of being the face of the Bramco businesses, generating its revenue in part or in whole by exploiting Mr Gilbert Leishman's intellectual property (primary judgment [262]). Funds that went into the DPI account which were generated by the profit-making exercises of BGI were to be held on trust for the benefit of BGI and Mr Gilbert Leishman.
That is, DPI was the trustee for both BGI and Mr Gilbert Leishman, and all funds received in the DPI bank accounts, minus proper expenses, were to be held on trust for their benefit (primary judgment [267]). As I found, Mr Gilbert Leishman and Mr Dimitriou had agreed that Mr Dimitriou would conduct the everyday financial running of the Bramco entities, keeping proper accounting records and holding surplus funds on trust for BGI having paid for various debts (primary judgment [267]).
However, I found that DPI had failed to discharge its onus and had committed serious breaches of its duty to keep proper accounts and records and to act honestly in relation to the trust (primary judgment [270]-[271]). I found that DPI, largely acting through Mr Dimitriou, acted in clear breach of its duties as trustee to keep proper accounts and to act honestly in relation to the trust, such that Mr Dimitriou was liable as an accessory (primary judgment [287]).
I was satisfied that in the DPI accounts there was a mingling of funds (primary judgment [270]-[272]), and it fell upon Mr Dimitriou and/or DPI to distinguish between these funds and prove any expenditures incurred were legitimately incurred and to account for the breach of trust (primary judgment [257], [290]).
I also found that Mr Dimitriou or someone at his direction had forged various mortgage documents dated 30 October 2014 (primary judgment [189]-[190]). However, notwithstanding this forgery, I found that Mr Dimitriou had used his own funds (that is the funds of the First Defendant Wise & Young, initially sourced from Union Steel Investments Pty Ltd through an arrangement that has never been clear to me) to discharge a mortgage owed by Ms Furlong and Mr Mark Leishman to the CBA, meaning that the Plaintiffs owed the First Defendant $1,070,334.82 (primary judgment [46], [199]). I found that this was not a simple loan but rather an equitable mortgage secured against the Property in favour of the First Defendant (primary judgment [204]).
[2]
Accounting exercise
The problem relating to the mingling of DPI accounts, however, was exacerbated by the failure of the Leishman parties in the closing submissions of the trial to provide any real evidence of the extent of the misappropriation of funds by Mr Dimitriou (primary judgment [296]). Indeed, in final submissions, Mr Dimitriou was able to point to numerous errors in Mr Mark Leishman's analysis which caused me to have considerable doubt about the entire exercise undertaken (primary judgment [296]).
I was therefore at the trial in no position to form any conclusion as to what, if any, funds were misappropriated, misapplied, unauthorised or otherwise unaccounted for in the various DPI bank accounts as to quantify the amounts which were in breach of trust. I referred the matter to a referee to assess the nature of each transaction in the DPI bank accounts and to quantify what, if any, monies were unexplained or unaccounted for by Mr Dimitriou (primary judgment [297]).
To this end, I gave the opportunity for Mr Dimitriou to tender any records (which I have previously prevented him from doing so) supporting the various payments out of the DPI accounts (primary judgment [298]).
Eventually, and after some time, the Court appointed Mr Bailey as referee and he was provided with the various documents of the DPI accounts. His task was simply to look at the various transactions in the DPI accounts and to determine if there was an underlying supporting document for that transaction.
[3]
Mingling trust funds and onus
The fiduciary obligations arising if a trustee mingles or mixes trust funds with non-trust funds were explained in Cook v Addison (1869) LR 7 Eq 466 (at 470):
It is a well-established doctrine in this court, that if a trustee or agent mixes and confuses the property which he holds in a fiduciary character with his own property, so as that they cannot be separated with perfect accuracy, he is liable for the whole.
This was applied by Ungoed-Thomas J in Re Tilley's Will Trusts; Burgin v Croad [1967] Ch 1179 who said (at 1183) (citations omitted):
The words in that passage "so as that they cannot be separated with perfect accuracy" are an essential part of the Vice-Chancellor's proposition, and indeed of the principle of Lupton v White. If a trustee mixes trust assets with his own, the onus is on the trustee to distinguish the separate assets, and to the extent that he fails to do so they belong to the trust.
In Foskett v McKeown [2001] 1 AC 102; [2000] UKHL 29 Millett LJ said (at 133) (citations omitted):
The rule in equity is to the same effect, as Sir William Page Wood V-C observed in Frith v Cartland: "if a man mixes trust funds with his own, the whole will be treated as the trust property, except so far as he may be able to distinguish what is his own".
Australian courts have accepted these principles: Brady v Stapleton (1952) 88 CLR 322 at 336-9; [1952] HCA 62 (Dixon CJ and Fullagar J) and Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 109-10; [1984] HCA 64 (Mason J).
In Raulfs v Fishy Bite Pty Ltd [2012] NSWCA 135 Campbell JA (with Meagher and Barrett JJA agreeing) said (at [95]):
Because Mr Chincotta paid various sums of money not derived from Heperu into the Westpac accounts, Allsop P held at [112] that the funds in that account were a mixture of trust funds and personal funds of the effective defaulting fiduciary, Mr Chincotta. Trust money that passes through a mixed fund can be traced into an asset that is still in existence when a court considers the matter. This arises through application of the principle that a defaulting trustee who withdraws from a mixed fund and dissipates the withdrawal is presumed to have dissipated his own money. Thus, it was open to Heperu to trace the trust funds from the mixed fund into any asset that had been purchased from the mixed fund: Scott v Scott (1963) 109 CLR 649 at 664. Further, if a withdrawal from the mixed fund was used to discharge a mortgage over real estate, tracing into that real estate could be effected by reason of Heperu being subrogated to the proprietary right of the mortgagee whose mortgage was paid out: Boscawen v Bajwa [1996] 1 WLR 328 at 340-1; Heperu v Belle at [135].
[4]
Accounting for profits
More recently in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd (2018) 92 ALJR 918; [2018] HCA 43 Kiefel CJ, Keane and Edelman JJ said (at [6]-[7]) (citations omitted):
In Consul Development Pty Ltd v DPC Estates Pty Ltd, in a passage accepted as authoritative by both sides in the present case, Gibbs J said that:
a person who knowingly participates in a breach of fiduciary duty is liable to account to the person to whom the duty was owed for any benefit he has received as a result of such participation.
So described, the liability to account and to disgorge benefits encompasses "any benefit" received by the knowing participant in a breach of fiduciary duty "as a result of" that participation. The benefit of a business connection is such a benefit. Foresters' submission fails to come to grips at all with the fact that the benefit that Foresters stood to gain, and in fact acquired, from its participation in the various acts of disloyalty by Woff and Corby was not sporadic deposits from retail customers; it was the business connections of Lifeplan and FPM.
Their Honours also said (at [13]-[16]) (citations omitted):
Quantification
Once it has been determined that a benefit or advantage has been caused by the acts of knowing assistance, there remains the question of quantification of the benefit to be disgorged. While it is true that equity will not require an errant fiduciary or a participant in a breach of fiduciary duty to account for an advantage which the breach of fiduciary duty has not caused or to which it has not sufficiently contributed, where causation is sufficiently established the onus is upon the errant fiduciary or participant to show that he or she should not account for the full value of the advantage. That onus is not discharged by mere conjecture or supposition giving the benefit of the doubt to a proven wrongdoer. The requirement of proof conforms with the obligation of a party charged with a breach of fiduciary duty to show why the full value of an advantage obtained in a situation of conflict of duty should not be disgorged.
There are two ways in which the wrongdoer might discharge that onus and reduce the extent of the liability to disgorge profits. The first way, which can involve notorious difficulties in attribution of costs, is by proving his or her entitlement to an allowance for costs incurred, and labour and skill employed. No issue of an allowance arises, or was relied upon, in this appeal because it was accepted that the expenses included in the discounted cash flow included an amount for the work and effort of Woff and Corby.
The second way, which was the focus of this appeal, is by demonstrating that the benefit or advantage is beyond the scope of the liability for which the wrongdoer should account for profits. A wrongdoer might prove that some profit or benefit is beyond the scope of liability for which he or she should account if the profit or benefit has no reasonable connection with the wrongdoing. For example, in Frank Music Corporation v Metro-Goldwyn-Mayer Inc, the Ninth Circuit Court of Appeals accepted that a copyright infringement by MGM Grand Hotel Inc in a performance at the MGM Grand Hotel entitled the plaintiffs to the profits directly from the performance. It also entitled the plaintiffs to a proportion of indirect profits, including from the consequential increase in hotel room bookings which were held to have a "sufficient nexus" with the performance. But the direct profit from the performance to be disgorged was limited to 9% because the copyright infringement comprised only the substantial part of Act IV in a 10-act performance. Nor did it entitle the plaintiffs to any profits made by the liable parent company, Metro-Goldwyn-Mayer Inc, as a result of "the advertising value" of the hotel.
No precise test has been prescribed for determining when it will be inequitable to account for a benefit on the basis that it has no reasonable connection with wrongdoing. Nor is there any need for such a test. All of the circumstances must be considered, including the nature of the conduct. It is pertinent here that the profits were from deliberate and dishonest conduct, and were those desired to be achieved.
[5]
Costs
The above discretion as to costs is relevantly provided by s 98 of the Civil Procedure Act 2005 (NSW):
98 Courts powers as to costs
(1) Subject to rules of court and to this or any other Act:
(a) costs are in the discretion of the court, and
(b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and
(c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis.
(2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court.
(3) An order as to costs may be made by the court at any stage of the proceedings or after the conclusion of the proceedings.
(4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to:
(a) costs up to, or from, a specified stage of the proceedings, or
(b) a specified proportion of the assessed costs, or
(c) a specified gross sum instead of assessed costs, or
(d) such proportion of the assessed costs as does not exceed a specified amount.
(5) The powers of the court under this section apply in relation to a married woman, whether as party, tutor, relator or otherwise, and this section has effect in addition to, and despite anything in, the Married Persons (Equality of Status) Act 1996.
(6) In this section, costs include:
(a) the costs of the administration of any estate or trust, and
(b) in the case of an appeal to the court, the costs of the proceedings giving rise to the appeal, and
(c) in the case of proceedings transferred or removed into the court, the costs of the proceedings before they were transferred or removed.
[6]
Disputed items
Far from the initial claim of $3,793,308.06 by Mr Gilbert Leishman as Cross-Claimant (to be specific Second Cross-Claimant), throughout the case management and hearing of the case during 2018, the amounts initially disputed by Mr Gilbert Leishman were increasingly conceded, as Mr Dimitriou gradually provided documentation that led the Leishman parties to concede amounts spent by Mr Dimitriou of BGI funds were legitimately incurred, or in other words not in breach of trust.
The following amounts are still claimed by Mr Gilbert Leishman:
Unsubstantiated sums $44,743.07
"Paragraph 17" items $165,978.05
"Column E" items $49,643.96
TOTAL $260,365.08
[7]
Unsubstantiated sums
With respect to the "unsubstantiated items", Mr Bailey found that of all the DPI transactions there was no supporting documentation for $44,743.07 worth of expenditure (Leishman/Furlong submissions [16]).
[8]
"Paragraph 17" items
In respect of Mr Bailey's table of transactions, the Plaintiffs and Mr Gilbert Leishman also dispute the following items as not expenditure on or behalf of GDI despite there being underlying documentation for the amounts. These are referred to in [17] of the Leishman/Furlong submissions dated 7 November 2018 and are hence referred to as the "Paragraph 17" items identified in Mr Bailey's report:
1. Items 47, 66, 92, 122, 137, 138, 218 (relating to Kangoo café);
2. Items 123, 118, 119, 214 (relating to Ms Huybers)
3. Item 105 (relating to art of Mr Kremnizer);
4. Items 166, 229, 259, 283, 308 and 35B (relating to Baccus Investments); and
5. Item 231 described as payment of a deposit of $79,620 (which appears in Annexure G of Mr Bailey's report).
The Kangoo café items are as follows:
Date Item Amount
10 April, 13 May 2014 47 $16,242.99
23 October 2014 66 $11,179.30
27 November 2014 92 $2,000.00
17 December 2014 122 $10,157.00
13 January 2015 137 $4,191.71
13 January 2015 138 $1,268.30
17 April 2015 218 $721.23
TOTAL $45,760.53
[9]
The Ms Huybers items are as follows:
Item Amount
123 $2,200.00
118 $660.00
119 $660.00
214 $2,640.00
TOTAL $6,160.00
[10]
The Mr Kremnizer art is as follows:
Item Amount
105 $9,000.00
TOTAL $9,000.00
[11]
The Baccus Investments items are as follows:
Date Item Amount
22 December 2014 308 $2,990.63
10 February 2015 35B $3,475.00
2 March 2015 166 $10,000.00
11 May 2015 229 $2,990.63
11 June 2015 259 $2,990.63
18 July 2015 283 $2,990.63
TOTAL $25,437.52
[12]
The Annexure G Item is as follows:
Item Amount
231 $79,620.00
TOTAL $79,620.00
[13]
The Annexure G Item is, according to Mr Dimitriou, an amount repaid to the Defendants from the assets of BGI to repay amounts loaned to it by the Defendants and is therefore legitimate.
[14]
"Column E" items
Mr Dimitriou himself seeks against the Plaintiffs and Cross-Claimants various payments by way of fees identified in column E of Annexure G of Mr Bailey's report totalling $49,643.96. The Plaintiffs and Mr Gilbert Leishman dispute this. As per my findings above, Mr Dimitriou produced no fee notes, did no bookkeeping, and provided no timely evidence of the precise amount of fees he was owed (primary judgment [216]-[221]). I also rejected his quantum meruit claim as baseless (primary judgment [253]-[256]).
[15]
Plaintiffs / Cross Claimants
As is clear from the above, a number of monies and items are in dispute. To this end, Mr Allen of counsel called Mr Mark Leishman to give evidence on these items and he was also cross-examined by Mr Dimitriou on 7 December and 17 December 2018.
Mr Mark Leishman swore one affidavit on 8 June 2018, of which only certain paragraphs were read for the purposes of identifying which transactions were disputed by the Leishman parties and providing evidence associated to these disputed transactions.
In cross-examination on 7 December 2018 Mr Leishman denied that Ms Susan Huybers was his girlfriend (T11/28-30). He denied there was any intimate relationship between him and Ms Huybers, stating she was "an acquaintance" (T12/9-13). He denied that the Bramco entities ever approved any expenses for or on behalf of Ms Huybers (T13/9-12). He accepted Ms Huybers had lent he and his wife $5,000 simply "as a friend" which he had not yet paid back (T14/27-43).
Mr Leishman denied any involvement in any café related to the Defendants, stating that the café and its furniture and equipment were simply the initiative of Mr Dimitriou himself and his attempts to create a "business hub" in Bella Vista (T18/25-T19/2).
In cross-examination on 17 December 2018, Mr Leishman accepted that he did not have formal qualifications in engineering, but had accumulated 20 years of experience working under his father as an engineer (T2/15-50). He accepted his wages would typically be around $2,689 net per week (T19/28-29).
Mr Leishman asserted that the Leishman parties were introduced to the Defendants in December 2013 (T22/8-13). Mr Leishman was cross-examined on various research and development grants and general disputes, with Mr Dimitriou for example suggesting that Mr Leishman had doctored invoices issued to Scottish Pacific, which Mr Leishman denied (T26/21-43). However, such cross-examination was in my view unhelpful to determining the real issues in this case. For example, whether or not there was a dispute concerning intellectual property between various companies related to the Plaintiffs is entirely irrelevant to Mr Dimitriou's explanation for breaches of trust (T38/18-22)
Mr Leishman stated that certain payments for "café equipment" were not expenses for or on behalf of the Bramco entities but the goods of Mr Dimitriou (T43/3-11). He said he would consult with his father daily concerning various expenditures by BGI, and told his father that he had bought a Citroen, a Land Rover and a Volkswagen (T63/23-31). He said that he and his family had been anticipating Mr Dimitriou would provide records and invoices for the work undertaken by the Defendants on behalf of the Bramco entities, but "we were completely in the dark" (T64/37-44).
He denied he had any relationship with Kangoo café, and said that this café was Mr Dimitriou's business as leased by Kangoo (T72/34-T73/1). He denied ever aspiring to own a café and denied his wife ever suggested to him she wanted to leave her job and open a café (T80/42-T81/2). He said it was his understanding Kangoo had nothing to do with the Bramco entities (T83/26-27). He accepted however that his wife did do some design work for the café "free of charge … for your exciting venture" (T113/25-33). Mr Leishman was shown an email where he requested approval for payment of "Marathon Meats" however denied he had any interest in this email, stating "[f]or some reason, I have been exposed to a supplier of the café who was asked if I could pass a message to Mr Dimitriou for the payment of an outstanding debt for the café" (T116/1-7). He said he believed that he may have just picked up the call whilst in the offices of the Defendants concerning the payment of the meats (T116/9-16). He accepted Ms Furlong assisted "in relation to colours and layout" of the café but he and his wife had no commitment to the café (T118/32-37).
Mr Leishman denied he went to the office of Baccus Investments in December 2014 to borrow money to repay back Wise & Young (T127/47-50). He denied that the Baccus loan repayments made from the BGI accounts were pursuant to an agreement where BGI would pay the mortgage repayments for DPI in exchange for use of the administration office of the Defendants at Bella Vista, denying knowledge of any monies loaned in relation to Baccus (T128/9-50). He denied these loan payments to Baccus were in lieu of rent, stating there was "[n]o document to confirm anything" (T129/23-24).
Mr Leishman likewise denied possessing the Kremnizer art paintings, stating "these paintings have never been in my possession again. I understanding some of these were being housed in the Wise & Young offices (T69/24-T70/2).
[16]
Defendants
Mr Dimitriou, a litigant in person, made himself available for cross-examination. He indicated via a comprehensive schedule that he read various sections of his affidavits of 13 November and 4 December 2015, 31 July, 3 August, 5 August and 10 August 2016, 26 June (first made), 26 June (second made), 6 July (first made), 6 July (second made), 6 July (third made) and 11 September 2018. I informed him at the time of producing this schedule I did not propose to address each of these items. There are many reasons for this. I have previously delivered judgment on this case, and made substantial factual findings. I have also made orders for Mr Bailey to provide an independent analysis of the various BGI transactions. Many of the affidavits mentioned in Mr Dimitriou's schedule were also from previous years, including 2015 and 2016.
I have had regard to the materials before me. Much of the affidavit materials of Mr Dimitriou, especially those affidavits from 2018, are argumentative, imprecise and seek to re-agitate issues that have already been subject to my findings in the primary judgment. From as much as I can understand the affidavits, they seek to assert that Mr Dimitriou legitimately expended all monies on the behalf of BGI, and any outstanding amounts were incurred legitimately as remuneration for his fees and services. The general import of these affidavits is encapsulated, for example, in the following statement (from the first made affidavit of 26 June 2018 at [28]):
I have from the onset pledged that I have done no wrong and maintain that I have worked tirelessly and in support of my evidence provided to this honourable court and to Mr Bailiee [sic] evidence that cannot be denied that supports the proposition that I did not breach trust and that Bramco Group is indebted to the Dimitriou group more than $3.1Million.
In cross-examination he asserted that he and Mr Mark Leishman entered into a written costs agreement (T145/13-15).
He said the lessee of the "Brothers Café" in January 2014 and September 2015 was KB Productions (T145/39-45). He said he first met Mr Mark Leishman in late December 2013 (T145/6-7). He agreed when he met Mr Mark Leishman the Brothers Café was being leased by KB Productions Pty Ltd (T146/13-15). He denied the only work Ms Furlong did with the café was some design work (T148/12-14). He asserted Mr Mark Leishman was involved in working in the café (T148/33-34). He asserted Kangoo took an assignment of KB Productions' lease of the café (T149/42-44). He said there was an assignment of the lease to the Leishman and Furlong parties' café (T150/12-15). He asserted there was a signed assignment document in existence (T150/20-24). He believed this assignment had been raised in the litigation involving KB Productions before McCallum J and other judges (T151/22-31).
Mr Dimitriou denied he was lying when he asserted Mr Mark Leishman had a sexual relationship with Ms Susan Huybers (T152/39-41). Mr Dimitriou said that Mr Kremnizer's company was Baccus Investments (T154/1-2). He denied he wanted to get a loan from Mr Kremnizer's company Baccus Investments and to ingratiate himself purchased several paintings made by Mr Kremnizer (T157/15-18). He accepted he paid $9,000 for the paintings but denied having any interest in the paintings (T157/41-T158/7). He said that it was Mr Mark Leishman who wanted the paintings for hanging in the BGI research and development plant facility (T159/3-11). He said the paintings were "[w]ell, interesting. They're lovely" (T160/38).
Mr Dimitriou said that he should have documented in writing the purported arrangement where BGI indemnified DPI for its mortgage commitments (T161/37-40).
[17]
General
Throughout the majority of the proceedings, Mr Dimitriou has been unrepresented, apart from briefly being represented by Mr Foley solicitor and Mr Hall solicitor in the primary proceedings. During the 2018 proceedings, which unfortunately for a number of reasons have become protracted, he has been entirely unrepresented. This has contributed significantly to the delays in this litigation as I have attempted to give Mr Dimitriou sufficient opportunity to meet the case against him.
However, in my assessment of the proceedings to date, Mr Dimitriou is clearly an intelligent individual deeply concerned with the outcome of this case and intimately acquainted with the multitudinous materials in evidence.
In my view, a trustee bears no lighter or heavier onus than the civil standard, and that this onus is not somehow reduced or negated by virtue of a party appearing represented. In my view, therefore, Mr Dimitriou is still charged with the onus of proving that he has not misappropriated or misapplied those monies held on trust by him (via his companies) to the beneficiaries Gilbert Leishman and BGI. As I found in the primary judgment Mr Dimitriou was an accessory to breach of trust (primary judgment [287]-[290]).
Nevertheless, during the course of hearing this case and during argument, the Leishman and Furlong parties have made a number of concessions throughout, essentially reducing their claim to a number of quite specific items identified by Mr Bailey. I will now deal with these remaining items in dispute.
[18]
Unsubstantiated sums
With respect to the "unsubstantiated items", Mr Bailey found that of all the DPI transactions there was no supporting documentation for $44,743.07. With the various bank accounts of DPI having been thoroughly investigated and canvassed by an independent referee and all the parties involved, Mr Dimitriou has never been able to adequately explain how these items were paid on or behalf of the Bramco entities. He has not discharged his onus for these amounts and should account for this amount.
[19]
Kangoo café
With respect to items 47, 66, 92, 122, 137, 138, 218 relating to Kangoo café totalling $45,760.53 the key point of distinction between the parties is whether or not the Leishman and Furlong parties had any interest in the Kangoo café as part of their business.
Mr Dimitriou's assertion is that Ms Mark Leishman and Ms Furlong had always expressed an interest in starting a café, which Mr Dimitriou facilitated by assigning a lease of property in the Bella Vista complex where they worked to BGI to set up a café.
Mr Leishman denies any involvement in the café, although his partner Ms Furlong did some design work for the café and there is an email he sent to Mr Dimitriou requesting payment to "Marathon Meats" (Exhibit D10). I have some concern about these issues, particularly as Mr Leishman's explanation that he simply happened to pick up the phone in the Bella Vista offices of the Defendants and acted as an amanuensis for the payment of a meat order by Mr Dimitriou is to some extent unbelievable.
However, against this, there is a series of pieces of litigation concerning the café: KB Productions v Kurt [2015] NSWSC 630 delivered by Wilson J on 22 May 2015, KB Productions 2001 Pty Ltd (deregistered) v Kurt [2015] NSWSC 1330 delivered by Beech-Jones J on 3 September 2015, KB Productions 2001 Pty Ltd (deregistered) v Kurt [2015] NSWSC 1415 delivered by Beech-Jones J on 18 September 2015 and KB Productions 2001 Pty Ltd v Kurt [2016] NSWSC 44 delivered by Davies J on 9 February 2016.
I have also had regard to an ex tempore judgment of McCallum J on 30 August 2015 KB Productions 2001 Pty Ltd v Kangoo Property Holdings Pty Ltd and Dimitriou.
In none of these judgments did Mr Dimitriou mention the Bramco entities or the interests of the Furlong or Leishman parties in the café. More importantly, Mr Dimitriou did not mention that to be evicted from the premises would cause a change of position to his detriment by way of any assignment of lease or interest in the café to the Furlong and/or Leishman parties. None of the judgments reflect any such involvement.
Despite my concerns about the Marathon Meats email, in my view Mr Dimitriou has not discharged his onus and his assertions that BGI or the Furlong and Leishman parties had any interest in the café is false and should be rejected. He has not discharged his onus for these items.
[20]
Ms Huybers items
With respect to items 123, 118, 119, 214 totalling $6,160, Mr Dimitriou asserts these amount to payments of a bond and rent for some accommodation in Mooloolaba where Ms Susan Huybers stayed, and also payment for some work done by Mr Foley solicitor for Ms Huybers totalling $2,200 (Disputed Transactions CB 14).
For example, items 118 and 119 are each $660 and appear to relate to payments to Resi Rentals Pty Ltd for a property in Mooloolaba (Disputed Transactions CB 15-16).
Mr Dimitriou's continual assertion is that there was some romantic or sexual relationship between Mr Mark Leishman and Ms Huybers which led him to direct BGI to pay these amounts on behalf of Ms Huybers. Further, Mr Dimitriou suggests that the property in Mooloolaba was some sort of "love nest" for Mr Leishman and Ms Huybers where they could stay, the inference being that Mr Leishman directed BGI to pay for the accommodation to provide for his lover Ms Huybers.
Mr Mark Leishman accepted in cross-examination that Ms Huybers had loaned $5,000 to him by depositing that amount into his account on 14 January 2016 as a friend, and that he had not yet repaid this amount (CB1 136).
This assertion is verified by the bank statement itself, which shows that prior to the deposit of $5,000 into the account, the account was in credit for only $11.83. This suggests, corroborating Mr Leishman's assertion, that the $5,000 was a lifeline loan provided to the Leishman parties.
Mr Dimitriou, on the other hand, suggests this amount was a repayment of money the Bramco entities lent to her at Mr Mark Leishman's direction.
Mr Dimitriou has not produced a signed copy of the lease at the property at Mooloolaba and these various items consist predominantly of allegations and denials between the various parties. In my view to suggest that these items relate to a sexual relationship between Mr Leishman and Ms Huybers, and payments arising out of this relationship, does not discharge Mr Dimitriou's onus. There is simply no contemporaneous documentation to support Mr Dimitriou's assertion and it is inadequate to simply assert these payments came out of Mr Leishman's relationship. Again, there is no corroborative documents to support Mr Dimitriou's assertion.
In my view Mr Dimitriou has not adequately accounted for these amounts and is liable for them pursuant to a breach of trust.
[21]
Art of Mr Kremnizer
Item 105 relates to a payment of $9,000 for the paintings of Mr Kremnizer solicitor, an apparently renowned artist, who is related to Baccus Investments below. This item is one concerned with the various versions of events provided by both Mr Dimitriou and Mr Mark Leishman. Mr Dimitriou denies any interest in the paintings and denies possessing the paintings. Mr Leishman likewise denies he ever bought the paintings for himself or on behalf of BGI and asserts he does not have possession of the paintings.
However, crucially, at the trial Mr Dimitriou provided numerous photographs of the paintings in the court books and materials tendered by him, and at some point they appear to have been hanging in offices in somewhere, however neither side purport to have any knowledge of their current whereabouts.
He has provided no documentation to prove that Mr Leishman or anyone associated with him desired the paintings for themselves, and I am not satisfied he has discharged his onus with respect to item 105 as trustee.
[22]
Baccus investments
With respect to items 166, 229, 259, 283, 308 and 35B totalling $25,437.52 Mr Dimitriou asserts that these payments were made from the BGI accounts because there was an agreement whereby BGI would pay Wise & Young's mortgage repayments to Baccus Investments in lieu of rent for staying in the Defendants' business premises in Bella Vista.
There is no formal documentation which supports this case beyond Mr Dimitriou's assertion that there was such an agreement and that he was entirely trusting of the Leishman and Furlong parties.
Given the nature of the transaction, in my view it would be a most unbusinesslike arrangement. I find it extraordinarily hard to accept that there would be such an arrangement between the parties, particularly in the absence of any corroborating contemporaneous document. It beggars belief that Mr Dimitriou would not have sent at least one email to any of the Furlong and Leishman parties evincing the agreement, particularly given the number of correspondences between them.
It is submitted by Mr Dimitriou that somehow the Baccus Investments loan was only to be a short term loan to facilitate the moving into new premises. This again is not supported by any documentation. There is further a real question why the Bramco entities would agree to be liable to the entirety of the mortgage repayments in lieu of rent, given the fact that the Bramco entities were only going to rent a section of the Defendants' premises, the rest of which were used to service a whole array of other clients of the Defendants.
In my view, given the lack of documentation and plausible explanation Mr Dimitriou has not discharged his onus for these amounts.
[23]
Item 231
Item 231 totalling $79,620 was in the last day of hearing effectively abandoned by the Furlong and Leishman parties, as when one calculates the amounts loaned by DPI to BGI the amount $79,620 would appear to be a repayment of part of the amount owed to DPI as of 14 May 2015 (T197/1-35). Mr Dimitriou has discharged his onus as to this amount.
[24]
"Column E" items
The "Column E" items totalling $49,643.96 are only explicable by way of payment of fees to the Defendants and/or Mr Dimitriou for services rendered to the Bramco entities.
As I have said, Mr Dimitriou produced no fee notes, did no bookkeeping, and provided no timely evidence of the precise amount of fees he was owed (primary judgment [216]-[221]). I also rejected his quantum meruit claim as baseless (primary judgment [253]-[256]).
Further, in the primary judgment, I said (at [230]-[233] and [241]-[242]):
While it was pleaded that WYI had performed work for the Bramco entities and had forwarded invoices for this work to Ms Furlong and Mark Leishman (Defence 31 March 2016 [AM]-[AP]; First Cross Claim 2 June 2016 [21]-[23]), no evidence was produced to support this assertion. This was even though it was promised in the First Cross Claim (since amended on 17 August 2016) that "the complete list of all the tax invoices evidencing the amount claimed as owed to the Third Cross-Claimant will be provided a reasonable time prior to the hearing" (First Cross Claim 2 June 2016 [23]).
Importantly, there is no evidence of any services rendered by the defendants which is even remotely 'professional' in nature, and therefore, no reason by which they could have charged any sort of corresponding professional fees. Over and above menial tasks such as the electronic transfer of funds between the DPI bank accounts and the registration of corporate entities, it is impossible to ascertain what other work was completed by the defendants.
As I have said there has been a total absence of evidence from other employees of the defendants, most notably, Ms Kaur, who was the key accountant allegedly working on behalf of the defendants for the Bramco entities.
Ms Sheaves gave evidence that there was no process or procedure employed by the defendant companies for recording time (T 272, 274). She further explained that she would bill time under the instructions of Mr Dimitriou on the basis of "how long he spent or how much he believes we should charge" (T 272). Ms Sheaves gave evidence that various tax invoices, including those supporting the 30 October 2014 security documents, were prepared retrospectively by her in 2015 under the instructions of Mr Dimitriou and Ms Kaur (T 275-281). Ms Sheaves also explained that various invoices she was cross-examined on dated 2014, 2015 and 2016 were not created by her and that she had never seen them before, even though it was her job to prepare such invoices (T 284).
…
In totality, there is simply no evidence to permit me to find that any invoices were rendered to the plaintiffs such that they would be liable for fees to be paid and that a caveatable interest arose under the relevant cost agreements. While the plaintiffs acknowledged that some work had been completed by the defendants for the Bramco entities, Mr Dimitriou has failed to satisfy the onus on him to quantify the precise debt that is owed to him, if any.
Without such quantification, the court cannot be satisfied that there is any debt owed to the defendants by the plaintiffs or the Bramco entities which could be repaid by them or which, in the same sense, could create a caveatable interest.
There is simply no evidence that the Defendants or Mr Dimitriou provided professional services giving rise to professional fee obligations. He has not made out a case for these amounts.
[25]
Costs
The next outstanding issue in my view from this matter is the issue of costs. Costs are discretionary and are not intended to be a punishment.
With respect to Plaintiffs' costs for their claim, the Plaintiffs state their case involved 3 elements: removal of caveat AJ876905K (5K), caveat AJ876904M (4M) and caveat AJ876906H (6H) (primary judgment [2]).
The first caveat 5K was abandoned in the course of the trial (primary judgment [5]-[6]). This left the second caveat 4M lodged pursuant to an unregistered mortgaged dated 30 October 2014 and the third caveat 6H lodged pursuant to the "appointment letter and cost agreement" of 1 January 2014 (primary judgment [6]).
The Plaintiffs were successful in removing caveat 6H (primary judgment [245]) and whilst I found that the mortgage documents of 30 October 2014 were forgeries (primary judgment [189]-[190]), I found that the caveat 4M must stand to protect an equitable mortgage for the loan made to the Furlong and Leishman parties by Wise and Young (primary judgment [203]-[204]). I was dissatisfied with Ms Furlong and Mr Mark Leishman's account that they had no idea how their CBA mortgage became repaid especially given their communications in evidence (primary judgment [191]-[195]).
In my view, whilst the Plaintiffs succeeded in removing two caveats and establishing the mortgage documents of 30 October 2014 were forgeries, they did not succeed in removing caveat 4M and were liable by way of an equitable mortgage. In my view, the mortgage issue was an important part of the case. Mr Dimitriou failed on his claim for fees as he had no evidence to support it
In my view in all the circumstances the Defendants should therefore pay 50% of the Plaintiffs' costs.
With respect to the costs of the Second Cross-Claim, I found that Mr Dimitriou was a trustee and I have found he has not discharged his onus for $260,365.08 worth of items less item 231 totalling $79,620 which as I have said was conceded, equalling $180,745.08.
This is significantly less than the amount originally claimed pursuant to the Second Cross-Claim. In my view, the numerous concessions made by the Leishman parties has been grudging and lacking a practical approach. Their approach has been simply to dispute a large number of transactions without seemingly undertaking a comprehensive analysis of the various transactions themselves. They may well attempt to suggest as they did not have access to BGI's invoices and bank statements, they have not been able to test various payments. However, at some considerable time prior to the engagement of Mr Bailey, they did have access to the invoices and relevant schedules.
On one view Mr Leishman and his family failed to act in a businesslike manner, by not demanding when they were dealing with the Defendants, invoices and tax returns in a timely fashion. It is not appropriate, in my view, to abdicate entire responsibility to Mr Dimitriou despite the fact that he acted as trustee (as an accessory via DPI). The Leishman and Furlong parties were responsible for issuing invoices and to some extent have been responsible for their own difficulties.
On balance considering all the circumstances, and in the exercise of my discretion, the Cross Defendants on the Second Cross-Claim should pay 60% of the Second Cross-Claimant's costs.
[26]
Conclusion
I invite the parties to provide short minutes which accord with my reasons and to relist the matter for further argument if there are any outstanding issues.
[27]
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.
Decision last updated: 06 February 2019
On 16 December 2016 I gave judgment in Kathleen Leishman Investment Trust & Kim Magella Leishman; Gilbert Innes Leishman v Defined Properties Investment Pty Ltd, Wise & Young Pty Ltd, Wise & Young International Pty Ltd, George Dimitriou and Bramco Group International Pty Ltd [2016] NSWSC 1839 (primary judgment).
This case concerned numerous disputes and cross claims surrounding the various business practices of Mr George Dimitriou and his dealings with the Leishman family and their business.
To be precise, Ms Kathleen Jeanne Furlong and Mr Mark Andrew Leishman (the Plaintiffs) filed a Summons on 6 November 2015 against Wise & Young Pty Ltd (First Defendant), Defined Properties Investment Pty Ltd (Second Defendant or DPI) and Wyse & Young International Pty Ltd (Third Defendant) seeking removal of caveats over a property at 24 Memorial Drive, The Hill, NSW 2300 (the Property) (primary judgment [2],[8]).
Mr Dimitriou is the director, secretary and shareholder of all three Defendants (primary judgment [25])
The three Defendants issued a First Cross-Claim against Ms Kathleen Jeanne Furlong (First Cross Defendant on First Cross-Claim), Mr Gilbert Innes Leishman (Second Cross Defendant on First Cross-Claim), Design by Kaka Pty Ltd as trustee for Kathleen Leishman Investment Trust (Third Cross Defendant on First Cross-Claim), Investments (ncle) Pty Ltd as trustee for Kathleen Leishman Investment Trust (Fourth Cross Defendant on First Cross-Claim), Kim Magella Leishman (Fifth Cross Defendant on First Cross-Claim) seeking declaratory relief to the caveats over the Property, and payment of $1,866,253.26 outstanding fees purportedly incurred by Mr Dimitriou through his various corporate entities (primary judgment [3]).
Mr Gilbert Leishman issued a Second Cross-Claim against Defined Properties Investment Pty Ltd (First Cross Defendant on Second Cross-Claim), Wise & Young Pty Ltd (Second Cross Defendant on Second Cross-Claim), Wyse & Young International Pty Ltd (Third Cross Defendant on Second Cross-Claim), George Dimitriou (Fourth Cross Defendant on Second Cross-Claim) and Bramco Group International Pty Ltd (Fifth Cross Defendant on Second Cross-Claim) seeking to set aside various costs agreement and reimburse $1,959,150.70 allegedly misappropriated by Bramco Group International Pty Ltd held on trust by the Defendants (primary judgment [4]). Prayer 9 of the Second Cross-Claim filed 6 July 2016 sought an order that DPI and Mr Dimitriou reimburse, account or otherwise pay to Mr Gilbert Leishman the sum of $3,793,308.06.