Lhk Nominees Pty Ltd v Maureen Ada Kenworthy

Lhk Nominees Pty Ltd v Maureen Ada Kenworthy - [2001] WASC 205 - WASC 2001 case summary — Zoe

[67]

"SOLOMON, MR: It's in section 9 now. It's essentially the same test.

WHITE AuJ: Yes, but that refers to - a reference to a director in the Corporations Law is to include such a person.

SOLOMON, MR: That's all conceded, your Honour. I'm not running a claim for breach of statutory duty.

WHITE AuJ: No.

SOLOMON, MR: I'm merely saying that in - take, for instance, since cases in tort the existence of a statutory provision may affect a duty of care. It may not create an actual remedy for breach of statutory duty at law but the imposition of a statutory liability is a factor in looking at a general law liability in tort.

All I'm saying is that the fact that the corporations legislation makes a person in his position accountable under the law as a director affects the approach in equity - that he is a person who is to be treated generally as at the same level of a director. I'm not relying on any breach of duty by a director. It just creates him at a level - he is at a level that the statute law of the country has recognised for quite some time. It's just a fact. It's just a material fact.

WHITE AuJ: Does it go beyond his knowledge?

SOLOMON, MR: No. No, because we are not saying that he acquired the property in breach of any fiduciary duty. It just goes to his knowledge and his position.

WHITE AuJ: So I don't really need to find whether he was a director or not.

SOLOMON, MR: No, no. As I say, unless you were to say that - along the lines in Heyman Council (sic), Mason J's judgment in tort - that a statutory duty may colour and affect the content of a common law duty of care like negligence, the same principle would apply in equity; that if he is a shadow director - it's just one of the bundle of facts, overall material, but if you don't think it's material at all, then don't find it. I have only put it down as part of the bundle of facts to establish his level of knowledge and involvement. Ultimately it is the de facto control which is made out on the witness statements that is the fact and whether or not that amounts to him being a shadow director is - - -

WHITE AuJ: Doesn't seem to matter.

SOLOMON, MR: No, it doesn't really. It doesn't.

WHITE AuJ: All right."

[76]

...

2. Until his death in 1997, my father had day to day control of the plaintiff. I did not have any day to day involvement. My sole role as a director of the plaintiff was to sign documents when asked to do so. My father was able to sign cheques on the plaintiffs bank account and had sole control of the plaintiff's finances. Board meetings were not held to discuss any of the investments made by the plaintiff.

3. From in or about 1984, the plaintiff's sole function was as trustee of the LHK Trust. It did not carry on any separate business. As trustee of the LHK Trust the plaintiff's main investments were in mortgages brokered by Blackburne & Dixon and Global Finance and a property investment in land in Muchea. The plaintiff also owned the property known as 141 The Esplanade, Mt Pleasant.

...

5. When a new investment was to be made by the plaintiff as trustee of the LHK Trust, which required my signature, I generally received a telephone call from my father. Usually my father and I arranged for me to meet him at 141 The Esplanade (he lived at 141 The Esplanade) and for me to sign the documents there. Occasionally, when the matter was urgent, he would meet me where I worked.

6. Invariably he would, either at 141 The Esplanade or where I worked, hand me the document he wanted me to sign. I generally asked him what the document was for. Most of the documents I recall signing related to loans made by the plaintiff through either Blackburne & Dixon or Global Finance.

7. When my father handed me a document relating to a new investment I made a practice of briefly looking at the document. I would not read the whole document. When looking at the document I would look at the amount of the investment and property description. I read nothing further. I looked at the amount and the property descriptions so that I had some knowledge of the sum being invested by the plaintiff. Once I had looked at those two items, I then signed the document, where my father indicated.

...

9. When he gave the document to me which I was required to sign and while I was briefly looking at it, my father usually said to me words to the effect 'this is the best offer available at this time'. I trusted my father and accepted what he said. I trusted him to be correct.

10. 1 did not investigate any of the investments on their merits. I did nothing more than look quickly at the documents and sign where my father told me to. I do not recall ever questioning my father about any of the investments made by the plaintiff.

11. 1 knew that the plaintiff, as trustee of the LHK Trust, owned a property in Muchea. At the time I was working on the neighbouring property. One day I visited my father at 141 The Esplanade. I do not know recall the reason I visited my father. It may be that he asked me to come to 141 The Esplanade to sign some documents. He then told me that the plaintiff was subdividing the property in Muchea into 6 lots. That was the first time I was told anything about the subdivision. My father said to me that the property had already been surveyed. He said that he only needed some documents signed to complete the subdivision. He handed a document or some documents ( I do not recall how many) to me and asked me to sign the document or documents. I did sign those documents. I had no input into and was not consulted in relation to the decision to subdivide the property at Muchea.

12. At the same meeting, or shortly after that meeting, I asked my father why the Muchea property had been subdivided. He said that the plaintiff had run out of money. I recall that the defendant was present when I was speaking to my father. We were in the living room at 141 The Esplanade. My father and I then went out to the shed at 141 The Esplanade. Only my father and I went out to the shed. The defendant did not. My father said to me that the plaintiff needed the money because interest rates were lower and the plaintiff was not earning the income it had been earning from its investments. He also said to me that the plaintiff had 'lost $30,000 on a deal'. I did not know and still do not know what 'deal' he was referring to. He did not explain to me what had happened or how the loss was incurred.

13. I said to my father that I thought that the top 3 lots at Muchea should be sold first. Although I do not now clearly recall, I must have seen the plan of subdivision at that time as I knew the lower 3 lots had better grazing potential. Ultimately, the top 3 lots were sold first."

[86]

26 It was apparent from the evidence of Lindsay Kenworthy that there were differing reasons for his having highlighted the relevant items in the cash-book. Where there were round figures, he was of the opinion that this displayed a "pattern" (of misappropriation) and he highlighted those items accordingly. In the case of references to a Subaru vehicle, he knew that the trust did not own a Subaru and that the second defendant did. He formed the view, in relation to expenses relating to a Subaru, that such expenses had nothing to do with the Trust and, of course, such a view seems entirely justifiable in the circumstances. Where a cheque butt showed a payment to a named payee but he thought the amount of the payment was excessive, he highlighted the item. An example is the cheque butt of cheque 635141 of 1 August 1989 in the sum of $200, in favour of The Sunday Times. This item is highlighted. As I understood his evidence, he formed the view that this was an excessive amount, bearing in mind the comparatively small amount of advertising in relation to manure or chaff or hay placed by the Trust. Although he did not expressly say so, I have the impression that he thought this item to be a false entry, masking a payment to Lionel Kenworthy personally. It is interesting to note, on a quick glance at the cash-book, that there are many entries referring to payments to The Sunday Times, usually in much smaller sums and not usually in round figures. In most cases, these smaller items are not highlighted or recorded under the column headed "Dwgs". However an item of $26.40 in favour of The Sunday Times in relation to cheque 472140 dated 11 December 1990, has been highlighted, as have the items relating to cheques 472302, 472753, 472759 and 472772 in favour of The Sunday Times for the sums of $33.00, $46.20, $19.80 and $23.10 respectively, bearing dates from January to April 1991. The reason for such highlighting is not apparent. These items appear in the cash-book under the heading "LHK Trust 1990-1991". Against this, there are items relating to payments to The Sunday Times reflected later in the accounts, under the heading "LHK Nominees 1990-1991", in respect of cheques 403733 ($24.00), 403737 ($30.00), 403747 ($33.00) and 403751 ($26.40) which are not highlighted. These latter items are reflected at dates between July and November 1990.

[111]

45 Counsel for the defendants argued that the Transfer itself constituted a contract for the conveyance of the property to Lionel Kenworthy. Counsel for the plaintiff denied that there was any contract and said that the Transfer was only an instrument, of no force or effect until and unless registered. Mr Solomon pointed to the provisions of s 31B of the Stamp Act in support of his submission that there was clearly no contract between the plaintiff and Lionel Kenworthy for the sale of the property and that the Transfer was a "mere conveyance". He said that if there had been an oral agreement for such sale, then, applying the principle expressed in the maxim omnia rite esse acta praesumuntur, the parties must be taken to have complied with s 31B by executing a written statement recording the oral contract and have had it stamped. It followed, he submitted, that the absence of any such written statement is to be regarded as proof of the absence of any oral contract between the parties. I do not uphold that submission. I do not accept that the maxim referred to, upon which the plaintiff relies to establish the absence of an oral agreement between the plaintiff and Lionel Kenworthy, has any application to the circumstances. However, be that as it may, there is no substance in that submission which ignores the evidence of the oral discussions, followed by the execution of the Transfer and, moreover, misstates the effect of s 31B of the Stamp Act. That section provides, in relevant part, that a person who becomes a party to a transaction which causes a change in the beneficial ownership of an estate or interest in freehold land, but which transaction "is not effected or evidenced by any instrument chargeable with ad valorum duty, shall, if he would have been liable to pay duty in respect of that transaction had such an instrument been executed, within three months after entering into that transaction, prepare and lodge with the Commissioner a statement in a form approved by the Commissioner in respect of that transaction".

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (161 paragraphs)

Lhk Nominees Pty Ltd v Maureen Ada Kenworthy (as Administratrix of the Estate of Lionel Kenworthy) & Anor [2001] WASC 205 (10 August 2001)

The plaintiff's claim against the second defendant

Parties

Legislation Cited (1)

Cases Cited (10)