Marriner v Australian Super Developments Pty Ltd [2016] VSCA 141

Marriner v Australian Super Developments Pty Ltd [2016] VSCA 141 - VSCA 2016 case summary — Zoe

[132]

The position is different, however, with the direction given by Mr Marriner to Mr Penridge on 22 May 2001. In the context of those dealings, I am satisfied that there is a proper basis for inferring that from at least 22 May 2001 or thereabouts, Mr Marriner must have had relevant knowledge of the action taken by Mr Jephson or the directions that he had given. As is explained below, this is because Mr Marriner made contact with Mr Penridge on 22 May 2001 and personally gave him instructions to disburse monies held on trust on the Erbacher file and make a payment of $80,000 to [the] WS Group.

... [I]t is most unlikely that Mr Penridge would have communicated any information to Mr Marriner about the source of those funds.

...

Given the contemporaneous evidence in the form of Mr Penridge's file note, I am satisfied that the conversation between Mr Marriner and Mr Penridge took place in the manner and to the effect recorded in the file note.

Mr Penridge's file note makes clear that when Mr Marriner contacted him on 22 May 2001 he knew that [W&W] held monies in its trust account for the Erbacher purchase. There was no evidence that Mr Marriner or any of the Marriner entities had separately deposited any monies with [W&W], in trust, pending settlement of the purchase of the Erbacher land. If, as Mr Marriner said when giving evidence at the trial, he had no knowledge of the manner in which Mr Jephson had directed Mr Penridge to disburse the third tranche bond monies, it is not apparent why Mr Marriner would make contact with Mr Penridge at all, let alone to arrange payment of the $80,000 from the Erbacher file. In making that observation, I am not (and should not be taken to be) relying on any aspect of constructive notice as traditionally understood. I am simply pointing to the absence of any obvious, or indeed logical, basis for Mr Marriner to make contact with Mr Penridge and discuss arrangements for the disbursement of monies from the firm's trust account.

Furthermore, I note that knowledge on the part of Mr Marriner that [W&W] held monies in its trust account for the Erbacher purchase is consistent with what is pleaded in paragraph 53(a) ... of the Marriner parties' Defence ...

In cross-examination, it was put to Mr Marriner that he was aware as at May 2001 that [W&W] were holding monies in respect of the Erbacher file for settlement. He responded in terms that he 'would have perhaps been aware of it in principle' but he was 'not involved in the day to day accounting and financial matters.' If he was aware 'in principle' that funds were held in the Erbacher file with [W&W] pending settlement, then in my view the inference is open that Mr Marriner must have known that those funds were not his to deal with as he saw fit. As I have noted, there was no evidence that he or any of the Marriner entities had deposited those monies with [W&W]. Nevertheless, knowing that funds were held in trust by [W&W] on the Erbacher file, Mr Marriner gave instructions to Mr Penridge to pay the sum of $80,000 to [the] WS Group.

In my view, the demonstrated knowledge on the part of Mr Marriner that [W&W] held monies in its trust account on the Erbacher file, taken together with the evidence of his awareness 'in principle' permits a strong inference to be drawn that Mr Jephson must have informed him of that fact or conveyed information to him at some stage that would lead him to believe that.

In order to prove knowledge of circumstances that would indicate the facts to an honest and reasonable person, ASD is not required to establish actual knowledge on the part of Mr Marriner that the funds he directed be paid were sourced from the third tranche bond monies. It is sufficient to establish moral obtuseness of the kind described by Gummow J in Elders Trustee or the Full Court in Grimaldi if the facts permit the Court to infer objectively and on the balance of probabilities that Mr Marriner knew the funds were ASD's (or were otherwise funds to which he had no entitlement) but he nevertheless directed their disbursement.

I am satisfied that Mr Marriner 'knew' in the relevant sense that he had no authority to deal with the monies held by [W&W] on the Erbacher file. Nevertheless, Mr Marriner proceeded to instruct Mr Penridge to pay $80,000 of those trust monies to [the] WS Group. In so doing, he knowingly induced or immediately procured the innocent breach of trust by [W&W].

Accordingly, in respect of the direction given by Mr Marriner on 22 May 2001, I am satisfied that Mr Marriner had knowledge of circumstances which would indicate to an honest and reasonable person that the monies he directed Mr Penridge to pay to [the] WS Group from the monies held on the Erbacher file in [W&W's] trust account were not his to use as he saw fit. In my view, knowledge of the nature of the funds necessarily carries with it knowledge that the payment Mr Marriner induced or procured is a breach of trust, and that is so even if his moral obtuseness prevented him from recognising the impropriety involved.

...

I have based the inference drawn (namely, that Mr Marriner knew the money on the Erbacher file being disbursed by Mr Penridge on his instruction was not his to deal with as he saw fit) on the admissions made in paragraphs 53(a) and 59(i) of the Marriner parties' Defence coupled with the absence of any demonstrated or logical basis for holding a belief that [W&W] held money in trust for the Marriner parties.[41]

[209]

I now consider the position on the assumption that [W&W] were in breach of the solicitor's trust in disbursing the third tranche funds in accordance with Mr Jephson's directions. For reasons which I have ventured to set out in some detail, I am unable to find that, in his dealings with the third tranche funds, Mr Jephson acted in accordance with Mr Marriner's specific instruction. He had a general mandate to pay creditors as and when necessary from such funds as were available within the ASD group of companies. ...

[T]he claim against Goldworthy, Laguna [Australia Pty Ltd], Laguna Airport and Stage Design [Pty Ltd], based on their inducing or assisting [W&W] to breach their trust, with respect to the third tranche funds, must also fail. This case depends entirely upon the conduct of these companies with respect to the disbursements. There was no evidence that these companies had any involvement in the disbursements other than having received accounts from creditors which were unpaid. Cheques from [W&W] in payment for these accounts were sent directly to the creditors. The case of inducing and assisting, then, by these companies is no stronger than that against Mr Marriner for the same conduct. It must meet the same fate.

The final cause of action with respect to the third tranche funds is that Goldworthy, Laguna Australia [Pty Ltd], Laguna Airport and Stage Design [Pty Ltd], were knowing recipients of the proceeds of the breach of trust. The critical aspect of this claim is their guilty knowledge. This must be the knowledge of Mr Marriner, as no other person or entity was suggested to have had such knowledge. What then is said to be Mr Marriner's knowledge? I have found that he did not concern himself with matters such as the source of funds within the corporate group for payment of creditors. He certainly knew that substantial sums were due to many if not most or all of the creditors which received payments from [W&W]. He was doubtless content that the debts should be paid. There is no evidence, however, that he knew that they were paid from the third tranche funds. There is no evidence that he knew at the time of payment that these creditors had in fact been paid. In these circumstances, the knowledge of the companies within the Marriner group, which benefited from the payments, cannot be greater than his. This claim against those companies must therefore fail.

I mention at this point that Mr Marriner's unauthorised instruction of 22 May 2001 directing [W&W] to apply $80,000 of ASD's funds is not the subject of a separate claim. I say nothing further about it.[76]

[284]

MR BICK: If Your Honour ultimately concludes that it's necessary for us to apply for leave to reopen our case, well, then we do, and our learned friend Mr O'Bryan said, 'In reality that's what they're doing'.

HER HONOUR: Well, no application has been made and I don't see how that would arise unilaterally from the court. No submission has been made that I should even give consideration to reopening. Mr O'Bryan said no application is made so he's not requiring one to be made and you're not making one. So that seems to be the end of that point, doesn't it?

MR BICK: No, Your Honour. That overstates the position we took, but if I haven't made it clear I'll make it clear now. We don't believe that it's a matter where we require leave to reopen because the parties chose to put their agreement before the court in a non-evidentiary form, but if we do need to reopen then in the alternative we'll apply - we do apply, sorry.

MR O'BRYAN: Your Honour - - -

HER HONOUR: That's a different submission to the one that you made before you sat down this morning.

MR BICK: No, with respect, Your Honour, I would submit that's not right, but let me make it quite clear. Order 1 of our summons seeks leave to file, serve and rely on the affidavit of Mr Pergl. That was the application I endeavoured to make this morning. My learned friend says that's, in effect, an application for leave to reopen. My submission this morning as I intended to make it, and thought I had made it, was if we need leave to reopen then we apply for it, but I made primary submissions, I would hope, forcefully that no leave was required.

Because the document we seek to rely on was never intended to form part of the evidence in the case, rather, it was intended to record an agreement between the parties the court was invited to act on, and should act on, which Your Honour correctly and accurately summarised. And it remains our primary position this is not a situation where we need to apply for leave to reopen our case. It's simply to put before the court that which the trial judge had before him, both parties being bound by the way in which they conducted the trial in that regard and every other regard for that matter.[113]

[295]

In my view, the present circumstances do not satisfy the high hurdle of 'exceptional circumstances'. The Marriner parties have waited until the eleventh hour, and then some, to raise directly what they now appear to contend was always their view of the effect of the settlement monies paid by [W&W], notwithstanding that they have never pleaded it or addressed it by way of evidence before the original trial judge or on the remitter. That is, they now contend, and for the first time with any real clarity, that the legal effect of the email exchange is that unless ASD is successful in having judgment entered for more than $350,000 then it cannot recover any sum from Mr Marriner. That contention calls into question both the utility of the remitter of Issue 4 by the Court of Appeal and also the finding made on the remitter about the effect of the settlement monies paid by [W&W]. Furthermore, in circumstances where the Court of Appeal ordered that the remitted issues were to be determined, subject to any contrary order, 'on the basis of the evidence already adduced in the trial', if this Court were to permit a fresh issue to be agitated now, the boundaries of the re-opened issues would be difficult to delineate - for example, because there is no reference in the pleadings to the payment of the settlement monies by [W&W] as giving rise to a 'real issue' between the parties - and it is likely that the ASD parties would be severely prejudiced by a re-opening and a further continuation of the remitter hearing.

Moreover, the proceedings between these parties have been on foot for 10 years. The original trial occupied 20 sitting days, the appeal was heard over two days with a further day for submissions on costs and final orders, and the remitter hearing occupied some six days, and a further day and a half of Court time has been taken up with submissions on costs and final orders and the hearing of the application for leave. The Civil Procedure Act 2010 (Vic) requires the Court to seek to give effect to the overarching purpose of facilitating the just, efficient, timely and cost effective resolution of the real issues in dispute between the parties when exercising any of its powers (s 7). Under s 9, when making any order the Court is expressly required to further the overarching purpose by having regard to certain stated objects, which relevantly include:

(a) the just determination of the civil proceeding;

...

(c) the efficient conduct of the business of the court;

(d) the efficient use of judicial and administrative resources;

...

(f) the timely determination of the civil proceeding.

As the plurality of the High Court observed in Aon Risk Services Aust Ltd v Australian National University, in the context of an application to amend the pleadings at a late stage in the proceeding, for an issue to be regarded as a 'real issue', 'the relevant dispute or controversy must exist at the time of the application' for it is only then that 'it is necessary for the court to allow it properly to be raised to enable a determination upon it.' And while the courts do not take an unduly narrow approach to what are the real issues in controversy, even though they are not, or are not sufficiently expressed in the pleading, here, the Court has already made a determination in the remitter decision by reference to the submissions that were made at the remitter hearing. To the extent that any issue in contention between the parties, real or otherwise, was raised it has been decided.

Furthermore, as ASD points out, no application for leave to re-open was made directly by the Marriner parties. ...

To the extent that such an application may be regarded as having been made indirectly, by the Marriner parties seeking leave to file and rely upon the [Pergl affidavit], in the circumstances outlined above and for the reasons stated, the application is refused. In my view, when the relevant circumstances are viewed as a whole, 'the justice of the case' (to adopt the expression used by Kenny J in Bradshaw) would not favour the grant of leave to re-open. If the Marriner parties had wished to place further evidence before the Court for the purposes of the remitter hearing they had the opportunity to seek to do so. I am not satisfied that their conduct in the present circumstances could be regarded as 'inadvertence' in the relevant sense.

The position is that findings have now been made on the remitter on the basis of the evidence presented and submissions made. The notion of 'the justice of the case' must address the position of all parties. The issues remitted by the Court of Appeal having now been heard and determined, any re-opening would, in my view, be productive of unfairness to the ASD parties. Furthermore, when regard is had to the Civil Procedure Act 2010, and the matters set out in subsections 9(a), (c), (d) and (f) in particular, the overarching purpose would not be furthered if the Marriner parties were given leave to re-open their case.[125]

[297]

ASD submits that if the Court of Appeal had considered ASD was precluded from recovering the $80,000 by reason of any 'agreement' reached before the original trial judge of the kind now contended for by the Marriner parties, there would have been little or no point in the Court remitting the question of Mr Marriner's liability for the $80,000 payment as a separate issue. I agree with that submission. ...

...

It should also be noted that the Marriner parties never advanced any 'agreement' between the parties of the kind they now contend for, as a reason why there would be no utility in the Court of Appeal remitting 'Issue 4'. In that regard, ASD also points to the letter from Mr Marriner's solicitors dated 16 October 2012, sent by way of response to the Calderbank offer it made dated 3 October 2012. This exchange of correspondence took place after the Court of Appeal had heard and determined the appeal and cross-appeal, and pronounced orders for the remitter. ASD submits that if an agreement of the kind contended for by the Marriner parties had been reached, having the effect on the remitter proceeding now contended for, one would expect reference to have been made to it in that correspondence. After all, if it were the case that there was an agreement concerning the manner in which the $350,000 was to be dealt with as between the parties, and the practical effect of that agreement was that ASD had to recover more than $350,000 in order to be entitled to recover anything from Mr Marriner, such that 'Issue 4' was of no utility as a stand-alone issue, it is surprising that such an agreement was not mentioned as a relevant factor in the context of the Marriner parties' rejection of the offer. Indeed, at the first hearing concerning final orders, Senior Counsel for the Marriner parties accepted that it would have been 'a good point to raise.' However, he said the fact that the Marriner parties did not refer to the rule against 'double recovery' and the agreement they contend for 'does not mean there was no such agreement.'

Given the long history of this matter before the Court, it is both surprising and a cause for real concern that at this late stage in the remitter hearing this matter is now being put forward as a substantive defence and not merely an issue that would affect the exercise of the Court's discretion as to costs. It is not mentioned in the pleadings. It was only touched on in the outline of contentions and oral submissions and was not articulated in a way that exposed what is now contended to be the real effect of the so-called agreement.

For the reasons set out above, in my view, the parties are bound by the finding made in paragraph 234 of the remitter judgment and no exceptional circumstances have been demonstrated that would permit any re-opening of the case. Further, having regard to the orders made by the Court of Appeal concerning the conduct of the remitter hearing, I do not propose to allow any further evidence to be adduced concerning the so-called agreement.

But even if a different view were to be taken, when regard is had to all of the evidence now sought to be placed before me, I am not persuaded that an agreement of the kind contended for by the Marriner parties is made out, essentially for the reasons that have been advanced by ASD.[126]

[359]

There was, in my view, a considerable overlap between the factual matters pertaining to the remitted issues on ASD's claim and those concerning the defences and counterclaims brought by the Marriner parties. Each counsel spent some considerable time taking me through the factual matters on which they relied to make good those claims.

I am not persuaded that it would be appropriate for me to deal with the question of costs of the remitter hearing on an 'issues basis' referable to the causes of action pleaded. Much has already been said by the original trial judge and the Court of Appeal about the unsatisfactory state of the pleadings in this matter. Suffice it to say that the lack of clarity in the pleadings in this case has not assisted in the resolution of the issues between the parties.

ASD has succeeded on the main issue, albeit only to the extent of $80,000 rather than the entirety of the third tranche funds. Because the claim for the $80,000 that Mr Marriner directed [W&W] to pay was itself a component of the third tranche funds, and all of the defences raised regarding the third tranche funds responded to it, it could not reasonably be said that significantly less evidence or submissions would have been required on that claim alone. In my view, the remitter hearing was conducted efficiently by both sides, and most, if not all, of the time spent in Court on ASD's claim in chief was required for it to make good the claim for the $80,000.

Similarly, with the Marriner parties' counterclaim. Much of this part of the case was put forward as a defence to ASD's claim in chief, as well as being a counterclaim. Having considered the issues raised at some length in the remitter reasons, I determined that each of those claims must fail in their entirety.

ASD contends that the Court should treat Mr Marriner's characterisation of the counterclaims as 'defensive' as being an acknowledgment of the fact that there was a significant overlap on the facts between the claims brought by ASD (including those on which it did not ultimately succeed, namely the second tranche and capital expenditure claims and the third tranche claims except for the $80,000) and the counterclaims. I tend to agree with the submission made by the ASD parties to the effect that the overlap between the counterclaims (on which they succeeded) and the claims on which ASD did not succeed favours an award of costs in favour of ASD because the factual underpinnings of ASD's claims had to be addressed in the counterclaims.

When viewed against the final outcome on the remitted issues, it is clear that the ASD parties have enjoyed considerably more success than the Marriner parties. That is, the ASD parties have succeeded on both the primary claim and on the counterclaim. In my view, as the successful party, it is appropriate that the ASD parties be awarded their costs of the remitter.[163]

[362]

Aside from the non-compliance with the [2005] Rules, the offer ASD made - to walk away completely and with the Marriner parties retaining the benefit of the costs order made by the Court of Appeal - was, in my view, an attractive one. Whilst the covering letter did not set out all of the reasons why ASD contended the offer was attractive and should be accepted, the basis for doing so had been canvassed at some length in the earlier Calderbank letter. I do not propose to re-visit each of the matters discussed under paragraphs (a) to (f) above in relation to the [2012 Calderbank offer]. Importantly, the Marriner parties were no longer required to pay $70,000 to ASD and they were entitled to retain the benefit of the costs order made in their favour by the Court of Appeal. Had they accepted, the ongoing litigation risk would have ceased and they would also have avoided the costs and expenses of the remitter hearing, and the prospect of them facing an adverse costs order from the original trial. In that regard, I note that in the Court of Appeal's costs reasons, their Honours observed that Mr Marriner's success on the appeal 'was, to a significant extent, based on an argument about the effect of the alleged expenditure cap which was not advanced at trial.'

With the introduction of the Civil Procedure Act in 2010, the legislature made clear, if it was not already, that the parties to litigation, the practitioners representing them, and the Court are each required to promote the just, efficient, timely and cost effective resolution of the real issues in dispute. Viewed objectively, the substance of the offer ASD made was directed to furthering those objectives, in circumstances where the costs incurred by the parties in running the proceeding had reached the point where they now dwarfed the quantum of the relief to be determined on the remitter. In my view, the offer as made, even though not one that fell strictly within Order 26, was nevertheless one that invoked the principles discussed in decisions such as Calderbank.

... [T]he very reason why ASD made offers to settle the proceedings [was because it recognised] that little would be gained from pursuing the litigation in circumstances where the costs incurred had dwarfed the sums capable of being recovered.

In the present case, I am satisfied that the overarching purpose would be furthered by treating the offer of compromise made by ASD on 22 February 2013 as being effective as a Calderbank offer. In the circumstances, I am also satisfied that it was not reasonable for the Marriner parties not to accept the offer. Although the offer was not one that conformed strictly with Order 26, when the offer, the proposed orders and the covering letter were read together, the gist of what was being put forward for consideration by ASD was clear, as was the reason why it was put forward. If the Marriner parties were in any doubt, it would have been sensible for them to seek clarification.

In circumstances where ASD, by making an offer, has taken appropriate and timely steps in the litigation that were directed to furthering the overarching purpose, but the offer was not accepted by the Marriner parties even though it would have been reasonable for them to do so, it follows that any costs ordered to be paid by the Marriner parties are to be assessed on an indemnity basis. Under Calderbank offer principles, the indemnity costs would ordinarily be payable from the date of expiry of the offer, being 4.00 pm on 8 March 2013, rather than from 22 February 2013, being the date the offer was made, as would apply under Order 26. Accordingly, any costs ordered to be paid by the Marriner parties are to be assessed on an indemnity basis from 4.00 pm on 8 March 2013.[166]

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