Rogers v Kabriel

New South Wales Supreme Court CITATION : Rogers v Kabriel [1999] NSWSC 368 CURRENT JURISDICTION : Equity Division FILE NUMBER(S) : 3052/97 HEARING DATE(S) : 06/10/98; 07/10/98; 08/10/98; 09/10/98; 10/2/99; 11/02/99 JUDGMENT DATE : 23 April 1999

Joan Freedom Rogers (P1) Joan Freedom Rogers Pty Ltd (P2) PARTIES : Bedrich Kabriel (D1) Narendra Prasad (D2) Fontana Films Pty Ltd (D3) JUDGMENT OF : Young J

Plaintiff: B A Coles QC and A P Coleman COUNSEL : Defendants 1 & 3: P Le G Brereton SC and D P M Ash 2nd Defendant in person. SOLICITORS : Plaintiff: Corrs Chambers Westgarth Defendants 1 & 3: Beilby Poulden Costello CATCHWORDS : Corporations [85]; Prescribed interests; Investment of $1 million; Whether exempt from Corporations Law; Equity [35]; Fiduciary; X owed fiduciary duties to Y and Z; Preferred Z over Y; Z obtained large amount of Y's money; Whether Y bound to restore; Procedure [788]; Money counts; Money had and received; Scope; Restitution [5]; Recovery of money; Extent of defence of change of position; Taxes & Duties [148]; Deductions; Investment in Australian films; Prerequisites for deduction; Trade Practices [141]; Accessory liability; Acts on behalf of others Corporations Law (NSW) Parts 7.11, 7.12 (s 995); ss 9, 66(3), 1005, 1274B Evidence Act 1995 (NSW) s 38(1) ACTS CITED : Fair Trading Act 1987 (NSW) ss 42, 61 Income Tax Assesment Act 1936 (Cth) Div 10BA, ss 124ZADA(1)(d)(iii), 124ZADA(2), 124ZAFA(1), 124ZAFA(1)(a), 124ZAFA(1)(c)(i), 124ZAFA(1)(c)(ii) Trade Practices Act 1974 (Cth) ss 52, 75B, 84(2) DECISION : See paras 205 to 208

THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

JUDGMENT 1 HIS HONOUR : The first plaintiff, a quite wealthy lady, controls the second plaintiff, a proprietary company. The first defendant is a film producer who is the leading light in the third defendant. The second defendant is an accountant and financial adviser. He acted as such for both the plaintiffs and the third defendant. 2 Mr B A Coles QC and Mr A P Coleman appeared for the plaintiffs. Mr P Le G Brereton SC and Mr D P M Ash appeared at the hearing, for the first defendant, Mr Kabriel, and the third defendant, Fontana Films Pty Ltd to which I will refer simply as "Fontana Films" or "Fontana". The written submissions were signed by Mr Brereton SC alone. The second defendant, Mr Prasad, appeared in person. 3 The plaintiffs complain about two transactions, the first which occurred about 17 September 1996 (the "First Transaction"), they say had the effect of depositing $650,000 into Fontana Films' bank account. The plaintiffs wish to recover it, either as money had and received or otherwise. 4 The other transaction took place on 16 October 1996 when the second plaintiff "invested" $1m with Fontana Films in connection with a film, (the "Second Transaction"). 5 As I said, the first plaintiff controls the second plaintiff. For simplicity, I will simply refer to "the plaintiffs". The plaintiffs' interests sold a business for $36m, of which the first plaintiff received $27m. By September 1996 the first plaintiff had lost confidence in her advisers and was suspicious of her daughter. She was friendly with the first defendant Mr Bedrich Kabriel, and he suggested that the second defendant, Mr Narendra Prasad, was a good accountant who could advise Mrs Rogers. 6 In September 1996, the plaintiffs were purchasing a property in the Southern Highlands and required $650,000 to complete the purchase. 7 Mrs Rogers first met Mr Prasad on 4 September 1996 and was interested in having him be her financial adviser. She met Mr Prasad for the second time on 7 September 1996 when she signed two authorities, authorising Mr Prasad to exercise authority over her monies in quite wide respects. Mr Prasad advised Mrs Rogers that she had a considerable tax problem and prepared investment plans. Included amongst these was a suggestion that an investment in the film industry would be a good idea. At this time Mr Prasad gave Mrs Rogers four copies of the prospectus for the film "The Ugly Dumpling" and he says he told Mrs Rogers "This is the type of document which is issued when the film is made". 8 Arrangements were then made for Mrs Rogers to see Mr Seller, a solicitor who is a partner in the firm of Gadens. Mr Prasad at least saw Mr Seller and gave him some material which referred to "The Ugly Dumpling" and also provided provisional certificates in respect of about five films including the film "Skar". It is doubtful whether Mr Bedrich Kabriel attended the conference at Gadens. Mr Seller's evidence was quite unsatisfactory generally and he provided the only evidence that Mr Kabriel did attend that conference. 9 On 13 September 1996, Mrs Rogers attended a meeting at Mr Seller's office with Mr Bonnell and Mr Kabriel. Mr Prasad was there though Mrs Rogers does not recollect his presence. Mr Prasad raised the topic of film investment and said that he proposed to put Mrs Rogers into a film scheme, though he was not sure which, and asked Gadens to advise her. In due course Gadens advised that Mrs Rogers should not take any steps with respect to film investment until a due diligence review of the documents could be undertaken so that Gadens could give her concluded advice. 10 On 16 September 1996, Mrs Rogers and Mr Prasad met at Quay West and walked down to the Advance Bank where they met a manager, Mr Stephenson. Mr Prasad wrote out a cheque for $15m, Mrs Rogers signed it and handed it over to Mr Stephenson. Mrs Rogers and Mr Prasad then went down to the National Bank, where the manager, Mr Davenport, refused to release the money. 11 On that day at the Advance Bank, Mr Prasad prepared two withdrawal slips for $650,000 each. Mrs Rogers can only remember signing one authority for $650,000 but the surrounding material shows she signed two. I found Mrs Rogers to be very vague in giving her evidence and reached the conclusion that it would be unsafe to rely on many of the statements she made unless they were corroborated. Mr Prasad says that Mrs Rogers told him, "I'd like to invest in the film. Can I invest $1.3 million?" to which Mr Prasad replied, "No Rick does not need that money" and Mrs Rogers then allegedly said, "Can I put half in it and half extra, and you make sure that the other half extra $650,000 goes into a fixed deposit, so it's instantly available". 12 Mr Prasad's evidence was hard to accept. He represented himself. At p 99 of the transcript Mr Prasad indicated that he wished to make a statement. I advised him as to his liability to be cross examined and he then said that he did not want to give evidence. Mr Brereton SC then called Mr Prasad to give evidence in the case of the other defendants and he was examined orally in chief by Mr Brereton SC for about three-quarters of an hour. Mr Coles QC cross examined him for about five minutes. The witness then requested and was granted, a five minute adjournment. About five minutes after resuming the witness was seen to be continuously rubbing his forehead with his right arm, his speech was slow and a couple of minutes after that the witness said he was sorry he could not answer any more questions and that he was ill. The matter was then adjourned to the next day. A medical report was tendered on the next day which showed that Mr Prasad had suffered severe heart failure attacks and suffered from a mild degree of dementia associated with increasingly severe short term memory changes. The doctor reported "All in all, I recommend that he be regarded as a not reliable witness in court, and respectfully request that in interest of his health he be excused court attendance." 13 This leaves me in a very odd situation. As I said during submissions, I do not think that I can disregard the whole of Mr Prasad's evidence. I would certainly pay attention to it if it contained admissions against Mr Prasad, but the rest of the evidence must have very little weight in view of the facts that the evidence was not cross examined and the doctor's view that Mr Prasad is an unreliable witness. However, there were some parts of Mr Prasad's evidence where he was able to look at documents and give some explanation. Some of that evidence, I think, is credible. On the other hand, I would be very loath to accept Mr Prasad's evidence as to conversations he had with anyone else in the case. 14 I will shortly deal with the two separate transactions, but before I do I should make mention of some evidence which was undisputed and which forms part of the background to the transactions. 15 Mr Bedrich Kabriel, who has been a director of the third defendant Fontana Films since 20 August 1968, first met Mrs Rogers in the mid to late 1960s when he was making a commercial for one of the products that her former company was promoting. They became friendly and in 1982 Bedrich Kabriel joined a group of advisers to Mrs Rogers known as "the Cenovis Advisory Group Committee". When Mrs Rogers was experiencing difficulties with her accountants she asked Mr Kabriel for advice, and it was he who suggested the services of the second defendant. Mrs Rogers first met Mr Prasad at Mrs Rogers' Quay West apartment when he was introduced by Mr Kabriel. Mrs Rogers appointed Mr Prasad her financial adviser and accountant without more enquiry. 16 It is alleged by the plaintiffs that the relationship between Mr Kabriel and Mrs Rogers was such that he could reasonably be treated as a fiduciary who had agreed to act on behalf of Mrs Rogers and to be her adviser. 17 On 7 September 1996, Mrs Rogers gave Mr Prasad two authorities, the first which is headed "Authority to Act and or Give Instructions" is addressed to Mr Prasad and confirms Mrs Rogers' authority for him to act on her behalf and on behalf of associated companies in relation to any dealings with banks, accountants and other institutions. The second headed "Acknowledgment and Authority to Give and Receive Information" acknowledges that Mrs Rogers has appointed Mr Prasad for financial and taxation advice and authorises him to seek or give information and use that information regarding Mrs Rogers' "personal and business affairs and associated companies for the purpose of deposit of funds and banking facilities". 18 In cross examination, Mrs Rogers was asked about these documents. Mr Brereton SC put: "When you signed the second of the documents ... you understood you were authorising Mr Prasad to act on your behalf?" A. "Yes". Q. "You understood that you were authorising him to act on your behalf in relation to any dealings with Gadens?" A. "Yes". Q. "And to act on your behalf, and on behalf of any of your associated companies in relation to any dealings with any other institutions that he deems appropriate?" A. "Yes". Q. "And you understood that by signing that you were giving him a very wide scope of authority to make decisions on your behalf?" A. "That's right". 19 In that background I must examine the two transactions and I believe that the most convenient way to do so is to deal with them and the other questions that arise in these proceedings under the following headings:

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