Appeal - Costs - Rules of the Supreme Court 1971 O24A - Whether in considering O 24A offers court may have regard to relief not involving payment of money

Taxation - Income tax - Income tax does not become due and payable until notice is served on the taxpayer: Income Tax Assessment Act 1936, s 204

Income Tax Assessment Act 1936

First Appellant (First Plaintiff) : Mr R I Viner QC & Mr N R Cogin

Second Appellant (Second Plaintiff): Mr R I Viner QC & Mr N R Cogin

Third Appellant (Third Plaintiff) : Mr R I Viner QC & Mr N R Cogin

1 MALCOLM CJ: This was an appeal and cross-appeal against the judgment of Scott J dated 23 April 1999. The principal reasons for judgment were delivered on 27 October 1998 after a trial on 16 - 18 February and 24 - 31 August 1998. On 30 March 1999, by consent, judgment was entered for the appellant in the sum of $16,843.40 on the basis that the appellants would not seek to enforce the judgment until questions of costs were resolved. The questions of costs were dealt with by the learned Judge in further reasons delivered on 23 April 1999 as a result of which the learned Judge made orders for costs.

2 The facts and circumstances are fully set out in the reasons to be published by Templeman J. I agree with those reasons and set out below, by way of summary, the orders which should be made in relation to the appeal and cross-appeal.

3 The essence of ground 1 of the grounds of appeal was that the decision of the learned Judge not to order the respondent to account for profits from his use of the sum of $69,700 paid to him as tax agent and trustee was wrong in law and in equity having regard, among other things, to his Honour's finding that the respondent had expended the $69,700 on a property development project of his own. In my opinion the appeal should be allowed in respect of ground 1 for the reasons to be published by Templeman J and the respondent directed:

(1) to make an affidavit containing details of the purchase of the properties in North Perth by the respondent with the appellant's money;

(2) to give discovery on affidavit of all documents relevant to those transactions and to any profit, actual or notional, thereby derived by the respondent, either directly or indirectly.

4 There should also be an order that within 14 days of the service of such affidavit or affidavits the appellants elect whether to claim an account of profits or compound interest. If the appellants elect to claim compound interest, the respondent should be ordered to pay to the appellants interest compounded at commercial rates with six monthly rests commencing from two months after 23 September 1987, namely 23 November 1987, calculated on the balance of the moneys that should have been retained by the respondent for the purpose of tax clearing, until the whole fund had been used for that purpose.

5 Ground 2 of the grounds of appeal contended that if it was proper to award compound interest it should have been awarded commencing two months after the date of payment, namely 23 September 1987, at a commercial rate compounded on six monthly rests on the reducing balance until 27 October 1998 and then compounded until judgment or payment. Ground 2 of the grounds of appeal should be dismissed for the reasons to be published by Templeman J.

6 Ground 3 contended that the learned Judge wrongly failed to award the appellants the sum of $10,400 (being part of the sum of $69,700 referred to in ground 1), in respect of the purchase of tax stamps for the second appellant in 1983 and 1984, because:

(a) the respondent did not file a tax return for the second appellant in 1983 or 1984;

(b) the second appellant did not have any liability for income tax in 1983 or 1984; and

(c) the respondent did not submit any tax stamps or pay any tax liability for either of the appellants in 1983 or 1984.

In respect of ground 3, I agree with Templeman J that there should also be an order that the respondent repay to the appellants the sum of $10,400 paid to the respondent for the purpose of purchasing tax stamps, which were not purchased, together with simple interest thereon at the rate agreed between the parties from 1 October 1997.

7 Ground 4 contended that the learned trial Judge wrongly rejected a claim by the first appellant that the respondent had received a tax refund cheque for the sum of $759.88 on his behalf which he negotiated and paid into his own account and converted to his own use. Ground 5 contended that the learned Judge wrongly rejected a claim by the second appellant that the respondent had received a tax refund cheque on her behalf which he negotiated and paid into his own account and converted to his own use. In respect of grounds 4 and 5, I agree with Templeman J that the appeal should be allowed and the respondent ordered to pay the first appellant the sum of $759.68 and the second appellant the sum of $839.93 together with interest at the rate agreed between the parties and compounded at six monthly rests.

8 Ground 6 contended that the learned Judge wrongly rejected a claim by the appellants for the sum of $3,160 paid by them to the respondent on 15 April 1995 in respect of their liability for income tax in the year ended 30 June 1979. The basis for the claim was that no return had been filed, no tax had been paid and no credit was given by the Australian Taxation Office. As to ground 6 of the appeal, I agree that the appeal be allowed

and the respondent ordered to pay the appellants $3,160 together with interest from 15 April 1995 at the rate agreed between the parties, compounded at six monthly rests.

9 Ground 7.1 contended that the respondent should have been ordered to pay the appellants interest compounded at a commercial rate with monthly rests on an amount of $5,707.13 paid to him on 23 September 1987 in respect of tax work carried out subsequently because the respondent ceased to be a registered tax agent on 3 May 1988 and was no longer permitted to charge for his services. Ground 7.2 made a similar contention in respect of a sum of $1,193.30 paid to the respondent on 4 February 1985. Ground 7.3 made a similar contention in respect of a tax refund of $471.39 received by the respondent on behalf of the appellants on 18 October 1984. As to ground 7.1 of the appeal, I agree that the respondent should be ordered to pay the appellants $5,707.13 which the appellants paid to the respondent on 23 September 1987 to carry out tax work together with interest thereon at the rate agreed between the parties and compounded with six monthly rests from 2 May 1988. As to ground 7.2 I agree that the respondent should also be ordered to pay the appellants $1,193.30 together with interest thereon at the rate agreed between the parties from 4 February 1985 until 30 October 1992 compounded with six monthly rests. As to ground 7.3 of the appeal, I agree with the order proposed by Templeman J, namely, that the respondent pay the appellants' compound interest at the rate agreed on $471.39 from 18 October 1984 to the date of payment by the respondent to the appellants of the sum of $180.54 on 30 October 1992 and compound interest on the balance of $290.85 from that date to the date of repayment of that sum.

10 As to grounds 8, 9 and 10, I agree with the comments made by Templeman J and the order his Honour proposes in respect of ground 10, namely that the respondent pay the appellants their costs of the action and of the account ordered by Acting Master Chapman.

11 Finally, I agree that the respondent should pay the outstanding costs which were ordered by Master Bredmeyer to be costs in the cause.

12 KENNEDY J: I have had the benefit of reading in draft the reasons to be published by Templeman J. I am in agreement with those reasons and with the orders his Honour proposes.

13 TEMPLEMAN J: The first and second appellants are husband and wife who carried on a building business in partnership. The third appellant (Lyndoch) is the corporate trustee of their family trust.

14 In 1992 the appellants brought an action against the respondent, who had been their accountant and tax agent since about 1974. The appellants alleged that the respondent had not dealt properly with money they had paid him at different times over the years and that he had used some of their money for his own purposes. The appellants contended that the respondent was a fiduciary. They sought to have him account to them on that basis. The appellants also claimed money said to be owed to them by the respondent. The respondent denied that he was a fiduciary. He said he was liable to account as a debtor and that he had done so.

15 At trial, the appellants were partially successful. The learned trial judge accepted most of their evidence where it conflicted with the respondent's evidence. He held that the respondent was a fiduciary. However, he did not order the respondent to account on that basis, as the appellants submitted he should, in order to determine what, if any, profit the respondent had made with their money. In relation to certain other claims, the relief granted by the learned trial judge fell short of the appellant's expectations. Hence this appeal, in which there are several discrete grounds. I shall deal with each in turn.

16 The learned trial judge found that in September 1987, the appellants had paid $69,200 to the respondent for the purpose of discharging their income tax liabilities: it was, therefore, trust money.

17 The respondent admitted in cross-examination that he had used the appellants' money, mixed with other money, to purchase an interest in three old shops in North Perth on behalf of Babacus Holdings Pty Ltd which was the trustee for his family trust.

18 Counsel for the appellants was permitted, over objection, to ask the respondent about the purpose for which the shops had been purchased. The respondent said it was "with a view of redeveloping". However, the cross-examination went no further, because the learned trial judge had ruled, in effect, that whether or not the respondent had derived a profit from that money was not in issue. The only relevant issue was whether the respondent was a fiduciary and had therefore misapplied the appellants' money.

19 The case was conducted on that basis from the outset. In opening, senior counsel for the appellants informed the learned trial judge that it was his clients' contention that the respondent had used their money for "trading purposes", and that they should be compensated by an award of compound interest, as an alternative to an account of profits. Counsel said he would elect which remedy to pursue at the end of the trial.

20 Counsel for the respondent immediately raised the question whether, if his client was found to be a fiduciary, the appellants should be entitled to an account of profits at all. Counsel submitted this was a discretionary remedy, in respect of which, acquiescence, delay and estoppel might become relevant. Counsel said the respondent would wish to lead evidence about those matters, but that it would not be necessary to do so unless the respondent was found to be a fiduciary. The learned trial judge responded by asking counsel why he would not be leading the evidence in any event. He said counsel was not precluded from doing so.

21 This was, perhaps, a somewhat generous position to adopt because the respondent had not raised acquiescence, delay or estoppel in his defence. This was despite the fact that the appellants had pleaded in their statement of claim that the respondent had failed to account for any profit earned from his use of the $69,200, and they had claimed, in the alternative, interest or an account of profits.

22 Counsel for the respondent justified his position by asserting that the claim for an account of profits was based on "a bland assumption" of an entitlement to that remedy when in fact, it was discretionary. That submission is not entirely correct. As the High Court held in Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544 at 559, an account of profits, while said to be discretionary, is nevertheless granted or withheld according to settled principles. However, it will be defeated by equitable defences such as estoppel, laches, acquiescence and delay. In every case, "the remedy must be fashioned to fit the nature of the case and the particular facts".

23 In the present case, the learned trial judge held that the respondent was in breach of trust in using the appellant's money for his own private projects. However, the judge found also that the respondent had repaid the whole of the $69,200 and used it to buy tax stamps for the appellants.

24 In his reasons, the learned trial judge said that the appellants' counsel had elected to claim an account of the profits made by the respondent from the unauthorised use of their money, and that he had requested the Court to remit the matter to a Master for inquiry, so that the profit, if any, derived by the respondent could be determined. It is common ground on the appeal that the learned trial judge had misunderstood the appellants' position. The appellants' counsel had not, in fact, made an election.

25 The learned trial judge went on to consider whether the appellants could be compensated adequately by an award of compound interest, or whether it would be appropriate to require the respondent to account for profits he had made from the unauthorised use of the appellants' money. In answering that question, the judge noted that the evidence at trial gave no indication whether the defendant had made any profit. He held, as a consequence, that it was impossible to assess whether it would be appropriate to order an account.

26 In the end, having regard to the fact that the respondent was a fiduciary and had kept the appellants out of their money for an unreasonable time, the judge ordered the respondent to pay compound interest at commercial rates with six monthly rests.

27 In my view, having regard to the way the trial was conducted, the learned trial judge erred in denying the appellants an account of profits on the ground that there was no evidence that the respondent had made any profit. As I have noted above, that matter was not explored in the cross-examination of the respondent because it was not then in issue.

28 In my view, once a finding had been made that the respondent was a fiduciary, the appropriate course would have been to order him to account on that basis. The appellants would then be in a position to make their election between interest and profits (if any) derived by the respondent from the unauthorised use of the trust funds. As James LJ held in Vyse v Foster (1872) LR 8 Ch App 309:

" ... if the Plaintiff is entitled to any election at all, she would have a right, at all events, to have such an inquiry and accounts as would enable her to determine her election." (at p 334)

29 It remains the respondent's position on the appeal that he should not be ordered to account for profits because there is no evidence that there were any profits. The respondent then submits that in any event, the applicants should be debarred from claiming profits by reason of acquiescence, estoppel and delay.

30 As to the first point, I do not think it open to the respondent to rely on an absence of evidence when he has denied that he was a fiduciary, has not accounted as a fiduciary, and has objected to answering questions in cross-examination which would have required him to disclose whether he, or some related entity, made a profit from the appellants' funds.

31 The respondent's acquiescence, estoppel and delay argument is based on the fact that the appellants had long ago accepted a payment of interest on the sum of $69,200. This was in the course of settlement negotiations in 1992 between the parties and their solicitors. On 30 October 1992, the respondent's solicitors wrote to the appellants' solicitors "without prejudice save as to the costs". The letter contained proposals for settlement of the dispute. The respondent offered interest on the sum of $69,200 "... on a completely without prejudice basis and with no admission of liability at all". On 5 November 1992, the respondent's solicitors sent cheques representing the amounts of interest which had been offered previously.

32 By letter dated 13 November, the appellants' solicitors acknowledged receipt of the cheques and said that, although they had been instructed to deposit them, "... this in no way constitutes an acceptance of your client's settlement offer". They pointed out that acceptance had not been made conditional on settlement.

33 In my view, there is nothing in the appellant's conduct here, which would debar them from seeking an account of profits on the ground of acquiescence or estoppel.

34 As to delay, it was the view of the learned trial judge that the appellants had not delayed unduly in bringing the matter to trial. That was said in response to the submission of counsel for the respondent that there should be a reduction in the period for which interest would otherwise run. However, the view of the learned trial judge is of general application and he was much better placed than we are in this Court, to assess that issue.

35 The respondent then relies on the fact that the appellants had not conducted their own investigation into his use of their money. Counsel for the respondent submitted that this was a failure on the part of the appellants; and that they should suffer the consequences. Counsel relied on the opinion of the Privy Council in Personal representatives of Tang Man Sit v Capacious Investments Ltd [1996] AC 514. There, Lord Nicholls dealt with the question of election between inconsistent remedies. He said that in the ordinary course, a plaintiff will know at the conclusion of the trial which remedy will be more advantageous to him. But if the plaintiff does not know how much money the defendant has made from the wrongful use of his property, it may be unreasonable to require the plaintiff to make his election without further information and:

" ... to meet this difficulty, the court may make discovery and other orders designed to give the plaintiff the information he needs, and which in fairness he ought to have, before deciding upon his remedy." (at p 521).

36 Lord Nicholls referred to the decision of Lightman J in Island Records Ltd v Tring International Pty Ltd [1996] 1 WLR 1256, on which the present respondent relies also. In that case, on a motion for judgment following a successful application for summary judgment, the court granted a declaration that the plaintiff was entitled, at its election, to damages for infringement of its copyright, or to the profits derived by the defendant from breaches of copyright. At the same time, directions were given:

" ... which secure that such information as is available and is reasonably required to enable the plaintiff to make an informed election (and accordingly is necessary for fairly disposing of the cause or matter ...) is made available to him and that the election is made within a reasonable time thereafter." (at p 1259)

37 As I understand the respondent's submission, it is that the appellants should have taken steps or sought orders before the trial, in order to investigate the respondent's contract so as to be able, at trial, to make an informed election. But the authorities referred to above do not support the respondent's submission: they are directly to the contrary. They support the appellant's contention that the learned trial judge fell into error in ordering the respondent to pay compound interest, when the appellants had not made their election and were in no position to do so.

38 Counsel for the respondent submitted that in fact, the appellants did have some knowledge about the way in which the respondent had used their money. Counsel pointed to certain questions asked of the respondent in cross-examination, from which such knowledge might be inferred.

39 Even if that was so, it would not avail the respondent. His obligation, as a fiduciary, was to provide the appellants with all relevant information, and this he refused to do.

40 In my view, this part of the appeal should be allowed. I would now direct the respondent:

(1) to make an affidavit containing details of the purchase of the properties in North Perth with the appellant's money; and

(2) to give discovery of all documents relevant to those transactions and to any profit, actual or notional, thereby derived by the respondent, either directly or indirectly.

For the avoidance of doubt, I wish to make it plain that, in my view, it is not now open to the respondent to raise any of the equitable defences in respect of these directions or any subsequent order for an account of profits, either on his own behalf or on behalf of any of his companies by which the profit was made.

41 The respondent must be taken to have known that if he diverted an unauthorised profit to an entity owned or controlled by him, that entity would be liable as a constructive trustee under the principle of Barnes v Addy (1874) 9 Ch App 244 at 251-2.

42 In my view, it is now too late for the respondent, who knew he was being pursued as a fiduciary for relief which included an account of profits, to contend that any profit was made not by him, but by an entity, related to him, which is not a party to the proceedings: see Waddington v Silver Chain Nursing Association [1998] WASCA 331; (1998) 20 WAR 269 at 280, applying Henderson v Henderson [1843] EngR 917; (1843) 3 Hare 100 at 115.

43 The respondent took the tactical decision to contest the appellants' claim on the basis that he was not a fiduciary. His defence having been unsuccessful, the respondent must now accept the consequences.

44 Counsel for the respondent submitted that his client's conduct "was one of the most innocent breaches of fiduciary duty". That submission was based on the proposition that there had been no finding of active fraud or concealment by the respondent and that he had repaid the sum of $69,200 within a relatively short time, and used it to purchase tax stamps in accordance with his instructions.

45 Accepting all that to be true, it is also true that the respondent cannot be permitted to retain any profit he derived from his use of the appellants' money. The directions I propose are intended to explore that issue, so as to enable the appellants to make their election. I accept entirely the submission of counsel for the respondent that there should be no question of punishing his client. He should simply be required to disgorge any profit he derived, directly or indirectly, from his breach of trust.

46 Having held that the appellants should be awarded compound interest on the amount of $62,900 the learned trial judge went on to direct that interest be compounded at commercial rates with six monthly rests. Interest would commence two months after 23 September 1987, and would be calculated on the balance of the monies which should have been retained by the respondent for the purchase of tax stamps, until the whole fund had been used for that purpose.

47 This Court was told that the parties had subsequently agreed on the appropriate rates to be applied and had cooperated in the preparation of a schedule of interest calculations. There is, apparently, an error in one part of the calculations, which should be corrected.

48 In this ground of appeal, it is contended that the learned trial judge had erred in fixing the beginning and end points of the interest calculation and in holding that six monthly rests were appropriate. However, it emerged during the hearing of the appeal that, having regard to the parties' agreement in relation to interest, the only outstanding issue is the period of the rests.

49 The learned trial judge held that six monthly rests were appropriate on the basis of Wallersteiner v Moir (No 2) [1975] QB 373 at 398. In that case, the Court of Appeal held that a company director, who had improperly profited from his fiduciary position, should be required to repay the monies which had been misapplied and to pay compound interest at one per cent per annum above the official bank rate or minimum lending rate, in operation from time to time, with yearly rests.

50 According to Lord Denning MR, the rationale for the decision was that if the company had not been deprived of the money, it would have been used in the most beneficial way. Alternatively, it should be presumed that the wrongdoer had made the most beneficial use of the money.

51 In the present case, the appellants contend that interest should be compounded at monthly rests. That is not because the evidence pointed to the appropriateness of such an interval, because there was no such evidence. Rather, as leading counsel for the appellants put it, was based on "the common understanding of the way in which banking is conducted today and the accumulation of interest on a daily or monthly basis".

52 Counsel referred to Nattrass v Nattrass (1999) WASC 77 in which Buss C ordered interest to be compounded at three monthly rests. However, that was because interest had been credited at three monthly intervals to the account from which funds had been withdrawn improperly.

53 Counsel referred also to Tavistock Holdings Pty Ltd v Saulsman (1991) 9 ACLC 450, in which Anderson J awarded compound interest at bank overdraft rates, and at quarterly rests, on monies of which the plaintiff had been deprived by "faithless fiduciaries". The basis for the quarterly rests is not apparent from the judgment. It seems to have reflected an acceptance of submissions by counsel for the plaintiffs in the exercise of judicial discretion.

54 In the absence of evidence, that, I think, is the position here. It was a matter for the learned trial judge to formulate an order which compensated the appellants adequately for being kept out of their money. The judge found that if the respondent had carried out his obligations properly, he would have called on the appellants from time to time to remit the amounts necessary to purchase tax stamps. Had that been done, the appellants would have had the use of the balance of their funds for their building business. In my view, it is not unreasonable to suppose that the appellants might have turned over their money, in building projects, at six monthly intervals. I am not persuaded, therefore, that the learned trial judge was wrong to award compound interest with six monthly rests.

55 More to the point, I am not persuaded that in reaching this result, the learned trial judge mis-exercised his discretion.

57 An amount of $10,400, forming part of the $69,200, was used by the respondent to buy tax stamps to discharge the second appellants' liability in respect of the 1983 and 1984 financial years. However, the respondent did not submit the tax returns for those years; nor did he submit the stamps. In those circumstances, the appellants claimed to have $10,400 refunded to them.

58 The respondent's evidence was that it was his practice, after preparing tax returns, to obtain from his clients sums of money required to meet their tax liabilities, which would be used to purchase tax stamps. The respondent would then attach the tax stamp sheet to the tax return, which would be sent to the Tax Office.

59 To purchase tax stamps, but to fail to submit the corresponding return was therefore a clear breach of what the learned trial judge described as the respondent's "normal accounting procedures". Despite that, the learned trial judge rejected the appellants' claim. He held that the sum of $10,400 was expended properly by the respondent.

60 The reason the respondent did not file the appellants' returns for the 1983 and 1984 years was that there was an amnesty. The learned trial judge held, however, that the second appellant was not thereby absolved from the liability to pay tax on her income for those years.

61 Leading counsel for the appellants submitted that the learned trial judge erred in reaching that conclusion because income tax does not become due and payable until a notice to that effect is served on the taxpayer: Income Tax Assessment Act 1936, s 204.

62 While that is so, the submission takes no account of the primary obligation of an employer who utilises the tax stamp method of accounting for deductions, to purchase and securely affix the stamps to the book of tax deduction sheets every four-weekly periods. This obligation is summarised on the cover of each book of tax deduction sheets and is set out in detail under the heading "Instructions to Employers".

63 In these circumstances, I do not think it can be said that the sum of $10,400 has been wasted: it should have been expended by Lyndoch, as the relevant employer, in any event. There is no evidence that the tax stamps purchased by the respondent cost more than the amount which should have been deducted from the second appellant's remuneration to make provision for income tax. That being so, the second appellant has suffered no loss as a result of the respondent's failure to follow his normal (albeit inappropriate) practice in relation to the purchase of tax stamps.

64 I would not, therefore, allow this ground of appeal.

65 The first appellant claimed that a tax refund cheque for $759.68 made payable to him was received by the respondent and that he negotiated it through his bank account. The second appellant claimed that a tax refund cheque for $839.93 made payable to her was received by the respondent and that he negotiated it through his bank account. The appellants sought payment of the two amounts.

66 The learned trial judge rejected the claims. He felt "unable to draw the inference that the (respondent) has had the benefit of the (first) cheque". As to the second cheque, the learned trial judge said he was not satisfied, on the balance of probabilities that it had been received and negotiated by the respondent.

67 In neither case did the learned trial judge say he accepted the respondent's evidence that he had not received or negotiated the relevant cheque. In each case, the decision is based on inference. That being so, it is open to this Court, while giving respect and weight to the decision, to consider whether the learned trial judge drew the proper inferences from the facts as he found them: Warren v Coombes [1979] HCA 9; (1979) 142 CLR 531.

68 The evidence relating to each cheque was that it had been issued by the Australian Taxation Office and sent to the second appellant at the respondent's address. Each cheque had been negotiated. The learned trial judge did not refer to this evidence in his reasons. The respondent admitted that he had received other tax refund cheques. He had negotiated at least one such cheque and had retained another on this file. The respondent's evidence was that he had not received the first cheque and that he knew nothing of the second.

69 In these circumstances, despite the absence of the relevant statements of the respondent's bank account, and with all respect to the learned judge, I consider that the appropriate inference to be drawn, on the balance of probabilities, is that the respondent had received and negotiated both cheques for his own benefit.

70 I would therefore allow the appeal in relation to these grounds and order the respondent to pay to the second appellant the sums of $759.68 and $839.93 together with interest from the date of issue of each cheque. Interest should be paid at the rates agreed between the parties and compounded at six monthly rests.

71 The appellants claimed $3,160 from the respondent, being the value of a cheque given to him on or about 15 April 1995 to purchase tax stamps but which he negotiated into his own bank account. The respondent said the money had reimbursed him for tax stamps of his own which he had submitted on behalf of the appellants in relation to a 1979 tax return. This evidence again illustrates the failure to comply with the proper regime for the use of tax stamps.

72 The learned trial judge held that because the 1979 tax return was no longer available, he was unable to make any finding that the respondent had not annexed tax stamps to it; and that "on balance" he would accept the respondent's explanation.

73 The appellants contend that the learned trial judge erred in reaching this conclusion because he overlooked the evidence that no 1979 tax return was ever filed for the first appellant; and that no tax stamps would have been used in relation to the second appellant's return for that year because tax had been deducted at source by her employer.

74 The evidence included a copy of a book of tax deduction sheets for the 1979 year relating to both appellants. The book appears to have had affixed to it stamps to the value of $3,200, although the total deductions are said to have been $3,160, which is the amount in issue.

75 The summary sheet forming part of the book discloses that tax stamps to the value of $300 relate to the second appellant's income of $4,800 from Lyndoch. That income appears on a copy of her 1979 tax return, which shows also her income from the other employer.

76 In the cross-examination of the second appellant, she said the only conclusion she could come to in relation to the copy of the 1979 return was that it had been changed by the respondent, so that it no longer reflected the original which he had filed. However, the second appellant was unable to verify her income from the other employer, because no group certificate was available.

77 The book of tax deduction sheets discloses that the first appellant derived an income of $12,000 from Lyndoch in 1979. However, according to the Australian Taxation Office, no return was lodged for that year, and no assessment was issued to the first appellant. The situation was complicated by an apparent discrepancy between the smaller parts of the tax stamps which the respondent said he had applied to the 1979 book, and the larger parts he said he had retained.

78 The respondent gave an explanation for this discrepancy. He said he kept the larger portions of the later stamps as a replacement pool for those he had used earlier. The learned trial judge did not make any express finding about this part of the respondent's evidence, extraordinary though it was. However, the learned trial judge did say earlier in his reasons that, generally speaking, he preferred the evidence of the first and second appellants to that of the respondent. This issue did not, of course, involve a direct conflict of evidence between the parties.

79 I am persuaded that the learned trial judge erred in the way he reached his conclusion that "on balance" the respondent's explanation should be accepted. That is because he did not take into account the evidence that no 1979 tax return had been filed in respect of the second appellant. Indeed, on 7 May 1982 a summons was issued against the second appellant by the Deputy Commissioner of Taxation for income tax and additional tax for the year ended 30 June 1979.

80 In these circumstances, I would allow the appeal and order the respondent to repay to the appellants the sum of $3,160 together with interest from 15 April 1995 at the rates agreed between the parties, compounded at six monthly rests.

81 The learned trial judge ordered the respondent to repay to the appellants an amount of $5,707.13 which they had paid to him on 23 September 1987 to carry out tax work. The appellants contended, and the learned trial judge accepted, that the payment had been made in respect of work to be carried out subsequently. However, on 3 May 1988, the respondent ceased to be a registered tax agent, with the consequence that he was not permitted to charge fees for his services.

82 The respondent was ordered to pay simple interest on the sum of $5,707.13 for a period of five years, apparently on the basis that he had offered to do so. The learned trial judge regarded the respondent's offer as generous. The appellants contend in Ground 7.1 that there was no reason to apply an arbitrary cut-off of five years, when they had been kept out of their money for some thirteen years, by a fiduciary.

83 I accept that proposition. I consider that the respondent should have disclosed to the appellants on 3 May 1988, that he was no longer entitled to charge them for his services as a tax agent. He should have repaid the money then. I therefore consider that the learned trial judge erred in not requiring the respondent to pay interest from that date.

84 The respondent submitted that the appellants would have had to pay for the services of a tax agent in any event. I regard that as irrelevant. That is because, in this context, interest is payable not because the appellants have been kept out of their money, but because it must be assumed that the respondent profited from his unauthorised use of that money.

85 I would therefore allow this part of the appeal and order the respondent to pay interest on the sum of $5,707.13 at the rates agreed between the parties, compounded at six monthly rests, from 3 May 1988.

86 For a similar reason, I would allow the appeal in relation to a claim for interest on an amount of $1,193.30 the subject of ground 7.2. That was the value of a tax refund cheque in favour of the first appellant which the respondent received on 4 February 1985 and deposited in his own account. The learned trial judge declined to order the respondent to pay interest on this sum because the respondent had repaid the sum on 30 October 1992 as soon as he received a demand from the appellants.

87 However, the appellants were kept out of their money for over seven years: and the respondent had the use of it. In my view, he should pay compound interest on the above basis, from 4 February 1985 until 30 October 1992.

88 I would allow the appeal also in respect of ground 7.3 in relation to a claim for interest on an amount of $471.39, the value of a tax refund which, as the learned trial judge found, would have issued to the second appellant on 18 October 1984 but for the respondent's failure to file the relevant return promptly. Because of that failure, the second appellant incurred fines and other deductions which reduced the refund to $180.54.

89 A cheque for that amount was issued to the second appellant by the Australian Taxation Office. However, the respondent kept the cheque in his file. He paid the appellant on 30 October 1992, when a demand was made.

90 For that reason, the learned trial judge declined to order the respondent to pay interest. However, in my view the position is the same in relation to the amount of $471.37 as it is in relation to the amount of $1,193.30, the subject of ground 7. I would require the respondent to pay compound interest from 18 October 1984, credit being given for the fact that he paid $180.54 on 30 October 1992.

91 Ground 8 of the grounds of appeal sets out the orders for payment and interest to which the appellants maintained they were entitled in respect of grounds 1 to 7. These have already been dealt with.

92 By this ground, the appellants seek orders which they contend the learned trial judge should have made for the taking of accounts. However, I do not think it necessary to make any orders beyond those I would make in relation to the various grounds referred to above, in respect of which the appellants have succeeded.

93 Where I would make orders for payment of money or interest, the calculations may now be carried out. In relation to the amount of $69,200, I have proposed orders for discovery, which will enable the appellants to elect between compound interest or an account of profits.

94 The appellants appeal against the orders for costs made by the learned trial judge.

95 The result of the action was a judgment for the appellants in the sum of $16,843, to be set off against any amount payable by them to the respondent by way of costs. However, on 19 December 1997, the respondent had made an offer pursuant to O 24A to settle the appellants' claim by payment of the sum of $60,000. That offer was not accepted.

96 In those circumstances, the learned trial judge ordered the respondent to pay the appellant' costs down to 19 December 1997; and the appellants to pay the respondent's costs thereafter. The appellants were ordered to pay also the respondent's costs of proceedings pursuant to O 45, in which the respondent had been required to account.

97 Although the relief sought by the appellants included several money claims, one of the principal issues in the action was, of course, whether the respondent was a fiduciary: hence the claim for an account of profits. The risk to a plaintiff of rejecting an O 24A offer, is that costs will be awarded against him from the date of that offer, if the judgment which he obtains at trial is "not more favourable to him than the terms of the offer": O 24A r 10(5). But in determining whether that criterion has been satisfied, the court may have regard to relief which the plaintiff has obtained which does not involve the payment of money: Timms v Clift [1997] QCA 61; [1998] 2 Qd R 100. The Court of Appeal there referred to a decision of the English Court of Appeal in Roache v News Group Newspapers Ltd [1992] TLR 551, where the plaintiff in a defamation action was awarded the very sum which had been paid into court. However, the plaintiff also obtained an injunction to restrain the publication. That being so, it was the plaintiff who emerged as "the substantial winner". The defendant had "denied the plaintiff the prize which the plaintiff fought the action to win".

98 In my view, that is the position here. The appellants were entitled to prosecute the action in order to obtain a finding that the respondent was a fiduciary and to be able to investigate whether he had profited from the unauthorised use of their money. In those circumstances, I consider that the appellants were justified in rejecting the O 24A offer. I consider also that the discretion exercised by the learned trial judge miscarried, because he did not take this factor into account. The appellants contend that in these circumstances, the respondent should pay their costs of the action. I agree. I would therefore allow this part of the appeal and make an order in those terms.

99 I turn to the account proceedings which were the subject of the other part of the costs order. On 7 December 1992, the appellants sought an order for an account before trial in relation to an amount of $107,940 which they had paid to the respondent. The appellants did not pursue the matter until 1995, when Acting Master Chapman ordered the respondent to account. This he did, on a debtor-creditor basis.

100 The appellants accepted that in relation to an amount of $35,580 the respondent had accounted properly. The appellants did not accept that he had done so in relation to the amounts of $69,200 and $3,160 which are now the subjects of grounds 1 and 6 of this appeal, because he had not accounted as a fiduciary.

101 The respondent applied to Master Bredmeyer for the costs of the account proceedings. The learned Master ordered the appellants to pay one third of the respondent's costs, because the account in relation to the amount of $35,580 "produced nothing more for the (appellants) than they already had". The learned Master ordered that the remaining two thirds of the costs be in the cause. That decision was upheld by the Full Court on an interlocutory appeal by the respondent: Ekamper v Stambulich, FCt SCt of WA; Library No 970639; 7 November 1997.

102 The learned trial judge dealt with the outstanding costs as follows:

"In my opinion also the defendant should have a costs order for the two interlocutory accounting exercises, the first of which (the debtor/creditor account) was entirely useless in the action and, the second of which, was undertaken before it was pleaded against the defendant that he was a fiduciary. The defendant says he was always prepared to account to the plaintiffs on a fiduciary basis, if that was required of him. In the circumstances, therefore, the defendant should also be awarded the remaining costs of the account, taken on a fiduciary basis"

With respect to the learned trial judge, that passage contains an error. The appellants pleaded from the outset that the respondent was a fiduciary. They maintained that plea through subsequent amendments to the statement of claim.

103 I am not persuaded that the account ordered by Acting Master Chapman was a pointless exercise insofar as it related to the amounts of $69,200 and $3,160. That is because an account prepared on a debtor-creditor basis provides the starting point for a fiduciary account. As the appellants have succeeded in the fiduciary issue, and as Master Bredmeyer's order that the outstanding costs be in the cause was upheld on appeal, I consider that the respondent should now be ordered to pay those costs.