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[2010] QSC 421
Supreme Court of Queensland
2010-11-11
Margaret Wilson J
Original judgment source is linked above.
The amount of the accretions was inserted in Downes' handwriting, and the words "payable to James Conomos Lawyers" were inserted in Conomos' handwriting. The draft order was signed by Pitman, Downes as counsel for the third respondent (Smits) and Conomos as solicitor for the first respondent (Pioneer). I am satisfied that these changes were made before the application was called on before White J.
[89] BBF and Dewar[80] had been served with the application but did not appear in response to it. There is no evidence that MacGillivrays or Jefferson & Joiner maintained any claim against the fund.
[90] White J made orders in proceeding 6354/06 reflecting the amended draft.[81]
[91] In the present proceeding, Togito alleged that it had given notice of its interest in the fund by Dibbs Abbot Stillman's letter of 1 August 2007, and that there was no determination by White J as to the entitlement of Pioneer in the fund or that Pioneer had priority to the fund ahead of Togito, BBF, Dewar, MacGillivrays or Jefferson & Joiner.[82]
[92] Smits acknowledged that Dibbs Abbott Stillman's letters of 1 and 2 August 2007 accorded with his instructions.[83] In the first of those letters, they said they were acting for both Smits and Togito, and in the second they conveyed the substance of Togito's instructions to them. Togito was not a party to the application. When the order came to be made, Downes correctly announced her appearance as being on behalf of Smits. Nevertheless, in all the circumstances I am satisfied that Dibbs Abbott Stillman acted for Togito as well as Smits in negotiating the terms of the consent order, and when Gubbins instructed Downes to consent to the draft order as amended. I reject Smits' evidence that they were acting only for him in his personal capacity.[84]
[93] The order of White J was that the balance of the fund be paid to Pioneer. The mechanism for that payment was payment to the trust account of James Conomos Lawyers. Even if that was a variation of the deed of settlement (which I doubt), it was a variation agreed to by Smits by his solicitors. If it defeated then existing rights of Togito (which I doubt), that was an outcome to which Togito consented by its solicitors Dibbs Abbott Stillman.
"On 2 August 2007 Conomos in his capacity as the solicitor for Pioneer and on his own behalf agreed to hold part of the Fund in the amount of $323,192.61 in his trust account (the James Conomos Lawyers Trust Account) pending the determination of the dispute with Togito ('the Undertaking')."[85]
[95] In particulars supplied on 5 February 2009, Togito alleged that the agreement/undertaking was partly express (being partly oral and partly in writing) and partly implied.[86] Those particulars were as follows -
(b) Impliedly from the facts and circumstances that on 1 August 2007 the second defendant undertook in writing to the plaintiff's solicitors that the subject trust funds would be paid into Court pending the resolution of the dispute between the parties as to the disposition of those funds, on 2 August 2007 the draft Order formulated by the second defendant was amended in handwriting by the second defendant to allow payment of the funds in lieu of payment to the first defendant and on 3 August 2007 the second defendant collected a trust cheque from Morgan Conley, Solicitors drawn in favour of the trust account of the firm of the second defendant and the funds were paid into that trust account and in accordance with the terms of the Deed of Settlement dated 13 June 2007.
(c) In so far as the Agreement was express, it was partly oral and partly in writing;
(d) In so far at [sic] it was written, herewith is a copy of the Order as amended in handwriting by the second defendant and the terms of the Deed of Settlement dated 13 June 2007;
(e) In respect of the oral component of the Agreement:
(ii) the persons who were parties to the oral conversations were the second defendant, Anne Gubbins, Solicitors and the Counsel, Ms Kylie Downs for Leo Smits and indirectly Leo Smits;
(iii) as between the second defendant, Anne Gubbins, Solicitor and Counsel, Ms Kylie Downs and for Leo Smits the conversations were in person and as between Anne Gubbins and Leo Smits the conversation was by telephone;
(iv) the material words or substance of the conversation or conversations were as deposed to by Leo Smits in his 15 December 2008 affidavit."
[96] Conomos denied this allegation, pleading that there was no such agreement, that the disposition of the money was dealt with by the consent order of 2 August 2007 and that the only agreement concluded by the parties was that evidenced by that consent order.[87]
[97] I find that no such undertaking was given and no such agreement was made.
[98] In his instructions to Guthrie at 7.52 am that morning Smits had referred to the balance of the fund as "the Pioneer balance".
[99] There is no evidence to support the oral making of any such undertaking/agreement.
[100] Those present at Court were Pitman, Conomos, Downes, and Gubbins. During the negotiations Gubbins telephoned Guthrie, who in turn telephoned Smits.
[101] Pitman was not called as a witness. I infer that he could not have given evidence of an undertaking or agreement as alleged.[88]
[102] Downes, Guthrie and Gubbins all made statements which were admitted into evidence.[89] None of them was cross-examined.
[103] I accept the evidence of Downes that she did not receive any instructions to enter into any agreement with Conomos that he was to hold the money in his trust account pending a determination as to who was entitled to the balance of the fund, and that she did not have any discussion with him to that effect.
[104] I accept the evidence of Gubbins that she did not have any discussion with Conomos at Court to that effect, and that had there been such a discussion she would have instructed Downes to have the terms of the agreement or undertaking recorded as part of the consent order. I accept her evidence that she did not inform Smits that Conomos had agreed to hold the moneys in his trust account pending a determination as to who was entitled to the balance of the fund. Indeed, she did not speak with Smits while she was at Court that day.[90]
[105] Gubbins telephoned Guthrie from the courthouse about the proposed amendment of the draft order. Despite her uncertainty about precisely when the words "payable to James Conomos Lawyers" were inserted, I am satisfied on the balance of probabilities that all of the handwritten amendments had been made before she called Guthrie.
[106] Guthrie called Smits for his instructions. I accept the evidence of Guthrie -
"14. I recall that Ms Gubbins rang me on my mobile phone from Court during the course of the morning. At the time, I was out of the office.
[107] Nor is there any evidence to support the making of any such undertaking/agreement in writing or by implication.
[108] In his letter of 1 August 2007, Conomos said that pending resolution of the dispute between Pioneer, Smits and Togito, he would inform the Court of that dispute and ask that the whole of the money be paid into Court. The relevant handwritten change to the draft order was the addition of the words "payable to James Conomos Lawyers". The draft order still provided for payment of the balance to Pioneer: the effect of the handwritten change was merely to provide a mechanism for achieving that end.
[109] In their letter of 2 August 2007 Dibbs Abbott Stillman said Togito was prepared to permit the funds to be released in accordance with the order of Chesterman J and the agreement between Pioneer and Smits made 13 June 2007.
[110] The deed of settlement of 13 June 2007 provided for the payment of the fund to Smits and James Conomos Lawyers Trust Account in the same proportions as those in the consent order;[91] the order of Chesterman J recited that upon Pioneer strictly complying with the terms of settlement, Smits abandoned his claim to the fund. At the time that deed was executed, Pioneer did not know of the assignment from Smits to Togito. There was nothing in that deed from which an agreement/undertaking on 2 August 2007 to hold the balance of the fund pending resolution of the dispute with Togito could be inferred.
[111] The signed draft consent order did not expressly provide that Conomos was to hold the money as a trustee. It did not identify the purpose or duration of any trust upon which he was to hold the money.
[112] On Friday 3 August 2007 Conomos caused a member of his staff to collect a cheque for $323,192.61 drawn in favour of James Conomos Lawyers Trust Account[92] from Morgan Conley. He did not receive any notice from Morgan Conley that Pitman did not have the authority or consent of Togito to pay the money from its trust account.[93] He deposited it into his trust account, as he was obliged to do by s 248 of the Legal Profession Act 2007 (Qld), and obtained a special clearance on it that day. Later that day, not having received notice from anyone that ownership of the moneys was in dispute, he paid the moneys out of his trust account in accordance with a trust account authority signed by Loel as director of Pioneer.[94]
[113] At 9.01 pm on Sunday 5 August 2007 Smits sent Conomos an email headed "Notice under Trustee Accounts Act 1973 (Qld)" and signed "Leo Smits Sole director, Togito Pty Limited".[95] Conomos read it when he arrived at his office the next morning. Smits asserted that Togito had an interest in the balance of the fund as his assignee of "all of [his] rights, title and interest in any and to all debts, loans and associated security concerning formerly registered Mortgages 704544382, 707227959, 703707735, 709100851 and 703494840". He said -
"Togito did not object in the face of an order of the court for payment out of the fund of all moneys, interest and/or costs due, or payable to or chargeable by:
(1) Smits pursuant to the Trust Account issued to Morgan Conley by Pioneer on 13 June, 2007;
(2) Morgan Conley on account of their trusteeship of or over the fund established by Order of de Jersey CJ on 17 October, 2006;
(3) the balance to the trust account of James Conomos Lawyers.
Accordingly, Togito hereby gives to you notice pursuant to Section 12(3) of the above Act not to distribute any other portion or part of the trust funds represented or included in item (3) above, against which Togito has claims under the Mortgage Rights. Togito confirms and gives to you further notice of Togito's interest in the trust funds and in priority to any alleged claim of Pioneer, which is denied absolutely by Togito in any event."
[114] Togito's purported notice under s 12(3) of the Trust Accounts Act 1973 (Qld) is not consistent with an agreement/undertaking having been made on 2 August 2007. In any event, the Trust Accounts Act 1973 (Qld) had ceased to be applicable to legal practitioners with the commencement of the Legal Profession Act 2007 (Qld) on 1 July 2007, and Conomos had already disbursed the funds.
[115] In summary, Conomos received the moneys pursuant to the consent order of 2 August 2007. In doing so he received them subject only to his obligations to Pioneer. He acted properly in paying the moneys as he did.
Conclusion on Togito's claims against Pioneer and Conomos
[116] I am satisfied that there was no breach of trust by Conomos or Pioneer.
[117] Conomos received the moneys into his trust account pursuant to the consent order. I have found that Dibbs Abbott Stillman acted for Togito in consenting to the disposition of the moneys in accordance with the terms of the draft order negotiated by Downes and Conomos. Even if that finding ought not to have been made, Conomos had no more than notice of a claim by Togito: Togito did not establish that he knew its claim was well founded and that accordingly Pioneer had no authority to give instructions for the disbursement of the moneys.[96]
[118] Before the orders were made by White J, Togito by its solicitors consented to the proposed disposition of the moneys. Pioneer received the moneys in accordance with the order of the Court. In doing so, it did not act in breach of trust.
[119] Togito's claims against Conomos and Pioneer should be dismissed.
[120] In Magill v Magill[97] Gleeson CJ said -
"The elements of the tort of deceit were stated by Viscount Maugham, in Bradford Third Equitable Benefit Building Society v Borders[98], as follows (omitting his Lordship's citation of authority):
'First, there must be a representation of fact made by words, or, it may be, by conduct. The phrase will include a case where the defendant has manifestly approved and adopted a representation made by some third person. On the other hand, mere silence, however morally wrong, will not support an action of deceit. Secondly, the representation must be made with a knowledge that it is false. It must be wilfully false, or at least made in the absence of any genuine belief that it is true. Thirdly, it must be made with the intention that it should be acted upon by the plaintiff, or by a class of persons which will include the plaintiff, in the manner which resulted in damage to him. If, however, fraud be established, it is immaterial that there was no intention to cheat or injure the person to whom the false statement was made. Fourthly, it must be proved that the plaintiff has acted upon the false statement and has sustained damage by so doing.'
His Lordship's reference to 'mere silence' contemplates, by way of contrast, the possibility of a case where there is a legal or equitable duty to speak and disclose the true facts" (Emphasis added)
[121] Pioneer's counterclaim against Smits and Togito for damages for fraudulent misrepresentation is largely a defensive proceeding premised on its not succeeding in its defence to Togito's claim. The damages claimed were particularised as follows -
"(a) the amounts payable (if any) by Pioneer to Togito in respect of Togito's claim against Pioneer;
(b) the amounts payable (if any) by Pioneer to Conomos in respect of legal fees if Conomos is required to pay Togito some or all of the amounts received by Conomos from Pioneer in respect of Conomos' legal fees;
(c) the costs (on an indemnity basis) of and incidental to engaging James Conomos Lawyers to act on its behalf to respond to the correspondence and application referred to in paragraph 25 of the statement of claim; and
(d) the costs (on an indemnity basis) of and incidental to defending these proceedings."[99]
The application was the one made by Pitman under the Trusts Act 1973 (Qld) s 96 which came before White J on 2 August 2007, referred to in paragraph 26 of the further amended statement of claim.
[122] Because Togito has failed on its claim, Pioneer cannot recover the damages under paragraphs (a) and (b) of its counterclaim.[100] This leaves the claims for indemnity costs of responding to correspondence and the application under the Trusts Act 1973 (Qld) and indemnity costs of defending Togito's claim in this proceeding.
[123] The counterclaim was formulated in this way. Togito and Smits knew of the assignment from Smits to Togito when the deed of settlement was executed: Smits had executed the assignment on his own behalf and on behalf of Togito. They did not disclose the assignment to Pioneer and Loel, who they believed were ignorant of it. Pioneer alleges that this conduct constituted a representation to Pioneer and Loel that Smits continued to hold the rights alleged in paragraph 13 of the statement of claim:
"On 31 July 2006 Shirlaw and Ostabridge assigned and transferred to Smits their rights in respect of Mortgages 702987988, 704246070, 703494840, 703570735, 704544382, 707227959 and 709100851 including their rights in respect of the Section 88 Trusts."
The representation is alleged to have been fraudulent having regard to Smits' and Togito's knowledge of the assignment, their failure to disclose it, and their belief that Pioneer and Loel were ignorant of it. Pioneer and Loel are alleged to have relied on the representation in executing the deed of settlement.[101] The losses claimed are alleged to have been sustained as a result of the fraudulent misrepresentation. But the pleading does not contain an allegation that the representation was made with the intention it should be acted on by Pioneer and Loel in a manner resulting in the alleged loss and damage[102] - an essential element in the tort of deceit.
[124] Fraud is a very serious allegation, which must be strictly proved.[103]
[125] The representation relied on was a representation by silence.
[126] This is more than a case of non-disclosure of knowledge of changed circumstances: Smits brought about that change of circumstances and then failed to disclose having done so. In the circumstances his silence was morally wrong. Nevertheless, I am not persuaded that he had a duty of disclosure.
[127] The parties were negotiating at arm's length. Pioneer was represented in the negotiations by a solicitor (Conomos personally until he went overseas, and then Allard, a solicitor in Conomos' employ), and its sole director Loel was himself a solicitor. Neither Conomos nor Loel made any relevant inquiry to establish whether Smits had dealt with his interest in the Togito mortgages in any way adverse to Pioneer or Loel. There would have been a duty of disclosure if the parties had stood in some fiduciary relation to each other or if there were a relevant statutory duty, [104] but this was not such a case.
[128] Pioneer did not prove that it relied on the alleged representation.
[129] Loel's evidence was that his primary focus in entering the deed of settlement was the discontinuance of proceedings, withdrawal of caveats, transfer of a property, assignment of a costs order and payment of some moneys. He was being advised by a solicitor, who was conducting the negotiations for him. He did not focus on the Togito mortgages at all.[105] His evidence went no further than that, had he known of the assignment to Togito, because of his distrust of Smits, he would have been wary to the point of not signing the deed.[106]
[130] At trial, considerable time was spent in the cross-examination of Smits in an endeavour to prove his intention to induce Pioneer and Loel to enter into the deed of settlement and then, through Togito, to continue to litigate claims they believed were compromised by the deed of settlement. His explanation of his conduct was attacked as commercially and legally unsound and dishonest.
[131] For the reasons I have already given, I consider that the counterclaim must fail. Accordingly, it is not necessary for me to make a finding as to Smits' real intention in assigning his interest in the Togito mortgages on 12 June 2007.
[132] For the sake of completeness, I mention another reason why Pioneer could not succeed against Smits on part of the counterclaim. Pioneer's costs of responding to correspondence and the application under the Trusts Act 1973 (Qld) were its costs of and incidental to that application, to which it was a party. White J ordered, by consent, that each party to the application should pay its own costs. In consenting to that order, Pioneer compromised any right it may have had to recover those costs from Smits.
[134] I will hear the parties on the form of the orders and on costs.
[1] Order of White J, court document 103 in proceeding 6354/06, between Joel Hunter Pitman (applicant) and Pioneer Investments (Aust) Pty Ltd (first respondent), Business Bridging Finance Pty Ltd (second respondent), Leonardus Gerardus Smits (third respondent) and Mary Dewar (fourth respondent).
[3] Trial bundle (exhibit 1) tabs 154, 29, 33. In subsequent footnotes, unless noted to the contrary, documents cited relate to this matter, namely file number 5325/08.
[4] Organisational search on Ammbar Pty Ltd (exhibit 12).
[8] See affidavit of Loel sworn 29 September 2009 (court document 133; exhibit 21) paras 1-15, 19-21, 30.
[9] Trial bundle tab 23 Declaration of Trust dated 11 November 2005; but see further amended statement of claim filed by leave on 24 May 2010 (court document 203) para 4.
[10] Trial bundle tab 26 Declaration of Trust dated 9 December 2005; but see further amended statement of claim filed by leave on 24 May 2010 (court document 203) para 5.
[12] Trial bundle tab 157; affidavit of Loel in proceeding 9791/05 sworn 20 November 2005, para 9.
[14] There were two versions of the contract: Trial bundle tabs 27 and 28. The second version included a provision: "The purchase price payable shall be reduced by the amount owed under Bill of Mortgage 704246070 which the property is being sold subject to and Bill of Mortgage 702987988." The trial of this proceeding was conducted on the basis that nothing turned on which was the correct version. Transcript 1-8 - 1-9.
[18] Affidavit of Loel sworn 29 September 2009 (court document 133; exhibit 21) paras 114 - 115. The written submissions of senior counsel for Pioneer refer to the $500,000 in fact being paid into an account in the names of Shirlaw, Jefferson & Joiner, White as trustee for Broadbeach Vista, Ammbar and Gallus Properties. Nothing seems to turn on this discrepancy.
[23] Wright v New Zealand Farmers' Co-operative Association of Canterbury [1939] UKPC 30; [1939] AC 439, [1935] NZLR 614.
[26] Real Property Act 1900 (NSW) s 58(3).
[27] Property Law Act 1974 (Qld) s 87.
[29] Proceeding 336/06; [2006] QSC 153; trial bundle tab 162.
[31] Exhibit 16; see also trial bundle tab 37.
[33] Court document 17 in proceeding 6354/06.
[36] Affidavit of Loel sworn 29 September 2009 (court document 133; exhibit 21) para 153; trial bundle tab 171.
[38] Affidavit of Loel sworn 29 September 2009 (court document 133; exhibit 21) para 156.
[40] The principal secured by the Dewar Mortgage was $300,000. Peter Gallus guaranteed Ammbar's obligations to Dewar. Pursuant to that guarantee, Gallus paid Dewar $150,000. That payment by Gallus was funded by BBF. See transcript 2-54 - 2-55.
[41] Affidavit of Conomos sworn 18 June 2008 (court document no 4; exhibit 22) para 25.
[44] The caveats were over "the balance stage 7 lots" and "the stage 8 lot". Presumably, lot 202 had been subdivided, and Pioneer had protected the interest it claimed in the land by lodging caveats against the lots in the subdivision. This was not expressly dealt with in the evidence.
[46] Pursuant to the deed of assignment of 31 July 2006, trial bundle tab 35.
[49] Affidavit of Conomos sworn 24 November 2008 (court document 19, exhibit 23) exhibit JNC 1, pp 166-197.
[51] Letters from Morgan Conley to Ammbar Pty Ltd care of Jefferson Stevenson & Co dated 13 July 2007 and letter from Forbes Dowling Lawyers to James Conomos Layers dated 20 July 2007 (exhibit 10).
[52] Mortgage 709480691; transcript 1-68.
[53] Amended copy of affidavit of Smits sworn 29 June 2009 (exhibit 5) para 95.
[55] Amended copy of affidavit of Smits sworn 29 June 2009 (exhibit 5) para 151(e).
[57] Transcript 1-68 - 1-69; amended copy of affidavit of Smits sworn 29 June 2009 (exhibit 5) para 151.
[58] Transcript 1-73, 1-83, 2-37, 2-44.
[59] Emails between James Conomos Lawyers and Morgan Conley Solicitors between 30 May 2007 and 13 June 2007 (exhibit 14).
[60] By the deed of settlement Pioneer agreed to assign its interest in that mortgage to Smits.
[67] Affidavit of Conomos sworn 18 June 2008 (court document 4; exhibit 22) JNC1, tab 9; paras 28-30, 43-44.
[72] Witness statement of Guthrie (exhibit 8) SDG-3.
[73] Trial bundle tab 133; witness statement of Guthrie (exhibit 8) SDG-4.
[74] Witness statement of Guthrie (exhibit 8) SDG-5; witness statement of Gubbins (exhibit 9) para 10; AEG-5.
[76] Transcript 2-64 - 2 -65; bundle of emails between Dibbs Abbott Stillman and Smits of 2 August 2007 (exhibit 15).
[78] The amount of $176,590 was comprised of $156,590 plus $20,000 GST on the transfer of one lot in the development to Pioneer pursuant to the deed of settlement of 13 June 2007 (trial bundle tab 49).
[79] Trial bundle tab 135; affidavit of Conomos sworn 18 June 2008 (court document 4; exhibit 22) JNC tab 24; paras 49-54; statement of Downes of 19 May 2009 (exhibit 7).
[80] On 1 August 2007 Pitman told Conomos he had received notice Dewar was withdrawing her claim to the fund: trial bundle tab 132.
[81] Court document 103 in proceeding 6354/06.
[82] Further amended statement of claim filed by leave 24 May 2010 (court document 203) para 26(d); plaintiff's outline of submissions (exhibit 37) paras 45-46.
[85] Further amended statement of claim filed by leave on 24 May 2010 (court document 203) para 25A.
[86] Further and better particulars requested by second defendant on 28 January 2009 in respect of the amended statement of claim filed on 24 December 2008 (court document 55).
[87] Amended defence of the second defendant filed 23 January 2009 (court document 53) para 24.
[88] Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 at 308; RPS v R [2000] HCA 3; (2000) 199 CLR 620.
[89] Statement of Downes (exhibit 7), statement of Guthrie (exhibit 8) and statement of Gubbins (exhibit 9).
[90] Cf. Smits in cross-examination: transcript 2-58 - 2-59.
[91] See trust account authority attached to the deed: trial bundle tab 49; order of Chesterman J exhibited to affidavit of Conomos sworn 24 November 2008 (court document 19; exhibit 23).
[92] Affidavit of Conomos sworn 24 November 2008 (court document 19; exhibit 23) paras 48-50, JNC1 p 189; affidavit of Conomos sworn 18 June 2008 (court document no 4; exhibit 22) paras 56-58.
[93] Affidavit of Conomos sworn 18 June 2008 (court document no 4; exhibit 22) para 56.
[94] Affidavit of Conomos sworn 18 June 2008 (court document no 4; exhibit 22) paras 58-60.
[95] Trial bundle tab 136. In fact there were two directors - Smits and his wife: trial bundle tab 155.
[96] Carl Zeiss Stiftung v Herbert Smith & Co (No 2) [1969] 2 Ch 276.
[97] [2006] HCA 51; (2006) 226 CLR 551 at 567.
[98] [1941] 2 All ER 205 at 211.
[99] Second amended defence and amended counterclaim of the first defendant (court document 91) para 54.
[100] Counsel for Pioneer conceded this in his written submissions at para 87.
[101] Second amended defence and amended counterclaim of the first defendant filed 19 May 2009 (court document 91) paras 43, 46.
[102] Second amended defence and amended counterclaim of the first defendant filed 19 May 2009 (court document 91) paras 46, 52, 54.
[103] Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 at 362.
[104] See John Fleming ,The Law of Torts (Law Book Co, 9th ed, 1998) 696.
Togito Pty Ltd
Pioneer Investments
Bofinger v Kingsway Group Ltd (2009) 239 CLR 269; [2009] HCA 44, cited
Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 at 362, cited
Magill v Magill [2006] HCA 51; (2006) 226 CLR 551, cited
(2009) 239 CLR 269
(1938) 60 CLR 336
(2006) 226 CLR 551
(1959) 101 CLR 298
(2000) 199 CLR 620