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Kenfrost (1987) Pty Ltd v Lyne

 

[2014] QSC 322

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

Kenfrost (1987) Pty Ltd v Lyne & Ors [2014] QSC 322

PARTIES:

Kenfrost (1987) Pty Ltd (ACN 082 384 325)

and 

Brendan Allan Lyne 

(First Defendant)

and

Stacey Lea Lyne

(Second Defendant)

and

RNB Group Pty Ltd (ACN 125 789 853)

(Third Defendant)

and

Leaco Pty Ltd (ACN 120 801 309)

(Fourth Defendant)

FILE NO:

CNS 316 of 2009

DIVISION:

Trial

PROCEEDING:

Trial

ORIGINATING COURT:

Supreme Court at Cairns

DELIVERED ON:

19 December 2014

DELIVERED AT:

Townsville 

HEARING DATE:

29, 30, 31 January 2013, 1, 4 February 2013

JUDGE:

North J

ORDERS:

  1. Judgment for the plaintiff against the first defendant for $1,002,927.43.
  1. Judgment for the plaintiff against the fourth defendant for $479,512.72.
  1. The plaintiff’s claims against the second defendant and the third defendant be dismissed.
  1. The parties have leave to file and serve written submissions concerning costs by 30 January 2015.
  1. If no party makes any submission as ordered by Order 4 then the orders will be:

(i) The first defendant and the fourth defendant pay the plaintiff’s costs of and incidental to the claim, including reserved costs if any, to be assessed on the standard basis.

(ii) No order as to the costs as between the plaintiff and the second defendant and the third defendant.

CATCHWORDS:

EMPLOYMENT LAW – other rights and duties of parties – whether general manager owed duty as Fiduciary

FIDUCIARY – breach - remedies

LEGISLATION:

CASES:

Corporations Act 2001 (Cth)

Farah Constructions Pty Ltd & Ors v Say-Dee Pty Ltd (2007) 230 CLR 89

Breen v Williams (1995-1996) 186 CLR 71

Chan v Zacharia (1983-1984) 154 CLR 178

Deeson Heavy Haulage Pty Ltd v Cox & Ors [2009] QSC 277

Grimaldi v Chameleon Mining NL (2012) 287 ALR 22

Hospital Products Limited v United States Surgical Corporation & Ors (1984-1985) 156 CLR 41

Tan Hung Nguyen v Luxury Design Homes Pty Ltd [2004] NSWCA 187

Woolworths Limited v Olson & Anor [2004] NSWSC 849

COUNSEL:

M D Martin for the Plaintiff

The first defendant appeared in person representing himself, the second defendant and the fourth defendant.

SOLICITORS:

MacDonnells Law for the plaintiff

[1] The plaintiff at material times operated a residential house building business in and about Cairns trading under the name David McCoy Homes (“DMH”).  Evidence before me suggests that the plaintiff conducts other businesses such as civil engineering and house construction under its own name and perhaps under other business names.  This case concerns the business the plaintiff operated as DMH.

  1. The first defendant was employed as the general manager of DMH from about 4 August 2003 until about 17 December 2008.
  1. The first and second defendants are husband and wife and the sole shareholders in the fourth defendant. At material times the first defendant was the sole director and the company secretary of the fourth defendant. At times relevant to this action the fourth defendant carried on a business under the name or style “Lights N More”.
  1. The plaintiff alleges the first defendant was a fiduciary of it and breached fiduciary duties owing to it. Alternative claims are alleged that, as an “officer” of the plaintiff (within the meaning of that term as used in the Corporations Act 2001 (Cth)) that the first defendant breached duties imposed by s 181 and s 182 of that Act.  It was also alleged that the first defendant breached implied terms of the contract of employment to act with good faith and fidelity, to perform his duties with reasonable skill and care and to render honest and faithful service.  At trial and in addresses the plaintiff tended to emphasise the claim based upon the breach of fiduciary duty but the other arguments were maintained. 
  1. The claims against the second and fourth defendants were, as pleaded, that they knowingly assisted the first defendant in his improper design within the second limb of Barnes v Addy.[1] At trial the plaintiff did not cross examine the second defendant.  In address counsel for the plaintiff made no submission with respect to the second defendant.
  1. The third defendant is now deregistered and no claim was pursued against it at trial but its activities at relevant times and the involvement of the first defendant in the business of the third defendant are in issue. At relevant times the first defendant was one of two directors of the third defendant and was its company secretary. The other director was one Roberto Lorefice. The fourth defendant at relevant times held 60 of the 120 ordinary shares which had been issued by the third defendant. The other 60 shares were held by a company controlled by Mr Lorefice, Lorefice Investments Pty Ltd ACN 091690854 (“Lorefice Investments”).
  1. In the upshot although the activities of the first defendant which involved the third defendant corporation are relevant to relief claimed against the first defendant the only claims for relief that were pressed at trial were those against the first and fourth defendants.

The Contract of Employment

  1. There is a dispute between the plaintiff and the first defendant as to the entitlements of the first defendant as agreed to by the plaintiff when he was employed. This has relevance to some of the claims made by the plaintiff against the defendant and it is convenient to address this issue at the outset.
  1. The sole director and shareholder of the plaintiff company was Mr John Richardson. Mr Richardson’s evidence was that the plaintiff was primarily a civil engineering company, that built roads bridges and the like, but which also carried on the business of house building. Mr Richardson said that he had experience in housing and had held a builder’s licence in Western Australia. In 2003 the plaintiff acquired the business of DMH from the previous owners. He met the first defendant who was then an employee of the National Bank in Cairns. Mr Richardson said that prior to purchasing the business of DMH he had consultations with his bankers concerning the proposed acquisition. The first defendant who was one of the assistants to the manager of the bank in Cairns approached Mr Richardson and asked whether he was looking for a manager of the business. Mr Richardson said that the agreement to employ the first defendant was reached in a subsequent conversation or series of conversations. Mr Richardson said that he told the defendant that as part of his remuneration package as general manager of the business he “could build two houses at cost for himself per year”.[2]  The defendant’s evidence was that Mr Richardson told him that he could build two staff houses per year at cost in his wife’s name to save on tax.[3] 
  1. Mr Richardson denied that in his discussions with the first defendant he said that the houses could be constructed in the names of nominees being the wife or another entity associated with the first defendant.[4]  When cross-examined by the first defendant Mr Richardson said that if, at a time when the first defendant was married, he had been approached and asked to agree to a staff house being built in the name of the first defendant’s wife he might have considered the proposal.  But his evidence was that at no time was he asked nor did he agree to staff houses being built in the name of a spouse or any other related entity.[5] 
  1. The first defendant in his amended counterclaim[6] has pleaded the terms of remuneration agreed, as alleged by him, on or about 4 August 2003 and as subsequently varied by discussions and agreements with Mr Richardson from time to time.[7]  For the most part the plaintiff does not dispute the alleged remuneration terms[8] but the plaintiff denies that, in relation to staff houses, words or words to the effect of “a related party’s name to save on tax” were said by Mr Richardson.  It is common ground between the parties that Mr Richardson used the words “at cost” when referring to the price to be paid by employees for staff houses.

Findings in relation to the contract and findings in relation to credit.

  1. When Mr Richardson gave evidence he was inclined to answer questions by asking questions. I gained the impression that he was a strong willed man who, as an experienced and apparently successful businessman, was used to asking not answering questions of others. He impressed me as a man who knew his business and was careful to be precise in his business dealings.[9]
  1. The resolution of the disputed conversation concerning staff houses depends upon whose evidence I accept. Notwithstanding the combative way in which Mr Richardson gave his evidence I was impressed by him as a man who knew his business and who was trying to accurately recall what was said and what occurred. By contrast I was not impressed by the first defendant as a witness of credit. For the reasons that I will give I have concluded that the first defendant acted improperly against the interests of his employer in a number of respects. I gained the impression from the plaintiff that he did not understand the significance of some of his conduct. At times he seemed not to understand the wrongfulness of his conduct, a product of what might be an obtuse morality. In the upshot I prefer the evidence of Mr Richardson.
  1. Other witnesses gave evidence on behalf of the plaintiff. They included Mr Stanislaw Nowak (a surveyor), Ms Carol Murray (a personal assistant), Mr Ian Barkley (a building supervisor), Mr Barry Van Der Sanden (a surveyor), Mr Graeme Puccini (building supervisor), Mr Sam Nucifora (electrical contractor), Mr Cyrus Vudrag (a waterproofing subcontractor), Mr Craig Allan (an estimator), Ms Lisa Harris (an external chartered accountant), Mr Andre Klaassen (tiler), Ms Lynda Clark-Brown (office worker), Ms Margot Berridge (office worker) and Mr Darryl Kruse. In large measure their evidence was not the subject of challenge and in some respects was supported by the documentary evidence. I am satisfied that their evidence was reliable and I propose to act upon it in the ways that I will discuss.
  1. The documentary evidence was substantial. Exhibit 3 comprised eight lever arch volumes of documents that was described as a “trial bundle”. Initially the eight bundles were marked for identification.[10]  The first six volumes were documents that the plaintiff relied upon.  The documents in volumes 7 and 8 were documents that the first and fourth defendant primarily relied upon, although the plaintiff made use of some at times during the trial.  Ultimately all eight volumes were tendered into evidence and became Exhibit 3.[11]  The particulars of a number of the claims advanced by the plaintiff were set out in six schedules styled Annexure A-F which comprised Exhibit 2.  These schedules were essentially proved by the witnesses Berridge[12] and Kruse[13] who assisted in the preparation of those documents having regard to the contents of the documents in Exhibit 3 with which they were familiar by reason of their occupation or duties.

The first defendant as general manager

  1. The first defendant enjoyed significant autonomy as general manager of DMH. He supervised office staff and directed experienced employees such as Mr Barclay who was a building supervisor. He had authority to operate the cheque account. It is admitted on the pleadings that he had authority to contract on behalf of the plaintiff.[14]  In the defence it is admitted that he made or participated in decisions which affected a substantial part of the plaintiff’s business known as David McCoy Homes and that he had the capacity to affect the financial standing of the DMH business.[15]  He was successful in growing the business and generating income.  He commenced duties after his appointment on or about 4 August 2003.  The total sales at the end of 30 June 2004 were $5,124,749.74.[16]  The trading income as at 2005 had grown to $8,551,827.22, as at 30 June 2006, $7,506,827.46, as at 30 June 2007, $11,907,623.31 and as at 30 June 2008 $32,986,958.55.[17]  Such were the profits that the first defendant was paid a performance bonus in respect of the year ended 30 June 2008 of $269,331.[18]
  1. The first defendant admitted that he was an “officer” of the plaintiff within the meaning of the Corporations Act 2001 (Cth)[19].  Accordingly it is not in issue that the first defendant in his capacity as the general manager of DMH had the capacity to affect significantly not only the financial standing of DMH but through that, the financial standing of the plaintiff.  This same consideration applies to the first defendant’s participation in making decisions which affected a substantial part of the plaintiff’s business generally.

Was the first defendant a fiduciary of the plaintiff?

  1. It is well recognised that an employee can be in a fiduciary relationship with an employer. In Hospital Products Limited v United States Surgical Corporation & Ors[20] Mason J said:

“The accepted fiduciary relationships are sometimes referred to as relationships of trust and confidence or confidential relations (cf. Phipps v. Boardman (25)), viz., trustee and beneficiary, agent and principal, solicitor and client, employee and employer, director and company, and partners.  The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense.  The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position.  The expressions “for”, “on behalf of”, and “in the interests of” signify that the fiduciary acts in a “representative” character in the exercise of his responsibility, to adopt an expression used by the Court of Appeal.

It is partly because the fiduciary’s exercise of the power or discretion can adversely affect the interests of the person to whom the duty is owed and because the latter is at the mercy of the former that the fiduciary comes under a duty to exercise his power or discretion in the interests of the person to whom it is owed:  see generally Weinrib, “The Fiduciary Obligation”, University of Toronto Law Journal, vol 25 (1975), pp. 4-8.  Thus a mere sub-contractor is not a fiduciary.  Although his work may be described loosely as work which is to be carried out in the interests of the head contractor, the sub-contractor cannot in any meaningful sense be said to exercise a power or discretion which places the head contractor in a position of vulnerability.

That contractual and fiduciary relationships may co-exist between the same parties has never been doubted.  Indeed, the existence of a basic contractual relationship has in many situations provided a foundation for the erection of a fiduciary relationship. In these situations it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties.  The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them.  The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction.”

(Footnotes omitted)

  1. Notwithstanding that Mason J was in dissent upon the question of whether, in the circumstances, a fiduciary relationship existed, I understand his Honour’s statement to concern a general principle and to be authoritative.
  1. More recently in Woolworths Limited v Olson & Anor[21] Einstein J extensively reviewed the leading authorities in this country and a number of judgments elsewhere[22]

“Fiduciary duties – when, to what extent and why may an employee owe fiduciary obligations to his/her employer

212The parties have taken the court to careful analyses of the manner in which the established principles treat with whether, and if so when, and to what extent, and why, an employee may owe fiduciary obligations to his/her employer. That analysis makes the points that:

.fiduciary duties arise not as result of the mere fact that there is an employment relationship, but rather from the fact that within a particular contractual relationship there are specific contractual obligations which the employee has undertaken which have placed him/her in a situation where equity imposes fiduciary duties in addition to the contractual obligations.

.an implied contractual term is not to be equated with a fiduciary obligation,

.the critical feature of fiduciary relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect in a legal or practical sense the interests of that other person: [Concut Pty Limited v Worrell (2000) 176 ALR 693 at [17] per Gleeson CJ, Gaudron and Gummow JJ; Pilmer v The Duke Group Ltd (in liq) (2001) 207 CLR 165 at [70] per McHugh, Gummow, Hayne and Callinan JJ]

.it is necessary to consider with precision the precise activity agreed to be undertaken by a particular employee and to ask if that employee had agreed to perform that activity solely in the interests of the employer to the exclusion of his/her own interests.

213In Youyang Pty Limited v Minter Ellison Morris Fletcher [2003] HCA 15, the Court [Gleeson CJ, McHugh, Gummow, Kirby and Hayne JJ at [40]] approved the statement of principle of McLachlin J in Canson Enterprises Limited v Boughton & Co [1991] 3 SCR 534 at 543 that “The essence of a fiduciary relationship, by contrast, is that one party pledges itself to act in the best interest of the other. The fiduciary relationship has trust, not self-interest, at its core, and when breach occurs, the balance favours the person wronged.”

214Elias J in Nottingham University v Fishel [2000] IRLR 471 [followed in Comax Secure Business Services Limited v Wilson (unrep, QBD, Richard Seymour QC, 21.6.2001); PMC Holdings v Smith [202] EWHC 1575 (QB) per Burton J; see also Macken & Ors, Law of Employment (5th Ed) at pp 139-143]] accurately summarised the position:

    “Establishing fiduciary obligations: the legal principles

What then are the underlying principles which enable the court to determine whether or not fiduciary obligations arise? Lord Millett, writing extra-judicially has identified three distinct categories of relationship (see his article ‘Equity’s Place in the Law of Commerce’ [1998] Vol 114 LQR 214). Two of them have no application in this case. These are first, where the obligations arise out of the fact that one party is in a position of influence over another; and second, where they arise from the fact that one is in receipt of information imparted in confidence by the other. Employees frequently fall into this latter category, because their work will often involve their being made privy to trade or business secrets of their employer. But although the existence of the employment relationship explains why the employee comes to be in possession of such information and the contract of employment will define the purposes for which such information may be used, the employment relationship itself in such cases is really only incidental to the imposition of the fiduciary duties. As the Court of Appeal noted in Attorney General v Blake [1998] Ch 439, this fiduciary obligation of confidence often arises in the course of another fiduciary relationship but it is not derived from it,. It is for this reason that the obligation of confidence can continue to subsist even when the employment relationship, and any fiduciary duties arising out of it, has terminated.

The third category identified by Lord Millett, and described by him as the most important, is as follows.

‘[it] is the relationship of trust and confidence. Such a relationship arises whenever one party undertakes to act in the interests of another, or where he places himself in a position where he is obliged to act in the interests of another. The core obligation of a fiduciary of this kind is the obligation of loyalty.’

In Bristol and West Building Society v Mothew (1998) Ch 1 at 18, he elaborated on this analysis, and identified the duties which classically arise from such a fiduciary relationship:

‘A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The principle is entitled to the single-minded loyalty of his fiduciary. This core liability has several facts. A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal. This is not intended to be an exhaustive list, but it is sufficient to indicate the nature of fiduciary obligations. They are the defining characteristics of the fiduciary.’

It is vital to recognize that although the key feature identified is the obligation of loyalty that has a precise meaning, namely the duty to act in the interests of another. This is the fundamental feature which, in this category of relationship at least, marks U-turn the relationship as a fiduciary one…

Employees as fiduciaries.

As these examples all illustrate, simply labelling the relationship as fiduciary tell us nothing about which particular fiduciary duties will arise.  As Lord Browne-Wilkinson has recently observed: 

‘…the phrase “fiduciary duties” is a dangerous one, giving rise to a mistaken assumption that all fiduciaries owe the same duties in all circumstances.  This is not the case’ (Henderson v Merrett syndicates Ltd [1995] 2 AC 145 at 206).

This is particularly true in the employment context.

The employment relationship is obviously not a fiduciary relationship in the classic sense. It is to be contrasted with a number of other relationships which can readily and universally be recognised as ‘fiduciary relationships’ because the very essence of the relationship is that one party must exercise his powers for the benefit of another.  Trustees, company directors and liquidators classically fall into this category which Dr Finn, in his seminal work on fiduciaries, has termed ‘fiduciary offices’.  (See PD Finn, Fiduciary Obligations (1977)).  As he has pointed out, typically there are two characteristics of these relationships, apart from duty on the office holder to act in the interests of another.  The first is that the powers are conferred by someone other than the beneficiaries in whose interests the fiduciary must act; and the second is that these fiduciaries have considerable autonomy over decision making and are not subject to the control of those beneficiaries.

By contrast, the essence employment relationship is not typically fiduciary at all.  Its purpose is not to place the employee in a position where he is obliged to pursue his employer’s interests at the expense of his own.  The relationship is a contractual one and the powers imposed on the employee are conferred by the employer himself.  The employee’s freedom of action is regulated by the contract, the scope of his powers is determined guilty the terms (express or implied) of the contract, and as a consequence the employer can exercise (or at least he can place himself in a position where he has the opportunity to exercise) considerable control over the employee’s decision-making powers.

This is not to say that fiduciary duties cannot arise out of the employment relationship itself.  But they arise not as a result of the mere fact that there is an employment relationship.  Rather they result from the fact that within a particular contractual relationship there are specific contractual obligations which the employee has undertaken which have placed him in a situation where equity imposes these rigorous duties in addition to the contractual obligations.  Where this occurs, the scope of the fiduciary obligations both arises out of; and is circumscribed by, the contractual terms; it is circumscribed because equity cannot alter the terms of the contract validly undertaken.  The position was succinctly expressed by Mason J in the High Court of Australia in Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR as follows:

‘That contractual and fiduciary relationships may coexist between the same parties has never been doubted.  Indeed, the existence of a basic contractual relationship has in many situations provided a foundation for the erection of a fiduciary relationship.  In these situations it is the contractual foundation which is all-important because it is the contract that regulates the basic rights and liabilities of the parties.  The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them.  The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction.’ …

…in analysing the employment cases in this field, care must be taken not automatically to equate the duties of good faith and loyalty or trust and confidence, with fiduciary obligations.  Very often in such cases the court has simply been concerned with the question whether the employee’s conduct has been such as to justify summary dismissal, and there has been no need to decide whether the duties infringed, properly analysed, are contractual or fiduciary obligations.  As a consequence, the two are sometimes wrongly treated as identical:  see eg Neary v Dean of Westminster [1999] MLR 288 at 290 where the mutual duty of trust and confidence was described as constituting a ‘fiduciary relationship’.

Accordingly, in determining whether a fiduciary relationship arises in the context of an employment relationship, it is necessary to identify with care the particular duties undertaken by the employee, and to ask whether in all the circs he has placed himself in a position where he must act solely in the interests of his employer.  It is only once those duties have been identified that it is possible to determine whether any fiduciary duty has been breached, as Lord Upjohn commented in Phipps v Boardman [1967] 2 AC 46 at 127:

‘having defined the scope of [the] duties one must see whether he has committed some breach thereof and by placing himself within the scope and ambit of those duties in a position where his duty and interest may possibly conflict.  It is only at this stage that any question of accountability arises.’

It follows that fiduciary duties may be engaged in respect of only part of the employment relationship, as was recognised by Lord Wilberforce, giving judgment for the Privy Council in New Zealand Netherlands Society v Kuys [1973] 1 WLR 1126 at 1130:

‘A person…may be in a fiduciary position quoad a part of his activities but not quoad other parts:  each transaction, or group of transactions, must be looked at.’”

215In Victoria University of Technology v Wilson and Ors [2004] VSC 33, Nettle J applied Nottingham University in the following passage:

“[145] the same is true of fiduciary duties [Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 at 97, per Mason J], although it is necessary to distinguish between an employee’s contractual duty of good faith and loyalty and such if any fiduciary duty as he or she may owe to their employer [Nottingham University v Fishel (QBD) [2000] ICR 1463 at 1940, per Elias J].  Some employees, particularly senior employees, do owe fiduciary duties to their employers [see, for example, Reading v Attorney General [1951] AC 507 at 517 per Lord Normand;  Industrial Development Consultants Ltd v Cooley [1972] 1 WLR 443; Timber Engineering Co Pty Ltd v Anderson [1980] 2 NSWLR 488;  Angus & Coote Pty Ltd v Render (1989) 16 IPFR 387;  State Rail Authority of New South Wales v Earthline Constructions Pty Ltd unreported, Supreme Court of NSW, O’Keefe CJ in Commission D, 14 September 1994); Colour Control Centre Pty Ltd v Thank you. (1996) 39 AILR §5-058 (Santow J) at 4,318-4,320;  EFG Australia Ltd v Kennedy [1999] NSWSC 922 (Hodgson CJ)); Francis v South Sydney District Rugby League Football Club Ltd [2002] FCA 1306 [265]; Canadian Aero Services Ltd v O’Malley (1973) 40 DLR 3d 371 at 391; Guth v Loft, Inc 23 Del Ch 255, 5 A2d 503 (1939)].  But others do not.  The scope of an employee’s fiduciary duties to the employer depends as much as anything upon the nature and terms of the employment.  “The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with and conforms to them.  The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction:.  [Hospital Products Ltd v United States Surgical Corporation above at 97, per Mason J;  Nottingham University v Fishel (QBD) [2000] ICR 1462 at 1491-2, per Elisas J]”

216In Francis y south Sydney District Rugby League Football Club Ltd [2002] FCA 1306, Lindgren J also accepted the analysis of Elias J in Nottingham University, although did not find a relevant fiduciary duty existed (that case being one where there was an attempt to impose such a duty upon the employer). His Honour said:

“[267] In support of the existence of the pleaded fiduciary duty Francis relies on Hollingsworth v Commissioner of police (No 2) (1999) 47 NSWLR 151 and Burazin v Blacktown ?City Guardian Pty Ltd (1966) 142 ALR 144 in which it was accepted that there is implied in every employment contact a term that the employer will not, without reasonable and proper cause, act so as to destroy or seriously damage “the relationship of confidence and trust: that exists between employer and employee, and that the employee has a corresponding duty to act with fidelity and good faith (cf Hollingworth at 190; Burazin at 146-147, 1t51.  But an implied contractual term of that kind is not to be equated with a fiduciary obligation:  see Nottingham University v Fishel [2000] ICR 1462 at 1492-1493.  Mutual trust and confidence may characterize a fiduciary relationship, but are not sufficient, without more, to give rise to one.  In News Ltd v Australian Rugby League Football Ltd (1996) 64 FCR 410 at 539-540, this Court noted that the notion of mutual trust and confidence may be more significant in establishing a fiduciary relationship between “collaborative” parties who are related to one another “horizontally”, such as joint venturers or partners, than between parties whoa re related to one another “vertically”, such as employer and employee.

[268] As Mason J pointed out in Hospital Products (at 96-97):

‘[t]he critical feature of [fiduciary] relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power of discretion which will affect the interests of that other person”

(referred to with apparent approval in Pilmer at [70]; and cf Meagher, Gummow and Lehane, Equity:  Doctrines and Remedies (3rd ed, 1992) at 130).  It is the lack of this “critical” undertaking by Souths to act “for or on behalf of or in the interests of” Francis with respect to the matters pleaded that signifies that Souths was not a fiduciary in its relationship with Francis.

[269] …

“That contractual and fiduciary relationships may coexist between the same parties has never been doubted.  Indeed, the existence of a basic contractual relationship has in many situations provided a foundation for the erection of a fiduciary relationship.  In these situations it is the contractual foundation which is all-important because it is the contract that regulates the basic rights and liabilities of the parties.  The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them.  The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction.””

217I accept that Mr Olson may not have been a fiduciary in respect of each and every activity undertaken by him in the course of his employment. It is necessary to consider with precision the precise activity agreed to be undertaken by Mr Olson and to ask if he had agreed to perform that activity solely in the interests of Woolworths (to the exclusion of his own interests). If that is the case then the obligation is fiduciary in character.

218Clearly it is well recognised [State Rail Authority v Earthline Constructions Pty Ltd (Supreme Court of New South Wales, O’Keefe CJ CommD, 14 September 1994, unreported,); Colour Control Centre Pty Limited v Ty (1996) 39 AILR 5-085 at 4,318-4,320; EFG Australia Limited v Kennedy [1999] NSWSC 922] that the duties of an employee which are normally categorized as fiduciary relevantly include:

 . to act honestly in the service of the employer;

 . not to benefit him or herself to the detriment of the employer;

 . to treat confidential information as such and not disclose it to competitors.”

  1. I have referred to the first defendant’s power to exercise control over the cheque account of the plaintiff’s business in DMH. The business was by any standards substantial and growing. The first defendant had authority to employ staff, to enter into contracts and in that respect to direct business opportunities. The autonomy the first defendant enjoyed as general manager suggests that the plaintiff was vulnerable to the first defendant in the relevant sense. The powers the first defendant was able to exercise and the responsibilities he undertook as in the performance of his duties as general manager of DMH persuade me that he had “a special opportunity to exercise the power or discretion to the detriment of” the plaintiff who was “accordingly vulnerable to abuse” by the first defendant of his position.[23] 
  1. A conclusion that a fiduciary relationship existed between the first defendant and the plaintiff does not conclude matters. It remains to consider the extent or the content of the duty owed in the relevant circumstances. .

Content of fiduciary duty and findings concerning breach

  1. In his written submissions relied upon during his final address the first defendant contended that the plaintiff’s claim for breach of fiduciary duty should fail because the plaintiff had failed to properly plead the content of a fiduciary duty that might be owed by an employee to an employer.[24]  Relying upon the statement made by Gaudron & McHugh JJ, in Breen v Williams[25] that fiduciary obligations are “proscriptive”.  The first defendant submitted that the formulation pleaded by the plaintiff in paragraph 8 of the amended statement of claim that it was owed a fiduciary duty by the first defendant “to act in good faith and fidelity for the period of his employment” was not part of the law and that accordingly the plaintiff’s claim should fail because it had failed to plead a duty known to the law.  In making this submission the first defendant contended that the only fiduciary duties recognised in Australia are the duties to avoid:
  1. conflicts of interest and duty;
  1. conflicts and duty and duty; and
  1. unauthorised profits.

This submission relied upon passages from the judgment of Deane J in Chan v Zacharia[26].

  1. A number of observations might be made at this juncture. The comments made by their Honours Gaudron & McHugh JJ in Breen v Williams were made in the context of the matter in issue, whether a patient was owed a fiduciary duty by a doctor which obliged the doctor to provide the patient with an entitlement to access to the doctor’s records.  It was in the context of that appeal that their Honours were at pains to distinguish the “proscriptive” obligations upon a fiduciary from any duty that might impose a “positive legal duty to act in the interests of a person to whom a duty may be owed”.  Moreover the observations of Deane J in Chan v Zacharia to which the first defendant’s written outline adverted are general in nature.  In the course of his Honour’s reasons he acknowledged that there have been in the leading authorities a number of different statements in which the duty to account for personal benefit or gain may have been described.  It was these formulations which were part of a wider “conflict of interest and duty” doctrine.
  1. While the plaintiff’s formulation of the content of the fiduciary duty alleged might have been pleaded otherwise the conduct of the case on behalf of the plaintiff was that the first defendant breached his obligation by putting himself in a conflict position where his personal interest conflicted with his duty to the plaintiff. The statement that a fiduciary owes a duty not to act in conflict of interest and duty is general. It does not put content into the nature of the duty in a particular circumstance. In the context of the employment relationship, Einstein J in Woolworths Limited v Olson & Anor said that the duty of an employee can be categorised as one to act honestly in the service of the employer and not to benefit him or herself to the detriment of the employer.[27]  In addresses counsel for the plaintiff referred me to the judgment of McMeekin J in Deeson Heavy Haulage Pty Ltd v Cox & Ors[28] where his Honour acknowledged the authorities in this country for the proposition that the content of the duty may be stated as noted by Einstein J.

The Plaintiff’s Claims

  1. I now turn the conduct complained of by the plaintiff and to its consequential claims.

Surveying work

  1. Between June 2007 and December 2008 the third defendant submitted invoices to the plaintiff for surveying work in the sum of $148,511.[29]  The third defendant was not a firm of surveyors.  Its directors were the first defendant and Robert Lorefice neither of whom were surveyors.  Its shareholders were the fourth defendant and Lorefice Investments.  Mr Lorefice is or was a water proofer.[30]  Although the plaintiff pleads that all of the surveying work in respect of which the third defendant submitted invoices was in fact performed by a licensed surveyor, Stan Nowak, there are however instances where the third defendant charged for services that weren’t performed.  There are also eight survey plans prepared by the third defendant without the input of Mr Nowak.
  1. At trial the first defendant admitted that the difference between what Stan Nowak charged for the surveying work and the invoices submitted by the third defendant was $96,216.57.[31]  The first defendant sought to justify the difference by asserting that the third defendant performed work over and above the surveying work referred to in the various invoices submitted by the third defendant.
  1. There is no reliable evidence that the third defendant performed any of the “extra work” pleaded in the defence. The third defendant did not employ anyone to that work and its only directors were the first defendant and Mr Lorefice. The defendants did not discover any documents which support that extra work was performed by the third defendant.[32] 
  1. The expert called by the defendants, Mr Roberts suggested that Mr Nowak would not have performed the surveying work directly for the plaintiff at the same price he charged the third defendant. Mr Roberts did not speak to Mr Nowak before preparing his expert report.[33]  Mr Roberts also assumed for the purposes of his report that the “extra work” had been performed.  But these assumptions are not supported by the evidence.  Stan Nowak gave unchallenged evidence that he could have been retained directly by the plaintiff to perform the surveying work carried out for the third defendant[34] and if that had occurred he would have charged the plaintiff the same price.  Mr Puccini, a building supervisor, gave evidence that he never saw anyone else other than Mr Nowak performing surveying work.[35]  He also gave evidence that much if not all of what the defendants plead as “extra services” was work performed by the staff of the plaintiff.[36]
  1. The first defendant admitted that his motivation for using the third defendant was to make money for himself and the reason why the surveying was arranged the way it was, was so that the third defendant could make money. Further he conceded that he did not tell Mr Richardson or the plaintiff about the third defendant because there was a real prospect that his employer might not approve and he consciously decided to hide it.[37]
  1. In the circumstances there is a breach of fiduciary duty by the first defendant, he used his position as general manager of the plaintiff to obtain a benefit for himself through his interest in the third defendant to the detriment of his employer without disclosing this to the plaintiff. The loss suffered by the plaintiff is $96,216.57.

Light fittings, fans and air conditioning units

  1. Between January 2007 and December 2008 the fourth defendant supplied the plaintiff with lights, fans and air conditioning units.[38]  The first defendant admits that to be the case but disputes the amounts in questions.  Prior to January 2007 the plaintiff trading as David McCoy Homes purchased all of its electrical goods from Toucan electrics who installed them. Its principal Mr Sam Nucifora gave evidence[39] and nothing was suggested to him by the first defendant about difficulties with his service or product.
  1. By reference to the fourth defendant's financial records the plaintiff alleges that for the relevant period the lights, fans and air conditioning units were marked up by an average of 41% resulting in the plaintiff being charged a mark-up of $224,725.22. This allegation is now admitted.[40]  The first defendant’s expert, Mr Roberts says that a charge of 41% is excessive.[41]
  1. The first defendant claims that his intention was that the fourth defendant would sell electrical goods to the plaintiff on more favourable terms than could have been obtained in the open market.[42]  But the first defendant's obligation was to direct any benefit to the plaintiff not to the fourth defendant. 
  1. The first defendant admitted that he did not tell Mr Richardson about Lights N More because there was a real prospect that his employer might not approve and he consciously decided to hide it.[43]
  1. The first defendant also asserted that the fourth defendant provided various services such as delivery, reviewing house designs to ensure the fans and lights were adequate for each house and managed on-site problems with the air conditioning units, fans and lights. But the evidence is that the plaintiff's staff performed these functions.
  1. In the circumstances the first defendant breached his fiduciary obligations to the plaintiff. He caused it to purchase electrical goods from the fourth defendant trading as Lights N More. In doing this he overcharged his employer and directed the benefit to his company. His conduct was deceitful. The plaintiff is entitled to compensation in respect thereof in the sum of $224,725.22.

Secret Commissions

  1. It is not in issue that by written agreement sometime in April 2007 Lorefice Investments agreed to pay the fourth defendant “commission” of 20% of any payments made to it by the plaintiff for waterproofing work.  It is admitted on the pleadings that commission payments were made totalling $55,985.06.  The first defendant now admits this was wrong and that at no time did he disclose to the plaintiff his business association with Robert Lorefice or Lorefice Investments.
  1. Bribery and the related secret commission is a serious breach of a fiduciary’s duty[44] and where a fiduciary accepts a bribe or a secret commission he is liable to account to his principal for the amount received.[45]  It matters not that the fourth defendant received the commission.  The first defendant admits the commission agreement was a means by which he could benefit notwithstanding that the work was arranged by Mr Lorefice but not done by the third defendant.[46]  The first defendant was the sole director of the fourth defendant and directed the benefit of his breach of fiduciary duty to his family company.

Waterproofing

  1. From in or about March 2007 the first defendant directed that all waterproofing services for houses built by the plaintiff were to be conducted by Lorefice Investments trading as Universal Waterproofing.
  1. Between March 2007 and January 2009 the plaintiff paid invoices rendered by Lorefice Investments for waterproofing services in a total sum of $346,057.12.[47]  Most of this work was performed by Permaseal Pty Ltd.[48]  The difference between the invoices rendered by Permaseal and those by Lorefice Investments to the plaintiff is $130,555.95.[49]
  1. The unchallenged evidence of Mr Barkley was that Permaseal could have been engaged directly by the plaintiff.[50]  Mr Vudrag the owner of Permaseal confirmed this.[51] The first defendant knew that Permaseal was performing the waterproofing work pursuant to a subcontract with Universal Waterproofing and that Universal Waterproofing had negotiated rates with Permaseal as was admitted by the first defendant in evidence.[52] Further, Mr Barry Van Der Sanden gave unchallenged evidence that he specifically raised the engagement of Permaseal with the first defendant.[53]  Mr Puccini knew of the price difference and raised it with the first defendant.[54]
  1. The first defendant had a vested interest in retaining Universal Waterproofing because of the commission agreement.[55] In evidence the first defendant acknowledged that he did not tell his employer about this arrangement because he saw that there was a real prospect his employer would not approve.[56] Further he acknowledged that he arranged the waterproofing affairs so that his associate Mr Lorefice through his business Universal Investments, could make money by providing the waterproofing work via sub-contractors who would do it more cheaply than Mr Lorefice would bill the plaintiff.  It was in this context that Mr Lorefice paid the plaintiff a commission.[57] In the circumstances by continuing with Universal Waterproofing when Permaseal was available to do the water proofing work more cheaply and directly the first defendant preferred his own interests to those of the plaintiff.  He is liable to compensate in the sum of $130,555.95.

Staff Housing

  1. The plaintiff claims against the first defendant in respect of ten houses that were constructed by the plaintiff between 2003 and 2009.[58]  Consistently with my findings concerning the contract of employment the first defendant was entitled to build two houses at “cost” for himself per year.[59]  It is common ground that of the ten houses that were built as “staff houses” one was built in the maiden name of the second defendant, seven were built in the name of the second defendant and two were built in the name of the fourth defendant.
  1. At trial the plaintiff advanced alternative claims. One was that the first defendant breached his fiduciary duty to the plaintiff by failing to include the cost component for administration and overheads in the cost he charged his wife or the fourth defendant. The plaintiff alleged that the costs of administration and overheads should have been charged at 8% in an amount of $138,831.36.[60] 
  1. The alternative was that the defendant breached his contract of employment by having the houses constructed in the names of his wife or the fourth defendant rather than in his name. The plaintiff contended that as the houses were constructed in the names of persons other than the first defendant the plaintiff was entitled to sell to those persons at a price that included a mark-up for profit.[61] 
  1. It will be recalled that the words said in the conversation between Mr Richardson and the first defendant were that he “could build two houses at cost for himself per year”.[62]  That finding, concerning the conversation, does not necessarily reflect the meaning or proper construction of any term of the contract of employment.  For example do the words “for himself” preclude the first defendant from obtaining the benefit of paying the reduced cost of construction but directing the house to be built on land owned or to be owned by his wife or a related company?  Do the words prevent a novation or transfer by direction?  In the upshot I was not assisted with detailed submissions upon the proper construction or interpretation of the contract arising out of the exchange of words between the two men.  Further even if I were to accept that the first defendant breached the terms of his agreement with the plaintiff by building houses in the name of persons other than himself I am not prepared to conclude that the loss following that breach was the 20% figure contended for by the plaintiff.  It will be recalled that Mr Richardson gave evidence that if he had been approached and asked to agree to a staff house being built in the name of the first defendant’s wife he might have considered the proposal.[63]  In the circumstances the loss to the plaintiff if any flowing from this breach was nominal. It was not suggested that the first defendant was not entitled to have up to ten houses constructed at cost in his own name over the period in which he was employed.
  1. But the same cannot be said of the costs that the first defendant caused the plaintiff to charge his wife or the fourth defendant. At trial it was common ground that the charges the defendant caused the plaintiff to make were calculated solely upon the invoice cost. The first defendant did not include in the charges any amount for overheads or administration. In adopting that practice the first defendant referred to an arrangement with a Mr Schilling. However this was a specifically negotiated agreement reduced to writing which contained a specific term that Mr Schilling was to pay “hard costs”.[64]
  1. Evidence was given by Ms Harris, the accountant, that she spoke to the first defendant suggesting that he should include an item for overheads and administration[65].  Ms Harris said the first defendant acknowledged to her that the plaintiff incurred administration costs.[66] The first defendant failed to do this.  In failing to include such a cost he failed to act honestly in the service of his employer and thereby directed a benefit to his wife or to his company at the detriment of his employer.
  1. Ms Harris’s evidence, which I found impressive and which I accept,[67] amply demonstrates that an allowance at 8% is a reasonable one for administration and overhead costs in the context of the plaintiff business with a result that the plaintiff suffered loss as a consequence of the first defendant’s breach in the amount of $138,831.36.[68]

Lot 24 Bowline Close

  1. In paragraph 50 of the second further amended statement of claim the plaintiff advanced a claim against the first defendant for some $9,304.73 for costs expended by the plaintiff on preliminary work for the construction of a house on behalf of or as commissioned by the first defendant. The first defendant admits that he has not paid this sum but contends he does not owe the money on the basis of a right to set this off against monies owing to him.[69]
  1. The amount claimed, as detailed in paragraph 50 of the statement of claim, is verified by the job costing statement[70] verified by Ms Berridge[71] plus an 8% cost mark-up.  This claim, not being in dispute subject to set off, should be recovered by the plaintiff.

Counterclaim

Termination pay and superannuation

  1. In his counterclaim the first defendant alleges that he is owed for unpaid salary upon termination $4,153.86. That is not disputed by the plaintiff. In like manner the first defendant claims unpaid superannuation contributions in the amount of $332.31. The plaintiff accepts that. The plaintiff however claims a set off in respect of those sums as against any award of damages or compensation it might recover against the first defendant.

Holiday Pay

  1. The defendant claims unpaid accrued holiday pay at $45,075[72].  The plaintiff admits that it owes the first defendant accrued holiday pay in the amount of $3,909.21.  That sum is calculated by reference to the defendant’s records as maintained by Ms Clark-Brown and Ms Berridge whose evidence I accept.  In his evidence the first defendant admitted that if I were to find that the staff kept accurate records the plaintiff’s calculation with respect to accrued holiday pay would be accurate.[73]  The evidence was, and the first defendant did not dispute it, that he received regular pay slips that showed the amount of accrued holiday pay as calculated by the plaintiff from time to time.  The first defendant’s evidence was that he received pay slips and that he never disputed the plaintiff’s calculations although he said in evidence that he didn’t pay close attention to the pay slips.[74]
  1. I have already indicated that I am prepared to accept the reliability of the evidence of Ms Clark-Brown and Ms Berridge. The defendant was unable to demonstrate that there was any basis not to accept the accuracy of the plaintiff’s records in this respect. He was unable to justify by reference to any documentation the likelihood that accrued and unpaid holiday pay of $45,075 could be owing at the time of termination. In the circumstances I find that the plaintiff owes the first defendant $3,909.21 for accrued holiday pay. The plaintiff claims an entitlement to set that sum off against any sum it might recover from the first defendant.

Profit share

  1. The first defendant claims entitlement to a bonus “profit share” payment of $81,397.35 calculated for the period he worked from 1 July 2008 to 30 November 2008 prior to his resignation in December that year.
  1. It was not contentious that on or about 13 October 2005 the first defendant and Mr Richardson had a discussion in which the first defendant’s remuneration package was reviewed and varied. As part of that discussion it was agreed that the plaintiff thereafter would become entitled to a 10 per cent performance incentive to be calculated upon the profits generated at the end of a financial year.[75]
  1. Subsequently in 2006 and in 2007 the first defendant calculated his profit share entitlement and paid himself in respect of the financial years ending 30 June 2006 and 30 June 2007.
  1. On the pleadings there is a dispute as to the precise methodology for the calculation of the 10 per cent of profit share. This issue was a matter of some contention before me but I do not need to resolve it. Just prior to ceasing work with the plaintiff the first defendant calculated what he contended was his pro rata share of profits that had been generated during the financial year from 1 July 2008 to 30 November 2008. That calculation was $81,397.35. The first defendant caused a cheque to be drawn and he paid himself that amount. Subsequently the plaintiff demanded the return of the funds. The first defendant repaid that sum but has persisted with his claim in the counterclaim.
  1. The plaintiff’s contention is that the first defendant’s entitlement to 10 per cent of profits (however calculated) arose as a result of an “entire obligation” upon performance by the first defendant of his duties as general manager for a relevant financial year and the generation of profits by the plaintiff in that financial year.[76]  I accept this submission.  The words the plaintiff alleges that were uttered by Mr Richardson when he agreed to such an arrangement suggest that any entitlement of the first defendant only accrued upon his performance of duties resulting in a profit being earned for an entire financial year.[77]  Further, in the absence of what is explicit or express terms, the very nature of an entitlement to a share of profits suggest the performance of an entire obligation.  Accordingly I reject the first defendant’s claim for a pro rata payment.

22 Banville Street

  1. This matter refers to a claim made by the first defendant relating to the purchase of the property at 22 Banville Street.[78]  Under a written contract in the standard REIQ form[79] the first defendant entered into a contract to purchase the property (land plus house) for $330,000.  The evidence is that the first defendant approached Mr Richardson to ascertain whether the plaintiff would sell the first defendant the property.  In his evidence the first defendant conceded that there was no suggestion in the conversations leading up to the contract that the purchase was to be regarded as a “staff house”.[80]  The plaintiff did not record the transaction as a “staff house”.  The contract was completed with the first defendant paying the monies required under the terms of the contract without any demur or suggestion that he was paying more than he was obliged to pay.
  1. In these circumstances I see no substance in the first defendant’s claim. He voluntarily entered into a contract to purchase a property and completed the transaction upon the terms of the contract. The first defendant conceded that there was no suggestion in conversations that the property was to be treated as a “staff house” and that the first time he raised any claim in relation to this transaction was in one of the later versions of his counterclaim in the proceedings well after the proceedings had been commenced.[81]

36 Bowline Close

  1. The first defendant claims[82] that the plaintiff was overpaid $96,370.91 in respect of the costs of the construction of these premises.  This property was a staff house that had been built for the first defendant’s wife, the second defendant.  Nevertheless the first defendant has purported to maintain a claim in his own right in respect of the costs of construction and the alleged overpayment.  Thus the first defendant’s claim is misconceived.
  1. Notwithstanding, the plaintiff’s records demonstrate that less than the costs of construction (including the 8 per cent allowance for administrative and overhead costs) was paid by the first defendant. Accepting as I have the accuracy of the figures set out in Annexure “E”[83], it is apparent that an amount of $9,029.76 is payable to the plaintiff in respect of that transaction because of the failure of the first defendant to ensure that the true cost of staff houses built for his wife or for the fourth defendant were recouped by the plaintiff.
  1. Accordingly this aspect of the first defendant’s counterclaim should be rejected.

Damages

  1. For the reasons I have given the plaintiff is entitled to succeed against the fourth defendant as schedulised below:

Damages

 

Goods sold by “Lights N More”

$224,725.22[84]

Secret Commission

$55,985.06[85]

Additional 8% cost price owing.[86]

$28,733.21[87]

Total payable by 4th defendant

$309,443.49

  1. Concerning the first defendant the plaintiff is entitled to recover damages as follows:-

Damages

 

Surveying services

$96,216.57[88]

Goods sold by “Lights N More”

$224,725.22[89]

Secret Commission

$55,985.06[90]

Waterproofing

$130,555.95[91]

Additional 8% cost price   

$138,831.36[92]

Additional cost price owing with respect to Lot 24 Bowline Close 

$9,304.73[93]

Sub total

$655,618.89

Less Counterclaim/Set-Off

 

Final termination pay

$4,153.86[94]

Superannuation

$332.31[95]

Admitted Holiday Pay

$3,909.21[96]

Sub total of offsets

$8,395.38

Total payable by the 1st defendant

$647,223.51

  1. The plaintiff has claimed interest against any sums recovered against the first defendant or fourth defendant at 10% from 22 June 2009 when these proceedings were commenced.
  1. I calculate the interest recoverable against the first defendant in the amount of $355,703.92 at $177.32 per day[97] from 22 June 2009 until 19 December 2014.[98]
  1. With respect to interest recoverable on the monies payable by the fourth defendant the plaintiff is entitled to recover the amount of $170,068.68 calculated at $84.78 per day[99] from 22 June 2009 until 19 December 2014.

Orders

  1. The orders will be:
  1. Judgment for the plaintiff against the first defendant for $1,002,927.43.
  1. Judgment for the plaintiff against the fourth defendant for $479,512.72.
  1. The plaintiff’s claims against the second defendant and the third defendant be dismissed.
  1. The parties have leave to file and serve written submissions concerning costs by 30 January 2015.
  1. If no party makes any submission as ordered by Order 4 then the orders will be:
  1. The first defendant and the fourth defendant pay the plaintiff’s costs of and incidental to the claim, including reserved costs if any, to be assessed on the standard basis.

No order as to the costs as between the plaintiff and the second defendant and the third defendant.

Footnotes

[1] See Farah Constructions Pty Ltd & Ors v Say-Dee Pty Ltd (2007) 230 CLR 89 at [159], [160].

[2] Transcript 1-51 l 10.

[3] Transcript 3-45 l 37.

[4] Transcript 1-51 l 15.

[5] See for example, transcript 1-58 l 30-50.

[6] Filed on or about 8 March 2012.

[7] See paras 4, 5, 6, 7 and 8.

[8] See paras 3, 4, 5, 6, 7 and 8 of the Fifth Amended Answer filed with the Amended Reply on or about 15 March 2012.

[9] For example, care was taken by Mr Richardson when he negotiated the written contract terms with Mr John Shilling, particularly in relation to the issue of costs of staff houses.  See for example, Exhibit 3, Vol 8 at p 2296.

[10] See T1-5 l 45 – T1-7 l 60 and T3-2 l 42 – T3-4 l 25.

[11] As to Volumes 1-6 see T3-37 l 60 (and generally T3-37 l 30 – T3-38 l 45).  With respect to Volumes 7 and 8 see T3-47 l 45 – T3-48 l 12 and T4-85 l 30-50.

[12] T2-75 l 10 – T2-76 l 55.

[13] T2-86 l 25-30.

[14] See para 7 second further amended statement of claim.

[15] See para 4 of the defence to the second further amended statement of claim.

[16] See the report by Ms Harris, exhibit 1, at LH 2.

[17] See for example attachments LH3, LH4, LH5, and LH6 to the report of Ms Harris, exhibit 1.

[18] See report of Ms Harris at exhibit 1 page 8.

[19] See exhibits 5 and 6 at para 1.  In both these defences paragraphs 9 and 10 of the relevant statement of claim are admitted.  In his last defence the first defendant purported to put the issue of his being an “officer” in issue but, his not having applied for or obtained leave to withdraw the admission, Mr Martin correctly submitted that the matters alleged in paragraphs 9 and 10 of the statement of claim remained admitted.  See UCPR 188.

[20] (1984-1985) 156 CLR 41 at 96-97.

[21] [2004] NSWSC 849.

[22] [2004] NSWSC 849 at [212]-[218].

[23] Recalling Mason J quoted above.

[24] See written outline of submissions, B for identification, at para 116ff.

[25] (1995-1996) 186 CLR 71 at 113.

[26] (1983-1984) 154 CLR 178 at 189-199.

[27] See Woolworths Limited v Olson & Anor [2004] NSWSC 849 at [218] (quoted at para [20] above).           

[28] [2009] QSC 277 at [73] and [74].

[29] See Exhibit 2, Annexure A.

[30] Recall paragraph [6] above.

[31] See Exhibit 2, Annexure A, T3-69 l 25

[32] At best Mr Lorefice (who was not called as a witness) took the instructions from the plaintiff and passed them on to Mr Nowak.  The invoices rendered by the third defendant make no reference to any additional service provided by the third defendant.

[33] See T3-74 l 10.

[34] T1-42 l 30-45

[35] T2-4 l 45.

[36] T2-4 l 50- T2-5 l 12.

[37] T3-70 l 39 – 3-71 l 5 in context

[38] Details are found in Annexures B and C found in Exhibit 2.

[39] T2-16 l 15 ff.

[40] See para 27 Statement of Claim; Exhibit 2, Annexures B & C and see evidence of First Defendant at T4-40 l 48 ff particularly at T4-47 l 30.

[41] See Exhibit 7 at p. 27.

[42] T4-41 l 1-10.

[43] T4-43 l 1-15.

[44] Grimaldi v Chameleon Mining NL (2012) 287 ALR 22, [576]

[45] Grimaldi v Chameleon Mining NL (2012) 287 ALR 22, [569]

[46] T3-72 L1-35

[47] See Exhibit 2, Annexure D.

[48] See Exhibit 2, Annexure D.

[49] See Exhibit 2, Annexure D.

[50] T1-100, L1

[51] T2-30, L10-20, T2-31, L30-40

[52] T3-73, L15-25

[53] T1-90, L10.

[54] T2-7, L 50-60    

[55] This is the implication of the first defendant’s evidence at T3-73 l 15 – 25.

[56] T4-43 l 18–21.

[57] See the first defendant’s evidence at T-43 l 35-52.

[58] See para 48, Second Further Amended Statement of Claim ff.

[59] See paras [9] & [11] above.

[60] See Exhibit 2 Annexure B.

[61] The plaintiff contended for a profit element charged at 20% in the amount of $362,578.64, see Exhibit 2 Annexure F.  Mr Richardson gave unchallenged evidence that the plaintiff expected at least a 20% profit mark-up, T1-54 l 1-10.  In cross-examination the first defendant agreed that a reasonable allowance,   T4-51 l 45-60.

[62] See para [9] above.

[63] See para [10] above.

[64] See Exhibit 3, Vol 8, page 2296-2299, Clause 8.

[65] T2-46 l 20 –T2-47 l 23.

[66] T2-47 l 23.  Discussions to this effect were held between Mr Kay and the first defendant.  T3-24 l 50 – T3-27 l 9.

[67] See Exhibit 1; see T2-41 l 1 ff.

[68] See Exhibit 2 Annexure E.

[69] Refer counterclaim as discussed below.

[70] Exhibit  Vol 5, page 1708.

[71] See T2-77 l 1-5.

[72] See para 15(c) of the amended counterclaim.

[73] Transcript 4-7 l 58 - 4-8 l 15.

[74] Transcript 3-75 l 45ff.

[75] In the amended counterclaim the first defendant, at paragraph 6, pleads the essential terms and the words he alleges Mr Richardson used.  The plaintiff’s pleading in response does not essentially dispute the terms of the conversation as alleged.

[76] See for example Tan Hung Nguyen v Luxury Design Homes Pty Ltd [2004] NSW CA 187 at [24].

[77] See para 6 of the amended counterclaim contained within the defence to the second further amended statement of claim filed on or about 8 March 2012 while noting that the words as pleaded vary somewhat from the words put to Mr Richardson in cross-examination by the first defendant.  See T1-62 l 5.

[78] See counterclaim paras 17-19.

[79] See Exhibit 3 vol 6 p 1913ff

[80] Transcript 4-56 l 10.

[81] See his evidence at transcript 4-56 l 58ff. 

[82] See amended counterclaim at paras 20-25.

[83] See Exhibit 2, Annexure E.

[84] See paras [33]-[38].

[85] See paras [39]-[40]

[86] For the two houses constructed in the name of the fourth defendant as per Exhibit 2, Annexure E for Lot 303 Piccone Drive and Lot 25 Banville Street

[87] See paras [45]-[51] and see Exhibit 2, Annexure E.

[88] See paras [27]-[32].

[89] See paras [33]-[38].

[90] See paras [39]-[40].

[91] See paras [41]-[44]

[92] See paras [45]-[51].

[93] See paras [52]-[53].

[94] See para [54].

[95] See para [54].

[96] See paras [55]-[56]

[97] At 10% per annum on $647,223.51.

[98] Being 2,006 days

[99] At 10% per annum on $309,443.49.

Close

Editorial Notes

  • Published Case Name:

    Kenfrost (1987) Pty Ltd v Lyne & Ors

  • Shortened Case Name:

    Kenfrost (1987) Pty Ltd v Lyne

  • MNC:

    [2014] QSC 322

  • Court:

    QSC

  • Judge(s):

    North J

  • Date:

    19 Dec 2014

Litigation History

No Litigation History

Appeal Status

No Status