SUPREME COURT OF QUEENSLAND

[1]  MCMURDO P: I agree with Muir J’s reasons for refusing the application for leave to appeal with costs. 

[2]  JERRARD JA:  In this appeal I have had the advantage of reading the reasons for judgment of Muir J and the orders proposed by His Honour, and I respectfully agree with those reasons and orders.  The evidence accepted by the learned trial judge established that the plaintiff had converted the third defendant’s cheque, and the applicant first defendant had procured that conversion by instructing the plaintiff to deduct the plaintiff’s professional fees and to write the first defendant a cheque for the balance.  They were accordingly joint tortfeasors.  The learned trial judge ordered that the appellant contribute all of the $28,000 he received from the plaintiff because of the finding the learned judge made, that while the plaintiff innocently but negligently converted the third defendant’s cheque, the appellant first defendant knowingly did so, misrepresenting his entitlement to it, and was thereby unjustly enriched to the extent of $28,000.  Those findings supported the conclusion that it was just and equitable the plaintiff recover the $28,000 together with interest from the first defendant, who had had the benefit of its use.

[3]  MUIR J: The applicant first defendant seeks leave to appeal against the judgment of a judge of the District Court after a trial in which the applicant was ordered to pay the respondent plaintiff $42,896 plus costs. Because the judgment sum is less than $50,000 the applicant requires leave to appeal.

     The central facts

[4] The facts central to the dispute between the parties are in relatively short compass. The respondent became aware in or about July 1992, when taking instructions from the applicant, a medical practitioner, concerning preparation of income tax returns for a number of past financial years, that the applicant was a bankrupt. The second defendant, the applicant’s wife, managed the medical practice in which he was employed as the sole qualified medical practitioner.

[5] On 6 October 1993, the respondent received a cheque from the Australian Tax Office in the sum of $38,338.53, made out to the applicant, which he deposited into his professional general account. He then drew a cheque in favour of the applicant in the sum of $35,500 and retained the balance on account of fees for professional services rendered to the applicant and the second defendant.

[6] There was a controversy at trial as to what the respondent did with the cheque drawn in favour of the applicant. The primary judge found that the cheque was posted by the respondent to the applicant who endorsed it in favour of the second defendant. She found also that the cheque was then paid into an account in the name of the second defendant and that the proceeds were used for the benefit of the applicant and second defendant. The applicant’s trustee in bankruptcy, the third defendant, on becoming aware that the Commissioner of Taxation’s cheque had been dealt with by the respondent, commenced proceedings against him in the Federal Court. Those proceedings concluded in a declaration on 3 November 1995 that the sum of $38,338.53, paid by the Commissioner of Taxation to the respondent, was an asset vested in the third defendant as trustee of the property of the applicant.

[7] On 28 October 1996 the respondent and the third defendant executed a deed under which the respondent agreed to pay to the third defendant $28,000 in full and final settlement of the third defendant’s claim against him. Under the deed, the third defendant agreed to assign to the respondent the benefit of the proceeds of any claims, actions, etc brought by the trustee against the applicant and the second defendant to recover the sum of $38,338.53 and agreed, upon certain conditions, to commence an action against those defendants at the request of the respondent. No such proceedings were commenced but the respondent commenced these proceedings against the applicant, the second defendant and the third defendant claiming against the applicant relief, including: “contribution and/or indemnity under s 5(c) of the Law Reform (Tortfeasor’s Contribution, Contributory Negligence, and Division of Chattels) Act 1952 and/or s 6(c) of the Law Reform Act 1995”.

The central findings at first instance

[8] The primary judge found that the applicant knew and approved of the deposit of the cheque and the deduction of fees by the respondent and that he took the benefit of the proceeds of the cheque drawn by the respondent, posted to the applicant and endorsed in favour of the second defendant. She further concluded that:

“The first defendant directed the plaintiff to deal with the [Commissioner of Taxation’s] cheque contrary to the rights of its true owner the third defendant.”

[9] On the basis of those findings, the primary judge, by implication, found that the applicant and respondent were each guilty of conversion of the cheque; the applicant as principal and the respondent as the applicant’s agent acting with his authority.

[10]  In his outline of argument, counsel for the applicant relied on eight grounds of appeal and it is proposed to address each of these in turn. None of them challenged the legal bases on which the primary judge found in the respondent’s favour and it is thus unnecessary to consider their correctness. It is sufficient for present purposes to state that the findings of fact provide an adequate foundation for the respondent’s claim for contribution or indemnity.

Ground 1

“The learned trial judge erred in failing to find that there was even no evidence, or alternatively, insufficient evidence of damages or compensation to support the giving of judgment in favour of the Respondent.”

[11]  I confess that I find this ground difficult to comprehend. It is not disputed that the respondent retained only $2,838 of the proceeds of the Commissioner of Taxation’s cheque. It is conceded that the respondent paid the third defendant $28,000 pursuant to the deed. It is common ground that the third defendant had a right to recover the amount of the Commissioner of Taxation’s cheque from the respondent. The respondent and the applicant were tortfeasors each liable in respect of damage suffered by the third defendant “as a result of a tort”. The respondent was thus entitled to claim contributions or indemnity from the applicant pursuant to s 6 of the Law Reform Act 1995 (Qld).

[12]  I note that the judgment sum consists of the sum of $28,000 plus interest.

Ground 2

“The learned Trial Judge erred in failing to find that the conduct of the Respondent and [Applicant] was such that the Court should have refused to enforce any remedy sought by the Respondent.”

[13]  This ground relies on illegality. It is submitted that the respondent was either the perpetrator of a fraud on the third defendant and the Commissioner of Taxation or acted in concert with the applicant to deceive the third defendant. These conclusions are said to flow from the respondent’s knowledge that the applicant was a bankrupt at the time he banked the Commissioner of Taxation’s cheque.

[14]  The respondent’s evidence was that at the time he received the cheque from the Commissioner of Taxation he did not turn his mind to the question of whether or not the applicant remained a bankrupt. That evidence is consistent with instructions given to a barrister from whom advice was sought by the respondent on the question of his liability to the third defendant. The primary judge found the applicant to be lacking in credibility but found the respondent a credible witness. She accepted that, in his practice, he had little to do with bankruptcy matters and that he “overlooked the question of [the applicant’s] bankruptcy at the time of the conversion”. She expressly rejected the contention that he “set out to defraud the trustee or the Tax Office”.

[15]  In another part of her reasons, the primary judge found that the respondent, in discussing the handling of the Commissioner of Taxation’s cheque with the applicant, overlooked the fact that the applicant was an undischarged bankrupt. In the same paragraph, however, when discussing the respondent’s claim for the amount of his legal costs incurred in obtaining counsel’s opinion, the primary judge concluded:

“The plaintiff has not given any satisfactory evidence as to how he overlooked the fact that the first defendant was an undischarged bankrupt, and, before me, gave no explanation as to why there was no appearance by him in the federal court in what has been described as the ‘Spender hearing’.”

[16]  On the basis of these findings, she declined to find the applicant liable to pay such costs. The applicant’s counsel submits that the two findings are inconsistent. That is not so. All the primary judge is saying is that, although satisfied that the respondent overlooked the fact of bankruptcy at relevant times, he failed to say how he came to do so and, in particular, failed to show that his inadvertence in this respect was justified or justifiable.

Ground 3

“The learned trial judge erred in finding that the Respondent [Applicant] gained a benefit from the transaction when the evidence could only support a finding that the Second Defendant and not the [Applicant] gained such benefit.”

[17]  The applicant’s evidence was that he took no benefit from the conversion. His evidence was rejected.

[18]  The proceeds of the cheque went in part to discharge the applicant’s liability to the respondent for work done in the preparation of his tax returns. He thus obtained a benefit.  The second defendant gave evidence that the balance proceeds of the cheque were spent mainly on or in connection with the purchase of a motor vehicle bought by her for use by her and the applicant. Her evidence was accepted by the primary judge.

[19]  Consequently, this ground fails unless the applicant can demonstrate that the primary judge erred in rejecting the applicant’s evidence or in accepting the evidence of the second defendant. The applicant’s challenge to the primary judge’s findings on credit is contained in the next three grounds of appeal which will be considered together.

Ground 4

“The learned Trial Judge erred in finding on a proper consideration of the evidence, the Respondent was a witness of credit.”

Ground 5

“The learned Trial Judge erred in finding that the [Applicant] was neither a credible or reliable witness.”

Ground 6

“The learned Trial Judge erred in finding that the Second Defendant was a credible witness.”

[20]  There are three pieces of evidence which are relied on to support the challenges to the primary judge’s findings as to the respondent’s credibility. The respondent gave evidence that the Australian Taxation Office contacted him about the applicant’s income tax affairs even though, at the time of the initial contact, he had not provided any professional services to the applicant. It is asserted that this evidence is highly improbable because the relevant officer’s conduct in so doing would constitute an offence under s 8XB of the Taxation Administration Act 2001 (Qld). A related submission is that, and the failure on the part of the applicant to respond to notices sent to the applicant care of the respondent requiring lodgement of tax returns by the applicant, could lead to “serious prosecutions against [the applicant] for breaches of the law”.

[21]  The respondent had worked for some years in the Australian Taxation Office in North Queensland, the region in which the events in question occurred. He had  done some work for the medical practice in relation to group tax and had had contact with departmental officers in that regard. There is thus nothing inherently improbable in the respondent’s evidence on this point. He was in fact engaged by the applicant in about early July 1992 to prepare income tax returns for him. The Australian Taxation Office wrote to the applicant care of the respondent in March 1993 concerning the late lodgement of his income tax returns. As the income tax returns had not been prepared and lodged by that time it is likely that there had been some contact between the respondent and a representative of the Australian Taxation Office concerning the missing returns. The point is peripheral at best and there is no reason why inaccuracy in the respondent’s evidence in this regard, had her Honour found any to exist, should have told significantly against his credit.

[22]  The respondent’s evidence that he had “little or no knowledge of the Bankruptcy Act” is said to be unbelievable as the respondent had conducted a general accountancy practice in Townsville from 1989 after leaving the Australian Taxation Office in 1977. His Bachelor degrees of Economics and Commerce are pointed to as is his Fellowship in the Association of Tax and Management Accountants. Those matters hardly establish any detailed knowledge of insolvency in general or the Bankruptcy Act 1966 (Cth) in particular and it has not been demonstrated that the respondent’s evidence in this regard should have been rejected. This point is peripheral also.

[23]  The more critical question is whether the respondent adverted to the fact of bankruptcy at relevant times and, having done so, intended to contravene the provisions of the Bankruptcy Act 1966 (Cth). No facts have been identified which show that the primary judge was not entitled to reach the conclusions she did about the respondent’s state of mind.

[24]  The argument relies also on the alleged inconsistency in the reasons discussed and disposed of earlier.

[25]  The final point made against the respondent’s credit is that he gave evidence of attempting to “hoodwink” the Australian Taxation Office about the second defendant’s affairs. The passage in the respondent’s evidence relied on to support these contentions seems to me to be innocuous and it was not explained how it told against the respondent’s credit.

[26]  The first challenge to the evidence of the second defendant is that she “is a convicted person” and thus lacking in credit. It seems she was charged with threatening her husband with violence at about the time of their marriage break up. Her evidence was that she didn’t make the threat and that the applicant stated in court that she had not made the threat. It was not suggested to her that her evidence in that regard was false. Nor is it explained why the commission of an offence (assuming she was in fact convicted), which does not involve dishonesty, should necessitate the conclusion that her evidence is to be regarded as inherently unreliable. The other alleged problem with her evidence is that in her evidence-in-chief she recalled only one visit to the respondent’s office but came to recall a second meeting in cross-examination. That discrepancy in her evidence hardly required the rejection of the whole of her evidence as unreliable. That is particularly so as at the time of her evidence-in-chief there was no issue about whether there was one meeting or more than one. 

Ground 7

“The learned Trial Judge, having found that the [Applicant] and the Respondent were joint tortfeasors, erred in determining that the [Applicant] should refund the Respondent the whole of the sum in question and not a lesser sum.”

[27]  This submission relies on the arguments advanced in support of ground 1. It was also submitted that if the applicant and respondent were joint tortfeasors the loss should be borne equally.

[28]  The contribution recoverable by the respondent from the applicant was such “as may be found by the court to be just and equitable having regard to the extent of that person’s responsibility for the damage [caused by the tort of conversion]”.[1] On the primary judge’s findings the applicant was aware that he was an undischarged bankrupt. The respondent may also have been aware of that fact but failed to advert to it. It is highly improbable, once the applicant’s version of his relevant conversations with the respondent is rejected, that he was not aware of his wrongdoing when appropriating the balance proceeds of the Commissioner of Taxation’s cheque. He and his wife took the benefit of those proceeds.  Consequently, it has not been demonstrated that the exercise of the primary judge’s discretion in relation to contribution or indemnity miscarried.

[29]  No principle was pointed to to support the contention that as the applicant and respondent were joint tortfeasors “the loss should be borne equally”.

Ground 8

“The learned Trial Judge erred in the exercise of her discretion in relation to costs in circumstances where the appropriate order should have been that the provisions of rule 698 (2) of the Uniform Civil Procedure Rules be applied.”

[30]  The basis of this submission was that any amount realistically recoverable by the respondent and the amount actually recovered was within the jurisdiction of the Magistrates Court. Consequently, it was urged that the discretion of the primary judge miscarried in not awarding costs on the appropriate Magistrates Court scale. The discretion is said to have miscarried as there was nothing “exceptional or unusual” to warrant departure from the “normal rule” expressed in r 698 of the Uniform Civil Procedure Rules 1999 (Qld).

[31]  The primary judge gave careful consideration to the question of costs. She took into account the fact that the claim included a claim for equitable relief and, inferentially, potentially raised questions of some legal complexity. She noted, and it is not disputed, that, initially, the applicant was seeking trial by jury. The relevance of that no doubt receded significantly once a trial date was set and it became known that the applicant no longer required a jury trial. But it is not suggested that the applicant sought to have the proceedings transferred to the Magistrates Court. There was thus a rational basis for the primary judge’s costs determination and it has not been shown that the exercise of her discretion miscarried.

[32]  Additionally, determinations on costs are discretionary and are not lightly interfered with on appeal, particularly if, as is the case here, there is no other substantive ground of appeal which is reasonably arguable.

Conclusion

[33]  For the above reasons, I would refuse the application with costs.

[34]  Counsel for the respondent argues that the “abject weakness” of the applicant’s case means that indemnity costs should be ordered. However, the case mounted by the applicant does not exhibit features of the kind referred to in cases such as Colgate-Palmolive Co v Cussons Pty Ltd[2] and Re Wilcox, Ex parte Venture Industries Pty Ltd (No 2),[3] as justifying departure from the normal order.