Artcraft Pty Ltd v Dickson

Case [2014] SASC 108

SUPREME COURT OF SOUTH AUSTRALIA

(Civil)

ARTCRAFT PTY LTD & ANOR v DICKSON & ANOR

[2014] SASC 108

Judgment of The Honourable Justice Kelly

15 August 2014

EQUITY - GENERAL PRINCIPLES - FIDUCIARY OBLIGATIONS - FIDUCIARY DUTY - ACCOUNT FOR BENEFITS GAINED

EQUITY - TRUSTS AND TRUSTEES - POWERS, DUTIES, RIGHTS AND LIABILITIES OF TRUSTEES - LIABILITY FOR BREACH OF TRUST - WHO MAY BE LIABLE - ACCESSORY LIABILITY

EVIDENCE - BURDEN OF PROOF, PRESUMPTIONS, AND WEIGHT AND SUFFICIENCY OF EVIDENCE - GENERALLY - CREDIBILITY AND WEIGHT - PARTY'S FAILURE TO GIVE OR CALL EVIDENCE

EQUITY - TRUSTS AND TRUSTEES - IMPLIED TRUSTS - CONSTRUCTIVE TRUSTS - KNOWING RECEIPT

DAMAGES - GENERAL PRINCIPLES - EXEMPLARY, PUNITIVE AND AGGRAVATED DAMAGES

The plaintiffs, Artcraft Pty Ltd and Artcraft (SA) Pty Ltd claim damages from the first defendant Benjamin Dickson for breach of employee’s contractual and fiduciary duties and wrongful conversion.

It was alleged that between 17 September 2007 and 18 October 2011, Mr Dickson, while in the plaintiffs’ employ, took a large quantity of the plaintiffs’ metal and delivered or had it delivered to scrap metal recyclers Ferris Metal Recyclers Pty Ltd and Trading Metals Pty Ltd, and appropriated to himself almost $500,000 from the sale of the property.

The plaintiffs seek against Mr Dickson damages for the value of the metal, estimated to be around $1,000,000 as well as an award of exemplary damages.

From second defendant Stacie Dickson, who is the wife of the first defendant, the plaintiffs claim damages on the basis of accessorial liability, namely as a knowing recipient of trust property, retaining trust property without having provided consideration and unjust enrichment. 

At trial, the first defendant gave evidence. The second defendant did not.

Held:

1. Each cause of action against the first defendant is proved.

2. It is proved beyond reasonable doubt that between 2007 and 2011 Mr Dickson delivered the alleged quantity of new and scrap metal to Ferris and Trading Metals and cashed the proceeds as alleged by the plaintiffs.

3. The first defendant is liable to pay general damages assessed at the value of the new metal sold to Ferris and amounts paid to the first defendant for the scrap metal sold by him in breach of his contractual and fiduciary duties.

4. The plaintiffs are entitled to an award of exemplary damages assessed at $50,000. The conduct of the first defendant can be described as conscious wrongdoing in contumelious disregard of the plaintiffs’ rights.

5. It is proved on the balance of probabilities that the second defendant received some of the proceeds obtained by the first defendant as a result of his breach of contractual and fiduciary duties.  The second defendant had the requisite state of knowledge required under the first limb in Barnes v Addy.

6. The alternative claims against the second defendant on the bases of unjust enrichment and volunteer liability fail.

7. The second defendant is liable to pay equitable compensation assessed at $59,800.

Barnes v Addy (1874) LR 9…

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Artcraft Pty Ltd v Dickson [2014] SASC 108
Case
[2014] SASC 108
Decision Date

CaseChat Overview and Summary

The case of Artcraft Pty Ltd v Dickson involves claims against Stacie Dickson for accessory liability, alleging she knowingly received trust property, retained it without providing consideration, and was unjustly enriched. The plaintiffs, Artcraft Pty Ltd and Artcraft (SA) Pty Ltd, are manufacturers of street furniture and road signs. The defendants, Ben and Stacie Dickson, were married and had several children. Ben Dickson was employed by Artcraft as the production/manufacturing manager. The dispute centers on the alleged misappropriation of Artcraft's aluminium by Ben Dickson, who sold it to metal recyclers Ferris and Trading Metals. Stacie Dickson is accused of being a knowing recipient of the proceeds from this sale.

The primary legal issues addressed by the court were whether Stacie Dickson was aware of and participated in the misappropriation of trust property, and whether she was unjustly enriched by receiving funds from the sale of the aluminium. The court had to determine if Stacie Dickson's involvement met the criteria for accessory liability under the first limb of Barnes v Addy. Additionally, the court examined whether she retained the property without providing consideration and if she was unjustly enriched by receiving the proceeds.

The court found that Ben Dickson's evidence was largely untruthful, despite his articulate and likeable demeanor. The phone records and other evidence indicated that Ben Dickson frequently left the Artcraft premises and made or received phone calls near Ferris within minutes of transactions occurring, suggesting his direct involvement in the sales. The employees' testimonies highlighted the power and influence Ben Dickson wielded, as they followed his orders without question. The court concluded that Ben Dickson had indeed misappropriated Artcraft's aluminium and sold it to Ferris and Trading Metals. However, the court found insufficient evidence to determine whether Stacie Dickson was aware of and participated in these activities. As a result, the claims against her were dismissed.

In summary, the court found that Ben Dickson was responsible for the misappropriation of Artcraft's aluminium and its sale to metal recyclers. However, the claims against Stacie Dickson for accessory liability were dismissed due to insufficient evidence of her knowledge or participation in the scheme.

Orders

Orders of the court

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Background

Background to the litigation

The claims against the second defendant, Stacie Dickson (“Mrs Dickson”) are brought on the basis of accessorial liability, namely knowing receipt of trust property under the first limb in Barnes v Addy,[1] retaining trust property without having provided consideration and as a recipient of monies on the basis of unjust enrichment. [1] (1874) LR 9 Ch App 244.Background The Artcraft group are manufacturers of street furniture and road signs. Artcraft (SA) Pty Ltd is a wholly owned subsidiary of the first plaintiff, Artcraft Pty Ltd. The Artcraft group has branches throughout Australia. Artcraft (SA) is based in Adelaide. Artcraft (SA) was, until August 2006, formerly known as Heatpac Safety Signs and Equipment Pty Ltd (“Heatpac”). When I refer to the Artcraft group I mean both plaintiffs. When I refer to “Artcraft” I mean the second plaintiff. For some of the relevant time, Artcraft operated from premises at Dry Creek, Cavan. In late 2010/early 2011, the premises moved to Port Road, Beverley upon the purchase of Allpack Signs, which operated out of the Beverley premises. Artcraft has, at all relevant times, manufactured and produced signs on site. In the course of business, the Artcraft group purchased and used raw materials including aluminium sheets and aluminium extrusions to manufacture road signs and street furniture. Mr Dickson was an employee of Artcraft. For most of the relevant time, Mr Dickson was the production/manufacturing manager of the Adelaide branch. He was responsible for the production of signs produced by Artcraft. Mr and Mrs Dickson married in January 2006. As at January 2007, their household included four children who were either fully or partially dependant: CC, JC (who lived with Mr and Mrs Dickson off and on), HG and DG. In August 2007 Mrs Dickson gave birth to BD, making theirs a household of seven. Ferris and Trading Metals were each metal recyclers whose business included the purchase of scrap metals for cash. At all relevant times, Ferris’ premises were located in Burton, South Australia while those of Trading Metals were located at Dry Creek, South Australia. Michael and William Tolmachoff are and at all relevant times were directors of Ferris. On 5 October 2011, Artcraft branch manager Donald Wild attended the yard of Ferris on the basis of hearsay information to the effect that Mr Dickson had been selling Artcraft’s metal, primarily aluminium, to that business. Mr Wild requested a list of transactions between Artcraft and Ferris and was provided with a list dating back to 1 June 2011 totalling $46,000. He was then shown a large volume of aluminium sheet metal stored at the Ferris yard, which he believed belonged to Artcraft. Mr Wild was informed that the metal had been delivered to Ferris in recent weeks. After verifying that Artcraft did not have an account with Ferris, Mr Wild reported the matter to the police. On 17 October 2011, Mr Wild attended the Ferris yard with police and approximately 16.25 tonnes of aluminium were seized. The police informed Mr Wild of a significantly longer history of transactions between Artcraft and Ferris. The next day, on 18 October 2011, a meeting between Mr Wild and Mr Dickson took place in Mr Wild’s office at the Artcraft premises. Mr Dickson’s employment ceased. It was disputed at trial whether his employment was suspended or terminated at that time. The terms of that conversation, in particular the question whether any admission was made by Mr Dickson, was disputed at trial.

Evidence

Evidence Before The Court

I turn now to consider the evidence of Mr Dickson. Analysis of Mr Dickson’s evidence Mr Dickson is an intelligent, capable man who worked his way into a position of influence and power within the Artcraft operation in Adelaide. On a day to day basis he was the key employee upon whom Mr Wellington relied, even during those periods of time when a State manager was appointed. It is plain that he was a likeable person who got on very well both with senior management of Artcraft and with his subordinates. Not one person testified to the contrary. This evidence accords with my own impression of Mr Dickson in the witness box. He is a likeable, articulate man with a ready answer for everything. In the end however, I have come to the conclusion that his evidence in many important respects was untruthful. Mr Dickson denied that he ever attended at the Ferris premises to sell aluminium cuttings and extrusions or that he ever instructed Mr Nicholas or any other Artcraft employee to do so on any of the occasions identified in the Ferris purchase summary.[17] [17] Exhibit P1, pages 261-273. In his evidence, Mr Dickson said that during a normal week he spent most of the time at the Artcraft premises and only left to attend site meetings in respect of particular projects. He said his absence from the factory would be noticed. Later however, he conceded that it was not necessary for him to be present throughout the whole production process and when he was out of the office he was accessible to others by way of mobile telephone. Telephone records covering the entire period from September 2007 to 18 October 2011 were tendered at the trial.[18] An analysis of those records indicates first that Mr Dickson was able to, and did, leave his employer’s premises often and at any time of the day. The records also indicate that on 37 different dates, Mr Dickson either made or received a phone call via a telephone cell in the suburb of Burton, which is where Ferris’ premises are located. Importantly, those records indicate that Mr Dickson either made or received a telephone call in Burton within minutes of transactions occurring at Ferris in the name of Artcraft. The timing of those transactions was evident from Ferris’ recipient created tax invoices[19] which recorded the time at which metal was weighed at the Ferris weighbridge. On some occasions the synchronicity between the weighbridge and telephone records is startling in that it is evident that on many occasions Mr Dickson either made or received a phone call in the Burton area within as little as two minutes of a relevant transaction occurring at Ferris. [18] Exhibits P1 USB 31 “Telephone records for Ben Dickson”; P5, P35 and D27.[19] Exhibit D15. On several of the 37 occasions identified, within minutes of the transactions occurring at Ferris, phone calls were made to or from the phone number used by Mrs Dickson. It is significant that there are very few entries in the phone records that are not consistent with Mr Dickson attending the Ferris yard personally and receiving cash payment for Artcraft metals. Moreover, the few telephone entries that are not consistent with Mr Dickson attending Ferris at times when a transaction occurred were occasions when Ferris’ records indicate that Mr Nicholas attended to deliver scrap materials. I find that Mr Nicholas attended Ferris on these occasions because the relevant recipient created tax invoices indicate that scrap as opposed to sheet metal was delivered, which is consistent with Mr Nicholas’ evidence that he delivered scrap metal to Ferris. There were approximately 300 recipient created tax invoices and, excluding deliveries referable to Mr Nicholas, I could find only one or two telephone records inconsistent with Mr Dickson being at Burton on the occasion of the relevant delivery. This is consistent with the evidence of the Tolmachoff brothers who testified that Mr Dickson was the person from Artcraft who attended on the majority of occasions.

Decision

Reasons for decision

KELLY J
Mr Dinh started working for Allpack Signs in 2003. That business was later sold to the plaintiffs, and Mr Dinh was transferred to Artcraft. His main work was as a sign installer. He received orders from Mr Dickson in relation to his daily duties. Mr Dinh described occasions when Mr Dickson asked him to get a pallet from the guillotine operator (Mr Stone), load it onto a ute and tie it up. He recalled that such a pallet was stacked with ally pieces about “1200 square and 600 high”. The material had been cut in half. He put it on the ute but he did not drive that ute anywhere. He did not see where it went. He recalls being asked to do this three or four times. On about two or three occasions he also saw Mr Dickson with a ute or a truck stacked with pallets. When Mr Dinh offered to take it, Mr Dickson said no and that it was going to be powder coated. Conclusion as to the Artcraft employees The evidence of the factory employees of Artcraft, namely Mr Stone, Mr Dewhirst, Mr Nicholas and Mr Dinh is important. Each of those employees were responsible to Mr Dickson. When asked whether he had any suspicions about what was occurring, Mr Dewhirst said “You don’t question your boss if you want to keep your job. You just do as you’re told”. Neither Mr Nicholas, Mr Stone, Mr Dewhirst nor Mr Dinh thought much about the requests they received from Mr Dickson. They simply accepted them as orders from their boss. As Mr Nicholas said in answer to a similar question in cross-examination:[8]Q.When you were taking scrap material from either the Beverley site or the Cavan site, did it ever occur to you that there was anything suspicious about taking the material.A.Slightly, but like I said, the only solace I got was that I received receipts and I felt comfortable with that, because I felt comfortable, it was recorded and if anyone had a problem with it, it could be traced. So I did not have a problem with it. [8] T335. There was a somewhat half-hearted challenge to Mr Nicholas’ evidence that he handed over cash on a regular basis to Mr Dickson; however there is no basis to reject Mr Nicholas’ evidence and in my view he was plainly telling the truth. The only criticism which was made of the evidence of Mr Stone was that his evidence was said to be inconclusive. His evidence about the frequency of Mr Dickson’s verbal instructions and the quantity of material which he was asked to cut was said to be vague and the fact that he did not notice anything amiss was said to detract from the probative force of his evidence. Similar criticisms were made of Mr Dewhirst’s evidence. Mr Dewhirst said he was not suspicious; he considered the verbal orders he received from Mr Dickson were an ordinary straightforward job. In addition, Mr Dewhirst’s evidence was said not to be supported by the extrusion ledger. Mr Dinh’s evidence was said to be neutral. I have considered the criticisms made of each of these employees’ evidence. It is correct that none of them really seemed to notice that anything was amiss; however it needs to be borne in mind that each of these employees were in a subordinate position to Mr Dickson and took orders from him. Their evidence, to my mind, underscores the status and power which Mr Dickson enjoyed in the Adelaide operation of Artcraft. Precisely because these orders came from their boss as far as they were concerned, no further questions needed to be asked by the employees. There is nothing unusual, startling or implausible about that.

Ratio Decidendi

Legal Principle Established

Established by: KELLY J

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