Break Fast Investments v Gravity Ventures (No 1)

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

S CI 2010 04463

BREAK FAST INVESTMENTS PTY LTD	Plaintiff
v
GRAVITY VENTURES PTY LTD & ORS	Defendants

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JUDGE:	Judd J
WHERE HELD:	Melbourne
DATES OF HEARING:	23, 24, 25 and 26 February, 2, 3, 4, 5, 10, 11 and 12 March, 21 May, 16 July and 4 August 2015
DATE OF JUDGMENT:	17 September 2015
CASE MAY BE CITED AS:	Break Fast Investments v Gravity Ventures & Ors (No 1)
MEDIUM NEUTRAL CITATION:	[2015] VSC 497	First revision: 17 November 2015

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PRACTICE AND PROCEDURE — Application to reopen – Incorrect assumption of legal position – New evidence – Risk of inconsistent judgments – Application refused.

COURTS — Abuse of process – Second proceeding with near identical allegations of fact – Same person controlled both proceedings – Second proceeding brought for an ulterior purpose – Risk of inconsistent judgments – Second proceeding unfairly prejudicial to defendants – Administration of justice – Stay granted.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Dr P Vout with Mr T Mitchell	Foster Nicholson Jones Lawyers
For the First, Ninth, Thirteenth and Fifteenth Defendants	Mr D Carbone	Sydney Law Practice
For the Second Defendant	Ms L Thompson	CBP Lawyers
For the Third Defendant	Mr C Voukidis appeared in person up to and including 21 May 2015, after which time Mr P Afshar appeared on his behalf	Spinks Eagle Lawyers
For the Fourth Defendant	Mr S Rubenstein	Spinks Eagle Lawyers
For the Twenty‑Second Defendant	Dr K Weston‑Scheuber	Spinks Eagle Lawyers

HIS HONOUR:

Introduction

In this proceeding the plaintiff, Break Fast Investments Pty Ltd, sought recovery of funds allegedly misappropriated by one of its directors, Christos Voukidis, in and between the years 2003 and 2009. Voukidis was the third defendant. Claims were also made against the first defendant, Gravity Ventures Pty Ltd, the second defendant, C & O Voukidis Pty Ltd, as trustee of the Voukidis Family Trust and the Voukidis Family Trust No 2, the fifteenth defendant, T‑Pay Pty Ltd, and the thirty‑first defendant, Voukidis Management Pty Ltd. The plaintiff alleged that each corporate entity was, at the relevant time, controlled by Voukidis.

The plaintiff’s case was that in and between 2003 and 2009, Voukidis misappropriated $4,796,732.51 of the plaintiff’s money by transferring funds held on behalf of the joint venture partners to his own benefit, or to the benefit of other defendants. It alleged that Voukidis was liable to repay that sum. The plaintiff alleged that Voukidis was the direct beneficiary of payments made to his credit card, in and between October 2003 and July 2009, in the sum of $286,340.61. It alleged that joint venture funds were also employed by Voukidis to purchase a property at Lane Cove, New South Wales, and to repay the mortgage granted over the property. The Lane Cove property has been sold. The net proceeds of sale, in the sum of $555,573.00, which are held pursuant to a Freezing Order, in an interest‑bearing account in the name of the plaintiff and Voukidis.

There are two overlapping claims against C & O Voukidis. Under the first limb, the plaintiff sought to recover the whole of the misappropriated sum ($4,786,732.51) on the basis that C & O Voukidis, as a member of an alleged joint venture, had failed to perform its contractual obligation to prevent the wrongful payments by Voukidis. The basis for the claim was a breach of cl 17 of an alleged Joint Venture Agreement which required ‘each party to use its best endeavours to advance the interests of the Joint Venture to achieve the Objectives’. The objectives of that agreement were the purchase, development and management of a property at 176 Wellington Parade, Melbourne.

At the relevant time, Voukidis was a director of the plaintiff, C & O Voukidis and numerous other entities to or through which funds were transferred. The plaintiff alleged that, by reason of the best endeavours clause, C & O Voukidis was under an obligation to disclose to Break Fast, Baker and its other joint venture partners, details of the misappropriation. It alleged that had C & O Voukidis complied with its disclosure obligation, Break Fast and/or the other joint venture participants would have taken steps to prevent Voukidis from making further unauthorised payments. The logic and viability of such an allegation is questionable.

Claims were also made against C & O Voukidis under Barnes v Addy for knowing receipt and knowing assistance. Having regard to Voukidis’ control of C & O Voukidis, and his control of the plaintiff’s accounts, a more direct approach for the plaintiff might have been to confine its case against C & O Voukidis to Barnes v Addy claims.

The plaintiff alleged that the Voukidis Family Trust derived a benefit from the misappropriated funds through the reduction of its indebtedness to the National Australia Bank, secured by properties at 5 Wyatt Avenue, Burwood and Lot 1, 60 Belmore Street, Burwood. The Belmore Street property has also been sold. The net proceeds, after discharge of the mortgage, are held in a controlled interest‑bearing account in the name of C & O Voukidis and the bank until further order, pursuant to a Freezing Order made by Vickery J on 16 March 2012. The funds exceed $1.4 million. The plaintiff claims they are held on a constructive trust for it, or under an equitable lien. The bank made no claim to the funds.

The National Australia Bank is mortgagee in possession of the Wyatt Avenue property. A mortgage over that property had been granted by Voukidis and his wife in support of other debts for which other security was also given. The plaintiff conceded that once that property is sold, the proceeds may be completely exhausted in discharge of the secured liabilities. Nevertheless, it contemplated the possibility of a claim by way of subrogation, or for recoupment, contending that there remained some utility in a declaration that it had an interest in the funds applied under the guarantee to reduce the debts of other entities.

The claims against Gravity Ventures were based on knowing receipt of the plaintiff’s funds. There was a direct transfer of $175,000 by six instalments, and receipt of a further $977,000 through other entities. Voukidis was the sole director of Gravity Ventures. The plaintiff alleged that Gravity Ventures received the funds in the knowledge of Voukidis’ breaches of fiduciary duties and his dishonest and fraudulent scheme.

The claim by the plaintiff against T‑Pay Australia Pty Ltd was for $24,114.63. The plaintiff alleged that its funds could be traced into T‑Pay through Gravity Ventures. The claim against T‑Pay overlapped with the claim against Gravity Ventures.

The trial commenced on 23 February 2015. The first and principal witness for the plaintiff was Theodore Baker. His evidence was crucial to the plaintiff’s case. Voukidis was unrepresented throughout the trial, but actively participated until day nine. Thereafter, he failed to attend, claiming ill health. The remaining corporate defendants were not represented at trial after the first day. The plaintiff closed its case on 11 March 2015 and judgment was reserved.

Shortly afterwards, the court sent a memorandum to the parties seeking further assistance on a number of issues:

Dear Practitioners and Mr Voukidis,
The absence of legal representation for the defendants in this proceeding imposed an additional burden on the court. Over the past weeks, his Honour has endeavoured to reach a decision in this proceeding, but now finds that there are significant issues that were not adequately addressed by the parties. Further submissions are required. There are documents that ought to be tendered. Some additional evidence may be required.
Notwithstanding the adversarial nature of the court process, the overarching obligation of the court is to ensure a fair trial, and that justice is done between the parties.
Additional evidence
Mr Voukidis cross-examined on numerous documents not formally introduced into evidence. The Deeds of Collateralisation are just one example. Consideration should be given to the tender of some documents on which witnesses were cross-examined.
The plaintiff chose to advance its case without the assistance of any finalised accounts for itself or other related entities. If it were to be held that certain intercompany advances or other transactions were authorised, there may be an absence of clarity surrounding the extent to which the plaintiff suffered a loss.
Res judicata and issue estoppel
Mr Voukidis has alleged that he was authorised to make some or all of the payments by the directors and shareholders in the plaintiff, or that they otherwise approved of, assented to, ratified, or acquiesced to each of the payments. That allegation, of course, presupposes a different ownership structure.
His Honour does not presently accept that Mr Voukidis admitted that the trust structure, declared by Vickery should provide the framework within which his conduct must be assessed.
His Honour requires additional assistance from the parties on the binding nature of the declarations made by Vickery J in the Ambridge proceeding. In particular, to what extent, if at all is Mr Voukidis (and C & O Voukidis) precluded from contending in this proceeding for a different ownership structure? It would appear there was no controversy between the plaintiff (Break Fast), Mr Voukidis and C & O Voukidis in the Ambridge proceeding.
Abuse of process
Mr Voukidis complained, in substance, that it is manifestly unfair that he alone should be pursued a second time for claims also made against Baker and others in the Ambridge proceeding. As presently advised, the compensation claims against Break Fast, Mr Baker, Mr Voukidis, C & O Voukidis and others in the Ambridge proceeding remain extant. The claims made in this proceeding appear to substantially replicate the claims made in the Ambridge proceeding.
Unfortunately, the similarity between the claims were not explored at trial. The fact that Mr Voukidis did not elaborate on his complaint, about the unfairness of this proceeding, does not diminish the court's duty to protect the integrity of its processes.
When addressing this question the plaintiff should be in a position to elaborate on the background to this proceeding, including the role of Mr Taylor, funding for the Ambridge proceeding, funding arrangements in relation to this proceeding, the circumstances under which Mr Benstead acquired the shares in the plaintiff previously held by Mr Baker, and the existence of any agreement or arrangement with Messrs Baker and Anastasopoulos to give evidence.
Further directions
Unless the parties can agree, in consultation with me, on a suitable day next week for further directions, his Honour has fixed Thursday 21 May at 10.00 am to resume the trial. On that occasion, directions may be given for the further conduct of this proceeding, and in particular, further submissions. His Honour strongly recommends that Mr Voukidis give consideration to engaging legal representation.

On 4 August 2015, the plaintiff applied to reopen its case, and Voukidis applied for a permanent stay on the ground that this proceeding was an abuse of the process of the court. At the heart of the plaintiff’s application to reopen was a concession that it had wrongly assumed that Voukidis and C & O Voukidis were bound by declarations made by Vickery J in Ambridge Investments Pty Ltd v Baker & Ors.[1] The plaintiff maintained that the effect of the declarations, which concerned the capacity in which Break Fast held the property, and the terms of a Joint Venture Agreement, had been admitted by Voukidis (although not by C & O Voukidis), but if it was wrong, it sought to lead evidence in support of its pleaded case to persuade the court to reach the same conclusion as did Vickery J.
[1][2010] VSC 59.

In its statement of claim, the plaintiff alleged that it held the property as trustee for joint venture partners. There is now a dispute as to whether that allegation was admitted by Voukidis. The plaintiff did not adduce evidence to support that allegation. For reasons given below, I am of the opinion that the allegation was not admitted by Voukidis, and the plaintiff did not conduct the trial on the footing that he had made any such admission. Instead, the plaintiff proceeded on the basis that Voukidis and C & O Voukidis were bound by declarations made by Vickery J in Ambridge.

Background and context

It is not possible to set out the background to the applications, and place them in context, without traversing controversial facts concerning the capacity in which it held the Wellington Parade property. The background involved complex relationships between the shareholders in and directors of Break Fast at different times.

The plaintiff was incorporated in December 1999 as a special purpose entity to acquire and hold the Wellington Parade property. The prime movers for the investment were Voukidis, Baker and Mark Stanley, who each invested through corporate entities. In early 2005, Ambridge commenced its proceeding. Ambridge was initially controlled by Stanley, who lost control in favour of Gregory Taylor before 2005. In the Ambridge proceeding, Break Fast, Voukidis, Baker and others were defendants.

The Ambridge proceeding was initially commenced to assert an entitlement to a 25 per cent beneficial interest in the ownership of the property through a joint venture. The scope of the proceeding was later enlarged to claim that funds had been misappropriated by the defendants in breach of trust. Ambridge contended that the respective interests of the investors in the property was not reflected in the shareholding, but as a percentage of the joint venture. Break Fast, Voukidis and Baker maintained a uniform defence resisting the claims. They engaged common solicitors.

Vickery J decided questions under r 47.04 of the Supreme Court (General Civil Procedure) Rules 2005. His Honour held that the Wellington Parade property was held on trust by Break Fast for members of the joint venture; and that Ambridge held a 25 per cent interest in the joint venture, C & O Voukidis Pty Ltd, 25 per cent, Career Path Pty Ltd, 40 per cent, and IMF Pty Ltd, 10 per cent. The substantive claims of misappropriation did not progress to trial. Instead, Break Fast commenced this proceeding in which substantially the same allegations were made against Voukidis and others, but not Baker, for the recoupment of unauthorised transfers. Baker was a director of Break Fast at the time, but is no longer a director. Break Fast’s role as plaintiff in this proceeding is controlled by Taylor.

The substantial overlap between the factual allegations in Ambridge and this proceeding was not sufficiently exposed at trial. The full history of, and pleadings in, Ambridge were not brought to the attention of the court during the trial. That was most unfortunate. It may be explained in part by the absence of legal representation for Voukidis. That did not excuse the plaintiff from bringing an unresolved allegation of abuse of process to the attention of this court.

It is unhelpful to the resolution of these applications to dwell upon the root causes of confusion and chaos created by the commencement and prosecution of this proceeding. There is no other way to adequately describe the events that have occurred. Suffice to say the cause of the chaos lies in procedural decisions made by the parties in both proceedings, and by the court. No one stakeholder is wholly to blame. On the bright side, however, there are important lessons for the management of future litigation.

Vickery J held in Ambridge that the interest of each party in the property was not defined until after the property had been acquired by the plaintiff. Career Path was controlled by Baker. It held a 50 per cent interest until around mid‑2000, when it transferred one fifth (10 per cent of the whole) to IMF, a company controlled by Todd McGrouther. Baker and Career Path were defendants in Ambridge, but not in this proceeding.

The declarations made in Ambridge were fundamental to the plaintiff’s case. They were to the following effect:[2]

(a)It is declared that the Plaintiff holds a 25% interest in the Wellington Parade Joint Venture under the terms of an enforceable contract of joint venture between the Plaintiff, Ambridge Investments Pty Ltd (“Ambridge”), the Third Defendant (“Career Path”), Fourth Defendant (“IMF”), the Fifth Defendant (“C & O Voukidis”) and the Sixth Defendant (“Break Fast”) in the terms of the written joint venture agreement executed by Break Fast and Ambridge and provided to the First Defendant on 8 October 2002.
(b)It is further declared that the Plaintiff holds a 25% beneficial interest in the Wellington Parade Property pursuant to an express trust of which the Sixth Defendant (“Break Fast”) is the trustee.

[2]Ibid [624].

The plaintiff contended that the declarations were binding on Voukidis and C & O Voukidis in this proceeding, because they were defendants in Ambridge.

In Ambridge, Vickery J also found:[3]

516… that the terms of the draft joint venture agreement provided by Stanley to Baker on 8 October 2002, which was executed by Ambridge and Break Fast, happens to record all of the terms of the binding joint venture agreement, the parties and their designated partnership interests, upon which the parties conducted their joint venture since mid July 2000, as it was developed by adding the corporate representatives for Baker, Voukidis and McGrouther in mid February 2001 pursuant to the contractual mechanism in place. The contract of joint venture continues in this form to this day.
517In terms of the express trust, upon the nominations of Baker and Voukidis, Break Fast appointed Career Path, C & O Voukidis and IMF to hold the interests of Baker, Voukidis and McGrouther, alongside that of Ambridge, in the Wellington Parade Property.

[3]Ibid [516]–[517] (citation omitted).

As for the plaintiff, Vickery J held that on purchase of the property:[4]

… Break Fast indeed held the property on an express trust for the partners of the joint venture as they were from time to time. The express trust arose from the conduct of the parties in relation to Break Fast and the Wellington Parade Property. Initially the beneficiaries and partners of the joint venture were Baker, Voukidis and Ambridge. However, by implication, Break Fast was also conferred with a special power of appointment to appoint beneficiaries in place of Baker and Voukidis as to the whole or part of their interests, upon nominations being provided by one or other of those persons. Ambridge was and continued to be a beneficiary under the express trust from its inception.

Thus, the beneficiaries under the trust were, from mid‑2000, held to be Ambridge, C & O Voukidis, Career Path and IMF.

[4]Ibid [493] (citation omitted).

It will be observed that the shareholding and control of the plaintiff did not reflect the interest held by each joint venture partner in the property as found by Vickery J. Baker held two shares, Voukidis held and continues to hold one share, and Stanley held one share until June 2004. Baker, Voukidis and Stanley were the initial directors. For a few years after the property had been acquired, Stanley controlled Ambridge.

In Ambridge, all defendants but for Stanley, a former director of Ambridge, advanced a unified defence[5] described by Vickery J in the following terms:[6]
[5]See second further amended defence and counterclaim dated 14 October 2009.
[6][2010] VSC 59, [21]–[27] (citations omitted).

21As to the case of Baker and Voukidis, their respective corporate entities and IMF (the First to Seventh Defendants, collectively called the “Defendants”), they say that there was no such unincorporated joint venture as claimed by Ambridge. An “incorporated joint venture” arose, which did not include Ambridge. They contend that between mid November 1999 and 23 November 1999, Baker, Voukidis and Stanley agreed to invest in the Wellington Parade Property pursuant to a shareholder agreement (the “Shareholder Agreement”). The terms of the Shareholder Agreement were said to be:
(a)Break Fast would be incorporated;
(b)It would acquire the Wellington Parade Property and would hold it beneficially;
(c)Each of Baker, Voukidis and Stanley would hold their interest in the property by means of their shareholding in Break Fast;
(e)Baker would hold a 50% interest in Break Fast by holding 2 shares; Voukidis would hold a 25% interest in Break Fast by holding 1 share; and Stanley would hold a 25% interest in Break Fast by holding 1 share;
(f)Each member would, in proportion to their respective shareholding, contribute capital to Break Fast, including for the purposes of acquiring, renovating and maintaining the property, with the initial capital contribution payable by each shareholder being determined on the basis of the price of acquisition of the property after its purchase;
(g)Each member would be entitled to any distributions paid by the company from profits earned, in proportion to their respective shareholdings; and
(h)Each of Baker, Voukidis and Stanley would be appointed a director of Break Fast and as a director would be entitled to participate in the management of Break Fast to the benefit of all members.

22Upon its incorporation immediately prior to the purchase of the Wellington Parade Property, Break Fast issued a total of four shares, each with a paid up capital of one dollar. Two shares were issued to Baker, one to Voukidis and one to Stanley. It was therefore contended that there was no joint venture which included Ambridge, and as Ambridge had no shareholding in Break Fast, it had no interest in the Wellington Parade Property.
The Rival Contentions Schematically Represented
23Schematically represented, the ownership structure established for the Wellington Parade Property contended for by the Plaintiff, Ambridge, looked like this:
24On the other hand, the ownership structure established for the Wellington Parade Property contended for by the Defendants looked like this:

Issues for Determination
25On the application of the Defendants at the trial, I made an Order on 6 October 2009 pursuant to Rule 47.04 of the Supreme Court (General Civil Procedure) Rules2005 that specified questions and issues raised in the pleadings be tried before the trial of other questions in the proceeding.
26This step had the effect of confining the trial at this stage to questions of liability, leaving such matters as the taking of accounts, any breaches of any alleged agreement or duties, and damages, to be tried subsequently.
27The questions for determination at this stage of the proceeding may be conveniently grouped in the following categories:
A.The existence of any joint venture agreement between the parties, the parties to any such agreement, the terms of any such agreement, and any duties which arose under any such agreement;
B.If such a joint venture agreement did arise, is it enforceable given that it was not evidenced in writing or signed as required by the Statute of Frauds (s.126 Instruments Act1958) (Vic)?
C.Whether any joint venture arose in equity, and if so, what duties arose under such a joint venture?
D.Whether Ambridge, by its knowledge of a transaction called the “Tauber Loan Agreement” and the securities pertaining to that transaction, is estopped from asserting that it has an interest in the Wellington Parade Property, and otherwise has no interest in the property?
E.Whether Ambridge is precluded by the terms of a guarantee which it entered into as part of the Tauber Loan Agreement from asserting that it has an interest in the Wellington Parade Property, or by reason of the guarantee it should be denied equitable relief ?
F.Further, it being common ground that Stanley was later bankrupted pursuant to a sequestration order made against him on or about 17 May 2005, the Defendants contended that, if Stanley had any interest in the joint venture through ownership of his share in Break Fast, any such interest now vested in his trustee in bankruptcy;
G.An issue also arose as to whether any interest which Stanley had in his share in Break Fast is now held absolutely by the Seventh Defendant, Oxley Group Finance Pty Ltd, by reason of an alleged mortgage of his share to that company;
…

In addition to declarations, Ambridge sought the taking of accounts, damages or equitable compensation. Importantly, Ambridge alleged that Career Path, C & O Voukidis, IMF and Break Fast had used the property of the joint venture for purposes unrelated to the interests of all joint venturers.

Ambridge sought to recover from Voukidis, Baker and their related entities amounts allegedly paid from the plaintiff’s bank account, set out in schedule 2 to the statement of claim. A review of the Ambridge statement of claim revealed a very substantial overlap between the alleged wrongful or unauthorised payments claimed by Ambridge, and the wrongful and unauthorised payments alleged in this proceeding. The differences, for present purposes, are immaterial.

The basis of the claim by Ambridge against the directors of the plaintiff was that they were aware of the breaches of trust or duty by Break Fast. The duties, alleged by Ambridge to be owed to it as a member of the joint venture were:

(a) to act in good faith in its dealings with Ambridge;

(b) to act in good faith in its dealings with the property of the joint venture;

(c) not to use the property of the joint venture for a purpose not related to advancing the interests of all joint venturers;

(d) to avoid conflicts of interest; and

(e) not to deny the interest of Ambridge in the joint venture.

Ambridge alleged that each joint venture partner owed similar duties to the others. It alleged that the duties flowed from the terms of the Joint Venture Agreement. Clause 17 required each joint venturer and Break Fast to use its best endeavours to advance the interests of the joint venture and to achieve its objective of developing and managing the property. In this proceeding, Break Fast has pleaded a breach of the very same clause against C & O Voukidis.

Ambridge alleged that C & O Voukidis and the other joint venture partners caused Break Fast to deal with joint venture property without the consent of Ambridge. Ambridge alleged that Break Fast failed to advance the interest of the joint venture and, with the other joint venture partners, use the property of the joint venture for a purpose unrelated to the interests of the joint venture. Particulars of the alleged breaches of the Joint Venture Agreement relevantly included:

They have caused or acquiesced in Break Fast making payments without the consent of Ambridge Investments, which were not for the benefit of the joint venture, including the payments set out in schedule 2 hereto.

Ambridge also alleged that Break Fast, in breach of duties owed to Ambridge, used property of the joint venture for a purpose not relating to advancing the interests of all joint venturers. The same particulars were relied upon to support a breach of the Joint Venture Agreement by C & O Voukidis and Career Path. Relevantly, the breach involved the making of the unauthorised payments. Ambridge claimed to have suffered loss and damage, which included a claim for the lost value of its interest in the joint venture.

Ambridge made a separate claim against Baker and Voukidis for procuring a breach of the Joint Venture Agreement by C & O Voukidis, Break Fast and others, followed by a Barnes v Addy claim against Oxley Pty Ltd, Voukidis and Baker for knowing assistance and receipt. Ambridge alleged that Oxley, Voukidis and Baker were aware of the breaches of trust or duty and assisted, induced or participated in the breaches by Break Fast, Career Path and C & O Voukidis. Ambridge claimed damages or equitable compensation payable to Ambridge, alternatively, payable to Break Fast on behalf of the joint venture.

While there is a very substantial overlap between the allegations of fact in Ambridge and in this proceeding, the claims for liability and recoupment were differently formulated. Ambridge sought compensation from Break Fast, Voukidis and others as a consequence of the ‘Wrongful Payments’, as they are defined in this proceeding, as a breach of trust by Break Fast, with the knowing assistance of Voukidis and others. In this proceeding, Break Fast claimed recovery from C & O Voukidis on essentially the same basis as did Ambridge. The claims against Voukidis in this proceeding, described in more detail below, are made on the basis of alleged breach of duty owed to Break Fast, knowing receipt and knowing assistance.

Notwithstanding the reformulation of the case against Voukidis in this proceeding, in terms of breach of duty owed to the company, the plaintiff advanced a case at trial firmly rooted in the binding nature of the declarations in Ambridge; and the proposition that, in the absence of express authorisation from all joint venture partners, certain payments made by Voukidis were recoverable because they were not made for the benefit of the joint venture.

The claims for compensation in Ambridge made against Voukidis, Baker and others, remain unresolved. The further prosecution of the Ambridge proceeding was to await the outcome of this proceeding. In 2013, the managing judge was informed that the purpose of this proceeding was to produce a ‘pot of money’ to benefit Ambridge in the Ambridge proceeding. The prosecution of both proceedings is under the ultimate control of Taylor.

At a directions hearing on 14 February 2013, there was some discussion as to which case should proceed first to trial. On that occasion, counsel for Break Fast submitted:

If I might tentatively proffer to Your Honour that if the Break Fast proceeding, given the attitude that's been taken by Ambridge it would appear, if the whole of this proceeding, the Break Fast proceeding, were to go first then Ambridge understands where there is a pot of money to go after and whether it's worth doing a taking of accounts. Depending on whether there's been any recoveries in this proceeding that seems to be the approach Ambridge has taken and it seems to be a sensible one because otherwise that whole taking of accounts may be a barren [sic] exercise.[7]

[7]T 38 (emphasis added).

The controlling influence of Taylor is relevant to the stay application. Taylor, through Headland Properties Pty Ltd, had acquired an interest in Ambridge about the same time as Break Fast purchased the Wellington Parade property. Vickery J found that Taylor was responsible for the appointment of a receiver to Ambridge, and funded the Ambridge proceeding. Taylor, who filed an affidavit on behalf of the plaintiff on 21 May 2015, in response to the memorandum from the court, conceded that companies controlled by him had funded the Ambridge proceeding. He further deposed that he was first appointed a director of Break Fast on 12 December 2002, to replace Stanley, as the representative of Ambridge. In August 2004, a company controlled by Taylor appointed a receiver to the assets of Ambridge under a charge granted by Ambridge when under the control of Stanley. Taylor deposed that it was the receiver of Ambridge who decided to commence the Ambridge proceeding, and his (Taylor’s) role was to provide advice and assistance to the receiver in relation to the Ambridge proceeding. He said, in effect, that he was qualified to do so because of his earlier involvement with Break Fast as a director, and his involvement in the purchase and fit out of the property.

Taylor resigned as a director of Break Fast in August 2004 and was reappointed on 31 October 2011, after this proceeding had commenced. It is not clear why Taylor resigned, and the circumstances of his re‑appointment were not explained. What is now clear is that he controls both proceedings. At the time this proceeding was commenced, in June 2010, the directors of Break Fast were Messrs Baker, Anastasopoulos and Crotti. While Taylor rejected ‘any involvement in the commencement of this proceeding’, he deposed that he became involved in the proceeding upon his appointment as a director of Break Fast in October 2011, and has been the principal director of Break Fast providing instructions to its solicitors since March 2012. Taylor deposed that the purpose of this proceeding was to recover, for the benefit of the joint venture, money misappropriated by Voukidis.

Taylor was not called as a witness in the trial. He was not cross‑examined on his affidavits filed after the conclusion of the trial, that were deployed by the plaintiff to support its application to reopen, and to resist a finding that this proceeding constituted an abuse of the process of the court.

It is surprising that the propriety of deploying this proceeding as a means to raise funds to satisfy claims made in the Ambridge proceeding did not result in a stay of this proceeding at its inception, or at least in February 2013. It is also surprising that the role of Baker, first as a defendant with Voukidis in the Ambridge proceeding, then as a director of Break Fast at the time the decision was made to commence this proceeding, and finally as the plaintiff’s principal witness against Voukidis, did not seem to cause the plaintiff a moment’s reflection.

Voukidis complained from time to time during the trial that he was unfairly isolated by Break Fast and Baker, as the target of this proceeding. Had Voukidis been represented, his complaint might have been developed. After all, the seeds of an abuse allegation had already been firmly planted by his counsel in February 2013. There was also the risk that Baker, as a co‑defendant in the Ambridge proceeding, might have been privy to confidential and privileged communications or information that could be unfairly deployed by Break Fast against Voukidis in this proceeding. Baker’s transition from co‑director and co‑defendant, to instigator of this proceeding, and then as its principal witness was, to say the least, arresting. The potential for unfair prejudice to Voukidis was manifest.

Following the trial, when further submissions were received by the court on the application to reopen, Voukidis, through his counsel, submitted that the proceeding ought to be stayed as an abuse of process. One ground was that this proceeding was maintained for an ulterior purpose, to provide funds for distribution to Ambridge in the Ambridge proceeding. While the role of Baker in this proceeding was mentioned, as creating some kind of unfairness to Voukidis, the potential for prejudice was not fully developed.

The significance of Baker’s mercurial role, from co‑defendant and director, to decision maker in the commencement of this proceeding, and eventually key witness for the plaintiff against Voukidis, was not confined to the abuse argument. Had the full extent of his role been exposed during the trial, it would have been highly relevant to his credibility as a witness against Voukidis. While it is true that Voukidis knew of Baker’s role, he was unrepresented at trial. The full significance of Baker’s role may not have been appreciated by Voukidis. Baker’s role was not fully exploited in cross‑examination, as might have been the case had Voukidis been represented by competent counsel. This was just another example of the failure of the adversarial system in the absence of competent legal representation.

By his defence, Voukidis alleged that Baker had authorised various transactions, with full knowledge of the manner in which funds were being deployed. He also alleged that Baker was a beneficiary of payments. Baker denied any benefit. And yet bank records disclosed that Baker or his company Career Path was the recipient of regular payments. No claim was made against Voukidis in respect of such payments. It must have been obvious to the plaintiff that a serious credit issue would arise in relation to Baker’s evidence.

Another factual conflict in the trial, which elevated the significance of Baker’s evidence and the question of the capacity in which Break Fast held the property, was Voukidis’ ‘group’ allegation. Evidence disclosed that investors in the Wellington Parade property also invested in other businesses and property development projects. Some of those other businesses and projects were owned or controlled by entities that are or were once defendants in this proceeding. Some of those parties had a role in the defences raised by Voukidis and C & O Voukidis. While Voukidis sought to characterise Break Fast as a member of a group of interdependent entities, whose interests were aligned, the plaintiff and Baker sought to isolate Break Fast by reason of its position as trustee on behalf of joint venture partners.

Although unrepresented, Voukidis contended, through his defence and submissions, that this court should assess his conduct through the prism of the ownership structure contended for by the defendants Break Fast, Baker, Voukidis and others in Ambridge. Voukidis placed emphasis on the shareholdings in the plaintiff as representing the true equity position of investors. He contended that the plaintiff, and other entities in which he and Baker had an interest, were part of a group within which funds could be utilised as and when required, and recorded against loan accounts. The group included Oxley, St Leonards and Onetofour Holdings Pty Ltd. If Voukidis is correct, the plaintiff may not succeed in establishing many of the alleged breaches of fiduciary duty. On the other hand, even if it be accepted that the plaintiff’s ownership paradigm ought to be applied to the facts, its formulation of the dishonest and fraudulent design, to support the second limb of Barnes v Addy claims, was based on the allegation that Voukidis knowingly procured Break Fast to breach its obligations as trustee on behalf of the joint venture. If Voukidis honestly believed that he was entitled to conduct the plaintiff’s business on the basis of his ownership paradigm, much of the sting in the plaintiff’s case would dissipate.

There was some evidence to support Voukidis’ contention that the scope of his duties as a director should be analysed and assessed by reference to the view of the ownership structure contended for by Voukidis, rather than through the prism of the judgment of Vickery J in Ambridge. The evidence included a Deed of Cross‑Collateralisation dated 21 August 2002; the circumstances in which the one share in the plaintiff, previously owned by Ambridge, became owned by Oxley; the use of Oxley as a conduit of funds for the support of other ‘group’ entities; and the recording of loan accounts with the plaintiff.

At the time the Wellington Parade property was purchased, Stanley was the sole shareholder in and one of two directors of Ambridge. He had been appointed a director of the plaintiff at the time of incorporation, but resigned in December 2002. In November 2001, Stanley mortgaged his one share in Break Fast to secure a liability to George Tauber Management Pty Ltd, in relation to a loan to St Leonards. Baker, Voukidis, Anastasopoulos and others had also invested in St Leonards. Stanley defaulted under the loan agreement, and in July 2004 Oxley was established to take an assignment of the mortgage. It ultimately became the shareholder in Break Fast in lieu of Stanley.

Voukidis argued that Oxley became the owner of the interest formerly held by Stanley through Ambridge. He contended that there existed a group structure, in which equity in the Wellington Parade property was reflected through shares held in the plaintiff, involved Baker (and later McGrouther) controlling 50 per cent through two shares, Voukidis controlling 25 per cent through one share and Oxley, in which Baker, Voukidis, Anastasopoulos and Crotti participated, controlling 25 per cent through one share. Voukidis contended that the shareholding in Break Fast was also reflected in St Leonards, a beneficiary of so‑called ‘wrongful payments’.

Voukidis alleged that those who controlled and owned the plaintiff, and thus the property and its revenue stream, were in a position to decide how to apply the plaintiff’s funds within the group. He alleged that they were entitled to apply the funds for the benefit of other entities in which they shared an equivalent, or near equivalent interest. He argued that under the cross‑collateralisation deeds, Break Fast was obliged to support St Leonards, and that many of the payments made by him were for that legitimate purpose. He argued that in so doing, there was no need to have regard to the interests of Ambridge, which Stanley had sacrificed.

Voukidis’ asserted position became less clear, of course, after Ambridge commenced its proceeding against the plaintiff, Baker, Voukidis and others in 2005. From that point, Voukidis must have known of the claim and the associated risks. Prudent directors and shareholders, whose belief was under challenge, might have reconsidered business decisions in view of the ownership and other allegations made by Ambridge. But, it was not part of the plaintiff’s case that Voukidis was obliged to do so, or failed to have regard to the risk that Ambridge might succeed in its claim.

The significance to the plaintiff’s case, of its reliance on res judicata or issue estoppel, was reflected in the evidence adduced from Baker, and to some extent Anastasopoulos, to provide a foundation for the alleged breach of fiduciary duty owed to the plaintiff as trustee for the joint venture. The witnesses Baker and Anastasopoulos were asked to express opinions as to the validity of particular payments. They gave formulaic evidence. Baker’s evidence in relation to the first impugned payment set the tone:[8]

What legitimate reason, if any, could there be for a $15,000 payment to Gravity Ventures? — — — No legitimate reason.
Can you think of any purpose or objective of the joint venture managed by Break Fast for a payment to Gravity Ventures? — — — There’s no purpose.

[8]T 217–218.

Putting to one side, for the moment, the speculative nature of such evidence, it was predicated on the assessment of a beneficial interest in the plaintiff’s funds held by joint venture partners, not the plaintiff as beneficial owner. Questions of authority were not confined to the authority of a director or decisions of the board of the plaintiff (relevantly Baker and Voukidis), or even the plaintiff’s best interests. The plaintiff maintained that authorisation by the board (Voukidis and Baker) was irrelevant, because all of those with a beneficial interest in the assets of the joint venture, managed by the plaintiff, had not given informed consent. That is because Ambridge had never authorised the payments.

On its application to re‑open, the plaintiff submitted that all defendants, but for C & O Voukidis (who, it alleged, withdrew an admission without leave) admitted that the plaintiff’s assets were held on trust for the joint venturers. I am not persuaded they did so. In particular, I am not persuaded that Voukidis admitted more than that, by reason of the declarations made by Vickery J in Ambridge, the plaintiff now acts as bare trustee. The question as to what admissions were made is considered below in the context of the plaintiff’s application to reopen its case. Suffice to say, Voukidis’ pleading made it reasonably clear that his conduct as a director ought to be assessed without regard to the declarations made by Vickery J in Ambridge. In my opinion, in the absence of an unequivocal admission, such a contention is not precluded by the principle of res judicata, nor is it precluded by issue estoppel. The declaration in question does not purport to be a judgment in rem.

The declarations made by Vickery J in Ambridge do not, in my view, bind the defendants in this proceeding. The plaintiff now concedes that to be the case. While res judicata and issue estoppel may operate as between defendants, it will only arise where there is a controversy between them which was necessary to decide in order to give the plaintiff relief. As Fisher J said in Taylor v Ansett Transport Ltd:[9]

… issue estoppel can only be raised by or applied against parties who were in ‘controversy’ at the time when the issue was first determined, either in their favour or adversely to them.

[9](1987) 18 FCR 342, 358. See also Yates Property Corp Pty Ltd v Boland (2000) 179 ALR 664, [104]–[110]; Interchase Corporation Limited v FAI General Insurance Company Limited [1998] QCA 180; [2000] 2 Qd R 301, 319.

Having conceded that no res judicata or issue estoppel arises, the plaintiff applied to reopen its case to introduce evidence of the joint venture to support allegations that Break Fast held the Wellington Parade property on trust for the joint venture partners in the shares, and on the terms, found by Vickery J. Break Fast proposes to advance in this proceeding the very same case against Voukidis and C & O Voukidis that Ambridge advanced against Baker, Voukidis, C & O Voukidis and others in Ambridge.

Unless the plaintiff is granted leave to reopen its case, and adduce further evidence to support the ownership structure contended for by the plaintiff in Ambridge, there will remain, in this proceeding, a contest over the capacity in which Break Fast held the Wellington Parade property, and the factual matrix against which Voukidis’ conduct is to be analysed and assessed. In the absence of admissions, the plaintiff’s allegations in paragraphs 20A and 20B of its statement of claim will not have been established.

In some respects, the role of the plaintiff as trustee on behalf of the joint venture partners might have been peripheral to the plaintiff’s pleaded case against Voukidis, which was based upon alleged breaches of duties owed to the plaintiff as an officer of the corporation. The plaintiff did not allege that Voukidis owed duties to the joint venture partners, although an allegation to that effect was made against C & O Voukidis. But the pleaded case, and the case advanced in opening and through Baker, did not align. It was as if the plaintiff ignored the pleaded duties. The allegations of breach made against Voukidis might have been advanced on the basis that the objectives of the investors in the property informed and regulated the nature and extent of the duties owed by Voukidis to the plaintiff, so that the capacity in which the plaintiff held the property was of no consequence.

While the business of the plaintiff is a relevant matter in determining the nature and extent of duties owed to it, and thus what constitutes the improper use of assets, the duty of directors is not owed to beneficiaries, even though the company may hold assets upon trust for them. Notwithstanding the bland formulation of pleaded duties, the plaintiff conducted its case as if Voukidis’ duties were regulated by an obligation to the beneficiaries of a trust, rather than an obligation to Break Fast. Moreover, as part of its case for a dishonest and fraudulent design, the plaintiff pleaded that Voukidis knew that Break Fast was under no obligation to make the payments because of the ownership structure. Thus, the plaintiff’s claim to recover many of the alleged misappropriations depended on proof that Voukidis knew that the plaintiff was a trustee. The plaintiff’s evidence, through Baker and Anastasopoulos, was designed to establish that the interests of the joint venture beneficiaries under the trust were paramount; and the payments had not been approved by Ambridge.

Lack of clarity in the plaintiff’s pleaded case masked the centrality of the trust structure until trial. At the very least, the formulation of Voukidis’ duties required clarification, to explain any limitations on expenditure by directors. If the directors required the express approval of beneficiaries, it ought to have been pleaded, with a proper foundation. In any event, the plaintiff’s case at trial depended upon it establishing that Voukidis was only authorised to make payments that were in the interests of the ‘joint venture’, and he was not authorised to depart from that prescribed mandate in the absence of authority from Ambridge.

I note that there are some claims against Voukidis that do not depend at all upon any clarification of the capacity in which Break Fast held the property. In some instances, the plaintiff alleged forgery and deceit.

Application to reopen

The plaintiff closed its case on 12 March 2015, having advanced its claims against Voukidis on the basis that he and C & O Voukidis were bound by the declarations made by Vickery J in Ambridge. The plaintiff relied on evidence given by Baker and Anastasopoulos to contend that numerous transfers made by Voukidis were not authorised. Other witnesses gave evidence about particular transactions, including allegations of forgery by Voukidis. While Voukidis cross‑examined Baker, Anastasopoulos, and Neil Holland, a forensic document examiner, he abandoned the trial before the plaintiff had closed its case, claiming ill health.

The obvious overlap between the unresolved factual allegations of misappropriation made in Ambridge, and in this proceeding, was not addressed during the trial. A review of the Ambridge file, to explain the background to the declarations, revealed the extent of the factual overlap. It was against that background the memorandum was prepared by the court and sent to the parties.

On 21 May 2015, the parties informed the court that they required further time to consider their respective positions and, in the case of Voukidis, engage counsel. Directions were made for the filing of affidavit material and submissions by early July. The proceeding resumed for further directions on 16 July 2015. On that day it became apparent that the plaintiff may apply for leave to reopen its case and adduce further evidence. Directions were given for further affidavits and submissions. The application was heard on Tuesday 4 August 2015.

The plaintiff’s application to reopen was supported by affidavits of Gregory Joseph Taylor, sworn 21 May 2015, 29 June 2015 and 24 July 2015, and an affidavit from the plaintiff’s solicitor, Philip Anthony Jones, sworn 24 July 2015. The plaintiff filed outlines of submissions dated 29 June 2015 and 24 July 2015.

The plaintiff did not object to the introduction into evidence of a category of documents deployed by Voukidis in his cross‑examination, but never tendered by him. The documents, tendered without objection, were the Deeds of Cross‑Collateralisation dated 2 August 2002 and 20 September 2006 and other documents listed in an attachment to the plaintiff’s written submissions dated 29 June 2015. The bundle of documents has been marked exhibit 1.

By written submissions dated 29 June 2015, the plaintiff contended that:

(a) by his defence, Voukidis admitted the trust structure and the joint venture; and

(b) the declarations made by Vickery J were binding on Voukidis by reason of res judicata estoppel, and because the declaration was a judgment in rem.

On 4 August 2015, it became clear that the plaintiff conceded that res judicata and issue estoppel had no application to bind Voukidis and C & O Voukidis in this proceeding to the declarations made by Vickery J in Ambridge. In his affidavit, sworn 24 July 2015, Mr Jones deposed to circumstances in which certain of the defendants, and relevantly Voukidis, had responded to paragraph 20A of the statement of claim, in which the plaintiff alleged the capacity in which it held the Wellington Parade property. Mr Jones deposed to circumstances in which paragraph 20A(f) came to be modified. Prior to a complaint made by the plaintiff about the late filing of defences, the relevant paragraph of Voukidis’ defence alleged:

It is only by reason of the preliminary judgment that the joint venture obligations were found to exist and bind the joint venture participants retrospectively …

Following the plaintiff’s complaint about the late filing of defences, resulting in the defences being ‘removed from the court file’, new defences were filed in which the words ‘only’ and ‘retrospectively’ were removed. Mr Jones relied on that change, and Voukidis’ failure to contradict the expression of a belief implicit in a written submission filed on 23 June 2014, prepared in support of the application to remove the defences. As I understand the point made by Mr Jones, he argued that the submission conveyed a belief on the part of the plaintiff’s counsel about the meaning of Voukidis’ pleading; and the belief, if erroneous, was never corrected or contradicted.

Mr Jones deposed that at all material times he believed that Voukidis had admitted the trust structure in paragraphs 20A(f) and 21B(a) of his defence. He said that he was informed by counsel that at all times they believed that Voukidis, C & O Voukidis and other ‘Voukidis defendants’ all made the same admission. Mr Jones deposed that while the plaintiff maintained that those defendants (Gravity Ventures, Voukidis, C & O Voukidis, Meet Me Introductions, Mobiview, and T‑Pay Australia) admitted that the plaintiff held the assets as joint venture manager on behalf of the joint venture participants, as declared by Vickery J, for the avoidance of doubt, it now sought leave to reopen its case to prove the fact. Mr Jones exhibited a bundle of documents the plaintiff proposed to tender, if leave to reopen was granted, for that purpose. The plaintiff made it clear that it did not intend to adduce any other evidence before finally closing its case.

The allegations which the plaintiff now seeks to address with new evidence are found in paragraphs 20A and 20B of its statement of claim:

20A.In or about 2000, Break Fast, Careerpath Pty Ltd, C&O Voukidis, IMF Pty Ltd and Ambridge Pty Ltd entered into an agreement (“the joint venture agreement”) to form an unincorporated joint venture (“the joint venture”), managed by Break Fast, to develop and manage the property at 176 Wellington Parade, East Melbourne (“the Wellington Parade Property”).
Particulars

The joint venture and its terms (contained in a written joint venture agreement signed by Break Fast and Ambridge Pty Ltd on 8 October 2002) was found to exist by Vickery J at paragraphs 515 and 516 of this decision made on 12 March 2010: [2010] VSC 59 (“the written joint venture agreement”). Clause 5 of the written joint venture agreement provides as follows:
“The Venture Manager is hereby appointed manager of the Joint Venture to act on behalf of, and in the name of, the Joint Venturers, and, for the purposes of advancing the Joint Venturers’ interests and achieving the Objectives, and not otherwise, is an agent of the Joint Venturers. The Venture manager may hold assets of the Joint Venture in its name in which case it does so as nominee for the Joint Venturers as beneficial owners to the extent of their respective Participating Interests.”
(“the joint venture obligations”)

20B.     There were terms of the joint venture agreement that:
(a)Break Fast would hold the property at 176 Wellington Parade, East Melbourne (“the Wellington Parade property”) as trustee, on an express trust for:
(i)       Careerpath Pty Ltd as to 40%
(ii)      C & O Voukidis Pty Ltd as to 25%
(iii)     IMF Pty Ltd as to 10%
(iv)     Ambridge Pty Ltd as to 25%;
(b)Break Fast was obliged to deal with the assets and income of the Wellington Parade property for the exclusive benefit of the joint venture, for the achievement of its objectives (completion of the purchase of the Wellington Parade property and the development and management of that property) and not otherwise;
(c)each party shall use its best endeavours to advance the interests of the joint venture and to achieve the objectives of the joint venture (“the best endeavours clause”).
Particulars

The terms were in writing and contained in the written joint venture agreement. A copy is in the possession of the solicitors for the first plaintiff and may be inspected by appointment.

To those paragraphs, Voukidis pleaded as follows:[10]
[10]Emphasis added.

20A.As to paragraph 20A thereof save that he says:
(a)Supreme Court of Victoria Proceeding No 2014 of 2005 ("the Ambridge proceeding'') was commenced by Ambridge Investments Pty Ltd ("Ambridge") against:
(i)Baker;
(ii)Voukidis, the Third Defendant herein;
(iii)Career Path Australia Pty Ltd (a company controlled by Baker) ("Careerpath");
(iv)IMF Pty Ltd (a company controlled by a Mr Tod McGrouther) ("IMF");
(v)C&O;
(vi)Break Fast;
(vii)Oxley;
(viii)a Mark Stanley (who has taken no part in the Ambridge proceeding);

alleging a joint venture between Ambridge, Careerpath, IMF and C&O, and seeking a declaration that it held a 25% interest in the joint venture (Careerpath holding 40% interest, IMF holding 10% interest, and C&O holding the remaining 25% interest) and that it had a 25% beneficial interest in the Wellington Pde property;
(b)Ambridge also sought ancillary relief by way of the taking of accounts between joint venturers;
(c)throughout the Ambridge proceeding the defendants therein (other than Stanley) ("the Defendants") resisted Ambridge's claim on the basis that the existence of the joint venture as alleged was disputed and that Break Fast at all relevant times was both the legal and beneficial owner of the Wellington Pde property;
Particulars

he refers to and repeats the matters contained in paragraphs 21 and 22 of the decision handed down by the Honourable Justice Vickery on 12 March 2010 ("the preliminary Judgment") in the Ambridge proceeding, and the matters alleged in the defences filed on behalf of the Defendants in the Ambridge proceeding, namely:
(i)Defence dated 18 March 2005;
(ii)Amended Defence dated 26 August 2005;
(iii)Defence to the Amended Statement of Claim dated 1 May 2006;
(iv)Defence to Plaintiffs Further Amended Statement of Claim dated 18 August 2006;
(v)Defence to Second Further Amended Statement of Claim dated 22 December 2006;
(vi)Amended Defence dated 27 September 2007;
(vii)Defence dated 20 March 2008;
(viii)Amended Defence and Counterclaim dated 5 August 2009;
(ix)Further Amended Defence and Counterclaim dated 7 October 2009; and
(x)Second Further Amended Defence and Counterclaim dated·14 October 2009;

(d)a trial of a preliminary question was heard by the Victorian Supreme Court in October of 2009. The preliminary question was whether Ambridge held the interest as alleged;
(e)on 12 March 2010 the Honourable Justice Vickery handed down the preliminary Judgment and made the following orders and declarations:
(i)It is declared that the Plaintiff holds a 25% interest in the Wellington Parade Joint Venture under the terms of an enforceable contract of joint venture between the Plaintiff, Ambridge Investments Pty Ltd ("Ambridge"), the Third Defendant ("Careerpath"), Fourth Defendant ("IMF"), the Fifth Defendant ("C & O Voukidis") and the Sixth Defendant ("Break Fast") in the terms of the written joint venture agreement executed by Break Fast and Ambridge and provided to the First Defendant on 8 October 2002.

(ii)(b) It is further declared that the Plaintiff holds a 25% beneficial interest in the Wellington Parade Property pursuant to an express trust of which the Sixth Defendant ("Break Fast") is the trustee."

(f)it is by reason of the preliminary Judgment that the joint venture obligations were found to exist and bind the joint venture participants; and
he otherwise denies the allegations contained in paragraph 20A thereof.

20B.As to paragraph 20B thereof:
(a)he refers to and repeats the matters set out in paragraph 20A above;
(b)he says that the terms of the joint venture agreement as found by Justice Vickery are in writing and set out in the partly executed joint venture agreement referred to in paragraph 20A(e) hereof; and
(c)he otherwise denies the allegations in paragraph 20B thereof.

21.As to the allegations contained in paragraph 21 thereof, save that he admits that as a director of Break Fast he owed statutory and fiduciary duties, he otherwise does not admit the allegations contained in paragraphs 21(a) and (b) thereof.
21A.Under cover of objection that the terms alleged to be implied (namely "the C&O Voukidis duty to disclose") do not meet the test for implication of terms set out in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266, he denies the allegations in paragraph 21A thereof.
21B.Further to paragraphs 20A, 20B, 21 and 21A hereof, he says:
(a)pursuant to the preliminary Judgment, Break Fast acts as the bare trustee, holding the assets of the joint venture on trust for the joint venture participants (Ambridge (having a 25% interest), Careerpath (having a 40% interest), IMF (having a 10% interest) and C&O (having a 25% interest) ("the beneficiaries");
(b)there are 4 issued shares in Break Fast:
(i)Oxley as to one share;
(ii)Baker as to 2 shares;
(iii)Voukidis as to the remaining share;

(c)Baker holds his 2 shares in Break Fast on trust for Careerpath (as to 4/5 of the 4 shares) and IMF (as to 1/5 of the 4 shares);
(d)Voukidis holds his share in Break Fast on trust for C&O;
(e)all of the shareholders of Break Fast (both legal and beneficial) were defendants in the Ambridge proceeding;
(f)insofar as the ancillary relief by way of a taking of accounts in the Ambridge proceeding is concerned, the pleadings relied upon by the parties to the Ambridge proceeding at trial have annexed to them various schedules. The schedules put in issue as between the parties to the Ambridge proceeding certain identified payments as being relevant to the overall determination of the precise interests of each of the parties in the alleged joint venture (without the Defendants therein having conceded they were joint venturers), including their respective contributions to or payments made to them and whether they were entitled to them;
(g)Ambridge alleged that the payments identified by it in schedule 2 annexed to its pleading (in its final form, the Fifth Further Amended Statement of Claim dated 13 October 2009) were made by Break Fast without Ambridge's consent and were not for the benefit of the alleged joint venture ("the alleged wrongful payments");
(h)of the alleged wrongful payments, Ambridge alleged that the Second and Third Defendants herein (C&O and Voukidis) were liable for knowing receipt of in excess of $5.5 million, Baker and Careerpath were liable for knowing receipt of in excess of $3.7 million, and IMF liable for knowing receipt of in excess of $17,000;
(i)the alleged wrongful payments alleged in the Ambridge proceeding to have been received by C&O and Voukidis are also the subject of the claim made by the Plaintiffs in this proceeding;
(j)at all times relevant to the payments set out in paragraphs 22–44 of the TASC:
(i)Voukidis and Baker were the directors of Break Fast;
(ii)they met regularly (weekly or thereabouts) to discuss the business of Break Fast;
(iii)at these meetings:
(A)Voukidis showed Baker the relevant records of Break Fast, such as cheque requisitions, General Ledgers or "Accounts Payable" ledgers;
(B)Voukidis and Baker discussed any payments to be made; and
(C)Voukidis and Baker jointly authorised the payments to be made;
Particulars

the authorisation was verbal or by way of Voukidis and Baker countersigning the relevant cheque or payment instruction;

(k)the Defendants (save for Stanley) conducted the Ambridge proceeding on the basis that they denied, amongst other things, causing or acquiescing in Break Fast making payments without the consent of Ambridge, which Ambridge alleged were not for the benefit of the Joint Venture (including the alleged wrongful payments);
Particulars

(i)the Defendants jointly retained Rigby Cooke Lawyers to act on their behalf in the Ambridge proceeding;
(ii)the alleged wrongful payments were first raised in pleadings filed by Ambridge on 17 April 2008, being the Reply to the Defence dated 20 March 2008 (which was filed in response to Ambridge's Third Further Amended Statement of Claim dated 22 February 2008);
(iii)subsequently, Ambridge filed further amended statements of claim (on 30 June 2009 and 13 October 2009) which each contained schedules identifying the alleged wrongful payments;
(iv)the Defendants instructed Rigby Cooke (and Senior Counsel and Counsel retained on their joint behalf) to prepare joint defences to the claims referred to in paragraph (iii) above (on 5 August 2009, 7 October 2009 and 14 October 2009) in which they, inter alia, expressly denied that they caused or acquiesced in Break Fast making payments without the consent of Ambridge, which were not for the benefit of the Joint Venture (including the alleged wrongful payments in the schedules to the statement of claim);

(l)by reason of:
(i)the matters referred to in paragraphs (b) and (j) above, all of the legal shareholders in Break Fast unanimously prospectively assented to each of the payments referred to in paragraphs 22–44 of the TASC;
(ii)the matters referred to in paragraphs (c), (d) and (j) above, 90% of the beneficial shareholders in Break Fast prospectively assented to each of the payments referred to in paragraphs 22–44 of the TASC;
(iii)the matters referred to in paragraphs (c)–(k) above, all of the beneficial shareholders in Break Fast unanimously ratified and/or acquiesced to each of the payments referred to in paragraphs 22–44 of the TASC; and
(iv)the matters referred to in paragraphs (a) and (c)–(k) above, at the time of making the payments referred to in paragraphs 22–44 of the TASC, all of the beneficiaries at the time (or 75% of the beneficiaries as found pursuant to the preliminary Judgment) prospectively assented, and subsequently ratified and/or acquiesced to the payments referred to in paragraphs 22–44 of the TASC.[11]

[11]Emphasis added.

The plaintiff paid little attention at trial to any admissions made by Voukidis on this topic in his defence. The foundation of its case was the judgment of Vickery J in Ambridge. In opening, the plaintiff’s counsel stressed the importance of the declarations made by Vickery J in the following terms:

Break Fast held its funds as a joint venture manager and as trustee. Its purpose, as was canvassed and found by Justice Vickery in the Ambridge proceeding which I will take Your Honour to shortly, take Your Honour to the reasons in that decision, it was found there that Break Fast was established for the purpose of acquiring, owning and managing property at 176 Wellington Parade, East Melbourne. I will simply refer to that as the Wellington Parade property. That property was purchased at auction in 1999 and settlement occurred in 2000.
So that property, the income derived from the property and we say any borrowings by that company against that property were trust funds and trust property and subject to all of the regulations imposed by reason of that property being a trust. I will take Your Honour shortly to the terms of the trust as found by Justice Vickery in the Ambridge proceeding.[12]
…
The one matter we say overwhelmingly is a matter of res judicata, Your Honour, is the fact of the joint venture and the trusts. I will take Your Honour to those findings in just a moment, but we would say Your Honour is bound by those matters.[13]

[12]T 11–12.

[13]T 19.

Counsel for the plaintiff opened the case by reference to substantial parts of the judgment in Ambridge. Counsel submitted:

Mr Voukidis admits that Break Fast acts as a bare trustee holding the assets of the joint venture on trust for the joint venture participants. That's in 21B(a) of Mr Voukidis's defence. Whatever a bare trustee means in this context, we say that it was obliged to deal with the assets of the joint venture, including rents and any borrowings against the equity in that building, conformably with the terms of the joint venture agreement as found by Justice Vickery, and that, as we have already indicated, means dealing with assets with the unanimous consent of the joint venture partners including, as Justice Vickery found, Ambridge and its directors.[14]

Thus, while at times Voukidis’ defence was said to constitute an admission, at other times it was said to be ‘irrelevant’. Counsel for the plaintiff dismissed defences raised by Voukidis, contending that the money held by the plaintiff was jointly owned by each of the joint venture partners, and could only be deployed with their unanimous consent. Counsel submitted that Voukidis’ defences were ‘just nonsense’ and ‘don’t make any sense’. They are ‘just not comprehensible’. That was because they ignored ‘Break Fast’s’ trust’.

[14]T 39.

The plaintiff’s reliance on res judicata was emphasised by the plaintiff’s counsel during Voukidis’ cross‑examination of Anastasopoulos. Counsel for the plaintiff objected to a line of questioning and submitted:

Ambridge's interest in the Break Fast joint venture is res judicata as against Mr Voukidis because he was a party to that. So the fact as found and declared is that Ambridge had a 25 per cent interest in the joint venture. I don't know how that could change or could disappear. There may be claims inter se for amounts recorded in the ledgers, but I don't think that just gets wasted away in the way that's perhaps being contended for, as I understand it.[15]

[15]T 743.

In closing submissions, counsel for the plaintiff submitted:

The relevant parties admit that the funds were held on trust, other than C&O. This is at paragraph 36 in the outline. C&O Voukidis doesn't admit. It withdrew that admission by a defence - without leave, I should add, with the defence that was filed shortly prior to the trial after the liquidators took over. But that is irrelevant because it is bound by Justice Vickery's declaration and it was a party to that Ambridge proceeding.[16]

The acknowledged absence of an admission by C & O Voukidis, coupled with the allegation that an admission was withdrawn without leave, did not interrupt the plaintiff in its stride. In my view, any admissions on this topic were ‘irrelevant’ to the plaintiff. When later referring to passages in the defence in which Voukidis alleged authority, counsel for the plaintiff submitted that:
The great problem with that plea of course is that what Justice Vickery did was to declare that there had been a joint venture since 2002, and that stands. It is unable to be pleaded by reason of Justice Vickery's judgment. All of the beneficiaries at the time included Ambridge. So there is no effective plea of unanimous consent, nor is it alleged that the beneficiaries gave informed consent.[17]

[16]T 821 (emphasis added).

[17]T 823 (emphasis added).

Upon a fair reading of his defence, Voukidis did not make the admission for which the plaintiff now contends. Voukidis’ defence revealed an intention to contend that, while the judgment in Ambridge had decided a certain state of affairs between the parties in relation to the joint venture, and the capacity in which the plaintiff held the property, that state of affairs only existed ‘by reason of the preliminary judgment’, and were otherwise denied. Voukidis’ first line of defence on this topic was to have questions of his authority assessed by reference to his responsibility as a director of the plaintiff, on the basis of the ownership structure agreed between Break Fast, Voukidis, Baker and others as defendants in the Ambridge proceeding.

Notwithstanding the decision of Vickery J in Ambridge, it is surprising that the plaintiff did not consider that there was a continuing dispute concerning the framework within which impugned conduct was to be assessed. At the very least the plaintiff complained that C & O Voukidis did not admit the trust structure, having withdrawn an admission without leave. If that was the plaintiff’s view, it was on notice. It prosecuted its claims against C & O Voukidis in full knowledge that there was no admission. Then there was the case advanced by Kolovos, who directly challenged the binding effect of the declaration made by Vickery J in Ambridge. Once again, the plaintiff was alerted to the potential for challenge to its assumption.

Counsel for the twenty‑second defendant, John Kolovos, contended that the judgment was not admissible. Kolovos was not a party to the Ambridge proceeding. Counsel for Kolovos relied on s 91 of the Evidence Act 2008, which provides:

91Exclusion of evidence of judgments and convictions
(1)Evidence of the decision, or of a finding of fact, in an Australian or overseas proceeding is not admissible to prove the existence of a fact that was in issue in that proceeding.
(2)Evidence that, under this Part, is not admissible to prove the existence of a fact may not be used to prove that fact even if it is relevant for another purpose.

Note
Section 178 (Convictions, acquittals and other judicial proceedings) provides for certificate evidence of decisions.

Section 93 of the Act provides:
93Savings
This Part does not affect the operation of—
(a)a law that relates to the admissibility or effect of evidence of a conviction tendered in a proceeding (including a criminal proceeding) for defamation; or
(b)a judgment in rem; or
(c)the law relating to res judicata or issue estoppel.

Counsel for Kolovos contended that the judgment did not fall within any of the exceptions. Unfortunately, the admissibility of the judgment in Ambridge, and the extent to which the parties in this proceeding may have been precluded from contending for a different configuration of the relationship between investors, shareholders, directors and the plaintiff, was not well developed in argument. The proceeding against Kolovos was compromised early in the trial. Accordingly, the court did not have the advantage of final submissions from his counsel on this issue.

The amendment made to paragraph 20A(f), following the plaintiff’s application to have the defences removed from the court file, coupled with Voukidis’ failure to contradict part of the written submission filed by the plaintiff in support of that application, does not assist the plaintiff’s application to reopen. Those events should not have confirmed a belief of the kind now asserted by the plaintiff. At the very least, those events ought to have caused the legal representatives to seek clarification of what case Voukidis would advance at trial. But, of course, none of this really mattered, because the plaintiff was proceeding with undiluted confidence in its assumption that the parties to this proceeding were bound by the declarations in Ambridge.

Voukidis’ plea to paragraph 20A was carefully crafted to admit no more than the fact of the judgment in Ambridge. The plaintiff had not alleged that some or all of the defendants in this proceeding were bound by the decision in the Ambridge proceeding. Paragraphs 20A and 20B of the statement of claim alleged a joint venture agreement and its terms. While Voukidis’ defence to those paragraphs was elaborate, he laid out the foundation of a challenge to the plaintiff’s paradigm for authority, based on the trust relationship. The plaintiff, however, considered those allegations to be ‘irrelevant’.

I do not accept that the plaintiff was reasonably justified in asserting a belief, based on pleadings, that Voukidis and other related defendants admitted that their conduct was to be analysed and assessed by reference to the trust structure under which Break Fast held the property. I do, however, accept that the plaintiff proceeded to trial on an incorrect assumption that the decision in Ambridge was binding on those defendants. Apart from the submissions made on behalf of Kolovos, the assumption was not openly challenged. In the circumstances, I accept that the plaintiff has provided an explanation for not having prepared its case to establish that the duties and responsibilities imposed upon Voukidis by reason of his position were to be regulated by the business of the plaintiff as trustee of the Wellington Parade property on behalf of the joint venturers.

In Inspector‑General in Bankruptcy v Bradshaw,[18] Kenny J reviewed the authorities applicable to an application to reopen a case. Her Honour said:

The authorities indicate that, broadly speaking, there are four recognised classes of case in which a court may grant leave to re-open, although these classes overlap and are not exhaustive. These four classes are (1) fresh evidence (Hughes v Hill [1937] SASR 285 at 287; Smith v New South Wales Bar Association [No 2] (1992) 108 ALR 55 at 61–2); (2) inadvertent error (Brown v Petranker (1991) 22 NSWLR 717 at 728 (application to recall a witness); Murray v Figge (1974) 4 ALR 612 at 614 (application to tender answers to interrogatories); Henning v Lynch [1974] 2 NSWLR 254 at 259 (application to re-open); (3) mistaken apprehension of the facts (Urban Transport Authority of NSW v NWEISER (1992) 28 NSWLR 471 (“UTA”) at 478; and (4) mistaken apprehension of the law (UTA at 478). In every case the overriding principle to be applied is whether the interests of justice are better served by allowing or rejecting the application for leave to re-open: see UTA at 478; also The Silver Fox Company Pty Ltd as Trustee for the Baker Family Trust v Lenard’s Pty Ltd (No 2) [2004] FCA 1310 (“Silver Fox”) at [22] and [25].

[18](2006) FCA 22, [24].

The plaintiff emphasised the primacy of the interests of justice. In Urban Transport Authority of NSW v Nweiser,[19] the New South Wales Court of Appeal held:
[19](1992) 28 NSWLR 471.

The principle which should guide the court in determining whether to grant an application for leave to re-open is whether the interests of justice are better served by allowing or rejecting the application as the case may be. No doubt it is relevant to take account of a number of matters such as likely prejudice to the party resisting the application and the reasons why the evidence was not led in the first place, but there is not, in my opinion, any hard and fast rule which requires the court to reject an application where the decision not call the witness in the party's case was a deliberate one. Of course that does not mean that that is not a very relevant consideration. It is. Where, for instance, a decision was based on tactical grounds it may be difficult to resist the conclusion that the interests of justice were better served by the rejection of the application. But even in that circumstance there may be cases in which it is felt that the client whose application it is should not have to suffer for his or her counsel's deliberate decision. Where the decision is not made for tactical reasons and is based on a mistaken apprehension of the law or the facts the case is more appropriately to be considered as one in which the application has resulted from an error by counsel.

Similar views were expressed by Sheppard J in Joyce v GIO (NSW) (Ritchie's Supreme Court Procedure, New South Wales, vol 2 [13,028]) and Jeffery J in Henning v Lynch [1974] 2 NSWLR 254. It is the fact, as Sheppard J observed in Joyce, that there are a number of decisions which support the view that the principles relating to the calling of fresh evidence on appeal are relevant when what is under consideration is an application to re-open. That view may be correct where the application to re-open is made after the delivery of judgment but I can see no justification for importing those principles into an application to re-open which is made before the hearing is concluded: see Smith v New South Wales Bar Association [No 2] (1992) 66 ALJR 605 at 608–609; 108 ALR 55 at 61–62 of the judgment of Brennan, Dawson, Toohey and Gaudron JJ.
In Henning, the late Jeffrey J said (at 259):
“… The applicable principle is one which in the circumstances obtaining here strongly favours the re-opening of the prosecution case: where the defendant's case has not been gone into and there is ready to be tendered some additional evidence which by accident, mistake or want of foresight has not been tendered before the prosecution case is closed it is — to use the words of Cave J in Hargreaves v Hilliam (1894) 58 JP 655 ‘a very fit and proper thing to allow the evidence to be given unless there is some very good reason’.”

That particular statement was approved by this Court in Brown v Petranker (1991) 22 NSWLR 717 and accurately expresses the principle which should have been applied by his Honour.
I would conclude, therefore, that the evidence which the appellant sought to lead was relevant and important and his Honour erred in failing to allow the appellant to re-open. In these circumstances the appeal should be upheld and a new trial ordered.

Counsel for Voukidis submitted that the foregoing authorities must be qualified by the decision of the High Court of Australia in Aon Risk Services Australia v Australian National University,[20] and the decision of the Court of Appeal in Victoria in Spotlight Pty Ltd v Ncon Australia Ltd.[21] In Spotlight, the Court of Appeal held:

There are good reasons why the circumstances must be exceptional before a court may allow a case, having been closed and judgment reserved, to be reopened. The need for finality in litigation is one. It is no answer to this point to say that the further evidence sought to be adduced by the respondent in this case is confined to the quantum of damages. Were applications to reopen to be allowed almost as of course, such applications would be regularly made. That would add enormously to inefficiencies in the administration of justice, even if the reopened hearing was strictly confined. The discipline which ought to attend the conduct of litigation by highly competent litigators would also inevitably decline.[22]

[20](2009) 239 CLR 175.

[21][2012] VSCA 232.

[22][2012] VSCA 232, [17].

Voukidis submitted that the plaintiff made a deliberate forensic decision to conduct its case on the basis that the relevant defendants were bound by the declarations made by Vickery J in Ambridge, which they now concede was erroneous. They should not now be permitted to advance a new factual case on the premise that the relevant defendants may be found not to have admitted that their conduct ought to be assessed by reference to the trust structure found by Vickery J.

Voukidis also invoked Aon, in which the High Court emphasised the importance, as a relevant consideration in considering an application for amendment, of maintaining public confidence in the administration of justice. The plurality held:

An application for leave to amend a pleading should not be approached on the basis that a party is entitled to raise an arguable claim, subject to payment of costs by way of compensation. There is no such entitlement. All matters relevant to the exercise of the power to permit amendment should be weighed. The fact of substantial delay and wasted costs, the concerns of case management, will assume importance on an application for leave to amend. Statements in J L Holdings which suggest only a limited application for case management do not rest upon a principle which has been carefully worked out in a significant succession of cases. On the contrary, the statements are not consonant with this Court's earlier recognition of the effects of delay, not only upon the parties to the proceedings in question, but upon the court and other litigants. Such statements should not be applied in the future.
A party has the right to bring proceedings. Parties have choices as to what claims are to be made and how they are to be framed. But limits will be placed upon their ability to effect changes to their pleadings, particularly if litigation is advanced. That is why, in seeking the just resolution of the dispute, reference is made to parties having a sufficient opportunity to identify the issues they seek to agitate.
In the past it has been left largely to the parties to prepare for trial and to seek the court's assistance as required. Those times are long gone. The allocation of power, between litigants and the courts arises from tradition and from principle and policy. It is recognised by the courts that the resolution of disputes serves the public as a whole, not merely the parties to the proceedings. [23]

[23](2009) 239 CLR 175, [111]–[113] (citations omitted).

The decision in Aon is not easily applied to the circumstances surrounding this proceeding. This is not an application to amend. Furthermore, the court must bear some responsibility for the events that have occurred.

In my opinion, the plaintiff should not be at liberty to reopen its case and adduce new evidence to support the existence of a legal relationship between Break Fast, its shareholders, directors and the investors in the Wellington Parade property, to conform with its pleading, and the declarations made by Vickery J in Ambridge. Quite plainly, the plaintiff made a strategic decision to override the complexity of Voukidis’ defence, and the absence of any admissions by C & O Voukidis, to rely on res judicata and issue estoppel. The significant parts of Voukidis’ defence, in which he sought to establish the foundation to challenge the plaintiff’s paradigm, were considered ‘irrelevant’ by the plaintiff. The underlying mistake or error involved the application of the legal principles, although there is no reason why such an error should disqualify an applicant in circumstances that would otherwise justify permission to reopen.

Three factors compel rejection of the plaintiff’s application to reopen. First, the impact of the new evidence on the plaintiff’s case as it was conducted in the trial; second, the invitation to this court to hear and determine an issue already heard and determined by Vickery J in Ambridge; and third, the consequential adverse impact on the integrity of the administration of justice more generally.

The plaintiff proposes to advance its case in support of the allegations in paragraphs 20A and 20B, by the tender of a bundle of documents marked exhibit PAJ3 to the affidavit of Mr Jones, sworn 24 July 2015. The trial of the preliminary question before Vickery J lasted 18 days. In that proceeding, Baker gave evidence as a defendant in support of the position, then advanced by Break Fast, Baker, Voukidis and others, that Break Fast was the beneficial owner of the property. Baker has already conceded that he gave false evidence on one topic before Vickery J. There is every likelihood that Voukidis, or some other active defendant, will seek to further cross‑examine Baker on the new material, or call other witnesses to explain some of the documents proposed to be tendered. Accordingly, the new case may involve many days of further evidence. Further delay, brought about by a new case, cannot be justified. The allegations of serious misconduct by Voukidis, as a director of Break Fast, were first made in the Ambridge proceeding more than six years ago.

The plaintiff might contend that a finding consistent with that made by Vickery J in Ambridge is inevitable, but such an expectation may not be realised. The possibility of inconsistent findings in a different case, with a reconfigured evidentiary framework, cannot be discounted.

Finally, to re‑run in this proceeding, the case first advanced by Ambridge against Voukidis, Baker, Break Fast and others in Ambridge, would bring the administration of justice into disrepute and constitute an abuse of process. In Walton v Gardiner,[24] Mason CJ, Deane and Dawson JJ said that proceedings before a court should be stayed as an abuse of process if, notwithstanding that the circumstances do not give rise to an estoppel, their continuance would be unjustifiably vexatious and oppressive for the reason that it is sought to litigate anew a case which has already been disposed of by earlier proceedings.[25] The re‑litigation in this proceeding, of the question set aside and determined by Vickery J in Ambridge, would bring the administration of justice into disrepute. It would be regarded by right‑thinking people as a waste of judicial resources, and inconsistent with the reasonable expectations of the community that identical allegations should not be decided twice.
[24](1993) 177 CLR 378.
[25](1993) 177 CLR 378, 393.

In Tomlinson v Ramsey Food Processing Pty Limited,[26] the plurality explained the overlap between the doctrines of estoppel and abuse of process in Australia in the following terms:

To explain contemporary adherence to the comparatively narrow principle in Ramsay v Pigram, it is appropriate also to explain the relationship between the doctrine of estoppel and the doctrine of abuse of process as it has since come to be recognised and applied in Australia. The doctrine of abuse of process is informed in part by similar considerations of finality and fairness. Applied to the assertion of rights or obligations, or to the raising of issues in successive proceedings, it overlaps with the doctrine of estoppel. Thus, the assertion of a right or obligation, or the raising of an issue of fact or law, in a subsequent proceeding can be simultaneously: (1) the subject of an estoppel which has resulted from a final judgment in an earlier proceeding; and (2) conduct which constitutes an abuse of process in the subsequent proceeding.
Abuse of process, which may be invoked in areas in which estoppels also apply, is inherently broader and more flexible than estoppel. Although insusceptible of a formulation which comprises closed categories, abuse of process is capable of application in any circumstances in which the use of a court's procedures would be unjustifiably oppressive to a party or would bring the administration of justice into disrepute. It can for that reason be available to relieve against injustice to a party or impairment to the system of administration of justice which might otherwise be occasioned in circumstances where a party to a subsequent proceeding is not bound by an estoppel.
Accordingly, it has been recognised that making a claim or raising an issue which was made or raised and determined in an earlier proceeding, or which ought reasonably to have been made or raised for determination in that earlier proceeding, can constitute an abuse of process even where the earlier proceeding might not have given rise to an estoppel. Similarly, it has been recognised that making such a claim or raising such an issue can constitute an abuse of process where the party seeking to make the claim or to raise the issue in the later proceeding was neither a party to that earlier proceeding, nor the privy of a party to that earlier proceeding, and therefore could not be precluded by an estoppel.[27]

[26](2015) HCA 28, [24]–[26] (citations omitted).

[27]Emphasis added.

The plaintiff has conceded in this proceeding that Voukidis and C & O Voukidis are not bound by the declarations made by Vickery J in Ambridge. In my view, the concession is correctly made. I have found that Voukidis did not make corresponding admissions. In all of the circumstances it would be unjustifiably oppressive to Voukidis and C & O Voukidis, and bring the administration of justice into disrepute, if Break Fast was permitted to relitigate, in this proceeding, at this time, the very same questions decided by Vickery J.

In my opinion, all necessary relief could and should have been obtained in the Ambridge proceeding. If necessary, Ambridge might have sought leave as a beneficiary to sue on behalf of the trustee, Break Fast, to formalise the claims for relief. If necessary, the statement of claim might have been amended to incorporate all of the allegations made in this proceeding. In short, it was unnecessary to commence a second proceeding. For reasons given below, I have concluded that it was unjustifiably oppressive to Voukidis and C & O Voukidis to commence and maintain this proceeding. To maintain this proceeding will bring the administration of justice into disrepute.

Abuse of process

The applicable principles were helpfully summarised by Robson AJA in Kermani v Westpac Banking Corporation.[28] Of particular relevance are the following passages from the judgment:[29]
[28][2012] VSCA 42, [93]–[114].
[29][2012] VSCA 42, [91].

(8)The rationale underlying the principle against double jeopardy, in that an individual should not be vexed twice for the same cause, is a factor properly to be taken into account in the weighing exercise: Walton v Gardiner.[30]
[30](1993) 177 CLR 378, 396–8 (Mason CJ and Deane and Dawson JJ).
(9)It is prima facie vexatious to bring two extant civil actions where one will lie: Moore v Inglis;[31] Thirteenth Corporation Pty Ltd v State.[32]
[31](1976) 9 ALR 509.
[32](2006) 232 ALR 491.
(10)This prima facie rule applies whether or not the two proceedings are in separate courts or one: Branir Pty Ltd v Wallco Pastoral Co Pty Ltd.[33]
[33][2006] NTSC 70.
(11)The prima facie rule applies where the issues overlap or significantly overlap or there is a similarity of subject matters of the proceedings.
(12)The fact that the parties may not be identical, or the relief different, does not necessarily disentitle relief under this principle: Moore v Inglis.[34]
[34](1976) 9 ALR 509.
(13)In considering whether the rule should apply, the court should consider whether there was no reasonable justification for the second proceeding based on legitimate considerations of convenience, cost or the like: Thirteenth Corporation Pty Ltd v State.[35]
[35](2006) 232 ALR 491, 505.
(14)The guiding considerations are oppression and unfairness to the other party to the litigation and concern for the integrity of the system of administration of justice. Regard may be had to:
(a)the importance of the issue in and to the earlier proceeding, including whether it is an evidentiary or ultimate issue;
(b)the opportunity available and taken to fully litigate the issue;
(c)the terms and finality of the finding as to the issue;
(d)the identity between the relevant issues in the two proceedings;
(e)any plea of fresh evidence, including the nature and significance of the evidence and the reason why it was not part of the earlier proceeding;
(f)the extent of the oppression and unfairness to the other party if the issue was relitigated and the impact of the relitigation upon the principle of finality of judicial determination and public confidence in the administration of justice; and
(g)an overall balancing of justice to the alleged abuser against the matters supportive of abuse of process: Rippon v Chilcotin Pty Ltd.[36]

[36](2001) 53 NSWLR 198, [32].

The pleadings in Ambridge were not initially exposed in the trial, although the plaintiff sought to rely upon certain aspects of the judgment of Vickery J, and in particular the declarations made by him concerning the ownership structure of the property.

By a path, as yet unexplained, Taylor had been appointed a director of the plaintiff, Break Fast, on 31 October 2011. He is also secretary of the company. The current shareholders of the plaintiff are Oxley, now de‑registered, Voukidis and Martin Thomas Bernstead. Bernstead is also a director. Bernstead probably acquired the two shares once held by Baker. A receiver and manager was appointed to the plaintiff on 5 April 2012. It would also appear that the plaintiff is still under external administration, although the identity of the administrator is uncertain. What is clear, however, is that Taylor was the moving force behind the Ambridge proceeding and controls this proceeding on behalf of the plaintiff. Baker, then a director of the plaintiff, participated in the decision to commence this proceeding, in which he is no longer a co‑defendant accused of misappropriating funds from Break Fast. Baker is now the plaintiff’s principal witness against Voukidis, and Taylor remains the moving force behind both proceedings.

Voukidis and C & O Voukidis are exposed in this proceeding to substantially the same factual allegations as in Ambridge. The lack of precise identity between the plaintiff in Ambridge and Break Fast is immaterial. The mere fact that Taylor may not have been the decision maker in Break Fast, at the time this proceeding was commenced, is beside the point. He is now. Break Fast was a defendant in Ambridge, and at the same time an intended beneficiary of any recoupment. Baker, Voukidis and Break Fast engaged and instructed common solicitors in Ambridge. The risk of prejudice to Voukidis as a result of confidential communications was very real. The stated purpose of this proceeding is to provide funds for distribution to Ambridge, upon the taking of accounts in the Ambridge proceeding. It is difficult to envisage a clearer example of abuse.

The plaintiff contended that the overlap in proceedings did not infringe the applicable principles, which were not in dispute between the parties. The plaintiff pointed out that Voukidis apparently consented to an order that the proceedings be tried separately. On 15 October 2010, the managing judge directed that both proceedings be tried together.

On 22 August 2012, Alan James Foster, solicitor for Break Fast, filed an affidavit in support of an application that the proceedings be heard separately. He deposed that, due to the factual overlap between the two proceedings, he had been informed by the receiver of Ambridge that he was content to be bound in the Ambridge proceeding by findings made by the court in this proceeding. The court was informed that of 122 ‘wrongful payments’ alleged in this proceeding, 103 were identical to those alleged in Ambridge. The receiver’s agreement to be bound was, however, qualified. The receiver had agreed to be bound by the answers to the following questions in this proceeding, namely whether those payments by Break Fast were caused to be made by Voukidis; whether those payments were for the benefit of the Wellington Parade joint venture; and whether the making of those payments by Voukidis constituted a breach by him of the Wellington Parade joint venture and the duties owed by him to the Wellington Parade joint venture.

The basis upon which it was contended that Voukidis owed duties to beneficiaries under a trust was not explained. The same unexplained allegation pervaded this case, even though the pleading of duty and breach was differently formulated. It is surprising that this aspect alone did not resonate with the parties and the court at the time as an indicator of a potential abuse of process, and the seeds of a future chaotic interaction between the two proceedings.

On 14 February 2013, the question of abuse of process was raised by counsel for Voukidis, in the context of an application by the plaintiff to amend its statement of claim. Counsel for Voukidis submitted:

We submit that the amendments sought today are an abuse of process … because it sets out precisely the same causes of action previously instituted by Ambridge which Break Fast now seeks to selectively bring against one of the co‑venturers.

Voukidis identified the pivotal role of Taylor. Thus, the managing judge was alive to the potential for inconsistent judgments. His Honour said:

It seems to me that careful thought needs to be given to how the case ought to be managed from hereon to avoid both cases deciding the same facts …

The plaintiff was under no illusion at that time (14 February 2013) that Voukidis was contending that this proceeding was an abuse of process, although he submitted that the resolution lay in case management. The plaintiff submitted:

It’s not an abuse of process and it can never be an abuse of process for two independent parties who have their own cause of action to bring a claim based on the same set of facts against the defendant.

Such a proposition is inconsistent with the authorities, although counsel for the plaintiff had obviously been surprised by the allegation. The point, however, is that the issue was raised, and put off to another day. Unfortunately, it was forgotten.

Submissions were made to the managing judge on ways and means to avoid the possibility of inconsistent judgments. The employment of this proceeding ‘to try and recover some money so that Ambridge has something to pursue’, was acknowledged. Ultimately, the managing judge decided on a course that was accepted by Voukidis. His Honour acknowledged the risks associated with the prosecution of two proceedings, but reserved the question for resolution by the trial judge. The problem with such a course, however, was that only one of the proceedings, in which Break Fast was plaintiff, came on for trial, while prosecution of the Ambridge proceeding, with the potential for conflicting decisions, and the allegation of abuse of process, was to wait in the background, for the creation of the ‘pot of money’.

In the face of such an important issue having been raised before the managing judge in February 2013, the plaintiff submitted on the stay application, ‘thankfully, no unfairness has occurred as a result’. It submitted that the possibility of inconsistent judgment or oppression to Voukidis could only arise if claims determined in this proceeding were relitigated in the Ambridge proceeding. The plaintiff submitted that Voukidis could then complain that any attempt to do so was an abuse of process:

But to give the court some comfort that will be unnecessary, Ambridge will undertake not to litigate the overlapping claims. If the court accepts that such an undertaking is necessary and sufficient, a representative of Ambridge will attend court to give an undertaking that Ambridge will not litigate the subject matter of any claim made in this proceeding against any defendant in this proceeding.

That submission misunderstood the origin of the abuse. An abuse of process is not cured simply by giving those who may be adversely affected an opportunity to later apply to the court for discretionary relief to prevent Ambridge from proceeding with its claims.

The recent offer by Ambridge, through counsel for Break Fast, of an undertaking not to pursue the overlapping claims, ignored the genesis of the abuse, which lies in the commencement and prosecution of this proceeding. Any undertaking not to double litigate in future is no answer to the continuation of an existing abuse in the prosecution of this proceeding.

The plaintiff contended that the relitigation in this proceeding, of the issues determined by Vickery J, was not an abuse of process because:

Break Fast can hardly be said to have conducted the proceeding oppressively by seeking to rely on that issue as an intermediate finding on the path to its relief. When the issue was in dispute in the Ambridge proceeding, Break Fast — under the control of Messrs Baker and Voukidis — denied the joint venture’s existence. It would be a strange result for the man misappropriating funds from a company to be permitted to cause it to set up a procedural defence he could hide behind when pursued by that company’s successor controllers.
…
Only once Mr Voukidis was removed from control of Break Fast did Break Fast have an opportunity to pursue its claims, including those that only it can bring. Mr Voukidis’ complaints that he is the only one being pursued would not justify a finding of an abuse of process, but in any event that course is readily explicable. The other potential defendants are bankrupt. Break Fast has pursued its available remedies as trustee in a responsible way, and as its position as trustee required.
An attempt by Break Fast in this proceeding, to rely upon an intermediate finding in another proceeding, or corresponding admissions, would not be oppressive. But that is not the proposed course. Break Fast has applied to re‑open its case and re‑run the questions determined by Vickery J in Ambridge. Nor is it appropriate to characterise the objection by Voukidis to the maintenance of this proceeding as ‘a procedural defence’.

The plaintiff’s contention that the commencement and prosecution of this proceeding is the work of a responsible trustee is rejected. I am persuaded that this proceeding is maintained and prosecuted for an ulterior purpose, to support the claims made by Ambridge in the Ambridge proceeding.

Finally, the plaintiff invoked s 8 of the Civil Procedure Act 2010, which requires the court to give effect to the overarching purpose in the exercise of any of its powers. Section 7 provides that the overarching purpose of the Act, and the Rules of Court, is to facilitate the just, efficient, timely and cost‑effective resolution of the real issues in dispute. The plaintiff submitted that to stay this proceeding as an abuse of process would contradict that purpose. In my opinion, the answer must be, no. The trial was conducted by the plaintiff on an incorrect premise. There was ambiguity caused by the disconformity between the pleaded case and the way in which the case was presented, including the evidence. The ambiguity disadvantaged Voukidis as a self-represented litigant.

The applications presently before the Court have disclosed a chaotic background in which the plaintiff now seeks to re-open its case in this proceeding and have the Court decide a question already decided in Ambridge. This proceeding was commenced for an ulterior purpose. I ought to have been stayed in February 2013 at the latest. These events have created a crisis of the plaintiff’s own making. None of the problems now confronting the court and the parties would have arisen had Ambridge prosecuted its case to conclusion. Instead, those in control of Ambridge and the plaintiff adopted a strategy which not only failed, but has brought the administration of justice into disrepute at great cost to the parties and the court.

There is nothing in the Act that requires the court to overlook what is, in my view, a clear abuse of process in the commencement and prosecution of this proceeding. It is only regrettable that the overarching purpose was not more prominent in the early management of the proceeding, to ensure that the abuse now identified was brought to a speedy conclusion.

It may be superficially attractive, or ‘pragmatic’ to overlook the sins of the past, because a trial has now taken place. Once this proceeding is stayed, Ambridge may choose to prosecute similar claims in its proceeding. In such circumstances, Voukidis would be required to participate in another trial, although with no uncertainty about the ownership structure. Voukidis has made that choice, implicit in this application for a permanent stay.

Where the court is confronted by such a clear abuse, at so many levels, it has a duty to act. Superficial attraction or pragmatism must be put to one side in favour of principle. A clear message must be sent to the plaintiffs in both proceedings, and to the practitioners, that the court will remain astute to protect its own processes, the integrity of the administration of justice more generally, and to prevent unjustified oppression.

The primary consideration for the court is, as the plaintiff rightly pointed out, whether this proceeding is unjustifiably oppressive to Voukidis and C & O Voukidis, or does it bring the administration of justice into disrepute. Even though the trial has concluded, the proceeding is and remains an abuse of the process of the court. It is unjustifiably oppressive that Voukidis and C & O Voukidis should be exposed to near identical claims in two proceedings by plaintiffs who are both under the effective control of Taylor. It is also unjustifiably oppressive because a decision to commence the proceeding was made by Baker, as a director of Break Fast, in circumstances where he was a co‑defendant with Voukidis in the Ambridge proceeding, instructing the same solicitors. Furthermore, the proceeding is unjustifiably oppressive because its purpose is to facilitate recovery by Ambridge in the Ambridge proceeding. These factors, compounded by the risk of inconsistent judgments would, if permitted to continue, bring the administration of justice into disrepute. The proceeding is stayed as an abuse of process.

I may, of course, be found on appeal to be wrong in granting a stay of this proceeding. Having heard the evidence, I have prepared draft reasons for judgment on the case advanced by the plaintiff at trial. I am in a position to deliver judgment and publish reasons at short notice. I decline to do so at this time to avoid obvious embarrassment should Ambridge choose to prosecute its case against Voukidis and C & O Voukidis in the Ambridge proceeding.

[2015] VSC 497

17 September 2015