Campaspe Investments Pty Ltd v PBP Accounting Solutions Pty Ltd
[2015] VSC 26
•13 February 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S CI 2013 6553
| CAMPASPE INVESTMENTS PTY LTD (ACN 008 407 761) AND OTHERS (according to the schedule attached) | Plaintiffs |
| v | |
| PBP ACCOUNTING SOLUTIONS PTY LTD (ACN 099 507 329) and MICHAEL GEORGE WORTMAN (according to the schedule attached) | Defendants |
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JUDGE: | DALY AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 28 January 2015 |
DATE OF JUDGMENT: | 13 February 2015 |
CASE MAY BE CITED AS: | Campaspe Investments Pty Ltd v PBP Accounting Solutions Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2015] VSC 26 |
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PRACTICE AND PROCEDURE – Summary judgment sought pursuant to s 61 of the Civil Procedure Act 2010 (Vic) - Whether defendants’ defence had any real prospect of success – Whether there has been a material change in the test for summary judgment with the enactment of the Civil Procedure Act 2010 (Vic) –Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [2013] VSCA 158 considered.
PRACTICE AND PROCEDURE – Default judgment sought pursuant to r 21.04 of the Supreme Court (General Civil Procedure) Rules 2005.
EQUITY - Whether defendants owed fiduciary duty to plaintiffs – If defendants owed fiduciary duty, whether that duty was breached.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Dr A Hanak with Mr D J Fahey | Mr H M Hearn |
| For the Second Defendant | In person | |
| For the First, Third, Fourth, Fifth, Sixth and Seventh Defendants | No appearance |
HER HONOUR:
The plaintiffs in this proceeding are the executors of the estate of Mrs Peggy Moorhead (‘Mrs Moorhead’), and two corporate entities which are the investment vehicles for the Moorhead family (‘Moorhead companies’). Prior to Mrs Moorhead’s death in April 2014 at the age of 88, the Moorhead family constituted Mrs Moorhead, her son Richard Moorhead, her daughter Ann Moorhead, and Ann’s young adult children, Amelia and George Hillary.
The first defendant, PBP Accounting Solutions Pty Ltd (‘PBP’) is an accounting firm. PBP was retained by the Moorhead family between 2005 and 2013 to provide accounting and financial advisory services for them and the Moorhead companies, the latter being largely passive investors in land and shares. Each of Mrs Moorhead and the two companies operated two bank accounts: one with the ANZ, and another with UBS.
The second defendant, Mr Michael Wortman (‘Mr Wortman’), is the sole director and shareholder of PBP, and was at all times the representative of PBP with responsibility for the financial affairs of the Moorhead family. Mrs Moorhead executed a general power of attorney in Mr Wortman’s favour in November 2005. Since at least October 2008, Mr Wortman had internet banking access to the ANZ bank accounts operated by Mrs Moorhead and the Moorhead companies (‘Moorhead family accounts’), with a maximum daily withdrawal limit of $25,000, and since October 2010 had the authority to request UBS to process the transfer of funds from the Moorhead companies’ UBS accounts. PBP operated its own bank account with the NAB (‘PBP account’). As shown by some of the correspondence exhibited to the affidavits filed in the proceeding, Mr Wortman was a trusted family confidant as well as a financial advisor, managing the funds in the Moorhead family accounts, paying the bills of the plaintiffs and other Moorhead family members, dealing with requests from family members for financial assistance, and assisting the family to resolve disputes between them regarding financial matters.
The third to seventh defendants are all companies in which Mr Wortman is the sole director and shareholder (or at least has been since 2010) (‘Wortman companies’). None of the Wortman companies has entered an appearance in this proceeding.
Mr Wortman’s power of attorney was terminated on 16 April 2013, for reasons which are not clear from the evidence. PBP’s retainer was terminated on 31 October 2013, apparently owing to concerns the Moorhead family held regarding the late preparation of tax returns and other financial accounts. Upon examining the bank statements of the Moorhead family accounts, the Moorhead family’s new accountants, Pitcher Partners, discovered that large sums of money (ultimately determined to be, in net terms, in excess of $5 million) had been transferred from the Moorhead family accounts to the PBP account between October 2008 and October 2013. After failing to receive a satisfactory explanation from Mr Wortman as to the uses to which these funds had been put, the plaintiffs sought and obtained freezing orders from this Court on 18 December 2013, as well as orders requiring PBP and Mr Wortman to explain the circumstances in which the funds were transferred from the Moorhead family accounts to PBP and the manner in which they were utilised. In that regard, Mr Wortman swore nine affidavits between January and March 2014, which were prepared by his then solicitors on his behalf. The plaintiffs filed a generally endorsed Writ against the first and second defendants on 18 December 2013. They filed a Statement of Claim on 21 August 2014. On 28 August 2014, the plaintiffs obtained leave to join the Wortman companies to the proceeding and filed an amended Statement of Claim on that day. A Further Amended Statement of Claim was handed up in Court during the course of the hearing on 28 January 2015.
On 1 September 2014, the plaintiffs filed and served an affidavit seeking summary judgment against each of the first and second defendants under s 61 of the Civil Procedure Act 2010 (Vic), and default judgment against the Wortman companies, although at the hearing they did not press for any relief against the sixth defendant, Forest Lodge Pty Ltd, having compromised their claims against that company. The plaintiffs relied upon affidavits sworn by Mr Richard Moorhead, their solicitor, Mr Harry Hearn, and their accountant, Mr Michael Howard of Pitcher Partners, as well as the various affidavits filed by Mr Wortman referred to above. Mr Richard Moorhead swore two affidavits, on 18 December 2013 and 24 February 2014. His evidence, in summary, addressed the following matters:
(a) the duration and the nature of the retainer between the Moorhead family and Mr Wortman and PBP;
(b) his lack of knowledge about the transfers and the alleged arrangement between his mother and Mr Wortman regarding the transfer, and the conversations he had with his mother and sister about those transfers of funds from the Moorhead family accounts to PBP; and
(c) his mother’s diagnosis with Alzheimer’s disease in 2010 and her current health status (in late 2013), and the discussions he held in 2010 with her doctor and Mr Wortman regarding whether a trustee ought to be appointed to manage her affairs.
In his affidavit sworn on 18 December 2013, Mr Moorhouse responded to Mr Wortman’s statement in correspondence with Mr Howard that:
Despite some minor adjustments, these transfers relate to loans provided to both PBP and clients of PBP.
Mr Moorhead deposed that he was not aware of any of the transfers from the Moorhead family accounts to PBP identified by Mr Howard in his investigations, and stated as follows:
To the best of my knowledge, at no stage have either my mother or me or my sister Ann authorised any loans to either PBP or clients of PBP. Until I read Mr Wortman’s email of 9th December 2013, I was completely unaware that any such loans had ever been made. I have also questioned my mother about such loans. I am informed by my mother and believe that they have no knowledge of these loans nor have they authorised the loans being made.
Mr Moorhead also deposed that at no time during his meetings with Mr Wortman, or in any other communications he had with him, had any of the alleged loans to PBP or PBP clients from the Moorhead bank accounts ever been raised by Mr Wortman or discussed with him or his mother.
Mr Moorhead deposed that he had read the following statement by Mr Wortman in an email from him to the solicitors for the plaintiffs, Mr Harry Hearn:
The concept of private transfers was first raised in 2008 in response to the activities of Ms Amelia Hilary. It was agreed with Mrs Peggy Moorhead that we would establish a pool of funds that would serve as a future entitlement for Mr George Hilary. It was agreed that this would be deemed a loan or a prepayment of professional fees in the interim so as not to arouse the interest of either Mrs Ann Moorhead or Ms Amelia Hilary.
Mr Moorhead deposed that he discussed this email with his mother and sister, and that neither of them had authorised the creation of such a pool of funds, or had any knowledge of such a pool of funds having been created.
Mr Hearn swore two affidavits on 18 and 19 December 2013, primarily concerning his investigations into Mr Wortman and his shareholdings in various entities, and his correspondence with Mr Wortman in the latter part of 2013. In his affidavit sworn on 19 December 2013, he deposed to receiving an email from Mr Wortman concerning the funds transferred from the Moorhead family accounts which stated, among other things:
2.These monies are not invested in an environment where security documentation has been obtained from any borrower and are effectively unsecured.
3.These monies have been transferred via our firm. I accept full responsibility for these balances and any interest.
There is no formal record which captures our discussion regarding the pool of funds or the pre-payment of professional fees.
Mr Michael Howard swore three affidavits, on 19 December 2013, 24 February 2014, and 1 September 2014. In his first affidavit sworn on 19 December 2013, Mr Howard deposed as to his investigations into the Moorhead family accounts, the transfers he identified having been made from those accounts to PBP, deposits made by PBP into the Moorhead family accounts, and correspondence between him and Mr Wortman, including the difficulties he faced in obtaining documents regarding the Moorhead family’s affairs and explanations concerning the transfers from Mr Wortman. In his second affidavit sworn on 24 February 2014, he commented upon the affidavits sworn by Mr Wortman pursuant to the orders made by Bell J on 19 December 2013, and observed that he could not, from the information provided by Mr Wortman in those affidavits, determine how the funds transferred to the PBP account had been used, what assets had been acquired using those funds, the value of those assets, or the current net financial position of Mr Wortman and his related entities.
In his third affidavit sworn on 1 September 2014, Mr Howard provided a final reconciliation and analysis that shows the funds transferred from the Moorhead family accounts to the PBP account for the period between October 2008 and October 2013. He also exhibited copies of some transfer of fund requests with respect to the Moorhead companies’ UBS accounts signed by Mr Wortman.
Mr Wortman swore nine affidavits in this proceeding, three on 21 January 2014, three on 18 February 2014, two on 12 March 2014, and one on 26 March 2014. These affidavits were all prepared while he and PBP were represented by solicitors. In these affidavits, Mr Wortman deposed to the following matters:
(a) his personal net asset position;
(b) the business activities and financial affairs of PBP;
(c) the circumstances in which Mrs Moorhead authorised the transfer of funds form her ANZ account to the PBP bank account, and how he was authorised to use what he describes as the Moorhead Loan Funds;
(d) the mixing of funds transferred from the Moorhead family accounts with funds from other sources in the PBP bank account;
(e) the identity of bank accounts which have, or may have received funds transferred from the Moorhead family accounts;
(f) a reconciliation showing the funds transferred from the Moorhead family accounts to the PBP bank account, and vice-versa;
(g) identifying transactions entered into using funds from the PBP bank account which may have been sourced from the Moorhead family accounts;
(h) details of various properties owned by the Wortman companies, including encumbrances over those properties; and
(i) the damage caused to the business of PBP by this proceeding, and the difficulties facing PBP in undertaking the extensive tracing exercise sought by the plaintiffs.
In relation to the question of whether the transfers from the Moorhead family accounts were authorised, Mr Wortman gave evidence about these matters in his affidavit sworn on 21 January 2014, with the caveat that:
This affidavit does not seek to:
(a)explain all the agreed arrangements that lie behind the transfer of funds from the Moorhead Lender Bank accounts to PBP; or
(b)provide a full explanation for the entitlement of PBP to receive and use Moorhead Loan Funds.
Those matters will be the subject of further affidavit material if that becomes necessary.
In paragraph 4 of his affidavit sworn on 21 January 2014, Mr Wortman deposed as follows:
Now shown to me and marked “MGW6” is a true copy of the email referred to in Order 21 dated 16 December 2013 sent from me to Harry Hearn and others. The reference to a “...pool of funds…” in that email is a reference to funds transferred from the Peggy ANZ Account to the PBP Bank account in the following circumstances:
(a)Between the Commencement date and a date in 2008 that I do not now recall, Peggy told me that there had been transactions on the Peggy ANZ Account that she had not authorised. I told her that I suspected her granddaughter Amelia had taken funds. She said she wished to stop the unauthorised transfers. She also said that she intended to provide her grandson George with up to $100,000 at some time.
(b)For those reasons, Peggy and I agreed that funds would be transferred from the Peggy ANZ Account to the PBP Bank Account so as to leave insufficient funds in the Peggy Bank Account to risk Amelia dissipating large amounts of funds.
(c)The funds so transferred would be treated in one of the following ways, which was to be determined by Peggy at a later date:
(i)as a prepayment of fees due to PBP; or
(ii)if it was determined that George should be provided with funds – then as a prepayment of that entitlement (with PBP to pay the entitlement to George at that time).
(d)In accordance with that agreement, I transferred funds from the Peggy ANZ Account to the PBP Bank Account. It is the total amount then transferred to which I referred when I referred to the ”pool of funds”. In this affidavit, I will refer to it as the “Pool of Funds”.
In paragraph 13 of this affidavit, Mr Wortman deposed as follows:
I say the following generally about the position between PBP, me, and the Moorhead Group.
(a) Peggy gave me authority to transfer the Moorhead Loan Funds from the Moorhead Lender Bank Accounts throughout the whole of the period when I did so.
(b) Upon such transfers, PBP became a debtor to the relevant Moorhead Lender for the amount transferred, such that funds transferred became the property of PBP for it to use as it so determined.
(c) PBP was obliged to pay interest at a rate of 10% per annum, with monthly rests, to the Moorhead Lenders on the amount borrowed. Payments of a significant amount of money (in part satisfaction of interest obligations) have already been paid by PBP, as further outlined below.
(d) PBP has never contemplated that it might be obliged to describe to the Moorhead Lenders how it had used the loan funds. It only ever believed it would simply be liable to the Moorhead Lenders for the repayment of the Moorhead Loan Funds, with interest.
No further evidence was filed by Mr Wortman regarding these matters prior to the hearing of this application.
Mr Wortman’s wife, Ms Kirstyn Wortman, swore an affidavit on 5 June 2014 deposing as to her financial position, and the net equity held by her and her related entities in two properties in Mornington, Victoria.
At the hearing of the application for summary judgment, Mr Wortman appeared on his own behalf, having terminated the retainer of his solicitors owing to lack of funds. He did not expressly seek leave to act on behalf of PBP and the Wortman companies, but I understood him to be speaking on their behalf as well as on his own behalf.
The plaintiffs contend that both Mr Wortman and PBP owed a duty at common law to exercise due care, skill, and diligence in providing professional services to the plaintiffs. The plaintiffs contended that Mr Wortman and PBP, by reason of the power of attorney in Mr Wortman’s favour, the power and control exercised by Mr Wortman over the funds of the plaintiffs, Mrs Moorhead’s vulnerability owing to her age and medical condition (she was diagnosed with Alzheimer’s disease in 2010), and the trust reposed in Mr Wortman by Mrs Moorhead and other Moorhead family members with respect to their financial affairs, Mr Wortman and PBP also owed fiduciary duties to the plaintiffs.[1] As such, Mr Wortman and PBP were under a duty not to use their position for their own advantage or for a third party’s advantage, and were under a duty to avoid any conflict of interest.
[1]See Breen v Williams [1996] 186 CLR 71 at [107] per Gaudron and McHugh JJ.
Counsel for the plaintiffs submitted that in transferring the funds from the Moorhead family accounts to PBP, which in turn directed the funds to the Wortman companies to purchase assets for the ultimate benefit of Mr Wortman (including a car, a boat, and a berth at a marina), Mr Wortman and PBP were in breach of their common law and fiduciary duties to the plaintiffs. Counsel submitted that Mr Wortman’s contention that the transfers had been authorised by Mrs Moorhead was undermined by the manner in which the funds were transferred, the lack of any documentation evidencing the alleged agreement and authorisation, and the use to which the funds were put. In any event, even if Mr Wortman’s contention that Mrs Moorhead authorised the transfers or any of them is true, then given Mrs Moorhead’s vulnerability, and Mr Wortman’s position as a fiduciary, the law requires that Mrs Moorhead’s informed consent would be needed in order for Mr Wortman to properly discharge his fiduciary duties, given that these transactions were almost entirely for his benefit or the benefit of companies controlled by him.
Finally, the plaintiffs relied upon a spreadsheet prepared by Mr Howard which summarises and reconciles the payments made from the Moorhead family accounts to PBP, along with payments made by PBP to the Moorhead family accounts (which totalled approximately $600,000) to establish the quantum of the loss and damages suffered by the plaintiffs, being $5,164,768.67.
In his oral submissions, Mr Wortman did not dispute that he and PBP owed the plaintiffs common law and fiduciary duties. He did not dispute that the transfers had been made. He maintained his position that the transfers were authorised, for the purpose of protecting the money in the Moorhead family accounts from unauthorised withdrawals by Moorhead family members, that they were used for investment purposes, and that Mrs Moorhead, despite her age and medical condition, was content to allow Mr Wortman to deploy the funds transferred from the Moorhead family accounts as he saw fit. He submitted that as a result of these proceedings, PBP’s accounting practice has been destroyed, his ability to service loans upon properties acquired in part through the transfers has been impaired, such that the value of the assets acquired using these funds has been greatly diminished and PBP’s ability to repay the funds ”in one line” has been impaired.
During the course of Mr Wortman’s oral submissions, he insisted that he had a number of conversations with Mrs Moorhead about what he was doing with the funds transferred from the Moorhead family accounts (indeed, the bank statements for Mrs Moorhead’s accounts were sent to her residence) and he withdrew the funds in $25,000 increments to avoid inconveniencing Mrs Moorhead.
Accordingly, given that I agree with counsel for the plaintiffs that the uncontradicted evidence establishes that Mr Wortman and PBP owed both common law and fiduciary duties to the plaintiffs, the question before me is whether Mr Wortman’s and PBP’s “defence”,[2] that the transfers were authorised, has any real prospect of success within the meaning of s 63 of the Civil Procedure Act. There has been some discussion in the authorities as to whether the test for summary judgment under s 63 is materially different than the test that applies under O 22 of the Rules. This issue was considered by the Court of Appeal in Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd,[3] which, among other things, did not disagree with the approach of the Queensland Court of Appeal, to the effect that the test of “real prospect of success” is more liberal than the “hopeless” or “bound to fail” test, in particular:
that there may be circumstances in which it is possible to satisfy the former without necessarily complying with the latter.[4]
The Court of Appeal emphasised that the power to award summary judgment is only to be exercised with caution and, therefore, not unless it is clear that there is no question to be tried, a real question to be tried being a question which might necessarily result in the respondent to an application for summary judgment succeeding in the proceeding.[5]
[2]No defence has actually been filed on behalf of either PBP or Mr Wortman.
[3][2013] VSCA 158.
[4]Ibid [27].
[5]Ibid [27]-[28].
In my view, this application might well be an instance of a case where while the respondent’s case is not “hopeless”, or “bound to fail” as such (according to the test laid down in General Steel Industries Inc v Commissioner of Railways (NSW)),[6] it does not have a real prospect of succeeding at trial. In the current case, the affidavit evidence reveals a factual dispute about a critical matter: that is, whether Mrs Moorhead authorised Mr Wortman to effect the transfers to PBP to be deployed at Mr Wortman’s discretion. It may well be that prior to the enactment of the Civil Procedure Act 2010 the existence of this factual contest would be sufficient to persuade a court that the matter proceed to trial.[7] However, even under the previous regime, the defence put forward by a defendant must have some ring of credibility, with the Court posing the question: does the defendant’s account of the facts have sufficient prima facie plausibility as to merit further investigation, or is it so incredible or improbable that there is no fair or reasonable probability of the defendant setting up a defence to the plaintiff’s claim?[8]
[6](1964) 112 CLR 125.
[7]See “Williams - Civil Procedure” at [I 22.06.20] and the authorities referred to in that paragraph.
[8]Commonwealth Development Bank of Australia v Karastavrou (Beach J, unreported, 12 November 1996, BC9605500).
Therefore, in determining whether to grant summary judgment, I am required to consider whether the first and second defendants’ defence, albeit not articulated in a formal pleading, has any real prospects of success, not whether the defence of the first and second defendants has a mere sliver of a chance. Evaluating the evidence relied upon by the plaintiffs, I consider that it is extremely unlikely that a court would accept Mr Wortman’s contention that the transfers were authorised. I do so on the basis of the following matters:
(a) the lack of knowledge of any family members, but in particular Mr Richard Moorhead, who lived with his mother, about the transfers and any arrangement between Mrs Moorhead and Mr Wortman regarding the transfers;
(b) the lack of any documentation of Mrs Moorhead’s alleged authorisation of the transfers, in circumstances where the financial arrangements within the family were subject to a formal, written legal agreement, and there was regular email communication between Mr Wortman and Moorhead family members;
(c) the pattern of transfers and withdrawals, and in particular, the withdrawal of funds from the ANZ bank account in a number of $25,000 increments over subsequent days. By way of example, in a three week period in January‑February 2010, there were ten withdrawals of $25,000 and one withdrawal of $15,000 made from the second plaintiff’s ANZ account. No fewer than 32 withdrawals were made from the second plaintiff’s ANZ account in the second half of 2010, that is, on average, a withdrawal every five to six days. Similar patterns emerge upon analysis of the other Moorhead family accounts. Further, approximately $525,000 was transferred from the Moorhead family accounts after the termination of Mr Wortman’s power of attorney on 16 April 2013;
(d) despite the fact that the alleged purpose of the arrangement between Mr Wortman and Mrs Moorhead was to protect Mrs Moorhead’s personal funds from misappropriation by Moorhead family members, the bulk of the transfers (more than 90 per cent) were made from bank accounts controlled by the Moorhead companies, not Mrs Moorhead’s personal accounts;
(e) the statement of financial position provided by Mr Wortman and PBP in response to orders of the Court make no reference to any debts owed by them to Mrs Moorhead or the Moorhead companies;
(f) the fact that transfers continued to be made for a number of months after Mr Wortman’s power of attorney was revoked, with
(g) the evasive conduct of Mr Wortman after PBP’s retainer was terminated;
(h) notwithstanding the issue of this proceeding, and Mr Wortman’s acknowledgement of responsibility to repay the “loans”, there is no evidence of any initiative on the part of Mr Wortman to repay the funds transferred from the Moorhead family accounts;
(i) despite Mr Wortman’s assertion that the terms of the loans included a term that they bear interest of 10 per cent per annum, the payments by PBP to the Moorhead family accounts do not appear to be payments in the way of interest; and
(j) the use to which the funds were deployed. Not only were funds used to buy a car, a boat, and a marina berth for the use of Mr Wortman, even the real estate purchased by the Wortman companies using funds from the Moorhead family accounts, appeared to be largely “lifestyle” properties, such as a tourist park in Tasmania, and properties on Flinders Island, on the Mornington Peninsula, on the Gold Coast and in rural Tasmania. Mr Wortman also deposed to funds being used to finance expenses associated with properties purchased by Unlimited Edition NZ Pty Ltd (the seventh defendant) in 2006, and to fund the purchase by Mr Wortman of his former business partner’s half share of PBP. While Mr Wortman’s evidence does not concede that each of the payments listed at paragraph 16 of his affidavit sworn on 18 February 2014 were funded in full from funds from the Moorhead family accounts, it ought to be noted that this evidence shows that over $1.5 million was paid to Mr Wortman’s former business partner, a substantial proportion of which was funded by the transfers. The only genuine third party transaction appears to be loans made to Lotus Folding Doors & Walls Pty Ltd totalling $250,000 (which were repaid).
These matters have to be counter balanced by Mr Wortman’s sworn evidence that he was authorised to transfer the funds from the Moorhead family accounts. Mrs Moorhead is now deceased, and did not swear any affidavit in this proceeding prior to her death, so, apart from the hearsay evidence of Mr Richard Moorhead, the Court will never have an opportunity to hear her version of events, including her response to Mr Wortman’s contentions that the transfers were authorised. Of course, the probative value of Mr Richard Moorhead’s hearsay evidence must necessarily be diminished by Mrs Moorhead’s diagnosis of Alzheimer’s disease and her poor state of health.
However, taking the evidence as a whole, the defence that the transfers were authorised is inherently implausible. The nature of the expenditures made from the funds transferred from the Moorhead family accounts are such that they can be hardly characterised as appropriate investments for a family, even a relatively affluent family such as the Moorheads. In some cases, the funds were used to purchase wasting assets such as cars and boats. Funds were used to service finance commitments on assets owned by other parties, and to purchase intangible assets such as goodwill in a small professional services practice. To the extent that the funds were used to purchase real property, no security was provided to the Moorhead family entities, such as a registered mortgage or in the form of recognition of their interests on the title. It appears from the rather vague statements in Mr Wortman’s affidavits that the funds transferred to PBP may have been mixed with the funds of PBP and the Wortman companies. No financial accounts have been provided for any entity which shows any loans from the Moorhead family entities to either PBP, Mr Wortman, or the Wortman companies. It simply beggars belief that any person would in effect authorise another to borrow unlimited sums of money, at will, on a completely unsecured basis.
Mr Wortman’s explanation of the agreement between him and Mrs Moorhead by which Mrs Moorhead authorised him to transfer funds from the Moorhead family accounts was vague and unconvincing. In the affidavits sworn by him in early 2014, when he and PBP were still represented by solicitors, he made assertions regarding the existence of such an agreement, but provided no details of any conversations he held with Mrs Moorhead, or, apart from a reference to the rate of interest being 10 per cent, the terms of any such agreement. He did not avail himself of the opportunity to file and serve further evidence in support of this contention prior to the hearing of the application.
Having regard to all of these matters, I consider that the evidence establishes that the first and second defendants’ defence has no real prospect of success. Further, I see no other reason why the matter ought proceed to trial.[9] After all, it is the position of the first and second defendants that the funds transferred to the PBP account were loaned to it, and that Mr Wortman accepted that he (or PBP) was liable to repay the funds to the Moorhead family.
[9]Section 64 of the Civil Procedure Act 2010 (Vic).
In circumstances where there is no other evidence about the terms of the so‑called “loan”, the funds would be repayable on demand. Accordingly, while the relief sought against the first and second defendants would be of a different character, if the transaction were to be characterised as a loan, there seems to be hardly any utility in the matter proceeding to trial. Of course, this, of itself, would not be a basis for ordering summary judgment if I considered that there was a serious question to be tried. But it does influence my views as to whether or not to exercise my discretion to refuse summary judgment on the basis that it is not in the interests of justice to do so, or because the dispute is of such a nature that only a full hearing on the merits is appropriate.
Given that I have found that the first and second defendants have no real prospect of success in making good their assertion that the transfers were authorised, I do not strictly need to consider the issue of whether, if, contrary to my view, Mr Wortman was authorised to make the transfers, was still in breach of his fiduciary duties by failing to obtain the informed consent of Mrs Moorhead, particularly in circumstances where there was a conflict of interest between the Moorhead family and Mr Wortman and/or PBP. My preliminary view is that, given that Mrs Moorhead was, on Mr Wortman’s version of events, providing him with unlimited and unsupervised access to the Moorhouse family accounts to borrow money for purposes to be determined by him, Mrs Moorhead’s informed consent would be required for Mr Wortman and PBP to escape liability for a breach of fiduciary duty. However,
What is required for a fully informed consent is a question of fact in all of the circumstances of each case, and there is no precise formula which will determine in all cases if fully informed consent was given.[10]
[10]Maguire v Makaronis [1997] 188 CLR 449 [446].
As such, while it is difficult to see how Mr Wortman could establish that Mrs Moorhead had provided her informed consent to the transfers based upon a mere assertion that “she always knew what she was doing”, the nature of the enquiry required would mean that granting summary judgment on this basis alone would be inappropriate.
I now turn to the relief sought by the plaintiffs. The plaintiffs have sought equitable compensation for breach of fiduciary duty on the part of PBP and Mr Wortman. As noted above, I accept the plaintiffs’ submissions that both Mr Wortman and PBP owed fiduciary duties to the plaintiffs. Further, given that I have found that the defence that the transfers were authorised has no real prospects of success, then clearly the transfer of funds to PBP and the Wortman companies is a breach of the fiduciary duties owed by Mr Wortman and PBP. As such, equitable compensation is an appropriate remedy, and the equal apportionment of the compensation between each of PBP and Mr Wortman also seems appropriate. Declarations are also sought against Mr Wortman that he holds 50 issued shares in the third defendant and the seventh defendant on trust for the plaintiffs, having regard to the fact that the transfers were utilised in part to acquire those shares as part of the process of Mr Wortman buying out his former business partner.
In relation to the Wortman companies, these defendants have not appeared in the proceeding, and default judgment is sought against them pursuant to r 21.04 of the Rules. Further, in relation to the relief sought, being declarations that these defendants hold their interests in various properties on trust for the plaintiffs, the Wortman companies are taken to have admitted each of the allegations in the Statement of Claim, including the allegations that the properties concerned were acquired with funds in circumstances where they had actual knowledge of Mr Wortman’s and PBP’s breaches of fiduciary duty. However, the plaintiffs have also advanced evidence, along with summary tables, which illustrate the flow of funds from the Moorhead family accounts to PBP and then to the Wortman companies and the purchase of particular assets. This evidence was not (save for the matter raised in the following paragraph) challenged during the course of the hearing of the application.
Mr Wortman in his affidavits was not precise about whether purchases of any particular assets were funded by the transfers, or only partially funded by the transfers. Further, Mr Wortman raised during the course of his oral submissions some transactions in relation to Unlimited Edition NZ referred to in the plaintiffs’ analysis that pre-dated the period in which Mr Wortman controlled the Moorhead family accounts.
In relation to the latter matter, counsel for the plaintiffs informed the Court that the transactions identified by Mr Wortman would be reviewed checked prior to the authentication of any orders should I be minded to grant default judgment. In relation to the question of whether the assets acquired by the Wortman companies were fully funded or partially funded by the transfers, the Wortman companies are taken to have admitted the allegations in the statement of claim, and no evidence was advanced by Mr Wortman as to other potential sources of funds for these purchases, despite the time and opportunity to do so. Further, I note that in respect of some properties in the hands of the Wortman companies, the plaintiffs have limited the relief sought to the value of the transfers that Mr Howard has been able to identify in his reconciliation and analysis, plus any pro rata increase in value in the relevant property since the date of the transfer.
Accordingly, I will make orders substantially in the form sought by the plaintiffs, subject to hearing further from the parties on the question of costs.
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SCHEDULE OF PARTIES
| CAMPASPE INVESTMENTS PTY LTD (ACN 008 407 761) | First Plaintiff |
| PEGMOORE PTY LTD (ACN 005 370 963) | Second Plaintiff |
| YUCCANA INVESTMENTS PTY LTD (ACN 008 413 992) | Third Plaintiff |
| PEGGY MOORHEAD (by her Litigation Guardian KEITH ROBERT HALL) | Fourth Plaintiff |
| PBP ACCOUNTING SOLUTIONS PTY LTD (ACN 099 507 329) | First Defendant |
| MICHAEL GEORGE WORTMAN | Second Defendant |
| UNLIMITED EDITION PTY LTD (ACN 118 499 273) | Third Defendant |
| M.G. AUSTRALIA PTY LTD (ACN 066 361 948) | Fourth Defendant |
| OYSTER BAY SHACK PTY LTD (ACN 145 458 573) | Fifth Defendant |
| FOREST LODGE PTY LTD (ACN 160 958 798) | Sixth Defendant |
| UNLIMITED EDITION NZ LIMITED (NZBN 9429034121368) | Seventh Defendant |
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