Chen v Chan
[2008] VSCA 280
•19 December 2008
SUPREME COURT OF VICTORIA
COURT OF APPEAL
No 7446 of 2003
| DAVID WEIPING CHEN, RENMIN LU CHEN AND LUJIA CHEN |
| v |
| KIM MAN CHAN, KWOK WAI CHAN, EAST WORLD INTERNATIONAL (AUSTRALIA) PTY LTD (ACN 094 780 775) AND EAST WORLD INTERNATIONAL LTD |
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JUDGES: | MAXWELL P, REDLICH JA and FORREST AJA | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 26 May 2008 | |
DATE OF JUDGMENT: | 19 December 2008 | |
MEDIUM NEUTRAL CITATION: | [2008] VSCA 280 | |
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PRACTICE AND PROCEDURE – Conduct of trial – Issues not confined to pleadings – No right to pursue different issues on appeal to those contested at trial – Evidence – Whether misappropriation of funds in breach of trust – Whether evidence sufficient to support findings against each Defendant.
MASTER – R 52.01 – Order that accounts be taken – Enquiry as to numerous transactions where credit of parties critical – Impermissible use of trial judge’s findings as to credit.
CONTEMPT – Alleged failure to serve orders – Contemnors knowledge and understanding of the orders.
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| APPEARANCES: | Counsel | Solicitors |
| For the First and Second Appellants | Mr W Alstergren with Mr D C Turner | Piper Alderman |
For the Third Appellant | Ms C M Kenny SC | D L A Phillips Fox |
| For the Respondents | Mr M R Simon | Chadwicks |
MAXWELL P
REDLICH JA
FORREST AJA:
Introduction
This appeal is another chapter in a long-running and bitter family dispute. The first appellant (‘DWC’) is the brother of the first respondent (‘CKM’). Their wives were school friends. They are, respectively, the second appellant (‘RLC’) and the second respondent (‘CKW’). All were born in the People’s Republic of China (‘PRC’). DWC became a permanent resident of Australia in June 1989 and in September 1991 his wife, RLC, and daughter, LC, came to this country. In March 1997, they became Australian citizens.
On 12 October 2000, CKM and CKW, who jointly operated a highly successful business in the PRC, came to Australia after obtaining business migration visas. The dispute concerns sums of $2 250 000, provided by CKW to DWC and RLC, and approximately $600 000 said to have been misappropriated by DWC from the third respondent, a Chan-controlled Australian company (‘EWA’).
On 16 October 2000, CKW and DWC travelled to Sydney to confer with Oliver Lai, a migration agent and company accountant engaged by the Chans. The following day, EWA was incorporated for the purpose of carrying on the Chans’ business in Australia. The three directors were CKM, CKW and DWC. CKW was allocated 4000 shares and the brothers CKM and DWC 3000 shares each.
On 18 October 2000, the Chans left Australia. On 20 October 2000, CKM electronically transferred $300 000 to DWC, which was deposited into a joint account held with JB Were (‘the Chen Family account’) in the names of the three Chens. Only DWC and his wife RLC were signatories, however.
On 21 November 2000, EWA entered into a lease of a property at 370 St Kilda Road, Melbourne. On 9 December 2000, a property at 178 Kooyong Road, Toorak (‘the Kooyong Road property’) was purchased for the sum of $1.65 million, in the name of RLC and/or her nominee. The deposit was paid by DWC out of the Chen Family account. On 19 December 2000, a nomination clause was signed by RLC and the property was registered in the name of CKM in early 2001.
The purchase moneys were paid out of a total sum of $2.25 million which CKW transferred to the Chen Family Account progressively between December and February of 2001.[1] On 23 January 2001, the Kooyong Road property was settled. On 27 January 2001, the Chans visited Australia for one week. Subsequently, in February or March 2001, with the permission of the Chans, the Chens moved into the property.
[1] (a) On 12 December 2000, $300 000 deposited in the Chen Family account.
From January 2001 until August 2003, EWA was, in effect, operated by DWC, who ceased working as a security officer in February 2001. In about August or September 2001, EWA ceased leasing the St Kilda Road office and engaged in spasmodic business activity from the Kooyong Road property. The primary activity was trading in derivatives and shares, which DWC conducted, utilising EWA’s funds. Significant amounts of money were transferred by DWC into EWA accounts, as well as large sums being transferred from the PRC by CKW to DWC for use by EWA. DWC, on behalf of EWA, opened a number of accounts with various financial institutions. Large sums of money were transferred in and out of these accounts by DWC.
On 7 February 2002, the Chans visited Australia for approximately two weeks. On that visit, CKM’s name was added to the title of the Kooyong Road property and the Chans became joint registered proprietors of that property.
On 1 April 2002, RLC and LC opened a separate account (‘the joint account’) with JB Were in their names, each having an entitlement to sign. A number of transfers were subsequently made into this account from EWA accounts and from the Chen Family account. Both RLC and LC made withdrawals from the joint account.
In early 2003, the relationship between the Chans and the Chens began to deteriorate. In February, the Department of Immigration advised the Chans that EWA was not conducting sufficient trading activities to satisfy the business condition of their visas. In about March 2003, the disagreements between the Chans and the Chens became more heated.
On 16 June 2003, Sing Chan, the daughter of the Chans, came to Australia. Her parents intended that she reside at the Kooyong Road property. The next day, 17 June 2003, a dispute arose between Sing Chan and the Chens as to her entitlement to stay at the Kooyong Road property. The Chens did not permit her to stay at the property.
On 14 August 2003, the Chans returned to Australia. They were extremely annoyed at the Chens’ attitude and particularly at their behaviour towards their daughter. A resolution was passed by the Chans (the majority shareholders) removing DWC as an EWA director. On 20 August 2003, a demand was made on DWC to hand over EWA documents to the Chans.
On 22 August 2003, the Chans attended at the Kooyong Road property and were refused entry. On 2 September 2003, proceedings were issued by the Chans and EWA against the three Chens, seeking repayment of moneys said to have been misappropriated, delivery up of chattels, delivery up of EWA’s documentation and an order for possession of the Kooyong Road property.
Proceedings in this Court
On 8 September 2003, Master Wheeler ordered DWC to deliver up all EWA’s documents, including all invoices and receipts. On 5 December 2003, Habersberger J granted an interlocutory injunction and ordered the Kooyong Road property be delivered up to the Chans on or before 1 February 2004.
The trial of the remaining issues before a judge of the Trial Division occupied 12 sitting days, between 26 September and 13 October 2005. His Honour rejected the Chens’ contention that there were a series of three agreements (‘the agreements’) in force which entitled DWC and RLC to a half share in the Kooyong Road property, as well as retention of the amounts forwarded by the Chans and EWA over and above the moneys used to purchase the house. We deal in more detail with these agreements below.
His Honour concluded that each of the Chens had misappropriated significant sums of money from the Chans and EWA and sent the matter out to a Master for the taking of accounts to determine the level of misappropriation. His Honour also entered judgment against the Chens for damages for the conversion of the Chans’ chattels. On 11 November his Honour delivered his reasons for rejecting all but one of the Chens’ claims and finding for the Chans and EWA on their claims. His Honour then adjourned the matter until the afternoon. Shortly after the adjournment, the Chens terminated the services of their solicitors Messrs Pointon Partners, and DWC appeared in person before his Honour that afternoon. The matter was then adjourned to 16 November, when his Honour made wide-ranging orders reflecting his conclusions and freezing the assets of DWC, RLC and LC. It will be necessary to return to the events of the afternoon hearing of 11 November and the 16 November hearing.
The trial judge ordered that there be a taking of accounts; to be conducted before a Master. After several hearings, the Master published his reasons on 24 April 2007, concluding that $167 072.82 was due to the Chans and $552 330.45 to EWA. The accounts were delivered by the Master to the trial judge on 24 April 2007 and on 4 May 2007, the trial judge made orders in the following terms:
(a)For CKM and CKW against the three Chens, in the sum of $167 072.82 together with damages in the nature of interest of $65 879.78.
(b)For EWA against the three Chens in the sum of $552 230.45 together with damages in the nature of interest of $217 754.54.
(c)The Chens to pay the Chans’ and EWA’s costs including reserved costs, on a party-party basis until and including 18 December 2004 and thereafter on a solicitor-client basis.
The issues
On the appeal before this Court, four discrete issues arose, namely:
(a) Whether the judge was correct in concluding that each of the Chens had misappropriated funds of the Chans and EWA.
(b) Whether, in the circumstances, it was appropriate to order that the Master engage in the taking of accounts, rather than the trial judge determining the quantum of the claim.
(c) Whether the procedure undertaken by the Master in the taking of accounts was in accordance with law and whether the procedure adopted was appropriate.
(d) Whether there was error on the part of a second judge who made findings of contempt against DWC and RLC.
The appeal against the trial judgment
The pleaded claims of the Chans alleged wrongful retention of moneys by each of the Chans. However, the pleaded claims of EWA distinguished between DWC on the one hand and his wife (RLC) and daughter (LC) on the other. It was alleged that DWC had misappropriated funds in breach of trust or fiduciary duty. No claim of misappropriation was made against either RLC or LC. Instead, it was alleged that they had received specific amounts out of DWC’s misappropriations, knowing that he was acting in breach of fiduciary duty,[2] or alternatively, on the basis of money had and received.[3]
Claim by the Chens and EWA against DWC
[2] To establish recipient liability under the first limb of Barnes v Addy (1874) LR 9 Ch App 244, it was necessary to prove:
[3] A claim for money had and received is a claim for restitutionary relief and is based on the concept of an unjust enrichment (Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221, 256). In Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516, [62], Gummow J cited with approval the following passage in the speech of Viscount Haldane LC in Royal Bank of Canada v The King (1913) AC 203, 296:
As noted earlier, between October 2000 and February 2001 the Chens sent a total of $2.25 million to DWC, to use for the purchase of the Kooyong Road house and some furniture and for the expenses of EWA. The surplus was to be held for the company. It was common ground that $1.74 million was paid towards the purchase of the house. The Chans accepted that a further $296 390 had been used for legitimate purposes of the company, leaving a balance of approximately $217 000. They alleged that DWC held these moneys as trustee and that he had breached the trust by wrongfully retaining that sum or using it for unauthorised purposes.
In his defence, DWC denied the existence of any trust. He alleged that the balance of the $2.25 million had been paid to him absolutely: ‘to reimburse [him] for moneys paid by him to the company and expenses incurred and to be incurred by him in relation to the company …’[4] DWC claimed that an agreement had been entered into in February 2001, under which the Chans agreed with the Chens that the balance of moneys provided but not used for purchase of the property should be used by the Chens in reimbursement of, first, moneys advanced by the Chens to accounts of the company and, secondly: ‘the living expenses of the Chens, all expenses associated with the proposed Toorak property including furnishing the proposed Toorak property and all expenses associated with the business of the company …’[5] This alleged agreement was referred to in the pleadings as ‘the reimbursement agreement’.
[4]FADAC [21] (b)(ii).
[5]FADAC [69], [66] (n).
Attached to the Further Amended Defence and Counterclaim (‘FADAC’) were two schedules. The first contained a very detailed list of expenditures ranging from amounts as small as $5 for groceries to amounts as large as $17 000 for a television screen. These expenses were said to have been incurred between October 2000 and August 2003, and totalled approximately $150 000. The schedule deducted an amount of approximately $13 000, representing furniture retained by DWC and RLC, leaving a balance of almost $137 000. The Chens’ claim was that, in breach of the reimbursement agreement, that amount had not been reimbursed to the Chens ‘by the company or the Chans’.[6]
[6]FADAC [76](d).
The second schedule to FADAC contained a reconciliation of payments said to have been made to EWA from Chan accounts (totalling $393 639) and amounts received from EWA by way of reimbursement (totalling $389 919). The balance said to be owing to the Chens was $3719.56.
Soon after the FADAC was filed, the plaintiffs filed a document entitled ‘Plaintiffs’ Statement of Damages Claim’. In relation to their claim for $217 000, the document stated:
insofar as the amount provided has not been shown to be either applied directly for expenses of the company or paid in proper reimbursement of company expenses, then any remaining balance should be paid to the [Chans]. So the question is what properly should be allowed in reduction from their prima facie claim of $217 012.86. It is acknowledged that some furniture was paid by DWC on behalf of the plaintiffs to a value of $30 865.00 and moneys for rates and insurance totalling $6610.75. The costs of these should be deducted from the claim made by the plaintiffs with respect to the claim of $217 012.86 … Thus, the plaintiffs’ claim under this head is for … $179 537.11. …
The ultimate answer depends upon proof by the defendants of their entitlement to reimbursement, therefore on the plaintiffs’ view of the arrangement (which limits authorised expenses to proper company expenses) we need to find out what company expenses were not paid by the company, but were in fact paid by DWC. [7]
[7](Emphasis added).
The pleaded case for DWC in answer to this part of the claim was that $213 402.86 had been paid by the Chans pursuant to the reimbursement agreement. This amount comprised the sum of $63 402.86, being the balance of the funds initially provided for the purchase of the Kooyong Road property, and the sum of $150 000 transferred by the Chans on 15 February 2001.[8] As already noted, DWC’s case was that the reimbursement agreement covered both company expenses and personal expenses. The Chans’ position, on the other hand, was that they were only ever obliged to reimburse DWC for expenses incurred on behalf of the company.
[8]FADAC [69A].
The pleading for DWC in answer to the Chans’ claim also relied on the payment of $300 000, made by the Chans to the Chens’ account on 20 October 2000. (On appeal, counsel for DWC acknowledged that the reliance on the $300 000 was unnecessary, since the reimbursement agreement — if accepted — was sufficient to account for almost all of the amounts claimed by the Chans.) The $300 000 was also said by DWC to have been paid to him absolutely, either as a gift or to compensate him for what he had done to assist the Chans to secure their visas and to establish the business of EWA in Australia. According to the pleading the payment would compensate him for:
·assisting the Chans to comply with their obligations under Australian immigration law;
·assisting them to obtain permanent residency in Australia;
·resigning from his employment with Chubb Securities;
·commencing employment with EWA; and
·closing his Chinese medicine practice.[9]
[9]FADAC [66](o).
The agreement to pay this amount of compensation, or alternatively to make a gift of $300 000, was said to be a term of an ‘immigration agreement’. DWC alleged that this agreement had been entered into between the Chens and the Chans in late October 2000, directed at the establishment of EWA and its business, the purchase of a property in Toorak, and the obtaining of permanent residency in Australia for the Chans. It was also a term of the alleged immigration agreement that, when the Toorak property was purchased, DWC and DKW would be registered as co-proprietors of the property, such that the Chans and the Chens would each have a half interest in the property.
During the trial, counsel for the Chens provided to the Court a document entitled ‘Defendants’ Commentary on Summaries of Funds claimed by the Plaintiffs’ (‘the Commentary’). The Commentary noted that, after allowance was made (as the Chans conceded it must be) for the value of chattels retained by the Chans, and for expenditure on home insurance and council rates, the amount of ‘residual funds’ to be accounted for by DWC, after the purchase of the Kooyong Road property, was $179 537.11.
According to the Commentary, the ‘defendant’s answer’ in relation to the claim for this amount was that it was ‘covered by $300 000 paid on 23/10/00 which is Chen money.’ Puzzlingly, the Commentary made no reference to the reimbursement agreement, that having been expressly pleaded as justifying the retention by DWC of the funds remaining after the purchase of the property. In other words, the Commentary implicitly abandoned DWC’s reimbursement defence to the Chans’ claim and placed sole reliance on the — quite different — argument that the residual funds were to be regarded as more than adequately accounted for by the $300 000 payment which DWC received either as compensation or as a gift. In his closing address, counsel for the Chens confirmed the position adopted in the Commentary — that is, ‘the difference which they say we haven’t accounted for is all covered by the $300 000 which is Chen money, so if you agree with us then nil is owing.’
The trial judge was not persuaded that any of the alleged agreements relied on by the Chens had been entered into. Nor did he accept that the payment of $300 000 in October 2000 was a gift. There was no challenge on the appeal to those findings. Instead, the argument on appeal for DWC was that, even without an express reimbursement agreement of the kind alleged, DWC as trustee had been entitled to reimburse himself from the trust fund for expenses incurred by him for trust purposes. Further, it was submitted, the trial judge was obliged, notwithstanding his rejection of the reimbursement agreement, to investigate whether and to what extent the residual funds could be accounted for on this basis, that is, as a reimbursement of expenses incurred by DWC on behalf of the company.
As noted earlier, the Chans accepted from the outset that DWC was (implicitly) authorised to incur expenses for proper company purposes and to be reimbursed for such expenditures. The trial judge also accepted that proposition. Having found that there had been misappropriation of moneys belonging to the Chans and the company, his Honour said in his reasons: ‘However, it is quite clear also that moneys appear to be owing to Mr and Mrs Chen for moneys paid by them for some company expenses. They are entitled to be reimbursed amounts so paid.’[10] But it was never suggested for DWC at trial that his entitlement to be recouped for expenses incurred on behalf of the company could fully account for all of the outstanding moneys claimed by the Chans. That is why the parties attached such significance to the dispute about whether the alleged reimbursement agreement applied only to company expenses (as the Chans contended) or extended to personal expenses (as DWC alleged in his pleading, and asserted in his evidence).
[10]Chan v Chen [2005] VSC 432, [121]. See also [123].
The trial judge squarely addressed that issue in his judgment. His Honour noted that DWC’s original defence did not suggest that it had ever been agreed that the Chens would have all their personal expenses paid by EWA. To the contrary, paragraph 15A of that defence alleged that the relevant agreement was that ‘EWA would reimburse DWC for all expenses incurred in and about the course of his employment with EWA.’ As the judge noted, it was pointed out to DWC in cross-examination that this allegation was inconsistent with the reimbursement agreement as subsequently pleaded in FADAC. It was also pointed out to him that, in an affidavit he had sworn on 22 September 2003, he had not suggested that he was to be reimbursed for living expenses. In his witness statement for the trial, by contrast, he had referred to a further conversation in which, he said, it had been agreed that he was to receive payment from the company for all living expenses. The judge commented on DWC’s evidence as follows:
In attempting to explain this [inconsistency] Mr Chen again demonstrated that he would say anything if he thought it would assist his case … Again, his evidence in relation to this change was far from convincing. He prevaricated and was evasive.[11]
[11][2005] VSC 432, [96].
Nor was it ever suggested by counsel for DWC that, if the defences of reimbursement, compensation and gift were rejected, the trial judge must nevertheless conduct an enquiry into the expenses incurred by DWC, in order to identify those which could be said to have been properly incurred on behalf of the company. The trial proceeded quite differently, with the evident concurrence of counsel for the Chens. Thus, in the course of the opening of the plaintiffs’ case by senior counsel, the judge noted that their pleading sought orders:
(a)that all necessary accounts be taken and enquiries made in relation to DWC’s failure to account to the company and to the Chans for funds provided by them; and
(b)for payment by DWC to the company and/or to CKW for the amount thus found to be owing.
Senior counsel confirmed that the plaintiffs were seeking a finding from his Honour about ‘whether the nature of the agreement was one that embraced all expenses or company expenses’, following which the matter should be referred to a Master for accounts and enquiries.
At the conclusion of the plaintiffs’ opening, counsel for the Chens raised several matters with the trial judge, but did not take issue with the proposed approach to the determination of the issues as discussed between the judge and senior counsel for the plaintiffs. In his opening on behalf of the Chens, counsel made clear that their defence relied on the alleged agreements, saying that ‘in essence, the case was that under the agreement(s), all of the expenses could be put through the company, even if they involved matters foreign to the purposes of the company …’ Counsel promised to produce a document responding to the detailed claims made. The Commentary was the document which counsel later provided for that purpose. At no time did counsel for the Chens suggest to the judge that he should undertake the detailed accounting necessary to decide which amounts were incurred on behalf of the company. As we have said, on the case advanced for the Chens, there was no need to distinguish between company and private expenses.
Disposition of the appeal of DWC
It is trite to say that the primary rule governing an appeal from a trial which involves complex findings of fact, and a determination based on these facts, is that a party will not be able to resile from the position adopted by it at the trial. To put it another way, unless there are exceptional circumstances, the law does not permit a party to run a new case on the appeal in such a situation. This is so, notwithstanding that an appeal is conducted as a rehearing of the trial.[12]
[12]See Coulton v Holcombe (1986) 162 CLR 1, 7– 8 (Gibbs CJ, Wilson, Brennan and Dawson JJ).
There are two fundamental propositions that underpin this rule. First, that of finality. A party is entitled, at the hearing of a trial, to regard the decision as final, absent an appeal on the issues that have been contested at the trial. The second is estoppel. As a matter of principle, a party should not be permitted to ventilate a fresh argument on appeal, as to do so would simply be to treat the trial as a preliminary skirmish, rather than the final determination of the rights of the parties subject to an appeal confined to those issues litigated before and determined by the trial judge.
The statement of principle was enunciated by Isaacs J in the High Court nearly 100 years ago:
But it is a sound general principle, leading not only to the maintenance of fair play, but also to the repression of unnecessary litigation that the parties must be bound by the course they deliberately adopt at the trial.[13]
[13]Rowe v Australian United Steam Navigation Co Ltd (1910) 9 CLR 1, 24.
In recent times, that proposition has been reaffirmed on several occasions. In University of Wollongong v Metwally [No 2], the Full Court of the High Court said:
It is elementary that a party is bound by the conduct of his case. Except in the most exceptional circumstances, it will contrary to all principle to allow a party, after a case had been decided against him, to raise a new argument which, whether deliberately or by inadvertence, he failed to put during the hearing when he had an opportunity to do so.[14]
[14](1985) 60 ALR 68, 71 (Gibbs CJ, Mason, Wilson, Brennan, Deane and Dawson JJ).
In Coulton v Holcombe, the Court (comprising Gibbs CJ, Wilson J, Brennan J and Dawson J) said:
To say that an appeal is by way of rehearing does not mean that the issues and the evidence to be considered are at large. It is fundamental to the due administration of justice that the substantial issues between the parties are ordinarily settled at the trial. If it were not so, the main arena for the settlement of disputes would move from the Court of first instance to the appellate Court, tending to reduce the proceedings in the former Court to little more than a preliminary skirmish.[15]
[15](1986) 162 CLR 1, 7. See also Multicon Engineering Pty Ltd v Federal Airports Corporation (1997) 47 NSWLR 631, 645–6 (Mason P), Doherty v Murphy [1996] 2 VR 553.
In both written and oral submissions, the appellants’ counsel placed considerable emphasis upon the fact that the issues of misappropriation and the significance of particular transfers and payments were raised by the pleadings between the parties and therefore could be ventilated on an appeal. This, in our view, involves a misconception of the role of pleadings in an appeal setting, particularly where the trial involved a substantive fact-finding exercise engaged in by the trial judge and where the trial was so conducted by the parties that it can be said that the issues which fell for determination were a restriction or enlargement of the issues pleaded.
Pleadings set the scene by which the trial is to take place. They ensure fair play and delineate the issues for the purpose of the trial. It is in this context that Appellate Courts have regard to the pleadings. They do not enable a party to maintain a new contention on appeal where the trial has been conducted on a different basis. It is simply not open to a party to assert on appeal that, provided that the matter was contained within the pleadings, it is then permissible to argue that point unless it truly arose as an issue for determination by the trial judge having regard to the manner in which the trial was conducted.
In Gould v Mount Oxide Mines Ltd (in liq),[16] the High Court noted the distinction in the following terms:
Undoubtedly, as a general rule of fair play, and one resting on the fundamental principle that no man ought to be put to loss without having a proper opportunity of meeting the case against him, pleadings should state with sufficient clearness the case of the party whose averments they are. That is their function. Their function is discharged when the case is presented with reasonable clearness. Any want of clearness can be cured by amendments or particulars. But pleadings are only a means to an end, and if the parties in fighting their legal battles choose to restrict them, or to enlarge them, or to disregard them and meet each other on issues fairly fought out, it is impossible for either of them to hark back to the pleadings and treat them as governing the area of contest. There is abundant authority for this even if a matter were required to rest on authority only.[17]
[16](1916) 22 CLR 490. See also Dare v Pulham (1982) 148 CLR 658, 664 (Murphy, Wilson, Brennan, Deane and Dawson JJ).
[17]Ibid 517 (Isaacs and Rich JJ) (emphasis added).
Then, in Banque Commerciale SA, En liquidation v Akhil Holdings Ltd,[18] the High Court said:
The function of pleadings is to state with sufficient clarity the case that must be met. In this way pleadings serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision. The rule that, in general, relief is confined to that available on the pleadings secures a party’s right to the basic requirement of procedural fairness. Accordingly in the circumstances in which a case may be decided on a basis different from that disclosed by the pleadings are limited to those in which the parties have deliberately chosen some different basis for the determination of their respective rights and liabilities.
Ordinarily the question whether the parties have chosen some issue different from that disclosed in the pleadings as a basis for the determination of their respective rights and liabilities is to be answered by inference from the way in which the trial was conducted. It may be that, in a clear case, mere acquiescence by one party in a course adopted by the other will be sufficient to ground such an inference.[19]
[18](1990) 169 CLR 279.
[19]Ibid 287 (citations omitted).
Recently, in Whisprun Pty Ltd v Dixon,[20] the High Court reaffirmed the proposition:
As Water Board v Moutsakas makes clear, a point may be a new point even though it is within the pleadings or particulars. The pleadings and particulars are frequently decisive in determining whether a party is seeking to raise a new point on appeal. But they are not conclusive. To determine whether a party is raising a new point on appeal, it is ‘necessary to look to the actual conduct of the proceedings’.
[20](2003) 77 ALJR 1598, [52] (Gleeson CJ, McHugh and Gummow JJ).
In Whisprun, the High Court also said ‘the reasons of the trial judge are usually the best indication of what matters were in issue at the trial’.[21] And went on to say:
To suggest the trial judge has not properly considered a party’s case is a serious charge. Such a suggestion should be accepted only when the record of the trial or other evidence persuasively suggests the judge failed to discharge that paramount judicial duty.[22]
[21]Ibid [50] (Gleeson CJ, McHugh and Gummow JJ).
[22]Ibid [63] (Gleeson CJ, McHugh and Gummow JJ).
The defence relied on by DWC at trial was rejected. Although it was accepted on all sides that there was an entitlement to reimbursement for expenses incurred on behalf of the company, the trial was not conducted on the basis that it was for the judge to investigate the expenditures, one by one, to determine the purpose for which they were incurred. Most importantly, it was never suggested that this exercise — were it to be carried out — would fully account for the moneys in issue.
It is not open to DC on this appeal to advance a case which was not advanced at trial. His appeal against the finding of misappropriation of Chan moneys must therefore be dismissed. The issue of quantum will be addressed later in these reasons.
In the amended statement of claim, EWA alleged that DWC had breached the fiduciary duty which as a director he owed to the company, by wrongfully misappropriating amounts totalling more than $750 000.[23] The FADAC answered these allegations by reliance on the immigration agreement (including the term said to entitle DWC to payment of $300 000) and the reimbursement agreement. DWC’s more detailed ‘answer’ was, once again, provided in the Commentary, which identified the total of EWA’s misappropriation claim as being approximately $694 000.
[23]ASC [35], [37], [44], [51], [57].
As to this figure, the Commentary contained the following response: ‘The total should be $146 280.44 — living expenses and reimbursement amount. (Depends on living expenses term and reimbursement term of agreement).’ In other words, an amount of approximately $550 000 was said to be accounted for by DWC’s entitlement to be reimbursed both for company expenses and for living expenses. As to the balance of $146 280, the table listed amounts totalling more than $150 000, which were said to be ‘allowances’ for, respectively, company expenses; company utility expenses; company salaries expenses; and ‘the purchase of Coogi knitwear’. According to the table, these amounts were agreed between the parties.
This meant, according to the Commentary, that no amount was owing by DWC to EWA at all, and that there was in fact a credit balance in his favour of more than $5000. The Commentary concluded with this statement:
The veracity of the defendants’ answer depends on the Court finding:
(a)the living expenses term of the Immigration Agreement; FADAC para 66(n);
(b)the reimbursement term of the Immigration Agreement; FADAC para 66(n);
(c)that the sum of $300 000 paid on 23 October 2000 being paid as compensation or a gift; FADAC para 66(o).
As in relation to the Chans’ claim, this statement accurately defined the answer to the EWA misappropriation claim which DWC had put forward. That is, his defence depended (to an unspecified extent) on the acceptance of the proposition that the Chens’ living expenses were agreed to be payable out of company funds. That defence was rejected. Accepting that DWC was entitled to be reimbursed for expenses incurred on behalf of the company, the finding of misappropriation of EWA funds was inevitable nonetheless. No other conclusion was open on the case as presented at trial on DWC’s behalf. This aspect of DWC’s appeal must also be dismissed.
The claim by the Chans and EWA against RLC
The pleaded case of the Chans against RLC asserted that she had wrongfully retained their moneys. The pleaded case of EWA, by contrast, identified specific transactions and alleged that RLC had received the sums in question knowing that they were trust moneys, alternatively, that they were moneys had and received.
The trial judge concluded that RLC was a party to the misappropriation of the Chan moneys. His Honour did not accept her evidence as to the movement of funds belonging to the Chans and concluded that she, with her husband, had lied about the disposition of funds. The Chan funds were paid into a bank account to which RLC and her husband were signatories. She lived with her husband and had, as her cross-examination demonstrated, a coincidence of interest with him both in business and personally. For example, she, together with her husband and the Chans, opened the company account for EWA; like her husband, she worked for EWA. She corroborated parts of his version as to the disputed agreements. She relied upon the agreements as providing a lawful justification for dealing with most of those monies. The trial judge concluded that she and her husband had acted together in relation to the missing Chan funds.
The submissions of counsel for the Chens made it clear that the immigration agreement and the reimbursement agreement were part of the joint defence of RLC with DWC to the Chan claim. The Commentary and closing submissions made this unambiguously clear.[24] Once the agreements were rejected, the trial judge was, in light of the conduct of the case, entitled to conclude that RLC as well as DWC was liable to the Chans.
[24]See [51] above.
Although, as we have noted, the EWA case against RLC was pleaded differently, the same defence was maintained during the course of the proceeding. RLC, like her husband DWC, relied upon the agreements in resisting the EWA claim. This is not surprising, given that if the agreements were upheld, her husband became entitled to a half share of the Kooyong Road property, and she would have no outstanding liability to EWA. She adopted, in effect, a joint position and did nothing to distinguish her position from that of her husband. RLC gave evidence in the course of the trial and supported his version in relation to proof of the agreements. Once again the Commentary confirmed that their position was a joint one and that its ‘veracity’ depended on the agreements being upheld.[25] Her position by the time of closing argument, was that a finding of misappropriation would follow if she and her husband failed to persuade the trial judge of the existence of the agreements. The extent of the misappropriation would then be a matter for the Master on the taking of accounts.
[25]See [51] above.
The trial judge rejected the contention that the agreements had been made. Once the agreements failed, it was inevitable that — as with DWC — RLC would be found to have been a participant in the misappropriation of the EWA funds. Counsel for the Chens drew no distinction between RLC and DWC for this purpose. In particular, counsel did not suggest to the judge that, if the agreements were rejected, any separate question arose in relation to RLC concerning the pleaded allegations of knowing receipt.
For these reasons, RLC’s position cannot be distinguished from that of her husband. Her appeal against the liability findings must be dismissed.
The claims by the Chans and EWA against LC
The pleaded claim by the Chans against LC was for misappropriation. Like her mother and father, she was alleged to have wrongfully retained Chan money. Alternatively, it was alleged, she was a knowing recipient of moneys dealt with by DWC in breach of trust. The EWA claim sought specific amounts on the basis of recipient liability or money had and received.
At trial the case against LC received virtually no attention from counsel on either side or from the trial judge. There was some limited consideration of her position as a signatory to the joint account into which funds were transferred from EWA accounts and Chen family accounts.[26] LC did not give evidence.
[26]See [9] above.
As counsel for LC submitted on the appeal, no effort was made at trial to differentiate the claims against her from the claims against her parents. Again, this seems to have resulted from the focus of the trial being on the counterclaim and the agreements on which it was based. Whatever the cause, neither side at trial directed attention at LC’s role in relation to any of the pleaded claims against her. Inexplicably, the Commentary filed by counsel for the Chens (who was acting for LC as well as for her parents) was filed only on behalf of DWC and RLC. It appears that no equivalent document was prepared or filed setting out LC’s answers to the claims against her. Nor was any point apparently taken about this by counsel for the plaintiffs.
The trial judge concluded that LC had misappropriated funds from both the Chans and EWA.[27] But the judgment contained no analysis of her role in relation to the disposition of funds.
[27](2005) VSC 432; [121].
LC was not a signatory to the Chen Family Account into which the funds were paid, and no evidence was adduced to implicate her in the misappropriation of the funds or to establish either recipient liability or moneys had and received. Significantly, no separate submission was made to the trial judge on behalf of the plaintiffs about the basis of LC’s liability or the evidence relied on to establish liability.
In relation to the EWA claim, two specific transactions were pleaded against LC as establishing recipient liability. Neither transaction received any consideration by counsel or — understandably in the circumstances — by the trial judge. On the appeal, counsel for EWA, in both written and oral submissions, directed our attention to particular transfers and transactions entered into by LC. We accept that certain transactions may well have raised a question about her knowledge of the source of funds, particularly in August 2003 when the dispute between the families came to a head. But the only transactions pleaded against her occurred in April 2002. Moreover, and critically, the type of analysis presented by EWA on the appeal was simply not put before the trial judge. By way of example, on appeal EWA’s counsel placed significant emphasis on the fact that the final withdrawal on 9 February 2004 from the joint account, signed by LC and payable to her, was in the sum of $75 529. This was not the subject of any pleaded cause of action against LC. Moreover, it was not the subject of any submission at the trial, whether by way of establishing a further claim (outside the pleadings), or by laying the foundation for an inference to be drawn in respect of her use of the account relating to the earlier transactions which were the subject of the pleadings.
Whereas the trial judge’s reasons contain a detailed analysis of the respective roles of DWC and RLC, the reasons do not explain on what basis LC was found to have misappropriated funds from EWA. His Honour placed some emphasis on the fact that LC was not called as a witness, in defence either of the claims against her or of the claims against her parents. Likewise on appeal, counsel for the plaintiffs argued that the judge had been entitled, in accordance with Jones v Dunkel,[28] to draw an adverse inference from her failure to give evidence. But it has long been established that the rule in Jones v Dunkel cannot be employed to fill gaps in the evidence, or to convert conjecture and suspicion into inference.[29] The rule only permits an inference which is already open on the evidence that has been given to be more readily drawn against the party which did not call the witness.
[28](1959) 101 CLR 298.
[29]Jones v Dunkel (1959) 101 CLR 298, 308 (Kitto J), 312 (Menzies J), 320-1 (Windeyer J); O’Donnell v Reichard [1975] VR 916, 929; Whitehorn v R (1983) 152 CLR 657, 690.
First and last, the responsibility lay on the plaintiffs to establish their case against LC and this, in our view, they failed to do. Whereas RLC adopted a joint position with her husband, there is nothing in the record of the trial to suggest that LC did likewise. As already noted, the Commentary was filed only on behalf DWC and RLC. While their defences were acknowledged to stand or fall with the agreements, no such concession was made on behalf of LC.
Unsurprisingly in the circumstances, counsel for EWA at the trial in respect of the claim based upon recipient liability acknowledged that he could ‘not say much about’ the case against LC. Her appeal against the findings of liability must be allowed.
The appeal from the Master’s decision
With the apparent concurrence of all parties, the trial judge ordered that an account be taken of all moneys received by DWC from the Chans, and ‘all moneys received and disbursed by the defendants or by any person on their behalf in respect of [EWA] …’ His Honour ordered that due allowance was to be made for wages owing to DWC and RLC, for ‘any amounts paid for or on behalf of’ EWA, and for any moneys due to RLC in respect of a particular transaction.
It was not in issue that the Master had the authority to carry out an accounting exercise.[30] Rule 52.01 permits the Court at any stage of a proceeding to make an order for the taking of an account. It is common practice for such referrals to be made to a Master. In carrying out the accounting exercise, the Master was exercising an independent judicial function, separate and distinct from that of the trial judge. But although the appellants had not objected to this course at trial, they now do so contending that the orders were unduly onerous.
[30]RSC R77.01.
The threshold question which emerged on this aspect of the appeal was whether it was appropriate, under r 52.01, that the Master be directed to undertake an enquiry of such width. The enquiry would inevitably involve the investigation of numerous transactions, some of which were plainly disputed and most of which would require the Master to determine whether there was a lawful basis for the manner in which the funds were dealt with. These questions would in turn, require an assessment of the credibility of those involved in each of these transactions. In the present case, there was the particular difficulty of the adverse credit findings already made by the trial judge about DWC and RLC.
The hearing before the Master took place over several days. The Chans and EWA were represented by counsel. The Chens appeared in person. DWC and RLC attended the hearing. LC did not. The Master ultimately concluded that $167 072.82 was ‘due to the plaintiffs’ on the claim made by the Chans and that $552 330.45 was due to EWA. He delivered his reasons on 24 April 2007. The accounts delivered by him formed the basis for the trial judge’s judgment on 11 May 2007.
The question of how much was payable to the Chans and EWA respectively had to be determined on the basis of the evidence in the proceeding. At the hearing the Master was provided with numerous conflicting affidavits and there was, as he observed, a lack of clarity and consistency in the records. There was no cross-examination of the deponents to the affidavits and parts of the Court Books were missing.
Each of the appellants relied on a wide-ranging number of grounds to support the appeal against the Master’s decision. They identified the loss of particular documents as having been inimical to their respective defences before the Master. LC contended that the allowances made by the Master did not relate to claims contained in the amended statement of claim. The primary issue ventilated before us concerned the manner in which the Master had adopted the credit findings made by the trial judge in the principal hearing.
In his reasons the Master said: ‘Due to conflicting evidence filed and the nature in which the accounts were presented to the Court by the parties, the only way in which I can take the accounts is to rely on the findings made by [the trial judge].’[31] The Master then restated the trial judge’s adverse findings as to the credibility of DWC and RLC.[32]
[31]The reasons of the Master (24 April 2007) [33].
[32][2005] VSC 432, [97], [100].
As the appeal progressed, it became apparent that it would not be necessary to resolve the question whether it was appropriate for the judge to have ordered an enquiry as broad as the parties had requested. It was conceded by all parties that the Master could not have determined the issues referred to him without making an independent judgment as to questions of credibility on each transaction in dispute, on the basis of the evidence adduced before him.
The Master’s extremely onerous task had not been simplified by the fact that the trial judge had conducted a full hearing, had seen the witnesses cross-examined and had made findings as to credibility. The Master was faced with a similar task. The approach which he adopted can be readily understood in the circumstances. Apart from the fact that he would have been concerned at the possibility of making credit findings inconsistent with those of the trial judge, he was faced with the difficult task of deciding which of the conflicting affidavit versions to accept in relation to each disputed transaction. But, on the assumption that such a broad enquiry was appropriate — a matter about which we express no view — if the Master was to reach findings as to credibility, these had to be resolved by him on the evidence and not by reference to other judicial perceptions as to credibility, no matter how persuasive. It was not open to him to adopt a determination made by another judicial officer — in this case, the trial judge — about the credibility of particular witnesses, no matter how emphatic that determination may have been.
It follows that the proceeding before the Master was not conducted according to law, and the appeals against his findings must be allowed. It is not necessary to consider the other grounds of appeal on this issue and we express no view about any other aspect of the manner in which the proceedings were conducted. The orders of the Master should be set aside, together with the consequential orders made by the trial judge.
Given the conclusions we have reached on the liability appeals, the practical significance of this conclusion is that there will have to be a judicial determination of the level of misappropriation by DWC and RLC of the Chan and EWA funds. It will, in effect, be a trial on quantum. In the circumstances, the taking of accounts is not an appropriate vehicle for determination of this question, which must therefore be undertaken afresh by a judge of the Trial Division. The starting point will be the findings of misappropriation made by the trial judge against DWC and RLC. The parties will, however, be at liberty to present their respective cases in relation to the quantum of misappropriation as they see fit.
The appeal against the contempt findings
The contempt proceedings arose out of the orders made by the trial judge on 11 and 16 November 2005. Having terminated Pointon Partners as their solicitors, DWC and RLC represented themselves on the afternoon of 11 November 2005. LC was represented by Mr Andrew Cox of Pointon Partners. His Honour refused an application by Mr Cox to be removed as solicitor on the record for DWC and RLC. An application made by the Chans for a freezing order in relation to the Chens’ assets was granted, in the form set out below. Apart from providing for living expenses and legal costs, it restrained the Chens from dealing with any of their assets. DWC and RLC were in Court when the orders were made. The hearing was then further adjourned to 16 November 2005.
The relevant parts of the orders of the trial judge on 11 November 2005 were as follows:
1.The defendants be restrained and an injunction be granted restraining them until 5.00pm on Wednesday, 16 November 2005 or further order of this Court, whether by themselves, their servants or agents or otherwise howsoever, from transferring, dealing with, charging, diminishing, mortgaging, assigning or disposing of other than to the plaintiffs any of their assets wherever situated.
2.Notwithstanding the order contained in paragraph 1, and subject to the defendants recording in a form to be made available to the Court on the request of the solicitors for the plaintiffs, the source of the relevant funds, the defendants be at liberty to expend moneys on their ordinary living expenses not exceeding $3000 and for future legal costs not exceeding $5000.
On 14 November 2005, DWC wrote a letter to the trial judge, advising that the appellants would not be attending the hearing on 16 November. The letter set out a critique of his Honour’s reasons for judgment on liability. The following day, DWC and RLC departed for the PRC.
On 16 November 2005, Mr Cox of Pointon Partners appeared before the trial judge as he was still the solicitor on the record. The Chens did not appear. Further freezing orders were made restraining the Chens from dealing with their assets. Judgment was entered for damages for the conversion of the Chans’ chattels and the orders for the taking of accounts by the Master were made.
The relevant parts of the trial judge’s orders were as follows:
9.Until further order, the defendants be restrained and an injunction be granted restraining them, whether by themselves, their servants or agents or otherwise howsoever, from transferring, dealing with, charging, diminishing, mortgaging, assigning or disposing of other than to the plaintiffs any of their assets wherever situated, save insofar as the unencumbered value of such assets exceed the sum of $800 000.
10.Notwithstanding the order contained in paragraph 9, and subject to the defendants recording in a form to be made available to the Court on the request of the solicitors for the plaintiffs, the source of the relevant funds, the defendants be at liberty to expend a sum of $1000 per week on their ordinary living expenses and the sum of $5000 for legal expenses.
11.The defendants, within 28 days make, file and serve on the plaintiffs an affidavit disclosing the full value and location of their assets wherever situated, identifying with full particulars the nature and whereabouts of such assets, including, without limiting the generality of the foregoing, every bank account and stating whether the same is held in their name or jointly by one or more of the defendants and/or their nominees or otherwise held on their behalf and exhibiting or disclosing all relevant documents in their possession, power, custody or control concerning such assets.
As at 11 November 2005, DWC and RLC held a number of bank accounts, including a Citibank account and a Macquarie Equities Ltd account in both their names; RLC held in her own name a Citibank account, a National Australia Bank (‘NAB’) Cash Management Accelerator account, and a NAB Flexi Direct account.
On 14 November 2005, $5500 was removed from the Citibank account. On the same day, $8377.29 was removed by RLC from her NAB account. On 15 November 2005, $190 000 was removed from the Citibank account in RLC’s name. (DWC and RLC then left for the PRC.) Meanwhile, the $190 000 taken out on 15 November 2005 was deposited into a Bank of Queensland account opened by the Chens on 28 November 2005. It was removed from that account on 5 December.
Subsequently, between November 2005 and August 2006, DWC and RLC, on over 20 separate occasions, were involved (either directly or by assisting each other) in the removal of funds from one or other of the bank accounts. For example, on 21 June 2006, $52 976 was removed by the Chens from the joint Macquarie account and deposited into a Bendigo Bank account in the name of Lujia Chen. Within days the amount was removed from that account and transferred into an HSBC account in RLC’s name.
The contempt proceedings
On 30 June 2006, a summons for committal was issued on behalf of the Chans alleging that the Chens were in contempt of the trial judge’s orders. The summons was amended on a number of occasions. Ultimately, the contempt proceedings dealt with over 30 charges of contempt against DWC and RLC and a number against LC.
The hearing of these charges occupied nine sitting days. LC was represented, as were the Chans and EWA. DWC and RLC were unrepresented. They had not been able to engage legal assistance, despite the judge in the contempt proceedings himself having endeavoured to secure representation for them. An interpreter was made available for RLC. Counsel who appeared for LC acted amicus curiae in assisting DWC and RLC.[33] Three witnesses were called by the Chans, and DWC and RLC gave evidence. LC did not.
[33][2007] VSC 24, [10], [11].
The hearing required his Honour to make a series of determinations. He concluded that the orders of the trial judge both of 11 and 16 November were sufficiently clear and unambiguous for the purposes of the contempt proceedings.[34] He also concluded that neither set of orders had been served on DWC or RLC and therefore orders of committal could not be made against them. This left alive the question of a monetary penalty which his Honour concluded was open to him. His Honour then determined that the Chens understood the terms of the orders made on 11 and 16 November. He rejected the evidence of DWC and RLC. His Honour formed adverse views as to the credibility of DWC and RLC, describing their evidence as ‘inconsistent’ and ‘highly improbable’,[35] ‘quite incredible’,[36] ‘riddled with inconsistencies and improbabilities’[37] and ‘quite unconvincing’.[38] He concluded that he was satisfied beyond a reasonable doubt that DWC and RLC knew of the orders of both 11 November and 16 November.[39]
[34][2007] VSC 24, [23]-[27].
[35][2007] VSC 24, [48].
[36][2007] VSC 24, [50].
[37][2007] VSC 24, [87].
[38][2007] VSC 24, [79].
[39][2007] VSC 24, [43], [50].
His Honour also found that DWC and RLC were in breach of paragraph 11 of the order of the trial judge of 16 November by failing to serve an affidavit as to their assets. This, his Honour found, also constituted a contempt of court. His Honour then addressed each of the withdrawals made from various bank accounts which were said to constitute the other contempts. Ultimately, his Honour found that the 24 charges of contempt were made out against DWC. He found RLC guilty of 22 charges of contempt. The charges against LC were dismissed. DWC was fined a total of $27 350 and RLC a total of $25 850.
By the time of the appeal, the grounds had been narrowed to two issues, as follows:
M.The Judge when hearing the contempt proceedings should have dismissed the allegations of contempt on the basis that the Respondents had failed to serve the Orders made on 16 November 2005 on the Appellants.
N.The Judge when hearing the contempt proceedings should have dismissed the allegations of contempt on the ground that the Judge could not be sure the First and Second Appellants understood the orders.
Dismissal on the basis of failure to serve the orders upon the Chens
It was accepted by the Court that neither set of orders had been served personally on DWC or RLC. The Chens argue, however, that the failure to serve precludes not only the making of an order for committal but the imposition of a monetary penalty.
His Honour determined — correctly in our view — that service of the orders was not a precondition for the imposition of a monetary penalty, provided that the Court was satisfied beyond reasonable doubt that the appellants had knowledge of the terms of the order which are said to found the breach.[40] His Honour relied, in particular, upon the decision in Miller v Eurovox Pty Ltd,[41] in distinguishing between committal for contempt and the imposition of a monetary penalty in relation to the need for service. No argument was addressed to us to suggest that that decision was attended with any doubt. This ground of appeal should be dismissed.
The Chens did not understand the orders
[40][2007] VSC 24, [33]–[34].
[41][2004] VSCA 211, [38] (Vincent JA).
The Court considered the critical issue of the Chens’ knowledge and understanding in denial.[42] His Honour concluded that he was ‘fully satisfied’ that DWC knew of and understood the order made on 11 November. DWC was present in court on that day and represented himself, having terminated the services of the solicitors during the morning. In the afternoon when the orders were pronounced, the trial judge addressed DWC directly and explained the orders to him. At that time, DWC asked that the amount of living expenses to be allowed be increased from $2000 to $3000. He also wrote the letter to which we have referred.[43] There is no error in the judge’s finding.
[42][2007] VSC 24, [35]–[50].
[43]See [81] above.
His Honour made similar findings in respect of RLC, who had also been present in court on 11 November. She asserted that she did not understand the orders pronounced by the trial judge because there was no interpreter available to her. His Honour noted that, when giving her evidence, she appeared to have some knowledge of English. More specifically, he concluded that if there was any doubt about the terms of the order, given the explanation that had been provided to DWC, it defied credulity to suggest that she did not discuss those orders and learn of their tenor from her husband. Once again, in our view, his Honour’s reasoning cannot be faulted.
The position regarding the Chens’ knowledge of the 16 November orders is different, in that they were not present at that hearing and were not served with the 16 November orders. But, his Honour rejected the evidence of DWC and RLC that it was not until March 2006 that DWC became aware of the 16 November orders, and not until mid-June 2006 that RLC became aware of the 16 November orders. He described their evidence as being ‘inconsistent and highly improbable’.[44] He described both DWC and RLC as intelligent people who were well aware of the hearing date before the trial judge on 16 November. Given their interest in the proceedings and particularly in the effect that the freezing order would have upon their assets, his Honour found, they would inevitably have been concerned to determine what had transpired before the trial judge, particularly as it affected the disposition of moneys and assets. His Honour identified a number of inconsistencies in their evidence as to when they knew that the bank accounts had been frozen.[45] He ultimately concluded that, upon their return from the PRC on 28 November, they engaged in a pattern of conduct involving the transfer and disposition of funds consistent with knowledge of the order of 16 November 2005.[46] His Honour said that whilst the Chens may not have been aware of the precise terms of the order, he was satisfied beyond reasonable doubt that each of them knew that the trial judge had made an order which had the effect of prohibiting them from withdrawing funds from their bank accounts or from bank accounts controlled by them, and from otherwise dealing with or disposing of their assets.
[44][2007] VSC 24, [46]
[45][2007] VSC 24, [48]–[49]
[46][2007] VSC 24, [50].
Nothing advanced on behalf of the appellants persuades us that his Honour’s findings as to the state of knowledge of DWC and RLC were wrong or based upon some faulty analysis of the evidence. To the contrary, his Honour’s thorough analysis of the evidence of the Chens, and of the inconsistencies and improbabilities associated with it, supported the conclusion he reached. His Honour was fully aware that he needed to be satisfied beyond reasonable doubt as to proof of the charges. Ultimately he was so satisfied.[47] No error has been demonstrated. This ground of appeal should also be dismissed.
[47][2007] VSC 24, [55].
The appeal against his Honour’s orders must therefore be dismissed.
Summary of conclusions
It follows from what we have said that orders will be made to give effect to the following conclusions:
(a) The appeal by DWC and RLC against the findings of liability in respect of the Chan claim should be dismissed.
(b) The appeal by DWC and RLC against the finding of liability in respect of the EWA claim should be dismissed.
(c) The appeal by LC in respect of both the Chan claim and the EWA claim and the EWA claim against her should be upheld. The claims should be dismissed.
(d) The appeals by DWC, RLC and LC in respect of the findings on the taking of accounts by the Master and any consequential orders should be upheld. This will necessarily involve the setting aside of those orders made by the trial judge consequent upon the Master’s findings.
(e) The appeal by DWC and RLC against the contempt orders should be dismissed.
(f) The issue of the amounts outstanding to the Chans and EWA by DWC and RLC should be remitted to and be determined by a judge of the Trial Division of this Court.
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(b) On 9 January 2001, $500 000 deposited in the Chen Family account.
(c) On 11 January 2001, $1 000 000 deposited into the Chen Family account.
(d) On 15 February 2001, $150 000 deposited into the Chen Family account.
First, a disposal of the assets in breach of fiduciary duty, secondly the beneficial receipt by the defendant of assets which are traceable as representing the assets of the plaintiff; and thirdly, knowledge on the part of the defendant that the assets received are traceable to a breach of fiduciary duty. [EL Ajou v Dollar Land Holdings plc [1994] 2 All ER 685, 700 (Hoffmann LJ)].
Knowledge of wrongdoing is an essential requirement for recipient liability and that knowledge may be either constructive or actual (see Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373). In Farah Constructions v Say-Dee Pty Ltd (2007) 230 CLR 89, [112] (Gleeson CJ, Gummow, Callinan, Heyson and Crennan JJ), the High Court said: ‘Persons who receive trust property become chargeable if it is established that they received it with notice of the trust.’
It is a well established principle of English common law that when money has been received by one person which in justice and equity belongs to another, under circumstances which render the receipt by the defendant to the use of the plaintiff, the latter may recover as for money had and received to his use. The principle extends to cases where the money has been paid for a consideration that has failed.
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