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Chickabo Pty Ltd v Zphere Pty Ltd (No 2)

Chickabo Pty Ltd v Zphere Pty Ltd (No 2)

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Case Copied 30 August 2019 76 min read

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IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT

S ECI 2018 00084

CHICKABO PTY LTD (ACN 074 576 186) AND OTHERS	Plaintiffs
v
ZPHERE PTY LTD (ACN 114 716 773) AND OTHERS	Defendants

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JUDGE:	Sifris J
WHERE HELD:	Melbourne
DATE OF HEARING:	31 July to 1 August 2019
DATE OF JUDGMENT:	30 August 2019
CASE MAY BE CITED AS:	Chickabo Pty Ltd & Ors v Zphere Pty Ltd & Ors (No 2)
MEDIUM NEUTRAL CITATION:	[2019] VSC 580

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PRACTICE AND PROCEDURE – Joinder of parties – Necessary parties – Trial in stages – Findings of breach of fiduciary duty by first and fourth defendants made after first stage – Plaintiffs sought constructive trust over property in the hands of first to fourth defendants – Reasons given but no orders made – Plaintiffs seek to trace proceeds of property to family members of the fiduciary – Family members were not parties at the trial of the first stage – Family members joined as seventh to twelfth defendants after reasons delivered – Whether seventh to twelfth defendants bound by findings or are entitled to have the reasons set aside – Whether a new trial should be ordered before a different Judge – Seventh to twelfth defendants were not directly affected by the findings or orders made at the first stage – Seventh to twelfth are bound by the findings made at the first stage - Boyd v Thorn (2017) NSWLR 390.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	J P Moore QC and J McComish	HWL Ebsworth
For the First to Fourth and Seventh Defendants	A G Uren QC and R J Harris	Herbert Smith Freehills
For the Fifth and Sixth Defendants	B Ryde	Strongman & Crouch
For the Eighth to Eleventh Defendant	M Garner	K & L Gates
For the Twelfth Defendant	No appearance	No appearance

HIS HONOUR:

A Introduction

On 22 February 2019, I published reasons (the Reasons)[1] following the trial of the first stage of this proceeding held in November 2018 (the Principal Proceeding).
[1]Chickabo Pty Ltd v Zphere Pty Ltd [2019] VSC 73 (Sifris J). I will assume familiarity with the Reasons and defined terms bear the same meaning. No orders were made.

The Reasons include various findings of breach of fiduciary duty and of the Partnership Act 1958 (Vic) (Partnership Act) by the fourth defendant, Gary Graco (Graco) and a company controlled by him, the first defendant, Zphere Pty Ltd (Zphere). Two of Graco’s associated companies, the second and third defendants, GFBR Nominees Pty Ltd (GFBR) and Glenaldon Pty Ltd (Glenaldon) respectively, were found to be liable as accessories to the various breaches. Despite publication of the Reasons, I did not make any substantive orders or grant substantive relief in favour of the plaintiffs. That is to say, I did not order compensation, disgorgement or impose or declare constructive trusts over assets (or proceeds) the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2019] VSC 580
Decision Date: 30 August 2019

CaseChat Overview and Summary

In this case, Chickabo Pty Ltd, represented by their solicitor, sought to enforce a constructive trust over certain properties held by Zphere Pty Ltd and related parties. The proceedings were before the New South Wales Supreme Court, where the matter was heard in stages. The primary legal issue before the court was whether the family members of the fiduciary, who were not parties in the initial stage of the trial, were bound by the findings of breach of fiduciary duty made against other defendants. Additionally, the court had to determine whether these family members were entitled to have the reasons set aside and whether a new trial should be ordered before a different judge.

The court considered the appropriate legal principles governing joinder of parties and the binding effect of findings in such circumstances. The court concluded that the family members of the fiduciary, who were subsequently joined as defendants, were not directly affected by the findings or orders made at the first stage of the trial. The court held that these family members were bound by the findings made at the first stage, as per the decision in Boyd v Thorn. The court found that the family members had not demonstrated any exceptional circumstances that would warrant setting aside the reasons or ordering a new trial before a different judge.

As a result, the court determined that the family members were bound by the findings of breach of fiduciary duty made against the other defendants in the first stage of the trial. The court did not order a new trial, nor did it set aside the reasons given for the findings made at the first stage. The decision underscored the importance of ensuring that all relevant parties are joined in proceedings to avoid future complications regarding the binding effect of findings.

Orders