Fatimi Pty Ltd v Bryant

[2004] NSWCA 140

Reported Decision: 59 NSWLR 678
(2004) Aust Torts Reports 81-746

Court of Appeal

CITATION:	Fatimi Pty Ltd v Bryant & 2 Ors [2004] NSWCA 140
HEARING DATE(S):	28/10/2003
JUDGMENT DATE:	6 May 2004
JUDGMENT OF:	Handley JA at 1; Giles JA at 43; McColl JA at 83
DECISION:	Appeal dismissed with costs.
CATCHWORDS:	CONSPIRACY - to injure by unlawful means - conspiracy must be aimed or directed at plaintiff - no need to prove dominant purpose of injuring plaintiff - purpose of protecting or advancing interests of conspirators no defence - CRIMINAL CONSPIRACY - conspiracy to defraud - dishonest means - requirement that victim have civil remedy - need for congruence with tort of conspiracy to injure by unlawful means - DAMAGES - exemplary - tort actionable only on proof of damage - exemplary damages not available where compensatory damages not proved and tort not established - D
LEGISLATION CITED:	Conveyancing Act 1919, s 37A Corporations Law, ss 471B, 570, 596 Crimes Act 1900, s 319
CASES CITED:	A v Bottrill (2003) 1 AC 449 Adams v The Queen [1995] 1 WLR 52 Amalgamated Television Services Pty Ltd v Marsden (No 2) (2003) 57 NSWLR 338 Brandy v Flamboyant Investment Company Ltd 772 F Supp 1538 (1991) Carey v After The Gold Rush 715 P 2d 803 (1986) Cash & Carry Cleaners Ltd v Delmas (1973) 44 DLR (3d) 315 Cassell & Co Ltd v Broome (1972) AC 1027 Coomera Resort Pty Ltd v Kolback Securities Ltd [2004] 1 Qd R 1 Cousins v Wilson (1994) 1 NZLR 463 Donsellar v Donsellar (1982) 1 NZLR 97 Guaranty Trust Co of Canada v Public Trustee (1978) 87 DLR (3d) 417 Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298 Johnston Terminals & Storage Ltd v Miscellaneous Workers, Wholesale and Retail Delivery Drivers & Helpers Local Union (1995) 61 DLR (3d) 741 Kirkbride v Lisbon Contractors Ltd 521 Pa 97 (1989) Lonrho Ltd v Shell Petroleum Co Ltd (No 2) [1982] AC 173 Lonrho Plc v Fayed (No 5) (1993) 1 WLR 1489 Lonrho Plc v Fayed [1992] 1 AC 448 Malec v J C Hutton Pty Ltd (1990) 169 CLR 638 McLaren Transport Ltd v Somerville (1996) 3 NZLR 424 McWilliam v Penthouse Publication Ltd [2001] NSWCA 237 Michaels v Taylor Woodrow Developments Ltd [2001] Ch 493 Peters v The Queen (1998) 192 CLR 493 The Queen v Warburton (1870) LR 1 CCR 274 Quinn v Leatham (1901) AC 495 R v Governor of Pentonville Prison Ex parte Tarling (1978) 70 Crim App R 77 R v Weaver (1931) 45 CLR 321 Rhoads v Heberling 306 Pa Super 35 (1982) Vorvis v Insurance Corporation of British Columbia (1989) 58 DLR (4th) 193 White v Hansen 813 813 P 2d 750 (1991) White v Moses Taylor Hospital 763 F Supp 776 (1991) Williams v Hursey (1959) 103 CLR 30 Williams v Hursey (1959) 103 CLR 30 XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1985) 155 CLR 448
PARTIES :	Fatimi Pty Ltd (Appellant) Elizabeth Charlotte Bryant (First Respondent) Richard Michael Bryant (Second Respondent) Richard Joseph Bryant (Third Respondent)
FILE NUMBER(S):	CA 40942/02
COUNSEL:	M Aldridge SC/M Evans (Appellant) F Kunc/M Henry (Respondents)
SOLICITORS:	John Cunningham (Appellant) John Sheehy (Respondents)

LOWER COURTJURISDICTION:	Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S):	SC 1444/98
LOWER COURT JUDICIAL OFFICER :	Campbell J

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40942/02
SC 1444/98

HANDLEY JA
GILES JA
McCOLL JA

6 MAY 2004
FATIMI PTY LTD v ELIZABETH CHARLOTTE BRYANT & 2 ORS
CATCHWORDS

CONSPIRACY – to injure by unlawful means – conspiracy must be aimed or directed at plaintiff – no need to prove dominant purpose of injuring plaintiff – purpose of protecting or advancing interests of conspirators no defence

CRIMINAL CONSPIRACY – conspiracy to defraud – dishonest means – requirement that victim have civil remedy – need for congruence with tort of conspiracy to injure by unlawful means

DAMAGES – exemplary – tort actionable only on proof of damage – exemplary damages not available where compensatory damages not proved and tort not established

FACTS


In 1994 the appellant, a judgment creditor of Rylegrove Pty Ltd, registered a writ of execution against the title of a block of vacant land which was the debtor’s only unencumbered asset. In July 1995 it filed and served a summons for the winding up of the debtor based on its failure to comply with a statutory demand. In that month a bank also obtained judgment against Rylegrove and on 11 August it too served a statutory demand. The company was wound up on 7 September.

On 8 August 1995 the company entered into a contract to sell its vacant block of land on terms which were extremely advantageous to the purchasers and it transferred the land the same day without receiving the purchase price. The liquidator had the transfer set aside.

The appellant brought an action for conspiracy against the directors of the company, a former director, the purchaser and its directors. The trial judge held that the defendants had not acted for the predominant purpose of injuring the appellant but to protect the property from the company’s creditors for the benefit of its shareholders. He also held that, for this reason, a conspiracy to injure the appellant by unlawful means had not been established. The appellant also failed to establish that the conspiracy had caused it any loss because the judge found that the bank would have acted to prevent it completing its execution and retaining the proceeds for its own benefit. Judgment was therefore given for the defendants. The plaintiff appealed contending that a conspiracy to injure by unlawful means had been established and sought awards of compensatory and exemplary damages. On appeal HELD : (1) The appellant had proved a conspiracy to injure it by unlawful means; (2) In such a case a plaintiff had to prove that the joint action of the conspirators was aimed or directed at it but it did not have to establish the conspirators had the dominant purpose of injuring it; (3) Where unlawful means were used defendants were not protected because they had acted to advance or protect their own interests; (4) The transfer for the purpose of defrauding the company’s creditors contrary to s 37A of the Conveyancing Act, s 596 of the Corporations Law and s 319 of the Crimes Act constituted unlawful means for the purposes of the tort; (5) The conspiracy would have been indictable as a conspiracy to defraud, and on principle it should also be actionable on proof of damage; (6) The appellant had failed to prove it had suffered any damage which entitled it to an award of compensatory damages; (7) Since a cause of action for conspiracy had not been established for want of proof of damage exemplary damages could not be awarded.

ORDERS


Appeal dismissed with costs.

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40942/02
SC 1444/98

HANDLEY JA
GILES JA
McCOLL JA

6 MAY 2004
FATIMI PTY LTD v ELIZABETH CHARLOTTE BRYANT & 2 ORS
Judgment

1 HANDLEY JA : This is an appeal from the judgment of Campbell J who dismissed the appellant’s action for conspiracy against the respondents. The comprehensive statement by Campbell J of the facts giving rise to this appeal was not substantially challenged and there is no need for it to be repeated. A summary will suffice.

2 On 20 May 1994 Master Macready gave judgment in favour of Fatimi Pty Ltd (“Fatimi”) against Rylegrove Pty Ltd (“Rylegrove”) for $137,687.65 inclusive of pre-judgment interest. Rylegrove had incurred the debt while operating as trustee of the Bryant Family Trust. It was the registered proprietor of two parcels of land, one at Little Hartley (“the land”) and one at Kemp’s Creek. It ceased to be trustee of the Bryant Family Trust in September 1992 but remained the proprietor of these properties.

3 On 9 August 1993 Hodgson J granted an interlocutory Mareva injunction at the suit of Fatimi against Rylegrove restraining it from reducing its assets below the value of $150,000. It remained in force until the final judgment of Master Macready but was not continued in his final orders.

4 On 2 November 1994 Fatimi registered a Writ for Levy of Property on the title of the land. However it did not prosecute the execution proceedings with diligence. It served a Statutory Demand on Rylegrove on 5 May 1995 and on 17 July it filed a summons to wind up that company returnable on 15 August.

5 On 8 August Rylegrove entered into a contract with N N & D Pty Ltd (“the purchaser”) for the sale of the land for a price of $161,000 on terms. The payments were spread over a long period with a risible deposit which was not paid and a minimal obligation to pay interest. The transfer was registered the same day.

6 On 7 September Master McLaughlin ordered Rylegrove to be wound up. On 29 September the liquidator commenced proceedings to set aside the transfer and on 22 April 1996 Bryson J set it aside. In due course the land was sold by the liquidator.

7 Mr Joseph Bryant (“Mr Bryant”) and various companies he controlled, before he became bankrupt, owed substantial sums to the Commonwealth Bank. The Bank held security over a number of properties, including Rylegrove’s property at Kemp’s Creek but not the land but Rylegrove was not otherwise indebted to the Bank. The Bank was on notice when it took its mortgage that Rylegrove held the Kemp’s Creek property as trustee and that the mortgage was a breach of trust.

8 On 5 July 1995 Windeyer J gave judgment for the Bank against Rylegrove for $43,695.36 damages for conversion and interest. It appeared as a supporting creditor on Fatimi’s winding up summons. There was no evidence that Rylegrove had any creditors other than the Bank and Fatimi.

9 After it became clear that Fatimi would only receive a small dividend in the liquidation of Rylegrove it sued Mrs Bryant, the wife of Mr Bryant, Mr Bryant, their son Michael and others for conspiracy, claiming the difference between the value of the land in August 1995 less the costs of an execution sale less its dividend in the winding up. Mr Bryant was a bankrupt, and no longer a director of Rylegrove when the land was transferred, but he was actively involved and was not protected from this claim. Since this Court reserved judgment he has been discharged from bankruptcy.

10 The purchaser and its directors Mr McCullough and Mr Fernando were also joined as defendants. Mr McCullough had been Mr Bryant’s accountant for many years and Mr Fernando was a business acquaintance. The proceedings against these defendants were compromised.

11 Fatimi pleaded a claim for conspiracy for the predominant purpose of injuring it and a conspiracy to injure it by unlawful means.

12 The Judge found that the contract of sale had not been entered into to obtain commercial benefits for Rylegrove but for the purpose of putting the land out of the reach of its creditors. However he found that the Bryant defendants had not acted with a predominant purpose of injuring Fatimi. Accordingly on established authority, here and in Britain, the claim of conspiracy for the predominant purpose of injuring Fatimi failed. The Judge’s findings on this part of the case cannot be disturbed.

13 His Honour then considered the claim of conspiracy to injure by unlawful means. He held, correctly, that if such claim was to be actionable one of the purposes of the conspiracy must have been to injure the plaintiff. However this requirement will be satisfied if the conspiracy and the unlawful means were aimed at or directed at the plaintiff. In Williams v Hursey (1959) 103 CLR 30 at 78 Fullagar J (whose judgment received the concurrence of Dixon CJ and Kitto J) said that the conspiracy there was “a combination to do unlawful acts necessarily involving injury”. In the same case Menzies J put the matter equally broadly when he said at 122:
“If two or more persons agree to effect an unlawful purpose, whether as an end, or a means to an end, and in the carrying out of that agreement damage is caused to another, then those who have agreed are parties to a tortious conspiracy.”


If the conspiracy and the unlawful means were aimed at the plaintiff damage to the plaintiff that was foreseen or foreseeable or was necessarily caused in carrying out the conspiracy will satisfy the requirements for this branch of the tort.

14 Where as in Lonrho Ltd v Shell Petroleum Co Ltd (No 2) [1982] AC 173 the joint illegal action was not directed at the plaintiff the fact that damage to it was reasonably foreseeable did not make the conspiracy actionable. See also Lonrho Plc v Fayed [1992] 1 AC 448, 467 where Lord Bridge quoted with approval from the unreported judgment of Lord Denning MR in the earlier Lonhro case:
“I would suggest that a conspiracy to do an unlawful act – when there is no intent to injure the plaintiff and it is not aimed or directed at him – is not actionable, even though he is damaged thereby. But if there is an intent to injure him then it is actionable. The intent to injure may not be the predominant motive. It may be mixed with other motives.”
15 Hence, despite the statement by Mason P in McWilliam v Penthouse Publication Ltd [2001] NSWCA 237 at [13], in which I concurred, that:
“It is not enough to establish that the acts of the conspirators necessarily involved injury to the plaintiff or that the plaintiff was a person reasonably within the contemplation of the conspirators as a person likely to suffer damage … “
I would not accept the correctness of the statement by the trial Judge (red 115):
“… the purpose to harm must still be what is actuating the defendants in acting. That the defendants realise that damage to the plaintiff is a likely, or indeed an inevitable, consequence of their action is not enough to satisfy this element of the tort. Rather, damage to the plaintiff must be one of the things which the defendants are trying to achieve.”
16 The Judge’s findings establish that the predominant purpose of the defendants was to preserve the value of the land for the benefit of the Bryant family but, in the words of Fullagar J in Williams v Hursey at 78 this “necessarily” involved injury to Fatimi, because their predominant purpose could not otherwise be achieved. In this situation the relevant principle, as re-established by Lonrho Plc v Fayed is that stated in that case by Lord Bridge at 465-6:
“But when conspirators intentionally injure the plaintiff and use unlawful means to do so, it is no defence for them to show that their primary purpose was to further or protect their own interests; it is sufficient to make their action tortious that the means used were unlawful.”
17 The most recently reported decision on this subject is Coomera Resort Pty Ltd v Kolback Securities Ltd [2004] 1 Qd R 1 where, after reviewing most of the authorities, Mackenzie J said (34-5):
“… there is good reason in principle why an intention to injure the plaintiff, albeit not the predominant motive, has to be established. Ordinarily the nature of the offence the conspirators agree to commit and the facts of the case will inevitably lead to the conclusion that it is intended to cause damage to a particular person. On the other hand, whatever other cause of action might be available, it would be contrary to principle for liability for tortious conspiracy to attach merely because a combination was put into effect and a person who was not reasonably within the contemplation of the conspirators as a person likely to suffer damage nevertheless suffered damage … In such a case, it would be impossible to infer that the conspirators had an intent or purpose of causing damage to that person … The concept of a requirement of some intent or conduct directed at the plaintiff was applied by Windeyer J in Womboin Pty Ltd v Reinchelt (unreported, 25 August 1995).”
18 This view is supported by the principles governing the crime of conspiracy to defraud stated in Peters v The Queen (1998) 192 CLR 493. It will be sufficient for present purposes to refer to the joint judgment of Toohey and Gaudron JJ. At p 505 they said:
“… for an agreement to constitute a conspiracy to defraud, it must be an agreement to bring about a result by dishonest means – means which … do not necessarily involve deception.”
19 At 507 they said:
“It has always been sufficient that the accused be aware that there is a risk of economic loss … it is misleading to speak in terms of the purpose of a conspiracy to defraud, particularly as the purpose of the conspirators may be quite different from the fraud perpetrated. The purpose of conspirators is usually to obtain some financial advantage; the fraud, on the other hand, is in depriving others of their property or of the opportunity to protect their interests. And, as is pointed out in Archbold , the conspirators may never intend or, even, foresee the probability that others will suffer economic loss. Rather, they may genuinely believe that there will be no loss because their venture will be brought to a successful financial conclusion to the advantage of all concerned, even those whose interests have been put at risk.”
20 They explained the requirement for proof of fraud in such a conspiracy as follows (508):
“Ordinarily … fraud involves the intentional creation of a situation in which one person deprives another of money or property or puts the money or property of that other person at risk or prejudicially affects that person in relation to ‘some lawful right, interest, opportunity or advantage’, knowing that he or she has no right to deprive that person of that money or property or to prejudice his or her interests .” (emphasis supplied)
21 Finally they analysed the requirement for dishonest means (509-10):
“… the offence of conspiracy to defraud involves dishonesty at two levels. First, it involves an agreement to use dishonest means. Ordinarily, the means will be dishonest if they assert as true something which is false and which is known to be false or not believed to be true or if they are means which the conspirators know they have no right to use or [they] do not believe that they have any right to use the means in question. And quite apart from the use of dishonest means, the offence involves an agreement to bring about a situation prejudicing or imperilling existing legal rights or interests of others. That, too, is dishonest by ordinary standards . If those matters are properly explained to a jury, further direction that the accused must have acted dishonestly is superfluous.” (emphasis supplied)

22 At the time of the transfer Fatimi, as a judgment creditor with a writ on the title, and in a position to execute against the land, had a lawful right, interest, opportunity or advantage of which it was deprived by dishonest means as a result of the conspiracy. The requirement for the use of dishonest means is amply established by the Judge’s primary findings although he declined to make an ultimate finding to this effect because he thought that there was no independent intention to injure Fatimi.

23 An intention to injure Fatimi was necessarily involved in the transfer, the manner in which it was implemented, and the consideration receivable by Rylegrove. In view of the debts owed by Rylegrove to Fatimi and the Bank the Bryants, judged by ordinary standards, had no right to do what they did and were not entitled to believe that they had any such right. The summons for the winding up of Rylegrove had been served on 18 July and the Bryants knew that they were about to lose control of the company. Their intention of defeating Rylegrove’s creditors made their conduct dishonest.

24 The transfer effected with that intent constituted dishonest means. This is made clear by s 37A of the Conveyancing Act and s 596 of the Corporations Law is to similar effect. The Judge found that the Bryants had contravened s 319 of the Crimes Act which proscribes conduct intended to pervert the course of justice, and this should have led to a finding of conspiracy to injure by unlawful means.

25 There was no doubt that Mr Bryant was fully aware of what was going on and the Judge found that Mrs Bryant and Michael Bryant knew that judgments had been given against Rylegrove and that there was a realistic possibility that steps would be taken to enforce one or other. He also found that each of the Bryant defendants knew and intended that the transfer would help save the land from possible execution (red 125-6).

26 In my judgment therefore Fatimi established a conspiracy by the Bryants to injure it by unlawful means. Mrs Bryant and Michael Bryant were directors of Rylegrove but since at the relevant time Mr Bryant was not and the other defendants had never been directors of that company there could be an actionable conspiracy between them. The question whether an agreement by the directors of a company can be an actionable conspiracy does not arise.

27 I agree with Campbell J that there is no requirement in the common law of Australia that the unlawful means for the purpose of this branch of the law of conspiracy must itself be tortious. The contrary was established by Williams v Hursey (1959) 103 CLR 30 and the other cases to which he referred. The decision of Laddie J in Michaels v Taylor Woodrow Developments Ltd [2001] Ch 493 is not the law in this country.

28 As the crime of conspiracy to defraud has developed the fraudulent deception of the victim has long ceased to be a necessary element. In The Queen v Warburton (1870) LR 1 CCR 274 a conviction was upheld of a partner who had conspired with others to cheat his co-partner by acts which were not otherwise criminal where the only civil remedy was an account in equity. This decision was approved in R v Weaver (1931) 45 CLR 321, 334, 348. At 349 Evatt J, in a judgment long accepted as authoritative, said:
“There is, however, a vital distinction between a conspiracy to cheat and conspiracy to obtain money by false pretences … The former conspiracy is proved by showing an agreement to do certain acts of a fraudulent or dishonest character which, if done, would enable the person defrauded to succeed in obtaining a civil but not necessarily a criminal remedy.”
29 Subsequently at 350-1 he said:
“If the agreement which can be inferred from the acts of the accused is to do acts which would enable purchasers to rescind their contracts because of the deceitful practices employed … then the conspiracy has been established.”
30 The civil remedies that will satisfy this requirement were extended by the Privy Council in Adams v The Queen [1995] 1 WLR 52, 65 where Lord Jauncey said:
“Since a company is entitled to recover from directors secret profits made by them at the company’s expense, it would follow that any dishonest agreement by directors to impede a company in the exercise of its right of recovery would constitute a conspiracy to defraud. In their Lordships’ view a person can be guilty of fraud when he dishonestly conceals information from another which he was under a duty to disclose to that other or which that other was entitled to require him to disclose.”

31 The Board explained the majority decision of the House of Lords in R v Governor of Pentonville Prison Ex parte Tarling (1978) 70 Crim App R 77 as depending on lack of proof of dishonesty. See Adams v The Queen at 62, 63 and 65. It was neither cited nor referred to in Peters v The Queen .

32 Non-disclosure by an agent in breach of fiduciary duty can attract the equitable remedies of accounting for profits, compensation, or rescission. There is no difficulty in treating the first two as civil remedies for the purposes of this crime. In R v Weaver Evatt J held that rescission for fraudulent misrepresentation satisfied this element in the crime [see paras 28-9]. In these circumstances rescission in equity for breach of fiduciary duty should also suffice and likewise the civil remedies for contravention of s 37A of the Conveyancing Act and s 596 of the Corporations Law.

33 The crime of conspiracy to defraud and the tort do not coincide in all respects because a combination is indictable before it is acted upon, but is not actionable until acted upon so as to cause damage. Nevertheless the law would lack coherence if a criminal conspiracy to defraud that had been acted upon and caused damage to the victim was not actionable.

34 The Judge also found, as a further reason for rejecting both conspiracy claims, that Fatimi had not proved that it had suffered any damage as a result of the transfer.

35 Having reviewed the facts, and the statutory provisions and rules of Court which govern executions against land, he concluded that if the transfer had not been made it was likely that Fatimi would have wound up Rylegrove or else an application by Fatimi to discontinue its winding up proceedings would have resulted in the Bank applying, under s 570 of the Corporations Law, to have Fatimi’s execution stopped. He also held that even if Fatimi had completed its execution the Bank would have wound up Rylegrove so that Fatimi either would not have received, or could not retain the benefit of its execution.
36 The primary findings from which the Judge drew these inferences cannot be disturbed but Fatimi challenged the ultimate findings based on inferences from those facts.

37 Mr Aldridge SC for Fatimi contended that there was a chance that it could have completed the execution and retained the proceeds and the Judge should have treated this as having some value and awarded damages accordingly. No doubt there was “some chance” but it was still necessary to find that it was a chance of some value.

38 The Judge was faced with a hypothetical past event and the relevant principles are those established by Malec v J C Hutton Pty Ltd (1990) 169 CLR 638, 639, 643. He did not refer to this case or use the expression “loss of a chance” but he would be familiar with these principles and presumably was addressed on the basis that Fatimi had lost a chance. I can see no error in his approach. He found that if the transfer had not taken place “it was likely” that Fatimi would have wound up Rylegrove and that if it did not do so the Bank would have taken steps to restrain the execution. These findings left room for the valuation of the chance that they would not have occurred.

39 However the Judge made a further finding that “even if” Fatimi had actually completed its execution the Bank “would have” had Rylegrove wound up in circumstances where Fatimi would not have been able to retain the benefit of its execution.

40 These findings excluded any realistic chance that Fatimi would otherwise have completed its execution and retained its benefits. I do not consider that the dictum of Deane, Gaudron and McHugh JJ in Malec v J C Hutton Pty Ltd at 643 that “unless the chance is so low as to be regarded as speculative – say less than 1 per cent …” binds a Court to evaluate a chance in percentage terms and award damages if this was more than 1 per cent. The figure mentioned was only illustrative, and the judgment is not to be construed as if it was a statute.

41 Fatimi also claimed exemplary damages. Although the conduct of the Bryants was reprehensible I do not think it would be appropriate to award exemplary damages where no compensatory damages were proved, even if this could properly be done. Since writing the above I have the benefit of reading the judgment of Giles JA. I agree with his Honour’s analysis of the cases and his conclusion that exemplary damages cannot be awarded where a cause of action is not established because compensatory damages have not been proved.

42 It follows that although a conspiracy to injure by unlawful means was established it was not actionable as the plaintiff failed to prove damage. The appeal therefore must be dismissed with costs.

43 GILES JA: Fatimi Pty Ltd (“Fatimi”) brought proceedings against Mrs Elizabeth Bryant, Mr Michael Bryant and Mr Joseph Bryant (“Mr Bryant”) claiming compensatory and exemplary damages for conspiracy to injure it by preventing it from enforcing a writ of execution upon land owned by Rylegrove Pty Ltd (“Rylegrove”). The judge found that the Bryants’ purpose was to take the land out of the reach of Rylegrove’s creditors and preserve its value for their own benefit. He was not satisfied that the Bryants had either the predominant purpose of injuring Fatimi or an intent to injure it by unlawful means, and considered that even if Fatimi had proved a conspiracy in one of those respects it had not proved that it had thereby suffered loss. He therefore dismissed the proceedings.

44 In my opinion, the appeal from this decision must fail. I will assume, without deciding, that the Bryants’ purpose sufficiently made out an intent to injure Fatimi, and that there was otherwise a conspiracy to injure Fatimi by unlawful means. The tort of conspiracy requires proof of pecuniary loss ( Quinn v Leatham (1901) AC 495; Lonrho Ltd v Shell Petroleum Ltd (No 2) (1982) AC 173 at 188; Lonrho Plc v Fayed (No 5) (1993) 1 WLR 1489 at 1494; Williams v Hursey (1959) 103 CLR 30 at 122). Error has not been shown in the judge’s conclusion that Fatimi had not proved loss, and free-standing exemplary damages can not be awarded. My reasons follow.

Background


45 On 20 May 1994 Master Macready gave judgment for Fatimi against Rylegrove for $133,545. Rylegrove appealed, and on 11 July 1994 execution of the judgment was stayed until determination of the appeal conditionally upon the provision of security of $10,000. On 27 July 1994 the appeal was dismissed by Young J. Rylegrove further appealed. A further stay of execution was later sought, but was never obtained.

46 After two abortive attempts to issue a writ of execution, on 26 October 1994 Fatimi obtained the issue of a writ of execution upon Rylegrove’s property. Rylegrove was the registered proprietor of land at Little Hartley (“the land”) and land at Kemps Creek. The Kemps Creek land was mortgaged to the Commonwealth Bank (“the Bank”) to secure other Bryant indebtedness, and was effectively unavailable to Rylegrove’s general creditors. It was unclear whether Rylegrove had other assets of any significance.

47 Fatimi caused attempted execution at the land. On 18 November 1994 the Sheriff reported that execution at the land on 14 November 1994 had been unsuccessful, it being vacant land.

48 In March 1995 Fatimi took misconceived and unsuccessful steps to obtain a writ of possession in relation to the land. It then took a different course. On 5 May 1995 it served on Rylegrove a statutory demand for payment of the judgment debt. The demand was not met, and on 17 July 1995 it filed a summons to wind Rylegrove up, returnable on 15 August 1995.

49 Fatimi did not, however, abandon levying execution. The writ of execution had been registered on the title to the land on 2 November 1994. On 11 July 1995 Fatimi caused the issue of a Form 57A notice, giving notice of its intention to proceed to the sale of the land after four weeks. On 13 July 1995 it purported to serve the notice on Rylegrove. On 1 August 1995 Rylegrove filed a notice of motion claiming to have the service set aside.

50 Fatimi was not alone in its pursuit of Rylegrove. On 5 July 1995 Windeyer J gave judgment for the Bank against Rylegrove for $43,695.36. Rylegrove filed a notice of appeal, but did not obtain a stay of execution. On 11 August 1995 the Bank executed a statutory demand for payment of its judgment debt, which was sent by post to Rylegrove’s registered office on 16 August 1995. The Bank appeared as a supporting creditor on the return of Fatimi’s summons to wind Rylegrove up. So far as the evidence went, Rylegrove had no creditors other than Fatimi and the Bank.

51 On 8 August 1995 Rylegrove entered into a contract to sell the land to NN & D Pty Ltd (“NN & D”). The directors of NN & D were Mr Bryant’s accountant and a business acquaintance. There was a token deposit of $1,000, the sale price of $161,000 was much less than Mr Bryant’s assertion of its value and was payable by annual payments until 2019, and the transfer to NN & D was registered on the same day as the contract was entered into. For these and other reasons the sale and transfer of the land was plainly intended to put it out of the reach of Rylegrove’s two creditors.

52 On 15 August 1995 the winding-up summons was adjourned, and it was ultimately heard on 7 September 1995. On 17 August 1995 Bryson J held that the service of the s 57A notice was irregular, but made an order whereby it was deemed to have been served on 25 July 1995.

53 On the hearing of the winding-up summons on 7 September 1995 an order was made that Rylegrove be wound up. The Bank again appeared as a supporting creditor.
54 On 29 September 1995 Rylegrove’s liquidator commenced proceedings to set aside the sale and transfer of the land. On 22 April 1996 Bryson J set it aside as a transaction made with intent to defraud creditors and ordered that the land be transferred to Rylegrove.

55 The liquidator sold the land on 1 May 1997 for $145,100. In due course Fatimi received in the winding-up its costs of $12,540 and a dividend of $9,386.84.

56 The judge’s reasons trace in greater detail a prolonged and bitter contest between Mr Deans and Mr Bryant, the effective controllers of Fatimi and Rylegrove. Rylegrove resisted Fatimi’s pursuit at every stage and by every means. Mr Bryant was also at extended loggerheads with the Bank.

Compensatory damages


57 The judge found that if Fatimi had prosecuted its writ of execution to a conclusion the land would have been sold by the Sheriff “no earlier than mid-November 1995, and probably later than that”, and that it would have received net proceeds of sale of the land of $149,380.

58 But Fatimi had turned also to a statutory demand and winding-up. Further, the Bank was moving towards winding Rylegrove up. On the assumption that there had not been the sale and transfer of the land, therefore, there were two questions. Would Fatimi have proceeded with its winding-up summons and caused Rylegrove to be wound up, so that it would in any event have received a dividend in the winding-up rather than the $149,380? Would the Bank have filed a summons to wind Rylegrove up and caused it to be wound up, with the same result? It was not Fatimi’s case that its dividend would have been greater if the winding-up had not been complicated by the prior sale and transfer of the land. But it was accepted that, although not prominent, its case included that these were questions as to past hypothetical events and that, if they were not answered in the negative, it lost a chance of receiving the $149,380 rather than a dividend in the winding-up.

59 The judge accepted that, if it had had a completely unfettered choice, Fatimi would have levied execution on the land rather than wound Rylegrove up. But Fatimi did not have an unfettered choice. His Honour thought that it would have been apparent to Fatimi that if it had discontinued its winding-up summons it was likely that the Bank would file a summons to wind Rylegrove up and would ensure that notice was given to the Sheriff whereby, pursuant to s 570 of the Corporations Law , the process of execution did not proceed. Further, his Honour thought that it would have been apparent to Fatimi that discontinuance would leave it without an entitlement to its costs of the summons. Thus the judge concluded that -
“173. … there is a very real possibility, though I cannot say it is more likely than not, that Fatimi, faced with the prospect of the Commonwealth Bank winding-up Rylegrove if Fatimi did not wind Rylegrove up itself, would have chosen to go ahead with its own winding-up application, so as to preserve its position concerning costs.”
60 His Honour continued, perhaps not entirely consistently in the first limb -
“174. In summary, if the transfer of the land had not taken place, it is likely that either Fatimi would have wound up Rylegrove itself, or else an application by Fatimi to discontinue its winding-up proceedings would have resulted in the Commonwealth Bank ensuring, under s 570 of the Corporations Law , that Fatimi’s execution against the land went no further.”
61 The judge found that if Fatimi had not wound Rylegrove up it was likely that the Bank would have issued a winding-up summons by the end of September 1995, that in that event Fatimi would have been precluded pursuant to s 471B of the Corporations Law from proceeding with execution against the land without the leave of the Court and that there was no reason for leave to have been granted, and that -
“158. … it seems to me likely that, if Fatimi had not sought and obtained the winding-up of Rylegrove, but rather had tried to recover its judgment debt through execution, the Commonwealth Bank would have succeeded in winding-up Rylegrove, no later than mid-March 1996. If the Bryants did not seek to delay the making of the winding-up order, the Commonwealth Bank would have succeeded in winding-up Rylegrove by mid-November 1995. It is to take account of the prospect of the Bryants trying to drag out the procedures for winding-up, notwithstanding their lack of real basis for doing so, that I have made the finding that the Commonwealth Bank would have succeeded in winding-up Rylegrove no later than mid-March 1996.”
62 The judge said -
“165 In my view, even if Fatimi had sought to continue with execution against the land, and had been able to receive the proceeds of execution before the Commonwealth Bank obtained a winding-up order against Rylegrove, the Commonwealth Bank would still have obtained its winding-up order against Rylegrove within six months of Fatimi receiving those proceeds of sale. Thus, Fatimi would have had to have put back into the liquidation fund the execution proceeds it had received. That this would have happened, if Fatimi had endeavoured to levy execution against the land, is a sufficient reason why Fatimi would have suffered no damage, even if there had been a conspiracy to injure of the type which it alleges.”

63 There was therefore a combination of reasons for the conclusion that, but for the sale and transfer of the land, Fatimi would still have received a dividend in the winding-up rather than the $149,380. It would have decided to proceed with the winding-up summons rather than prosecute its writ of execution. If it had chosen to prosecute the writ of execution, the Bank would have stepped in and either it would have been prevented from levying execution or it would have had to give back the proceeds of execution. The judge’s findings were generally in terms of likelihood, but the finding in para [165] last set out was not so qualified.

64 Fatimi submitted that the judge failed to assess and value its lost chance of receiving the $149,380 rather than a dividend in the winding-up, and that he should have awarded “substantial damages” for the loss of the chance. It pointed to the judge’s description of a decision to proceed with the winding-up summons as no more than “a very real possibility”, and focussed on the Bank stepping in. It submitted that the amount of the Bank’s statutory demand was not great, that there was not the same prolonged and bitter contest between Mr Bryant and the Bank, and that although resistance from Rylegrove could be anticipated there was a significant possibility that “when all avenues of opposition had been exhausted a deal with the Bank would have been done”. Thus, it said, a lost chance lay in Fatimi deciding to prosecute its writ of execution and a deal between Rylegrove and the Bank leaving it able to do so.

65 This seems to me to be quite unreal. The Bank had served a statutory demand the time for compliance with which would expire shortly after 7 September 1995, and there was no reason for it to hold back. Mr Bryant’s litigious history encompassed the Bank, which had made him bankrupt in March 1995, and the support for doing a deal sought to be found in an earlier settlement with the Bank was illusory: the settlement was a pragmatic concession by the Bank, with no compromise by Mr Bryant, and there was no reason for the Bank to concede any part of its $43,695.36. Nor can the assertion that in the last resort Rylegrove would have paid in order to avoid a winding-up, an assertion made without the benefit of evidence from any of the Bryants, be reconciled with the fact that it did not pay Fatimi in order to avoid a winding-up notwithstanding Mr Bryant’s claim that the land was worth over $300,000.

66 The only conclusion reasonably available, in my opinion, is that if Fatimi had discontinued its winding-up summons and endeavoured to levy execution on the land the Bank would have filed its own winding-up summons and, within the period found by the judge, Rylegrove would have been wound up. So far as Fatimi submitted that Rylegrove would have applied to set aside the Bank’s statutory demand, and thereby prolonged the prosecution of the Bank’s winding-up summons so that the period would have been longer and the relation back would not have caught the proceeds of execution, Rylegrove had the opportunity but did not so apply (perhaps because for once it was recognised that there were no grounds and nothing to be gained); even if the period found by the judge were extended, a winding-up by mid-May 1996 or even later would have sufficed. But I do not think successful levying execution on the land was an option. The Bank knew of the land and the possibility of execution. It would surely have filed its winding-up summons well before mid-November. Fatimi would have been prevented from levying execution.

67 When there is added to this that commercial considerations directed Fatimi to a prompt and reasonably certain winding-up of Rylegrove, and that it could not sensibly have relied on a deal between Rylegrove and the Bank as the key to its prosecuting or keeping the proceeds of its writ of execution, in my opinion there was no possibility that, absent the sale and transfer of the land, Fatimi would have received the $149,350 rather than a dividend in the winding-up.

68 The judge did not address the valuation of a lost chance, but his references to likelihood must been seen in the light of this negligible prospect of Fatimi benefiting from a levy of execution on the land. His Honour did not exclude a decision by Fatimi to prosecute the writ of execution. But in relation to the Bank stepping in and what would then follow his Honour’s references to likelihood were really a findings of inevitability, reflected in the language of para [165]. There was no lost chance to be valued. That, no doubt, is why his Honour did not address its valuation.

69 As a late submission, Fatimi suggested that it had suffered loss because the most likely course of events was that Fatimi would have received the proceeds of execution but had to give them back to the liquidator, so that it lost the use of the money and thus the benefit of interest earned by investment or of non-payment of interest on borrowings. For the reasons I have given, I do not think that Fatimi would have received the proceeds of execution. In any event, there was no evidence of what would have been done with the money, and any benefit may well have been off-set by additional costs. The suggested suffering of loss was not litigated at the trial, and can not now be raised.

Exemplary damages


70 It was not in dispute that, if the tort of conspiracy were made out, exemplary damages could be awarded if warranted in the circumstances. Since the tort of conspiracy requires proof of pecuniary loss, Fatimi did not make out the tort.

71 Where the plaintiff has a complete cause of action without proof of loss, exemplary damages can be awarded. That is illustrated by Cousins v Wilson (1994) 1 NZLR 463. The plaintiff sued in trespass. He did not prove loss, but was awarded nominal damages and exemplary damages. See also Johnston Terminals & Storage Ltd v Miscellaneous Workers, Wholesale and Retail Delivery Drivers & Helpers Local Union (1995) 61 DLR (3d) 741 (no damages proved, but breach of statute actionable per se and nominal damages plus exemplary damages awarded); Cash & Carry Cleaners Ltd v Delmas (1973) 44 DLR (3d) 315 (no damages proved, but injunction to restrain further trespass granted and exemplary damages awarded).

72 It is otherwise, however, when proof of loss is an ingredient of the plaintiff’s cause of action. In XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1985) 155 CLR 448 at 468-9 Brennan J said -
“Exemplary damages are parasitic on compensatory damages, the plaintiff being unable to recover exemplary damages if he is not the victim of the behaviour which attracts the exemplary damages: per Lord Devlin in Rookes v Barnard [(1964) AC 1129 at 1227]. A single cause of action provides the foundation of a judgment awarding, in an appropriate case, exemplary damages as well as compensatory damages. When a plaintiff’s claim for compensatory damages has been satisfied in full, however, he no longer has a cause of action that can support an award of compensatory damages to which an award of exemplary damages can attach.”

73 Lord Devlin’s reference to the victim of the behaviour is, with respect rather Delphic, see McGregor on Damages , 17th ed, para 11-033. Brennan J used it to support the parasitic nature of exemplary damages, which is to be understood in the light of his Honour’s subsequent remarks. If exemplary damages can not be obtained when a plaintiff’s claim for compensatory damages has been satisfied in full, despite the single cause of action under which exemplary damages could also be awarded, they equally can not be obtained when the plaintiff’s claim for compensatory damages has failed. If there is no host, there can not be a parasite.

74 Perhaps unsurprisingly, there is a dearth of local authority. Fatimi relied on two New Zealand cases. In Donsellar v Donsellar (1982) 1 NZLR 97 the plaintiff claimed exemplary damages following assault and battery. Under the accident compensation regime of the Accident Compensation Act 1972 (NZ) (“the Act”) proceedings for damages for personal injury were barred. It was held that, while compensatory damages could not be obtained, exemplary damages could be obtained. The reasoning was (see in particular Richardson J at 109) that rights of action were left intact and the Act was concerned with remedies. The plaintiff still had a cause of action, damages meant compensatory damages, and so the plaintiff could bring proceedings for exemplary damages. It was later held that exemplary damages for negligence in circumstances falling within the accident compensation scheme were also available, see McLaren Transport Ltd v Somerville (1996) 3 NZLR 424 at 431 (a recent consideration of such damages is A v Bottrill (2003) 1 AC 449). A cause of action in negligence requires proof of loss, but on the same reasoning a plaintiff still has a cause of action even though compensation for the loss can not be recovered, and so can bring proceedings for exemplary damages. Fatimi’s reliance on these cases was misplaced, since they were not concerned with exemplary damages when the plaintiff had not proved loss as a necessary ingredient of his cause of action.

75 The Bryants submitted that awarding exemplary damages in the absence of compensatory damages would be inconsistent with the principle that exemplary damages should be awarded if, but only if, the sum awarded as compensation is inadequate to punish the defendant, deter the defendant and others from similar conduct and mark the Court’s disapproval of the conduct: Amalgamated Television Services Pty Ltd v Marsden (No 2) (2003) 57 NSWLR 338. I do not think that a strong point. If consistently with the principle exemplary damages can be awarded where the plaintiff obtains nominal damages, there would be much the same consistency with the principle if damages were awarded although the plaintiff did not obtain compensatory damages.

76 The point is more fundamental. Whatever be the extent of availability of exemplary damages (see recently the differing views in Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298 on availability for equitable wrongs), the civil law is not directed to punishment, deterrence and disapprobation for its own sake. As was said by Lord Reid in Cassell & Co Ltd v Broome (1972) AC 1027 at 1086, in a passage often cited including by Heydon JA in Harris v Digital Pulse Pty Ltd at [345], awarding a plaintiff more than compensatory damages is “highly anomalous” because “[i]t is confusing the function of the civil law which is to compensate with the function of the criminal law which is to inflict deterrent and punitive penalties”. The anomaly is entrenched, and must be accepted. But for a civil law remedy there must be a civil wrong. Tortious and statutory civil wrongs have elements to be made out. Unless they are made out there is no civil wrong and, specific statutory provision aside, the civil law has no business in imposing punishment or in deterring and expressing disapprobation. Deserving punishment or occasioning deterrence and disapprobation is not a civil wrong.

77 The point was concisely made by McIntyre J, speaking for the majority of the Supreme Court of Canada, in Vorvis v Insurance Corporation of British Columbia (1989) 58 DLR (4th) 193 at 206 -
“It must never be forgotten that when [punitive damages are] awarded by a judge or a jury, a punishment is imposed upon a person by a court by the operation of the judicial process. What is it that is punished? It surely cannot be merely conduct of which the court disapproves, however strongly the judge may feel. Punishment may not be imposed in a civilized community without a justification in law. The only basis for the imposition of such punishment must be a finding of the commission of an actionable wrong which caused the injury complained of by the plaintiff.”
78 As a corollary, a plaintiff who has a cause of action against a defendant can not rely on unrelated outrageous conduct on the defendant’s part as a basis for exemplary damages: see Guaranty Trust Co of Canada v Public Trustee (1978) 87 DLR (3d) 417 at 421-2. In Waddams, The Law of Damages , 2nd ed, (1991) , para 11.390 the learned author says of this case that -
“ … once the connection between compensation and remedy is lost, as it is by the acceptance of the concept of exemplary damages, there is no strictly logical reason why exemplary damages should not be awarded whenever conduct comes to light which the court considers worthy of punishment. It is irrelevant from the point of view of the purposes of exemplary damages whether they happen to go into the pocket of one plaintiff or another, but this would open the door to actions by informers who had no connection with the conduct complained of. It is submitted, therefore, that the courts are on sound ground in insisting that the punishable conduct must be wrongful vis-à-vis the plaintiff and that the plaintiff cannot attach a complaint of conduct that is not wrongful in this sense to an entirely unrelated cause of action.”
79 Punitive damages have been quite prominent in the United States of America. In a work devoted entirely to the subject, Redden, Punitive Damages (1980), it is said (at para 4.2) that to recover punitive damages a plaintiff “must establish that he has sustained actual damages”, with discussion thereafter whether the actual damages must be “measurable” or may be nominal. The American Restatement Torts 2d, (1977) para 908 includes -
“Although a defendant has inflicted no harm, punitive damages may be awarded because of, and measured by, his wrongful purpose or intent, as when he unsuccessfully makes a murderous assault upon the plaintiff, who suffers only a momentary apprehension. In all these cases, however, a cause of action for the particular tort must exist, at least for nominal damages. …
Compensatory damages in a trifling amount and substantial punitive damages in the same verdict are not necessarily inconsistent. It is essential, however, that facts be established that, apart from punitive damages, are sufficient to maintain a cause of action. Thus a nonharmful unauthorized dealing with an other’s chattel, if not amounting to a dispossession, does not give rise to a cause of action and the fact that it was done with a bad motive is immaterial. On the other hand, in torts like malicious prosecution that require a particular antisocial state of mind, the improper motive of the tortfeasor is both a necessary element in the cause of action and a reason for awarding punitive damages.”
80 Amongst the cases cited in the supplement is Kirkbride v Lisbon Contractors Ltd 521 Pa 97 (1989), in which it was said at 101 -
“Since punitive damages are an element of damages arising out of the initial cause of action, if that cause of action is dismissed the punitive damages which are incident to actual damages cannot stand … . If no cause of action exists, then no independent action exists for a claim of punitive damage since punitive damages is only an element of damages.”


Statements in various jurisdictions to the same effect are abundant, for example Rhoads v Heberling 306 Pa Super 35 (1982) at 44; Carey v After The Gold Rush 715 P 2d 803 (1986) at 807; White v Moses Taylor Hospital 763 F Supp 776 (1991) at 792-3; White v Hansen 813 813 P 2d 750 (1991) at 752; Brandy v Flamboyant Investment Company Ltd 772 F Supp 1538 (1991) at 1543-4.

81 Principle, supported by this guidance from elsewhere in the common law world, leads to the conclusion that where Fatimi did not make out a cause of action for conspiracy, exemplary damages can not be awarded.

Orders


82 The appeal should be dismissed with costs.

83 McCOLL JA: I agree with Handley JA.
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Last Modified: 05/07/2004