JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: LEE -v- MAVADDAT [2005] WASC 68
CORAM: ROBERTS-SMITH J
HEARD: 8-12, 15-19, 22-26, 29 NOVEMBER 2004 & 17 JANUARY 2005
DELIVERED : 29 APRIL 2005
FILE NO/S: CIV 1862 of 2001
CIV 1824 of 2001
Consolidated by Order dated 24 October 2001
BETWEEN: KYUNG HEE LEE
Plaintiff
AND
MICHAEL MOOJAN MAVADDAT
Defendant
Catchwords:
Contract - Partnership agreement to acquire and develop property - Purchase of property negotiated by defendant - Defendant taking "extreme" commission on sale - Whether disclosed to plaintiff - Whether authorised - Whether unjust enrichment - Price paid - Whether breach of defendant's duty of care - Loan from bank to fund project in plaintiff's name only and security only over her property - Whether to be a joint loan and jointly secured - Whether false or misleading conduct - Whether undue influence, breach of fiduciary duty or unconscionable conduct - Project management and other fees taken by defendant - Whether authorised - Whether informed consent - Use of partnership funds
Legislation:
Fair Trading Act 1987 (WA) , s 79
Result:
Plaintiff's claim allowed
Counterclaim dismissed
Category: B
Representation:
Counsel:
Plaintiff: Mr J Gilmour QC & Mr S M Davies
Defendant: Mr N W McKerracher QC & Mr S Penglis
Solicitors:
Plaintiff: Stables Scott
Defendant: Freehills
Case(s) referred to in judgment(s):
Boardman v Phipps [1967] 2 AC 46
BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337
Gemstone Corp of Australia Ltd v Grasso (1994) 62 SASR 239
Hill v Rose [1990] VR 129
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41
Kenny & Good Pty Ltd v MGICA (1992) Ltd (1999) 199 CLR 413
Madden v Kevereski [1983] 1 NSWLR 305
March v E & M H Stramare Pty Ltd (1991) 171 CLR 506
Re Dawson; Union Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd [1966] 2 NSWR 211
Case(s) also cited:
Birtchnell v Equity Trustees Executors & Agency Co Ltd (1929) 42 CLR 384
Blomley v Ryan (1956) 99 CLR 362
Brickenden v London Loan & Savings Co [1934] 3 DLR 465
Browne v Dunn (1893) 6 R 67
Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447
Freeway Hotel v Ugle, unreported; FCt SCt of WA; Library No 940017; 21 January 1994
Fry v Lane; Whittet v Bush (1888) 40 Ch D 312
Harrison v Schipp [2001] NSWCA 13
Maguire v Makaronis (1997) 188 CLR 449
Mahoney v Purnell [1996] 3 All ER 61
McKenzie v McDonald [1927] VLR 134
New Zealand Netherlands Society 'Oranje' Inc v Kuys [1973] 1 WLR 1126
Nocton v Lord Ashburton [1914] AC 932
R v Birks (1990) 19 NSWLR 677
ROBERTS-SMITH J: This case involves financial and business dealings between the plaintiff, the Korean wife of a wealthy Chinese businessman living in Hong…
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- AGLC
- Lee v Mavaddat [2005] WASC 68
- Case
- [2005] WASC 68
- Decision Date
CaseChat Overview and Summary
The court examined the legal principles regarding indemnity costs, particularly the need for a special or unusual feature to justify a different order from the settled practice of party/party costs. It considered whether Mavaddat's evidence, if accepted, would have provided a defence to Lee's claims, and if Lee's argument for an indemnity order was tantamount to a proposition that a defendant should have known their defence was hopeless if their evidence was not accepted. The court also looked at whether the allegations made by Mavaddat were false, deliberately concocted, and if there was any misconduct that caused a loss of time to the court and other parties.
The court found that Mavaddat's actions, including taking an "extreme" commission on the sale, were not disclosed to Lee, not authorised, and amounted to unjust enrichment. It was held that Mavaddat breached his duty of care by taking fees for project management and other services without authorisation or informed consent from Lee. The court also found that the loan used to fund the project should have been a joint loan and jointly secured, and that Mavaddat engaged in false or misleading conduct, undue influence, breach of fiduciary duty, and unconscionable conduct.
The court made orders for Mavaddat to pay indemnity costs to Lee, as there were special or unusual features in the case justifying such an order, including the making of allegations knowing them to be false, particular misconduct causing loss of time to the court and other parties, and the undue prolongation of the case by groundless contentions.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
I considered the authorities in relation to indemnity costs in SDS Corporation Ltd v Pasdonnay Ltd & Anor [2004] WASC 26 (S2) (delivered 27 February 2004 at [46] ‑ [106]). I adhere to what I said there and will not repeat it. The submissions advanced against the orders sought are in substance that whilst the principle may be applied to defendants as well as plaintiffs, a court ought to be slower in being prepared to presume an ulterior motive in the absence of any evidence from which such emotive may fairly be inferred, eg Biltoft Holdings Pty Ltd v Casselan Pty Ltd (1991) 4 WAR 14 at 20. It is submitted that in this case there is no evidence upon which any "ulterior motive" may be established, and it ought not to be inferred; there were no "known" facts which made the defendant's case hopeless (see Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd & Ors (1988) 81 ALR 397 at 401); and had the defendant's evidence been accepted, it would have given the defendant a defence to the plaintiff's claims. It is further submitted that in these circumstances the plaintiff's argument is tantamount to a proposition that where a defendant gives evidence which, if accepted, sounds in a good defence, but that evidence is not accepted, he ought to have known that he had no defence and therefore an indemnity order as to costs ought be made - which proposition, it is said, cannot be and is not correct. The plaintiff referred to the judgment of Holland J in Degmam Pty Ltd (In liq) v Wright (No 2) [1983] 2 NSWLR 354 at 358. There his Honour held a case had been made out for the making of a special costs order, it being:"… sufficient to say that the allegations of fact she made as the basis of her defences and causes of action were in my opinion false and deliberately concocted by her in an attempt to deny the plaintiff its rights and to shift all blame and legal liability to the plaintiff from herself to the second cross‑defendant. As well as that, she so conducted herself in the proceedings, by multiplying allegation upon allegation, and by prevaricating in the witness box, as grossly to prolong the litigation, thereby to cause the other parties to incur liability for solicitor and client costs far beyond what they could reasonably have expected to incur in litigation of genuine issues." In Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225, Sheppard J presented a useful distillation of principles (at 232 ‑ 234) from his survey of the authorities in this area. It is clear from those that the "settled practice" is for costs orders to be made on a party/party basis, and a different order usually ought not be made. It will be made only where justified by the circumstances. As Sheppard J pointed out, the tests have been variously put, but in essence all seem to come to the existence of some special or unusual feature of the particular case justifying such an order. Some examples of such circumstances given by his Honour include the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud; evidence of particular misconduct that causes loss of time to the court and to other parties; the fact that the proceedings were commenced or continued for some ulterior motive, or in wilful disregard of known facts or clearly established law; and the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions, amongst others.