Lunt v New Resource Holdings Pty Ltd [No 3] - [2011] WASCA 45

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: LUNT -v- NEW RESOURCE HOLDINGS PTY LTD [No 3] [2011] WASCA 45

CORAM: PULLIN JA
NEWNES JA
MURPHY JA

HEARD: 2 DECEMBER 2010

DELIVERED : 22 FEBRUARY 2011

FILE NO/S: CACV 78 of 2008

BETWEEN: WILLIAM TREVOR LUNT
Appellant
AND
NEW RESOURCE HOLDINGS PTY LTD
Respondent

ON APPEAL FROM:
Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA
Coram  :TEMPLEMAN J
Citation  :NEW RESOURCE HOLDINGS PTY LTD -v- LUNT [No 2] [2008] WASC 140
File No  :CIV 1489 of 2001

Catchwords:

Appeal - Claim for restitution for money paid out of company allegedly without authority - Fresh evidence - Principles governing admission on appeal - Whether judgment should be set aside

Legislation:

Supreme Court (Court of Appeal) Rules 2005 (WA), r 47(3)(d)

Result:

Appeal allowed
Retrial ordered

Category: B

Representation:

Counsel:

Appellant: Mr W J Chesnutt
Respondent: Mr P G McGowan

Solicitors:

Appellant: B W Duckham & Co
Respondent: Vincent Partners

Case(s) referred to in judgment(s):

Beaton v Psychologists Board of Western Australia [2008] WASCA 223
Burrell v The Queen [2008] HCA 34; (2008) 238 CLR 218
de la Espriella‑Velasco v The Queen [2006] WASCA 31; (2006) 31 WAR 291
Gerlach v Clifton Bricks Pty Ltd [2002] HCA 22; (2002) 209 CLR 478
Goninan & Co Pty Ltd v Direct Engineering Services Pty Ltd [2007] WASCA 10; (2007) 33 WAR 182
Lunt v Briggs [2009] WASC 134
Mickelberg v The Queen [2004] WASCA 145; (2004) 29 WAR 13
New Resource Holdings Pty Ltd v Lunt [No 2] [2008] WASC 140
New Resource Holdings Pty Ltd v Lunt [No 3] [2008] WASC 221

REASONS OF THE COURT: This is an appeal by the appellant, Mr Lunt, against a judgment requiring him to pay $200,000 to the respondent, which, at the time was called WRS Pacific Ltd (WRS).
In effect, the judgment obliged Mr Lunt to pay to WRS $200,000 as restitution for a like sum which Mr Lunt had arranged for WRS to pay to a company with which he was associated. The trial judge held that Mr Lunt as a director of WRS was not authorised by WRS to make the payment. The case was conducted by the parties on the basis that if Mr Lunt was not so authorised, then he was in breach of statutory, equitable and common law duties and was obliged to repay the money.
Mr Lunt's defence was that he arranged for the payment because WRS was indebted to a company he was associated with in the sum of $325,000, that the payment of $200,000 was in reduction of that debt and that Peter Briggs (Mr Briggs), the controller of WRS, agreed that the payment could be made.

Was WRS indebted to Mr Lunt's company in the sum of $325,000?

There is no doubt that WRS was indebted to Mr Lunt's company in that sum, but it was a debt repayable on a condition which is explained in the following paragraphs.
Mr Lunt, who had been acquainted with Mr Briggs for many years, approached Mr Briggs as a potential investor in a venture for the manufacture of organic fertiliser from chicken manure. Mr Lunt owned shares in a company, Baywil Pty Ltd, which has subsequently changed its name to Australian Capital and Technologies Ltd and will be referred to as 'ACT'. ACT owned shares in the company which owned the know‑how, assets, intellectual property and goodwill relating to the manufacturing process. This company was called Waste Recovery Systems Ltd and will be referred to in these reasons as 'Waste Recovery Co'. Mr Lunt controlled another company, WRS Australia Ltd, to administer and manage the affairs of Waste Recovery Co.
Mr Briggs and Mr Lunt reached an agreement which was eventually reduced to written form (GAB 480). This agreement is dated 21 May 1991 and was made between WRS, Waste Recovery Co, Essex Properties Pty Ltd (a company controlled by Mr Briggs) and ACT (1991 Agreement). The 1991 Agreement included recitals stating that:
(a)WRS had issued 10.5 million shares (which were held by Mr Briggs);
(b)Waste Recovery Co was the legal and beneficial owner of the assets relating to the manufacturing process;
(c)ACT owned the shares in Waste Recovery Co;
(d)WRS Australia Ltd was the administrator and manager of the affairs of Waste Recovery Co; and
(e)after settlement WRS Australia Ltd company would continue to administer and manage WRS.
The operative clauses in the 1991 Agreement then provided:
(a)for Waste Recovery Co to sell all of its assets to WRS for a purchase price of $3,325,000 to be satisfied as follows:
(i)$3 million by the allotment and issue of 1,485,000 shares; and
(ii)$325,000 to be a loan owing by WRS to Waste Recovery Co which should be classified as a subordinated loan and be payable in accordance with the terms and conditions of cl 11;
(b)for ACT to sell and WRS to buy the shares held by ACT in WRS Australia Ltd;
(c)that ACT was to subscribe at settlement for 2,340,000 shares in WRS.
Clause 11 of the 1991 Agreement read:
The Subordinated Loans shall be interest free and subordinated to all other creditors and loans and shall only be repaid pro rata on the balance outstanding from time to time as at 1st July out of audited after tax profits. In the event that the Subordinated Loans are not whole [sic] or in part repaid from all of the audited after tax profits in any financial year then the Subordinated Loans shall, with the agreement of [Waste Recovery Co] and Essex, become repayable on demand.
It was common ground at trial that as at April 1995 when Mr Lunt arranged for the impugned payment of the $200,000, WRS had no after tax profits audited or otherwise. Unless there was some agreement to vary the condition in cl 11 or unless WRS authorised the payment, it followed that Mr Lunt had no authority to make a payment of $200,000 out of WRS's funds in reduction of the subordinated loan.

The pleadings

In the statement of claim, WRS as plaintiff pleaded that at all material times Mr Lunt was a director of WRS, that on 11 April 1995 WRS under the direction of Mr Lunt paid 'to a third party unknown to the Plaintiff' the sum of $200,000 and that by reason of the payment Mr Lunt breached duties he owed to WRS.
In the defence filed by Mr Lunt, he pleaded that control of WRS rested with Mr Briggs 'through his interest and control of … Essex … the majority shareholder in the Plaintiff at all material times' and that Mr Briggs was at all material times a common law director of WRS or alternatively a director within the meaning of s 60(1)(a)(b) of the Corporations Act 2001 (Cth) .
The defence also pleaded:
(a)That at all material times up to the month of April 1995 [WRS] was indebted to an entity known as [Waste Recovery Co] in the amount of $325,000.
(b)In the month of April 1995 after oral consultation between Briggs and [Lunt] and Kevin Bond [WRS's] then secretary it was orally agreed or approved that the sum of $200,000 would be paid to or to the credit of [Waste Recovery Co] by way of reduction in the above pleaded debt.
(c)Further [WRS] with the knowledge and approval of Briggs obtained legal advice to the effect that the proposed payment could be made legally.
(d)By letter dated 12 April 1995 on the letterhead of Essex Properties Pty Ltd executed under the common seal [of] Essex Properties Pty Ltd the payment was acknowledged as being contemplated with approval.
(e)Upon such agreement being reached and advice being obtained payment was duly made in partial discharge of the debt due by [WRS].
(f)Such payment was noted in the accounts of [WRS] as a reduction of indebtedness of [WRS].
Particulars
(i)In the audited balance sheet of [WRS] for the year ended 30th June 1994 the said sum of $325,000 was included as a liability of [WRS].
(ii)In the balance sheet for the year ended 30th June 1995 which contained a comparison with the balance sheet for 30th June 1994 the reduction was acknowledged by the below set out entry:

1995

1994

Loan WRS Ltd $125,000

$325,000

(iii)Such reduced sum was reflected in successive balance sheets of [WRS] in particular for the years 30th June 1999 to 2002 by an entry described inter alia as:
WRS (HK) Limited $125,000

(g)Notwithstanding that the payment was to be the credit of [Waste Recovery Co] the particulars of the payee of the said sum of $200,000 was authorised by Briggs and consented to by [Mr Lunt];
(h)[Mr Lunt] pleads further that [WRS] was under liability to make the payment and the payment was approved by [WRS] and its officers.

Mr Lunt also pleaded that WRS was estopped from now claiming that the sum of $200,000 was due and payable to it.
In reply, WRS pleaded out the terms of the 1991 Agreement and pleaded that there had been no variation, modification or waiver of any provision of it. WRS denied that the letter of 12 April 1995 was 'issued' and pleaded that it 'takes issue with the authenticity of the letter'. In par 10, WRS pleaded that:
10.1In relation to the letter dated 23 December 1992 ('the Letter of 23 December 1992') referred to in the Letter of 12 April 1995:
(i)The Plaintiff denies that the Letter of 23 December 1992 was issued on or close to 23 December 1992 or at all;
(ii)The Plaintiff denies that Essex Properties Pty Ltd issued the Letter of 23 December 1992; and
(iii)The Plaintiff takes issue with the authenticity of the Letter of 23 December 1992.
10.2In relation to the letter dated 16 December 1992 ('the Letter of 16 December 1992') referred to in the Letter of 23 December 1992:
(i)The Plaintiff denies that the Letter of 16 December 1992 was issued close to 16 December 1992 or at all;
(ii)The Plaintiff denies that Essex Properties Pty Ltd ever received the Letter of 16 December 1992;
(iii)The Plaintiff denies that Essex Properties Pty Ltd ever agreed to the contents set out in the Letter of 16 December 1992; and
(iv)The Plaintiff takes issue with the authenticity of the Letter of 16 December 1992.
In unconventional form, WRS, apparently anticipating some evidence to be led by Mr Lunt, pleaded that:
10.3In relation to the waiver of pre‑emptive rights dated on or about 11 April 1995, the original of which is purported to be annexure WTL.1 to the affidavit of [Mr Lunt] sworn 20 February 2004 in these proceedings ('the Waiver'):
(i)[WRS] denies that all the shareholders of [WRS] signed the Waiver either in April 1995 or at all;
(ii)[WRS] denies that all the shareholders of [WRS] agreed to the matters set out in the Waiver;
(iii)[WRS] takes issue with the authenticity of the Waiver; and
(iv)By reason of the matters pleaded at paragraph 4 above, [WRS] was not obliged to pay the $200,000 the subject of this action either to WRS … or any other party.
The reply also pleaded that, up until 31 December 1996, Mr Lunt, Kevin Bond, or both, were responsible for preparation of the accounts and the information supplied to WRS's auditors and that Mr Lunt had possession of the records disclosing the payment of $200,000 and that, as a result, WRS was not in a position to assess the accuracy or validity of information provided by Mr Bond in relation to the payment of $200,000.

The conduct of the trial

The trial judge identified two main lines of defence raised by Mr Lunt. The first was whether 'Mr Briggs on behalf of Essex Properties' agreed that the loan of $325,000 created by cl 2.3(b) [of the 1991 Agreement] would no longer be subordinated'. His Honour referred to this as the alleged agreement to 'unsubordinate' the loan. The second line of defence was that Mr Briggs, on behalf of WRS, approved the payment of $200,000. The trial judge accepted that 'if Mr Briggs did approve the payment, Mr Lunt would have a complete defence' [100] (the 'authorisation' defence).

The alleged agreement to 'unsubordinate' the loan

As to the first line of defence, Mr Lunt's evidence was that in December 1992, Mr Briggs, on behalf of Essex, agreed that the loan of $325,000 referred to in the 1991 Agreement would no longer be subordinated. The trial judge noted that this had not been pleaded [49], but nevertheless determined the point. His Honour referred to the evidence in relation to it because the parties had conducted the trial on the basis that there was an issue as to whether or not there was such an agreement. Mr Briggs denied that he made any such agreement.
The trial judge found that there was no such agreement. His reasons on this point read as follows [51] ‑ [63]:
Mr Lunt contends that as at December 1992, neither Mr Briggs nor 'any of his entities', had paid him or his wife for any of the services rendered to the plaintiff since their engagement by the plaintiff. According to Mr Lunt, he instructed his solicitors, A R Mackinlay & Co, to commence an action against the plaintiff and Essex Properties. He said that in December 1992, Mackinlays sent a draft writ to Mr Briggs. However, no such document has been produced: nor was Mr Mackinlay called to give evidence about its preparation.
Mr Lunt then said that as a result of (unspecified) discussions between them, Mr Briggs gave him an undertaking that he would be paid from the first income of the plaintiff 'as a priority to all other calls': and that in consideration of his forbearance to sue, the subordinated loan of $325,000 was no longer to be subordinated. Mr Lunt said he caused WRSL to write to Mr Briggs to confirm their oral agreement.
The correspondence on which Mr Lunt relies is said to commence with a letter dated 20 September 1991 on WRSL letterhead, addressed to Essex Properties at Mr Briggs' home: not the address of that company as it appears on the 21 May agreement. The letter is as follows (TB 192):
We are very disappointed that we have not received the balance of monies owed to us in accord with our agreement put in place by your Solicitor Mr Michael Bowen and our legal representation [sic] in Australia Mr Alistair MacKinlay.
We now stress that this matter must be settled within the next 30 days otherwise Mr MacKinlay has instructions to proceed with legal action to recover our debt.
The letter bears the signature of Samantha Hong, under the name 'Corporate Directors Limited'. As far as I can tell from the photocopy letter in evidence, it was signed by the application of the stamp to which I have referred above (or a similar stamp). However, Mr Lunt's evidence was that he had nothing to do with the letter: it was 'generated by Samantha', who 'sent this letter down' (ts 476).
The next letter is dated 14 November 1999 (TB 193). It is in a similar form to that dated 20 September and appears to have been signed in the same way. It is as follows:
Attention Mr Peter Briggs
Dear Sirs
We refer to our discussion today and now confirm that we have paid Mr MacKinlay $71,000 in settlement of legal costs due to him as a consequence of our agreement dated 21 May 1991 and that this amount plus interest is to be added to your existing debt of $117,000 plus interest to make $188,000 plus interest as now due to us.
We acknowledge that you have an overseas transaction settling in the near future and that we will be paid from those proceeds.
There is then a further letter dated 14 November 1991 (TB 194):
We are now proceeding to litigation without further referral to you.
Then a letter dated 19 May 1992 (TB 195):
We are extremely concerned that you still have not settled your debt to us.
Your failure to honour your agreement leaves us in no other position but to commence legal proceedings.
A further letter dated 7 September 1992 (TB 196):
We refer to the discussion today in which you have given an unequivocal promise to settle your debt immediately and confirm that no action will be taken pending receipt of your remittance within 28 days.
And finally, a letter dated 16 December 1992 (TB 198):
This is to confirm our agreement today to drop proceedings against you on the clear understanding that immediately funds have been generated within WRS Pacific Ltd that Managing Director William T Lunt has instructions from you to pay us in full and with interest.
This undertaking is given by you and with your acknowledgment that we will be paid as a priority to all other calls upon the first income to be earned by the company and which includes staff, consultants, creditors and taxation.
Mr Lunt's evidence was that he had not applied the Samantha Hong signature stamp to the letters dated 20 September or 14 November 1991, but he thought he had applied it to the letters of 19 May (possibly) and 7 September 1992 (ts 476 - 478).
However, he did not believe he had stamped the letter dated 16 December 1992 'because at this time we were talking serious litigation' (ts 478). I do not understand that explanation.
I accept Mr Lunt's evidence to the effect that all of the above letters were prepared at his request. However, in the absence of evidence from Ms Hong (assuming she was the author) it is impossible to say when they were prepared or whether they were ever sent to Mr Briggs. He denies having received them and claims never to have dealt with anyone in Hong Kong. This is consistent with Mr Lunt's evidence, to which I have referred above, that it was he who had the discussions with Mr Briggs, leading to the agreement said to have been made between them.

The letter of 23 December 1992 apparently signed by Mr and Mrs Briggs

It is appropriate to interrupt the reasons to note that the trial judge then referred to a letter dated 23 December 1992 said to have been signed by Mr and Mrs Briggs. This has become important because of fresh evidence produced on this appeal which bears on the trial judge's findings concerning the letter. The reasons read [64] ‑ [72]:
On Mr Lunt's evidence, that agreement is acknowledged in a letter dated 23 December 1992, signed by Mr and Mrs Briggs as directors of Essex Properties. The letter is as follows (TB 199):
Essex Properties Pty Ltd
5 Ocean Court, City Beach 6015
23 December 1992
Waste Recovery Systems Ltd
12 Harcourt Road
HONG KONG
We accept the content of your letter dated 16th December 1992. Further, the loan which was previously subordinated of $325,000 to all other creditors now ranks equally.
The debt of $188,000 plus interest stand together with the aforementioned amount so that you are a priority ranking creditor due payment upon the completion and encashment of WRS Pacific Limited's first Letter of Credit from the sale of equipment.
Yours faithfully
The letter bears signatures which are said to be those of Mr and Mrs Briggs respectively, in each case, above the word 'Director'.
The letter in evidence is a poor quality photocopy. Mr and Mrs Briggs deny having signed any such document.
There are a number of features of this letter which cause me to doubt its authenticity. First, I would have expected Essex Properties to have a proper letterhead. The heading here is in the same font as the text. It does not contain a full address or include telephone or fax numbers. In any event, the address is that of Mr Briggs' residence. It is not the company's address.
Secondly, although the letter purports to be an acceptance of the contents of the letter dated 16 December 1992, it does not do so: the terms are different.
Thirdly, and in my view, most significantly, Mr Briggs was not, as at December 1992, a director of Essex Properties. He was disqualified from acting as a company director for five years from December 1987 to November 1994. I therefore think it unlikely he would have signed any document as a director during that period.
The handwriting experts to whose evidence I shall refer below, were unable to express an opinion as to the authenticity or otherwise of the signatures of Mr and Mrs Briggs. However, in the absence of any evidence as to the preparation of the letter dated 23 December 1992, or as to the circumstances in which it was signed, I am not persuaded that it is what it purports to be.
I accept the evidence of Mr and Mrs Briggs that they did not sign the letter, and that they did not see it until after these proceedings had been commenced.
The audited accounts of the plaintiff for the year ended 30 June 2004 show non-current loans of $325,000 for that year and the previous year. The accounts show also a subordinated loan of $848,734 in the 2004 year. This is said to represent a loan from a related entity which is interest free and not repayable until 30 June 2000.
I draw the inference, in the absence of any other explanation, that the non‑current loan of $325,000 is the subordinated loan created by cl 2.3 of the 21 May 1991 agreement. I do not understand why it was not referred to specifically as a subordinated loan, but that does not affect my conclusion: which is that there was no agreement between Mr Lunt and Mr Briggs in or about December 1992, to the effect that the $325,000 loan would be unsubordinated. The fact that the loan remained non-current in the 2003 ‑ 2004 financial year is inconsistent with any such agreement as alleged.
In relation to the 23 December 1992 letter, it will be noted that his Honour concluded that [69]:
[I]n the absence of any evidence as to the preparation of the letter dated 23 December 1992, or as to the circumstances in which it was signed, I am not persuaded that it is what it purports to be.
I accept the evidence of Mr and Mrs Briggs that they did not sign the letter, and that they did not see it until after these proceedings had been commenced.
The proceedings were commenced by a writ filed on 9 April 2001.

It may also be noted that his Honour said that the letter was not an acceptance of the contents of the letter dated 16 December 1992 but did not go on to deal with the legal significance of the letter of 23 December 1992 if he had concluded that it was a document signed by Mr and Mrs Briggs. The existence of the letter, if in fact signed by Mr and Mrs Briggs, would also have had relevance to the second line of defence and to the credibility of Mr and Mrs Briggs.

The authorisation of defence - Did Mr Briggs approve the payment of $200,000 to Waste Recovery Co?

As to the second line of defence, it is not necessary to go into the kind of detail which the trial judge set out in his reasons, but a brief statement is necessary about the transaction which provided funds to WRS so that there was money available to WRS so that Mr Lunt could authorise payment to Waste Recovery Co in reduction of the $325,000 loan. Without the transaction, there was no money available in WRS to make payment of $200,000.

The Latief/Kingsgate Transaction

Mr Lunt's evidence was that in 1995 a new investor, Mr Latief, through his company Kingsgate, entered into an agreement with ACT whereby Kingsgate bought some options which ACT held in WRS. (When WRS had issued these options is not mentioned in the reasons, but it is not necessary to say when this was because no issue was raised that there were such options.) Upon acquiring the options, the ACT/Kingsgate agreement obliged Kingsgate to exercise a certain number of them and to pay to WRS a sum of $200,000 in return for shares in WRS. Thus, WRS would have some 'funds' and, if Mr Lunt's letter of 16 December 1992 recorded an agreement between Mr Lunt on behalf of Waste Recovery Co and Mr Briggs on behalf of WRS and Essex, then Mr Lunt had, as the letter of 16 December 1992 stated,
instructions from you [ie Mr Briggs] to pay us in full and with interest … and with your acknowledgement that we will be paid as a priority to all other calls upon the first income to be earned by the company and which includes staff, consultants, creditors and taxation.
Mr Lunt obtained from Mr Latief a bank cheque for $200,000 made out to ACT. Although WRS had a Citibank account, Mr Lunt deposited the cheque into ACT's Bankwest account. He then drew a cheque on that account in the sum of $200,000 which he deposited in a new account which he opened at Bankwest for WRS. Mr Lunt was the sole signatory of that account. He then arranged to have $200,000 transferred from that Bankwest account to someone in Hong Kong. Mr Lunt flew to Hong Kong where a cash cheque was drawn by the Hong Kong payee and used by Mr Lunt to purchase a bank cheque made payable to himself. He then took the cheque to Singapore where he deposited it into an account in a Bankwest branch. He then transferred the money from that account to an account in the joint names of he and his wife at Bankwest Karrinyup. The transaction between Mr Lunt and Mr Latief/Kingsgate and the payment of $200,000 from Kingsgate to WRS and then to Waste Recovery Co, but not the movement of money through to Mr Lunt and his wife, will be referred to as the Latief/Kingsgate Transaction.
Mr Lunt advanced various reasons for these transactions which depended upon Mr Lunt's evidence that he thought that WRS did not have a bank account. The trial judge considered this explanation to be 'implausible' [108]. Mr Lunt said that he left a letter dated 10 April 1995 in Mr Briggs' letterbox confirming that Mr Latief had agreed to subscribe $200,000 to WRS to enable WRS to reduce its debt to Waste Recovery Co. The trial judge accepted Mr Briggs' evidence that he did not receive the letter.
This is the appropriate time to note that, in his evidence, Mr Briggs said that he only found out about the transaction at the end of 1997 or 1998 (ts 305 ‑ 306). He testified that, as at 19 June 1997, he was not aware that shares had been issued to Mr Latief (ts 355). He said he 'never knew about how … the transaction was conducted until 2000' (ts 371).

The waiver of pre‑emptive rights document

Mr Lunt also relied on a 'waiver of pre‑emptive rights' document dated 11 April 1995 (GAB 169) to show that Mr Briggs knew about the Latief transaction and approved the payment of the money from the exercise of the options by Kingsgate to Waste Recovery Co. This document is also the subject of fresh evidence on this appeal. The waiver document was prepared because a solicitor consulted by Mr Bond about the proposed transaction involving Mr Latief was of the view that 'in order to effect the transaction it would be necessary to issue new shares in the plaintiff and to obtain the agreement of each of the existing shareholders to the waiver of their pre‑emptive rights to purchase such shares. [The solicitor] thought that even if such waiver was not actually necessary, it would be prudent to obtain it' [80]. The trial judge observed that no such waiver was required because the pre‑emptive rights provision in the 1991 Agreement only applied to the transfer of fully paid ordinary shares. The transfer from ACT to Mr Latief's company, Kingsgate, was of options. Mr Lunt gave evidence that the 'waiver of pre‑emptive rights' document was signed by Mr and Mrs Briggs at the Briggs' home on 11 April 1995. He produced and tendered the document. It appeared to be signed by Mr Briggs and Mrs Briggs. Mr and Mrs Briggs denied that Mr Lunt came to their home as he claimed. They denied that they had signed the document. Forensic document examiners were called to give evidence about the signatures. His Honour referred to what he regarded as the unsatisfactory nature of Mr Lunt's evidence and the lack of any direct challenge to the evidence of Mr and Mrs Briggs that they did not sign the waiver of rights documents. His Honour concluded on the basis of that and some other evidence that:
I think it probable that the features of Mr and Mrs Briggs' disputed signatures identified by [one of the document examiners] as distinguishing them from genuine signatures are explicable on the basis that the disputed signatures are not genuine.
His Honour had regard to Mr Bond's evidence that he had seen the document 'in real time back in 1995' although he could not recall the exact date. His Honour said '[t]hat is not, of course, evidence that the document is genuine' [150]. His Honour said that he therefore placed no weight on the waiver of rights document.

The Essex Properties Letter dated 12 April 1995

Mr Lunt further relied upon a letter dated 12 April 1995 of Essex to Waste Recovery Co (the 'Essex Properties Letter') to show that Mr Briggs knew about, and approved, the Latief/Kingsgate Transaction. This letter is also the subject of fresh evidence. The Essex Properties Letter, which was apparently sealed with the company seal of Essex and signed by Mr Briggs and Mrs Briggs, read:
By letter dated 23 December 1992 we acknowledged our indebtness [sic] to you in the amount of $325,000.
We have not been able to settle the debt but William Trevor Lunt has now secured a fresh injection of capital into [WRS] that will allow [WRS] to remit the sum of A$200,000 to you leaving a balance of $125,000 as due to you.
Mr Lunt gave evidence that he went again to the home of Mr and Mrs Briggs and presented the letter to them and that he saw them sign it and apply the company seal. Mr and Mrs Briggs denied that this happened. Mr and Mrs Briggs gave evidence that they had not seen, and did not sign the Essex Properties Letter. The trial judge said that their evidence was not 'challenged directly in cross‑examination' [156]. The document examiners agreed that the photocopy of the document that they had seen was poor quality which did not permit the authenticity of the signatures to be determined. His Honour accepted the evidence of Mr and Mrs Briggs [161].

The fax dated 23 April 1995 and telephone call on 22 April 1995

Mr Lunt also relied upon a fax dated 23 April 1995 sent from the Shangri-La Hotel in Singapore. Mr Lunt said that this fax was sent to Mr Briggs' fax number at his home. It read:
Hi Pete
$200K has cleared OK. I'm on my way home to settle with banks. Thanks for all your help in arranging & agreeing payment to Lois & me. See you before ANZAC Day.
Best Regards
Trev
The fax also referred to copy documents 'attached', being a deed of assignment and a cheque. Mr Lunt testified that the deed of assignment document was one between Waste Recovery Co and Mr Lunt which referred to the payment of $200,000 and which provided for the assignment of the balance of the debt to $125,000 to Mr Lunt. According to Mr Lunt, the cheque referred to in the fax was the cheque he had banked into Bankwest which his Honour assumed was the cheque deposited at the Singapore branch of Bankwest. Mr Lunt's evidence was that, on 22 April 1995, he telephoned Mr Briggs at his home and told him he had successfully cashed and banked the $200,000 and transferred the balance of the debt of $125,000 to him. Mr Briggs denied receiving the fax or having a telephone conversation on 22 April 1995. The trial judge accepted Mr Briggs' evidence that he was not at home on 22 April to take the call from Mr Lunt and, while his Honour accepted that a fax was sent to Mr Briggs' home on 23 April, he did not accept that it comprised the 'Hi Pete' note and accompanying documents as Mr Lunt claimed [175] ‑ [176].

The trial judge's conclusion

The result of the evidence referred to above was that the trial judge found that Mr Briggs did not know of the 'April 1995 transaction' ie the transaction involving Mr Latief and the payment of $200,000 to Mr Lunt and 'did not approve it'. As a result, his Honour concluded that Mr Lunt acted improperly in transferring $200,000 of WRS's funds 'out of the Bankwest account to [Waste Recovery Co] and ultimately, to himself and his wife' [209] and entered judgment for WRS against Mr Lunt. Mr Lunt now appeals.

The grounds of appeal

There are 13 grounds of appeal. The first 11 grounds challenge various findings of fact made by the trial judge and ground 12 challenges an indemnity costs order that was made. However, it is necessary (for reasons which will appear later in these reasons) to begin with ground 13 which asserts that the discovery of fresh evidence by Mr Lunt reveals that there has been a miscarriage of justice.

Ground 13 - Fresh evidence - miscarriage of justice

The fresh evidence which Mr Lunt wished to adduce was evidence revealing that Mr Briggs did know about the 23 December 1992 letter, the Essex Properties Letter and the 'waiver of pre‑emptive rights' document before the commencement of the trial, that he had possession of them in early 1997, and produced them and showed them to two New Zealand men in early 1997 when he explained to them what the liabilities of WRS were in relation to a proposed transaction between WRS and Max Resources Ltd. The fresh evidence, if accepted, also reveals that Mr Briggs did know about the Latief/Kingsgate Transaction in early 1997 contrary to Mr Briggs' evidence that he did not know about the transaction until late 1997. If the fresh evidence that he produced the letters and document in early 1997 and knew about the Latief/Kingsgate transaction in early 1997 is accepted and if it had been adduced at trial, it would have impacted on his credibility.

Power of the Court of Appeal to receive fresh evidence

Appeals to this court are appeals by way of rehearing. Rule 47(3)(d) of the Supreme Court (Court of Appeal) Rules 2005 (WA) confers power in the court to make an order relating to the admission of additional evidence on an appeal. The rule does not contain any words limiting or governing the exercise of that discretion. This may be contrasted with the repealed O 63 r 10 of the Rules of the Supreme Court 1971 (WA) which conferred power on the Full Court to receive further evidence, but only on 'special grounds' and with the 'special leave' of the court: see the discussion in Goninan & Co Pty Ltd v Direct Engineering Services Pty Ltd [2007] WASCA 10; (2007) 33 WAR 182 [9]. Nevertheless, the discretion to admit fresh evidence must be exercised judicially. See de la Espriella‑Velasco v The Queen [2006] WASCA 31; (2006) 31 WAR 291.
The distinction between 'fresh' and 'new' evidence is discussed in Mickelberg v The Queen [2004] WASCA 145; (2004) 29 WAR 13. Fresh evidence is evidence which either did not exist at the time of the trial or which could not then with reasonable diligence, have been discovered: Mickelberg [411]. 'Fresh' evidence which satisfies the Court of Appeal that there is a 'significant possibility' that there would have been a different result if it had been adduced at trial will establish the existence of a miscarriage of justice: Mickelberg [416]. Mickelberg was a case dealing with a criminal appeal, but the propositions apply equally to applications to adduce fresh evidence in a civil appeal: Beaton v Psychologists Board of Western Australia [2008] WASCA 223 [35].

The discovery of fresh evidence

After the publication of the trial judge's reasons for judgment in favour of the respondent, Mr Lunt set about preparing for two other pieces of litigation which were due to come to trial in the Supreme Court before EM Heenan J in 2009. That trial eventually took place. See Lunt v Briggs [2009] WASC 134. In that case, it was necessary to investigate the circumstances of a transaction between a New Zealand company, Max Resources Ltd, and WRS. In early 1997, two directors of Max Resources, Mr Johnson and Mr McShane travelled to Western Australia to carry out due diligence in relation to the transaction. This involved them investigating the liabilities of WRS because the proposal was for Max Resources Ltd to purchase the shares in WRS.
In an affidavit sworn 9 October 2008 and filed in this appeal, Mr Lunt deposed that he made contact with Mr Johnson and Mr McShane for the purpose of proposed evidence in the trial of Lunt v Briggs. By this time, Templeman J's reasons in this case had been published and judgment entered. Mr Lunt said that during the course of his discussions with Mr Johnson, he discussed with him the trial of this action and the findings which had been made by the trial judge. Mr Johnson informed Mr Lunt that he had a recollection as to certain facts relevant to the present action and receiving from and viewing documents from Mr Briggs and that he had retained these documents following the completion of his due diligence in early 1997. Mr Lunt deposed that he was not aware until these conversations that Mr Johnson and Mr McShane were able to provide relevant evidence in relation to the current proceedings. He deposed that he was not aware of this evidence at the time of the trial of this action.
Exhibited to Mr Lunt's affidavit was an affidavit of Thomas William Johnson sworn 11 September 2008. This affidavit deposes that Mr Johnson was a director of Max Resources Ltd which was a public company listed on the New Zealand stock exchange when it received from Mr Briggs a proposal for Max Resources to purchase the WRS shares. Mr Johnson deposed that when he came to Perth it 'soon became apparent that WRS and Briggs owed significant sums of money to WRS employee [Mr Lunt]'. Mr Johnson had a copy of WRS's 1994 audited accounts and they recorded non‑current liabilities and in a note 8 a reference to non‑current loans as follows:
(i)Other loans $ 325,000
(ii)Other loans subordinated $ 848,734
$1,173,734
Mr Johnson said that in relation to item 1(i):
[W]e were given documents by Briggs which he said supported the unsubordinated nature of loan due to Lunt's company [Waste Recovery Co].
Mr Johnson annexed to his affidavit two copy letters given by Mr Briggs to support his advice to Mr Johnson and Mr McShane. They were marked 'TJ1' and 'TJ2'.
TJ1 was a photocopy of the 23 December 1992 letter. This was the letter Mr Briggs had said on oath to the trial judge in this case, that he did not sign and which he had not seen until after the proceedings currently under review had been commenced. If it were the case that Mr Briggs had given a copy of the letter to Mr Johnson and Mr McShane in early 1997, then Mr Briggs' evidence in this trial was false.
'TJ2' was the letter dated 12 April 1995 from Essex Properties Pty Ltd to Waste Recovery Co, sealed by Essex Properties Pty Ltd and which the trial judge in this case said appeared to be signed by Mr and Mrs Briggs. It was this letter that Mr Lunt said he presented to Mr and Mrs Briggs at their home on 12 April 1995 and which Mr and Mrs Briggs denied took place. Mr and Mrs Briggs denied that they had seen the letter. Mr Briggs said he had not seen it until 'after 2000'. At [161], the trial judge had accepted the evidence of Mr and Mrs Briggs that they had not seen the letter. If Mr Johnson's evidence be accepted, then Mr Briggs had this letter in his possession and produced a copy of it and treated it as authentic in early 1997.
Further, Mr Johnson in his affidavit said at par 16:
In respect of the unsubordinated loan of $325,000 in (i) above, we were advised by Briggs that a payment of $200,000 had been made against this debt in 1995 so that the balance debt was only $125,000. Briggs produced a number of documents in support of his statement. One such document was titled 'Waiver of Pre Emptive Rights'. Briggs produced the original of this document to satisfy us that the balance debt was only $125,000.
Annexed to Mr Johnson's affidavit and marked 'TJ5' was a copy of the original document provided to he and Mr McShane by Mr Briggs. 'TJ5' was the waiver of pre‑emptive rights documents in respect of which Mr Briggs gave evidence before this trial judge that it was 'definitely' not his signature and that it had not been signed in Mr Lunt's presence as he had claimed. If the evidence of Mr Johnson is correct, then the evidence of Mr Briggs that his signature had been forged was false. He would not have produced to Mr Johnson what he now says is a forged document in order to establish that WRS's liabilities had been reduced.
In addition, Mr Johnson's affidavit stated that:
Another document was the 1995 trial balance prepared by the then accountant of WRS, Kevin Bond. Briggs explained the increase in capital of $200,000 and the reduction in debt to [Waste Recovery Co] by that amount. Briggs went through the process which he said had been designed by the company's solicitor and accountant.
Annexed and marked 'TJ6' to Mr Johnson's affidavit was a copy of the trial balance which had been produced by Mr Briggs showing this to be so.
In addition, Mr Johnson deposed in his affidavit to the fact that Mr Briggs explained that the sum of $200,000 had been raised by Mr Lunt from Mr Latief and was by Mr Briggs' agreement used to reduce the debt due to Mr Lunt and his company. This evidence, if accepted, would provide powerful circumstantial evidence to support Mr Lunt's second line of defence.
Mr Lunt also relies on the affidavit of Mr McShane sworn 6 September 2008 as fresh evidence. Mr McShane deposed that he had read Mr Johnson's affidavit which was then in statement form and indorsed 'the general series of events as set out by him'.
Mr Lunt submits, in effect, that if the evidence of Mr Johnson and Mr McShane had been led at trial, there is a significant possibility that there would have been a different outcome. This is so because despite the fact that the trial judge said at one point in his reasons 'neither Mr Briggs nor Mr Lunt was a particularly satisfactory witness' and that his Honour did not place any greater weight on Mr Briggs' denials of any relevant knowledge of the payment than he did on Mr Lunt's assertions to the contrary [101], his Honour, at many points throughout the reasons, expressly accepted Mr Briggs' evidence of events as opposed to those of Mr Lunt: see for example, [70], [120], [161], [175] and [208].

The trial judge's supplementary reasons for decision

The trial judge's reasons for decision in New Resource Holdings Pty Ltd v Lunt [No 2] [2008] WASC 140 were delivered on 16 July 2008. The judgment was sealed on 23 July 2008. It was only after that occurred that Mr Lunt found out about the evidence that Mr Johnson could give concerning the case. Notwithstanding the fact that judgment had been sealed in July, an application was made by Mr Lunt on 25 August 2008 seeking to reopen this case in order to lead the evidence of Mr Johnson and Mr McShane. The trial judge published supplementary reasons: New Resource Holdings Pty Ltd v Lunt [No 3] [2008] WASC 221. In the supplementary reasons, the trial judge said [20]:
I came to the conclusion that it was unnecessary to consider the threshold criteria for the exercise of the discretion to reopen, because a reopening would not avail Mr Lunt: he really requires retrial. In my view, it would not be enough simply to call Messrs Johnson and McShane. It would be necessary for Mr Briggs to give further evidence.
In fact, a more significant reason why it was not possible to reopen was that the judgment had been sealed before the application was heard. That marked the end of the litigation: Burrell v The Queen [2008] HCA 34; (2008) 238 CLR 218.

The respondent's submissions concerning ground 13

The respondent made the following submissions in opposition to the admission of fresh evidence and in relation to ground 13 generally:
(a)The first submission was that because the appellant made the application to reopen the trial on the basis of the same material which is the subject of the present application and that because the application was dealt with and dismissed, the appellant is 'estopped by the principle of res judicata' from pursuing this ground and that the 'proper course would have been' to appeal against Templeman J's decision to dismiss the appellant's application to reopen the case.
(b)The second submission was that the appellant had not demonstrated that he had used due diligence to obtain the evidence for the trial in that he had not demonstrated why he could not have contacted Mr Johnson and Mr McShane before the trial.
(c)The third submission was that the evidence of Mr Johnson and Mr McShane goes only to credit because what Mr Johnson and Mr McShane gave evidence about went to what Mr Briggs knew in 1997, which was not relevant to his knowledge in 1995 when the payment was made; that in effect this was a collateral issue and that a party is not permitted to lead evidence relating to a collateral issue.
(d)The fourth submission was that the evidence of Mr Johnson and Mr McShane was not 'sufficiently strong enough to conclude that a trial judge would have reached the opposite result to that reached by the learned Trial Judge'.
(e)The final submission was that the evidence of Mr Johnson and Mr McShane did not affect Mrs Briggs' evidence.

The respondent's submissions concerning ground 13 - res judicata

As already mentioned, the trial judge in reality had no power to reopen the case because judgment had been sealed before the application was heard. Even if that had not been the case, his Honour's decision would have been an interlocutory decision. An appeal against a final judgment can correct an interlocutory order which affected the final order: see Gerlach v Clifton Bricks Pty Ltd [2002] HCA 22; (2002) 209 CLR 478.

Ground 13 - respondent's submissions that appellant did not demonstrate due diligence to obtain the evidence before trial

This submission was that the appellant had not demonstrated why he could not have contacted Messrs Johnson and McShane before the trial. The answer to that submission is that Mr Lunt gave uncontradicted evidence that he did not know that they could give evidence which was relevant in relation to this trial and there was nothing to suggest that he had any reason to make inquiry of them before the trial before Templeman J. Further, there was no application to cross‑examine Mr Lunt on this issue.

Ground 13 - respondent's submissions that the evidence of Mr Johnson and Mr McShane went only to credit

It is true that the evidence of Messrs Johnson and McShane had a potentially highly significant impact on Mr Briggs' credit. However, the evidence of Mr Johnson and Mr McShane does not go only to the collateral issue of credit. The 23 December 1992 letter and the Essex property letter dated 12 April 1995 were pleaded in the appellant's defence and, in the respondent's reply in relation to each document, the respondent pleaded that it took 'issue with the authenticity' of those letters. In effect, Mr Briggs said these letters were forgeries and both he and Mrs Briggs denied that they signed the letters. Not only did Mr Briggs say that the letters were forgeries, but he said that he had not seen them until the commencement of proceedings. Evidence about whether the letters were forgeries and evidence about whether Mr Briggs had ever seen the letters before the commencement of the trial were therefore central issues in the case and central to the main issue of whether or not Mr Briggs knew about, and therefore approved, the payment to Mr Lunt.
Mr Briggs also claimed that the waiver of pre‑emptive rights document was a forgery. Evidence about what Mr Briggs knew about the payment to Mr Lunt depended upon evidence about what he said he knew and circumstantial evidence from which an inference could be drawn about his state of knowledge. Circumstantial evidence can include retrospectant circumstantial evidence: see JD Heydon, Cross on Evidence (8th ed, 2010) [1170]. Subsequent evidence indicating a state of mind at one date may justify an inference that the state of mind previously existed. Thus, if Mr Briggs in 1997 produced the documents referred to above which he proffered as authentic documents then this event revealed that he knew about the payment to Mr Lunt in 1997 and left it open to infer that he knew about the payment when it occurred two years before.

Ground 13 - respondent's submissions - the evidence of Mr Johnson and Mr McShane not sufficiently strong

This submission is that the evidence of Mr Johnson and Mr McShane is not sufficiently strong to conclude that the trial judge would have reached the opposite result if he had the evidence before him. That is a matter of assertion only. The evidence of Mr Johnson and Mr McShane, if believed, is significant evidence which could have led the trial judge to reach the conclusion that Mr Briggs did know about, and approve of the payment to Mr Lunt.

Ground 13 - respondent's submissions - the evidence of Mr Johnson and Mr McShane did not affect Mrs Briggs' evidence

That submission is beside the point. That is contrary to the way the trial was fought. At [100], the trial judge said that he accepted that for practical purposes if Mr Briggs approved the payment, Mr Lunt would have a complete defence. The evidence of Mr Johnson and Mr McShane bears upon Mr Briggs' knowledge. The result is that none of the respondent's submissions should be accepted.

A miscarriage of justice occurred

In the opinion of the court, the evidence of Mr Johnson and Mr McShane is fresh evidence giving rise to a significant possibility that there would have been a different outcome if the fresh evidence had been available and led at trial. As a result, there has been a miscarriage of justice and ground 13 should be upheld. Judgment should be set aside and there should be a retrial.
It is only necessary to add that any observations made about the evidence of Mr Johnson and Mr McShane are only provisional observations. Their evidence has not been tested in cross‑examination and the final conclusion about the significance of their evidence will be a matter for the new trial judge.

Other grounds of appeal

It is not appropriate to deal with the first 12 grounds of appeal, which challenge findings of fact made by the trial judge. This is because all of the findings that were made were dependant upon the trial judge accepting the evidence of Mr and Mrs Briggs, rather than the evidence of Mr Lunt. The fresh evidence which has resulted in ground 13 being upheld and the order for a retrial means that the whole of the evidence including that of Mr Johnson and Mr McShane and the evidence of the witnesses who gave evidence at trial will have to be assessed in the retrial.

Conclusion

Ground 13 should be upheld. It is not appropriate to deal with grounds 1 to 12. The judgment of the trial judge should be set aside. There should be an order for a retrial.