Micro Minerals Pty Ltd v Grossberg
[1998] FCA 1795
•30 OCTOBER 1998
FEDERAL COURT OF AUSTRALIA
PARTNERSHIP – liability of firm for the wrongful act of partner – whether wrongful act committed in the ordinary course of the firm’s business – whether deposit of cheque was in the ordinary course of firm’s business – whether partner knew or ought to have known the firm received a third party’s cheque – rule in Clayton’s Case – whether rule applicable to withdrawals on the same day
Baker v Microdos (1996) 20 ACSR 148 mentioned
Consulere Design& Construction Pty Ltd v Hooker Corporation Ltd [1991] 2 VR 189 mentioned
Clayton’s Case (1816) 35 ER 781 applied
James v Oxley (1939) 61 CLR 433 discussed
National Commercial Banking Corporation of Australasia Ltd v Batty (1986) 160 CLR 251 applied
Pavey & Matthews Pty Ltd v Paul (1986-1987) 162 CLR 221 applied
Re Loteka Pty Ltd (in liq) [1990] 1 Qd.R. 322 mentioned
Re Selmar Pty Ltd (in liq) [1978] VR 531 mentioned
The Mecca [1897] AC 286 mentioned
MICRO MINERALS PTY LTD (IN LIQUIDATION) v EGON GROSSBERG and CAMILLE NAHAS
NG 3788 of 1996
FINKELSTEIN J
MELBOURNE
30 OCTOBER 1998
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
NG 3788 of 1996
BETWEEN: MICRO MINERALS PTY LTD (IN LIQUIDATION)
Applicant
AND: EGON GROSSBERG and CAMILLE NAHAS
Respondents
JUDGE:
FINKELSTEIN J
DATE OF ORDER:
30 OCTOBER 1998
WHERE MADE:
MELBOURNE
THE COURT ORDERS THAT:
The first respondent pay to the applicant the sum of $250,000 together with interest fixed at $---
The first respondent pay to the applicant one half of its costs of and incidental to the application.
The second respondent pay to the applicant the sum of $260.89 together with interest fixed at $---.
The applicant pay to the second respondent his costs of and incidental to the application.
The first respondent pay to the second respondent the sum of $260.89.
The first respondent pay to the second respondent the costs of and incidental to the claim for contribution.
Note: Settlement and entry of orders are dealt with in order 36 of the Federal Court Rules
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
NG 3788 of 1996
BETWEEN: MICRO MINERALS PTY LTD (IN LIQUIDATION)
Applicant
AND: EGON GROSSBERG and CAMILLE NAHAS
Respondents
JUDGE:
FINKELSTEIN J
DATE OF ORDER:
30 OCTOBER 1998
WHERE MADE:
MELBOURNE
REASONS FOR JUDGMENT
HIS HONOUR: The applicant (Micro Minerals) was the tenant of premises at Laverton, an outer industrial suburb, under a lease dated 30 June 1992. The lease was for a term of five years with options for two further terms of five years each. On 28 May 1996 Micro Minerals and its landlord, Transfloor Australia Pty Ltd (Transfloor), entered into an agreement (the license agreement) by which it was acknowledged that the lease had been lawfully terminated by Transfloor on 25 March 1996 and by which it was agreed that Micro Minerals would remain in occupation of the premises as licensee until 31 October 1996. The license agreement provided that upon the termination of the license Transfloor would pay $250,000 to Micro Minerals.
Micro Minerals was ordered to be wound up in insolvency on 26 September 1996. On 19 November 1996 Smorgon Consolidated Industries (Smorgon), at the direction of Mr Grossberg, the first respondent, drew a cheque in the sum of $250,000 made payable to Grossberg & Co Trust Account and sent it to Mr Grossberg in satisfaction of Transfloor’s obligations under the license agreement: Transfloor was a company controlled by Smorgon. The respondents maintained an account styled Grossberg & Co Trust Account with the National Australia Bank Ltd (NAB). The cheque was delivered to NAB who received the proceeds and paid them into the account. The money was then paid out of the account to or for the benefit of Mr Grossberg and companies and trusts controlled by him, and allegedly to Mr Nahas, the second respondent, who it was said received $16,500.
Micro Minerals sues to recover the $250,000. It alleges that the money payable under the license agreement was the property of Micro Minerals and that any disposition of it to the respondents was a void disposition of the property of the company by reason of s 468(1) of the Corporations Law. That sub-section provides:
“Any disposition of property of the company, other than an exempt disposition, and any transfer of shares or alteration in the status of the members of the company made after the commencement of the winding up by the Court is, unless the Court otherwise orders, void.”
Micro Minerals seeks an order that the respondents pay to it or to its liquidator $250,000 together with interest and costs.
The respondents defend the claim on different grounds. Mr Grossberg says that on 30 November 1991 or on 29 October 1993 Micro Minerals had granted a charge over the lease in favour of certain companies and trusts controlled by him and his wife and that, by application of the equitable principles of tracing, the sum of $250,000 payable under the license agreement belonged to the chargees and thus is not recoverable by Micro Minerals or by its liquidator as a void disposition under s 468(1). As an alternative argument Mr Grossberg contends that on 29 May 1996 Micro Minerals sold (and thereby assigned) its rights under the license agreement and when the respondents received the sum of $250,000 from Smorgon it was held by the respondents for and on behalf of the assignees.
Micro Minerals answers these allegations in the following way. It denies that it granted a charge over the lease but, in any case, says that the charge does not confer any interest in the $250,000. In relation to the assignment it says that it did not enter into an agreement to assign its rights under the license agreement before the company was wound up.
Mr Nahas puts his defence on a different basis. He says that although he was a member of Grossberg & Co at the time the $250,000 was paid into the firm’s trust account he is not liable to repay that amount because the payment of the money into the account and the payments made out of the account were not payments that were made with his knowledge or authority. Mr Nahas also says that if he is found to be liable to Micro Minerals then he is entitled to be indemnified by Mr Grossberg for the amount of that liability as well as for his costs of the proceeding.
First, it is convenient to deal with the existence and effect of the charge alleged to have been granted on 30 November 1991 or 29 October 1993 and then to turn to the existence of the alleged assignment. If Mr Grossberg is correct in his contention that, before the commencement of the winding-up, Micro Minerals either had granted a charge over the lease that resulted in the amount payable under the license agreement belonging in equity to the chargees or had assigned its rights under the agreement it is accepted that Micro Minerals cannot succeed in its claim. The parties were content to act on the assumption that s 468(1) only applies to property in respect of which Micro Minerals had a beneficial interest, that is property that would be available for distribution among its creditors and contributories: Baker v Microdos (1996) 20 ACSR 148 at 154 applying Re Loteka Pty Ltd (in liq) [1990] 1 Qd R 322 at 325. No argument was advanced that the sub-section might have application to the disposition of a legal interest in property even where that disposition is in favour of the beneficial owner: compare Re Selmar Pty Ltd (in liq) [1978] VR 531 where it was assumed that such a disposition would be caught by s 227(1) of the Companies Act 1961 (Vic), the antecedent of s 468(1).
The history of the allegation that Micro Minerals had charged its interest under the lease or that it had assigned its rights under the license agreement is not without significance for the purpose of determining whether the charge had been granted or whether an assignment had taken place and it is appropriate to trace that history in a little detail.
In early December 1996 the liquidator of Micro Minerals discovered that Smorgon had paid the sum of $250,000 due under the license agreement to Grossberg & Co. On 5 December 1996 the liquidator wrote to Mr Grossberg seeking information about the payment. He was not provided with any information and so on 24 December 1996 Micro Minerals made an ex parte application to and obtained an order from the Federal Court that the respondents be restrained from paying out of the Grossberg & Co trust account any money that had been received under the license agreement: as it turned out the money had by then been paid out of the account.
On 8 January 1997 Mr C Wykes, a partner of the liquidator, spoke to Mr Grossberg about the matter. Mr Wykes made a contemporaneous note of his conversation and the note has been tendered in evidence. According to Mr Wykes he told Mr Grossberg that it appeared that the money that Smorgon had paid to Grossberg & Co was the property of Micro Minerals. He requested that the amount be paid to the liquidator. Mr Grossberg said that one day after the license agreement had been entered into the agreement had been transferred to “related parties” in satisfaction of a lien and, accordingly, the $250,000 was not an asset of Micro Minerals and would not be paid to the liquidator. Mr Wykes asked Mr Grossberg to provide him with copies of the transfer documents but said that it was his view that any assignment was void as against the liquidator.
On the following day the liquidator wrote to Feingold Partners, Mr Grossberg’s solicitors. I infer from the contents of the letter and from the author’s reference noted on the letter that it had been drafted by Mr Wykes. The letter referred to the discussion of 8 January 1997 in the following terms:
“Mr Grossberg also represented that the ‘ownership’ of the license agreement and thus the $250,000 was transferred to a related party the day after the license agreement was entered into. This transfer was purported to be in satisfaction of the lien that the related parties held over the company but he would not provide further details other than to say that this was minuted in the company’s board of directors minutes. These minutes have not been forwarded to this office, or the purported ‘transfer of ownership’ documents and I request a copy of both documents.”
The liquidator was not provided with any minutes or other documents in response to this request or in response to the oral request for documents that had been made by Mr Wykes on the previous day.
Further investigations by the liquidator led him to form the view that the respondents had deliberately breached the restraining order made on 24 December 1996. Accordingly, on 16 April 1997 Micro Minerals moved for orders that the respondents be punished for contempt of court. The motion was supported by several affidavits sworn on behalf of Micro Minerals. It is not necessary to relate their contents. On 28 May 1997 Mr Grossberg filed his affidavit in reply. In that affidavit Mr Grossberg said in relation to the $250,000:
“4.On 19 November 1996, a cheque in the sum of $250,000 drawn on the account of Smorgon Consolidated Industries was received by me and paid into the Grossberg & Co trust account. At that time I believed, as I do now believe, that the whole of that $250,000 belonged to entities associated with me having been assigned or transferred or repaid by Micro Minerals to those entities in reduction of substantial advances which those entities had made to Micro Minerals.
5.At the time the License Agreement was negotiated, Micro Minerals intended to use the whole of the money payable to it under the License Agreement to repay part of the debts owing by it to Big Mountain Nominees Pty Ltd, Coussinet Pty Ltd, Brimscombe Management Pty Ltd and Fastlink Pty Ltd as trustee for the M Besser No. 1 Trust, being entities with which I or my wife are associated (“the Associated Entities”). At that time, that is to say, May 1996, Micro Minerals, the Associated Entities and I believed that Micro Minerals had assigned its rights to the $250,000 payable under the License Agreement to those Associated Entities …”
Mr Grossberg did not refer to or exhibit any document that evidenced or constituted the assignment or transfer of the license agreement or the assignment or transfer of the right to receive the $250,000 that was payable under that agreement.
The next relevant event is that on 25 July 1997 Micro Minerals sought and obtained an order that Mr Grossberg discover all documents upon which he had relied to form his belief, referred to in paragraphs 4 and 5 of his affidavit, that his “Associated Entities” were entitled to the proceeds of the cheque for $250,000.
Mr Grossberg filed a list of documents in compliance with this order on 15 August 1997. The list specifically identified the documents upon which Mr Grossberg had relied to form his belief as being certain (presently irrelevant) banking records and a document that was described as the minutes of a meeting of the directors of Micro Minerals held on 30 November, 1991. That document, which was subsequently inspected by the liquidator, is in the following terms:
“MICRO MINERALS PTY LTD
A C N 054 404 527
MINUTES OF MEETING OF DIRECTORS
HELD AT 1ST FLOOR, 12 CARTERS AVENUE, TOORAK
ON THE 30TH NOVEMBER 1991
PRESENT: Egon Grossberg
Greta Oviss
Camille Nahas
Peter GrossbergCHAIRMAN: It was resolved to appoint Egon Grossberg chairman of the meeting
RETENTION OF It was resolved that contracts and leases (including
ASSETS:lease on rental of premises) entered into the plant and equipment purchased with funds contributed to the company by the following individuals/entities:
Egon Grossberg
Greta Oviss
Peter GrossbergBella Grossberg
Jakrom Nominees Pty Ltd
Big Mountain Nominees Pty Ltd
Cheltenham Market Pty Ltd
M Besser No 1 Trustare to remain the property of each of the respective individuals/entities providing the funds and title will not be transferred to the company until such time as the funds are repaid in full
CLOSURE: There being no further business, the meeting was closed.
………………………..
EGON GROSSBERG
CHAIRMAN
It will be necessary to return to the contents of this document later but at present it is convenient to mention the following features. First, the document does not purport to be the original of the minutes of the meeting but merely a copy of those minutes: it is an unsigned document. Second, four persons are said to have been in attendance at the meeting in their capacity as directors. However, according to the records of the company that were filed with the Australian Securities Commission (ASC) three of those persons, Mr Grossberg, Ms Oviss (Mr Grossberg’s wife) and Mr Nahas, were not directors of the company in November 1991. The returns filed with the ASC show that the only directors of the company at that time were Mr R. McEwan and Mr T. Morobito, that Mr Nahas and Ms Oviss had been appointed directors on 12 November 1992 and that Mr Grossberg had been appointed on 2 September 1996.
It should also be noted that Mr Grossberg had not previously given these minutes to the liquidator of Micro Minerals notwithstanding that the liquidator had written to Mr Grossberg and to Grossberg & Co advising them of his appointment and requesting that he be provided with all of the books and records of the company: see s 474 of the Corporations Law.
Directions had been given on 12 July 1997 for the filing by the parties of affidavits and summaries of the evidence of the witnesses the parties intended to call at the trial and on 17 November 1997 for the filing of a court book which was to contain copies of the documents upon which the parties intended to rely.
Mr Grossberg filed his court book and a summary of his evidence on 1 April 1998. A copy of the minutes of the meeting of 30 November 1991 that had been discovered in the list of documents was included in the court book. So also was a copy of what purported to be a photocopy of the original minutes of a meeting of the directors of Micro Minerals held on 29 October 1993. Those minutes record the passing of a resolution concerning the “retention of assets” that is in all relevant respects the same as the “retention of assets” resolution recorded in the minutes of the meeting said to have been held on 30 November 1991. Mr Grossberg and Mr Nahas are the directors recorded as being in attendance at the meeting: it will be remembered that according to documents filed with the ASC Mr Grossberg was not then a director of the company. The document was signed by Mr Grossberg as a true record of the meeting.
In his summary of evidence, which was verified at the trial, Mr Grossberg explained that the resolution of 29 October 1993 was passed in order to provide security for further funds that had been advanced to Micro Minerals by his “Associated Entities”.
The liquidator had not previously been provided with the minutes of the meeting of 29 October 1993 and Mr Grossberg had not discovered them in his list of documents. The reason for this became clear at the trial. The minutes had been typed on 25 November 1997 on a word processor that belonged to Grossberg & Co. This was ascertained when it was noticed that at the foot of the page the minutes bear a reference code that is used to “call up” documents on the word processor. This code enabled the date of typing to be determined.
Mr Grossberg’s summary of evidence also dealt with the $250,000 payable under the license agreement. Mr Grossberg said that on 29 May 1996 the directors of Micro Minerals had resolved “to sell the rights under the license to Brimscombe Management Pty Ltd (Brimscombe) and G.J.M. Nominees Pty Ltd (GJM).” He said that this resolution was recorded in two minutes of meetings of the directors that were included in his court book. Mr Grossberg also said that on 29 May 1996 the directors of Brimscombe and GJM resolved to purchase the rights under the license agreement. The minutes of these meetings were also included in the court book.
With regard to the minutes of the meetings of the directors of Micro Minerals one was concerned with the sale of the license agreement to Brimscombe and the other dealt with the sale to GJM. The minutes record that Mr Grossberg and Mr Nahas were the directors who were present at the meetings and they are signed as a true record by Mr Grossberg. The relevant resolutions read:
“That the company sell the rights under the License Agreement dated 28 May 1996 with TRANSFLOOR AUSTRALIA PTY LTD for the nominal amount of $1 to [Brimscombe in one case and GJM in the other]
FURTHER RESOLVED that Tony Rogers of TRANSFLOOR AUSTRALIA PTY LTD be notified that a cheque for $250,000 be made to GROSSBERG & COMPANY Trust Account.”
These documents also have a reference code from which it was established that they had been typed on 25 November 1997.
The minutes for the meetings of the directors of Brimscombe and GJM state that the directors who were present were Mr Grossberg and his brother Peter. Both minutes were signed as a true record by Mr Grossberg. The minutes had also been typed on 25 November 1997. The relevant resolutions in these minutes are identical and read:
“That the company purchased the rights under the license agreement dated 28 May 1996 between TRANSFLOOR AUSTRALIA PTY LTD and MICRO MINERALS PTY LTD for the nominal amount of $1.
FURTHER RESOLVED that Tony Rogers of TRANSFLOOR AUSTRALIA PTY LTD be immediately notified that the funds to $250,000 be paid to the GROSSBERG AND COMPANY Trust Account.”
The minutes of the two meetings of the directors of Micro Minerals held on 29 May 1996 are curious in several respects quite apart from the fact that they had been typed on 25 November 1997, that is shortly after it had been ordered that the parties file a court book containing the documents to be tendered in evidence. First, it is by no means clear why the directors felt the need to hold two separate meetings to deal with the transfer of the rights under the license agreement. Second, if read literally, the minutes record that Micro Minerals had disposed of the same asset (the license agreement) to both Brimscombe and GJM.
Needless to say, the minutes of the meetings of 29 May 1996 had not been discovered in Mr Grossberg’s list of documents and copies had not been provided to the liquidator. The first occasion on which the liquidator was aware of the existence of these minutes was when a copy of the court book was served on the solicitors acting on behalf of Micro Minerals a few days before the trial commenced.
I have already mentioned that the minutes of the meetings of 29 October 1993 and 29 May 1996 had been typed on 25 November 1997. Initially Mr Grossberg’s evidence was to the effect that the minutes had been prepared at or around the time of the alleged meetings but when confronted with the fact that the word processor on which the minutes had been typed had not been purchased until early 1997 Mr Grossberg conceded that the minutes had only recently been typed. Mr Grossberg did say that the minutes had been typed from his hand written notes of the meetings and that those notes were made at the time of or shortly after the meetings. When asked to explain why he had not given his hand written notes to the liquidator Mr Grossberg said that he had not located them until March or April 1997. No explanation was given for the failure to discover the notes in the list of documents filed on 15 August 1997.
In re-examination Mr Grossberg was asked by his counsel to explain why in 1997 he had instructed his staff to type the minutes of the meetings of the directors of Micro Minerals that had been held in previous years. He said: “Well, basically we wanted to get all records on the computer so that we would be able to access minutes as and when we required them. And would also have identification on the minutes.”
With regard to this explanation two points might be made. First, Mr Grossberg did not instruct his staff to type the minutes of any meeting other than one that was concerned with the entitlement to the $250,000. Second, Mr Grossberg did not explain his need to maintain the records of a company that was in the process of being wound up.
At all events, as the trial progressed the issue of the minutes became even more complicated. It was on the first day that it had become apparent that the minutes bearing the reference code had been typed in 1997. On the second day of the trial, Mr Grossberg produced more versions of the minutes of the meetings held on 30 November 1991, 29 October 1993 and 29 May 1996.
With regard to the alleged meeting of 30 November 1991 two further versions of the minutes were produced. The first was substantially the same as the version that appears in the court book but was signed as a true record by Mr Grossberg. However, it had been typed on 25 November 1997. The second was also signed by Mr Grossberg as a true record but differs from the others in important respects. It is convenient to set out this document in full:
“MICRO MINERALS PTY LTD
ACN: 054 404 527
MINUTES OF MEETING OF DIRECTORS
HELD AT 1ST FLOOR, 12 CARTERS AVENUE, TOORAK
ON THE 30TH NOVEMBER 1991PRESENT: Egon Grossberg
Greta Oviss
Camille Nahas
Peter GrossbergCHAIRMAN: It was resolved to appoint Egon Grossberg Chairman of the meeting.
RETENTION OF
ASSETS: It was resolved that assets purchased and
capital improvements undertaken with funds
contributed to the company by the
following Individuals/Entities:
Egon Grossberg
Greta Oviss
Peter Grossberg
Bella Grossberg
Jakrom Nominees Pty Ltd
Big Mountain Nominees Pty Ltd
Cheltenham Market Pty Ltd
N Besser No. 1 Trustare to remain the property of each of the
respective Individuals/Entities providing
the funds and title will not be
transferred to the company until such time
as the funds are repaid to the
Individuals/Entities together with
Interest at a rate yet to be determined.
Pending such payment, the company will
only act as bailee of all such assets and
shall store and maintain the assets to the
satisfaction of the Individuals/Entities
contributing the funds for their purchase.
AGENT FOR
CONTRIBUTORS: It was further resolved that Big Mountain
Nominees Pty Ltd will act as Agent for:
Egon Grossberg
Greta Oviss
Peter Grossberg
Bella Grossberg
Jakrom Nominees Pty Ltd
Big Mountain Nominees Pty Ltd
Cheltenham Market Pty Ltd
N Besser No. 1 Trust
In all future dealings and transactions.
CLOSURE: There being no further business, the
meeting was closed.”
[signed]
EGON GROSSBERG
CHAIRMAN
First, it will be seen that these minutes record a resolution that does not appear in the other minutes. Second, the resolution concerning the “retention of assets” is materially different from the form of the resolution in the other minutes of the same meeting. Here the property the subject of the resolution is described as “assets purchased and capital improvements undertaken with funds contributed to the company by the [named] Individuals/ Entities”. This description does not include the “leases (including the lease on rental premises)” that are referred to in the other versions.
To complicate matters even further, Mr Grossberg then produced his hand written minutes of the meeting of 30 November 1991. These are in substantially the same terms as the minutes set out above but with one important difference. They do not record any person as having been present at the meeting. The minutes contain this notation: “Informed: EG [a reference to Mr Grossberg], GG [a reference to Mrs Grossberg] CN [a reference to Mr Nahas] & Peter G [a reference to Mr Grossberg’s brother].” When asked about these minutes Mr Grossberg said that the persons who were present at the meeting were himself, Mr McEwan, Mr Moribito, Mr Nahas and Mr P. Grossberg. A second hand written sheet was also produced. The notation at the top of this document reads “(Lease of Property left out in 1st minutes + any contracts)”. Below the notation is the following text:
“Micro
Minutes of Meeting of Directors
Held:- Toorak
Present:- same as 1st minute
Chairman = EG
Retention of Assets:- Resolved that contracts and leases
(including Lease on rental premises)
entered into, plant and equipment
purchased with funds contributed to
the co. by the following entities/individuals
(list as in 1st minutes)
are to remain the property of each
of the respective individuals/entities
providing the funds and title will
not be transferred to the co. until
such time as the funds are repaid
in full.EG”
In his evidence Mr Grossberg said of this document: “That was a subsequent minute. I left out the matter of the lease and therefore another minute was drawn up. But in any event, these matters were discussed at the meeting.”
In relation to the meeting purportedly held on 29 October 1993 Mr Grossberg produced his hand written notes of the resolutions said to have been passed. The notes are the same as the typed version of the minutes that appear in the court book.
Mr Grossberg also produced further minutes of the meeting of the directors of Micro Minerals said to have been held on 29 May 1996. One was a typed document signed as a true record by Mr Grossberg. In that document the resolution dealing with the sale of the rights under the license agreement is different from that contained in the version of the minutes in the court book. Here the resolution reads:
“That the company sell the rights under the license agreement dated 28 May 1996 with Transfloor Australia Pty Ltd for the nominal amount of $4 to:
(i)Coussinet Pty Ltd,
(ii)Big Mountain Nominees Pty Tld (sic),
(iii)Brimscombe Management Pty Ltd,
(iv)Fastlink Pty Ltd (ATFM Besser No. 1 Trust).”
It should be noted that the sale is for a consideration of $4, that there are four purchasers and that GJM is not one of them.
Mr Grossberg also produced five hand written minutes of the meetings of the directors of Micro Minerals dealing with the assignment of the license agreement. Each of these minutes records a resolution that Micro Minerals sell its rights under the license agreement for the nominal sum of $1. There is a different purchaser mentioned in each minute being each of the companies mentioned in the minutes where the rights are sold for $4 and one minute recording a sale to GJM. In his summary of evidence Mr Grossberg had only identified Brimscombe and GJM as the purchasers of the license agreement.
Mr Grossberg then produced hand written minutes of meetings of the directors of each of the five purchasers. The hand written minutes state the meetings took place on 29 May 1996 and that Mr and Mrs Grossberg and his brother Peter were the directors who were in attendance. In the case of each minute the relevant resolution is in the following terms:
“That the company purchase the rights under the agreement dated 28/5/96 between Transfloor Australia Pty Ltd and Micro Minerals Pty Ltd for the nominal amount of $1. Further resolved that Tony Rogers of Transfloor Australia Pty Ltd be immediately notified that the funds to [sic] $250,000 be paid to Grossberg & Co Trust A/c”.
Now there are two other aspects of these purported meetings that may be conveniently dealt with at this point. They concern whether Mr Nahas was a director of Micro Minerals in 1991 and 1996 and, if he was, whether he attended the meetings of the directors said to have been held on 30 November 1991 and 29 May 1996. It is also necessary to determine whether Mr Nahas attended a meeting of the directors of the company on 29 October 1993.
Mr Nahas’ case is that he was not appointed as a director of Micro Minerals until November 1992 and that in November 1991 the only directors of the company were Mr McEwan and Mr. Moribito as appears from the return lodged with the ASC. Mr Nahas says that he resigned as a director in 1995. He also says that he did not attend any meeting of the directors of Micro Minerals on 30 November 1991, 29 October 1993 or 29 May 1996.
Mr Nahas explained that in November 1992 he had been requested by Mr Grossberg to become a director of the company and in that capacity to act on behalf of Mr Grossberg. Mr Nahas said that he was told by Mr Grossberg that he, Mr Grossberg, was not willing to be a director of Micro Minerals because he was involved in a dispute with his bankers, Hong Kong and Shanghai Banking Corporation and Australia and New Zealand Banking Group Ltd. Mr Nahas agreed to the request whereupon he was appointed as a director. Mr Nahas said that he resigned that directorship in June 1995. With regard to the meetings of the directors said to have taken place on 30 November 1991, 29 October 1993 and 29 May 1996, Mr Nahas said that he attended no such meetings, that he did not know that they had taken place and that the matters purportedly resolved at those meetings had not been discussed with him.
Mr Grossberg disputed this evidence. He said that Mr Nahas had been appointed as a director of Micro Minerals immediately upon the establishment of the company. Mr Grossberg also said that initially he had been appointed as a director but that he had subsequently resigned because of his dispute with his bankers. He did not explain the circumstances in which Mr McEwan and Mr Moribito had been appointed as directors of Micro Minerals and how their directorships came to an end in November 1992.
There is some independent evidence that suggests that it was the intention of Mr Grossberg that both Mr Nahas and Mr Grossberg were to be appointed as directors of Micro Minerals from the time of its incorporation. Here, I refer to the hand written minutes of the meeting of directors of 30 November 1991. That document records that it was proposed to appoint Mr McEwan, Mr Moribito, Mr Nahas, Mrs Grossberg, Peter Grossberg and Mr Grossberg as the directors of the company and that Mr Grossberg was to be appointed as the company secretary. But there is no evidence to explain why, if this was the case, Micro Minerals had lodged a return that indicated that only Mr McEwan and Mr Moribito had been appointed as directors in 1991.
There can be no doubt that at some stage Mr Grossberg decided that he should not be a director of Micro Minerals. He agreed that he was involved in a dispute with his bankers. He explained that this dispute followed the collapse of the Hooker Corporation Ltd, a collapse that had resulted in Mr Grossberg suffering a loss of some $30 million. Mr Grossberg said the dispute with his bankers lasted for six years and was resolved in May 1996. Mr Grossberg said that after the dispute had been resolved he was appointed as a director of Micro Minerals in substitution for his wife. According to the records lodged with the ASC this occurred on 2 September 1996.
It is not an easy matter to determine whether Mr Grossberg was a director of Micro Minerals as at 30 November 1991. On the one hand there is his own testimony that it was intended that he be appointed and there is the hand written minutes of the meeting of 30 November 1991 which confirms this intention. I do not mean to imply that Mr Grossberg could have been appointed as a director at that meeting. After all what is recorded in the minutes is what purportedly transpired at a meeting of the directors of the company whereas the power to appoint a director ordinarily resides with the members.
On balance, however, I am not persuaded that Mr Grossberg was appointed as a director until 1996. First there is the notification to the ASC that in 1991 the only directors of Micro Minerals were Mr McEwan and Mr Moribito. Then there is the dispute between Mr Grossberg and his bankers that prevented him being appointed a director. Mr Grossberg says that the dispute commenced after the collapse of the Hooker Corporation and continued for 6 years until its resolution in May 1996. That dates the collapse as having occurred in 1990. This accords with my own recollection of what at the time was a notorious event: as counsel I was involved in litigation concerning the insolvency of Hooker Corporation: see also Consulere Design& Construction Pty Ltd v Hooker Corporation Ltd [1991] 2 VR 189, a case that arose out of the provisional liquidation of Hooker Corporation. Third, there is no evidence to show that the members of Micro Minerals resolved to appoint Mr Grossberg as a director in 1991. Finally, there is the absence of any evidence that in 1991 or 1992 Mr Grossberg carried out any duties as a director of the company. If he had been appointed as a director in 1991 then surely it would have been possible to produce some evidence to show that he had undertaken some activity in that capacity other than signing the various versions of the minutes of the meeting of 30 November 1991.
For much the same reasons I reject the contention that Mr Nahas was a director of Micro Minerals in 1991. It is true that Mr Nahas appears to have been appointed as a director in 1992 because Mr Grossberg was unwilling to act as a director and that was also the position that pertained in 1991. Nevertheless it appears to me that Mr Grossberg dealt with his unwillingness to be appointed as a director by the appointment of Messrs McEwan and Moribito. In that circumstance it was not necessary for Mr Nahas to be appointed as a director in 1991.
There is conflicting evidence as to whether Mr Nahas remained a director of the company after June 1995. In a document dated 12 December 1996 that was executed by Mr and Mrs Grossberg and Big Mountain Nominees it was acknowledged that Mr Nahas had “resigned as a director of Micro Minerals Pty Ltd in June 1995 [and that the signatories] failed to replace or remove him as required by the Corporations Law." Mr Grossberg said that this was a false acknowledgment made at the request of Mr Nahas. However, the evidence does show that after June 1995 Mr Nahas continued to act as a director of the company. He executed documents such as minutes of directors’ meetings, returns to the ASC and the license agreement in that capacity. Mr Nahas’ explanation that he had signed these documents without being cognisant of their contents and because they had been presented to him for signature by Mr Grossberg, whom he trusted, is not one that I accept. This is not to say that I reject the evidence of Mr Nahas that he had tendered his resignation in June 1995. But there is no doubt in my mind that Mr Nahas continued to act as a director thereafter and probably did so until late 1996.
Reaching the conclusion that neither Mr Grossberg nor Mr Nahas was a director of Micro Minerals on 30 November 1991 does not necessarily dispose of the possibility that, on that day, at a meeting of the appointed directors of the company, it was agreed that the company’s assets, notably its leases, be charged in favour of individuals and entities associated with Mr Grossberg as security for advances made or to be made by them to Micro Minerals.
Nevertheless, I am satisfied that no such meeting took place and I reject the evidence of Mr Grossberg that it did. First, there is the fact that there are three typed versions of the minutes of this meeting and each of them is different from the others. Two of them are signed as a true record yet that cannot be correct because of the significant differences in the terms of the “retention of assets” resolution: one version includes leases and the other is confined to “assets purchased and capital improvements undertaken”. Second, there is the inconsistency between the typed minutes in their various formulations and the evidence of Mr Grossberg concerning the directors of the company who were in attendance at the meeting. This inconsistency is aggravated by the fact that a fair reading of the hand written version of the minutes suggests that there were in fact no persons in attendance; that is to say there was no meeting at all.
Thirdly, I accept the evidence of Mr Nahas that he did not attend any meeting on 30 November 1991 although I should record that in certain other respects Mr Nahas did not present as a completely honest witness. One reason why I accept his evidence concerning this particular meeting, and for that matter his evidence that is to the same effect in relation to the meeting of 29 October 1993, is because his evidence does not assist his cause. If he had supported the evidence of Mr Grossberg that these meetings had taken place it would have been open to Mr Nahas to defend the claim on the same basis as Mr Grossberg seeks to defend the claim against him
Finally, there is the failure by Mr Grossberg to call his brother, Peter Grossberg, or Messrs McEwan and Moribito to give evidence on this subject: it was not suggested that any of them was unable to give evidence. I infer from the failure to call any of these persons that, if called, they would not have given evidence that would have assisted Mr Grossberg’s case.
In the result I have been left with the very clear impression that what has occurred with regard to the minutes of the purported meeting of 30 November 1991 is that Mr Grossberg took it upon himself to draft those minutes for the purpose of recording what he regarded as the appropriate resolutions of the directors and that it was of no consequence to Mr Grossberg that no such meeting had taken place.
I am bound to say that this is not an unusual occurrence in the case of private companies. Very often minutes of meetings of directors are prepared notwithstanding that no such meetings took place merely to satisfy the legal requirement that such documents should be in existence. Sometimes the minutes are a true reflection of the “mind” of the company concerned and sometimes they are not. In this case, the minutes are merely a reflection of the “mind” of Mr Grossberg and not the “mind” of the company that was, at the relevant time, under the control of Mr McEwan and Mr Moribito.
I hold the same view concerning the meeting that allegedly was held on 29 October 1993, namely that there was no such meeting. Here the minutes record that only Mr Nahas and Mr Grossberg were present. On his own evidence Mr Grossberg could not have been a director of Micro Minerals in October 1993. So he could not have been involved in the passing of the resolution recorded in the minutes. Mr Nahas swore that he was not in attendance at any meeting on this day and, as I say, I accept his evidence on this aspect of the case. There being no other evidence that the appointed directors of the company had agreed to charge the company’s assets in favour of the persons mentioned in the minutes the allegation that certain associated entities had acquired an equitable interest in the money payable under the license agreement must fail.
Even if I had reached the conclusion that Micro Minerals had charged the “contracts and leases (including lease on rental premises)” in favour of the persons who contributed the funds for those contracts and leases, I do not accept that this would give any of those persons any entitlement in respect of the $250,000 payable under the license agreement.
In order to establish a proprietary right over the $250,000 it would need to be shown that this amount was a payment that was made to obtain a surrender of the lease: if it was it would be inequitable for Micro Minerals to contend that the amount received in exchange for the destruction (by surrender) of the charged property did not belong to the chargees.
Very little evidence was directed towards establishing the purpose of the payment. In his summary of evidence Mr Grossberg asserted that Transfloor wished to take possession of the demised premises and agreed to pay compensation to Micro Minerals if it agreed to surrender the lease. But this is inconsistent with the provisions of the license agreement. There it is recited that on 26 March 1996 Transfloor had re-entered the premises, presumably as a consequence of a breach or any alleged breach by Micro Minerals of its obligations under the lease being a failure to pay the rent due under the lease. By clause 2.3 of the license agreement, Transfloor agreed to waive the payment of all rental arrears. The recitals record that “a dispute arose between the licensor [Transfloor] and the licensee [Micro Minerals] in relation to the termination of the Lease by the licensor” and that the license agreement was entered into in settlement of that dispute. One aspect of the dispute that was settled was whether Transfloor had lawfully terminated the lease when it had re-entered the demised premises on 25 May 1996. The settlement required Micro Minerals to acknowledge and agree that the lease had been lawfully (that is with cause) terminated. The acknowledgment is found in clause 2.1 of the license agreement. These provisions contradict the assertion that the sum of $250,000 was payable for a surrender of the lease. Further, the license agreement provided that this sum was payable “in full and final settlement of all actions, suits, costs, expenses, demands and damages which [Micro Minerals] may at any time have or may bring or claim or but for the execution of [the license agreement] may have been brought made or claimed against [Transfloor] by reason of or in respect of any matter howsoever arising from the Lease.” The nature of these potential actions, suits, demands etc. was not explained in any way. It is probably safe to assume that one of the potential claims that was in contemplation was a claim for damages consequent upon an alleged wrongful termination of the lease such as a claim in trespass or a claim for breach of the covenant of quiet enjoyment contained in the lease. But other potential actions might also have been compromised. Accordingly, even if the sum of $250,000 was paid in part to obtain a surrender of the lease it is not possible to say what proportion of the $250,000 represented a payment for the surrender and therefore it is not possible to determine what amount should be treated as the property of the chargees.
Let me now turn to consider whether there was a meeting held on 29 May 1996 where the directors of Micro Minerals resolved to sell the rights under the license agreement. I do not mean to imply that if such a meeting had been held the mere passing of the resolution would have resulted in a binding contract for sale between vendor and purchasers. If the directors of Micro Minerals had resolved to sell the company’s rights under the license agreement it would still need to be established that an agreement for sale was entered into in pursuance of the authority given to the directors. I should also point out that if the directors had resolved to sell the rights under the license agreement there is little evidence to show that a sale agreement was entered into. For example, there is no evidence to show that the nominal consideration (up to $5) was ever paid and I assume that it was not. If the resolution was passed I suppose it would be possible to conclude that the agreement might have been effected (that is an offer made and accepted) through the medium of Mr Grossberg acting on behalf of both the vendor and the purchasers.
Mr Grossberg says that two directors of Micro Minerals, himself and Mr Nahas, agreed that the rights under the license agreement be sold. The various versions of the minutes of the meeting said to have taken place on 29 May 1996 assert that Mr Grossberg and Mr Nahas were the directors who were present at the meeting. However, it will be recalled that Mr Nahas’ evidence was that he has resigned as a director in 1995 and this was acknowledged in writing by Mr Grossberg although, as I have found, he did continue to act as a director thereafter. More importantly, however, the records filed with the ASC show that Mr Grossberg was not appointed as a director until 2 September 1996. Mr Grossberg sought to overcome this apparent difficulty with the proposition that notwithstanding the contents of the documents filed with the ASC he had nevertheless been appointed in May 1996 around the time he had settled his dispute with the banks. He said that there was a delay in the filing of the documents showing his appointment. When asked precisely when it was he had settled his dispute with the banks Mr Grossberg said that the settlement was recorded in signed terms of settlement and that his solicitors were aware of the precise date. Yet the terms of settlement were not produced and Mr Grossberg’s solicitors did not give evidence establishing the date of settlement.
On the basis of this evidence, or the lack of it, I am not able to find that Mr Grossberg was a director of Micro Minerals as at 29 May 1996. The failure to call evidence establishing the precise date of the settlement of the dispute with the banks and the failure to call evidence from any of the members of Micro Minerals concerning the appointment of Mr Grossberg as a director are factors that lead me to the conclusion that he had not been appointed as a director by 29 May 1996. The somewhat vague evidence given by Mr Grossberg concerning the precise time of his appointment is not sufficient to displace the evidence to be gathered from the published records of the company that he had been appointed on 2 September 1996.
In any event there are other curious aspects of the purported agreement to sell the rights under the license agreement that I should mention. Mr Grossberg produced a letter said to have been sent to Smorgon on 4 June 1996 directing it to pay the $250,000 to Grossberg & Co. The letter is addressed to Mr T Rogers and reads:
“Dear Sir,
Re: License Agreement
Please make payable the $250,000 License fee to Grossberg & Co Trust Account. Should you have any difficulties with regard to the charge from Micro Minerals please contact Mr E Grossberg, secretary of Micro Minerals P/L.
Yours faithfully,
…………
Egon Grossberg”
It should be noticed that in this letter Mr Grossberg describes himself as the secretary not as a director of Micro Minerals. This tends to confirm that he had not been appointed a director by 29 May 1996.
Further, Mr Grossberg said that Mr Rogers misplaced this letter and, as a result, a copy of it was sent to Mr M Fox, Group Manager, Property Development of Smorgon on 12 November 1996. It was as a consequence of sending this copy of the letter that the cheque for $250,000 payable to the Grossberg & Co Trust Account was sent to Mr Grossberg.
However, I have considerable doubt whether the letter that was sent on 12 November 1996 was a copy of a letter that had been sent on 4 June 1996. The letter dated 4 June 1996 was sent to Mr Fox on 12 November 1996 as a consequence of conversations between Mr Fox and Mr Grossberg that occurred sometime shortly before 6 November 1996. On 6 November 1996 Mr Fox wrote to Mr Grossberg summarising those conversations. The relevant parts of the letter read as follows:
“We refer to our various telephone conversations and advise the license agreement expired on 31 October 1996.
In accordance with the agreement a cheque will be delivered for $250,000 to Microminerals Pty Ltd. However, as per your request if we receive a written request from you on Microminerals Pty Ltd letterhead we will have the cheque made out to Grossberg & Co Trust Account (subject to Financial Controller’s approval).”
I do not read these paragraphs as a statement by Mr Fox that he be provided with a copy of the letter that had previously been sent to Transfloor or to Mr Rogers. To my mind the letter records a request by Mr Grossberg that the amount payable under the license agreement be paid to the Grossberg & Co Trust Account and the response of Smorgon that it will act on that request if provided with an instruction from Micro Minerals the company to whom the amount would otherwise be payable.
This tends to suggest that the letter which is dated 4 June 1996 (being a date that precedes the winding-up of Micro Minerals) was first written sometime between 6 November and 12 November 1996. However, it is not necessary for me to reach any concluded view on this matter.
The reason is that I am of the clear view that there was no meeting of the directors of Micro Minerals held on 29 May 1996 as has been alleged is that Mr Nahas said that he did not attend any such meeting and I accept his evidence as truthful. Further, if Mr Grossberg had attended any such meeting and voted in favour of the resolution he was not a director of the company at the time and his vote would be of no consequence. Accordingly, I do not accept that the various minutes of this purported meeting that were produced by Mr Grossberg can be relied upon to establish that the meeting had in fact occurred.
It follows that the $250,000 received into the trust account of Grossberg & Co was the property of Micro Minerals and is recoverable by it in a claim for money had and received or, perhaps more correctly, in a claim for restitution: Pavey & Matthews Pty Ltd v Paul (1986-1987) 162 CLR 221. Against whom is this claim maintainable? Is it maintainable against both respondents? For his part, Mr Grossberg does not contest that, there being findings that the lease had not been charged to his “individuals/entities” referred to in the minutes of 30 November 1991 and that the rights under the license agreement had not been assigned, he is liable in the amount claimed. The issue that requires resolution is whether Mr Nahas is also liable to suffer a judgment in that amount.
There are three bases upon which it might be said that Mr Nahas is liable to repay the sum of $250,000 or some part of it to Micro Minerals. First, Mr Nahas and Mr Grossberg were partners in the firm Grossberg & Co and if Mr Grossberg was acting in the ordinary course of the business of the practice in depositing the cheque in the Grossberg & Co Trust Account, Mr Nahas, as his partner, would be liable to repay to Micro Minerals the amount deposited: see ss 9 and 13 of the Partnership Act 1958 (Vic). The second possible basis for liability arises if the money was received by Grossberg & Co otherwise than in the ordinary course of its business. In that event Mr Nahas would be liable if he knew or ought to have known that the money had been credited to the trust account: see generally National Commercial Banking Corporation of Australasia Ltd v Batty (1986) 160 CLR 251. Finally, if Mr Nahas personally received any part of the money then prima facie he would be liable to repay the amount that he had received.
It is convenient first to deal with the question whether Mr Nahas had personally received any part of the $250,000 rendering him liable to account for or make restitution of the amount so received.
The evidence establishes that after 19 November 1996, the day on which NAB had credited the $250,000 to the trust account, Mr Nahas drew three cheques totalling $16,500 from that account and received the proceeds of those cheques. The first was a cheque for $500 drawn on 28 November 1996, the second was a cheque for $10,000 drawn on 19 December 1996 and the third was a cheque for $6,000 drawn on 23 December 1996. To determine whether any of these amounts were paid out of the $250,000 I propose to apply the rule known as the rule in Clayton’s Case (1816) 35 ER 781, namely “first in, first out”. No other basis for determining whether Mr Nahas had received any of the money was put forward.
The account statements for the Grossberg & Co Trust Account are in evidence. They show the following: (a) that the account was in credit in the sum of $16,268.14 immediately before the deposit of the $250,000; (b) that between 19 November 1996 and 27 November 1996 further amounts totalling $65,451.57 were deposited into the account; (c) that between 19 November 1996 and 27 November 1996 amounts totalling $251,574,122 were paid out of the account; and (d) that on 28 November 1996 amounts totalling $28,160.80, including the sum of $500 that found its way to Mr Nahas, were paid out of the account.
Applying the rule in Clayton’s Case not all of the $250,000 had been withdrawn by the end of 27 November 1996: there still remained $14,693.92. If the account statements were followed literally this balance would have been eliminated before Mr Nahas received his $500 on 28 November 1996. But it is not permissable to apply the rule in Clayton’s Case to transactions entered in a bank account on the same day: see The Mecca [1897] AC 286 at 291. The amounts paid out must be treated as reducing the balance rateably. On this basis Mr Nahas received $260.89 and it is this sum that he must repay to Micro Minerals.
On 12 December 1996, Mr Grossberg and others agreed to indemnify Mr Nahas “from all claims, suits actions of any nature whatsoever arising form (sic) or relating to Micro Minerals”. The present proceeding brought by Micro Minerals against Mr Nahas is a claim “relating to” Micro Minerals. Mr Grossberg did not argue to the contrary. Accordingly, Mr Grossberg is liable to indemnify Mr Nahas in relation to the judgment for the sum of $260.89 that will be entered against him.
I can now turn to the issue whether the $250,000 was deposited in the ordinary course of the business of Grossberg & Co. The firm conducted an accountancy practice. It had been established by Mr Grossberg’s father in the 1950s and Mr Grossberg joined the firm in 1968. Mr Nahas became a member of the firm in either 1982 (according to his evidence) or in 1987 (according to Mr Grossberg). The partnership was dissolved on 9 January 1997 upon the resignation of Mr Nahas.
According to the evidence the Grossberg & Co Trust Account was maintained for two principal purposes. First, it was used to receive, on behalf of clients of the firm, refunds of income tax from the Australian Taxation Office. This money, after the deduction of fees due to the firm, was paid to the client on whose behalf the money had been received. The second use to which the trust account was put was to receive money from clients that was to be utilised for the purpose of paying fees and disbursements such as ASC filing fees and the like. These fees were paid out of the account. Mr Nahas said that from time to time money in the trust account was applied towards payment of the expenses of the firm. I take this to mean that, on occasion, cheques were drawn on the trust account to meet the firm’s expenses and that the amount of those cheques represented fees due to the firm being fees that had not been transferred from the trust account into the firm’s private account.
On the evidence it is beyond argument that the depositing of the $250,000 was outside Mr Grossberg's authority as a partner. He had no authority from the firm to collect the proceeds of a cheque that belonged to either Micro Minerals or, if it be relevant, to the chargees of the lease or the assignees of the rights under the license agreement. Nor was it in the ordinary course of the business of the firm to collect money on behalf of other persons unless that money was being collected in the course of some work or services that were being performed on behalf of those persons as clients. The fact is that $250,000 was received into the trust account upon the direction of Mr Grossberg and the receipt was unrelated to any professional activity of the firm.
The final basis upon which liability might be founded is if it could be shown that at any stage before the $250,000 was paid out of the trust account Mr Nahas knew, or there were circumstances whereby he ought to have known, that the deposit had been made. As Dixon J explained in James v Oxley (1939) 61 CLR 433 at 456:
“The explanation of the introduction into the question of the element of ‘means of knowledge’ may lie in the peculiarity of the position of partners in relation to a partnership bank account upon which each partner may be empowered to draw by himself. In substance, money, though temporarily there, may never be in the actual de facto control of any member of the firm except a fraudulent partner. He may pay a cheque to the credit of the account and immediately draw against it. In some circumstances the technical ‘receipt’ by the firm may be considered as insufficient to make payment into the account a receipt to the use of the plaintiff unless the other partners knew or ought to have known of the credit and of its nature. In the same way, if an agent who operates on his principal’s account free of his actual control or supervision pays in money fraudulently obtained from a stranger and forthwith draws it out again, the principal may be regarded as never having really received it to the use of the stranger unless he knew or ought to have known of its presence before it was withdrawn.”
Accordingly, if Mr Nahas knew or ought to have known that he had the possession or control of the money before it was paid out of the account, he will be liable to Micro Minerals for its return.
As to whether Mr Nahas knew of the credit his evidence was that he first became aware of the deposit in February 1997. Mr Nahas did say that he had looked at the account statements for the month of November 1996 sometime in December 1996 but that he did not notice the deposit of $250,000 at that time. Even if he had, the true question is whether Mr Nahas was aware that the cheque had been deposited before the money had been paid out of the account, that is before 27 November 1996 and the account statements had not been received at that time.
Interestingly Mr Grossberg did not give evidence that he had informed Mr Nahas that the money had been paid into the account. Of course, if, on 29 May 1996, Mr Grossberg and Mr Nahas had resolved to sell the rights under the license agreement and to request Transfloor to pay the $250,000 to the Grossberg & Co Trust Account then Mr Nahas would not be able to say that he was unaware of the receipt of the money. However, I have already rejected the evidence of Mr Grossberg that such a resolution was passed. I also reject the evidence of Mr Grossberg that he had discussed the matter with Mr Nahas at any stage before the receipt of the money. There being no other evidence from which it could be inferred that Mr Nahas knew of the payment the only conclusion that I am able to reach is that he did not in fact know that the $250,000 had been received into the Grossberg & Co Trust Account.
Finally, there is no basis for concluding that between 19 November 1996 and 27 November 1996 Mr Nahas ought to have discovered that the money had been paid into the account. It is true that Mr Nahas was a signatory to the account and from time to time drew cheques on the account as part of his duties as a partner in the firm. But, there is nothing in the evidence to suggest that there were circumstances in existence during the period 19 November 1996 to 27 November 1996 that imposed an obligation on Mr Nahas to enquire whether the money had been deposited into the account. That is to say, there is no basis upon which it might be said that Mr Nahas ought to have known of the existence of the deposit.
Accordingly, there will be judgment against Mr Grossberg for the sum of $250,000 together with interest and costs. As against Mr Nahas, Micro Minerals is entitled to recover $260.89 together with interest but Mr Nahas will be indemnified by Mr Grossberg for the amount of the judgment. However, Micro Minerals has in substance failed in its claim against Mr Nahas and he should be given his costs of the proceedings.
I certify that this and the preceding twenty-five (25) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein
Associate:
Dated: 30 October 1998
Counsel for the Applicant: Mr A Rodbard-Bean Solicitor for the Applicant: Ledlin Partners Counsel for the First Respondent: Mr S Anderson Solicitor for the First Respondent:
Feingold Partners Pty Ltd
Counsel for the Second Respondent:
Solicitor for the Second Respondent:
Mr FJ Holzer
Robert Hodgens
Date of Hearing: 6,7 and 8 April 1998 Date of Judgment: 30 October 1998
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