| JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA LOCATION : PERTH CITATION : MILLAR -v- KIDD [2013] WADC 144 CORAM : DAVIS DCJ HEARD : 4 SEPTEMBER 2013 DELIVERED : 4 SEPTEMBER 2013 FILE NO/S : CIV 2085 of 2011 BETWEEN : JEREMY JAMES MILLAR First Plaintiff
YOLANDA MILLAR
Second Plaintiff
AND
BLAINE DAVID KIDD
Second Defendant
Catchwords: Default judgment against second defendant - Trial of Assessment of Damages - Trial proceeding in absence of defendant - Principles re damages for breach of contract and fiduciary duty - Turns on own facts Legislation: Rules of the Supreme Court 1971 O 34 r 2
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Result: Plaintiffs' damages assessed at $407,205.61
Representation: Counsel:
First Plaintiff : Mr P G McGowan
Second Plaintiff : Mr P G McGowan
Second Defendant : No appearance
Solicitors:
First Plaintiff : WHL Legal Pty Ltd
Second Plaintiff : WHL Legal Pty Ltd
Second Defendant : Not applicable
Case(s) referred to in judgment(s):
Broadway Pty Ltd v Lewis [2012] WASC 373
Nocton v Lord Ashburton [1914] AC 932
O'Halloran v RT Thomas & Family Pty Ltd (1998) 45 NSWLR 262
Warman International Ltd v Dwyer (1995) 182 CLR 544
Wenham v Ella (1972) 127 CLR 454
Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 212 CLR 484
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1 DAVIS DCJ: This judgment was delivered extemporaneously on 4 September 2013 and edited from transcript.
2 On 7 May 2012, the plaintiffs in this action obtained default judgment against the second defendant, Mr Kidd, after he failed to file a defence. The terms of the judgment were that the second defendant do pay the plaintiffs' damages to be assessed and costs to be taxed if not agreed. 3 Orders were made on 11 March 2013 for a trial of the assessment of damages against Mr Kidd. The trial of the assessment of damages has been heard before me. 4 Mr Kidd, who is self-represented, did not attend the trial of assessment of damages today. I am satisfied from my review of the court file and from an email which Mr Kidd sent to the court on 1 September 2013 that Mr Kidd is aware of both the default judgment which has been obtained against him and the listing of this trial for the assessment of damages. 5 Order 34(2) of the Rules of the Supreme Court 1971 provides that if, when a trial is called on, one party does not appear the judge may proceed with a trial of the action in the absence of that party. 6 In the absence of Mr Kidd, I determined that the trial should proceed, rather than be adjourned. As I indicated at the commencement of the trial, I did so because I am satisfied that Mr Kidd has been provided with notice of the date of the trial, and he is aware of the implications for him if he fails to attend. He has, in fact, given an indication that he is not going to attend. I have also taken into account the plaintiffs' position and case management objectives which militate against adjourning the trial: see Broadway Pty Ltd v Lewis [2012] WASC 373 [33], [43] - [53]. 7 By way of background, these proceedings were commenced by writ of summons, endorsed with a statement of claim, filed on 24 June 2011. Mr Kidd entered an appearance by his then solicitor. 8 At a directions hearing on 30 September 2011 orders were made programming the action as between the plaintiffs and the first and fourth defendants. The third defendant appeared to be in liquidation at that stage and in relation to Mr Kidd, the second defendant, an application had been made by his solicitors for leave to cease acting for him. (Page 4)
9 An order declaring that the solicitors had ceased acting for Mr Kidd was made on 7 November 2011. 10 Notice was given of further directions hearings to Mr Kidd in person. He did not attend those directions hearings. 11 The plaintiffs' solicitors gave Mr Kidd more than one opportunity to file a defence in this matter. Annexed to an affidavit of David Williams, the plaintiffs' solicitor, sworn 26 April 2012, in support of the plaintiff's application for default judgment, there are copies of letters written by the plaintiffs' solicitors to Mr Kidd on 10 February 2012, 27 March 2012 and 28 March 2012. In each of these letters notice was given that if Mr Kidd did not file a defence, the plaintiffs would be seeking judgment. 12 No defence was filed and, accordingly, default judgment was entered against Mr Kidd on 7 May 2012. 13 By his failure to lodge a defence Mr Kidd has admitted the plaintiffs' claim, which as pleaded against him can be summarised as follows. 14 The first defendant, BDK (WA) Pty Ltd (BDK), has carried on the business of providing accounting and investment advice and services. At all material times Mr Kidd was a director of BDK: statement of claim pars 2 and 3. 15 The plaintiffs sought financial advice from BDK and in May 2007 met with Mr Kidd at BDK's offices in Subiaco, for the purpose of obtaining investment advice. The discussion at that meeting was in relation to the redevelopment of a property at Toodyay: statement of claim, pars 7 and 8. 16 In September 2007 the plaintiffs met with Mr Kidd again and during the course of that meeting Mr Kidd advised the plaintiffs that they should: (a) invest $250,000 towards the purchase and redevelopment of two properties located at 326 and 330 Churchill Avenue, Subiaco; and (b) invest $50,000 in the purchase of shares in a listed company, RIM Capital Limited: statement of claim, par 15. 17 In the course of the meeting Mr Kidd advised the plaintiffs to borrow the total of $300,000 required for these investments, against their home. He also made representations to the plaintiffs as to the cost to purchase and redevelop the Subiaco properties, the anticipated time it would take to develop the two Subiaco properties (approximately two years) and the (Page 5)
profit that the plaintiffs might expect to receive from both the redevelopment of these properties and their investment in RIM Capital Limited: statement of claim, pars 16 - 19. 18 Following Mr Kidd's advice, the plaintiffs borrowed $300,000 from their bank and then on the instruction of Mr Kidd, deposited that sum into the account of a company, Mabe (LB) Pty Ltd (Mabe). In making that payment the plaintiffs acted in reliance on representations made by Mr Kidd to the effect that they were making a payment towards the purchase and redevelopment of the Subiaco properties: statement of claim, pars 23 - 25. 19 Mr Kidd was a director of Mabe. However, Mabe was not the registered proprietor of the Subiaco properties. The registered proprietors of the two properties were two other companies, SBH (326) Pty Ltd (SBH 326) and SBH (330) Pty Ltd (SBH 330). The sole shareholder of those two companies was another company, No Cee Pty Ltd. At all material times Mr Kidd and another, Adam Lenegan, were the directors and only shareholders of No Cee Pty Ltd: statement of claim, pars 9 - 14, 24, 37 and 38. 20 Mr Kidd did not disclose to the plaintiffs the following: (a) his interest in SBH 326 and SBH 330 and that, in turn, he was to profit from the purchase and eventual sale of the Subiaco properties: statement of claim, par 20; and (b) that Mabe was not at the time of the September meeting the purchaser of the Subiaco properties, and that the payment of $250,000 made by the plaintiffs on the advice of Mr Kidd had not in fact been invested in those properties. Further the $50,000 which the plaintiffs had paid for the investment in RIM Capital Limited had also not been so invested: statement of claim, par 39. 21 Had the plaintiffs known that Mabe had no interest in the Subiaco properties and by paying the money into Mabe's account, the plaintiffs would acquire no interest in the Subiaco properties, they would not have paid the money into Mabe's account and would not otherwise have relied upon Mr Kidd's representations: statement of claim, par 42. 22 To the extent that the representations made by Mr Kidd constituted representations as to future matters, the representations are those for which neither Mr Kidd nor BDK had any reasonable grounds: statement of claim, par 43. (Page 6)
23 The plaintiff has suffered loss and damage as a result of a breach of the duties of Mr Kidd and BDK. While Mr Kidd and the company BDK were providing advice and services to the plaintiffs, both Mr Kidd and BDK owed fiduciary and contractual duties to the plaintiffs to: (a) act in good faith and in the best interests of the plaintiffs; (b) not use their position to gain an advantage for themselves or anyone else; and (c) disclose all facts and matters to the plaintiffs that were relevant to an investment decision: pars 44 - 46 of the statement of claim. 24 In breach of these obligations, Mr Kidd: (a) used his position to procure a benefit to himself from related parties without the prior knowledge and consent of the plaintiffs in breach of his fiduciary duty to them; (b) failed to act in the best interests of the plaintiffs in breach of his fiduciary duty to them; (c) failed to disclose all material facts relevant to an investment decision in breach of his contractual duty to the plaintiffs; and (d) failed to act in good faith towards the plaintiffs. These breaches are set out in par 47 of the statement of claim. 25 The plaintiffs' claim against Mr Kidd was for breach of contract and fiduciary duty and the specific relief or remedy sought in the statement of claim at par 48 were damages for breach of contract or equitable compensation for breach of fiduciary duty, as follows: 26 In relation to a claim for damages for breach of contract, the general principle is that damages should place the party who sustained the loss in (Page 7)
the position that he would have been in but for the breach, that is the position that the party would have been in if the contract had been performed: see Wenham v Ella (1972) 127 CLR 454, 471. 27 Compensation for a breach of fiduciary duty is assessed based on loss at the time of the trial with the full benefit of hindsight and commonsense: see Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 212 CLR 484 [35]. The objective of equitable compensation is to restore the plaintiff to the position it was in prior to the breaches and to make good any loss caused by the fiduciary's wrongful conduct: see Nocton v Lord Ashburton [1914] AC 932, 952 and O'Halloran v RT Thomas & Family Pty Ltd (1998) 45 NSWLR 262, 272 - 273. 28 Unlike common law damages, equitable compensation is not limited or influenced by principles of remoteness of damage, foreseeability or causation. However, there does have to be some causal connection between the breach of fiduciary obligation and the loss for which compensation is recoverable. It is necessary for the plaintiff to establish that the loss would not have occurred but for the breach: O'Halloran (275 - 276). The necessary inquiry is whether the loss would have happened had there been no breach, not whether the loss was caused by or flowed from the breach: O'Halloran (267 - 277). 29 The range of remedies for breach of fiduciary duty includes both equitable compensation and account of profits. However, those remedies are in the alternative. A plaintiff must elect between the remedy of equitable compensation and an account of profits: see Warman International Ltd v Dwyer (1995) 182 CLR 544, 558. 30 In support of the claim for loss and damage by the plaintiffs in this case, each of them has sworn and filed an affidavit, sworn 1 August 2013. At the trial I gave leave to the plaintiffs to adduce evidence at this trial by way of these affidavits and ordered that these affidavits stand as their evidence. 31 The affidavit sworn by each of the plaintiffs confirm that had Mr Kidd disclosed his personal interest in the Subiaco properties the plaintiffs would not have sought financial or investment advice from him or borrowed the sum of $300,000 against their property. 32 The only amount claimed by the plaintiffs in this trial is the total sum of $300,000 borrowed against the plaintiffs' property which was then transferred into the Mabe account, which has been dissipated, (Page 8)
together with interest charged and paid on that sum of $300,000. There is no claim for an account of profits. 33 The plaintiffs have provided copies of their bank statements setting out the interest on their bank loan. The claim for interest, which is supported by the documentary evidence from the bank statements, is a total sum of $107,205.61. 34 I am satisfied that the plaintiffs have suffered the loss and damage as claimed and that they are entitled to the total sum of $407,205.61 in accordance with the principles of contractual damage and equitable compensation as I have outlined above. 35 I therefore enter judgment for the plaintiffs against the second defendant in the total sum of $407,205.61.
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