Modern Office Concepts v Stewart
[2008] QDC 216
•13 June 2008
DISTRICT COURT OF QUEENSLAND
CITATION:
Modern Office Concepts v Stewart [2008] QDC 216
PARTIES:
Modern Office Concepts
(Applicant)
V
Robert Gordon Steward (Also known as Robert Gerard Stewart)
(Respondent)
FILE NO/S:
303/08
DIVISION:
Civil
PROCEEDING:
Application
ORIGINATING COURT:
District Court
DELIVERED ON:
13 June 2008, ex tempore
DELIVERED AT:
Southport
HEARING DATE:
12 June 2008
JUDGE:
Kingham DCJ
ORDER:
[1] Upon the plaintiff by its solicitors providing the usual undertaking as to damages, and until the claim is determined or until it is otherwise ordered by this Court, I maintain the orders that are set out in paragraphs 1A and B of the orders of his Honour Judge Wall.
[2] Secondly, counsel for the parties are directed to confer with a view to reaching agreement as to pre-trial directions.If they cannot agree, they have until 4 p.m. on Friday 20 June 2008 to provide me with written submissions about pre-trial directions which I will then determine.
[3] Thirdly, the parties have until 4 p.m. on Friday 20 June 2008 to make written submissions to me as to the costs of this hearing.
COUNSEL:
Mr G Senior for the applicant
Mr L Young for the respondent
SOLICITORS:
Corporate and Property Lawyers for the applicant
HW Litigation for the respondent
HER HONOUR: This is a judgment in the matter of Modern Office Concepts and Stewart.
Mr Stewart owns a Stutz sedan, a vintage motor vehicle, purchased in part using funds deducted from the cheque account of Modern Office Concepts, which I will refer to as MOC in these reasons.
MOC claims it is the victim of a fraud perpetrated by Mr Stewart. The fraud alleged is that Mr Stewart instructed Mr Dowden, a servant or agent of MOC, to pay $100,000 to a motor vehicle dealer towards the purchase of the vehicle. MOC claims damages for fraud and either a declaration that Mr Stewart holds the vehicle on trust for it, or that it is entitled to an account of the money supplied for its purchase.
On the 2nd of June 2008, on an ex parte application, his Honour Judge Wall made interim orders restraining dealings in the vehicle and adjourned the application for further hearing. MOC seeks an extension of the orders until the claim is determined and invited the Court to make directions for an expeditious hearing of the claim. Mr Stewart argues the order should be vacated.
He submits the only basis upon which the orders can be maintained is a Mareva order under rule 260A of the Uniform Civil Procedure Rules, and that the requirements for that type of order have not been fulfilled. MOC argues the orders were sought under rule 250 not rule 260A, and that the precondition to relief under rule 250 has been met, and the circumstances of this case support the exercise of the Court's discretion in its favour.
The argument about the application of rule 250 rests on the submission that the Court does not have jurisdiction to deal with a claim for declaratory relief alone. That is not controversial. However, MOC seeks both damages within the Court's jurisdiction and clarity relief and accordingly the claim is within the jurisdiction of the Court. The application for orders under rule 250 is a claim for interlocutory orders founded on a claim that is within this Court's jurisdiction.
Mr Stewart did not argue that if rule 250 does apply, the claim does not involve property about which a question may arise in a proceeding. It clearly does. MOC seeks to trace its funds to the vehicle and to recover the proportion of its value that its funds represent to its purchase price.
I am satisfied that I have the power to extent the orders pursuant to rule 250. The discretion invested in the Court by that rule is broadly expressed and it is not appropriate to curtail it by applying conditions not contained in the rule.
In determining whether to exercise the Court's discretion, I have had regard to the principles generally applicable to interlocutory injunctions, that is, whether there is a serious question to be tried and where the balance of convenience lies in the interim.
The latter, the balance of convenience, clearly weighs in favour of MOC. Lester Slater has deposed that a person he identified as Ray, an associate of Mr Stewart, spoke to him by telephone on Friday 30 May and told him that he wanted to remove the vehicle from Mr Slater's garage where it had been stored for a month awaiting repairs. Mr Stewart denied he gave anyone instructions to arrange to remove the Stutz, however, he has neither disavowed an intention to deal with it, nor has he given an undertaking not to deal with the vehicle pending the determination of these proceedings.
If Mr Stewart sells the vehicle, he will lay waste to the claim by MOC for a declaration of trust. The company will lose the opportunity to claim a proportionate share of any appreciation in its value.
On the other hand, Mr Stewart has not indicated any prejudice or even inconvenience if the orders are maintained. MOC has given an undertaking as to damages and has invited directions for an expeditious hearing. The balance of convenience weighs in its favour.
The other consideration I identified is some assessment of the claim made by MOC. To put the matter beyond doubt, I am not here applying the test that MOC must establish a prima facie case or cause of action, the test applicable to a freezing order under rule 260A. Rather, I have considered whether MOC has established there is a serious question to be tried as a factor in determining whether the order should be maintained. This is the test generally applied to interlocutory injunctions.
Whilst this necessarily involves some assessment of the merits of the case, the threshold is low. Mr Stewart complains of a lack of particularity in the pleading regarding the claim for damages for fraud. There are some deficiencies in the pleading.
Given the allegations made in the affidavit material, it is unclear whether MOC intended to assert that the misrepresentation by Mr Stewart was that he was the principal of Spector Trading, rather than of MOC. This should be clarified.
Further, the loss or damage suffered by MOC should be specifically pleaded. It must be said, however, that the claim for damages for fraud is not the claim to which the application for these orders relates. It is rather the claim for declaratory relief.
As to that claim, Mr Stewart complains that MOC has not expressly pleaded, nor does any person depose that the money paid towards the purchase of the vehicle was money to which that company was then entitled.
Counsel for MOC noted the material was drawn up in urgent circumstances and the pleading requires amendment. He also argued it was implicit in both the pleading and the affidavit material, that MOC was entitled to the disputed funds. That is certainly the tone of the material but it is not and should be explicitly pleaded.
The context of the disputed transaction is that a company, Spector Trading Pty Ltd, which sublet premises from MOC used the latter's EFTPOS facility to process customer payments. Liquidators were appointed to Spector Trading within a week prior to the disputed transaction. Mr Senior deposes that the use of the EFTPOS facility occurred during the relevant period without his consent.
There is some evidence that the practice predated the relevant period and was a commercial arrangement between MOC and Spector Trading, which involved payment of a commission to MOC for the use of the facility. Nevertheless, Mr Senior denies the disputed transaction was authorised.
Counsel for Mr Stewart relies on an affidavit by Mr Dowden sworn on 2 June, and filed on behalf of the plaintiff, which asserts that deposits of $548,763 were made to MOC's account, by what Mr Dowden described as, "Stewart's business activities", and that cheques to the value of $430,083 were drawn on that account and cashed and paid to a representative of Mr Stewart, the balance being comprised of rent to MOC and the disputed transaction.
On this evidence, I am invited to conclude that the particular funds employed in the disputed transaction were not the property of MOC. I cannot accept that submission on an interlocutory basis. In his first affidavit, Mr Dowden swore the transactions including the disputed transaction, were undertaken by him on Mr Stewart's instructions. Mr Dowden later swore an affidavit filed on behalf of Mr Stewart in which he withdrew the assertion that implicated Mr Stewart. His rationale for doing so, to clarify statements in his first affidavit, does not survive scrutiny and he has drawn his credit as a witness into question. If his testimony is set to one side, there is the documentary evidence annexed which demonstrates the source and destination of the funds.
There is neither an assertion by any other person nor any documentary evidence to establish that any other entity was entitled to those funds. Mr Stewart has not yet filed a defence but has filed an affidavit. He denies any involvement in, or knowledge of the withdrawal from MOC's account. He deposes to an agreement with a different company, Spector Holdings Pty Ltd. He stated that he worked for that company on a commission basis. He entered into an agreement with Spector Holdings for it to make a payment of $100,000 towards the purchase of the vehicle, $70,000 by way of outstanding commission and $30,000 by way of loan.
The distinction must be drawn between Spector Holdings and Spector Trading. This is one that Mr Stewart himself is careful to draw, perhaps because Spector Trading is itself in liquidation. There is no evidence of any arrangement between MOC and Spector Holdings for funds to be processed through MOC's EFTPOS facility.
In his second affidavit, if any reliance can be placed on it, Mr Dowden is clear that the arrangement to use the EFTPOS facility was with Spector Trading, and was adamant that it was Spector Trading which directed him to make the disputed payment. Whilst Mr Dowden speaks of various employees of Spector Trading, he does not identify them by name, nor does he produce the facsimile by which he says he was instructed to make the payment. Whilst Mr Stewart says he was aware that payments made to Spector Trading and/or Spector Holdings were made through MOC's EFTPOS facilities, this is only based on information from Mr Burroughs, a person to whom I will shortly return.
Mr Williams, the director, secretary and sole shareholder of Spector Trading, has no knowledge of the day to day operations of the company. His affidavit makes it clear he is a shadow director.
Two persons are identified by both Mr Williams and Mr Stewart as the effective controllers of Spector Trading. Mr Stewart also identifies them both as the effective controllers of Spector Holdings; they are Mr Hutchinson, who has apparently passed away, and Mr Burroughs who has curiously not sworn an affidavit in these proceedings.
I say this is curious because whilst Mr Williams says that he has tried without success to make contact with Mr Burroughs, both Mr Stewart and Mr Dowden depose to having conversed with him. The terms of Mr Stewart's affidavit suggest the conversation took place after February this year when the bank started to reverse in MOC's cheque account, certain customer payments that Mr Dowden referenced to Spector Trading. It was reasonable to infer that those customers persuaded the bank they had not authorised the payments.
As for Mr Dowden, if it is accepted that he spoke to Mr Burroughs, the conversation must have taken place after he swore his affidavit for MOC on the 2nd of June, and before he swore his affidavit for Mr Stewart in which he deposed to that conversation of the 11th of June. As much was conceded by Mr Stewart's counsel.
Another potential witness for Spector Trading is John Ford, whom Mr Dowden identifies as somebody involved in a managerial capacity. Mr Dowden said he talked with him in May 2008 about reversals in MOC's account. Mr Stewart also places him in a managerial role. Mr Ford has not sworn an affidavit in these proceedings.
Accordingly, in support of its claim is the implicit assertion by MOC of its right to the disputed funds, supported by bank statements and other documents showing that money was withdrawn from the company's account and applied to the purchase of the vehicle. Not Mr Stewart, not any representative of Spector Trading and not any representative of Spector Holdings asserts a right to the particular funds used, nor is there any documentary evidence proffered to sustain such a claim. As counsel for MOC observed, what is not said in the material filed by Mr Stewart is instructive.
In that context, some reference should also be made to the report to creditors by the liquidators appointed to Spector Trading. They express a suspicion that Mr Stewart is involved in Spector Trading and also in what they describe as Phoenix Activities. This involves an entity being established with another person as director to run the business. When investors raise questions about their returns, the entity is shut down and a new one created to run the same business. They recommended to ASIC that it conduct an investigation of this matter.
Of course, the liquidator's report is only an opinion and the basis for it is not fully established by the report. However, the liquidators are appointed for their expertise in investigating corporate dealings. Their view was formed after an inquiry into the affairs of Spector Trading on an interlocutory basis. I pay some heed to that report.
Finally, Mr Stewart led a bold attack against Mr Senior personally whom he accused of a lack of candour in material filed on the ex parte application. Mr Senior is the director of MOC and a practising solicitor. The accusations are grave ones to level against one who owes a professional duty to this Court.
Whilst it is true that a company search would have demonstrated who the registered director of Spector Trading was at the relevant time, it was clear from the outset that MOC asserted Mr Stewart was the effective controller of Spector Trading regardless of who was its registered director. Certainly, Mr Senior had conducted a real property search in April and knew Mr Stewart held an interest in property in the jurisdiction. However, MOC did not seek a freezing order against Mr Stewart's assets generally in order to ensure satisfaction of the judgment debt, rather it sought to secure a particular asset itself, the subject of the claim. The relevance of information about Mr Stewart's other assets is therefore tangential.
The only potential in material non disclosure relates to any pre-existing arrangement for Spector Trading to use MOC's EFTPOS facilities. A more comprehensive description of the relationship between the various entities may have filled out the picture but I am not persuaded it would have affected the outcome at the initial hearing. No-one has contested Mr Senior's deposition that he did not authorise either the disputed transaction or the use of the MOC EFTPOS facilities during the relevant period.
Given the overt assault upon Mr Senior's character, I observe; I see no foundation for it in the material filed thus far.
Upon the plaintiff by its solicitors providing the usual undertaking as to damages, and until the claim is determined or until it is otherwise ordered by this Court, I maintain the orders that are set out in paragraphs 1A and B of the orders of his Honour Judge Wall.
Secondly, counsel for the parties are directed to confer with a view to reaching agreement as to pre-trial directions. If they cannot agree, they have until 4 p.m. on Friday 20 June 2008 to provide me with written submissions about pre-trial directions which I will then determine.
Thirdly, the parties have until 4 p.m. on Friday 20 June 2008 to make written submissions to me as to the costs of this hearing.
Those are my orders.
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