Nadinic v Drinkwater

In *Nadinic v Drinkwater*, the New South Wales Court of Appeal considered an appeal from a decision of Pembroke J in the Equity Division. The dispute arose from a property development agreement and a subsequent Deed of Settlement between the two shareholders, Ms Drinkwater and Mr Nadinic. Ms Drinkwater had agreed to purchase Mr Nadinic's interest in the development but failed to pay the agreed purchase price. Ms Drinkwater alleged that she had been induced to enter into the agreement by Mr Nadinic's misleading and deceptive conduct. The primary judge found that Mr Nadinic had committed fraud and set aside part of the Deed of Settlement.

The Court of Appeal was required to determine whether the primary judge erred in finding fraud and in setting aside part of the Deed of Settlement. Specifically, the court considered the difference between fraud at common law and in equity, the obligation to plead fraud with specificity, and the extent to which a court can make findings of fraud that go beyond the case advanced at trial. The court also examined the principles governing rescission for fraudulent misrepresentation, including the requirement for *restitutio in integrum* and the basis on which orders may be made to achieve "practical justice".

The Court of Appeal allowed the appeal, finding that the primary judge had erred in making findings of fraud that were not adequately pleaded or put to Mr Nadinic in cross-examination. The court held that while fraud can unravel agreements, it must be properly established. The court noted that the primary judge's findings of fraud went beyond the case that had been advanced by Ms Drinkwater at trial, and that the obligation to confront a witness in cross-examination had not been met in relation to the allegations of fraud. Consequently, the court set aside the orders made by the primary judge and ordered a retrial.

The Court of Appeal ordered that the appeal be allowed, and the orders made on 9 December 2016 be set aside. The parties were referred to court-annexed mediation, with a deadline of 25 July 2017. Following mediation, the proceeding was remitted to the Equity Division for a new trial before a different judge, which would include determining the costs of the first trial. Ms Drinkwater was ordered to pay Mr Nadinic’s costs of the appeal, and her application for funds to be paid from the joint bank account was refused.