Naomi Marble & Granite P/L v FAI & All Risks Management P/L

IN THE SUPREME COURT
OF QUEENSLAND

Brisbane No.1053 of 1994

Before the Hon. Mr Justice Shepherdson

[Naomi Marble & Granite P/L v. FAI & All Risks Management P/L]

BETWEEN:

NAOMI MARBLE AND GRANITE PTY LTD
Plaintiff

AND:

FAI GENERAL INSURANCE COMPANY LIMITED
First Defendant

AND:

ALL RISKS MANAGEMENT PTY LTD
Second Defendant
REASONS FOR JUDGMENT - SHEPHERDSON J.

Judgment Delivered 4 April 1997

In its pleading in this action the plaintiff has claimed against the above defendants as follows:

Against the first defendant -
(a)$1,321,078.17 for damages for breach by the first defendant of an interim contract of insurance between the plaintiff and the first defendant;
(b)damages by way of compound interest on the sum of $290,598.00 for loss of use of the said sum;
(c)interest pursuant to s.57 of the Insurance Contracts Act 1984 on the sum referred to in sub-paragraph (a) above;
(d)interest pursuant to s.72 of the Common Law Practice Act 1867 (as amended).
Against the second defendant (by way of a claim made in the alternative) -
damages in the same amounts as those claimed against the first defendant such damages being based on alleged breach of contract and/or negligence.
The first defendant has admitted:

(a)its incorporation and that it carried on the business of insurance in the State of Queensland at FAI Insurance Building, 100 Eagle Street, Brisbane;
(b)that the second defendant is and was at all material times an incorporated company having its registered office at an address in Spring Hill, Brisbane;
(c)that the second defendant is and was at all material times a registered general insurance-broker within the meaning of that term as set forth in the Insurance (Agents and Brokers) Act 1984 (as amended);
(d)that the second defendant is and was at all material times an insurance intermediary within the meaning of that term as set forth in the Insurance (Agents and Brokers) Act;
(e)that on or about 18 October 1993 it issued cover note number PL 134315 in favour of the plaintiff pursuant to a quotation request slip received from the second defendant on behalf of the plaintiff on or about 16 October 1993 which cover note had an expiry date of 4 p.m. on 16 November 1993, and that on 16 November 1993 it was orally agreed between the second defendant as agent for the plaintiff on the one part, and the first defendant, on the other part, that the interim contract of insurance provided by cover note PL 134315 would be extended and that pursuant to that extension agreement the first defendant remained liable in accordance with the interim contract of insurance up to and including 22 November 1993.

The second defendant in its pleadings has admitted its incorporation, that it carried on business at a Spring Hill address, that it carried on the business of a trustee operating insurance brokerage, that it is and was at all material times a registered general insurance broker within the meaning of that term as set forth in the Insurance (Agents and Brokers) Act 1984 (as amended), that it is and was at all material times an insurance intermediary within the meaning of that term as set forth in the Insurance (Agents and Brokers) Act 1984, and that at all material times one Darryn Shiels was its duly authorised servant or agent.
           The second defendant has admitted the existence of the above cover note PL 134315 for the period from 16 October 1993 to 16 November 1993 at 4 p.m. The second defendant also alleged that it and the first defendant by its servant or agent Peter Laydon orally agreed to an extension of the cover under the cover note from 16 November 1993 to 16 December 1993.
           Both defendants have raised other issues and I shall mention them shortly.
           The plaintiff's case is primarily against the first defendant. Its case against the second defendant is in the alternative to its case against the first defendant.
           The plaintiff's case against the first defendant is that during the currency of the cover note, namely on the weekend of 20 and 21 November 1993 at premises at 86A Yarraman Place, Virginia, Brisbane, the plaintiff's property was damaged by the acts of vandals or persons of malicious intent and that as a consequence of that damage it suffered loss including loss from interruption or interference with the carrying on of its business and that such losses fell within the risks covered. The property alleged to have been damaged has been particularised in the statement of claim. Broadly described the property includes articles in different parts of the building then occupied by the plaintiff at 86A Yarraman Place and stock in the adjoining storage yard then occupied by the plaintiff and also forming part of 86A Yarraman Place. The plaintiff's pleading particularises this stock as slabs of granite, marble and silstone and certain tiles. Greater details of the property and claimed replacement costs of $290,598 will be given later in these reasons. The first defendant while admitting that certain property was damaged on or about 21 November 1993 notified the plaintiff on 21 December 1993 that it was not liable to the plaintiff on the basis of no contract and reserved its right to raise other defences.
           The plaintiff's claim includes loss of profit totalling $1,030,480.17 which loss is said to flow from the first defendants refusal of its claim and its loss of use of the $290,598. Particulars of this claim have been given in the pleading and will appear later in these reasons.
The first defendant has denied liability on a number of pleaded grounds and they are -(1)An allegation that an express term and condition of the cover note was not met by the plaintiff in that no premium was paid and no proposal was submitted to the first defendant before the expiry date of the cover note - this defence was not pressed at trial.

Allegations that the plaintiff failed to disclose to the first defendant a large number of matters particulars of which appear in paragraph 17 of the first defendant's latest defence, any one or more of which matters it is said was or were relevant to the decision of the first defendant whether to accept the risks under the cover note (which risks were varied on or about 3/11/1993) and policy and if so on what terms.
The alleged failure or failures to disclose are (on the pleadings) said to have occurred.
(a)at the time of obtaining the cover note from the first defendant on or about 18 October 1993;
(b)at the time of the renewal or extension of the cover note from 16 November 1993;
(c)at any time prior to the events on the weekend of 20 and 21 November 1993 pleaded by plaintiff and relied on to justify its claim.
Allegations that by its answers to the proposal for insurance the plaintiff made certain representations to the first defendant each of which is alleged to have been false and to have been made fraudulently (particulars appear in paragraph 20 of the first defendant's defence).
An allegation (paragraphs 20A and 20B of its defence) that in order to obtain the cover note from the first defendant the plaintiff falsely and fraudulently represented to the first defendant by the quotation request slip faxed by the second defendant on behalf of the plaintiff to the first defendant on or about 16 October 1993 that -
(i)the plaintiff's request for a cover note was not sought consequent upon other insurance held by the plaintiff having ceased or being about to cease;
(ii)the plaintiff's business did not have any insurance claims history.
Particulars of the alleged fraud are:-
(a)the plaintiff's request that the first defendant issue a cover note was made consequent upon the termination in October 1993 of a policy of insurance with L'Union des Assurances de Paris ("UAP") which insurance had covered the plaintiff for substantially the same risks as the insurance cover being sought from the first defendant;
(b)the plaintiff's business did have an insurance claims history particulars of which had been pleaded earlier in the first defendant's defence.
That the first defendant exercised its right under s.28(2) of the Insurance Contracts Act 1984 to avoid its contract of insurance with the plaintiff and it did so by letters dated 21 December 1993 and 22 December 1993 from its solicitors to the plaintiff's solicitors or alternatively by delivery of its amended defence or further alternatively by its solicitors' letter of 20 May 1996.
Alternatively, if the plaintiff's alleged failure to make disclosures and/or the plaintiff's alleged misrepresentations were not made fraudulently, the first defendant says that had the plaintiff disclosed the matters pleaded and/or not made the misrepresentations pleaded, the first defendant:-
(a)Would not have accepted the insurance on 18 October 1993 or renewed or extended that insurance beyond 16 November 1993 or would have cancelled the contract of insurance before the events of 20-21 November 1993.
(b)Alternatively, would have imposed conditions restricting the cover provided and imposed a higher premium and excess as terms of the insurance.
If it is otherwise liable for the plaintiff's alleged loss then its liability is reduced to "Nil" pursuant to s.28(3) of the Insurance Contracts Act of 1984.
Alternatively the first defendant refuses to pay the plaintiff's claim pursuant to s.56 of the Insurance Contracts Act 1984 on the basis that the plaintiff's claim was made fraudulently in that at the time of making its claim the plaintiff knew:-
(i)the amounts claimed on certain identified items of damaged property were excessive;
(ii)that the plaintiff claimed for the costs of items when those items were owned by companies other than the plaintiff, namely companies in the Elegant Group or Jela Imports and Marketing Pty Ltd;
(iii)that the plaintiff had, by its agent Edward Morales, on or about 29 November 1993 procured from each of certain identified persons a document described as a "quotation" which was submitted to the first defendant and relied on by the plaintiff to support its claim which document stated prices for the property therein referred which the plaintiff by its agent Edward Morales had devised and/or knew to be well above their true market value and not to reflect an independent valuation.
I mention now the plaintiff's claim against the second defendant. This claim at trial was for alleged breach of contract and/or negligence by the second defendant by its servant or agent Darryn Shiels. The second defendant has admitted that Shiels was its agent at all material times. The plaintiff's claim against the second defendant pursued at trial is made alternatively to the plaintiff's claim against the first defendant and is enlivened in the event that the Court finds that the first defendant was entitled to avoid the contract of insurance between it and the plaintiff or reduce its liability to the plaintiff by reason of nondisclosure by the plaintiff of the following facts:-
In September 1993 the plaintiff made a claim on a policy of insurance issued in its favour by Associated Marine Insurers Agents Pty Ltd ("AMIA") in respect of sixteen slabs broken in transit on 14 September 1993 which claim was paid in the sum of $13,715.27.
In the event of the court so finding, the plaintiff alleges that the loss and damage which it has suffered were caused by the negligence of Darryn Shiels as servant or agent of the second defendant. The statement of claim is not as clearly worded as one would have wished but the thrust of its pleaded claim against the second defendant is that Shiels negligently advised the plaintiff, that he negligently caused certain answers to be given to certain questions in the first defendant's proposal for insurance, that he negligently failed to advise Ann Hunter the managing director of the plaintiff to disclose certain matters therein and that he negligently failed to inform the first defendant of certain matters of which he knew or ought to have known (of which matters it is alleged Darryn Shiels knew or ought to have known that failure to disclose could lead to the first defendant seeking to avoid the contract of insurance or reduce its liability to the plaintiff for non-disclosure thereof).
           In its defence the second defendant has denied breach of contract and negligence and has adopted a number of the matters pleaded by the first defendant in what is described as its "further further amended defence".
           The hearing of the action occupied some 126 days.
           The case was one which had been case managed and some amendments to pleadings were allowed during the trial. Others were refused.
           I have already mentioned companies other than the plaintiff - the Elegant Group of companies and Jela Imports and Marketing Pty Ltd. Before I explain how these companies came into the picture and how they became relevant in this action, I propose now to list a number of matters, none of which was in issue, although each was part of the evidence as they will provide a skeletal background or framework against which the finer detail of evidence in this case can be viewed.
The plaintiff was incorporated on 17 May 1993.
Its directors were Anna Maria Hunter (also known as Ann Hunter) and her mother Anna/or Ana) Morales both of whom became directors on 17 May 1993.
On 17 May 1993 the plaintiff began business and rented premises at 80 Yarraman Place, Virginia.
On 24 April 1990 a company named Jela Imports & Marketing Pty Ltd was incorporated. It later carried on a business under the name of Elegant Marble and Granite.
Not later than 5 June 1992, at the invitation of Edward Morales, Ann Hunter commenced to work for Jela Imports and Marketing Pty Ltd at their premises at 229 Robinson Road, Geebung (she said she believed she was working for Elegant Marble and Granite Pty Ltd).
From 4th June 1990 a director and Principal Executive Officer of Jela Imports and Marketing Pty Ltd was Edward Morales the brother of Ann Hunter. On 13 March 1992 Pedro Tejero Morales became a director of Jela Imports and Marketing Pty Ltd.
On 5 August 1992 a company named Elegant Porcelain Pty Ltd was incorporated - its registered office was at Mylonas and Associates, Solicitors of 1 Manning Street, South Brisbane. The principal of Mylonas & Associates was George Mylonas. On 5 August 1992 Edward Morales and Pedro Tejero Morales were appointed directors of this company.
On 25 August 1992 Elegant Tiles Pty Ltd was incorporated; its registered office was the same as for Elegant Porcelain Pty Ltd and from 25 August 1992 it had the same directors as Elegant Porcelain Pty Ltd.
On 27 August 1992 Elegant Marble and Granite Pty Ltd was incorporated - registered office from 27 November 1992 to 8 August 1993 care of Mylonas and Associates. Edward Morales and Pedro Tejero Morales were directors of this company from 27 August 1992. Elegant Marble and Granite Pty Ltd, Elegant Porcelain Pty Ltd and Elegant Tiles Pty Ltd traded under the name of the Elegant Group of Companies at 229 Robinson Road, Geebung and later at offices in Waterfront Place, Eagle Street, Brisbane.
20 September 1992 - on about this day Edward Morales, Diego Santos-Morales (father of Edward and Ann), Ronald Favaloro and Cameron Mathieson left Australia to travel to Spain. All these people were involved in the running of or working for the Elegant Group of Companies. On 28 October 1992, Mathieson returned to Australia. The others returned later.
November 1992 - by this time the Elegant Group of Companies and Jela had moved to occupy premises at Waterfront Place and ceased to operate from the premises at 229 Robinson Road, Geebung. By this time the persons employed by the Elegant Group of Companies were Edward Morales, Pedro Morales, Ron Favaloro, Wayne Phillips and Mal Jensen.
The nature of the business conducted by the Elegant Group of Companies and Jela changed after the move to Waterfront Place - thereafter the group advertised for sale pre‑cut marble and granite benchtops - these items were to be cut to purchasers' requirements in Spain and imported into Australia - such cutting to be in accordance with requirements of Australian purchasers. No longer were the Elegant Group and Jela concerned with selling slabs of marble and granite and fabricating marble and granite items either themselves or by subcontract as they had done before moving to Waterfront Place.
June and August 1992 - during the Elegant Group occupancy of 229 Robinson Road, Geebung, Jela made claims under insurance policies for damage to ceramics which it had imported in 2 containers - these containers were delivered to 229 Robinson Road in June and August 1992.
27 June 1992 - inspection of first container at Jela's premises.
22 and 23 August 1992 - second container at Jela's premises inspected and contents unpacked.
28 January 1993 - a man named Karoly Kocsardi ("Kochardy") gave to Elegant Tiles Pty Ltd a guarantee from National Australia Bank for $146,839 - for performance by Stephen Truscott of Porsan Australia Pty Ltd of a contract to purchase ceramic tiles to be imported into Australia by Elegant Tiles Pty Ltd.
19 March 1993 - Elegant Tiles Pty Ltd demanded from National Australia Bank, ("NAB") at Mt Ommaney moneys secured by the Kochardy bank guarantee and received $146,839.
19 March 1993 - $146,839 being moneys from NAB paid to the credit of the account of Elegant Tiles Pty Ltd with NAB 167 Eagle Street, Brisbane.
25 March 1993 - guarantee by Australia & New Zealand Banking Group Limited for Stern Electronics Pty Ltd to perform its contract with Elegant Porcelain Pty Ltd for the purchase of items to be imported into Australia by Elegant Tiles Pty Ltd .
30 April 1993 - the account of Stern Electronics Pty Ltd with ANZ Bank was debited by $74,240 and $74,240 credited to the account of Elegant Porcelain Pty Ltd with NAB 167 Eagle Street.
30 April 1993 - Order made by Robin DCJ in action by Porsan Australia Pty Ltd against Elegant Tiles Pty Ltd restraining Elegant Tiles Pty Ltd from dealing with certain ceramic tiles pending determination of the action and listing action for speedy trial to begin on 9 August 1993.
30 April 1983 - cheque no. 11 drawn on Elegant Tiles Pty Ltd made payable to Ann Hunter for $25,000 and Elegant Tiles Pty Ltd by Pedro Morales requested National Australia Bank to issue bank cheque for $25,000 in favour of Ann Hunter.
30 April 1993 - National Australia Bank issued bank cheque 613670 in favour of A.M. Hunter for $25,000 on application of Elegant Tiles Pty Ltd.
30 April 1993 - Ann Hunter opened in her name Westpac Cash Management Account at Queen and Eagle Streets Branch of Westpac with $25,000 National Australia Bank cheque giving her name as Ann Maria Hunter and her residential address as 15 Walter Street, Toowong.
5 May 1993 - Kochardy issued notice of motion and swore affidavit in action ("Kochardy action") he had instituted in the Federal Court of Australia at Brisbane against Elegant Tiles Pty Ltd, Porsan Australia Pty Ltd, National Australia Bank, Edward Morales and Pedro Morales.
11 May 1993 - In the Kochardy action Edward Morales was served personally at Waterfront Place with copies of the notice of motion and supporting material and Elegant Tiles Pty Ltd and Pedro Morales were served on the same day - notice of motion sought Mareva injunction.
12 May 1993 - Elegant Tiles Pty Ltd were served at office of George Mylonas. Edward Morales signed cheque 000022 on the account of Elegant Tiles Pty Ltd in the sum of $70,000 in favour of Rachel Weldon.
12 May 1993 - above cheque for $70,000 taken to NAB Eagle Street and paid to credit account Rachel Weldon with NAB Grafton.
12 May 1993 - Edward Morales signed cheque 000007 on account of Elegant Porcelain Pty Ltd payable to "cash" for $40,000 and an application was made to the NAB at Eagle Street for a bank cheque in favour of A M Hunter for $40,000.

12 May 1993 - National Australia Bank cheque 613738 for $40,000 issued in favour of A M Hunter by NAB 167 Eagle Street.
12 May 1993 - $40,000 paid to Westpac Branch, Eagle Street for credit of Ann Hunter's Westpac Cash Management Account.
12 May 1993 - $70,000 withdrawn from account of Rachel Weldon and Rachel Weldon applied to NAB Eagle Street for bank cheque in favour of Ann Hunter for $70,000.
12 May 1993 - bank cheque 613744 for $70,000 issued by NAB Eagle Street payable to AM Hunter.
12 May 1993 - bank cheque $70,000 paid into Westpac Eagle Street branch for credit of Ann Hunter's cash management account with Westpac Eagle Street branch (Exhibit 68 which is the bank cheque shows Westpac stamp 12 May 1993).
14 May 1993 - In Kochardy action order made by Drummond J in Federal Court of Australia restraining Elegant Tiles Pty Ltd, from dealing with any of its assets until 4pm on 17 May 1993 and restraining Elegant Porcelain Pty Ltd and Elegant Marble and Granite Pty Ltd from dealing with any of their assets until 4pm on 17 May 1993 - further hearing fixed for 2:15pm on Monday 17 May 1993 and leave given to join Elegant Porcelain and Elegant Marble & Granite as respondents in the action.
16 May 1993 - Elegant Group of Companies effectively vacated premises leased at Waterfront Place - almost all furniture and equipment removed and premises virtually stripped. The furniture and equipment removed was then used by the plaintiff.
17 May 1993 - further order made by Drummond J in Kochardy action restraining all respondents to the action including Edward and Pedro Morales but excepting Porsan Australia and NAB, from dealing with their respective assets.
17 May 1993 - Wayne Phillips signed agreement binding the plaintiff Naomi Marble and Granite Pty Ltd to lease premises at 80 Yarraman Place, Virginia.
19 May 1993 - at Waterfront Place Wayne Phillips paid $7,000 to King & Co the landlord's agent of the premises which plaintiff had taken on lease.
19 May 1993 - Ann Hunter withdrew $30,000 from her Westpac Cash Management Account.
21 May 1993 - Ann Hunter withdrew $93,314 from her Westpac Cash Management Account.
21 May 1993 - Naomi Tiles Pty Ltd by Ann Hunter opened bank account 680916 at Westpac, Queen and Eagle Streets branch with deposit of $46,657.
21 May 1993 - Naomi Marble and Granite Pty Ltd by Ann Hunter opened bank account with Westpac, Queen and Eagle Streets branch with deposit of $46,657.
24 May 1993 - $15,000 deposited to the Westpac account of the plaintiff.
24 May 1993 - $15,000 deposited to the Westpac account of Naomi Tiles Pty Ltd.
7 July 1993 - $20,000 debited to Westpac account of Naomi Tiles Pty Ltd.
7 July 1993 - $20,000 credited to the Westpac account of the plaintiff.
8 July 1993 - $20,000 debited to Westpac account of Naomi Tiles Pty Ltd.
8 July 1993 - $20,000 credited to Westpac account of the plaintiff.
12 July 1993 - $20,000 debited to Westpac account of Naomi Tiles Pty Ltd.
12 July 1993 - $20,000 credited to the Westpac account of the plaintiff.
30 July 1993 - Ann Hunter first met John Horton of J W Bell & Associates, insurance brokers, on the introduction of Ken Pitts of MMI Insurance and requested Horton to arrange business insurance being a package providing cover for fire and perils, business interruption, burglary, glass, money and liability. Ken Pitts was then engaged to and later married Ann Hunter.
30 July 1993 - Horton requested Paul Fuller of UAP to give cover - cover issued by UAP subject to completed survey.
7 October 1993 - Paul Fuller conducted survey of plaintiff's premises and noted stock in the open air.
7 October 1993 - Fuller telephoned Horton of J W Bell & Associates Pty Ltd and sent fax message offering rates and declining to give cover for accidental damage to and theft of stock in the open air and malicious damage to stock in the open air.
18 October 1993 - cover note PL134315 issued by the first defendant covering plaintiff faxed to second defendant.
2 November 1993 - plaintiff sent second defendant a letter by fax seeking to extend the risks covered by the cover note.
3 November 1993 - letter from plaintiff to second defendant faxed on 2 November received by second defendant and discussed with officer of first defendant.
4 November 1993 - proposal signed by Ann Hunter during meeting with Shiels. Edward Morales was present at time the document was completed and signed.
It will be obvious from the above skeletal chronology that the evidence in this trial concerned many matters which occurred before 17 May 1993 the date on which the plaintiff was incorporated and commenced business. The reasons for this basically are:-
The first defendant's allegations in its defence that:-
(a)Edward Morales and Pedro Tejero Morales were persons involved in the management of the plaintiff and executive officers of it.
(b)Edward Morales and/or Pedro Tejero Morales were directors of the plaintiff by virtue of s.60(a) and (b) of the Corporations Law or alternatively were partners with the plaintiff in its business.
On the first defendant's case, the portrayal of the plaintiff's business as a "new venture" was a sham.
On the first defendant's case the plaintiff, far from being a new venture was a continuation of businesses conducted by entities controlled and managed by members of the Morales family.
On the first defendant's case the incorporation of the plaintiff was part of a scheme to defraud the creditors and investors of businesses conducted by entities controlled and managed by members of the Morales family and was relied on to avoid disclosing the previous insurance history of those businesses and of the persons controlling and managing those businesses, in particular Edward Morales.
The principal witness in the plaintiff's case was Ann Hunter, the plaintiff's managing director.
           Because, as she claimed in her evidence, she worked for Jela and the Elegant Group of companies after 5 June 1992 and up to mid-March or late March 1993 when she left and on her evidence, went into her own business as managing director of the plaintiff on 17 May 1993 she was, on her evidence, obviously working for the businesses for most of the period from 5 June 1992 up to January 1994. Most of the evidence before me covered events within this period. She denied having worked at or having had anything to do with Jela or the Elegant Group of companies after mid-March or late March 1993.
           The credibility of Ann Hunter was strongly attacked by both defendants.
           Although her evidence included her actions and dealings from 5 June 1992 to January 1994, I propose to deal first with her evidence touching a number of matters from and including 17 May 1993 to January 1994, i.e. for some seven to eight months from the time that the plaintiff was incorporated and began its business.
           Ann Hunter's evidence-in-chief was to the effect that it was she who ran the plaintiff's business aided by her mother, although she conceded in cross-examination her mother knew nothing about the business. Her mother was not called to give evidence. Ann Hunter's evidence-in-chief was that her brother Edward had no involvement with the plaintiff company before the break and enter and malicious damage occurred on the weekend of 20/21 November 1993. She said that thereafter she was helped by her brother Edward and she gave him written authority (ex.62 dated 9 December 1993) to act on behalf of the plaintiff.
           Her evidence-in-chief as to her attitude to Edward Morales was in my view one which proved to be extreme and one which I thought she found difficult to explain satisfactorily after her cross-examination began and the very large amount of documentary evidence concerning the plaintiff and the plaintiff's dealings was then put to her. I say her attitude was extreme because of the words she used to describe her feelings for Edward, e.g. "I hated him" and "I couldn't have cared whether he dropped dead on the floor". She denied Edward Morales had any involvement in the plaintiff. She said he was never welcome at the plaintiff's premises. Other evidence showed the extent to which Edward Morales was so involved and the extent of his involvement was quite contrary to Ann Hunter's evidence.
           A number of cheques drawn on the plaintiff's bank account and signed by Ann Hunter and on which I am satisfied Edward Morales' handwriting appeared, were produced to her in cross-examination. Details of these cheques (there are 20) and appropriate exhibit and transcript references are listed in Appendix B hereto. The total of these cheques was $18,072.25. Apart from the cheques listed in Appendix B there was evidence of payments made by the plaintiff for the benefit of Edward Morales and/or Pedro Tejero Morales. Some of these payments were by cheques drawn on the plaintiff and signed by Ann Hunter and such cheques were other than those listed in Appendix B. Details of these payments (which totalled $30,095.75) appear in Appendix C to these reasons. Certain of the payments in Appendix C were described by Ann Hunter as "loans" but I do not accept that such payments were loans.
           Then there was evidence of a number of the plaintiff's cheques signed by Ann Hunter and paid to Thynne & Macartney, solicitors. A detailed summary of these payments to Thynne & Macartney appears in Appendix D to these reasons. On the first defendant's case these payments in Appendix D which total $11,487.90 were made to discharge Edward Morales' obligations to pay Thynne & Macartney's fees. A number of these cheques, signed by Ann Hunter, bore Edward Morales' handwriting.
           The evidence also showed that one cheque was drawn on the plaintiff's bank account and signed by Ann Hunter and paid to Avis Rent A Car for car hire by Edward Morales for the period 27 September 1993 to 25 October 1993. Appendix E to these reasons contains details of that cheque for $1,453.22 as well as two cheques paid for cars hired by the plaintiff for use by Ann Hunter and Wayne Phillips.
           I shall later return to the payments and cheques mentioned in these four appendices and Ann Hunter's evidence concerning them.
           I shall deal with the following matters in the evidence, each of which bore heavily on Ann Hunter's credibility:-
Did Ann Hunter cease to work for the Elegant Group of Companies from mid-March or late March 1993 or did she continue to work for such group until Sunday 16 May 1993.
Whether or not the three bank cheques totalling $135,000 received by Ann Hunter on 30 April and 12 May 1993 represented payment to her by Edward Morales of arrears of wages due to her and/or compensation for her mistreatment as Ann Hunter had claimed.
The question of who was residing at 7 Grevillea Street, Everton Hills from October 1993 to January 1994 - was it Edward Morales or was it, as Ann Hunter claimed, she and her husband, Ken Pitts? This issue arose because, on the evidence, rent and a telephone account for 7 Grevillea Street were paid by cheques drawn on the plaintiff's account which cheques were signed by Ann Hunter.
I shall deal now with the above two matters. The third matter I shall leave until much later in the reasons.
Did Ann Hunter cease to work for the Elegant Group of Companies from mid-March to late March 1993 or did she continue to work for the Group until Sunday 16 May 1993?
The events at the Elegant Group and events concerning the Elegant Group which occurred during this period were significant because during this period the Elegant Group's fortunes declined to the point where a successful action was taken by Kochardy to freeze by way of Mareva injunction the assets of the group in order to try to recover his guarantee moneys totalling $146,839 which he alleged had been unlawfully drawn by Elegant Tiles Pty Ltd on 19 March 1993 against his account with the National Australia Bank at Mt Ommaney.
           Once the order was made by Drummond J on 14 May 1993 in the Kochardy action the Elegant Group ceased to trade under that name and Jela also ceased to trade. It was I find obvious to those in control of the Elegant Group and Jela that if the Mareva injunction were granted, then moneys in the Elegant Group's bank accounts would be at risk of loss to Kochardy. On 19 March 1993 Kochardy's account with the National Australia Bank had been drawn down by $146,839 and that amount had been paid to the credit of the account of Elegant Tiles Pty Ltd. Apart from Kochardy, there was also Stern Electronics Pty Ltd (controlled by Walter Meyer) whose account at ANZ Banking Group Ltd on 30 April 1993 had been drawn down to the extent of $74,240 which sum had been then credited to the bank account of Elegant Porcelain Pty Ltd. I note in passing that it was on 30 April 1993 that the first bank cheque (for $25,000) of the three bank cheques totalling $135,000 was paid to Ann Hunter and that sum had been drawn on the account of Elegant Tiles Pty Ltd; on that same day two other significant events occurred - Ann Hunter had opened her Westpac Cash Management Account at Queen and Eagle Streets Branch with the initial deposit of the National Australia Bank bank cheque for $25,000 and His Honour Judge Robin had made an order in an action by Porsan Australia against Elegant Tiles restraining Elegant Tiles from dealing with certain ceramic tiles pending determination of the action.
           In its defence the first defendant had alleged that Edward Morales and Pedro Morales had dishonestly misapplied the two sums of $146,839 (the property of Kochardy) and $74,240 (the property of Stern Electronics Pty Ltd as trustee) and they had thereafter misappropriated those sums. (The first defendant further alleged non-disclosure by the plaintiff of these misappropriations.)
           During this period of some two months (during which Ann Hunter denied she was working for or attending the offices of the Elegant Group of Companies) the three cheques totalling $135,000 were paid into her bank account. I leave aside for the moment the evidence as to the character of the three cheques totalling $135,000 and evidence as to Ann Hunter's alleged involvement in obtaining these bank cheques. Apart from that evidence there is quite a large amount of evidence concerning events which, if that evidence is accepted, identifies Ann Hunter as working for the Elegant Group during that two month period.
           Ann Hunter swore that she left the employ of the Elegant Group - in mid-March 1993 or possibly at the end of March 1993 - and that thereafter she never went back to the Elegant offices, save for one occasion when on one weekend she called at their Waterfront Place premises when Ken Pitts and her father were removing furniture which she swore she had bought from her father. A sales docket (ex.75) was tendered and said to support the purchase by the plaintiff of the items on that docket from her father - I shall deal with this issue later. Ann Hunter denied any involvement in any of the steps leading to the issue of the three bank cheques totalling $135,000. She insisted that she went to her bank (after she had reached agreement with Edward Morales as to the amount which was to be paid to her for payment in lieu of unpaid wages and compensation for mistreatment) and that she was there given three bank cheques totalling $135,000. There was evidence as to her involvement in steps leading to the issue of the three bank cheques but I leave that evidence aside for the moment as later in these reasons I shall separately consider this issue. Other evidence which was against Ann Hunter's claim that she had nothing to do with and never returned to Elegant's offices, was as follows:

(a)9 April 1993. I find that on this day Ann Hunter telephoned and spoke to Ronald Jeffrey Maude, a plant systems control operator employed by Resolve Engineering Pty Ltd. As such an operator Maude was required to look after seven high-rise buildings and a retail complex for air conditioning, security access control, lighting, water, tenant comfort and customer service after hours for tenants of those buildings, one of which was Waterfront Place. On this day Maude I find was present in and working from level one in the main operations control room at Waterfront Place. The Elegant Group of Companies were tenants on the sixth floor of the same building. As part of a record kept by his employer Maude wrote in a log-book (ex. 205) "Dec-Talk not working. Ann Hunter level six north requested air conditioning for three hours. Done." I am satisfied that this entry actually records a conversation which Maude had with Ann Hunter at that time. I am also satisfied that Dec-Talk was a voice-operated facility and that it was used by tenants who required air conditioning to any part of a tenant's premises after normal hours. I am well satisfied that by 9 April 1993 Maude was familiar with and well able to recognise Ann Hunter's voice on Dec-Talk even without her name being stated. I find that at the beginning of the Elegant Group's tenancy of Waterfront Place Ann Hunter met Maude face to face on level six of the Waterfront Place building and she told him then that she was the office-manager of the Elegant Group of Companies and that for any problems dealing with the Elegant Group tenancy he was to deal with her. I find that thereafter Maude, on at least six occasions spoke with Ann Hunter who was experiencing difficulty in starting Dec-Talk. I am satisfied that he had conversations with Ann Hunter face to face on more than one occasion. Maude was I find an honest and credible witness.
(b)11 April 1993. Exhibit 205 which is a photocopy of Maude's employer's control log-book, contains an entry in the handwriting of Graham Clare, another plant systems control operator, which showed that at 7.39 a.m. "Ann Hunter rang and requested I program A/C via Dec-Talk to run until 1 p.m. (5 hrs and 20 mins). She advised she had left her Dec-Talk access card at home". Although Clare did not give evidence, I give considerable weight to that entry made, I am satisfied, in the course of Clare's duties. I find that at about 7.39 a.m. on 11 April 1993 Ann Hunter did telephone and speak to Clare on the topic indicated in that entry.
(c)15 April 1993. I find that on this day Ann Hunter wrote out cheque 000272 drawn on the account of Jela Imports and Marketing Pty Ltd with the NAB 167 Eagle Street for $3175 payable to Mylonas & Associates' Trust Account. A photocopy of the front side of that cheque is ex. 338. I am satisfied after hearing the evidence of George Mylonas that probably on 15 April 1993 he was at the Elegant Group premises at Waterfront Place. I find that he spoke to Ann Hunter and asked her to organise payment to him of a cheque in respect of his firm's outlays and that the cheque, a copy of which is ex. 338, was written out by Ann Hunter, signed by Pedro Morales and then sent to George Mylonas as a result of that conversation. I find also that on 15 April 1993 Ann Hunter wrote out and Pedro Tejero Morales signed two cheques drawn on the account of Elegant Marble and Granites Pty Ltd with NAB 167 Eagle Street Brisbane each payable to Jela Imports and Marketing Pty Ltd - the first cheque was 000194 for $1080 and the second cheque was 000196 for $2229.85. I am satisfied that these two cheques were credited to the account of Jela Import and Marketing Pty Ltd to put it in funds to meet the cheque for $3,175 drawn in favour of Mylonas & Associates.
(d)20 April 1993. I find that at 12.42 p.m. on 20 April 1993 a document on the letterhead of Elegant Group of Companies was sent by facsimile transmission to National Australia Bank Ltd, fax no. 07 229 1231. The document was a single page. On the document the date "20.04.93" was handwritten as also were the words and figures "National Australia Bank Limited" and the figures "(07)229 1231". After the printed word "From" there appeared in handwriting "Ann". After the printed words "For the attention of" appeared in handwriting "Mr Greg Wasmund", and after the printed word "Message" appeared in handwriting "As requested". The document which was the actual facsimile transmission is ex. 97. It was shown to Ann Hunter. She was asked whether she could confirm that the document shown her was "a fax that was sent by yourself whilst employed at the Elegant Group of Companies to the National Bank on 20 April 1993". She replied, "This is a fax - facsimile header and as everybody would have known in the office to clients that we would have had, like the National Australia Bank, say, for example there would have been a master one". This answer was non-responsive and evasive. The question was then read to her and she replied "No, it wasn't not be me sending it is that what you are asking?" Mr O'Donnell QC, counsel for the first defendant, told Ann Hunter it was the question he was asking and after I then warned Ann Hunter as to her right not to answer a question if she believed the answer could incriminate her, she said "I'd like to answer it ... No, I did not send this fax". When later asked in cross-examination whether she could confirm that the writing on the fax was her writing she replied:

"This is a - what do you call it - probably an original standard fax they probably would have had in the file that would have had my writing on it, yes, addressed to National Australia Bank."

She then conceded the physical handwriting on the document was hers. Later she said she did not recall writing the date in. I thought that ex. 97 posed real difficulties for Ann Hunter when she was cross-examined on it quite early in the course of this trial - it was day 9, on 6 June 1996.
I should at this stage say that the original facsimile transmission has faded somewhat but the document is in a condition such that I can still read below the handwritten words "as requested" typed words "Antonio Carrillo Rial" and underneath that appears some further typing which appears to be an address in Spain. During her cross-examination on day 9 Ann Hunter was referred to a photocopy of a letter dated 20 April 1993 from the NAB, Eagle Street, signed by Wasmund addressed to Marpi SL and Signor D. Antonio Carrillo Rial at an address in Spain (this became ex. 307) and a photocopy of a letter dated 23 April 1993 (this letter became ex. 308) also from the NAB, 167 Eagle Street Brisbane to Marpi SL and Signor D. Antonio Carrillo Rial at the same address in Spain also signed by Wasmund. The first dated letter commenced by stating that the letter was intended to confirm to Marpi SL that Elegant Marble and Granites Pty, Elegant Tiles Pty Ltd and Elegant Porcelain Pty Ltd conducted accounts with NAB, 167 Eagle Street. It then went on to deal with other matters including a letter of credit.
I found Ann Hunter's explanation given on oath as to how ex. 97 came to be sent bearing her handwriting quite incredible. I shall mention part of her evidence which I find well illustrates the lengths to which she was prepared to go, in evidence on oath, to distance herself from the Elegant offices during this period after mid to late March 1993.
After she had been referred to the two letters which became ex. 307 and ex. 308 she was asked:-
"Is what's occurred here that the National Bank was asked to write a letter to Mr Carrillo Rial with respect to the Elegant Group of companies. He's asked -the National Australia Bank has then asked for the address to send it to Mr Carrillo Rial and you then sent a fax on 20 April supplying that address."

She replied:-

"I don't know that because if I would have had to write the address there why would I have gone to the trouble of writing it in more than my handwriting and then somebody else come along and typed it in."

After her denial that she sent the fax (ex. 97) the following appeared in her cross-examination:-

Question: "Can you explain how it is that the document was sent with your handwriting and with what looks to be the handwriting of the date 20 April 1993 being yours?"

Answer: "As I explained before, I had a procedure that if there was certain faxes that they were often sending, for example Mr George Mylonas and say, for example, like this one to the National Australia Bank, there would be an original document that would be in my handwriting to those particular people and what would have happened is photocopy - I would have done photocopies so that every time I would have had to send them a fax I wouldn't have to go through the rigmarole of filling it all out."

Question:"If you followed that practice you would still have to fill out on the individual fax wouldn't you the date the fax was sent and also the message because the date and the message would change from fax to fax, wouldn't it Mrs Hunter?"

Answer:"Well a lot of it was just 'as requested'. A lot of it - if it was any different from what they told me I would have just simply crossed it out. Per month I would have the dates as well on them so that would be from Mondays to Friday, if it was like, for example National Australia Bank. If it was anything to do with Mylonas he worked from his office on a Saturday it was really from the Elegant Group of Companies."

Question:"Would you answer my question? I am suggesting to you, even if you did have this practice of filling out details on faxes, to people to whom faxes were regularly sent on an individual fax you would still have to fill in the date and the message for that individual fax?"

Answer:"No, no. As I said to you I had already done it on a month basis. Like for example I'd do like January's and February's. I was so bored I had to find sometimes to do something so as I said I would do it for a couple of weeks or a couple of months and then I would just simply leave out the time because I had to put in a time there as to when I would be putting it in but in most cases it was just 'as requested' or faxed to a particular person. If it was I would then cross it out and put it in but the rest of the content would be blank."

Question: "Even if you followed that practice though, even if you wrote up the dates at the beginning of the month, you would still have to leave the day and the month blank and write the day of the month in when you were sending the fax?"

Answer: "As I said, I did them on a weekly basis. I would write in the date like if it was like 22nd, like in this instance it is 20.4.93 I would have a look at the calendar and see when the week starts and when the week finished and I would do five copies of it."

Question: "One for each day?"

Answer:"Mmm. I was pretty bored."

Question:"On the off-chance you might have to send a fax to the National Bank on each day during the week - is that evidence you are telling His Honour?"

Answer: "Sorry?"

Question:"Are you being serious in this evidence that at the beginning of each week or each month you would write out a fax - or each day of this week or that month - on the off-chance that you would have to send a fax on that day?

Answer:"Well, if I did use that particular day it would be just a matter of redoing it again."

I then asked, "What do you mean by redoing it again?" and she replied:

"Well, your Honour, I would do it either on two-monthly or three-monthly. I would get the calendar and then what I would do is if they requested more than one this thing was already on the computer so it was just a matter of photocopying the letterhead onto this and faxing it through."

Question by me: "What was on the computer, the letterhead?"

Answer:"That's correct."

Question by me: "So you print out a letterhead for a facsimile transmission, when it's printed out it is blank?"

Answer:"I just remembered what was on the computer was printed 'facsimile transmission'. That's what's typed there. Then what I would do is I would get a letterhead, a photocopy of the letterhead and I would put it into the printer and then it would print that facsimile transmission."

Question by me: "So it came out blank and you as I understand your evidence you might do it a week at a time or a month at a time and you fill in a lot of these?

Answer:"Yes, your Honour."

Question by me: "In anticipation of sometime in the future being called on to send a fax?"

Answer:"That's correct."

Question by me: "And you'd write in for instance 'National Australia Bank Ltd' and the phone number?"

Answer:"That's correct."

Question by me: "It might be a week in advance?"

Answer:"Yes."

Question by me: "It might be several days in advance. From what you are telling me you would write in the name of the person for whose attention it was?"

Answer:"That's correct."

Question by me: "Mr Greg Wasmund?"

Answer: "Wasmund, yes."

Question by me: "And what about the number of pages?"

Answer: "I would normally just put one. If it was any different I would simply just cross it out and put it in."

Question by me: "You say 'as requested' was usually what was in the fax messages and you'd write that in too?"

Answer:"Yes, your Honour."

Question by Mr O'Donnell: "So you would have one for each day of the forthcoming week or month?"

Answer:"That's correct."

Question:"On the off-chance you might have to send a fax to the National Bank on that day with a message saying 'as requested'?"

Answer:"No. As I said, if it was any different I would cross it out."

Question: "But you were writing these out at the beginning of the month on the off-chance that the message might have to be 'as requested' and you might be sending a fax on this day?"

Answer:"Sorry, I didn't hear your question."

Question:"Well on your evidence I'm trying to put to you the effect of your evidence comes to this: that you not only have these pre-printed and pre-prepared faxes with the addressee to whom the fax is to be sent and the fax number and saying it is from you, but you're also typing - you're also predicting - - -?"

Answer:"No."

Question:"What would be the message and you're also typing in or writing in each future day on the off-chance that you might have to send a fax on that day to that addressee with that particular message?"

Answer:"What I said was what I would fill out and it would be not just on a weekly basis as I said to you. I was pretty bored OK, and what I used to do - and I would get a lot of photocopies of the letterhead and I would type. I would get one copy out of the computer like this and then I would do several photocopies and then I would simply fill out the dates - I'd get the calendar and see how many months that month Mondays to Friday for example. There's one for the National Australia Bank and I'd write in my letter in my own handwriting 'National Australia Bank', the telephone number, from and 'as requested'. We would either put one page or none on the page. If it so happened that they would ask me to send a fax twice that day to the National Australia Bank and I had used that already piece of facsimile that I had previously filled out it meant that I would just either get a blank copy of the master and then I would simply either do that or cross off whoever it was to at the National Australia Bank, write it in and if it wasn't 'as requested' it would just simply be crossed off and then I would simply fax what I was given or whatever I was asked to do. But in the system I am saying that I have never seen the date that you are saying. I don't recall writing it in but as I said I don't recall this particular fax with the contents of that address."

A little later Mr O'Donnell asked Mrs Hunter:

"I suggest to you that you appreciate the fax poses a problem for you in your evidence because you've told His Honour at least two things with which this fax is inconsistent - first that you left this company in mid-March and this fax suggests you were still there on 20 April?'

She answered: "I deny that. I did leave in mid-March. As to - if somebody else has gone to the file and used that particular facsimile without me well how can I answer to that?"

Question: On your evidence someone has gone to the file and they have used this document that you wrote out more than a month before with a message saying 'from Ann, as requested' and they have sent it off to the National Australia Bank without changing the name Ann to their name and without changing the words 'as requested' to whatever might have been the appropriate message but they have gone to the trouble of typing in Mr Carrillo Rial's details?"

Answer:"Isn't that interesting."

A little later she was asked:

"The reality is, isn't it, that you appreciate this fax poses problems for your evidence and you are concerned to distance yourself from it by making up this ridiculous story that you wrote in the date and the message weeks or even months in advance."

She answered: "I disagree with you."

I should at this stage mention the evidence of Ronald Angelo Favaloro who in April 1993 was the manager of the Elegant Group of Companies. He gave evidence after having been shown photocopies of the letters which became exs.307 and 308, that Rial required from the Elegant Group's bank, National Bank in Eagle Street a letter stating that we were purportedly a good company and that we did bank with the National Bank. He swore that this requirement was something he heard personally from Mr Rial at a time when he, Favaloro, Edward Morales, Rial and Greg Wasmund (from NAB) were having a meal, that Rial did not speak very good English and that Edward explained to Wasmund what Rial required. In the witness-box Favaloro was shown ex.97. His recall was that Wasmund needed to know the exact name and address and spelling of Rial, that Wasmund rang "our office and Ann prepared" ex.97 and typed the address on the piece of paper which was then faxed to Wasmund at the National Bank. He swore that Wasmund had originally spoken to him about his request and that he told Ann of it and she agreed to attend to the request and did so. I accept Favaloro's above evidence which includes the circumstances in which ex.97 came into being.
           Exhibit 395 was another facsimile sent in February 1993 by Ann Hunter but on this occasion instead of using the words "as requested" her hand written message (to a Mr Craig Doyle) was "as per your request".
           I find that on 20 April 1993 Ann Hunter did write out and send the facsimile message which is ex.97. In my view when Ann Hunter gave evidence, (which included the above cited extracts from her evidence) concerning the time of composition and the sending of ex. 97 to the NAB, she could not be believed. It is not simply a case of rejecting her evidence on this aspect. Exhibit 97 was an important piece of evidence in this case. It bears the handwriting of Ann Hunter and is dated 20 April 1993 - almost in the middle of the period during which Ann Hunter said she was not present at the Elegant Group premises and she no longer worked for the Elegant Group. Favaloro confirmed Ann Hunter sent Exhibit 97 to the bank and the sending of Exhibit 97 dovetails with Exhibits 307 and 308.
           Ann Hunter, when in the witness-box and being cross-examined was in my view desperate not to make any admission that she was in any way involved with the Elegant Group during this period after mid to late March 1993 and up to 16 May 1993. When giving her evidence she must have known that the allegations made by the first defendant against the plaintiff (of which she was the managing director) included an allegation that she knew of or was party to a conspiracy to defraud or defeat the creditors of the Elegant Group - particularly in respect of the payments from the Elegant Group of 3 sums totalling $135,000 and into her account of the three bank cheques totalling $135,000. Indeed, by the time of her cross-examination part of which is set out above Ann Hunter had received independent legal advice concerning her right to remain silent in respect to any questions the answers to which she thought might incriminate her.
           I bear in mind the warnings against my making a finding that a witness lied (see "The Writing of a Judgment" by the Hon. Mr Justice Mahoney AO (as he then was) (1994) 2 TJR 61 at p.65) and the following statement by four members of the High Court in their joint judgment in Smith v. New South Wales Bar Association (1992) 176 CLR 256 at 268:-
"The finding that a person deliberately lied when giving evidence is, in effect, a finding of perjury and, thus, it ought not to be made on 'the single oath of another man, without any confirmatory evidence'."
(Reg v. Hook (1858) Dears & Bell 606 at p.616, per Byles J
[169 ER 1138 at p.1142] speaking in relation to perjury)

In my view, in this case I should make and I do make a finding that Ann Hunter deliberately lied when she denied that she faxed Exhibit 97 to the NAB and gave evidence concerning the time of composition of and the sending of ex.97 to NAB, Eagle Street, Brisbane. In making this finding I bear in mind that the case before me is a civil case. The finding I have made is required to be proved to a high standard. I have no reasonable doubt that she lied in respect of the matters which I have found.

(e)23 April 1993
Prior to this date the Elegant Group had purchased a warehouse at West End or South Brisbane. This fact was not in dispute and evidence to that effect was given by George Mylonas a solicitor who, acting on behalf of the Elegant Group took part in the negotiations to purchase the property. Mylonas gave evidence that in about the third week of April he, Ann Hunter and Pedro Morales had gone to a furniture supplier named Wallace Brothers on Ipswich Road near the Princess Alexandra Hospital. There, he said, the three of them had chosen and bought desks and other furniture to be used in the warehouse. There is no doubt that cheque no. 000208 dated 23 April 1993 was drawn on the account of Elegant Marble and Granites Pty Ltd with NAB 167 Eagle Street and made payable to "Wallaces" for $3273. I find that cheque was entirely written out by Edward Morales and signed by him (see ex. 215). I accept the evidence of Mylonas that Ann Hunter accompanied him to Wallaces, probably on 23 May 1993 and that she selected furniture both second-hand and new and that the above cheque 000208 was used to pay for that furniture.
(f)23 April 1993
On this day according to the AMP control-room log (ex. 465, a typed copy of which is ex.466) a vehicle was noted in the Waterfront Place carpark - registration number 539 PLV being a white Mazda sedan with the left-hand side doors and panel kicked in on the driver's side. Ronald Favaloro gave evidence that this was a car which had previously belonged to his wife (see ex. 400 which is the registration certificate for Mazda 539 PLV). He swore that an arrangement was made between Mrs Favaloro, the registered owner as shown on ex. 400 and Ann Hunter whereby Ann Hunter bought the car and had possession of it. He swore that thereafter Ann Hunter regularly drove the car and parked it in the carpark at Waterfront Place. He swore that on one occasion he had seen it in the carpark when every door panel had been broken in, the bonnet had been severely dented and also the boot panel and the roof had been pounded in on the car. He thought the car was in the carpark for more than a week. According to Favaloro, Ann Hunter had told him that she had been working late and went downstairs and the car would not start and that Edward, when he could not get the car started, "took out his temper on the car" - "he just went around berserk and kicked in all the panels and smashed it up". I accept the evidence of Favaloro.
I am satisfied that at some stage during the third week of April 1993 the Mazda sedan 539 PLV was driven by Ann Hunter to the Waterfront Place carpark and parked there by her, that not long thereafter Edward Morales damaged the car in the manner generally described by Favaloro and that as a result the entry appearing in ex. 465 was made. Suggestions were made during cross-examination of Favaloro that in fact the damaged Mazda bore another and different registration number and was a different model of Mazda. These suggestions were rejected and of course they did not become evidence. Favaloro's evidence concerning the damage to the vehicle was confirmed by ex. 465.
(g)3 May 1993
George Mylonas gave evidence that on Monday, 3 May 1993 - Labor Day -he attended a meeting at Waterfront Place and those present at that meeting were Edward Morales, Pedro Morales, Favaloro and Ann Hunter. He said that price-lists were then discussed and that Ann Hunter was not present for the whole of the meeting - only for part of the meeting. I see no reason not to accept the accuracy of Mylonas' evidence as to Ann Hunter's attendance at the meeting on this day. I should now say that Mylonas' credit was challenged in other areas of his evidence and I shall deal with these challenges later when discussing that portion of his evidence. For present purposes, I accept his evidence as to Ann Hunter's presence at Waterfront Place on 3 May 1993.

(h) Finally, the plaintiff's ability to sell 100 square metres of unpolished rosa aurora marble tiles of an unusual size and thickness at $375 per square metre was not established.

Schedule 2

(a)This claim assumes the silstone tiles and slabs listed in Schedule 2 could have been all sold at retail prices; this was quite contrary to evidence that there was virtually no demand for silstone and the plaintiff could not sell what it already had.

Schedule 3

(a) I find the sale of the roof tiles to Eastern Stone & Minerals was not lost by the first defendant's refusal to pay the reimbursement moneys. I find any sale of the crema marfil and blue pearl tiles was unaffected either by the break‑in or by the first defendant's refusal to pay the reimbursement money.
(b)The policy specified no time for payment of reimbursement moneys and thus the first defendant was obliged to pay the reimbursement moneys within a reasonable time. See Settlement Wine Co Pty Ltd v. National & General Insurance Co. Ltd (1994) 8ANZ Ins. Cases 61 - 209 at 75318; Protean (Holdings) Ltd v. The American House Assurance Co. (1986) 4ANZ Ins. Cases 60 - 683 and Moss v. Sun Alliance Australia (1990) 55 SASR 145.
I find that Eastern Stone & Minerals cancelled the order on 1/12/93 (Exhibit 170) only 9 days after the claim had been made on the first defendant following the break-in (Exhibit 316). The plaintiff has not shown that a reasonable time for the first defendant to have investigated the claim, arrived at a decision on the claim and paid the money to the plaintiff had expired by 1 December 1993. I am reinforced in this conclusion by further finding that the plaintiff refused to supply necessary documentation to validate the claim. The plaintiff has not satisfied me that it was in a position to satisfy the order from Eastern Stone & Minerals on or before 1 December 1993 even if the break-in had not occurred.

Schedule 4

(a)A basic problem with this claim which relates to 17 transactions is that there is no evidence which directly related to the November 1993 break-in the cash flow difficulty referred to by Barnes.
(b)The plaintiff opened that it would call its accountant Donna Stonebridge but failed to do so and there was no satisfactory accounting or other financial information about the plaintiff's trading position in the period after November 1993 or even before that time.
(c)In my view it is only guess work to say that any cash flow shortage experienced on and after February 1994 (as Barnes said occurred) was due to the damage suffered during the break-in.
(d)At trial the plaintiff pursued only 4 of the 17 sales or jobs in Schedule 4 and its pursuit was unsuccessful. The evidence which dealt with these 4 slabs did not satisfy me that the plaintiff's claim in respect of any of these 4 transactions was made out. In relation to Schedule 4 I find, on the evidence that the plaintiff has failed to satisfy me that it would have received any of the 17 jobs even if it had been able to get in the necessary stock. I should add that Column E in Schedule 4 is headed "Expected Trading Profit" and no evidence was led to establish the figures in that column.

Schedule 5
The heading to this Schedule asserts that the plaintiff auctioned items to raise cash to replace reduced working capital caused by non-receipt of reimbursement moneys. The first defendant has submitted that the plaintiff did not establish this assertion. It argues that on the evidence the auction was equally consistent with the plaintiff having been conducting a failing business and making a loss. The sales by the plaintiff as far as they appeared in the evidence and related to the period prior to the break-in were in my view insufficient to enable the plaintiff to carry on its business. Thus, I find it more likely than not that the plaintiff sold off some of its stock in order to replace the deficiency in working capital caused by trading losses and not by non-receipt of the reimbursement monies. One matter I do not overlook is that the stock said to have been sold at auction was material which had arrived in a damaged condition or on arrival had been of an unacceptable quality as Mr Sterling had reported in Exhibits 173 to 176.

Further, I find that the auctions in September and October 1994 are too remote in time from the break-in in November 1993 to enable me to use them as the plaintiff would have me do.
I accept Mr O'Donnell's argument that the plaintiff cannot have losses which it claimed in Schedules 1,2, 3 and 4 and also the loss claimed in Schedule 5. As Mr McDonnell correctly points out - if the plaintiff can recover for sales at auction in Schedule 5 then it will be recovering for loss incurred in generating money to replace the moneys it should have received from the first defendant and it cannot also claim the losses in the first four Schedules.
Another matter in respect of which justifiable criticism of Schedule 5 was made is that the calculation is incorrect. As Schedule 5 shows the amount sought to be recovered is the difference between the plaintiff's retail sale price (called "Expected Gross Takings") and the amount recovered at auction. In my view this is not the correct measure of loss - the correct measure of such a loss is the difference between the auction price and the cost of replacement of the particular item. In Burns v. M.A.N. Automotive (supra) at p. 667 Wilson, Dean and Dawson JJ. said:-
"... where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it to be placed in the same situation, with respect to damages as if the contract had been performed."

In my view the plaintiff will have been placed in the same position as if the contract had been performed if it receives the difference between the auction price of an item and what it would cost the plaintiff to replace that item. The reason for this is that if the plaintiff had received the reimbursement moneys from the first defendant it would not have had to sell the item and therefore would still have had that item. However what the plaintiff cannot recover is the profit which it says it would have made in normal retail sales of the item. As I have already said the plaintiff has failed to prove replacement cost of the items auctioned. Leaving aside the matters to which I have just referred, I find that the plaintiff has failed to show that demand for retail sales of the items sold at the auction was such that all of those items would have been sold at the plaintiff's listed sale price - a fact apparently assumed by the draftsman of Schedule 5. In addition the plaintiff's retail sale prices for ceramic and terracotta tiles etc. were not proved. The expected gross takings referred to in Schedule 5 were not proved by evidence and the Schedule assumes that the condition of each item was such that it could have been sold for the price specified.
Finally, if the claim under Schedule 5 were valid the quantum of that claim must be limited to an amount equal to the amount of the reimbursement moneys. Items sold which generated funds in excess of reimbursement moneys are not recoverable.
Claim for Interest under s.57 of the Insurance Contracts Act 1984
This section relevantly reads:-

"57(1) Where an insurer is liable to pay to a person an amount under a contract of insurance or under this Act in relation to a contract of insurance, the insurer is also liable to pay interest on the amount to that person in accordance with this section.
(2) The period in respect to which interest is payable is the period commencing on the day as from which it was unreasonable for the insurer to have withheld payment of the amount and ending on whichever is the earlier of the following days:-
(a) The day on which the payment is made;
(b) The day on which the payment is sent by post to the person to whom it is payable;

(3) The rate at which interest is payable in respect of a day included in the period referred to in sub-s.(2) is the rate that is the prescribed rate in respect of that day."

Regulation 32 of the Insurance Contracts Regulations prescribes a rate of 13 per cent a year.

Interest will be awarded only if the insurer is liable to pay. As I have said earlier the first defendant is not liable to pay the plaintiff for anything but if I am wrong in that view I have assessed at $7,243.75 the amount which should be paid. As I have already said I do not propose to award damages for loss of profits which the plaintiff might have derived from the application of the insurance moneys. This being so the rule against double compensation does not operate. I may say that I agree with the ruling of Perry J. in Settlement Wine Co Pty Ltd v. The National & General Insurance Co. Ltd (1994) ANZ Ins. Cases 61-209, in which His Honour decided (at 75328) that:-
"The rule against double compensation which is a "rule of the common law" is expressly preserved in the case of the Insurance Contracts Act by s.7 of that Act".

The situation then is that if the first defendant were liable to pay the sums which I have indicated for the losses claimed then interest under s.57 must in my view commence to run after a reasonable time has been allowed for the first defendant to investigate the claim.
If I were to award interest to be paid by the first defendant, the commencement date would have been 1 February 1994.
The defendants are entitled to judgment against the plaintiff.

[1997] QSC 76

4 April 1997

Key Legal Topics

Areas of Law

Insurance Law

Legal Concepts

Contract Formation

Breach of Contract

Misrepresentation

Fiduciary Duty

Compensatory Damages