Omniveta Australia Pty Ltd v Modern AZ Kitchens Pty Ltd

[2015] NSWDC 431

District Court

New South Wales

Medium Neutral Citation:	Omniveta Australia Pty Ltd v Modern AZ Kitchens Pty Ltd [2015] NSWDC 431
Hearing dates:	13 October 2015
Date of orders:	13 October 2015
Decision date:	13 October 2015
Jurisdiction:	Civil
Before:	P Taylor SC DCJ
Decision:	(1)   Judgment in favour of the plaintiff against the second defendant in the sum of $211,306.03 (including $14,610.14 for interest). (2)   The second defendant to pay the plaintiff’s costs of, and incidental to, the assessment hearing. (3)   Order that the exhibit be returned forthwith (and returned in court).
Catchwords:	DAMAGES – assessment of damages – misleading conduct – knowing involvement by director – factoring arrangement – invoices not genuine – proof of damage – value of judgment against company
Legislation Cited:	Uniform Civil Procedure Rules 2005, r 16.3, r 16.7, r 30.1, Form 39
Category:	Principal judgment
Parties:	Omniveta Australia Pty Ltd ACN 160 834 579 (plaintiff) Modern AZ Kitchens Pty Ltd ACN 150 770 648 (first defendant) Aaron Alan Jackson (second defendant)
Representation:	Counsel: Mr J Stephens (plaintiff)   Solicitors: Whittens & McKeough (plaintiff)
File Number(s):	2014/329028
Publication restriction:	None

Judgment

THE CLAIM

1. Omniveta Australia Pty Ltd seeks an assessment of its damages arising from the involvement of the second defendant, Aaron Jackson, in the misleading conduct by his company, the first defendant, Modern AZ Kitchens Pty Ltd.

BACKGROUND

2. Omniveta is a factoring company. It entered into an agreement with Modern AZ Kitchens to purchase certain invoices by an advance of 85% of the value of the invoices of Modern AZ Kitchens. By the agreement, Modern AZ Kitchens warranted that the goods and services the subject of the invoices had been ordered by the customers, had been delivered or performed by Modern AZ Kitchens, and that there was no dispute in respect of the invoices. Any dispute by the customer as to liability created an entitlement in Omniveta under the agreement to recover from Modern AZ Kitchens the full amount of the relevant invoices.

3. By payment of a total sum of $196,695.89, Omniveta purchased invoices of Modern AZ Kitchens totalling $231,406.89. Omniveta received no funds from the customers. It commenced proceedings against Modern AZ Kitchens and Mr Jackson, the sole director and shareholder of Modern AZ Kitchens who signed the agreement. The verified statement of claim alleged that “there were no debts or contracts between Modern AZ Kitchens and any customers of Modern AZ Kitchens in the terms of the customer invoices” and “the customer invoices are valueless and...have always been valueless”.

4. The claim against Modern AZ Kitchens was for a contractual debt and for breach of contract and misleading conduct in relation to the invoices. The claim against Mr Jackson was for knowing involvement in misleading conduct.

DEFAULT JUDGMENT

5. Modern AZ Kitchens and Mr Jackson were served but neither entered an appearance or filed a defence. Default judgment on the liquidated claim for $231,406.89 plus interest and costs against Modern AZ Kitchens was awarded on 27 February 2015, and default judgment on the unliquidated claim against Mr Jackson with damages to be assessed was awarded on 4 September 2015. There is no direct evidence before the Court, nor was there on the awarding of default judgment, proving the claim against either defendant or even proving the actual default.

6. In respect of default judgment with damages to be awarded, rr 16.3 and 16.7 of the Uniform Civil Procedure Rules 2005 require, and Form 39 confirms, that in addition to proof of service, all that is required by the affidavit in support is evidence of the matters listed in r 16.7(2), namely, that the matter has not settled, the source of the deponent’s knowledge, the extent to which costs are claimed and the method and time of service. The default, such as the absence of an appearance or defence or some other default, presumably can be established from the court file.

7. The default judgment allows a court to assume, and may preclude a defendant from contesting, liability on the statement of claim in favour of the plaintiff. Thus, I need not consider whether Mr Jackson was knowingly involved in misleading conduct. The default judgment determines that matter.

ASSESSMENT OF DAMAGES

8. Pursuant to Pt 30 of the Uniform Civil Procedure Rules 2005, where judgment has been given against a party with damages to be assessed, the proceedings are to proceed to trial for an assessment of damages (r 30.1(2)). Thus, assuming Mr Jackson is liable in accordance with the judgment, as I must, the issue is what damages were caused by his conduct established by the judgment, that is, what loss was occasioned to Omniveta by the pleaded conduct of Mr Jackson.

9. Omniveta established that in reliance upon the representations, it paid the sum of $196,695.89. This is the amount of its loss, so long as the default judgment against Modern AZ Kitchens and its rights against the customers under the invoices are worthless. As to the second matter, there is no direct evidence about the absence of payment of the invoices or of the customers’ rejection of them. But liability on the misleading conduct claim involves acceptance of the pleaded facts that there were no debts or contracts the subject of the valueless customer invoices, as quoted above. This is sufficient to establish that, on the balance of probabilities, no payments have been received from the customers on the invoices and that the invoices are worthless. That leaves the question of the value of the default judgment against Modern AZ Kitchens.

10. Mr Stephens, who appears for Omniveta, obtained instructions and informed the Court that no moneys have been recovered from the company, notwithstanding the judgment for the liquidated sum many months ago. The affidavits of attempted service on Mr Jackson indicate that no business is being conducted by Modern AZ Kitchens. In that event, I am persuaded, on the balance of probabilities, that no moneys have been or are likely to be paid by Modern AZ Kitchens. In the event that any moneys were recovered, they would of course be a credit in favour of the judgment against Mr Jackson as well as the judgment against Modern AZ Kitchens.

11. The orders of the Court are:

1. Judgment in favour of the plaintiff against the second defendant in the sum of $211,306.03 (including $14,610.14 for interest).

2. The second defendant to pay the plaintiff’s costs of, and incidental to, the assessment hearing.

3. Order that the exhibit be returned forthwith (and returned in court).

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Decision last updated: 11 July 2018