Pavilion Drive Pty Ltd v 21st Platinum Holdings Pty Ltd
[2010] VCC 1822
•17 December 2010
| IN THE COUNTY COURT OF VICTORIA | Revised |
Not Restricted
AT MELBOURNE
COMMERCIAL LIST GENERAL DIVISION
Case No. CI-10-01661
| PAVILION DRIVE PTY LTD | Plaintiff |
| (ACN 089 057 527) | |
| v | |
| 21ST PLATINUM HOLDINGS PTY LTD | Defendant |
| (ACN 074 631 333) |
---
| JUDGE: | HER HONOUR JUDGE KENNEDY |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 7, 8, & 9 December, 2010 |
| DATE OF JUDGMENT: | 17 December 2010 |
| CASE MAY BE CITED AS: | Pavilion Drive Pty Ltd v 21st Platinum Holdings Pty Ltd |
| MEDIUM NEUTRAL CITATION: | [2010] VCC 1822 |
REASONS FOR JUDGMENT
---
Catchwords: claim as payee of cheque under Instruments Act 1958 – whether payment due pursuant to contract supported by consideration – whether in the alternative payment made by trustee of trust.
---
| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D. Aghion | Sackville Wilks |
| For the Defendant | Mr M. Dean | KCI Lawyers |
| HER HONOUR: |
1 Pursuant to an Instruments Act writ dated 19 April 2010, the plaintiff seeks the sum of $108,000 as payee of a cheque dated 31 December, 2009 (the cheque), together with interest pursuant to statute from 31 December, 2009.[1]
[1] The defendant’s Counsel indicated that if there was an entitlement found to the sum of $108,000 then he would not have any opposition to interest running from 31 December.
2 A director of the defendant, Mr Rohan Davis, filed an affidavit dated 4 May in support of an application for leave to appear and defend[2] which leave was given by order of 5 May. The affidavit was subsequently tendered into evidence.
[2] A defendant is not entitled to appear as of right on a writ under the Instruments Act 1958 but must obtain leave to appear and defend pursuant to s.5.
3 The plaintiff claims that it is entitled to payment as payee of the cheque on the basis of a contract or alternatively as a beneficiary under a declaration of trust.
4 The defendant says that no consideration was given for any agreement[3] and, further, that no declaration of trust is established, particularly given there is uncertainty as to what was the trust property.
[3] Defence filed 17 May 2010 paragraph 1.
5 Accordingly the issues are:
(a) whether the plaintiff has established an agreement supported by consideration; and/or (b) whether the plaintiff has established entitlement to the proceeds of the cheque as a beneficiary under a declaration of trust. Background
6 Mr Davis is a property financial advisor and has been a share trader for over 20 years, describing himself as “momentum based” in his trading (i.e. he would buy shares when there was price escalation accompanied by strong volume and hope to “sell in time”). In the middle of 2008 he was working for Ashe Morgan Winthrop and met Mr Vukadinovic who was subleasing premises on the same floor.
7 Mr Vukadinovic is an investment banker and director of the plaintiff company. He had a background in investments in the transport industry and had advised Toll Holdings and worked as managing director of Rothschilds. He later formed his own investment bank, Blackwood capital, and bought a transport company called Wettenhalls Group.
8 Both men had traded in and were familiar with “CFDs” or contracts for difference. When one enters into a CFD (or “opens a position”) one is betting against the market value of shares without ever really owning them. The benefit is that a contractor does not have to lay out the money to buy a share in the usual way but pays a margin specified by the CFD provider which is typically 5-10% of the share price. The benefit is therefore that one can control a great number of shares, and therefore potentially make larger profits, for less outlay. However, the downside is that potential losses are also greatly magnified.
9 In “late February” 2009 Mr Vukadinovic claims that he and Mr Davis met at the Pizza Napoli restaurant wherein the parties discussed the purchase of CFDs in a company known as “Asciano.” Mr Hennessy, an employee of Ashe Morgan Winthrop, was also allegedly present at the restaurant.
10 Mr Davis however claims that he had already acquired shares and options in Asciano in late February and that he only had a fairly general discussion with Mr Vukadinovic prior to purchasing the CFDs the subject of this dispute in late March.
11 The monthly statements in the name of the defendant show that on 29 March, 2009, some 450,000 CFDs in Asciano were purchased in the name of the defendant at prices ranging from 90 cents to 94.5 cents.
12 Mr Davis admits that he told Mr Vukadinovic of the purchase of Asciano CFDs set out in these statements after that purchase took place and agreed to hold certain CFDs “on his behalf.” That evidence will be referred to in full, below.
13 Later in 2009 Mr Davis also accepts that he wrote out the cheque and gave it to Mr Vukadinovic after he and Mr Vukadinovic had calculated the profit from the CFDS “which the company had agreed to hold on his behalf and which had been sold.”[4] However, he post-dated the cheque pending the outcome of another transaction.
[4] Affidavit of Mr Davis of 4 May 2010 at para 10.
14 There then followed a series of email exchanges wherein Mr Vukadinovic pursued payment, culminating in an email of 4 March entitled “debt payment” wherein Mr Vukadinovic threatened banking the cheque and issuing proceedings if the cheque was not cleared.
15 By reply email of 5 March, Mr Davis stated that the contents of Mr Vukadinovic’s emails “are rejected and without foundation. There is no debt owing.”
16 After some further heated exchanges, the cheque was subsequently dishonoured and the current proceeding issued.
Witnesses
17 Both Vukadinovic and Mr Hennessy were called on behalf of the plaintiff while Mr Davis was called for the defendant.
18 There were aspects of Mr Vukadinovic’s testimony that were unsatisfactory. Thus, at times, he appeared to be straining to establish that an enforceable agreement had been reached and that he had provided consideration for such an agreement. Further, although under examination-in-chief he admitted that he already had some positions in Asciano and that he did not have “any free funds” to increase that position, under cross examination he sought to resile somewhat from this position, suggesting that he “had the financial resources” but “chose to limit my share portfolio at that time.”
19 It was also difficult to distinguish between what Mr Vukadinovic claimed had actually been said and what was based on his subjective view of events. For example, he claimed that “his understanding” was always that, if there was a margin call, he would immediately fund the margin call.
20 Mr Hennessy attempted to give his evidence honestly, although there were some gaps in his memory. He claimed that the relevant meeting occurred in March 2009 and admitted that the men had met only one month earlier at the restaurant in January/February. However, he could not recall what was discussed at that (earlier) time. He also fairly admitted that he has had “three or four discussions” with Mr Vukadinovic in the last six months about the pivotal meeting in March.
21 Mr Davis gave evidence for the defendant. He was at times unresponsive, but nevertheless appeared to make ready concessions even against his own interest. More significantly, the account given in his affidavit (when events were more fresh) was generally consistent with his oral evidence in court.
22 There were difficulties, then, with the evidence of each witness in the case. To some extent, some of the difficulties with the evidence are explicable by the passage of time and the lack of objective written evidence. However, the case must be approached on the basis that it is the plaintiff who bears the onus. This has been less significant, in the result, however, given the admissions made by Mr Davis.
Whether contract created
23 Mr Vukadinovic alleged that an agreement was formed that any purchases or investments that Mr Davis and Mr Vukadinovic made in Asciano would be made by Mr Davis’ company, and that Mr Davis’ company would hold a third of those purchases/investments on trust for Mr Vukadinovic’s company. Once the transaction was settled, there would be a transfer of funds from the defendant to the plaintiff. If there was a loss position, then the plaintiff (or Mr Vukadinovic) would have to contribute one-third of the margin call on the plaintiff’s (or Mr Vukadinovic’s) proportion.[5]
[5] Outline of Submissions of the Plaintiff dated 9 December 2010 para 1.
24 The oral evidence of Mr Vukadinovic, as to what occurred at the Pizza Napoli in February 2009, was that the men were discussing the valuation of Asciano. Further, that Mr Davis asked what sort of work Mr Vukadinovic could do to “assist him in quantifying the conservative nature of a valuation and that, if we were convinced of that valuation, he wanted to buy some shares.” The conversation continued:
Mr Davis then “offered that if he [Mr Davis] was to buy any shares as a result of the work that we were doing, then we would share in the profits of those shares…
At that stage, at the lunch we didn’t specify the details of how the purchase would be structured. In the following days we had discussions around that any purchases made or investments made in Asciano would be made from Mr Rohan Davis’s company and that he would hold a third of those on trust for my company, Pavilion Drive …
Did you discuss what would happen, that is in terms of the mechanical processes, if Mr Davis made a profit?---Yes.
What would happen?---A third of those profits would be accounted to me…
What was the mechanical process if there was a loss?---I would have to account for my third of the margin call.
When would you have to do that?---Rohan said at the time that he had sufficient funds in the account, he could buffer it for a period of days. But my understanding was always that, if there was a margin call, I would immediately fund the margin call.
Did you discuss whether this arrangement should be documented in any way?---We said that once the transaction was complete and we knew how many shares were bought and sold that we would document it through a normal standard trust deed document, bare trust document.” (emphasis added)
25 The case for the plaintiff was that consideration was provided for this agreement constituted by the work subsequently done by Mr Vukadinovic and/or his undertaking to bear one third of the loss risk.
26 Mr Hennessy’s evidence as to the discussion at the restaurant he said was in March 2009 was that:
“[Michael] said he wasn’t in a position to buy any shares for himself at that particular time … He just didn’t have the cash available … Rohan then discussed obviously the potential, whether he would buy some shares on his account … And Michael would then obviously be a beneficiary of those shares downstream …
Did they discuss what Michael would be the beneficiary of?---The shares of Asciano that Rohan would buy on his behalf …
Did they discuss what would happen to those shares that would be bought?---I was only aware that they would be bought through Rohan and that Michael would have an interest in a percentage of those shares.”
27 Under cross examination Mr Hennessy agreed that Mr Vukadinovic indicated in his presence that he was not in a position to buy at that time because he had no cash available.
28 The evidence of Mr Davis was that he had acquired options and shares in Asciano prior to the end of March. This was corroborated by an email he wrote to a Mr Rosenbaum (a broker at Macquarie) on 16 March (at 3.09 p.m.) following receipt of a “tip” as follows: “Great tip on Asciano. Thank you again for that. What do you think. Would you still hold?” (The response received at 3.25 is to “hold”).
29 The evidence of Mr Davis was that he and Mr Vukadinovic did go to lunches. However, that he only had a general discussion about Asciano shares with Mr Vukadinovic in the office wherein Mr Vukadinovic told him that the company was not going to go out of business. Further, that no other discussions took place in relation to Asciano prior to the acquisitions at the end of March.
30 Contrary to the evidence of Mr Davis, I accept that there was some general discussion about Asciano shares at the Pizza Napoli restaurant in late February/March 2009. I also accept that, at this time, there was at least “talk” of Mr Davis buying shares on behalf of Mr Vukadinovic.
31 Such findings appear more probable than not given the recollection of Mr Hennessy (who is more independent). It also appears unlikely that Mr Davis would suddenly agree to hold shares “on behalf of” Mr Vukadinovic on 29 March in the absence of any prior discussion.
32 However, I am unable to be satisfied that the discussions went further prior to the acquisitions on 29 March. More particularly, I do not accept that the parties discussed the specifics of structure and proportions, nor that if there was a loss, then the plaintiff would have to contribute one-third of the margin call as described by Mr Vukadinovic. My reasons for saying so are as follows:
•
The evidence of Mr Vukadinovic under examination in chief as well as the evidence of Mr Hennessy was that Mr Vukadinovic did not have access to funds so as to contribute towards any loss at that time;
•
During 2008 Mr Vukadinovic conceded that he had made a net loss on Asciano of somewhere between $100,000 and $200,000 and other losses on trading CFDs he “can’t recall”;
•
There appears no good reason why Mr Vukadinovic could not have bought the CFDS/ a smaller bundle of CFDs in his own right if he was prepared to cover the loss;
•
The email of Mr Davis rejecting the characterisation of the transaction as a “debt” is consistent with an absence of a binding agreement;
•
The evidence of Mr Hennessy does not corroborate the existence of the specific agreement alleged;
•
There were some unsatisfactory parts of the evidence of Mr Vukadinovic as previously referred to above.
33 In the light of these circumstances, I am unable to be satisfied that the parties reached any binding agreement as alleged, particularly given there is no clear objective evidence to support the making of any such agreement.
Declaration of trust
34 The evidence given by Mr Davis in his affidavit[6] was:
“After the company purchased the CFDs I told Mr Vukadinovic of the purchase. During conversations shortly thereafter he asked me if the company could hold part of my CFD holding in Asciano on his behalf. He did not offer any money for the CFDs nor did he offer to accept any of the loss risks associated with the transaction. I agreed to hold 50,000 of the CFDs on his behalf because we were developing a friendship at that time. No documents were executed to reflect our transaction.
The company subsequently purchased more CFDs in Asciano through the CFD account of the company. I told Mr Vukadinovic of these additional purchases and he asked me to hold some more CFDs on his behalf. I agreed to hold a further amount on his behalf. On this occasion he did not offer any money for the CFDs nor did he offer to accept any of the loss risks associated with the transaction. No documents were executed to reflect our transaction. … ” (emphasis added)
[6] Affidavit of Mr Davis of 4 May 2010 at paras 5 and 6
35 The oral evidence of Mr Davis was similar, namely, that shortly after the purchase:
“Michael came up to me and was sort of standing over my desk and he could see I was on my CFD account and he said ‘You’re buying Asciano.’ I said ‘Yes.’ Then he said, ‘How many have you got?’ At that time I roughly had, it was 150,000 I was buying and he said, ‘Can I have 50,000, will you hold 50,000,’ you know.
What did you say to him?---He is standing over my desk and I said, ‘Yes, okay, fine.’ That was it.
Subsequent to that, were there any discussions after that time in which- - -?---Yes, there was. Michael at a subsequent occasion then said to me, ‘How many have you got now, Batman?’ You know, he’d sort of call me – it’s a nickname. I would say ‘450’. He said, ‘Can I have another 100,’ you know, of the Asciano shares.
This is of the CFDs?---CFDs, sorry.
Why on those two occasions did you agree to give him 150,000 in total of the CFDs?---Michael had really, I guess, cried – he was crying poor. He was beaten around and indicated he had lost a lot of money during the financial crisis, especially he said to me on a CFD he had been effectively wiped out. So as a friend – I at this stage was doing pretty well on the option position that I had bought and so I agreed to try and – I wanted to try and look after him.”
36 Although, as highlighted by the plaintiff, the CFD statement does not suggest that 150,000 shares were precisely held, Mr Davis only speaks in “rough” terms. Further, the statement generally supports the purchase of a total of 450,000 consistent with this evidence.
37 Mr Vukadinovic rejected this account and maintained that he had given Mr Davis “his word’ that he would cover his share of any losses.
38 For reasons already given, I do not accept the evidence of Mr Vukadinovic on this aspect, particularly his suggestion that he had promised to cover the loss. Instead, I prefer the evidence of Mr Davis as to what occurred on the day he purchased the CFDs, which evidence was against his own interests and not (understandably) the subject of challenge.
39 The question then arises as to whether this evidence is sufficient to establish a declaration of trust.
40 In order to constitute a voluntary declaration of trust, the declarant must manifest an intention presently to create a relationship in respect to property which the law characterises as a trust.[7] There must also be certainty of subject-matter and object.[8]
[7] Re Armstrong [1960] VR 202; Pascoe v Boensch (2008) 250 ALR 24 at [21].
[8] See generally Pascoe v Boensch (2008) 250 ALR 24 at [20].
41 In my view, the words and context make it clear that Mr Davis, as director of the defendant, intended to declare a trust “on behalf of” Mr Vukadinovic.
42 The defendant submitted that there was insufficient certainty of trust property. Given the large volume of transactions undertaken on 29 March, it submitted that it was unclear which shares were covered at which price.
43 However, in his affidavit[9], Mr Davis said that in or around the month of October 2009, Mr Vukadinovic requested that he meet him for coffee and demanded that he bring him a cheque. He agreed to meet Mr Vukadinovic. The following then transpired:
“During our meeting Vukadinovic said that he wanted me to write him a cheque. We calculated together the profit from the CFDs which the company had agreed to hold on his behalf and which had been sold. The amount was calculated as $108,000. I wrote out a cheque from the company for $108,000 dated it 31 December 2009 and gave it to Vukadinovic at that meeting. Vukadinovic asked me to make it payable to Pavilion Drive Pty Ltd, which was a company that I had not heard of prior to that meeting ….” (emphasis added)
[9] Affidavit of Mr Davis of 4 May 2010 at para 10.
44 Mr Vukadinovic accepted that a meeting took place in December wherein he was given the cheque, but said that the profit figure had been agreed at an earlier date in June.
45 The parties were thereby sufficiently able to identify the shares and the price to calculate and agree a profit figure from “the CFDs” which the company had agreed to hold on Mr Vukadinovic’s behalf (which profit was then paid at Mr Vukadinovic’s direction). The subject matter of the trust was therefore sufficiently certain.
46 In those circumstances, I am satisfied that a trust was declared as alleged by the plaintiff.
Conclusion
47 The plaintiff is entitled to judgment in the amount of $108,000 together with interest pursuant to statute from 31 December, 2009.
48 I will hear from the parties on the question of costs.
- - -
0
1
0