Phoenix Eagle Company Pty Ltd v Ardrey [No 3] - [2019] WASC 437

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION:   PHOENIX EAGLE COMPANY PTY LTD -v- ARDREY [No 3] [2019] WASC 437
CORAM:   KENNETH MARTIN J
HEARD:   14 OCTOBER 2019 AND BY DEFENDANT'S WRITTEN SUBMISSIONS OF 14, 24 AND 27 OCTOBER 2019
DELIVERED          :   29 NOVEMBER 2019
FILE NO/S:   CIV 3072 of 2011
BETWEEN:   PHOENIX EAGLE COMPANY PTY LTD
Plaintiff
AND
WILLIAM JAMES ARDREY
Defendant

Catchwords:

Corporations - Assessment of damages trial - Fraud and breach of fiduciary duty established by consent judgment - Part payment - Assessment of drawings hearing on affidavit evidence - Defendant self represented and partial attendance by telephone link from Canada - Start up corporation - Wound healing developmental product - Plans to market to Big Phama by licence agreements - Causation and qualification of damage of plaintiff proven - Paw paw extract - Directors' duties - Breaches - Violation of duties of honesty and fidelity - Equitable compensation - Compound interest awarded with monthly rests

Legislation:

Corporations Act 2001 (Cth)
Rules of the Supreme Court 1971 (WA)

Result:

Damages assessed

Category: B

Representation:

Counsel:

Plaintiff	:	Mr P Ward
Defendant	:	In person (by telephone for part)

Solicitors:

Plaintiff	:	Williams + Hughes
Defendant	:	In person

Case(s) referred to in decision(s):

Ardrey v State of Western Australia [2016] WASCA 154
Bennett v State of Western Australia [2012] WASCA 70
Hadley v Baxendale [1854] EWHC J70
Hollington v F Hewthorn [1943] KB 587
Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125
Mickelberg v Director of Perth Mint (1986) WAR 365
Phoenix Eagle Company Pty Ltd v Ardrey [No 2] [2016] WASC 417
Phoenix Eagle Company Pty Ltd v Tom McArthur Pty Ltd [2017] WASC 130
Westpac Banking Corporation v Bell Group Ltd (in liq) [No 3] [2012] WASCA 157; (2012) 44 WAR 1

KENNETH MARTIN J:

This is an assessment of damages exercise by a contested trial as to the quantum of damages suffered by the plaintiff, conducted on affidavit evidence.
The action was commenced by writ of summons issued on 31 October 2011. After a period of hibernation while crime related proceedings unfolded concerning the defendant (Dr Ardrey), it reawakened in August 2015. That was when the plaintiff, Phoenix Eagle (PE), made an application for freezing orders against Dr Ardrey - and which I ultimately issued on 6 August 2015. I have case managed the civil action since then in the CMC List. Some history of the dispute can be found related within my earlier reasons in Phoenix Eagle Company Pty Ltd v Ardrey [No 2] [2016] WASC 417 (Phoenix Eagle [No 2]).

Background - Dr Ardrey's fraud charges

In 2015, Dr Ardrey, a former director of PE, was tried and found guilty by a jury on multiple fraud charges relating to conduct committed against PE in the District Court of Western Australia. In 2016, the Court of Appeal set aside the convictions and ordered a retrial: see Ardrey v State of Western Australia [2016] WASCA…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2019] WASC 437
Decision Date: 29 NOVEMBER 2019

CaseChat Overview and Summary

Phoenix Eagle Company Pty Ltd (the plaintiff) sought damages against Dr Ardrey (the defendant) in the Supreme Court of Western Australia. The plaintiff alleged breaches of fiduciary duty and fraud by the defendant, who was a director of the plaintiff company. The parties had previously entered into a consent judgment that established the defendant's misconduct. The case before the court was to assess the damages owed to the plaintiff for the losses resulting from the defendant's misconduct. The court had to determine the appropriate form of damages, including whether compound interest should be awarded as part of the equitable compensation. The court also had to decide the rate of interest and the calculation method for the interest on damages.

The court examined the nature of the losses incurred by the plaintiff, the appropriateness of awarding compound interest as part of the equitable compensation, and the method of calculating such interest. The court considered the precedents and principles governing the award of compound interest in cases of equitable compensation. The court concluded that, given the nature of the losses and the defendant's misconduct, awarding compound interest was appropriate. The court also determined that the interest should be calculated at a rate of 18% per annum with monthly rests, based on the evidence and submissions presented. The court held that the plaintiff's claims for damages should be allowed, and that the defendant should pay compound interest as part of the equitable compensation.

The court ordered that the plaintiff would be awarded compound interest at 18% per annum with monthly rests on the amounts identified as established losses. The plaintiff was required to submit a minute of orders, including the compound interest calculations, within 14 days. The court also reiterated that the plaintiff should be awarded its costs of the assessment of damages hearing on an indemnity basis. The final orders should reflect the appropriate special costs order for the assessment of damages exercise.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

Alternatively, Dr Ardrey's Misconduct could also be characterised as a breach of his director's fiduciary duties and, thus, as an equitable cause of action. Hence is the scope for equitable relief against Dr Ardrey under such circumstances, where appropriate, will extend to the grant of interest as relief and requiring the payment of compound interest on lost sums as part of PE's proper level of equitable compensation for breaches of director's fiduciary duty as regards PE's losses resulting from his breaches: see Westpac Banking Corporation v Bell Group Ltd (in liq) [No 3] [2012] WASCA 157; (2012) 44 WAR 1 [1237] ‑ [1239] and [1246]. Consequently, I am left satisfied, at the end, that compound interest as compensatory relief to PE is fully appropriate here, as regards all amounts that I have earlier identified as established losses incurred by PE – and which interest amounts are recoverable as damages, or as equitable compensation against Dr Ardrey. An award to PE of compound interest at 18% per annum with monthly rests should be made for those amounts, and calculated in accord with a table to be prepared and presented by PE's lawyers - rendering calculations of interest on damages amounts as allowed, incurred from the respective times at which such amounts were paid out by and so lost to PE, all by reason of Dr Ardrey's Misconduct. The evidence before me establishes those precise dates of payment by PE by reference, in almost all cases, to ANZ bank statements of PE and found appended to Mr Richardson's October 2018 affidavit. Ultimately, I have come to the conclusion that the following claims of PE should be allowed: These reasons shall now issue to the parties. PE as the successful plaintiff now has 14 days to submit a minute of orders, including the compound interest calculations in respect of each amount as allowed above, as envisioned by counsel for PE. Further, my assessment is that order 5 of the consent orders of 24 July 2017 awards PE its costs of this assessment of damages hearing on an indemnity basis. But lest there be any level of doubt over that, the final orders (as should be reflected in PE's minute of proposed orders) should reiterate that such a special costs order should issue as fully appropriate under the present assessment of damages exercise.