Plaza West Pty Ltd v Simon's Holdings (NSW) Pty Ltd

[2011] NSWSC 263

Supreme Court

New South Wales

Medium Neutral Citation:	Plaza West Pty Ltd v Simon's Holdings (NSW) Pty Ltd [2011] NSWSC 263
Hearing dates:	24 March 2011
Decision date:	07 April 2011
Before:	Gzell J
Decision:	Notice of Motion dismissed with costs.
Catchwords:	ESTOPPEL - General Principles - plaintiff obtained judgment for damages for fraud - later proceedings in constructive trust against recipients of fraud moneys - application for summary termination - whether abuse of process - whether Anshun applied - whether earlier proceedings constituted an election between alternative remedies - whether remedies were cumulative
Legislation Cited:	Trade Practices Act 1974 (Cth)
Cases Cited:	Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589 Rippon v Chilcotin Pty Ltd [2001] NSWCA 142; (2001) 53 NSWLR 198 State Bank of New South Wales Ltd v Stenhouse Ltd (1997) Aust Torts Reports 81-423 Haines v Australian Broadcasting Corporation [1995] NSWSC 136; (1995) 43 NSWLR 404 Black v S Freedman & Co [1910] HCA 58; (1910) 12 CLR 105 Heperu Pty Ltd v Belle [2009] NSWCA 252; (2009) 76 NSWLR 230 Tang Man Sit v Capacious Investments Ltd [1996] AC 514 United Australia Ltd v Barclays Bank Ltd [1941] AC 1 Dey v Victorian Railways Commissioners [1949] HCA 1; (1948-1949) 78 CLR 62 General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125
Category:	Principal judgment
Parties:	Plaza West Pty Ltd (Plaintiff) Simon's Holdings (NSW) Pty Ltd (First Defendant) Simon Emerzidis (Second Defendant) Georgia Emerzidis (Third Defendant)
Representation:	Counsel: M Rudge SC/M Hall (Plaintiff) B Walker SC/ K Andronos (First and Third Defendants) Solicitors: Adrian Batterby (Plaintiff) Paul Bard Lawyers (First and Third Defendants)
File Number(s):	2010/289587

Judgment

1. In earlier proceedings the plaintiff, Plaza West Pty Ltd, obtained judgment for damages for fraud against Simon's Earthworks (NSW) Pty Ltd and Simon Emerzidis and, in the alternative, damages for breach of the Trade Practices Act 1974 (Cth), s 52 against Earthworks.

1. In the current proceedings Plaza West seeks relief in constructive trust against the first defendant, Simon's Holdings (NSW) Pty Ltd, Mr Emerzidis, the second defendant and Mrs Emerzidis, the third defendant. It is alleged that Earthworks was a fraudster and held the moneys obtained by fraud as constructive trustee for Plaza West. It is alleged that the moneys were paid by Earthworks to Holdings as trustee of the Emerzidis Family Trust, that Holdings gave no consideration and, to the extent that it still holds the moneys, it does so on constructive trust for Plaza West. It is alleged that Holdings distributed some of the moneys to Mr and Mrs Emerzidis as beneficiaries of the Trust who gave no consideration and they hold the moneys on constructive trust for Plaza West.

1. Holdings and Mrs Emerzidis contend that the current proceedings are an abuse of process and ought to be struck out or, in the alternative, permanently stayed and that, by way of consequential relief, freezing orders made by consent and without admission, extended from time to time and now until further order, should be dissolved.

1. The basis for the application is two fold: that by the operation of the principle in Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589 Plaza West is estopped from pursuing the relief it seeks in the current proceedings as it was unreasonable to fail to join Holdings and Mrs Emerzidis in the earlier proceedings; and that Plaza West is not entitled to relief in constructive trust as it elected to obtain relief in damages in the earlier proceedings by which election it is bound.

Anshun

1. In Anshun a hirer of a crane agreed to indemnify the owner against any claim that might be made arising out of the use of the crane. A workman suffered injury arising from the hirer's use of the crane and sued the hirer and the owner. Damages were awarded against both defendants. The owner then brought separate proceedings against the hirer claiming under the indemnity.

1. Gibbs CJ, Mason and Aiken JJ at [37]; 602 said there would be no estoppel unless it appeared that the matter relied upon in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it.

1. In Rippon v Chilcotin Pty Ltd [2001] NSWCA 142; (2001) 53 NSWLR 198 the principle in Anshun was applied to subsequent proceedings against a different defendant.

1. In that case purchasers of a business sued the vendor on the grounds that a warranty as to the accuracy of financial statements had been breached and that representations in the statements contravened the Trade Practices Act , s 52. The purchasers were successful on the contractual claim but failed on the misrepresentation claim on the basis that the purchasers had not relied on the accuracy of the figures.

1. Subsequent proceedings by the purchasers against the accountants who prepared the financial statements for damages for negligent misrepresentation were held to be subject to an Anshun estoppel. The second proceedings were an attempt to litigate against fresh parties a matter that had already been determined conclusively against the plaintiff in the earlier proceedings. The issue of reliance on the financial statements was an ultimate issue in the earlier proceedings and the attempt in the second proceedings to re-litigate the same issue against fresh parties was held to be an abuse of the process.

1. In State Bank of New South Wales Ltd v Stenhouse Ltd (1997) Aust Torts Reports 81-423, Giles CJ Comm D doubted what had been said by Hunt CJ at CL in Haines v Australian Broadcasting Corporation [1995] NSWSC 136; (1995) 43 NSWLR 404 that there was a limit on the striking out of pleadings as an abuse of process and the issue determined in earlier proceedings which is sought to be litigated in later proceedings must be one that the party propounding it in the latter lost in the former.

1. But in Rippon at [31]; 204 Handley JA, with whom Mason P and Heydon JA agreed, cited the passage from Haines with approval.

1. It is unnecessary for me to deal with this apparent divergence of views because Plaza West does not rely solely upon its non-agitation in the current proceedings of any issue it lost in the earlier proceedings and I am of the view that there are other compelling reasons for the continuance of the proceedings.

1. In State Bank at 64,089 Giles CJ Comm D set out some guiding principles which were quoted with approval by Handley JA in Rippon at [32]; 204:

"It is apparent from this brief review of the decisions that whether proceedings are, or an aspect of proceedings is, an abuse of process because a party seeks to relitigate an issue already decided depends very much on the particular circumstances. The guiding considerations are oppression and unfairness to the other party to the litigation and concern for the integrity of the system of administration of justice, and amongst the matters to which regard may be had are -

(a) the importance of the issue in and to the earlier proceedings, including whether it is an evidentiary issue or an ultimate issue;

(b) the opportunity available and taken to fully litigate the issue;

(c) the terms and finality of the finding as to the issue;

(d) the identity between the relevant issues in the two proceedings;

(e) any plea of fresh evidence, including the nature and significance of the evidence and the reason why it was not a part of the earlier proceeding; all part of -

(f) the extent of the oppression and unfairness to the other party if the issue is relitigated and the impact of the relitigation upon the principle of finality of judicial determination and public confidence in the administration of justice; and

(g) an overall balancing of justice to the alleged abuser against the matters supportive of abuse of process."

1. The issue of fraud was the ultimate issue in the earlier proceedings, but the current proceedings do not seek to relitigate that issue. They embrace it. They proceed upon the basis that Earthworks was a fraudster. It paid the proceeds of its fraud to Holdings which held them on constructive trust for Plaza West and a portion can be traced into the hands of Mrs Emerzidis who, similarly, holds the moneys on constructive trust for Plaza West.

1. The opportunity to litigate the constructive trust issue did not arise until the eleventh hour as it were. In August 2010 Macready AsJ made a disclosure order and Plaza West became aware for the first time of the existence of Holdings and its role as trustee of the Emerzidis Family Trust.

1. On 2 August 2010, the solicitors for Plaza West wrote to Holdings saying they believed that all or part of the money from Earthworks may have been received by Holdings.

1. On 31 August 2010, Plaza West successfully moved for preliminary discovery orders against Holdings. Partial compliance, it is said, with those orders gave rise to knowledge for the first time of the extent of the payments made by Earthworks to Holdings, that Mrs Emerzidis was a principal beneficiary of the Trust, and that she received significant allocations of funds from Holdings.

1. The earlier proceedings had been set down for several weeks commencing on 18 October 2010. Counsel for Earthworks and Mr Emerzidis were retained less than a week before the hearing. They sought an adjournment, which was refused.

1. On 6 October 2010, Bergin CJ in Eq heard a notice of motion of Plaza West seeking an interim freezing order against Holdings. Holdings was represented by senior counsel. Freezing orders were made by consent without admission until 5 pm on the first day of the hearing of the proceedings. Her Honour mentioned that it was most efficient to have the matters heard together or the fraud case could be heard with a separate hearing in relation to the other claim. That course was not followed for fear that it would give rise to an adjournment of the earlier proceedings.

1. It was submitted that Plaza West could have consented to the adjournment which would have given it time to have the current proceedings consolidated with the earlier proceedings or an order made that they be heard together. It was submitted that Plaza might have applied on the first day of the hearing for consolidation or an order that the proceedings be heard together.

1. But it seems to me that it was not unreasonable for Plaza West not to have taken any of these courses. It would have meant that the hearing was aborted. It was submitted that that was not necessarily so. An application might have been made for the constructive trust issue to be heard at a later date. But if that course was opposed it might not have been accepted by the trial judge.

1. So far as the terms and finality of the finding as to the issue in the earlier proceedings is concerned, I have already indicated that the finding of fraud in the earlier proceedings brought them to a conclusion but the current proceedings do not seek to relitigate that issue.

1. There is an identity between the relevant issues in the two proceedings but, again, the current proceedings adopt the finding of fraud in the earlier proceedings.

1. Fresh evidence is to be called to establish the receipt by Holdings and Mrs Emerzidis of funds transferred to Holdings by Earthworks and I have already indicated why that evidence was not called in the earlier proceedings.

1. There is no oppression or unfairness to Earthworks or Mr Emerzidis if the current proceedings are continued. They admitted fraud in the earlier proceedings and their defence was that it was not causative. The current proceedings do not retread that path. It is accepted that Earthworks and Mr Emerzidis were guilty of fraud.

1. Both the principle of finality of judicial determination and public confidence in the administration of justice would not be harmed if the current proceedings are continued. They do not seek to relitigate the issues in the earlier proceedings, which have reached finality. The current proceedings are based on the proposition that a fraudster holds funds or assets in trust for the entitled party and the money or other assets can be traced into the hands of anyone who receives them for they also hold the money or other goods in trust for the owner if they are volunteers.

1. The balancing of justice to Plaza West as against matters supportive of abuse of process favours the continuation of the current proceedings for reasons already expressed and, in particular, the non-relitigation of issues in the earlier proceedings.

1. The judgment in the current proceedings should not be struck out or stayed for Anshun estoppel.

Election

1. It was submitted that the remedies of damages for fraud and statutory damages for misleading or deceptive conduct are inconsistent with constructive trust over moneys of which the true owner has been deprived as a result of fraud and by electing to frame its claim in damages alone in the previous proceedings Plaza West has abandoned any right it might have had to pursue a claim of constructive trust of the moneys.

1. The constructive trust case in the current proceedings is based upon Black v S Freedman & Co [1910] HCA 58; (1910) 12 CLR 105 in which it was held that stolen money can be followed into the hands of a person who takes as a volunteer. Where a husband handed stolen money to his wife and there was prima facie evidence that she received it as a volunteer and no evidence was offered to rebut the inference, it was held it could be recovered.

1. Black was followed in Heperu Pty Ltd v Belle [2009] NSWCA 252; (2009) 76 NSWLR 230 at [92]; 253 where it was said that the well known principle is that a person entirely innocent of a fraud who comes to know that he or she has received and still retains the proceeds of, or taken advantage of, a fraud to which he or she was not a party, cannot knowingly seek to retain those proceeds or that advantage, without, in effect, becoming a party to that fraud and liable accordingly.

1. Reliance was placed upon Tang Man Sit v Capacious Investments Ltd [1996] AC 514 in which judgment at first instance was given against the respondent both in damages for loss of use and occupation of houses that the respondent had agreed to assign to the appellant and an account of profits and current rental payments. Those remedies being alternatives, the Privy Council held at 521 that the appellant must elect between them.

1. But the relief in the earlier proceedings and the relief sought in the current proceedings not being against the same defendant are cumulative and not alternative.

1. The leading case on the subject of election is United Australia Ltd v Barclays Bank Ltd [1941] AC 1 which was followed in Tang . The judgment of their Lordships in Tang was delivered by Lord Nicholls of Birkenhead and I set out his Lordship's stylish discussion of United Australia at 522-524:

" The leading authority on the subject of election is the decision of the House of Lords in United Australia Ltd. v. Barclays Bank Ltd. [1941] A.C. 1. Contrary to the view sometimes expressed, there is no inconsistency between the various speeches in that case if the different considerations applicable to alternative remedies and cumulative remedies are kept firmly in mind.

In that case an officer of United Australia improperly endorsed in favour of a third party, M.F.G. Trust Ltd., a cheque which was made payable to United Australia. M.F.G. paid the money into its account with Barclays Bank. The bank collected the proceeds of the cheque and placed them to the credit of M.F.G.'s account. United Australia sued M.F.G. for "money lent" and "money had and received." M.F.G. went into compulsory liquidation, the action was automatically stayed, and United Australia recovered nothing from M.F.G. United Australia then sued Barclays Bank, as the collecting bank, for damages for conversion and negligence. At the trial the bank's only defence was the technical one that the earlier abortive proceedings against M.F.G. had relieved it, the bank, from all liability. The House of Lords rejected this defence. The earlier proceedings against M.F.G. could provide the bank with no defence unless, as a result, United Australia had received full satisfaction for its loss.

Against M.F.G. the plaintiff had a choice of one of two alternative and inconsistent remedies. It could claim redress either in the form of compensation, that is, damages as for a tort, or in the form of restitution of money to which it was entitled but which M.F.G. had wrongfully received: see Viscount Simon L.C., at pp. 18-19. In this context Viscount Simon L.C. stated, at p. 19:

"At some stage of the proceedings the plaintiff must elect which remedy he will have. There is, however, no reason of principle or convenience why that stage should be deemed to be reached until the plaintiff applies for judgment."

Likewise Lord Atkin, at p. 30:

"on a question of alternative remedies no question of election arises until one or other claim has been brought to judgment. Up to that stage the plaintiff may pursue both remedies together, or pursuing one may amend and pursue the other: but he can take judgment only for the one ... "

Lord Romer's statement of principle, at p. 34, regarding election between two alternative remedies was to the same effect. Obtaining judgment for one remedy against a wrongdoer precludes a plaintiff from thereafter claiming the alternative remedy.

That was the position regarding the company's claims against M.F.G. But the remedies of United Australia against M.F.G. on the one hand and the bank on the other hand were cumulative, not alternative. Accordingly the earlier proceedings against M.F.G. could not bar the company subsequently bringing fresh proceedings against the bank unless the company had recouped the whole of its loss in the earlier proceedings. It was in this context that Viscount Simon L.C. stated, at p. 20: "the earlier proceedings against M.F.G. could provide the [bank] with no defence, unless as a result of them the plaintiffs had received satisfaction for their loss."

He reiterated this, at p. 21. Lord Atkin was similarly of the view that even if United Australia had been called upon to elect which remedy it would take against M.F.G., and indeed had received part satisfaction, that would have had no effect on the company's remedies against the bank. Lord Atkin said, at p. 31:

"If a thief steals the plaintiff's goods worth 500 and sells them to a receiver for 50 who sells them to a fourth party for 400, if I find the thief and he hands over to me the 50 or I sue him for it and recover judgment I can no longer sue him for damages for the value of the goods, but why should that preclude me from suing the two receivers for damages. . . . I can see no justice in the contention: and I know of no authority in support of it."

Lord Porter's observations, were to the like effect, at p. 50:

"an action against one . . . tortfeasor for conversion is no bar to an action against another, nor indeed does the signing of judgment against the first end the matter. The plaintiff can even then proceed to judgment against the second, and his rights are not exhausted until from one or both he has obtained the full measure of his loss."

The original basis of the form of action of indebitatus assumpsit for money had and received was a fictitious contract of loan of the money. The bank argued that by setting up this contract in its claim against M.F.G., United Australia had "waived the tort" of conversion for all purposes and, hence, could not set up the wrongful conversion against the bank. The House of Lords rejected this contention. Even if the M.F.G. action had reached judgment and the company had taken judgment for money had and received, this election by the company between the alternative remedies available to it against M.F.G. would have been a waiver of the right to recover from M.F.G. damages for the tort, not a waiver of the tort itself. In a celebrated passage Lord Atkin said, at p. 29:

"These fantastic resemblances of contracts invented in order to meet requirements of the law as to forms of action which have now disappeared should not in these days be allowed to affect actual rights. When these ghosts of the past stand in the path of justice clanking their medieval chains the proper course for the judge is to pass through them undeterred.""

1. On the basis of his Lordship's analysis of United Australia , the current proceedings seek cumulative and not alternative relief to the damages obtained in the earlier proceedings and no question of election arises.

1. In his oral reply, Mr Walker SC who with Mr Andronos appeared for Holdings and Mrs Emerzidis submitted that the passage of Lord Aitkin in United Australia at 31 set out by Lord Nicholls in Tang cannot be treated as authority in this country for the proposition that a plaintiff can have at one and the same time a remedy in damages for the whole of the money induced to be paid by fraud and a remedy in trust for any part of the money in the hands of another.

1. That is hardly an acceptable basis to strike out or permanently stay the current proceedings.

1. A case must be very clear to justify summary intervention to prevent a plaintiff submitting a case for determination in the usual way ( Dey v Victorian Railways Commissioners [1949] HCA 1; (1948-1949) 78 CLR 62 at [13]; 91). The court's powers of summary dismissal should not be exercised to deny a plaintiff access to the courts unless the lack of a cause of action is clearly demonstrated ( General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at [8]; 129).

1. Reliance upon the House of Lords in United Australia and the Privy Council in Tang is more than sufficient to reject summary termination of the current proceedings on the basis of election.

1. The notice of motion is dismissed with costs.

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Decision last updated: 11 April 2011