Reitano v Jones

[2001] NSWSC 1076

Reported Decision: 54 NSWLR 661

New South Wales

Supreme Court

CITATION:	Reitano v Jones [2001] NSWSC 1076
CURRENT JURISDICTION:	Equity Division
FILE NUMBER(S):	SC 3686/94
HEARING DATE(S):	25 September, 22 October, 16 November 2001
JUDGMENT DATE:	23 November 2001
PARTIES :	Alfred Concetto Joseph Reitano, Rosa Oliveri, Joseph Oliveri and Emanueli Oliveri (Cross-Defendants/Appellants) Michael Gregory Jones (Cross-Claimant/Respondent)
JUDGMENT OF:	Young CJ in Eq

LOWER COURT JURISDICTION :	Supreme Court (Master)
LOWER COURT FILE NUMBER(S) :	3686/94
LOWER COURT JUDICIAL OFFICER :	Master McLaughlin

COUNSEL :	B W Rayment QC and P Conway (Cross-Defendants/Appellants) M Broun QC and D Durston (Cross-Claimant/Respondent)
SOLICITORS:	Di Lizio & Associates (Cross-Defendants/Appellants) McCabes (Cross-Claimant/Respondent)
CATCHWORDS:	TORTS [237]- Conspiracy- Elements- Conspiracy to injure bankrupt estate not actionable- Overt act may be positive or negative.
CASES CITED:	Allen v Flood [1898] AC 1 Carrington v Taylor (1809) 11 East 571; 103 ER 1126 Conte v Flood 277 NYS (2d) 697 Cox v Journeaux (No 2) (1935) 52 CLR 713 Elders Rural Finance Ltd v Westpac Banking Corp (1988) 4 BPR 9383 Gregory v Brunswick (Duke) (1843) 6 Man & G 205; 134 ER 866 Hutchins v Hutchins (1845) 7 Hill 104 Kearney v Lloyd (1896) 26 Ir Rep 268 Lonrho Plcv Fayed [1992] 1AC 448 Marrinan v Vibart [1963] 1 QB 234 McKernan v Fraser (1931) 46 CLR 343 Rogers v Dutt (1860) 13 Moo PC 209; 15 ER 78 Savile v Roberts (1697) 1 Ld Raym 374; 91 ER 1147 Schoolmasters' case (1356) YB 29 Ed 3 State v Erwin 120 P (2d) 285 (1941) (Utah) Sweeney v Coote [1906] 1 Ir Rep (Ch) 51 Victoria Park Racing & Recreation Grounds Ltd v Taylor (1937) 37 SR (NSW) 322
DECISION:	See para 43.

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

3686 of 1994
YOUNG CJ in EQ
Friday 23 November 2001

REITANO v JONES

Judgment

: This is an appeal from a judgment of Master McLaughlin of 1 February 2001. The learned Master declined to dismiss part of a cross-claim under Part 13(5) of the Supreme Court Rules.

2 The part of the cross-claim in question essentially pleads that the cross-claimant (Jones) is a Trustee in Bankruptcy and was Trustee in the bankruptcy of Dominic Laurence Oliveri (DLO). It is alleged that the cross-defendants fraudulently conspired together to cheat and defraud the cross-claimant by denying the bankrupt estate the full value of DLO’s interest in land in Palmer Street, East Sydney. The overt acts were to purchase the mortgage over that land from the Commonwealth Bank, then to permit the bankrupt and his solicitor to occupy the premises erected on the land rent free whilst interest still ran on the mortgage. The effect of this was the continued erosion of the value of the bankrupt’s equity.

3 The learned Master said in paragraph [17] of his judgment that the cross-claimant needed to establish a number of elements including that it was the predominant purpose of the combination of the cross-defendants to cause harm or injury to the cross-claimant. The learned Master found that he was not satisfied that the cross-claim was doomed to failure and thus declined to strike it out.

4 The learned Master was influenced to a great degree by the fact that the pleader had followed the 12th edition of Bullen & Leake on Pleadings (Sweet & Maxwell, London, 1975).

5 Unfortunately, two matters were overlooked below: (1) that the 12th (1975) edition of Bullen & Leake ante-dated the decision by the House of Lords in Lonrho Plc v Fayed [1992] 1 AC 448 and that it is out of date in this respect as hinted at in the 13th (1990) edition at page 220, and now clearly stated in the 14th (2001) edition at p 823; and (2) that the pleading did not actually plead that the predominant purpose of the conspiracy was to injure the cross-claimant.

6 Thus, when the argument on the appeal commenced before me on 25 September last, it soon became apparent that both sets of counsel were arguing the very same point.

7 It was thus apparent that the appeal had to be allowed. However, I adjourned the hearing for further submissions. It was relisted on 22 October 2001, but after acquainting counsel with various authorities I had discovered in the meantime, it was further adjourned as the whole action seemed close to settlement.

8 On 16 November, I was told that settlement negotiations had broken down. I heard further argument and then announced that I had reached the conclusion that the cross-claim in conspiracy could not stand. I indicated that I would give my reasons in due course. I gave some directions for the trial and listed the matter for further directions before me at noon on 29 January 2002.

9 I will now give the detailed reasons for my decision on the cross-claim. As indicated earlier, the key question is whether it is possible to save the cross-claim by granting leave to amend.

10 Counsel for the cross-claimant formulated the proposed amendments to the pleading and the particulars and these were delivered to the court shortly before the proposed hearing of 22 October. The key amendment is to add to paragraph 5 of the cross-claim the words “with the predominant purpose of injuring the cross-claimant’s legitimate interests.”

11 I should also note the proposed amendment to the particulars by adding para 6(fa) “The first and second cross-defendants refrained from taking any step to enforce the mortgage by sale or otherwise apparently contrary to their own interests.” I will return to this proposed amendment later in these reasons.

12 Mr Rayment QC, who appears with Ms Conway for the appellants says that the key amendment is still insufficient as the pleading does not say “injure the cross-claimant”, but “injure the cross-claimant’s legitimate interests”.

13 Mr Broun QC and Mr Durston for the cross-claimant say that this is outside the grounds of appeal. Mr Rayment QC and Ms Conway say that, at the worst, all that needs to happen is for there to be an amendment to the notice of appeal, but, as the pleading is clearly bad, the real question is how it can be amended. I agree with the latter submission.

14 It is thus unnecessary to consider the ambit of an appeal from a Master in the present case.

15 Mr Broun QC agreed that it was essential for a claim in civil conspiracy that the conspiracy be directed against the cross-claimant personally. However, he put, that whilst it was true that in the present case the conspiracy was directed against the bankrupt estate and to the detriment of the bankrupt estate, the conspiracy was actually directed at Mr Jones sitting in his office working on his file rather than to Mr Jones at home or on the tennis court. It was directed at the bankrupt estate of which he was Trustee. There is no principle that a claim in conspiracy can only be brought by an individual person. Large corporations can bring a claim; eg Lonrho Plc v Fayed [1992] 1 AC 448. Further, the attack may be designed to injure not so much the person of the claimant but his business or undertaking, in effect his legitimate interests or reasonable expectations.

16 Counsels’ submissions continued by saying that Mr Jones’ legitimate interest, indeed, his very duty, is to protect the bankrupt estate and to bring into it such funds as may legally and properly be able to the bankrupt estate. In Allen v Flood [1898] AC 1, although the parties were natural persons the discussion is of interference of rights and the consequences flowing from interference in rights rather than the direct infliction of damage. The interference with rights seems to come first and the question of damages is consequential. The Trustee in Bankruptcy has an obligation as well as the right to pursue his legitimate claim in respect of the quarter interest in the relevant property and, accordingly, has a cause of action against those who conspire to ensure that the trustee received nothing in respect of that quarter interest.

17 With respect, Mr Broun QC’s analogy of a corporation suing in conspiracy does not surmount the difficulty. In such a case, the plaintiff is the one which suffers in its person or property.

18 As the action in conspiracy is an action on the case, special damage must be pleaded and proved. As Lord Holt said in Savile v Roberts (1697) 1 Ld Raym 374, 378; 91 ER 1147, 1150, a passage which has been repeated on many occasions since, “an action will not lie for the greatest conspiracy imaginable, if nothing be put in execution.”

19 In Marrinan v Vibart [1963] 1 QB 234, Salmon J (whose decision was affirmed in the Court of Appeal see [1963] 1 QB 528), put the matter simply, but accurately, when he said at p 238, “The gist of the tort of conspiracy is not the conspiratorial agreement alone, but that agreement plus the overt act causing damage.”

20 Such damage is direct damage to the plaintiff’s person or property; see eg Rogers v Dutt (1860) 13 Moo PC 209, 241; 15 ER 78, 90. This passage was accepted in this court in Victoria Park Racing & Recreation Grounds Ltd v Taylor (1937) 37 SR (NSW) 322, 337-8 (the point was not considered on the appeal to the High Court (1937) 58 CLR 479).

21 It is certainly correct to say that in Allen v Flood (supra) such damage was held to include damage to the reputation of a business, including the right to trade. The Law Lords referred to ancient and then modern authority to support that proposition, commencing with the Schoolmasters’ case (1356) YB 29 Ed 3 in which a schoolmaster was held able to sue for damage to his business when the defendants beat and terrorized his pupils so that they did not attend his school. See also Carrington v Taylor (1809) 11 East 571; 103 ER 1126 where an action was held to lie for indirect damage to a duck shooting range where the defendant was frightening the ducks upstream.

22 However, there is nothing in Allen v Flood or the authorities cited in it which would extend to damage caused to property which a trustee was administering in bankruptcy.

23 The nearest case to the present is Hutchins v Hutchins (1845) 7 Hill 104, which is cited in Pollock on Torts, 11th ed (Stevens, London ,1920) pp 324 et seq and still appears as a footnote to the latest 15th ed, 1951 p 242.

24 The facts in Hutchins were that the defendants, after the plaintiff’s father had made a will devising his land to the plaintiff, conspired with each other to induce the testator to revoke it. The defendants demurred and the New York Full Supreme Court allowed the demurrer and dismissed the action

25 The Court held that it was insufficient that the conspirators may have induced a testator to revoke his will as this did not cause the testator any damage. The plaintiff did not have any property in the lands originally devised, and so the defendants’ actions had caused him no legal damage.

26 In Rogers v Dutt (supra) the same point was made though with less emphasis. The appellant was a tugboat owner who had attempted to charge very high rates to tow British warships up the Hooghly River at Calcutta during the Indian Mutiny. he government officials then prohibited the use of the appellant’s boat by any government agency. The appellant lost considerable income from this. However, he failed in conspiracy because just as he could demand high prices, so could the government decline to use his services and he had no legal right to expect government contracts.

27 Again in Kearney v Lloyd (1896) 26 Ir Rep 268, an alleged conspiracy to remove a parish clergyman by the parishioners declining to give to his sustenance fund was not actionable as the clergyman had no right to compel their gifts. See also Sweeney v Coote [1906] 1 Ir Rep (Ch) 51 where a parents’ meeting decided to withdraw their Presbyterian children from the plaintiff (a Roman Catholic) so reducing the plaintiff’s salary which depended on the number of scholars she taught.

28 In my view, both principle and what authority there is supports the proposition that in conspiracy the damage must affect the plaintiff personally or the plaintiff’s property or personal business interests. An effect on business interests operated as trustee is insufficient.

29 The cross-claim on conspiracy thus cannot succeed even if amended. It must thus be dismissed.

30 I must now deal with four subsidiary matters.

31 The complaint made by the cross-claimant refers to the conduct of the cross-defendants after they had purchased the first mortgage on the property. As the cases show, activity in this type of situation is hard to deal with because of the commixture of various conflicting legal and equitable principles; see eg Elders Rural Finance Ltd v Westpac Banking Corp (1988) 4 BPR 9383, 9385, where the limited scope of equitable interference in such transactions is discussed.

32 The next matter is whether the overt acts alleged are sufficient.

33 Despite the oft-repeated statement that overt acts need to be pleaded and established, there is little in the cases or textbooks to define what is meant by an overt act.

34 The starting point appears to be the definition in Coke’s Institutes (3 Inst 12) cited in Stroud’s Judicial Dictionary of Words and Phrases, 4th ed (Sweet & Maxwell, London, 1973) that “An overt act is an open act which must be manifestly proved.”

35 Mr Broun QC submits that it is incorrect to say that the overt acts must be positive acts. It is sufficient that they be open and manifest and public so that evidence may be given about them, but that is all. The scenario must exist whereunder something happened by itself or in combination with other happenings whereby an inference may be drawn that the conspiracy has proceeded beyond mere intention.

36 Mr Broun QC cited no authority for his submission, nor have I been able to find any direct authority. Indeed, there is a dictum against it in New York. In Conte v Flood 277 NYS (2d) 697, 698-9, Pittoni J said that an overt act “must be a specific, affirmative, independent, identified overt act done to further the object of the conspiracy”. Nonetheless, I consider that Mr Broun QC’ s submission must be correct.

37 In Kearney v Lloyd (supra) the negative act of not giving to the minister’s fund seems to have been considered to be an overt act.

38 Indeed, the more one thinks about it, negative acts may be the only possible overt act. There are a couple of criminal cases from Utah which illustrate this. The alleged conspiracy was that the police had deliberately permitted brothels to trade by taking no action to close them when they could and should have done so (see eg State v Erwin 120 P (2d) 285 (1941) (Utah)).

39 Again, there is the leading case of Gregory v Brunswick (Duke) (1843) 6 Man & G 205; 134 ER 866 which points me in the same direction. There it is said that there was a conspiracy to minimise the plaintiff’s earning capacity as an actor by organising hissing, groaning and shouting at his performances. Would the position have been any different if the conspiracy had been to organize bored silence in lieu of applause?

40 The next matter which was raised in the notice of appeal, but was not really argued on appeal was whether the following dictum from Evatt J in McKernan v Fraser (1931) 46 CLR 343, 364 represented the current law. Evatt J said, “It now seems clear that the tort of civil conspiracy cannot be established unless the plaintiff proves (inter alia) the existence of a conspiracy punishable in criminal jurisdiction.”

41 The learned Master held that this dictum should not be followed. He held that it was inconsistent with later authority in particular what was said by Dixon J in Cox v Journeaux (No 2) (1935) 52 CLR 713, 717. The learned Master was correct in his view.

42 The final matter concerns the debate as to whether the cross-claimant should be permitted to amend the particulars especially with respect to para 6(fa) set out earlier in these reasons. This question went away because of my decision on the principal point. However, I should record that Mr Rayment QC sought to present evidence that the proposed new particulars under heading (fa) were contrary to established fact. I declined to receive that evidence as the way my mind was working at that stage, which I ultimately confirmed after listening to the remaining argument, was that it could not assist on the principal point and that any other point was irrelevant.

43 Accordingly, the appeal is allowed with costs, the orders of Master McLaughlin set aside and in lieu the Court orders that the part of the cross-claim that alleges conspiracy against the cross-defendants be struck out.

44 The proceedings will be listed before me at noon on 29 January 2002 for the purpose of giving further directions for their trial.

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Last Modified: 11/26/2001