Restoration PL v Bowenbrae PL; Ultimate Aerobatics PL v Flying Fighters Maintenance and Restoration PL - [2012] QDC 332

DISTRICT COURT OF QUEENSLAND

CITATION:

Bowenbrae PL & Anor v Flying Fighters Maintenance and Restoration PL; Flying Fighters Maintenance and Restoration PL & Anor v Bowenbrae PL & Anor; Ultimate Aerobatics PL v Flying Fighters Maintenance and Restoration PL [2012] QDC 332

PARTIES:

BOWENBRAE PTY LTD (ACN 060 747 377)
(first plaintiff)

and

NIGEL EDWARD ARNOT
(second plaintiff)

v

FLYING FIGHTERS MAINTENANCE AND RESTORATION PTY LTD (ACN 087 084 197)
(defendant)

FLYING FIGHTERS MAINTENACE RESTORATION PTY LTD (ACN 087 084 197)
(first plaintiff by counterclaim)

and

FLYING FIGHTERS PTY LTD (ACN 067 895 005)
(second plaintiff by counterclaim)

v

BOWENBRAE PTY LTD (ACN 060 747 337)
(first defendant by counterclaim)

and

NIGEL EDWARD ARNOT
(second defendant by counterclaim)

ULTIMATE AEROBATICS PTY LTD (ACN 061 278 564)
(plaintiff)

v

FLYING FIGHTERS MAINTENANCE AND RESTORATION PTY LTD (ACN 087 084 197)
(defendant)

FILE NO/S:

BD1528/08
BD1907/08

DIVISION:

Brisbane Registry

PROCEEDING:

Commercial List

ORIGINATING COURT:

District Court, Brisbane

DELIVERED ON:

6 November 2012

DELIVERED AT:

Brisbane

HEARING DATES:

12 July and 30 August 2012 (rulings on evidence); and
10, 11, 12, 13, 14, 17, 18, 19, 25 and 26 September 2012 (trial)

JUDGE:

Dorney QC, DCJ

ORDERS:

1. In proceeding BD 1528/08, the judgment of the Court is that:

On the claim:(a)

FFMR deliver up to Bowenbrae the Staggerwing aircraft VH-BBL;(i)

FFMR pay Bowenbrae the amount of $1,000.00 as damages for the detention of the Staggerwing aircraft VH-BBL;(ii)

((b(b)On the counterclaim:

Arnot pay FFMR $299,792.67 as equitable compensation; and(i)

Arnot pay FF $79,794.95 as equitable compensation.

(ii)

2. In proceeding BD 1907/08, the judgment of the Court is that FFMR have judgment against UA on the claim.

3. The Court gives leave to the parties to file and serve written submissions on the issue of interest by 4:00pm on 13 November 2012.

4. The Court gives leave to the parties to file and serve written submissions on costs, by 4:00pm on 13 November 2012.

5. Both parties to bring in Short Minutes of the Judgments upon determination of all outstanding issues.

CATCHWORDS:

Detinue – recovery (where possessory and/or equitable lien alleged) – damages (and whether nominal and exemplary) Fiduciary duty –– whether equitable compensation - whether equitable charge – whether compromise – whether plea in bar operable

Corporations Act 2001 (Cth) ss 286(1), 1305(1), 1305(2)

Campbell, Some Historical and Policy Aspects of the Law of Equitable Liens (2009) 83 ALJ 97
Mason, Carter and Tolhurst, Mason and Carter’s Restitution Law In Australia , 2^nd ed (2008)
Meagher, Gummow and Lehane, Equity: Doctrines and Remedies, 4^th ed (2002)
Sykes and Walker, The Law of Securities, 5^th ed (1993)
Young, Croft and Smith, On Equity (2009)
Young, Declaratory Orders, 2^nd ed (1984)

Albemarle Supply Co Ltd v Hind & Co [1928] 1 KB 307
Anderson & Ors v ASIC [2012] QCA 301
ASIC v Rich (2005) 53 ACSR 752
BC Timber Industries Journal v Black [1934] 3 DLR 31
Beaton v McDivitt (1985) 13 NSWLR 134
Bennett v Minister of Community Welfare (1992) 176 CLR 408
Blacktown City Council v Hocking [2008] NSWCA 144
Bolwell Fibreglass Pty Ltd v Foley [1984] VR 97
CBA v Marwan Tabet [2008] VSC 161
Day v Perisher Blue Pty Ltd [2005] NSWCA 110
Deputy Commissioner of Taxation v Dick (2007) 64 ACSR 61
Duvall v Spry [1982] 2 NSWLR 68
Egan v State Transport Authority (1982) 31 SASR 481
Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89
Fischer v Automobile Finance Co of Australia Ltd (1928) 41 CLR 167
Hall v Poolman (2007) 65 ACSR 123
Hartnett v Hynes [2009] QSC 225
Hewett v Court (1983) 149 CLR 639
Jones v Dunkel (1959) 101 CLR 298
Lawes v Nominal Defendant [2008] 1 Qd R 369
Malec v JC Hutton Pty Ltd (1990) 169 CLR 638
Medlik & Anor v Toowoomba City Council No 3063 of 1996, Supreme Court, 3 June 1998 Brisbane, Justice White
Monaghan Surveyors Pty Ltd v Stratford Glen-Avon Pty Ltd [2012] NSWCA 94
O’Halloran v RT Thomas & Family P/L (1998) 45 NSWLR 262
Palace Backpackers Australia Pty Ltd v Christensen Industries Pty Ltd [2002] QDC 084
Pilmer v The Duke Group Limited (in liq) (2001) 207 CLR 165
Protean Enterprises (Newmarket) Pty Ltd v Randall [1975] VR 327
R v Towey (1996) 21 ACSR 46
Schmidt v Schmidt [1969] QWN 3
Spencer v Commonwealth (1907) 5 CLR 418
Strand Electric and EngineeringCo Ltdv Brisford Entertainments Ltd [1952] 2 QB 246
Tubby Trout Pty Ltd & Anor v Sailbay Pty Ltd& Ors (1992) 113 ALR 748
Twynam Agricultural Group Pty Ltd v Williams [2012] NSWCA 326
University of Western Australia v Gray and Ors (No. 28) (2010) 185 FCR 335
United States Surgical Corporation v Hospital Products International P/L & Ors [1982] 2 NSWLR 766
WAQ v Di Pino [2012] QCA 283
Worrell v Issitch [2001] 1 Qd R 570

COUNSEL:

S J Given (for the first and second plaintiffs and the defendants by counterclaim in the first proceeding; and for the plaintiff in the second proceeding)

P J Roney SC (for the defendant and the plaintiffs by counterclaim in the first proceeding; and for the defendant in the second proceeding)

SOLICITORS:

Gall Stanfield & Smith Solicitors (for the first and second plaintiffs and the defendants by counterclaim in the first proceeding; and for the plaintiff in the second proceeding)

Bickfords Lawyers (for the defendant and the plaintiffs by counterclaim in the first proceeding; and for the defendant in the second proceeding)

CONTENTS
Para No.
Introduction	[1]
Chronology (corporate matters)	[8]
Other relevant events	[16]
Credibility	[24]
Arnot	[26]
S Hart	[34]
Petersen and L Hart	[39]
Tracey Anne Keller	[46]
Further witnesses	[48]
Proof of business records	[52]
Possessory liens	[61]
Equitable “liens”	[66]
Declaratory Orders (concerning liens)	[70]
Detinue	[71]
Breach of fiduciary duty	[82]
Limitation defences	[87]
Existence, and effect, of a compromise	[91]
The limitations on use of photographs	[94]
Damages for “legal costs”	[96]
“Restitution damages” and restitution generally	[105]
Equitable compensation	[106]
Recovery of Staggerwing VH-BBL	[110]
Damages for detention	[136]
Staggerwing; and Arnot’s fiduciary duty	[141]
Equitable lien	[156]
UA’s claim for services (including supply of parts and materials)	[161]
Compromise “in full”?	[172]
Value of Cub aircraft	[183]
Work on the Stearman	[188]
Yak 52 VH-VVS parts	[197]
Coad work (Yak 50 VH-YVO)	[202]
Claim for legal costs (Pitts Special VH-KKT)	[211]
Zero aircraft	[228]
Remaining relevant witnesses	[246]
Interest	[250]
Costs	[253]
Summary	[254]

Introduction

Nigel Edward Arnot (“Arnot”) and Steven Irvine Hart (“S Hart”) were in the late 1990s not only friends but also persons who both had a passion for aviation with a particular interest in aerobatics and flying “Warbirds” (a description of military aircraft from various 20th century wars), which aircraft included, amongst others, the Spitfire, the Zero, the Sea Fury, the Trojan, the MIG and a Russian military training aircraft, the Yak.

By an offer in writing made by Flying Fighters Pty Ltd (“FF”), then named Unlimited Aerobatics Pty Ltd (“UA”), dated 5 October 1998, to Arnot’s “company” UA contract work for, essentially, the proper maintenance of aircraft including that of all aircraft owned by FF was offered. There is some significant dispute about whether the work also involved buying and selling aircraft (and aircraft parts) on behalf of FF (for aircraft) and later FFMR (for parts) and, perhaps, other persons. Although that letter sought a signature on behalf of the contemplated company, it was never signed and returned, although Arnot, presumably as an employee of UA, began providing such services. While S Hart contended that the offer was made “to commence work with” Flying Fighters Maintenance and Restoration Pty Ltd (“FFMR”), considering that that company, then named Unlimited Aero Maintenance Pty Ltd (“UAM”), was only registered on 12 April 1999 (adopting the new name on 1 October 2001), it must have been with FF: see later discussion at [10] and [14] and S Hart’s acknowledgement that FF paid “Arnot” until March 1999. This, as it has turned out, has been typical of the looseness with which important evidence in these two proceedings has been given, which is also illustrated by the use by both Arnot and S Hart of personal and possessive pronouns when, in reality, describing corporate entities of which they were directors or, sometimes, only employees or agents or even advisors. This is despite S Hart, in particular, stressing in his affidavits that FF was a separate legal entity which owned the relevant aircraft so that the “assets” were “removed” from any maintenance based “risk” (i.e. that FFMR would have).

While a full survey of the actual contractual relationships – insofar as they can be determined – will be canvassed later, the close relationship between Arnot and S Hart began to deteriorate after the Australian Federal Police, with warrants, raided FFMR’s hangars at Archerfield on 9 May 2003. At its briefest, at a staff meeting of FFMR on 10 June 2003, S Hart told Arnot to remove one of “his” Warbirds, a Staggerwing aircraft VH-BBL, to which Arnot responded, in terms, that, if the Staggerwing went, he would also (though both the Staggerwing and Arnot stayed for some time still). Eventually, by a letter dated 22 September 2006, Arnot, as director of UA, stated that “I hereby withdraw my” services from FFMR. A final confirmation of Arnot’s rejection of any offer to continue by him, or UA, or both was sealed by the later letter of 5 October 2006 sent by UA, under the hand of Arnot, stating that “I” had decided to decline a proposed offer to take over FFMR.

Although there are aspects of the issues raised which emerged earlier than late 2006, it is from that time onwards that the relationship between Arnot and S Hart irreversibly deteriorated, leading to the present pleadings – in their amended and abandoned forms - in both proceedings. Both proceedings were ordered to be heard together, noting the similarity of witnesses and parties.

Although the pleadings, as amended in both proceedings, ranged far wider, what this Court has been asked to decide – which is still extremely wide and complex – are:

· whether there should be delivery up of the Staggerwing by FFMR to Arnot, or Bowenbrae Pty Ltd (“Bowenbrae”), or both [with a determination of whether there is a possessory lien existing, or an equitable “lien” (or charge), or both, and, if a possessory lien, the amount outstanding or, if an equitable charge, the amount of such charge];

· further, if the Staggerwing has been wrongfully detained, or there was trespass to it, what damages, if any (and, if so, whether nominal only, or whether exemplary) are to be awarded;

· whether UA is owed $110,161.30 for “services rendered” [against which UA concedes a partial satisfaction of $35,000.00 for the sale of a Piper Cub J3 (“Cub”) aircraft] or whether there has been a compromise of this claim such that no amount is now owing;

· if FFMR has a provable claim against Bowenbrae and Arnot for $245,061.45 as “restitution” for works undertaken for and to their benefit whether, as Arnot asserts, in stark contrast, there was an agreement, as varied, between Arnot and S Hart such that, in consideration of Arnot’s forbearance to enforce an alleged loan of $275,000.00 to S Hart it was agreed between Arnot and FFMR that not only would the principal sum be repaid within 12 months but also the interest accruing on the loan would be “off-set” by restoration work to be undertaken by FFMR’s employees on the Staggerwing at no cost to Arnot and/or Bowenbrae;

· whether FFMR, regardless of any enforceable claim for restitution (as claimed above), is entitled against Arnot to damages for breach of Arnot’s duties as a director and officer of FFMR and, or alternatively, equitable compensation for breach of fiduciary duty, for not only the $245,061.45 but also for some or all of:

· $37,457.52 for restoration that Arnot allegedly caused to be undertaken on a Stearman aircraft VH-SNM;

· $454.95 for parts that Arnot allegedly caused to be purchased from Aircraft Spruce & Speciality Co for a Yak aircraft 52 VH-VVS;

· $2,773.70 for maintenance work by FFMR Arnot allegedly caused to be undertaken by UA on a Yak 50 aircraft VH-YVO (owned by Michael Coad);

· $14,500.00 for legal costs incurred as a consequence of seeking to recover charges for work undertaken on a Pitts Special aircraft VH-KKT; and

· whether FF has enforceable claims against Arnot for $79,794.95 for amounts allegedly received by Arnot and for which he failed to account (being part of the payments made to Richard Goode concerning an unsuccessful attempt to purchase a Zero aircraft by FF) for alleged breaches of Arnot’s duties as a director and officer of FF and, or alternatively, equitable compensation for breach of fiduciary duty.

As was pointedly indicated by Bowenbrae and Arnot in their joint written submissions, numerous other counterclaims advanced by both FFMR and FF have been abandoned either prior to, or during, the two proceedings here, including allegations of:

· a non-particularised claim for $50,000.00 for the theft of aircraft parts;

· a claim for $200,000.00 for lost commissions on the sale of aircraft;

· a claim for $100,000.00 for the theft of: 2 large aircraft tow-bars; various Yak 3 aircraft parts; various Yak 50 aircraft parts; 2 aircraft fabric rolls; aircraft dope; a gas bottle; tools; spray guns; and a T 28 aircraft propeller and engine [although these last two result from the recovery of them (or their kind) late in the week beginning 17 September 2012 and, as asserted in written submissions, notwithstanding that the valuable papers associated with the engine are missing, it is contended that the circumstances of removal and recent “discovery” by Arnot remain relevant to issues concerned with Arnot’s credit];

· a claim for $130,000.00 for a secret commission on the sale of an L 39 aircraft; and

· a claim for $98,000.00 for the proceeds of the sale of a Yak aircraft misappropriated by Arnot.

Although those abandoned claims were contended by the plaintiffs by counterclaim in the first proceeding to be approached on the basis that legal advice given stated that there was not sufficient evidence to maintain them, it must remain of concern to the Court that it was considered that there was sufficient evidence to make the allegations in the pleadings concerning them in the first place. If it can be taken no higher, it at least indicates the level of antipathy that now exists between Arnot and S Hart (together with those who support the latter). Also in this mix is the abandoned claim by Bowenbrae for damages for “malicious and/or vexatious prosecution”. All these matters may have consequences in costs orders to be made.

Chronology (corporate matters)

Because of reasons to be canvassed later dealing with my concerns about the credibility of the major players – which not only includes Arnot and S Hart but also Shirley Ann Petersen (“Petersen”) and Laura Elizabeth Hart (“L Hart”) – I intend to rely primarily upon relevant documentation put in evidence, or upon matters which are the subject of admissions, or non-contested facts in disclosure, in pleadings or in evidence, or other uncontested facts – and certainly for certain conversations for which there is no contemporaneous documentation of significance but later documentation is produced.

Bowenbrae was registered in Queensland on 9 July 1993. The ASIC Company Extract has Darryl Glen Beattie (“Beattie”) appointed as both director and secretary on 16 September 1999. There is no such Extract for UA. Unlimited Aerobatics Pty Ltd (later named Harts Flying Fighters Pty Ltd, and even later named FF) was registered on 20 January 1995, first changed its name on 14 December 2000 and eventually became FF on 1 October 2001. As earlier noted, FF, in its former name, was the company that offered the contract in the document dated 5 October 1998.

FFMR, particularly relevantly for the second proceeding, was not registered until 12 April 1999 (as also mentioned earlier). Although the ASIC Extract tendered stated that the “Details Start Date” was 24 August 2007, it is clear from the other entries in the Extract that the Application for Registration as a Proprietary Company was only lodged on 12 April 1999. Consequently, as was also earlier observed, it could not have been a party to any original agreement with UA concerning remuneration for undertaking contract work in the way described in the letter of 5 October 1998. Even more curiously, UA in its Further and Better Particulars of the Statement of Claim in the second proceeding, filed 2 September 2011, alleged that the original engagement of 5 October 1998 between UA and FFMR was varied “orally” between Arnot and S Hart and that, on occasions, the varied agreements were reduced to writing. Two instances of that were said to be the attached correspondence of 6 September 2002 and 17 January 2003. The problem is that the first letter was one from Nemesis Australia Pty Ltd (not purporting to act as any agent for FFMR) and the second was from Spider Tracks Pty Ltd to the National Australia Bank Limited advising that UA had a consulting agreement with “this company” and that the agreement “with this or associated companies” has been over 4 years. Despite all this contradictory documentary evidence, in the end, at least with respect to the second proceeding, FFMR does not raise any defence about incorrect parties to any agreement pleaded but, rather - consistently with correspondence written by FFMR in October 2006 - contended that such amounts as were owing for contract work contemplated by that letter of 5 October 1998 and later arrangements were either not proved to the relevant standard or were fully settled by a compromise; or, should that not be so, that an offset for the value of the Cub should be “at least $65,000.00”, although it is also contended that “independent evidence” was that its value was $90,000.00.

On the important issue of who were directors of FF and FFMR at the material times, the ASIC Company Extracts in the Trial Bundle of Bowenbrae and Arnot disclose – though only as to part of the full details - that:

· for FF, Arnot was a director between 14 December 2000 and 2 September 2004, Petersen was a director between 20 January 1995 and 25 September 2006 (and then from 2 October 2006 to at least mid 2008) and L Hart was a director from 20 January 1995 to at least mid 2008; and

· for FFMR, both Petersen and L Hart were directors, the former from 2 October 2006 until at least mid 2008 and the latter from 31 May 1999 to at least mid-2008.

Independently of the ASIC Extracts, Arnot pleaded that he ceased to be a director of FFMR on 2 September 2004 (which is consistent with a notification in the ASIC Company Extract for that company). This was admitted by FFMR in the first proceeding, although it is also alleged that Arnot started as a director on 31 May 1999 and that Petersen and L Hart were co-directors for that period as well (an allegation deemed to admitted by a non-response in the Amended Reply). Again, none of this is inconsistent with the relevant ASIC Company Extract and is entirely consistent with an earlier extract exhibited to Arnot’s first affidavit.

By admissions made in the pleadings in the first proceeding, it appears that: S Hart was a director of FFMR between 12 April 1999 and 1 October 2001; and, between 12 April 1999 and when he was made bankrupt by the lodgement of a Debtor’s Petition on 26 April 2002, he was a “servant or agent” of FFMR.

As for Arnot’s employment position in FFMR, S Hart deposed that Arnot was initially its General Manager and, even after Arnot’s resignation as a director in 2004, he stayed as General Manager until he left in October 2006. That was similar to the depositions of L Hart and Petersen (the latter giving the most convincing explanation of the contractual arrangements, although referring to Arnot as a contracting party rather than UA and stating that the initial contract was with FF and that the transfer was effected to FFMR when “formed”). Petersen also asserts that Arnot was the Accountable Manager who was responsible for ensuring all activity was carried out by FFMR under its certificate of approval “within the limitations and conditions approved by CASA”.

Arnot himself, in his affidavit filed 1 March 2012, first stated that he was never referred to as the General Manager and that his roles were as an engineer and Workshop Manager. Despite that, in cross-examination, Arnott conceded that, while he ceased to be Manager in late 2004, he resumed that position by February or March 2005. In addition, in cross-examination, he freely admitted that he was the “boss of the operation” for work done in the hangar of FFMR, that it would be an accurate description of his role to call him “the Managing Director”, and that it was an accurate description to describe him also as “the General Manager of the business”. Although, then, expressing some reservation about the accuracy of those descriptions, Arnot eventually accepted that he signed documents as Managing Director and that it would accurately represent the way in which he saw his role as observed by the outside world.

Other relevant events

In or about January 2000, according to Arnot, the Staggering was bought to the FFMR facility and Arnot began working on the aircraft himself or with the help of volunteers outside working hours. In October 2000, FFMR moved its workshop operations to Hangar 400, Wirraway Avenue, Archerfield from Hangar 406. Since Hanger 400 was the only FFMR hangar capable of containing the Staggerwing, it is likely to have been brought in January 2001: see paragraph [21] of these Reasons.

On 27 November 2000, by a Buy Contract Note, BNP Paribas Equities (Australia) Limited informed Harts Consulting Pty Ltd (“Harts Consulting”), “with attention to” S Hart, that it had bought “ON YOUR ACCOUNT” 500,000 shares in Harts Australasia Limited (“HAL”) for a consideration of $600,050.00. By facsimile transmission sent on 1 December 2000 from Petersen to Arnot, a copy of that Buy Contract Note was conveyed to Arnot, along with the Bank Account details of BNP Paribas Equities. In Arnot’s affidavit filed 11 December 2008, Arnot exhibited what he called “a true copy of the deposit details requested of me for the said sum of $275,000.00 dated 1 December 2000” and exhibited a further letter stating it was a true copy of his bank statement recording the transfer of the sum. The first of those documents was that very facsimile transmission from Petersen of 1 December 2000, together with the Buy Contract Note. The second of those documents was UA’s bank statement with NAB which showed that on 11 December 2000 Arnot had himself transferred $279,122.52 to UA and that, on the same day, UA had transferred to BNP Paribas Equities the sum of $275,000.00.

Of course, according to that affidavit of Arnot, the “said sum” of $275,000.00 was that which he asserted was the loan that S Hart asked him for in late 2000 (alleged to have been first agreed to be repaid in “approximately” 6 months).

By 29 December 2000, Arnot had been authorised to purchase and restore a Zero aircraft, which was to be purchased from Richard Nicholas Goode (“Goode”). FFMR and FF allege that the authorisation came from FFMR and the Zero was to be owned by FF. At times it has appeared to have been put in dispute by Arnot that FF made a payment of US$20,000.00 (or that sum less bank fees) on 29 December 2000 to Goode. Further, Arnot alleged that the agreement was only between him, FF and Goode. Evidence before the Court showed that Arnot had acknowledged on 3 September 2004 that US$98,630.50 was so paid to Goode: see “FFMR-04”, page 1. In Arnot’s affidavit filed 1 March 2012, he stated that he agreed that the payments set out in paragraph 180 of S Hart’s affidavit filed 2 November 2011 were those payments made by FF in respect of the Zero aircraft. S Hart’s affidavit, in the relevant paragraph, asserted that, in addition to the US$98,630.50, FF had made a payment of US$19,989.96 on 29 December 2000: see the Table in that paragraph. The documents referred to by S Hart appear to support this “additional” payment. This will have to be analysed in greater detail when attention is focused on that particular issue.

A Stearman aircraft VH-YSM, owned by Tom Smillie, entered the hangar facility of FFMR on 21 September 2001. This aircraft had its maintenance release issued by FFMR on 7 March 2005.

On 15 January 2001, the Staggerwing, the subject of the alleged lien, was entered into FFMR’s Job Record Book. This appears to have been, according to Arnot, because he, then, “fully intended to reimburse FFMR”.

On 1 October 2001, S Hart was first charged with tax offences (which involved defrauding the Commonwealth – and, therefore, dishonesty). They eventually came to trial in 2004. It is not in dispute that, after conviction, S Hart entered prison on 24 June 2004, was released on 3 March 2005, went back to prison on 23 May 2005 and was eventually finally released on 13 March 2008. It, therefore, became unnecessary to engage Division 5 of Part 5 of the Evidence Act 1977 (Qld) concerning evidence of convictions in civil proceedings. I will take the convictions into account, although in a general way only, when considering S Hart’s credibility.

On 9 May 2003, as related above, there was the raid by the Australian Federal Police and on 10 June 2003 the staff meeting was held at which the statements concerning the Staggerwing were made. I accept that the evidence of those who heard the statements, Arnot apart, is to the effect that S Hart conveyed that all non-profit making aircraft be removed. I find that no one heard Arnot make a statement about having an agreement with S Hart. Later events concerning the Arnot/S Hart “relationship” have been dealt with earlier, or will be canvassed later. It also assists in understanding some of the events of 2006 that on 18 April 2006 assets of FF and FFMR were automatically forfeited to the Commonwealth under its Proceeds of Crime Act 2002 (Cth) and FFMR was “forced to close” (according to L Hart) for approximately 7 weeks.

Credibility

As I expressed earlier, I have many concerns about credibility. It is necessary to canvas each of the most important witnesses in turn. When a consideration is later undertaken of a particular aspect of this case, my findings of credibility will be applied to such a witness at that time.

I will, hence, deal with each of these witnesses in turn.

Arnot

Arnot’s evidence was presented, in chief, by way of affidavit (as were all the major witnesses). Two days, pre-trial, were spent in determining objections by the parties to opposing parties’ witnesses. It, therefore, might have been expected that, by the time of the trial itself, it would be fairly clear where each witness stood concerning the issues about which he or she would be giving admissible evidence.

I have mentioned earlier the about-face that Arnot made concerning his role with FFMR up to late 2006. It was somewhat perplexing that he so readily agreed, in cross-examination, that his roles were as suggested to him, even though the evidence so given was contrary to what he had deposed in his various affidavits. That, of itself, might not be thought to be very significant. But in the context of a case where it was being alleged against Arnot and Bowenbrae that Arnot had undertaken roles which would generate fiduciary obligations, and that he was in a position to cause work to be undertaken on aircraft which he either owned or had some interest in without easy detection or constant supervision, it might not be surprising that he would respond by asserting a limited importance of his role. This he certainly did originally. But then, inconsistently, he readily accepted that he was, for instance, the “boss of the operation”, consistently with the evidence of Michael Joel Olive (“Olive”) that he was the person who told people what jobs to do and not to do.

That, of course, is but one aspect of Arnot’s evidence. Much more concerning is the significant difference between the evidence he gave, on oath, at earlier times as contrasted with the evidence he gave, on oath, in this trial. After stating in cross-examination that he “didn’t” have an understanding, certainly in 2004, of what the financial position of FF and FFMR was, he then admitted he certainly knew enough to be able to “genuinely” state his concerns about the financial position and to “genuinely” review the ways in which to increase its viability. More importantly, when taken to questions asked of him earlier in the cross-examination, in which he said he was not a director of FF although he had “believed” he was as at September 2004, he answered that he was a “director briefly” of FF. When, then, taken to an examination under oath conducted on 28 July 2003, he conceded that he gave answers there that he was not only a director of FF but also its Managing Director, having ultimate control, and that he was involved in the day-to-day running of FF. When presented with the present conflict with that latter evidence, he responded that “that’s what I believed at the time”, but “looking back at it, probably not”. When it was put to him as to how he could have made that mistake, he replied that “very simply, that’s what I believed in at that particular time”. As has been demonstrated from the ASIC Extracts, Arnot was a director at all times between 14 December 2000 and 2 September 2004 for FF. For completeness, Mr Arnot’s attention was drawn to a later passage in the same earlier examination where he conceded that he had replied, without hesitation, that he was the Managing Director of FF.

Another example of such inconsistency is that, after it was originally established that his evidence was, with respect to a $300,000.00 loan from him to FFMR, that he “negotiated” it “initially” with Mr Hart - after first stating that “he really could not recall” whether the negotiation was simply with L Hart and Petersen “and no another person” - he conceded that in his examination in 2003 he did state the latter proposition. But, more importantly, he also conceded that he had stated in that earlier examination that the examiners “could be satisfied, on oath” that, as far as he was then concerned, he had no communication with S Hart in any way in respect of that loan of $300,000.00, even though he may have “simply asked for (S Hart’s) advice”. He went on to add that, reading the transcript of the 2003 examination now, he would “definitely agree” that it “certainly was not” S Hart who had requested that Arnot advance the monies. Yet another example concerns Staggerwing invoices exhibited to his affidavits, which were presented there a genuine. When their authenticity was challenged, Arnot admitted in cross-examination that he did not “think” they were genuine, despite having deposed that he “did make some attempt to issue” them. When it was put to him that his original testimony was false, he replied that it was, instead, “incorrect”.

What, though, is perhaps the most concerning aspect of Arnot’s many reversals involves the documentation involving the $275,000.00 “loan”. This has been dealt with, albeit briefly, earlier. Arnot agreed in cross-examination that, at the time of the alleged variation, there had been no earlier agreement to pay interest, even though the loan had been made by that time. Rather, he stated that S Hart had agreed with him that he would “get a reasonable return for my money”. It was then put to him that his pleadings merely stated that it was a loan “repayable in 6 months”. He responded by disagreeing with the proposition that there was no agreement about “a reasonable return”. After then agreeing that a reasonable return in that context “would be” some kind of interest, he later adjusted that to meaning “getting some – some form of money”, being “some sort of return”, with that being whatever S Hart “thought a fair thing”. He then conceded that at no time had he ever taken any steps to recover any of this sum from S Hart. When, thereafter, he was taken back to a further examination (before Brabazon QC DCJ) on 30 February 2004, he was moved to agree that there was “never” an arrangement for interest to be paid on the loan. With respect to Arnot’s further assertion that it was only “after” the offer of a loan was made that he found out that S Hart was to use it to buy some shares, when taken back to his examination on 30 February 2004, he conceded that it was S Hart who stated that he “needed some money to buy some shares” and that he “didn’t have the right amount of money”, so that, since Arnot had “some money sitting there so I offered it to him to buy the shares” (emphasis added).

The last aspect of this alleged loan which has an effect on Arnot’s credibility involves the contemporaneous documents referred to at the beginning of these reasons. In cross-examination, Arnot conceded that in his affidavit filed 1 March 2012 he had stated that he had “never received” the facsimile transmission from Petersen, nor the BNP Paribas Equities Tax Invoice, asserting in that affidavit that the facsimile transmission did “not show any indication that it has been faxed and the fax details on the top of the Buy Contract Note are not able to be read”. Yet these two documents were the same documents which were part of Exhibit “NA-2” to his earlier affidavit filed 11 December 2008. When pressed in cross-examination about the assertion of non-receipt as being “demonstrably false”, he simply stated that there was “a mistake there, definitely”. Also important in this aspect, particularly in light of his denial that he knew that either he or UA had a beneficial interest in the shares bought in HAL, is his concession that, in the fax sent by him to S Hart on 7 February 2001, he used the words, concerning the $275,000.00, “the money I invested”. When pressed about his reference to the money being an investment, and after conceding that it “appears to be, yes”, he then proffered the “explanation” that the word, “invested”, “should have been in inverted commas”, even though he admitted that he himself had drafted that correspondence.

Further concerns about Arnot’s credit arose from arrangements made with respect to the insurer of the Pitts Special aircraft VH-KKT. Not only do letters dated as written in October 2006 contain obvious contradictions to his version of events given at trial, but also he gave information to a valuer, Richard Wayne Maclean (“Maclean”), about that aircraft’s condition (which formed the basis of the assumptions made by Maclean when he made that valuation). That information was entirely inconsistent with what was given in evidence by one of the purchasers of the Cub aircraft, thereby destroying any weight that the valuation might otherwise have had. Yet again, Arnot’s letter of 27 October 2006 suggested that the entity that was the owner of the aircraft had requested UA, through the insurance company, to conduct repairs, and that it was the insurance company that accepted “his” quotation to do that job. This is to be contrasted to the contemporaneous correspondence with the insurance company which, in clear terms, suggested that FFMR had agreed with UA to allow it to do the repairs. Lastly, Arnot now accepts that an invoice, which he previously described as a “perfectly legitimate invoice”, was in fact raised only on or about 12 October 2006, although it is shown as dated a month earlier. There is also the matter of “bogus” invoices for the Staggerwing. Although originally asserting that they were genuine, and relying on them in his affidavit, when it became more and more obvious that they were not, Arnot engaged first in a tactical retreat (resiling from “caus(ing)” them, to making “some attempt to issue” them), then in cross-examination, his final retreat was to say that they had just “surfaced” and anything he had earlier deposed to was - yet again - “incorrect”.

It has proved unnecessary for me to canvass the Kronk “evidence”. As the trial evolved, it could only have effect on the issue of credit – and, therefore, since it was led against Arnot, it will be left unexplored. In summary, I have severe concerns about both the credibility and reliability of any evidence that was led from Arnot where that is not supported by some contemporaneous documentation, some concession by his opponents, or some other non-contested evidence.

S Hart

Although the written submissions of behalf of FFMR and FF contend that little of their case turns on issues of the credibility, among others, of S Hart, and that the objective facts which found their case remain clear because they do not depend upon the credibility of those witnesses, it is still important to make an assessment of the credibility of S Hart. This is partly because it has some relevance to that “little” part of the case that deals with whether or not the $275,000.00 was for a “loan”, but also because it is necessary for the Court to determine to what extent S Hart was, expressed at the very least, a guiding hand behind many of the decisions that were made involving certain issues in this case, especially those dealing with a “full and final settlement” of FFMR’s liability to UA.

Since I later determine that the amount of $275,000.00 advanced from Arnot to UA and then on, through BNP Paribas Equities, to Harts Consulting was not a loan – because I cannot be satisfied that the evidence given by Arnot on this issue can be accepted, because of my general doubts about his credibility and because of the contemporaneous documentation suggesting a conclusion strongly to the contrary – it is unnecessary to traverse much of S Hart’s evidence in order to discern credit. I reject the contention that, because a pleading admission was withdrawn, I can more readily conclude that later denials of such a loan are a lie: see the principles concerning unverified pleadings as explained in Anderson & Ors v ASIC[1], per Philip McMurdo J at [27].
[1] [2012] QCA 301.

Nevertheless, I do have several concerns about the evidence of S Hart, even apart from the dishonesty convictions. The first results from the contrast between his training, background and experience (which was put forward as revealing a comprehensive understanding, and an ability to undertake a forensic analysis, of business books of accounts and financial reports) and his oral evidence. In addition, given S Hart’s asserted experience (canvassed in evidence) concerning the extent of various trusts that he caused to be created and the many companies involved in the Hart Group, it would not be expected that he would show any lack of understanding of how the $275,000.00 advanced by UA would be characterised in the various steps which were taken concerning it. Yet when questions were asked of him by the Court, it was disconcerting that his initial, if not final, answers showed such a lack of apparent understanding. First, when he was asked about his response that the sum in the ITSA letter “refers to monies lent to Harts Consulting” (emphasis added), his response was that that was because Hart Consulting “purchased all” the shares - which was an incomprehensible, non-responsive answer, particularly in light of the money being advanced by UA for a purchase and not a loan (according to S Hart’s own evidence). Secondly, when it was put to him that the shares must have been purchased “beneficially” he, without any hesitation (even given his earlier answer), agreed. But then, when it was asked of him that, if they were purchased beneficially, it was not “a loan”, his response was, simplistically, to suggest that “Arnot has got his shares.” Thirdly, when it was then put to him that, thus, Harts Consulting must be holding it for “him” beneficially, his response was that Harts Consulting was beneficially “owning” $275,000.00 worth of HAL shares, despite S Hart (correctly) stating in his last affidavit that “Arnot” “owned” the relevant shares “beneficially”. That whole series of answers does not in any way convince me that he had the deep understanding of commercial accounting that he asserted or, if he did, then it raises significant doubts about his willingness to give careful and accurate answers.

Additionally, there is a concern that I have resulting from the evidence involving various Trust Account Authorities signed personally, and alone, by him that are dated in January and February 2002. It is acknowledged that questions about these simply went to credit. Nevertheless, they have a wider impact for this case. It was an important aspect of the evidence led from FFMR and FF that S Hart did not have carriage of either of these proceedings because Petersen and L Hart were, insofar as FFMR and FF were concerned, the relevant directors and/or shareholders and/or beneficiaries of these relevant entities in the Hart Group at that time. This itself was premised on the “fact” that Petersen and L Hart were always “in control of the entities”, although S Hart acknowledged that due to his “extensive business connections and experience” he was always the “rain maker” for the family enterprises and his advice was sought “regularly”. The basis extended to the assertion that any decision made to purchase or sell an asset and to enter into any agreement or loan was made by Petersen and L Hart, even though with input from others, and that this was a “fundamental plank” for the operation of the various family businesses and entities during the relevant times. But when the evidence about how S Hart executed 5 of these authorities in early 2002 was canvassed, it was then clear that S Hart signed each of them in his own name without any assertion of authority, or any statement of acting on behalf, of the trustee (of which he was neither a director nor an officer). And this was where the evidence was that at least L Hart, if not Petersen, was, or were, present with him when those signatures were made. It strongly points to the conclusion that he was not simply an advisor but a guiding, if not a moving, hand. The proffered explanation that Peter Challen of Hawthorn Cuppaidge & Badgery had typed S Hart’s name without consulting the actual directors seems to stretch credulity, particular when a letter several months earlier of 4 October 2001 was sent to Harts Flying Fighters Pty Ltd, as trustee for the Unlimited Aerobatics Discretionary Trust (being the Trust in question), for the “attention” of “Mr Steve Hart Director”. That letter was a letter from Challen. There was no evidence of any correction attempted by any director of Challen’s potential “misunderstanding”. Given the crucial role that Petersen and L Hart played, allegedly, with respect to this Trust, it is an unlikely explanation that Challen just got it wrong as to who was the power figure in the Hart Group; and was never informed so.

Consequently, I do have concerns about both the credibility and reliability of any evidence that was led from S Hart unless it is supported by some cogent contemporaneous documentation or some other non-contested evidence, or merely involves a search of company records.

Petersen and L Hart

It is no disrespect to either of these witnesses that I am considering this issue of credibility concerning them concurrently. The evidence led from both – if at times perhaps concerningly so – dovetailed with each other. Even so, in so far as their evidence was directed to actual events rather than the central role they played in the business of FFMR and FF, I accept that they were both credible and reliable. In particular, I accept the evidence by L Hart concerning the FF invoices which became Exhibit 52. As I understood the evidence, because those invoices were issued using the current computer template, aspects of the information printed in them did not necessarily reflect what would have been in such invoices if they had been printed at the time that they were originally prepared for dispatch. Given the nature of computer templates, I do not see any discrepancy between the affidavit evidence of L Hart about these issues and her oral evidence. In accordance with the principles analysed later, the stored electronic information is the important aspect of these “kept” records (and not the physical form in which it was printed for demonstrating its content).

Furthermore, I accept that the computer system that was run at the Archerfield hanger, and from which invoices were both prepared and dispatched, was a stand-alone computer system and distinct from that operated from the “office” which was run by Petersen and L Hart. The latter conclusion is reached because there is just simply no evidence, rather than speculation or conjecture, that there was some interconnectedness, particularly when the attack on L Hart’s assertions about the invoices – just canvassed – has been determined her way.

In conjunction with what I expressed above concerning S Hart, I do not accept that the constant refrain of Petersen and L Hart that they were the sole decision makers (apart from what input Arnot had as a director) for FFMR and FF. As already concluded, the “rain maker”, even when he was incarcerated, was the person who I conclude played a crucial role in decisions that were reached, even if the implementation was solely carried out at most, if not all, times by Petersen and L Hart.

I accept that Petersen was a very competent financial administrator and that L Hart was a dedicated director (even though I find she was loyal to a fault to S Hart).

I do not find that it was an appropriate practice - particularly because of the concerns that must be had about witness contamination (see Day v Perisher Blue Pty Ltd[2]) - as S Hart admitted, that both Petersen’s and L Hart’s drafts of affidavits were read by him and that what he did was that he “knocked (them) into shape”. Although S Hart, at the time of that statement, was simply giving evidence about the affidavits sworn in May 2012, the concession by Petersen that she gave all her affidavits to S Hart for that purpose compels me to the conclusion that S Hart (at the very least) was one person who knew the substance of the evidence to be given by Petersen and L Hart before he gave oral evidence in this trial. This is despite his denials that he “didn’t read their affidavits per se”. Such a conclusion is reinforced by concessions made by Petersen in her oral evidence that her affidavits deposed to such things as the detection of “an error in Steve’s affidavit” and the confirmation of conversations “that Steve described” in nominated paragraphs. The explanation that Petersen gave that she gave it to S Hart to check her spelling includes the use of a similar phrase to “knocking it into shape”. Additionally, to justify such a practise, by contending that this was the “professional state that the solicitor would want them before” such instructing solicitors settled them, again stretches credulity. Their evidence, to be accepted, depends upon independence of recollection.
[2] [2005] NSWCA 110 at [30].

But, as examined earlier, there is much in the documentary evidence in this case which gives support to many of the assertions made by both Petersen and L Hart. And, to that extent, I am minded to accept their evidence where it is consistent with such documentation or, as canvassed, it deals with actual day-to-day work.

The one remaining area where oral conversations are important is that concerning what was said when Arnot visited S Hart in jail. Since there are documents which are consistent with the versions of those conversations as given by both Petersen and L Hart, where there is conflict between Arnot and these two female witnesses, I do prefer the evidence of the latter for the above reasons.

Tracey Anne Keller (“Keller”)

Keller was a former de facto partner of Arnot. In Arnot’s written submissions, a forceful attack is made upon Keller’s credit, contended to have resulted, particularly, from the circumstances of the break up of their relationship. But from my observation of Keller in the witness box I found her to be a considered and thoughtful witness who demonstrated no obvious grudge or ill feeling towards Arnot, candidly admitting that, in a property dispute with him which went to litigation, even though she received something less than 25% of what she sought and no costs, as well as no specific property, she “actually was pleased with” the judgment given by Lyons J, indicating that it was “not all about money”, and therefore she might have “a different viewpoint” from her cross-examiner.

In the end, she gave little evidence of direct value to the issues I have to decide. To the extent it impinged upon Arnot making use of her credit card to purchase parts which he intended to use himself, but to have FFMR repay the amount to him, while I accept her evidence about it, it adds little to my conclusions concerning Arnot’s credibility already expressed.

Further witnesses

Although there were many other witnesses, apart from Goode (who will be dealt with separately), their evidence can be sufficiently dealt with when a consideration of the issue about which they gave evidence is undertaken.

With respect to Mr Goode, while there is no reason to doubt that he attempted to give his evidence honestly, the reliability of his evidence is extremely suspect. Although he was given many opportunities to explain the entries in Exhibit 20 both with respect to the “Nigel Arnot” Statement of Account and the “Arnot (Zero)” Statement of Account, he was at a loss to explain how his attempts to offset, against monies he owed, benefits that he provided (through Arnot). His evidence, after acknowledging that FF had caused the sums to be paid from it to him for the Zero aircraft, accepted that when he could not supply the aircraft, it was necessary to pay, or cause the money advanced to be repaid in kind. Despite admitting, through his Accounts, that FF both paid money to him and he repaid money to FF, he maintained he had no relationship with FF. What can be discerned from the evidence given by Goode is that from his perspective, except for the payments admitted to have been repaid by Goode directly to FF, Goode provided money and parts to Arnot, it being up to Arnot, entirely, to account to whom he determined (though that, as will be seen later, does not cover many other difficulties with that “evidence”).

It is also clear from the approach of Goode that his arrangements were directly with Arnot (even asserting confidentiality for his arrangements with Arnot, which needed Arnot’s consent to divulge) and not with Arnot’s company, UA.

Quite obviously, further discussion will be necessary in order to determine the actual outcome with respect to this issue.

Proof of business records

Many business records were tendered, particularly by FFMR and FF. During the two days dedicated to the hearing of objections to affidavits filed, some objection was taken to limited categories of documents. In oral evidence, clarification from his clients’ witnesses was sought by Mr Roney SC, counsel for FFMR and FF, with respect to those categories to which objection had been made. Petersen gave oral evidence, on oath, that every document referred to by her was one which was kept as a record “with a view to it becoming part” of the relevant records of either FFMR or FF. Indeed, although in examination-in-chief, Ms Petersen was boldly asked whether “all” of the documents which were exhibited to her affidavits, insofar as they were either created for or on behalf of FFMR, or were received by it, became part of the financial records of the company “which you’ve kept”, to which, unsurprisingly, she responded “yes”.

L Hart, again to a question framed to her in examination-in-chief, was also asked whether she was able to say whether the various documents that she had dealt with in various places in her affidavits “formed part of the financial records of the companies, FFMR or FF”. She also unhesitatingly responded that “all” of the documents “form part of the financial or business records of our companies, FFMR, FF, FFA, other members of the family group”.

Necessarily, such very general comments made about “all” records must be subject to specific scrutiny if admissibility tests for them are to be seen to be met.

Relevantly, s 286(1) of the Corporations Act 2001 (Cth) states that a company must keep original financial records that both correctly record and explain its transactions and financial position and performance and that would enable true and fair financial statements to be prepared and audited. The definition of “financial records” in s 9 includes a variety of documents which besides invoices, receipts and vouchers, also encompasses documents of prime entry.

What, concerning proof, s 1305 of the Corporations Act provides is, by sub-section (1), that a book kept by a body corporate under a requirement of the Act “is admissible in evidence in any proceeding and is prima facie evidence of any matter stated or recorded in the book” and, by sub-section (2), that a document purporting to be a book kept by a body corporate “is, unless the contrary is proved, taken to be a book kept as mentioned” in sub-section (1). In turn, books are defined in s 9 of the Act as including: a register; any other record of information; financial reports or financial records, however compiled, recorded or stored; and a document.

In CBA v Marwan Tabet[3] Robson J, in the Commercial and Equity Division of the Supreme Court of Victoria, held that a loan contract, including its financial information, was a book kept by the CBA under a requirement of the Corporations Act for the purposes of s 1305 because the loan contract was a financial record required to be kept under s 286 since “it correctly recorded and explained the loan transaction and would enable true and fair statements to be prepared and audited”: at [7]. Moving to bank statements purported to be reproductions of matters stored by electronic means, Robson J, in addition, referred to s 1306(1) of the Act which provides that a book that is required by the Act to be kept or prepared may be kept or prepared: by making entries in a bound or loose leaf book; by recording or storing the matters concerned by means of a mechanical, electronic or other device; or in any other matter approved by ASIC. Reference was also made to s 1306(6) which provides that writing that purported to reproduce a matter recorded or stored by means of a mechanical, electronic or other device is, unless the contrary is established, taken to be a reproduction of that matter: at [8].
[3] [2008] VSC 161.

In Tubby Trout Pty Ltd & Anor v Sailbay Pty Ltd& Ors[4], Drummond J in the General Division of the Federal Court of Australia, although also referring to the Evidence Act 1905 (Cth), made reference to the legislative predecessor to the Corporations Act. He held that the evidentiary effect of such a record just discussed would depend upon its exact nature. Referring to cited authority (of the time), he held that not every document kept on a company’s premises will be a book kept by the corporation, even if it is a book as defined in the legislation, accepting the principle that the word “kept” does not simply mean a document which is retained by a corporation but requires the further characteristic of being in the nature of a document or record that is in some way maintained by the corporation in a systematic or periodic fashion: at 754. Earlier, Drummond J had held that, if a document is a letter sent by an outsider to the business, it would depend upon such matters as, for example, the content of the letter, its location in an inward correspondence file and how it was to be responded to by the business and whether the letter could be said to be made for the purposes of the recipient’s business: at 752.
[4] (1992) 113 ALR 748.

The decision of Austin J in ASIC v Rich[5] is contrary to the conclusion in Tubby Trout. In particular, Austin J, in addressing the submission that there is no justification for extending the reach of s 1305 of the Corporations Act “to every piece of paper found in the possession of the company”, held that the risk of oppressive or unfair operation is addressed by preserving the court’s discretion to exclude evidence under the relevant Evidence Act, “as well as by insisting … that there must be something on the face of the document to satisfy the requirement that it purports to be a book kept by the body corporate”. That was held to address the concerns of the proponents of the narrower view, which included the cited authority in Tubby Trout. Immediately thereafter, Austin J stated that he adopted the “wider” construction that a document is “kept” for the purposes of s 1305 of the Act if it is retained or held (and is therefore “kept”, a fortiori, if it is maintained systematically and periodically): at 810 [265]. But that is clearly subject to the earlier qualification.
[5] (2005) 53 ACSR 752 at 810 [264].

Accordingly, when considering marginally “kept” documents, even though there was no challenge to the generalised evidence that I have referred to above, I will make a decision with respect to that document at that time, noting that the absence of objection may mean it is to be given some weight.

Possessory liens

As expressed in the authoritative text The Law of Securities[6], where a possessory security arises from implication of the law it is known as a possessory lien: at 737. According to the text, possessory liens furnish an unadulterated example of the possessory security; and the right of the lienee is limited to that of holding possession (except where there has been statutory interference): also at 737.
[6] Sykes and Walker, The Law of Securities (5^th ed) (1993).

Turning, then, to what kind of lien might arise in this case: on the evidence led, it can only be a particular, or special, lien. Again, as The Law of Securities instructs, such a lien merely enables the holder to retain the property until payment; and then payment only of the particular charges which have been incurred in relation to it: at 739. As to the classes of particular, or special, liens, it is only the second class analysed in that text that has present relevance. It arises where a person has improved, repaired or altered goods by the exercise of her or his “labour or skill”; and the person is given a lien for the price of such skill or labour, and for expenses incurred: also at 739. Particularly relevant to the present circumstances is the necessity that the work should have been done “by the order or at the request of the owner or some person authorised by him or her”.

This was the point made by the Full Court of the Court of Victoria in Protean Enterprises (Newmarket) Pty Ltd v Randall[7] by holding that, so far as possessory liens are concerned, they “only” arise from “possession” of property given to the lienee “by the authority of the owner of the property”: 333-334. As was observed by Knox CJ, Gavan Duffy and Starke JJ in Fischer v Automobile Finance Co of Australia Ltd[8], such authority can be inferred: at 174.
[7] [1975] VR 327.
[8] (1928) 41 CLR 167.

Also important in the present context is a statement in The Law of Securities that reservation of a right of free removal to the owner will negative a lien: at 742, noting that Albemarle Supply Co Ltd v Hind & Co[9] is distinguishable because there was an agreement there that the lien continue.
[9] [1928] 1 KB 307.

As Duvall v Spry[10] has held, expenses incurred for care and maintenance do not necessarily result in a lien arising. Caution, nevertheless, must be had about the authority of that case with respect to all liens, particularly statutory liens, because it was clear that Waddell J, in the Equity Division, held that the case was put on the basis that the alleged lienee incurred expense in the performance of a duty which was owed in respect of the property (which were animals): at 79. In particular, he held that no case had been cited to him which suggested that under the general law the performance of a statutory duty in respect of property may give rise to a lien enforceable against the owner for the expense of doing so, even though such may be provided by statute: also at 79.
[10] [1982] 2 NSWLR 68.

Equitable “liens”

As observed in The Law of Securities, a possessory lien is to be distinguished from an equitable lien because the latter “is not dependent upon possession at all”: at 737. As that text goes on to state, not only is an equitable lien not dependent upon possession, it does not “confer a right to possession”: at 751.

One of the seminal sources in Australia about the nature of an equitable lien is Hewett v Court[11]. There, Gibbs CJ held that an equitable lien arises by operation of law, depending neither upon contract nor upon possession but rather under a doctrine of equity “as part of a scheme of equitable adjustment of mutual rights and obligations”: at 645. As expressed by Deane J, the right is one “against property” which arises automatically by implication of equity to secure the discharge of an actual or potential indebtedness and, though “called a lien, it is, in truth, a form of equitable charge over the subject property…. in that it does not depend upon possession and may, in general, be enforced in the same way as any other equitable charge, namely, by sale or pursuance of a court order”: at 663. Deane J further stated that it differs from a traditional mortgage in that it does not transfer any title to the property and, while “it arises by implication of some equitable doctrine applicable to the circumstances, its implication can be precluded or qualified by express or implied agreement of the parties”: also at 663. Finally, with respect to identifying what circumstances are sufficient for the implication, independently of agreement, of an equitable lien between parties in a contractual relationship, Deane J held that they are:
[11] (1983) 149 CLR 639.

· that there be an actual or potential indebtedness on the part of the party who is the owner of the property to the other party arising from a payment or a promise of payment either of consideration in relation to the acquisition of the property or of an expense incurred in relation to it;

· that the property (or, arguably, property including that property) be specifically identified and appropriated to the performance of the contract; and

· that the relationship between the actual or potential indebtedness and the identified and appropriated property be such that the owner would be acting unconscientiously or unfairly if that owner were to dispose of the property to a stranger without the consent of the other party or without the actual or potential liability having been discharged;

: at 668.

According to Mason and Carter’s Restitution Law In Australia[12], while an equitable lien secures the discharge of an actual or potential indebtedness, it is not confined to contract and may operate in aid of a purely equitable “relationship” between the parties: at [1734].
[12] Mason, Carter and Tolhurst, Mason and Carter’s Restitution Law In Australia, 2^nd ed (2008).

It also seems to be indisputable that, for at least the last 150 years, as a general principle, whenever an equitable lien arises upon property for a sum of money, that sum of money bears interest: see Some historical and policy aspects of the law of equitable liens[13].
[13] Campbell, Some historical and policy aspects of the law of equitable liens (2009) 83 ALJ 97, at footnote 52.

Declaratory Orders (concerning liens)

The view is expressed in Declaratory Orders[14] that liens have, in fact, been the subject of declarations, adding that it is “more necessary to make a declaration in (such a) case than in other cases as otherwise there may be great uncertainty”: at [2116].
[14] Young, Declaratory Orders, 2^nd ed (1984).

Detinue

While this is referable to the claim by Bowenbrae and Arnot for delivery up of possession of the Staggerwing aircraft VH-BBL, it also concerns the claim, as set out in the Claim and the Statement of Claim, for $50,000.00 for “wrongful detention and/or trespass”.

In addition, it is the basis of the defence contention that a lien (of some kind) existed so as to preclude the establishment of this, or these, cause, or causes, of action.

Although Bowenbrae and Arnot did not abandon the claim for trespass, there is almost nothing in their written submissions which deals with it. For its part, FFMR in neither its written submissions nor the oral submissions made by its counsel at the conclusion of the trial addressed, in other than any cursory way, either cause of action.

But because detinue was considered explicitly, some survey of the relevant legal principles is desirable.

As remarked by Young CJ in Bolwell Fibreglass Pty Ltd v Foley[15], the action of detinue, like the action of conversion, is an action “complaining of interference with the immediate right to possession, not with the title to property”: at 99.
[15] [1984] VR 97.

In terms of the requirement for a demand, there being not much, in reality, in issue between the parties about other aspects of the cause of action itself (apart from damages), it is of assistance that White J in Egan v State Transport Authority[16] held that, with respect to the nature of the demand, subsequent conduct might amply prove the determination of the detaining party not to hand over the property, no matter what the form of the demand was: at 521. As White J added, the stand, in that case, adopted in the pleadings was identical with its stand before action and was, alone, sufficient to establish the action in detinue: also at 521.
[16] (1982) 31 SASR 481.

Moving, then, to damages: in the English Court of Appeal decision of Strand Electric and EngineeringCo Ltdv Brisford Entertainments Ltd[17] Somervell LJ held that, for a claim in detinue, on a finding that the defendants had “for their own benefit” the use of the plaintiffs’ chattels, the wrong is not the mere deprivation, as in negligence and “possibly some detinue cases”, but the user: at 252. For his part, Denning LJ, while conceding that a wrongdoer who has merely detained the goods and not used them would not have to pay a hiring charge, held that where the owner has in fact suffered no loss, or less loss than is represented by a hiring charge, if the wrongdoer “has in fact used the goods he must pay a reasonable hire for them”: at 254. Romer LJ - after referring to the three salient facts there as being, first, that the equipment detained was profit earning property and, secondly, that the plaintiffs normally hired out the equipment in the course of their business and, thirdly, that the defendants during the period of wrongful detention applied the property to the furtherance of their own ends - held that it was a sound proposition that if the use of an article has a recognised hiring value then such value constitutes the measure of damages recoverable by the owner from a defendant who, by wrongful detention, has the use of that article: at 256. He specifically expressed no opinion as to what the plaintiff’s rights would have been in the matter of damages had the property detained been of a non-profit earning character or, if, although profit-earning, the plaintiffs had never applied it to remunerative purposes: at 257.
[17] [1952] 2 QB 246.

In Egan it was held that the tort of detinue is not complete until the defendant fails to deliver up the chattels at the time of judgment. Dealing specifically with exemplary damages, White J held that the ignominy surrounding the peremptory and overbearing exercise of contractual power (on an erroneous basis) justified, in that case, the award of a substantial, but not inflated, award of exemplary damages. Given the fact that it was 1982, White J awarded “the relatively modest sum” of $25,000.00 under that head.

More recently, McGill SC DCJ in Palace Backpackers Australia Pty Ltd v Christensen Industries Pty Ltd[18] surveyed the remedies available in detinue. He, first, noted that commonly a defendant’s possession of the goods would have been wrongful from its inception and that, therefore, no real question arises as to the period over which any, for instance, hire charge should be calculated. In the case in question, he held that once there was a refusal to deliver the goods in response to a demand, the cause of action in detinue arose, giving rise to an obligation to “pay” for the goods thereafter: at [19]-[21].
[18] [2002] QDC 084.

Concerning exemplary damages, the Queensland Court of Appeal in WAQ v Di Pino[19] discussed potential judicial error in not ordering the payment of exemplary damages. Gotterson JA (with whom Fraser JA and Mullins J agreed) considered, in particular, whether the “if, but only if” test for awarding exemplary damages applied in Queensland. After a review of many appellate authorities, and relying upon the clear direction emanating from the High Court in Farah Constructions Pty Ltd v Say-Dee Pty Ltd[20], he held that in conformity with that direction the trial judge was required not to depart from applying that test in an assessment of exemplary damages, although adding the rider that, since there may be a genuine reason for querying whether the test ought to be one of universal application, in cases such as the one there considered (which was one for trespass to the person in the form of sexual assault) it was appropriate: at [62]-[63].
[19] [2012] QCA 283.
[20] (2007) 230 CLR 89.

The test, as explained in WAQ, is that, in a case where exemplary damages are appropriate, if, but only if, the sum which the decider has in mind to award as compensation is inadequate to punish the person for “outrageous conduct”, to mark a disapproval of such conduct and to deter the person from repeating it then some larger sum can be awarded: at, particularly, [54].

Breach of fiduciary duty

The allegation by both FFMR and FF concerning Arnot with respect to fiduciary duties owed to them arises not only from his position as a director of them but also from his position as the manager and an employee of them. As set out in paragraph 21 of the counterclaim, the duties allegedly owed were:

· a duty not to improperly use his position to gain an advantage for himself, or someone else, or cause detriment to them;

· a duty not to improperly use information obtained from his positions with them to gain an advantage for himself, or someone else, or cause detriment to them; and

· a duty to act in good faith and in the best interests of them.

No allegation was made that Arnot was in breach of statutory duties owed pursuant to, for instance, the Corporations Act, perhaps because he ceased to be a director of both some 2 years before leaving the FFMR hangar.

Although concerned with statutory obligations, in R v Towey[21], Gleeson CJ, with whom Allen and James JJ agreed, canvassed duties under the general principles of company law: at 58. Although expressly confined to directors, in particular he identified that: a director is obliged to act bona fide for the benefit of the company; a director is obliged not to make a profit at the expense of the company; and a director is obliged to avoid a conflict of duty and personal interest. Earlier, Gleeson CJ had identified, with reference to a leading company text, that the clearest case of a director having a disabling personal interest, or conflict of duties, is when a director enters into a transaction with the company, whether by way of contract, trust or other transaction, under which the director stands to make a direct personal gain: at 57. Later, in a consideration of the duties of company directors, he noted that it is often necessary to distinguish between three different questions, which he identified as: first, the legal nature and extent of those duties; secondly, the practical content of the duties in light of the facts and circumstances of an individual case; and, thirdly, the likelihood, in an individual case, of a breach of duty being made the subject of complaint (remarking that the third question is ordinarily not one which concerns the court because, if a case has come before a court, then that question will already have been answered): at 59. As to the second question, he noted that for what are “sometimes colloquially called family companies”, for practical purposes, if everything done by the directors is known to and approved by all shareholders, duties cannot safely be ignored, even though their practical content may be less stringent: at 59. Given Arnot’s continuing position as “boss”, similar considerations must apply to him, especially where so much trust was placed in him even after his resignation as director of both FF and FFMR.
[21] (1996) 21 ACSR 46.

Although reference is made in the written submissions on behalf of Arnot that “honesty” is a defence, it appears to rely upon a court granting relief under s 1318 of the Corporations Act. At best, in a case where such relief is claimed, the notion of “honesty” might simply be found to be useful in a determination of whether any genuine attempt at all had been made to carry out the duties and obligations of a person’s office or trusted position of control and authority (imposed either by the Corporations Act or by the general law): see a discussion by Palmer J in Hall v Poolman[22]. But no claim has been made in any pleading concerning Arnot for that relief. Where, as here, that has not been done and, therefore, where no opportunity has been given to Arnot’s opponents to investigate, by cross-examination or otherwise, this particular issue [particularly where s 1318(1) refers to the court having regard to all of the circumstances in the case, including those connected with the person’s appointment, where the person “ought fairly to be excused”], it is far too late to rely upon such a statutory provision during submissions. This is particularly so where the provision does not operate to remove the breach but, rather, has its operation as a dispensing power excusing the contravention: see Deputy Commissioner of Taxation v Dick[23].
[22] (2007) 65 ACSR 123 at 193 [325].
[23] (2007) 64 ACSR 61 at 74 [78], per Santow JA.

According to Equity: Doctrines and Remedies[24], dishonesty or bad faith is irrelevant to a fiduciary’s liability, as is intention where duty and interest are in conflict and a profit is made (though it may affect the remedy): at [5-110] and [5-250].
[24] Meagher, Gummow and Lehane, Equity: Doctrines and Remedies, 4^th ed (2002).

Limitation defences

With leave given by the Court on 1 March 2011, FFMR and FF caused an amended counterclaim to be filed. Such leave to amend reserved to the defendants by counterclaim the right to raise limitation defences.

In consequence, in the Amended Reply, there was an allegation that any claims based upon a quantum meruit as particularized in paragraphs 14(f) and 14(g) of the counterclaim were statute barred: see paragraph 12(f). Similarly, the counterclaim as particularized in paragraph 23 of the amended pleading was also alleged to be statute barred, as was the claim particularized in paragraphs 26 to 32: see, respectively, paragraphs 17(d) and 19A(i).

But, despite that, in oral submissions made before me counsel for the defendants by counterclaim stated that the limitation points were not “being pressed”. This concession was made without specific reference to any particular paragraph of the pleading, although reference was made to “the Stearman claim” and the “Goode claim”, it being acknowledged that certain counterclaims have not been pressed. The basis stated was that it was “an equitable case” and “not a common law quantum meruit case”.

It has thus become unnecessary for me to consider the issue canvassed by Applegarth J in Hartnett v Hynes[25] where he noted that, insofar as the cause of action was one for “equitable compensation or damages for breach of fiduciary obligations”, while the Limitation of Actions Act 1974 (Qld) does not proscribe a time limit, equity may apply a limitation period by analogy: at [81].
[25] [2009] QSC 225.

Existence, and effect, of a compromise

One of the issues that is still live in these proceeding is whether or not certain claims in the second proceeding were compromised in full.

An analysis of the relevant principles was submitted by Bowenbrae and Arnot to have been made by White J (as she then was) in Medlik & Anor v Toowoomba City Council[26]. Its use for present purposes is limited; but she did canvass, relevantly for the case in question, the notion of it needing to be clear “that the parties intended to settle, once and for all, all matters” (arising out of the allegation there of negligent advice and the consequences flowing from that): at folios 10-11. She also noted that, as the plaintiffs had the assistance of capable solicitors throughout, had it not been their intention to settle all claims, something to that effect would surely have been included in correspondence, given the detailed nature of the formal negotiations: at folio 11. Accordingly, she held that the compromise was a complete defence.
[26] No 3063/1996, Supreme Court, 3 June 1998 Brisbane, Justice White.

Necessarily, that analysis can only be used as some general guidance as to whether such a compromise was reached in this case. Since the present proceedings are very different in their facts, the extent of the influence of the reasoning in Medlik must be limited in the way that I have indicated.

The limitations on use of photographs

This particular matter was discussed in Blacktown City Council v Hocking[27]. Spigelman CJ, in considering the issue, held that it is not entirely clear in what circumstances photographs could be used as direct evidence, as distinct from explicating the evidence otherwise given. He canvassed many decisions including Schmidt v Schmidt[28]. In the end, he opined that Schmidt may need reconsideration as suggested by Young J (as he then was) in Beaton v McDivitt[29]. There, Young J had held that photographs can be treated as evidence and not merely as material to understand the evidence: at 142-143. In his separate consideration, Tobias JA concluded that care must be taken to ensure that the photographs are not used as the sole source from which a primary fact is to be inferred where that fact is not revealed on the face of the photograph (such as the condition of a structure at a time significantly removed from that when the photograph was taken): at [170]. His concluded view was that, in the absence of expert evidence directed to interpreting the relevant photograph, it was not open to the trial judge to substitute her or his own view as a lay observer over the evidence of an expert: at [172].
[27] [2008] NSWCA 144.
[28] [1969] QWN 3.
[29] (1985) 13 NSWLR 134.

In the later decision of Twynam Agricultural Group Pty Ltd v Williams[30], Campbell JA, with whom Allsop P and Beasley JA agreed, after referring to Hocking, remarked that the trial judge had not used the photograph as the sole source from which a primary fact was to be inferred but, rather, permissibly used it as an aid in determining which of the accounts given by several witnesses was to be preferred: at [66].
[30] [2012] NSWCA 326.

Damages for “legal costs”

One of the claims made in the first proceeding is for the recovery, by payment, of fees paid by FFMR to its solicitors which were not recovered from the person who sued FFMR after service by FFMR of a statutory demand for the recovery of the value of work done on the Pitts Special aircraft VH-KKT.

FFMR alleged that in October 2006 Arnot, while still engaged with FFMR in a position of trust and without the knowledge and authority of either of the directors of FFMR, removed the aircraft while there remained substantial “funds” owing to FFMR. It is alleged that, while the amount of the actual invoice for the work was eventually paid by the owner of the aircraft, the outstanding “legal costs” have not been recovered.

The claim can be contended to result from Arnot’s breach of fiduciary duty. That duty is considered as arising from the evidence that Arnot was the person who controlled the employees of FFMR and was permitted access to FFMR’s hangar. As will be analysed later, the width of the equitable remedy of equitable compensation is potentially wider than that reviewed by the cases discussed in this section of the Reasons. Nevertheless, they provide the base upon which a consideration can be later undertaken.

Pausing for a moment as to the foundation of this claim, Arnot in cross-examination asserted that he did not seek to get any approval from anybody connected with FFMR until after all the work had been finished, when he asserts that for “the first time” he raised it with Troy Hart, explaining that any delay in raising it was because, simply, he “did feel I was entitled to do it”. This concession again reinforces the view that I have formed about Arnot’s cavalier view about obligations, duties and responsibilities which were the subject of these proceedings. It also adds to my considerable concern about accepting anything that he has stated, except where it is directly contrary to his own interest and, even then, only if there is some other support for his assertion.

Consequently, I do not accept, with respect to this Stearman claim, what Arnot has sworn to as the value of the Tiger Moth engine (i.e. as being between $18,000.00 and $20,000.00). Further, I reject his statement that no figure of $10,000.00 was discussed with Petersen, or agreed, particularly where the Amended Reply admitted that Arnot “sold” it for $10,000.00 (“which remained unpaid”) [see paragraph 16(c) of the Amended Reply and Answer] and where one of UA’s letters to FFMR of 3 November 2006 expressly refers to the $10,000.00.

During the evidence led with respect to this issue, Arnot asserted, consistently with what was pleaded in the Amended Reply that, by agreement with FFMR, he took a part off his Stearman on which he was then working and put it on a Stearman aircraft owned by Smillie. The problem with the allegation is that Arnot had caused a Release with respect to Smillie’s Stearman aircraft VH-YSM to be signed by Smillie on 7 March 2005. Consequently, it would be logical to conclude that that work had been finished by April 2005, in circumstances where Arnot did not cause FFMR to work on his Stearman, according to the “Time by Job Detail” records, in any real way until mid-April 2005. While there may be evidence (for instance that referred to in Arnot’s affidavit of the different blue and yellow paints on the Smillie Stearman) which supports Arnot’s assertion of a part from his Stearman being put on Smillie’s Stearman, how that could have affected Petersen’s figures is, further, unexplained (perhaps as a set-off, though no value was proferred). Hence, I reject any defence raised by Arnot concerning the Stearman owned by Smillie. In any event, Arnot admitted in cross-examination he had been reimbursed in circumstances where labour only was sought by FFMR. If there was extra labour involved, Arnot would still have had to pay for it, subject to some, perhaps, credit for removal (but the amount, if any, was never particularised, or identified in evidence); and if there was labour for the work on Smillie’s Stearman, it would have been done by FFMR.

Finally, I need to consider the evidence by Mr Arnot that he made an agreement about the Tiger Moth engine with T Hart. Arnot stated that he had put a proposal to T Hart “who was then the manager of the workshop” that the work undertaken on Arnot’s Stearman, including parts and consumables, would be offset against the money that Arnot was owed in respect of the Tiger Moth engine and that T Hart subsequently informed Arnot that Petersen and L Hart had agreed to Arnot’s proposal. While I have already accepted that the arrangement was made with Petersen herself, I also reject any involvement by T Hart, because the cross-examination of Arnot showed that it was Arnot himself who had resumed that position in charge of the workshop at the time he had stated that T Hart occupied that position; and I do not accept the evidence of Arnot, where, as here, there is no independent written verification. While it was submitted on Arnot’s behalf that a Jones v Dunkel[42] enquiry should be undertaken with respect to the fact that T Hart was not called by FFMR to give evidence, given the conclusions that I have already reached and the fact that Arnot had subpoenaed him anyway, I reject the invitation to engage in such an exercise, particularly where I have such concerns about Arnot’s evidence in any event.
[42] (1959) 101 CLR 298.

In summary, I find that the claim of $37,457.52 for equitable compensation has been established on the balance of probabilities.

Yak 52 VH-VVS parts

This claim, brought by the plaintiffs by counterclaim in the first proceeding, deals with a Yak 52 aircraft VH-VVS. The claim is based upon, in the year 2006, Arnot causing parts to be purchased from Aircraft Spruce & Specialty Co for use on this particular aircraft at a cost of $454.95 (the subject of 2 identified invoices).

Part of the allegation relies upon the Yak 52 aircraft being owned by Arnot, or an associated entity of his. Arnot did not contest the fact of such ownership. In his latest affidavit, he referred to later selling it.

One of the parts in question was alleged to have been an interrupter pump for a long range fuel tank. In cross-examination, Arnot stated that his response was not that the parts in question were not in fact fitted but that he himself had paid for all the parts for his aircraft. He also stated that the parts from the source relied upon in the claim were not ones that he “recognised” and they were not for a Yak aircraft, though he expressly conceded that a long range fuel tank had been installed on his Yak aircraft.

Because of my scepticism about Arnot’s evidence generally, it is necessary to see what documentary evidence there is that concerns this claim. The two invoices were dated 13 April 2006 and 17 April 2006. They were both stated to be shipped to Arnot, with the documents stating that the purchaser was FF. Further documents advertising the parts are of no significant assistance and the letter dated 18 May 2007 from Shand Taylor Lawyers, on behalf of FFMR and FF, to Morgan Conley Lawyers, on behalf of Arnot and UA, merely stated the allegation itself, adding that the purchases were charged by the supplier to “our client’s credit card (presumably at Mr Arnot’s request)”.

Although Arnot led no evidence, at least of a documentary kind, which supported his statement that all parts for his Yak aircraft were paid by him, including that of a long range internal fuel tank, I, initially, am left in a state of not being able to determine, on the balance of probabilities, whether the parts that were the subject of the two invoices identified were in fact fitted to the relevant Yak aircraft, even though I might speculate that they were. It is necessary, nonetheless, to consider the evidence of Keller. Her first affidavit referred to the use of Arnot’s credit card for purchasing parts for his Yak aircraft, but giving the account to FFMR to pay. Since she was not cross-examined on the Yak issue and since the payment for the parts here (according to each of the two invoices) was by “credit card” (although not identified), I am satisfied that this evidence is relevant and cogent to this issue. But because the above solicitor’s letter refers to “our client’s credit card”, I am thrown back into a field of uncertainty again. Thus, I find that this claim has not been established to the requisite standard of proof.

Coad work (Yak 50 VH-YVO)

This is with respect to an annual inspection on a Michael Coad (“Coad”) owned Yak 50 aircraft VH-YVO. The amount claimed is $2,773.70.

The claim is based upon an allegation that Arnot caused invoices to be issued in the name of UA to Coad for work which was in fact performed by FFMR. Further, it is alleged that Coad then paid either Arnot or UA that sum and, thereby, deprived FFMR of the benefit of the payment for the provision of those services. Again, the underlying obligation relied upon is the fiduciary duty said to be owed by Arnot to FFMR.

The pleading response, contained in the Amended Reply, is simply to deny the relevant allegations as being “unparticularised and not within the knowledge” of the defendants by counterclaim. While this denial might be able to be characterised as being a deemed admission, where, as here, Arnot identified a person who in fact carried out the work [namely, Cameron Rolph-Smith (“C Rolph-Smith”)], Arnot asserted that the work was carried out at a hanger which was not owned by FFMR, and that evidence was not objected to as irrelevant, it is necessary to determine this issue. I take this position despite Mr Roney SC stating at the outset of the trial that objections would not be taken to irrelevant material where there were deemed admissions in the pleadings. It is insufficient for that general assertion to be made when no objection is specifically taken to the actual evidence when led, meaning that there was no occasion to make a ruling on its admissibility when it was necessary to do so.

It is not disputed that the work in question was done between 26 September 2006 and 6 October 2006. From earlier findings that I have made, Arnot then still worked at the FFMR hanger (which he did not leave until 12 October 2006 - at least officially). The job register book of FFMR showed that the Coad Yak aircraft entered into the hanger of FFMR on 26 September 2006, which book was then under Arnot’s control. It was entered up in FFMR’s document as: “Carry out annual inspection”. Further, there is a Certification Sheet signed by William Turner (“Turner”), FFMR’s Chief Engineer, on 6 October 2006 and a Certification signed by Arnot himself, dated 6 October 2006, both on documents which are clearly those of FFMR. FFMR’s timesheets show Turner’s work for FFMR.

While Arnot asserts that he and C Rolph-Smith did the majority of the work, he stated that Button might have done some of it and that, if he did, he would have been paid for such work by FFMR. In the same section of the cross-examination, Arnot conceded that at least some of the work done on the aircraft was done in the FFMR hanger, albeit a “brief” inspection, by Turner.

Arnot, although conceding that in previous years Coad had always used FFMR to undertake the annual inspection (which had gone on for the previous 6 years), stated that Coad approached him to do this particular work. When pressed for an explanation for such an approach, Arnot stated that the expertise was “no longer at FFMR” because he and C Rolph-Smith had left. Even with respect to that, he conceded that the latter had been re-engaged as an independent contractor to perform services for FFMR on occasions after that through to the end of October 2006, thus acknowledging that C Rolph-Smith would have been FFMR’s contractor.

Finally, he conceded that without the certification by Turner the aircraft could not have been flown legally and that Turner was then an employee of FFMR. When further pressed about his statement that he gave instructions for an invoice to be raised by FFMR for Turner’s fee, he conceded that there was no such document.

Because of the evidence given by Arnot it is met with great scepticism on my part, even if I were to accept even part of what Arnot has stated about this issue, I would conclude that Arnot appropriated to himself work that was, at least potentially, work to be undertaken by FFMR at a time when, even though he had notified his, and UA’s, withdrawal of his services to FFMR on 22 September 2006, he continued to do certain work for them. I conclude that the Coad work was work done where he did in fact have a conflict of duty and interest and that he breached his fiduciary duty by taking that Coad work.

Accordingly, FFMR is entitled to recover the sum of $2,773.70 by way of equitable compensation for such claim.

Claim for legal costs (Pitts Special VH-KKT)

I have canvassed, earlier, aspects of this when considering Arnot’s credibility.

There are many aspects that were not in contention here. First, it was common ground that FFMR did perform certain work on this aircraft, that a legal proceeding was brought against FFMR concerning the cost of that work performed, and that this proceeding was compromised after the payment by the owner of the aircraft. As to fiduciary obligations, his letter of resignation dated 26 September 2006 expressly stated that Arnot would continue work at FFMR “until” this aircraft was “completed”. It can therefore be concluded that FFMR placed Arnot in a position of trust. The argument is as to whether that trust was abused in a fiduciary setting.

Again, FFMR has raised in its written submissions that there was a deemed admission. But it did not specifically object to any of the evidence which thereby might have been rendered irrelevant. Accordingly, as I have indicated before, I will consider this particular issue in light of that evidence.

I accept that the owner of the aircraft brought a proceeding to seek to set aside a statutory demand served by FFMR on it with respect to payment for the work performed. FFMR’s argument is that there was a necessity to serve that demand and, therefore, to defend any proceeding that arose out of it, because Arnot misled FFMR, the relevant insurer who authorised the repairs, and the owner of the aircraft, by telling to each a different version.

The circumstances of the misleading will now be detailed. Arnot wrote to the loss adjustor agent for the insurer on 5 September 2006 (before his resignation letter of 22 September 2006 referred to earlier) stating that UA had taken over the particular job and that FFMR had agreed to that. In a letter to FFMR of 27 October 2006, Arnot told a different story, suggesting that in fact he had been contacted by the insurer and instructed to conduct the repairs and that the insurer had accepted his quote with an undertaking on his behalf to pay the costs incurred to FFMR to date. The contents of that letter relied upon the “pretence” that an invoice dated 12 September 2006 had been legitimately issued by FFMR to UA. I find that Arnot needed to take that step in order to perpetuate the deceit. In that letter of 27 October 2006 Arnot stated that the invoice dated 12 September 2006 was raised when he was “managing the company” and that it was “a perfectly legitimate invoice”. Arnot has admitted in an affidavit filed this year that in fact it was backdated by a month. Accordingly, it was not issued until the day on which he caused the particular aircraft to be removed from FFMR’s possession.

The affidavit filed in the Supreme Court proceeding by James Sutter Wilson, the director of the aircraft’s owner, Arenco Holdings Pty Ltd, shows that the basis of disputing the debt was information given to him by Arnot that the insurer had entered into an agreement with FFMR that the aircraft would be repaired by UA. The affidavit also referred to the invoice issued which was (falsely) dated 12 September 2006. It is also clear from that affidavit that the deponent was of the belief that the amounts referred to in the statutory demand were not owed to FFMR or, if they were to be owed to FFMR, they would be owed by UA.

It is unnecessary the canvas the evidence further in order to conclude that there was undoubtedly a common sense causal link between Arnot’s behaviour and the bringing of the Supreme Court proceedings against FFMR, and no break in that chain of causation. On such a conclusion, two further issues remain. The first is whether the legal fees can be recovered by a court award in these circumstances; and the second is whether there has been a release which covers this matter (entered into at the behest of the insurance loss adjustor by FFMR).

As to the first issue, the cases that I have analysed concerning the recovery of legal costs, while endorsing a claim that did not rely upon a lost opportunity as still being a viable cause of action, on their face appeared to limit the recovery, where a person had defended the litigation in question, to the difference between the costs incurred and the costs recovered from the third party, although they were common law claims.

In this case, there were no costs which can be directly attributable as recovered from the third party. In fact, the costs sought are the costs of FFMR’s own solicitors as charged between solicitor and client, because each party to the proceeding agreed to pay its own costs. In terms of breach of fiduciary duty, since foreseeability is not a constituent element, it is difficult to see why a direct loss such as this is outside the ambit of such recovery.

As to the matter of non-recovery of any costs against the third party, it has been raised by FFMR that Arnot has not alleged a failure to mitigate (by alleging, for instance, a failure to mitigate by not seeking costs from the third party). I accept in these circumstances that the absence of such an allegation of failure to mitigate does permit FFMR to overcome this apparent hurdle. And, in any event, contributing fault is not a relevant issue for this remedy.

The next matter is whether the legal costs were reasonable. No evidence was led, or cross-examination undertaken, by Arnot to suggest in any way that the costs were not reasonable; and there is nothing on the face of them that shows that they are apparently unreasonable. Although in oral submissions Arnot contended that there was no proof of the $14,500.00 – which was not true because “payments” to the relevant solicitors were proved totalling $14,506.58 (including relevant Tax Invoices for them) – it was, in truth, the subject of a deemed admission under r 166(1)(a) of the Uniform Civil Procedure Rules 1999 (Qld). No amendment was sought of the Reply: even if it had been, FFMR would have had a good argument that such an admission should not be allowed to be withdrawn after the close of all evidence.

The last aspect to be considered is the Release and Discharge. This was dated as made 1 May 2007 and was entered into by FFMR at the behest of the insurer’s loss adjustor agent, GAB Robins Aviation (Australia). In it, FFMR acknowledged that in consideration for a payment of $14,012.43 “for work performed by us” on the Pitts Special aircraft VH-KKT, amongst others UA and Arnot “and their respective servants, employees and agents” are “hereby forever discharged and fully released” from “any and all further claims, demands or liability whatsoever” that FFMR “may have in respect of the said Pitts Special aircraft”. It further stated that the release and discharge “does not extend to include any other matters that might exist between” FFMR, Arnot and UA, because it is “acknowledged and understood that this release and discharge is limited to all matters concerning (that aircraft)” (emphasis added). Finally, it stated that FFMR “shall have no further claim upon the said parties to this release and discharge” “in respect of the said Pitts Special aircraft” and that the “discharge may be pleaded in bar to any such claim or any action, suit and/or demand”.

Arnot’s written submissions, relying upon to the statements by White J in Medlik contended that this particular claim is barred, on the proper interpretation of that Release and Discharge.

For its part, FFMR contends that Arnot was not a party to the negotiations, was not involved in the resolution of the proceeding, and that the release did not extend to include “any other matters” that might be alleged to exist between FFMR and Arnot. On that approach, those submissions contend that a claim for legal expenses resulting from a breach of fiduciary by Arnot cannot come within the terms of the Release and Discharge.

Although the words “in respect of” are capable of a wide meaning (see Lawes v Nominal Defendant[43]), they do take their meaning from the context. In the context of this Release and Discharge, I conclude that on its proper interpretation it is limited to claims concerning the performance of the actual work performed on the aircraft. Under that interpretation, particularly where the Release and Discharge referred expressly to the non-extension to any other matters that might exist between FFMR and Arnot, the ambit of the terms used is not apt to include a claim for breach of fiduciary duty and certainly not a claim where Arnot himself has been cause of the aircraft owner taking proceedings with respect to setting aside a statutory demand. After all, the sum of $14,012.43 is, as the document itself states, “for work performed” by FFMR on the aircraft. I reject Arnot’s argument that at least part of the discharge sum should be credited against the claim, based on that sum potentially covering some of the “legal costs” sought.
[43] [2008] 1 Qd R 369 at 358 [46].

On that approach, there is no bar to FFMR suing, successfully, on the basis of such a breach of fiduciary duty by Arnot.

Thus, FFMR can successfully recover the sum claimed of $14,500.00 as equitable compensation under this claim.

Zero aircraft

I have touched upon this issue earlier when dealing with the credibility of Goode. While I intimated during the trial that S Hart’s analysis of Goode’s records would not persuade me to a particular view, I emphasised that I would not take the same approach to an explanation of the facts behind the documents that appeared in such records. That intimation has the additional aspect that, where mere statements of what witnesses said were contended to be not in dispute about the content of such documents, it did not, necessarily, entail that I was bound by them as to what occurred if there was independent evidence. Some of the confusion appears to have resulted from a failure to properly discern that the original money advanced for the purchase, through Arnot, was advanced by FF for the relevant Zero aircraft. The majority of Goode’s evidence on this aspect dealt with either payments or payments in kind (by the provision of parts) to Arnot, leaving it to Arnot, in turn, to account. Arnot’s accounting was to FFMR (and, seemingly, not FF), although (from the analysis below) Goode appeared to be indifferent as to any distinction between FF and FFMR, which provides, perhaps strangely, some clarity to his Accounts.

Unsurprisingly, FF and FFMR assert that there was an authorisation by both of them given to Arnot to enter into an agreement with Goode, or an associated entity, for the purchase and restoration of that Zero aircraft, although the reality appears to be that they were both content to leave Arnot to make arrangements on an unattributed basis with Goode generally, concerning both planes (which FF was to own) and parts (which FFMR was to receive): see S Hart’s first affidavit at para [183] with respect to FFMR; and paragraph 23(a) of the Amended Defence and Counterclaim for them both.

Arnot has asserted that the only agreement was between FF, Arnot and Goode: but that is unlikely since the Zero Account had had merged into it the running account in Arnot’s own name (which clearly involved both FF and FFMR from late June 1999).

Goode, for his part in a facsimile to Petersen dated 9 November 2006, asserted that, although Arnot made it clear to him that the Zero aircraft was ultimately for “S Hart”, Goode’s dealings and contractual relationships were only with Arnot and, in particular, he received the order for the Zero from Arnot. Support for Goode’s assertions about the arrangements is given in an invoice raised by him dated 15 September 2000 and addressed to Arnot at “Unlimited Aero Maintenance” for the sale of this Zero aircraft. But the reference to UAM only blurs the picture, being the early name of FFMR, though it was the place where Arnot was the “boss” (and, anyway, runs counter to Arnot’s own assertion).

The transactions were in US dollars. Hence, most of the documentation reflects that fact. From that perspective, the equivalent of US$20,000.00 was withdrawn from an account of FF (then named Harts Flying Fighters Pty Ltd) with the NAB on 29 December 2000 and entered in its records as directly referable to the Zero aircraft. The evidence is that that sum, less fees, was then transferred to Goode: see Goode’s entry in the “Nigel Arnot” Account on the same day discussed below. Further transactions involving Standard Chartered on 20 February 2001 for US$20,000.00, on 6 August 2001 for US$15,000.00, and on 24 October 2001 for US$15,000.00, were paid from Merrell Associates Ltd to Goode. As well, from NatWest documentation there was a transfer from GIO Finance Ltd to Goode of US$48,630.50. The eventual total of those payments was US$118,630.50 (or US$118,620.46 actually received by Goode himself). Despite this, FF and FFMR’s written submissions stated that it is not contested that FF caused US$98,630.50 to be paid to Goode for the Zero aircraft which Goode was to refund. That leaves the amount of US$20,000.00 paid on 29 December 2000 in limbo, even though that is the one entry from their documentation that appears to explicitly refer to the Zero aircraft itself.

It must be said at this stage that the document “Statement of Account – Arnot (Zero)” (a document prepared by Goode himself) also does not include that original US$20,000.00, thereby stating, by implication, that the “total” amount received by Goode was indeed US$98,630.50. Nonetheless, in another document prepared by Goode, “Statement of Account – Nigel Arnot”, there is an entry for 29 December 2000 of a receipt of US$19,989.96 credited to “Harts Flying Fighters”. Stripped of deducted fees, this is confirmation of the earlier referred to, though sometimes excluded, US$20,000.00.

If any confirmation of the figure of US$118,630.50 needs to be made, it is clear from Arnot’s last affidavit that he agreed that the payments set out in the immediately proceeding affidavit of S Hart were those payments made by FF in respect of the Zero aircraft. That included the payment of $19,989.96 – in truth US$20,000.00 - made 29 December 2000.

Accordingly, I will begin with the proposition that US$118,630.50 was paid by FF. I reach this conclusion despite Arnot’s written submissions denying that last payment by FF of $48,630.50. The submission is partly based on conflicting statements made by FF and FFMR in their rejoinder (which I am ignoring in favour of what the objectively interpreted documents show) and partly based upon apparently accurate entries appearing in what I have otherwise found to be the quite confusing financial documents prepared by Goode. Arnot’s argument is based upon accepting entries in the “Nigel Arnot” Statement but ignoring the “Arnot (Zero)” Statement which clearly acknowledged the sum of US$48,630.50 (although, as indicated earlier, it fails to pick up the earlier sum of approximately US$20,000.00 on 29 December 2000 – which I still need to explore later). It is impossible for Arnot to rely upon one of Goode’s Statements of Account and not the other unless it is clearly established why. Additionally, as I have already concluded concerning Goode, he was quite at a loss to explain his own Statements of Account; and what has just been canvassed – and what will next be canvassed - are good illustrations of why that is so. An alternative contention by Arnot does not appeal, either, as being a logical proposition. The running account conducted by Goode with Arnot (in Arnot’s own right) took account of the fact that, eventually, no one remained in the accounting process as paying this US$48,630.50 towards the Yak 52 “debt”. In fact, the consequence of all entries is that the Yak 52 is neutralised (probably because, as the account declares for 18 April 2002, the Yak 52 “was not received” – although there was no exploration of this particular matter at all). So nothing has been proved to remain outstanding for it. For the Zero, it was also neutralised in this Account because the “(Zero)” Account had transferred to it the sum of $48,630.50 referrable to 18 October 2002.

Regarding payments made by Goode directly to FF, it is not in dispute that two sums, each of US$25,000.00, were made on 11 February 2005 and 6 April 2005.

After deduction of those payments made from the total advance, a sum remains of US$68,630.50 for the Zero aircraft (on the assumption that the December 2000 $20,000.00 is still in play), before any deduction of $10,273.47 for “parts purchased” and accounted for by Arnot. That figure of $10,273.47 reflects a running account balance in which that first $20,000.00 payment by FF was appropriately acknowledged. Hence, on FF and FFMR’s approach, only US$48,630.50 should be utilised in the calculations. Despite the contentions by each side, the pleadings only add to the present confusion – with some of that confusion already being considered above.

Although Arnot’s written submissions asserted that primary documents contained in the bundle “FFMR 1 – 20” show that FFMR sold most of the parts that Arnot alleges that he gave to FFMR (as a conduit for parts supplied to him for that purpose by Goode), it is not at all clear from the face of the documents to which Arnot makes reference (apart from what I discuss next) how that is so. I do accept what S Hart “discovered” from an examination of the facts behind the records of FFMR for specific entries in the two Statements of Account of Goode (Ex 20), especially where Petersen has reviewed the documents and verified them from her own knowledge of the financial records of FF and FFMR. Thus, I am content to find that: US$51,814.52 credited by Goode to Arnot was not received by FF or FFMR (the problem from Arnot’s perspective being he has never bothered to identify why personal payments should remain with him in an acknowledged derivative account); and that US$20,557.00 referable to the Invoices dated 8 November 2004, 19 July 2005 and 21 February 2006 should not be credited to Arnot (on the basis that the parts detailed were never received by FFMR). But those earlier entries do not all necessarily deal directly with the Zero obligations.

Although the onus for establishing this claim is on FF and FFMR, the evidence from Goode, both orally and in his somewhat confusing documentation, shows that (from his perspective at least) he discharged any obligations he had to Arnot (and derivatively to FF and FFMR) by payments and by supplying parts to Arnot which were equal to the value of the outstanding amount. Then, it was the duty of Arnot to complete this aspect of the transactions. Since Arnot accepted that he was at least a conduit, his position on being given the money or parts by Goode brought with it obligations of a fiduciary nature. Thus, in the circumstances where Goode and any analysis undertaken from the financial and other records of FF and FFMR are the only sources of evidence made available by Arnot to satisfy this Court that there is sufficient evidence to gainsay a breach of his fiduciary duty, he must make good the evidential onus on him to that effect.

Unassisted by any cogent source other than FF and FFMR’s records, I must attempt to make what logical sense I can of such evidence.

The first difficulty is that the initial “Nigel Arnot” Statement started with a balance “agreed” as at 23 June 1999 of $37,284.57. That, clearly, was well before any payments were made by FF to Goode. Some explanation has been proferred, to Arnot’s advantage, by S Hart’s concession that the payment recorded on 6 July 1999 effectively brought the “Nigel Arnot” Account back to zero (though still being, in fact, negative “US$307.58”) at the time it was “to become a FFMR account”. Given that small negative balance at the beginning (being a balance of what Arnot owed to Goode) – ignoring presently the transfer on 30 April 2004 of $10,273.47 to the “Arnot (Zero)” account (referred to in paragraph [237]) – and given the further credit on “termination” on 9 October 2007 of US$4,353.07 (which is unexplained by Goode or Arnot, and inexplicable to FF and FFMR), the further sum of US$4,660.65 also remains unpaid by Arnot to FF and FFMR (although US$307.58 is primarily referable to FFMR).

S Hart accepted that the earlier transferor account of Goode’s was effectively FF’s and FFMR’s (subject to “rogue” entries).

In the end, I am totally unsatisfied that Arnot has discharged his evidentiary onus. It may well be that there is evidence somewhere that Arnot, after being advanced money or delivered parts by Goode, advanced or delivered them in turn to FF or FFMR’s stock: but it is not in any convincing evidence before me, apart from anything conceded by S Hart.

In conclusion, given the earlier decisions that I have reached, I find that there has been a breach by Arnot of his fiduciary duty. Since the figures that I have canvassed as showing a failure by Arnot to account for monies or the value of parts exceeds the sum claimed of US$61,857.03 (even giving Arnot credit of US$20,000.00 for the December 2000 payment being accounted for in the eventual transfer from the transferor running account), I will allow recovery of the claimed sum. Since it is not in dispute that the exchange rate as at 1 November 2006 was US$1.00 to AU$1.28999, or that it is the correct date for such conversion, the balance owing in Australian Dollars is $79,794.95.

But it remains to be determined who has a right to that sum. As noted, there is no evidence led about any breakdown of the actual figures flowing from the consequences of such failure to discharge the duty, as between FF and FFMR. Hence, I intend to allow only FF to recover that particular sum – in accordance with the pleadings - since I find that it was the intended purchaser of the Zero aircraft, paid the initial sums, permitted repayments in money or in kind to be channelled through FFMR, and sought recovery solely on the basis of the original Zero payments by it to Goode.

Remaining relevant witnesses

Although a number of other witnesses were called, including John Dunne, Cameron Rolph-Smith, Kim Rolph-Smith and Michael Peter Ellis, it has been unnecessary for me to make any findings upon credibility concerning them, particularly when their evidence was not in contest, or the issue for which they were called has not now been pressed.

There is nothing that these witnesses gave evidence about which has any significant effect on the outcomes I have reached. In particular, although Dunne, C Rolph-Smith and K Rolph-Smith gave evidence concerning the T-28 engine and propeller – an aspect of one of the claims which is not being pressed – there is nothing particular in their evidence that enables me to reach any different conclusion on the issues canvassed concerning either Arnot or any of the major witnesses called by FF and FFMR. If anything, it only generally reinforces the view that I have formed that Arnot, on occasions, made statements to other persons which did not reflect the truth of the representation so made.

If I were to have been called upon to decide what various photographs [referable to the (sometime) missing T28 engine], on the application of the principles discussed above, I would have preferred not to make any independent call on what they contained. It seemed to me that each witness called could see an object, or objects, that opposing witnesses denied was, or were, there. If any decision were to be necessary, those supporting Arnot’s version would have been preferred. Like the decisions on photographs that I have analysed, I could not have independently reached a decision on what was shown (other than to conclude that I could see something beyond what FF and FFMR contended was not there).

Finally, because FF and FFMR have made submissions about the payment of costs of the action on an issue that now has been abandoned, it is necessary to say something, briefly, about Beattie. As submitted by them, Beattie was called in an attempt to prove facts to sustain a claim for damages based upon “malicious and/or vexatious prosecution”. Beattie was a person whose evidence I would have accepted, had it mattered. But that conclusion does not permit me to reach any final decision on any costs orders yet.

Interest

I have been given no assistance with the calculation of interest (other than FF and FFMR at least nominating a rate of 8%, where 9% was originally claimed), either in the written submissions or in oral submissions made to me.

That is, of course, may be understandable where so much has still been a matter of contest between the various parties to the two proceedings.

The only way to deal, effectively, with the issue of interest is to reserve to the parties, when handing down my judgment, the right to make written submissions on it.

Costs

As it is obvious that there will be widely differing submissions on costs, again as with interest, I will give leave to the parties to make written submissions on costs, at the time that the judgment is handed down in the two proceedings.

Summary

Apart from interest, and costs, I have reached the following conclusions in this case:

In proceeding BD 1528/08:
(a)On the claim:
(i)      It is ordered that FFMR deliver up to Bowenbrae the Staggerwing aircraft VH-BBL;
(ii)     FFMR is to pay Bowenbrae the sum of $1,000.00 as damages for detention of the Staggerwing;
(b) On the counterclaim:
(i)      Arnot is to pay FFMR $299,792.67 by way of equitable compensation; and
(ii)     Arnot is to pay FF $79,794.95 by way of equitable compensation.

2. In proceeding BD 1907/08:

(a)Judgment for FFMR against UA.

I also intend to order that, when all issues have finally been decided, the parties bring in Short Minutes of Judgment in both proceedings for final settlement by me.

CITATION:	Bowenbrae PL & Anor v Flying Fighters Maintenance and Restoration PL; Flying Fighters Maintenance and Restoration PL & Anor v Bowenbrae PL & Anor; Ultimate Aerobatics PL v Flying Fighters Maintenance and Restoration PL [2012] QDC 332
PARTIES:	BOWENBRAE PTY LTD (ACN 060 747 377) (first plaintiff) and NIGEL EDWARD ARNOT (second plaintiff) v FLYING FIGHTERS MAINTENANCE AND RESTORATION PTY LTD (ACN 087 084 197) (defendant) FLYING FIGHTERS MAINTENACE RESTORATION PTY LTD (ACN 087 084 197) (first plaintiff by counterclaim) and FLYING FIGHTERS PTY LTD (ACN 067 895 005) (second plaintiff by counterclaim) v BOWENBRAE PTY LTD (ACN 060 747 337) (first defendant by counterclaim) and NIGEL EDWARD ARNOT (second defendant by counterclaim) ULTIMATE AEROBATICS PTY LTD (ACN 061 278 564) (plaintiff) v FLYING FIGHTERS MAINTENANCE AND RESTORATION PTY LTD (ACN 087 084 197) (defendant)
FILE NO/S:	BD1528/08 BD1907/08
DIVISION:	Brisbane Registry
PROCEEDING:	Commercial List
ORIGINATING COURT:	District Court, Brisbane
DELIVERED ON:	6 November 2012
DELIVERED AT:	Brisbane
HEARING DATES:	12 July and 30 August 2012 (rulings on evidence); and 10, 11, 12, 13, 14, 17, 18, 19, 25 and 26 September 2012 (trial)
JUDGE:	Dorney QC, DCJ
ORDERS:	1. In proceeding BD 1528/08, the judgment of the Court is that: On the claim:(a) FFMR deliver up to Bowenbrae the Staggerwing aircraft VH-BBL;(i) FFMR pay Bowenbrae the amount of $1,000.00 as damages for the detention of the Staggerwing aircraft VH-BBL;(ii) ((b(b)On the counterclaim: Arnot pay FFMR $299,792.67 as equitable compensation; and(i) Arnot pay FF $79,794.95 as equitable compensation. (ii) 2. In proceeding BD 1907/08, the judgment of the Court is that FFMR have judgment against UA on the claim. 3. The Court gives leave to the parties to file and serve written submissions on the issue of interest by 4:00pm on 13 November 2012. 4. The Court gives leave to the parties to file and serve written submissions on costs, by 4:00pm on 13 November 2012. 5. Both parties to bring in Short Minutes of the Judgments upon determination of all outstanding issues.
CATCHWORDS:	Detinue – recovery (where possessory and/or equitable lien alleged) – damages (and whether nominal and exemplary) Fiduciary duty –– whether equitable compensation - whether equitable charge – whether compromise – whether plea in bar operable Corporations Act 2001 (Cth) ss 286(1), 1305(1), 1305(2) Campbell, Some Historical and Policy Aspects of the Law of Equitable Liens (2009) 83 ALJ 97 Mason, Carter and Tolhurst, Mason and Carter’s Restitution Law In Australia , 2^nd ed (2008) Meagher, Gummow and Lehane, Equity: Doctrines and Remedies, 4^th ed (2002) Sykes and Walker, The Law of Securities, 5^th ed (1993) Young, Croft and Smith, On Equity (2009) Young, Declaratory Orders, 2^nd ed (1984) Albemarle Supply Co Ltd v Hind & Co [1928] 1 KB 307 Anderson & Ors v ASIC [2012] QCA 301 ASIC v Rich (2005) 53 ACSR 752 BC Timber Industries Journal v Black [1934] 3 DLR 31 Beaton v McDivitt (1985) 13 NSWLR 134 Bennett v Minister of Community Welfare (1992) 176 CLR 408 Blacktown City Council v Hocking [2008] NSWCA 144 Bolwell Fibreglass Pty Ltd v Foley [1984] VR 97 CBA v Marwan Tabet [2008] VSC 161 Day v Perisher Blue Pty Ltd [2005] NSWCA 110 Deputy Commissioner of Taxation v Dick (2007) 64 ACSR 61 Duvall v Spry [1982] 2 NSWLR 68 Egan v State Transport Authority (1982) 31 SASR 481 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 Fischer v Automobile Finance Co of Australia Ltd (1928) 41 CLR 167 Hall v Poolman (2007) 65 ACSR 123 Hartnett v Hynes [2009] QSC 225 Hewett v Court (1983) 149 CLR 639 Jones v Dunkel (1959) 101 CLR 298 Lawes v Nominal Defendant [2008] 1 Qd R 369 Malec v JC Hutton Pty Ltd (1990) 169 CLR 638 Medlik & Anor v Toowoomba City Council No 3063 of 1996, Supreme Court, 3 June 1998 Brisbane, Justice White Monaghan Surveyors Pty Ltd v Stratford Glen-Avon Pty Ltd [2012] NSWCA 94 O’Halloran v RT Thomas & Family P/L (1998) 45 NSWLR 262 Palace Backpackers Australia Pty Ltd v Christensen Industries Pty Ltd [2002] QDC 084 Pilmer v The Duke Group Limited (in liq) (2001) 207 CLR 165 Protean Enterprises (Newmarket) Pty Ltd v Randall [1975] VR 327 R v Towey (1996) 21 ACSR 46 Schmidt v Schmidt [1969] QWN 3 Spencer v Commonwealth (1907) 5 CLR 418 Strand Electric and EngineeringCo Ltdv Brisford Entertainments Ltd [1952] 2 QB 246 Tubby Trout Pty Ltd & Anor v Sailbay Pty Ltd& Ors (1992) 113 ALR 748 Twynam Agricultural Group Pty Ltd v Williams [2012] NSWCA 326 University of Western Australia v Gray and Ors (No. 28) (2010) 185 FCR 335 United States Surgical Corporation v Hospital Products International P/L & Ors [1982] 2 NSWLR 766 WAQ v Di Pino [2012] QCA 283 Worrell v Issitch [2001] 1 Qd R 570
COUNSEL:	S J Given (for the first and second plaintiffs and the defendants by counterclaim in the first proceeding; and for the plaintiff in the second proceeding) P J Roney SC (for the defendant and the plaintiffs by counterclaim in the first proceeding; and for the defendant in the second proceeding)
SOLICITORS:	Gall Stanfield & Smith Solicitors (for the first and second plaintiffs and the defendants by counterclaim in the first proceeding; and for the plaintiff in the second proceeding) Bickfords Lawyers (for the defendant and the plaintiffs by counterclaim in the first proceeding; and for the defendant in the second proceeding)