Rheem Australia Pty Ltd v McInnes (No 2) - [2020] NSWSC 1665

Supreme Court

New South Wales

Amendment notes

Medium Neutral Citation: Rheem Australia Pty Ltd v McInnes (No 2) [2020] NSWSC 1665
Hearing dates: 26 October, 5 November 2020
Date of orders: 6, 23 November 2020
Decision date: 23 November 2020
Jurisdiction: Equity
Before: Parker J
Decision:
See [83]-[84]

Catchwords:
EQUITY – tracing – mixed funds used to acquire property – equitable charge – charge includes interest on traceable amount
COSTS – party/party – Calderbank offer – whether rejection unreasonable – plaintiff against separately represented defendants – form of costs order

Legislation Cited:
Conveyancing Act 1919 (NSW), ss 37A, 66G
Family Law Act 1975 (Cth)

Cases Cited:
ATCO Controls Pty Ltd v Stewart [2013] VSCA 132
Challenger Managed Investment Ltd v Direct Money Corporation Pty Ltd [2003] NSWSC 1072
Dimos v Willetts (2000) 2 VR 170
Foskett v McKeown [2001] 1 AC 102
Gray v Haig (1885) 20 Beav 219; 52 ER 587
Heperu Pty Ltd v Belle (2009) 76 NSWLR 230
Newton v The Grand Junction Railway Company (1864) 16 M & W 139; 153 ER 1133
Nguyen v Corbett (No 2) [2018] NSWSC 441
Scott v Scott (1963) 109 CLR 649
Re Diplock [1948] Ch 465

Category: Costs
Parties: Rheem Australia Pty Ltd (Plaintiff)
Paul Bruce McInnes (First Defendant)
Nicole Maree McInnes (Second Defendant)
Representation:
Counsel:
D Robertson (Plaintiff)
GES Ng (Second Defendant)

In person:
P McInnes (First Defendant)
Solicitors:
DLA Piper (Plaintiff)
YPOL Lawyers (Second Defendant)

File Number(s): 2019/18467
Publication restriction: Nil

Judgment

On 30 September I delivered my principal judgment in these proceedings: Rheem Australia Pty Limited v McInnes [2020] NSWSC 1313. This further judgment assumes familiarity with my principal judgment, paragraphs of which are referred to as “J”. The same abbreviations used in the principal judgment are used in this judgment.
On delivery of my principal judgment I ordered that Rheem bring in short minutes of order giving effect to my conclusions. Following further argument on 26 October and 5 November, I made orders for final relief on 6 November. This judgment sets out the reasons for those orders and gives reasons for the costs orders which I will now make.

Final relief

I found that Rheem was entitled to judgment against Mr McInnes in the amount $2,098,608 fraudulently misappropriated by him: J [127]. Rheem calculated the statutory interest down to entry of judgment as $937,984.
Mr McInnes did not dispute the quantum of Rheem’s calculation. He did complain about the length of time that the proceedings took to come to hearing.
Pre-judgment interest is awarded to reflect the fact that the money in question has been “fructifying in the wrong pocket”: Newton v The Grand Junction Railway Company (1864) 16 M & W 139 at 141; 153 ER 1133 at 1134. Rarely if ever would the delay of the conduct of the proceedings result in the plaintiff not receiving interest at statutory rates. Most of the interest which has been calculated covers the period during which Mr McInnes concealed the fraud from Rheem. I…

Grounds of appeal

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

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

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

Consideration

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

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

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Details

Case: [2020] NSWSC 1665
Decision Date: 23 November 2020

CaseChat Overview and Summary

The matter before the court involved Rheem Australia Pty Ltd, a corporation, as the plaintiff and McInnes, an individual, as the defendant. The dispute centred on the plaintiff's claim for an equitable charge over certain property held by McInnes, arising from the use of mixed funds in its acquisition. The plaintiff sought to trace the funds and establish a charge over the property, including interest on the traceable amount. The case was heard in the Supreme Court of New South Wales.

The central legal issues that the court had to address were whether the plaintiff could successfully trace the mixed funds into the property and, if so, whether the charge over the property should include interest on the traceable amount. The court also had to determine the appropriate costs order, particularly in light of the plaintiff's rejection of a Calderbank offer from McInnes. This offer, which would have resulted in the plaintiff recovering significantly less than the amount claimed, was made during the period when McInnes was represented by separate legal counsel.

The court found that the plaintiff could indeed trace the mixed funds into the property, thereby establishing an equitable charge over it. Regarding interest, the court held that the charge should encompass interest on the traceable amount, as it was equitable to do so. The court considered the plaintiff's rejection of the Calderbank offer unreasonable and found that McInnes was entitled to costs on the party/party basis. However, because McInnes was separately represented during the period in question, the court ordered that McInnes's costs would be taxed at a reduced rate. The final orders included the establishment of the equitable charge over the property with interest and the taxation of McInnes's costs.

Orders