Robins Haigh McNeill Pty Ltd v Nichols-Cumming Advertising Australia Pty Ltd (in liq)
[2001] VSC 427
•12 November 2001
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No.7177 of 2000
| ROBINS HAIGH McNEILL PTY LTD (ACN 002 499 078) | Plaintiff |
| v | |
| NICHOLS-CUMMING ADVERTISING AUSTRALIA PTY LTD (IN LIQUIDATION) (ACN 007 176 883) and LEON A. LUMSDEN) (In his capacity as Liquidator of NICHOLS-CUMMING ADVERTISING AUSTRALIA PTY LTD (IN LIQUIDATION) | |
| Defendant |
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JUDGE: | Habersberger, J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 17, 18, 19, 20 and 24 September 2001 | |
DATE OF JUDGMENT: | 12 November 2001 | |
CASE MAY BE CITED AS: | Robins Haigh McNeill Pty Ltd v Nichols-Cumming Advertising Australia Pty Ltd (in liq) | |
MEDIUM NEUTRAL CITATION: | [2001] VSC 427 | |
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Trusts and Trustees – Trusts – Existence – Accredited advertising agency entering into agreement to place orders for media space on behalf of clients of another advertising agency – Whether second advertising agency trustee of payments from clients for media invoices – Indicia for determining whether imputed trust or debtor creditor relationship existed – Trust of certain payments held to exist.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M.A. Robins | Kliger Partners |
| For the Defendant | Mr A.A. Nolan | Middletons Moore & Bevins |
HIS HONOUR:
The Proceeding
On 13 October 1999, the plaintiff, Robins Haigh McNeill Pty Ltd (ACN 002 499 078) ("RHM"), commenced proceedings against Nichols-Cumming Advertising Australia Pty Ltd (In Liquidation) (ACN 007 176 883) ("NCAA") and Leon Lumsden, in his capacity as liquidator of NCAA. The proceeding contained an application for leave to issue proceedings and proceed against NCAA seeking relief which included a declaration that the moneys received by NCAA in respect of media invoices issued in the name of "Nichols-Cumming Advertising Australia a Division of Robins Haigh McNeill Pty Ltd" were the property of RHM and/or held on trust for RHM in their entirety, alternatively to the extent that RHM had paid for the media expenses claimed therein. Alternatively, RHM sought an order that NCAA account to RHM for the moneys received by NCAA in respect of the identified media invoices and that NCAA pay such sum as may be due to RHM upon the taking of such accounts. RHM also sought leave to appeal out of time the decision of the liquidator rejecting RHM's claim that the moneys received by NCAA in respect of the identified media invoices were held on trust for RHM.
The Parties
In 1990, Advertising Dynamics Pty Ltd ("Advertising Dynamics") purchased all of the shares in Nichols-Cumming Advertising Australia Pty Ltd ("NCAA") and two other related companies. Messrs John Robins and Anthony Lorkin were appointed directors of NCAA on 1 September 1990. At that time, NCAA operated an accredited advertising agency in Victoria. A substantial deposit was provided by Mr Robins' company, RHM. The balance of the purchase price was paid over time out of the profits of NCAA's business.
Mr Robins and Mr Lorkin had been directors of Advertising Dynamics since 1988. Although the historical company extract did not show this, Mr Robins asserted that from an early date he held four (or two thirds) of the shares and Mr Lorkin held two (or one third) of the shares in Advertising Dynamics. Mr Lorkin did not disagree with this statement. Advertising Dynamics also carried on an advertising business.
In 1990, Mr Robins beneficially owned all of the shares in RHM. This company, an accredited advertising agency based in Sydney, carried on business in Victoria under the unregistered business name Nichols-Cumming Advertising ("NCA"). The business name was registered on 1 August 1996. By 1990, Mr Robins had been a director of RHM for some eight years. RHM also carried on business under the registered business name of Advertising Professionals and much of the financial dealing with NCAA was conducted under that name.
The History of the Relationship Between RHM and NCAA
There was a dispute between Mr Robins and Mr Lorkin about the terms of the agreement which resulted in the purchase of the shares in NCAA. Mr Lorkin said in his first affidavit that he had agreed with Mr Robins that he would be paid an annual salary of $60,000 to run NCAA, that he would be entitled to draw 1% of the revenue that NCAA earned from the placement of media bookings and that Mr Robins would arrange for the provision of cash flow needed for the running of the business of NCAA. It was agreed that both companies would trade from the same address in South Melbourne and that Mr Lorkin would act as the manager for RHM in Melbourne as well as running NCAA. Mr Lorkin said that he considered that he and Mr Robins "were, in substance, partners" in the business of NCAA and that he had an equity entitlement of one third and Mr Robins an equity entitlement of two thirds of the assets and business of NCAA.
Rather more accurately, Mr Robins pointed out that Advertising Dynamics owned the 85,003 shares in NCAA and that initially the shares in the former company were held two thirds by him and one third by Mr Lorkin. Mr Robins denied that he and Mr Lorkin were partners. However, he agreed that it was intended that one or more of his companies, including RHM, would provide the initial working capital to allow NCAA to operate. He denied any obligation to provide money on an ongoing basis to NCAA.
At the time Advertising Dynamics purchased the shares in NCAA Mr Robins and Mr Lorkin and a Mr Meissner, who was the accountant for Mr Robins' group of companies, agreed that NCAA's accreditation would cease. It is unnecessary to detail the conflicting explanations for this step. What is more important is that RHM agreed with NCAA that NCAA could place its advertising with media service providers using RHM as the accredited advertising agency.
The Media Council of Australia's Guidelines for the Establishment and Conduct of Advertising Agencies provided that an accredited agency could place advertising with a media service provider, such as a newspaper or radio station, and so long as the cost was paid on time by the accredited agency, a rebate of 10% of the cost was given by the media service provider. This rebate represented the commission earned by the agency. However, if the agency failed to pay on time, being 45 days after the end of the month in which the service was provided, the 10% rebate was lost and if the failure to pay on time occurred frequently accreditation could be lost. The Guidelines required a direct relationship between the client and the accredited agency. Following the outlawing of the Media Council's scheme in about 1996, all of the media service providers entered into individual agreements along the same lines with each accredited agency. Generally, an agency which was not accredited could only place advertising with media service providers by paying cash up front without any rebate.
In practice, the agreement between NCAA and RHM was as follows. NCAA would book advertising space on behalf of its client by sending a space insertion instruction under letterhead styled:
"Nichols Cumming
Advertising Est. 1946
A Division of Robins Haigh McNeill Pty Ltd ACN 002 499 078".
NCAA would then send an invoice ("the media invoice") to its client for the media service under letterhead styled:
"Nichols Cumming
Advertising Australia
A Division of Robins Haigh McNeill Pty Ltd ACN 002 499 078".
Sometimes a service fee would be charged on the media invoice in addition to the full amount charged by the media service provider. The service fee was charged as a percentage of the cost of the advertisement. NCAA would also send an invoice ("the production invoice") to its client for the cost of its production work under letterhead styled:
"Nichols Cumming
Advertising Australia
Proprietary Limited ACN 007 176 883".
NCAA would send a statement to its client recording the amounts payable under both the media invoice and the production invoice under letterhead styled:
"Nichols Cumming
Advertising Australia
A Division of Robins Haigh McNeill Pty Ltd ACN 002 499 078".
In each case, the typeface reduced as the heading descended the page, so that the words "Nichols Cumming" were the most dominant.
The total amount due by the client was payable within 30 days from the end of the month in which the invoice and statement were issued. At the end of each month, NCAA would send copies of the instructions to media service providers and the media invoices to RHM/Advertising Professionals, together with the invoices received by NCAA from the media service providers. RHM/Advertising Professionals would prepare a reconciliation of the amounts payable to the media service providers and the amounts receivable from the clients in respect of the media invoices, but not the production invoices. The reconciliation would record the gross amount charged by the media service providers before the deduction of the 10% rebate. That gross amount would equal the amount payable by the clients under the media invoices. The reconciliation would also record the amount which RHM owed to the media service providers and was to be paid by NCAA to RHM/Advertising Professionals, and the amount of the commission and the split of that commission between RHM and NCAA.
When the client paid the amount due on the statement the cheque would be banked into an NCAA account with the Commonwealth Bank. NCAA was then required to account to RHM for 90% of the amount of the media invoice (less any service fee) and for a further 4% of the amount of the media invoice (or 40% of the 10% rebate). Mr Robins said that NCAA was supposed to pay that amount into the account of RHM/Advertising Professionals on the same day. If the client paid on time and NCAA accounted to RHM straight away, RHM would be able to pay the media service provider from the amount paid by the client. NCAA retained the full amount of any service fee and the full amount of the production invoice, and 6% of the amount of the media invoice (or 60% of the 10% rebate). Mr Robins said the 6% could only be retained if RHM had been paid its 94% on time.
RHM asserted that it was this arrangement which meant that, of the funds received by NCAA from clients, 100%, alternatively 94%, of the media invoices were the property of RHM. Alternatively that those amounts were held by NCAA on trust for RHM. The analysis of this relationship is a crucial part of the case and I will return to it later in these reasons.
Termination of that Relationship between RHM and NCAA
NCAA was one of a number of companies in which Mr Robins and Mr Lorkin, or their interests, were involved. Increasingly, financial difficulties were being experienced by these companies in 1999. This apparently led to Mr Robins writing a letter to Mr Lorkin dated 6 July 1999. Neither party was able to produce a copy of that letter. Mr Lorkin responded by a letter dated 16 August 1999 in which he made certain proposals for ending the relationship between him and Mr Robins' family interests. I say Mr Robins' family interests because by 1999 Mr Robins was no longer a shareholder in either Advertising Dynamics or RHM. Mr Robins gave evidence that his sister, Ms Rosemary Pollock, had purchased his four shares in Advertising Dynamics and his 99,999 shares in RHM and shares in other companies of his from him for about $300,000 in about 1994 or 1995. Ms. Pollock still held the shares in Advertising Dynamics but not those in RHM. These shares had been transferred to a former employee of RHM in 1997 and then to Ms Cheryl Robins, the wife of Mr Robins, in 1998. Although it was put to Mr Robins that he had retained some interest in the shares in both Advertising Dynamics and RHM he denied this. The 1997 annual return of Advertising Dynamics, which was verified by Mr Lorkin, recorded that Ms Pollock held her shares beneficially. An historical company extract in respect of RHM recorded that Ms Robins held her shares beneficially. In June 2001, not long before the hearing of this matter, Mr Robins was bankrupted as a result of unrelated problems.
Mr Robins' response to Mr Lorkin's proposal was stated in a letter to Mr Lorkin dated 2 September 1999. Mr Robins referred to a spreadsheet of calculations in respect of moneys owed by NCAA to RHM, which was attached to his letter and continued:
"In summary up until and including June Media, it comes down to this:
Media Short Payments 1998/98 [sic] $116,867.57 1998/99 $133,635.90 Unpaid Commission
Pre 1997
1997/98
1998/99$250,503.47
$ 88,470.46
$ 53,764.19
$ 34,416.16
$180,650.81Total outstanding (forgetting Meissner's stuff ups)
$431,154.28
Obviously this is unable to be paid and although I can write off any income due for the past three years, as this is not an out of pocket cost, I believe that Robins Haigh McNeill alone should not be expected to fund the $250,503.47 owed to it for media which it has had to pay. I think you will agree that this is far beyond any funding expectation considered to be part of our agreement.
…
I do however believe it is time to 'clean the slate' and start again. Accordingly, I propose the following in relation to NCA:-
1.The amount due for the balance of April, May, June, July and August media is to be paid in full at net cost to Robins Haigh McNeill Pty Ltd ($13,569.36 for April, May and June plus July and August as reconciled).
2.The amount due prior to July media ($431,154.28) is crystallised and becomes due for immediate payment.
…
5.Nichols-Cumming makes arrangements locally to place its media at the more advantageous rates you believe are available (as from 1 September) and all outstanding media bookings are transferred to that agency.
…
For this proposal to proceed you would need to do the following:
…
2.You pay all money due from clients for media up until 31 August 1999 directly into the Robins Haigh McNeill bank account.
3.You pay the outstanding amount for April, May, June and July media no later than 21 September 1999.
Should you elect not to proceed along this path, the potential problems are substantial.
1.NCAA has, by depositing money due upon media invoices, converted money due to Robins Haigh McNeill Pty Ltd consequently Robins Haigh McNeill would have a priority claim against all assets held by NCAA as this money could only be held by NCAA in trust for Robins Haigh McNeill Pty Ltd
2.The full amount of money due to Robins Haigh McNeill Pty Ltd which has been advised regularly to NCAA and confirmed to Sothertons annually would be required to be paid immediately. If this were unable to be done a liquidator would be appointed.
All money due for media would go directly to RHM. …
Remember it was you who always stressed we were partners, that means sharing losses as well as profits.
Please consider this carefully and then get back to me.
In the meantime you are hereby instructed to immediately cease booking media in the name of Robins Haigh McNeill Pty Ltd and to cancel all outstanding bookings. You may, if you so elect, re book through another agency. Please adhere strictly to this instruction as you would be in serious trouble if you chose to ignore it. This instruction is given with the approval of the Directors of Robins Haigh McNeill Pty Ltd."
It was not clear whether this letter was faxed or sent by mail. The original facsimile or letter was not produced. Mr Lorkin said that he thought he had received it as a letter on 4 September 1999, but having ascertained that that day was a Saturday he agreed that this could not be correct. He also said that he remembered commenting to Mr Mitchell that he had been asked to do something immediately and yet he had not received the letter until after the relevant time. I accept Mr Lorkin's evidence that he received the letter of 2 September not as a facsimile on that day but a short time after, probably 3 September 1999.
Mr Lorkin and Mr Robins exchanged further letters on 10 September 1999. Mr Robins' letter instructed Mr Lorkin to deposit all client cheques which were primarily in payment for media billed by RHM directly to RHM's account. He promised to transfer to NCAA any amount from the cheques due to NCAA. Under no circumstances was money due to RHM to be banked in the account of NCAA.
Mr Lorkin said that it was not possible for NCAA to cancel outstanding bookings on such short notice and that he had not made any attempt to do so or given any such instructions. However, he had given instructions to cease using RHM's name. He said that he had one of his staff contact the main media providers and that they had agreed to accept bookings in the name of NCAA. He believed that NCAA had then ceased using RHM's name in placing the media orders. However, the documents show quite clearly that Mr Lorkin's belief was incorrect. Space insertion instruction sheets using RHM's name continued to be completed by NCAA staff after 2 September 1999, including one by Mr Lorkin himself on 20 September 1999. This is despite the fact that around this time NCAA started using media invoices in its own name and with a new format following its change of offices. Mr Lorkin's only explanation was that he thought it had taken longer to produce the lined space insertion instructions compared with the simpler general office letterhead. The instruction sheets with RHM's name on them had been used inadvertently.
I find this explanation unconvincing, but I accept that to a large extent the problems probably occurred through a lack of appreciation on the part of NCAA staff of the importance of clarifying that it was NCAA which was placing the order with the media service provider and of removing any reference to RHM. Confusion on the part of Mr Lorkin himself is amply illustrated by the space insertion instruction sheet he completed on 20 September 1999. Believing that he was following the administrator's instruction that all NCAA documents had to have the words "Administrator Appointed" added to them, he wrote these words on the space instruction sheet just below the heading, which made it appear that it was RHM which had an administrator appointed.
The Appointment of an Administrator of NCAA
On 16 September 1999 Leon Lumsden was appointed Administrator of NCAA. Mr Lorkin said that he believed Mr Lumsden's firm "were making investigations for a good week" before the appointment and that he had been concerned with the delay. Mr Lorkin also said that Mr Lumsden's Senior Manager, Mr Adrian Brown, had attended his office for several days before the appointment. This evidence was consistent with the passage in Mr Robins' first affidavit sworn 13 October 2000 in which he said:
"20.On or about 4 September, 1999 I received a telephone call from Tony Lorkin who advised me that he had met with Lumsden and had been advised to appoint an administrator to the company after showing him my letter of 2nd September, 1999."
Mr Mark Robins of counsel for the plaintiff submitted that it was significant that it was not until after the case had been opened that there had been any attempt by Mr Lumsden to suggest that Mr Robins' statement in paragraph 20 of his affidavit was incorrect. Mr Lumsden said that previously he had overlooked this paragraph. He strenuously denied that he had had any relevant contact with Mr Lorkin before 14 September 1999. He said that he had received a telephone call from Mr Lorkin on that day and had then gone to his new office. On the next day he and Mr Brown had met with Mr Lorkin. Mr Lumsden produced file notes and timesheets that supported this evidence. Mr Brown did not recall any involvement with NCAA before the meeting on 15 September. I believe that Mr Lorkin's memory of these events is incorrect and that he and Mr Robins are a little confused about the timing of their conversation. I find that Mr Lumsden was not approached about an administration of NCAA until 14 September 1999.
On 16 September 1999, English Kearns, a firm of solicitors in Sydney acting for RHM, faxed a letter to Mr Lumsden which included the following:
"… NCAA has been collecting trust monies for and on behalf of RHM and NCAA has a continuing fiduciary duty to RHM to properly deal with and account to RHM with respect to these trust monies. …
We are instructed that for some time, NCAA has not been paying the full amount of the money it has received on trust for RHM into the RHM bank account. …
You are probably now aware that all the arrangements in relation to booking media through RHM have been recently terminated."
Mr Lumsden agreed that he would have read this letter on the morning of 17 September, at the latest. He said that he then caused inquiries to be made of Mr Lorkin as a result of which he was subsequently shown a copy of the letter of 2 September for the first time. He forwarded a copy of that letter to his solicitors by a letter dated 23 September 1999 which was drafted and signed on his behalf by Mr Brown. It would appear from a file note of Mr Brown dated 22 September 1999 that Mr Lorkin gave him copies of certain correspondence, including Mr Robins' letter of 2 September, on 21 September 1999. No doubt Mr Brown gave copies to Mr Lumsden on that day or the following day, and that enabled Mr Lumsden to arrange for that correspondence to be sent to his solicitors on 23 September 1999.
Mr Lumsden's file note of his telephone call with Mr Lorkin on 14 September reveals that Mr Lorkin referred to Mr Robins' letter of 2 September, and to the fact that his "two-thirds" partner had "pulled" the funding "via" that letter. Just what else was said about the contents of that letter is not clear, although I assume some explanation of the relationship between NCAA and RHM and RHM's termination of that relationship must have been discussed. At the least, enough must have been said by Mr Lorkin for Mr Lumsden to understand the significance of the end paragraph of the English Kearns letter quoted in the previous paragraph, when he received that letter. Mr Brown also recalled Mr Lorkin mentioning the letter of 2 September at the meeting on 15 September at which Mr Lumsden was also present, but was firm in rejecting the suggestion that Mr Lorkin had handed over copies of that letter on that day. I therefore find that Mr Lumsden knew from 17 September 1999, at the latest, that Mr Robins had previously instructed Mr Lorkin to cease using RHM's name when placing media advertisements.
Mr Brown said that on 16 September 1999 he instructed NCAA staff to add the words "Administrator Appointed" to all orders and correspondence. However, Mr Brown thought, incorrectly as it turned out, that NCAA staff had been complying with Mr Lorkin's direction to cease using RHM's name and were using the new NCAA stationery. Mr Brown agreed that on 16 September he had not specifically instructed NCAA staff to stop using letterhead bearing RHM's name. He said that following a discussion with Mr Lorkin on 22 September and having read the correspondence given to him by Mr Lorkin, he realised the need for a specific instruction to that effect. In his file note of 22 September 1999, Mr Brown recorded the following entry after noting receipt of the correspondence from Mr Lorkin:
"Instructed T.L. to cease using any L/head with RHMc immediately."
Mr Brown also agreed that on 20 September he had made a mistake in approving the space insertion instruction prepared by Mr Lorkin which bore the handwritten words "Administrator Appointed" just below the heading, which included reference to RHM.
Mr Brown also explained that his misunderstanding about the NCAA staff not using RHM's name after 2 September 1999 caused him to overlook the issue of liability for advertisements which had been placed, using RHM's name, but had not yet been published as at the date of the appointment of the administrator:
"I don't believe I turned my mind specifically to it other than to have made the assumption that if RHM had withdrawn its support on 2/9 then I assumed that the placements that were being made were being made by NCAA, so I thought well, if that's the case then the liability for those orders would form part of the unsecured claims on NCAA."
He stated that no instruction had been given by him to NCAA staff to cancel any outstanding placements.
Mr Lumsden was asked in cross-examination whether he or Mr Brown had taken any step on 16 or 17 September 1999 to cancel outstanding media bookings. Mr Lumsden first suggested that Mr Brown sent a circular to the media service providers straight after his appointment. He subsequently agreed that the circular he had in mind had not been sent to the media service providers as they were not listed as creditors of NCAA. Mr Lumsden then said that he believed Mr Brown:
"undertook the responsibility of contacting the media providers to advise them that anything booked in the name of NCAA should be either rebooked or cancelled."
Mr Brown's evidence referred to above shows that Mr Lumsden's belief was incorrect. Mr Brown agreed that he had not taken any step during the period of administration to cancel any outstanding media bookings. Mr Lorkin confirmed that neither Mr Lumsden nor Mr Brown had instructed him to cancel any media bookings placed prior to 16 September 1999.
The result of all this was that, despite the letter of 2 September 1999, between that date and 16 September 1999 NCAA did not cancel any outstanding bookings and continued to place media advertisements in the name of RHM, and between 16 September 1999 and 5 October 1999, when NCAA ceased trading, the administrator did not cancel any outstanding bookings previously made by NCAA staff and advertisements in the name of RHM continued to be placed by NCAA staff.
The Appointment of a Liquidator of NCAA
On 14 October 1999, the creditors of NCAA resolved to wind up the company and Mr Lumsden was appointed Liquidator. He accepted liability for all advertisements placed by NCAA on and after 16 September 1999 (the date of his appointment as Administrator). The actual amount of that liability has remained a matter of dispute. Mr Lumsden rejected the suggestion that there was any trust with respect to RHM and treated it simply as an unsecured creditor for an amount of $431,154.28 plus what was owing from the months of July, August and September 1999. In a report to creditors dated 6 October 1999, Mr Lumsden stated that he had rejected RHM's trust claim. When RHM wrote to the clients directly seeking payment of the media invoice, Mr Lumsden reacted strongly, asserting that RHM had no right to interfere with NCAA's debtors. Faced with this conflict, the debtors complied with the liquidator's demands that they pay him and not RHM.
As previously stated, Mr Lumsden did acknowledge that he was liable to pay to RHM any amounts it had paid to media service providers in respect of media space booked on and after 16 September 1999. Because he could not be sure whether space insertion instructions dated 16 September 1999 were placed before or after his appointment on that day he accepted liability for everything ordered on that day. Mr Lumsden sought details from RHM of the amount claimed by it in this respect and although Mr Robins prepared a breakdown in December 1999 and gave it to his solicitors, it was apparently never forwarded on to Mr Lumsden's solicitors despite repeated requests for that information.
In a report to creditors dated 25 May 2000, Mr Lumsden stated that he was seeking this further information and that he expected the liability to be about $30,000. He continued:
"If liabilities for which I am responsible have been paid by RHM, reimbursement will be made to RHM from funds held."
(In the same report, Mr Lumsden also noted that RHM had not pursued its trust claim by commencing legal proceedings.)
Mr Lumsden subsequently decided that the amount he owed to RHM was $30,168.08. He offered to pay this amount to RHM in return for a complete release from any other liability. RHM rejected this offer. I was told by the parties that after proceedings were issued, it was agreed that the amount admittedly owing by Mr Lumsden was to be retained by him as security for costs.
Mr Lumsden called for proofs of debt to be lodged by 30 June 2000 and, in a report to creditors dated 6 September 2000, he indicated that he intended to make a distribution to the creditors of NCAA on 13 October 2000, following the declaration of a dividend on that day. He extended the time for creditors to submit proofs of debt to 30 September 2000. At no stage did RHM submit a proof of debt.
By letter dated 14 September 2000, RHM's present solicitors wrote to Mr Lumsden seeking his consent to proceedings being brought against NCAA and his undertaking not to distribute or dispose of any moneys held by him as liquidator of NCAA. By letter dated 20 September 2000, Mr Lumsden's solicitors wrote to RHM's solicitors indicating that he would not consent and would not give such an undertaking.
The proceedings were commenced on 13 October 2000 and RHM obtained an interim order from the Court on that day restraining Mr Lumsden from declaring a dividend in relation to NCAA. Eventually, on 16 February 2001 the Court ordered that he be restrained from doing so until the hearing and determination of the matter. The Court also ordered that the leave questions be determined at the trial rather than beforehand.
The Leave Questions
The preliminary issues to be determined are whether RHM should be granted leave to proceed against NCAA, being a company in liquidation, and/or whether the time for the bringing of an appeal against Mr Lumsden's rejection of RHM's claim should be extended. With respect to the first question, Mr Nolan of counsel for the defendants pointed out in his submissions that the originating process incorrectly referred to s.471B of the Corporations Law and not s.500(2), this being a voluntary winding up. However, he sensibly conceded that nothing turned on this point. Of course, by the time of the hearing, the relevant references were to the Corporations Act 2001.
The legislative policy behind s.500(2) was considered by Finkelstein, J. in O.D. Transport (Australia) Pty Ltd (In Liq) v O.D. Transport Pty. Ltd[1]. His Honour referred to a number of judicial explanations – that independent actions against the company should not be encouraged because it was for the liquidator to satisfy the rights of creditors (see Re A.J. Benjamin Ltd[2]); that it was required to avoid the company in liquidation being "subjected to a multiplicity of actions which would be both expensive and time-consuming" (see Ogilvie –Grant v East[3]) and that a company in liquidation should not be harassed and its assets wasted by unnecessary litigation: (see Thomson v Mulgoa Irrigation Co. Ltd[4]). Finkelstein, J. concluded:
"Hence, on an application for leave to proceed it has usually been necessary to show that there is some foundation for the proposed claim against the company in liquidation."[5]
In Vagrand Pty Ltd (In Liq) v Fielding[6] the Full Court of the Federal Court held that the test to be applied was akin to that used in considering whether an interlocutory injunction should be granted: "a serious question to be tried".
[1](1997) 80 FCR 290 at 293-4
[2](1969) 90 WN Pt 1) (NSW) 107 per Street, J.
[3](1983) 7 A.C.L.R. 669 at 672 per McPherson, J., with whom Campbell, C.J. and Sheahan, J. agreed
[4](1893) 4 BC (NSW) 33
[5](1997) 80 FCR 290 at 294
[6](1993) 41 FCR 550 at 556
As a result of the question of leave having been deferred to the final hearing of this matter, I am able to decide very easily that the plaintiff has established that there is a serious question to be tried. Indeed, as my subsequent reasons show, I have concluded that the plaintiff has established a case for substantive relief. Thus, the only issue is whether, as a matter of discretion, I should grant the plaintiff leave, notwithstanding its undoubted delay in commencing this proceeding.
Mr Nolan submitted that this application should not be granted because there would be prejudice suffered by the creditors of NCAA by reason of the delay, and because the explanation for the delay by RHM was not convincing. Mr Nolan pointed out that the proprietary claim was first raised in September 1999 and rejected by Mr Lumsden in October 1999. Thereafter, no relevant action was taken by RHM until its new solicitors wrote to Mr Lumsden in September 2000 and subsequently commenced this proceeding in October 2000. Mr Nolan submitted that meanwhile Mr Lumsden continued with the administration and liquidation and reported to creditors on receipts and payments made, including for work carried out by Mr Lumsden, on the basis that he would be remunerated. Mr Robins' explanation for the delay was that RHM had been involved in other time consuming and costly litigation, that RHM's financial resources had been stretched by the defendants' actions and that RHM's former solicitors had assured him that the claim against the liquidator was under control.
I am not satisfied that the delay has caused any relevant prejudice to the creditors of NCAA. Mr Lumsden's evidence in this respect was not convincing and Mr Nolan was unable to point me to any actual prejudice to the creditors. It is really Mr Lumsden who runs the risk of losing out if RHM is successful in its claim, but that is not prejudice caused by RHM's delay in commencing this proceeding. The plaintiff's counsel submitted that RHM would be "punished" for its delay by not being entitled to recover any interest on its claim prior to 13 October 2000 and NCAA and/or Mr Lumsden were to that extent benefiting from the delay. It seems to me that justice requires that RHM be granted leave to proceed against NCAA. Otherwise, RHM would be precluded from recovering from NCAA moneys which I have found were held on trust for it by NCAA. Whether or not the explanation for the delay by RHM was convincing is, I consider, irrelevant in all the circumstances.
In a case such as this, where a party asserts a proprietary claim to assets held by a company in liquidation, the appropriate course, in my opinion, is for that party to seek leave to proceed against the company rather than to appeal an unfavourable act, omission or decision of the liquidator (see Vagrand Pty Ltd (In Liq) v Fielding[7].) Certainly, there can be no appeal against the rejection of a proof of debt where, as in this case, there has been no proof of debt lodged because the putative plaintiff is seeking that its money, or money held on trust for it, be paid to it by the company in liquidation. I therefore consider that it would be unnecessary and inappropriate to extend the time for RHM to appeal against the liquidator's rejection of its trust claim, when I am giving RHM leave to proceed with its action against NCAA in respect of the same issues. Otherwise, I would have given RHM leave to appeal out of time the decision of the liquidator to reject RHM's trust claim.
[7](1993) 41 FCR 550 at 552-3
The Law
The arrangement between NCAA and RHM set out above was such that NCAA acted as the agent of RHM in collecting the moneys due to RHM in respect of the media expenses. The question in this case is whether NCAA held the moneys due to RHM, which NCAA had received from the clients, as the property of RHM or on trust for RHM, so that the relationship between them in equity was that of trustee and beneficiary as well as that of debtor and creditor at law,[8] or whether NCAA simply owed to RHM whatever sum of money was from time to time due by it to RHM, so that the relationship between them was simply that of debtor and creditor.[9] The answer to that question depends on the intention of the parties.[10] The parties agreed that the law is that where, as in this case, the parties have not expressed their intention, it becomes necessary to decide, in all the circumstances of the case, what intention the law should impute to them, and that requires the Court to look at "the nature of the transaction, the particular provisions of the agreement of the parties, and the whole of the circumstances attending the relationship between the parties."[11]
[8]The co-existence in the one transaction of legal and equitable rights and remedies was recognised in Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 at 580-1 per Lord Wilberforce. See also Stephens Travel Service International Pty Ltd (Receivers and Managers Appointed) v Qantas Airways Ltd (1988) 13 NSWLR 331 at 340-1 per Hope, JA., with whom Kirby, P. and Priestley, JA agreed.
[9]Walker v Corboy (1990) 19 NSWLR 382 at 384 per Priestley, JA.
[10]Walker v Corboy (1990) 19 NSWLR 382 at 395 per Meagher, JA.
[11]Walker v Corboy (1990) 19 NSWLR 387 at 397 per Meagher, JA.
The learned authors of Jacobs' Law of Trusts in Australia succinctly summarise the relevant principles:
"A court cannot hold that an express trust exists unless it is satisfied that there was the necessary intention to create such a trust. The question will be whether there is language or conduct which shows a sufficiently clear intention to create such a trust. No formal or technical words are required; any apt expression of intention will do. The conclusion that the intention existed may be drawn as an inference from the available evidence. In order to infer intention the court may look to the nature of the transaction and the circumstances. … The overall question is whether in the circumstances of the case, and on the true construction of what was said and written, a sufficient intention to create a trust has been manifested. It is not necessary that the creator of the trust should know that the particular relationship which he intends to create is in law a trust. A trust will be created, whether or not the creator thereof is precisely aware that he is so doing, provided that in substance he intends that his actions should have the legal effect of creating the relationship which is known in law as a trust. If his language is such that an intention to create such a legal effect is manifested, then a trust will be created whether he uses the word 'trust' or 'trustee' or not."[12]
[12]6th Edition at 80-81 (footnotes omitted).
Conclusions – The First Period
My view of the initial relationship between RHM and NCAA is that, in addition to being that of debtor and creditor at law, it was also, in equity, that of trustee and beneficiary. I have reached this conclusion for a number of reasons. First, the nature of the relationship between the accredited agency, RHM, and the media service providers, and between RHM and the advertising clients and between RHM and NCAA lead me to conclude that RHM would have understood that it needed to ensure that it would have received the payments due to it from the clients by the time that it had to pay the media service providers, and that the way it did this was by insisting that RHM's share of the moneys paid by the clients to NCAA be treated as RHM's property or held by NCAA on trust for RHM. In the circumstances, this claim makes a great deal of sense. Otherwise, RHM would be exposing itself to a significant financial obligation without any certainty of being able to recoup what it was liable to pay each month to the media service providers. The unusual form of the media invoices and the monthly statements, with their reference to Nichols Cumming Advertising Australia being a "Division" of RHM, and the contrast between the form of those documents and the form of the production invoices, which bore no reference to RHM, support this conclusion.
Secondly, I find that initially the parties intended that RHM's share of the moneys paid by the clients to NCAA would be paid by NCAA to RHM on the same day it was received and banked by NCAA. I accept Mr Robins' evidence that this was the initial intention. Mr Lorkin did not really dispute that this was the initial intention. What he said was that, from time to time, there had been specific agreements regarding a deferral of payments of the amounts due to RHM. This meant NCAA was able to use RHM's moneys as its own. Such express agreements would not have been necessary if NCAA could simply have taken all of the moneys and paid RHM in due course from different funds.
Thirdly, the accounts of NCAA initially recorded as the income of NCAA only the gross receipts from the production work and the income from service fees and the 6% commission. RHM's share of the moneys paid by the clients to NCAA was not included. Mr Lorkin said that he dissented from this method of preparing the accounts, but "only on the point that this profit and loss statement didn't really reflect the amount of business turnover that NCAA was doing and therefore if there was a future sale, it might have put the company in a lesser light." He did not criticise the accuracy of the accounts. Indeed, Mr Lorkin sent the 1996 accounts, which were prepared in this fashion, to the Commonwealth Bank, when seeking approval for an overdraft for NCAA, without any comment about them understating NCAA's income.
From 1997, after Mr Robins ceased to be a director of NCAA and Mr Mitchell replaced Mr Meissner as the accountant of NCAA, the accounts of NCAA included all of the funds received by NCAA as its income. That is, the amount paid to RHM was included as income with a corresponding entry for expenditure, so that the net result was the same. The unpaid commission was treated as a loan by RHM in NCAA's accounts and the unpaid media expenses were included as part of NCAA's trade creditors. Tax returns were prepared in accordance with this approach. The form of the accounts was changed by Mr Mitchell because he did not "like the format or the information" the earlier accounts gave. They did not mean anything to him. He was not instructed to change the format, he did it because he thought "Mr Lorkin needed the simplest set-up that he could possibly get because he's not … a trained accountant".
The initial accounting format is strong support for RHM's argument that all of the income from the media invoices, alternatively 94% of that income, was the property of RHM, alternatively that NCAA held that income on trust for RHM. Given Mr Mitchell's explanation for the change in format, it seems to me that there was no significance in the fact that from 1997 the accounts of NCAA treated all of the income from the media invoices as its income.
Fourthly, whilst an important indication of a trust relationship is that the holder of the property of another is obliged to keep the property separate from his own, a trust may be constituted in circumstances where the trustee is not obliged to keep the trust funds separate from his own[13] The intention may be to create a trust pursuant to which trust moneys and the moneys of the agent may be mixed.[14] The operating procedure adopted by the parties, in particular the sending of the statement in respect of both media invoices and production invoices, meant that it was inevitable that NCAA would receive only one cheque in payment of both invoices and, to that extent, would mix RHM's money with its own money when the cheque was banked. RHM was still entitled to be paid out of the proceeds of that cheque. Moreover, as the plaintiff's counsel noted in his written submissions, many of the cases, where the mixing of moneys has been held to be significant, involved the alleged trustee receiving moneys for multiple beneficiaries.[15] Here there was only one potential beneficiary, RHM, asserting that there was a trust. I have, therefore, not counted against the claim of a trust relationship the fact that the moneys were mixed.
[13]Cohen v Cohen (1929) 42 CLR 91 at 101 per Dixon, J.
[14]Re Air Canada and M&L Travel Ltd (1993) 108 DLR (4th) 592 at 605
[15]Walker v Corboy (1990) 19 NSWLR 382; Re Australian Elizabethan Theatre Trust (1991) 30 FCR 491;
G & M Aldridge Pty Ltd v Walsh [1999] 3 VR 601; Peter Cox Investments Pty Ltd (in Liq.) v International Air Transport Association (1999) 161 ALR 105.
Nevertheless, whatever might have been the initial intention of the parties, I find that all of the moneys which were outstanding at 30 June 1999 had come to be regarded by the parties as moneys lent by RHM to NCAA. That is, they were no longer moneys held on trust, but simply a debt due by NCAA and RHM. Of the total amount of $431,154.28, the amount of $250,503.47 represented short payments in respect of the cost of media placements over the last two years and the amount of $180,650.81 represented the unpaid 4% commission over at least the last three years.
In the end, there was very little disagreement between the parties on this issue. Mr Lorkin said that when, from time to time, NCAA was unable to pay to RHM the amount due to RHM for the costs of media service providers and the amount representing RHM's 4% commission, he would discuss the matter with Mr Robins and they would reach agreement that payments could be deferred. He saw this as part of Mr Robins' ongoing obligation to assist NCAA with the cash flow.
Further, the practice arose that when on the relatively rare occasions that clients paid early or before RHM had to pay the media service providers, NCAA would bank that money and would use it in its normal operations, such as for paying staff or suppliers, until the time came to pay RHM. The evidence clearly established that, whatever might have been the initial arrangement with respect to NCAA immediately paying RHM its share of the media invoice income, any such practice had ceased by 30 June 1998. Of the payments made by NCAA to RHM in respect of the 1998‑99 financial year, only one was for a precise amount rather than a rounded amount – the $45,069.82 paid on 12 October 1998. (But even that payment was not for the total due for the July 1998 invoices amount. It followed five payments totalling $80,000 made between 15 and 25 September 1998.) Apart from that one precise payment all of the remaining payments were rounded amounts in the thousands, usually adding up to just a little bit short of the total amount due in that month. These rounded amounts were paid on several days each month. For example, on 12 April 1999, after the February 1999 invoices had been reconciled, RHM faxed to NCAA the following schedule of payments:
"Tuesday 13/4/99 $10,000.00
Wednesday 14/4/99 $10,000.00
Thursday 15/4/99 $14,419.56
Total $34,419.56."
The actual payments made were as follows:
15 April 1999 $15,000.00
16 April 1999 $10,000.00
19 April 1999 $ 9,000.00
$34,000.00
The difference of $419.56 for the media expenses and the commission of $1,495.80 were not paid.
On 12 July 1999, after the May 1999 invoices had been reconciled, RHM became rather more insistent about payment being made on time. By facsimile on that day, Mr Lorkin was told that the net amount due for media advertising for May was $72,343.22. This amount was to be paid as follows:
"13/7/99 $15,000.00
14/7/99 $20,000.00
15/7/99 $37,343.22
Total $72,343.22
The facsimile continued:
"As noted by our fax dated 6/7/99 we can not fund any short payment this month. …"
The actual payments made were as follows:
13 July 1999 $10,000.00
14 July 1999 $30,000.00
15 July 1999 $10,000.00
21 July 1999 $10,000.00
23 July 1999 $10,000.00
$70,000.00.
The difference of $2,343.22 for the media expenses and the commission of $3,102.65 were not paid.
The firmer tone continued the next month. RHM's facsimile dated 12 August 1999 stated as follows:
"To meet the media commitments this month we require the following to be deposited to our bank account by Monday 16/8/99
Jun'99 Media 37,993.01
Media Not Paid Apr'99 9,283.13
Media Not Paid May'99 2,343.22$49,569.36
Please deposit this amount as following:
Friday 13/8/99 $25,000.00
Monday 16/8/99 $24,569.36."
The actual payments made were as follows:
13 August 1999 $25,000.00
17 August 1999 $ 6,000.00
20 August 1999 $ 5,000.00
$36,000.00
The difference of $1,993.01 for the June media expenses and the April and May back payments of $11,626.35 and the June commission of $1,600.34 were not paid.
Mr Robins said that he believed that RHM had first been short paid in about 1994 or 1995. He agreed that there had been discussions with Mr Lorkin and that on 20 to 30 occasions he reluctantly agreed to NCAA deferring payment to RHM so that it could use those funds to meet its own obligations. Mr Robins described these as "short extensions of time", by which he meant two to three days. However, he also said that from time to time he agreed that some of the 4% commission due to RHM could remain with NCAA as a loan from RHM. At the very least this had to be the amount of $88,470.46, being all of the pre 1 July 1997 amount of commission, which Mr Robins acknowledged was regarded by him as a loan to NCAA. Although at one stage he denied that the amount due to the media was ever lent by RHM to NCAA he did agree that "in 1996 and 1997 there was [sic] some bad debts which remained unpaid and had to be funded by RHM". He also conceded that "progressively over 1998 and 1999, NCAA did not pay the full amount due into our account … [and] that money remained outstanding by NCAA and they had no money to pay it so yes, it was loaned to them". In particular, a large amount owed by a company, Camejus Pty Ltd, was treated as a loan to NCAA. He further conceded that in 1998 and 1999 there was only one occasion when RHM received the "monthly media costs" in their entirety. It was also common ground that Mr Robins had never formally demanded payment of about $420,000 of the $431,154.28 figure before his letter to Mr Lorkin of 2 September 1999. He said that he had "reluctantly accepted" NCAA retaining this money. Finally, the wording of Mr Robins' letter of 2 September 1999 suggests that by then he regarded all of these moneys as lent to NCAA – "the amount due prior to July media ($431,154.28) is crystallised and becomes due for immediate payment." When asked in cross-examination what he meant by that statement in his letter Mr Robins said:
"… what I said was that where we had allowed it to just roll and grow, it became payable immediately."
I therefore find that when NCAA went into liquidation it was no longer holding any part of the $431,154.28 on trust for RHM. Instead, all of it had been lent to NCAA by RHM and was, therefore, simply a debt owed by NCAA to RHM.
The Second Period
I turn then to the period between 1 July and 3 September 1999, when Mr Lorkin received Mr Robins' letter of 2 September 1999. Is there any difference in the relationship between RHM and NCAA in this period compared with the preceding months? As previously mentioned, there had been the statement in the 12 July 1999 facsimile that "we can not fund any short payment this month" and the firmer tone used in the 12 August 1999 facsimile. Nevertheless, there was a shortfall in the payments for both months and RHM made no complaint other than to seek payment of the May shortfall the next month. Further, as I have found, Mr Robins regarded the shortfalls as a loan from RHM to NCAA, along with all of the other funds making up the debt of $431,154.28 in respect of the period ending 30 June 1999.
By the time the July 1999 invoices were reconciled in September, Mr Robins had sent his letter dated 2 September 1999. The reconciliation simply assumed that the full amount due of $39,928.53 for the media expenses and $1,708.19 for the commission would be paid by 15 September 1999. Nothing was paid and the administrator was appointed the next day. By the time the August 1999 invoices were reconciled in October, NCAA was under administration and about to go into liquidation. Again, the reconciliation simply assumed that the full amount due for $33,972.10 for the media expenses and $1,438.90 for the commission would be paid by 15 October 1999. Nothing was paid as NCAA went into liquidation on 14 October 1999.
In my opinion, there was no relevant change in respect of the parties' express or imputed intention with respect to liability for media orders published in this period between 1 July and 3 September 1999. I therefore find that the amounts due for media expenses incurred and commission earned in July, August and the first three days of September 1999 were simply debts due by NCAA to RHM.
The Third Period
The next period of the relationship between RHM and NCAA to be examined is that between 4 September 1999 (being the day following the day when I have found Mr Lorkin received Mr Robins' letter of termination) and 15 September 1999 (being the day before NCAA went into administration). Contrary to Mr Lorkin's belief, NCAA staff continued to place media advertisements in the name of RHM, some of which were published before, and some after, 16 September. In these circumstances, I find that the moneys paid in respect of these media invoices was the property of RHM, or that the intention that should be imputed to the parties is that, in respect of media orders placed in this period, the relationship was that of trustee and beneficiary as well as debtor and creditor. NCAA could only have used RHM's name to place the advertisement on the basis of the initial arrangement between the parties, that is that the moneys received from the clients would belong to RHM. It is unthinkable that NCAA could have contemplated using such proceeds as part of its normal cash flow. In my opinion, equity would require NCAA to hold any moneys received in respect of these media orders as the property of RHM or on trust for RHM. Otherwise, NCAA would be receiving a financial benefit from ignoring, albeit inadvertently, RHM's express instruction not to place further orders in RHM's name.
The second issue in respect of this period is that of media orders placed before 4 September but appearing on or after that date. Mr Robins said that newspaper advertisements could generally be cancelled on 24 hours' notice and that pre-printed material required perhaps 48 hours' notice. However, he also said that media services providers would accept a transfer of a booking to another accredited agency up "until the time they issue their statement at the end of the month in which the advertisement appears." Relevantly, that date would be 30 September, 1999. Mr Lorkin seemed to agree with Mr Robins' suggested cancellation times. In respect of the suggestion that there could be a transfer of the booking to another agency, Mr Lorkin did not disagree. He simply said: "That would take a bit of time and a bit of negotiating." This meant that NCAA could and should have either cancelled outstanding orders or made alternative arrangements with respect to replacing RHM in respect of all publications on or after that date. I therefore find that NCAA holds any moneys received in respect of any advertisement published on and after 4 September 1999 as the property of RHM or on trust for RHM.
Mr Nolan argued that RHM's conduct in terminating its agreement with NCAA without notice was not reasonable. He drew attention to the fact that the plaintiff had pleaded in its statement of claim that it was a term of the agreement that it could be terminated upon either party giving reasonable notice. In my opinion, RHM's conduct was reasonable in the circumstances. The letter of 2 September 1999 followed two earlier indications on 6 and 12 July that RHM could not "fund any short payment" in respect of the May invoices. The facsimile of 12 August 1999 made it clear that RHM was no longer allowing the shortfalls to pass without complaint. In circumstances where NCAA owed RHM over $430,000 it was not unreasonable for RHM to put a halt to the relationship. This could be done without notice, in my opinion, where, as I have found, bookings could be transferred to another accredited agency.
Alternatively, if I am wrong in concluding that RHM was entitled to terminate the relationship without notice, then it continued in existence after 3 September 1999. One cannot, however, ignore the fact that the letter of 2 September was sent. At the very least, that letter must be taken to indicate to NCAA that RHM was no longer agreeable to not being paid in full as soon as the clients paid NCAA. That is, the relationship reverted to the parties' initial intention, that the moneys received by NCAA from the clients in respect of the media invoices was the property of RHM or that NCAA held it on trust for RHM.
The Fourth Period – Mr Lumsden's Liability
The final period of the relationship between RHM and NCAA is that between 16 September 1999 (when NCAA went into administration) and 5 October 1999 (when it ceased trading altogether). Again, there are two issues in respect of this period. First, I find, and Mr Lumsden accepts, that he is liable to RHM for all advertisements appearing after 16 September 1999 where orders had been placed by NCAA in the name of RHM on and after 16 September 1999. Secondly, for similar reasons to those already given in respect of NCAA, I also find that Mr Lumsden is liable to RHM for all advertisements appearing after 16 September 1999 where the orders had been placed by NCAA in the name of RHM before 16 September 1999 but had not been cancelled by the administrator on or after that day or the adminstrator had made no alternative arrangements with respect to replacing RHM in respect of all publications on or after that date.
Constructive Trust
In the light of my findings set out above I do not consider it either necessary or appropriate to consider the plaintiff's further submissions based on the alleged existence of a constructive, rather than express, trust.
The Amount Due to RHM
Although I have been asked only to make the appropriate declarations and to order the taking of accounts in accordance with those declarations, it does seem to me that, where I can, I should indicate my analysis of the evidence relating to the invoices, given that some time was spent in the hearing examining these issues. Hopefully, this indication from me may mean that the parties can avoid or limit the cost of the taking of accounts. I deal with Mr Lumsden's liability first before considering that of NCAA, because more time was spent during the hearing on the former and once that liability has been established the remaining calculations appear straight forward.
The Amount of Mr Lumsden's Liability
Relying on Mr Brown's analysis, Mr Lumsden acknowledged a liability of $30,168.08 in respect of media orders placed on and after 16 September 1999. As I followed it, this amount was calculated as follows:
Abercromby & Beatty – 3 advertisements dated 16 September 1999 $ 1,187.28
(Southgate, East Melbourne, Toorak)
Bensons Trading – 2 advertisements $26,000.00
Kellow Falkiner – 4 advertisements dated 16 September 1999 $ 2,980.80
(VW, Peugot, Volvo, Jaguar)
$30,168.08
In the course of the hearing, however, Mr Lumsden accepted that the figure for Bensons Trading had been understated by $876.00 and that both the Abercromby & Beatty and Kellow Falkiner figures incorrectly stated the net position (after deduction of the 10% commission) and not the full amount of the media invoices. I am not sure that this second proposition was entirely accurate. Nevertheless, the important point is that Mr Lumsden accepted the principle that he was liable to pay to RHM the full amount of any media invoice placed on and after the day his administration commenced. Based largely on Exhibits AB–8 and AB–10 to Mr Brown's affidavit sworn 14 September 2001, my analysis would indicate that the amount due to RHM is $32,329.80, calculated as follows:
Abercromby & Beatty – Documents 3, 4, 5 and 6 of Ex. AB-10 $ 1,875.00
Bensons Trading – Document 11 of Ex. AB-10 and Ex. 2 $26,876.00
Kellow Falkiner – Document 17 of Ex. AB-10 $ 3,578.80
$32,329.80
I am not able to say why this amount does not match the amount of $32,336,80 referred to in the plaintiff's final written submissions.
In addition, there is the amount in respect of invoices which I have found could have been cancelled or transferred by Mr Lumsden. My analysis of the evidence would indicate that the amount due to RHM is $13,911.70, calculated as follows:
Adease Advertising – Document 7.2 of Ex. AB-10 $ 260.10
Bensons Trading – Document 10 of Ex. AB-10 $11,500.00
Coal Creek Village – Document 13 of Ex. AB-10 $ 951.60
Englehart Homes – Document 15 of Ex. AB-10 $ 1,200.00
$13,911.70
Again, this amount does not match the amount of $14,517.50 referred to in the plaintiff's final written submissions.
The Amount of NCAA'S Liability
Once again based largely on Exhibits AB–8 and AB–10 to Mr Brown's second affidavit, my analysis would indicate that the amount held by NCAA as the property of RHM or on trust for RHM in respect of media advertisements ordered and appearing between 4 and 15 September 1999 is $4718.01 calculated as follows:
Abercromby & Beatty – Documents 1.2 and 2 of Ex. AB-10 $1139.21
Kellow Falkiner - Document 19 of Ex. AB-10 $3578.80
$4718.01
Further, my analysis of the evidence would indicate that the amount held by NCAA as the property of RHM or on trust for RHM in respect of media advertisements ordered before 4 September and appearing between 4 and 15 September 1999 and which I have found could have been cancelled or transferred by NCAA is $53,543.06, calculated as follows:
Abercromby & Beatty - Document 1.1 of Ex. AB-10 $ 543.20
Adease Advertising - Document 7.1 of Ex. AB-10 $ 64.00
BASF Australia Ltd - Document 8 of Ex. AB-10 $ 4,520.00
Bensons Trading - Document 9 of Ex. AB-10 $43,649.06
IMR Pty Ltd - Document 16 of Ex. AB-10 $ 1,188.00
Kellow Falkiner - Document 18 of Ex. AB-10 $ 3,578.80
$53,543.06
Finally, some of the orders, for which I have found Mr Lumsden liable, would also be payable by NCAA. Three of the four orders, which I have held could have been cancelled or transferred by Mr Lumsden, were placed by NCAA after 3 September 1999, but were not published until after NCAA went into administration:
Adease Advertising - Document 7.2 of Ex. AB-10 $ 260.10
Coal Creek Village - Document 13 of Ex. AB-10 $ 951.60
Englehart Homes - Document 15 of Ex AB-10 $1200.00
$2411.70
The fourth order was placed before 4 September 1999, but appeared after NCAA went into administration. It could have been cancelled or transferred by NCAA prior to that date:
Bensons Trading - Document 10 of Ex. AB-10 $11,500.00
Needless to say, RHM cannot recover payment for these orders more than once.
Orders
None of the amounts set out above should be seen as final. As previously stated, they are simply my attempt to indicate what I understand the evidence to be in relation to those parts of RHM's claim which I have found to be successful.
Once the parties have had the opportunity to read and consider these reasons I will hear submissions in respect of what orders I should make at this stage.
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