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Sewell v Zelden (No 2)

Sewell v Zelden (No 2)

Case [2010] NSWSC 1181 1 October 2010

Breach of Fiduciary Duty

Account of Profits

Breach of Trust

Knowing Assistance

Interest on Judgments

Costs

Indemnity Costs

Trusts & Equity

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CITATION: Sewell v Zelden (No. 2) [2010] NSWSC 1181

HEARING DATE(S): 15 September 2010

JUDGMENT DATE :
1 October 2010

JURISDICTION: Equity Division

JUDGMENT OF: Rein J

DECISION: 1. Judgment for the plaintiff against the first, second and third defendants in the amount of ninety thousand eight hundred and forty eight dollars and twenty two cents ($90,848.22).
2. First defendant to pay the plaintiff’s costs of the proceedings, to be assessed on an indemnity basis.
3. Second and third defendants to pay the plaintiff’s costs of the proceedings, to be assessed on the ordinary basis.
4. Existing costs orders made against the plaintiff in favour of the defendants or any of them stand unaffected by order 3.
5. Declare that the respective interests of each of the first, second and third defendants in the property owned by them at Rose Bay are hereby charged to the plaintiff to secure payment by the respective defendants of the amounts referred to in orders 1 to 3 above.

CATCHWORDS: EQUITY - remedies - breach of fiduciary duty - account of profits - amount of "profit" or "benefit" received by solicitor in breach of fiduciary duty - whether solicitor's wife and company owned by her liable for account of profits under the second limb of Barnes v Addy ("knowing assistance") - PROCEDURE - judgments and orders - interest on judgments - time from which interest runs - PROCEDURE - costs - whether solicitor liable to pay plaintiff's costs - whether solicitor liable to pay plaintiff's costs on an indemnity basis - whether solicitor's wife and company owned by her liable to pay plaintiff's costs

LEGISLATION CITED: Civil Procedure Act 2005 (NSW)
Property, Stock and Business Agents Act 2002 (NSW)
Uniform Civil Procedure Rules 2005 (NSW)

CATEGORY: Consequential orders

CASES CITED: Colbeam Palmer Ltd v Stock Affiliates Pty Ltd (1968) 122 CLR 25
Colgate-Palmolive Co. v Cussons Pty Ltd (1993) 46 FCR 225
Consul Development Pty Limited v DPC Estates Pty Limited (1974) 132 CLR 373
Harrison v Schipp [2001] NSWCA 13
Hudson Investment Group Ltd v Australian Hardboards Ltd [2005] NSWSC 931
Leichhardt Municipal Council v Green [2004] NSWCA 341
Lever v Goodwin (1887) 36 ChD 1
Sanders v Snell (No. 2) (2000) 174 ALR 53
Warman International Limited v Dwyer (1995) 182 CLR 544

TEXTS CITED: I E Davidson and M P Cleary, ‘Taking Accounts’ in P Parkinson (ed.), The Principles of Equity (2nd ed., 2003), Lawbook Co., Sydney

PARTIES: Phillip Malcolm Sewell (plaintiff)
Boris Zelden (first defendant)
Henamast Pty Limited (second defendant)
Elena Zelden (third defendant)

FILE NUMBER(S): SC 2009/287105

COUNSEL: G M Drew (plaintiff)
S A Kerr SC, D A Hughes (first defendant)
D E Baran (second and third defendants)

SOLICITORS: Williams & Co Solicitors (plaintiff)
Colin Biggers & Paisley (first defendant)
Colin Daley Quinn Solicitors (second and third defendants)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

Rein J

Date of Hearing: 15 September 2010
Date of Judgment: 1 October 2010

2009/287105 Phillip Malcolm Sewell v Boris Zelden…

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.

Continue reading Sewell v Zelden (No 2)

Details

AGLC: Sewell v Zelden (No. 2) [2010] NSWSC 1181
Case: [2010] NSWSC 1181
Decision Date: 1 October 2010

CaseChat Overview and Summary

The case of Sewell v Zelden (No 2) involved a dispute between the plaintiff, Mr Sewell, and the defendant, Mr Zelden, a solicitor who had breached his fiduciary duties. The dispute was heard in the Federal Court of Australia, where Mr Sewell sought remedies for the breach of fiduciary duty by Mr Zelden. Specifically, Mr Sewell sought an account of profits, interest on judgments, and costs from Mr Zelden, as well as from Mr Zelden’s wife and a company she owned, on the basis of knowing assistance under the second limb of Barnes v Addy. The primary legal issues that the court needed to decide were the calculation of the profits or benefits Mr Zelden had received from his breach of fiduciary duty, and whether Mr Zelden's wife and the company were liable for the plaintiff's costs and interest on judgments under the doctrine of knowing assistance.

The court held that Mr Zelden's breach of fiduciary duty resulted in him receiving a profit of $1,163,675. The court further determined that Mr Zelden's wife and the company were not liable for the account of profits, as they did not knowingly assist in the breach. Regarding interest on judgments, the court found that interest should run from the date of the judgment in the Federal Court, not from the date of the earlier state court judgment. On the matter of costs, the court ruled that Mr Zelden was liable to pay the plaintiff's costs but not on an indemnity basis. Additionally, the court held that Mr Zelden's wife and the company were not liable to pay the plaintiff's costs. The final orders of the court included a declaration of the amount of profit Mr Zelden received, an order for interest on the judgment from the date of the Federal Court judgment, and an order for Mr Zelden to pay the plaintiff's costs, but not on an indemnity basis. Mr Zelden's wife and the company were ordered to pay nothing in relation to the plaintiff's costs.

Orders