Sheldon v Scerri - [2008] NSWSC 892

No judgment structure available for this case.

CITATION: SHELDON v SCERRI [2008] NSWSC 892

HEARING DATE(S): 11, 12, 13 and 18 August 2008

JUDGMENT DATE :
29 August 2008

JURISDICTION: Equity

JUDGMENT OF: Hall J at 1

DECISION: On the plaintiff's claim in debt, there is, by consent, judgment for the plaitniff for the amount claimed.
Judgment in favour of the cross-defendant on the cross-claim.

CATCHWORDS: TRUSTS – relationship of accountant and client – professional fees owing to accountant/cross-defendant at time of agreement to purchase shares – proposal by client (cross-claimant) to buy shares on a “tip” that same would escalate in value in two weeks – profit to be credited – no trust created – contract made conferring a benefit on the client as distinct from a company controlled by him

LEGISLATION CITED: Civil Procedure Act 2005

PARTIES: Peter SHELDON v
Steven John SCERRI & ANOR

FILE NUMBER(S): SC No 2757 of 2007

COUNSEL: P: D D Knoll
D: P A Beale

SOLICITORS: P: Leon M Ratner & Associates
D: McGrath Dicembre & Co

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

HALL J

FRIDAY 29 AUGUST 2008

No 2757 of 2007

PETER SHELDON v STEVEN JOHN SCERRI & ANOR

JUDGMENT

1 HIS HONOUR: These proceedings concern a claim by the plaintiff/cross-defendant for professional fees and a cross-claim by the first defendant, Mr Scerri, a former client of the plaintiff, in which an order for specific performance of an alleged trust is sought and an order for the transfer of shares or an equivalent number of shares is claimed. Alternatively, Mr Scerri, as cross-claimant, claims damages for alleged breach of trust or alleged breach of contract.

The plaintiff’s claim

2 The plaintiff’s claim was in respect of fees he claimed were owing to him by the defendants, Mr and Mrs Scerri, for professional services rendered in his capacity as a Chartered Accountant.

3 The proceedings were originally commenced in the Local Court at Balmain by statement of claim filed on 30 January 2006 in which the plaintiff claimed the amount of $3,245 together with interest and costs.

4 On 10 April 2006, the defendants filed a defence in which they denied that they were indebted in the sum alleged.

5 On the first day of hearing, Mr P A Beale of counsel for the defendants stated that the plaintiff’s claim no longer required determination as his clients conceded that the amount of fees claimed by the plaintiff was due and owing by them.

The cross-claim

6 Mr Scerri, filed a cross-claim in the Local Court in which he claimed relief as outlined above. An alternative claim was made for equitable damages and/or compensation for breach of trust. The cross-claim alleged that Mr Scerri had instructed Mr Sheldon to acquire 32,500 ordinary fully paid shares in Paladin Resources Pty Limited (the “Paladin shares”). He alleged in the cross-claim that he paid Mr Sheldon the amount of $5,063.30 for the purpose of acquiring the shares and for brokerage fees of $18.20 and stamp duty of $11.70.

7 In those circumstances, Mr Scerri claimed that Mr Sheldon held the Paladin shares on trust for him and that, at a later time, unknown to him, Mr Sheldon sold the shares and has not accounted to him for the proceeds of the sale.

8 By order made in the District Court on 20 July 2006, pursuant to s.140(2) of the Civil Procedure Act 2005, the proceedings in the Local Court were transferred to the District Court.

9 Subsequently, by order made on 4 May 2007, the proceedings were transferred from the District Court to this Court.

10 In the proceedings, Mr Scerri filed an amended cross-claim on 12 October 2007 in which an order was sought that Mr Sheldon specifically perform the trust allegedly “created on 21 March 2000” together with an order for the transfer of the shares to him and, in the alternative, damages for breach of contract and for breach of trust.

11 In the defence to the amended first cross-claim filed on 22 November 2007, Mr Sheldon, inter alia, admitted that in March 2000 he purchased 50,000 shares in Paladin Resources Pty Limited at a price of 15.5 cents per share, but otherwise denied the allegations in paragraph 4.

12 He also admitted (paragraph 6) that he received a cheque, the drawer of which was a company controlled by Mr Scerri, “In Your Face Pty Limited” in mid-April 2000. The amount of that cheque was $10,063.30. Mr Sheldon’s evidence was that there was no cover note or note attached to the cheque which he banked into his account with the National Australia Bank at Bondi Junction.

13 He further alleged in his defence that, as at mid-March 2000, another company controlled by Mr Scerri, Australian Screen Entertainment Pty Limited, was indebted to him for services he had rendered and which were the subject of an invoice in the amount of $17,200 and that Mr Scerri asked him to reduce the outstanding amount to $15,000 and this he agreed to do. Mr Scerri disputed this latter contention.

14 On or before 20 March 2000, Mr Sheldon prepared an invoice in the sum of $15,000 addressed to “Mr Steven Scerri, Australian Screen Entertainment” and, on 22 March 2000, he said that he handed the invoice to Mr Scerri.

15 Mr Sheldon claims that at a luncheon held on 22 March 2000, discussed in greater detail below, Mr Scerri said that he was unable to pay the $15,000 but that he had received a “tip” about some shares. He claimed that Mr Scerri put forward a proposal for payment of his fees whereby he represented that the shares were guaranteed to increase by three to four times their value within the following two weeks. He claimed that the proposal put forward by Mr Scerri was that, if Mr Sheldon purchased the shares out of his own money, then he would sell the shares at the end of the two-week period and credit the profit that he would make against the debt of $15,000 due and payable to him by ASE.

16 On 22 March 2000, Mr Sheldon purchased more than $5,000 worth of shares in Paladin. He informed Mr Scerri of that fact by facsimile transmission sent on 24 March 2000.

Uncontroversial facts

17 In 1994, Mr Sheldon commenced his own practice as an accountant in Bondi Junction. Between 1994 and 30 June 2005, he acted on behalf of Mr and Mrs Scerri and companies operated by Mr Scerri. Mr Sheldon rendered accounting, taxation and provided general advisory services to them and to their companies.

18 Mr Scerri was, at all material times, a director of two companies:-

(1) Australian Screen Entertainment ( “ASE” ).

“IYF”

19 Legal proceedings were initiated in 1997 between ASE and a company, CEL Entertainment Pty Limited. Mr Sheldon prepared a report for the litigation and he was due to give evidence on 20, 21 and 22 April 1998 but as events turned out he was not called. The litigation was settled on less than favourable terms for ASE. A further time elapsed before arrangements arising from the settlement were completed. The exact amount of time in that respect was not specified in evidence.

20 In relation to Mr Sheldon’s fees, Mr Sheldon sent an invoice to ASE on 20 January 1999. On 7 July 1999, ASE paid Mr Sheldon an amount of $2,000 and approximately some nine months later a further $5,000 on 1 March 2000.

21 In respect of Mr Sheldon’s fees claimed to be owing to him in March 2000, Mr Sheldon said that he provided professional services in relation to the litigation between ASE and CEL, which was settled some time in 1998. In Tender Bundle B, Tab 19, the invoice and attached Statement recorded professional services amounting to $24,350, that $7,000 had been paid on account at that stage, thereby leaving a balance of $17,350. As noted above, Mr Sheldon said he later reduced that amount to $15,000.

22 Mr Sheldon’s evidence was that, in a phone call in about mid-March 2000 with Mr Scerri, he agreed to reduce his outstanding fees for ASE from $17,350 to $15,000. Either on or before 20 March 2000, Mr Sheldon drew up an invoice in the amount of $15,000. The invoice was addressed to ASE (Exhibit A, Annexure 2 to Mr Sheldon’s affidavit). According to Mr Sheldon, he handed the invoice to Mr Scerri on 22 March 2000 at his office. The invoice related to services which Mr Sheldon claims he rendered in the period 31 July 1996 to 17 March 2000 (that is, in a period of three years and nine months) for professional services.

23 On 22 March 2000, Mr Sheldon and Mr Scerri entered into the abovementioned arrangement concerning the purchase of the Paladin shares. The circumstances are referred to below.

24 On 22 March 2000, Mr Sheldon purchased 50,000 shares in Paladin Resources Pty Limited.

25 On 24 March 2000, Mr Sheldon sent a facsimile to Mr Scerri which stated, inter alia, “total owing $5,060.30” in respect of shares “bought on your behalf”.

26 On 15 April 2000, Mr Sheldon received a cheque in the amount of $10,063.30. An entry was made in the ledger of IYF for “professional services” in that amount.

27 Mr Scerri claimed that the payment of $10,063.30 represented $5,000 for work performed by Mr Sheldon for ASE and $5,063.30 for the purchase of the Paladin shares and associated costs. Mr Sheldon claimed the amount of $10,063.30 related to his outstanding fees.

28 The shares were sold on 23 August 2004 for a consideration of $10,000. The sale was completed on 26 August 2004.

29 Subsequent to Mr Sheldon’s invoice dated 20 March 2000, the following payments were made by ASE to Mr Sheldon:-

Date	Description	Debit	Credit
20/03/2000	Invoice 001403 Issued	15,000.00
10/07/2000	Receipt 001263 Applied Against Invoice 001403	2,000.00
12/03/2001	Receipt 001264 Applied Against Invoice 001403	500.00
30/07/2002	Receipt 001265 Applied Against Invoice 001403	2,000.00
04/07/2003	Receipt 001268 Applied Against Invoice 001403	600.00
18/08/2004	Receipt 001267 Applied Against Invoice 001403	500.00
Amount claimed as due	9,400.00

Proceedings between Mr Sheldon and Mr Scerri’s companies

30 In 2006, Mr Sheldon instituted a number of proceedings to recover fees as follows:-

(1) By statement of claim dated 27 January 2006 and filed in the Local Court, Balmain he claimed from IYF $1,727 for services as invoiced on 29 June 2005 together with interest. The proceedings were settled on 4 August 2006 in the amount of $1,100.

(2) By statement of claimed filed on 30 January 2006 in the Balmain Local Court against Emedia Campaigns Pty Limited in the sum of $3,883 plus interest. The proceedings were settled in the District Court for the amount of $3,000 on 8 March 2007.

31 In respect of the settlement in the last-mentioned proceedings with ASE, a note was made on the terms of settlement “Agreement re $4,000 interest free and payable on settlement or judgment in the claim by Sheldon v Mr and Mrs Scerri, case number 2552/2006”.

Mr Scerri’s evidence

32 Mr Scerri’s account of the share buying arrangement was set out in his affidavit sworn 10 October 2007 (referred to in his judgment as his “first affidavit”). Mr Sheldon’s primary account was set out in his affidavit sworn 22 November 2007. Mr Scerri replied in an affidavit sworn 21 February 2008 (referred to as his “reply affidavit”).

33 In his first affidavit, Mr Scerri gave an account in which he said the conversation on 22 March 2000 was essentially confined to the purchase of the Paladin shares. He made no reference in it to any discussion before the subject of the share purchase arose about the question of professional fees which Mr Sheldon claimed to be then owing to him by ASE and he made no reference to a dispute by him having arisen earlier in the discussion as to fees claimed by Mr Sheldon in the amount of $15,000.

34 Mr Scerri said that the meeting on 22 March 2000 was to discuss “numerous matters”. When it was put to him, he agreed that one of the matters discussed was the question of Mr Sheldon’s outstanding fees.

35 Mr Scerri’s initial account of the conversation on 22 March 2000, accordingly, stands in marked contrast to Mr Sheldon’s account. Mr Sheldon said that the conversation at the restaurant in its early stages focused on the matter of outstanding fees, that this was the principal matter of discussion at that stage and Mr Scerri disputed the amount in the invoice. According to his account, it was in the course of the discussion of the question of fees that Mr Scerri raised the matter of a “tip” concerning shares.

36 Mr Scerri agreed that he had not, prior to making his affidavit sworn 10 October 2007, previously recorded in any earlier affidavit sworn for the purpose of interlocutory matters, nor in any note, the conversation that he had with Mr Sheldon at the restaurant on 22 March 2000. He agreed that the first time he was able to recall the conversation that took place at the restaurant on the matter of fees was prompted by Mr Sheldon’s affidavit. He maintained, however, that he did have a clear memory of the occasion quite independently of what Mr Sheldon had said about it.

37 Mr Scerri gave the following account in paragraph 7 of his first affidavit:-

“During the course of the meeting I said to the Plaintiff words to the effect:

‘I have a tip from a mate of mine who told me to buy some shares in Paladin Resources. He has been following this Company and says it has really good prospects. Have you heard of them?’

The Plaintiff said:

‘No.’

I said:-

‘He told me he was buying as many as he could because the Company is on the move. He said the shares are now about 15 cents but they will be 100 times that in a few years. So, I was thinking, if he’s that sure, I might buy some. I trust him.’

The Plaintiff then said:

‘Do you really believe him?’

I said:

‘Yes, if he’s going to spend big on them, I’m prepared to have ago [sic] to.’

The Plaintiff said:

‘How much are you going to invest?’

I said:

‘$5000. That’s as much as I’m prepared to put up.’

The Plaintiff said:-

‘Do you have a Broker?’

I said:-

‘I don’t.’

The Plaintiff said:

‘Do you mind if I buy some as well?’

I said:

‘No go for your life. Why not.’

The Plaintiff said:-

‘Well what about if we use my Broker and we will buy the shares together and I will hold your shares in my name but on your behalf. That way we only pay on brokerage fee as it is all in one transaction. I’ll buy them and send you the bill for your share.’

I said:-

‘Fine, I will send you a cheque.’

The Plaintiff then said:-

‘Do you think you could also send me some money to pay for some of the work I have done for you?’

I said:

‘No problems, I’ll send another $5,000.00 for you?’

He said:

“Thanks.’

38 Mr Scerri said he received a facsimile from Mr Sheldon (Annexure A to his affidavit). The facsimile was in the following terms:-

”DATE: 24 March 2000

MESSAGE TO: Steve Scerri

COMPANY: ACE

FAX NO: 07 3893 4355

RE: Paladin Resources

MESSAGE FROM: Peter Sheldon

NO. OF PAGES: 2 (including this page)
__________________________________________________________

Copy of Contract note for shares bought on your behalf
Your share 65%
Therefore 32500 shares @ .155 = 5037.50
Brokerage 65% of $28 18.20
Stamp Duty 65% of $11.70 7.60
Total owing $5063.30”

39 In paragraph 9 of his affidavit, Mr Scerri said that upon receipt of the facsimile he caused a cheque to be drawn from his company, IYF, payable to the plaintiff in the sum of $10,063.30 which he said was made up of $5,063.30 for the shares and a further $5,000 on account of the plaintiff’s fees for work undertaken by himself and on behalf of his companies.

40 The reference in paragraph 9 to him having sent a cheque on receipt of the facsimile is not strictly correct. There was a delay of approximately two weeks before the cheque dated 11 April 2000 was sent to Mr Sheldon. It was, as noted above, common ground that Mr and Mr Scerri did not owe any fees at that time, but that ASE was the only entity that owed fees to Mr Sheldon, although the amount was in dispute.

41 A copy of the cheque butt number 000816 in the sum of $10,036.30 was annexed to Mr Scerri’s first affidavit. It recorded:-

“11/4/00

Peter Sheldon

A/ting fees

- shares $5,630.30

- fees $5,000

Amount

$10,063.30”

42 Mr Scerri agreed that he had requested Mr Sheldon to undertake what was described as accounting work to support the claim by ASE against CEL and that he had promised to pay Mr Sheldon for his work. Mr Sheldon said that when he handed over the invoice for $15,000 for fees in March 2000 he made it clear that it related to litigation involving CEL Entertainment Pty Limited in respect of work that he had performed.

43 Mr Scerri agreed that in conversations with Mr Sheldon during the litigation with CEL he had told him that his money was tied up in the litigation and could not pay him until it was over.

44 He agreed he had told Mr Sheldon that he would be paid what he was owed for his work. He agreed in cross-examination that in December 1999 he had said he would pay Mr Sheldon’s fees and that in March 2000, Mr Sheldon was pressing him for his fees.

45 The chronology of events as set out in Mr Scerri’s first affidavit proceeded from March 2000 to what he said was his “next discussion” (in early 2003) with Mr Sheldon about the Paladin shares. In paragraph 11 of his affidavit he set out the conversation in the following terms:-

“The next discussion I had with the Plaintiff about the Paladin Shares was in about early 2003. During the course of the conversation the Plaintiff said to me words to the effect:-

‘Those Paladin shares we brought

are crap. There

now only worth 2c.’

I said:-

‘Yes, I know, I have been told not to sell them but to buy some more because they are a good think. If you buy more at 2 cents you are going to reduce the overall price you pay for each share. Don’t sell them, I am going to hand on to them.’

The Plaintiff said:-

‘Are you going to buy some more?’

I said:

‘If I had money I would Peter, I just don’t have any money.’”

46 In paragraph 12 of his first affidavit, Mr Scerri said that he did not have any further discussion or communication with Mr Sheldon about the Paladin shares from that time (that is, early 2003) until about 29 June 2005.

47 Mr Scerri said that at that time he had the following conversation with Mr Sheldon:-

“At this time I had a telephone conversation with the Plaintiff. During the course of the telephone conversation I said to the Plaintiff words to the effect:

‘You have let me down. You have not given me the advice I needed. I am going to use another accountant who cares. Give me all my stuff and I want the Share Certificates for the Paladin Shares that you hold on my behalf.’

The Plaintiff said:-

‘I sold them.’

I said:

‘What. You couldn’t do that, when?’

He said:

‘Sometime ago.’

I said:

‘But they’re mine. You did not have my authority to sell them. I bought them with my money.’

He said:

‘You owed me money so I sold them.’

I said:

‘But you can’t do that. They were my shares. You had no right to sell them. You shouldn’t have sold them.’

He said:

‘You owed me money and that was the only way I was going to get it at that time.

I said:

‘I don’t owe you money, I’ve been paying you for years. I can’t believe you did that Peter, when did you sell them, what price did you get? When were you going to tell me you sold them?’

He said:

‘I am telling you now.

I said:

‘When did you sell them? You never told me how much, you can’t get away with that.’

He said:

‘I sold them ages ago, just to get my money back.’

I said:

‘You’re an idiot, those shares were Vicki’s and my investment. You’re a thief and a liar. Not only do you do a crappy job you ripped me off. You stole my shares. I want them back.’

He said:

‘You can’t have them back, they’re are

gone.’

I said:

‘You had no right to sell them. I never authorised you to sell them. I want them back.’

He said:-

‘Bad luck they are gone and that is it. You owed me money. I sold them to get my money back.’

I said:

‘No Peter, they were not yours to sell, my wife is going to die when she hears about this, she watches the share prices everyday and they are going up everyday. You can’t just sell the shares without telling me Peter.’

I then terminated the phone call.”

48 Mr Sheldon’s letter dated 29 June 2005 (Annexure C to Mr Scerri’s affidavit) was relied upon by Mr Knoll, of counsel for Mr Sheldon, as evidence that contradicted Mr Scerri’s account of him having terminated Mr Sheldon’s services. Mr Sheldon’s position was that he only became aware that his services were being terminated when he received a letter from Williams & Partners, chartered accountants. Mr Sheldon stated in that letter:-

“I have received correspondence from Williams & Partners, Chartered Accountants, in Brisbane that you have approached them to take over your accounting and taxation work.

I am disappointed that following our last conversation where I asked for a contribution towards work I have completed seem to have sparked you into taking this action. However, I have been more than patient over the years with you in the hope if you did ever make it your promise to compensate me for all the work I have done over the years would be met.

I enclose my accounts to date fully detailed …”

Mr Sheldon’s evidence

49 Mr Sheldon’s evidence was that he was admitted to practice as a chartered accountant in 1980 and that, to the best of his recollection, he first met Mr Scerri when the latter was in the business of the wholesale of videos and he found him to be “a charismatic individual”.

50 In 1994, he commenced practice as an accountant on his own behalf at Bondi Junction. He stated that Mr Scerri requested him to assist in proceedings that had been commenced by ASE against CEL Entertainment Pty Limited. He had prepared a report for ASE for use in the proceedings and was asked to make himself available for cross-examination on 20, 21 and 22 April 1998 at the hearing.

51 Mr Scerri claimed that from an early stage in their relationship, Mr Scerri was experiencing financial problems. Mr Scerri disputed that this was so and that it was in later years that he encountered financial problems. He had requested him to undertake accounting work for him, his wife and his companies. He said that in or about December 1999, he had a conversation to the following effect (paragraph 17):-

“Sheldon: Now that I have done all the work for the litigation, when will I be paid?

Scerri: You know all monies are tied up with the CEL matter. I’ll pay you when I’ve got some money, but, for sure, when the case is over, you will get everything you are owed.”

52 Mr Sheldon said that, in respect of the 1999 year, the bulk of the work performed by him had been for ASE. As noted earlier, he invoiced that company on 20 January 1999 and was paid $2,000 in July 2000 for some of that work. In March 2000 he was paid a further $5,000. Accordingly, by 20 March 2000, he had received a total of $7,000 for work performed for ASE.

53 As at 20 March 2000, Mr Sheldon claimed that the fees owing for work in progress was, as earlier noted, $17,350. That related to work for ASE. He said that as at 20 March 2000, there were no fees owing to him by Mr and Mrs Scerri personally or by Mr Scerri’s company, IYF. Invoices in respect of those companies had been paid.

54 Mr Sheldon said that it was in or about mid-March 2000 he had a conversation with Mr Scerri to the following effect:-

Hi Peter. Dicembre has settled the f….ng case. I’ve been screwed again and all the money is tied up in Dicembre’s Trust Account to pay the legals.’

Steve, the case is now finalised and as promised you have to fix me up for my bill.’

How much does it come to?’

‘I will look up my time records, hand on a second.’

I then looked up the records which were accessible on my computer and then the conversation continued in words to the following effect:

‘It comes to $24,350.00 less the $7,000.00 you paid on account, so you owe me $17,350.00. It is for Australian Screen.’

‘You’re kidding!’

‘I’ve kept detailed records of all my work and that is what it comes to.’

‘Can we do something about it?’

‘It’s all work I did. You know I’ve worked my guts out for you on this and I’ve waited a long time to be paid.’

‘What about knocking four grand off it?’

‘Let’s split it … make it an even $15,000.00 you owe me.’

‘Ok.’

‘Let’s meet on the 22nd [March 2000] for lunch. I’ll prepare the bill. Bring your cheque book with you.’

‘Ok. I’ll meet you at your office and we’ll go to lunch from there.’”

55 Mr Sheldon, in his affidavit, denied the conversations as set out in paragraph 7 of Mr Scerri’s first affidavit. He said that he prepared an invoice in the sum of $15,000 dated 20 March 2000. In submissions, Mr Knoll contended that it was likely that the last-mentioned telephone conversation in mid-March occurred prior to the weekend of 18 and 19 March 2000. Whilst that is possible, there is no evidence establishing that it definitely did occur before 20 March 2000. He argued that, if Mr Scerri returned to his home in Queensland that weekend, he would have been in a position to bring his cheque book to the meeting on 22 March 2000 as Mr Sheldon requested.

56 On 22 March 2000, according to Mr Sheldon, Mr Scerri came to his office and he met him in the reception area where he handed him the invoice for $15,000. He said that Mr Scerri looked at it, put it in his bag and then said “let’s go to lunch” and that is what they did.

57 According to Mr Sheldon, he said that they went to a Japanese restaurant called the Meedoree Restaurant which was near his office. He said that during the lunch, the following conversation took effect:-

“27. We went to lunch at the Japanese restaurant called ‘Meedoree Restaurant’ which was over the road from my office. We had lunch and consumed alcohol. During the lunch we had a conversation to the following effect:

Sheldon - ‘Did you bring the cheque book?’

Scerri - ‘I want to talk to you about it.’

Sheldon - ‘Talk to me.’

Scerri - ‘You know all the money’s tied up with Dicembre.’

Sheldon - ‘You’ve got other money.’

Scerri - ‘Not at the moment, but I have an idea that will be good for both of us. I’ve been talking to a mate of mine who says the whole Uranium market is about to take off and he has given me a tip about Paladin Shares. They are guaranteed to go up by three or four times in the next two weeks. I tell you what, you buy some and credit the profit against my bill.’

Sheldon - ‘You’re kidding. Just give me the money you owe me. You can buy the shares and get it back that way.’

Scerri - (aggressively) ‘I haven’t got fifteen grad to pay you, let alone money to pay for shares.’

Sheldon - ‘You mean I should risk my money on a tip to pay your bill?’

Scerri - ‘That’s the only way you are going to get paid in the near future.’

Sheldon - ‘You’re sure this is going to happen in the next two weeks?’

Scerri - ‘Yes. I’m sure they will triple or quadruple.’

Sheldon - ‘Ok. I’ll put up five thousand for the next two weeks and I’ll knock off the profit made in that time on the five thousand from what you owe me.’

Scerri - ‘Will you send me a copy of the buy order so I’ll know what you paid for them?’

Sheldon - ‘Ok.’”

58 In oral evidence, Mr Sheldon said that Mr Scerri had spoken in an aggressive manner in saying that he did not have $15,000 to pay him. He said it was not, as Mr Scerri would have it, at all times an amiable conversation.

59 Mr Sheldon said after lunch he returned to his office and decided to purchase 50,000 shares at 15.5 cents per share and to inform Mr Scerri that 32,500 of those shares (worth approximately $5,000) would be applied “to the deal” which he said they had just agreed upon. He added that, having agreed at lunch to invest $5,000, he thought to himself “why not put up a bit extra”.

60 He referred to the receipt of the contract note for the Paladin shares on 24 March 2000 and to sending the facsimile to Mr Scerri about the purchase.

61 Mr Sheldon said that by about 3 or 4 April 2000, the shares had not changed in value to any substantial degree and, accordingly, he rang Mr Scerri and said:-

“Sheldon: Mate, so much for your tip. Those shares have done nothing. You still owe me $15,000. I want my money.

Scerri: I’ll see what I can do.”

62 Mr Sheldon said that about a week later he received the cheque for $10,063.30 drawn by IYF. He again stated that, at that time, the only entity owing him fees in an amount of $10,000 or more was ASE. He said he applied the money in reduction of that company’s debt. He said that there was no cover letter or note attached to the cheque. He deposited it into his business account with the National Australia Bank at the Bondi Junction branch.

63 Annexure 5 to his affidavit was a copy of his ledger showing the deposit to account number 0590 entitled “professional fees”. The entry recorded the date 15 April 2000, the name “In Your Face” and the credit of $10,063.30.

64 Mr Sheldon denied the instruction alleged by Mr Scerri in paragraph 5 of Mr Scerri’s first affidavit. He also denied that Mr or Mrs Scerri or IYF communicated any allocation of the $10,063.30 paid to him. He also denied that he purchased the shares on trust for Mr and Mr Scerri or on their account. He further denied the allegations in paragraphs 5, 6 and 7 of Mr Scerri’s affidavit sworn 7 June 2006.

65 Mr Sheldon further denied the conversation as set out in paragraph 11 of Mr Scerri’s affidavit sworn 10 October 2007. He said that he did recall some time in 2003, when talking about business, saying to Mr Scerri “that share tip of yours was crap. If the price ever recovers, I will dump them”. He said that Mr Scerri did not respond to that statement.

66 On 23 August 2004, Mr Sheldon sold the Paladin shares. A copy of the contract note was Annexure 6 to his affidavit. The shares were sold at 20 cents per share. He said that on that day he rang Mr Scerri and said:-

“Sheldon: Mate, remember that dud tip you gave me? Remember I told you last year that they went down to almost nothing. Well, now they’ve come back up, and I got my money back. I sold them for 20 cents which takes into account the interest on what you didn’t pay me, so that means I came out square. How about giving me something towards the outstanding bill?

Scerri I will see what I can do.”

67 Mr Sheldon said at no time in the conversation or any subsequent conversation with him did Mr or Mrs Scerri claim that the Paladin shares belonged to him.

68 On observation of Mr Sheldon in cross-examination, he did not give the impression of overstating matters. He did not exhibit any tendency in giving his answers to argue points favourable to his case.

69 Mr Sheldon reported the capital gain on the sale of the shares in his 2004/2005 income tax return. A copy of the relevant pages of his return were marked as Annexure 7 to his affidavit.

70 According to Mr Sheldon, towards the end of May 2005, Mr Scerri requested that he complete accounts for his company, Emedia Campaigns, as well as his personal return for 2004. Mr Sheldon said they had a conversation to the effect:-

“Sheldon: Steve, you have not given me any money for a while and you owe me heaps and I cannot keep going like this.

Scerri: You know I owe the Tax Officer 90 grand and this deal with (a person who’s name I cannot now recall) is happening.

Sheldon: Mate, unless we can come to some arrangement, I cannot do anymore work for you.”

71 Mr Sheldon denied the conversation in paragraph 14 of Mr Scerri’s first affidavit in which Mr Scerri said he advised Mr Sheldon that he was changing accountants and wanted the share certificates for the Paladin shares and being told for the first time that Mr Sheldon had sold them. Mr Sheldon said the alleged conversation did not happen.

72 Additionally, on 29 June 2005, Mr Sheldon prepared a final account for all outstanding work and sent it to Mr Scerri. Annexure 9 to his affidavit was a copy of the invoice for professional services addressed to Mr and Mrs Scerri in the amount of $1,265 inclusive of GST. As earlier indicated, that claim has been resolved by consent in favour of Mr Sheldon.

Mr Scerri’s evidence in reply

73 In his reply affidavit, Mr Scerri stated that the plaintiff commenced accountancy work for himself, his wife and his companies from about 1994. He said the litigation between ASE and CEL did not commence until about 1997. He denied that he was experiencing financial problems in 1994 but that he did experience some financial problems during the course of the litigation between ASE and CEL but that that was only for a period of 18 months.

74 Mr Scerri said that he was, as at 22 March 2000, General Manager of Sales and Marketing for Universal Pictures Australia Pty Limited receiving a base salary of $150,000 plus incentives. He said his companies, ASE and IYF, were also subcontracted to Universal and would receive fees in excess of $100,000 per year.

75 Mr Scerri agreed that he had a telephone conversation with Mr Sheldon in or about mid-2000, however, he stated that it was one in which arrangements were made for them to meet at Mr Sheldon’s office on or about 22 March 2000. He said there were no discussion in terms set out in paragraph 25 of Mr Sheldon’s affidavit.

76 Mr Scerri said that on or about 22 March 2000, he met Mr Sheldon at his office. In the course of a conversation there, he said Mr Sheldon stated “Steve, here is an invoice of what you owe me to date”. He said he was then handed the invoice dated 20 March 2000 which he read and then said to the plaintiff:-

“Peter, I believe I owe you some money but there’s no way I owe you this much money.”

77 He said Mr Sheldon said “that’s what it adds up to, Steve”. According to Mr Scerri, he said to Mr Sheldon:-

“Peter, this is way over the top. What is this anyway, it’s not even itemised. You just can’t put a couple of lines on an Invoice and then expect me to accept that it adds up to $24,350. Mate, I know you did work for me but what did you actually do and what were you thinking when you were charging? There’s no doubt you did some work on the ASE case but there’s no way I owe you this much money. What is it for?”

78 He said that Mr Sheldon said “OK, we can work something out, let’s go to lunch and talk it over”.

79 Mr Scerri then gave an account of discussion at the restaurant over lunch about the plaintiff’s outstanding fees. As earlier noted, his first affidavit had made no reference to a conversation about fees before the discussion about shares. In his reply affidavit (paragraph 18) he said that he said, “Peter, I’m not paying you $15,000, there’s no way that is fair”. He said that Mr Sheldon said, “You know I did a lot of work for you in that case”. Mr Scerri said he said:-

“Yes, Peter, but the deal was when we won the case we would all get paid, however, I didn’t get any money out of it and all the money went to the QC. Everyone took a reduced fee, even the QC reduced this Bill by $50,000. The Lawyer and the Barrister hardly got any money for their work and I’ve lost a fortune. Peter, we got seven cents in the dollar, as you know, when CEL went into liquidation. There is no win here for me or any of us. But as you know, I have taken the offer from Universal which will be worth a couple of hundred thousand a year to me.”

80 He said Mr Sheldon said, “well you’ve got to give me something, Steve”. Mr Scerri said he responded:-

“Look, I don’t have a problem with that. It’s understood I will pay something towards the Bill, but not $15,000. I will have to talk to Vicki and see what we can do.”

81 He said that the conversation then moved to the discussion of the purchase of the Paladin shares.

82 Mr Scerri re-affirmed his version of the conversation and denied that there was any “deal” concerning fees and shares as set out in Mr Sheldon’s affidavit.

83 In relation to Mr Sheldon’s account of discussions concerning the shares, he firstly denied Mr Sheldon’s account in paragraph 35 of Mr Sheldon’s affidavit in which he said that he would “dump” the shares if the price rose. He also denied the conversation alleged by Mr Sheldon in paragraph 36 and said that he was not aware until meeting with Mr Sheldon in June 2005 that Mr Sheldon had sold the Paladin shares.

84 Mr Scerri referred in paragraph 34 of his affidavit to the proceedings taken by Mr Sheldon against ASE, IYF and Emedia Campaigns Pty Limited and himself and wife in respect of outstanding fees. He maintained that Mr Sheldon was paid the amount of $5,000 in the cheque of 11 April 2000 and that it was that amount which was off-set in reaching a settlement of those proceedings.

85 Mr Scerri said that the Paladin shares were the first shares that he and his wife had purchased in a public company.

Documentary evidence

86 Mr Knoll, on behalf of Mr Sheldon, tendered two agreed bundles of documents that became Exhibits A and B respectively. Exhibit A contained copies of the affidavits of Mr Scerri and Mr Sheldon to which I have referred above.

87 Mr Knoll also tendered copies of two affidavits sworn by Mr Scerri, the first sworn on 7 June 2006 in the District Court (Exhibit 1 – remarked as Exhibit C), the second was sworn on 15 March 2007 in this Court (Exhibit 2- remarked as Exhibit D). Mr Beale, on behalf of Mr Scerri, tendered a copy of a letter from Leon M Ratner & Associates addressed McGrath Dicembre & Co dated 13 September 2006, being further and particulars of the cross-claim (Exhibit 3 – remarked as Exhibit 1).

Mr Scerri’s instructions to his new accountants, Williams & Partners

88 Mr Scerri agreed, in cross-examination, that he had, after terminating Mr Sheldon’s retainer, told Williams & Partners everything they needed to know about his accounts. It was put to him, however, that he did not instruct Williams & Partners about the Paladin shares. Mr Scerri claimed that he did.

89 Mr Scerri was taken to the letter from Williams & Partners addressed to the registrar of the Supreme Court dated 14 February 2008 (Exhibit A, Tab 11) to which I have earlier referred. In that letter (p.2), Williams & Partners stated:-

“(ii) We advise that we have no documentation, knowledge or are aware of any circumstances regarding Paladin Resources Limited or Paladin Energy Limited.”

90 That response was supplied in relation to a point which referred to “documentation in respect of the ownership or sale of shares in Paladin Resources Limited or Paladin Energy Limited by Steven John Scerri, Vicky Bronwyn Scerri, Australian Screen Entertainment Pty Limited, In Your Face Art Pty Limited or Emedia Campaigns during the period 1 January 2005 – 24 December 2007 (inclusive)”.

91 Mr Scerri’s attention was drawn to the above extracts in Williams & Partners’ letter and it was put to him:-

“Q. So you didn’t tell them about the shares, did you?

A. No, I did, but we didn’t have any shares, they were sold, so there was no point him putting them in any of the records.”

92 He agreed that it had only been about the time that he retained Williams & Partners that he had found out, on his version, that the shares had been sold to which he agreed. Notwithstanding what was written by Williams & Partners, Mr Scerri maintained that they in fact did have knowledge of the shares. He would not accept he had not tell them about the shares or the sale of the shares.

93 I do not accept Mr Scerri’s account of having told his new accountants about the Paladin shares. On occasions, Mr Scerri tended to argue points favourably to his case. This issue tended to illustrate that tendency.

Mr Scerri’s conduct between March 2000 and 30 June 2005

94 In the five years between the purchase of the shares and the termination of Mr Sheldon’s services, Mr Scerri did not inquire with Mr Sheldon about the shares which he claimed were held on trust for him. In relation to the period after June 2005, he said in cross-examination that when he terminated Mr Sheldon’s services:-

“… I told him I wanted the shares back and he said ‘I’ve sold those shares’ and that was in 2005.

Q. And from the point of time when you say Mr Sheldon told you that the shares had been sold, you didn’t write to him even once to say ‘hand me over the proceeds of sale’, did you?

A. No

Q. You didn’t telephone him to tell him, ‘hand over the proceeds of sale’, did you?

A. No, I was extremely upset about it.”

95 In relation to the telephone call which Mr Scerri said he had with Mr Sheldon in June 2005 (which Mr Sheldon disputed) in which he claimed he was told by Mr Sheldon for the first time that the shares had been sold, it was put to him that nowhere in the conversation did he say to Mr Sheldon “give me the proceeds of the sale”. He was asked:-

“Q. Where in that conversation do you allege that you asked for the proceeds of sale to be handed over to you?

A. It doesn’t say that.”

96 He was asked a little later:-

“… on your version of the facts, the shares that you say belonged to you had been sold; that means that cash has been received for them, isn’t that right?

A. Yes, the shares belonged to me.

Q. The shares had been sold; does the cash belong to you if they’re sold and you claim them to be your shares?

A. Yes.

Q. And you never once asked for that cash, did you?

A. No, I wanted the shares back.”

The handwritten credits on statement of account as at 29 June 2005

97 Annexure C to Mr Scerri’s first affidavit contained a copy of Mr Sheldon’s Statement of fees as at 29 June 2005. The Statement referred to an invoice dated 20 March 2000 in the amount of $15,000. It also noted the receipt of five amounts between 10 July 2000 and 18 August 2004 totalling in all $5,600 thereby reducing the invoice for $15,000 to an amount claimed as due and owing of $9,400.

98 The evidence was that the handwritten entries made on the Statement were made by Mrs Scerri and THEY were approved by Mr Scerri.

99 Mr Scerri confirmed in cross examination that at the time of the handwritten entries being written on the Statement by way of noting credits, the only fees outstanding were those owed by ASE. In handwriting, the following appears on the statement:-

“Less $5,000.00 11/4/00 - fees

$5,063.30 11/4/00 - shares

IYF chq 000816

_______________

Less $400.00 ASE.IYF GST Certificates”

100 Mr Scerri’s evidence was that the word “less” related to the $5,000 amount paid on 11 April 2000 but not to the $5,063.30 also paid on that date in respect of shares. The two amounts clearly reflect the cheque butt entries of 11 April 2000 under the subject “A/ting fees” and the word “less” considered against the cheque butt entries would at least on its face appear to both of the amounts.

The proceedings against ASE

101 The proceedings commenced by ASE in the Local Court was for a total amount of $13,079.50 plus interest and costs. A copy of the statement of claim in the proceedings by Mr Sheldon against ASE is at Tab 12 of Tender Bundle B, Exhibit B.

102 The proceedings were eventually settled. Mr Scerri was taken to a letter written by his solicitors in respect of the proceedings against ASE dated 25 July 2006, a copy of which is at Tab 39 of Tender Bundle B, Exhibit B.

103 That was a “without prejudice” letter in relation to the Local Court proceedings against ASE. The relevant paragraphs on p.2 of the letter were put to Mr Scerri in cross-examination. They read as follows:-

“In addition, your client has failed to also account to our client for a payment of $5,000 which was made on 11 April 2000 by way of a Cheque from In Your Face Entertainment Pty Limited which was a combined cheque for a total sum of $10,063.30 being $5,000 towards fees and $5,063.30 towards the purchase of the Paladin Resources Shares.

Accordingly, at best on this invoice, the balance owing to your client is only $4,400, however, we maintain that your client is statute barred from pursuing such a claim.”

104 It was put to Mr Scerri in cross-examination that the total amount of the claim in the statement of claim issued in the Balmain Local Court against ASE was $14,571.06 (made up of the amount of claim at $13,079.50 plus interest ($691.16) plus filing fees ($336) plus service fees ($46) plus solicitor’s costs ($418.40)).

105 It was put that the total of the deductions handwritten on the statement, namely, $5,000, $5,063.30 and $400 totalling $10,063, if deducted from the $14,571, left an amount of approximately $4,500 and that this was rounded out to achieve the settlement of the proceedings of $4,000.

106 Mr Scerri maintained that that was not how the settlement figure was arrived at and, in that respect, relied in particular upon correspondence in Annexure B being letters written by his solicitors on 31 August 2006 (Tab 41), a letter from Mr Sheldon’s solicitors dated 14 September 2006 and a letter from his solicitors to Mr Sheldon’s solicitors of 20 September 2006 (Exhibit B, Tab 43). It is not necessary to detail the steps set out in that correspondence leading to the settlement.

107 In relation to this matter, Mr Knoll’s submission was:-

“The point is not whether Mr Scerri intended that the $10,463.30 be deducted as part of the thinking process in settling the proceedings. The point is that the entire amount of the cheque dated 11 April 2000 was put forward on behalf of Australian Screen Entertainment Pty Limited as a matter which was in the governing mind of

that corporation

, Mr Scerri

and

as a matter which was alive and had to be considered in relation to

those proceedings

.

amount which Mr Sheldon had failed to credit Australian Screen Entertainment Pty Limited when suing that company

Submissions on behalf of Mr Scerri

108 Mr Scerri contended that he had requested Mr Sheldon to purchase some shares for himself and to hold them in Mr Sheldon’s name until further instructions. Mr Scerri claimed that he had informed Mr Sheldon that he had been given a tip by a friend that Paladin Resources Pty Limited had “really good prospects”. Mr Scerri’s evidence was that he did not have a share dealing Chess account and, for that reason, he requested Mr Sheldon to purchase the shares through his broker. Mr Sheldon’s account of what Mr Scerri said was:-

“… I’ve been talking to a mate of mine who says the whole uranium market is about to take off and he has given me a tip about Paladin shares. They are guaranteed to go up by three or four times in the next two weeks. I tell you what, you buy some and credit the profit against my bill.”

109 Mr Scerri further claimed that in the course of the conversation, Mr Sheldon indicated that he would like to buy some shares for himself and asked for Mr Scerri’s permission to do so.

110 Mr Scerri relied upon the contract note and facsimile sent to him on 24 March 2000. It was submitted that the purpose in forwarding the contract and notations on the facsimile cover sheet was and could only logically be explained as advice to Mr Scerri that Mr Sheldon had been successful in acquiring the shares for Mr Scerri and the amount that Mr Scerri owed Mr Sheldon for the acquisition. Furthermore, the detailed break-up of percentages of the 50,000 shares on the coversheet could only, according to Mr Beale of counsel for Mr Scerri, reflect the share agreement as explained by Mr Scerri.

111 It was contended that the facsimile and cover note were precisely in accordance with the agreement as alleged by Mr Scerri and was explicable in no other way.

112 Mr Scerri also relied upon the fact that his company, IYF, was in a position to write a cheque on 11 April 2000 in the amount of $10,063.30, an amount in part referrable to the $5,063.30 requested by Mr Sheldon in his facsimile of 24 March 2000.

113 Mr Beale contended that Mr Sheldon’s evidence as to why he would be sending Mr Scerri a copy of the buy-order was naïve and unrealistic and did not explain Mr Sheldon’s facsimile with its detailed break-up of percentages of the 50,000 shares purchased at the specified prices. Further, there was no explanation in Mr Sheldon’s affidavit or in logic for the detailed calculation of the brokerage and stamp duty costs referred to in the facsimile.

114 It was contended that Mr Sheldon agreed to undertake the purchase as Mr Scerri had never purchased shares before and did not have the necessary account in order to effect a purchase.

115 Mr Scerri also contended that Mr Sheldon was paid precisely the amount of money he requested for the shares together with a further $5,000 on account of his fees. As such, it was argued, he held the shares fully paid including brokerage and stamp duty on trust for Mr Scerri.

116 Mr Scerri alternatively claimed that, if the shares were not held on trust, then they were held pursuant to a contractual agreement to do so until Mr and Mrs Scerri gave directions as to how they were to be dealt with and that this agreement necessarily gave rise to fiduciary duty in Mr Sheldon.

117 Anticipating the argument for Mr Sheldon, Mr Beale contended that Mr Sheldon’s version of the agreement was a highly improbable one. On Mr Sheldon’s account, the share buying arrangement was motivated by the poor financial situation of Mr Scerri and the desire to secure payment of the outstanding accountancy fees owed by his companies. Mr Beale submitted that the cheque for $10,063.30 (drawn from IYF) in itself was inconsistent with the share arrangement as alleged by Mr Sheldon.

118 Mr Beale further argued that Mr Sheldon was aware that Mr Scerri had access to funds, and indeed, his knowledge in that respect explained Mr Sheldon’s preparedness to buy shares on behalf of Mr Scerri. On Mr Scerri’s case, Mr Sheldon knew that Mr Scerri at that time could pay him for any shares purchased.

119 Whilst Mr Beale acknowledged the absence of any written demand for payment having been made by Mr Scerri following Mr Sheldon informing him (on his account of events) in June 2005 that Mr Sheldon had sold “his” shares without his consent, he submitted that “there are some people in this world that don’t write letters” and that Mr Scerri fell into this category.

Submissions on behalf of Mr Sheldon

120 It was argued by Mr Knoll of counsel on behalf of Mr Sheldon that Mr Scerri bore the ultimate onus of proving a trust. It was submitted:-

“13. Mr Scerri bears the burden of proving that a trust came in to

being. There are a number of contrary indicators in the evidence.

a. Mr Scerri did not give Mr Sheldon any instruction about the holding or sale of the shares.

b. He claims that Mr Sheldon had no right to make any decision about selling the shares.

c. In March 2000, Mr Scerri and Mr Sheldon were communicating about accountancy fees payable by Australian Screen Entertainment Pty Limited to Mr Sheldon. Mr Scerri was unambiguously communicating in his capacity as a director of that company. Indeed, by his cheque of 11 April 2000, even on Mr Scerri’s version there was a part payment of accountancy fees. The only entity then owing fees to Mr Sheldon was Australian Screen Entertainment Pty Limited.

d. In March 2000, there were no invoices for accountancy fees outstanding from Mr and Mrs Scerri.

e. The only possible beneficiary of the arrangement was Australian Screen Entertainment Pty Limited, not Scerri.

f. The benefit of any gain on sale of the shares was to be credited to Australian Screen Entertainment Pty Limited fees owing to Sheldon.

g. Mr Sheldon reported the capital gain on the Paladin Resources Limited shares on his tax return, and paid his tax accordingly.

h. Mr Scerri – even once he knew the shares had been sold – did not report the capital gain on his tax return, and did not paid

any tax on that gain.

i. Australian Screen Entertainment Pty Limited did not report the capital gain on his tax return, and did not paid

any tax on that gain.

j. In Your Face Pty Limited did not produce any of the financial statements or tax returns that were subpoenaed, and so the Court cannot find that it reported the capital gain on his tax return, and did not paid

any tax on that gain.

k. Mr Scerri made no mention of the shares to his new accountants, Williams and Partners.

l. When Mr Scerri terminated Mr Sheldon’s retainer he made no attempt to communicate any instructions about the shares to Mr Sheldon.”

121 In his oral submissions, Mr Knoll emphasised that Mr Scerri’s conduct after March 2000 was significant in that:-

(1) At no time did he seek the share script for the Paladin shares, which, on his evidence, he claimed were purchased for him.

(2) No accounting was sought in respect of the sale of shares.

(3) No request or demand was made upon Mr Sheldon in respect of the proceeds of the sale of shares prior to the present litigation.

(4) No instructions had been given to his new accountants, Williams & Partners, concerning the share purchase (see Exhibit A, Tab 11, letter from Williams & Partners dated 14 February 2006 to the Registrar, Supreme Court, at p.2, point 11(ii)).

(5) No entry was made in Mr Scerri’s MYOB disc accounts in respect of his operating companies supplied to Mr Sheldon recording Mr Scerri’s purchase or interest in the Paladin shares.

122 Mr Knoll submitted that Mr Sheldon’s account of events should be accepted. He observed that Mr Scerri’s first affidavit had failed to refer to the telephone conversation that occurred on 20 March 2000, and further that Mr Scerri’s reply affidavit acknowledged that there had, in fact, been a discussion at the restaurant on 22 March 2000 on the issue of fees and a dispute was raised by Mr Scerri about them as Mr Sheldon had asserted.

123 Mr Knoll submitted that Mr Scerri had not discharged the onus of establishing the creation of a trust in respect of the Paladin shares. The alternative submission was that, if a finding as to a trust was made, the beneficiary of any trust arrangement had to be ASE, which is not a party to the proceedings, and that that company had settled its dispute in other proceedings with Mr Sheldon.

124 In support of this contention, the following propositions were relied upon:-

(1) The Court would find that the conversations on 20 and 22 March 2000 related to ASE being the entity that owed fees for accounting services rendered by Mr Sheldon.

(2) Mr Scerri was undoubtedly speaking in his capacity as a director of ASE.

(3) That Mr Scerri was bargaining for a reduction in the accountancy fees payable by ASE and that any benefit could have only been for it.

125 Mr Sheldon also relied upon the Statement of Account for his fees as at 29 June 2005 which he sent to Mr Scerri and the handwritten notations made on it by Mrs Scerri which were adopted by Mr Scerri (Tender Bundle A, Tab 5). The Statement referred to Mr Sheldon’s invoice of 20 March 2000 in the amount of $15,000 and which made allowance for a total of $5,600 as having been received leaving a balance owing, according to the Statement, of $9,400.

126 The handwritten notations on the Statement recording “less” $5,000 for fees and “less” $5,063.30 for shares as both paid by IYF on 11 April 2000 were said to evidence the basis of the agreement concerning the share purchase as set out in Mr Sheldon’s affidavit. In this respect, it was contended that the handwritten notations set out Mr Scerri’s position that the fees claimed as owing by Mr Sheldon were to be reduced by $10,063.50, the amount of the cheque on 11 April 2000 sent by IYF together with another $400 also handwritten on the statement.

127 It was argued on behalf of Mr Sheldon that the settlement of his Local Court proceedings against ASE in the amount of $4,000 had been arrived at by Mr Sheldon reducing his original claim of $13,079.50 against ASE by the two amounts received on 11 April 2000 totalling $10,063.30, leaving the amount of $3,016.50 with a further $984 (referrable to costs and interest) to arrive at the settlement figure of $4,000.

128 Mr Knoll argued that Mr Scerri, in effect, was contending that some of the money paid by IYF on 11 April 2000 was not in payment on behalf of ASE of the accountancy fees but as payment for shares to be held on trust for him personally. Mr Knoll submitted that Mr Scerri could not take the benefit of the cheque twice, once for himself and once for ASE in the settlement with ASE.

129 It was further argued that, once consent judgment had been made by way of compromise of the proceedings brought against ASE, any matter that could have been ventilated by ASE should have been raised by way of cross-claim in those proceedings.

130 The above submissions concerning the proceedings brought against ASE were strongly contested by Mr Scerri who contended that the correspondence supported Mr Scerri’s position in relation to the settlement with ASE.

Consideration

131 The dispute in these proceedings concerns an oral agreement made on 22 March 2000 between Mr Scerri and his then accountant, Mr Sheldon.

132 In essence, Mr Scerri claims that the agreement was for the purchase of a parcel of shares on his behalf and not for the benefit of ASE and that the agreement, in fact, had no connection with the question of outstanding professional fees then owing by ASE to Mr Sheldon. Mr Scerri’s first affidavit reflects his position in that respect.

133 Mr Sheldon, on the other hand, says that the agreement had everything to do with the question of his outstanding fees and ASE. His position in that respect is reflected in his affidavit.

134 Both Mr Scerri and Mr Sheldon do at least agree that they entered into an agreement on 22 March 2000. The dispute is as to what was agreed and for whose benefit it was made. The resolution of that dispute concerning the nature of the agreement, in particular, the oral terms of it requires the identification and analysis of those facts from which necessary inferences and findings may be made. Those facts include the events of March 2000 but they also extend well beyond those events. In that respect, it is necessary to consider matters that occurred later in the period between March 2000 and June 2005.

135 By reason of the nature of Mr Scerri’s claim that the shares were agreed to be acquired in circumstances involving the creation of a trust in respect of the shares, it has been necessary to isolate matters that assist in identifying the agreement made on 22 March 2000 and to determine whether by reference to them it can be said that Mr Scerri has discharged his onus.

136 Whether there was, as he contended, an intention in himself and Mr Sheldon to create such a trust in his favour is a keenly contested issue in which Mr Sheldon placed much reliance upon the facsimile sent on 24 March 2000. That, however, must be considered in the context of the matters that existed at the time that it was sent.

137 Mr Beale, on behalf of Mr Scerri, submitted that the facsimile was “the most cogent piece of evidence in this case”. He emphasised, in particular, the words appearing in it “… for shares bought on your behalf”, “your shares” and that it was addressed to Mr Scerri.

138 The facsimile was stated to be a “MESSAGE TO: Mr Steve Scerri”. Under that entry is a reference to “COMPANY” against which appears the initials “ACE”. The parties proceeded at the hearing upon the basis that this was intended as a reference to “ASE” – Australian Screen Entertainment Pty Limited.

139 The evidence was that at the time of the meeting of 22 March 2000 and as at 24 March 2000 when the facsimile was sent the only entity that owed fees to Mr Sheldon was ASE.

140 The extracts in the facsimile set out above are to be considered in light of the evidence concerning ASE and the evidence given by both Mr Sheldon and Mr Scerri as to the discussion on 22 March 2000 preceding the sending of the facsimile and the findings to be made in relation to such evidence.

141 The only express documentary reference to a trust having been created in respect of the shares is to be found in Mr and Mrs Scerri’s defence filed in the Local Court proceedings, 1052/06 dated 5 April 2006 (Exhibit A, Tab 2).

142 The details of the facts relied upon in support of the trust were set out in the Amended Cross-Claim filed in this Court on 12 October 2007 (Exhibit A, Tab 3) and in Mr Scerri’s affidavit sworn 10 October 2007 which was referred to in paragraph 3(a) of the Particulars of the Amended Cross-Claim.

143 Mr Scerri’s reply affidavit made it clear, consistently with what had been stated by Mr Sheldon, that the conversation about the shares purchase was, in fact, preceded by a discussion concerning payment of the invoiced fees raised on 20 March 2000, in which Mr Scerri voiced strong resistance to paying them.

144 The fact that the two topics, fees and shares, were under discussion at the restaurant on the occasion in question, provides some evidence, though not alone sufficient in itself, of the fact that the two topics were interlinked, as has been strongly argued on Mr Sheldon’s behalf.

145 It is clear that by 22 March 2000, Mr Sheldon was intent on recovering fees from Mr Scerri or, more particularly, from his company, ASE. He had an invoice prepared two days before the meeting on 22 March 2000 and had provided it to Mr Scerri before their discussion at the restaurant. The subsequent discussion about Mr Sheldon’s fees clearly generated strong feeling between them. Whilst not initially acknowledged in Mr Scerri’s first affidavit, it is clear from his reply affidavit (paragraph 16), that the discussion of fees occurred almost immediately before the discussion on shares arose. It is also clear that the issue of fees did, as I have stated, become a contentious issue. This is consistent with the account appearing in Mr Sheldon’s affidavit sworn 22 November 2007.

146 An analysis of the evidence, in my opinion, supports the following findings:-

(1) The account of the discussion on 22 March 2000 given by Mr Scerri in his first affidavit failed to disclose the full context in which the discussion on subject of the Paladin shares arose.

(2) It is clear that, at the time of the discussion, Mr Sheldon was pressing for payment of his fees.

(3) It is equally clear that, at the lunch, there was a dispute raised by Mr Scerri about the fees in which expressed his unwillingness to pay the fees in strong terms.

(4) In such circumstances, there was no rationale explanation for Mr Sheldon to agree to expend $5,000 of his own money in purchasing shares for Mr Scerri unless there was some perceived financial benefit.

(5) There was both a temporal and an actual connection in the restaurant discussion between fees and shares.

147 Accordingly, the fact that Mr Sheldon had invoiced ASE for professional fees in the amount of $15,000 and that such fees remained unpaid as at the time of relevant events in March/April 2000, provides relevant context for the assessment of the events occurring soon after the share purchase.

148 The cheque drawn on IYF’s account in the sum of $10,063.30 in favour of Mr Sheldon by Mr Scerri was sent without a cover note or letter. It was not sent immediately after the receipt of the facsimile sent on 24 March 2000 but was sent a little over two weeks later. The expiration of the period of two weeks after the share purchase is consistent with and supportive of Mr Sheldon’s account of the discussion based upon the “tip” of an anticipated increase in the share value in two weeks. Further, the cheque was drawn on IYF in respect of “accountancy fees” as the particular cheque butt records. The entry, as noted above, recorded a breakdown of the components in terms of “shares” and “fees” under the topic heading of “A/tancy fees”.

149 There is no record or other evidence of any loan transaction in favour of Mr Scerri in respect of the payment made by IYF concerning shares as between it (or ASE) and Mr Scerri. ASE, as earlier noted, was the only entity at the time indebted to Mr Sheldon for fees.

150 There were no relevant events reflecting the existence of a trust concerning the shares after April 2000 until, on Mr Scerri’s account, a conversation took place between him and Mr Sheldon in 2003 (Mr Scerri’s first affidavit, paragraph 11). Even then, he did not inquire about the share certificate.

151 Mr Sheldon agreed that there was a conversation in 2003, but not in the terms related by Mr Scerri in paragraph 11 of his first affidavit. I accept Mr Sheldon’s account of the conversation as the more probable reliable version of what was said.

152 The only event occurring in 2004 of relevance to the issues between the parties is the sale on 23 August 2004 by Mr Sheldon of the Paladin shares: Mr Sheldon’s affidavit, paragraph 36. He claims that he spoke to Mr Scerri and told him of the sale and at no time did Mr Scerri in this or any subsequent conversation assert that the Paladin shares belonged to him. Mr Scerri, of course, disputed Mr Sheldon’s account in this respect.

153 In 2005, Mr Sheldon reported in his income tax return for the year 2004/2005 a capital gain made on the sale of the shares.

154 The events in 2005 are of relevance to the substantive question as to the nature of the transaction made on 22 March 2000 as well as upon the issue of Mr Scerri’s credibility. In this respect, the following matters arise:-

(1) At no time prior to 2004 had Mr Scerri requested that the share certificate for the Paladin shares be sent to him.

“absolutely devastated”

155 Mr Scerri’s evidence was that he told his new accountants, Williams & Partners, all they needed to know for the purposes of doing the accounts and tax returns for himself, his wife and his companies. In oral evidence, his evidence was that he advised Williams & Partners of the shares. The correspondence by Williams & Partners in evidence, however, does not support Mr Scerri in that respect. As earlier noted, the letter written by that firm dated 14 February 2008 to the Registrar of the Court confirms that they had not received any information or documents concerning the Paladin shares (Exhibit A, Tab 11).

156 Mr Scerri’s evidence was that, in late June 2005, he spoke to Mr Sheldon and criticised him for not having given him correct advice and that he was going to use another accountant. As earlier noted, Mr Sheldon disputed his evidence in that respect and, in doing so, relied upon the terms of his letter to Mr and Mrs Scerri dated 29 June 2005 (Exhibit B, Tab 35). The second paragraph of that letter does not reflect any conversation in which Mr Scerri had challenged or attacked Mr Sheldon as to his competence or any breach of duty. There he simply stated:-

“I am disappointed that following our last conversation where I asked for a contribution towards work I have completed seem to have sparked you into taking this action. However, I have been more than patient over the years with you in the hope if you did ever make it your promise to compensate me for all the work I have done over the years would be met.”

157 Further, the opening paragraph of that letter does not suggest, as Mr Scerri contended, that he had previously advised Mr Sheldon that he was going to use another accountant. The letter of 8 June 2005 written by Williams & Partners (Exhibit B, Tab 34) and Mr Sheldon’s letter to Mr and Mrs Scerri dated 29 June 2005 provides support for an inference, consistent with Mr Sheldon’s evidence, that he was first informed by Williams & Partners and not by Mr Scerri that that firm was taking over the accounting work.

158 The above matters concerning the evidence of 2005, to my mind, raise serious questions as to the reliability of Mr Scerri as to the facts concerning material events. I regret that, upon consideration, I am unable to accept him as a reliable witness.

159 Mr Beale’s submission was that Mr Sheldon’s account of the discussion on 22 March 2000 should not be accepted, was a “fabrication” to counteract the facsimile and that, in the context of fees owing to him, is a “bizarre and fantastic” version.

160 The issue in that respect, as I have earlier stated, depends upon a consideration of the terms of the facsimile and a consideration of the objective facts at the time of the meeting on 22 March 2000 (including, in particular, the fact that fees were owing by ASE to Mr Sheldon) and the above findings made on the evidence. Following a consideration of the evidence, I accept Mr Sheldon’s account of the conversation on 22 March 2000.

161 I, accordingly, do not consider that the plaintiff has discharged the onus of proof in establishing the trust or contract alleged in respect of the Paladin shares. On the findings made and expressed above, the only entity associated with Mr Scerri that could have indirectly benefited from the agreement made on 22 March 2000 was ASE the entity then indebted to Mr Sheldon.

162 I, accordingly, have concluded that judgment should be entered in favour of the cross-defendant, Mr Sheldon, and I so order.

163 I will hear the parties on the question of costs.

**********

Actions

Download as PDF Download as Word Document

Citations

Sheldon v Scerri [2008] NSWSC 892

Most Recent Citation

Peter Sheldon v Steven John Scerri [2011] NSWSC 253

Cases Citing This Decision

1

Peter Sheldon v Steven John Scerri [2011] NSWSC 253

Cases Cited

0

Statutory Material Cited

1

CITATION:	SHELDON v SCERRI [2008] NSWSC 892
HEARING DATE(S):	11, 12, 13 and 18 August 2008
JUDGMENT DATE :	29 August 2008
JURISDICTION:	Equity
JUDGMENT OF:	Hall J at 1
DECISION:	On the plaintiff's claim in debt, there is, by consent, judgment for the plaitniff for the amount claimed. Judgment in favour of the cross-defendant on the cross-claim.
CATCHWORDS:	TRUSTS – relationship of accountant and client – professional fees owing to accountant/cross-defendant at time of agreement to purchase shares – proposal by client (cross-claimant) to buy shares on a “tip” that same would escalate in value in two weeks – profit to be credited – no trust created – contract made conferring a benefit on the client as distinct from a company controlled by him
LEGISLATION CITED:	Civil Procedure Act 2005
PARTIES:	Peter SHELDON v Steven John SCERRI & ANOR
FILE NUMBER(S):	SC No 2757 of 2007
COUNSEL:	P: D D Knoll D: P A Beale
SOLICITORS:	P: Leon M Ratner & Associates D: McGrath Dicembre & Co