Tingey, A v Blu-Binda Marina P/L

[1993] FCA 151

I JUDGMENT NO. ..,..,.....,....,. 15 1 I. ....,.,.,. ISS 3

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IN THE FEDERAL COURT OF AUSTRALIA	)
1
NEW SOUTH WALES DISTRICT REGISTRY )	NO. G53 of 1991

1

GENERAL DIVISION 1

BETWEEN:  ALLEN TINGEY
Applicant

AND BLU-BINDA MAR I NA PTY

LIMITED
First respondent
ARTHUR GEORGE COOK

Second respondent

2 3 MAR 1993 BRIAN MILLARD
Third respondent
TREVOR BUTT
Fourth respondent

CORAM:	Beaumont J.
W:	4 March 1993

EX TEMPORE REASONS FOR JUDGMENT

By application filed on 14 February 1991 the applicant, Mr Allen Tingey, has claimed as against the respondents the following relief. Flrst, a declaration that -. the respondents have engaged in misleading and deceptive conduct in breach of s.52 of the Trade Practices Act 1974

the outset.
("the Act").	Secondly, an order that the respondents pay the

applicant a sum of $72,500 and interest.

The relief is claimed on the basis stated in the
statement of claim, to which I will refer shortly. Before
doing that, some matters of background should be mentioned at

On 10 July 1992 the first respondent was de- registered by the Australian Securities Commission pursuant to the provisions of s.574 of the Cor~orations Law. As a result, no relief , - now sought against the first respondent. It is not suggested that its de-registration or its dissolution pursuant to the provisions of the Coruoration Law, happening as it did after the commencement of these proceedings, has any significance so far as the claims made against the other respondents are concerned.

The second preliminary matter to be noted is that the second respondent who was formally a director of the first respondent did not appear in the proceedings. I have evidence of service and I am satisfied that the second respondent was served with process and has elected not to appear. There is a suggestion in the evidence, which appears to be accurate, that the second respondent now resides permanently in the United States of America.

-.

The third respondent, also a former director of the

first respondent, appeared in person before me at the trial.
On the second day of the hearing he applied to the Court to be
dismissed from the proceedings on the basis that the evidence
adduced to that point disclosed no cause of action as against
him. His application for dismissal from the proceedings was
not opposed by the applicant and I thereupon ordered that he
be dismissed from the proceedings.

1

The case sought to be made by the applicant is, so :

far as presently material, pleaded in paragraphs 4 to 15 and 26 and 27 of the amended statement of claim. By those paragraphs it is alleged that in June 1989 the applicax~t	\
entered into an agreement with the first respondent for the	l
! ,
purchase of a factory new Leeder 28 Deluxe Motor Vessel ("the	l~
Leeder boat"). The terms and conditions of the agreement were,
:  '
inter alia, that the applicant pay a purchase price of
$112,000 and an initial deposit of $5000 and a final payment	I
of $107,000 on delivery of the boat and that the boat be	!.
delivered by the end of October 1989.
It is then said that on 21 June 1989 the applicant paid the first respondent a deposit of $5000 pursuant to the agreement. It is further said that on 3 July 1989 the second respondent represented, that in order to avoid delay in delivery, an additional $20,000 was required to purchase motors for the boat and a further $6000 was requested to make
up a 10 per cent deposit. It is next alleged tliat on 11 July	1989 and 17 August 1989 at the request of the first respondent
the applicant - paid the sums of $17,000 and $9,000 respectively towards the purchase of the boat.
It is further alleged that on behalf of the applicant the first respondent sold the applicant's Marina Pacer motor boat for the sum of $41,500, notwithstanding that the first respondent had represented that the sale price was

$37,000. It is then said that the first respondent was

- instructed by the applicant to hold the proceeds of that sale

to be applied towards the purchase of the Leeder boat. It is further pleaded that the total thereby :.aid 'by the first respondent in respect of the transaction was the sum of

$72,500.

The applicant alleges that the Leeder boat was not delivered by the end of October 1989, nor at all. On 13

December 1989 the applicant terminated the agreement and demanded the return of the sum of $68,000, which the applicant then believed was held by the first respondent on behalf of the applicant pursuant to an undertaking by the first respondent not to disburse the funds provided by the applicant.

The amended statement of claim then makes the

following allegations which are the essential claim made in

the proceedings and particulars:  -

"13. On 14 December, 1989 it was represented by the
Fourth Respondent on behalf o f the F i r s t
.- Respondent that the t r u s t monies would not be

disbursed pending resolution o f the dispute between t h e p a r t i e s ( ' t h e f i r s t

representa t ion ') .

14.     On 15 December, 1989 i t was represented by the Fourth Respondent on behalf o f the F i r s t

Respondent  that : 

(i) the t rus t monies  were held b y the F i r s t

Respondent pending finalisation o f the transaction which would occur upon the provision o f a Leeder boat t o the

A p p l i c a n t	and	paynent	by	the	A p p l i c a n t	o f
the	b a l a n c e	o f	the	purchase	p r i c e	('the

second r e p r e s e n t a t i o n ' ) ;

(ii) the b o a t t h a t was o r i g i n a l l y t o be s o l d t o

the A p p l i c a n t was no l o n g e r a v a i l a b l e ;

(iii)	an	a l t e r n a t i v e	Leeder	b o a t	was	a v a i l a b l e
for	s a l e .

15 . I n r e l i a n c e upon the first and second

r e p r e s e n t a t i o n s the A p p l i c a n t r e f r a i n e d from

i n i t i a t i n g l e g a l proceed ings t o recover the

t r u s t monies b u t con t inued t o n e g o t i a t e w i t h

the F i r s t Respondent for the s u p p l y o f an

a1 t e r n a t i v e vessel on terms t o be agreed.

26. In making the r e p r e s e n t a t i o n s r e f e r r e d t o i n

paragraphs 13 and 14 herein the F i r s t

Respondent engaged i n fa1 se, m i s l e a d i n g and

d e c e p t i v e conduct i n breach o f S e c t i o n 52 o f

the Trade P r a c t i c e s Ac t .

PARTICULARS

(a) At the t i m e o f the making o f the

f i r s t	r e p r e s e n t a t i o n ,	the	F i r s t
Respondent	had	a l r e a d y d i sbur sed	the

t r u s t monies;	o r
(b) a t the	t i m e o f the making o f the
second	r e p r e s e n t a t i o n the F i r s t

Respondent had a l r e a d y d i s b u r s e d the

t r u s t monies; o r

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( c )	a t some	t i m e a f t e r the making o f the
first	r e p r e s e n t a t i o n the F i r s t

Respondent d i sbur sed the t r u s t monies

c o n t r a r y t o the r e p r e s e n t a t i o n and

7

w i t h o u t n o t i f y i n g the A p p l i c a n t ;

( d ) a t some	t i m e	a f t e r the	making o f	the
second	r e p r e s e n t a t i o n	the	F i r s t	r esponden t

d i sbur sed the t r u s t monies c o n t r a r y t o the

r e p r e s e n t a t i o n	and	w i t h o u t	n o t i f y i n g	the
A p p l i c a n t .

27.      The Second, T h i r d and Fourth Respondents were

pe r sons i n v o l v e d i n the c o n t r a v e n t i o n bv the

F i r s t Respondent o f S e c t i o n 52 o f the Trade

P r a c t i c e s Ac t , p a r t i c u l a r i s e d i n ~ a r a a a p h 25.

PARTICULARS

la) the Second and Third R e s p o n d e n t s w e r e a t

a l l m a t e r i a l	t i m e s	d i r e c t o r s	o f	the	F i r s t
r e s p o n d e n t :

/b) the F o u r t h R e s m n d e n t was a t a l l m a t e r i a l

t i m e s	the	solicitor	for	the	F i r s t
Responden t	and	the	Second	and	T h i r d

R e s p o n d e n t s and took his i n s t r u c t i o n s from

the Second and T h i r d R e s p o n d e n t s ;

/c) a s a t December 1989 the F i r s t Responden t

was i n d i r e f i n a n c i a l c i r c u m s t a n c e s and

had been i n s u c h c i r c u m s t a n c e s since a t

l e a s t A u m s t 1989;

Id) the F o u r t h Responden t had a c t e d a s

so l ic i tor for the F i r s t Responden t since

a t l e a s t J a n u a r v 1989;

le) i n v a r i o u s t r a n s a c t i o n s the F o u r t h

Responden t a c t e d i n c i r c u m s t a n c e s wh ich

f u l l v r e v e a l e d t o h i m the d i r e f i n a n c i a l

c i r c u m s t a n c e s o f the F i r s t Responden t :

/f)	a s and from a t l e a s t A u m s t 1989 the F i r s t Responden t was insolvent and u n a b l e t o p a y
i t s d e b t s a s thev f e l l due:
a s a t December 1989 the F o u r t h Responden t
knew t h a t a s e r i o u s d i s p u t e had a r i s e n
b e t w e e n the Second and T h i r d R e s p o n d e n t s
concerninu the f i n a n c i a l a f f a i r s o f the
F i r s t Responden t ;
lh)	bv let ter d a t e d 13 December 1989 the F i r s t
Responden t was t h r e a t e n e d w i t h a n
iniunction r e s t r a i n i n u the d i s b u r s a l o f
the monevs the s u b j e c t o f these
-	p r o c e e d i n u s :
t h a t le t ter was r e f e r r e d t o the F o u r t h
Respondent who. i n o r d e r t o d e f l e c t
i n j u n c t i o n p r o c e e d i n u s , r e p r e s e n t e d t h a t
the monevs would not be d i s b u r s e d and t h a t
a n i d e n t i c a l b o a t was a v a i l a b l e :

fjJ the F o u r t h Responden t i n the knowledue o f

the F i r s t R e s p o n d e n t ' s d i r e f i n a n c i a l

position therebv a i d e d or a b e t t e d the

F i r s t Responden t t o d i s b u r s e the monevs t o

i t s own advan taae :

lk) a l t e r n a t i v e l v a s a t 13 December 1989 the

F o u r t h Responden t k n e w or o u g h t t o h a v e

known t h a t the monevs had a l r e a d v been

d i s b u r s e d i

a l t e r n a t i v e l v b e t w e e n 13 December 1989 and

22 Mav 1990 the F o u r t h Responden t l e a r n e d

t h a t the monevs h a s been d i s b u r s e d and

w i t h h e l d	t h a t	i n f o n n a t i o n	from	the
A p p l i c a n t	and	i n s t e a d	i n d u c e d	the

A p p l i c a n t t o believe t h a t the F i r s t

Respondent would s u ~ ~ l v a L e e d e r b o a t t o

the A p p l i c a n t :

/m) the F o u r t h Responden t was thereby

knowing1 v c o n c e r n e d i n the c o n t r a v e n t i o n

o f Section 5 2 o f the T r a d e P r a c t i c e s r A c t ]

bv the F i r s t Responden t . r e f e r r e d t o i n

paragraph 25 . "

The applicant's case is that the conduct of the first respondent thus pleaded was misleading within the meaning of s.52(1) of the Act. The applicant further says that the second and fourth respondents were knowingly concerned in the contravention by the first respondent and were liable accordingly pursuant to the provisions of section

74B(l)(c) of the Act. -.

There was also a claim made within the statement of claim that the respondents were in breach of a common law duty of care arising out of the circumstances I have described. However, whether a cause of action in negligence has been established in the present case is not I think a matter that I need decide.

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In my view there is no apparent difference between the measure of damages so far as the applicant is concerned.

SO far as the fourth respondent is concerned, it is true that

it may, in certain even-, have been open to the fourth respondent to make a claim for contribution against the second respondent by virtue of the relevant New South Wales legislation as picked up by s.79 of the Judiciarv Act 1903. No such cross-claim has been made in these proceedings. However, I will, if necessary, entertain such a claim if it is advanced. I note that the absence of the second respondent from the proceedings may serve to indicate that there will be little practical purpose in the fourth respondent pursuing a cross-claim against the second respondent.

Before giving reasons, I propose to give a history of the dealings between the parties to the litigation and then to refer to some aspects of the corporate and financial history of the first respondent. I do so in the knowledge

that I have admitted some of the material to which I will now	refer subject to its ultimate relevance being established. I
am conscious of the circumstance that the fourth respondent, - although the solicitor acting for the first respondent at the material times, may not have been present and may not have been actually aware of all the events to which I now refer. Nonetheless, some of the background facts and some of the corporate and financial history have been established to my
satisfaction as objective facts and as I have said, I have

. admitted the material subject to relevance in any event.

The history of the dealings between the parties was as follows. On 10 June 1989 the applicant attended the Sydney Boat Show at Darling Harbour. He saw a "Leeder 28" motor vessel at the display area conducted by the first respondent at the show. On that occasion and subsequently, the applicant inspected the vessel and had several conversations with a Mr David Hewett, representing the first respondent. The applicant having indicated an interest in the vessel was informed that it was for sale at a price of $112,000. He was also informed that the vessel was manufactured in Western Australia, but that a delivery date in September or October could be achieved.

The applicant asked whether it was possible to use

Volvo motors instead of the standard fitting of Mercruiser

motors and was informed that this could be- done. The	applicant also asked Mr Hewett whether it was possible for him
to trade in his own boat, a Marina Pacer vessel. Mr Hewett 7 indicated that this would be possible and that subject to inspection, a price of around $40,000 should be achieved on a trade-in basis. On that footing the applicant indicated to Mr Hewett that he would like to place an order for a Leeder boat.
On 20 June 1989 Mr Hewett telephoned the applicant and informed him that a deposit had to be paid into the bank account of the first respondent at the Commonwealth Bank, Newport branch ("the Bank"). The account number was indica-ed and the applicant was informed that an order for the vessel could not be placed until the deposit was paid. The applicant said that he would pay the deposit.
On 20 June 1989, the applicant wrote to Mr Hewett on behalf of the first respondent stating that a deposit of $5000 had been paid, as requested, to secure the purchase of the boat and authorising the sale of the Marina Pacer vessel at a minimum value of $37,000 or better if sold before the balance of the funds on the purchase of the Leeder vessel were required. The applicant said that he would deliver the Marina Pacer boat to the first respondent as soon as possible and that the sale proceeds could be applied to the cost of the new boat after getting confirmation from the applicant.

-.

In accordance with a discussion which had occurred at about this time, in a letter dated 20 June 1989, the applicant indicated that he would provide a further $20,000 for the purchase of the engines within the next few weeks if the Pacer was unsold. It appears that there had been initially some misunderstanding with respect to the procedure to be followed concerning the order of the Volvo motors. Eventually it was clarified that, although the purchase price for the vessel overall was not to be increased by reason of the circumstance that the vessel were to be fitted with Volvo motors, nonetheless the Volvo motors could not be ordered until a special deposit had been provided by the applicant in this connection.

On 21 June 1989, the applicant paid the sum of $5000 to the credit of the account of the first respondent at the Bank. Although not known to the applicant at the time, the evidence shows that the amount was received into the account of the first respondent but forthwith credited towards the reduction of a substantial overdraft account then owed by the first respondent to the Bank. The significance of this will appear subsequently.

By facsimile transmission sent on 7 July 1989, the
applicant wrote to Mr Hewett on behalf of the first

respondent, saying that he had sent off that day the next

instalment for payment, namely $17,000. He stated in the	facsimile transmission that the balance was to follow for the
motors and deposit. That is, a total of $31,000 was required of which $22,000 had been paid to date. He said that either the proceeds of the sale of his own boat could be applied or he would make up the cash balance of $9000 himself. This was all done.

i

12.   t '

'

I

On 11 July 1989 the applicant paid a sum of $17,000 to the account of the first respondent at the Bank.	!
I _

This sum	I
! -:

was immediately appropriated in reduction of the overdraft of	j
the first r~apondent. On 17 August 1989 the applicant paid a	I ~
sum of $9000 to the first respondent's account with the Bank.	I '
1.'
At that stage also, and as will appear in evidence to which I
I
will refer later, at all material times the overdraft account
i
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held by the first respondent with the Bank was substantial and	C'
significantly in excess of $100,000.
I
In August 1989 without the knowledge at that stage of the applicant, the first respondent sold the applicant's	,
I
I
Marina Pacer for a total figure of $41,500, being a cash	;
component of $26,500 and $15,000 allowed by way of trade-in.	! ,
..
In September 1989 the second respondent informed the first
,
respondent that the Marina Pacer had been sold for the sum of
$37,000. The applicant asked the second respondent to hold
the proceeds of sale in the first respondent's trust account	I
until the Leeder boat was delivered. The proceeds could then	form part of the purchase money on the footing that interest
on the moneys in the trust account were to be shared equally	L

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between the parties.	I	'
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I
i
On 28 November 1989 the applicant wrote to the second respondent asking a number of questions about the	i
I-
I
Leeder boat and in particular what work was required to finish
.	.
it. The questions were as follows:

"5. What m o u n t o f money h a s been sent t o Leeder WA

f o r m y b o a t .

6 . Given the $68,000 d e p o s i t e d w i t h Blu-Binda

p l e a s e c o n f i r m you have $68,000 less the amount

sent t o Leeder (5 above) on d e p o s i t i n your

t r u s t account .

M y a d v i c e was t h a t the interest earned on these

funds a r e shared between Blu-Binda and m y s e l f . What i s the approximate interest c r e d i t worth t o d a t e . "

B y le t ter da t ed 13 December 1989, Messrs Lane &

Lane, ( "Lane & Lane") s o l i c i t o r s a c t i n g for the a p p l i c a n t ,

mo te t o the f i r s t responden t a let ter which was s e n t by

f a c s i m i l e t r a n s m i s s i o n i n the f o l l o w i n g t e r m s :

" W e a c t f o r Mr and Mrs T ingey .

Our clients i n s t r u c t u s t h a t on o r about 2 0 t h June 1989 they agreed through you t o purchase upon i t s manufac ture a Leeder 28 Deluxe Motor V e s s e l f o r the

sum o f $112,000. You s a i d t h e vessel would be

manufactured i n Western A u s t r a l i a . A t your request

o u r clients paid the t o t a l sum o f $68,000 t o you

upon the b a s i s o f your r e p r e s e n t a t i o n s t h a t the

vessel was b e i n g manufactured and t h a t u l t i m a t e l y

they would be a b l e t o t a k e d e l i v e r y o f i t .

You r e p r e s e n t e d t o o u r clients t h a t t h e vessel would

be completed b u t i t now appears and d e l i v e r e d by October 1989.

Not only was The sum o f $68,000 t h e vessel not d e l i v e r e d a s promised,

t h a t i t cannot be d e l i v e r e d .

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was pa id t o you to be h e l d i n

t r u s t pending	the comp le t i on o f the purchase	o f the
vessel.

In the c i r cums tances o u r clients require a r e f u n d i n

f u l l	o f a l l monies pa id	by them t o you by bank
cheque on or b e f o r e 2.00	pm,	Thursday 1 4 t h December,

1989, f a i l i n g which proceed ings w i l l be commenced

w i t h o u t f u r t h e r n o t i c e .

W e	a l s o	require	your	under tak ing	i n	w r i t i n g	by
r e t u r n	f a c s i m i l e	t h a t	you	w i l l	not	d i s b u r s e	a n y

funds h e l d by you on b e h a l f o f o u r clients t o a n y

person. I n the absence of r e c e i p t o f such an

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u n d e r t a k i n g	o u r	clients	w i l l	w i t h o u t	f u r t h e r	n o t i c e
move	f o r	an	i n j u n c t i o n	r e s t r a i n i n g	you	from
d i s b u r s i n g	a n y f u r t h e r	monies	t o g e t h e r	w i t h	an	o r d e r
for costs.
W e	urge	you	t o refer	this	letter	t o your

s o l i c i t o r s . "

On 14 December 1989, the fourth respondent sent a facsimile transmission to Lane & Lane in the following terms. This is the judgment sued upon and referred to in paragraph 13 of the amended statement of claim:

" I refer t o your le t ter o f y e s t e r d a y and o u r recent

t e l e p h o n e d i s c u s s i o n . I c o n f i r m t h a t no i n j u n c t i o n

w i l l	be	n e c e s s a r y	a s m y	client	h a s	i n d i c a t e d	t h a t
the	d e p o s i t	(o f	$68,000)	w i l l	n o t	be	d i sbur sed

pending r e s o l u t i o n o f the d i s p u t e . I c o n f i r m

f u r t h e r t h a t an i d e n t i c a l ( n o t 2nd hand) b o a t i s

a v a i l a b l e ;	s h a l l	f a x	f u l l	d e t a i l s	tomorrow
morning. "

On the following day, 15 December 1989, the fourth
respondent wrote to Lane & Lane a letter which again was sent

by facsimile transmission as follows. This is the letter

pleaded in paragraph 14 of the amended statement csf claim:

"Fur the r	to	m y	t e l e p h o n e	c o n v e r s a t i o n	and
h a n d w r i t t e n	f a c s i m i l e	t r a n s m i s s i o n	o f	y e s t e r d a y	I

c o n f i n n t h a t I a c t for A r t h u r Cook and f o r -Blu-Binda

Marina P t y L im i t ed o f Newport.

I wish t a k e f u l l t o a d v i s e i n s t r u c t i o n s t h a t I have had the o p p o r t u n i t y t o

from m y client and am adv i s ed

t o the e f fect t h a t a c o n t r a c t u a l r e l a t i o n s h i p would appear t o exist between m y client and y o u r client based on the s u p p l y o f a b o a t by m y client t o y o u r

cl ient .

I am i n s t r u c t e d t h a t the t r a n s a c t i o n was a s

f o l l ows : -

M y c l i en t was t o supp ly a new Leeder 28 Deluxe

motor vessel for a purchase p r i c e o f

$112,000.00.

Your c l i e n t paid a t o t a l o f $31,000.00 i n cash

b e i n g an i n i t i a l d e p o s i t o f $5,000.00 and two

suLseguent	payments	o f	$9,000.00	and
$17,000.00.

I n a d d i t i o n your c l i e n t traded i n f o r an agreed

va lue o f $37,000.00 a Marina Pacer V e s s e l .

The t o t a l agreed va lue o f $68,000.00 d e p o s i t i s

he ld by m y c l ient pending f i n a l i s a t i o n o f t h e

t ransac t ion which w i l l occur upon the prov is ion

o f t h e vessel	t o your client on payment	o f t h e
f i n a l	ou t s tand ing balance	o f $44,000.00.

The con t rac t was never in tended t o be i n

r e l a t i o n t o any p a r t i c u l a r vessel b u t only i n

r e l a t i o n t o a vessel o f t h e correc t

specifics t i o n s .

O r i g i n a l l y it was hoped t h a t a vessel c u r r e n t l y

under cons t ruc t ion i n Perth would	be	ready i n t ime
f o r your	c l i e n t , however,	it now appears through no

f a u l t	o f m y client	t h a t such	vessel	would	n o t be
ready and	m y c l i en t	i s now	i n a	position	t h e r e f o r e

t o provide an i d e n t i c a l new vessel from s t o c k i n

accordance w i t h t h e con t rac t between t h e p a r t i e s .

A l l t h a t i s required now i s conf i rmat ion from your

client t h a t h e i s i n a p o s i t i o n t o complete t h e

t ransac t ion by payment o f t h e $44,000.00 and on

r e c e i p t	o f	such	conf i rmat ion	t h e	t r i m and	u p h o l s t e r y
s h a l l	be	a l t e r e d	t o s u i t your	client's	requirements .	-

I am rece ived advised f u r t h e r t h a t i f such conf i rmat ion i s

today then t h e t r a n s a c t i o n could be

f i n a l i s e d	next	week	w i th	the	d e l i v e r y o f	t h e boat	i n
r e t u r n	f o r	t h e	balance	o f	$44,000.00	r e f e r r e d	t o
aboive .

With regard t o t h i s p a r t i c u l a r vessel it appears

t h a t your c l i e n t m a y have some misconcept ion about

i t and it i s advised t h a t t h e vessel i s not second

hand and i s a brand new vessel whose h i s t o r y i s t h a t

i t has been de l i vered from Western A u s t r a l i a by

t r u c k (which i s usua l ) and subsequent ly water- tes ted

for a period o f approximately six hours and s i n c e

then h e l d i n s t o c k a t m y client's marina.

Should t h e r e be any doubt a s t o t h e f a c t t h a t the

vessel i s brand new m y client i s prepared i n t h e

circumstances to provide an appropriate marine

survey at no cost to your client on settlement.

I look forward to your early reply. "

No application for an injunction or otherwise was made on behalf of the applicant. A reply was sent by Lane & Lane by letter dated 19 December 1989, saying that the applicant would be returning to Sydney in the first week of January 1990, at which time his instructions would be sought in relation to the offer contained in the letter dated 15 December.

By letter dated 20 December 1989, the fourth respondent wrote to Lane and Lane stating that the offer would remain open until 15 January. On 11 January 1990, the applicant who up to this time had been overseas, telephoned the premises of the first respondent and spoke with the second respondent. On 13 January arrangements were made for the applicant to inspect what was referred to as the substitute

the applicant prepared a list of items which, on his	boat. This inspection took place on that date. -- At the time
inspection of the vessel on 13 January, were not, from his - point of view, satisfactory.
On 18 January 1990, Lane and Lane wrote to the fourth respondent referring to the letter of the fourth respondent dated 15 December 1989, seeking further details by way of clarification of the offer made in that letter. On 22 January 1990 the fourth respondent replied to Lane and Lane providing some details as requested and reiterating that the current asking price for the Leeder Boat of $112,000 would remain open for a further period of 7 days.
By letter dated 23 February 1990, the fourth respondent wrote again to Lane and Lane stating that he had had difficulty in obtaining instructions from the second respondent as he had been in Western Australia having discussions with the current manufacturers of Leeder Boats.
The letter went on to say that it was the belief of the fourth respondent that the applicant had been informed, that the replacement boat which had been suggested, had been sold to another purchaser. It was further stated that the second respondent was proposing to finalise payment for a new 28 foot Leeder cruiser which should then be available for supply to the applicant, fitted out to the applicant's original requirements.

-.

By letter dated 23 February 1990, Lane and Lane wrote to the fourth respondent putting forward a proposal with respect to the building of a new vessel for the applicant and stating the perception of Lane and Lane as to the financial dealings between the parties to that point, including a statement that a sum of $75,000 should be immediately transferred to an account in the joint names of the solicitors. The fourth respondent replied by letter dated 8 March 1990 putting a counter proposal on a "without prejudice" basis. -Lane and Lane replied by letter dated 12 March 1990 again on a "without prejudice" footing, seeking inter alia an

acknowledgment that the f i ~

L respondent was holding on trust -

for the applicant a sum of $75,000.

By letter dated 20 April 1990, forwarded on a "without prejudice" basis, the fourth respondent put a further counter proposal to Lane and Lane in the course of that letter the fourth respondent said and I quote:

" O f course your requirement t h a t funds be he ld i n

t r u s t i s imposs ib le t o meet a s a l l funds have gone

i n to t h e cons t ruc t ion o f t h e vessel t o i t s present

s tage and your cl ient 's e q u i t y rests i n t h a t . "

Lane and Lane responded by letter dated 30 April

1990 as follows:

" W e refer t o your le t ter dated 20 Apr i l 1990.

By f a c s i m i l e t ransmiss ion on 14 December 1989 you

i n d i c a t e d t h a t ' . . .no i n junc t ion w i l l be rrecessary

a s my c l i e n t has i n d i c a t e d t h a t t h e d e p q s i t (or

$68,000.00) w i l l not be disbursed pending r e s o l u t i o n

o f t h e d i s p u t e . '

8.

B y r l e t t e r dated	15	December	1989 you	s t a t e d	'The
t o t a l	agreed	va lue	o f $68,000.00	d e p o s i t i s he ld by	i

m y c l ient pending f i n a l i s a t i o n o f t h e t ransac t ion

which w i l l occur upon t h e prov i s ion o f t h e vessel t o

8

your c l i e n t balance o f $44,000.00. ' on payment o f t h e f i n a l ou ts tanding

Your c l i e n t dur ing a recent te lephone conversa t ion

w i t h our client, made comments impl ic i t l y i n d i c a t i n g

t h a t he d i d not have t h e money.

W e now	apprec ia te	t h e p o t e n t i a l	s i g n i f i c a n c e	o f your
comment	i n the	t h i r d l a s t paragraph	o f y o u r	letter

of 20 A p r i l , 1990.

W e	require	you	t o i n f o r m	u s	f o r t h w i t h	whether	i n
f a c t	your	client	s t i l l	h o l d s	the	d e p o s i t	o f

$68,000.00 i n accordance w i t h your r e p r e s e n t a t i o n s

o f 1 4 t h and 15th December, 1989.

W e need not s a y t h a t we regard th is m a t t e r a s one o f

the u tmos t s e r i o u s n e s s and require y o u r r e sponse by

r e t u r n f a c s i m i l e . "

The fourth respo-ndent responded by letter dated 22

May 1990 as follows:

" I refer t o your le t ter o f 30 A p r i l , 1990 which was

r e c e i v e d d u r i n g my absence o f a short vaca t i on .

I a p o l o g i s e f o r n o t h a v i n g r e p l i e d to i t sooner .

I	w ish	t o a d v i s e	t h a t ,	o f c o u r s e ,	the monies pa id	by
y o u r	c l i e n t ,	a s i n t e n d e d ,	have	been	devo ted	towards

the c o n s t r u c t i o n s o f the s u b j e c t vessel.

I am i n s t r u c t e d t o the e f fec t t h a t a s f a r a s my

client i s concerned, the t r a n s a c t i o n i s s t i l l on

f o o t w i t h a m inor d i s p u t e a s t o the amount payable

by your c l i e n t and w i t h some d i f f i c u l t i e s r e l a t i n g

t o a d e l i v e r y d a t e which I unders tand i s endemic i n

the b o a t b u i l d i n g i n d u s t r y .

I a l s o unders tood p r i o r t o m y depar tu re on v a c a t i o n ,

t h a t the p a r t i e s were d i s c u s s i n g the m a t t e r - amongst

t hemse l ve s and	were close	t o agreement .
I	have s e n t your	correspondence	t o m y c l i e n t w i t h a

c o p y o f th i s le t ter and s h a l l c o n t a c t you

immed ia t e l y I receive a r ep1 y. "

It is hardly necessary to add that nothing came of these negotiations and no vessel was ever delivered to the applicant.

As I have said these proceedings were commenced in
February 1991. Reference should next be made to some aspects

of the corporate and financial history of the first respondent

'so far as is relevant for present purposes.

The first respondent was incorporated in 1984, Lne second and third respondents were its directors. Its solicitors were a firm of Michael Miller & Associates. In December 1987 the fourth respondent acquired that practice, and by that process, became the solicitor for the first respondent. In February 1989 the fourth respondent opened a file for the first respondent entitled "Blu-Binda Marina Pty Limited Re Change of Directors and Company Structure". It appears that at about this time it had been agreed that the third respondent would withdraw from the first respondent and that the fourth respondent was asked to advise and act in this connection.

By letter dated 23 March 1989, the fourth respondent wrote to the second and third respondents as follows:

"I am w r i t i n g to c o n f i r m t h a t I have t a k e n

change i n the s t a t u s o f your respective interests i n	i n s t r u c t i o n s from b o t h of you i n respect o f the
the company known a s Blu-Binda Marina P t y L im i t ed
an& I set o u t here b e l o w m y under s tand ing o f such
i n s t r u c t i o n s .
I unders tand D i r e c t o r s h i p t h a t Br ian i s t o r e s i g n his

and i s t o be r e p l a c e d a s D i r e c t o r by

David Hewett .

F u r t h e r I unders tand t h a t Br ian s h a l l c o n t i n u e t o work for the company on a commission b a s i s o n l y , and on a l l t e rms and c o n d i t i o n s a s agreed between

h i m s e l f and the company from t i m e t o t i m e , a f t e r he

h a s moved his household t o Noosa Heads i n

Queensland.

A t t h i s s t a g e approx ima te l y I unders tand t h a t Br ian s h a l l pay b a c k

an amount o f $90,000.00 l o a n account

t o the company and s h a l l p l a c e an amount between

$140,000.00 and $160,000.00 ( t o be determined more

e x a c t l y ) w i t h the Commonwealth Bank a t Newport by way o f a guarantee for the performance o f the company. Br ian i s awarc. t h a t he may or may n o t ever

a c t u a l l y have	these	monies	r e l e a s e d	t o him	i n the
f u t u r e .	A t	wor s t he	i s prepared	t o see	a l l o f th is
money u t i l i z e d by	the	company shou ld	it	r u n	i n t o
d i f f i c u l t i e s .

I unders tand f i n a l l y t h a t the shareho ld ings a r e t o

remain a s they a r e c u r r e n t l y , t h a t i s w i t h each o f

you h o l d i n g one share o u t o f a t o t a l o f two s h a r e s .

W i t h r egard	t o	t h e	commission	r e f e r r e d	t o	above
Br ian ment ioned c e n t o f the net p r o f i t	t h a t	th is	f i g u r e	shou ld	be	30 per

on each b o a t s o l d by him.

As d i s c u s s e d a p p r e c i a t e I have forwarded a c o p y o f this le t ter

t o your accountan t f o r c o n f i n n a t i o n and would

your both e n d o r s i n g your s i g n a t u r e s on

the d u p l i c a t e c o p y i n c o n f i r m a t i o n o f m y

i n s t r u c t i o n s . "

O n 27 June 1989, the f o u r t h responden t wro t e f u r t h e r

t o the second and t h i r d responden ts a s f o l l o w s :

"Fur the r t o o u r r e c e n t c o n f e r e n c e I now enclose the

f o l l o w i n g documentat ion f o r e x e c u t i o n : -

T r a n s f e r o f Share from Br ian t o Simon Cook. -

Form o f Consent t o A c t a s D i r e c t o r f o r e x e c u t i o n by

Simon Cook.

R e s o l u t i o n o f Company a c c e p t i n g B r i a n ' s r e s i g n a t i o n .

-

R e s o l u t i o n o f Company a c c e p t i n g appointment o f Simon

Cook a s fresh D i r e c t o r .

Deed o f Agreement s e t t i n g o u t the t e rms o f your

p u r s e 1 ves.	arrangement for e x e c u t i o n by the company and each o f
In s i m p l e t e rms m y unders tand ing i s t h a t Br ian i s t o
r e s i g n h is d i r e c t o r s h i p (and be r e p l a c e d by Simon) ,
t r a n s f e r h i s share t o Simon, pu t u p $140,000.00
worth o f o v e r d r a f t w i t h the Commonwealth Bank l a n d and s e c u r i t y a g a i n s t the company's

a t Newport w i t h

such f i g u r e b e i n g reduced by A r t h u r ' s e f f o r t s over

the next two months t o $100,000.00; th is amount t o

be c a p i t a l i s e d i n to a cash payment by Br ian w i t h i n

the next t w e l v e months on the b a s i s t h a t a l l o t h e r

o b l i g a t i o n s and l i a b i l i t i e s v i s - a - v i s Br ian and

A r t h u r and Br ian and the company s h a l l be a t an end.

I u n d e ~ ~ t a n d t h i s t o mean t h a t a l l Loan Accounts a r e

t o be	waived	or	c a n c e l l e d .	The end	r e s u l t w i l l	be
t h a t Blu-Binda	Marina	P t y .	L t d .	s h a l l	o p e r a t e	w i t h

Simon Cook and A r t h u r Cook a s i t s Directors and

shareho lde r s	and	s h a l l	be	a b l e	t o o p e r a t e	t o t a l l y
w i t h o u t	a n y	connec t i on	w i t h	Br ian	f o l l o w i n g	the

c a p i t a l i s a t i o n o f the $100,000.00 Bank guarantee .

Assuming m y unders tand ing i s correct p l e a s e s i g n the

bo t t om o f the c o p y o f this le t ter t o g e t h e r w i t h a l l

the n e c e s s a r y documentat ion .

W h e n the m a t t e r i s f i n a l i s e d I s h a l l c l o s e m y f i l e

m a t t e r and a t the same time I s h a l l cost o u t the	and forward a bill o f c o s t s for work done on th is
f i l e r e l a t i v e to the Lease d i s p u t e . "

As has been seen in both letters, reference was made by the fourth respondent to the overdraft account held by the first respondent with the Bank. There is no doubt that the fourth respondent was at all material times aware of the first respondent's overdraft account.

The correspondence in March and June to-which I have referred, further indicates that a significant financial reorganisation was required. The principles governing this

-

reorganisation are described in those letters. Some of the further detail is found in a internal memorandum written by Mr Lambley the then manager of the Bank's Newport branch dated 17 May 1989. It is not suggested and it is not known whether

M r Butt saw this memorandum, but it provides details by way of

background of the financial status of the first, second and

-

23.

t h i r d respondents i n May 1 9 8 9 . T h e memorandum was as fo l lows:

" (R/M/C) - BLU-BINDA MARINA PTY LIMITED

A/A L/- $70,000 BAL DR $154,205
T/LOAN NO 1 BAL DR $223,176-15

T/LOAN NO 2 BAL DR $139,325-60

B/D/F $82,000

Related Accounts

(R/M/C) - BDF MILLARD B L & G H $340,000 MATURING
20.6.89
MILLARD MARINE SERVICES PTY LTD DR $8138
MILLARD B L & G H BAL DR $4,466

TAMPICO PTY LTD BAL DR $9,394

S e c u r i t y proper t y a t 158 Barrenjoey Road Newport has

been so ld and s e t t l e m e n t i s expected i n a day or so.

S a l e p r i c e was $600,000 o f which $60,000 d e p o s i t has

a l ready been d i s t r i b u t e d . O f t h e remaining

$540,000, $40,000 w i l l be i n t h e form o f a 2nd

Mortgage t o B & G Mil lard over t h e house property .

The remaining $500,000 w i l l be forwarded t o t h e Bank

for d i s t r i b u t i o n .

Funds	are	to	be	d i s t r i b u t e d	i n	t h e	fo l lowing
manner -

$340,000	B/D/F MILLARD B L & G H ( t o be lodged on
MMCA pending m a t u r i t y o f B i l l ) .
$ 30,000	t o Blu-Binda Marina P t y L t d .

$	8,000	t o Mil lard Marine Serv ices
$	3,000	t o Mil lard B L & G H

22,000 for purchase o f boat (cheque i s s u e d -.

$ 2,000 S o l i c i t o r ' s fees

$ 10,000	KSA Mil lard B L & G H
$ 85,000	Term Deposit Mil lard B L & G H

New s e c u r i t y p o s i t i o n i s t o be a s fo l lows -

EXISTING

NO. 1

R/M by Arthur George Cook over house proper ty a t 103 McCarrs Creek Church

Point Bank's	Valuat ion (10.5.89)	$350,000
No. 2

U/M by Applicant company over property

at 13 Oak Street Sunshine Beach

Bank's Valuation ( 4/89)	$ 88,000
G/- (unlimited) by Gail Lorraine Cook
supported by L/Ack over Term Deposit	$ 41,555
-	NEW
NO. 4
G/- (limited to $85,000) by Brian
Lennox Millard and Gaye Helen Millard
supported by L/Ack over Term Deposit	$ 85,000
No. 5
G/- (limited to $100,000) by Brian
Lennox Millard and Gaye Helen Millard
supported by securities held on account
B L & G H Millard, Security being U/M over house property at Lot 72 Mossman Court Noosa Heads
Bank's Valuation (9/12/88) $295,000	$100,000

TOT& SECURITY POSITION T/D $126,555

GUXGh'TEE $100,000

PROPERTY 70% $306,600

At present there is a shortfall of approximately

$13,000 in Security Margins on projected balances

after settlement i.e. 7

A/A Limit $70,000 BAL DR $100,000

T/LOAN No. 1	BAL DR $223,176
T/LOAN No. 2	BAL DR $139,325
B/D/F	BAL DR $ 82,000

Account, Blu Binda Marina Pty Ltd, is to be reduced to $100,000 at settlement (including $30,000

s e t t l e m e n t f unds ) and f u r t h e r r e d u c t i o n s w i l l be

made to b r i n g o v e r a l l f a c i l i t i e s in to margins .

Presently s t o c k h o l d i n g i s approx. $275,000 and the

c u r r e n t s p a t e o f wet wea ther (5 months ) h a s reduced

s a l e s t o a trickle.	The Boat Show w i l l be s taged a t
Dar l i ng Harbour on	10-12 June and it i s expec t ed

improvecl s a l e s w i l l r e s u l t .

Br ian M i l l a r d i s e x p e c t i n g $87,000 from his on-going

b a t t l e w i t h QBE i n s u r a n c e b u t he w i l l need th is f o r

house r e n o v a t i o n s . Funds a r e e x p e c t e d around the

m i d d l e o f June and w i l l be lodged on d e p o s i t a t this

branch.

Meanwhile we a r e h o l d i n g an u n l i m i t e d Guarantee by

Br ian and Gaye M i l l a r d which i s t o be c a n c e l l e d when

l i m i t e d guarantee i s s igned .

P l ease confirm i f new s e c u r i t y arrangements a r e

accep tab l e .

W e .wi l l a d v i s e when new s e c u r i t y documentat ion h a s

been completed . "

I admitted this memorandum as a business record of the Bank, subject to relevance.	In my view it is at least
relevant on the issue of damage.
I have previously referred to a letter written by the fourth respondent to the second and third respondents	-
changes proposed in the financial and corporate structure of	dated 27 June 1989. Again, whilst this letter deals with the
the first respondent, there are some matters of detail which are relevant at least by way of background to the issue of damage and those details are to be found in a further memorandum of Mr Lambley dated 26 June 1989 as follows:

"DIARY NOTE 26.6.89

(R/M/C) BLU-BINDA MARINA PTY LIMITED

A/A L / - $70,000 BAL DR $206,549 DR

T/LOAN NO 1 BAL DR	$235.24 7
T/LOAN NO 2 BllL DR	$145,382

-

B/D/F $82,000

RELATED ACCOUNTS

MILLARD MXRINE SERVICES $2,384 DR O/P/A

MILLARD B L & G H $100 CR
MILUUZD B L & G H (CMCA) $41,355 CR

MILLARD B L & G H (KSA) $8,668 CR

TAMPICO PTY LTD (COOK) $10,052 DR O/P/A

COOK A G (KSA) $4 7 DR

MILLARD B L & G H (T/D) $85,000

Brian Mil lard rearranging s e c u r i t i e s on and Ar thur Cook c a l l e d today t o d i s c u s s

account Blu Binda Marina P t y

L td . Brian i s r e s i g n i n g from t h e company a s he now lives

i n Noosa	Heads	Qld .	Total	present	d e b t s	a r e	o u t s i d e
s e c u r i t y margins	and	d i r e c t o r s	have	been	t o l d	o f	our
concern.

Brian e v e n t u a l l y wants t o reduce h i s l i a b i l i t y t o t h e

company t o a l i m i t e d guarantee o f $100,000 supported by

s e c u r i t i e s on B L & G H Mi l lard ' s account.

When and i f a l l t ransac t ions t a k e p lace , our s e c u r i t y

p o s i t i o n	w i l l	be	a s fo l lows	-
NO. 1

R/M by Arthur George Cook over house proper t y a t 103 McCarrs Creek Road

Church Point (Bank's va lua t ion 10.5.89) $350,000

No . 2

-.

G/- (Unl imi ted) by Gail Lorraine Cook supported by L/Ack	over Term d e p o s i t	$ 41,555
NO. 3

G/-- (Limited t o $100,000) by B L & G H

Millard supported by s e c u r i t i e s h e l d on

account B L & G H Mi l lard . S e c u r i t y

b e i n g U/M over house proper t y a t ~ o 72 t

Mossman Court Noosa Heads. Bank's va lua t ion

(9/12/88)	$295,000	$100,000
TOTAL SECURITY POSITION	T/D	$ 41,555
Guarantee	$1 00,000

Proper ty	70%	$245,000
$386,555

On accep tance o f this r e v i s e d s e c u r i t y p o s i t i o n ,

f a c i l i t i e s on accoun t s w i l l be a s f o l l o w s -

j

A/A Blu Binda Marina	P t y L td	L/ -	$ 50,000
T/Loan N o 1	D r .	$235,24 7
T/Loan No 2	D r .	$ 92,382

Meanwhile, d i r e c t o r s d o not wish t o sell their

p r o p e r t y a t Sunsh ine Beach a s t h e y a r e o b t a i n i n g

r e n t a l income. They have r e q u e s t e d this s e c u r i t y

and l o a n be separa t ed from the other Blu Binda

accounts . B i l l f o r $82,000 f a l l s due 26.7.89 and

d i r e c t o r s w i sh t h i s t o be conver t ed to a n interest-

only RPIL for two year s . P r o p e r t y w i l l then be

s o l d . Loan would not be suppor ted on N/L/M so

updated v a l u a t i o n h a s been r e q u e s t e d .

Term d e p o s i t s e c u r i t y $85,000 by Br ian and Gaye

Mi l l a rd h a s been prepaid t o r educe A/A d e b t t o

$130,000. Cook h a s been t o l d on no account d e b t

w i l l be al lowed t o exceed t h i s amount and f u r t h e r

s u b s t a n t i a l r e d u c t i o n s w i l l be expec t ed .

Should an a c c e p t a b l e v a l u a t i o n be r e c e i v e d f o r the

Sunsh ine Beach p r o p e r t y t o suppor t i t s own d e b t ,

Br ian h a s asked i f he cou ld borrow $65,000 t o

purchase a B a y l i n e r from the company. S e c u r i t y

would be a g a i n s t h is Noosa p r o p e r t y and p o s i t i o n

would be adequate . Loan would be i n the form o f a

90 d a y bank bill t o be r e p a i d from the s a l e o f t h e

b o a t . Br ian s a i d he would have a better chance t o

sell t h e b o a t i n Queensland a s the competition f o r

B a y l i n e r s i s t o o c u t - t h r o a t i n t h i s area . Proceeds

would immed ia t e l y be d e p o s i t e d t o r educe --the Blu

Binda d e b t . Br ian s a i d h e cou ld a l s o r a i s e $53,000

t o p l a c e on a Term Depos i t t o s e c u r e the d e b t s u n t i l

the company cou ld r educe them from s a l e s . T h i s

would be i n 60-90 days . -

P r i o r t o r e c e i p t o f funds from s a l e s . S e c u r i t y

p o s i t i o n would be a s f o l l o w s -

1. Cook A G ( D i r e c t o r ) N/L/M $245,000

2 . COOK G (35d P a r t y ) T / D $ 41,555

3.	MILLARD B L & G H	( L i m i t e d )	$100,000
4 .	MILLARD B L & G H	(3rd P a r t y ) T/D	$ 53,000

Position o f accoun t s -

A/A would need t o be reduced a n o t h e r $7,000 shou ld we

approve	the	BDF	f o r	Br ian	M i l l a r d	t o b r i n g the	d e b t	t o
$58,000.

The company h a s the f o l l o w i n g b o a t s i n c u r r e n t s t o c k -

38' Leeder ( S o l d ) $250,000 E s t . P r o f i t $30,000

28'	Leeder (Trade- in )	$100,000	P r o f i t smal l due t o
B a y l i n e r	(To be purchased	Trade- in	$65,000

by M i l l a r d ) $ 65,000

Bay1 iner	$110,000
Marte l 50	$ 50,000
D e p o s i t s on B a t s i n W.A.	$ 30,000

Curren t	d e b t s a r e a s f o l l o w s	-
S H Lock Barcl a y s

W e	recommend	t h a t	shou ld	a	s a t i s f a c t o r y	s e c u r i t y
p o s i t i o n	be	e s t a b l i s h e d	on	the	Sunsh ine	Beach

p r o p e r t y l o a n s be rearranged a s set o u t i n d i a r y

n o t e . A r t h u r Cook h a s been t o l d shou ld these

arrangements be a c c e p t a b l e t o the Bank account would need t o be conducted strictly i n accordance w i t h the arrangements.

-

I	a l s o i n fo rmed A r t h u r	Cook	t h a t h is company account
Tampico P t y L t d	i s c a u s i n g concern.	Account	i s t o

be placed i n r e d u c t i o n and a repayment programme

commenced.	A l s o	a	guarantee	i s	t o be	t a k e n	t o
suppor t	the	d e b t .	D e t a i l s	o f	repayments	a r e	$274

p er month over 5 y e a r s a t 22% p.a."

Again I have admitted this material as a business record, subject to relevance. As I have said, it is at least relevant on the issue of damage.

The fourth respondent then proceeded to draw up an agreement between the first, second and third respondents which was executed by those parties and dated 1 July 1989. The agreement which gave effect to the instructions given to the fourth respondent and referred to in the correspondence already mentioned, was in the following terms:

"THIS AGREEMENT made the 1st d a y o f J u l y One

thousand n i n e hundred and e i g h t y - n i n e BETWEEN m-

BINDA MARINA PTY. LTD. a company d u l y i ncorpora t ed

w i t h	i t s	r e g i s t e r e d	o f f i ce	a t	83	Beacons f i e l d
S t r e e t ,	Newport	i n the	S t a t e	o f New	Sou th	Wales
( h e r e i n a f t e r	r e f e r r e d	t o	a s	'B lu -Binda ' )	o f	the

first p a r t ( h e r e i n a f t e r r e f e r r e d D = BRIAN LENNOX M I L L A R D o f 15 Mosman

Cour t , Noosa Heads i n the S t a t e o f Queensland

t o a s ' M i l l a r d ' ) o f the second

p a r t D = ARTHUR GEORGE COOK o f 103 McCarrs C r e e k

Road, Church P o i n t i n the S t a t e o f New Sou th Wales

( h e r e i n a f t e r	r e f e r r e d	to	a s	'Cook ' )	of	the	t h i r d
p a r t WHEREAS

1 .	Cook	and	M i l l a r d	a r e	c u r r e n t l y	D i r e c t o r s	o f	Blu-
Binda .
2.	Cook

and Binda owning one (1) share each. Mi l l a rd a r e each shareho lde r s - - i n Blu-

3 . B1 U-Binda o p e r a t e s an o v e r d r a f t bank ing

f a c i l i t y w i t h the Commonwealth Bank o f

- A u s t r a l i a a t i t s Newport branch ( h e r e i n a f t e r

r e f e r r e d t o a s ' t he Bank ' ) .

4 . Blu-Binda has o b l i g a t i o n s and l i a b i l i t i e s t o

M i l l a r d and M i l l a r d h a s o b l i g a t i o n s and

l i a b i l i t i e s	t o	Blu-Binda	by	v i r t u e	o f	Loan
Accounts .

5 . M i l l a r d d e s i r e s t o r e s i g n his D i r e c t o r s h i p i n

B1 U-Binda,	t r a n s f e r	h i s	shareho ld ing	i n	B1 u-
Binda	and	r a t i o n a l i z e	the	o b l i g a t i o n s	and

l i a b i l i t i e s be tween h i m s e l f and B1 U-Binda; a l l

o f which i s w i t h the consent	o f Cook and B lu-
Binda .

-

NOW THIS DEED WITNESSETH t h a t :  -

1 . M i l l a r d Binda i n favour o f a nominee appo in ted by Cook. s h a l l r e s i g n his D i r e c t o r s h i p i n Blu-

2. M i l l a r d s h a l l t r a n s f e r his s h a r e h o l d i n g i n B1 u-

Binda to such nominee a f o r e s a i d .

3. B1 U-Binda s h a l l f o n n a l l y resolve t h a t the

r e s i g n a t i o n o f M i l l a r d ' s d i r e c t o r s h i p and the

appointment o f t h e f r e s h D i r e c t o r nominated by Cook

s h a l l be accep t ed .

4 . Blu-Binda s h a l l t a k e a l l n e c e s s a r y s t e p s t o

o b t a i n a fonn o f consen t t o a c t a s D i r e c t o r from the

fresh	Director	a f o r e s a i d	and	s h a l l	f u r t h e r	t a k e a l l
n e c e s s a r y	s t e p s	t o	n o t i f y	the	Commissioner	o f

Corporate A f f a i r s a s t o t h e change i n d i r e c t o r s h i p s

and s h a l l t r a n s f e r o f shareho ld ing a l s o arrange f o r the r e g i s t r a t i o n o f t h e

from M i l l a r d t o the nominee

appoin ted by Cook a f o r e s a i d .

5. M i l l a r d Blu-Binda i n an amount o f $140,000.00 shall i n s t i t u t e a p p r o p r i a t e s e c u r i t y

w i t h the Bank t o s e c u r e an o v e r d r a f t f a c i l i t y f o r

t o be reduced

by Cook and Blu-Binda t o an amount of $100,000.00 on

or b e f o r e 3 0 t h August 1989. M i l l a r d s h a l l on o r

b e f o r e 3 0 t h June 1990 redeem the o u t s t a n d i n g

c o n t i n g e n t l i a b i l i t y i n an amount o f $100,000.00 by

way o f a cash payment t o the Bank. Blu-Binda and

Cook h e r e b y acknowledge t h a t c e r t a i n funds have

a l r e a d y been paid t o the Bank by way o f t h e

r a t i o n a l i z a t i o n o f M i l l a r d ' s a f f a i r s by M i l l a r d .

6 . B1 U-Binda acknowledges t h a t a l l Loan -Accounts

and monies owed	t o it by Mi l l a rd have now been
s a t i s f i e d . "

-	-- It will be noted that there is a recital in the agreement that the first respondent operates an overdraft bank facility with the Bank. It will further be noted that in clause 5 of the agreement the third respondent was to institute appropriate security with the Bank to secure an
overdraft facility for the first respondent in the amount of $140,000 to be reduced by the second and first respondents to
an amount of $100,000 on or before 30 August 1989.
Moreover, under that provision, the third respondent was, on or before 30 June 1990, to redeem the outstanding contingent liability in an amount of $100,000 by way of cash payment to the Bank. It was there acknowledged by the first and second respondents that certain funds had already been paid to the Bank and I quote, "by way of the rationalisation of Millard's affairs by Millard". The explanation of this part of that provision may, I think, be found in the internal memoranda of the Bank to which I have referred.
By letter dated 5 July 1989 the fourth respondent wrote to the third respondent a letter in the following terms:

" F u r t h e r t o o u r t e l ephone c o n v e r s a t i o n t o d a y I now

enclose the f o l l o w i n g f o r your a t t e n t i o n and where

a p p l i c a b l e your e x e c u t i o n .

M y l e t ter o f 2 7 t h June 1989 t o y o u r s e l f and A r t h u r

Cook b e i n g a c o p y which h a s a l r e a d y been endorsed by

A r t h u r . P l ease r e t a i n the p h o t o s t a t c o p y and r e t u r n

the o r i g i n a l t o me w i t h y o u r s i g n a t u r e a t the b a s e

o f the page.

The Deed o f Agreement f o r e x e c u t i o n by you where

i n d i c a t e d , w i t h the document b e i n g w i tne s sed on b o t h

pages I would s u g g e s t by one o f y o u r Accountan t s . I a t t a c h a c o p y for retention by you and I believe it would be best i f the o r i g i n a l document i s r e t a i n e d

on m y f i l e a t th is s t a g e u n t i l a l l m a t t e r s a r e

comple ted .

I n o t e t h a t w h i l s t the Deed d o e s not s p e c i f i c a l l y

refer t o the $85,000.00 pa id by you t o the Bank,

n o n e t h e l e s s t h i s payment h a s been acknowledged by

A r t h u r Cook and by extension by Blu-Binda	Marina
P t y .	L t d .

I a l s o enclose form o f T r a n s f e r of Share i n the

company	f o r	y o u r	s i g n a t u r e	where	i n d i c a t e d .	T h i s
t o g e t h e r	w i t h	the	a t t a c h e d	r e s i g n a t i o n	a s	D i r e c t o r

shou ld be r e t u r n e d t o me a f t e r e x e c u t i o n .

When a l l these documents a r e r e t u r n e d t o me Simon

Cook s. 2 1 1 sign the Consent t o A c t a s Director (a

c o p y o f which i s a t t a c h e d , the Share T r a n s f e r form

s h a l l a l s o be s igned by h im and r e g i s t e r e d , the Deed

w i l l be e x e c u t e d by the company by i t s new

Directors, stamped and r e t a i n e d by me and the

company w i l l adopt the r e s o l u t i o n s c o p i e s o f which

a r e a t t a c h e d .

I	s h a l l	a t t e n d	t o a l l	n e c e s s a r y m a t t e r s	on	A r t h u r ' s
r e t u r n	from	Melbourne	and	s h a l l	f o r m a l l y	a d v i s e you

when a l l documentat ion h a s been completed .

Should you have a n y q u e r i e s i n the meantime p l e a s e

do n o t h e s i t a t e t o t e l e p h o n e me. "

According to a file note kept by the fourth respondent, on 10 August 1989 the third respondent telephoned the office of the fourth respondent and instructed the fourth respondent to forward a copy of the agreement dated 1 July 1989 to the Bank. However there is a further file note dated 11 August 1989, made by the fourth respondent, that the second respondent had in effect countermanded that instruction, the

the agreement at that stage. second respondent asking the fourth respondent not to forward -

There appears also in the file of the fourth respondent an undated file note which refers to a debt being owed by the first respondent to the Bank in the sum of $503,000 and suggesting that it be dealt with in a particular way. The note is as follows:

"Blu-Binda owes Bank $503,000.

To be paid a s follows:-

*	B.M.	t o purchase a BAYLINER 2950	$65,000
*	A.C.	t o pay i n	$85,000

( t o match $85 t h a l r e a d y

put i n by B.M.)

* A.C. t o pay b u l k loan a / c

t o t h e Company;

thence t o Bank

B.M. loan a / c NIL

*	B.M.	to pay i n	$113,000
*	A.C.	t o pay i n	$113,000

Other evidence before me, enables me to be satisfied

that this note was probably generated on or about 21 November

1989. It will be seen that the note envisages a financial and

corporate restructure somewhat different from the previous arrangement embodied in the agreement dated 1 July 1989. The subsequent arrangement, as reflected in the file note was put

which I will refer shortly. into place and embodied in a deed executed in January 1990 to 7

Before going to this deed, reference should be made to another internal memorandum of the Bank, dated 29 September

1989 as follows:

"DIARY NOTE 29.9.89

BLU-BINDA MARINA PTY LTD : BALANCE DR $159,711

'Phoned company regarding a $6,500 cheque presented

28/9 f /o W i l f Barker. The boat which was s o l d t o

W i l f Barker a s mentioned i n our D/N 11.8.89 d i d n o t

pass- s u r v e y and the s a l e fell through. Cheque was

for re fund A f t e r d i scuss ions o f d e p o s i t .

w i t h Regional Manager, we agreed

t o pay the cheque and I a l s o paid cheque for

$1,200. Brian Mil lard was informed o f our d e c i s i o n

and was t o l d no f u r t h e r excesses would be allowed.

Brian s a i d he spoke t o J e f f Gaunt from Development Bank r e c e n t l y , who suggested t o put a proposal

before the C89 and i f dec l ined have i t referred to

the Development Bank. Brian s a i d he w i l l prepare a

proposal and present i t t o us l a t e n e x t week.

Ar thur Cook i s supposed t o be going t o put his house on the market n e x t week. "

As I have already said, it is not suggested nor is it known whether the fourth respondent saw this memorandum. In the memorandum a question had arisen as to the willingness of the Bank to honour a cheque in the sum of $6500, being a refund of a deposit. Mr Lambley's note indicates that after discussions with the regional manager, it was agreed that the cheque would be paid, together with another cheque for $1200.

M r Lambley notes that he then informed the third respondent

material is relevant on the issue of damage. that no further excesses would be allowed. In my-opinion this -

In order to understand the detail of the financial position of the first respondent, again a matter relevant on the issue of damage, reference should be made to a further

internal memorandum of Mr Lambley, dated 25 October 1989 as
follows :

"NORTHERN METROPOLITAN (NSW) ZONE

--- X541 CMT L7.10.89

NEWPORT BEACH NSW 2211

R/M/C BLU BINDA ~ I N A PTY LIMITED

A/A 19 1985 L/- $70,000 BAL $409 DR SEC $795,000 + T/D
$40,000
T/L.l 22 1814 I N REDN BAL $235,343 DR SEC AS ABOVE

T/L 2 26 1795 IN REDN BIlL $140; 100 DR SEC AS ABOVE

B/D/F DUE 8.11.89 $82,000 SEC AS ABOVE

Brian Mil lard curren t developments. 'phoned t o b r i n g u s up t o d a t e on

House proper t y a t Sunshine Beach has been so ld for $110,000 and settlement i s expected t o t a k e p lace

w i t h i n 45 days. Proceeds w i l l c l e a r B/D/F and

surp lus used t o reduce A/d d e b t . Brian s a i d h e was

hopefu l he h a s so ld t h e Bayl iner 2950 ( t h e one t h a t

W i l f Barker dec l ined t o purchase). H e should know

t h e outcome shortly and i f s o l d funds w i l l be used

t o reduce d e b t . I t i s b e l i e v e d s a l e p r i c e i s

$65,000.

Ar thur Cook informed me a Leeder 38' was so ld

r e c e n t l y and t h e y a r e expec t ing t o make a t l e a s t

$40,000 p r o f i t . Don't know i f any o f t h e s e funds can

be used commitments t o pay. t o reduce d e b t a s they have outs tanding

Ar thur sa id interest has picked

up	cons iderably i n t h e l a s t month	and	recent
d e p o s i t s	t o account	conf i rm this .	-.

Arthur Cook has a l s o placed h i s house on	the market
i n an e f f o r t t o reduce Company's	deb t s .

W e w i l l not know exac t p o s i t i o n u n t i l a l l s a l e s i n

prugress have been s e t t l e d . However, it i s hoped

t h e y w i l l	be	i n a	p o s i t i o n	t o rearrange	s e c u r i t i e s
a s per	our	d i a r y memo	26.6.89	forwarded	t o your

o f f i c e 29.6.89.

Brian Mil lard informed me 29.9.89 b u s i n e s s needed

more c a p i t a l and i f we dec l ined reques t could it be

r e f e r r e d t o the Development Bank. H e sa id h e was

going t o prepare a proposal	through h i s Accountant
and present i t t o us e a r l y October.	To d a t e we have
not been approached for extra finance."

! '

As I have s a i d a t a d a t e be tween 20 and 22 November

I

1989, the f o u r t h responden t made the f i l e n o t e by way o f I :

i n s t r u c t i o n s	t o prepare	fresh	documenta t ion ,	g i v i n g	e f f e c t t o	I .
1

the f i n a n c i a l and c o r p o r a t e r e c o n s t r u c t i o n on the f i r s t , ,

responden t t h a t was	proposed.	1
, .

These i n s t r u c t i o n s were embodied i n a deed and da ted

10 January 1990 a s f o l l o w s :

"THIS AGREEMENT made 1 0 t h d a y o f January One

thousand n i n e hundred and ninety BETWEEN BRIAN LENNOX MILLARD o f 15 Mosman Cour t , Noosa Heads i n the S t a t e o f Queensland ( h e r e i n a f t e r r e f e r r e d t o a s

'M i l l a rd ' ) o f the first p a r t =D ARTHUR GEORGE COOK

o f 103 McCarrs Creek Road, Church P o i n t i n the S t a t e

o f New Sou th Wales ( h e r e i n a f t e r r e f e r r e d t o a s

'Cook ' )	o f the second p a r t
WHEREAS

1. Cook and M i l l a r d a r e c u r r e n t l y D i r e c t o r s o f a

company known a s Blu-Binda Marina P t y . L t d .

( h e r e i n a f t e r r e f e r r e d t o a s 'Blu-Binda ' )

2.        Cook

and Binda owning one Mi l l a rd a r e each shareho lde r s i n Blu-

( 1 ) share each

3. Blu-Binda o p e r a t e s an o v e r d r a f t bank ing

f a c i l i t y and o t h e r b a n k i n g accoun t s w i t h the

Commonwealth	Bank	o f A u s t r a l i a	a t i t s Newport
branch	( h e r e i n a f t e r r e f e r r e d	t o a s	' the Bank')

4 . ' Blu-Binda h a s o b l i g a t i o n s and l i a b i l i t i e s t o

M i l l a r d and Cook and M i l l a r d and Cook each have

o b l i g a t i o n s and l i a b i l i t i e s t o Blu-Binda and t o

each o t h e r

5. The p a r t i e s d e s i r e t o r a t i o n a l i s e the

o b l i g a t i o n s	and	l i a b i l i t i e s	be tween	t hemse l ve s
and	Blu-Binda	and	arrange for	s a t i s f a c t i o n o f

the d e b t s owing t o the Bank.

NOW THIS DEED WITNESSETH THAT

1 . On s a l e o f the p r o p e r t y a t 103 McCarrs Creek

Road, Church P o i n t owned by Cook t h e f o l l o w i n g

payments a r e t o be made by the p a r t i e s t o the

Bank i n the f o l l o w i n g order : -

(i)             Cook i s t o pay an amount o f O n e hundred and thirty tf,:-se thousand

d o l l a r s ($133,000.00) t o the Bank.
( i i )	Cook i s t o p a y E i g h t y f i v e thousand
d o l l a r s ($85,000.00) t o the Bank.
( i i i )	M i l l a r d i s t o pay S i x t y f i v e thousand
d o l l a r s ($65,000.00) t o the Bank

( b e i n g i n r e s p e c t o f a B a y l i n e r

vessel purchased by him from Blu-

Binda payment f o r which i s t o be made

i n a n y event n o l a t e r t h a n 11th
February 1990 i n r e d u c t i o n o f the
d e b t t o the Bank) .
( i v )	Payment by M i l l a r d t o One hundred and
e i g h t e e n thousand f i v e hundred
d o l l a r s ($118,500.00) t o Blu-Binda ' S
Account w i t h the Bank.
I V )	Payment by Cook o f One hundred and e i g h t e e n thousand f i v e hundred
d o l l a r s ($1 18,500.00) t o Blu-Binda * S
Account w i t h the Bank.

2. In c o n s i d e r a t i o n o f th i s t o t a l sum o f F i v e

hundred and t w e n t y thousand d o l l a r s ($520,000.00)

b e i n g d e a l t w i t h a s set o u t i n the paragraph

h e r e i n b e f o r e	M i l l a r d	agree s	t o	r e s i g n	his
D i r e c t o r s h i p	i n Blu-Binda	i n favour	o f	a	nominee

appo in ted by Cook and Mi l l a rd agree s t o t r a n s f e r h i s

shareho ld ing i n Blu-Binda t o such nominee a s

a f o r e s a i d and Cook agree s a s the rema in ing Director

o f Blu-Binda t o e n s u r e t h a t M i l l a r d ' s r e s i g n a t i o n	s h a l l be accep ted by the company and the appointment
o f - t h e fresh D i r e c t o r nominated by Cook- s h a l l be
accep ted by the company Blu-Binda and fur thermore
Cook agree s t h a t he s h a l l e n s u r e t h a t Blu-Binda
s h a l l t a k e a l l n e c e s s a r y s t e p s t o o b t a i n a form o f
consen t t o a c t a s D i r e c t o r from t h e f r e s h Director
a f o r e s a i d and s h a l l f u r t h e r t a k e a l l n e c e s s a r y s t e p s
t o no t i f y the Commissioner o f Corpora te A f f a i r s a s
t o the change i n D i r e c t o r s h i p s and s h a l l a l s o
arrange for the r e g i s t r a t i o n o f the t r a n s f e r o f
shareho ld ing from M i l l a r d t o the nominee appo in ted
by Cook a s a f o r e s a i d . "

!

~t is not seriously disputed by the fourth respondent that in instructing the fourth respondent to send	i :
the facsimile transmission 14 December 1989 and the letter	i t
i
dated 15 December 1989, :le first respondent engaged in	l *

misleading conduct contrary to section 52.	In my opinion,	I :
this concession is properly made.

The statement in the facsimile transmission that the ! '

deposit of $68,000:  , .

" w i l l n o t be d i s p e r s e d pending r e s o l u t i o n o f t h e d i s p u t e " i -

and the statement in the letter dated 15 December 1989 that:

" t h e t o t a l agreed va lue o f $68,000 d e p o s i t is h e l d by m y

c l i e n t pending	f i n a l i s a t i o n	o f	t h e	t ransac t i on"	:	.	.
- ,

are both false. As has been seen, the sum of $68,000 had	1.
!
already been paid to the Bank towards a reduction of the first	i ,

respondent's overdraft. That is to say, as at 14 and 15	1.-
I .
December 1989, the funds paid by the applicant to the first	, . ,
!
respondent had already been paid over by the first respondent	7

-

to the Bank in reduction of the debt. The applicant's funds . ,

were no longer held by or for the first respondent. Those funds had become the property of the Bank. The statements in the facsimile transmission dated 14 December and in the letter dated 15 December explicitly and implicitly were to the contrary and were thus false.

The evidence of the fourth respondent, to which I will return, is that the instructions in question were given to him by the second respondent. As has been said, the second respondent has elected to take- no part in these proceedings. I have already found that the first respondent has engaged in misleading conduct in this connection. I think it is inevitable that I conclude also, that within the meaning of the test enunciated in York v Lucas (1985) 158 CLR 661, the second respondent was knowingly concerned in that contravention. The second respondent gave the instruction to the fourth respondent. There can be no doubt that the second respondent was fully aware of all the circumstances which the statements made in the facsimile dated 14 December and in the letter dated 15 December were false. In my opinion, the claim that the second respondent was knowingly concerned in the contravention by the first respondent has been made out.

.

The position of the fourth respondent is, of course, different but I have come to the conclusion that he also was	knowingly concerned in this contravention. In doing this, I
apply the test enunciated in York v in the sense that I -
must be satisfied on the civil onus, but bearing in mind the gravity of the allegation, that the ingredient of actual knowledge has been made out.
I have been referred in this connection to the reasoning of the High Court in Gioroianni v The Oueen (1985)

:

156 CLR 473 . In that case the issue was whether a person had

aided or abetted the commission of a criminal offence.

Reference was made to a statement of Lord Goddard in Carter v	1,	: I
' ,

Mace, (at ( 1 9 8 4 ) 156 CLR 507 ) as follows:

" I f a person	s h u t s his eyes	to	the	obv ious or r e f r a i n s
from	making a n y inquiry where	a	r e a s o n a b l y sensible	man

would make inquiry, I think the c o u r t can f i n d t h a t he

was a i d i n g and a b e t t i n g , c e r t a i n l y i f he s h u t s his eyes

t o the obv ious . "

The fourth respondent in his evidence has denied that he knew that the funds in question had already been dispersed when he made the statements in the facsimile dated

14 December and in the letter dated 15 December. In his first

affidavit filed in these proceedings sworn 28 April 1992 the
fourth respondent gave the following evidence:

"19. I first became aware o f a d i s p u t e between Mr T i n g e y and Blu-Binda when I was shown a letter da t ed 13 December 1989 from Lane & Lane solicitors, a c o p y o f which i s annexed h e r e t o

and marked 'A ' . I knew n o t h i n g about the

t r a n s a c t i o n or a n y c o n t r a c t - be tween the p a r t i e s

p r i o r t o t h a t d a t e . That le t ter was forwarded

t o me by A r t h u r Cook, either by f a x o r by hand

d e l i v e r y , I do n o t now r e c a l l which. I d i d n o t have an appointment t o see M r Cook b u t I have a recollection o f b e i n g asked by h i m someth ing i n

-- the f o l l o w i n g words or words t o the - f o l l o w i n g

e f f ec t :

' T r e v o r what d o we d o about this' or

' T r e v o r g i v e u s a c a l l about this.'

20. Annexed h e r e t o and marked 'B' i s a c o p y o f the

f a c s i m i l e which I	sent	t o Lane & Lane da t ed 14
December,	1989.	B e f o r e I sent t h a t f a x I had a

c o n v e r s a t i o n w i t h A r t h u r Cook. I cannot now

r e c a l l i n a n y d e t a i l the c o n v e r s a t i o n t h a t I

had w i t h Mr Cook b u t I r e c a l l t h a t he s a i d t o

me the f o l l o w i n g words or words t o the

f o l l o w i n g e f fec t :

A r t h u r Cook: 'The d e p o s i t w i l l not be

d i s b u r s e d	u n t i l	th i s	d i s p u t e	i s
r e s o l v e d . '

21. I am c e r t a i n t h a t I would not h a v e written t h a t

f a c s i m i l e w i t h o u t s p e a k i n g t o A r t h u r Cook and

r e c e i v i n g h is i n s t r u c t i o n s . I r e c a l l t h a t I

p e r c e i v e d	t h a t	it	was	a	s e r i o u s	s i t u a t i o n	a s I
t h o u g h t	t h a t	Lane	&	Lane	would	p u r s u e	the

m a t t e r	very	v i g o r o u s l y and	m a y	t a k e	the	m a t t e r
quickly	t o C o u r t .	I	was	a l s o aware	t h a t	I
would	shortly	be	c l o s i n g	the	o f f i ce	for
C h r i s t m a s	and	w i shed	t o f i n a l i s e	the	m a t t e r	a s

best I c o u l d p r i o r t o c l o s i n g the o f f ice .

22 . A f t e r s e n d i n g the f a x which i s a n n e x u r e 'B'

hereto, I d r a f t e d the letter which was

s u b s e q u e n t l y d a t e d 15 December 1989. W h i l e I

d o not now s p e c i f i c a l l y r e c a l l , I would not

h a v e	d r a f t e d	t h a t	le t ter	w i t h o u t	o b t a i n i n g
d e t a i l e d i n s t r u c t i o n s from	Mr	Cook.	I	had	no

other knowledge o f the t r a n s a c t i o n . I either

showed the d r a f t letter t o M r Cook i n m y o f f i c e

or sent it t o him by f a x . I t i s not possible

t h a t a n y o f the m a t t e r s c o n t a i n e d i n m y le t ter

o f 15 December 1989 were w r i t t e n by me other

t h a n	upon	s p e c i f i c	i n s t r u c t i o n s	from	Mr	Cook.
H i s	i n s t r u c t i o n s	seemed	t o	me	t o	be

s t r a i g h t f o r w a r d and n o t h i n g he t o l d me

s u g g e s t e d t h a t he wanted t o p r a c t i c e a n y

d e c e p t i o n o f the a p p l i c a n t . I b e l i e v e d what he

t o l d me. I f I had a n y s u g g e s t i o n t h a t t h i s was

not the c a s e I would not h a v e writ ten s u c h a

le t ter . I h a v e no d o u b t t h a t I -received

s p e c i f i c	i n s t r u c t i o n s	t h a t	Blu-Binda	h e l d	the
money d e p o s i t e d by MY	T i n g e y .	I	had	no	r e a s o n ,
on	the	b a s i s	o f m y d e a l i n g s	w i t h A r t h u r	Cook,

B r i a n M i l l a r d and B1 U-Binda t o d o u b t the

- a c c u r a c y o f a n y i n s t r u c t i o n s wh ich they gave

me. Annexed hereto and marked 'C' i s a t r u e

c o p y o f m y letter d a t e d '15 December, 1989 t o

Lane & Lane which was sent t o them by

f a c s i m i l e . "

It will be noted that the fourth respondent does not appear to have made a file note of his instructions.

I n a subsequen t a f f i d a v i t sworn b y the f o u r t h

responden t i n t h i s m a t t e r o n 28 May 1 9 9 2 i n answer t o M r

Lambley's a f f i d a v i t the f o u r t h responden t s a i d :

"When I wrote on i n s t r u c t i o n s from A r t h u r Cook the

f a c s i m i l e da t ed 14 December 1989 and the letter

da t ed 15 December 1989, which a r e annexures 'B' and

'C'	t o m y first	a f f i d a v i t ,	I	was	aware	t h a t Blu-
Binda	opera ted	an	o v e r d r a f t	f a c i l i t y	and	s e v e r a l

other accoun t s a t the Bank. I knew n o t h i n g which

sugges t ed t o me t h a t Blu-Binda 's a f f a i r s were

o t h e r w i s e t h a n h e a l t h y o r t h a t Messrs Cook and

M i l l a r d	were	n o t	o p e r a t i n g	the	o v e r d r a f t	f a c i l i t y
w i t h i n	i t s l i m i t s .	No	cheque	drawn	by	Blu-Binda

which was pa id t o me ever bounced, n o r were a n y

comp la in t s made t o me by o t h e r s i n r e l a t i o n t o Blu-

Binda cheques . I d i d n o t addre s s m y mind t o the

q u e s t i o n i n t o which account the d e p o s i t pa id by Mr

T i n g e y had been pa id . I was i n s t r u c t e d t h a t the

d e p o s i t had not been d i sbur sed and would n o t be

d i sbur sed	pending	r e s o l u t i o n o f	the	d i s p u t e and	i f I
had	t u rned m y mind	t o it	I	would	t h e r e f o r e have

assumed t h a t it had n o t been pa id i n t o the

o v e r d r a f t . "

I n h i s o r a l e v i d e n c e i n the c o u r s e o f c r o s s -

examina t ion the f o u r t h responden t s a i d :

"Now, M r . B u t t , I want t o s u g g e s t t o you t h a t you

d i d make a n o t e i n December 1989 o f the i n s t r u c k i o n s

you go t Cook had t o l d you t h a t the $68,000 from Mr Cook and t h a t n o t e r e v e a l e d t h a t Mr

had gone in to the

o v e r d r a f t	account 7---Tha	t	would	s u r p r i s e me.
W e l l , do you r e c o l l e c t i o n i s t h a t he	d e n y t h a t M r Cook	t o l d you	t h a t	the

$68,000 had gone in to the o v e r d r a f t account ?---My

t o l d me t h a t the moneys were

w i t h the bank.

W e l l , you see, M r B u t t , i n y o u r second a f f i d a v i t you

s a y t h a t you have no recollection o f a d d r e s s i n g your

mind to the q u e s t i o n o f w h i c h account the d e p o s i t

had been pa id i n t o . Do you r e c a l l s a y i n g that?---

That ' s correct .

Now, I want t h a t it had been paid t o s u g g e s t t o you t h a t Mr Cook t o l d you

i n t o the o v e r d r a f t account?---

I don ' t r e c a l l t h a t , no.

W e l l ,	i s i t p o s s i b l e	t h a t he	d i d	tell	you	t h a t ,	M r
But t? - - - I t	i s	u n l i k e l y .	I t	i s p o s s i b l e	b u t	it	i s

u n l i k e l y ; I c e r t a i n l y don ' t r e c a l l t h a t .

W e l l , now Mr B u t t a t a l l events you d i d n o t receive

i n s t r u c t i o n s t h a t the money had been pa id i n t o a

t r u s t account d i d you?---Well, I c e r t a i n l y d i d n o t

receive t h o s e i n s t r u c t i o n s .

Did you know whether Mr Cook conducted a t r u s t account?---I knew t h a t he c o u l d n ' t conduct a t r u s t

account a s I know t r u s t accoun t s t o be, i f t h a t i s

what you mean.

W e l l , do you know - - -

HIS HONOUR: That he cou ld n o t , i s t h a t what you

said?---Well, your Honour, the only peop l e t h a t can

s t a t u t o r i l y r u n t r u s t accoun t s a r e s o l i c i t o r s , I

think accoun tan t s and e s t a t e a g e n t s , there may be

other b o d i e s b u t they a r e the only ones t h a t I know o f , when I - and by t h a t I mean the specific tern i s known a s a t r u s t account t h a t ' s a d m i n i s t e r e d , t h a t ' s

a u d i t e d , checked by the government and a l l t h a t k i n d

o f t h i n g . Now, I knew o f cour se t h a t a b o a t broker

cou ld not	r u n	t h a t k i n d	o f s t a t u t o r y account	because
they don ' t	exist	o r c e r t a i n l y they d i d n ' t	exist	a t

t h a t s t a g e f o r b o a t b r o k e r s or f o r b u i l d e r s or f o r a

whole l o t o f other peop l e t h a t t a k e monies i n the

c o u r s e o f their t r a d e s . So , i f you mean t h a t k i n d

o f t r u s t account I knew from m y knowledge o f

commerce t h a t Blu-Binda Marina c o u l d n ' t r u n a t r u s t

account such a s I r u n a t r u s t account .

MR WHITE:  Did you know whe ther or n o t - - -

HIS HONOUR: Plenty o f peop le have t r u s t a c c o u n t s

t h a t a r e n o t o f those categories?---Well - - -

T r u s t e e s , executors?---Your Honour, i f we c a l l -

yes, i f you j u s t c a l l i t - - -

-

They a r e n o t s t a t u t o r y accoun t s , the q u e s t i o n pu t t o

you was n o t whe ther you knew t h a t he had a s t a t u t o r y

t r u s t account it was a more general guest ion?---

W e l l , I knew t h a t he d i d n ' t and a n y other account

would have been an account perhaps c a l l e d i n t r u s t

f o r o r a general account o r some other accoun t , t h a t

I d i d know.

W e l l , a s l o n g a s you a r e c l e a r on t h a t Mr B u t t , I

d i d n o t mus t say?---Well, i n t e r p r e t the q u e s t i o n the way you d i d , I

I suppose it i s because I am a

solicitor and r u n a t r u s t account I have a c e r t a i n

concep t i on o f what I c o n s i d e r a t r u s t account t o be.

I r e a l i s e p l a c e money i n t r u s t - there a r e other accoun t s where peop le

- -

You were assuming the q u e s t i o n was whe ther he was

k e e p i n g a t r u s t account which was r e g u l a t e d by

s ta tu t e s? - - -Yes .

You see the q u e s t i o n d i d not u s e t h o s e words?---I

believe t h a t he pa id the d e p o s i t in to an account

w i t h the bank , yes.

MR M I T E : W e l l , on what d o you b a s e t h a t belief Mr

White?---On what he t o l d me.

When d i d he tel l you t h a t he had such an account?--- I r e c e i v e d - or he r e c e i v e d a letter from y o u r f i rm ,

from y o u r s e l f which he r e f e r r e d t o me, either by f a x

or	t e l e p h o n e	o r something,	and	t h a t caused me	t o
have	a	c o n v e r s a t i o n	w i t h either y o u r s e l f	or	somebody

from your f i r m and t o i m m e d i a t e l y hand write o f a

s h o r t f a x which I fo l lowed u p w i t h a lengthy letter.

You see, Mr B u t t , you d i d n o t o b t a i n i n s t r u c t i o n s

from Mr Cook t h a t he h e l d the money i n a s e p a r a t e

account which he k e p t f o r the purpose o f h o l d i n g

d e p o s i t s and monies which had been ob ta ined from the

s a l e o f b o a t s t h a t d i d he?---No, on commission, he d i d n o t t e l l you

he d i d n ' t s a y t h a t no.

I	s u g g e s t	t o you	t h a t what	he	d i d t e l l you	was	t h a t
i f Blu-Binda	was	c a l l e d	upon	by	a	c o u r t	t o d e p o s i t

$68,000	t o be	h e l d	pend ing	the	r e s o l u t i o n o f	the
d i s p u t e between	the	p a r t i e s	Blu-Binda	cou ld	n o t	do

so?---He c e r t a i n l y d i d n ' t tell me t h a t .

I s u g g e s t was c a l l e d upon t o p a y $68,000 t o you t h a t he t o l d you t h a t i f Blu-Binda

it would go down?---

H e c e r t a i n l y d i d n ' t te l l me t h a t . I n f a c t I believe

t h a t i f t h a t	was	r e q u i r e d	they would	be	a b l e	t o d o
i t . "

In the absence of a file or other contemporary note of the discussion which no doubt took place between the fourth respondent and the second respondent, it is perhaps not surprising that the fourth respondent's recollection of what was said is now not good. In my opinion, the evidence of the fourth respondent with respect to the turns of that

discussion, is not reliable. However, there is other evidence which does establish that the fourth respondent knew that the first respondent not only operated an overdraft facility with the Bank but that this overdraft was substantial and that difficulties were being experienced in making arrangements for its discharge.

I have already referred to the role played by the fourth respondent in endeavouring to effect the corporate and financial re-organisation of the first respondent. As has been said, the initial instructions to bring this about, were received in February 1989. The initial arrangement embodied in the agreement dated 1 July 1989 had been put into effect at that time but by reason of supervening circumstances, needed to be revised.

It is clear from the file note prepared by the

fourth respondent on or about 21 November 1989 that the fourth

respondent knew that special measures were called--for to discharge the significant overdraft then owed to the Bank. in order	In that context, I am satisfied that the fourth respondent -
must have known that the funds provided by the applicant, on account of the purchase of the subject vessel, had been banked into the ordinary bank account of the first respondent. Indeed, it is not, and never has been suggested on behalf of the fourth respondent, that he believed that these amounts had been paid into any special account whether strictly a trust account or designated in some similar fashion. Not only is
- that suggestion not made, it of course, does not accord with the facts as we now know them.	i
It is true that there is a reference in the agreement dated January 1990 to accounts with the Bank in	,. .
addition to the overdraft accounts but it is clear from the
memorandum of the Bank, to which I have referred, that this	I .
was a reference to other term loan accounts which were	, .
themselves in debit.
:
I am satisfied that when the fourth respondent wrote the facsimile dated 14 December 1989 and the letter dated 15 December 1989 he must have known that the funds provided to	;:,
I
the first respondent by the applicant over the previous five months had been banked to the ordinary account of the first respondent and not to any special account earmarked for the purposes of the applicant's purchase.

-

It is clear from the file note, prepared by the fourth respondent on or about 21 November 1989, that he was aware that the first respondent owed more than half a million dollars to the Bank and that special measures including the sale of the personal assets of the second and third respondents were required in an effort to reduce that debt. In those circumstances it is unrealistic to assume that the fourth respondent could not have been aware that all funds available to the first respondent had been applied in the

.

discharge of the first respondent's significant debt with the Bank. I therefore find that the fourth respondent was knowingly concerned in the contravention.

I move next to the measure of damages. I have been

referred on behalf of the applicant at a late stage in the argument to the reasoning of Gummow J in Elna Australia Pty Limited v International ComDuters Australia Ptv Limited (1987)

75 ALR 271 at 281-2. His Honour there refers to the

possibility, that in proceedings for damages alleging a contravention of Section 52 of the Act, it may be open to a Court to have regard to the measure of damages applied in courts of equitable jurisdiction.

As I have said this point was advanced late in the
case and I would, in any event, having regard to the way in

which the point was brought forward, have difficulty in

entertaining it. However, the statements of principle in this	area made by Mason CJ, Dawson, Gaudron, and McHugh JJ, in
Wardlev Australia Ltd. v State of Western Australia (1992) 109 7
ALR 247 and in particular the passage at pp 253-254, reasoning
of course which is subsequent to that of Gummow J in the case, is binding on me for present purposes.
In Wardley their Honours said that, although the measure of damages recoverable under s .82 ( l), can only be
fully ascertained after a thorough analysis of those

' pzovisions in Parts IV and V of the Act, the common law

measure of damages will in many cases be an appropriate guide. Their Honours, went onto 2 : ~ that in such a case "it may safely be assumed that the plaintiff is entitled to recover a sum representing the prejudice or disadvantage [the plaintiff] has suffered in consequence of his altering his position under the inducement " of the misleading conduct or "the actual damage directly flowing from" that conduct, to take up and adapt well-known statements of the measure of damage applicable in an action of deceit. In my opinion that is the appropriate measure of damages in the present case.

As I have already said on the issue of damage, it is relevant, I think, to look in particular at the Bank's assessment of the financial position of the first respondent	.
, -, ,
at the material times.	It appears from that material, that by

1

m ,

December 1989 at least, the first respondent's financial

-.

position was indeed powerless. I I

It must follow in my opinion, that the prospect of performance by the first respondent of any contract negotiated at about that time pursuant to the negotiations which followed

7

L

in the December 1989-January 1990 period going through to	I
February of 1990, were remote.
It may well be, as has been suggested on behalf of the applicant, that the first respondent may have entered into negotiations but its prospect of delivery in terms of performance of a contract to sell a vessel was, I think, an unlikely event. However, this is not to say that the applicant should receive only nominal or no damages. I have been referred to reasoning of Burchett J in Poseidon Ltd. v Adelaide Petroleum NL (19'91) 105 ALR 25, the passages in particular at pp.40 and 41. This was a decision of a Full Court and Sheppard J was in agreement with Burchett J on the point. Lee J also concurred and his Honour's reasons, which are to a similar effect, appear at p.51.
As was there pointed out and is well settled by the course of authority, the mere difficulty in estimating damages does not relieve a Court from responsibility of estimating them as best it can. It does sometimes of necessity involve what is guess work rather than an estimation and where precise
evidence is not available the Court must do the--best In my opinion this reasoning applies in the present case. it can.	As has been noted by his letter of demand dated 13

December 1989, the applicant sought an undertaking that the

first respondent would not disburse the funds held and

threatened to apply for injunction. An undertaking, having

been given, which on its face appeared to be an appropriate

one, the applicant did not seek an injunction. In my opinion

it is proper to infer that if the undertaking had not been

given and if the true position as to the disbursement of the	I
funds provided by the applicant to the first respondent had
then been known, the applicant would have been in a posit,~n
to negotiate with the first, second and third respondents with	f
respect to the future conduct of the matter.
As I have said, although the first respondent then appeared to be in a difficult financial position and perhaps	1.:
r
even technically insolvent, the previous history of the
dealings between the Bank and the first respondent indicates	:

. l

that in case of need the Bank would be prepared to make

available funds, perhaps not in a large amount but still some	I .
funds to hold the status quo in terms of the business
operations of the first respondent. I have already referred
to the example of the regional manager of the Bank being	I .
prepared to honour a cheque in the sum of $6,000 and of M r	I
Lambley himself undertaking responsibility of honouring a

-

cheque for $1,200.
In those circumstances I think it is proper to infer that the Bank would have been prepared to assist the first	8 -
X l
L -
,
respondent perhaps in a modest way only to hold the status quo in order that the business operations of the first respondent
i
could continue as a going concern.	!
In my view, doing the best I can, it is probable that in this situation, difficult as it was, the Bank would have been prepared to make available a sum in the order of $5,000 so that the first reapondent might make that amount available in turn to the applicant by way of some compensation for this serious loss which he was then facing. In my view the misleading conduct which I have found deprived the applicant of that amount. On the balance of probabilities I find that this was the loss suffered by the applicant.
The applicant also seeks interest or claims interest up to judgment pursuant to section 51A(1) of the Federal Court of Australia Act 1976. The claim is made in accordance with the schedule handed up in the course of argument which I have now marked as exhibit J. In my opinion, it is appropriate that the applicant receive interest on the amount of his damages. The rates and the dates, in respect of which the claim is made by the applicant, are in my view appropriate.
South Wales in this period and those rates may be used as a 7	comparable with those prescribed in the Supreme Court of New In particular, the rates of interest claimed-. are overall	guide in this Court. See McDonell v Wavne, Full Federal Court, 11 May 1992, unreported.
I propose, however, to round off the amounts claimed to allow the sum of $500 for each amount of $1,000 awarded by
way of damages thus giving a total amount by way of interest	, .

-

In the result then I make the following orders: I

' of $2,500.	:
p
i , .
1. I order -.lat the second and fourth respondent pay the sum of $7,500 to the applicant.	I
:
i
;:
2. I order that the second and fourth respondent pay the applicant's costs.
A cross claim has been filed but has not been pressed at this stage. Therefore, I reserve liberty to the fourth respondent to restore the cross-claim to the list for hearing or such notice if any as a Judge shall allow.	t

I hereby certify that this and the fifty-one (51) preceding

-

Associate: