Turner & Zollo v Kostoglou - [2009] SASC 204

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
TURNER & ZOLLO v KOSTOGLOU & ANOR
[2009] SASC 204
Judgment of The Full Court
(The Honourable Justice Bleby, The Honourable Justice Gray and The Honourable Justice Layton)
15 July 2009
LANDLORD AND TENANT - RENT - BREACH OF COVENANT TO PAY - DISTRESS FOR RENT
Appeal against decision dismissing plaintiffs' claim for conversion - plaintiffs and appellants, Mrs Turner and Mr Zollo, claimed damages for unlawful distraint of property - whether ownership and loss of property proved - whether Mr Zollo entitled to an award of damages without proof of loss.
Held: appeal by Mrs Turner dismissed - ownership not established - appeal by Mr Zollo dismissed - no loss as a consequence of distraint established - damages without proof of loss unavailable.
Interoven Stove Co Ltd v Hibbard [1936] 1 All ER 263; Robson & Pritchard 86 W Va 681 (1920); Bisset v Goss 481 SW 2d 71 (Ky 1972); Matthias v Scott [2000] TASSC 88; Gilman v Elton (1821) 129 ER 1211; Field v Mitchell (1807) 170 ER 833; Megson v Mapleson (1883) 32 WR 318; Lucas v Tarleton (1858) 157 ER 409; Rodgers v Parker (1856) 139 ER 1308, considered.

TURNER & ZOLLO v KOSTOGLOU & ANOR
[2009] SASC 204
Full Court: Bleby, Gray and Layton JJ

BLEBY J. In my opinion both appeals should be dismissed. I agree with the reasons of Gray J.
GRAY J.
These two appeals relate to separate proceedings by different plaintiffs against the same defendants. They were heard together at trial, and on appeal. Although the claims of the plaintiffs, now appellants, involved different proceedings, it is convenient to provide the one set of reasons with respect to the appeals.
During the 1990’s, the defendants and respondents Michael and Angela Kostoglou leased premises to Tennyson Turner at Enfield. The premises comprised a shop front, with rooms behind and a shed at the rear of the premises. A retail business was conducted in the shop front selling art and craft supplies. One of the rooms behind the shop front, was used by Tennyson Turner as his office, from which he ran an accounting business. Pamela Turner, a plaintiff and appellant in one of the proceedings, and the spouse of Tennyson Turner, performed secretarial work for him, and used another of the rooms. The shed at the rear of the premises was used for storage. Artworks by Ernesto Zollo, the plaintiff and appellant in the other proceedings, were stored in the shed at relevant times.
In February 2002, Tennyson Turner was in arrears with his rent. On 22 February 2002, a bailiff instructed by Mr and Mrs Kostoglou attended the premises, served a notice of termination of tenancy and then a warrant for distress. Tennyson Turner was required to leave the premises immediately. The locks were changed. The goods in the shop, the offices and the shed were impounded, most of them for the ensuing 18 months.
Mrs Turner and Mr Zollo issued proceedings in the Magistrates Court for the return of the goods. The Magistrate dismissed their claims, but on appeal, both were successful in obtaining an order that the distraint was unlawful. This was on the ground that the tenancy had ended before the execution of the warrant. Following this order, Mr and Mrs Kostoglou released the goods to Mrs Turner and Mr Zollo, but without making any concession that either owned any of the goods.
Mrs Turner and Mr Zollo then instituted the within proceedings seeking damages for conversion. To establish their claims, they had to prove ownership and loss. Both claims were dismissed following a trial in the District Court. These appeals are against the dismissal of those claims.
Claim of Mrs Turner
Mrs Turner’s case was that Tennyson Turner had transferred the art and craft business and its stock to her in May of 1998. Absent proof of ownership, Mrs Turner’s claim was bound to fail. Her evidence was supported by evidence from Tennyson Turner.
The learned trial Judge rejected their testimony in the following emphatic terms:
I reject Mr and Mrs Turner’s claim that he transferred the business and its stock to her and I reject her claim that she owned the office equipment. Mrs Turner’s case depends completely on her and Mr Turner’s evidence. I do not believe either of them.
The Judge provided detailed reasons for his conclusions, noting in particular that there was no document to evidence the suggested transfer, no stamp duty paid, and the art business continued to use Tennyson Turner’s cheque account and his credit facility. The Judge also drew attention to inconsistent sworn evidence given in other proceedings, where Mrs Turner had sworn an affidavit to the effect that she and her daughter were the joint proprietors of the business. With respect to Tennyson Turner’s evidence, the Judge noted:
I make the same finding about Mr Turner. Mr Turner is a lawyer who was admitted to practice in 1951. For many years he practised as a solicitor and a tax agent. In 1976, his name was struck off the roll of practitioners after he had been found guilty of fourteen counts of fraudulent conversion. In 1977 and 1981, he was again convicted of offences of fraudulent conversion. In all, he has served three separate terms of imprisonment for offences of dishonesty. In the witness box he gave glib answers, was evasive and sometimes would only answer a question directly if I directed him to do so. Much of his evidence was implausible. For example, he insisted that he transferred the business and stock to his wife yet he, a lawyer and tax expert, did not bother to record that fact. And he valued the stock at some uncertain figure “between $25,000 and $40,000”. Some of his evidence in Mr Zollo’s case was almost farcical.
On appeal, the Judge’s findings were challenged. Mrs Turner submitted that there was evidence before the Judge which supported a finding she was the owner of the business and that the Judge had failed to have proper regard to this evidence. The evidence included oral testimony given by Mrs Turner’s daughter, taxation returns, business records, a change of name of the business and GST status.
The testimony of the daughter relied upon was the recounting of alleged conversations with Mrs Turner and Tennyson Turner, being either the relaying of self-serving statements or hearsay. Full tax returns were not produced. Cover sheets of tax returns as filed were produced, but the following pages to those returns did not appear to be as filed. In any event, an analysis of the taxation returns tended to confirm the Judge’s findings. The business records, which included a day book and journal of sales, did not evidence ownership. The reference to the change of name and GST status, particularly in the absence of a complete trading name history, did not evidence ownership by Mrs Turner.
In short, none of the evidence referred to supported a conclusion that Mrs Turner was the owner of the art and craft business and its stock.
No basis has been established to suggest that the Judge’s findings on credibility and reliability were not soundly based. The findings were open on the evidence and were overwhelmingly supported by the evidence. Ownership was not established.
Mrs Turner submitted that the Judge erred in law in treating the action as being for conversion. Instead it was submitted that the Judge should have treated the action as being one for distress and trespass to chattels and that damages should have been awarded accordingly. It was contended that Mrs Turner was not required to prove ownership, but instead was able to recover the full value of goods by reason of an entitlement less than ownership, such as a bailee.
There are two problems with this submission. Mrs Turner specifically claimed conversion and has always made her claim on the basis that she was the owner and in no other capacity.[1] Mrs Turner was not a bailee and did not claim to be so.
[1] Amended Statement of Claim [9], [17], [19] and [33].
The characterisation of a claim as conversion and not as a claim for distress or trespass to chattels is a distinction without a real difference. Damages for conversion are assessed in the same way as damages for illegal distress or trespass to goods and, indeed the same as in an ordinary tort action.[2] This topic is discussed in detail late in these reasons.
[2] Harvey McGregor, McGregor on Damages (17^th ed, 2003) at [33-087]-[33-089].
The appeal by Mrs Turner should be dismissed.
Claim of Mr Zollo
Mr Zollo’s case was that he was the owner of artworks stored at the Enfield premises, and that the other goods had been the subject of unlawful detention and that he was entitled to an award of damages as a consequence. The Judge accepted that Mr Zollo honestly believed that he was the owner of all of the paintings and prints that were the subject of the unlawful distraint. The Judge concluded that he had been deceived by Tennyson Turner, a practised fraudster:
I shall not leave this case without making some further observations. I do not believe that Mr Zollo has been dishonest. He honestly believes that he was the owner of all of the paintings and prints and that they are of considerable value. Sadly, he has been deceived by Mr Turner, who is a practised fraudster. In my view, the claims are preposterous.
The Judge concluded that two works, “David” and “Mona Lisa”, were always owned by Mr Zollo. These works were released to Mr Zollo by Mr and Mrs Kostoglou in February of 2003. The claim advanced by Mr Zollo was put on two bases: that he was entitled to damages without the proof of loss, and that he had lost the ability to earn income from the two paintings over the 12 month period when they were impounded.
The Judge did not address a claim that damages flowed from unlawful distraint, without proving loss. I will return to that aspect later.
The Judge rejected the claim of Mr Zollo that he would have used the paintings “David” and “Mona Lisa” to produce profit. It was claimed that this would be the result of the use of the paintings in association with the performance of a play. A play had been staged at a restaurant, in conjunction with the paintings during the year 2000, however, there was no evidence that any profit was produced. Certainly no profit flowed to Mr Zollo.
From that time until the subject of the wrongful distraint in February 2002, the paintings “David” and “Mona Lisa” remained wrapped and in storage. Since their release from distraint, in February 2003 and over the ensuing six years, they have not been used to produce income. In these circumstances, the Judge rejected the claim.
Nothing was advanced on appeal to undermine the Judge’s analysis, or to provide any basis for raising doubt about his conclusions. The Judge’s finding that the two paintings would not have produced any income to Mr Zollo had he had access to them between the date of distraint and the date of their return was fully justified on the evidence. The Judge’s conclusion that Mr Zollo suffered no loss from being deprived of the two paintings was a correct finding.
As earlier observed, Mr Zollo claimed an entitlement to an award of damages without proof of loss. During the course of the appeal, counsel for Mr Zollo submitted that such an entitlement was available in the circumstance of unlawful distraint. Reliance was placed on the following observations of Hilbery J in Interoven Stove Co Ltd v Hibbard:[3]
An illegal distress has always been a trespass and an action would always lie. And where there is a trespass to goods, though no actual damage results, the law gives a right to recover damages not limited to actual damage sustained, but a right to recover substantial damages even though there be no proof of actual loss. The case of Bayliss v Fisher was cited and is an authority for that proposition. More recently the law has been alluded to and stated in the Court of Appeal in the case of Owen & Smith v Reo Motors (Britain) Ltd, which was an action for damages for trespass to goods. There Greer LJ, says at page 278:
‘Now what damage have the dealers suffered by reason of the fact that these vehicles were removed without the opportunity being given which was provided for in the contract? I think, practically speaking, there was no damage. If they had been given the opportunity, there would still have been a loss of reputation to the dealers in their business. It does not follow that if the opportunity had been given the bodies would have been removed. It would only have meant their having a reasonable time in which to remove all the cables and bodies which were theirs. The creditors looking out from the opposite side of the street would have seen just as much, if the contract had been strictly carried out, as he did, in fact, see. No authority has been cited to show that punitive damages could be recovered for trespass to chattels. I prefer not to express an opinion on that somewhat difficult matter, but I do think that in this case there must be something in the nature of substantial damages.’
I am satisfied, therefore, that though no actual damage is proved, the court is entitled to give, if the circumstances justify it, substantial damages.
I have stated what the attitude of the defendants was in this matter. The plaintiff company were treated in a very high-handed manner …The stoppage of delivery on 26 March, at the height of the radiator season was a very serious time to stop delivery of heaters. The defendants ought to pay a substantial sum for the illegal distress and trespass.
It is relevant to emphasise that the observation of Hilbery J included the important qualification “if the circumstances justify it”.
[3] Interoven Stove Co Ltd v Hibbard [1936] All ER 263 at 270.
The decision in Interoven was made where it was probable that the unlawful distraint would have caused loss and damage. In these circumstances one can readily understand the decision to award damages without proof of actual damage. The other decisions referred to by Mr Zollo’s counsel, said to support an entitlement to damages without proof of loss, were shipping cases,[4] and again, involved circumstances where it was probable that loss had been sustained.[5]
[4] The Winkfield [1902] LRP 42.
[5] American jurisprudence relating to wrongful distress similarly provides that the measure of damages for a wrongful distress is the actual loss sustained unless the conduct of the landlord was wanton and malicious and done for the purpose of injuring the tenant, thereby justifying exemplary or punitive damages: see Newman v Robson & Pritchard, 86 W Va 681 (1920); Bisset v Goss, 481 SW 2d 71 (Ky 1972).
In Matthias v Scott[6] Underwood J considered that in the case of irregular distress a plaintiff would not be entitled to recover even nominal damages without the proof of special damage.
The claim of excessive distress is not made out. Unless privileged under some exceptional law, all the plaintiff's personal chattels on the demised premises were liable to be distrained.[7] However, any distress must not be excessive. A distress must be clearly proportional to the rent and any costs, taking into account the conditions under which a forced sale of the goods must take place.[8] Although the plaintiff did not adduce any evidence of the value of his goods, such evidence was given by the first defendant. He said that the ANZ Bank offered the goods up for sale by public tender. He said that the defendants tendered $12,500 and bought the goods from the Bank for that sum, inferentially, as the highest tenderer. Upon the evidence of the second defendant and of a letter written by the plaintiff's solicitor, I find that at the time of the distress the arrears of rent and other outgoings under the lease were in the vicinity of $9,000. Accordingly, it is not established that the distress was excessive.
In any event, a claim of excessive distress is really a claim for irregular distress.[9] At common law a claim for damages for irregular distress cannot be maintained without proof of special damage. Without that proof, the plaintiff is not entitled to recover even nominal damages.[10] There was no evidence of the plaintiff suffering damage by reason of irregular distress.
I respectfully agree with these observations.
[6]    Matthias v Scott [2000] TASSC 88 at [22]-[23].
[7]    See Gilman v Elton (1821) 129 ER 1211.
[8]    See Field v Mitchell (1807) 170 ER 833.
[9]    See Megson v Mapleson (1883) 32 WR 318.
[10] See Lucas v Tarleton (1858) 157 ER 409; Rodgers v Parker (1856) 139 ER 1308.
The evidence in Mr Zollo’s proceeding allows the conclusion that had there been no distraint, unlawful or otherwise, the paintings “David” and “Mona Lisa” would have remained wrapped and stored in the shed from February 2002 until at least February 2003. In these circumstances, in no real sense was Mr Zollo’s control of the paintings the subject of interference to his detriment. In the circumstances of this case, there was no loss.
The other aspect of Mr Zollo’s claim related to ten paintings described as “Animal Emotions”, together with many thousands of prints taken by a photographic process. The Judge rejected the claim for two reasons.
The Judge found that ownership of “Animal Emotions” and the prints belonged to an entity AITA, a trust established by Tennyson Turner. The Judge found that these works of art did not belong to Mr Zollo. As the Judge observed, AITA paid for the printing and framing. It appears that ownership may have been transferred at a time when Mr Zollo became bankrupt. The Judge found it unnecessary to resolve the question of whether Mr Zollo was the owner, whether the property in the artwork had been vested in his trustee in bankruptcy.
The Judge’s conclusion that Mr Zollo had not established ownership of “Animal Emotions” and the associated artwork was open on the evidence. Although the Judge appears to have misread one letter relevant to ownership that did not erode the overall effect of the evidence. In my view, this finding of the Judge should be sustained. In any event, the Judge concluded that there was no basis to reach a conclusion that Mr Zollo suffered economic loss during the year this artwork was the subject of distraint.
Tennyson Turner gave evidence in relation to sales suggesting that an earlier work of Mr Zollo had sold for $1,000,000.00. The Judge rejected that testimony. It was further asserted that the originals of the “Animal Emotions” series had been sold, but in that respect, the Judge concluded:
Mr Zollo said that each of the originals of the Animal Emotions series had been sold for $20,000. Mr Zollo took no part in any of the sales but said he had overheard one of them being transacted. In proof of the sales and sale prices, Mr Zollo relied upon a series of receipts made out by Mr Turner. Mr Turner purported to confirm that each picture had sold for $20,000. He relied on the receipts only. No bank records were produced to prove receipt of the money. None of the purchasers were called to give evidence. One purchaser was said to have been an Adelaide solicitor, Mr Peter Kerin. He was not called and no explanation was offered for his absence. I conclude that he would not have assisted Mr Zollo’s case. Mr Zollo has never received any part of the $200,000 said to have been realised by the sale of the ten original paintings. I reject Mr Turner’s evidence of the sales and of the sale prices. Further, Mr James Bruce, a valuer, gave evidence that he knew of Mr Zollo’s work because some of his paintings had passed through Mr Bruce’s auction rooms. The paintings commanded no interest.

The evidence in regard to suggested loss was vague and unsubstantiated. The rejection of Mr Zollo’s claim that he had suffered loss was justified. Mr Zollo has failed to establish ownership of “Animal Emotions” or the associated artwork and any consequent loss.
Conclusion
The appeal by Mr Zollo should be dismissed.
LAYTON J: I agree with the decision of Gray J that both of the appeals should be dismissed, and for the reasons which he gives.