Whites Hill (SA) Pty Ltd v All Commodities Pty Ltd (No 2)

[2017] SADC 9

DISTRICT COURT OF SOUTH AUSTRALIA

(Civil)

WHITES HILL (SA) PTY LTD v ALL COMMODITIES PTY LTD (No 2)

[2017] SADC 9

Judgment of His Honour Judge Slattery

3 February 2017

ADMINISTRATIVE LAW - JUDICIAL REVIEW

Sapphire (SA) Pty Ltd traded under the business name River City Grain Co until 5 March 2014. Until that time a Mr Strauss was a director of Sapphire. On 6 March 2014 Whites Hill (SA) Pty Ltd became the proprietor of that business name. Mr Strauss was appointed general manager of Whites Hill. At about that time, Mr A C Matthews was appointed as administrator and later deed administrator of Sapphire.

As at 5 March 2014, Sapphire had entered into two contracts, one with an entity in Queensland and one with an entity in New South Wales for the supply of almond hulls. As at that date, Sapphire appears to have given some form of charge to NAB over its receivables so that the benefit of the Queensland contract and the New South Wales contract may have been required to be paid to NAB. There is no evidence that NAB provided any form of financing or credit arrangement to Sapphire at the time of those two contracts. There is no evidence before the court about the arrangements made between Sapphire and NAB to secure the loan made by NAB; NAB later appointed receivers and managers to Sapphire.

On 6 March 2014 Sapphire and Whites Hill executed two written forms of assignment of the benefit of the Queensland contract and the New South Wales contract to Whit’s Hill. Mr Strauss made these arrangements. The assignment agreements were executed by the assignor and the assignee and notice in writing was given to All Commodities.

Whites Hill discharged the whole of the burden of the two supply contracts and it now makes a claim against All Commodities for payment of the contract price. The receivers and managers of Sapphire have now asserted a claim to the fund as has Mr Matthews.

Whites Hill brought a claim against All Commodities in the minor civil jurisdiction of the Magistrates Court. The defendant actively resisted the claim of Whites Hill but no party in the proceeding sought the joinder of NAB or Mr Matthews in order to bind them to the result of the disposition of this claim. The learned Magistrate decided that Rule 2.0 of the Grain Trade Association Rules which formed part of the terms of the two contracts prevented any assignment of the two contracts. Alternatively, the learned Magistrate decided that the conduct of Strauss and Whites Hill contravened the obligation of Strauss to take into account the interest of creditors and it contravened s 181 Corporations Act (CA). The Magistrates Court was empowered to make orders setting aside the assignment agreements.

Whites Hill applies for a review of judgment of the learned Magistrate in the minor civil action.

Held

1. The debt due under the two contracts became due at the date that the almond hulls were discharged from the silo on a carrier.

2. As at the date that the debts due under the two contracts became payable, an issue arose about whether NAB or the administrator of Sapphire, or either of them had a claim to the receivable payable under the two contracts by All Commodities in priority to any other creditor or entity.

3. It was necessary for the learned Magistrate to resolve the competing claims of all of the interested parties claiming an interest in the receivable fund.

4. The Magistrates Court has no jurisdiction to make orders under s 181 CA that gave rise to any rights under s 1317E CA, s 1317F CA or s 1317G CA.

5. There is no obligation for a director to take into account the interests of creditors, a breach of which would give rise to some right of action against the director.

6. An assignment of the burden of a contract may occur in circumstances where the exercise of the rights under the assigned chose may be attached to obligations arising under the contract. The assignee of a benefit may not in those particular circumstances take the benefit of the assignment of the chose without also discharging the whole of the burden of the contract.

7. The conduct of Strauss in arranging for the assignment by Sapphire of the two contracts was a breach of the fiduciary duties owed by him to Sapphire; Whites Hill was knowingly concerned in that breach in light of its involvement in the assignment and because Strauss was the general manager of that company.

8. In assessing any damages that may occur as a result of any breach of fiduciary duties an allowance may be made for the skill, expertise and other expenses incurred in the conduct in breach of those fiduciary duties.

9. Rule 2 of the GTA Rules had no application in this case.

10. All Commodities is required to pay into Court the amount of the claim and interest.

Prior to the handing down of this final judgment, it is necessary to resolve the question of the competing claims of NAB and Mr Matthews such that the claims of all interested parties in the fund paid into court by All Commodities as interpleader are resolved. In judgment No. 1 in this matter, the court required notice to be given to NAB and to Mr Matthews inviting them to inform the court of any claim that each or any of them make upon the funds in court and if such a claim was made, that the court would give directions for the filing of points of claim and points of defence and would resolve such claims. Mr Matthews did not make a claim upon that fund. NAB notified the court that on a costs and return basis, it would not ask the court to determine whether it had an interest in that fund and so NAB disclaimed any interest in the fund.

Held:

11. As a result of the election made by NAB and Mr Matthews following notice from the court, final orders may be made by the court disposing once and for all of the legal equitable or other interest in the fund paid into court.

12. After payments by Whites Hill of the costs of purchase of almond hulls and the transport costs under the two contracts, a gross profit of $1,741.98 was generated for Whites Hill from both contracts.

13. The payment by Whites Hill of the expenses associated with discharging the burden of the contract is a matter to be taken into account for the benefit of Whites Hill and Mr Strauss in the assessment of damages for breach of fiduciary duty.

14. In the assessment of damages for breach of fiduciary duties, the burden of disproving damages or the amounts thereof falls upon the party in breach. There is no evidence before the court that Sapphire has suffered any loss sounding in damages as a result of the actions of Mr Strauss and Whites Hill in breach of fiduciary duties or for being knowingly concerned in such breach of fiduciary duties.

15. The gross profit figure of $1,741.98 was so small and insignificant that as a matter of practicality and commercial common sense, no order directing payment of that sum to any third party should be made by the court in the circumstances of this case.

16. Orders:

16.1 That the order and judgment made by the learned Magistrate on the 18th day of August 2015 are rescinded.

16.2 The whole of the monies standing to the credit of the District Court Suitors Fund in Action DCCIV-15-1257 including interest be paid to the plaintiff.

16.3 The court will hear the parties on the question of costs.

Corporations Act s 58AA, s 180, s 181, s 588, s 1317E, s 1317F, s 1317G(1A); Law of Property Act 1936 s 15; EI Sykes and S Walker, The Law of Securities 5th ed, Law Book Co 1993 page 197, referred to.
Leigh-Mardon Pty Ltd v Wawn (1995) 17 ACSR 741; Credit Corporation Pty Ltd v Atkins (1999) 30 ACSR 727; Reed International Books Australia Pty Ltd v King & Prior Pty Ltd (1993) 44 FCR 587; Playspace Playground Pty Ltd v Osborn [2009] FCA 1486; Westbourne Grammar School v Sanget Pty Ltd [2007] VSCA 39; Holt v Heatherfield Trust Ltd and G & T Bridgewater Ltd [1942] 2 KB 1; Norman v Federal Commissioner of Taxation (1963) 109 CLR 9; Master v Miller (1791) 4 TR 320; Tito v Waddel (No 2) [1977] Ch 106; Rhone v Stephens [1994] 2 AC 310; Bruce v Tyley (1916) 21 CLR 277; Re New World Alliance Pty Ltd; Sycotex Pty Ltd v Baseler (1994) 51 FCR 425; Furs Ltd v Tomkies (1936) 54 CLR 583; Warman International Ltd v Dwyer (1995) 182 CLR 544; Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672, discussed.
Webb v Stenton (1883) QBD 518; Ogden’s Ltd v Weinberg (1906) 95 LT 567; Fryer v Powell (2001) 158 FLR 433; Standard Chartered Bank of Australia Ltd v Antico (1995) 38 NSWLR 290; Shepherd v Australia and New Zealand Banking Group Ltd (1996) 20 ACSR 589; Australian Securities and Investment Commission v Edward (2005) 220 ALR 148; Hawkins v Bank of China (1992) 20 NSWLR 562; Shaw v Harris (No 2) (1992) 3 Tas R 167; Spies v R (2000) 201 CLR 603; Fergus v Wilson (1866) LR2ChApp 77; Young v Murphy [1996] 1 VR 793; Grove v Flavel (1986) 43 SASR 410; Canadian Aero Services Ltd v O’Malley (1973) 40 DLR (3d) 370; Mordecai v Mordecai (1988) 12 NSWLR 58; 12 ACLR 75; Cook v Deeks [1916] 1 AC 554; Chan v Zacharia (1984) 154 CLR 178 ; Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134; Gemstone Corp of Australia Ltd v Grasso (1994) 13 ACSR 695; Lord Provost of Edinburgh v Lord Advocate (1879) 4 AppCas 823; Phipps v Boardman [1964] 1 WLR 993; Estate Realties Ltd v Wignall (1992) 2 NZLR 615; Agnew v Commissioner of Inland Revenue [2001] 2 AC 710; CPT Custodian Pty Ltd v Commissioner of State Revenue (VIC) (2005) 224 CLR 98; Austino Wentworthville Pty Ltd v Metroland Australia Limited (2013) 93 ACSR 297; Matheson Nominees Pty Ltd v Aerodevelopments Pty Ltd [2016] VSC 131; Mango Boulevard Pty Ltd v Mio Art Pty Ltd [2016] QCA 148; Markets Nominees Pty Ltd v Commissioner of Taxation [2012] FCA 262; Palett Shoes Pty Ltd (in liq) v Crohn (1937) 58 CLR 1; Matheson Nominees Pty Ltd v Aerodevelopments Pty Ltd (2016) VSC 131; Roberts v Investwell Pty Ltd (2012) 88 ACSR 689; Lotteries Pty Ltd v Volteas [2015] VSCA 226; Korda v Australian Executor Trustee (SA) Limited (2015) 255 CLR 62; Sino Iron Pty Ltd v Palmer (No 3) [2015] 2 Qd R 574; Koompahtoo Local Aboriginal Land Council v Sanpine (2007) 23 CLR 115, considered.

WHITES HILL (SA) PTY LTD v ALL COMMODITIES PTY LTD (No 2)
[2017] SADC 9

1. In a claim of 18 November 2014 Whites Hill (SA) Pty Ltd (“Whites Hill”) seeks payment of the sum of $23,143.37 from All Commodities Pty Ltd (“All Commodities”). The sum is alleged to be due and owing by All Commodities to Whites Hill arising from the supply of almond hulls to All Commodities on or about 7 March 2014 and 13 March 2014. There is no contest that All Commodities received the almond hulls and has not yet paid the plaintiff for them. There is also no dispute that All Commodities entered into two contracts with Sapphire (SA) Pty Ltd (“Sapphire”) for the supply and delivery of those almond hulls. The contracts were created on or before 5 March 2014.

2. The evidence discloses that All Commodities entered into two separate contracts with Sapphire in February and March 2014. Sapphire then traded under the registered business name “River City Grain Co”. The first contract was for the purchase of 50 metric tonnes of almond hulls to be delivered to Glen Innes in New South Wales (“the NSW contract”). The second contract was for the purchase of 35 metric tonnes of almond hulls to be delivered to Biggenden, Queensland (“the Queensland contract”). Both contracts were for the specified amount, plus or minus 12 tonnes depending on quality. Thus, the specific amount to be invoiced to the purchaser would be determined only once the almond hulls were loaded onto a truck for delivery and those delivery trucks weighed at the dispatch point.

3. A Mr Strauss was a director of Sapphire and he became the general manager of Whites Hill. Mr Strauss made a decision shortly after the commissioning of both contracts, that Sapphire would cease trading. This was followed by the registration of the new company (Whites Hill) which now commenced to trade under the same name of River City Grain Co. It would thus become the registered proprietor of that name. The reason that this decision was made was that Sapphire had accumulated a very high level of bad and unrecoverable debt in recent trading years and inferentially at least, Sapphire was insolvent. Following the decision about the fate of Sapphire, Whites Hill was incorporated on 5 March 2014. That company is the applicant in this minor civil review.

4. On 6 March Whites Hill was registered as the proprietor of the business name “River City Grain Co”. On that day Sapphire entered into two deeds of assignment relating to a number of contracts including the New South Wales contract and the Queensland contract made with Sapphire. Mr Strauss executed these deeds of assignment in his capacity as a director of Sapphire and in his capacity as a general manager of Whites Hill. By letter of the same date, 6 March 2014, All Commodities was informed of the assignment. All Commodities had not provided its consent to the assignment nor was it informed of the fact of assignment prior to that assignment occurring. A number of things are apparent. The first is that this assignment has all of the hallmarks of an interdependent agreement. The assignment occurred because Sapphire could not fulfil its contractual responsibilities. Whites Hill was therefore implicitly and actually obliged to fulfil the obligations of Sapphire under the agreement for the supply of almond hulls. They are therefore properly to be seen as interdependent. They are for largely the same reasons properly to be seen as conditional. This is because Whites Hill could not seek any payment unless it fulfilled the obligations of the contract. That benefit could only be seen to be for any profit to be generated from the contracts; the assignment is by deed under seal and without any consideration. This is obviously linked to the likely insolvency of Sapphire.

5. In about 2006, Sapphire had entered into a debt financing facility agreement with the National Australia Bank. The court has not been provided with a copy of the debt finance facility agreement and is therefore unaware of the specific terms of that agreement. The court is aware that in the usual course, under such agreements, in consideration of the bank continuing to make credit available, the borrower, Sapphire, agrees to assign to the bank all of its collectable debts then due and owing or at any time due and owing in the future. In evidence before the learned Magistrate was a letter of 19 March 2014 from a Mr Greg Kerr on behalf of National Australia Bank sent to Mr Jamie Chapman, the solicitor for All Commodities. The letter recites that:

   … pursuant to the terms of the agreement, Sapphire… has assigned to National Australia Bank absolutely the debt and any other amount due and owing by you to Sapphire…

6. I will hereafter call this claimed interest of the bank as a charge even though that is potentially a misuse of that technical term. This is because the bank has claimed that an assignment has been made to it by Sapphire of past, present and future receivables.

7. The learned Magistrate accepted that in 2006 Sapphire had entered into the debt facility agreement with National Australia Bank (“NAB”). The learned Magistrate found at [58] that the terms of that agreement required Sapphire to “assign” to National Australia Bank the benefit of debts due and owing to it under particular circumstances.[1] In its letter of 19 March 2014, National Australia Bank provided notice of the assignment of debts due and owing and claimed the benefit of the contracts. The contention of Whites Hill is that the amount claimed by National Australia Bank is exclusive of the amounts generated from the two contracts which had been assigned to Whites Hill by Sapphire. This was because those contracts had been validly assigned and thus those debts were never debts due and owing to Sapphire but debts owing to the plaintiff. The NAB did not attend or seek to be joined to the action or to be heard on the application.

   [1]    Whether or not this arrangement was strictly an assignment is not clear on the papers. There is no copy of the alleged agreement available. There is no evidence whether the bank terminated its funding arrangement. Mr Strauss would be aware of these arrangements.

8. Following the assignments, Mr A C Matthews was appointed administrator of Sapphire which later entered into a deed of company arrangement on 21 May 2014. Mr Matthews was later appointed deed administrator. Mr Matthews claimed to be an interested party in the matter as a result of the assignment of the company’s contracts. He did not attend this application and, he did not seek to be joined to the action.

9. The learned Magistrate recorded that the submission of Whites Hill was that only it (and not Sapphire) was able to incur the costs of performing the contract and therefore it was entitled to the benefit of those contracts. This submission carried with it the argument that no other party had been disadvantaged as a result of those assignments. The position is that All Commodities which is the debtor under the contracts (in reality in a form of interpleader) asks the court to decide to whom payment should be made.

10. The learned magistrate received into evidence the Grain Trade Associations Trade Rule (the GTA rules). The GTA rules had application under the terms of the contracts made by Sapphire. It was submitted that those rules did not contemplate the assignment of contractual rights or for that matter the charging of receivables to third party financiers. For the reasons which follow, I consider that the GTA rules have no bearing upon the resolution of this matter.

11. The learned Magistrate found that rule 2.0 of the GTA rules had application. That rule was an entire agreements and variations rule which required any variation to the express terms to the written agreement must be mutually agreed in writing. Of course this does no more than reflect the general common law rule which also informs the rules in relation to assignments at common law. At common law an absolute assignment is not effective except if it is in writing and the consent of the parties has been obtained. The learned Magistrate found that as the defendant had not provided its consent to the assignments in writing as required pursuant to Rule 2 of those rules, there was no effective assignment. Her Honour found that if she was wrong, then the conduct of Mr Strauss in his capacity as a director breached s 181(1) of the Corporations Act 2001 (“CA”) and that she was at liberty to make an order under that section setting aside the transaction on the basis that it had not been entered into in good faith in the best interests of the corporation and for a proper purpose.

12. Her Honour also found that a reasonably prudent director in the position of Mr Strauss was required to act in the best interest not only of the shareholders of Sapphire but also of the interest of its creditors. When he did act, Mr Strauss was not acting in the interests of Sapphire’s shareholders and creditors but only for the benefit of Whites Hill. Her Honour set aside the deeds of assignment.

13. It is necessary to address a number of issues in this matter. In no particular order they are:

    1When in these transactions does a debt become due and owing;

    2Whether this court or the Magistrates Court has any jurisdiction under s 181 of the Corporations Act;

    3Whether the assignment was in any way effective;

    4Whether the actions of Mr Strauss were in breach of his fiduciary duty and, if so, what orders are available to the court as a result;

    5Any other matters.

    When a debt is due and owing

1. I consider that the rules in relation to when a debt is due and owing and payable are now well settled. They may be reduced to a series of principles as follows:

   1A debt is a sum of money which is now payable or will become payable in the future by reason of a present obligation;[2]

   2The word “debts” means something recoverable in an action for debt and nothing can be recovered in an action for debt except that which is ascertained or can be ascertained;[3]

   3The word “debt” and “incur” should be given their ordinary English meanings (in the context of s 588 CA);[4]

   4A company incurs a debt when by its choice, it does or omits to do something which as a matter of substance and commercial reality renders it liable for the debt for which it otherwise would not have been liable[5]. This includes situations where a company does not necessarily choose to take on a liability;[6]

   5The expression “incurring” is the act, omission or other circumstance which causes the company to owe the debt;[7]

   6A debt is not yet incurred under a contract for supply of goods on a cash on delivery basis until the date of delivery, not the date of the formation of the contract;

   7The expression “incurs” is apt to describe in an appropriate case, the undertaking of an engagement to pay a sum of money at a future time. Incurring happens when the corporation so acts to expose itself contractually to an obligation to make a future payment of a sum of money as a debt;[8]

   [2]    Webb v Stenton (1883) QBD 518 at 527.

   [3]    Ogden’s Ltd v Weinberg (1906) 95 LT 567.

   [4]    Fryer v Powell (2001) 158 FLR 433 at 442-443.

   [5]    Standard Chartered Bank of Australia Ltd v Antico (1995) 38 NSWLR 290.

   [6]    Shepherd v Australia and New Zealand Banking Group Ltd (1996) 20 ACSR 589.

   [7]    Australian Securities and Investment Commission v Edward (2005) 220 ALR 148.

   [8]    Hawkins v Bank of China (1992) 20 NSWLR 562 at 576.

2. In Leigh-Mardon Pty Ltd v Wawn[9] Hodgson J addressed the question of whether a debt is incurred when the order for good or chattels is made or at delivery of them. His Honour held:

   …In relation to sale of goods, it seems to me that, in some cases, it will be the order which in substance and commercial reality renders the company liable for the price of the goods, even if that price is not actually payable until delivery; while in other cases, it will be the acceptance of delivery which, as a matter of substance and commercial reality, so renders the company liable. And intermediate positions are possible.

   For example, if the goods which are ordered are readily saleable by the vendor elsewhere at the same price, so that to refuse delivery not only precludes any liability for the price, but also involves at worst minimal damages, one might readily say that the debt is incurred not by placing the order, but by accepting delivery.

   On the other hand, if what is ordered is goods which are to be specially manufactured for the company, and are not saleable elsewhere, so that to refuse delivery would be a breach of contract sounding in damages approximating to the full price of the goods, then, as a matter of substance and commercial reality, one would regard the debt as having been incurred by placing the order and binding the company to it, or possibly by not cancelling the order at a time before the damages flowing from such cancellation would be of a similar order to the price of the goods.

   [9] (1995) 17 ACSR 741.

3. In Credit Corporation Pty Ltd v Atkins[10] O’Loughlin J said that when a debt is incurred will vary from case to case, depending principally upon the express or implied terms of agreement between the parties[11]. His Honour referred with approval the decision of Hodgson J in Leigh-Mardon and held that in that case, the goods purchased were resalable, the debts would have been incurred upon delivery. Similar sentiments were expressed by Einfeld J in Reed International Books Australia Pty Ltd v King & Prior Pty Ltd.[12] His Honour held that a debt did not arise from an agreement for the supply of paper; instead only a merely contractual obligation arose at that time.[13]

   [10] (1999) 30 ACSR 727.

   [11]   Ibid at 741.

   [12] (1993) 44 FCR 587.

   [13]   Ibid at 589.

4. In the decision of Reeves J in Playspace Playground Pty Ltd v Osborn[14] his Honour determined that a debt arising from a contract ordering parts of playground equipment was incurred at the time at which the parts were dispatched from the supplier, not when the order was made. His Honour found that the substance and commercial reality of the situation meant that, once these packages of playground equipment were dispatched to the destination (Toy Shed), it became obliged to pay for them as opposed to when they were ordered. It is not clear to me whether the decision of Reeves J in Playspace Playground is consistent with the decisions in Leigh-Mardon, Reid International Books and Credit Corporation v Atkins. It is difficult to perceive that specialist playground equipment ordered for a particular purpose would be readily saleable elsewhere at the same price. Such goods appear to be those which fall within the description of “specially manufactured for the company”. It may be in that case that Reeves J was satisfied that the goods were generic and not specially manufactured for the purchaser and so were readily saleable by the vendor elsewhere at the same price. It would only be in that basis that the decision of Reeves J in Playspace Playground would be consistent with the settled common law on the point. If it were otherwise, I would not follow the decision of Reeves J.

   [14] [2009] FCA 1486.

5. On the facts of this matter, the product involved namely almond hulls would have been a readily resaleable commodity. Almond hulls are principally crushed almond shells. They are used for cattle feed and are a rich source of fibre for stock generally. It follows that at the time that both contracts for sale were entered into, no debt was incurred by the respondent. As such, no debt owing to Sapphire was brought into existence. It also follows that no debt was available to be charged under the arrangements made between Sapphire and National Australia Bank. Therefore, to the extent that her Honour’s judgment found that the debt was immediately charged to National Australia Bank, I consider that her Honour’s judgment was in error. That charge would only have been operative (on the information before me) at the time of delivery. However in light of what follows in my judgment, it is not necessary to finally resolve this question because of the position taken by NAB.

6. I turn then to the question of assignment. Section 15 of the Law of Property Act 1936 reads as follows:

   15—Assignment of debts and choses in action

   (1)Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal chose in action, of which express notice in writing has been given to the debtor, trustee, or other person from whom the assignor would have been entitled to receive or claim such debt or chose in action, shall be effectual in law (subject to equities having priority over the right of the assignee), to pass and transfer from the date of such notice—

   (a)     the legal right to such debt or chose in action; and

   (b)     all legal and other remedies for the same; and

   (c)     the power to give a good discharge for the same, without the concurrence of the assignor.

   (2)However, if the debtor, trustee, or other person liable in respect of such debt or chose in action has notice—

   (a)     that such assignment is disputed by the assignor, or any person claiming under him; or

   (b)     of any other opposing or conflicting claims, to such debt or chose in action,

   he may, if he thinks fit, either call upon the persons making claim thereto to interplead concerning the same, or pay the debt or other chose in action into court, under the provisions of the Trustee Act 1936 .

7. I am satisfied that the obligations and benefits for both the New South Wales contract and the Queensland contract were assignable under s 15 Law of Property Act. I am also satisfied that there was an absolute assignment in writing under the hand of the assignor and that written notice had been provided to All Commodities as the debtor. These findings are also consonant with the factual findings made by the learned Magistrate.

8. In considering those matters further it is necessary to identify the chronology as it informs the applicable law. The Queensland and NSW contracts were confirmed at the latest on 5 March 2014. There is some indication that the NSW contract was made as early as 27 February 2014 and the Queensland contract on 4 March 2014. I do not need to consider these matters further. In relation to the NSW contract the documents confirm that the product left the supplier on 5 March 2014.[15] The Queensland contract documents confirm that the product left the supplier on 11 March 2014.[16] This means that the sale for the NSW contract had occurred on 5 March 2014 at the latest and on 11 March 2014 for the Queensland contract. Depending on the enforceability of the bank assignment agreement with Sapphire, the relevant assignment of the receivable could not take place until those dates. Any further assignment of the NSW contract after 5 March 2014 is likely to be ineffectual.

   [15]   See Bozzi invoice 5 March 2014.

   [16]   See Bozzi invoice 11 March 2014.

9. By letter of 6 March 2014 addressed to the respondent from Mr Strauss writing on behalf of Sapphire, the respondent was informed that Sapphire had assigned both of the contracts to Whites Hill. All Commodities then allege that the notice provided is insufficient as it was not received until on or about 8 or 9 March 2014. I consider that the response of All Commodities to that notice on the basis of timing is incorrect. The Court of Appeal of Victoria considered that question in its decision of Westbourne Grammar School v Sanget Pty Ltd.[17] The Court held that notice of assignment may be provided at any time. By its nature, notice will be provided at or subsequent to the time of the assignment. Those comments only reflect commercial reality. It would be artificial to demand or require notice at any different time, for example prior to the date of assignment. The reasons are obvious.

   [17] [2007] VSCA 39 at [8]-[9].

10. In Holt v Heatherfield Trust Ltd and G & T Bridgewater Ltd,[18] Atkinson J held that notice becomes effective on the date on which it is received. His Honour held as follows:

    Absence of notice does not affect the efficacy of the transaction as between the assignor and the assignee. Until notice be given the assignment is an equitable assignment, but it is an assignment which requires nothing more from the assignor to become a legal assignment. The assignee may himself give notice at any time before action brought, and, further than that, even before notice he may sue in his own name, provided that he makes the assignor a party to the action, as plaintiff if he consents, and as defendant if he does not consent…

    [18] [1942] 2 KB 1.

11. Apart from one issue, it is therefore irrelevant when a notice was sent or was in fact received by the respondent. The issue obviously enough is that the notice should be received early enough to avoid the debtor paying the wrong entity. This of course is not fatal to the assignee’s rights under the assignment. In this case, all of the requirements for a legal assignment of both contracts under the Law of Property Act 1936 have been fulfilled. The assignments are valid statutory assignments. Any finding to the opposite effect is in error. The difficulty is that the assignment under at least the NSW contract post-dates the operational effect of the assignment to the bank. This may have been an issue to be resolved.

12. Earlier in these reasons, I identified that the learned Magistrate held that the assignments were contrary to the GTA rules to which the contracts were bound. Rule 2.0 of the GTA rules states as follows:

    1.The contract terms represent the entire agreement between the parties to the exclusion of any preceding drafts, negotiations and/or representations.

    2.     Any variation to the express terms must be mutually agreed in writing.

13. The learned Magistrate held that the respondent did not provide mutual consent to the assignments in writing. As a result, the learned Magistrate held that Sapphire’s assignment of both the New South Wales contract and the Queensland contract was invalid. In addressing this question, it is first necessary to reiterate the rules in relation to assignments. The assignments before the court are an assignment at law. At common law, a chose of action could not be assigned except with the consent and agreement of the other parties. This consent would entitle the assignee to sue for recovery for the product of the chose in its own name. The assignment gave the assignee a contractual right against the person who is the assignor. It did not give an independent right of action against the debtor. Ways were invented to circumvent the harshness of the common law rules. This was because the assignee would normally wish to proceed to recover the asset belonging to it under the assignment without the involvement of the assignor. At common law that was not possible. One way to avoid the harshness of the common law was for the assignor to grant to the assignee a power of attorney to represent the assignor and so recover the debt owing in the name of the assignor. Another method was novation but that is not relevant in the present circumstances.

14. The harshness of the common law rule was ameliorated in two ways. From about the 17^th century, the Court of Chancery recognised assignment in equity of choses in action. In Norman v Federal Commissioner of Taxation,[19] Windeyer J said as follows:

    The common law doctrine that debts and other choses in action were not assignable never applied to Crown debts; and, by the influence of the law merchant, bills of exchange and promissory notes were outside it. And it was never accepted in equity. "Courts of equity from the earliest times thought the doctrine too absurd for them to adopt" said Buller J in 1791 in the course of a vigorous condemnation of it: Master v Miller.[20]

    [19] (1963) 109 CLR 9 at 26.

    [20] (1791) 4 TR 320 at p 340; 100 ER 1042 at 1053.

15. Equity enabled the assignee to invoke the aid of equity so that the assignor held only the legal interest on trust for the assignee whereas the assignee held the equitable interest in the right. Thus equity would recognise the means by which the transaction could be made effectual. For example, equity accepted that the assignor could be joined as a plaintiff by consent or, without consent, could be joined as a defendant. Orders for specific performance could be made.[21] Also, equity recognised the intention to assign and did not prescribe the harsh formal rules required by the common law. In relation to the equitable assignment of a debt, equity required some form of evidence of a clear intention to assign. In the usual course, equity required that consideration be given for the assignment. Equity enquired of the intention of the assignor and needed to identify that intention to immediately dispose of the chose in equity. Equity also required that the assignment of the equitable interest must be in writing signed by the assignor at least where there was no consideration.

    [21]   Shaw v Harris (No 2) (1992) 3 Tas R 167.

16. I earlier mentioned the second basis upon which the harshness of the common law rule was ameliorated. That occurred under the amendments to the equivalent of the Law of Property Act legislation. I have earlier set out the content of s 15 of the Law of Property Act. That section required an absolute assignment in writing under the hand of the assignor. That is, the assignor needs to have signed the absolute assignment in writing. The assignment could be of any debt or other legal chose in action. All that is necessary, after the writing is completed, is for notice in writing to be given to the debtor from whom the assignor would otherwise have collected the debt. Once that is done, the absolute assignment is effectual in law to give to the assignee the legal right to such debt or chosen action. This is what has occurred in this case.

17. It is in that background that a view needs to be formed as to whether there has been any variation to the express terms of the relevant contract. I consider that properly construed, an assignment under s 15 Law of Property Act or in equity is in no sense an alteration of the express contractual terms. If it were otherwise, the rule would operate so as to exclude the existence and operation of s 15 of the Law of Property Act or alternatively, the rules of equitable assignment. That is plainly not the intention of Rule 2.0 of the GTA rules. In order to offend that rule, it would necessary for there to be a variation to the express terms of the contract. I consider that there has been no variation to the express terms of the contract and I therefore consider that there has been no breach of the GTA rules. For those reasons the learned Magistrate erred in her decision on that topic.

18. Even if I was wrong about that view I consider that the only remedy available to any wronged party would sound in damages. The High Court has made clear that the principles governing the circumstances when a contract may be terminated for breach are within a reasonably narrow scope.[22] As far as possible the focus must be upon the performance of contracts made between parties who are negotiating at arms length. The courts would not take an artificially inflated view of when a party may claim a discharge for breach of contract.

    [22]   Koompahtoo Local Aboriginal Land Council v Sanpine (2007) 23 CLR 115.

19. In this case, the contract was fulfilled, the almond hulls were delivered as required and the issue for resolution was the payee of the contract price. Two things follow. It is too late after complete performance to attempt to discern some basis to assert a breach of contract entitling one party to the contract to seek its discharge. It is a sterile discussion to be considering questions of breach of a fully performed contract where a party alleging the wrong has suffered no damage and does not complain about fulfilment of the contract.

20. However for a number of reasons that is not the end of the debate. The general rule is that an assignor is only able to assign contractual rights. Usually, an assignor is not able to assign contractual duties or burdens. The justification for this rule lies in contract. If party A has contracted with party B for the supply by party B of product and party B assigns to party C the benefit and burden of that contract then, under general rules of privity and having regard to the attention that the law of contract pays to the intentions of the parties, neither law nor equity would usually recognise that party B could escape the burden of the supply contract. It could only assign the benefit of the contractual right for which it received payment by party A. In the case at bar, Sapphire has purported to assign both the benefit and the burden of the contract for supply of almond hulls under the NSW and Queensland contracts. The agreement was made by Mr Strauss acting as a director of Sapphire and in his role as general manager of Whites Hill. Plainly enough, the mutual intention was that Whites Hill would accept the burden to perform the contractual obligation that otherwise would have been performed by Sapphire. In such a case, an assumption may be made that Whites Hill, as assignee, took the benefit of the contract subject to the contingency or condition that it is required to perform the contract that would otherwise have been performed by Sapphire. Another way of looking at the matter is if the obligation that once sat with Sapphire is capable of “vicarious” performance by Whites Hill, it would be necessary for Whites Hill to perform the obligation to supply the almond hulls if it wants to enforce its assigned right of gaining payments.

1. In such a case, it may be thought as a matter of contract, that the duty of Sapphire to perform the NSW and Queensland contracts has been transferred or assigned to Whites Hill and so Whites Hill becomes responsible for the performance of that duty. A review of the assignment agreement clearly raises such a possibility. The assignment under clause 3.1 is an assignment absolutely to the assignee of all right, title and interest in the sales contract. The only indemnity given by Sapphire as the assignor is in respect of any losses suffered as a result of any breach by Sapphire of Sapphire’s obligations and warranties under the deed. The assigned sales contract is the contract confirmation of sale numbered SC15359 dated 5 March 2014 which is the NSW sales contract. The second deed of assignment is in relation to contract of sale numbered 15358-1 which, although not free from controversy, may be understood as the Queensland sale contract. However, at the date of the assignment, namely 6 March 2014, if the bank deed of assignment operates, then there was no benefit to assign to Whites Hill by Sapphire because the rights under the charge to the bank had already come into operation. Under the two deeds of assignment, the benefit and burden of the NSW and Queensland contracts were both assigned to Whites Hill under deeds dated 6 March 2014. The question arises is whether or not it is possible to assign a contractual burden. My investigations indicate that this possibility has been considered in a number of authorities, most directly in a decision of Megarry VC in Tito v Waddel (No 2).[23] At page 290, Megarry VC held as follows:-

   An instrument may be framed so that it confers only a conditional or qualified right, the condition or qualification being that certain restrictions shall be observed or certain burdens assumed, such as an obligation to make certain payments. Such restrictions or qualifications are an intrinsic part of the right – you take the right as it stands, and you cannot pick out the good and reject the bad. In such cases it is not only the original grantee who is bound by the burden: his successors in title are unable to take the right without also assuming the burden. The benefit and the burden have been annexed to each other ab initio, and so the benefit is only a conditional benefit.

   [23] [1977] Ch 106.

2. In Rhone v Stephens,[24] Lord Templeman accepted that conditions can be attached to the exercise of a power in express terms or by implication but that those conditions must be relevant to the exercise of the right.[25] In his speech, Lord Templeman appeared to accept that if it could be said that, for example in the case at bar, the only possibility of Whites Hill obtaining a benefit of a payment was to fulfil the obligation to supply the almond hulls, then it could be said that that burden was inherent or intrinsic to the right itself. This is linked to the requirement to earn the payment. That is to be distinguished from performing some mere contractual duty to earn a payment. The test of the interdependence of the duty and the burden of the right must mean that the party claiming the right must perform an obligation intrinsic to the contract itself.

   [24] [1994] 2 AC 310.

   [25] Ibid at 322.

3. In this case, that would be the payment for the almond hulls at the weigh bridge and the payment of the cost of transportation of the almond hulls to the NSW and Queensland destinations. Thus, an assignee in the position of Whites Hill would be obliged to perform the contract of supply under the NSW and Queensland contracts by reason of the fact that it had taken the assignment and not by some separate agreement to undertake the burden of supply. As Mr Strauss was aware of the insolvency of Sapphire and the willingness of Whites Hill to accept the obligation as assignee, it is open for the Court to find that Whites Hill could not accept the receivable without also accepting the obligation to make supply of the almond hulls under the two contracts. This is the concept of interdependence (and not independence) between what is seen as the right and what is seen as the contractual obligation to be fulfilled under the terms of the contract. In those circumstance, any agreement of the assignee (in this instance Whites Hill) would be irrelevant because the assignment could only have been made in circumstances where Whites Hill automatically accepted or had imposed upon it the burden of fulfilling the supply of almond hulls under the NSW and Queensland contracts in order to receive payment.

4. The same finding is available to the Court having regard to what apparently are the intentions of the parties which are to be assessed objectively and may arise by implications having regard to the objective assessment made by the Court. Speaking in terms of a chose in action that may be transferred, it is open to the Court to find that the chose has attached to it an obligation upon the assignee to complete the obligations of the assignor under the transactions. Such a finding is open to the Court on both the documents and the oral evidence of the witnesses in this matter. Implicit in such a finding is that if Whites Hill failed or refused to perform its obligations under the burden assigned to it as part of the deed of assignment, then, ultimately, Whites Hill would become liable at common law for breach of contract. The reasons are self-evident. I consider that Whites Hill made itself legally responsible for the performance of the legal obligation to supply the almond hulls under the two contracts. It performed its legal obligations. If it had not done so, I consider that it would have been liable for non-performance. Such a finding is not available under every circumstance of assignment. However I consider that such a finding is available in the peculiar circumstances and factual background of this matter.

5. I consider that in these circumstances, the proper enquiry is whether expressly or impliedly the contract of assignment must be understood as requiring some form of agreement by Whites Hill as assignee to perform the terms of the contract and so become the beneficiary of the assignment which it would seek to be upheld in its favour. There are many examples where assignees have been required to perform positive obligations. In Bruce v Tyley[26] a right to remove rubbish refuse from military land during a time of war could not be assigned because the Court held that it was a personal obligation. This was because the identity of the person coming onto the land was important to the military. That finding does not detract from the fact that the assignee would have had an obligation to come onto the land and remove the rubbish refuse from the military base. If the question of identity of the person coming onto the land was not in issue, then the obligation to remove refuse from the military land would fall upon the assignee. As in the case at bar, the duty to carry out the contractual obligation is invariably connected to the obligation to supply (services for removal of refuse or almond hulls under two contracts).

   [26] (1916) 21 CLR 277.

6. I have earlier mentioned Lord Templeman’s stipulation in Rhone about the relevance of the obligation to the exercise of the right. This would have significance where an assignee may have no idea of an obligation that is required to be performed under the burden that attaches to the assignment. That is not relevant to these circumstances because the guiding hand and mind of Sapphire was Mr Strauss and he was the relevantly the guiding hand (and perhaps guiding mind) of Whites Hill. He of all people knew that the contract could not be fulfilled except by another entity that was prepared to incur the outgoing of the purchase price of the almond hulls and then the cost of the delivery under the existing contracts. Therefore, the benefit to be assigned to Whites Hill was conditional upon Whites Hill accepting the burden of the supply contract and so the benefit and the burden were relevant to each other and were interdependent. Otherwise, there was no point at all in the assignment.

7. For those reasons, I consider that the usual contractual rule in relation to the benefit and the burden of a contract not being assignable does not apply. I consider that the general rule of contract that contractual duties or burdens may not be assigned, does not have application in this situation. I consider that the peculiar factual circumstances of this matter where the assignee has taken the benefit and the burden of the contract means that the general rule has no application. That view is easily tested as a matter of fact. In order to obtain the assigned benefit, it was necessary for Whites Hill to fulfil the contract. It attended to the collection and payment for the almond hulls and for the payment of the carrier Bozzi & Co Bulk Transport of the product to the NSW and Queensland destinations. It follows that it is not possible to reach any other conclusion but that this was an exception to the general rule having regard to the facts of this matter.

8. I have earlier indicated that on common law principles, the sale under the NSW contract took place as early as 5 March 2014 when the product left the silo of Almond Co in the transport provided by Bozzi & Co Bulk Transport. If I am correct about that finding, then the question of the assignment of the benefit and burden of the contract takes on a particular significance. If the benefit had been previously assigned by Sapphire, then Sapphire was not in a position to execute the assignment document. That is because Sapphire, and Whites Hill, would have been aware of the interdependence of the benefit and burden under the assignment agreements. It may be accepted that no one would have been more aware than Mr Strauss of the banking arrangements with NAB and therefore that Mr Strauss would have or should have been aware when acting in both roles that Whites Hill was accepting the burden of the contract. But if the assignment to NAB was valid it could obtain no benefit under that contract. However unfair that seems, it is a product of the arrangements made by Mr Strauss. Mr Strauss is the very person who should have been aware of the banking arrangements with NAB, the assignment of present and future receivables to NAB and the inadvisability of entering into an assignment agreement which obliges the assignee to accept the burden previously required to be fulfilled by the assignor but with no prospect of recouping the benefit, namely the contract amount payable by the recipient of the goods at the farm gate. I cannot think that these circumstances may be said to operate harshly against the interest of Whites Hill. That is because it was incumbent upon Whites Hill to be aware of the recoverability of any benefit for which it accepted a burden. It accepted a burden to fulfil two contracts but certainly in respect to one of them, the NSW contract, the assignment agreement with NAB arguably already applied to the receivable payable under the NSW contract from the date of sale which was, at the latest, 5 March 2014. This was the day before Whites Hill executed its assignment agreement in relation to that contract.

9. The learned Magistrate made findings in relation to the operation of s 181 CA. That section reads as follows:

   Good faith--civil obligations

   Good faith--directors and other officers

   (1)    A director or other officer of a corporation must exercise their powers and discharge their duties:

   (a)in good faith in the best interests of the corporation; and

   (b)for a proper purpose.

   (2)    A person who is involved in a contravention of subsection (1) contravenes this subsection.

10. The provision reflects the common law requirement for a director to exercise the powers and discharge duties of the office of director in good faith in the best interest of the corporation and for a proper purpose. Any person involved in the contravention also contravenes the sub-sections.

11. It also appears that, at least indirectly, the learned Magistrate formed the view the Mr Strauss had, in bringing about the assignments, breached s 180 CA. That section reads as follows:

    Care and diligence--civil obligation only

    Care and diligence--directors and other officers

    (1)    A director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they:

    (a)were a director or officer of a corporation in the corporation's circumstances; and

    (b)occupied the office held by, and had the same responsibilities within the corporation as, the director or officer.

    Business judgment rule

    (2)    A director or other officer of a corporation who makes a business judgment is taken to meet the requirements of subsection (1), and their equivalent duties at common law and in equity, in respect of the judgment if they:

    (a)make the judgment in good faith for a proper purpose; and

    (b)do not have a material personal interest in the subject matter of the judgment; and

    (c)inform themselves about the subject matter of the judgment to the extent they reasonably believe to be appropriate; and

    (d)rationally believe that the judgment is in the best interests of the corporation.

    The director's or officer's belief that the judgment is in the best interests of the corporation is a rational one unless the belief is one that no reasonable person in their position would hold.

    (3)    In this section:

    "business judgment " means any decision to take or not take action in respect of a matter relevant to the business operations of the corporation.

12. Under s 1317E CA, if the Court is satisfied that a person has contravened ss 180(1) and 181(1) and (2) CA it must make a declaration of contraventions. Under s 1317E(2) CA any declaration of contravention made by the Court must specify the Court that made the declaration, the civil penalty provision that was contravened, the person who contravened the provision, the conduct and if the contravention is of a corporate/scheme civil penalty provision – the corporation or registered scheme to which the conduct related. Under s 1317F CA, a declaration of contravention is exclusive evidence of the matters referred to in sub-section 1317E(2) CA. Under s 1317G CA the Court may order a person to pay the Commonwealth a pecuniary penalty of up to $200,000 if:

    (a)   A declaration of contravention by the person has been made under s 1317E; and

    (aa) The contravention is of a corporation/scheme civil penalty provision;

    (b)  The contravention:

    (i)    Materially prejudices the interest of the corporation or scheme, or its members;

    (ii) Materially prejudices the corporations ability to pay its creditors;

    (iii)   Is serious.

13. Under s 1317G(1A) CA a Court may order a person to pay the Commonwealth a pecuniary penalty of the relevant maximum amount.

14. As will be apparent from the above discussion, the references to any judicial body in ss 180, 181, 1317E, 1317F and 1317G are to a “Court”. That reference follows the definitional provision of s 58AA CA. That section reads as follows:

    (1)    Subject to subsection (2), in this Act:

    "court " means any court.

    "Court " means any of the following courts:

    (a)    the Federal Court;

    (b)    the Supreme Court of a State or Territory;

    (c)    the Family Court of Australia;

    (d)    …

    (2)    Except where there is a clear expression of a contrary intention (for example, by use of the expression "the Court"), proceedings in relation to a matter under this Act may, subject to Part 9.6A, be brought in any court.

15. It is apparent from the forgoing that any claim to be made in relation to any breach of ss 180, 181 or in respect of such breaches, for the civil consequences of contravening civil penalty provisions under Part 9.4B CA must be brought in either the Supreme Court, the Federal Court or another Court as defined in s 58AA CA. The Magistrates Court had no power to make any orders about any alleged breach of ss 180, 181 CA or in respect of any civil penalty provision under Part 9.4B CA. Similarly this court has no such jurisdiction. No orders could be made. Insofar as the learned Magistrate purported to rely upon those provisions, the learned Magistrate fell into error.

16. The High Court has on a number of occasions discussed whether a director is required to have the interest of creditors in mind when making decisions as a director of a corporation. The general rule is now very well settled and may be stated as follows:

    1.In general, directors do not attract any liability for a company’s breaches of its contract.[27]

    2.Directors do not owe a duty to a company’s creditors: Spies v R.[28]

    3.Director’s duties under the Corporations Act and at general law are owed to the company. This is the case notwithstanding the business activities of that company.[29]

    [27]   Fergus v Wilson (1866) LR2ChApp 77 at 89 per Cairns LJ.

    [28] (2000) 201 CLR 603 at [93]-[95].

    [29]   Young v Murphy [1996] 1 VR 793 at 301.

17. It follows that, to the extent that the learned Magistrate relied upon a principle that a director owes a duty to a company’s creditors, the learned Magistrate fell into error.

18. In the High Court Decision in Spies v R at [93], the plurality said the following on the topic of whether the Court should find that such a duty, simplicter, is recognised:-

    … to give some unsecured creditors remedies in an insolvency which are denied to other creditors would undermine the basic principle of pari passu participation by creditors.

19. At [94]-[95], the plurality held as follows:

    [94] In Re New World Alliance Pty Ltd; Sycotex Pty Ltd v Baseler,[30] Gummow J pointed out:

    It is clear that the duty to take into account the interests of creditors is merely a restriction on the right of shareholders to ratify breaches of the duty owed to the company. The restriction is similar to that found in cases involving fraud on the minority. Where a company is insolvent or nearing insolvency, the creditors are to be seen as having a direct interest in the company and that interest cannot be overridden by the shareholders. This restriction does not, in the absence of any conferral of such a right by statute, confer upon creditors any general law right against former directors of the company to recover losses suffered by those creditors … the result is that there is a duty of imperfect obligation owed to creditors, one which the creditors cannot enforce save to the extent that the company acts on its own motion or through a liquidator.

    [95] In so far as remarks in Grove v Flavel[31] suggest that the directors owe an independent duty to, and enforceable by, the creditors by reason of their position as directors, they are contrary to principle and later authority and do not correctly state the law.

    [30] (1994) 51 FCR 425 at 444-445.

    [31] (1986) 43 SASR 410.

20. Therefore, such duty as exists is a duty of imperfect obligation. There is no right conferred by statute except in respect of an action to be taken against a director for allowing a company to trade whilst insolvent. In this instance, there seems little doubt that at the time of the assignments, Sapphire was insolvent. Ordinarily, the rights to be exercised by creditors would need to be exercised through a liquidator or any other authorised person or entity in respect of the trading of the company. There is no evidence before the court on this topic. All that can be said is that the evidence expressly or impliedly discloses that Sapphire was insolvent or nearing insolvency at the time of the assignments. At that time the creditors were seen to have a direct interest in the company which could not be overridden by shareholders but that does not convert to a right in the creditors to bring some general law action against Mr Strauss as a director.

21. However that is not the end of the matter. I consider that this court, as well as the Magistrates Court, had the jurisdiction at common law and in equity in relation to the observation (or otherwise) by Mr Strauss of his fiduciary obligations to Sapphire. It is first necessary to identify the rules of equity which apply and then to analyse those rules under specific headings. It is to those matters to which I now turn. The learned authors of the text “Company Directors Principles of Law and Corporate Governance”[32] at paragraph 8.4 say as follows:

    [32]   The Honourable R P Austin, H A J Ford and I M Ramsey, Lexis Nexis Butterworths Australia 2005.

    … there are five closely related rules administered by equity, which have an application to conflict of interest on the part of company directors and senior officers:

    1.   The conflict of interest rules:

    The director/officer must not, in any matter falling within the scope of his or her office, have an interest that conflicts or may possibly conflict with his or her duty to the company, except with the company’s fully informed consent;

    2.   The conflict of duties of rules:

    The director/officer must not, in any matter falling within the scope of his or her office, have an inconsistent engagement with a third party, except with the company’s fully informed consent;

    3.   The misappropriation rules:

    The director/officer must not misappropriate the company’s property for personal or a third party’s benefit;

    4.   The profit rule:

    The director/officer must not misuse his or her position for personal or a third party’s possible advantage, except with the company’s fully informed consent and, therefore, he or she must account to the company for any gain made in connection with the fiduciary office;

    5.   The business opportunity rule:

    The director/officer (at least if engaged full time in the service of the company) must not divert any profit making opportunity, in the same line of business as the company’s present or prospective business, to himself or herself or to some other person, except with the company’s fully informed consent.

1. As probably appears quite obvious, the rules, almost by definition, potentially overlap with each other. An obvious example is the conflict of interest rule, the misappropriation rule and the profit rule. All of these rules apply to company directors. They also apply to de facto and shadow directors and senior executives who are not directors, corporate officers as a whole and employees generally. These principles have a wider application than merely directors. It therefore is of no consequence that, in this case, Mr Strauss may or may not have been a director of Whites Hill. As an executive, he was plainly engaged in the business of Whites Hill at the time that he made a decision as a director of Sapphire to cause Sapphire to enter into the assignments. The general law fiduciary rules which apply to all directors and executives abovementioned are the conflict of interest, conflict of duty, misappropriation and profit rules. These apply to directors and de facto directors. The conflict of interest and conflict of duty rules apply to alternate directors while those persons are acting as directors and the business opportunity rule appears only to apply to full time executive directors. However, it is clear that all of the rules apply to senior non-director executives who occupy a fiduciary position.[33]

   [33]   Canadian Aero Services Ltd v O’Malley (1973) 40 DLR (3d) 370.

2. The contracts made by Sapphire were plainly enough an asset of Sapphire. Upon delivery, they would have generated a profit for Sapphire. In the absence of any evidence about whether National Australia Bank had continued to fund Sapphire through an overdraft or some other financing facility, it is impossible to know whether the whole of the receivable payable under the New South Wales and Queensland contracts would have been received by National Australia Bank. I consider that the greater likelihood is that National Australia Bank had ceased to provide funding to Sapphire. A clear inference arises on the balance of probabilities that the failure of the funding arrangements with National Australia Bank was the genesis of the creation of the assignment agreements. If Sapphire could not obtain sufficient credit to enable it to purchase the raw materials for supply under the two contracts, then Sapphire would obtain no benefit through the contracts. They would be lost. Before that occurred, Whites Hill was incorporated, the assignments took place and Whites Hill, through other funding arrangements, attended to the completion of the obligations of Sapphire under the contracts.

3. Even though that be the case, Mr Strauss was not in a position where he could take the company property, namely the supply contracts, and then apply it for his own personal benefit or the benefit of any other legal entity without the authority of Sapphire. The other legal entity to which the company property was applied was Whites Hill. There is no evidence before me that the company Sapphire authorised this appropriation of its property in a resolution at a general meeting. I do not think it is of any consequence that Mr Strauss may have been the only director and guiding hand and mind of Sapphire. It would still have been necessary for the formality of the resolution of the company to be achieved in order for the asset to be appropriated to Whites Hill. It follows that it is plain that through the actions of Mr Strauss, Whites Hill has misappropriated the contracts belonging to Sapphire and in so doing, it is also open to the court to find that Mr Strauss had breached his fiduciary responsibility by the misapplication of the company property of Sapphire. This breach would expose those persons in breach to an obligation to account for profit.

4. An example of such a situation is the decision in Mordecai v Mordecai.[34] In that case two brothers conspired to ensure the estranged wife of their brother Joseph would not have any claim upon company assets. They transferred the business of the company to the two brothers and then transferred that business to a new company in which their brother would have no shares. The plan was not implemented before the brother died. After the death of the brother, the two surviving brothers implemented the plan and transferred the business to themselves. In an action by the beneficiary of the deceased brother’s estate, the court held that the two surviving brothers had committed a breach of their fiduciary duties. That judgment was upheld in the Court of Appeal of New South Wales. The Court of Appeal confirmed that the plan was put into effect by the two surviving brothers by merely closing down one company’s business and starting an equivalent business at the same premises and with the same telephone number. They told suppliers and customers that they would after that time be conducting the business. The court rejected the argument that the surviving brothers were doing no more than competing with the company. The court found that the surviving brothers had treated the company’s business as their own to be disposed of for their own private purposes and as they thought fit. This was an example of those directors misappropriating their company’s property in breach of duty.

   [34] (1988) 12 NSWLR 58; 12 ACLR 75.

5. I have earlier said that a fiduciary may not misapply a company’s property without authority. Ordinarily, it would be necessary for a director who is appropriating company property for the benefit of himself or herself or for another person to obtain the fully informed consent of the company in a general meeting. This principle has been extended to make the director accountable for any profit derived in connection with the fiduciary office without that consent. This is called the profit rule.[35] These rules operate to prevent a director from engaging in some other business activity even in competition with the company’s business. This also means that the director may not use the confidential information belonging to the company. The directors may not divert business opportunities away from the company for their own or someone else’s benefit.[36]

   I earlier referred to a clear inference arising on the facts of this matter that Sapphire did not have the credit resources available to it to pay for the almond hulls at the supply point. There is no evidence that National Australia Bank had continued to make its funding arrangements available to Sapphire. Inferentially the evidence points clearly to a withdrawal of NAB’s funding arrangements. This is the usual consequence of the financial position of a company such as Sapphire. Even then, Mr Strauss was not in a position where he was entitled to divert that business opportunity in which Sapphire had an interest. Even if that impediment to the fulfilment of the contractual obligations by Sapphire could not be removed, the directors could not take advantage of that corporate opportunity.[37]

   [35]   Cook v Deeks [1916] 1 AC 554.

   [36]   Chan v Zacharia (1984) 154 CLR 178 at 198.

   [37]   Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134.

6. This approach is reflected in the comparatively early High Court decision in Furs Ltd v Tomkies.[38] Tomkies was the managing director of Furs. He negotiated the sale of the company’s business to the promotor of a new company yet to be formed. The new company wanted to employ Tomkies and he approached the chairman of Furs who advised that he should make the best arrangements for himself. The High Court held that Tomkies was accountable for his benefits to Furs even though it was not clear that Furs had in fact suffered any loss by Tomkies actions.[39] It has been suggested that this decision and others like it operate harshly upon someone like Mr Tomkies because he made a disclosure to the managing director of Furs.

   [38] (1936) 54 CLR 583.

   [39]   See also Gemstone Corp of Australia Ltd v Grasso (1994) 13 ACSR 695 at 702 per Prior J and Chan v Zacharia at 204-5.

7. Any doubt about the positon appears to have been resolved by the High Court decision in Warman International Ltd v Dwyer[40] where the High Court held, in a joint judgment, that:

   It is no defence that the plaintiff was unwilling, unlikely or unable to make the profits for which an account is taken.[41]

   [40] (1995) 182 CLR 544.

   [41] Ibid at 558.

8. This approach was applied by Spigelman CJ in Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd.[42] In this case two of three directors of a family company that operated a large private bus business obtained a profitable bus services contract for another company owned and controlled by them. At 692, Spigelman CJ said as follows:

   The issue is not whether the beneficiary – relevantly the company entitled to the opportunity – would or even could, otherwise have availed itself of that opportunity. Equity is concerned with the protection of the fiduciary relationship and frequently does so with a strictness which has a consequence that the errant fiduciary must account for profits which the beneficiary would never have obtained (see Furs v Tomkies at 592) e.g. by reason of a legal disability or an insufficiency of funds (e.g. Regal (Hastings) v Gulliver.

   [42] (2001) 37 ACSR 672.

9. The rule applied by Spigelman CJ in Fexuto following the decisions of the High Court in Warman and Chan operates arguably harshly towards the defaulting fiduciary. It means that the fiduciary must account for the benefit that the beneficiary could not otherwise have obtained. It may be thought that there is a level of unfairness in the application of that rule. Properly considered, that “harsh” approach is fully justified because the interests of equity is to protect the fiduciary relationship. If it were otherwise the principle would be bedevilled with exceptions, none of which could be sufficiently defined or curtailed in their operation so as to leave the principle intact.

10. The courts have ameliorated the harshness of the rule by applying the maximum “he who seeks equity must do equity”. It is necessary to discuss the application of that principle in the context of the equitable remedy of account of profits. Under this remedy, any gain made by the holder of an equitable obligation such as Mr Strauss or any entity connected with him may represent merely the product of the efforts of Mr Strauss/Whites Hill in obtaining funding and completing the obligations under the contracts. I consider that doing equity in such a situation would require consideration of a number of matters in the taking of accounts in relation to those profits. For example, it is usually thought that some form of just allowance for the skill and efforts of the fiduciary must be taken into account. In exercising its equitable jurisdiction the Court ordinarily leaves itself with significant room as to how it would assess the benefit of such an allowance. It is described as “everything which the court thinks just and proper”.[43] In Warman International[44] the High Court held:

    Whether it is appropriate to allow an errant fiduciary a proportion of profits or to make an allowance in respect of skill, expertise and other expenses is a matter of judgment which will depend on the facts of the given case. However, as a general rule, in conformity with the principle that a fiduciary must not profit from a breach of fiduciary duty, a court will not apportion profits in the absence of an antecedent arrangement for profit-sharing but will make allowance for skill, expertise and other expenses.

    [43]   Lord Provost of Edinburgh v Lord Advocate (1879) 4 AppCas 823 at 839 per Lord Hatherley; cf in Phipps v Boardman [1964] 1 WLR 993 at 1018 Wilberforce J ordered that an allowance be made for the effort, skill and industry of the completely honest defaulting fiduciary. His Lordship made that allowance on a liberal scale.

    [44]   Supra, at 562

11. There may be some cases where the breach of duty is so serious that no allowance would be made. This would involve dishonesty and serious fraud on the part of the fiduciary.[45] Similar views were expressed by Deane J in Chan v Zacharia.[46]

    [45]   Estate Realties Ltd v Wignall (1992) 2 NZLR 615 per Tipping J.

    [46] (1984) 154 CLR 178 at 204-205.

12. Despite the seriousness of the conduct of Mr Strauss I am satisfied that the conduct of Mr Strauss has not been so dishonest as to amount to a serious fraud thereby forfeiting any right to a just allowance. Also, a just allowance would be made for “… skill, expertise and other expenses… (my emphasis)” That is assessed according to what the court thinks is just and proper. I earlier mentioned that an inference was available on the whole of the material before the court that Sapphire was bereft of assets, working capital and bank credit which may have otherwise enabled it to fulfil the New South Wales and Queensland contracts. Those circumstances have the usual hallmarks of the insolvent company. At the time that the contracts were fulfilled, it was necessary to obtain the raw materials and then pay for the freight to the farm gate under both contracts.

13. I consider that it is appropriate to make an allowance in favour of the defendant as the beneficiary of the breach of fiduciary duty, it being a legal entity knowingly concerned in the breach, for the cost of supply and the cost of freight for the contracts which have been assigned to it. I would not make any other allowance. I turn now to those issues. I consider that the correct approach is that the position of Strauss and Whites Hill must be considered together because Whites Hill was knowingly concerned with the breach of fiduciary duties. Insofar as I later discuss the position of Strauss in this context, that discussion will automatically include the position of Whites Hill.

14. My approach here is to make an assessment in relation to both contracts. It will later be necessary to make final orders. I use this approach in the event that I am wrong in the view I have formed about the assignments. There are a number of documents which provide the details of the costs incurred by Whites Hill in purchasing the almond hulls. A document entitled “Payment Advice” with the River City Grain header and the payment advice number EFT000016 lists the number of orders made by River City Grain to Almond Co Australia Ltd. A first highlighted order shows that 34.96 tonnes of almond hulls at a rate of $18 per tonne under a contract dated 5 March 2014. The total price is $692.21 (including GST). This price is reflected in a document entitled “Tax Invoice and Adjustment Note” sent by Almond Co Australia which provides the details of a number of orders made by Whites Hill. The relevant tax invoice is numbered 76571 and dated 17 March 2014. The content of that document is consistent with the order and showing a total contract price of $692.21.

15. There is also a second highlighted order on the document entitled “Payment Advice”. It shows that 31.76 tonnes of Almond Hulls at the rate of $25 per tonne were supplied under a contract dated 11 March 2014. The total contract price was $873.40. There is a second “Tax Invoice and Adjustment Note” sent by Almond Co Australia Ltd to Whites Hill numbered 76572 also dated 17 March 2014. It charges a total supply price of $794.

16. A further document entitled “Supplied Account Payment History” provided by Almond Co Australia Ltd shows details of two corresponding payments being made by the same EFTPOS payment with the reference number EFT000016. I am therefore satisfied that Whites Hill has made payment for the almond hulls.

17. The almond hulls were required to be transported to the farm gate. That transport was carried out by Bozzi & Co Bulk Transport under invoice number INV-0005355 and dated 5 March 2014. This relates to transport of 35.06 tonnes of almond hulls from Almond Co to Glen Innes at the rate of $210 per unit. The total freight price was $7,362.60 plus GST for a total price of $8,098.86. This amount was paid by Whites Hill and that payment is recorded in the Bozzi & Co Bulk Transport payment advice numbered EFT000005. That invoice also provides that 31.76 tonnes of almond hulls was transported from Almond Co to Biggenden Queensland at a rate of $272 per unit totalling $8,638.72 plus GST, in total $9,502.59. The payment of this invoice was confirmed in the payment advice document addressed to Bozzi & Co Bulk Transport from River City Grain number EFT000091 stamped with a payment dated 8 May 2014. The document entitled “Carrier Account Payment History” (V & E Bozzi & Co Pty Ltd) discloses that a payment was made with reference number EFT000091 for the amount of $8,098.86 on 8 May 2014. The second payment with reference EFT000158 for the amount of $9,502.59 was made on 3 June 2014. Therefore, in relation to the New South Wales contract the total charges incurred were $8,791.07. In relation to the Queensland contract the total charges incurred were $10,375.99.

18. Whites Hill then made a charge upon the purchaser for the supply of these two contracts. A tax invoice numbered 000016 dated 13 March 2014 provides that All Commodities Pty Ltd owed $11,074.71 including GST to River City Grain for delivering 31.76 tonnes of Almond Hulls to Biggenden Queensland. A further tax invoice numbered 000004 dated 7 March 2014 disclosed that All Commodities Pty Ltd owed $9,834.33 including GST to River City Grain for delivery of 35.06 tonnes of almond hulls to Glen Innes New South Wales. The profit assessable in relation to the New South Wales contract is the difference between $9,834.33 and $8,791.07 namely $1,043.26. The profit made in relation to the Queensland contract is achieved by deducting $10,375.99 from $11,074.71, namely $698.72. Those two amounts disclose the profit made by Mr Strauss or an entity associated with Mr Strauss who was knowingly concerned in the breach of Mr Strauss of his fiduciary duties. The total amount of that profit is in the sum of $1,741.98.

19. Under the authorities, I may make an allowance for what I have earlier described as amounts for skill and expertise and other expenses. The other expenses (apart from those already discussed) would include overheads as well as direct costs. I am not satisfied on the evidence that those overhead expenses are sufficiently discernible nor am I satisfied that they may not have been otherwise incurred in any event. In the exercise of my discretion, I do not think it is just and proper to make any allowance for those expenses, if they were incurred. And it must be recalled that in such an assessment, the burden falls upon Mr Strauss as a fiduciary in breach of duty to prove that no loss has been suffered by Sapphire as a result of the breach of fiduciary duties.[47] This same burden falls upon Whites Hill for being knowingly concerned in the breach. Accepting that the burden of disproving damage in equity falls upon Mr Strauss and Whites Hill, there is no evidentiary basis before the court to make any findings except that Mr Strauss and Whites Hill have proved that no assessable loss has been suffered by Sapphire. This finding is confined only to the transactions which are the subject of this decision. The position may well be otherwise if the whole of the conduct of Mr Strauss and Whites Hill was taken into account vis-à-vis Sapphire but that issue is not before this court.

    [47]   Re: Dawson (dec,d) (1966) 84 WN (Pt1) NSW 399 at 404-405 per Street J.

20. It becomes necessary to “draw the threads” together of these reasons. I have discussed the possibility that NAB may have some claim to the fund. There are no documents before me to explain how that interest of NAB may arise. I have also identified that Mr A.C. Matthews, in his capacity as a company administrator or deed administrator under the Corporations Act (of Sapphire Pty Ltd) has claimed an interest. It was likely that Mr Matthews would not press any claim to the fund if there was a prior claim to it that, on any basis, was superior to his claim as administrator or deed administrator. The unsatisfactory position reached is that the court has not heard from NAB or from Mr Matthews. As a result, I published judgment No 1 in this matter. I found that the respondent All Commodities Pty Ltd may properly be treated as being in a position of an interpleader. I gave directions for a notice to be given to NAB and to Mr Matthews that if they wished to make a claim against the fund, to be paid into court by All Commodities Pty Ltd, notice should be given and the court would make specific directions for filing of points of claim and points of defence in this proceeding. I required a form of notice to be sent to NAB and to Mr Matthews. The notice was in the following form:-

    Notice

    1.   In this proceeding, Whites Hill Pty Ltd trading as River City Grain Co claim against All Commodities Pty Ltd for payment of the sum of $23,143.37 for the supply of almond hulls in March 2014 under two contracts made between All Commodities Pty Ltd and Sapphire Pty Ltd trading as River City Grain Co.

    2.   The two contracts for the supply of product that were made between Sapphire Pty Ltd trading as River City Grain Co and All Commodities Pty Ltd were dated in or about February and March 2014.

    3.   The total purchase price payable under the two contracts by All Commodities Pty Ltd is in the sum of $23,143.37 (the receivable fund).

    4.   By deeds of assignment both dated 6 March 2014, Sapphire assigned to Whites Hill, now trading as River City Grain Co the benefit and the burden of the two contracts.

    5.   In March 2014 Whites Hill discharged the supply of product obligations under the two contracts at its own cost and then sought payment to it of the contract price from All Commodities which has, since that time, refused to make any payment to Whites Hill.

    6.   By letter dated 19 March 2014, the receivers of Sapphire appointed by the secured creditor NAB gave notice of a claim to the benefit payable under the two contracts. The receivers allege that under certain financing arrangements between Sapphire and NAB, Sapphire had assigned to NAB the benefit of any present or future receivable owned by Sapphire.

    7.   On 14 March 2014 Anthony Christopher Matthews was appointed company administrator of Sapphire. In or about April 2014 Mr Matthews informed the parties of his interest in the receivable funds as company administrator.

    8.   The receivers and managers of Sapphire allege that the receivable payable by All Commodities is the property of NAB and that it should be paid to the receivers and managers.

    9.   All Commodities refused to pay the contract price to Whites Hill and has not paid that contract price to any other person or entity.

    10.   By action number ELCCI-14-13909 in the Magistrates Court in Elizabeth, South Australia, Whites Hill commenced a proceeding against All Commodities alleging that All Commodities was indebted to it in the amount of $23,777.00

    11.   All Commodities defended the action and pleaded that it was not indebted to Whites Hill; that its contract had been made with Sapphire; that it had not received notice of any assignment of contract between Sapphire and Whites Hill; and that there was no privity of contract arising between it and Whites Hill.

    12.   The Magistrates Court dismissed the claim of Whites Hill. Subsequently Whites Hill sought a review in this Court of the decision of the Magistrate.

    13.   The District Court of South Australia has heard the application for a minor civil review brought by Whites Hill.

    14.   NAB and Mr Matthews were not joined to the proceedings by any party and no application was made by them or either of them to be joined to these proceedings.

    15.   NAB and Mr Matthews have not made any binding compromise in respect of any claims which they have or claim to have upon the sum of $23,143.37.

    16.   All Commodities is in the position of an interpleader and disclaims any interest in the said sum.

    17.   The Court has ordered that All Commodities pay into Court the sum of $23,143.37 together with the interest payable thereon at the rate of $6 per centum per annum from 11 March 2014 to date and continuing.

    18.   The Court orders that:-

    i.If so advised, by close of business on 27 January 2017, NAB, Mr Matthews or either of them shall inform the Court in writing of any claim for payment of the said sum made by them, the basis of such claim, the documents supporting such claim and their willingness to participate in a hearing before this Court to prove their entitlement to maintain such claim;

    ii.In the event a response is received from NAB, Mr Matthews or either of them as prescribed in clause 8(i) hereof, the Court shall conduct a directions hearing on Wednesday 8 February 2017 at 8.45am at which time it shall make orders for the filing of points of claim, points of defence and other ancillary orders including for a hearing date as early as possible thereafter for the disposition of any such claims.

    19.   In the event that NAB and Mr Matthews do not respond in writing by close of business 27 January 2017, or that alternatively they respond to the Court in writing and formally disclaim any entitlement to or any legal or equitable interest in the amount paid into Court, then this Court shall deliver judgment on the minor civil review on Friday 3 February 2017.

1. By letter of 20 January 2017, NAB by its solicitor responded to the notice. NAB referred to the matters discussed by me in judgment No 1 and announced that having regard to the sum in question, and the likely costs, it is not in the commercial interest of NAB to become involved in the District Court action. Also as expected, no response was received from Mr Matthews. I am satisfied that proper notice of Whites Hill’s claim had been given to the other two possible claimants to the fund. I am also satisfied that both of those potential claimants, NAB and Mr Matthews, have consciously made an election not to apply to be joined in the action or to argue for orders to be made for the determination of any right that they may claim in the fund. I am satisfied that this election has been made in circumstances where both of them are aware of the completing claim of Whites Hill and the interpleader status of All Commodities. I am also therefore satisfied that I may now pronounce a judgment on the entitlement of Whites Hill with the intention that this judgment fully and finally disposes of all and any legal, equitable or other entitlement to the fund paid into court by the interpleader.

2. In the absence of any competing claim, the only question that arises is the resolution of the issue of the assignment of the benefit and burden of the contract and whether there is any other competing claimant to the fund which has a priority to the claim of Whites Hill (SA) Pty Ltd. I turn to that issue. It is first necessary for me to identify that there are a multiple of issues that I am not required to decide in this judgment (which may otherwise have been required to be decided if NAB had acted differently). In no particular order they are as follow:-

   1. Whether NAB was a beneficiary of a charge and if so the proper categorisation of the charge as either fixed or floating;[48]

   2. Whether what has been granted to NAB constitutes an equitable charge or equitable mortgage or a hypothecation;[49]

   3. Whether what has occurred is an absolute assignment;[50]

   4. Whether the arrangements between Sapphire and NAB constitute an equitable charge;[51]

   5. Whether an equitable charge arises over funds arising from a promise to transfer proceeds of sale;[52] and

   6. Whether any form of trust arises in respect of the funds received from customers.[53]

   [48]   Agnew v Commissioner of Inland Revenue [2001] 2 AC 710; CPT Custodian Pty Ltd v Commissioner of State Revenue (VIC) (2005) 224 CLR 98; Austino Wentworthville Pty Ltd v Metroland Australia Limited (2013) 93 ACSR 297 at [62].

   [49]   Matheson Nominees Pty Ltd v Aerodevelopments Pty Ltd [2016] VSC 131 at [73]; see also EI Sykes and S Walker, The Law of Securities, 5th ed, Law Book Co 1993 page 197.

   [50]   Mango Boulevard Pty Ltd v Mio Art Pty Ltd [2016] QCA 148; compare Markets Nominees Pty Ltd v Commissioner of Taxation [2012] FCA 262 per Tracey J.

   [51]   Compare Palett Shoes Pty Ltd (in liq) v Crohn (1937) 58 CLR 1 and Matheson Nominees Pty Ltd v Aerodevelopments Pty Ltd (2016) VSC 131 and Roberts v Investwell Pty Ltd (2012) 88 ACSR 689.

   [52]   Lotteries Pty Ltd v Volteas [2015] VSCA 226.

   [53]   Korda v Australian Executor Trustee (SA) Limited (2015) 255 CLR 62 at [111]; compare Sino Iron Pty Ltd v Palmer (No 3) [2015] 2 Qd R 574.

3. It has not been necessary to resolve any of these matters because they do not arise between the parties to these proceedings. I consider that it is only necessary to resolve the issues arising in the proceedings. Those issues turn on the question of whether it is possible for Sapphire to have assigned the benefit and burden of the contracts of supply to Whites Hill. I am satisfied that such an assignment is both possible and has occurred in the circumstances of this case. I am also satisfied that Whites Hill has discharged the burden of the contract. In so doing, it has exercised skill and expertise and incurred expenses which I have discussed above.

4. In the calculations that I have done, I have identified a very small amount of gross profit which has been made from these contracts. The major costs of the contract was the transportation cost paid to Bozzi & Co Bulk Transport. It is not appropriate for me to attempt an assessment of the taxable income or the assessable income generated from the sales. There are too many variables which are unknown which prevents such an exercise being carried out.

5. What is clear is that when regard is had to the requirement to act with equity and good conscience I need to consider whether some part of the fund in court should be set aside for the benefit of another entity not before the court. For the reasons that I have already set out, I am satisfied that no such provision should be made. There is no practical utility in attempting to identify who could or should be the recipient of that fund. I consider that the appropriate order is to fully discharge the amount paid into court and then to consider the question of costs.

6. For the forgoing reasons, I consider that in making her final orders the learned Magistrate was in error. Under s 38(7)(d)(ii) I may rescind that judgment and substitute a judgment that I consider appropriate.

7. The judgment that I consider appropriate is in the following form:-

   1.    That the order and judgment made by the learned magistrate on 18 day of August 2015 are rescinded;

   2.    The whole of the monies standing to the credit of the District Court Suitors Fund in Action DCCIV-15-1257 including interest be paid to the plaintiff;

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