Youyang v Alexander
[2000] NSWSC 698
•20 July 2000
CITATION: Youyang v Alexander [2000] NSWSC 698 CURRENT JURISDICTION: Civil FILE NUMBER(S): SC 50083/99 HEARING DATE(S): 28/06/00, 29/06/00 JUDGMENT DATE: 20 July 2000 PARTIES :
Youyang Pty Limited as Trustee of The Bill Hayward Discretionary Trust - Plaintiff
Charles Delius Somerville Alexander and Others trading as Minter Ellison - DefendantsJUDGMENT OF: Brownie AJ at 1
COUNSEL : Mr A.S. Martin SC - Plaintiff
Mr I.M. Jackman/Mr T.M. Faulkner - DefendantsSOLICITORS: Carneys - Plaintiff
Mallesons Stephen Jaques - DefendantsCATCHWORDS: No question of principle LEGISLATION CITED: Fair Trading Act 1985
Trade Practices Act 1974 (Cth)
Wrongs Act 1950 (Victoria)CASES CITED: Re Dawson; Union Fidelity Trustee Company Limited v Perpetual Trustee Company Limited [1966] 2 NSWR 211 at 215
Target Holdings Limited v Redferns [1996] 1 AC 421 at 435, 436
O'Halloran v R.T. Thomas & Family Pty Limited (1998) 45 NSWLR 262 at 273-278
Wilkinson v Feldworth Financial Services Pty Limited (1998) 29 ACSR 642 at 752-754, 755-757
In Re Lewis; Lewis v Lewis [1904] 2 Ch 656
Hawkins v Clayton (1988) 164 CLR 539 at 553
Hedergen v Federal Commissioner of Taxation (1988) 84 akr 271 AT 281
Harmer v Federal Commissioner of Taxation (198o9) 91 ALR 550 at 559
Medlin v State Government Insurance Corporation (1995) 182 CLR 1 at 6-7
Marks v GIO Australia Holdings Limited (1998) 196 CLR 494 at 513-514DECISION: The plaintiff is entitled to judgment, for equitable compensation, in an amount which will yield $500,000 on 24 September 2003. I will adjourn the case for a short time for the plaintiff to bring in Short Minutes of Order giving effect to these reasons for judgment. The defendants should pay the plaintiff's costs.
THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LISTBROWNIE AJ
THURSDAY, 20 JULY 2000
50083/1999 - YOUYANG PTY LIMITED v ALEXANDER & ORS
JUDGMENT
HIS HONOUR:
1 The plaintiff is the trustee of a trust called The Bill Hayward Discretionary Trust. Mr Hayward and his wife are the directors of the plaintiff company, and in a practical sense Mr Hayward made all the presently relevant decisions. Generally speaking, he acted upon the advice of an accountant, Mr Fowler.
2 In 1993, through various companies and trusts that Mr and Mrs Hayward controlled, Mr Hayward was managing investments worth some $25m. Mr Hayward, having spoken to Mr Fowler, thought it appropriate that the plaintiff make the investment the subject of this litigation, recognising that it was speculative in nature, but thinking it appropriate to make such a speculative investment.
3 The plaintiff agreed to invest $500,000 in a company called EC Consolidated Capital Limited, conventionally referred to as ECCCL, pronounced to rhyme with “speckle”. The general scheme of the investment was that an investor such as the plaintiff would subscribe for 5,000 shares in ECCCL, each share having a par value of one cent, but issued at a premium of $99.99. The investor was required to deliver to the defendants, Minter Ellison Morris Fletcher, the solicitors for ECCCL, a bank cheque for $500,000 representing the whole of the subscription moneys. ECCCL was to use a significant part of that sum to purchase a Deposit Certificate, intended to give the investor a form of security. Another significant part of the investment moneys was to be used by ECCCL in dealing in securities on the “International Money Markets”, as defined; and the balance was to be used to pay certain nominated expenses.
4 The parties no doubt hoped to make money by dealing with securities on the International Money Markets, but it was expressly stated to be a speculative investment; and in the event all the money so used was lost. The litigation concerns the provisions relating to the Deposit Certificate. Generally speaking, the intention was to guarantee to an investor at least the return of the investor’s capital, $500,000, on the tenth anniversary of the completion of the investment contract, so that, even if all else failed, the investor would recover the whole of the original investment, although, of course, without interest, and probably subject to it having diminished in value with inflation over the ten year period. Broadly speaking, this was to be achieved by ECCCL procuring from Dresdner Bank AG, called “Prime Bank”, a “bearer” Deposit Certificate, the effect of which was that Dresdner Bank agreed to pay $500,000 to the bearer of the certificate, ten years later.
5 Out of the subscription moneys paid by the investor to the defendants, the defendants were to pay out a sufficient sum to enable the Deposit Certificate to be purchased; and the Deposit Certificate was to be held by National Registries Pty Limited, called the “Paying Agent”, to be held on behalf of the investor. That is, the investor’s security was to take the form that the Paying Agent would hold the Deposit Certificate on behalf of the investor during the ten year period, and would then present it to Dresdner Bank, for payment out for the benefit of the investor.
6 Matters went awry when the defendants paid $256,800, being apparently the sum appropriate to purchase a Bearer Deposit Certificate of the contractual description, but obtained instead a certificate showing that money had been deposited, but not being a Bearer Certificate. Some time later, ECCCL took steps which led to this certificate being replaced by another one, again not being a Bearer Certificate; and later still ECCCL managed to procure the payment to it of the money so deposited, and the whole of this money was lost to the plaintiff.
7 The defendants concede that they committed a breach of trust, when paying out the sum of $256,800, without obtaining a Bearer Certificate of Deposit, as defined in the Subscription Agreement; they concede also that they acted negligently and that their conduct in relation to the transaction breached the provisions of s.13 of the Fair Trading Act 1985 (Victoria), but they deny that the plaintiff suffered any loss, or alternatively the loss claimed; and they raise various other defences.
8 The relationship between the plaintiff and ECCCL was governed by the terms of the Subscription Agreement they made, dated 24 September 1993.
9 Clause 1.1 defined “Deposit Certificate” as meaning “the bearer certificate of deposit, guarantee or letters of credit drawn against and with full recourse to the Prime Bank to be lodged in accordance with clause 4 with the paying agent on the terms of the Paying Agency Agreement”.
10 The “Paying Agent” was defined as meaning “National Registries Pty Limited”, and “Paying Agency Agreement” was defined as meaning the agreement between the paying agent and ECCCL under which the Paying Agent would hold the Deposit Certificate.
11 “Put Option” was defined as meaning the agreement to be entered into between ECCCL and an unrelated third party under which the third party is required to arrange for the provision of the Deposit Certificate to be held by the Paying Agent in accordance with the terms of the Paying Agency Agreement.
12 “Prime Bank” was defined to mean “Dresdner Bank AG or any wholly owned subsidiary of Dresdner Bank AG”. In fact, the money was initially deposited with Dresdner International Financial Markets (Australia) Limited, which later changed its name to Dresdner Australia Limited, conventionally referred to in this case as DAL. It was a wholly owned subsidiary of Dresdner Bank AG.
13 “Company’s Solicitors” was defined as meaning Minter Ellison Morris Fletcher of Melbourne.
14 The following provisions of the agreement are now relevant:-15 The provisions of clause 7.3(d) were explained in an INFORMATION MEMORANDUM, issued by ECCCL, which Mr Hayward had read before deciding to make the investment:-
“2. SUBSCRIPTION FOR SHARES
2.1 The Investor on signing this Agreement will provide an unendorsed non negotiable bank cheque made payable to the Company’s Solicitors trust account for the aggregate of the Subscription Moneys … to be held in trust by the Company’s Solicitors in accordance with the provisions of this Agreement.
2.2 On Completion the Investor will subscribe for the Preference Shares at a par value of 1 cent per share each to be issued at a premium of $99.99 per share and the Company agrees to allot and issue to the Investor the Preference Shares in the capital of the Company.
2.3 The Company subject to the terms of this Agreement will use the Subscription Moneys in the following manner:
(a) procuring the provision of the Deposit Certificate as detailed in clause 3;
(b) paying expenses and commissions incurred by the Company relating to the subscription by the Investor under this Agreement details of which are set out in Schedule 2; and
(c) the balance to be applied to the working capital requirements of the Company to be used among other matters, for example, providing margin funds to lenders concerning the Company’s proposed borrowing of foreign currencies (physical or synthetic), funding purchases and investments in securities (such as bonds, bills of exchange etc) as International Money Markets (physical or synthetic), for the paying of option fees concerning the Company’s proposed dealing in paper and non paper currencies such as precious metals and for working capital reserves, overhead costs and operating needs generally.
3. DEPOSIT CERTIFICATE
3.1 Prior to Completion, from the funds provided by the Investor to the Company’s Solicitors pursuant to clause 2.1, the Company will procure the delivery of the Deposit Certificate. The Company has entered into the Put Option which provides, among other matters, for the delivery to the Paying Agent of the Deposit Certificate which complies with the requirements detailed in clause 3.2.
3.2 The Deposit Certificate must:
(a) be issued by the Prime Bank;
(b) have a maturity date which either corresponds to the Redemption Date or is no more than 14 days prior to the Redemption Date;
(c) have on its maturity date a value at least equal to the aggregate of the Subscription Moneys; and
(d) be deposited at Completion with the Paying Agent to be applied to the benefit of the holder of Preference Shares in accordance with the terms of the Paying Agency Agreement.
3.3 The Investor by his execution of this Agreement authorises the Company’s Solicitors prior to Completion to release that amount requested by the Company up to and not exceeding the Deposit Certificate Purchase Limit to be applied by the Company solely for the purpose of procuring the Deposit Certificate by way of the Put Option.
……..
4. COMPLETION
4.1 Completion will take place on that date nominated by the Company which must be within 21 days of the date of this Agreement and will take place at the Melbourne office of the Company’s Solicitors or any other place agreed in writing by the parties.
4.2 At Completion, the Investor will:
(a) give to the Company a duly executed application for the Preference Shares in the form of Schedule 3;
(b) provide written authorisation to the Company’s Solicitors in the form of schedule 4 to pay to the Company the aggregate of the Subscription Moneys after the purchase of the deposit Certificate under clause 3;
(c) provide to the Company details of the Investor’s tax file number.
4.3 At Completion the Company’s Solicitors from the funds held pursuant to clause 2.1 will pay to the Company the aggregate of the Subscription Moneys remaining after the provision of the Deposit Certificate.
4.4 At Completion the Company will procure that:
(a) the Preference Shares are allotted and issued to the investor;
(b) the Client Account Balance concerning the holder of the Preference Shares is initially credited with an amount equal to the Subscription Moneys;
(c) appropriate share certificates under seal detailing the allotment are delivered to the Investor; and
(d) the Deposit Certificate is delivered to the Paying Agent.
4.5 The Investor will not be obliged to complete the subscription for the shares under this Agreement and will be entitled to be refunded in full without deduction the moneys paid by the Investor under this Agreement if at Completion the matters set out in clauses 4.3 and 4.4 do not occur provided that the Investor has first complied with its obligations under clause 4.2.
4.6 The reference in clause 4.5 to ‘the moneys paid by the Investor under this Agreement’ will be deemed to mean either the cash paid by the Investor to the Company’s Solicitors pursuant to clause 2.1 or, if the Deposit Certificate has been purchased pursuant to clause 3, the balance of the cash held by the Company’s Solicitors pursuant to clause 2.1 after deducting an amount equal to the purchase price (including any brokerage or commission payable) of the Deposit Certificate together with the appropriate documents of title to the Deposit Certificate.
……
6. PROVISIONS FOR REDEMPTION
6.1 As a term of the Investor’s subscription for the Preference Shares the Company undertakes to procure that at Completion the Deposit Certificate which satisfies the requirements of clause 3.2 is delivered to the Paying Agent.
6.2 On the Redemption Date the holder of Preference Shares may present the Preference Share scrip with proof of identification to the Paying Agent who as the Company’s agent will redeem the Preference Shares from the maturity funds held by the Paying Agent (as a result of the maturity of the Deposit Certificate) and pay to the holder of the Preference Shares $100 for each redeemed share.
6.3 On redemption in accordance with clause 6.2 the Paying Agent is to notify the Company of the redemption of the Preference Shares and the Company will pay to the holder of the Preference Shares which are redeemed the Income Value applicable to that holder’s Client Account Balance.
6.4 In addition the early redemption of the Preferences may be permitted by the Company in accordance with Article 5 of the Articles.
7. ARTICLES OF ASSOCIATION
7.1 The Articles of the Company confer on a holder of A class preference shares in the capital of the Company, among other rights, obligations and limitations, the following:
…..
(d) As regards redemption: Redeemable in accordance Article 5 of the Articles (which is summarised in clause 7.3 of this Agreement).
…..
7.3 The Preference Shares and each of them are redeemable on the following terms:
…..
(d) after the expiry of 12 months from the date of issue of the relevant shares, if the Company receives a written request by the holder for the redemption of all of the shares held by the holder, the Company must within 30 days of receipt of that request, redeem all of the shares held by the holder.
…..”
16 The plaintiff appointed the defendants as its agents, for the purpose of attending to completion of the Subscription Agreement. In admitted breach of various duties, the defendants obtained a certificate from DAL dated 24 September 1993, addressed to ECCCL, in the following form:-
“After the expiry of 12 months from the date of issue of the relevant shares, if the Company receives a written request by the holder for the redemption of all the shares held by the holder, the Company must within 30 days of receipt of that request, redeem all of the shares held by the holder. In this case, the Company will pay to the holder of the shares which are to be redeemed the amount equal to the then balance of the holders’ Client Account Balances, applicable to the “A” class preference shares to be redeemed less a discount of 20% of the Income Value attributable to those Client Account Balances.”
“We confirm your deposit with us value 24 September 1993.
Our Ref : 600
Dealt date : 24 September 1993
Principal : AUD 256,800 (banked into our
account with BNZ Melbourne
number 00035102)
Term : 10 years
Maturity 24 September 2003
At maturity we confirm repayment of AUD 500,000 representing principal of AUD 256,800 and interest of AUD 243,200.”
It is common ground now that this certificate did not answer the description of a “Bearer Certificate”, contained in clause 1.1 of the Subscription Agreement. In particular it was addressed to ECCCL. It is also common ground that, by reason of their prior involvement with transactions involving other investors, the defendants knew at the time that the certificate they obtained did not answer the contractual description. Nevertheless, the defendants attended to the completion of the agreement, and did not tell the plaintiff anything about this problem.
17 By letter dated 26 August 1994 from ECCCL to the plaintiff, ECCCL asked the plaintiff to execute a Deed Poll authorising ECCCL to withdraw the money deposited with DAL, and to deposit that money with “such other Prime Bank that [ECCCL] might decide”, and varying the definition of “Prime Bank” in the Subscription Agreement so that it now meant “a bank as nominated in writing by [ECCCL] from time to time which is Investment Grade”, and there followed a definition of “Investment Grade”. In brief, it meant a bank rated by ratings agencies as equivalent to Dresdner Bank AG or any of its wholly owned subsidiaries.
18 The letter explained the request in terms of securing a possible tax advantage: interest earned by DAL might attract withholding tax, but this possibility could be averted if the money were deposited with a foreign bank.
19 The plaintiff executed the Deed Poll, without obtaining independent advice, and returned it to ECCCL. ECCCL then withdrew the money deposited with DAL, and used it otherwise.
20 In the present litigation, the defendants rely upon these dealings, and on what happened in early May 1997, referred to below, both as denying a causal connection between their admitted breaches and the plaintiff’s loss, and as showing that the plaintiff did not rely upon the conduct of the defendants.
21 As to the events of 1994, the defendants point to the circumstance that what the letter of 26 August 1994 asked the plaintiff to do was to trust ECCCL to procure the uplifting of the Deposit Certificate then held by the Paying Agent, to withdraw the relevant funds from DAL, and then to reinvest those funds, outside Australia. The Deed Poll did not bind ECCCL, and there was no promise by ECCCL to procure a new Deposit Certificate answering the description contained in the Subscription Agreement.
22 By letter dated 2 May 1997, faxed by ECCCL to the plaintiff, ECCCL stated that it had not held Deposit Certificates, in the terms required by the Subscription Agreement, since either 1995 or March 1996 (the letter was evidently one of a circular nature, written to investors generally, but adapted for the plaintiff), and that ECCCL had lost substantial sums of money. As Mr Hayward said in cross-examination, when he read the letter he thought that ECCCL had gone “bottom up”.
23 On both of these occasions, 1994 and early May 1997, the plaintiff took no step to attempt to redeem its shares in ECCCL.
24 The defendants attacked the evidence of Mr Hayward, to the general effect that he relied upon the defendants, and that if he had at any time known that the Deposit Certificate which the defendants obtained was not a Bearer Certificate, answering the description contained in the Subscription Agreement, the plaintiff would have sought to redeem its shares in ECCCL. Virtually the whole of Mr Hayward’s evidence in chief consisted of two written statements. It is plain that they are the work of lawyers, using their language rather than his, and I accept the criticism of the defendants that those statements did not really attempt to deal with the objective facts occurring after the completion of the Subscription Agreement. In cross-examination, Mr Hayward was taken in detail through these various events, leaving him plainly discomforted and, I regret to say, unconvincing, so that I am obliged to say that I do not feel able to accept his evidence as to his state of mind. He was no doubt in a difficult situation, years after the relevant events, having to explain his state of mind from time to time, and in relation to a complicated transaction, but in the end, I conclude that his evidence is not reliable. In particular, I am not satisfied that, if Mr Hayward or the plaintiff had learned that the Deposit Certificate obtained did not correspond with the description contained in the Subscription Agreement, the plaintiff would have sought to redeem its shares in ECCCL.
25 A provisional liquidator was appointed to ECCCL on 28 May 1997, and it was ordered to be wound up on 15 July 1997. There was no money at all available to pay unsecured creditors, such as the plaintiff.
THE BREACH OF TRUST CASE
26 The defendants conceded that they acted in breach of trust, in accepting the certificate quoted above, obtained from DAL. However, they say that the plaintiff suffered no loss in consequence of that breach. They say that the loss suffered was a consequence of the failure of the plaintiff to act in 1994 or in early May 1997 to redeem its shares in ECCCL.
27 Unlike the position in other branches of the law, it has been accepted that, in relation to a claim based upon a breach of trust, the enquiry is whether the loss would have happened if there had been no breach: Re Dawson; Union Fidelity Trustee Company Limited v Perpetual Trustee Company Limited [1966] 2 NSWR 211 at 215, Target Holdings Limited v Redferns [1996] 1 AC 421 at 435, O’Halloran v R.T. Thomas & Family Pty Limited (1998) 45 NSWLR 262 at 273-278 and Wilkinson v Feldworth Financial Services Pty Limited (1998) 29 ACSR 642 at 752-754. In this case, the plaintiff contends and I accept that it sustained its loss on the date of completion, also 24 September 1993, when there was provided for its benefit, not a Bearer Deposit Certificate which effectively guaranteed it the return of its $500,000 in 2003, but another document which did not do that. Thereafter, the plaintiff was content to stand by, accepting the statements of ECCCL that the speculative investment was prospering, and willing to continue to take the benefits and risks of that speculative investment. What it lost was not its original investment, but this opportunity to be repaid $500,000 in 2003. That is, in the circumstances of this case, if there had been no breach, the plaintiff would have had the right to have its capital of $500,000 returned to it in 2003, but would have lost the rest of its investment.
28 The plaintiff contends that it is entitled to have the trust fund replenished, and it says that this “trust fund” is the amount of the original investment of $500,000, deposited by it with the defendants on or about 24 September 1993. The defendants contend that the appropriate relief to be granted is equitable compensation. The reasoning in Target at 433-435 seems to me to make it plain that the defendants’ submission on this point must be preferred.
29 On the unchallenged evidence of Mr Carter, this means that the measure of equitable compensation, at the date of judgment, will be approximately $410,000, and that it would be inappropriate to award any sum by way of interest, since this amount will represent the value at the date of judgment of $500,000 on 24 September 2003.
30 Next, the plaintiff contended that the defendants owed a duty to the plaintiff to inform it of their breach of trust. No authority was cited which actually supports the existence of such a duty on the part of a trustee, and the proposition does not seem to be sound in principle. The authorities cited seem to support the contention advanced by the defendants, that there is no such duty: In Re Lewis; Lewis v Lewis [1904] 2 Ch 656, Target at 436, Hawkins v Clayton (1988) 164 CLR 539 at 553, Herdegen v Federal Commissioner of Taxation (1988) 84 ALR 271 at 281, and Harmer v Federal Commissioner of Taxation (1989) 91 ALR 550 at 559.
THE NEGLIGENCE CASE
31 Again, the plaintiff contends that the defendant owed them a duty, this time a part of their duty of care, to inform the plaintiff that they had failed to procure a Deposit Certificate answering the contractual description. Again, the defendants deny the existence of such a duty. I do not find it easy to resolve this question, but proceed on the assumption that there was such a duty. If there was, it was admittedly breached.
32 On the above findings of fact, what the plaintiff has proved it lost as a result of the admitted negligence is limited to the present value of a proper Deposit Certificate, that is, it is entitled to be paid approximately $410,000, to put it in the position where it would have been but for the breach.
33 However, the defendants raise two further lines of defence, which are inter-related. First, they say that the plaintiff’s loss was not caused by the defendants’ negligence, and secondly, they say that the plaintiff was guilty of contributory negligence. Both propositions are based upon the plaintiff’s execution of the Deed Poll in 1994, and the surrounding circumstances.
34 The detailed facts going to these matters are summarised in the written submissions, but I think that they may be summarised quite briefly for present purposes. It is clear enough that by 1994 DAL had become suspicious about the activities of ECCCL, so that when ECCCL sought to withdraw the deposit money of the plaintiff, and of other investors in a generally smaller position, DAL took the stance that it would not permit the moneys, deposited for a period of ten years, to be withdrawn earlier without the consent of the various investors; and the plaintiff so consented when it executed and delivered the Deed Poll. The steps which DAL took were quite elaborate and unusual, and were, it seems, motivated by DAL’s suspicions about ECCCL, demonstrated by what happened later to have been well founded.
35 As to the causation issue, the test to be applied in a claim for damages for negligence is, of course, quite different to the test to be applied in relation to a claim for relief against a breach of trust. See generally Medlin v State Government Insurance Corporation (1995) 182 CLR 1 at 6-7. Approaching the question in this way, it seems to me that, as a matter of commonsense and experience, the defendants’ negligence did cause the plaintiff’s loss of the money deposited with DAL.
36 On the other hand, I think that the plaintiff was guilty of contributory negligence in executing and delivering the Deed Poll, and in dealing with the Deed Poll generally. Mr Hayward was no novice investor, and he was accustomed to acting on the advice of Mr Fowler; he read the letter from ECCCL of 26 August 1994 carefully; he understood that the effect of the proposed Deed Poll was to release the deposit moneys to ECCCL, and to discharge DAL from liability, without DAL being concerned with the application of the moneys so released; he understood that there was nobody supervising ECCCL in relation to the reinvestment of the money so released. He understood that the Deed Poll did not bind ECCCL; he merely expected that ECCCL would procure a Bearer Deposit Certificate from another banker; and he took no independent advice.
37 On the other hand, the defendants were solicitors, who undertook to represent the plaintiff on the completion of the Subscription Agreement, who were very familiar with the overall scheme, who knew that the Deposit Certificate obtained at the time of completion was not a Bearer Certificate, and who did not tell the plaintiff of these circumstances.
38 I consider that, in relation to the negligence claim, the plaintiff should bear twenty per cent responsibility for the loss.
THE FAIR TRADING ACT CASE
39 As already stated, the defendants admit that they breached the provisions of the statute, in that what they did amounted to conduct likely to mislead or deceive. They say, however, that this cause of action is time barred.
40 The relevant provisions of the statute mirror the more familiar provisions of the Trade Practices Act 1974 (Cth). Section 11 prohibits misleading or deceptive conduct; s.37(1) provides a remedy for a person suffering loss or damage “by” conduct infringing s.11; and s.37(2) provides that an action under sub-s.(1) “may be commenced at any time within three years after the cause of action accrued”. The action was commenced on 29 June 1999.
41 The plaintiff contended that the cause of action was not complete until the plaintiff ascertained or could reasonably ascertain that it was worse off than it would have been if it had not entered into the transaction. In my judgment, this argument fails. On the completion of the Subscription Agreement on 24 September 1993, the plaintiff effectively obtained a Deposit Certificate which did not answer the contractual description. The essence of other parts of the plaintiff’s case, which I accept, is that the document that the plaintiff effectively obtained then was different in nature to and less valuable than the Bearer Deposit Certificate contracted for. It follows that the cause of action was complete then: Marks v GIO Australia Holdings Limited (1998) 196 CLR 494 at 513-514.
42 Independently of this, I take the view that the plaintiff ought to have known no later than about the time of the execution and delivery of the Deed Poll (in 1994) that its money was not properly secured. It simply trusted ECCCL to reinvest the money, withdrawn from DAL, without taking any step at all to check the position. It could and should have made an appropriate enquiry.43 As already noted, the plaintiff appointed the defendants as its agents, for the purpose of completion of the Subscription Agreement. The plaintiff contends that there was a contract between the plaintiff and the defendants requiring the defendants to act in this way. The defendants deny that there was any such contract; and I agree. The plaintiff pointed to an account for $600 rendered by the defendants, and submitted that either the payment or the promise of payment of that sum constituted the consideration passing from the plaintiff to the defendants for their acting as agents for the plaintiff. However, the account is addressed to ECCCL, and there is no suggestion that the plaintiff promised to pay or did pay that sum or any part of it. The plaintiff paid the defendants the subscription moneys of $500,000, and no more. Further, the account, which was for the lump sum of $600, recites the doing of work done for ECCCL, and not for the plaintiff. In short, I conclude that the defendants acted as the plaintiff’s agent, but without there being a contract to that effect.
THE CONTRACT CASE
THE CONTRIBUTION ARGUMENT
44 In relation to the claim for breach of trust, the defendants contend that the compensation granted should be halved by reason of the fact that the beneficiaries of The Bill Hayward Discretionary Trust are entitled to compensation from the plaintiff; the defendants say that the plaintiff was guilty of a breach of trust. Assuming a breach of trust by the plaintiff, I do not think that it can be said that there were any co-ordinate liabilities to make good the one loss: the defendants are liable to the plaintiff, and the plaintiff is liable to the beneficiaries of The Bill Hayward Discretionary Trust. The principles were discussed by Rolfe J in Wilkinson v Feldworth Financial Services Pty Limited (1998) 29 ACSR 642 at 755-757. That case arose out of the same general investment scheme as the present case, although there are quite significant factual differences between that case and this case.
45 In relation to the claim under the Fair Trading Act, a generally similar argument was advanced, relying upon s.23B of the Wrongs Act 1950 (Victoria). For the reasons given by Rolfe J in Feldworth, I reject this contention.46 The plaintiff is entitled to judgment, for equitable compensation, in an amount which will yield $500,000 on 24 September 2003. I will adjourn the case for a short time to enable the evidence as to the precise sum needed, as at the date of judgment, to be brought up to date. I assume that the plaintiff is also entitled to judgment for a lesser amount, on its claim in negligence, but in the circumstances, that becomes academic. On the occasion when the matter is re-listed, the plaintiff should bring in Short Minutes giving effect to these reasons for judgment. Unless something is said to the contrary, the defendants should pay the plaintiff’s costs.
CONCLUSIONS
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