Zurich Bay Holdings Pty Ltd v Burton
[1999] WASC 161
•8 SEPTEMBER 1999
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: ZURICH BAY HOLDINGS PTY LTD -v- BURTON & ANOR [1999] WASC 161
CORAM: MASTER BREDMEYER
HEARD: 3 SEPTEMBER 1999
DELIVERED : 8 SEPTEMBER 1999
FILE NO/S: CIV 1859 of 1999
BETWEEN: ZURICH BAY HOLDINGS PTY LTD (ACN 009 422 093)
Plaintiff
AND
JOHN JOSEPH BURTON
TORRENOVA AGENCIES PTY LTD (ACN 009 146 981)
Defendants
Catchwords:
Summary judgment - Fraud - Breach of trust and breach of contract
Legislation:
Nil
Result:
Application allowed
Representation:
Counsel:
Plaintiff: Mr A D Bereyne
Defendants: Mr A C Thorpe
Solicitors:
Plaintiff: Jackson McDonald
Defendants: A C Thorpe
Case(s) referred to in judgment(s):
Barnes v Addy (1874) LR 9 Ch App 244
Eng Mee Yong v V Letchumanan s/o Velayutham [1980] AC 331
Evans v Bartlam [1937] AC 473
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87
Gillon & Ors v Kyle, unreported; FCt SCt of WA; Library No 9123; 16 October 1991
Jacobs v Booths Distillery Co (1901) 85 LT 262
Lewkowski v Bergalin Pty Ltd, unreported; FCt SCt of WA; Library No 7675; 26 May 1989
Manning & Ors v Talgarth Enterprises Pty Ltd & Anor, unreported; SCt of WA; Library No 960374; 18 July 1996
Webster v Lampard (1993) 177 CLR 598
Whitehall Holdings Pty Ltd & Ors v Custom Credit Corporation Ltd, unreported; FCt SCt of WA; Library No 9189; 13 December 1991
Case(s) also cited:
Biala Pty Ltd & Anor v Mallina Holdings Pty Ltd & Ors (1993) 11 ACSR 785
Consul Development Pty Ltd v DPC Estates Pty Ltd 91975) 132 CLR 373
Royal Brunei Airlines & Anor v Tan (1995) 3 WLR 64
Turner v TR Nominees Pty Ltd (1995) 31 ATR 578
MASTER BREDMEYER: This is an application for summary judgment by the plaintiff against the defendants. The plaintiff carries on a business of earthmoving, contract mining and civil contracting under the name of Mine Site Construction Services. The defendant company, Torrenova Agencies Pty Ltd (the company), has premises at Welshpool and trades as John Burton Machinery. Mr Burton is the company’s only director and shareholder. He is also the company's secretary. He is an auctioneer and valuer and is aged 63 years. The plaintiff's principal, Mr Caruso, and Mr Burton have done business together for the past 15 years. The company has offered no opposition to the application and I have entered summary judgment against it. The first named defendant, Mr Burton, contests the application.
The plaintiff's case as pleaded in the statement of claim is as follows:
"1The Plaintiff ('Zurich') is, and was at all material times, a company duly incorporated in the State of Western Australia carrying on the business of mining and contracting services.
2The first named Defendant ('Burton') is a director of the second named Defendant.
3The second named Defendant ('Torrenova') is, and was at all material times, a company duly incorporated in the state of Western Australia carrying on the business of selling machinery.
4(1) On about 6 March 1999, Mr Caruso on behalf of Zurich entered into an oral agreement ('the sale agreement') with Burton on behalf of Torrenova to purchase from Torrenova a Howard Porter tri axle semi tipping trailer for the sum of $22,000.
(2)The parties agreed that payment was to be made as follows:
(a)Zurich would direct Curran Holdings Pty Ltd, to whom Zurich was negotiating to sell a Caterpillar motor scraper for a price of about $235,000, to pay the price agreed into a trust account of Torrenova called the 'John Burton Machinery Trust Account' or the 'John Burton Machinery Auction Valuer Account' ('the trust account') for the benefit of Zurich;
(b)upon receipt of that sum Torrenova would deduct $22,000 representing the price of the trailer, and would hold the balance in trust for Zurich.
5On about 9 Mach 1999 Zurich orally directed Curran Holdings Pty Ltd by Mr Peter Curran to pay the sum of $235,000 to the trust account to the credit of Zurich and Curran Holdings Pty Ltd did so.
6On 22 July 1999 Zurich in writing instructed Torrenova to transfer the balance of Zurich's funds held in the trust account, in the amount of $213,000, to Zurich's account with Paterson Ord Minnett.
7On 26 July 1999 Torrenova transferred an amount of $100,000 only into Zurich's account with Paterson Ord Minnett bank account.
8Fraudulently and in breach of trust and of the sale agreement, Burton withdrew $100,000, being money standing to the credit of Zurich from the trust account, for the purposes of his own personal use.
PARTICULARS
On 28 July at a meeting at Zurich's office Burton advised Mr M Caruso on behalf of Zurich of such withdrawal and purposes and offered to provide security over his personal assets for the repayment of the amount owed.
9(1) On 28 July 1999 Torrenova by Burton paid Zurich the amount of $8,000 in reduction of the amount owing.
(2)On 29 July 1999 Torrenova by Burton paid Zurich the amount of $5,000 in reduction of the amount owing.
AND THE PLAINTIFF CLAIMS
(1)An account of how the sum of $100,000 was withdrawn and how and to whom it was paid;
(2)Return of the sum of $100,000;
(3)Alternatively to (2), damages or compensation in the sum of $100,000;
(4)Interest in equity and pursuant to section 32 of the Supreme Court Act 1935 on the sum of $100,000."
Since that statement of claim was prepared a further $5000 has been paid to the plaintiff by the company leaving a balance of $95,000 owing.
The director of the plaintiff company is a Mr Mark Victor Caruso and he has filed an affidavit in support of the application. I quote from parts of that affidavit:
"16.On 26 July 1999 I telephoned Ms Robin Vanderaa, Mr Burton's secretary, and enquired as to why the full amount in the account had not been transferred. Ms Vanderaa informed me and I verily believe that an amount of $100,000 only had been telegraphically transferred. I asked her why the full amount had not be transferred and Ms Vanderaa replied … that I should contact Mr Burton to discuss the situation concerning the balance.
17.I then telephoned Mr Burton on his mobile telephone and asked him why only $100,000 had been transferred. Mr Burton replied to me that he only wanted to transfer the funds in $100,000 lots and he would issue an instruction for the balance of the funds remaining to be telegraphically transferred immediately and instructions that a statement of the trust account funds relating to the transaction to be prepared and sent to me that day (26 July 1999).
18.Mr Burton telephoned me on 28 July 1999. I was not available and he left a message for me to return his call. I returned Mr Burton's call and Mr Burton said he needed to arrange a meeting with me urgently. I suggested that he come to meet me at my office in Welshpool. Mr Burton attended at my office. He told me that he had personally taken $100,000 from the Plaintiff's trust account with John Burton Machinery. Mr Burton stated to me that was in very ill health due to a chronic heart condition and may only have three months to live. He said he had used the Plaintiff's money to look after his family. I said words to the effect that I was very alarmed about this misappropriation of the Plaintiff's money. Mr Burton refused to provide details as to how the monies had been applied and to whom they had been applied. However, Mr Burton offered to provide security to the Plaintiff over his personal assets."
Mr Burton in his affidavit in opposition states:
"2.I refer to the affidavit of Mark Victor Caruso sworn on 19 August 1999 and to paragraph 18 therein. I confirm that I had a conversation with Mr Caruso as set out therein but not all that I told him was correct. Though I am very ill and my life expectancy is short I did not personally take the sum of $100,000.00 or any monies of the plaintiff from the second-named defendant's trust account or at all. I wrongly told Mr Caruso that the monies were taken by me to look after my family in an attempt to obtain more time to enable the second-named defendant to make arrangements to repay the plaintiff. That was also the reason I offered to give the plaintiff security over my personal assets.
3.I have taken none of the plaintiff's money and I am not indebted to it as alleged at all. I have a good defence to the claim herein."
This action commenced on 4 August. On 6 August the plaintiff obtained injunctions against the defendants. The application was made inter partes and the orders granted by McKechnie J were as follows:
"2.
(a)subject to a right to claim privilege against self incrimination, the Firstnamed Defendant do by 4.00pm on 9 August 1999 file and serve an Affidavit deposing to the receipt by the Secondnamed Defendant of $235,000 on or about 9 March 1999 whether by cheque or otherwise, if by cheque to what account at which bank the cheque was paid, the disbursement of that sum and to whom and for what consideration or for what purpose such monies were disbursed and the records of that account including its current balance;
(b)to the extent to which the second named Defendant has in its trust account funds which do not belong to any other beneficiary, the Defendants be forthwith restrained and an injunction is hereby granted restraining them whether by themselves or their officers, servants or agents or otherwise until further order from transferring or otherwise dealing with such funds up to an amount of $100,000.
(c)the Defendants be forthwith restrained and an injunction is hereby granted restraining them whether by themselves or their officers, servants or agents or otherwise until further order from dealing with their assets other than in the ordinary course of the business affairs and in the case of the first named defendant his personal affairs."
Pursuant to order 1 Mr Burton swore an affidavit on 9 August 1991 stating:
"Upon the advice of my solicitors I decline to depose to the details sought on the basis that the answers may tend to incriminate me and I therefore claim privilege against self incrimination."
The power to order summary judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried: Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 at 99. Where the facts are in dispute the Court will not normally dispose of the factual merits on a conflict of affidavits: Jacobs v Booths Distillery Co (1901) 85 LT 262, and Evans v Bartlam [1937] AC 473 at 489. It is not appropriate to reject the defendant's affidavit evidence because of its arguable inconsistency with the documentary evidence adduced by the plaintiff: Gillon & Ors v Kyle, unreported; FCt SCt of WA; Library No 9123; 16 October 1991. If the version of facts put forward by the defendant is not inherently incredible, then, in the absence of cross‑examination, the Court must presume for the purposes of the application that it will be ultimately accepted at the trial: Webster v Lampard (1993) 177 CLR 598 at 608. At the same time, however, the Court is not bound to accept uncritically as raising a dispute of fact calling for further investigation every statement of fact in an affidavit, however equivocal, lacking in precision, or inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself it may be: Eng Mee Yong v V Letchumanan s/o Velayutham [1980] AC 331 at 341 quoted with approval by Malcolm CJ in Manning & Ors v Talgarth Enterprises Pty Ltd & Anor, unreported; SCt of WA; Library No 960374; 18 July 1996. It is also necessary that an affidavit in opposition should condescend to particulars and should so far as possible deal with the plaintiff's claim and state clearly what the defence is and what facts are relied upon as supporting it. However, the requirement is for a condescension to the particulars of an arguable defence not the defence in its complete form and a statement of the facts which go to show that it is arguable and not the facts which would be necessary to establish at trial: Lewkowski v Bergalin Pty Ltd, unreported; FCt SCt of WA; Library No 7675; 26 May 1989 and Whitehall Holdings Pty Ltd & Ors v Custom Credit Corporation Ltd, unreported; FCt SCt of WA; Library No 9189; 13 December 1991.
The plaintiff's case against Mr Burton, as argued, was based on accessorial liability as set out in Barnes v Addy (1874) LR 9 Ch App 244 at 251‑2, that he knowingly assisted the company in its breach of fiduciary duty. That claim is not pleaded in that way against Mr Burton and I think it unfair to amend the statement of claim to allow it when the defendant's affidavit in opposition has been drawn to meet the claim as pleaded. I therefore propose to consider the plaintiff's claim as pleaded and par 8 of the claim is the key paragraph.
It is clear from the plaintiff's evidence that as at 26 July 1999 $113,000 of the plaintiff's money was missing. The company had received $235,000 at the direction of the plaintiff. $22,000 had been deducted for the purchase of the trailer and $100,000 had been sent on to the plaintiff's stockbroker. $113,000 was missing. It is clear from par 18 of Mr Caruso's affidavit that at their face to face meeting Mr Burton said that he had personally taken $100,000 from the plaintiff's trust account with John Burton Machinery. He said he had used the plaintiff's money to look after his family. If that evidence is true I have no doubt that he took the money fraudulently and in breach of trust and in breach of the sale agreement. He refused to provide details as to how the moneys had been applied and to whom they had been applied. However, Mr Burton offered to provide security to the plaintiff over his personal assets.
Mr Burton in his affidavit in opposition admits that he told Mr Caruso that he had taken the moneys to look after his family, but he says that was a lie to obtain more time for his company to repay the plaintiff. The statement implies that his company took the money. This defendant has made two contradictory statements. He told Mr Caruso that he had used the money to look after his family but in his affidavit he says that, although he said that, it is, in effect, a lie. I consider that his first statement to Mr Caruso is much more likely to be true. He was speaking face to face to Mr Caruso just a few days after the money was removed from the company's account. He is more likely to have been affected by guilt and remorse. He was clearly deeply concerned by his ill health due to a chronic heart condition and a belief that he may have only three months to live. In saying that he hoped it would offer some explanation for his conduct and evince some clemency from Mr Caruso. His affidavit in opposition was prepared over a month later when feelings of guilt and remorse would have diminished and with the benefit of skilled legal advice. I consider his explanation in the affidavit to be inherently improbable. Mr Burton has run this company since its incorporation in 1985. He would be well aware of the difference between personal liability and company liability. If his company had taken the money and used it, say to pay an urgent debt, it would be much more natural to say "my company took the money" than to say "I took the money". I consider his explanation as to why he took the blame upon himself rather than upon his company to be improbable and incredible. Also, his later explanation is not supported by any evidence which would be readily available to him.
Moreover, he has not condescended to particulars of his defence. He is the sole director, sole shareholder and the secretary of his company which trades and has traded for 14 years as John Burton Agencies. It would be a relatively simple matter for him to depose to facts or lead some evidence which supports his defence, for example to show that the company used the money to reduce its overdraft, or to pay a debt to a third person. For these reasons I am satisfied to the requisite standard that the plaintiff has proved its case against Mr Burton as pleaded, and that he has not raised any fact or issue in dispute which ought to be tried, or that there ought for some other reason to be a trial of the action. I consider it just to enter summary judgment against him.