William Timothy Cape v Robert George Maidment; Redarb Pty Limited; Kerry John Breeze; Lawrence Victor Quigg and Serendipity Pty Limited [1991] ACTSC 8; (1991) 103 FLR 259 (22 February 1991)

SUPREME COURT OF THE ACT

WILLIAM TIMOTHY CAPE v. ROBERT GEORGE MAIDMENT; REDARB PTY LIMITED; KERRY JOHN
BREEZE; LAWRENCE VICTOR QUIGG and SERENDIPITY PTY LIMITED
S.C. No. 333 of 1989
Arbitration
[1991] ACTSC 8; (1991) 103 FLR 259

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Miles C.J.(1)

CATCHWORDS

Arbitration - Referral to referee for inquiry and report - Power of Court in relation to report - Factors to take into account in accepting or rejecting report.

Chloride Batteries Australia Ltd. v Glendale Chemical Products Pty. Ltd. (1988) 17 NSWLR 60 at pp 67-68

White Constructions (NT) Pty. Ltd. v Commonwealth of Australia (Supreme Court of New South Wales, unreported, 30 May 1990)

HEARING

CANBERRA
22:2:1991

Counsel for the Plaintiff: Mr Collins, QC

Solicitors for the Plaintiff: Crossin Power Haslem

Counsel for the 1st Defendant: Mr Tamberlin, QC

Solicitors for the 1st Defendant: Sly Weigal

ORDER

The reports of Sir Laurence Street dated 19 September 1990 and 13 November 1990 be accepted.

This application be stood over to a date to be fixed.

Costs be reserved.

There by liberty to apply.

DECISION

On 19 November 1990 the first defendant (Mr Maidment) and the fifth defendant (Serendipity) took out a notice of motion seeking, inter alia, an order that two reports of Sir Laurence Street furnished to the Court as a result of an earlier order of 27 June 1990 be accepted by the Court.

2. The application arose out of a dispute between the parties which by order dated 14 December 1989 required the taking of accounts between Mr Maidment and the plaintiff, Mr Cape, as they related to their credit or indebtedness in the Redarb Unit Trust.

3. Sir Laurence Street furnished a report to the Court dated 19 September 1990 and a further report dated 13 November 1990 on the matters referred in accordance with the order of 27 June 1990.

4. The matters referred to Sir Laurence Street were identified as numbered items. There is no dispute that the reports should be accepted by the Court on all items except Item 3. Item 3 was a claim that Mr Maidment had by way of loan withdrawn a total of $71,000 from a bank account maintained by Redarb Pty. Limited and had failed to repay it. The claim was to the effect that the accounts should reflect that indebtedness of Mr Maidment and the interest that Redarb Pty. Limited had foregone as a result.

5. It is not disputed for the purposes of the application that the following amounts were withdrawn by Mr Maidment on the following dates:
30 November 1983 $20,000.00

18 September 1984 $20,000.00
3 March 1986 $25,000.00
Not clear $ 7,000.00

6. In relation to the first three of the above amounts, totalling $65,000, Sir Laurence Street found that "within the general manner of the conduct of the affairs of this company, these payments were assented to or acquiesced at the time by Mr Cape". I do not take these words to mean that Sir Laurence Street found that Mr Cape had knowledge of these withdrawals as they were made. Rather the conclusions of Sir Laurence Street were based on his findings as to the general background of the relationship of the parties which had led to the carrying on of the Trust "in substance as a commercial partnership between the two men without meticulous regard either to precision in accounting or to fiduciary considerations deriving from the legal position of Redarb Pty. Limited as trustee under the Redarb Unit Trust". Sir Laurence Street found that all parties over the period of six years in question acquiesced in the conducting of the business activities in this way, with the result that "each concurred in such lax accounting as existed as well as in the consistent disregard of strict fiduciary standards and the running of the company, the administration of the trust and the conduct of the business".

7. It is against that background that Sir Laurence Street went on to find, in accordance with the claim by Mr Maidment, that the moneys were withdrawn by him against what would on a subsequent preparation of proper accounts be found to be outstanding in his favour, but the payments were "not wrongful".

8. In my view, Sir Laurence Street was entitled to come to those conclusions. It is true that the ultimate conclusion that the payments were not wrongful was not simply a question of fact. That conclusion involved the application of a legal standard to the facts as found. Sir Laurence Street recognized the obligation of the directors of a trustee company in relation to irregular dealings with trust assets from which they derive personal benefits. However, he was entitled to take into consideration conduct constituting laches or equitable negligence of the person who was at the one and the same time the co-trustee and co-beneficiary. That contributing conduct allowed the situation to exist where Mr Maidment was able to draw against the company's bank account with a view to the benefit he derived being brought into account in due course.

9. Further, Sir Laurence Street found that at the time of such withdrawals the company's account was in credit with the bank. Although Mr Neil QC for Mr Cape submitted in this application that the company must have foregone interest as a result of these withdrawals, it has not been shown that the relevant bank account or accounts were interest bearing. In addition, at the time of each withdrawal, the capital accounts with the company as they then stood showed the contribution by Mr Maidment to be substantially higher than than of Mr Cape. The approach of Sir Laurence Street to the matter of interest was that it should be debited against Mr Maidment only to the extent that it was shown that the payment to Mr Maidment resulted in increasing the overdraft of the company and accordingly increased the company's liability for interest to the bank. That approach was based on the finding of fact that the affairs of the partnership were conducted against the background of lax accounting and a less than meticulous regard for fiduciary consideration to which I have already referred.

10. The approach to be taken to the reception of a referee's report has been the subject of several recent judicial pronouncements, particularly in New South Wales. Although the relevant Rules of the Supreme Court of New South Wales have no counterpart in this Court at the present time, the consent order by which the parties agreed that the reference to Sir Laurence Street should be made contained provisions very similar to those of the relevant New South Wales Rules and the result, in my view, is that for all practical purposes this Court should look at the reception of the reports of Sir Laurence Street in a way similar to that in which such reports are regarded in New South Wales.

11. In Chloride Batteries Australia Ltd. v Glendale Chemical Products Pty. Ltd. (1988) 17 NSWLR 60 at pp 67-68, Cole J. in a passage with which I would respectfully agree said:

"The Court will have regard to the futility of a
process of re-litigating an issue determined by the referee
in circumstances where parties have had an opportunity to
place before the referee such matters as they desire. It
will also have regard to cost. If the report shows a
thorough, analytical, and scientific approach to the
assessment of the subject matter of inquiry, the Court will
have a disposition towards acceptance of the report, for to
do otherwise would be to negate the purpose of and the
facility of referring complex, technical issues to
independent experts for inquiry and report. This
disposition may be enhanced in circumstances where the
parties, as a consequence of the operation of Rule 8, have
had the opportunity to place before the referee such
evidence and technical reports as they may wish. The Court
may be more hesitant in its disposition if the report is
provided by the expert in the absence of the parties having
been given such an opportunity. The disposition must always
yield to the requirements of justice, if it becomes apparent
for any reason that to adopt the report would result in an
injustice or unfairness to a party. These matters reinforce
the view that each matter requires its own consideration."

12. It might be observed that the reference to the referee in the present case did not involve the determination by an expert experienced in matters of a technical nature. Nevertheless, two things should be said. First, it would not be realistic to fail to acknowledge the eminence and experience of the referee whom the parties chose in this case. Secondly, despite that eminence and experience, if the Court saw reason to differ from the approach of the referee on any matter of law, or on any question involving the application of a legal standard, the Court would be failing in its constitutional duty if it did not give effect to what it considered to be the correct application of law or of a legal standard. Those remarks do not contradict what was said by Cole J. in White Constructions (NT) Pty. Ltd. v Commonwealth of Australia (Supreme Court of New South Wales, unreported 30 May 1990) where his Honour expressly recognized that the disposition to accept a comprehensive report dealing in logical manner with both factual and legal issues flows "not from the persona of the referees but from the perceived quality of the assessment and review of the issues made by the referees". I add only that I see no reason at all to depart from the referee's application of the primary facts as found to the question he was required to answer and which he did answer in clear and convincing terms. I quote Cole J. in the White Industries case once again:

"The purpose of referees reporting to the Court on
disputed questions of fact is rendered futile if the Court
is to reconsider disputed questions of fact in circumstances
where it is conceded that there is factual material
sufficient to enable the referees to reach the findings they
did. In circumstances where the Court, having closely
scrutinised the referees' report, has a comfortable feeling
of satisfaction that the factual issues have been properly
explored and considered, in my view the Court should adopt
the referees' report on findings of fact."

13. There was, in my view, abundant factual material for the referee to make the findings of fact that he did make. To those findings of fact he applied a standard of reasoning which has not been shown to be based on any misapprehension of law.

14. For those reasons I made the order on 17 December 1990 that the reports of Sir Laurence Street dated 19 September 1990 and 13 November 1990 be accepted, that this appliction be stood over to a date to be fixed, and that the costs be reserved. It is further ordered that there be liberty to apply.