Heperu Pty Limited v Belle [No 2] [2010] NSWCA 13 (12 February 2010)

Supreme Court of New South Wales - Court of Appeal

[Index] [Search] [Download] [Help]

---

Heperu Pty Limited v Belle [No 2] [2010] NSWCA 13 (12 February 2010)

Last Updated: 17 February 2010

NEW SOUTH WALES COURT OF APPEAL

CITATION:
Heperu Pty Limited v Belle [No 2] [2010] NSWCA 13


FILE NUMBER(S):
40107/08

HEARING DATE(S):
17 November 2009

JUDGMENT DATE:
12 February 2010

PARTIES:
Heperu Pty Limited
Kirisi Holdings Pty Limited
Patrice Belle (formerly Patrice Cincotta)

JUDGMENT OF:
Allsop P Campbell JA Handley AJA

LOWER COURT JURISDICTION:
Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S):
6165/03

LOWER COURT JUDICIAL OFFICER:
Palmer J

LOWER COURT DATE OF DECISION:
12 December 2007

LOWER COURT MEDIUM NEUTRAL CITATION:
Heperu Pty Ltd & Ors v Morgan Brooks Pty Ltd & Ors (No 2) [2007] NSWSC 1438

COUNSEL:
G K Burton SC, C L Cochrane (Appellants)
J S Van Aalst (Respondent)

SOLICITORS:
Thomas Henry Bray, Sydney (Appellants)
Hardings Lawyers, Sydney (Respondent)

CATCHWORDS:
REMEDY - further submissions as to tracing - assessment of benefit ordered

LEGISLATION CITED:


CATEGORY:
Procedural and other rulings

CASES CITED:


TEXTS CITED:


DECISION:
1. Allow the appeal and set aside orders 1 and 2 made by the Equity Division on 4 February 2008 and entered on 12 March 2008 and in lieu thereof remit the matter to the primary judge for assessment of the value of the traceable benefit (if any) in the retained relevant properties held by the respondent when she received notice that misappropriated funds had been paid into the Westpac account, the primary judge in the conduct of such assessment, subject to the reasons of this Court on 26 August 2009 and 12 February 2010, be free (a) to assess the amount of that benefit (if any) to be payable to the appellants; (b) to assess and make an order in respect of costs of the first hearing before him and of the assessment; and (c) to order the payment of any such sum found to be such benefit.
2. The parties file written submissions on costs within 14 days.



JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40107/08

ALLSOP P

CAMPBELL JA

HANDLEY AJA

Friday 12 February 2010

HEPERU PTY LTD v BELLE [No 2]

1 ALLSOP P: On 26 August 2009, the Court made orders for the filing of further submissions on the question of tracing. The parties completed their submissions in this respect on 17 November 2009.

2 The submissions on both sides were detailed. The purpose of the submissions was to permit the appellants an opportunity to demonstrate what was referred to in [170] of my earlier reasons:

“If it can be demonstrated, with precision, that some benefit in a traceable interest in the properties can be shown at the relevant time to found a personal claim, the appeal should be allowed and the case remitted to the Equity Division for assessment.”

3 I am satisfied that, on the approach referred to at [111]-[116] of my earlier reasons ([2009] NSWCA 252), the way I expressed the matter in [118] of those reasons (that “the following payments into the Westpac account can be seen to be referable to these funds”, being the misappropriated funds in the Perpetual account) was justified. On this basis, the withdrawals from the Perpetual account described in [118(b)(i)-(v), (e)(i)-(iv), (g)(i)-(iii) and (i)(i)-(ii)] were traceable to the misappropriated funds. This was implicitly challenged by the respondent in her further submissions. The respondent submitted that the running balances in the Perpetual account were sufficiently great to throw into the realm of speculation the origins of the transfers to the Westpac account (from which mortgage repayments were made). But that proposition is implicitly founded on a Clayton’s case or like approach to the transfers out of the Perpetual account. It challenges the proposition in [111] of my earlier reasons by submitting that all funds in the Perpetual account should (absent proof) be treated as (equally) fraudulently obtained and thus subject to some kind of arbitrary first in and out approach, rather than an approach based on Re Oatway as discussed in [114] and [115] of my earlier reasons.

4 I am not persuaded to change the view I previously expressed.

5 On this hypothesis, it appears that a substantial number of the mortgage payments from August 2001 were referable to funds in the Westpac account having their source in the Perpetual account.

6 Whilst there is a lack of precise differentiation between interest and principal in the loan repayments, there appears to have been a reduction in principal prior to August 2003. The reductions in principal are dealt with in the appellants’ further submissions. For present purposes, reference to precise amounts is unnecessary.

7 As to the effect of the refinancing, the appellants submitted that prior to the refinancings of the Coffs Harbour and Potts Point properties the principal reduction was $86,970.01, disregarding the effects of payments for periods in which the Westpac account was exhausted of misappropriated funds (see [120] and [121] of my earlier reasons and paras 4(3) and 7 of the appellants’ further submissions). The appellants argued that this represented an enduring and retained benefit after the refinancing, by reference to the equity of redemption. It is unnecessary to make detailed reference to the arguments.

8 I am presently less than fully persuaded that the refinancing in 2003 does not affect the position more significantly than as submitted by the appellants. No substantive submission was, however, put by the respondent about the refinancing and its effect. In these circumstances, it would be unjust to deny the appellants an assessment of the value (if any) of any continuing benefit in the two properties of the respondent at the time she received notice of the claim that is traceable from the proceeds of the relevant misappropriated cheques. In that assessment the effects of the refinancings can be debated.

9 The assessment should be limited to the evidence led before the primary judge. It should be founded on the premises set out at [111]-[118] in my earlier reasons. Otherwise, the primary judge should have the authority to examine and make findings on the evidence as on a hearing afresh. In putting the matter thus, we do not intend to restrict the use of any aspect of the rules, such as the use of a referee in the process of assessment. The computation of the amount of the benefit appropriate to reflect a personal remedy will be a matter to be decided in that hearing. The primary judge will have authority not only to assess the appropriate amount of the traceable benefit, but also to order that it be paid.

10 The substantive order I would make disposing of the appeal is as follows:

Allow the appeal and set aside orders 1 and 2 made by the Equity Division on 4 February 2008 and entered on 12 March 2008 and in lieu thereof remit the matter to the primary judge for assessment of the value of the traceable benefit (if any) in the retained relevant properties held by the respondent when she received notice that misappropriated funds had been paid into the Westpac account, the primary judge in the conduct of such assessment, subject to the reasons of this Court on 26 August 2009 and 12 February 2010, be free (a) to assess the amount of that benefit (if any) to be payable to the appellants; (b) to assess and make an order in respect of costs of the first hearing before him and of the assessment; and (c) to order the payment of any such sum found to be such benefit.

11 The appellants have had a measure of success, but they lost almost all grounds of the appeal. Subject to the parties leaving an opportunity to put submissions on costs, I would order that the respondent pay 25% of the appellants’ costs of the appeal.

12 The costs of the matter below are best dealt with by the primary judge after the assessment, as I have provided for in the suggested order.

13 CAMPBELL JA: I agree with Allsop P.

14 HANDLEY AJA: I agree with Allsop P.

**********

LAST UPDATED:
16 February 2010