Tuesday, November 30, 2004

Two interesting VSC cases

Two recent Victorian Supreme Court cases are good examples of how to discuss complex issues in a concise and expeditious fashion.

The first case, NIML Limited v MAN Financial Australia Limited [2004] VSC 449 (8 November 2004) concerned the plaintiff’s attempts to recover from the defendant the proceeds of a fraud perpetrated by the plaintiff’s employee. NIML sued on three causes of action (a) breach of trust and knowing receipt of trust property, (b) money had and received (i.e. unjust enrichment), and (c) conversion. The plaintiff failed on all three claims.

Harper J observed that:

This case illustrates the point. A fraud has been committed. The identity of the wrongdoer is known. Both of the victims of his fraud have a cause of action against him - either directly or in third party proceedings. But he is not worth pursuing. So, in its search for recompense, one of his two victims has turned on the other. Several causes of action have been invoked. One is conversion; another, money had and received. Each is obviously applicable in a proceeding by that victim against the wrongdoer. Neither offers an equally ready solution where, as here, the defendant is not the tortfeasor, but rather has been singled out essentially because it was a party, albeit (as it claims) an innocent one, to a series of transactions financed by the proceeds of the wrongdoer's tortious conduct. A third cause of action - liability to account as a constructive trustee - is also pleaded. This does include as an element the defendant's knowing involvement in the wrongdoer's fraudulent design. Even here, however, the allegation is not so much that the defendant knew, but that it ought to have known, that a wrong was being done to the plaintiff.

Regarding the ‘knowing receipt’ claim, his Honour held that at least constructive knowledge was required. He thus rejected the fashionable assertion that liability should be strict, along quasi-restitutionary lines. What is worth remarking, though, is the way his Honour was able to expeditiously deal with the ‘knowing receipt’ point, without repetitiously examining every authority on the subject, as seems so often to happen in other Australian jurisdictions. Brevity, in this case, is indeed the very soul of wit.

The second case, Esso Australia Resuorces Pty Ltd v Southern Pacific Petroleum NL (rec & man apptd) & Ors [2004] VSC 477 (23 November 2004), concerns the scope and content of the implied duties of good faith and co-operation. The case concerned whether Esso could prevent SPP from assigning rights under a joint venture agreement without Esso’s consent. Esso claimed that this unilateral assignation breached the implied terms of good faith and cooperation. Justice Hollingworth held that they did not, and although her Honour was open-minded about the existence of such a duty of good faith, she stressed that it could not override the plain meaning of the express terms of a commercial contract.

While we at the Branch are somewhat more sceptical of the duty of good faith than Justice Hollingworth, we commend her Honour for her concise and direct style in writing about the issue. Good faith is a topic that normally encourages ponderous, indecisive and turgid writing -- especially so in NSW -- so it is a relief to see a fresher approach from courts south of the border.