STATE RAIL AUTHORITY OF NEW SOUTH WALES v EARTHLINE CONSTRUCTIONS PTY LIMITED SUPREME COURT OF NEW SOUTH WALES — COURT OF APPEAL HANDLEY JA 19 October 1994 [1994] NSWCA 296 Handley JA. Mr Martin has moved this morning on notice of motion filed on 13 October to continue Mareva injunctions which I granted on an urgent interim basis on Monday, 17 October at a time when I was unable to do anything else having regard to the volume of the material and the lack of any opportunity at that time to have read and understood it even on a provisional basis. I have since had an opportunity to read the material, in particular the reasons for judgment of O'Keefe J of 14 September in the principal proceedings which comprised 145 pages. The case of the State Rail Authority at the trial was based upon breaches of fiduciary duty by its former officers, Messrs Greber, Child and Bell and the knowing participation by the defendant companies and the Davies Brothers in those breaches of fiduciary duty, together with a claim in restitution against the companies for money paid under a mistake of fact. The corporate defendants were earthmoving contractors the State Rail Authority engaged on an informal basis in connection with a major upgrading of the main northern railway line from Sydney to Brisbane which was carriedout by the Authority from late 1989 until mid-1992. The case of the Authority was that the corporate defendants, in particular Earthline Constructions Pty Limited, had submitted to it invoices and work dockets which were false and fraudulent making claims for work which had not been done or making more than one claim for work which had been done. I need not go into the details of these claims for the purposes of this judgment. The case was a complex one as the length of the reasons for judgment demonstrates. In the result the claimants failed at first instance except in respect of certain duplicated claims and claims for work done by machines which, at the relevant time, were out of service for repair and maintenance. The net result of the litigation was that judgment was entered in favour of the Authority for $146,587.63 together with twenty per cent of its costs. The Authority had made two alternative claims at the trial, one to recover $2,765,002 which was set out in Exhibit CC and the other to recover $1,765,609 based on Exhibit AA. As at present advised it appears to me that the Authority's prospects of success on the appeal are not good. In so far as the case depends upon oral evidence the Authority is confronted with findings of fact made by the trial judge which can only be reversed on appeal in limited circumstances. At the moment I am far from persuaded that the appellant will be in a position to point to any glaring improbabilities or indisputable facts which would entitle this Court to reverse the Judge's credibility-based assessment of the evidence of Mrs Page. The Authority also relies upon a documentary case based on the business records of the companies and the claims for payment submitted to it and paid. Its documentary case in respect of duplicated payments was the basis of its limited success in the proceedings. Here again the Authority faces difficulties because 2 UNREPORTED JUDGMENTS each category of documents relied upon includes asignificant percentage which were processed by other officers against whom no allegations of misconduct were made who were not called as witnesses in the proceedings. There are also a number of other difficulties on the probabilities which were referred to by the trial judge. Furthermore the appellant faces difficulties in establishing that Messrs Greber, Child and Bell committed breaches of their fiduciary duties to the Authority. I have no doubt, contrary to the view of the trial judge, that these officers did owe fiduciary duties to the Authority and Reading v Attorney General [1951] AC 507 would seem to establish this. However, while I would be prepared to infer that there may well have been breaches by the defendants Greber, Child and Bell of their contractual duties of care, skill and diligence owed to the Authority in that they did not efficiently or competently carry out their duties as certifying officers in relation to the claims for payment and work dockets submitted to them by the two companies, this, in my view, does not establish a prima facie case of breach of fiduciary duty. There is no evidence that these officers received any corrupt benefits from the companies and in these circumstances it seems to me the likely inference is one of negligence or incompetence rather than breach of fiduciary duty. For all these reasons it seems to me the appellant's prospects of success are not great. Nevertheless towards the end of the hearing this morning it became clear that the practical effect of these Mareva injunctions which, in substance, have been in force now for over years at the present time is limited to two items of earthmoving plant and a sum of money in a bank account. Without binding the parties in any way at this stage it seems to me that the balance of convenience is heavily in favour of continuing the existing injunctions so as to preserve the assets which at this point of timeare admittedly in existence and have been bound by the injunctions granted by Cole J for over two years. There is an outstanding question in relation to the proviso in the orders by O'Keefe J in his decision of 11 October authorising the payment of legal expenses out of these assets. There are also apparently other proceedings on-foot against other companies controlled by the Davies Brothers of which I know nothing. In the circumstances I propose to continue the existing injunctions granted by me on 17 October until the determination of the appeal or further order and to stand this matter over to a date convenient to both counsel so that I can have further evidence placed before me as to the nature and extent of the assets hitherto affected by the Mareva injunctions and the question of possible payment of legal expenses out of those assets. Orders accordingly.