E S G Chi Investments v Lo [2000] NSWSC 60

New South Wales Supreme Court

CITATION : E S G Chi Investments v Lo [2000] NSWSC 60 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 1800/98 HEARING DATE(S) : 25 February 1999, 20 & 24 May 1999 JUDGMENT DATE : 23 February 2000

PARTIES : E S G Chi Investments Pty Ltd (P) Xavier Lo (D) JUDGMENT OF : Austin J

COUNSEL : D B Studdy (P) S T Krishnar (Sol) (D) SOLICITORS : Deacons Graham & James (P) S T Krishnar (D) CATCHWORDS : EVIDENCE - whether plaintiff authorised loan for purchase of scrap metal - whether plaintiff had purpose of evading capital gains tax - inferences from oral evidence and correspondence Docker v Somes (1834) 2 My & K 655 CASES CITED : Foley v Hill (1848) 2 HLC 28 Palette Shoes v Krohn (1939) 58 CLR 1 DECISION : Proceedings for failure to account dismissed.

THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

AUSTIN J

WEDNESDAY 23 FEBRUARY 2000

1800/98 - E S G CHI INVESTMENTS PTY LTD V XAVIER LO

JUDGMENT

HIS HONOUR:

The plaintiff's claims 1 By its statement of claim filed on 24 March 1998 and amended on 12 March 1999, the plaintiff has sought relief against the defendant on two grounds, namely failure to account and failure to manage the affairs of the plaintiff. 2 The failure to account was alleged to have arisen out of a sale of property by the defendant on the plaintiff's behalf. The plaintiff says that the defendant improperly and without authorisation withdrew money from a bank account which contained the proceeds of sale of the property, and is accountable for the difference between the sale proceeds and the amount which he eventually paid over to the plaintiff. The plaintiff also claims compensation for the interest and bank charges in respect of a mortgage which the defendant had been slow to discharge out of the proceeds of sale. The plaintiff seeks the recovery of all those amounts plus interest. 3 As to the complaint about failure to manage its affairs, the plaintiff says in its statement of claim that the defendant failed to keep proper accounts and lodge tax and company returns for the period from 1 July 1989 to 30 June 1995; and that it was accordingly necessary for the plaintiff to instruct a firm of accountants to rectify the problem, incurring costs of $13,454.71, as well as $3036.87 for additional tax for the 1991, 1992 and 1994 tax years. In its statement of claim the plaintiff sought recovery of those amounts plus interest. 4 After the defendant had failed to file a defence, the plaintiff entered judgment by default for a total sum of $124,433.88 plus interest. The defendant successfully applied to Master Macready to set aside the part of the judgment which dealt with the first ground, namely failure to account. On 7 August 1998 the Master varied the judgment by reducing it by the amount of $101,280.02 down to $23,153.85. The Master found on the evidence that there was a dispute in respect of part of the proceeds of sale in the sum of $47,000 and the consequential charges and interest relating to discharge of the mortgage, and his orders were intended to permit the issue of failure to account to be contested; but he did not set aside the judgment with respect to the plaintiff's second ground, relating to failure to manage the plaintiff's affairs. 5 At the hearing before me the defendant contested the plaintiff's claim on the ground of failure to account, and the present judgment deals with that question. The defendant also sought to contest the second ground, on the basis that he did not charge for the preparation of financial statements and tax and company returns for the years from 1989 to 1995, and should not be required to reimburse the plaintiff for its cost of obtaining that work elsewhere. The plaintiff says it is too late for him to raise such matters, since judgment was entered against him in 1998 and that judgment was not set aside in respect of the second ground. The defendant submits that Master Macready's judgment was the 'product of vitiating factors', but no detailed basis for this was advanced on the defendant's behalf, and no application was made to set aside the judgment except orally in submissions. I see no basis for setting aside the judgment against the defendant on the second ground, and it accordingly stands.