Supreme Court New South Wales Medium Neutral Citation: Luben Petkovski v Kai Yin Huang (No. 2) [2019] NSWSC 1563 Hearing dates: 10 & 11 September 2019 Date of orders: 08 November 2019 Decision date: 08 November 2019 Jurisdiction: Equity Before: Slattery J Decision: On the plaintiffs'/cross-defendants' motion of 29 August 2019, no order is made setting aside declarations 9 and 10 made on 17 December 2018 but no consequential relief will be given on the declarations. Various judgments entered for various amounts. Costs reserved. Catchwords: PRACTICE AND PROCEDURE – the Court's first judgment directed the parties to bring in short minutes of order to give effect to the Court's reasons in the first judgment – short minutes of order were prepared and made by consent – plaintiffs/cross-defendants consented to the short minutes of order under a misapprehension as to the effect of the directions of the Court – orders made include declarations as to the liability of the second, third and fourth cross- defendants – Uniform Civil Procedure Rules 2005, rr 36.15 and 36.16(3) – whether the declaratory orders can and should be set aside – whether consequential relief can be claimed based on declaratory orders. DAMAGES – assessment of the quantum of various claims for damages for trespass or nuisance – no question of principle. Legislation Cited: Australian Consumer Law, s 238 Uniform Civil Procedure Rules 2005, rr 36.15(1), 36.16(3) Cases Cited: Barnes v Addy (1874) LR9ChApp 244 Luben Petkovski v Kai Yin Huang [2018] NSWSC 1667 Category: Consequential orders (other than Costs) Parties: Luben Petkovski (first plaintiff, first cross-defendant) Diana Petkovski (second plaintiff, second cross-defendant) George Gashovski (third plaintiff, third cross-defendant) Lence Petkovski (fourth plaintiff, fourth cross-defendant) Kai Yin Huang (defendant, first cross-claimant) Xuan Jing Huang (second cross-claimant) Representation: Counsel: D A Moujalli (plaintiffs/cross-defendants) J S Wheelhouse SC, J E Doyon (defendant /cross-claimants) Solicitors: Daniel William Turk, TurksLegal (plaintiffs/cross-defendants) Stanley Zi-Jun Yee, Levitt Robinson Solicitors & Attorneys (defendant/cross-claimants) File Number(s): 2015/308860 Publication restriction: No Judgment 1. This is the Court's second judgment in these proceedings. The Court's first judgment dealt with a range of disputes arising between the parties between early 2010 and mid-2012, relating to the purchase and subdivision of six properties in Rockdale, and other disputes arising between mid-2012 and 2014, about alleged trespasses and nuisances among the adjacent property owners in the subdivision: Luben Petkovski v Kai Yin Huang [2018] NSWSC 1667. 2. These reasons should be read with the Court's first judgment. Events, matters and persons are referred to in the same way in both judgments. 3. The Court's first judgment contemplated, (at [593]), that as a result of the success of the Huangs as cross-claimants in establishing their claims for unconscionable conduct, misleading and deceptive conduct and economic duress, that a separate relief hearing would need to be held consequent upon the Court's delivery of the first judgment and directions were made for the holding of such a hearing, (at [516]). 4. Among other directions the Court required the parties, (at [596](1)), "to bring in short minutes of order to give further effect to these reasons". A short hearing was held on 17 December 2018 in which various orders and declarations were made with the parties' consent. For reasons which will be explained, some of those orders have now become contentious. 5. The Court held a number of further directions hearings in preparation for a damages hearing, which was ultimately heard on 10 and 11 September 2019. 6. At the damages hearing Mr Henry SC, leading Mr Moujalli (except in relation to a motion of 29 August 2019) and instructed by TurksLegal, appeared for Mr Petkovski and the other plaintiffs/cross-defendants. Mr Wheelhouse SC, leading Mr Doyon and instructed by Levitt Robinson Solicitors & Attorneys, appeared for the Huangs. 7. In preparation for this relief hearing, the parties adopted a common conventional identification of nine separate claims that required assessment as result of the findings made in the first judgment. Most of the claims were brought by the Huangs. But some of them were brought by the Petkovski parties. These reasons deal with five of the nine claims. This judgment groups the nine claims into four separate groups of issues, as is explained below, and gives reasons for, or determines, the first two groups of issues. 8. The first group of issues arises from what the parties called "Claim 8" during submissions. In this claim, the Huangs seek against the Petkovski parties (as they describe it) "equitable compensation as persons knowingly concerned in the breach of the Huangs' equitable rights in relation to the execution of the Trust Deeds". The Huangs propounding of this claim at the relief hearing led to a closer examination of whether or not it had been properly pleaded in the first place. Mr Petkovski and the other Petkovski parties moved on a motion dated 29 August 2019, seeking to set aside the part of the orders entered by consent on 17 December 2018 that were the foundation of the compensation sought through this claim, Claim 8. The right of the Petkovski parties to set aside these orders and declarations was contested. This group of issues, relating to Claim 8, is described in these reasons as "the liability of the Petkovski parties other than Mr Petkovski". 9. At the hearing on 10 and 11 September, the Court indicated what decision it would take on this issue. These are the Court's reasons for that decision. 10. The second group of issues for this relief hearing concerns the proper assessment of damages consequent upon the Court's findings on the respective trespass and nuisance claims. This issue is described in these reasons as, "the assessment of damages in relation to trespass, nuisance and on the Trust Deeds". This group of issues encompasses the following claims: Claims 1 to 3, which were the Petkovski parties' claims for reinstatement and consequential loss, arising from trespass and physical damage to Lot 1(No. 57); and Claim 9, which was the Huangs' claim against Mr Petkovski for trespass on Lot 2 (No. 55). 11. The third group of issues was the Huangs' claim under the Trust Deeds. This was what the parties called in their submissions Claim 7. Under this claim the Huangs contended, and Mr Petkovski disputed, that monies were still owing to the Huangs under the Trust Deeds. This group of issues is referred to in these reasons as: "the Huangs' claim under the Trust Deeds" 12. In the fourth group of issues, the parties argued about what they called claims 4, 5 and 6. These were various claims for damages under Australian Consumer Law, s 236 and for equitable compensation. The main issue which evolved from submissions in relation to these claims was whether the measure of damages against Mr Petkovski should be assessed by reference to his loss of opportunity to acquire and retain one of the Watkin Street properties, rather than three properties. The Huangs' assert a claim to loss of profits for three properties. Mr Petkovski contended that the proper measure of the Huangs' loss is the market value of only one property. This issue is described in these reasons as: "the loss of opportunity to acquire one property or three properties?". 13. These reasons will now deal with each of the first and second groups of issues. The Court's next judgment will deal with the third and fourth groups of issues. The Liability of the Petkovski Parties Other Than Mr Petkovski 1. By their motion dated 29 August 2019, the Petkovski parties, other than Mr Petkovski (the second, third and fourth cross defendants), sought orders that declarations 9 and 10 made on 17 December 2018 on the Second Further Amended Cross-Claim should be set aside. Pursuant to Uniform Civil Procedure Rules 2005 ("UCPR"), rr 36.15(1) or 36.16(3). 2. Declarations 9 and 10 made on 17 December 2018 were as follows: "9. Declare the Second, Third and Fourth Defendants were knowingly concerned in the unconscionable conduct of the First Cross Defendant in relation to the First Cross Claimant's execution of the Trust Deeds. 10. Declare the Second, Third and Fourth Defendants were knowingly concerned in the unconscionable conduct of the First Cross Defendant in relation to the Second Cross Claimant's execution of the Trust Deeds." 1. These provisions are as follows. UCPR, r 36.15 provides: "36.15 General power to set aside judgment or order (1) A judgment or order of the court in any proceedings may, on sufficient cause being shown, be set aside by order of the court if the judgment was given or entered, or the order was made, irregularly, illegally or against good faith. (2) A judgment or order of the court in any proceedings may be set aside by order of the court if the parties to the proceedings consent." 1. The other power relied upon that the Petkovski parties rely upon is r 36.16(3), which provides in the context of the full rule as follows: "36.16 Further power to set aside or vary judgment or order (1) The court may set aside or vary a judgment or order if notice of motion for the setting aside or variation is filed before entry of the judgment or order. (2) The court may set aside or vary a judgment or order after it has been entered if: (a) it is a default judgment (other than a default judgment given in open court), or (b) it has been given or made in the absence of a party, whether or not the absent party had notice of the relevant hearing or of the application for the judgment or order, or (c) in the case of proceedings for possession of land, it has been given or made in the absence of a person whom the court has ordered to be added as a defendant, whether or not the absent person had notice of the relevant hearing or of the application for the judgment or order. (3) In addition to its powers under subrules (1) and (2), the court may set aside or vary any judgment or order except so far as it: (a) determines any claim for relief, or determines any question (whether of fact or law or both) arising on any claim for relief, or (b) dismisses proceedings, or dismisses proceedings so far as concerns the whole or any part of any claim for relief. (3A) If notice of motion for the setting aside or variation of a judgment or order is filed within 14 days after the judgment or order is entered, the court may determine the matter, and (if appropriate) set aside or vary the judgment or order under subrule (1), as if the judgment or order had not been entered. (3B) Within 14 days after a judgment or order is entered, the court may of its own motion set aside or vary the judgment or order as if the judgment or order had not been entered. (3C) Despite rule 1.12, the court may not extend the time limited by subrule (3A) or (3B). (4) Nothing in this rule affects any other power of the court to set aside or vary a judgment or order." 1. In circumstances which will shortly be outlined, the Petkovski parties (which for relevant purposes in this judgment describes the second, third and fourth cross-defendants and not Mr Petkovski) contend that the orders made on 17 December 2018 were entered "irregularly". The Petkovski parties did not contend that the orders were entered illegally or against good faith. The Huangs contend that the orders were not entered "irregularly" and, as to UCPR, r 36.16, the Petkovski parties contend, and the Huangs contest, that the challenge to declarations did not determine any claim for relief or question arising on any claim for relief. 2. This issue raises a broader contest about the basis for the Court's consent orders on 17 December 2018. The Petkovski parties contend, both on the pleadings and in the way that the case was run, that the Huangs did not make out any case for relief against them. They accept that relief may be available against Mr Petkovski but deny that it is available against them. The Petkovski parties accept that, although the 17 December 2018 orders were made by consent, they were made in circumstances where counsel then representing the Petkovski parties thought that he was merely complying with the Court's order "to give effect of these reasons", which reasons did contain findings conformable with the declarations ultimately made. The consent so given, it is contended, was consent to a grant of relief which the Huangs did not plead or claim. 3. The Huangs' contest this position. They say they ran a pleaded case consistent with the substance of the declarations and that the declaration should stand, and they should now have an award of damages against the Petkoski parties consequent upon the Court's findings of unconscionable conduct against Mr Petkovski in executing the Trust Deeds. The Huangs' contend that the Petkovski parties benefited under the Trust Deeds and the same relief should be available against them as is available against Mr Petkovski. 4. Resolution of this contest requires examination of the way the Huangs pleaded their case on their cross-claim, the way it was amended, and finally the way that they conducted the proceedings. 5. At the time these proceedings commenced, the Huangs, in their cross claim, pleaded a relatively narrow case against the Petkovski parties. The hearing leading to the first judgment was conducted over seven days, commencing on 15 August 2017 and concluding on 28 and 29 August 2017. Throughout that hearing, and until 28 August 2017, the Huangs relied upon their Further Amended Statement of Cross-Claim. The Petkovski parties contend, with justification, that this document did not plead any case of general law or statutory unconscionable conduct against the Petkovski parties. The Further Amended Statement of Cross-Claim clearly sought relief against Mr Petkovski, on the basis that he held Lot 1 (No. 57), Lot 3 (No. 53) and Lot 4 (No. 51) on constructive trust for the Huangs and, alternatively, they sought equitable compensation for the difference between the purchase price of those parcels of land in 2012 and their value at the time of judgment: Further Amended Statement of Cross-Claim, prayer for relief 1A. 6. Prayer for relief 1A was confined, seeking relief only "against the first cross defendant, Luben Petkovski". Prayer for relief 2A was not so confined. It sought as follows: "2A. The cross-claimants claim against all defendants: g. The sum of $833.55, as alleged in paragraph 60 below; and h. The sum of $876.36, as alleged in paragraph 64 below. i. Damages, as alleged in paragraphs 73 and 84 and 92 and 93 below. j. Interest on money, compensation and damages. k. Costs. l. Further and other orders." 1. These two claims for relief clearly distinguished the scope of relief against Mr Petkovski from the scope of relief against the Petkovski parties. The scope of relief against the Petkovski parties was confined in prayer for relief 2A(g) and (h) to specific amounts of money. The $833.55 claimed in paragraph [60] related to an alleged underpayment of that amount by Goran Petkovski who provided a cheque for $25,416.65 instead of the amount due of $26,250. 2. The other sum alleged to be due of $876.36 is alleged in paragraph [64] to be monies due under the Trust Deeds, clauses 2 and 3, which required the Petkovski parties to indemnify the Huangs for one-sixth of the option fee, applicable stamp duty and outgoings; the allegation being that a balance of $876.36 is required to cover those amounts. On no reading of the Further Amended Statement of Cross-Claim was there a claim that the Petkovski parties, as distinct from Mr Petkovski, held Lot 1 (No. 57), Lot 3 (No. 53) or Lot 4 (No. 51) on constructive trust for the Huangs, or, alternatively, that the Huangs were entitled to equitable compensation for the Petkovski parties' conduct in relation to those properties. 3. On the day prior to the commencement of the principal hearing, on 21 August 2017, Sunday, 20 August 2017, the Huangs served their "Amended Defendants' Preliminary Submissions on Unconscionable Conduct Case". A fair reading of those submissions is consistent only with the conclusion that broad claims for relief for unconscionable conduct were being made only against Mr Petkovski and not the other Petkovski parties. For example, in paragraph [272] of the 20 August 2017 submissions, the Huangs introduce a constructive trust/equitable compensation claim in respect of the three properties, Lot 1 (No. 57), Lot 3 (No. 53) or Lot 4 (No. 51) with these words "By the Amended Cross Claim a variety of relief is specifically claimed against the first cross defendant, Petkovski only including". The word "only" appeared in the submissions in bold, as if to emphasise that this claim was not being made against the Petkovski parties. 4. The reasons for the Huangs taking this position were better explained in paragraph [273] of their submissions, which pointed out that the time that Mr Petkovski held Lot 1 (No. 57), Lot 3 (No. 53) or Lot 4 (No. 51) "on a constructive trust is not pressed as [Mr Petkovski] is not the registered proprietor of those lots". This is slightly odd because, as the Court found in its principal judgment (at [15]), at the time of hearing Mr Petkovski owned Lot 4 (No. 51). Ms Yanna Elfes owned Lot 3 (No. 53). But Ms Elfes has never been a plaintiff or cross-defendant, so the position taken by the Huangs in paragraph [273] of the opening submissions was logical so far at least as Lot 3 (No. 53) was concerned, which was owned by a non-party. But Mr Petkovski was a part owner of Lot 1 (No. 57) and the sole registered proprietor of Lot 4 (No. 51). The contentions in paragraph [273] are therefore puzzling. That being said, the thrust of these 20 August 2017 opening submissions was clear: no constructive trust or equitable compensation claim in respect of these three properties was being made against cross-defendants beyond Mr Petkovski. 5. The pleadings, combined with the 20 August 2017 submissions, were a sound basis for Mr Moujalli, counsel for Mr Petkovski and the Petkovski parties, to assume that the Petkovski parties were not the subject of constructive trust or equitable compensation claims in respect of the non-Huang properties. 6. Mr Wheelhouse SC opened the Huangs' case on 21 August 2017. His opening was consistent with the pleadings and with the 20 August 2017 submissions. Again, nothing alerted Mr Moujalli to Mr Wheelhouse SC propounding any wider case on behalf of the Huangs. 7. Evidence was then called at the trial. Neither Mr Petkovski nor the Petkovski parties gave evidence. Final submissions commenced on 28 August 2017 and concluded on 29 August 2017. Mr Wheelhouse SC handed up a document entitled "Note Of Oral Argument" to which he spoke in closing submissions. The Huangs' 28 August 2017 closing submission, for the first time, raised contentions against the Petkovski parties about the Trust Deeds that they had signed. Paragraphs [415] and [416] and part of [417] of Topic 17 of the Note of Oral Argument were as follows: "415. In relation to the failure of the other parties, it is Diana Petkovski, George Gashovski and Lence Petkovski to give evidence it open to the Court to conclude: a. That Luben Petkovski was acting as their agent and that his conduct binds them as principals; or b. That each: i. Wilfully shut their eyes to the obvious; or ii. Wilfully and recklessly failed to make such enquiries as an honest and reasonable person would make; or iii. Knew of the circumstances which would indicate the facts to an honest and reasonable person; or iv. Knew of the circumstances which +would put an honest and reasonable person of enquiry. 416. The trust documents themselves would put a reasonable person on enquiry for the following reasons: c. Each of them signed it; d. They signed it after Mrs X J Huang signed it; e. There is no indication on the document that either K Y Huang or X J Huang signed it with the benefit of legal advice; f. Each of them could have made enquiries with either Petkovski or Cohineas as to the circumstances under which the declaration of trust was executed; g. There is no evidence of any prior conduct as KY Huang and XJ Huang and the beneficiaries. One would think the obvious question is, if you are a beneficiary is, "who are these people?". h. Each of them knew that both Petkovski and Cochineas were real estate agents and that it was unusual for a real estate agent to be seeking to have a purchaser hold real estate in trust for a real estate agent, when the agency that employed them was the selling agent; i. The trust deeds committed the trustee to execute the "option agreement" which in turn bound the trustees to carry out the subdivision in circumstances where the beneficiaries could remove the trustees at any time. 417. It is open to the Court that none of the cross-defendants would have given evidence that contradicted the above propositions." 1. These paragraphs raised for the first time a case that the Petkovski parties were knowingly concerned in Mr Petkovski's misconduct in procuring the Huangs' execution of the Trust Deeds. The fact that "Topic 17 – Miscellaneous" was not accompanied by any application to amend the pleadings led to a degree of confusion, both on the part of Mr Moujalli and the Court, as events unfolded. 2. Mr Moujalli responded in writing to the 28 August 2017 closing submission. His response did what might be expected in the circumstances; it took issue with "Topic 17 – Miscellaneous". 3. The Huangs also provided written submissions in closing. They seem to have been provided to the Court and to Mr Moujalli about the same time as the "Note of Oral Argument" document. The written closing submissions contain no equivalent of "Topic 17": they do not promote a case of damages for unconscientious dealing by Mr Petkovski against the Petkovski parties. Somewhat confusingly "Topic 17" in this document is entitled "the Huangs' Financial Position" and has nothing to do with the possible liability of the Petkovski parties for Mr Petkovski's unconscionable conduct. 4. To add to the confusion, the Huangs filed a Second Further Amended Statement of Cross-Claim on 28 August 2017, a document that was filed without objection. The Second Further Amended Statement of Cross-Claim did not plead allegations of unconscientious conduct or economic duress against the Petkovski parties. Its only amendments, which need not be detailed here, were to add claims in trespass onto Lot 2 (No. 55) – a property acquired by the Huangs – against the Petkovski parties; and to clarify that the damages claim in prayer for relief 2A covered all the Huangs' trespass claims in relation to Lot 2 (No. 55). 5. Thus, in summary, at the time of oral closing submissions, apart from "Topic 17 – Miscellaneous" in the "Note of Oral Argument" there was no mention in the Huangs' pre-trial documents, the pleadings or on the written submissions, or indeed in the principal closing submissions, of any claim for equitable relief for participation in any breach of duty by the Petkovski parties, knowing involvement in unconscionable conduct, participation in any claim for economic duress or any other breach of equitable duty or a duty under the Australian Consumer Law against them. It should be noted that both paragraph [336] of the Huangs' opening submissions and paragraph [610] of the closing submissions say "section 236 of the ACL entitles [the Huangs] to recover from [Mr Petkovski] the loss and damage each suffered as a consequence of the unconscionable conduct gauged in by [Mr Petkovski]". 6. The matter came up in final oral submissions. On behalf of the Huangs, Mr Wheelhouse SC submitted that the beneficiaries under the Trust Deeds "must have been aware that there was some untoward activity being engaged in by Mr Petkovski and Mr Cochineas". Mr Wheelhouse SC submitted: "That's to say that we say that the beneficiaries looking at the trust deeds must have been closing their eyes to the obvious. They must have been aware that there was some untoward activity being engaged in nby Mr Petrovksi and Mr Kokinis. I can develop that argument in some detail if your Honour wishes. The constructive trust argument arises from the conduct which is unconscionable but the only, the pleading pleads the unconscionable conduct was engaged in by Mr Lu Petrovski only. There's no sophisticated pleading that fits the various states of mind as required by Barnes v Addy or ---"" 1. The possibility of a knowing receipt claim under the first limb of Barnes v Addy (1874) LR9ChApp 244; (1874) 43 LJ Ch 513; (1874) 30 LT 4 ("Barnes v Addy") was then further discussed in oral submissions. But time for full oral submissions was short. The Court said to Mr Moujalli that Mr Wheelhouse SC "has raised this and he said it's available as something which on the pleadings I could do. It's a Barnes v Addy class I. I just want to know in your submissions after you have given it some thought whether you contest that or not". 2. The Court also said whether the Barnes v Addy relief was available may not have to be decided and the Court indicated that it might "make a series of findings and either the relief is there or it is not". Ultimately that is what happened: in the first judgment the Court made a series of findings of fact and did not deal with any issue of relief against the Petkovski parties. 3. But the Court ran out of time for full oral submissions. It directed the parties to put their further responses in writing, after the hearing. The further exchanges in writing after the hearing dealt with this issue. 4. After the hearing Mr Moujalli filed "Supplementary Closing Submissions" on behalf of the Mr Petkovski and the Petkovski parties. Those submissions dealt with the Barnes v Addy issue as follows: "8.17 At the hearing on 29 August 2017, his Honour asked counsel to consider whether relief pursuant to the first limb of Barnes v Addy (1874) LR 9 Ch App 244 is available on the cross-claim in the event that the Court needs to consider the question of relief. 8.18 Receipt pursuant to the first limb of Barnes v Addy requires: (a) receipt of property by the defendant to which a fiduciary obligation owed to the plaintiff is attached; and (b) receipt by the defendant in the knowledge that such property was received in breach of the relevant fiduciary obligation: Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at [110] - [129], 8.19 The cross-claim does not plead any matters which could establish a relevant fiduciary obligation, the person or persons to whom the fiduciary obligation was owed, breach of any fiduciary obligation and knowledge of such breach. 8.20 In the circumstances, relief pursuant to the first limb of Barnes v Addy is not available on the pleadings." 1. Mr Moujalli took the not unsurprising view that Barnes v Addy relief was not available because there was no breach of fiduciary duty. The Petkovksi parties took clear issue with the lack of pleading of a claim for relief against the Petkovski parties. Mr Moujalli's Supplementary Closing Submissions did not deal with any other possible liability of the Petkovski parties under Australian Consumer Law, s 238. 2. When the Court gave the first judgment in paragraph [378] it made factual findings that it could be inferred from the Trust Deeds and the circumstances that the Petkovski parties were knowingly concerned in Mr Petkovski's unconscionable conduct. Paragraph [378] provided as follows: "378. The cross-defendants (other than Mr Petkovski) were also knowingly concerned in his unconscionable conduct. Mr Petkovski arranged the Trust Deeds for all the beneficiaries. Those beneficiaries were well aware that they were relations either of Mr Cochineas or Mr Petkovski. They each signed the Trust Deeds. They would have known from the very terms of the Trust Deeds that Mr and Mrs Huang were apparently gifting these properties to them for no consideration, which in turn would have raised for each of the beneficiaries the question why the Huangs had agreed to enter into such improvident transactions for their benefit. Any enquiry on their part to Mr Petkovski would have revealed more. And given their closeness to Mr Petkovski and Mr Cochineas, it is highly likely, in my view, that they knew that Tome Bros were the vendor's agents on the sale of the Watkin Street property." 1. The Court then addressed the puzzle of the Huangs' contentions based on Barnes v Addy principles in paragraphs [398] to [402] as follows: "398. Mr and Mrs Huang also argued in submissions that both limbs of Barnes v Addy (1874) LR 9 Ch App 244 apply in the present case to attach liability to all the cross-defendants at the suit of the cross-claimants. 399. The relevant principles are well known. Responsibility as a constructive trustee may be extended in equity to those who are not properly trustees but were found (per Lord Selborne at p 251) "either making themselves trustees de son tort, or actively participating in any fraudulent conduct of the trustee to the injury of the cestui que trust". The first limb of the rule applies to receivers of trust property and the second limb to those who participate in the dishonest conduct of a trustee. Both limbs apply to defaulting fiduciaries as well as trustees: Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373; [1975] HCA 8 ("Consul") at 397 and Hospital Products Ltd v United States Surgical Corporation, Surgeons Choice (1984) 156 CLR 41; [1984] HCA 64. 400. One question would arise whether the cross-defendants "received" trust property. Receiving trust property within the first limb of the rule goes beyond obtaining either physical possession of, or an absolute interest in, trust property. It includes any interest, including a security interest: Carl Zeiss Stiftung v Herbert Smith & Co [No 2] [1969] 2 Ch 276 at 290. Under the first limb, it is unnecessary to establish that the transfer of the trust property stemmed from dishonest conduct by the transferor; it need only be established that the transferee had notice that the property was trust property and that it was being misapplied: Polly Peck International PLC v Nadir (No. 2) [1992] 4 All ER 769 at 777. 401. These principles could potentially be applied a claim to be brought by the vendor, Pangani. On the facts already found, each of the Petkovski parties had notice of circumstances under the first limb in Barnes v Addy that the properties they received were being misapplied by the vendor's fiduciary agent. That inference arises from their knowledge that Mr Cochineas and Mr Petkovski were the agents for the vendors and that a trust structure was being set up which had no obvious purpose other than, at least temporarily, to conceal their identity as purchasers from the vendors. 402. But whether such principles could possibly apply as between the Huangs and the Petkovski parties is doubtful. The matter was not adequately developed in submissions. Whilst the Court has found that Mr Petkovski engaged in unconscionable conduct in relation to the Huangs, he did not owe the Huangs any fiduciary duty. His employer, Tome Bros, owed that duty solely to the vendor, Pangani. It is difficult to see how the Huangs could mount any Barnes v Addy case arising out of Mr Petkovski's primary conduct as agent dealing with Pangani's property. With these preliminary observations, whether any relief is available based on either limb of Barnes v Addy can be left to a later relief hearing." 1. Just what kind of Barnes v Addy case was being relied upon and against whom remained uncertain because of the lack of pleading of either a first limb case of knowing receipt or a second limb case of dishonest participation in the scheme of a defaulting fiduciary. But as paragraph [402] expressed, the Court remained doubtful that such a case was available at the suit of the Huangs, who were not the injured principal in this situation and it seems contrary to accepted principle that there should be any such liability. 2. There the matter lay until 17 December 2018, when the Court entered consent orders which included declarations 9 and 10 set out above. Mr Moujalli, who did not appear on the 29 August 2019 motion, swore an affidavit of that date explaining why he consented to the 11 December 2018 consent orders, including declarations 9 and 10. He had concerns that no case had been pleaded against the Petkovski parties of being knowingly concerned in Mr Petkovski's conduct but he "did not object to declaration to this effect being made as such declarations were consistent with the finding paragraph [378] of the judgment". His view was that all he was consenting to was short minutes of order which were consistent with the findings in the judgment. He assumed that whether any damages or other relief would flow from the declaration would be the subject of a separate hearing. 3. The final steps in this history occur in preparation for the present damages hearing. On 1 July 2019, the Court directed the parties to prepare an agreed list of issues for determination at the damages hearing. By mid-August 2019, it was clear that the Huangs were asserting that they had opened a claim in equitable compensation damages pursuant to Australian Consumer Law, s 236 against the Petkovski parties. It then became clear to Mr Moujalli that that did not accord with his recollection of the conduct of the trial. When the conflict was raised with the Court, it directed the Petkovksi parties to bring the matter to a head by filing a motion. That led to the filing of the 29 August 2019 motion. Analysis 1. Before considering the specific submissions about whether declarations 9 and 10 on 17 December 2018 should be set aside, what was before the Court can be stated with certainty, which in turn, in my view, leads the resolution of the contest on the motion. 2. A claim for Barnes v Addy relief can be put aside entirely. Relief on either limb of Barnes v Addy has never been pleaded against the Petkovski parties. It was only mentioned in passing by counsel for the Huangs in the opening of the case, only to emphasise that no such claim was pleaded. Moreover, it is difficult to see how such a claim would be maintainable by the Huangs because firstly there is no claim nor finding that they were in a fiduciary relationship with Mr Petkovski, and secondly because there is no clear articulation of how either first or second limb liability would arise against the Petkovski defendants, some of whom were beneficiaries to the Trust Deeds but others of whom actually received the benefit of the Lots taken away from the Huangs and some of whom, such as Ms Elfes and Mr Goran Petkovski, are not even cross defendants. It would be quite unfair to the Petkovski parties to allow such an inchoate case to be advanced any further against them. To answer the question posed by the Court at paragraph [482] of the first judgment, no relief based on either limb of Barnes v Addy is available to the Huangs. 3. But nor, in my view, is any relief for compensation against the Petkovski parties, other than Mr Petkovski, available to the Huangs under Australian Consumer Law, s 238 based upon any claim of unconscionable conduct under Australian Consumer Law, Part 2.2. The Huangs did not plead the claim nor articulate it in their written submissions either in opening or closing. It gets a mention in the "Note of Oral Argument" but not in a way which really alerts counsel for the Petkovski parties about the nature of the claim being made. The Petkovski parties' submissions in reply show at every level that they were not aware that such a claim was being made. This is not surprising because of the absence of a clear pleading to that effect. 4. It is possible to conduct proceedings other than on the pleadings in a way that can be accepted by both parties and by the Court. Sometimes everyone in the courtroom understands that there has been an agreed departure from the pleadings. But this is not such a case. Mr Moujalli rightly concluded that no relief was being sought against the Petkovski parties under Australian Consumer Law, s 238 and that so far as that cause of action was concerned he only needed to focus on Mr Petkovski's position and he did. 5. Mr Wheelhouse SC did not seek to amend the Second Further Amended Statement of Cross-Claim any further to formally claim relief under Australian Consumer Law, s 238 based upon any unconscionable conduct of Mr Petkovski. Mr Wheelhouse SC not advancing such a claim is understandable. He came into the proceedings only just before they started. He decided not to formally amend the pleadings at that point. At the close of the case, the capacity to make such an amendment was even more difficult. The Petkovski parties had closed their case without going into evidence themselves and without cross-examining, on the basis of the case pleaded against them. Such an amendment could rarely, if ever, be allowed without giving them the opportunity to reopen their case. And leave to reopen would not have been granted here. In those circumstances, no relief under Australian Consumer Law, s 238 is available against the Petkovski parties, other than Mr Petkovski. The Court will not grant relief of this character against them in the damages hearing. 6. The Huangs argued that the Petkovski parties had delayed in bringing the 29 August 2019 motion, that their delay was unexplained and that, as a result, any discretionary relief that was being sought should be refused. 7. But there was no delay on the Petkovski parties' part. Indeed, they responded promptly when they realised this issue existed. It was not until the preparations for the damages hearing in July this year that it became clear to the Petkovski parties that a consequence of consenting to the declaration was that unpleaded Australia Consumer Law, s 238 relief would be sought against the Petkovski parties. 8. Given the state of the pleadings, it is not possible after this examination of the procedural history for any declarations of the kind that were made on 17 December 2018 to lead to consequential relief. There seems to be no point in making the declaration in the circumstances. But there is no obvious power under the rules to vacate the declaration the Court would have vacated it. 9. Mr Henry SC submitted that the entry of the orders was "irregular" within UCPR, r 36.15(1). It is very difficult to say that the entry of the declarations was "irregular" within UCPR, r 36.15. They were consented to by properly instructed counsel appearing for the Petkovski parties, who was not unreasonably interpreting the Court's direction to bring in short minutes of order to give effect to the reasons. Those reasons did contain paragraph [378] that justified the declarations in the form that they were made. 10. In my view, the Court should not set aside Declarations 9 and 10. That could not properly be done whilst the Court's finding at paragraph [378] stands. That can only be changed on appeal. Other than on appeal, the Court cannot alter its own findings and conclusions reached after a contest. 11. But for the reasons given, the Court will not grant any relief based upon those findings. This is not least because a party who is relying upon submissions that stretch the scope of the pleadings, should really elect to make an application to amend the pleadings. So there is no possibility of misunderstanding on the other side. Failure to do so leads to the kind of time-consuming contest that has occurred here. Assessment of Damages in Relation to Trespass, Nuisance and on the Trust Deeds 1. The second group of issues for this relief hearing concerns the proper assessment of damages consequent upon the Court's findings on the respective trespass and nuisance claims. 2. The Court's first judgment, between paragraphs [421] and [592], determined a series of trespass and interference claims covering a period of time after the subdivided lots of the Watkin Street property had been transferred into the names of the parties who occupied from about mid-2012. This part of the Court's second judgment assesses the damages consequent upon the Court's findings in this part of the Court's first judgment. 3. As was earlier indicated, in preparation for this relief hearing, the parties adopted a common conventional identification of the various claims that required assessment in the relief hearing, as result of the findings made in the first judgment. The claims that are dealt with in this section are as follows: Claim (1) Cost the Reinstatement of the Sewerage at Number 57; Claim (2) Cost of Reinstatement of the Storm Water Pipe at Number 57; Claim (3) Consequential Losses from the Trespass on Number 57; and Claim (9) The Claim for Damages for Trespass to Lot 55. The Petkovski parties bring Claims (1), (2), and (3). The Huangs bring Claim (9). 4. Claim (1) – Cost the Reinstatement of the 2014 Sewer Pipe at Number 57. At paragraph [552] of the Court's principal judgment, the Court found that the plaintiffs were entitled to the cost of reinstating the sewer piping (known in the first judgment as the 2014 Sewer Pipe), which Mr Huang demolished and removed. 5. The Petkovski parties claim an amount of $2,500 on account of this head of damage. The Huangs point out that the original price quoted for this task in September 2014, that is before Mr Huang removed it, was $1,500. The Huangs submit that the Petkovski parties have not explained why the quotation for executing exactly the same task has increased by $1,000 to the present quotation of $2,500. The Huangs submit that the increase is also not justified when a current quotation from Mr Tsoutsouras suggests that the "reinstatement of stormwater system and sewer system to number 57 which were previously damaged/removed", which appears to be for the whole costs of rectification for claims 1 and 2, is a total of $3,800. The Huangs submit this works out at an average of $1,400 per task, a figure which the Huangs say is in line with the original quotation. 6. The Huangs are prepared to concede $1,750 for this task. But in the Court's view, the identified and claimed increase over the five years from 2014 to 2019 in the cost of executing this task is not remarkable. The Court has accepted the evidence of Mr Fandakis and Mr Tsoutsouras on other subjects. The Court continues to regard them as reliable witnesses. The Court will allow the full $2,500 claimed on account of this item. 7. Claim (2) – Cost of Reinstatement of the Storm Water Pipe at Number 57. The Petkovski parties claim an amount of $5,250 for the execution of this task. The Huangs' submissions again refer back to the current quotation for the total amount of these two tasks of $3,800, or an average of $1,400 per task. They also point out that the evidence of Mr Fandakis is that these costs have been incurred. The Huangs dispute that the current stormwater piping at Lot 1(No. 57) is inadequate, or that the stormwater piping has to be moved in the way described in exhibit H, such that the amount claimed for this task should be awarded. 8. In the Court's view, the amount claimed should be awarded. It is properly quoted by Mr Tsoutsouras, a reliable witness, and endorsed by Mr Fandakis and appears reasonable, given the scope of the works required. Evidence strongly suggests that major steps are needed to reinstate the stormwater pipes, including some hydraulic redesign. The full amount claimed will be allowed. 9. Claim (3) – Consequential Losses from the Trespass to Number 57.In the Court's first judgment [587], the Court found that the Petkovski parties may be able to establish some consequential loss flowing from Mr Huang's trespasses when he destroyed and removed the 2014 Sewer Pipe and the stormwater piping from Lot 1 (No. 57). The Court accepted the Petkovski parties' submissions that Mr Huang's disconnection and removal of the sewer and stormwater pipes from Lot 1 (No. 57) gave them an entitlement to compensation for the reasonable rent which would have been derived from the use of their property. 10. But the Court observed that there were real constraints on assessing the quantum of this claim. At [586], the Court said that these damages might encompass loss arising only from "minor temporary delay in completion to building work on that property". And at [587], the Court further said that "this would appear to be a loss confined to a short period, being the reasonable period of time required to replace and reinstate the damaged plumbing works". The Court rejected, at [286], any consequential loss flowing from a claim based on the Huangs, or their agents, parking vehicles on Lot 1(No.57) or the easements appurtenant to that lot. 11. The Petkovski parties claim loss of rental income for five weeks at the rate of $550 per week, totalling lost rental of $2,750. Many of the integers of this claim are supported by some existing evidence. Mr Ashcroft, a certified practising valuer, has assessed the rental income which could have been derived from Lot 1(No.57) in 2016 at $550 per week. The Huangs have not adduced evidence suggesting a different figure for lost weekly rent. 12. Mr Tsoutouras was engaged in late October 2014 to install the storm water and sewer piping to service Lot 1 (No. 57). His work was substantially completed by 7 December 2014. So, the Petkovski parties submit that the Court can infer that a comparable period (of about five or six weeks) would have been required to replicate his work, after it have been demolished by Mr Huang. The Petkovski parties claim loss of rent of five weeks. 13. The Huangs counter these arguments in various ways. They say that during the period for which the Petkovski parties claim loss of rent, through no fault of the Huangs, no occupation certificate had been obtained and a certificate could not be issued until the building was "suitable for occupation or use": Environmental Planning and Assessment Act 1979 s 109H(3)(c) and 5(c). They submit therefore, that the building on Lot 1 (No.57) was not ready for occupation and that therefore no loss of rent flowed to the Petkovski parties from Mr Huang's conduct. 14. But the Huangs point out that Mr Ashcroft's evidence relates to the loss of rent for the granny flat on Lot 1 (No. 57) only and there is no evidence of the lack of stormwater pipes in the primary residence at Lot 1 (No. 57) that would have contributed to an inability to rent out the granny flat. 15. This distinction is important. The Huangs' submission is persuasive. Mr Fandakis' evidence is a basis to infer, as the Court does, that there was delay in complying with a number of development approval conditions for the Lot 1 (No. 57) granny flat, with the result that an occupation certificate was not obtained. For example, gas connection to the granny flat was only established in 2016. And the Petkovski parties' failure to respond to a notice to admit facts seeking an admission that there is no occupation certificate, means that even now it does not appear there is a current occupation certificate in respect of the granny flat on Lot 1 (No. 57). 16. There was therefore ample time before the issue of an occupation certificate for the Lot 1 (No. 57) granny flat, for the rectification works to have been done to repair the damage to the 2014 Sewer Pipe and the stormwater pipes. In my view, this claim fails in its entirety. It does so, because the Petkovski parties have failed to demonstrate they actually suffered any demonstrable consequential loss of rent from being unable to use the granny flat, as a result of Mr Huang's conduct in removing the 2014 Sewer Pipe and the stormwater pipes. 17. Claim (9) – the Huangs' Claim against Mr Petkovski for Trespass to Lot 55. As a result of the exchange of submissions, this loss of rent claim has now been agreed at $560, representing the loss of one week's rent. No further discussion of the issues arising out of Claim (9) is required. 18. This then leaves unresolved the third and fourth groups of issues considered at the relief hearing: the Huangs claims under the trust deeds; and, a loss of opportunity to acquire one property, or three properties? As indicated earlier these will be dealt with in the Court's next judgment on relief issues. Conclusions and Orders 1. No costs orders will be made in relation to the relief hearing until the Court has decided the balance of the issues. 2. Otherwise, for the above reasons the Court makes the following orders and directions: 1. On the plaintiffs'/cross-defendants' motion dated 29 August 2019, being Claim 8 on the relief hearing: 1. Make no order setting aside declarations 9 and 10 of the Court's orders made on 17 December 2018 but no consequential relief will be given upon the declarations; 2. Otherwise dismiss the motion, and 3. Reserve the question of the costs of the motion. 1. Enter the following judgments, exclusive of interest, in respect of Claims 1, 2, 3 and 9 of the relief hearing: 1. On Claim 1, judgment for the plaintiffs/cross defendants in the sum of $2,500; 2. On Claim 2, judgment for the plaintiffs/cross defendants in the sum of $5,250; 3. On Claim 3, judgment for the defendants/cross-claimants; and 4. On Claim 9, judgment for the defendants-cross-claimants in the sum of $560. 1. The Court continues to reserve consideration of Claims 4, 5, 6 and 7, on the relief hearing, which will be dealt with in the Court's next judgment. 2. Adjourn these proceedings to, not before 10am on Monday, 11 November 2019. 3. Upon the defendants/cross-claimants continuing the undertaking as to damages, extend Order 5 of the orders made on 3 October 2019, but in continuing that order, Order 1 of the Motion will be varied, changing: "48 Hours prior notice" to "12 hours' notice" and deleting the words "during normal business", until 5pm on Monday, 11 November 2019. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 08 November 2019