Baker v Loel

[1995] QSC 139

IN THE SUPREME COURT
OF QUEENSLAND

Brisbane

[Baker v Loel]
  Writ No. 1099 of 1994
BETWEEN:
  MICHAEL VINCENT BAKER
  Plaintiff
AND:
  JAMES BERESFORD LOEL
  Defendant

Writ No. 1185 of 1994
BETWEEN:
  MICHAEL VINCENT BAKER
  Plaintiff
AND:
  JOSEPH JOHN PATTISON
  Defendant

Writ No. 1186 of 1994
BETWEEN:
  MICHAEL VINCENT BAKER
  Plaintiff
AND:
  JAMES BERESFORD LOEL
  Defendant

Writ No. 1187 of 1994
BETWEEN:
  MICHAEL VINCENT BAKER
  Plaintiff
AND:
  SHARYN JAMES
  Defendant

Writ No. 1188 of 1994
BETWEEN:
  MICHAEL VINCENT BAKER
  Plaintiff

AND:
  MARK WILLIAM HALLETT
  Defendant

JUDGMENT  -  DERRINGTON J.

Delivered:1 June 1995

CATCHWORDS:             TRUST - action against innocent recipients of trust fund - leave of court required to enforce any remedy unless claimant exhausted all remedies against trustee - whether action may be brought without leave while action against trustee still pending - whether actions should be consolidated - Trusts Act s.109(2).

LIMITATIONS - action against innocent recipient of trust fund - not permitted without leave until remedies against trustee exhausted - when time begins to run - limitation period fixed to commence from time of "right of action" - Limitations Act s.27(1).

PRACTICE - amended Statement of Claim - whether claim in Statement of Claim allowed without amendment of writ - same claim but different cause of action from that first pleaded - Rules of the Supreme Court O.24 r.1.

Counsel:I.D.F. Callinan QC with him M.D. Martin for the plaintiff

M.D. Hinson for the defendant (Loel)

M.P. Amerena for the defendants (Pattison, James, Hallett)

Solicitors:Baker Johnson & Partners for the plaintiff

Michell Sillar Nicholsons for the defendant (Loel)

Halletts Solicitors T/A for Pattisons Solicitors for the defendants (Pattison, James, Hallett)

Hearing date :  8 May 1995

IN THE SUPREME COURT
OF QUEENSLAND

Brisbane

Writ No. 1099 of 1994
BETWEEN:
  MICHAEL VINCENT BAKER
  Plaintiff
AND:
  JAMES BERESFORD LOEL
  Defendant

Writ No. 1185 of 1994
BETWEEN:
  MICHAEL VINCENT BAKER
  Plaintiff
AND:
  JOSEPH JOHN PATTISON
  Defendant

Writ No. 1186 of 1994
BETWEEN:
  MICHAEL VINCENT BAKER
  Plaintiff
AND:
  JAMES BERESFORD LOEL
  Defendant

Writ No. 1187 of 1994
BETWEEN:
  MICHAEL VINCENT BAKER
  Plaintiff
AND:
  SHARYN JAMES
  Defendant

Writ No. 1188 of 1994
BETWEEN:
  MICHAEL VINCENT BAKER
  Plaintiff

AND:
  MARK WILLIAM HALLETT
  Defendant

JUDGMENT  -  DERRINGTON J

Judgment delivered the 1st day of June 1995

The first application is one by the plaintiff to consolidate a number of actions, each against one of his former partners in a firm of solicitors.  In one case, there are two actions against the same defendant, who does not object to the consolidation of those two actions but, along with the other defendants, he objects to their consolidation with the other actions.
       The plaintiff and the defendant Mr Loel were the co-trustees under a trust deed dated 10 June 1982 of a superannuation trust for all the members of the former partnership.  It replaced an earlier deed of the same kind dated 1 June 1981 in which the intended beneficiaries seem to have been the plaintiff and Mr Loel.  The plaintiff refused to join with Mr Loel in the distribution of the trust fund in accordance with the proportions prescribed on the face of the document, claiming that there were antecedent verbal arrangements between them as to the distribution, providing him with a larger share.  Although it is difficult to understand the whole history accurately, and it is probably not necessary to do so at this stage, it seems that this arrangement is alleged to have been made in or about June 1981.  It is not possible to say whether this means that it was before or after the first deed.  It is also not possible to say whether any such arrangement was superseded by the second deed.
       When agreement could not be reached as to the distribution of the fund, Mr Loel managed to effect it alone.  He seems to have divided it in accordance with the terms of the trust deed, including a payment to the plaintiff himself, which he refused to accept.  The plaintiff then instituted this series of proceedings.  He brought one action against Mr Loel as his co-trustee for wrongful distribution of the trust fund, and a separate action against him to recover the funds which he had personally received as a beneficiary.  In separate actions he claimed against the other partners respectively to recover the moneys received by them under the distribution, although it is not alleged that they were other than innocent parties to it.
       The beneficiaries other than Mr Loel apply to strike out the respective actions against them on the ground that the plaintiff cannot succeed in those claims at this stage.  They argue that he must first exhaust all his remedies against Mr Loel, unless he has the leave of the court, which he now seeks to obtain if it be necessary.
       Each application by those beneficiaries was technically based on the claim set out in a statement of claim that had been delivered but in anticipation of consolidation the plaintiff has produced a proposed fresh statement of claim for the consolidated action.  Of course it will not have effect unless the consolidation is granted.  However, it reveals the present nature of his actions against them.  It differs from the original statements of claim in that it frames the same claim on different grounds.
       It alleges the agreement between the plaintiff and Mr Loel referred to above, the distribution by Mr Loel which is alleged to be wrongful, the receipt by each of the others of the respective payments alleged to be wrongfully received, and it seeks the refund of those sums.  It does not claim any loss by the plaintiff but that is easily amendable.  The defendants complain that it raises a fresh cause of action, and that this requires leave to amend the writ and/or the original statement of claim, which should not be allowed because of the effluxion of the limitation period.  As it will later be seen, the limitation period has not yet begun to run.  In any case, the claim is a fair extension of the claim made in the writ, albeit based on a differently defined cause of action.  If it is the latter then of course there is no difficulty;  and if the former, then it is permitted by the Rules of Court without amendment - O.24 r.1.  Whether the plaintiff will seek leave to amend the various original statements of claim under O.32 r.3 remains to be seen for in the light of the results of these applications the course that will be followed by the plaintiff cannot be assumed.  Any consideration of this now would be premature.  This disposes of that issue.
       It is impossible to say on the material available whether the trustees did or could have bound their discretion in advance in the way claimed by the plaintiff;  or if they could not have done so, whether the plaintiff could have suffered any damage by the distribution;  or whether the later deed overrode all prior arrangements.  The matter cannot be resolved on these issues at this stage, for until the allegations are known in full, the governing principles cannot be identified.  In the case of such doubt, a pleading will not be struck out:  General Steel Industries Inc v. Commissioner for Railways (1964-5) 112 CLR 125, 129. So too there is a question to be tried as to whether the deed under which the distribution was made was fully operative, or was in some way modified by other arrangements. That will certainly be determined in the action against Mr Loel, though the decision there will only be binding on those parties inter se and it would probably be in the interests of all if some process could ensure that it could be made definitive of the rights of all these parties, at least as far as it goes.
       Consolidation of the actions would achieve that, but there may be defences open to each of the beneficiaries other than Mr Loel that would depend on the personal circumstances of the particular person, so that there would be no common interest on those points, except perhaps on issues of the principles controlling a common defence.  Despite the absence of common interest in this respect, the area of common interest that does exist is enough to support consolidation.  The only impediment is the suggested postponement of action effected by the Trusts Act.
       Section 109 of it reads as follows:

"109.    (1)  In any case where a trustee has wrongfully distributed trust property any person who has suffered loss by that distribution may enforce the same remedies against the trustee and against any person to whom the distribution has been made as in the case where a personal representative has wrongfully distributed the estate of a deceased person.

(2)  Except by leave of the Court, no person who has suffered loss by reason of the wrongful distribution of trust property or of the estate of a deceased person may enforce any remedy against any person to whom such property or estate has been wrongfully distributed until the person has first exhausted all remedies which may be available to the person against the trustee or personal representative.

(3)  Where any remedy is sought to be enforced against a person to whom a wrongful distribution of trust property or the estate of a deceased person has been made and that person has received the distribution in good faith and has so altered the person's position in reliance on the propriety of the distribution that, in the opinion of the Court, it would be inequitable to enforce the remedy, the Court may make such order as it considers to be just in all the circumstances."

Anterior to his saving application for any necessary leave under sub-s.(2), the plaintiff argues that he does not need it because the subsection means only that he cannot exercise the remedy of execution of any judgments he may obtain against those other beneficiaries until he has exhausted all his remedies against Mr Loel;  but that it does not inhibit his right to bring action against those persons before that stage is reached.  He argues that if it were otherwise, a party in his position would be unfairly burdened by the Limitations Act for the period of limitation of his actions against the others, for example, would have expired before he could have pursued Loel to judgment and found it to be barren.  This, he says, could not have been intended by the legislation, and that must determine the construction of the section in favour of his argument.  It is desirable to consider these arguments separately without disregarding the cumulative effect of their relationship.
       The obtaining of a judgment involves the enforcement of a remedy, so that the taking of action towards that end comes within the meaning of the words "may enforce any remedy" within the meaning of sub-s.2:  cf Pritchett v. English & Colonial Syndicate (1899) 2 428, citing Re Boyd [1985] 1 Q.B. 611; Godfrey v. George [1896] 1 Q.B. 48. Execution, to which the plaintiff refers, is enforcement of a judgment. The section refers to enforcement of the remedy, and this plainly applies to enforcement of it by action, including execution if necessary.
       The second part of the argument depends upon the proposition that the period of limitation began to run with the making of the payments by Mr Loel as though it related to the accrual of the cause of action, as for example in the case of actions for personal injury (Limitations of Actions Act s.11) or conversion (ibid s.12(1)).  This does not take into account the different expression in the section imposing a limitation on actions by beneficiaries in respect of trust property (ibid s.27(1)) where the time begins to run from the accrual, not of the cause of action, but of the "right of action".
       This means that as the plaintiff's rights against those beneficiaries do not accrue until he has exhausted his rights against Mr Loel or has obtained earlier leave, time does not begin to run against him until then.  This deprives his argument of its major premise.
       It follows that these actions cannot be commenced without leave and the next question is whether leave should be granted.  While the areas of common interest are sufficient to support consolidation, which is an argument in favour of the grant of leave, it would be contrary to the whole purpose of the provision to grant leave on that reasoning, for the same position would obtain in almost every case.
       Leave should therefore have been refused except for one matter.  As proceedings in each case have been commenced and the claim formulated, it would be a serious waste of costs if the actions were to be struck out for the want of leave;  but they can be held in abeyance until their proper time if that were made a term of a grant of leave.  If for any reason the actions do not proceed when that becomes open, the defendants can then apply to have them struck out, and they will be no worse off.  To this end the plaintiff should pay them their costs of the action to the present stage.
       This course would permit the parties, if they are so minded, to agree to have all the actions heard together on the issue of Mr Loel's alleged absence of authority to distribute the trust.  It will also ensure that there is no unnecessary limitations argument should the above reasoning be wrong, for this is a suitable case for leave to be granted nunc pro tunc.
       The plaintiff should also bear the costs of all applications.  His leave application is successful only to avoid waste from his earlier misconceived steps, he has failed on his application for consolidation, and the defendants' applications were reasonably brought, having regard to the defect in the plaintiff's position before leave was granted.
       It Is Therefore Ordered pursuant to s. 109(2) of the Trusts Act 1973 that the plaintiff have leave nunc pro tunc to the date of commencement of each action to commence the proceedings in each of the above actions Nos. 1185, 1187 and 1188 of 1994 subject in each respective case to the following:

(i)The action is stayed and save by leave of the court is to remain in abeyance until the termination of above actions 1099 and 1186 of 1994 against Mr Loel and the plaintiff's exhaustion of any remedies established in such actions;

(ii)The plaintiff is to pay within a reasonable time to each of the defendants Mark William Hallett, John Joseph Pattison and Sharyn James their costs to the present of and incidental to the respective actions against them.;

And That there is liberty to apply;
And That actions nos. 1099 and 1186 of 1994 be consolidated;
And That save for the above the plaintiff's application be dismissed ;
And That the plaintiff pay costs of the whole application;
And That the applications of the defendants be dismissed;
And That the plaintiff pay the costs thereof.