Banque Commerciale SA v Akhil Holdings Limited

[1989] HCATrans 275

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S36 of 1989

B e t w e e n -

BA.NQUE COM}!ERCIALE SA, EN

LIQUIDATION

A;:rnellant J. •

and

AKHIL HOLDINGS LI:v!ITED

Respondent

iYIASON CJ

BRENNAN J
DAWSON J
TOOHEY J

GAUDRON J

Banque

TR.Ai.~SCRIPT OF PROCEEDINGS

AT CANBERRA ON TUESDAY, 14 NOVEMBER 1989, AT 10.18 AH

Copyright in the High Court of Australia

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MR M.H. TOBIAS, QC: If the Court pleases, I appear with

my learned friend, MR R.G. FORSTER, for the

appellant. (instructed by Messrs Freehill Hollingdale

& Page)

MR A.J. MYERS, QC: If the Court pleases, I appear with

MR D.P. ROBINSON, for the defendant. (instructed

by Messrs Brown & Partners)

MR TOBIAS:  Your Honours, may I hand up seven copies of a

chronology and seven copies of the appellant's

outline of submissions?

MASON CJ:	Thank you.
MR TOBIAS:	Your Honours, there are two amendments I would

like to make - one to each document - if I may.

In relation to the chronology: after the date,

30 March 1983, would Your Honour insert - and it

is applicable to the same date by sheer coincidence -

"the Bank placed into liquidation". On page 2,

paragraph 7, of the outline there is a reference

to the Supreme Court Rules - Part 21 rule 1 -

could Your Honours add a reference to rule 3

subparagraph 1 as well so that it will read

"Part 21 rule 1 and 3 (1)" .

I have handed up, Your Honours, through the

Court officer, copies of the relevant section of

the TRUSTEE ACT and the LIMITATION ACT together

with photocopies of the relevant portions of

the Supreme Court Rules. Your Honours, the

essential proposition for which we contend is

that the Court of Appeal erred in this case

when, on the appeal, they made findings of

fraudulent breach of trust against the appellant

Bank in circumstances where fraud had never been

pleaded against the Bank and otherwise alleged

against it and in respect of which the Bank,

therefor~ never had the opportunity to provide

an answer.

(Continued on page 3)

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MR TOBIAS (continuing):  And the context in which that occurred

was in response in the Court of Appeal to a notice

of contention on the part of the Bank that it was

entitled to the benefit of the limitation provisions

of the TRUSTEE ACT and the LIMITATION ACT which

required proceedings in respect of a breach of

trust against the trustee to be commenced within

six years of the breach.

The short background facts against which this

dispute arose so far as the Bank is concerned I

can summarize as follows, but the relevant material

is to be found from pages 463 to 471 of the appeal

papers. In essence it was this: Akhil Holdings in Fiji, at all material times controlled by a

Mr Akhil; during the 50s and 60s that company had

a number of valuable mining rights in Fiji in

relation to the mining of manganese ore.

In early 1961, Mr Akhil met Mr Messara who was the third defendant. Mr Messara was the

controller of Deauville Nominees, the second defendant.

Towards the latter part of 1968, there were discussions

between Mr Messara and Mr Akhil with a view to Akhil Holdings selling its mining interests in

Fiji to a company which would go public. A company

known as Southland Mining Limited was formed and

eventually, in 1968, an option agreement was entered

into whereby Akhil had the option to transfer to -

Akhil had the opportunity to sell its interests to

Mr Messara and his interest for a consideration

and it was proposed that that would take place

by way of the allotment of shares to Akhil Holdings

in the capital of Southland Mining.

That option was duly exercised and Akhil gave

a direction to Southland which at that time was

also controlled by Mr Messara that of the shares,

of which I think there were 1.6 million fully paid

ordinary shares of 25 cents each, but of those

1.6 million shares one million were to be transferred

direct to Akhil and 600,000 were to be transferred

or allotted to the Bank as nominee.

(Continued on page 4)

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MR TOBIAS (continuing): That direction was complied

with and on 30 January 1969 Southland allotted

600,000 25 cent s~ares in its capital to the

Bank, the Bank havinp made a formal apnlication

to Southlana for that allotment. Thereafter

Bank transferred 25,000 of those shares and the balance of 1.475 million were

in June 1970 at the direction or request of defendants, the

transferred, again at the request of Deauville

and/or Messara, in or· about November 1970. I should

add that between 1969 when the shares were

allotted and 1970 when the shares were transferred

by the Bank the 600,000 ordinary 25 cent shares

had been converted by Southland to 1. 5. million

10 cent shares. That is the explanation for

the two transfers of 25,000 in June 1970 and

1.475 million in November 1970.

Akhil commenced proceedings on 13 September 1978,

nearly eight years after the last of the alleged
breaches of trust, in which it alle~ed inter alia

that the transfers by the Bank of the shares

constituted a breach of trust. A defence was

filed by the Bank to that claim in June 1982 and

in paragraph 6 of that defence, which aopears

at page 12 of the appeal book, it pleaded the

statute of limitations - or limitation periods

under the TRUSTEE ACT and the LIMITATION ACT.

To all intents and purposes the relevant

statute of limitations was that contained in

section 69 of the TRUSTEE ACT as the LIMITATION ACT which repealed that provision, that is the provision in the TRUSTEE ACT, did not come into

force until 1 January 1971, that is shortly
after the last of the alleged breaches.

The defences were also filed by the second and third defendants denying breaches of trust

and also setting up the limitation period. Their

position in relation to the question of

limitations was more clouded, if only for the

reason that the shares which were transferred to

Deauville by the Bank were then later, between 1972

and 1977 as the Court of Appeal found,

transferred to third parties.

(Continued on page 5)

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MR TOBIAS (continuing): It was, therefore, alleged firstly

that the Bank was in breach of trust when it first

transferred the shares to Deauville in 1970 and

that Deauville was in breach of trust to which

Mr Messara was a party when it transferred the

shares without the consent and knowledge of

Akhil from 1972 onwards.

Bearing in mind that the proceedings were

instituted in September 1978, some of the breaches

of trust alleged against the second and third

defendents, Deauville and Messara, fell without

and some within the relevant period of limited.	But
it was common ground that so far as the Bank was

concerned the relevant breaches took place or
concluded by 27 November 1970, as Mr Justice Cohen

found ,and the Court of Appeal accepted that finding.

As the chronology indicates, on 21 December 1982,

the plaintiff, Akhil, filed a reply to the defence of

the second defendant and on 10 March 1983, it filed

an amended reply to the defence of the third

defendant. Each of those two replies were, to all

intents and purposes, in identical terms and they

sought in paragraph l(b) thereof to allege that

the breach of trust alleged against the Bank and

against Deauville fell within the proviso to

section 69 of the TRUSTEE ACT; that is, it was in

effect a fraudulent breach of trust.

However, no reply was served in answer to the defence of the Bank. I should add, as appears

from the chronology, that on 30 March 1983, by

coincidence the date upon which the Bank was placed

into liquidation, a copy of the amended reply to

the defence of the third defendant was served on
the appellant's solicitors pursuant to Part 15 rule 28
of the Supreme Court Rules. That rule provides -

although there have been some amendments but none

that are currently relevant - that a party filing

a pleading shall serve it upon all other parties

to the proceedings: 

Each party to any proceedings in the Court

who files a pleading shall, on the date of

filing, serve the pleading on each other
party to the proceedings -

irrespective of whether it is a plea directly

relevant to that party or not.

However, although the rule was not complied

with in terms in the sense that the pleading was not served until some 20 days after the pleading was filed, it was, in fact, served upon the appellant's

solicitors.

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The original reply to the defence of the

third defendant and the reply to the defence of

the second defendant were not so served. Thereafter,

as the chronology indicates, the Bank filed a verified

list of documents by way of discovery and in January 1984,

filed verified answers to interrogatories which had been

administered against it by the respondent. Then, on

23 July 1984, the solicitors for the appellant filed

a notice of ceasing to act and, thereafter, neither they

nor the appellant Bank took any further part in

the proceedings until the appeal before the Court

of Appeal.

The consequence of that was that at the hearing before Mr Justice Cohen that commenced in July 1985

and which concluded in February 1986 - it was done in

two bites - the Bank played no part and called no

evidence and were, in fact, not represented.

(Continued on page 7)

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MR 'IDBIAS (continuing): Mr Justice Cohen found for the three defendants

u~on the basis that the plaintiff had not

discharged the onus of establishing that it was

the beneficiary of the shares in respect of which

it alleged were held in trust by the Bank. The

proceedings were therefore dismissed. Accordingly,

Mr Justice Cohen did not have to consider any

question of limitations. However, during the course

of the evidence of the plaintiff and as it appears,

by the plaintiff's own statement of claim, it is

clear that the breaches of trust alleged against
the Bank took place outside the six year limitation

period. In fact, in the statement of claim as

originally filed, as appears from page 3 of the

appeal papers, between lines 5 and 10, it alleged

a breach of trust occurring between

9 October 1970 and	2 July 1971. As the
proceedings were not commenced until	14 September

1978, more than six years later, ex facie on the

face of the statement of claim, the proceedings were

out of time. An amended statement of claim was

filed at the hearing on 17 February 1986, that

is during the course of the hearing,and it commences

at page 22 of the appeal papers. In paragraphs

13 and 14 thereof, on page 24, it alleges two breaches

of trust by the Bank, one relating to the transfer

of the 25,000 shares which was asserted to

occur between 9 October 1970 and 2 July 1971)

aQd in paragraph 14 of the balance of 1,475,000 shares

in or about December 1970.

In fact the court found that, in relation to the

25,000 shares, they were transferred in June 1970 and in relation to the 1,475,000 shares, they were

transferred on 27 November 1970. But all in all,

based on the allegations contained in both the

statement of claim and the amended statement of claim,

in effect, confirmed by the findings of the court,

the breaches of trust, on their face, took place

outside the six year limitation period.

(Continued on page 8)

7

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MR TOBIAS (continuing):  The respondent then appealed to the

Court of Appeal against the findings of Mr Justice Cohen

and at that hearing the Bank appeared: it sought to

adopt the submissions of the other two respondents,

Messara and Deauville, in response to the arguments of

Akhil that Mr Justice Cohen had erred.

BRENNAN J:  Was there any order made for the service of the

amended statement of claim?

MR TOBIAS:  No. The reason for that, probably, Your Honour, was

that the amendments contained in the amended statement
of claim do not affect the substance of the allegations
against the Bank as set forth in the original statement

of claim. Apart from some tidying up that occurred in

relation to those allegations, the major amendment

in relation to the amended statement of claim was

allegations against Mr Messara, in which, of course,

the Bank were not interested. As Mr Myerspoints out,

we had no solicitor acting, and note that the only

solicitor, Freehills, who had acted had filed a notice

of ceasing to act in, I think, July 1984. The hearing

commenced practically to the day 12 months later.

The Bank did file a notice of contention in the

Court of Appeal, claiming that it was entitled to uphold Mr Justice Cohen's decision upon a ground that

His Honour did not find necessary to deal with, namely

the limitation question. The response of the appellant
to that was to allege fraud, not only on the part of
the Bank, but also, of course, on the part of the
other respondents to that appeal, that is, the
other two defendants. In dealing with that aspect of

the matter, the Court of Appeal made a number of

comments. But in the course of so doing, one of the

matters that was raised in reply to the limitation

point by Akhil was that it claimed a case of concealed

fraud. All respondents to the appeal, including

Deauville and Messara, asserted that concealed

fraud had never been pleaded in the replies to their

defences that had been filed, and that therefore,

consistent with the statements of this Court in	COULTON V HOLCOMBE and WATER BOARD V MOUSTAKAS,
Akhill, the appellant, should not be allowed to
allege concealed fruad before the Court of Appeal.

(Continued on page 9)

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MR TOBIAS (continuing):  However, it did not deal with the

issue that is now before this Court and that is

whether the Court of Appeal was entitled to deal

with the response by the appellant to the

limitation issue raised before it in the notice

of contention by way of alleging fraud and thereby
being able to bring itself within a proviso to

section 69 in circumstances where fraud had never

been pleaded in any pleading filed as against the

Bank.

Can I take Your Honours back, however, to

that reply? They are in identical terms and it

is sufficient to refer to that at page 18.

Paragraph l(b) is the relevant paragraph, commencing

just below line 15. It asserted, as against the

second defendant and third defendant, that:

The plaintiff's claim is an action on a cause

of action in respect of a fraudulent breach

of trust by the first defendant -

that is the Bank

who was privy or a party to the breach of

trust while a trustee or alternatively a cause
of action for a remedy for the conversion

to the first defendant's own use of trust

property received as trustee -

The alternative action I do not think was pursued

that it was common ground that the Bank had never

retained the shares and converted them to its own

use but had transferred them to Deauville.

The particulars that are then set forth are,

on their face, insufficient to comply with the

rules in relation to an allegation of fraud.

Part 16 rule 2 of the Supreme Court Rules provides

that:

of any fraud, misrepresentation, breach of A party pleading shall give particulars

trust, wilful default or undue influence on

which he relies.

The relevant allegation contained in paragraph l(b)

had been pleaded in the reply as required by

Part 15 rule 13 which is the critical rule	and,
in particular, subrule (2). It provides, so far
as is presently relevant, that:

In a defence or subsequent pleading -

which would include a reply -

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the party pleading shall plead specifically

any matter -

and then some examples are given including fraud -

which he alleges makes any claim, defence or

other case of the opposite party not maintainable

As all defendants had pleaded the statute of limitations, which is also required to be pleaded

specifically by the same rule, and as the plaintiff,

or the respondent to this appeal, sought to set

up fraud upon the basis that that would make the

defence of limitations non-maintainable because

of the proviso to section 69, it was required to

plead fraud in accordance with that rule .. It

pleaded it but did not adequately particularize

it as against the other two defendants, Deauville

and Messara, it never pleaded it against the Bank.

Yet, in the Court of Appeal it sought to set up

fraud and the Court of Appeal upheld the submissions in relation thereto. The Court of Appeal castigated the Bank for not appearing at the trial in no

uncertain terms.

(Continued on page 11)

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MR TOBIAS (continuing): At page 482, in the judgment, dealing,

under the heading which appears at page 481, with

the issues on the pleadings, at line 39 the Court

said:

The Bank appeared. It submitted to the

jurisdiction. It confined its defence to

denials. But it added, in answer to the

whole claim, a defence based upon the

relevant statute of limitations.

At page 483, line 9:

In reply to the defences based upon the

limitation period, Akhil Holdings relied upon

the assertion that its action was based upon

a fraudulent breach of trust by a trusteee or

otherwise arose in circumstances in which the

defendants could not, being "privy or a party

to the breach of trust," rely upon the

defence.

The Court did not advert to the fact that no such

reply had been filed as against the Bank. They then

deal with the position of the Bank, at page 509,

saying that:

At this stage it is appropriate to say something

about the position of the Bank. Although it

filed the defence previously indicated (relying
on the limitation period) it did not appear at

the trial. It therefore did not appear to

·support its defence. The trial was conducted

in its absence. In these circumstances, any
complaint by the Bank (faintly voiced on the

appeal) about the issues which were litigated

at the trial when, at the trial, the statement

of claim was amended, cannot be entertained.

The Bank by absenting itself must be taken to have waived any objection which it might have

voiced had it appeared.

(Continued on page 12)

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1:1R TOBIAS (continuing): That was really an irrelevancy,

with respect, because it related only to the

Bank objecting to the amended statement of

claim,the amendments to which.so far as the

Bank were concerne4were of no concern to

it. It then, at line 35, went on to note

the fact that "the Bank had appeared by counsel

to support a notice of contention asserting

the judgment below could be sustained on the alternative

argument of the limitation period." There is

then some mention of the fact that the Bank

was in liquidation and the proceedings had

to be amended. Then, at the top of oage 510

just under line 5:

Accordingly, the title was amended. Tr.e

Bank, in liquidation, was heard to argue the limitation defence set out below.

The Court then dealt with the evidence before

Mr Justice Cohen and it eventually come to the

conclusion firstly that the Bank had received

the shares as a trustee and secondly that it

had received such shares as a trustee for the

appellant before it, that is Akhil as beneficiary.

At page 527 it then dealt with the limitation of

action defences by all defendants:

The last general defence which was

pleaded by all of the respondents relied

upon the defence of the relevant statute

of limitations ..... The first breach of

trust upon which Akhil Holdings sues the

Bank, Deauville and Mr Messara.occurred

on 27 November 1970.

I pause there to observe that there was no such

breach by Deauville and Messara on that date.

Deauville received the shares on that date

and accordingly held them as trustee for Akhil

not breach that trust until it dealt with those	on the findings of the Court of Anneal. It did
shares in 1972 onwards. On the top of page 528:

This was the day on which the Bank made

its transfer to Deauville which was

unauthorised by Akhil Holdings and made

without its knowledge. The proceedings

commenced on 13 September 1978. Accordingly,

without relief, the proceedings would be

out of time, being commenced more than

six years after the cause of action accrued.

They then set out section 69 of the TRUSTEE ACT,

which was the relevant provision so far as the

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Bank was concerned and in oarticular the proviso.

At the bottom of page 528:

The Bank, as well as Deauville and

Mr Messara, relied upon the limitation

period provided by force of s69(c) of

the TRUSTEE ACT. We do not pause to

cormnent on the claim by the Bank for

this defence. Although pleaded below,

it was not argued for. Doubtless the Bank

is entitled to rely upon any defence which

our law provides. To do so in these

proceedings is somewhat surprising. It is,

and claims to be, nothing more than a

receptacle. It has refrained throughout from

answering the appellant's contention of a

breach of trust.

But not a fraudulent breach of trust:

It has orovided no evidence for the defence

on the merits -

which clearly only went against the Bank to a

bare breach of trust -

although it clearly had relevant evidence

which could have cleared up many of the

mysteries of the case.

The basis upon which that cormnent is made is

difficult to understand, with respect. The Bank

had given discovery; it had answered interrogatories,

some of which were, in fact, tendered and are in

the appeal papers.

(Continued on page 14)

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MR TOBIAS (continuing):  They then go on to deal with the

proviso:

To circumvent the limitations defence, Akhil

Holdings invoked the proviso ..... In the relevant sense, this was a fraudulent breach of trust.

It was a deliberate action by the two trustees

and by Mr Messara.

The two trustees being the Bank and Deauville. -

The purpose of the proviso, ..... was to afford a

statutory version of the general equitable

fraud involving a trustee.

doctrine of relief against concealed fraud.

And page 530, line 24:

The fraud asserted is the deliberate action of the trustee to deprive the beneficiary of its property.

One assumes knowing that it was so doing. -

That is what occurred here. Accordingly, the

ordinary limitation period of six years was not

available to the respondents in respect of the

first breach of trust ...... the action, although

connnenced outside the normal limitation period,

is not statute barred.

They then went on to deal with the alternative ground

of"concealed fraud"to which I have already made

reference. -

By this doctrine, the limitation period would

not run until the victim of the fraud which

had been concealed learned of it.

And then on page 531, line 11:

However, the respondents objected that the

reply filed in the court below did not adequately

raise a case of concealed fraud. They contended

that, had this been done there might have been

evidence (although it was unspecified) which they

might have wished to call.

It is true that fraud must, by conventional

practice

and in fact by the rules -

be alleged and pleaded with particularity.	The
reply did raise the proviso to s69(1) -

but not against the Bank.

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Accordingly, that matter may be considered.

So how the court erred, in our respectful submission,

is simply overlooking the fact that never had there

been a reply to the Bank's defence alleging fraud
against it. It had only been alleged against it

in pleadings filed against other defendants.

However, in the circumstances, consistent with

the instruction of the High Court in SUTTOR, HOLCOMBE

and MOUSTAKAS, it is necessary to uphold the

objection of the respondents to a reply based on

concealed fraud. We do so without any sure

conviction that there was any relevant evidence

which was not already canvassed in the trial and

which the respondents would have wished to call

to rebut the contention of concealment. It

cannot, for example, be imagined that the Bank,

which even waived its right to be present at

the trial, could have been lured into giving evidence

had only it known that the reply would have

asserted concealed fraud on its part. Because it elected not to be present at the trial, its standing to object to the equitable reply must

be seen as tenuous in the extreme. So far as

Deauville and Mr Messara are concerned, it seems

scarcely likely that -

they would give evidence -

But because there is a theoretical (as distinct from

a practical) possibility that some evidence to

rebut concealment might have been called, and

to uphold the principle of strict pleading of
fraud, we would not allow, in the case at least of

the second and third respondents the reply now to

be relied upon.

So, in our respectful submission, the Court of Appeal, having recognized firstly the strict requirement that fraud should be both pleaded and particularized

against a party against whom such a serious

allegation is made and having accepted the principles

of this Court_ in MOUSTAKAS and COULTON V HOLCOMBE,

then set about making a finding of fraud as against

the Bank in circumstances where that had never been

alleged against the Bank and any pleading filed

against it.

TOOHEY J: Mr Tobias, the judgment does not necessarily reflect

the way in which the argument went, but putting
concealed fraud to one side, are we to take it that

the Bank raised, during the course of the argument,

the fact that the reply to its defence had not

alleged fraud of any sort?

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MR TOBIAS:	There has been no reply at all to its defence - - -
TOOHEY J:	I am sorry, but the absence of a reply.
MR TOBIAS:	- - - but the answer to Your Honour's question

is yes, that was the very substance of the written

submissions that had been placed before the Court of

Appeal. Now, I thought the Court might ask me that

question and I have brought copies of those written

submissions with me, if the Court would wish to have

them.

TOOHEY J:  So, the argument is put in terms of an oversight

by the Court of Appeal in relation to this particular

point.

MR TOBIAS:  It was argued before the Court of Appeal that as

fraud had never been pleaded against the Bank because
no reply to the Bank's defence had ever been filed,
that it was not open to the Bank to assert fraud in
response to the Bank's plea of limitation. That was,
with respect, simply ignored by the court who

proceeded to find fraud and thereby supplied an

answer to the limitation point.

MASON CJ:  Yes. Now, Mr Tobias, if there is no concession

by the respondent that this point was argued on behalf

of your client in the Court of Appeal, we should have

the document to which you refer.

MR MYERS: It was argued, if Your Honour pleases.

MASON CJ:	Thank you.
MR TOBIAS:	So, Your Honour, in our respectful submission, the

proposition for which we contend is clear. There is

no doubt that the matter was pleaded; there was no

doubt on the face of the plaintiff's own statements

of claim that it was out of time and the Bank was

entitled to proceed upon the basis that at no

material time was there any response or allegation

of fraud against it. Naturally, it took the risk

when it failed to appear at the trial that there

would be adverse findings against it in terms of

breach of trust and even an adverse finding against
it on the issue of limitations - when I say an "adverse

finding", perhaps, a finding that the breach took place

later than what was asserted. At the trial, in our

submission, it would not have been open, in the
absence of the Bank, to Akhil to have pleaded fraud
without giving the Bank notice and the opportunity
to appear and contest it. It did not do so. True,
as the appellant did not appear at the trial, the

only obligation upon the plaintiff, Akhil, was to

prove its case which it failed to do and the Bank

took a risk in relation to that but, having failed

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to do so and having, then, taken the matter to appeal,

there was no suggestion that the Bank was not properly

joined as a respondent to the appeal or that it was

not entitled to file and argue its notice of contention.

That being so, in our respectful submission, it just

flies in the face of all principle, and including

the decisions of the High Court upon which the Court
of Appeal itself relied to reject a reply based on
concealed fraud, for the Court of Appeal to have

permitted the respondent, Akhil, to then allege and

prove on the material then before the Court of Appeal

fraud against the Bank when the Bank had never been

given an opportunity of meeting it and the case is

as clear and as simple as that, in our respectful

submission.

For those reasons, in our submission, the appeal

should be upheld.

(Continued on page 18)

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MASON CJ: Thank you, Mr Tobias. Yes, Mr Myers.

MR MYERS:  If the Court pleases, there is an outline of

submissions which are to be handed to the Court.

MASON CJ: Thank you.

MR MYERS:  While that is being done, may I direct the Court's

attention to page 18 of the appeal book.

MASON CJ: That is the page we looked at earlier?

MR MYERS:	Yes, it is, Your Honour. This is the document which was entitled "Amended Reply to Defence of
Third Defendant" and, no doubt, that is what it
was, a copy of which was served upon the Bank on
30 March 1983.  The reply in paragraph 1 refers
to:

The plaintiff's claim ..... on a cause of

action in respect of a fraudulent breach

of trust by the first defendant.

It is a very curious document. I do not

know that I can make anything of it in a formal

sense but it certainly goes to, as it were, the

justice of the matter and the understanding of the

persons who were involved in the litigation about

what was going to be alleged at the trial. The

first defendant is the Bank and this document is
served upon the Bank before the trial. It is quite

clear that the Bank has notice that the allegations

that are going to be made in the action are "a

fraudulent breach of trust" by the Bank. Now, for

some reason which one can never know, no reply,
headed'Amended Reply to Defence of First Defendant"

was ever served upon the Bank. But this document was.

TOOHEY J:  The other feature of it, though, is that there is

nothing, I understand, in the judgment of the

Court of Appeal which suggested that the existence

of the reply to the other defendants was some sort of basis upon which the Court might reach the conclusion that it did in relation to the Bank.

MR MYERS:	That is so, Your Honour.
TOOHEY J:	I mean, that might have cast an entirely different

aspect on the matter.

MR MYERS:  There is no doubt, in our respectful submission, that

the difficulties arise in a practical v-7a.y in this appeal

because the Bank did not appear at the trial. Now, I have to

make submissions about the law- in relation to that. However,

the trial was conducted on the basis that 'When these shares were
transferred by the Bank to Deauville there was a fraudulent

breach of trust by the Bank in 'Which Deauville was involved.

C2Tl2/l/DR	18	14/11/89
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My learned friend, Mr Tobias, said, "Well,

there was no breach of trust by Deauville at that
time." Of course there was: Deauville was
participating in the breach of trust. It was not
the trustee: it was the person who was wrongfully,
fraudulently, as the evidence established, taking

the shares from the Bank and that is the basis

upon which the trial was conducted and the Bank

was not there.

BRENNAN J:  I do not understand that proposition of a basis

on which a trial is conducted? Even in such a

free-wheeling jurisdiction as New South Wales, I

rather thought that pleadings were intended to

define the issues between parties.

(Continued on page 20)

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MR MYERS:  Yes, they did, if Your Honour pleases, and the

pleadings defined the issue, as Your Honour sees

from page 18, as being whether there was a fradulent

breach of trust by the first defendant.

BRENNAN J: Perhaps I should restate it. I thought that the

pleadings between parties were intended to define

the issues between them.

MR MYERS:  Yes, indeed they are, Your Honour, and I must

accept that, but I do draw attention to the fact

that this document, which was served upon the first

defendant, plainly says that what is being alleged,

unfortunately against the third defendant, is the

first defendant's fraudulent breach of trust.

DAWSON J:  But you really put your argument on a broader basis.

You say the rule that you cannot raise something on

appeal is based on fairness - - -

MR :MYERS :	Yes , Your Honour .
DAWSON J:	- - - that you might have wanted to call evidence;

you might have, if you had known about it, below.	But
what you are saying is "They knew about it, they
were not deprived of any opportunity, whatever the pleading said."

MR MYERS: Exactly, Your Honour, and that is the starting point

of the consideration of the matter, and that is the

first matter that I advanced, and I rely, in particular,

on this document which was served upon the first

defendant. Now, shortly after that document was

served, the first defendant ceased to have solicitors;

was a company in liquidation in Switzerland.

The next answer which is the first answer advanced

in the outline of argument is of a more formal kind.

The appellant's argument has proceeded on the basis

that it did not have to appear at the trial to make

out the defence of limitations. It was for the
plaintiff, in some way, to negative that defence.	The
fact is, in our respectful submission, if a party is
absent from the trial, the other party may proceed

in his absence and obtain such relief as is appropriate.

In the case of the plaintiff, that means that the

plaintiff may proceed and prove its case.

DAWSON J: What is the status of the defence?

MR MYERS:  The defence is something which the defendant, if it

were there, could have relied upon.

DAWSON J: It is no longer being pursued?

MR MYERS:  Yes. It is simply not there, and the limitations

defence is, in truth; a defence.

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BRENNAN J: I do not understand that again, Mr Myers. Again, if

the defence raises an issue it may be that the

defendant has the onus of proving that issue, and if

he does not attend at the trial, then, of course, he

does not discharge the onus of proof if that be the

fact. But if the onus of proof is discharged

by the body of evidence adduced by the plaintiff, why

is that issue not one falling for the court's

determination?

MR MYERS:  Because the defendant may not rely upon a matter

that is pleaded. It is not for the court to assume

that the defendant relies upon every defence which is
put down on the piece of paper that is called a

defence.

BRENNAN J:  But is that not the boundaries of the issues?

Is that not what the court sits to determine?

MR MYERS:  Only, in our respectful submission, if the

defendant comes along at the trial to uphold the

defence.

BRENNAN J: Is there any authority which - - -?

MR MYERS:  No, there is not, Your Honour, and my learned friends

have not been able to find any. 'When I say there is

no authority, I did discover one case which is perhaps
hardly worth mentioning, but I should, however, refer

to it.

(Continued on page 22)

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MR MYERS (continuing): It is a report of a decision of

Mr Justice Holroyd of the Supreme Court of Victoria, last century, reported in - there are no reasons

but I should mention it, (1894) 15 ALT 272.

MASON CJ:	Does it have a name, this decision?
MR MYERS:	Yes, it does, DE PURY-and they are still around
making wine - V BRIGGS.  In that case,
Mr Justice Holroyd refused to hear counsel for
a party who had not delivered a defence. It is
obviously not precisely in point but what it shows is that the delivery of a defence, in our submission, is just the prerequisite to be established for appearing at the trial and maintaining a particular
defence.  However, it is not for the court to assume
that any particular defence which is pleaded will
be maintained at the trial and a limitations defence, for example, may well not be taken by a trustee,
even if it is pleaded.

There is no authority directly of the point,

however, to answer Your Honour Mr Justice Brennan's

question to me, none that we have discovered and

I infer none that my learned friend has discovered

because he does not cite any authority for

propositions 11, 12 and 13 on his outline of argument.

TOOHEY J:	Mr Myers, how far does that proposition go? Does
it go this far, that if a defence of limitations
is filed by a defendant who does not appear to support the defence but at the end of the hearing the evidence
shows, let us say beyond any shadow of doubt, that
the action has been commenced outside the limitation
period, that the court may then ignore the limitation
defence, it not having been supported during the
trial?
MR MYERS:	Yes, in our respectful submission, yes. The court
does not have to give judgment for the absent
defendant on a defence which has not been supported
at the trial.

BRENNAN J: If the defendant did not appear at the commencement

of the trial until after the plaintiff's

case closed and then came into court and said,

"I move for judgment"?

MR MYERS:	The defendant would not be allowed to appear, in
our submission, in those circumstances, unless
the plaintiff could reopen its case, perhaps.
But the defendant would not allowed, in justice,
to turn up half-way through the trial and after the plaintiff has closed its case.
BRENNAN J:	But if he sat there saying not a word until the

end of the plaintiff's case?

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MR MYERS: It is a question, if Your Honour pleases, whether

the defendant appears or not. And we simply advance

the propositicn, albeit unsupported by authority,
that it is not for the court to decide what defences

should be relied upon by the defendant.

TOOHEY J:	But is not the difficulty here that the court did decide and decided in order to pave the way to
a consideration of whether there was fraud or not,
and that consideration could not arise in a sense unless the court had first determined that otherwise the defence would be upheld?

(Continued on page 24)

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MR MYERS:  Perha:1s, if I understand Your Honour, the

question involves consideration of what one

is looking at at the trial. In this case

at the trial -

TOOHEY J:  No, I was not looking at the trial, I

was looking at the appeal.

MR MYERS:  Yes. If that be regarded as, as it is in

New South Wales, a rehearing, it would have

been open for the first defendant on the appeal

to say, "We want to call some more evidence." that on the appeal or could have remitted it

to a judge to take the further evidence. But

that course was not chosen on the appeal; that

was open to the first defendant. What the

first defendant came along and said was though,

"Checkmate, because we didn't turn up at the

trial and you didn't deliver a reply against

us, therefore you're foreclosed forever."

But if -

TOOHEY J:  But you really put your case on two bases:

you say first of all the defence of the

statute of limitations was abandoned.

MR MYERS:	Yes.
TOOHEY J:	But if that is not so, then the first defendant

was not taken by surprise by what happend in

the Court of Appeal.

MR MYERS:  Yes, I do, Your Eonour. Whether the word

"abandoned" in all its strict technical connotations

is one that I should fully assent to I am not sure,

but at least - - -

TOOHEY J: It was not pursued then.

MR MYERS:  It was not pursued and why is it for the court,

one may ask rhetorically, to decide that a

trustee should be given the benefit of a

limitations defence which it does not pursue?

MASON CJ:: By the way, were these your responses in the Court of Appeal to the argument on this point presented by the appellant here?

MR MYERS:  I cannot honestly say whether they were put

in precisely these words, if Your Honour oleases,

it is a little time ago. The responses were

in reply. There was no written document that

embodied them, but I believe that these submissions

were made.

MASON CJ:	Yes.
C2Tl5/l/J:M:	24
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MR MYERS: Certainly the first submission concernin~ the

document at page 18 was made.

MASON CJ:	Yes.
MR MYERS:	It was at the forefront of what I said.
BRENNAN J:	On this argument, as you present it, what is

the difference, if any, between a defence

which is a traverse and a defence which is

a confession and avoidance so far as the finding

of issues is concerned by a trial judge where

the defendant does not appear? Can a trial

judge act upon the confession, but not upon

the avoidance?

MR MYERS:  Your Honour, I think that is not the case

here, but the defence in so far as it contains

an admission could be relied upon by the

plaintiff and the plaintiff's only task is

to make out his case, not to neeative what a

true defence is.

The third proposition that I advance

is this, that if everything else that has been

put is not accepted, then, and if ·the court

was obliged at the trial to consider the

limitations defence, it would have concluded

that the Bank had not made out the defence

because on the evidence it was established that

the Bank was involved in a fraudulent breach
of trust - I do not wish to go into the evidence,

and I am sure the Court does not wish me to do

so - that was the finding of the Court of Appeal

at page 531, which my friend read to the Court.

(Continued on page 25)

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MR MYERS (continuing): This contention is bound up with a

question of the true construction of section 69

of the TRUSTEE ACT. Section 69(1) provides:

In any action suit or other proceeding against

a trustee or any person claiming through him,

the provisions of this section shall have

effect:

Provided that this section shall not affect

any action suit or other proceeding where

the claim is founded upon any fraud or
fraudulent breach of trust to which the

trustee was party or privy, or is to recover

trust property, or the proceeds thereof still

retained by the trustee, or previously received

by the trustee and converted to his use.

Although that is expressed as a proviso, as a matter

of statutory construction it does not follow that

the burden falls upon the plaintiff - I am sorry,

I thought the Court had been supplied with a copy.

MASON CJ:	Yes, we do have them, Mr Myers.
MR MYERS:	Although that is expressed as a proviso, it does

not necessarily follow that the burden of establishing

that there was fraud or fraudulent breach of trust

is on the wronged beneficiary. In its context,

what is expressed as a proviso may well be part

of the conditions which have to be satisfied by

the person who seeks to rely upon the limitations

defence. In other words, it is for the trustee

who wishes to rely upon this defence against his

beneficiary to show that he was not fraudulent.

In our respectful submission, there are most

powerful considerations which suggest that it ought

not to be the beneficiary who has to prove fraud

against a trustee who says, "Oh, limitations of

actions". If a trustee wants to take the benefit

of this limitations defence against his beneficiary,

he should establish that his breach of trust is
not fraudulent.

This Court has considered the construction

of provisos and so forth in the case mentioned in
paragraph 4 of the notes of argument, VINES V

DJORDJEVITCH, (1955) 91 CLR 512, especially at

page 519. The effect of it is, really, to say,

"Well, simply because it's a proviso doesn't mean

that that cast the burden upon the other party".

There are copies of this, if the Court pleases.

It was not a limitations case here. This

was a case that arose under an earlier provision

of the MOTOR CAR ACT when, as I infer, provisions

C2T16/1/SH	26	14/11/89
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for suing a nominal defendant were first enacted

and it provides:

"Where the death of or bodily injury to any
person is caused by or arises out of the use

of a motor car but the identity of the

motor car cannot be established any person

who could have obtained a judgment against

the driver of the motor car in respect of

such death or bodily injury may obtain against

a nominal defendant to be named by the Minister

the judgment which in the circumstances he could have obtained against the driver of the motor car: Provided that no such judgment

may be obtained unless such person as soon

as possible after he knew that the identity

of the motor car could not be established - and it is those words that gave rise to the terrific

difficulty -

gave to the Minister notice of intention to

make the claim and a short statement of the

grounds thereof" -

Now, the actual course of argument in this case is, perhaps, of no great importance.

(Continued on page 28)

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MR MYERS (continuing):  The question of principle is discussed

at page 519 and on to page 520:

It is said that the form of the sub-section places the burden of disproof on the defendant.

Just as here it is said that the burden of proving the fraud by the trustee is placed on the plaintiff

because it is cast as a proviso.

For the requirement of prompt notice after the injured party becomes aware of the

impossibility of identifying the car

inflicting the injuries is expressed in the

form of a proviso. "There is a technical

distinction between a proviso and an

exception, which is well understood. All
the cases say, that if there ben an
exception in the enacting clause, it must be
negatived: but if there be a separate

proviso, it need not" -

be.

The distinction has perhaps come to be applied

in a less technical manner, and now depends

not so much upon form as upon substantial

considerations. In the end, of course, it is
a matter of the intention that ought, in the case
of a particular enactment, to be ascribed to

the legislature and therefore the manner in

which the legislature has expressed its will

must remain of importance. But whether the form

is that of a proviso or of an exception, the
intrinsic character of the provision that

the proviso makes and its real effect cannot be

put out of consideration in determining where

the burden of proof lies. When an enactment

is stating the grounds of some liability that it

is imposing or the conditions giving rise to

some right that it is creating, it is possible

that in defining the elements forming the

title to the right or the basis of the liability

the provision may rely upon qualifications

exceptions or provisos and it may employ

negative as well as positive expressions. Yet

it may be sufficiently clear that the whole

amounts to a statement of the complete factual

situation which must be found to exist before

anybody obtains a right or incurs a liability

under the provision. In other words it may

embody the principle which the legislature

seeks to apply generally. On the other hand

it may be the purpose of the enactment to lay

down some principle of liability which it means

to apply generally and then to provide for

C2Tl7/l/DR	28	14/11/89
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some special grounds of excuse, justification
or exculpation depending upon new or additional
facts. In the same way where conditions of

general application giving rise to a right are

laid down, additional facts of a special

nature may be a ground for defeating or

excluding the right. For such a purpose the

use of a proviso is natural. But in whatever

form the enactment is cast, if it expresses an

exculpation, justification, excuse, ground of
defeasance or exclusion which assumes the
existence of the general or primary grounds from

which the liability or right arises but denies

the right or liability in a particular case by

reason of additional or special facts, then it
is evident that such an enactment supplies

considerations of substance for placing the

burden of proof on the party seeking to rely upon

the additional or special matter.

And then consideration is given to the construction of the proviso in this case. In our submission, there are substantial grounds for construing this proviso as not being in truth a proviso casting an onus upon the plaintiff, but rather as expressing

a condition which a trustee who wishes to rely,

as against his beneficiary, upon a limitations Act

must satisfy.

(Continued on page 30)

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MR MYERS (continuing):  And in the facts of this case,

not only did the defendant not appear at the trial

to attempt to satisfy that, the evidence at the

trial showed, as the Court of Appeal has found,

that the trustee was a party to a fraudulent breach

of trust. If the Court pleases,they are the

submissions on behalf of the respondent.

BRENNAN J: Can I just ask one question. Is it alleged

that the statement of claim raised an allegation

against the Bank of such a nature which, on its

face, excluded the operation of section 69?

MR MYERS:  I am indebted to Your Honour for asking that question

and I ought to have mentioned it. Could I take

Your Honour to page 24 of the appeal book. This is

the amended statement of claim. There is no

allegation of fraud in terms. There is an allegation -

first of all the beneficial ownership of the shares

is pleaded. Then there is an allegation in

paragraph 13 on page 24:

During the period from 9 October 1970

to 2 July 1971 -

so we are outside the limitation period -

the First Defendant as transferor executed and lodged with Southland certain brokers'

transfer forms whereby 25,000 ordinary

10 cent shares in the capital of Southland

being part of the Original Shares were transferred

by the First Defendant to divers purchasers for

value.

In or about December 1970 the First Defendant

as transferor and the Second Defendant as

transferee executed and lodged with Southland

a Transfer bearing date 10 December 1970 and

numbered 35400 whereby 1,475,000 ordinary

being part of the Original Shares were voluntarily

10 cent shares in the capital of Southland

transferred by the First Defendant to the

Second Defendant.

In or about May -

then that is allegations against the second defendant.

Paragraph 15:

The transfers referred to in paragraphs

13, 14 and 14C above were made by the First

Defendant -

and then the amendment was to add:

and the Second Defendant without the authority

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without the authority and consent of the

Plaintiff and in breach of trust and were

not within the knowledge of the Plaintiff.

Now it is not an allegation of fraud in terms,

but it is an allegation against a trustee. The

trustee voluntarily, without authority and consent,

in breach of trust and without the knowledge of

the beneficiary, transferred the shares. And it is

an allegation moreover, which is made in a pleading

where the dates of the transfers alleged are well

outside the six year limitation period. We say that,

as I began, that the complaint here is wholly

artificial. It was quite clear on the pleadings

what the issued were and the nature of the allegations.

If Your Honour pleases.

MASON CJ: Yes, Mr Tobias.

MR TOBIAS:  Your Honours, may I shortly deal with a couple

of the points raised by my learned friend.	May I
deal with the last one first.

(Continued on page 32)

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MR TOBIAS (continuing):  In our submission, there is nothing

in paragraph 15 that could, by any stretch of the
imagination, be said to comply with the rules of

pleading fraud with particularity.

BRENNAN J: That is not quite the point, though, is it? I mean, the

rule about particulars is a rule which a party

can take advantage of in order to obtain the

particulars but if the allegation is made in terms

of fraud then that might enliven the rule. The

fact that no particulars are provided does not
necessarily preclude the nature of the allegation

that is made?

MR TOBIAS:  No, Your Honour, but it does indicate, and the

fact that no particulars are provided is some

indication when read against the general terms of paragraph 15 that what is being alleged and

what a fair reading of paragraph 15 would give

to the reader is an understanding that all that

was being alleged was a bear breach of trust and
not a fraudulent breach of trust. The fact that

it is not supported by particulars, which one would

normally expect to support an allegation of fraud,

would confirm in the mind of the reasonable reader

of paragraph 15 that what was being alleged - and

all they had to allege at that time - was a claim

for breach of trust and not fraudulent breach of

trust.

Further, Your Honour, in relation to what

Mr Justice Dawson put by my learned friend and

which he grasped with both hands, that the relevant

rules are based on fairness and the first defendant,

the appellant, was aware that an allegation of

fraudulent breach of trust was being made, albeit

not in a pleading filed as against it and therefore
was not caught by surprise, what, with respect,

that tends to overlook, if they are to mean anything,

is the provisions of Part 15 rule 13(2)(a) and

(b), that requires matters of fraud to be pleaded

party is not taken by surprise - and therefore one	as against a party, not only so that the opposite	could not say, in this case, that we were taken
by surprise, nor do we seek to, in that sense -
but that if one is going to raise a matter that will defeat a defence, one has to do so specifically.
So there is a double requirement and it was only
one of those requirements that might be said, to
put it at its highest, to have been met in this case by the serving of one of the replies upon the solicitors for the appellant.

DAWSON J.	What is the status of the pleadings when you get
to the trial stage, Mr Tobias?
MR TOBIAS.	So far as?

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DAWSON J:	They define the area within which the dispute is
fought but they do not establish anything except perhaps by way of admission?
MR TOBIAS:	No, they do no more.

DAWSON J: It is not a trial on the pleadings when you

have a ..... trial?

MR TOBIAS: It is a trial based on the issues as articulated

in the pleadings. It ought to be anyway.

DAWSON J: All that means is that when the parties come along

and fight out the case, they are confined in putting

their case to the pleadings, that is to the area

marked out by the pleadings, but if you are not

there that does not matter.

MR TOBIAS: It does matter, with great respect.

DAWSON J:  Why?

MR TOBIAS: It does matter, Your Honour - it does not matter

in the sense that, not being there, the plaintiff
was obliged only to prove its case, subject to one
matter to which I will come to in a moment, but
it is another matter and, in our respectful submission,
the plaintiff would not have been permitted if
it had sought to do so, to establish fraud as against

the first defendant in the first defendant's absence

without the there being a reply so alleging it.

DAWSON J: Without there being an amendment of the pleadings

but you cannot have amendments of the pleadings,

it is not necessary when the party is not there.

MR TOBIAS:  That may be so, Your Honour, but in the present

case, of course, the respondent had the opportunity

of filing this reply and notifying it at least

up until July 1984 and simply did not do so.

DAWSON J: It certainly did buti you see, your absence, is

what I_am putting to you, renders that unnecessary

because if you are not there to fight the issues

there is no point in confining them?

(Continued on page 34)

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MR TOBIAS (continuin~): Except this, Your Honour, that - - -

DAWSON J:	Except for the statement of claim.
MR TOBIAS:	Yes, except for the statement of claim.

That brings me, out of order, to the last point my learned friend made in relation to whether the onus lay upon the apoellant to

prove fraud, and that is this, if one looks

at the proviso then the proviso only relates

to a situation where a claim is made.	The
section does not apDlY where the clain that is the claim of the beneficiary:

is founded upon any fraud or fradulent

breach of trust.

It is quite clear, in our respectful submission, that is what is there being referred to is that

where the beneficiary claims a fraudulent breach of trust,which clearly under the proviso he must

Prove - and that is in his statement of claim -

then the section does not apply. As a matter of fairness that must be so because otherwise the situation would be that if the onus lay

upon the appellant,, or the trustee, to prove

that he was not - the negative - that he was

not guilty of a breach of trust then it would be
open to a beneficiary to corrnnence proceedings

well after six years, say 12 years, after the

alleged breach of trust and then say, "Well, true

I·m outside the six-year period and true I've

waited 12 years to sue, but now you have to
prove that you are not guilty of breach of trust."
Your Honour, in our resoectful submission, the
section could clearly not have intended to

Place a trustee in that position because it would

then be to the beneficiary's benefit to delay as

long as possible so as to put the trustee in a most difficult position in proving a negative. And in any event, in our respectful submission,

on the true construction of the section and

of particularly the uroviso when it talks of

"claim being founded upon any fraud or fraudulent

breach of trust" -the proviso itself is requiring
the beneficiary to assert that in his claim in

order for the section not otherwise to apply.

So far as the other point made by

Your Honour Mr Justice Dawson : subsection (3)

just bears a little consideration because it

says this, and it goes to a point made by

Mr Justice Brennan, that if at the end of the

day on the evidence established, or in this case,
on the admissions contained in the pleadings,

that is the admissions contained in the statement

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of claim which on their face indicated that

the claim was out of time, what section 69(3)

says is that:

the trustee ..... shall be entitled to the
benefit of ..... the lapse of time as a bar

to the action -

and is at liberty to so plead. "Is entitled to

the benefit of the lapse of time as a bar to
the action." In our submission, firstly,
that militates against the submission of my
learned friend that as a matter of construction

the onus lies upon the trustee of negativing

a fradulent breach of trust. Secondly, in our

submission, it makes the so-called defence of

limitations a little different from the normal

confession and avoidance situation because

what it does, in our respectful submission,

is to require the Court to determine on the

facts at the end of the evidence whether or not

the lapse of time is such that the trustee is

entitled to the benefit thereof.

DAWSON J: That is what I was wondering. One is entitled

to plead it.

MR TOBIAS:	Of course.
DAWSON J:	And then you have only got the effect of the

pleadings, but the pleadings carry the whole way

in relation to a limitation defence.

MR TOBIAS: That is true, Your Honour.

DAWSON J: Or do they? You say they do, I suppose?

MR TOBIAS: Yes, I do. But, Your Honour, in the present

case, there is no question of abandonment or

withdrawal of the defence.

DAWSON J: It gets very close to it; you do not even

bother to come along.

MR TOBIAS:  We take that risk, but that does not mean

that we cannot assert it to some point of time

during the course of the proceedings.

DAWSON J:	Take what risk, Mr Tobias?
MR TOBIAS:	The risk, Your Honour, that there will be

findings of fact against us which we do not
contest. It would be an odd situation if

the appellant in a worse position than in the

example postulated by Mr Justice Brennan. He

had a solicitor turn up at the hearing who says,

"I just want to make a submission at the end of the

case. Will you excuse rre from further attendance t.mtil
address?" He is then excused; he turns up for addresses

and says, ''Limitations".

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DAWSON J:  At least that is pursuing the defence, but the

alternative is, you are really asking simply because

you flag the point at the pleadings, for the court

to take the defence, on your behalf.

MR TOBIAS:  Only because the evidence was not in contest,

and in this particular case - - -

DAWSON J:  That would not matter if you did not take the defence,

would it?

MR TOBIAS:  We would submit it does, but even if we do not

take the defence in the court below, there is no
base that has been put, in our submission, that we

were not entitled to take it in the Court of Appeal. We did take it: it was not contested that we should not take it. What was there asserted was that,

all right, you are taking it, true it is out of time,

but we can establish and we persuaded the Court of

Appeal to find that you are guilty of a fraudulent

breach of trust, even though it was never pleaded

against you. It removes it to that level. In our

respectful submission, the mere fact that the

appellant did not assert it in the court below, and
thereby took whatever risks that that might give rise

to, did not, nor was it suggested, in our submission,

that it was not entitled to raise it in its notice of

contention. Where we say the unfairness is, in our

submission, is then for the respondent to turn round

and say, "Well sure, you have new taken it, now we

are going to prove fraudulent breach of trust against

you".

DAWSON J: That is a different question.

MR TOBIAS:  A different question. That then leads me to the

last point, and that was - - -

BRENNAN J:	Mr Tobias, can I just interrupt you before you come to your last point? If the trial judge did not
make the necessary findings in favour of the
plaintiff in the action, but that was the question that
was agitated then on rehearing before the Court of
Appeal, and the Court of Appeal was asked to find
on specified evidence that there was a breach of
trust, which is, in fact, a fraudulent breach of
trust, and at that stage your client appears, why is
it not that on the rehearing the issue falling for the Court of Appeal's decision is whether or not -
I am assuming in this question a favourable answer
to the second argument of Mr Myers - there was a fraudulent breach of trust?
MR TOBIAS:	Because that had never been pleaded as against the appellant.

BRENNAN J: That may not have been -

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MR TOBIAS:  One can take it to the point where you are in

a hearing situation, and the Court of Appeal then

has to determine the issues on the pleadings and

on the evidence that was given. But then the

Court of Appeal is in no different position from

the trial judge in that sense. No application was

made by the respondent to file a reply alleging

fraud against the appellant before the Court of

Appeal.

BRENNAN J:  But was the issue raised by the present

respondent before the Court of Appeal an allegation

of fraudulent breach of trust against you?

MR TOBIAS:  Yes, undoubtedly.

BRENNAN J: Well now, if that is so, you answer to that was,

it was not pleaded.

MR TOBIAS: Correct, and therefore too late to argue because

we were denied the opportunity, both in the court

below and before the Court of Appeal to consider our

situation and obtain evidence. My learned friend says,

"Well, it was open to the Bank on the appeal to call
evidence on the issue of fraud", but, with great

respect, Your Honour, that is really not a fair or

practical answer to the difficulty the Bank was then

placed in. It went before the Court of Appeal upon the

basis of asserting its defence; it was then met with

the submission that, "True, you are asserting the

defence, but we say that defence is not maintainable

because of fraud", to which our response is, "Well, you

did not plead it; it is too late".

(Continued on page 38)

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MR TOBIAS (continuing): "You're raising now a new issue

against the Bank which you have never pleaded and

which the High Court authorities indicate you can't

plead and, therefore, argue, because we have been
denied the opportunity of a possibility~ as the

decisions put it, "of calling evidence in rebuttal".

BRENNAN J: Well, that raised for the Court of Appeal's

decision two question: first, whether it was too

late and that might have involved questions of

amendment of pleadings and delivery of replies out
of time; and the second is, if favourable to the

plaintiff in the action, what the result should be.

MR TOBIAS:  If the Court of Appeal had permitted the appellant

before it, being the respondent before this Court, to

plead fraud against the Bank, then the Bank would have

had to have considered its position and no doubt sought

at least an adjournment in order to consider it but,

as there was no application to plead it, any requirement

for an adjournment really became academic; difficult,

in any event, because the matter was then under way.

BRENNAN Jf Did the Court of Appeal give any intimation as

to whether the issue of fraudulent breach ot trust as

between the plaintiff and your client was alive and

falling for determination by that court?

MR TOBIAS:  I was not there but - would Your Honour

just repeat the question? I am sorry, I got waylaid.

BRENNAN J: 

Did the Court of Appeal give any intimation to

the parties before it that it was approaching the
resolution of the appeal on the footing that the

question which the court W3S asked to determine was

whether or not there was a fraudulent breach of trust

committed by your client against the plaintiff?

MR TOBIAS: 

As I understand it, the basis upon which the

argument went - because it fell from the appellant,

Mr Myers, before the Court of Appeal - he argued and

the Court of Appeal was obviously receptive to submissions

asserting a fraudulent breach of trust on the part

of the Bank, there is no doubt about that.

GAUDRON J:  The suggestion from Mr Myers in argument was

that he put those matters by way of reply.

MR TOBIAS:  No. The argument, I think, that he put by way

of reply, Your Honour, was, in his submissions in-chief -

and I will stand to be corrected by those who were there -

he sought to argue fraudulent breach of trust. Mr Forster's

reply was, "You can't raise fraudulent breach of trust

because you didn't plead it" and then, Mr Myers replied

to that in the manner in which he has indicated.	I
think that is right.

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MR MYERS:	I ag~ee with that, Your Honours.
MR TOBIAS:	There was no doubt that the way the case was

conducted by Arkhil, as appellant before the Court of

Appeal, knowing of course that there was a notice of contention in relation to the limitation point which

ex facie was established, was that in order to meet

that not only against the Bank but also against the

other respondents to that appeal, that he would have

to establish and persuade the Court of Appeal to find

fraudulent breach of trust and that is what he set out

to do in-chief and the Court of Appeal was receptive to
that and then Mr Forster, in his response, said, "Well,

it's too late; you can't do that. It's never been

pleaded against us".

BRENNAN J:  I confess one of the problems that is worrying me

at this stage, Mr Tobias, is this: whether or not

the Court of Appeal ought to have made a formal order
giving leave to the plaintiff either to amend its
statement of claim or to deliver a reply and then to

make the determination which was appropriate having

regard to the issues so defined and whether, having regard to the course which the argument took in the Court of Appeal, there has been a failure by the
Court of Appeal to appreciate and, therefore, to deal

with an issue which, in truth, arose on the appeal and
which, therefore, requires this matter to be sent back

to the Court of Appeal for its consideration of that

question.

(Continued on page 40)

~

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MR TOBIAS: Well,it would have to go back further than that,

Your Honour. It would probably have to go back

to the trial judge, because not only would the

pleadings have to be formalized, but the Bank would

then be entitled to the opportunity to determine

what its situation might be and may then wish to call

evidence on that issue.	More appropriately that
would be before the trial judge.	But Your Honour,

the position that that would then place the Bank,

of course, which has been in liquidation since

1983,it it went back on that basis, is that this
breach of trust would then be 20 years old and that

Your Honour, in our respectful submission, would

not be an appropriate course. The appellant before

the Court of Appeal knew precisely what the position

was. It knew that it had not filed a reply alleging

fraud against the Bank and it never sought, before

the Court of Appeal, to correct that situation.	Now
the initial error carried right through the
proceedings was that of the respondent, not that
of the Bank.	Now having made that bed, in our

respectful submission, it ought to lie in it. It was,

and could have before the Court of Appeal, sought

to amend its pleadings and no doubt have been met

with an application for an adjournment. It took the
tactical decision, one assumes, of· not to pursue

that course, and therefore was met, no doubt by anticipation, with the response that Mr Forster

asserted before the Court of Appeal and which we now

assert before this Court.

Now it took that risk. It took that tactical

decision, of course obviously at the risks of

adjournments, and therefore, in our submission,

it should not be able to benefit from it. Those are

our submissions, Your Honour.

MASON CJ:  Yes. Thank you, Mr Tobias. The Court will consider

jts decision in this matter.

AT 11.45 AM THE MATTER WAS ADJOURNED SINE DIE

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