Belgravia Nominees Pty Ltd v Lowe Pty Ltd [No 3] - [2015] WASC 442

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: BELGRAVIA NOMINEES PTY LTD -v- LOWE PTY LTD [No 3] [2015] WASC 442

CORAM: TOTTLE J

HEARD: 13 OCTOBER 2015

DELIVERED : 18 NOVEMBER 2015

FILE NO/S: CIV 2583 of 2013

BETWEEN: BELGRAVIA NOMINEES PTY LTD
JOONDEL DEVELOPMENTS PTY LTD
Plaintiffs
AND
LOWE PTY LTD
First Defendant
COLIN REGINALD HEATH
Second Defendant
PENHURST NOMINEES PTY LTD
Third Defendant

Catchwords:

Practice and procedure - Application to re-amend the amended writ of summons - Whether new causes of action are statute barred by fixed period of limitation - Whether new causes of action arise out of the same facts or substantially the same facts - Turns on own facts

Legislation:

Corporations Act 2001 (Cth), s 79, s 181(1), s 181(2), s 182, s 1317H, s 1317K, s 1322
Limitation Act 1935 (WA), s 38(1)(c)(vii), s 47
Limitation Act 2005 (WA), s 13, s 27, s 38
Real Estate and Business Agents Act 1978 (WA), s 4, s 60(2), s 61(3)
Rules of the Supreme Court 1971 (WA), O 6 r 1(1), O 21 r 5(2), O 21 r 5(5)

Result:

Application granted in part

Category: B

Representation:

Counsel:

Plaintiffs:     Mr M D Cuerden SC
First Defendant              :     Mr D H Solomon
Second Defendant         :     Mr D H Solomon
Third Defendant            :     Mr C S Gough

Solicitors:

Plaintiffs:     Robertson Hayles Lawyers
First Defendant              :     Solomon Brothers
Second Defendant         :     Solomon Brothers
Third Defendant            :     Mills Oakley Lawyers

Case(s) referred to in judgment(s):

ABB Service Pty Ltd v Hetherington [2001] WASCA 417
Allco Funds Management Limited v Trust Company (RE Services) Ltd [2014] NSWSC 1251
Barnes v Addy (1874) LR 9 Ch App 244
Belgravia Nominees Pty Ltd v Lowe [2015] WASCA 143
BHP Iron Ore Pty Ltd v Westraint Resources Pty Ltd [2002] WASCA 18
Brickfield Properties Ltd v Newton [1971] 3 All ER 438; [1971] 1WLR 862
Cigna Insurance Asia Pacific Ltd v Packer (2000) 23 WAR 159
Dye v Griffin Coal Mining Co Pty Ltd (1998) 19 WAR 431
Farah Construction Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89
Golski v Kirk (1987) 14 FCR 143; (1987) 72 ALR 443
Hewitt v Henderson [2006] WASCA 233
Levi v Stirling Brass Founders 36 ATR 290
Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635
Morgan v Banning (1999) WAR 474
Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221
Rayney v State of Western Australia [No 3] [2010] WASC 83
Rossen v Airey [2012] WASCA 26
Stone James v Pioneer Concrete (WA) Pty Ltd [1985] WAR 233
Tristram v Hyundai Automotive Distributors Australia Pty Ltd [2005] WASCA 168
Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514
Weldon v Neal (1887) 19 QBD 394
TOTTLE J:

Introduction

By a chamber summons issued on 30 September 2015 the plaintiffs applied for leave to re‑amend the amended writ of summons and sought an order that the question of the date from which the proposed amendments take effect be left to the trial judge.
The writ was issued on 18 October 2013 and was indorsed with a claim that (omitting the prayer for relief) read as follows:
1.The Plaintiffs' claims arise from a written agreement made 26 August 1999 pursuant to which the First Defendant has received payment without a valid appointment as agent under Section 60 of the Real Estate and Business Agents Act 1970, or has failed to provide the services for which the payments have been received or has received payment for services provided by third parties for which they received payment.
2.Further the Second Defendant acting on behalf of the Plaintiffs including an account signatory made payments to the First Defendant purportedly pursuant to the written agreement and in breach of his duty to the Plaintiffs when the Second Defendant was interested in the payments as a director and shareholder of the First Defendant and the First Defendant was not entitled to the payments for the reasons at 1. above.
Pursuant to an order made by the Court of Appeal on 16 July 2015 (as to which see Belgravia Nominees Pty Ltd v Lowe [2015] WASCA 143) the writ was amended on 19 August 2015 to add Penhurst Nominees Pty Ltd (Penhurst) as a third defendant.
The plaintiffs filed and served an amended statement of claim on 16 September 2015. The application to make further amendments to the indorsement was made in anticipation of an attack on the amended statement of claim on the basis that it raised causes of action not mentioned in the writ or which arise from different facts.
In its proposed amended form the indorsement of claim is as follows:
1.The Plaintiffs' claims arise from a written agreement made 26 August 1999 pursuant to which the First Defendant has received payments without a valid appointment as agent under Section 60 of the Real Estate and Business Agents Act 1970, or has failed to provide the services for which the payments have been received or has received payment for services provided by third parties for which they received payment.
1A.Further and alternatively (and to the extent that they are not otherwise within the indorsement in paragraph 1 herein) the Plaintiffs claim repayment of monies which the Second Defendant caused to be paid by way of mistake to the First Defendant, and which were received by the First Defendant, being the sum of $4,340,280.10 from the bank account held jointly by the Firstnamed Plaintiff and the Third Defendant, over the period on or about 4 April 2006 to on or about 29 January 2012, and the sum of $220,000 from the bank account of the Secondnamed Plaintiff on or about 16 July 2009.
1B.Further and alternatively (and to the extent they are not otherwise within the indorsement in paragraph 1 herein) the Plaintiffs claim repayment of the monies referred to in paragraph 1A herein by way of restitution for the First Defendant's unjust enrichment.
2.Further the Second Defendant acting on behalf of the Plaintiffs including an account signatory made payments to the First Defendant purportedly pursuant to the written agreement and in breach of his duty to the Plaintiffs when the Second Defendant was interested in the payments as a director and shareholder of the First Defendant and the First Defendant was not entitled to the payments for the reasons at 1. above.
2A.Further and alternatively (and to the extent they are not otherwise within the indorsement in paragraph 2 herein) the Plaintiffs claim relief against the Defendants with respect to the Second Defendant's breaches of fiduciary duty to the Plaintiffs as a director of each of the Plaintiffs, further and alternatively breaches of duties imposed on the Second Defendant pursuant to sections 181 and/or 182 of the Corporations Act 2001 (Cth), and the First Defendant's knowing involvement in those breaches, with respect to the entry by each of the Plaintiffs into the written agreement referred to in paragraph 1 herein while the Second Defendant was a director of each of the Plaintiffs, further and alternatively with respect to the receipt by the First Defendant of the monies referred to in paragraph 1A herein.
3.AND the Plaintiffs claim:
(A)1. a declaration that the First Defendant does not have a valid appointment as agent; and
2.an order for repayment of all consideration received by the First Defendant;
(B)Alternatively an order for the First Defendant to refund the consideration received for services not performed by the First Defendant.
(BA)A declaration that the First Defendant was not and is not entitled to receive or retain any commission, reward, or valuable consideration under the written agreement referred to ion paragraph 1 herein because it was not a valid appointment to act as agent for the Plaintiffs and the Third Defendant under section 60(2) of the Real Estate and Business Agents Act 1970.
(BB)An order against the First Defendant for repayment of all payments received by the First Defendant from the Firstnamed Plaintiff and the Third Defendant referred to in paragraph 1A herein, being the sum of $4,349,280.10 in restitution, alternatively in debt and interest thereon pursuant to s 32 of the Supreme Court Act 1935 calculated from 4 April 2006 to judgment at 6% per annum or at such other rate for such other period as this Honourable Court may deem just.
(BC)An order for repayment to the Secondnamed Plaintiff by the First Defendant of the sum of $220,000 received by the First Defendant referred to ion paragraph 1A herein in restitution, alternatively in debt, and interest thereon pursuant to section 32 of the Supreme Court Act 1935 and calculated from 16 July 2009 to judgment at 6 per cent per annum and $36.16 per day or at such other rate for such other period as this Honourable Court may deem just.
(BD)an order against the Second Defendant to pay each of the Plaintiffs equitable compensation, alternatively compensation pursuant to section 1317H or damages pursuant to section 1324(10) of the Corporations Act 2001.
(BE)An order setting aside the written agreement referred to in paragraph 1 herein.
(BF)A declaration to the effect that the First Defendant holds the sums it received as referred to in paragraph 1A herein on constructive trust for the Firstnamed Plaintiff and the Third Defendant as to the sum of $4,340,280.10, and for the Secondnamed Plaintiff as to the sum of $220,000.00.
(C)Damages or equitable compensation from the Second Defendant.
(D)Interest at such rate and and (sic) on such amounts as the Honourable Court deems appropriate.
(DA)Such other orders as this Honourable Court may consider just and appropriate.
(E)Costs.
The essential questions raised by the application for leave to re‑amend the writ were:
(a)first, whether the amendments proposed would introduce causes of action which are barred by the Limitation Act 1935 (WA) or the Limitation Act 2005 (WA) and are, therefore, impermissible in accordance with the rule in Weldon v Neal (1887) 19 QBD 394; and,
(b)secondly, if the amendments are statute barred whether they are of a kind that fall within the provisions of O 21 r 5(2) and r 5 of the Rules of the Supreme Court 1971 (WA) (RSC). Those sub‑rules read:
(2)Where an application to the Court for leave to make the amendment mentioned in sub-rule (3), (4) or (5) is made after any relevant period of limitation current at the date of issue of the writ has expired, the Court may nevertheless grant such leave in the circumstances mentioned in that sub‑rule if it thinks it just to do so.
(5)An amendment may be allowed under sub‑rule (2) notwithstanding that the effect of the amendment will be to add or substitute a new cause of action if the new cause of action arises out of the same facts or substantially the same facts as a cause of action in respect of which relief has already been claimed in the action by the party applying for leave to make the amendment.
Counsel for Penhurst attended the hearing but did not participate in the argument.

Relevant principles

The effect of the rule in Weldon v Neal is that a plaintiff will not be permitted to amend a writ if the effect of the amendment is to set up a new cause of action, which, if made the subject of fresh proceedings, would be statute barred by a fixed period of limitation.
Order 21 r 5(2) and r (5) operate to ameliorate the difficulties which can be caused by an unduly rigid and narrow approach to the rule in Weldon v Neal. Order 21 r 5(5) avoids an overly technical and rigid application as to the degree of coincidence which must be found to exist between the facts necessary to establish the cause of action as originally advanced and those contained in the proposed amendments: Morgan v Banning (1999) WAR 474, 476 - 477 (Owen J, as his Honour then was).
As explained by McLure J (as her Honour then was) in ABB Service Pty Ltd v Hetherington [2001] WASCA 417 [12], [19], the Court has power to allow an amendment to a writ notwithstanding that the proposed cause of action is statute barred because when a statutory limitation bars the remedy rather than the right, the remedy is not barred unless pleaded in the defence. It is for the defendant who says that the action is statute barred to plead the defence specifically: Cigna Insurance Asia Pacific Ltd v Packer (2000) 23 WAR 159 [36]. The grant of leave to amend cannot affect a defendant's rights pursuant to a statutory limitation period.
Order 21 r 5(2) and r 5(5) only apply if the relevant limitation period had not expired at the commencement of the action but had expired at the application to amend is made: ABB Service Pty Ltd [13].
In O 21 r 5(5) the reference to 'cause of action' is a reference to the fact, or combination of facts, which gives rise to a right to sue: Morgan (476) (Owen J).
Questions as to whether a cause of action is new, or arises out of the same facts, are largely and often questions of degree resolved as a matter of impression: Dye v Griffin Coal Mining Co Pty Ltd (1998) 19 WAR 431, 434 (Owen J).
It is no objection that some of the facts out of which a new cause of action arises are peculiar to it and that some of the facts out of which the old causes of action arises are peculiar to it. It is enough if the overlap is so great that the new cause of action can fairly be said to arise out of substantially the same facts as the old cause of action: see Brickfield Properties Ltd v Newton [1971] 3 All ER 438; [1971] 1WLR 862, 880 and Stone James v Pioneer Concrete (WA) Pty Ltd [1985] WAR 233, 240 - 241.
Order 6 r 1(1) of the RSC does not require a plaintiff to plead a cause of action in the sense that the phrase is used in O 21 r 5(5). The omission of material facts, per se, does not render an indorsement defective. It is to be expected that an indorsement will cover a narrower factual field and be of a greater level of generality than a statement of claim. Thus, it may be more difficult to determine whether a proposed amendment raises a new cause of action to which O 21 r 5(5) applies: ABB Services Pty Ltd [26] (McLure J).
An indorsement on a writ is not a pleading and it should not be read narrowly, see Stone James (239) (Burt CJ)), but generously: Rayney v State of Western Australia [No 3] [2010] WASC 83 [36] (Martin CJ).
In making an assessment of whether a cause of action arises out of the same facts or substantially the same facts as an existing cause of action, it is permissible to have regard to the facts which have been pleaded in support of the existing cause of action and the any facts pleaded or proposed to be pleaded in support of the new cause of action.
The discretion to allow the introduction of a new cause of action after the statutory limitation period has expired is limited to the circumstances in O 21 r 5(5). There is no general discretion under O 21 r 5(1) to permit amendment despite the expiry of the relevant limitation period: Dye (439) (Owen J).
If a court decides that a limitation issue should be decided at trial, it may order that amendment take effect only from the date upon which they were made or that the date upon which the amendments should take effect be determined by the trial judge: BHP Iron Ore Pty Ltd v Westraint Resources Pty Ltd [2002] WASCA 18 [97] - [99] (Steytler J, as his Honour then was, Anderson J agreeing) and Tristram v Hyundai Automotive Distributors Australia Pty Ltd [2005] WASCA 168 [42] (Pullin JA).
It is generally undesirable to determine questions of limitation in interlocutory proceedings, except in the clearest of cases; Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514, 533. An application analogous to a strike-out application will rarely be a satisfactory process for determining whether equity should apply a statutory limitation period by analogy; Hewitt v Henderson [2006] WASCA 233. These authorities do not hold, however, that a limitation question can never be determined before trial.

Statement of claim

Before it was amended, the statement of claim pleaded claims in the following way.
First, it identified the relations between the parties at the relevant times. The second defendant (Heath) was a director of the first defendant (Lowe), a licensed real estate and business agent. Heath was also a director of first named plaintiff (Belgravia) and the second named plaintiff (Joondel). Belgravia held two thirds of the shares in Joondel and Penhurst (which had not been joined as the third defendant at that stage) held the remaining third. It was alleged that by a written agreement made on 26 August 1999 (the Agreement) between Belgravia, Penhurst, Joondel and Lowe, Lowe was appointed to act as project manager to manage, first, the subdivision and development of various properties and, secondly, the sale of developed lots in those subdivisions on behalf of Belgravia, Penhurst and Joondel. The Agreement provided for Lowe to receive a fee for project management activities and a fee for selling and marketing activities.
Secondly, the statement of claim alleged that between 4 April 2006 and 29 January 2012 Lowe received 19 payments totalling $4,340,280.10 from Belgravia and Penhurst and one payment from Joondel of $220,000. The statement of claim recorded that Lowe had asserted it was entitled to those payments pursuant to the Agreement.
Thirdly, Belgravia and Joondel allege that Lowe's activities under the Agreement were governed by s 4 of the Real Estate and Business Agents Act 1978 (WA) (REBA Act) and they are entitled to recover the amounts received by Lowe on the grounds the Agreement did not constitute a valid appointment of Lowe as an agent for the purposes of s 60(2) of the REBA Act. Alternatively, they claim that the amounts of the fees were unjust in the circumstances, s 61(3) of the REBA Act.
Fourthly, Belgravia and Joondel raise a further claim to the effect that Heath breached the duty he owed to each of them pursuant to s 181(1) of the Corporations Act 2001 (Cth) by making payments to Lowe when Lowe was not entitled to those payments. The bases on which it was alleged that Lowe had no entitlement to the payments included the following: first, the payments included payments for project management fees in relation to land in respect of which Lowe was either not the project manager or the exclusive project manager; secondly, the payments included payments for selling fees in relation to the sale of land in respect of which Lowe was not the selling agent or the exclusive selling agent; and thirdly, the payments were received in respect of land which was not the subject of the Agreement. The third basis upon which it is alleged that Lowe had no entitlement to the payments is of some significance to the application to amend the indorsement to include par 1A of the proposed amendment.
On the basis of those pleaded facts Belgravia and Joondel sought: a declaration that Lowe did not have a valid appointment as agent; an order against Lowe and Heath for repayment of the monies paid by Belgravia together with interest; an order against Lowe for repayment of the monies paid by Joondel together with interest; and an order against Heath for compensation pursuant to s 1317H of the Corporations Act.

Amended statement of claim

The first significant amendment introduced in the amended statement of claim is the plea of a series of property development ventures which Belgravia and Joondel allege fell outside of the ambit of the operation of the Agreement and which they allege gave rise to no entitlement to fees on the part of Lowe. It is then alleged that Health caused payments to be made to Lowe by the Belgravia and Joondel in the mistaken belief that Lowe was entitled to payments in respect of the sale of lots in the property developments which were the subject of the ventures freshly pleaded in the amendment. The payments are the same payments alleged to have been made by Belgravia, (19 payments amounting to $4,340,280.10), and Joondel (one payment of $220,000) in the original statement of claim. Each of Belgravia and Joondel then pleads that it is entitled to restitution on the basis that Lowe has been unjustly enriched by the amounts it has received from them.

Belgravia and Joondel expand their claims against Heath for breach of duty by pleading various fiduciary duties owed by him to them and by pleading the statutory duty owed by Heath pursuant to s 182 of the Corporations Act.
Belgravia and Joondel then plead the following matters, none of which appeared in the original statement of claim:
1.The other directors of Belgravia and Joondel were elderly and relied upon Heath for advice and guidance.
2.Until 30 June 2012 Heath had de facto control of the day to day business affairs of Belgravia and Joondel.
3.Neither Belgravia nor Joondel received independent property or real estate advice before entering the Agreement.
4.Heath participated in the decision to enter the Agreement and encouraged Belgravia and Joondel to enter the Agreement without taking steps to ensure that they obtained independent advice about the merits of the transaction.
5.Alternatively, it is alleged that Heath knew that Lowe was not entitled to the relevant payments or that he knew that Lowe's entitlement to the payments was doubtful and that neither Belgravia nor Joondel received any independent advice as to whether Lowe was entitled to the payments and Heath did not advise Belgravia or Joondel that Lowe's entitlement to the payments was doubtful or take any steps to protect the interests of Belgravia or Joondel.
On the basis of these facts, Belgravia and Joondel allege that the Agreement should be set aside and all payments purportedly made pursuant to it should be repaid. In addition to claims for statutory compensation, Belgravia and Joondel claim equitable compensation from Heath for breach of his fiduciary duties. Belgravia and Joondel also make a claim against Lowe on the basis that it received the payments knowing of Heath's breaches and that as a consequence it holds the monies it received on constructive trust for them and Penhurst or that it is liable to pay Belgravia and Joondel equitable compensation.

Paragraph 1A of the proposed further amended writ

Does par 1A add a new cause of action?

By par 1A of the proposed amended indorsement Belgravia claims the repayment of the $4,340,280.10 received by Lowe, and Joondel claims repayment of $220,000 received by Lowe.
The claims are restitutionary claims of the kind previously classified as claims for 'money had and received'. The existence of a mistaken belief on the part of Heath at the time of each payment is a central and essential element of the causes of action.
As I have noted above, the amounts which are the subject of the claims in par 1A are the same amounts which are the subject of the claims in par 1.
It was submitted on behalf of Belgravia and Joondel that the original indorsement did not specify whether the payments were made intentionally (that is, knowing that there was no entitlement to the payments, or with reckless indifference as to whether there was such an entitlement) on the one hand, or by mistake on the other, and that, adopting the principle that the indorsement should be construed generously, par 1 of the indorsement should be read as encompassing claims that the payments were made by mistake as well as claims that the payments were made intentionally.
I do not agree for two reasons.
First, one of the functions of the indorsement is to inform the defendant of the nature of the plaintiff's claim and an indorsement should be construed with that function in mind. It is not possible to discern from par 1 of the indorsement that Belgravia and Joondel were advancing a claim for the return of money paid by mistake.
Secondly, the reference in par 1 of the indorsement to the 'written agreement made on 26 August 1999 pursuant to which' payments were received implies that the payments were made intentionally and not under a mistaken belief.
Accordingly, I read par 1A of the proposed amended indorsement as raising a new cause of action or, more precisely, a series of new causes of action, each of which depends upon the existence of a new fact, being a mistaken belief on the part of Heath as to Lowe's entitlement to fees at the time of each payment.

Do the new causes of action arise out of the same facts or substantially the same facts as the causes of action in respect of which relief has been claimed?

The factual overlap between par 1 of the indorsement (read in the context of par 2) and par 1A encompasses the following:
(a)Heath caused the Belgravia and Joondel to make payments received by Lowe;
(b)all but one payment was made out of an account held jointly by Belgravia and Penhurst, the one exception was a payment out of Joondel's account;
(c)the payments and receipts relied upon for the purposes of par 1 and par 2 are the same as those relied upon for par 1A.
The facts which do not fall within the overlap are as follows:
(a)the payments and receipts alleged in par 1 were allegedly made pursuant to the Agreement whereas, as is clear from the amended statement of claim, in support of the claim raised by par 1A, Belgravia and Joondel rely upon facts to demonstrate that the payments were not made pursuant to the Agreement;
(b)each payment was caused by a mistake on the part of Heath;
(c)the absence of a valid appointment under s 60 of the REBA, alternatively, the failure by Lowe to provide the services for which payments were received, alternatively, the fact that the services for which Lowe received payment were provided by others.
It was submitted on behalf of Lowe and Heath that the fact that the amended statement of claim alleged that the payments were made not pursuant to the Agreement but in respect of a series of property development ventures which fell outside of the ambit of the Agreement demonstrated that the new causes of action did not arise out of the same facts or substantially the same facts.
Lowe and Heath placed particular reliance on the decisions in Rossen v Airey [2012] WASCA 26 and Golski v Kirk (1987) 14 FCR 143; (1987) 72 ALR 443.
In Rossen the Court of Appeal (Pullin, Newnes JJA, & Allanson J) was concerned with a case in which the appellant had issued a writ for defamation against the respondent concerning a letter which the appellant alleged had been written to, and was thereafter republished by, Community Newspapers. In fact, the letter was written to and republished by a different entity, The Post Newspaper. The appellant applied to amend the indorsement to substitute 'The Post Newspaper' for 'Community Newspapers'. The primary judge dismissed the application for leave to amend on the ground that the amendment would introduce a new, statute barred cause of action. Newnes JA (with whom Pullin JA and Allanson J agreed) held at [22] and [25] that publication of the letter by the editor of Community Newspapers was a different cause of action to that based upon publication of the letter by the editor of The Post Newspaper. The two claims arose out of quite different facts and thus the amendment was not permitted pursuant to O 21 r 5(5). Rossen was a case in which it was clear that the cause of action arose from different facts.
Golski v Kirk is an example of the application of the rule in Weldon v Neal. It does not involve a consideration of a rule of the court of the nature of O 21 r 5(5). Golski concerned an appeal against a decision to allow the plaintiff in a medical negligence action to amend his statement of claim to allege negligence constituted by a failure to give correct advice pre-operatively in addition to the existing claim of negligence in performing the operation in question. All three members of the court agreed that the appeal should be allowed and the amendment to the statement of claim disallowed. Kelly J, with whose reasons Ryan J agreed, held as follows:
In my opinion, a plaintiff should not be allowed to introduce new claims by amendment which in substance amount to the bringing of a new cause of action for claims already barred by statute. However, where the proposed amendments do not change the cause of action but do no more that particularise the facts by which the respondent proposes to sustain it even though the facts sought to be brought forward under the amendment are quite different from those originally alleged, amendment will be allowed. (151)
With respect, however, this is an area of practice and procedure in which the assistance to be derived from the application of the principles in other cases is limited. Cases in which the court is called upon to form an impression as to whether a new cause of action arises out of substantially the same facts relied upon as those relied upon for an existing cause of action are necessarily fact specific. Previous decisions on different facts and causes of action are of limited assistance in making the required assessment.
Order 21 r 5(5) makes it clear that absolute conformity between the facts relied upon for the new cause of action and those relied upon for the existing cause of action is not required.
It is my impression that the claims for the repayment of the amounts received by Lowe in par 1A arise from substantially the same facts as those which are relied upon by Belgravia and Joondel for the claims made in par 1 of the indorsement. The factors that have influenced me to form that impression are as follows.
First, the facts which form the foundation of all the causes of action are the same payments by Belgravia and Joondel and the same receipts by Lowe, thus there is a common factual substratum.
Secondly, the existence of a mistaken belief on the part of Lowe at the time of each payment are new facts, but these do not compel the conclusion that the new causes of action do not arise from substantially the same facts as the existing causes of action. The mistaken belief is a fact peculiar to the causes of action relied upon in par 1A. In the same way, there are some facts which are peculiar to the claims made in par 1 of the indorsement.
Thirdly, a common premise underlies both the claims in par 1 and the claims in par 1A, namely, that the first defendant was not entitled to the payments made to it.
Fourthly, with the exception of the 'mistaken belief', the facts relied upon for the claims in par 1B are a sub-set of those relied upon for the claims in par 1A.
Fifthly, leaving to one side evidence about Heath's mistaken belief, the evidence that might be adduced in respect of the causes of action in the original indorsement as pleaded out in detail in the statement of claim could extend to include evidence of the new facts alleged in the amended statement of claim designed to establish that the payments received by Lowe related to property developments which fell outside the ambit of operation of the Agreement. I say this because, as I have noted above, one of the grounds relied upon to support the breach of statutory duty claim is that the payments received by Lowe were in respect of land which was not the subject of the Agreement.

Had a limitation period which was current at the time of the issue of the writ expired at the time of the application?

Belgravia and Joondel accepted that the relevant limitation period was six years from the accrual of the cause of action: s 13 of the Limitation Act 2005 (WA). In an action for money had and received based upon the receipt of money, the limitation period runs from the date of receipt of the money: Levi v Stirling Brass Founders 36 ATR 290, 296 (Malcolm CJ, Pidgeon & White JJ). Belgravia and Joondel did not argue that any equitable principles operated to extend the limitation period.
Order 21 r 5(2) and (5) only operate if the relevant limitation period had not expired at the time the action was commenced but had expired by the time of the making of the application to amend, thus it is necessary to consider when each of the payments which make up the total of $4,340,280.10 and the payment by Joondel was received by the first defendant. The amounts received from Belgravia/Penhurst and the dates of the receipts were pleaded in the particulars to par 11 of the statement of claim as follows:
$627.589.544 April 2006 $370,390.63 4 April 2006 $610,912.50 26 March 2007 $224,915.63 26 March 2007 $ 5,461.50 26 March 2007 $107,593.75 26 March 2007 $ 65,278.12 29 October 2007 $ 3,437.50 29 October 2007 $217,133.00 28 October 2008 $330,000.00 2 February 2009 $220,000.00 6 March 2009 $110,000.00 30 March 2009 $165,000.00 23 April 2009 $220,000.00 16 July 2009 $182,568.10 8 January 2010 $220,000.00 17 February 2010 $220,000.00 15 June 2011 $220,000.00 27 September 2011 $220,000.00 29 January 2012
When the action was commenced on 18 October 2013 the limitation period was current in respect of all amounts received on and after 29 October 2007.
By the time of the application for leave to amend the writ, 29 September 2015, the limitation period in respect of the amounts received by Lowe from Belgravia and Penhurst on and from 29 October 2007 up to and including 16 July 2009 had expired.
The indorsement on the writ may only be amended to include the Belgravia claims which arose between 29 October 2007 and 16 July 2009 (inclusive) and those claims in respect of receipts on and from 8 January 2010. Any claims which were statute barred on 18 October 2013, namely, the claims in respect of payments and receipts made before 18 October 2007, cannot be the subject of the amendment.
The limitation period in respect of the claim for $220,000 received by Lowe from Joondel on 16 July 2009 was current at the date the writ was issued, 18 October 2013, but it had expired by the time of the application to amend. The indorsement may be amended to include a claim by Joondel in respect of this amount.
The amendment in the form proposed in the minute of further amended writ of summons does not identify each receipt by its amount and date, but simply states the aggregate of the receipts over the period between 4 April 2006 and 29 January 2012. As a result of this approach, par 1A alleges some causes of action which are allowed pursuant to O 21 r 5(5) and some which are not. In those circumstances, the correct course is not to allow the amendment in the form proposed, but to permit Belgravia and Joondel to bring in a further minute of proposed amended writ of summons limiting the claims in par 1A to those claims which I have held are permitted.

Paragraph 1B

Unjust enrichment is not a definitive legal principle according to its own terms: see Farah Construction Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89, 156 (Gleeson CJ, Gummow, Callinan, Heydon & Crennan JJ). It is 'a unifying legal concept which explains why the law recognises, in a variety of distinct categories of case, an obligation on the part of a defendant to make fair and just restitution for a benefit derived at the expense of a plaintiff': Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221, 256 - 257 (Deane J).
Unjust enrichment is not a principle which can be taken as a sufficient premise for direct application in particular cases: Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635 [85] (Gummow, Hayne, Crennan & Kiefel JJ). It is necessary to identify a vitiating factor such as mistake, duress or illegality: David Securities (379).
In my opinion, the proposed amendment in the form of addition of par 1B to the indorsement should not be allowed. The amendment does not serve any of the functions of an indorsement as identified by McLure J in ABB Service Pty Ltd at [7] - [9]. Paragraph 1B does no more than identify the concept of unjust enrichment as a foundation for the claims. It does not allege any relevant vitiating factor. As a consequence, it fails to mark out the perimeter within which Belgravia and Joondel may frame the statement of claim. For the same reason, it fails to provide notice to the defendants of the nature of the claims which may be advanced pursuant to it. Finally, it suffers from the same defect as par 1A in that it does not identify the date on which the relevant amounts were received and thus obscures the limitation issue to the advantage of Belgravia and Joondel.

Paragraph 2A

What is the nature of the claims made in par 2A?

The precise nature of the claims sought to be advanced against Lowe in par 2A of the proposed amended indorsement is obscured by the reference to Lowe's 'knowing involvement' in Heath's breaches of duty with respect to the entry into the Agreement and with respect to the receipt of monies referred to in par 1A of the indorsement. The lack of clarity is compounded by the plea in par 29 of the amended statement of claim that the first defendant was otherwise knowingly concerned in the second defendant's breaches of duty.
It is not clear from the way in which par 2A is expressed whether Belgravia and Joondel are alleging:
(a)knowing receipt and knowing assistance claims pursuant to the first and second limbs of Barnes v Addy (1874) LR 9 Ch App 244; and
(b)claims that Lowe was involved in the alleged contraventions by Heath of s 181 and s 182 of the Corporations Act 2001 (Cth) by reason of s 181(2) and s 182(2) of the Corporations Act read with s 79 of the Corporations Act.
In the course of oral submissions, senior counsel for Belgravia and Joondel clarified that what was intended so far as the claim against Lowe related to the payment and receipt of monies referred to in par 1A was a 'knowing receipt' claim within the first limb of Barnes v Addy.
The relief claimed by Belgravia and Joondel against Lowe does not include compensation or damages from Lowe pursuant to the Corporations Act. Accordingly, I proceed on the basis that no relief is claimed against Lowe on the basis that it was a person involved in Heath's alleged breaches of the Corporations Act.
The submissions do not suggest that Belgravia and Joondel are advancing a claim against Lowe on the basis of the second limb in Barnes v Addy which imposes liability on a defendant if that defendant assists a trustee or fiduciary with knowledge of a dishonest and fraudulent design on the part of the trustee or fiduciary.
Belgravia and Joondel base their claim to have the Agreement set aside on the principle that equity may set aside an agreement or other transaction entered into by the fiduciary with the principal in breach of the fiduciary's duty, as to which see Meagher, Gummow & Lehane's Equity: Doctrines & Remedies (5th ed, 2014) [5-265] and Allco Funds Management Limited v Trust Company (RE Services) Ltd [2014] NSWSC 1251 [114] – [116].
Against that background, I will proceed on the basis that by par 2A Belgravia and Joondel intend to raise:
(a)Claims against Heath for breach of the fiduciary duties owed by him to Belgravia and Joondel giving rise to a claim to equitable compensation or damages.
(b)Claims against Heath for breach of the statutory duties owed by him to Belgravia and Joondel giving rise to a claim for compensation or damages under the Corporations Act.
(c)Claims against Lowe arising from the receipt by it of the sum of $4,340,280.10 from Belgravia and Penhurst, and $220,000 from Joondel, on the basis that it knew those funds had been received by it as a result of breaches of the fiduciary duties owed by Heath to Belgravia and Joondel giving rise to a claim that Lowe holds the amounts received by it on constructive trust, alternatively, a claim for equitable compensation.
(d)A claim against Lowe for an order setting aside the Agreement on the basis that it was entered into by reason of Heath's breach of fiduciary duties, (I will refer to this as the rescission claim), and a claim that Lowe holds the amounts it received from Belgravia and Joondel on constructive trust.

The claims for breach of fiduciary and statutory duties

I am satisfied that the claims against Heath for breaches of fiduciary and statutory duties are encompassed by par 2 of the original indorsement and no limitation issue in respect of those claims falls to be resolved by reference to O 21 r 5(2) and r (5).

The knowing receipt claims and the rescission claim

It is convenient to deal with these claims together because although Belgravia and Joondel appeared to place some reliance on O 21 r 5(5) in respect of the knowing receipt claims, their primary submission was that the rule in Weldon v Neal did not apply because the limitation period in respect of both these claims had not expired.
Belgravia and Joondel accepted that the rescission claim and the consequential claim for a constructive trust over the monies paid to Lowe were new claims.
No such concession was made in respect of the knowing receipt claims. I must, therefore, consider whether these are new claims or whether they are encompassed within the existing indorsement.
Whilst there is a substantial degree of commonality in the facts alleged to establish that Heath caused money to be paid to Lowe in breach of his duties on the one hand, and knowledge of those breaches by Lowe on the other, in my view, the knowing receipt claims against Lowe are new causes of action which were not encompassed by par 2 of the indorsement.
Put shortly, there is nothing in par 2 of the indorsement which would convey to Lowe that any claim, let alone a 'knowing receipt' claim, was being made against it. There is nothing in the relief claimed which would indicate such a claim had been made in the body of the indorsement.
Paragraph 2 of the indorsement does not allege that Lowe had knowledge of Heath's breaches of duty. Whilst knowledge might be inferred from the fact that Heath was a director of Lowe, the inclusion of this fact in par 2 conveyed the existence of a conflict of interest on the part of Heath rather than knowledge on the part of Lowe of Heath's alleged breaches of duty.
I am satisfied, however, that the knowing receipt claims arise out of substantially the same facts as the claims advanced in pars 1 and 2 of the indorsement and, but for the fact that the central argument advanced on behalf of Belgravia and Joondel in respect of these claims was that the limitation periods had not expired, I would go on to consider whether the relevant limitation periods were current at the time the writ was issued but had expired at the time of the application to amend and rule on the amendments accordingly: O 21 r 5(2) and ABB Service Pty Ltd [13].

Have the limitation periods in respect of the knowing receipt and rescission claims expired?

Lowe and Heath argued strongly that it was so clear that the limitation periods had expired that the issue should be resolved summarily by refusing leave to amend. Omitting references to authorities, their primary submissions in relation to the knowing receipt and rescission claims were as follows:
(a)The limitation period applicable to claims for compensation under the Corporations Act applied by analogy to the claims for breach of fiduciary duty and the relevant period was six years (s 1317K of the Corporations Act) and that period cannot be extended. As a result, it was argued that the only amendments that should be permitted are those which claim amounts received in the period 2010 - 2012.
(b)The fact that Belgravia and Joondel seek the imposition of a constructive trust does not enable them to invoke s 47 of the Limitation Act 1935 to extend any limitation period because that section does not apply unless there was a pre-existing trust relationship and there was none in this case.
(c)The rescission claim was analogous to an action on the case to which a limitation period of six years applied pursuant to s 38(1)(c)(viii) of the Limitation Act 1935.
(d)Whilst the application in equity of a limitation period by analogy is subject to an exception where reliance on the statute would be unconscionable both Belgravia and Joondel were bound to plead facts in the amended statement of claim to demonstrate that the application of the statutory limitation periods by analogy was unconscionable and they have not done so.
(e)The claims advanced by Belgravia and Joondel are not 'equitable claims' within the meaning of s 27(2) of the Limitation Act 2005, because the definition of such claims exclude claims where statutory limitation periods are applied by analogy, and thus the limitation period was not three years from when time started running on equitable principles.
(f)There is no application before the Court to extend any limitation period pursuant to the power contained in s 38 of the Limitation Act 2005 and the existence of that power is not relevant to the application for leave to re-amend the writ.
Belgravia's and Joondel's primary submissions were as follows:
(a)As the Agreement was made on 26 August 1999, neither the Limitation Act 2005 nor, relevantly, s 1317K of the Corporations Law (which was conceded to have commenced after 26 August 1999) limitation periods apply to the rescission claim; and, an equitable claim of this nature is not to be considered analogous to an action on the case in respect of which the limitation period under s 38(1)(c)(vii) of the Limitation Act 1935 applied.
(b)If the limitation period specified in s 1317K of the Corporations Act applied by analogy to any of the claims for breach of fiduciary duty, then there was power to extend the limitation period under s 1322 of the Corporations Act and that a court of equity may extend the limitation period by analogy to the statutory discretion to do so.
(c)If the limitation period under s 1317K of the Corporations Act applies by analogy and there is no power to extend it then:
(i)Equity would not apply a limitation period where there are circumstances which would make the application of the statute unconscionable, that is where there is a consciousness on the part of the defendant that what is being done is wrong or that to take advantage of a particular situation involves wrongdoing. In this case Belgravia and Joondel allege facts which, if established, show that Heath was in de facto control of Belgravia and Joondel and that the he knew that Lowe was not entitled to be paid the amounts he had caused to be paid to it;
(ii)The claims arising after 15 November 2005 may be 'equitable actions' within the meaning of s 27 of the Limitation Act 2005 and that the limitation period is three years since time started running on equitable principles.
(iii)Any limitation period imposed by the Limitation Act 2005 is subject to the possibility of an extension of time of up to three years from when the action ought reasonably to have been commenced if the failure was attributable to relevantly improper conduct on the part of the defendant.
(iv)It is not appropriate to determine whether equity should apply the statutory limitation period by analogy on an interlocutory application such as this.
(vi)Belgravia and Joondel were not obliged to plead facts in the statement of claim to demonstrate that its claims are not statute barred.

Disposition in respect of the knowing receipt claims and the rescission claim

In my view, leave to amend the indorsement to include the knowing receipt claims and the rescission should be granted for the following reasons.
First, the broad discretionary considerations favour the grant of leave. Permitting the amendments will not prevent Lowe and Heath raising any limitation defences. The prejudice that Lowe and Heath will suffer if the amendments are allowed and the claims introduced by the amendments are ultimately held to be statute barred will be limited to the additional costs of defending those claims. Conversely, there is the potential for considerable prejudice to Belgravia and Joondel if they are shut out on a summary basis from pursuing claims which may be viewed differently after the facts have been established at trial.
Secondly, I do not accept that Belgravia and Joondel are obliged to plead facts in the amended statement of claim or adduce affidavit evidence to demonstrate a basis upon they may overcome the limitation defences. To require this would be a step on the road to the application for leave to amend the indorsement on the writ becoming the hearing of a preliminary issue. The application involves a matter of practice and procedure to be determined on the basis of the impression the court forms of the limitation issue and an assessment of the most appropriate stage for the determination of that issue.
Thirdly, it is very difficult for the court to embark on an evaluation of limitation issues in the absence of pleadings. It is for the defendants to plead the limitation defences and for Belgravia and Joondel to set up the basis upon which those defences will be overcome in the reply.
Fourthly, I am guided in my approach by the authorities to which I referred earlier in these reasons, which make it clear that it will rarely be appropriate to attempt to resolve limitation issues on an interlocutory basis. In this respect, as I have already observed, it would be premature to determine the limitation issues without hearing the evidence and making factual findings that bear upon those issues. This is not one of the rare cases in which it is appropriate to determine the limitation issues raised by the knowing receipt claims and the rescission claim on a summary basis.
I will hear the parties in relation to the form of the orders and costs.