Benson v Doloraine (No 2)
[2021] TASSC 57
•18 November 2021
[2021] TASSC 57
COURT: SUPREME COURT OF TASMANIA
CITATION: Benson v Doloraine (No 2) [2021] TASSC 57
PARTIES: BENSON, Christopher Ian
BENSON, Mark Andrew
BENSON, David Anthony
v
DOLORAINE PTY LTD
FOREST HILL FARM (TASMANIA) PTY LTD
BENSON, Ian
BENSON, Gloria
HERNYK, Steven Allan
ALGERI, Salvatore
FILE NO: 2868/2020
DELIVERED ON: 18 November 2021
DELIVERED AT: Hobart
HEARING DATE: 15 November 2021
JUDGMENT OF: Holt, AsJ
CATCHWORDS:
Equity – Trusts and trustees – Powers, duties, rights and liabilities of trustees – Accounts – Liability of trustees and entitlement of cestui que trust – General rule – Liability of trustee to account to beneficiaries – Ordering of an account is generally interlocutory rather than by way of final relief.
Aust Dig Equity [1396]
Procedure – Civil proceedings in state and territory courts – Pleadings – Striking out – Generally – Application to strike out parts of statement of claim – Discretionary considerations – Application refused.
Supreme Court Rules2000 (Tas), r 258.
Aust Dig Procedure [1196]
Procedure – Civil procedure in state and territory courts – Pleadings – Particulars – Function – Application for particulars – Discretionary considerations – Application refused.
Supreme Court Rules 2000 (Tas) r 253.
Aust Dig Procedure [1187]
REPRESENTATION:
Counsel:
Plaintiffs: S B McElwaine SC
Fifth and Six Defendants: C Groves
Solicitors:
Plaintiffs: Terracall & Associates
Fifth and Six Defendants: Dobson Mitchell Allport
Judgment Number: [2021] TASSC 57
Number of paragraphs: 24
Serial No 57/2021
File No 2868/2020
CHRISTOPHER IAN BENSON, MARK ANDREW BENSON,
DAVID ANTHONY BENSON v DOLORAINE PTY LTD, FOREST HILL FARM (TASMANIA) PTY LTD, IAN BENSON, GLORIA BENSON,
STEVEN ALLAN HERNYK, SALVATORE ALGERI
REASONS FOR JUDGMENT HOLT AsJ
18 November 2021
The application
By the statement of claim the three plaintiffs want to be compensated for loss in value of certain trust assets. The fifth and sixth defendants, sued as former trustees, have applied for an order striking out several sub-paragraphs in the plaintiffs' pleading and for an order requiring the plaintiffs to provide detailed particulars of a number of the allegations, including particulars under one of the impugned paragraphs.
The assessment of the application requires an understanding of the procedures usually employed by courts in dealing with claims in equity by trust beneficiaries against trustees where the relief sought, as it does in the present case, includes a claim for the provision of an account by the trustees.
The nature of an order in equity for an account of administration
An order for an account of administration may take one of two forms. There may be an order for an account of administration in common form, which is routinely made on an interlocutory basis in proceedings against trustees. Such an order requires the defendant to account for what has actually been received disbursed and distributed. There may be an order for an account of administration on the basis of wilful default by which the defendant must, in addition, account for what might have been received if there had been no default. The former type of account is ordered without proof of wrongdoing, whereas the later type of account is only ordered where a plaintiff has alleged and proven that there is something which ought to have been and might have been received by a trustee for the benefit of a plaintiff which has not been received due to wilful default.
The distinction between these two types of order and an order for an account of profits was set out in some detail by Austin J in Glazier v Australian Men's Health (No 2) [2001] NSWSC 6 at [36]–[45] and [56].
In accordance with the usual procedure, an order for an account does not operate to finally determine the rights of the parties, but instead is interlocutory in that the action returns for further consideration following the accounting, perhaps several times. This was explained by Giles JA, with whom Sheller JA and Beazley JA agreed in Meehan v Glazier Holdings Pty Ltd [2002] NSWCA 22 (2002) 54 NSWLR 146 at [31] and [33] where his Honour said:
"[31] The normal Chancery procedure on an application for an order for taking accounts has long been to order that the accounts be taken before a Master and to adjourn the proceedings for further consideration. When the Master has certified what is due to be paid the proceedings are relisted for further consideration and an order is made that the amount certified be paid. In simple cases an immediate order can be made that the amount certified be paid by the party from whom to the party to whom it is certified to be due, but that is not the usual course. The normal procedure is described or reflected in, for example, Daniell's Chancery Practice, 8th ed (1914), vol 1, pp 683, 686. 1009; Parker's Practice in Equity, 2nd ed (1949) p 250-2, and in the forms in Seton's Judgments and Orders, 3rd ed (1862), vol 1 and 7th (last) ed (1912), vol 2, pp 97 and 1309 respectively (alternate forms of order), 107 and 1342 respectively (stating the usual course); Miller and Horsell, Equity Forms and Precedents, p 287.
…
[33] If order 4 had ordered no more than the taking of accounts, and the orders made on 18 March 1998 had included that the proceedings be adjourned for further consideration, it could readily enough be said that order 4 did not determine Glazier's claim for relief and was interlocutory. The composite claim to relief had two stages, and its culmination was the order that money be paid. Until the order that money be paid there would not be 'a perfect judgment': I take the expression from Daniell's Chancery Practice, 8th ed, Vol 1, p 683 -
'But the most usual ground for not making a perfect judgment in the first instance is the necessity which frequently exists to make inquiries, or to take accounts, or sell estates, and adjust other matters, which must be disposed of before a complete decision can be come to upon the subject-matter of the action.'
So it is said in Daniell's Chancery Practice, 8th ed, Vol 1, p 1009 that where at the trial the further consideration of the action has been adjourned 'it is necessary in order to obtain a final judgment that the action should be set down to be heard on further consideration, which process must be repeated as often as the further consideration of the action has been adjourned by the last order or judgment in the action'."
The statement of claim
Insofar as it concerns the fifth and sixth defendants, the pleading on behalf of the plaintiffs is as follows. The three plaintiffs are the children of the third and fourth defendants. Family assets included the following. Four farms held in trust for the Benson Family Trust with the original trustee being the second defendant. Two investment properties held in trust for the IR and GM Benson Family Trust, with the original trustee being the first defendant. There was a family dispute over the assets which was resolved by a consent order made in the Federal Court on 5 December 2014 whereby the assets were divided into six fixed trusts with a combined net value of $6,064,018.96 and with the three plaintiffs to each receive 20% of the net value and their parents to receive between them jointly the other 40%.
According to the agreed value at the time the order was made, the 60% combined share of the three plaintiffs should have been $3,683,411.39.
On 31 August 215 Porter AJ in the Supreme Court of Tasmania made orders removing the first and second defendants as trustees and replacing them with the fifth and sixth defendant as trustees of each of the six fixed trusts. They remained as trustees until 4 October 2019 when they were removed by a further order made by Porter AJ.
It is alleged that the fifth and sixth defendants mismanaged the trust assets so that the amount available for distribution has been devalued and it is further alleged that the defendants have failed or refused to provide an account to the plaintiffs.
Relevantly, for the purposes of the strike out application para 10.2 (e), (f), (g) and (h) of the statement of claim contains the following allegations against the fifth and sixth defendants:
"(e) applied trust assets without the consent of the plaintiffs
(f) failed to preserve the property of the six fixed trusts for the benefit of the plaintiffs
(g) intermingled the corpus of the IR and GM Benson Trust or the Benson Family Trust with the corpus of the six fixed trusts
(h) allowed the assets of the six fixed trusts:
(i) to be wasted and
(ii) to be depleted in value;"
In the claim for relief, preceding a claim for compensation for loss, is the following:
"11.1 And the plaintiffs claim:
…
(c) Steven Hernyk and Salvatore Algeri provide an account to the plaintiffs of their respective dealings with the assets of the six fixed trusts between 31 August 2015 and 4 October 2019"
It is to be noted that the order sought is not expressed in terms of an account of what ought have been and might have been received by the trustees had there been no wilful default and all that is sought is the provision or making of the account.
If the order is made, what must be provided is as set out in the Supreme Court Rules 2000, r 597, which is as follows:
"Form of Account
(1) The items on each account are to be numbered consecutively.
(2) Unless directed to the contrary, an account is to be verified by the affidavit of the accounting party.
(3) An alteration in an account –
(a) is not to be made by erasure; and
(b) is to be marked with the initials of the person before whom the affidavit is sworn.
(4) The account and the affidavit are to be filed."
Counsel for the fifth and sixth defendants says that subpars 10.2 (e), (f), (g) and (h) should be struck out as defective, being conclusions from unstated facts. Plainly the impugned pleas are conclusory and hence defective. See H 1976 Nominees Pty Ltd v Galli (1979) 30 ALR 181 at 186. Counsel for the plaintiffs does not dispute this, but says that the plaintiffs should have the account before any order is made with might result in the need to amend, particularise or abandon the allegations concerning the depletion and wasting of assets and the like. In short, the contention is that the fifth and sixth defendants have misunderstood the nature of the claim against them and the procedure which will, in the ordinary course of events, be followed to resolve the litigation. Accordingly, there is no present disadvantage to the fifth and sixth defendants when the claim is properly construed and there is potential significant prejudice to the plaintiffs if the pleadings are struck out before the plaintiffs, with the benefit of an account, can further articulate and refine their claim.
Disposition of the strike out application
If the usual procedure is followed, and there is no reason to think that it will not be, the action will proceed in stages with the first stage being the disposition of the issue of whether or not the fifth and sixth defendants should be ordered to make an account of administration in common form. Properly construed the plaintiffs are not, on the present framing of the relief sought in the statement of claim, seeking an account of administration based on wilful default, nor an account of profits, nor a final determination of the action when it first comes on for trial. Counsel for the plaintiffs has confirmed that this is what is intended by the framing of the relief claimed. If an account is ordered and made it might follow that there is an application to amend the pleadings or an application to amend the claim for relief.
The power to strike out a defective pleading is discretionary. In my view the strike out application is premature and an order now is unnecessary. The authorities cited by counsel for the plaintiffs support the proposition that particularity of alleged wrongdoing is unnecessary prior to the taking of an account if an account is to be taken as a preliminary step. In particular counsel referred to Blackie v Osmaston (1885) 28 Ch D 119; Augustinus v Nerinckx (1881) 16 Ch D 13 at 17 and Sharer v Wallace [1950] 2 All ER 463. Dismissal of the application will not, at this stage, disadvantage the fifth and sixth defendants. A fresh application can be made, if necessary, at a later stage as the action progresses. Striking out now has the potential to cause oppression to the plaintiffs which can and should easily be avoided by leaving the existing claim as it is.
Accordingly, I decline to exercise the discretion in favour of the fifth and sixth defendants and their strike out application will be dismissed.
The application for particulars
The request of the fifth and sixth defendants for particulars is extensive and I need not set it out in full. It has been made in the context where the fifth and sixth defendants have admitted by their defence that they were trustees for the period 31 August 2015 to 4 October 2019.
An illustration of the particulars sought arises from the plaintiffs pleading in para 6.2(a), (b) and (c). The plea is as follows:
"Steven Hernyk and Salvatore Algeri in their capacity as the trustees of the IR & GM Benson Family Trust and the Benson Family Trust:
(a) for a time, conducted the business of those trusts;
(b) engaged consultants and employees;
(c) realised certain assets of the trusts;"
The corresponding application for an order of particulars of these allegations is in these terms:
"If paragraph 6.2 is intended to make any allegation of material fact, particulars of:
a the conduct of the business alleged by subparagraph 6.2(a), including each act or omission said to constitute that alleged conduct and the date thereof;
b each consultant and employee engaged as alleged by subparagraph 6.2(b), including the name of that employee or consultant, that person's position description, and that person's date of engagement;
c each asset realisation alleged by subparagraph 6.2(c), including the asset realised, the date of realisation, and the manner of realisation;"
The fifth and sixth defendants, having admitted that they were trustees for the claimed period should not need this information from the plaintiffs for them to be fairly apprised of the nature of the case they are called upon to meet.
Similarly the rest of the particulars requested relate to matters which should already be within the knowledge of the fifth and sixth defendants.
It is possible that as the action progresses following the first stage, being resolution of the application for an order for the provision of an account, that further precision will be called for, but at this stage the application for particulars is oppressive and unnecessary and so should be dismissed.
Orders
I make the following orders:
1The application of the fifth and sixth defendants made by letter to the Court dated 17 August 2021 is dismissed.
2The plaintiffs and the fifth and sixth defendants are to file and serve submissions as to the costs order, if any, which should follow the dismissal of the application within 21 days unless in the meantime questions to the costs are agreed.
3There is a certificate for the attendance of counsel in respect of the application.
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