Bird v Bird

[2010] NSWSC 303

CITATION:	Bird v Bird [2010] NSWSC 303
HEARING DATE(S):	18 November 2009
JUDGMENT DATE :	21 April 2010
JUDGMENT OF:	McLaughlin AsJ
DECISION:	1. I order that the amended notice of motion filed by the Plaintiff on 18 November 2009 be dismissed. 2. I order that the Plaintiff pay the costs of the First, Second and Third Defendants of the aforesaid amended notice of motion, and of the notice of motion filed by the Plaintiff on 25 August 2009.
CATCHWORDS:	PRACTICE - Application for summary dismissal of cross-claim - application for striking out of parts of cross-claim and of parts of defences - whether cross-claim discloses a reasonable cause of action - whether defences disclose a reasonable defence - Plaintiff has received benefit from conduct of which she now complains - allegation of accessorial liability for knowing receipt of trust property - claim for imposition of a constructive trust - indefeasibility of title.
LEGISLATION CITED:	Uniform Civil Procedure Rules
CATEGORY:	Procedural and other rulings
CASES CITED:	Barnes v Addy (1874) LR 9 Ch App 244 General Steel Industries Inc. v Commissioner for Railways [1964] HCA 69; (1964) 112 CLR 125 Breskvar v Wall [1971] HCA 70; (1971) 126 CLR 376 Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583 Baumgartner v Baumgartner [1987] HCA 59; (1987) 164 CLR 137 Bahr v Nicolay [No 2] [1988] HCA 16; (1988) 164 CLR 604 Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378 Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133 LHK Nominees Pty Ltd v Kenworthy [2002] WASCA 291; (2002) 26 WAR 517 Farah Constructions Pty Limited v Say-Dee Pty Limited [2007] HCA 22; (2007) 230 CLR 89 Super 1000 v Pacific General Securities [2008] NSWSC 1222
TEXTS CITED:	J D Heydon and M J Leeming, Jacobs’ Law of Trusts in Australia (2006)
PARTIES:	Deborah Michelle Bird (Plaintiff) Warrick Lindsay Bird (First Defendant) Rodney David Bird (Second Defendant) Herbert James Cannington (Third Defendant) Mona Ethel Bird (Fourth Defendant)
FILE NUMBER(S):	SC 5749 of 2005
COUNSEL:	Mr J. Drummond (Plaintiff) Mr L. Ellison, SC and Mr M. Condon (First and Second Defendants) Ms B. Nolan (Third Defendant) No appearance for Fourth Defendant
SOLICITORS:	Hewitts Commercial Lawyers (Plaintiff) Hills Solicitors (First and Second Defendants) Middeltons (Third Defendant) No appearance for Fourth Defendant

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

ASSOCIATE JUSTICE McLAUGHLIN

Wednesday, 21 April 2010

5749 of 2005 DEBORAH MICHELLE BIRD –v- WARRICK LINDSAY BIRD and Ors

JUDGMENT

1 HIS HONOUR: By notice of motion filed on 25 August 2009 Deborah Michelle Bird, the Plaintiff/Cross-defendant, seeks orders that parts of the cross-claim filed by the First and Second Defendants on 4 June 2009, and parts of the amended defences filed by those Defendants on 1 June 2009 and of the amended defence filed by the Third Defendant on 23 June 2009 be summarily dismissed pursuant to Part 13, rule 13.4 of the Uniform Civil Procedure Rules 2005, or, in the alternative, that those parts of the cross-claim and those parts of the amended defences be struck out pursuant to Part 14, rule 14.28 of those Rules.

2 At the outset of the hearing the Plaintiff/Cross-defendant sought and (there being no objection thereto by the foregoing Defendants) was granted leave to file an amended notice of motion dated 18 November 2009, seeking, in addition, similar relief to the foregoing in regard to further paragraphs of the cross-claim.

3 (I would here interpolate that the amended notice of motion identifies the cross-claim as being dated 4 June 2009, whereas in the notice of motion as originally filed it is referred to as being dated 1 June 2009. However, nothing appears to turn upon that discrepancy.)

4 The substantive proceedings were instituted by summons filed by the Plaintiff on 8 November 2005, which named Warrick Lindsay Bird, Rodney David Bird and Herbert James Cannington, as the First, Second and Third Defendants respectively. Subsequently a statement of claim was filed, which pleading therafter was twice amended. The further amended statement of claim, filed on 30 April 2009, names an additional Defendant, being Mona Ethel Bird, as the Fourth Defendant.

5 At the outset of the hearing I stated, and had it recorded, that I had had some professional contact with the Third Defendant, Herbert James Carrington, who is a solicitor, when I was in practice at the Bar more than twenty years ago. That fact did not occasion any problem to the First and Second Defendants or to Mr Cannington himself, or, ultimately, to the Plaintiff, concerning my hearing the present application.

6 By the further amended statement of claim the Plaintiff seeks declaratory and other relief against the First and Second Defendants, consequent upon alleged breaches of fiduciary duties relating to the exercise of powers of attorney by which was effected the sale of properties owned by the late Percy Clifford Bird (to whom I shall refer as “the Deceased”). Further, by that pleading the Plaintiff alleges that the First, Second and Third Defendants (who are the executors of the will of the Deceased) acted in breach of their duty as such executors, in failing to get in the assets of the Deceased. The relief sought by the Plaintiff includes, inter alia, the removal of those Defendants as executors.

7 The First, Second and Third Defendant have filed separate defences. The amended defence of each of the First and Second Defendants was filed on 1 June 2009, whilst that of the Third Defendant was filed on 23 June 2009.

8 A cross-claim was filed by the First and Second Defendants on 4 June 2009.

9 It is appropriate that I should set forth, at least in summary, the factual background to the proceedings which is disclosed in the various pleadings of the respective parties.

10 The Deceased, who died on 2 September 1996, aged 93 years, owned (or, in the case of Bonnington, co-owned) the following properties during his lifetime:

83 Marks Point Road, Marks Point (“the Marks Point property”);
Farming property known as Bonnington, at Allynbrook via East Gresford (“Bonnington”)
163 Russell Road, New Lambton (“163 Russell Road”)
161 Russell Road, New Lambton (“161 Russell Road”)
Farming property known as Anambah at Rutherford (“Anambah”)

11 Until 1993 the Deceased resided with his wife of 50 years, Mona Ethel Bird, in the premises at Russell Road, New Lambton. In August 1993 the Deceased suffered a cerebral haemorrhage, in consequence whereof he was admitted to the John Hunter Hospital, at Newcastle, and thereafter to the Greenhills Nursing Home, were he remained until his death on 2 September 1996. The First and Second Defendants and the Plaintiff are the three children of the Deceased and Mrs Mona Bird.

12 The Deceased left a will dated 31 July 1991, probate whereof was on 8 November1996 granted to the First, Second and Third Defendants. By that will the Deceased gave the residue of his estate to be divided equally between Warrick, Rodney and the Plaintiff as tenants in common in equal shares. It is as such a residuary beneficiary that the Plaintiff brings her present claim.

13 On 11 June 1991, several years before he suffered the cerebral haemorrhage, the Deceased executed a general power of attorney (the “first power of attorney”) in favour of his wife Mona Ethel Bird (the Fourth Defendant) and his two sons Warrick Lindsay Bird and Rodney David Bird (the First and Second Defendants). (I will for convenience, and without intending any disrespect, hereafter refer to each of those Defendants and other parties by their respective first given names).

14 That first power of attorney provided that it could be exercised by Mona, Warrick and Rodney jointly and severally, and prohibited the donee thereof from exercising that power to obtain a personal benefit.

15 On 28 March 1994 (some seven months after suffering the cerebral haemorrhage) the Deceased purportedly executed a second general power of attorney (the “second power of attorney”). That power of attorney provided that it could be exercised by Mona alone, or by Warrick and Rodney jointly. It similarly prohibited the donee thereof from exercising that power to obtain a personal benefit.

16 The complaint of the Plaintiff (who is the youngest of the three children of the Deceased and Mona) is essentially that the foregoing various pieces of real estate owned by the Deceased were sold under one or other of the two powers of attorney, and that the proceeds of sale were substantially retained by Mona, the Fourth Defendant, the Deceased himself receiving no benefit from any of those sales.

17 The complaint of the Plaintiff against Warrick and Rodney is essentially that they assisted their mother in her foregoing conduct which, the Plaintiff asserts, constituted a breach of trust; and, further, that after the death of the Deceased the three executors (being Warrick, Rodney and Mr Cannington) failed to get in from the Fourth Defendant the foregoing proceeds of sale.

18 On 4 June 2009 Warrick and Rodney filed a cross-claim (which is the subject of the relief sought in paragraphs 1 and 2 of the amended notice of motion filed by the Plaintiff on 18 November 2009).

19 By that cross-claim it is pleaded that in exercise of one or other of the powers of attorney the Fourth Defendant, Mona, sold the properties at Marks Point, 163 Russell Road, 161 Russell Road, and (conjointly with the other co-owner thereof, P C Bird Pty Limited), Bonnington.

20 In consequence, so it is pleaded, the Fourth Defendant deposited into an account with Newcastle Permanent Building Society a total amount of $847,349 (“the sale proceeds”), being the proceeds of sale of those properties (apart from an amount of $4,375 which was placed in a joint account, conducted by Mona and the Deceased).

21 For a period exceeding 30 years, to December 2005, Mona had been the registered proprietor of a property at Blake Street, Carrington (referred to in the cross-claim as “Carrington”). In early 1984 Deborah, with her mother’s permission, moved into residence in Carrington, which previous to that time had been used as a weekend and holiday retreat for the Bird family. From 1984 to December 2005, Mona, at the request of Deborah, paid or applied in the renovation, rebuilding, refurbishment and upgrading of Carrington, amounts exceeding $500,000. It is alleged in the cross-claim that those improvements converted the Carrington property from a two-bedroom weatherboard cottage to a substantial four-bedroom brick residence, which is even equipped with a large lap swimming pool. It is further asserted that those improvements, at least to the extent of moneys totalling $217,666, were funded from the sale proceeds. Further, that Deborah at all material times knew that the Carrington improvements were being so funded.

22 In December 2005, Carrington was transferred from Mona to Deborah, there being no monetary consideration for such transfer. The transfer was registered on 7 December 2005. (It will be appreciated that that transfer was effected after the institution of the present proceedings.)

23 It is alleged in the cross-claim (paragraph 19) that Deborah, as a mere volunteer owning Carrington, knew or ought to have known that, if her allegations pleaded in her statement of claim were found to be proved, then:

(a) the Carrington improvements were impressed with a trust in favour of the Deceased and his estate; and
(b) the transfer of Carrington to her by Mona could defeat a claim on behalf of the Deceased’s estate for the sale proceeds and [the Plaintiff] thereby has taken Carrington impressed with a trust or trusts in favour of the Deceased and his estate;
to the extent that the Plaintiff’s allegations are found to be true.

24 In consequence, Warrick and Rodney, as Cross-claimants, seek a declaration that Carrington is charged with payment to the Cross-claimants, as trustees of the estate of the Deceased, of moneys applied from the sale proceeds to improve and augment the said property; a declaration that Carrington is charged with payment to the Cross-claimants as such trustees of all moneys deposited by Mona in Newcastle Permanent Building Society; an order that Carrington be sold; equitable damages; or an account of profits.

25 It should be recognised that, although Mona is named as the Fourth Defendant to the present proceedings (by the further amended statement of claim filed on 30 April 2009, such joinder of Mona being effected in consequence of the request of Warrick and Rodney to that effect), no relief is sought against her. She has not filed an appearance, and has not participated in the proceedings. Neither did she participate in the present application. (Where in these reasons for judgment there is reference to “the Defendants” that phrase, unless expressly stated to include a reference to Mona, the Fourth Defendant, refers only to the First, Second and Third Defendants.)

26 I have had the benefit of receiving a written outline of submissions from Counsel for the respective parties to the present application. Those documents will be retained in the Court file.

27 I shall deal first with the application of the Plaintiff (sought in paragraph 1 of the amended notice of motion) for an order that paragraphs 17 and 19 and paragraphs 20 to 23 of the cross-claim be dismissed, on the basis that they fail to disclose any reasonable cause of action, are frivolous and vexatious, and thereby constitute an abuse of process, pursuant to Part 13, Rule 13.4 (a), (b) and/or (c) of the Uniform Civil Procedure Rules 2005.

28 Paragraphs 20 to 23 of the cross-claim set forth the items of substantive relief claimed in that pleading.

29 A claim for relief, strictly, does not constitute part of a pleading (such as a statement of claim or of a cross-claim). In any event, where a plaintiff (or a cross-claimant) is able to establish a cause of action, a Court of Equity can always mould to the circumstances of the case the relief to which the successful plaintiff (or cross-claimant) is entitled.

30 Accordingly, the application of the Plaintiff for the dismissal of paragraphs 20 to 23 of the cross-claim, and, similarly, the application of the Plaintiff (sought in paragraph 2 of the amended notice of motion) for the striking out of those paragraphs of the cross-claim cannot succeed.

31 Paragraph 17 alleges that, in so far as the Carrington improvements have been effected using the sale proceeds or part thereof, should the Plaintiff’s allegations that such expenditure was not authorised by the Deceased be established, then the Carrington improvements are impressed with a trust in favour of the Deceased and his estate.

32 I have already referred to the allegation in paragraph 19 that at 7 December 2005 [that being the date upon which Carrington was transferred to her] Deborah, as a mere volunteer owning Carrington, knew or ought to have known that if her allegations pleaded in her statement of claim were found to be proved, then the Carrington improvements were impressed with a trust in favour of the Deceased and his estate; and the transfer of Carrington to her by Mona could defeat a claim on behalf of the Deceased’s estate for the sale proceeds and [the Plaintiff] thereby has taken Carrington impressed with a trust or trusts in favour of the Deceased and his estate.

33 The assertion of the Plaintiff that paragraphs 17 and 19 constitute an abuse of process is dependent upon the Plaintiff’s assertion that those paragraphs are frivolous and vexatious. The allegations made in those paragraphs raise serious issues of both fact and law. Neither paragraph is in any fashion frivolous or vexatious. Indeed, neither in his written outline of submissions nor in his oral submissions at the hearing did Counsel for the Plaintiff assert that those paragraphs were either frivolous or vexatious. The closest that those submissions came to support such an assertion was the Plaintiff’s written submission that “if a pleading fails to disclose a reasonable cause of action, it should be struck out pursuant to Part 13, rule 13.4(a), (b), and/or (c) and Part 14, rule 14.28 (a), (b), and (c) of the Uniform Civil Procedure Rules”. (It should be observed that rule 13.4 relates to dismissal of proceedings, whereas it is rule 14.28 which empowers the Court to strike out a pleading.)

34 The only remaining challenge to be considered in respect to paragraphs 17 and 19 is that grounded upon the assertion that those paragraphs fail to disclose a reasonable cause of action.

35 Despite the wording in the Plaintiff’s amended notice of motion of 18 November 2009, “that paragraphs 17 and 19 … be dismissed…”, it is apparent, not only from the reference to Part 13, rule 13.4 of the Uniform Civil Procedure Rules (“ in relation to the proceedings generally… the court may order that the proceedings be dismissed generally…”), but also from the express statement in that regard by her Counsel at the hearing of the present application, that what the Plaintiff is presently seeking is the summary dismissal of the cross-claim (and that such relief is encompassed by paragraph 1 of the amended notice of motion).

36 The principles relating to applications for summary dismissal where no reasonable cause of action is disclosed are well recognised. I need do no more than refer to the decision of the High Court of Australia in General Steel Industries Inc. v Commissioner for Railways (1964) 112 CLR 125, where Barwick CJ said, at 130,

…great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal. On the other hand, I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff's claim. Argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed.

37 To the extent that the present application for summary dismissal of the cross-claim is grounded upon the assertion that the pleading discloses no reasonable cause of action, it is proper for the Court to proceed upon the basis that the Cross-claimants, at a final hearing, will be able to establish the various factual matters asserted in the pleading. It is not appropriate, therefore, in the present application, for the Court to give consideration to any question of the evidentiary strength or weakness of the Cross-claimants’ case.

38 The essential complaint of the Plaintiff is that the allegation in the cross-claim that the Plaintiff knowingly received trust property is not enough to found an action capable of overcoming the indefeasibility of the Plaintiff’s title. The Plaintiff asserts that the cause of action pleaded against her by the cross-claim is, essentially, a cause of action referred to as the first limb of Barnes v Addy (1874) LR 9 Ch App 244. In that case Lord Selborne LC in the Court of Appeal in Chancery (with whom James and Mellish LJJ agreed) said, at 251,

Those who create a trust clothe the trustee with a legal power and control over the trust property, imposing on him a corresponding responsibility. That responsibility may no doubt be extended in equity to others who are not properly trustees, if they are found either making themselves trustees de son tort , or actually participating in any fraudulent conduct of the trustee to the injury of the cestui que trust . But, on the other hand, strangers are not to be made constructive trustees merely because they act as the agents of trustees in transactions within their legal powers, transactions, perhaps of which a Court of Equity may disapprove, unless those agents receive and become chargeable with some part of the trust property, or unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees.

39 In Farah Constructions Pty Limited v Say-Dee Pty Limited [2007] HCA 22; (2007) 230 CLR 89, the High Court of Australia (in the joint judgment of Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ) accepted the correctness of the foregoing passage of Lord Selborne, saying, at 140,

The form of liability referred to in the first part of the last sentence is often called the “first limb” of Barnes v Addy , and the form of liability referred to in the second part of the last sentence is often called the “second limb”…

It has become common to describe the first limb as involving “knowing receipt” and the second limb as involving “knowing assistance”. Lord Selborne LC did not use the expression “knowing receipt”. It seems to have been employed first in 1966 by the editors of Snell’s Principles of Equity (26 ed, p 202)… However, in 1972 Brightman J adopted the expression in Karak Rubber Co Ltd v Burden[No 2] [1972] 1 WLR 602 at 632 - 633. He said that the labels “knowing receipt or dealing” and “knowing assistance” employed by Snell were “an admirable shorthand description of their different natures”. Those labels have been commonly used since then. In contrast, Lord Selborne LC’s expression was “receive and become chargeable” (at 251). Persons who receive trust property become chargeable if it is established that they received it with notice of the trust.

40 It will be appreciated that in the instant case the relevant property was not trust property as such, but was property that was allegedly dealt with and received pursuant to a breach of fiduciary duty. The extension of the principles of third party liability to property to which fiduciary obligations were attached and breached has not been questioned in the authorities (see Farah Constructions Pty Limited v Say-Dee Pty Limited, [113]).

41 It is alleged by the Cross-claimants that the Plaintiff received the Carrington property, and the benefit of the improvements thereto, with full notice of any breach of fiduciary duty owed to the Deceased. In consequence, so the Cross-claimants allege, the Plaintiff’s legal interest in that real property should be impressed with a trust in favour of the estate of the Deceased, such a consequence constituting an in personam exception to the Plaintiff’s indefeasibility of title.

42 In Farah Constructions, supra, the High Court of Australia had occasion to consider instances in which a constructive trust will operate as an in personam exception to indefeasibility. Their Honours said, at 171,

The essential point on which Ashley A-JA differed from the majority in Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133 at 166 was put thus:
“The proposition that an equity may be recognised and enforced so long as it involves no conflict with the indefeasability [sic] provisions has not prevented the High Court from imposing constructive trusts so as to recognise equities in cases where the transfer of real property was effected at different stages in the course of events giving rise to the equities.”
He referred to Bahr v Nicolay[No 2] (1988) 164 CLR 604, Muschinski v Dodds (1985) 160 CLR 583 and Baumgartner v Baumgartner (1987) 164 CLR 137. Earlier, Ashley A-JA had said, at 162, that the “necessary balance” between personal equities and indefeasibility was “disclosed by the judgment of Wilson and Toohey JJ in Bahr v Nicolay[No 2] ” (1988) 164 CLR 604 at 637-638. However, as Pullin J pointed out in LHK Nominees Pty Ltd v Kenworthy (2002) 26 WAR 517 at 571, in those cases “the defendant was the primary wrongdoer, attempting to ignore an obligation to share or convey the land with or to the plaintiff. In none of those cases was the defendant a party who merely had notice of an earlier interest or notice of third party fraud”. There is no analogy between the constructive trusts involved in those cases and that which can arise from application of the first limb of Barnes v Addy .

43 It should be emphasised that nothing in Bahr v Nicolay [No 2], Muschinski v Dodds, Baumgartner v Baumgartner or Farah Constructions derogates from the principles of indefeasibility enunciated by the High Court of Australia in Breskvar v Wall [1971] HCA 70; (1971) 126 CLR 376 (and also by the Judicial Committee of the Privy Council in Frazer v Walker [1967] 1 AC 569), as was recognised by Tadgell JA (with whom Winneke P concurred) in the Court of Appeal in Victoria in Macquarie Bank v Sixty-Fourth Throne Pty Ltd, at 279.

44 It was submitted by the Plaintiff that, without a pleading in the cross-claim that the plaintiff was a “primary wrongdoer” (in the sense in which that phrase was used in LHK Nominees Pty Ltd v Kenworthy, supra) in respect to the sale proceeds, no reasonable cause of action is disclosed in the cross-claim.

45 It was a further assertion of the Plaintiff that the cross-claim is limited only to the first limb, and not the second limb, of Barnes v Addy. The Plaintiff argued that, whilst it is asserted on behalf of the Cross-claimants that Mona, by transferring Carrington to the Plaintiff, acted in breach of her fiduciary duty, the Cross-claimants do not make any allegation of actual fraud on the part of Mona, let alone on the part of the Plaintiff. Thus, according to the Plaintiff, any moral turpitude asserted against the Plaintiff should be established to have existed at the time when Mona diverted the proceeds of sale to the bank account from which, ultimately, came the funds with which the improvements to Carrington were effected.

46 The Plaintiff observes that in the cross-claim there is no allegation of any conduct on the part of the Plaintiff, other than a request by the Plaintiff to Mona in respect to improvements to Carrington. A further complaint of the Plaintiff regarding the cross-claim is that the pleading does not seek to set aside the transfer of Carrington to Mona.

47 The Plaintiff asserts that the cross-claim does not plead facts sufficient to establish the second limb of Barnes v Addy, and that that pleading must be taken to be an assertion only of liability in the Plaintiff for knowing receipt.

48 However, in this regard the Plaintiff appears to have proceeded in the following manner. First, she asserts that the claim of the Cross-claimants falls, and can fall only within certain categories (being the two limbs of Barnes v Addy) identified by the Plaintiff. Then the Plaintiff submits that the Cross-claimants cannot succeed in establishing such a cause of action which the Plaintiff herself identifies as the only cause of action which the Cross-claimants either seek, or are enabled, to plead.

49 That the Plaintiff is not alone in falling into this error has been recognised by J D Heydon and M J Leeming, Jacobs’ Law of Trusts in Australia (2006), 283, [1334] where the learned authors, in considering the effect of Barnes v Addy say,

The resultant tendency has been to treat the two limbs of Barnes v Addy as an exhaustive statement of the circumstances in which a third party may become accountable as a trustee. Plainly this is not so… [T]here was well established authority at the time Lord Selborne spoke whereunder third parties who had not received trust property as agents and who had not as agents participated in a fraudulent design within the second limb and who had not acted as trustees de son tort, were held accountable as trustees. That is, whatever the required mental state for a third party who participates in a fiduciary’s breach, it is not necessary to establish that the fiduciary was behaving dishonestly. That has now been affirmed by the Privy Council in Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378 at 384-385.

50 Further, the foregoing, somewhat curious, approach here adopted by the Plaintiff appears to be inappropriate to an application of the nature of that presently before the Court, especially in the light of the facts and circumstances of the present case.

51 It should be appreciated that the present proceedings were instituted by Deborah as Plaintiff. Her complaint is that the proceeds of sale were used in a way in which they should not have been used, and that, in consequence, the estate of the Deceased has been depleted, with consequent loss to Deborah as one of the three residuary beneficiaries. However, the Cross-claimants, being two of the three executors (and being themselves the other two residuary beneficiaries) have by their cross-claim raised the assertion that Deborah herself participated in the depletion of the estate of the Deceased. Deborah allegedly contributed to that depletion by requesting Mona to effect improvements to the Carrington property, and was at all material times aware that the improvements were being funded, at least in part, by the sale proceeds. If that alleged conduct is at a final hearing proved to be true, then the depletion of the estate directly benefited Deborah. Such an allegation is relevant, first, to undermine Deborah’s case; and, second, to entitle the Cross-claimants to seek against Deborah some remedy in their capacity as residuary beneficiaries, as well as in their capacity as executors. Indeed, it is one of the specific complaints of Deborah that the executors have failed to get in the assets of the estate. The assets which are the subject of that complaint include the moneys of which Deborah herself continues to enjoy the benefit, being the moneys expended upon improvements to Carrington.

52 Both the cross-claim and also the defences must be approached in the context that Deborah’s complaint is essentially that, by reason of the benefit which she has received from the improvements to Carrington (of which she is now the registered proprietor), she has been deprived of a greater financial interest in the estate of the Deceased than that which she will presently receive. A complaint concerning that deprivation is equally available to the Cross-claimants, neither of whom has enjoyed the benefit which Deborah has received in respect to the Carrington improvements. When so expressed, it will be recognised that what Deborah is claiming by her amended statement of claim, is that the executors should be personally liable for the diminution in the size of the estate, while Deborah herself, first, should have the benefit of the improvements effected with the funds which would otherwise have gone into the estate; and, in addition, should have the benefit of a restoration of those funds into the estate from the pockets of the three executors personally.

53 In the light of the facts which I have just outlined the cross-claim must been seen as seeking equitable relief to prevent Deborah from obtaining what would be, if the alleged facts are proven, a double benefit, first from the proceeds of sale as initially applied to Carrington, and again in the present proceedings against the Defendants executors personally. (Phrases such as “double dipping”, “having one’s cake and eating it”, and “avoir le beurre et l'argent du beurre” immediately spring to mind.) Conduct such as that on the part of an applicant seeking relief cannot be ignored by a Court of Equity. Such conduct would also appear to attract the doctrine of clean hands when the substantive claim of the Plaintiff against the Defendants executors is being considered by the Court.

54 I have already observed that it was the submission of the Plaintiff that, because the cross-claim did not expressly plead that the Plaintiff had been a “primary wrongdoer” in the sense in which that phrase was used in LHK Nominees Pty Ltd v Kenworthy [2002] WASCA 291; (2002) 26 WAR 517, at 571, then that that pleading cannot succeed on the first limb of Barnes v Addy.

55 However, it should be recognised that the phrase “primary wrongdoer” as used by Pullin J in LHK Nominees, at 571, is not used in any of the cases in which His Honour so categorises the parties who were ultimately the subjects of relief by way of the imposition of a constructive trust. Although not referred to in argument before me, in Super 1000 v Pacific General Securities [2008] NSWSC 1222 (26 November 2008, unreported), White J provides a useful review of the relevant authorities and principles, especially subsequent to the decision of the High Court in Farah Constructions. His Honour (at [234]) stated that he was bound to follow the decision of the Court of Appeal of Western Australia in LHK Nominees Pty Ltd v Kenworthy, but not before expressing a certain reservation concerning the reasoning in that decision. I would respectfully agree with His Honour’s view, at [230], that the status of someone as a

principal wrong-doer…does not, with respect, explain why liability under either limb of Barnes v Addy , which is a personal liability, is not within the “personal equity” exception to indefeasibility.

56 Nevertheless, even if the Plaintiff’s accessorial liability for knowing receipt of trust property does turn on whether or not it can be established that the Plaintiff was a primary wrongdoer in the foregoing sense, that question is one which, especially in the light of the alleged facts in the instant case, deserves to be resolved at a final hearing and should not be disposed of in a summary fashion by dismissal of the cause of action asserted by the cross-claim.

57 It is certainly arguable by the Cross-claimants that, by reason of the Plaintiff directing that payments be made by Mona for the improvements on Carrington, the Plaintiff was a “primary wrongdoer”, in the foregoing sense. Further still, it is clearly arguable that the Plaintiff was “ignoring an obligation to share or convey the land” to the estate of the Deceased after his death, if that property was charged with an interest pursuant to an antecedent wrongdoing.

58 Such an argument, if ultimately sustained, would, by extension of the principles compendiously referred to as the first limb in Barnes v Addy, affect the beneficial ownership of the property transferred to, and now held by, the Plaintiff. In any event, I need only reiterate that that question should be the subject of evidence at a final hearing. At this stage of the proceedings it is not necessary that the Cross-claimants establish that they must of necessity succeed at the final hearing – only that their claim is not doomed to fail.

59 Further, in regard to this question of the status of the Plaintiff as a primary wrongdoer it is not without either relevance or significance in the circumstances of the instant case that, if Mona had originally been named as a Defendant upon the institution of the proceedings on 8 November 2005, the subsequent transfer of Carrington by Mona to the Plaintiff, effected on 7 December 2005, would almost certainly not have occurred. In such situation, the relief presently sought by the Plaintiff against the Defendants in respect to Carrington and the improvements thereto would then have been sought against Mona, since she would still have been the registered proprietor of Carrington.

60 If the Cross-claimants can ultimately establish an entitlement to relief against the Plaintiff consequent upon her knowing receipt of property which was the subject of a fiduciary relationship between Mona and the Deceased, such breach (if it occurred) resulting in practical benefit to the Plaintiff herself, then the remedy of a constructive trust falls to be considered. As I have already observed, where a plaintiff (or a cross-claimant) is able to establish a cause of action, a Court of Equity can always mould to the circumstances of the case the relief to which that plaintiff (or cross-claimant) is entitled. As was recognised by Deane J in Muschinski v Dodds, at 616,

The principal operation of the constructive trust in the law of this country has been in the area of breach of fiduciary duty. Some textwriters have expressed the view that the constructive trust is confined to cases where some pre-existing fiduciary relationship can be identified: see, e.g., Lewin on Trusts , 16th ed. (1964: Mowbray ed.), p. 141. Neither principle nor authority requires however that it be confined to that or any other category or categories of case: cf., generally, Professor R. P. Austin's essay on “Constructive Trusts” in Essays in Equity , (Finn ed.) (1985), esp. at pp. 196-201; Waters, op. cit., p. 28ff. Once its predominantly remedial character is accepted, there is no reason to deny the availability of the constructive trust in any case where some principle of the law of equity calls for the imposition upon the legal owner of property, regardless of actual or presumed agreement or intention, of the obligation to hold or apply the property for the benefit of another: cf. Hanbury and Maudsley, op. cit, p. 301; Pettit, op. cit, p. 55.

61 It will be appreciated that the imposition upon a defendant of a constructive trust in favour of a successful plaintiff does not offend against the principles of indefeasibility of title. The legal title in the subject property continues in the person or entity who or which is the registered proprietor. Nevertheless, that registered proprietor will hold the legal estate for the benefit of the person in whose favour the constructive trust is imposed.

62 If it here be established that the Plaintiff gave knowing assistance to the breach of the fiduciary obligations or knowingly received property the subject of such a breach of trust, then, consonant with the principles recognised by the High Court of Australia, regarding the concept of a constructive trust, in such cases as Muschinski v Dodds, and Baumgartner v Baumgartner, it is at least arguable that the property legally held by the Plaintiff would be impressed with such a constructive trust in favour of the Deceased’s estate.

63 The foregoing views which I have expressed concerning the application for summary dismissal of the cross-claim, which summary dismissal was expressly sought by the Plaintiff during the course of the hearing, have even stronger application to the relief sought by the Plaintiff in paragraph 2 in the amended notice of motion, being an order that paragraphs 17 and 19 of the cross-claim be struck out on the basis that they disclose no reasonable cause of action pursuant to Part 14, rule 14.28(a). That relief is grounded upon alleged defects in the form of the pleading (as distinct from defects in an alleged cause of action). Any such defects in form can always be cured by appropriate amendment of the pleading.

64 The Plaintiff by paragraph 3 of the amended notice of motion seeks an order that the paragraphs referred to therein of the amended defences “be struck out on the basis that they fail to disclose any reasonable cause of action, are frivolous and vexatious and thereby are an abuse of process pursuant to Part 13, rule 13.4(a)(b) and/or (c) of the Uniform Civil Procedure Rules”.

65 The parts of the amended defences of the First and Second Defendants, Warrick and Rodney, of which the Plaintiff here complains are the following.

66 Paragraph 39(f), being an admission that Mona paid to various persons, including the Plaintiff, the First Defendant and the Second Defendant, amounts set out in the affidavits filed by Mona in these proceedings, which payments may have comprised part of the payment proceeds.

67 Paragraph 41E, being in answer to 41E of the statement of claim, that the Plaintiff, a person closely related to the First and Second Defendants, has received benefits from Mona (in the form of payments made at her direction or for her benefit) where the Plaintiff knew those moneys formed part of the sale proceeds. Mona has identified amounts supplied in the sum of $319,759.93 as follows: [such amounts then being identified].

68 Paragraph 42A(b) (to the extent that it incorporates paragraph 41E) by which the First and Second Defendants admit that the affidavit evidence of Mona, which is not disputed by those Defendants, discloses that money was received by each of the Plaintiff, the First Defendant, the Second Defendant and another person (identified as Andrew) as set out in paragraphs 41B, 41C, 41D and 41E of the amended defence.

69 Paragraph 56(c) being a denial that the Plaintiff has suffered a loss. The particulars to that subparagraph assert that the Plaintiff, having received the benefit of Carrington as a mere volunteer, with knowledge that Mona at the request and direction of the Plaintiff had expended substantial parts of the sale proceeds in improving the property, has in substance received or received the benefit of amounts in excess of the amount she would have received as a one third residuary beneficiary in the estate of the Deceased, if her claim was successful.

70 Paragraph 58(ii) (which consists of particulars to the substance of that paragraph), by which the Defendants dispute the standing of the Plaintiff to bring the proceedings. They deny that as a residuary legatee she has such an entitlement. The particulars in subparagraph (ii) repeat the particulars in paragraph 56C.

71 Paragraph 60 incorporates by reference the contents of paragraphs 1 to 58 in the amended defence.

72 Paragraph 61(a) incorporates by reference the contents of paragraphs 1 to 58 in the amended defence.

73 Paragraph 60 is pleaded in answer to paragraph 59 of the statement of claim, and paragraph 61 is pleaded in answer to paragraph 60 of the statement of claim.

74 By paragraph 3 of the amended notice of motion the Plaintiff also seeks the striking out of “the relief claimed[sic] in paragraph 79(i) and (ii) and paragraph 80 (i) and (ii) of the amended defences of the first and second defendants”.

75 Paragraph 79 (which is in further answer to paragraphs 74 to 80 of the statement of claim) asserts that the Plaintiff has received from Mona part of the sale proceeds or other property, which property, on the Plaintiff’s claim, belonged to the Deceased and the amount received exceeds the Plaintiff’s entitlement (if any) should a claim against the estate succeed. Particulars disclosed in subparagraph (i) of paragraph 79 are that the Plaintiff has received either directly or for her benefit from Mona from the account to which the sale proceeds were deposited, amounts exceeding $300,000 before interest; and particulars disclosed in subparagraph (ii) are that immediately before the commencement of these proceedings Mona transferred to the Plaintiff for nil consideration the Carrington property, which property had been substantially improved by the application of part of the sale proceeds.

76 Paragraph 80 is a defence in answer to the entirety of the statement of claim. By subparagraph (i) thereof the First and Second Defendants assert a defence of acquiescence, and by subparagraph (iii) those Defendants assert a defence of estoppel.

77 The foregoing provisions of rule 13.4 of the Uniform Civil Procedure Rules relate “to the proceedings generally or in relation to any claim for relief in the proceedings” (subrule (1)). They do not relate to a defence. Accordingly, the relief sought in paragraph 3 in the amended notice of motion will be dismissed.

78 By paragraph 4 of the amended notice of motion the Plaintiff seeks that the specified paragraphs of the amended defence of the First and Second Defendants “be struck out on the basis that they disclose no reasonable cause of action and thereby have a tendency to prejudice, embarrassment, and/or delay, and are thereby an abuse of process pursuant to Part 14, rule 14.28(a), (b) and/or (c) of the Uniform Civil Procedure Rules”.

79 Subrule 1 of rule 14.28 provides,

The court may at any stage of the proceedings order that the whole or any part of a pleading be struck out if the pleading:

(a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading, or

(b) has a tendency to cause prejudice, embarrassment or delay in the proceedings, or

(c) is otherwise an abuse of the process of the court.

80 The form of the relief sought in paragraph 4 of the amended notice of motion is to the effect that it is only if the specified paragraphs of the defences disclose no reasonable cause of action that it is asserted that they have a tendency to cause prejudice, embarrassment and/or delay and is thereby are an abuse of process.

81 The cumulative effect of the paragraphs of the defences of the First and Second Defendants in respect of which the Plaintiff presently complains is to a similar effect as the cause of action pleaded by the First and Second Defendants in their cross-claim. For the reasons which I have already expressed in regard to the cross-claim, I am satisfied that the defence which those Defendants seek to raise by their amended defences (or by those parts thereof in respect of which the Plaintiff presently complains) are at least arguable.

82 Despite the somewhat inappropriate wording of paragraph 4 of the amended notice of motion (“… on the basis that they disclose no reasonable cause of action”), I am satisfied that the specified paragraphs disclose an arguable defence to the claim of the Plaintiff and should not in a summary fashion be struck out.

83 By paragraph 5 sought in her amended notice of motion the Plaintiff seeks to strike out paragraphs 27, 40 and 50 of the amended defence of the Third Defendant, Herbert James Cannington, filed on 23 June 2009, “on the basis that they fail to disclose any reasonable cause of action, are frivolous and vexatious, and thereby are an abuse of process pursuant to Part 13, rule 13.4(a), (b) and/or (c) of the Uniform Civil Procedure Rules”.

84 Paragraph 27 of the amended defence of the Third Defendant (being in answer to paragraph 41E of the statement of claim) does not admit the paragraph, and further says that the Plaintiff has received from Mona the benefit of certain moneys with the knowledge that those moneys form part of the sale proceeds of each of the lands referred to in paragraphs 17 to 37 of the statement of claim. Particulars to this paragraph of the amended defence refer to the affidavit of Mona sworn 2 September 2008 as identifying the following moneys totalling $319,759.93.

85 By paragraph 40 of his amended defence the Third Defendant disputes that the status of the Plaintiff as a residual legatee entitles her to bring the proceedings. The particulars to that paragraph repeat the particulars appended to paragraph 56(c) in the amended defence of each of the First and Second Defendants.

86 By paragraph 50 of his amended defence the Third Defendant asserts, in answer to the whole of the statement of claim, that the Plaintiff by her conduct is disentitled to any of the equitable relief claimed or any other relief. By the particulars to that paragraph the Third Defendant relies upon the defences of acquiescence, laches with prejudice, estoppel, as well as specific factual matters (including the Plaintiff’s failure to seek specific relief against the Fourth Defendant concerning the sale of the properties at Marks Point, Bonington, 161 Russell Road, and 163 Russell Road; the benefits received by the Plaintiff; the knowledge of the Plaintiff that Mona had exercised one of the powers of attorney to sell the various properties; that the Plaintiff had procured a transfer of Carrington from Mona to herself as a volunteer, with knowledge that that property had been substantially improved by the application of part of the proceeds of sale; that the Plaintiff has receive Carrington impressed with the trust for the sale proceeds; and that, if the Plaintiff be permitted to retain Carrington and maintain her claim, the Plaintiff would receive both the benefit of property impressed with a trust for the sale proceeds, and, in addition, the benefit of her present claim).

87 For the same reason which I have expressed regarding the relief sought in paragraph 3 of the amended notice of motion (in respect to specified paragraphs of the defences of the First and Second Defendants), it will be appreciated that the relief sought by the Plaintiff pursuant to rule 13.4 is inappropriate to a defence.

88 For the reasons which I have already expressed regarding the defences of the First and Second Defendants, I am not persuaded that paragraph 27 of the defence of the Third Defendant does not disclose an arguable defence.

89 By paragraph 40 of his defence the Third Defendant directly challenges the entitlement of the Plaintiff to receive what might be described as a double benefit from the conduct of Mona, which conduct was effected with the knowledge of the Plaintiff. I have already expressed my view that that defence is arguable, and should not be struck out.

90 None of the assertions made in paragraph 50 of the Third Defendant’s amended defence fails to disclose an arguable defence. Indeed, at the hearing the Plaintiff hardly submitted to the contrary.

91 Accordingly, I am not satisfied that the paragraphs of the defence of the Third Defendant of which the Plaintiff presently complains (being paragraphs 27, 40 and 50) disclose no defence. Therefore those paragraphs will not be struck out.

92 It follows from the foregoing that the Plaintiff has not established an entitlement to any of the items of relief claimed in her amended notice of motion filed on 18 November 2009. That amended notice of motion will be dismissed with costs.

93 I make the following orders:

1. I order that the amended notice of motion filed by the Plaintiff on 18 November 2009 be dismissed.

2. I order that the Plaintiff pay the costs of the First, Second and Third Defendants of the aforesaid amended notice of motion, and of the notice of motion filed by the Plaintiff on 25 August 2009.

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