Brian Neville Mayfield and Marlene Theresa Mayfield (ATF B and M Mayfield Superannuation Fund) v P and B Corporation Pty Ltd (ATF North Cape Development Trust)
[2015] WASC 213
•12 JUNE 2015
BRIAN NEVILLE MAYFIELD & MARLENE THERESA MAYFIELD (ATF B & M Mayfield Superannuation Fund) -v- P & B CORPORATION PTY LTD (ATF North Cape Development Trust) [2015] WASC 213
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2015] WASC 213 | |
| Case No: | CIV:2796/2013 | 4 JULY 2014 | |
| Coram: | ALLANSON J | 12/06/15 | |
| 29 | Judgment Part: | 1 of 1 | |
| Result: | Application allowed in part | ||
| B | |||
| PDF Version |
| Parties: | BRIAN NEVILLE MAYFIELD & MARLENE THERESA MAYFIELD (ATF B & M Mayfield Superannuation Fund) RICHARD COBLEY & ROBYN COBLEY (ATF R & R Cobley Family Super Fund) KENNETH MAXWELL DOWNES & LYNETTE LORRAINE GRIEVES PETER DAVID HORWOOD AND JILL HORWOOD DISCOVERY III PTY LTD FORMERLY LATITUDE FISHERIES PTY LTD (ATF Boschetti Superannuation Fund) MURRAY RONALD HORAK & ASTRID JEANETTE MARQUERITE HORAK MARTIN RYAN HORAK & URIEL GERALDINE DEKALBERMATTEN P & B CORPORATION PTY LTD (ATF North Cape Development Trust) BARRY COLIN HUMFREY PETER FRANCIS BELL REGIONAL WA PTY LTD FORMERLY P & B SERVICES PTY LTD KENESTA PTY LTD THOMSON SMSF WARRANT PTY LTD JOHN SCOTT THOMSON BIRDANCO NOMINEES PTY LTD (T/As RSM Bird Cameron) |
Catchwords: | Practice and procedure Application to strike out Part of statement of claim does not disclose reasonable cause of action Whether some allegations are embarrassing |
Legislation: | Rules of the Supreme Court 1971 (WA), O 20 r 19(1)(a), O 20 r 19(1)(b) |
Case References: | Arthur Young v Tieco International [1995] SASC 5173; (1995) 182 LSJS 367 Automotive, Food, Metals, Engineering, Printing & Kindred Industries Union of Workers Western Australian Branch v Bell-A-Bike Rottnest Pty Ltd [2005] WASCA 157 Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279 Barclay Mowlem Construction Ltd v Dampier Port Authority [2006] WASC 281; (2006) 33 WAR 82 Barnes v Addy (1874) LR 9 Ch App 244 Commonwealth Bank of Australia v Barker [2014] HCA 32 Day v William Hill (Park Lane) Ltd (1949) 1 KB 632 DM Drainage & Constructions Pty Ltd v Karara Mining Ltd [2014] WASC 170 Elders Trustee and Executor Co Ltd v E G Reeves Pty Ltd [1987] FCA 332; (1987) 78 ALR 193 Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 Forrest v Australian Securities and Investments Commission [2012] HCA 39; (2012) 247 CLR 486 Gould v Mount Oxide Mines Ltd (in liq) [1916] HCA 81; (1916) 22 CLR 490 Hart-Roach v Public Trustee (Unreported, WASC, Library No 980044, 11 February 1998) Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 Jingellic Minerals NL v Abigroup Ltd (1992) 7 WAR 566 Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449 Marriner v Australian Super Developments Pty Ltd [2012] VSCA 171 Mutual Life & Citizens' Assurance Co Ltd v Evatt [1971] 1 All ER 150; (1970) 122 CLR 628 Nyoni v Patterson [2012] WASCA 171 Pancontinental Mining Ltd v Posgold Investments Pty Ltd [1994] FCA 983; (1994) 121 ALR 405 Pilmer v The Duke Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165 Snelgrove v Great Southern Managers Australia Ltd (In liq) (Receiver and Manager Appointed) [2011] WASC 103 United Dominions Corp Ltd v Brian Pty Ltd [1985] HCA 49; (1985) 157 CLR 1 Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- First Plaintiffs
RICHARD COBLEY & ROBYN COBLEY (ATF R & R Cobley Family Super Fund)
Second Plaintiffs
KENNETH MAXWELL DOWNES & LYNETTE LORRAINE GRIEVES
Third Plaintiffs
PETER DAVID HORWOOD AND JILL HORWOOD
Fourth Plaintiffs
DISCOVERY III PTY LTD FORMERLY LATITUDE FISHERIES PTY LTD (ATF Boschetti Superannuation Fund)
Fifth Plaintiff
MURRAY RONALD HORAK & ASTRID JEANETTE MARQUERITE HORAK
Sixth Plaintiffs
MARTIN RYAN HORAK & URIEL GERALDINE DEKALBERMATTEN
Seventh Plaintiffs
AND
P & B CORPORATION PTY LTD (ATF North Cape Development Trust)
First Defendant
BARRY COLIN HUMFREY
Second Defendant
PETER FRANCIS BELL
Third Defendant
REGIONAL WA PTY LTD FORMERLY P & B SERVICES PTY LTD
Fourth Defendant
KENESTA PTY LTD
Fifth Defendant
THOMSON SMSF WARRANT PTY LTD
Sixth Defendant
JOHN SCOTT THOMSON
Seventh Defendant
BIRDANCO NOMINEES PTY LTD (T/As RSM Bird Cameron)
Eighth Defendant
Catchwords:
Practice and procedure - Application to strike out - Part of statement of claim does not disclose reasonable cause of action - Whether some allegations are embarrassing
Legislation:
Rules of the Supreme Court 1971 (WA), O 20 r 19(1)(a), O 20 r 19(1)(b)
Result:
Application allowed in part
Category: B
Representation:
Counsel:
First Plaintiffs : Mr M L Bennett & Mr D Banda
Second Plaintiffs : Mr M L Bennett & Mr D Banda
Third Plaintiffs : Mr M L Bennett & Mr D Banda
Fourth Plaintiffs : Mr M L Bennett & Mr D Banda
Fifth Plaintiff : Mr M L Bennett & Mr D Banda
Sixth Plaintiffs : Mr M L Bennett & Mr D Banda
Seventh Plaintiffs : Mr M L Bennett & Mr D Banda
First Defendant : Mr C S Williams
Second Defendant : Mr C S Williams
Third Defendant : Mr C S Williams
Fourth Defendant : Mr C S Williams
Fifth Defendant : Mr C S Williams
Sixth Defendant : Mr C S Williams
Seventh Defendant : Mr M C Goldblatt
Eighth Defendant : Mr M C Goldblatt
Solicitors:
First Plaintiffs : Bennett + Co
Second Plaintiffs : Bennett + Co
Third Plaintiffs : Bennett + Co
Fourth Plaintiffs : Bennett + Co
Fifth Plaintiff : Bennett + Co
Sixth Plaintiffs : Bennett + Co
Seventh Plaintiffs : Bennett + Co
First Defendant : Solomon Brothers
Second Defendant : Solomon Brothers
Third Defendant : Solomon Brothers
Fourth Defendant : Solomon Brothers
Fifth Defendant : Solomon Brothers
Sixth Defendant : Solomon Brothers
Seventh Defendant : Hammond King Touyz
Eighth Defendant : Hammond King Touyz
Case(s) referred to in judgment(s):
Arthur Young v Tieco International [1995] SASC 5173; (1995) 182 LSJS 367
Automotive, Food, Metals, Engineering, Printing & Kindred Industries Union of Workers Western Australian Branch v Bell-A-Bike Rottnest Pty Ltd [2005] WASCA 157
Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279
Barclay Mowlem Construction Ltd v Dampier Port Authority [2006] WASC 281; (2006) 33 WAR 82
Barnes v Addy (1874) LR 9 Ch App 244
Commonwealth Bank of Australia v Barker [2014] HCA 32
Day v William Hill (Park Lane) Ltd (1949) 1 KB 632
DM Drainage & Constructions Pty Ltd v Karara Mining Ltd [2014] WASC 170
Elders Trustee and Executor Co Ltd v E G Reeves Pty Ltd [1987] FCA 332; (1987) 78 ALR 193
Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89
Forrest v Australian Securities and Investments Commission [2012] HCA 39; (2012) 247 CLR 486
Gould v Mount Oxide Mines Ltd (in liq) [1916] HCA 81; (1916) 22 CLR 490
Hart-Roach v Public Trustee (Unreported, WASC, Library No 980044, 11 February 1998)
Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41
Jingellic Minerals NL v Abigroup Ltd (1992) 7 WAR 566
Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449
Marriner v Australian Super Developments Pty Ltd [2012] VSCA 171
Mutual Life & Citizens' Assurance Co Ltd v Evatt [1971] 1 All ER 150; (1970) 122 CLR 628
Nyoni v Patterson [2012] WASCA 171
Pancontinental Mining Ltd v Posgold Investments Pty Ltd [1994] FCA 983; (1994) 121 ALR 405
Pilmer v The Duke Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165
Snelgrove v Great Southern Managers Australia Ltd (In liq) (Receiver and Manager Appointed) [2011] WASC 103
United Dominions Corp Ltd v Brian Pty Ltd [1985] HCA 49; (1985) 157 CLR 1
Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544
1 ALLANSON J: By their third amended statement of claim, filed 17 June 2014, the plaintiffs plead claims against eight defendants.
2 Each of the plaintiffs holds units in the North Cape Development Trust. There are currently 2.8 million units issued in the Trust. The plaintiffs hold 1.4 million units between them. The other units are held by six corporations, including Regional WA Pty Ltd (the fourth defendant) and Kenesta Pty Ltd (the fifth defendant).
3 The first defendant, P & B Corporation Pty Ltd, is the trustee.
The parties
4 There are seven plaintiffs. Each plaintiff claims as a unit holder in the Trust. Their pleaded claims are identical.
5 P & B Corporation is trustee of the Trust and also the registered proprietor of land at Exmouth (the Exmouth Property), which was the subject of a proposed development project.
6 Barry Colin Humfrey (the second defendant) and Peter Francis Bell (the third defendant) are directors of P & B Corporation. Mr Humfrey holds one share in P & B Corporation and was, at all material times, a director of Regional WA and a director of Kenesta. Mr Bell held one share in P & B Corporation and was a director of Regional WA.
7 Regional WA holds 50,000 of the shares issued by P & B Corporation.
8 Kenesta is in the business of property development. Its shares are held by Mr Humfrey and his wife, Mary.
9 The seventh defendant, John Scott Thomson, is a director of RSM Bird Cameron (the eighth defendant, Birdanco Nominees Pty Ltd trades as RSM Bird Cameron). He is also the sole director and the shareholder of the sixth defendant, Thomson SMSF Warrant Pty Ltd, which is a self-managed superannuation fund. Thomson SMSF Warrant holds 2,000 of the shares issued in Regional WA.
10 The defendants contend that, in regard to some of the claims, the statement of claim does not disclose a reasonable cause of action: see Rules of the Supreme Court 1971 (WA) O 20 r 19(1)(a). The defendants also apply to strike out specific allegations on the ground that they are embarrassing: O 20 r 19(1)(c).
11 The principles to be applied on the application are well settled. First, the court must consider the role of pleadings in the context of case management techniques, including the pre-trial exchange of witness statements: Barclay Mowlem Construction Ltd v Dampier Port Authority [2006] WASC 281; (2006) 33 WAR 82 [8]. This approach does not, however, deny the need for a statement of claim to state the material facts to support the claim for relief, and for the pleadings to define with clarity and precision the issues or questions which are in dispute between the parties and fall to be determined by the court requirements that were reaffirmed by the Court of Appeal in Nyoni v Patterson [2012] WASCA 171 [36] - [38].
12 Second, pleadings ensure a basic requirement of procedural fairness, and, to do so, must state the case sufficiently clearly to allow the other party a fair opportunity to meet it: Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279, 286 - 287; Gould v Mount Oxide Mines Ltd (in liq) [1916] HCA 81; (1916) 22 CLR 490, 517; Forrest v Australian Securities and Investments Commission [2012] HCA 39; (2012) 247 CLR 486 [26].
13 Third, what is needed to satisfy the requirement for a clear statement of the case will depend upon 'the cause of action, the complexities of the case and the whole of the circumstances of the case. None of those matters can be considered in isolation any more than each of the paragraphs of the pleading can be considered in isolation': Arthur Young v Tieco International [1995] SASC 5173; (1995) 182 LSJS 367, 370.
14 Fourth, the allegation that a party is liable as a knowing participant in a dishonest and fraudulent design of a trustee, must be pleaded clearly and particularised: see, for example, Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 [170].
15 On an allegation that there is no reasonable cause of action, '"reasonable" means reasonable according to law … if the facts pleaded conceivably give rise to relief … then the cause of action should be held to be reasonable': Automotive, Food, Metals, Engineering, Printing & Kindred Industries Union of Workers Western Australian Branch v Bell-A-Bike Rottnest Pty Ltd [2005] WASCA 157 [54]. The question is whether it would be open to the first defendant on the pleadings 'to prove facts at the trial which would constitute a cause of action': see Mutual Life & Citizens' Assurance Co Ltd v Evatt [1971] 1 All ER 150; (1970) 122 CLR 628, 631; Pancontinental Mining Ltd v Posgold Investments Pty Ltd [1994] FCA 983; (1994) 121 ALR 405, 414.
16 Pleadings of irrelevant or unnecessary material may also be struck out on the ground that they may prejudice, embarrass or delay the fair trial of the action 'because they are evasive, they conceal or obscure the real questions in controversy, they are ambiguous or not reasonably intelligible, they raise immaterial or irrelevant issues, they fail to confine the issues or state the case of the party in question with reasonable particularity, or they raise a case in terms which are simply too general': Hart-Roach v Public Trustee (Unreported, WASC, Library No 980044, 11 February 1998) 8 - 9; DM Drainage & Constructions Pty Ltd v Karara Mining Ltd [2014] WASC 170 [34]; Terravision Pty Ltd v Black Box Control Pty Ltd [No 2] [2015] WASC 66 [16].
17 In the following reasons, the references are to paragraphs of the third amended statement of claim, filed 16 June 2014.
18 The case pleaded by the plaintiffs is as follows.
Formation of the North Cape Development Trust and Fundraising
19 The Trust was set up in 2004 to acquire the Exmouth Property and undertake a project of development and subdivision. The Trust was established pursuant to the Northcape Development Trust Deed: [18], [19].
20 P & B Corporation sought to raise $3 million to commence the project. Individuals and entities subscribed for $1 units in the unit trust: [20], [23].
21 Each plaintiff subscribed for 200,000 units.
22 Kenesta subscribed for 200,000 units, with payment of $32,724.66 by cheque, and the balance 'on the basis of expenses which Kenesta claims to have incurred on behalf of the Trust', including an option fee, deposit and legal fees: [25].
23 Regional WA was issued with 200,000 units without cash contribution, on the basis that this was a trust fee which the Trust was required to pay to Regional WA. Regional WA was formerly named P & B Services Pty Ltd, and was appointed as the manager under the Trust Deed.
Management agreement
24 On 1 June 2004, the unitholders and Regional WA entered into a management agreement: [34]. Under the management agreement, 'Regional WA was required to do everything the unit holders required it to do that was lawful, desirable or necessary in connection with the unit holders' participation in the project and the management of the Trust': [35]. Regional WA 'acknowledged and agreed' that the Management Committee had day to day control of the trust and its assets [37].
25 The unitholders agreed to pay Regional WA a trust fee of $200,000 on the start date or on completion of the purchase of the Exmouth Property; and a Management Fee comprising an administration fee or administration cost of $15,000, to be paid annually in advance, and a management sales percentage when sales were effected in the development: [38].
The North Cape Development Trust Deed
26 Terms of the Trust Deed on which the plaintiffs rely are pleaded in [27] to [32]. The Trust Deed was put before the court in an affidavit of Tamisha Kim Gadson sworn 17 June 2014. I have had regard to the whole of the Trust Deed, as a document mentioned in the pleadings: see Day v William Hill (Park Lane) Ltd (1949) 1 KB 632, 639.
27 The Trust Deed is dated 1 June 2004. The parties are the trustee (P & B Corporation), the settlor, the initial unitholders (including the plaintiffs) and the manager (Regional WA).
28 The recitals include that the manager agrees to manage the Trust on the terms of the Trust Deed and the Management Agreement but 'expressly acknowledges and agrees that it does not have day to day control of the Property, the Unit Holders' interests in the Property or the Trust or the Unit Holders' contributions to generate a return or benefit from their investment in the Trust'.
29 Clause 1 contains definitions. The Project is defined as the 'acquisition, ownership and management of the Interest in the Property and the sale of lots (including strata title lots) arising from the subdivision and development of the Property in accordance with the Business Plan'. The Business plan is defined to mean a business plan agreed to by the unitholders. The Property is specified in a schedule to the Trust Deed, and identified as the Exmouth Property.
30 Trust expenses are defined as all costs and expenses properly incurred by the trustee or the manager 'in the operation of the Business contemplated by this document, a Business Plan or a Budget'.
31 By cl 2.4 the trustee holds, and must continue to hold, the trust assets for the unitholders on the terms of the Trust Deed. The trustee is not an agent of the unitholders, but receives income as trustee (cl 2.9).
32 Clause 3 deals with the interest of unitholders. By cl 3.4, the unitholders must ensure that the business begins operating in accordance with the business plan, the budget and the Trust Deed; each unitholder must make all payments required of it under the business plan, the budget and the Trust Deed; and, if applicable, the unitholders must appoint the manager pursuant to the terms of the Management Agreement.
33 Clause 17 deals with the trustee's rights and liabilities. Specifically, in cl 17.2, it provides that the trustee acting with good faith to the unitholders may be interested in any contract or transaction with the Trust, an associate or any unitholder, and may deal with the Trust, an associate or any unitholder. By cl 17.6, the trustee acting in good faith and without wilful breach is not liable to unitholders for any loss suffered in connection with the Trust.
34 By cl 21, the trustee may be a corporate trustee.
35 By cl 26, the unitholders acknowledge that they are aware of the risks of property investment and other risks relevant to the nature of the trust.
36 By cl 27, the trustee and the manager irrevocably acknowledge and agree that the Management Committee has the day to day control of the Trust, trust assets, and use to which the contributions of the unitholders make to the Trust to generate their returns or benefits. The trustee and manager do not have day to day control of any of those matters and, in carrying out their duties and performing their obligations, they will 'always act only in accordance with the directions of the Management Committee'.
37 Clause 28 contains conditions precedent to the trustee acquiring the property, including that a majority of unitholders agree to a business plan for the business and a budget for the first financial year, and that the unitholders enter into the Management Agreement with the manager.
38 Clause 29 deals with financial matters and cl 31 with the Management Committee.
39 By cl 33, the unitholders must appoint the manager and enter into the Management Agreement with the manager. Each unitholder severally appoints the manager as its agent to conduct the business and perform the duties imposed on the manager under the Trust Deed and under the Management Agreement. Clause 16.3 and sch 3 provide specific management and investment powers of the trustee.
Obligation of trustee at law
40 P & B Corporation was subject to obligations arising from its position as trustee: [41]. Mr Humfrey and Mr Bell as directors of the trustee company were obliged not to knowingly participate or procure P & B Corporation to engage in breaches of its obligations to the Trust and to unit holders: [42].
Development of the project
41 From par 43 onwards the plaintiffs plead a narrative of the development of the project.
42 A central allegation is that P & B Corporation, Mr Humfrey and Mr Bell 'failed or neglected to constitute and maintain or cause the unit holders to constitute and maintain a Management Committee' ([30] and [55]), and, from the inception of the project, they incurred expenditure and liability that had not been approved.
43 P & B Corporation incurred expenditure and paid amounts to Regional WA and to Kenesta; alternatively Mr Humfrey and Mr Bell caused P & B Corporation to incur that expenditure and pay those amounts: [49]. The allegations regarding the payments and liabilities made by P & B Corporation are relied on in later pleas, referring back to these allegations, so it is convenient to identify them and, as far as possible, the dates on which they were paid or incurred. I will do so in the order in the plea, which is not in chronological order.
1. Before 20 September 2007 (that is before the Shire gave planning consent), P & B Corporation incurred expenditure for earthworks ($285,000), consultants ($1,273,383), landscaping ($48,357), and fees: [45].
2. On 2 April 2009, Bankwest advanced a loan to P & B Corporation of $2.9 million secured by a mortgage over the property: [47]. Bankwest advanced a further amount of $100,000 on 29 June 2012: [52].
3. Between 20 September 2007 and 20 September 2009, P & B Corporation incurred and paid expenditure for construction ($114,429), consultants ($1,342,669), and landscaping ($46,508), and for fees including a $200,000 Trust Fee; paid Regional WA, including a bookkeeping fee ($16,500, the same fee is also pleaded at [58.2]), project management fees ($100,000, also pleaded at [58.3]) and an administration fee ($33,000), P & B Corporation also paid Kenesta $532,407.34, including a $500,000 project management fee: [49]. The project management fee paid to Kenesta is again pleaded at [58.1].
4. After 20 September 2009, on dates not stated, P & B Corporation incurred and paid fees for consultants ($27,000) and valuation fees ($5,852): [50].
5. Between May 2008 and August 2012, the Trust incurred liability for $682,189.07 to Kenesta, which claims to have provided 'working funds' to the Trust between May 2008 and August 2012: [54]. At [51], the plaintiffs plead that Kenesta submitted invoices totalling $121,456.41 between 2009 and 2013, which remain unpaid.
6. Sometime after 1 April 2008, P & B Corporation paid $500,000 to Kenesta (the fee pleaded at [49]); and paid Regional WA a fee for bookkeeping services and a management fee (also pleaded at [49]).
7. On or about 24 November 2006, P & B Corporation paid $400,000 to redeem the units of Hospitality Pty Ltd: [67].
8. In June 2010, December 2011, and June 2013, P & B Corporation entered into three loan agreements and borrowed from Quantum Asset Management Pty Ltd: [78], [80] and [82]. The amounts borrowed were $394,448.13, $526,667, and $661,909.32.
44 The claims made against each of the defendants are based on those payments or liabilities, and on two other transactions or events: in about January 2008, Regional WA agreed to purchase the plaintiffs' units; and in 2013, Kenesta purported to compulsorily acquire their units.
Unit purchase agreement
45 On 5 December 2007, Mr Humfrey, on behalf of Regional WA, offered to purchase units for the amount of $515,000 per 200,000 units [69]. In January 2008, the plaintiffs accepted the offer [70]. The contracts were not cancelled and Regional WA did not pay [74] - [76]. The plaintiffs claim that Regional WA has breached that agreement: [111], [115.5].
Purported compulsory acquisition
46 On 12 February 2013, Mr Humfrey and Mr Bell convened a meeting of the directors of P & B Corporation and resolved to make calls on unit holders under the Trust Deed, and to issue default notices in the event of default, and for non-defaulting unit holders to issue compulsory acquisition notices: [95].
47 On 12 February, Mr Humfrey on behalf of P & B Corporation purported to issue call notices to raise a total of $5.2 million [96]. None of the unitholders complied with the call notices [97].
48 On 1 March 2013, Kenesta issued notices of default to all unitholders except Regional WA [98], and on 8 May 2014, purportedly served compulsory acquisition notices on the unit holders, except Regional WA, pursuant to cl 35.3 of the Trust Deed: [98A].
49 On 14 May 2013, Kenesta purportedly reissued notices of default to all unit holders [98B], and on 21 May 2013 purportedly reissued compulsory acquisition notices [99]. The reissued notices offered to acquire the units at $0.0 per unit [99B].
50 The plaintiffs claim that the compulsory acquisition was not valid. It is not necessary to go into why the plaintiffs make that claim, as there is no application to strike it out. The plaintiffs also plead that, at 16 September 2013, P & B Corporation advised that it had not effected any changes on the register of unit holders: [103]. The plaintiffs plead their claim on the basis that they hold units in the Trust, and at all material times held those units.
51 This part of the claim is particularly significant to the plaintiffs' pleas against Mr Thomson, Thomson SMSF Warrant, and RSM Bird Cameron because the plaintiffs allege a scheme by P & B Corporation, Kenesta, Regional WA, Mr Humfrey and Mr Bell to compulsorily acquire the plaintiffs' units, and 'participation' by the other defendants in that scheme.
52 The causes of action and relief sought
53 Despite the number of defendants and the varied nature of the claims against them, the plaintiffs' prayer for relief simply claims:
1. Damages
2. Equitable compensation
3. Declarations that each of the Call Notices, Default Notices and Compulsory Acquisition Notices were and are invalid and of no force and effect
4. Such further or other relief as to this Honourable Court may seem just.
54 The prayer for relief does not particularise the relief sought against each defendant. In par 115, the plaintiff identifies the loss and damage claimed against each defendant.
P&B Corporation
55 The plaintiffs plead that, on a proper construction of the Trust Deed, or as a term implied by law, P & B Corporation and its directors would use reasonable endeavours to constitute and maintain a Management Committee; and were obliged to seek approval of the Management Committee with respect to any expenditure incurred and not included in an approved business plan or budget before effecting the payment: [30].
56 The plaintiffs plead that the conduct of P & B Corporation in:
1. making the payments pleaded in [45], [49], [50], [55] - [60], and [61] - [68] without the approval of a Management Committee;
2. incurring the liabilities pleaded in pars [45], [47], [49], [50], [51], [52], [54], [77] - [84], and [85] - [105];
3. issuing the call notices as pleaded in pars [85] - [105], on terms which had not been approved by a business plan or budget;
breached its obligations under the Trust Deed: [107]. The payments and liabilities are those I have identified earlier in these reasons.
57 The plaintiffs also plead that P & B Corporation breached obligations in law and equity by not seeking approval of a Management Committee for payments and liabilities, by issuing the Call Notices in circumstances that were not approved, and by redeeming the units of Hospitality Pty Ltd at an amount in excess of their redemption value. That conduct is asserted to be failure to act in accordance with and carry out the terms of the Trust Deed, failure to act in the best interests of the unit holders, failure to act with due care and diligence, failure to act in good faith, and failure to act for proper purposes: [108.1] - [108.5].
58 The plaintiffs also plead failure to act in the best interests of the unit holders, failure to act in good faith, and failure to act for proper purposes by inducing unit holders, without adequate or proper advice, to authorise and subsequently make the payments to Kenesta and Regional WA pleaded in [58].
59 P & B Corporation are also alleged to have failed to act impartially between beneficiaries in issuing the Call Notices, and in redeeming the units of Hospitality Pty Ltd at an amount in excess of redemption value: [108.6].
60 The payments to Kenesta and Regional WA, pleaded in [58], are also pleaded to be a dealing with trust property for the benefit of related third parties, when such dealing 'was not authorised by the unit holders whilst being fully informed or authorised': [108.7].
Kenesta and Regional WA
61 The claim against Kenesta and Regional WA is that they knowingly received money 'paid as a result of breach of trust': referring to [34] - [40], [42], [49] and [58] - [60]. The relevant payments are the bookkeeping fee, project management fees and administration fee paid to Regional WA ([49], [58.2], and [58.3]); and the project management fee paid to Kenesta ([49] and [58.1]).
Regional WA
62 There is a separate claim against Regional WA for breach of the unit purchase agreement.
Mr Humfrey and Mr Bell
63 As directors of P & B Corporation, Mr Humfrey and Mr Bell are alleged to have knowingly procured and participated in P & B Corporation's breach of the terms of the Trust and its obligations as Trustee: [110], [115.4].
64 At [58], the plaintiffs also plead that Mr Humfrey and Mr Bell 'misled and induced' the unitholders to incorrectly authorise payments by P & B Corporation to Kenesta (for project management fees), to Regional WA (for book keeping services), and to Regional WA (for project management fees).
Mr Thomson
65 The claim against Mr Thomson is that he:
1. 'knowingly participated in and assisted P&B Corporation to breach its obligations to the trust and the unit holders': [110A];
2. placed himself in a position giving rise to a conflict of interest;
3. benefited or gained from the scheme to compulsorily acquire the plaintiffs' units in the trust and thereby increase the interests of Kenesta and Regional WA; and
4. used his or RSM Bird Cameron's knowledge of the financial affairs of the trust for his own benefit: [112A].
66 Mr Thomson's conflict of interest is said to arise because he and RSM Bird Cameron had provided 'financial, commercial and business advice to P&B Corporation' since about October 2009 ([84A]), and had been the accountants and financial advisors of Kenesta and Mr Humfrey since about October 2009 ([86C]).
67 It is further alleged that Mr Thomson is a director of RSM Bird Cameron, and that Mr Thomson, through Regional WA and Thomson SMSF Warrant, had a commercial interest in three projects and a caravan park promoted, managed and partially owned by Mr Humfrey 'through entities controlled by him'; Thomson SMSF Warrant held shares in Regional WA, which 'non-beneficially' held shares in P & B Corporation, and held 200,000 units in the Trust: [86C]. Mr Thomson is also alleged to have held interests in three other companies associated with Mr Humfrey, none of which is alleged to have any connection with the Trust, other than the connection with Mr Humfrey. The general assertion is made that by reason of these matters, Mr Thomson had an indirect commercial interest in the Trust, and 'a financial interest in supporting Mr Humfrey'.
68 Mr Thomson did not disclose his commercial interest in the Trust, or Mr Humfrey's other ventures: [86D]. And he did not seek or obtain informed consent from the unit holders to provide advice in circumstances where he had the conflict: [86E], [88].
69 The allegations relate directly to matters on and after 3 November 2012. Relevantly, the plaintiffs allege that in reliance in whole or in part on advice provided by Mr Thomson to a meeting of unit holders on 3 November 2012, the meeting resolved: to not sell the Exmouth Property and for the project to continue by having the Bankwest loan refinanced; and Regional WA to proceed with its best endeavours to refinance with a financier of Mr Humfrey's choice for a 6 to 12 month term to enable time to re-syndicate: [89]. The minutes are referred to in the pleading at [86], particular (c) as recording the substance of the advice given by Mr Thomson and the substance of the representations made by Mr Humfrey.
70 The plaintiffs do not allege that either refinancing occurred. Otherwise, the only matters pleaded to have occurred after the meeting of 3 November 2012 are the issue and reissue of the Call Notices, Default Notices, and Compulsory Acquisition Notices. The refinancing in the third Quantum loan (in June 2013) was a refinancing of the earlier Quantum loans, and is not pleaded to be a refinancing of the Bankwest facility or of the project finances generally.
RSM Bird Cameron
71 Essentially the same allegations made against Mr Thomson are made also against RSM Bird Cameron: [110], [112B].
72 In addition, RSM Bird Cameron was appointed by Kenesta to value the units in the Trust and valued them at no value [100], [101]. The plaintiffs allege RSM Bird Cameron used its knowledge obtained as a fiduciary to 'advance a scheme' by P & B Corporation, Kenesta, Regional WA, Mr Humfrey, and Mr Bell to compulsorily acquire the plaintiffs' units at $0 per unit: [112B.3].
73 The plaintiffs also allege that RSM Bird Cameron benefited or gained by charging the Trust for its services: [112B.2].
74 There is also a plea in negligence. The statement of the duty of care is a duty to ensure that the advice 'considered and expressed an opinion on material matters relating to the Trust; did not cause unfair financial prejudice to unit holders of the Trust; and was accurate and did not omit material matters': [91]. The plaintiffs allege negligence in advice provided by a letter dated 3 February 2013 (although there is evidence that it is misdated and was not signed until on or about 1 May 2013) and subsequent failure to correct that advice. The particulars of the allegation specify failure to advise about certain matters, and include an allegation that RSM Bird Cameron failed to advise the Trustee to recover payments it had earlier made, or to seek the approval of a Management Committee to confirm and authorise liabilities it had incurred: [113].
75 On the basis of Mr Thomson and RSM Bird Cameron 'procuring and participating in P & B Corporation's breach of the terms of the Trust Deed', those defendants are asserted to be jointly liable for the loss and damage suffered by the plaintiffs, including losses which are pleaded to arise from the breaches of trust by P & B Corporation: [115.8].
Thomson SMSF Warrant
76 The plaintiffs allege that Thompson SMSF Warrant 'gained and benefited' from the conflict of interest of Mr Thomson and RSM Bird Cameron: [115.6]. I assume this is based on its shareholding in Regional WA.
Application by the first to sixth defendants
The claim for failure to establish a management committee
77 The defendants challenge the pleas at [30] and [55] that P & B Corporation, alternatively Mr Humfrey and Mr Bell:
(1) would use their reasonable endeavours to constitute and maintain a Management Committee; and
(2) were obliged to seek the approval of the Management Committee with respect to payment and liabilities incurred on behalf of the Trust, not included in an approved business plan or budget; and
(3) failed to constitute and maintain, or to cause the unitholders to constitute and maintain, a Management Committee.
78 The defendants say that, to the extent the plaintiffs have pleaded an obligation that arises on a proper construction of the Trust Deed, the plaintiffs do not identify the clauses of the Trust Deed on which they rely.
79 In [27] to [29], the plaintiffs set out the material effect of cl 28.1, cl 31 and cl 31.3 of the Trust Deed. On a fair reading of the plea, the plaintiffs rely on the provisions they have identified. By [30] and [41.1], they further plead the obligation of the trustee to act in accordance with and carry out the terms of the Trust Deed. The clauses identified refer specifically to the functions and duties of the Management Committee to maintain day to day management and control of the trust, including approving any expenditure and liability that is not provided for in the business plan or budgets.
80 The defendants correctly submit that the obligation to establish a Management Committee is expressly and unambiguously imposed on the unit holders, including the plaintiffs. Clause 31 of the Trust Deed is headed 'Management Committee'. Relevantly, it provides:
(1) the unitholders must establish a Management Committee to manage the trust (cl 31.1);
(2) each unitholder is to appoint one member to the Management Committee by notice in writing to the other unitholders (cl 31.2); and
(3) a unitholder may at any time replace the member it has appointed to the Management Committee by notice in writing to the other unitholders and may, at any time, appoint alternates (cl 31.4, 31.5).
81 But it is unrealistic to isolate the pleas in [30] and [55]. The substance of the plaintiffs' claim is not simply the failure to ensure the unit holders constituted a Management Committee, but the losses caused by the trustee making payments and incurring liabilities that had not been approved: see [30.2], [56], [107.1], [107.2], [108.1] - [108.3], and [115]. The argument that the trustee could not cause the payments to be made or liabilities to be incurred, and so could not carry out its functions as trustee, without first ensuring a Management Committee was in place, is not so untenable that the plea against P & B Corporation should be struck out.
82 The plaintiffs' alternative basis is that the obligation to establish a Management Committee is a term that arises by implication of law. A term to be implied by law is generally a term that is necessary as a legal incident of the particular kind of instrument, although the courts will also imply an obligation on the part of each party to a contract to cooperate in the doing of acts necessary to performance, or to enable the other party to secure a benefit provided by the contract: see, for example, Commonwealth Bank of Australia v Barker [2014] HCA 32 [56] - [62]. The plaintiffs have not identified on what basis the law would impose such a specific obligation, unless it arises out of the terms of the Trust Deed.
83 The defendants separately contend that there is no foundation for the alternative allegation against Mr Humfrey and Mr Bell. The fact that they are directors of P & B Corporation is not a sufficient basis to impose on them obligations that the Trust Deed imposes on the unitholders and (assuming the plaintiffs can maintain their construction) the trustee. They submit that the claim that the directors are 'promoters' of the project is both unclear in meaning, and no basis to impose such a liability under the Trust Deed.
84 In my opinion, both submissions should be accepted. The plaintiffs have pleaded no basis for imposing duties to beneficiaries separately on the directors, as an alternative to the duty on the corporate trustee. The fact that they are promoters of the project is of no legal relevance to the obligations arising, either expressly or by implication, under the Trust Deed.
85 As discussed later in these reasons, the claim against Mr Humfrey and Mr Bell can be maintained on the basis that each of them is accountable for knowingly inducing or immediately procuring breaches of duty by a trustee, alternatively on the principles in Barnes v Addy (1874) LR 9 Ch App 244. It cannot, in my view, be maintained on the basis that the Trust Deed imposes duties to the beneficiaries on them. The pleas in [30] and [55], and pleas consequent on those paragraphs, should be struck out to the extent that they plead the obligation of the directors.
Claim against Thomson SMSF Warrant
86 The statement of claim pleads that Thomson SMSF Warrant holds a minority shareholding in Regional WA, which in turn was a unitholder. Regional WA also holds shares in P & B Corporation. The plaintiffs plead, in [86C], [92.1], [94] and [115.6], that Thomson SMSF Warrant 'assumed a position of conflict' or had a conflict of interest in relation to the trust.
87 The defendants submit that the plaintiffs have pleaded no material facts which would give rise to a duty which that company owed either to P & B Corporation or to the unitholders, and to which a plea of 'conflict of interest' could be relevant. The submission must be accepted. The plaintiffs have pleaded that Thomson SMSF Warrant has an interest arising from a minority shareholding in Regional WA. To say that Mr Thomson has a conflict because of his interest in Thomson SMSF Warrant is quite different from alleging that the company 'assumed a position of conflict' as pleaded in [86C]. The allegations based on Thomson SMSF Warrant having a conflict are untenable.
88 The defendants also submit that, although there is an allegation that Thomson SMSF Warrant benefitted or gained from certain matters, that is not sufficient to result in liability. There is no allegation that it received trust property, so the first limb of Barnes v Addy is not engaged (see 251 - 252).
89 The defendants also argue that the claim against Thomson SMSF is based upon a purported but invalid compulsory acquisition of units. If the compulsory acquisition was invalid, then the conduct pleaded against the defendant could not result in it acquiring a benefit.
90 The plaintiffs support their claim against Thomson SMSF Warrant on the basis that:
1. Mr Thomson is the sole director and shareholder of the company and his knowledge is, relevantly, the knowledge of the company;
2. Thomson SMSF Warrant was, through Mr Thomson's knowledge, aware of the scheme involving P & B Corporation, Kenesta, Regional WA, Mr Humfrey and Mr Bell to remove the plaintiffs from the Trust;
3. Thomson SMSF Warrant benefited from the scheme, because it has an interest in Regional WA, and Regional WA would have benefited as a result of the scheme.
4. While the purported acquisition of units has not been completed, the defendants could alter the register at any time.
91 The plaintiffs submit that this falls within the first limb of Barnes v Addy, as knowing receipt of a benefit.
92 The present difficulty for the plaintiffs, however, is that Thomson SMSF Warrant has not received any trust property, knowingly or otherwise. On the plaintiffs' case, the acquisition is both invalid and not yet complete. There has been no receipt of trust property by any of the defendants as a result of the scheme.
93 Further, the plaintiff's pleaded case is that Kenesta purported to compulsorily acquire the plaintiffs' units: [99B], [100], [108.6]. That is, even if the alleged scheme is completed, no benefit will be received by Regional WA. It will remain the holder of 200,000 units, and its share of the total number of units will be unchanged.
94 The plaintiffs separately plead that Regional WA received money from P & B Corporation as a result of breach of trust: [109.2]. Those payments, pleaded at [49] and [58], are not alleged to be part of this scheme which supports the claim against Thomson SMSF Warrant. There is no allegation that Thomson SMSF Warrant knowingly received trust property, or the traceable proceeds of trust property, as a result of those payments.
95 For these reasons, the plea against Thomson SMSF Warrant should not stand. The defendant submits that there should not be leave to re-plead, this being the fourth version of the statement of claim. The plea has not previously been struck out - the earlier amendments have evidently followed conferral between the parties. I will not enter judgment now, but will require the plaintiffs to bring in a minute of any proposed amendment within a specified time. Should the proposed amendment not cure the defects, I will then hear the parties as to whether judgment should be entered for the sixth defendant.
Redemption of units: paragraphs 61 to 68
96 These paragraphs of the statement of claim are directed to the redemption of the units formerly held by Hospitality Pty Ltd. The plaintiffs allege that the sum paid was in excess of the Redemption Value at the relevant time.
97 The defendants submit that 'Redemption Value' is a defined term in the Trust Deed, and the plaintiffs have in fact pleaded that definition. Calculation of Redemption Value requires consideration of the 'Current Unit Value', the charges and disbursements payable by the trustee in connection with the redemption, and the 'Redemption Provision', as defined in cl 1.1 of the Trust Deed. The defendants submit that the material facts necessary for calculating the Redemption Value, and whether the amount paid was greater than the Redemption Value, have not been pleaded.
98 The plaintiffs submit that they have pleaded facts on which the court can draw an inference that the amount paid exceeded the Redemption Value; that they are not required to plead the actual redemption value; and that further particulars can only be provided after discovery and inspection, and perhaps after expert evidence.
99 It is true, as the defendants submit, that the plaintiffs have not pleaded all of the material facts necessary to establish that the amount paid exceeded the Redemption Value calculated in accordance with the Trust Deed. There are two reasons why that does not lead to the plea being struck out.
100 First, when one party knows the facts and the other does not, an insufficiently particularised allegation may be made in the statement of claim and the plaintiff be permitted to obtain discovery of documents and answers to interrogatories before providing the necessary particulars: Jingellic Minerals NL v Abigroup Ltd (1992) 7 WAR 566, 570; Snelgrove v Great Southern Managers Australia Ltd (In liq) (Receiver and Manager Appointed) [2011] WASC 103 [55]. Second, in the context of current case management practices, the plaintiffs' claim in this regard will be clearly stated before trial. Should there be need to revisit the adequacy of the pleading at a later time, following usual interlocutory processes, it can be done.
101 In Snelgrove, Le Miere J did not strike out a plea which he found was inadequate, but said the defendant would have leave to make a further application to strike out if, after discovery and inspection, the plaintiffs cannot or do not plead further material facts or give further particulars to support their allegations [61]. That, in my opinion, is a just way to resolve this part of the present application.
Knowing participation in procuring breaches of trust
102 The last of the challenges brought by the first to sixth defendants is to [110], which pleads that Mr Humfrey and Mr Bell, as directors of P & B Corporation, knowingly participated and procured P & B Corporation to breach its obligations to the trust. The defendants contend that the allegation does not come within the first limb of Barnes v Addy as there is no allegation that either of the directors received trust property; and nor do the plaintiffs plead facts material to establishing that either participated in a dishonest and fraudulent design of P & B Corporation. Consequently neither limb of Barnes v Addy is applicable. The challenge is on the basis that the plaintiffs must bring their claim within the second limb of Barnes v Addy, or the claim must fail.
103 I do not, however, accept the defendants' submission that the two limbs of Barnes v Addy exclusively state the basis upon which personal liability may be imposed for participation in a breach of trust: see Jacobs' Law of Trusts in Australia, 283 [1334]; Farah Constructions Pty Ltd v Say-Dee Pty Ltd [161]. The High Court in Farah did not disapprove of what Gummow J said in Elders Trustee and Executor Co Ltd v E G Reeves Pty Ltd [1987] FCA 332; (1987) 78 ALR 193, 238 - 239, where his Honour recognised that a person might be accountable for knowingly inducing or immediately procuring breaches of duty by a trustee, as an alternative basis of liability to the principles in Barnes v Addy. Later authorities have accepted that a third party may be held liable for a deliberate act bringing about a breach of trust, where the third party had actual knowledge that the breach was occurring and actively instigated it: see Marriner v Australian Super Developments Pty Ltd [2012] VSCA 171.
104 I am not prepared, at an interlocutory stage, to dismiss a claim that a director of a trustee company can be liable for knowingly procuring a breach by the trustee.
Application by the seventh and eight defendants
105 Mr Thomson and RSM Bird Cameron apply for summary judgment, alternatively to strike out parts of the statement of claim.
106 The defendants seek the order for summary judgment on the basis that there is no serious question to be tried on any cause of action sought to be raised against them, alternatively that the plea discloses no reasonable cause of action or may prejudice, embarrass or delay the fair trial of the action.
107 There are some matters which can be dealt with immediately.
108 First, the claims against Mr Thomson and RSM Bird Cameron are based on the 'purported compulsory acquisition' pleaded in [84A] to [105]. These defendants make the same point that was made on behalf of Thomson SMSF Warrant; on the plaintiffs' pleaded case the Call Notices and subsequent action on them were invalid, and they still own their units in the Trust. Until it is determined whether the Call Notices were validly issued and, ultimately, the compulsory acquisition was effective, it cannot be ascertained whether the plaintiffs suffered loss.
109 Second, the claims against Mr Thomson and RSM Bird Cameron plead the earliest occasion on which either provided advice to the trustee was October 2009. On the plaintiffs' case, the two defendants came under a fiduciary duty by reason of the conduct of Mr Thomson in advising the unit holders at a meeting on 3 November 2012. The allegation of negligence relates to advice given to the Trustee in 2013. The payments made and liabilities incurred by P & B Corporation, and relied upon by the plaintiffs to establish their loss, were, with few exceptions, made or incurred before October 2009. There is no ostensible basis, on the pleading, for the seventh and eighth defendants to be liable for those losses.
110 Third, Mr Thomson and RSM Bird Cameron also rely on the contention that, as strangers to the Trust, any liability they might have for breach of Trust by P & B Corporation must be on the basis of the two limbs of Barnes v Addy. I have said above why I do not accept that argument and believe there remains an alternative route to liability.
111 But that alternative route is based upon knowingly inducing or actively procuring a breach of trust, and the plaintiffs do not properly plead such a case. The plaintiffs' plea in this regard is not consistently put and is confusing.
112 First, at [110A], the statement of claim pleads the defendants knowingly participated and assisted P & B Corporation to breach the Trust. An earlier plea alleged that they 'procured' the breach, but it was amended by deleting 'procured' and substituting 'assisted'. At [115.8], however, the plaintiffs plead loss and damage by reason of the two defendants' 'procuring and participating in P&B Corporation's breach of the terms of the Trust Deed and its obligations as Trustee pleaded in paragraph 110A' (emphasis added). There is no allegation that the procuring and participating was done knowingly.
113 Second, the plea in [110A] refers back to matters pleaded in [84A] to [105], that is, the events from the meeting of 3 November 2012 up to the purported compulsory acquisition. At [115.8], the plaintiffs plead the defendants are jointly liable for the loss and damage pleaded in [115.1], which refers back to [107]. At [107], the plaintiffs plead the issue of the Call Notices, but also the payments made and liabilities incurred by P & B Corporation from the inception of the project.
114 That confusion is, in itself, a sufficient reason to not permit the pleas in [110A] and [115.8] to stand. The present pleading is embarrassing in the relevant sense, because the defendants cannot know the case they are required to meet.
115 The defendants contend that there are other difficulties with the case pleaded against them.
116 First, they submit that the plaintiffs have not made sufficient allegations to enable the court to infer the alleged fiduciary relationship or make any findings as to its scope. The allegation that a person is a fiduciary is of little value, without more. Fiduciary duties are moulded to the character of the particular relationship, so that, even in one of the established fiduciary relationships, the content of the duties may not be uniform in all cases: United Dominions Corp Ltd v Brian Pty Ltd [1985] HCA 49; (1985) 157 CLR 1, 11.
117 The plaintiffs rely on the duties pleaded in [86B], that is, the duty on the defendants not to:
86B.1 place themselves in positions or situations giving rise to a conflict of interest without full disclosure and the informed consent of the unit holders;
86B.2 benefit or gain from this fiduciary relationship in circumstances where a conflict of interest exists;
86B.3 benefit or gain from an opportunity or knowledge resulting from the fiduciary relationship; and
86B.4 knowingly participate or procure P&B Corporation to engage in the breaches of its obligations to the Trust and unit holders..
118 It is at least arguable that a person providing advice in the circumstances pleaded would come under fiduciary obligations. While there is little in the pleading to enable an analysis of the content of the fiduciary obligations, the plaintiffs rely on very generally stated duties. The first three of these 'duties' simply state (or state aspects of) the conflict rule and the profit rule: see Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41, 103; Pilmer v The Duke Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165 [78]; Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544, 557; Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449, 468. The fourth 'duty', at least as regards knowingly procuring a breach of trust, does require the existence of a fiduciary relationship to the beneficiaries of the trust.
119 The defendants are alleged to have provided advice to the plaintiffs as unit holders in a unit trust created for the purpose of a development. The defendants are alleged to have been the accountants to the Trustee since about 2009: [84A]. They were advising at a meeting at which the unit holders made decisions regarding the continuation of the project, and refinancing: [89]. The advice was provided to the meeting, and not just to the Trustee. The case for the existence of a duty pleaded is at least arguable on the facts that have been pleaded.
120 Second, the defendants submit that the facts pleaded do not, without more, give rise to a conflict of interest between the interests of Mr Thomson and the plaintiffs. The conflict rule would require that there was a conflict or a real or substantial possibility of a conflict between the personal interest of Mr Thomson and RSM Bird Cameron and the unit holders.
121 The conflict alleged against RSM Bird Cameron relies in part on the interests of Mr Thomson; and in part on their own role as accountants to the Trust and in providing services to entities associated with Mr Humfrey. The plaintiffs do not plead their case as a conflict of duties.
122 At the time of the meeting of 3 November 2012, the facts pleaded at [86C] are that Mr Thomson held, indirectly, an interest in Regional WA, which was one of the unit holders. Regional WA also held shares in P&B Corporation, although not beneficially. Mr Thomson also had interests in other ventures 'established, promoted, managed and partially owned by Mr Humfrey'. At [86CA] the plaintiffs plead that Mr Thomson had (before November 2012) held office in three companies associated with Mr Humfrey, and may have held shares in two of them. None of these companies is alleged to have a connection with the Trust or the project. RSM Bird Cameron provided accounting work for companies and property syndicates managed by Kenesta and promoted by Mr Humfrey: [86CA.5].
123 The case against RSM Bird Cameron is not confined to the meeting of 3 November, but includes the advice given to the Trust by the letter dated 3 February 2013, but perhaps sent 1 May 2013. The statement of claim pleads no material matters that occurred after November 2012 and when the letter was sent but relies upon the conflict pleaded in [86C].
124 There is nothing pleaded which would enable the plaintiffs to establish that, as a result of these matters, either defendant had interests that were in conflict with the interests of unit holders at 3 November 2012 or later, or that there was a real or substantial possibility of such conflict. For an allegation of this nature, the plaintiffs should state their case clearly.
125 Third, the defendants submit, and I have dealt with it above, that the plaintiffs do not plead any loss or damage they have suffered, or any gain or benefit obtained by either defendant for which the defendants should account.
126 Fourth, RSM Bird Cameron challenges the plea based on breach of a duty of care. The duty is pleaded in [91] in very specific terms:
Given the effect and scope of the advice provided by RSM Bird Cameron in the letter dated 3 February 2013, in that the advice in relation to the net asset backing valuation for the Trust included RSM Bird Cameron's consideration of the Trust Deed, the resolution of 12 February 2013 pleaded in paragraph 95 herein and the Default Notices and Call Notices issued to the plaintiffs and necessarily an evaluation by RSM Bird Cameron as to whether the payments improperly made by the Trust gave rise to liabilities on the part of the recipients of such payments to repay the Trust, such as to constitute further assets of the Trust, RSM Bird Cameron had a duty of care to the unit holders which included the plaintiffs to ensure that the advice:
91.1 considered and expressed an opinion on material matters relating to the Trust;
91.2 did not cause unfair financial prejudice to unit holders of the Trust; and
91.3 was accurate and did not omit material matters.
127 At [101] the plaintiffs plead a failure to properly or adequately consider certain matters as part of valuing the units of the unit holders. And at [113], they plead the advice to the trustee, and subsequent failure to correct the advice, was negligent. Allegations of negligence include failure to advise the trustee to recover certain payments or to seek the approval of a Management Committee to confirm and authorise liabilities, and to advise on whether the Call Notices and Default Notices complied with the Trust Deed.
128 The duty of care pleaded by the plaintiffs may well be arguable. But the difficulty for the plaintiffs, on these pleas, is their failure to identify any loss or damage caused by breach of the pleaded duty. In [115.7], the plaintiffs simply plead that by reason of that negligence they have suffered loss and damage. They could not, on that bare plea, prove any loss they have incurred as a result of the letter or any subsequent failure to advise. And, for the reasons discussed above, on their pleaded case, the plaintiffs have suffered no loss.
Conclusion
129 On the basis of these reasons, the following paragraphs of the statement of claim should be struck out:
(1) the pleas in [30] and [55], and pleas consequent on those paragraphs, to the extent that they plead an obligation of the second and third defendants.
(2) the plea against the sixth defendant arising out of the alleged conflict of interest.
(3) the plea against the seventh and eighth defendants.
130 While I will not strike out the plea in [61] - [68], the defendants have leave to make a further application to strike out if, after discovery and inspection, the plaintiffs cannot or do not plead further material facts or give further particulars to support their allegations.
131 In relation to the seventh and eighth defendants, I have considered whether judgment should now be entered. This is, however, the first occasion when the plea has been formally challenged. And the court should only enter summary judgment in the clearest of cases. I will, as for the plea against Thomson SMSF Warrant, require the plaintiffs to bring in a minute of any proposed amendment within a specified time. Should the proposed amendment not cure the defects, I will then hear the parties as to whether judgment should be entered for the sixth to eighth defendants.
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