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) [No 2]
[2015] WASC 356
•30 SEPTEMBER 2015
BRIAN NEVILLE MAYFIELD & MARLENE THERESA MAYFIELD (ATF B & M Mayfield Superannuation Fund) -v- P & B CORPORATION PTY LTD (ATF North Cape Development Trust) [No 2] [2015] WASC 356
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2015] WASC 356 | |
| Case No: | CIV:2796/2013 | 26 AUGUST 2015 | |
| Coram: | ALLANSON J | 30/09/15 | |
| 23 | 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 Pleadings Whether proposed amendments to statement of claim disclose a reasonable cause of action Where new cause of action introduced Summary judgment application No sufficient reason to summarily dispose of claim |
Legislation: | Australian Consumer Law, s 18 Australian Securities and Investment Commission Act 2001 (Cth), s 12DA Court Procedure Rules 2006 (ACT), r 21 Rules of the Supreme Court 1971 (WA), O 1 r 4A, O 1 r 4B |
Case References: | Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 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 Caltex Refineries (Qld) Pty Ltd v Stavar [2009] NSWCA 258; 75 NSWLR 649 CGU Insurance Ltd v Lawless [2008] VSCA 38 Clay v Clay [2001] HCA 9; (2001) 202 CLR 410 DM Drainage & Constructions Pty Ltd v Karara Mining Ltd [2014] WASC 170 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 Howard v Commissioner of Taxation [2014] HCA 21; (2014) 253 CLR 83 Issitch v Worrell [2000] FCA 477 Jingellic Minerals NL v Abigroup Ltd (1992) 7 WAR 566 Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; (2011) 243 CLR 361 Renowden v McMullin [1970] HCA 24; (1970) 123 CLR 584 Snelgrove v Great Southern Managers Australia Ltd (In liq) (Receiver and Manager Appointed) [2011] WASC 103 Terravision Pty Ltd v Black Box Control Pty Ltd [No 2] [2015] WASC 66 |
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 - Pleadings - Whether proposed amendments to statement of claim disclose a reasonable cause of action - Where new cause of action introduced
Summary judgment application - No sufficient reason to summarily dispose of claim
Legislation:
Australian Consumer Law, s 18
Australian Securities and Investment Commission Act 2001 (Cth), s 12DA
Court Procedure Rules 2006 (ACT), r 21
Rules of the Supreme Court 1971 (WA), O 1 r 4A, O 1 r 4B
Result:
Application allowed in part
Category: B
Representation:
Counsel:
First Plaintiffs : Mr M L Bennett
Second Plaintiffs : Mr M L Bennett
Third Plaintiffs : Mr M L Bennett
Fourth Plaintiffs : Mr M L Bennett
Fifth Plaintiff : Mr M L Bennett
Sixth Plaintiffs : Mr M L Bennett
Seventh Plaintiffs : Mr M L Bennett
First Defendant : No appearance
Second Defendant : No appearance
Third Defendant : No appearance
Fourth Defendant : No appearance
Fifth Defendant : No appearance
Sixth Defendant : No appearance
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 : No appearance
Second Defendant : No appearance
Third Defendant : No appearance
Fourth Defendant : No appearance
Fifth Defendant : No appearance
Sixth Defendant : No appearance
Seventh Defendant : Hammond King Touyz
Eighth Defendant : Hammond King Touyz
Case(s) referred to in judgment(s):
Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175
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
Caltex Refineries (Qld) Pty Ltd v Stavar [2009] NSWCA 258; 75 NSWLR 649
CGU Insurance Ltd v Lawless [2008] VSCA 38
Clay v Clay [2001] HCA 9; (2001) 202 CLR 410
DM Drainage & Constructions Pty Ltd v Karara Mining Ltd [2014] WASC 170
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
Howard v Commissioner of Taxation [2014] HCA 21; (2014) 253 CLR 83
Issitch v Worrell [2000] FCA 477
Jingellic Minerals NL v Abigroup Ltd (1992) 7 WAR 566
Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; (2011) 243 CLR 361
Renowden v McMullin [1970] HCA 24; (1970) 123 CLR 584
Snelgrove v Great Southern Managers Australia Ltd (In liq) (Receiver and Manager Appointed) [2011] WASC 103
Terravision Pty Ltd v Black Box Control Pty Ltd [No 2] [2015] WASC 66
1 ALLANSON J: The plaintiffs have filed a minute of proposed fourth amended statement of claim and a minute of third amended writ of summons. They require leave for each of the amendments. The seventh and eighth defendants oppose the grant of leave to amend in the terms proposed, and apply for summary judgment.
2 On 12 June 2015, I delivered reasons on an earlier application by the seventh and eighth defendants, and others, to strike out allegations pleaded against them in the statement of claim: 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. The circumstances which gave rise to this action are set out in more detail in the earlier reasons, and it is unnecessary to repeat them.
3 In very general terms, the plaintiffs invested in a property development and subdivision project at Exmouth. The investment vehicle was a unit trust, the North Cape Development Trust. The plaintiffs hold units in the Trust.
4 The plaintiffs bring their action against P & B Corporation Pty Ltd (the Trustee), and others. There are eight defendants to the action, but the current application is between the plaintiffs and the seventh and eighth defendants only. The plaintiffs' claim against the seventh and eighth defendants alleges breaches of common law and statutory duties in providing financial, commercial and business advice to the Trustee and to the unit holders. The seventh defendant, John Scott Thomson, is a director of the eighth defendant, Birdanco Nominees Pty Ltd (trading as RSM Bird Cameron).
5 Most of the arguments put forward are common to both of the defendants. Accordingly, in these reasons, the seventh and eighth defendants will be referred to collectively as the defendants. Where it is necessary to refer to only one of them, or to other defendants to the action, the reasons will specify which is intended.
6 In summary, the defendants submit:
1. the plaintiffs have failed to disclose a reasonable cause of action on either of the causes of action in negligence or under statute;
2. this is the sixth attempt to plead a cause of action and it remains flawed;
3. the plaintiffs have substantially changed their case between various versions of this statement of claim;
4. the plaintiffs have provided no explanation for the indulgence sought in belatedly making allegations of reliance on 'lost opportunity', and those allegations are inconsistent with material allegations of fact pleaded against other defendants; and
5. in any event the allegations are 'impenetrable and would prejudice, embarrass or delay the fair trial of the action'.
7 The defendants submit that the court should refuse leave to amend and enter judgment for them. Alternatively, they submit that the action should be disposed of summarily on the basis that there is no serious question to be tried on any cause of action sought to be raised by the plaintiffs.
The evidence and relevant documents
8 The plaintiffs have pleaded the content of several documents, including the Trust Deed for the North Cape Development Trust, invoices sent by the eighth defendant to the Trustee, minutes of a meeting of unit holders on 3 November 2012, and a letter from the eighth defendant to the Trustee, misdated February 2013, but sent about 1 May 2013.
9 Even on an application to strike out for failure to plead a reasonable cause of action, these documents would be admissible. Where the defendants also seek summary judgment, it is proper for the court to have regard to them.
10 In the application for summary judgment, the defendants also rely on affidavits of Mr Thomson and Trevor Lake, a director of the eighth defendant. I will refer to the content of those affidavits where relevant.
The amendment to the writ
11 The proposed amendment deletes reference to Mr Thomson in those paragraphs of the indorsement relating to breach of trust and director's duties. Paragraph 7 retains reference to the seventh defendant. In the light of the amendment to par 6, it is likely that this is a slip. The proposed statement of claim does not plead a claim against the seventh defendant on this basis, and it is the statement of claim that determines what are the claims which the plaintiff wishes to litigate: Renowden v McMullin [1970] HCA 24; (1970) 123 CLR 584, 596 - 597, 609.
12 Paragraphs 9, 10, and 11, setting out claims based on conflict of interest by a fiduciary have been deleted.
13 The paragraphs setting out the claim in negligence would now specifically include Mr Thomson; specifically include the provision of advice to the plaintiffs on 3 November 2012; and amend the date of the letter providing written advice from 3 February 2013 to 'on or about 1 May 2013'. A claim relating to conduct of Mr Thomson in 'participating, assisting, and/or knowing receipt of benefits from the first defendant and second defendant' has been deleted.
14 The most significant proposed amendment is the addition of paragraphs 17 to 19, setting out causes of action under the Australian Consumer Law, alternatively the Australian Securities and Investment Commission Act 2001 (Cth) in respect of the defendants advice to the first defendant, second defendant, third defendant, and the plaintiffs.
Outline of the claims against the defendants
The plea in negligence
Duty of care
15 The plaintiffs plead a case in negligence in providing advice. As part of the circumstances giving rise to a duty of care, they plead the relationship between the Trustee and the defendants in this way.
16 Since October 2009, Mr Thomson and RSM Bird Cameron have provided financial, commercial and business advice to the Trustee. As an incident of the relationship of client and adviser, the defendants entered into a fiduciary relationship with the Trustee, and assumed fiduciary obligations to it: par 108.
17 The defendants have known that the Trustee is the Trustee of the North Cape Development Trust and had duties to the unit holders arising under the Trust Deed and by law: par 110.
18 On 3 November 2012, Mr Thomson attended a meeting of unit holders 'as a financial, commercial [and] business advisor in his personal capacity and as a representative of RSM Bird Cameron': par 114. He provided advice directly to unit holders at the meeting: par 115. By providing advice directly to unit holders at the meeting, the defendants entered into a fiduciary relationship with the unit holders and assumed fiduciary obligations to them: par 117.
19 While the plaintiffs plead the fiduciary relationship, they do not pursue claims that arise directly out of breach of fiduciary duty - by a conflict of interest or by taking advantage of the fiduciary position to derive some profit or advantage. Rather, the fiduciary relationship is pleaded as one of the circumstances relevant to the imposition of a duty on the defendants to exercise due diligence and care in relation to the provision of financial, commercial and business advice to the Trustee and the unit holders: par 119.
20 The plaintiffs also allege that at a date unknown, but before 1 May 2013, the Trustee requested RSM Bird Cameron to provide advice in relation to the valuation of the Trust and the compulsory acquisition of the unit holders' units: par 126. The Trustee informed RSM Bird Cameron, or RSM Bird Cameron understood, that the purpose of the advice was: to determine the value of the Trust as at the date of valuation; to determine the required amount of funding from the unit holders in order for the net asset value of the Trust to be other than deficient; and to enable the Trustee and Kenesta to rely upon the advice and valuation to determine a unit call price: par 127.
21 The plaintiffs plead in par 128:
RSM Bird Cameron had a duty of care to P & B Corporation and the unit holders, including the plaintiffs to ensure that it exercised due diligence and care in the provision of advice pleaded in paragraph 126, 127 and 128 herein in order to ensure that:
128.1 the valuation of the Trust was accurate; or
128.2 the valuation represented the fair market value of each of the units of the Trust.
22 In the letter of 1 May 2013, RSM Bird Cameron provided advice to P & B Corporation 'regarding the value of the trust': par 129. The letter identified and commented on various assets and liabilities of the Trust 'for the purpose of determining the value of the Trust': par 131.
Breaches of duty
23 The plaintiffs allege that the defendants breached the duty of care pleaded in par 119, in that they failed to advise the Trustee and the plaintiffs that:
150.1 the Trustee had to seek the approval of the management committee to approve all expenditure by and liabilities of the Trust;
150.2 the purported outstanding loan by the Trust to Kenesta in the amount of $682,169 was invalidly incurred in accordance with the Trust Deed;
150.3 the payment of monies to Regional WA and Kenesta … constituted recoverable assets of the Trust;
150.4 the Trustee recover any payments made without the authority of a management committee …;
150.5 the Trustee identify Trust assets such as recoverable payments [not] made in accordance with the Trust Deed by the authority of a management committee;
150.6 the Trustee not to request financial contributions from unit holders without a business plan or a budget approved by the unit holders representing 80% of the units held;
150.7 it would be inappropriate for the Trustee to seek financial contributions from unit holders, including the plaintiffs in excess of the amounts reasonably required by the Trust to meet current liabilities and interest payments as and when they accrue.
24 The plaintiffs also allege that the advice and valuation provided by RSM Bird Cameron in the letter of 1 May 2013 was negligent in that RSM Bird Cameron failed to:
153.1. provide an accurate and fair market valuation of the Trust and units in the Trust;
153.2 evaluate the veracity of each of the claims made by the Trust;
153.3 identify Trust assets such as recoverable payments …;
153.4 advise the Trustee not to request financial contributions from unit holders without a business plan or a budget approved by the unit holders representing 80% of the units held;
153.5 advise the Trustee it would be inappropriate to seek financial contributions from the unit holders … in excess of the amounts reasonably required by the Trust to meet current liabilities and interest payments as and when they accrue;
153.6 advise the Trustee and that any exercise of power set out in clause 29.1, 29.2 and 29.3 of the Trust Deed had to be for proper purpose in that it had to actually raise funds for the Trust;
153.7 advise the Trustee to recover it improper payments of money is to Regional WA and Kenesta …;
153.8 advise the Trustee to recover payments made without the authority of a Management Committee …;
153.9 advise the Trustee to seek the approval of a management committee to confirm and authorise liabilities …;
153.10 advise the Trustee that the Call Notices and Default Notices issued to the plaintiffs did not comply with the terms of the Trust Deed;
153.11 advise the Trustee not to proceed with the attempted compulsory acquisition of the plaintiffs' units.
The plea of misleading or deceptive conduct
25 The pleas under the Australian Consumer Law and the Australian Securities and Investment Commission Act mirror the pleas in negligence.
26 First, 'by reason of … failing to provide the advice pleaded in paragraphs 150.1 and 150.7' (the plaintiffs may have intended to plead par 150.1 to 150.7), the defendants 'engaged in conduct in trade or commerce which was misleading or deceptive, or likely to mislead or deceive'. The plaintiffs plead contravention of s 18 of the Australian Consumer Law, alternatively s 12DA of the Australian Securities Investment Commission Act: par 151.
27 Second, by providing the advice in the letter of 1 May 2013, in the circumstances pleaded in in pars 126, 127, 129, 132, 133, and 134, RSM Bird Cameron engaged in conduct in trade or commerce that was misleading or deceptive or likely to mislead or deceive. This plea catches the failure to verify the accuracy of a purported outstanding loan, the failure to advise regarding recoverable payments, the failure to advise the Trustee regarding approval of payments, and the failure to advise on the validity of call and default notices: par 133. It also includes allegations of error in the letter - wrongly including a liability and failing to include assets; recommending a capital raising; and valuing the units of unit holders at $0: pars 133, 134.
28 In each case, the plaintiffs allege that the defendants' advice caused them to believe their interest in the Trust was hopeless, and that it was commercially unviable to save the project: par 152, par 155.
Loss and damage
29 The plaintiffs also plead that, in or about January 2008, they made unit purchase agreements with Regional WA Pty Ltd (the fourth defendant), under which Regional WA agreed to purchase their units for a price of $515,000 for each 200,000 units. The plaintiffs say that Regional WA has repudiated and breached these agreements: pars 69 - 76. In par 156.5, they claim that they have suffered loss and damage by Regional WA breaching those agreements.
30 The claims against the seventh and eighth defendants are pleaded 'alternatively to the claim in paragraph 156.5'. The plaintiffs plead, in effect, that by reason of the defendants' negligence, they lost the opportunity to recover assets of the Trust and prevent repossession of the Exmouth property; the value of their investments in the Trust; and the opportunity to develop the project: par 157, par 159. The negligence pleaded in par 153 (that is, with regard to the letter of 1 May 2013) is said to have also caused the plaintiffs to incur legal costs to prevent the perfection of the compulsory acquisition of their units.
31 Similarly, as an alternative to the claim in par 156.5, the plaintiffs plead that by reason of the defendants' misleading and deceptive conduct, they lost the opportunity to recover unauthorised payments from the Trustee and others, and to develop the project: pars 157 to 160.
The defendants' objections
32 The defendants put forward the following specific objections in support of both the application to strike out and the application for summary judgment.
The question of good faith
33 Some of the matters raised by the defendants may be dealt with as a preliminary point. The defendants submitted that the considerations relevant to the exercise of a discretionary power to amend are directly applicable to this application for leave. The plaintiffs do not dispute that general proposition, and submit that the discretionary factors favour allowing the amendments.
34 The defendants further submitted that the plaintiffs were required to show that the application to amend was brought in good faith, and also to put forward the circumstances giving rise to the proposed amendment so that the court may weigh those circumstances against the effect of any delay and the objectives of the Rules of the Supreme Court 1971 (WA). In this submission, the defendants relied substantially on statements in the judgments in Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 [19] - [103], [111] - [112] (Aon). It is unnecessary to set those passages out in detail. The general principle is summarised in the joint judgment of Gummow, Hayne, Crennan, Kiefel and Bell JJ, where their Honours said:
Generally speaking, where a discretion is sought to be exercised in favour of one party, and to the disadvantage of another, an explanation will be called for. The importance attached by r 21 to the factor of delay will require that, in most cases where it is present, a party should explain it. Not only will they need to show that their application is brought in good faith, but they will also need to bring the circumstances giving rise to the amendment to the court's attention, so that they may be weighed against the effects of any delay and the objectives of the Rules. There can be no doubt that an explanation was required in this case [103].
35 The court in Aon was concerned with r 21 of the Court Procedures Rules 2006 (ACT), a rule that is similar in many ways to the case management principles embodied in O 1 r 4A and r 4B of the Rules of the Supreme Court.
36 In Aon, the plaintiff sought an adjournment of the trial on the third day of a trial listed for four weeks. The plaintiff also foreshadowed an application for leave to amend its claim to allege a substantially different case. Delay was an important factor, and an explanation was required.
37 The circumstances before me are markedly different. The action is still in its early stages procedurally. The defendants have not yet pleaded to the statement of claim.
38 The application to amend follows the earlier successful application to strike out. In reasons delivered on 12 June 2015, I said that I would strike out the plaintiffs' plea against the defendants (and some of the pleas against other defendants), and would 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 would then hear the parties as to whether judgment should be entered for the defendants.
39 The parties conferred about the wording of orders to give effect to the reasons and to further progress of the action and, on 19 June, orders were made that the statement of claim be struck out in part (including, relevantly, paragraphs pleading the plaintiffs' claim against the seventh and eighth defendants), and that the plaintiffs file and serve any application for leave to re-plead the claims and a minute of proposed amended statement of claim by 30 June 2015. The plaintiffs complied with those orders.
40 On 31 July, the court made orders programming the defendants' submissions and affidavits in opposition to the application for leave to amend, and in support of an application for summary judgment. On 14 August, further orders were made programming affidavits and submissions to be filed by the plaintiffs in support of an application to amend the statement of claim and the writ (adding a new cause of action).
41 The proposed amendments deal with many things: some of the causes of action originally pleaded have been abandoned. With the related amendment to the writ, the plaintiffs raise the statutory cause of action for misleading or deceptive conduct. The amendments also deal with a significant factual development since the commencement of the action. On 28 August 2014, Bankwest, which provided finance to the development, gave notice that it had retaken possession of the Exmouth property which was the major asset in the development project. Where, previously, the plaintiffs' loss may have resulted from the resumption of their units in an ongoing development, the action of the bank altered the position significantly. Amendment to meet those changes was inevitable.
42 The defendants referred, in particular, to four other matters.
43 First, the proposed amendments abandon some causes of action. The defendants say no explanation has been given for that abandonment. The previous plea was struck out for not disclosing a reasonable cause of action. That is itself sufficient explanation.
44 Second, the proposed amendments introduce a cause of action in misleading or deceptive conduct, not previously pleaded. The introduction of the new cause of action is not a sound reason for denying the amendment. The conduct relied upon is the same conduct as that already pleaded in the claim in negligence. And the new cause of action is well within any period of limitation, as it is based on events in November 2012 and May 2013 and losses which occurred subsequent to those events. It would not, in my opinion, be just to exclude such a claim if it has a reasonable basis on the pleaded facts, just because it was not previously pleaded.
45 Third, the defendants refer to the introduction, in the new plea, of issues of reliance and loss of opportunity. The fact that reliance was not previously pleaded may affect the strength of the claim, but is a matter to be dealt with at trial. It is not unusual for a party to be cross-examined on omissions in or departures from earlier versions of a pleading. Other factual matters raised by the defendants (such as whether all plaintiffs attended relevant meetings) are also for trial. But the introduction of the loss of opportunity claim after the first statement of claim is not a sufficient reason to find the amendment was not made in good faith, or should be disallowed as something akin to an abuse of process. That is particularly so where the plea relies, in part, on the consequences of the bank resuming possession of the property subsequent to the earlier strike out application.
46 Fourth, the defendants say that the plaintiffs' repeated attempts to ensure they are parties to the action, when the plaintiffs' primary dispute is with the Trustee and others (described, in submissions, as the true protagonists), is for an 'ulterior purpose', and 'a transparent stratagem to ensure that there is at least one deep pocket amongst the defendants before the Court'. The submission should be rejected. Even if the plaintiffs are attempting to attribute liability to a party they perceive is capable of meeting an award of damages, that does not demonstrate the use of the proceedings for other than their proper purpose. And it is no reason to prevent the plaintiffs from proceeding with claims if those claims disclose reasonable causes of action.
47 To the extent the defendants' argument relies on the submission that the plaintiffs have taken two years to formulate a claim against them, it overlooks the considerable delay in the determination of the first strike out application. That delay cannot be attributed to the plaintiffs.
48 Accordingly, I will deal with the specific challenges to the proposed statement of claim.
The relationship between the defendants and the Trustee
49 The plaintiffs provided particulars of the allegation that the defendants provided financial, commercial and business advice to the Trust: par 107. The plaintiffs referred to:
1. invoices issued by RSM Bird Cameron which 'record in general terms the work performed … including the provision of advice';
2. inference from the description of the invoices in the general ledger of the Trust;
and said that full particulars will be provided after discovery and inspection.
50 The defendants submit that the question of the existence and scope of a fiduciary relationship requires close consideration of the facts and circumstances of the particular case. The plea of the relationship of 'adviser', as a foundation for the plea of a fiduciary duty, is entirely speculative and constructed on the basis of a review of invoices and entries in the general ledger of the Trust. The defendants submit that the plaintiffs have not pleaded material facts and circumstances, such as the terms of the engagement between the Trustee and RSM Bird Cameron, or the nature and content of the advice provided (other than the specific advice in the letter of 1 May 2013).
51 The defendants also put forward evidence as to what the advice or services were in relation to invoices and ledger entries identified in the statement of claim, and have produced two letters setting out the terms of their engagement. In particular, the defendants say that the scope of their engagement did not require them to audit or review any information provided to them.
52 The earlier of the letters of engagement is dated 28 May 2010. It is attached to the affidavit of Mr Thomson sworn 13 August 2015. The letter identifies the 'Purpose, Scope and Output of the Engagement' as the preparation of the Annual Financial Report and income tax returns of various entities (including the Trustee, Regional WA and Kenesta), but also provides that, from time to time, other services may be conducted, including 'undertaking any other type of special assignment for such matters as management consulting, succession planning, business acquisition or reorganisation and other similar matters'. The second letter is dated 12 July 2012, and refers to an engagement by the North Cape Development Trust for:
1. Preparation of the Annual Financial Report, attendance to ASIC Annual Company Statement Review and Solvency Declaration and preparation of Income Tax Returns and Fringe Benefits Tax Returns where applicable.
2. Maintenance of the Corporate records, where we are the registered office of the above corporate entities.
3. Preparation and lodgement of quarterly Business Activity Statements (BAS returns), Instalment Activity Statements (IAS returns), and Annual GST Returns if requested.
The purpose of these services is to enable you and/or the above entities to comply with the taxation and corporate law requirements. The procedures we will perform will be limited exclusively to those related to this purpose. As a result no audit or review will be performed and, accordingly, no assurance will be expressed nor do we assume responsibility in relation to the following:
• Reliance on our reports by any person or entity other than yourself and those parties indicated in the report. The report shall not be inferred or used for any purpose other than for which it was specifically prepared
• Disclosure of irregularities including fraud, other illegal acts and errors that may exist. However, we will inform you of any such matters that may come to our attention.
53 In his affidavit of 13 August 2015, Mr Thomson states that the basis on which the defendants were engaged by the Trust are set out in two letters of engagement, dated 28 May 2010 and 12 July 2012, which he attached. He also states that the defendants were not engaged generally to provide advice to the Trustee of a 'financial, commercial and business nature': par 6.
54 This evidence is not, however, a sufficient reason to summarily dispose of the plaintiffs' plea. First, while Mr Thomson deals with the invoices and entries identified by the plaintiffs in the statement of claim, he does not say whether the services described in those documents - or indeed the letters of engagement - are exhaustive of the scope of the engagement. The defendants own evidence suggests it is not: the services apparently provided by the letter of 1 May 2013 do not fall readily within either scope of engagement, other than as a special assignment. Mr Thomson also says, in his affidavit dealing with the invoices, that Jarrad Steel, an accountant employed by RSM Bird Cameron, was instructed to prepare a cash flow report for the Trust, on the basis of development of the property as contractor accommodation. That work, even if not completed, is also outside the scope of either engagement letter.
55 Counsel for the defendants also agreed that he could not say that the documents put forward were all of the documents relevant to the engagement of RSM Bird Cameron by the Trustee, or the services that RSM Bird Cameron provided.
56 Even if I was satisfied that the invoices and ledger entries identified by the plaintiffs in the particulars to par 107 are not a sufficient basis on which to find a relationship of the type alleged, that may not dispose of the plaintiffs' plea. The plaintiffs have also pleaded that further particulars will be provided following discovery and inspection. It is well established that 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: see 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].
57 As a result, even if the plea of a fiduciary duty based on the provision of advice is currently inadequately particularised, that may be remedied following discovery. Should there be need to revisit the adequacy of the pleading at a later time, following usual interlocutory processes, it can be done.
58 The case is, perhaps, unusual in that the plaintiffs do not rely on breach of fiduciary duty, but plead the duty as a factor relevant to the existence of a duty of care. That does not alter what must be shown to establish a fiduciary relationship, or make it entirely unnecessary to identify the scope of the fiduciary duty by reference to the terms of the underlying relationship between the parties: see Howard v Commissioner of Taxation [2014] HCA 21; (2014) 253 CLR 83 [34] (French CJ and Keane J); Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41, 102 - 103; Clay v Clay [2001] HCA 9; (2001) 202 CLR 410 [46] - [47]. But the plaintiffs rely on fiduciary duties of limited scope - in effect a duty of loyalty. On the previous application, I held that it was at least arguable that a person providing advice in the circumstances pleaded would come under fiduciary obligations. That is still my view.
59 Accordingly, I do not believe the plea is embarrassing, and I would not strike out the allegation of a fiduciary relationship at this stage.
Negligence
60 The plaintiffs and the defendants were not in a direct contractual relationship. The plaintiffs rely upon a range of factors to establish that the defendants were under a duty of care to them. Such an approach is consistent with the 'multifactorial' or 'salient features' approach to imputing a duty to take reasonable care: see, for example, Caltex Refineries (Qld) Pty Ltd v Stavar [2009] NSWCA 258; 75 NSWLR 649 [102] (Allsop P). See also Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; (2011) 243 CLR 361 [20] (French CJ and Gummow J).
The provision of advice to the Trust
61 As I have outlined above, the question of the scope of the defendants' engagement to provide advice to the Trustee might await the completion of discovery. It would be premature, at this stage, to determine whether the breaches alleged at par 150, arising out of the conduct pleaded at pars 107 to 111 and pars 113 to 118, could not conceivably give rise to the relief claimed.
62 The same qualification, however, does not apply to the second limb of the negligence claim.
The letter of 1 May 2013
63 The plaintiffs plead that, in the letter, RSM Bird Cameron provided advice to P & B Corporation 'regarding the value of the trust'. They allege a duty of care to the plaintiffs to ensure that:
128.1 the valuation of the Trust was accurate; or
128.2 the valuation represented the fair market value of each of the units of the Trust.
- They plead specific failures, by omission, in providing that advice, so that the advice was incorrect in determining the value of the Trust assets (par 133.4), in its conclusion regarding the reason for the deficit in asset backing, and in recommending a capital raising.
64 Where the claim is pleaded solely on the basis of the advice in a written document, it is proper to consider whether the document could reasonably bear the construction sought to be placed on it. On the plaintiffs' pleaded case, the question is whether the letter of 1 May 2013 can reasonably be construed as advice regarding the valuation of the Trust or the fair market value of each of the units, and as recommending a capital raising of $2 million from the unit holders of the trust.
65 The letter was put before the court in the affidavit of Mr Lake, sworn 30 June 2014, prepared for the earlier strike out application but referred to also in this application. The letter is addressed to the Trustees, and titled 'Net Asset Backing North Cape Development Trust'. The first section is headed, 'Our understanding of the circumstances'. It begins:
Please find set out below our advice and comments with respect to the net asset backing valuation for the North Cape Development Trust based on the following documents:
- and sets out, in 19 numbered paragraphs, documents and other matters upon which Mr Lake was instructed.
66 The first paragraph refers to an email 'regarding default notices', and the fifth to a letter dated 12 February 2013 to unit holders, regarding the call made on them.
67 Paragraphs 9 to 13 deal with the value of the land. Paragraph 10 refers to a previous valuation of the Exmouth land at $8.5 million; pars 11 and 12 to a current valuation, for mortgage purposes, of $3.2 million; and par 13 to the current book value of the land at $5.252 million.
68 Paragraph 14 refers to the default notices being sent to unit holders 'as per the Trust Deed'. Paragraphs 15 to 19 purport to state the effect of the Trust Deed following the issue of the default notices.
69 Mr Lake then uses the mortgage valuation 'as an estimate', noting that if it was not accepted that there needed to be either an agreed valuation or a new valuation prepared. In the conclusion, Mr Lake again says that 'the asset may be revalued at the expense of the unit holders to establish the current value or rely on the past valuation'.
70 Mr Lake does not, in fact, recommend a capital raising of $2 million. He calculates the difference between the asset value and existing debt at that sum, and outlines options available to the different parties. Those options include revaluation of the major asset, but also winding up of the Trust.
71 While Mr Lake proceeds to consider net asset backing, it is expressly on the basis of the estimate of the property value, and 'current liabilities as provided to us'. He advises, 'A meeting with the Unit Holders should be held in order to clear all the points dealt with above'.
72 The letter is qualified on a number of occasions as 'based on the information available'. The letter concludes with the qualification that if the facts provided to RSM Bird Cameron are not correct, or if there is further information, 'this could have a significant impact on our advice'.
73 The defendants submit that the plaintiffs have not pleaded any facts to support the terms of an engagement of the eighth defendant to do anything other than what appears on the face of the letter.
74 Even if one were to accept that RSM Bird Cameron had a duty of care to ensure that the valuation of the Trust was accurate and the valuation of the units represented fair market value, as pleaded in par 128, it could not be established that the letter purported to do either of those things and negligently failed to provide an accurate and fair valuation. To that extent, even allowing for the caution required in dealing summarily with the claim, the statement of claim does not disclose a reasonable cause of action with regard to the letter. The difficulty lies not in whether the duty of care is arguable, but in pleading a document that cannot reasonably be construed in the manner alleged.
75 In submissions, the plaintiffs referred to matters including the possible effect on findings of fact from the cross-examination of witnesses, including Mr Thomson. His credibility cannot affect the terms of the letter. Accordingly, I do not consider it necessary to make any findings on the affidavit evidence adduced by the defendants regarding the instructions given to Mr Thomson, and by Mr Thomson to Mr Lake, for the preparation of the letter.
Misleading or deceptive conduct
76 The case in misleading or deceptive conduct again has two limbs: the failure to give particular advice, and the 'valuation and advice' contained in the letter of 1 May 2013.
77 Both limbs of the misleading or deceptive conduct case depend upon the failure by the defendants to provide particular advice. The defendants characterise this as a 'silence' case, in failing to advise, rather than on something that they are alleged to have said or to have done. In particular, they submit that the plaintiff's case relies on silence, in all the circumstances, giving rise to an implied representation by the defendants regarding the undisclosed facts.
78 The plaintiffs have not, however, pleaded their case in terms of a representation. They submit that their claim, properly understood, is that the defendants' conduct was misleading or deceptive in that it caused them to believe certain matters.
79 With regard to the letter of 1 May 2013, it is possible to identify the conduct referred to. Paragraph 155 pleads that the 'valuation and advice' in the letter caused the plaintiffs to believe certain things, and in that way misled them.
80 The first limb of the plaintiffs' case is, however, unclear. The only conduct referred to is the failure to give certain advice; a failure that is attributed to both Mr Thomson and RSM Bird Cameron. That, by itself, is not enough. The failure to give advice may be misleading if, without that advice, other advice or conduct would be misleading. Or it may be misleading because there are circumstances that give rise to the reasonable expectation that relevant facts would be disclosed, or relevant advice or warnings given. If the plaintiffs' case is that the defendants' actual conduct in the circumstances was misleading, both the conduct and the relevant circumstances which make that conduct misleading are material facts. The current plea is inadequate in failing to set out those matters. The case is even more difficult for the defendants to understand, or meet, when the failure is apparently alleged to be 'from 2009'.
81 Such a plea is embarrassing in the sense described by Murray J in Hart-Roach v Public Trustee (Unreported, WASC, Library No 980044, 11 February 1998) 8 - 9. That is, pleadings 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': 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].
Loss and damage
82 Except for a claim for costs incurred, the plaintiffs claim is for loss of opportunity. Pleading loss of opportunity does not remove the need to prove that the conduct of the defendant was a material cause of relevant loss. The defendants submit that the plea is defective, and the plaintiff must plead, particularise, and prove that but for the alleged contravening conduct they could and would have taken steps which they say they lost the opportunity to do. At this stage, the court is concerned only with pleading, and not proof.
83 The defendants characterise the plaintiffs' claim of lost opportunity as based on the plaintiffs' belief, because of the failure by the defendants to provide relevant advice, that their interests in the Trust were so financially hopeless that they could and should not take commercial action. They submit that this plea is inconsistent with plaintiffs' claim that they had earlier sold their units in the Trust, and that the inconsistency inherent in this plea cannot be overcome by pleading the claim is in the alternative.
84 There is a general pleading rule that prohibits a party from pleading an inconsistent set of facts in the alternative where one of those sets of facts must be known to the party to be false: see CGU Insurance Ltd v Lawless [2008] VSCA 38; Issitch v Worrell [2000] FCA 477. In CGU Insurance, Redlich JA (Maxwell P and Neave JA agreeing) said:
Such a pleading is embarrassing and will be struck out. The rationale for this pleading principle is that it would be an abuse of the Court's process to permit facts to be pleaded which deliberately place on the record positive statements of fact, one or other of which must be known by the pleading party to be untruthful [27].
85 The alternative claims in this case are not, however, inconsistent in the sense that the plaintiffs must know that one of them is false. Had the unit purchase agreements been completed, the plaintiffs' participation in the development would have ceased. But on the plaintiffs' case, Regional WA breached that agreement. And despite their earlier agreements to sell their units, the plaintiffs were still registered unit holders in 2012 when Mr Thompson attended the meeting of unit holders, in 2013 when Kenesta purported to compulsorily acquire their units, and in 2014 when Bankwest took possession of the project land. It may be necessary at some later stage to resolve inconsistency in the consequences of the two pleas, but it is not now a ground for striking out the plea against the seventh and eighth defendants as one that would prejudice, embarrass or delay the fair trial of the action.
86 The plaintiffs' claim, particularly the claim for loss of the opportunity to develop the project, will have to meet several challenges. But I am not satisfied that it should be struck out on the basis that was argued.
87 The defendants also challenge the plea in par 159(a) that the plaintiffs incurred legal costs as a result of the negligent advice in the letter of 1 May 2013. It is not necessary to further consider that question, because I would strike out the plea in negligence based on that letter.
Successive amendments
88 The result is that I would strike out the plea that RSM Bird Cameron breached its duty of care, as pleaded in par 128, in its letter of 1 May 2013. As a consequence, par 159 must also be struck out. The other paragraphs dealing with the letter of 1 May 2013 are, however, relevant to the misleading conduct plea and I will not strike them out.
89 I would also strike out the plea of misleading or deceptive conduct relating to the conduct of the seventh and eighth defendants from October 2009, as pleaded in pars 151, 152 and 158.
90 Lastly, the defendants say that this is the third amendment of the writ and the fourth re-amendment of the statement of claim. There are cases where, after successive amendments, a party has still failed to disclose a reasonable cause of action and the proper course is to refuse leave to re-plead. Given the limited extent to which the statement of claim has been struck out, that position has not been reached.
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