Falzon v Perpetual Limited; Venacom Pty Limited v Perpetual Limited

[2010] NSWSC 582

CITATION:	Falzon v Perpetual Limited; Venacom Pty Limited v Perpetual Limited [2010] NSWSC 582
HEARING DATE(S):	12 March 2010
JUDGMENT DATE :	4 June 2010
JURISDICTION:	Equity Division
JUDGMENT OF:	Bryson AJ
DECISION:	Amendment allowed in part.
CATCHWORDS:	PRACTICE AND PROCEDURE - Amendment to Statement of Claim - claims by plaintiffs on facts with general similarities to Heperu v Perpetual Trustees [2009] NSWCA - applications to amend to recast claims and add new claims - extensive consideration of proposed amendmenets led to decision to allow some and not others - plaintiffs to make further redraft
LEGISLATION CITED:	ASIC Act 2001 (C’th) Civil Procedure Act 2005 Corporations Act 2001 (C’th) Corporations Law 1989 (C’th Court Procedure Rules (ACT) Fair Trading Act 1987 (NSW) Limitation Act (1969) Maintenance and Champerty Abolition Act 1993 Managed Investments Act 1988 (C’th) Trade Practices Act 1974 s 52 (C’th) Trustee Companies Act 1964 (NSW) Uniform Civil Procedure Rules
CATEGORY:	Procedural and other rulings
CASES CITED:	Aon Risk Services Australia Limited v Australian National University [2009] HCA 27, 83 ALJR 951 Campbells Cash and Carry Pty Ltd v Fostiff Pty Ltd [2006] HCA 41, 229 CLR 386 Giles v Thompson [1992] 1 AC 142 Heperu Pty Ltd & Ors v Perpetual Limited & Ors, [2007] NSWSC 1438 (12 December 2007) Palmer J, [2009] NSWCA 84 (23 April 2009) (Court of Appeal); Court of Appeal [2009] NSWCA 387 (30 November 2009); [2010] NSWCA 3 (9 February 2010); [2010] HCA Trans 16 Mijac Investments Pty Ltd v Graham No. 2 [2009] FCA 773 NIML Ltd v MAN Financial Australia Ltd [2006] VSCA 128, 15 VR 156 Norman v Federal Commissioner of Taxation (1963) 109 CLR Poulton v The Commonwealth (1953) 89 CLR 540 Rickard Constructions Pty Ltd v Rickard Hales Moretti Pty Ltd [2004] NSWSC 1041, 220 ALR 267 Salfinger v New Guinea Mining (Australia) Pty Ltd (No 3) [2007] FCA 1532 Scholle Industries Pty Ltd v AEP Industries (NZ) Ltd [2007] SASC 322, 99 SASR 178 Trendtex Trading Corporation v Credit Suisse [1983] AC 691 Voss v Suncorp – Metway Ltd (No 2) [2003] QCA 252, 1 Qd R 214
PARTIES:	Carmela Falzon (First Plaintiff in 279457 of 2008) Pacific Blue Logistics Pty Limited (Second Plaintiff in 279457 of 2008) Carmela Falzon as trustee for Hollie Rebecca Cooper and Jacob Jeskie-Falzon (Third Plaintiff in 279457 of 2008) Perpetual Limited (First Defendant in 08/279457) St George Bank Limited (Second Defendant in 08/279457) Bananacoast Community Credit Union Limited (Third Defendant in 08/279457) Australia and New Zealand Banking Group Limited (Fourth Defendant in 08/279457) ACN 059 197 787 Pty Ltd trading as Morgan Brooks Group (Fifth Defendant in 08/279457) Perpetual Investment Management Limited (Sixth Defendant in 08/279457)
FILE NUMBER(S):	SC 279457 of 2008; 288745 of 2009
COUNSEL:	Mr J Digby QC with him Mr A Hourigan (Plaintiffs in both matters) Mr R Dubler SC (First Defendant in both matters)
SOLICITORS:	Wilson Solicitors (Plaintiffs in both matters) TressCox Lawyers (First Defendant in both matters)

- 34 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRYSON AJ

FRIDAY 4 JUNE 2010

2008/279457 CARMELA FALZON v PERPETUAL LIMITED ACN 004 027 258
2009/288745 VENACOM PTY LIMITED ACN 074 567 061 v PERPETUAL LIMITED ACN 000 431 827

JUDGMENT

1 HIS HONOUR: The plaintiffs applied by notices of motion for leave to amend their Amended Statements of Claim, and I heard those applications together on 17 August 2009 and 12 March 2010. The facts out of which these two proceedings arise are significantly similar, although the plaintiffs are not related in interest. I deal first with Falzon v Perpetual Limited; Venacom Pty Limited v Perpetual Limited involves further questions. When in these reasons I state facts I state them according to the parties’ allegations, and do not attempt to find facts conclusively. The lengthy adjournment arose from my wish, supported by the parties, to know the disposition of appeal proceedings in other litigation arising from significantly similar facts, Heperu Pty Ltd & Ors v Perpetual Limited & Ors, [2007] NSWSC 1438 (12 December 2007) Palmer J, [2009] NSWCA 84 (23 April 2009) (Court of Appeal). Later there were further decisions of the Court of Appeal [2009] NSWCA 387 (30 November 2009) and [2010] NSWCA 3 (9 February 2010), which do not bear on the amendment applications and relate to issues special to Heperu. On 12 February 2010 [2010] HCA Trans 16 the High Court of Australia (Gummow and Heydon JJ) granted special leave to appeal on two grounds against the decision of 23 April 2009, referred the application for special leave on 11 other grounds for consideration at the hearing, but refused special leave on many other grounds. The decision of 23 April 2009 and the reasons then given are of considerable significance for these applications; as too are the circumstances that special leave to appeal has been granted on some grounds and kept open on others.

2 The first defendant Perpetual Limited has had several changes of its name. It was named Perpetual Trustees Aust Ltd until 21 April 2000, Perpetual Trustees Australia Ltd until 1 June 2000 and Perpetual Trustees Australia Limited until 23 January 2006. I will refer to it as PTAL. The proposed sixth defendant Perpetual Investment Management Ltd is referred to as PIML. Unless distinction is important I will refer to them as the Trustee or the Trustees, although that is not always a completely accurate expression of their positions.

3 In Falzon there are six respondents to the notice of motion. However only PTAL the first defendant and first respondent, and PIML which the plaintiffs wish to join as the sixth defendant, resisted the amendment application. An order made on 28 January 2009 gave the plaintiffs leave to file and serve the further amended Statement of Claim unless PTAL objected within a stated period; PTAL did so, but no other defendant has contested the grant of leave. The second, third and fourth defendants indicated that they did not wish to take an active part in these applications, and the fifth defendant has left the litigation by discontinuance after going into liquidation. The joinder of PIML as an additional defendant is clearly necessary to the determination of all matters in dispute in the proceedings; see UCPR 6.24. Its joinder was not contentious.

4 The proposed amendments fall within the wide power of amendment in s 64 of the Civil Procedure Act 2005. The power to allow amendments is exercised liberally, in view of the directions in s 64(2) and with a view to ensuring that the pleadings accurately reflect the substance of the matters that are really in dispute; see Aon Risk Services Australia Limited v Australian National University [2009] HCA 27, 83 ALJR 951. I have regard to the overriding purpose stated in s 56(1) of the Civil Procedure Act; the plaintiffs’ application does not conflict with that overriding purpose as Defences have not been filed, no date for hearing has been fixed and the proceedings have been almost at a stand pending disposition on the Heperu litigation. There is no procedural context which requires any exigency; there is ample time for addressing any new considerations or even factual investigations which the amendment may require. The controversy, and when the litigation was commenced the litigation have been conducted without precipitancy, conforming to what is said to be a proverb of the Irish Bar: "When God made time He made plenty of it."

5 The significant discretionary consideration bearing on powers of amendment in the present applications is the question whether the claims which the plaintiffs wish to bring forward by the amendment are reasonably arguable; unless they are, nothing would be achieved by exercise of the power and an unreasonable burden would be imposed on the defendants.

6 When considering the decision of the High Court in Aon Risk Services and the application of observations there made to the procedural law of New South Wales attention should be paid to differences of expression in the legislative provisions relating to the power of amendment. In Aon Risk Services the High Court considered rr 501, 502 and 21 of the Court Procedure Rules of the Australian Capital Territory, set out at paras [58], [59] and [60] of that decision. Rule 502 conferred a power of amendment, r 501 prescribed that, for stated purposes, all necessary amendments must be made, and r 21 stated the purpose of these rules, and the Court was required to apply the rules with the stated objects. The Civil Procedure Act 2005 (NSW) contains provisions which correspond generally but not exactly to those Court Procedure Rules. Section 64(1) confers the general power of amendment, and subs (2) contains a provision prescribing that necessary amendments are to be made. The statement of purpose in subs (2) is not identical with the statement in r 501 but includes a requirement that "all necessary amendments are to be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings …". The words I have emphasised make the prescription somewhat wider. The powers in s 64 are subject to s 56 relating to overriding purpose and to s 58 requiring the Court to follow dictates of justice, in stated ways. Section 58 applies directly to orders for amendments – see s 58(1)(a)(i) - but for emphasis s 64(2) is expressly made subject to s 58. These provisions relating to purpose are more extensive than the provisions of r 21 of the Court Procedure Rules, which themselves are quite extensive.

7 In my opinion the authority which should be accorded to judicial opinion on r 501 in Aon Risk Services does not exhaust consideration of what is involved in the prescriptive requirements of s 64(2). The view of French CJ was expressed at para 31:

[31] The amendment allowed in the present case could only be supported as an exercise of the discretion under r 502. On no view was it required by r 501(a). The requirement to make amendments for the purpose of deciding ‘the real issues in the proceedings’ does not impose some unqualified duty to permit the late addition of any new claim. The real issues in the proceeding were to be determined in this case by reference to the limited way in which ANU had deliberately chosen to frame its original claim against AON, and its persistence in that limited approach up to the trial date itself.

8 French CJ’s observations "The requirement to make amendments of the purpose of deciding ‘the real issues in the proceedings’ does not impose some unqualified duty to permit the late addition of any new claim" are in my respectful opinion applicable to s 64(2), but his Honour's observation about material on which the real issues in the proceedings were to be determined is not so clearly applicable because of the wider range of the prescription in s 64(2).

9 The words which I have emphasised are found in the imperative provision of the Rules of the Supreme Court 1883 (UK) cited by Gummow, Hayne, Crennan, Kiefel and Bell JJ at para [68]. Those Justices expressed views at para [71] which state a wider source from which to determine what are the real issues than that referred to by French CJ at [31]; their Honours said:

[71] The words ‘the real issues in the proceedings’ in r 501(a) obviously refer to issues raised, perhaps unclearly, in the pleadings at the time of the application for leave to amend. The ‘real’ issues may also extend beyond the pleadings, as cases concerned with the purpose stated in the original Rules show. But, as is explained in these reasons, to be regarded as a real issue, and for amendment therefore to be necessary, the relevant dispute or controversy must exist at the time of the application. Amendments raising an entirely new issues fall to be considered under the general discretion given by r 502(1), read with the objectives of r 21.

10 Their Honours went on in paras [82] and [83] to illustrate some sources from which the existence of the relevant dispute or controversy may be established. See too Heydon J at [119].

11 In my opinion the proposed new causes of action and grounds of suit which the amendments would introduce are not amendments which the Court is required to allow under the prescriptive provisions of s 64(2). There is no showing that the amendment is required to bring out the real questions raised by or otherwise depending on the proceedings; so far as any evidence shows they had no part in the proceedings at any earlier stage or in any controversy between the parties. The amendment application falls to be determined under s 64(1).

12 The Statement of Claim by which the proceedings were commenced was filed on 30 June 2008. The Amended Statement of Claim was filed on 27 August 2008. The notice of motion sought leave to file proposed Second Amended Statement of Claim in the form produced by the plaintiffs’ solicitor Mr D.B Wilson and exhibited to his affidavit of 5 April 2009. After the conclusion of the hearing Mr Wilson sent me another form of proposed Second Amended Statement of Claim, (2ASC) with which I now deal. The claims against PTAL and PIML are found in Schedule A and paras 1 to 193 on pp 9 to 48 of 2ASC. Schedules B, C, D and E and the remaining paragraphs to para 521 were not debated before me. 2ASC is not marked up so as to show the respects in which earlier Statements of Claim have been amended. I did not find this convenient but the plaintiffs’ counsel told me to the effect that the proposed amendments are so comprehensive that it has not been possible to mark up the document. The differing powers of amendment in s 64(1) and s 64(2) give importance to understanding what parts of the pleadings introduce a new claim. Marked-up pleadings would have been quite useful. I treat the document as a proposed entire repleading of the plaintiffs’ case, so that everything in it requires my consideration of whether leave to file should be granted.

13 These litigations and many others arise from frauds practised by Mr Dominic Cincotta who over many years carried on business as a mortgage originator or broker under a franchise from Morgan Brooks Pty Ltd. Mr Cincotta was amongst other things a mortgage broker, investment adviser and financial adviser and conducted a business in Coffs Harbour known as Morgan Brooks Coffs Harbour. He acted as agent for investors including the plaintiffs (2 ASC para 49). Mr Cincotta obtained cheques from persons including Mrs Falzon who wished to invest money, and used the cheques to make deposits in a Cash Management Fund operated by PTAL, and operated by PIML from 27 June 2001 onwards.

14 The plaintiffs’ allegations about the relationship between Mr Cincotta and themselves (2ASC para 49) are:

At all material times, a certain Dominic Cincotta … was amongst other things a mortgage broker, investment adviser and financial adviser whom (sic) conducted the business known as Morgan Brooks Coffs Harbour … and at all such times Cincotta was an agent of the fifth defendant [the Morgan Brooks company] and at all such times Cincotta and/or Morgan Brooks acted as agent for investors including the plaintiffs.

15 Mr Cincotta controlled dealings in this account as he knew the confidential password and the Pin Number. The Statement of Claim alleges that Mr Cincotta opened dealings with PTAL with a cheque for $28,500 accompanying an initial investment application investment form taken from Perpetual’s prospectus No 12, dated 31 August 1995 and completed so as to show his wife Patrice Cincotta as the applicant, himself as her authorised representative and Morgan Stockbroking Limited (Coffs Harbour) as the adviser. The form made provision for telephone withdrawals to be paid to a designated account named P H Cincotta Cash Management Account at Westpac Bank Coffs Harbour Plaza. PTAL received the application form and cheque about 1 September 1995, established an Investment Sub Account in the name of Patrice Cincotta and allocated an account identification code number. Arrangements were also made for telephone withdrawals, involving a password and pin number. (In the Heperu proceedings the former Mrs Cincotta maintained, successfully, that she did not authorise or know of this account or dealings on it, and in Falzon it is not alleged that she incurred any liability).

16 On many occasions, beginning in December 1996 Mr Cincotta obtained cheques from the plaintiffs for investments and forwarded the cheques with an Investment Application Form containing information which directed the investment to Mrs Patrice Cincotta’s Investment Sub Account. These cheques totalled $528,839.58. The plaintiffs allege (2ASC para 62) "At all material times and prior to Cincotta receiving each Investment Cheque, Cincotta represented to the plaintiffs that each cheque would be deposited into an investment account conducted by Perpetual or other related entity and which gained the plaintiffs, the highest possible rate of return and acting on the faith and truth of Cincotta's promise, the plaintiffs provided Cincotta with the investment cheques." This process led to the creation of units in the CMF corresponding with the amount invested. It is alleged that some of these cheques belonged to Mrs Falzon herself and some to the second and third plaintiffs, which were closely connected with her.

17 During argument defendants’ counsel gave me a schedule, based on allegations in 2 ASC and written submissions on behalf of the plaintiff, which showed that there were 13 such cheques bearing seven different dates from 2 December 1996 to 29 November 1999 which were treated in this way while PTAL conducted the fund; each of these cheques were drawn by Carmela Falzon or another of the plaintiffs on an ANZ counter cheque form, the payee shown being "Perpetual Trustees". They total $126,000.

18 It is alleged that after the transition of 27 June 2000 Mr Cincotta received three cheques for and on behalf of the plaintiffs and forwarded them to PIML which banked them. The first of these cheques dated 6 March 2001 for $278,851.61 was a Westpac Bank cheque and the payee was "Perpetual Trustees Australia Ltd or bearer". The cheque dated 7 March 2001 for $30,000 was a cheque drawn by Seabold Pty Ltd on its cheque account with the ANZ Bank and the payee was "Perpetual Trustees”. (Seabold Limited has changed its name and is the second plaintiff Pacific Blue Logistics Pty Ltd.). The third was dated 19 August 2003 for $89,987.91 and was a bank cheque issued by the Commonwealth Bank of Australia; the payee named was "Perpetual Trustees Australia or bearer".

19 It is first alleged (2 ASC paras 63-77) that on each occasion when provided with one of these cheques Mr Cincotta forwarded the cheque to PTAL or PIML with an Investment Application Form, one or other of the Trustees deposited the cheque into an account referred to as a Cheque Clearing Facility at the National Australia Bank and after clearance instructed the custodian of the Cash Management Fund (which was the Royal Bank of Canada) to issue units, debited the funds generated by each cheque from the account at NAB and deposited it into other account; the proceeds were then available for investment. The amount of each cheque was then credited to Mrs Cincotta's Perpetual Sub Account. It is alleged (para 77) that crediting to Mrs Cincotta’s Perpetual Sub Account was without the consent and authority of the plaintiffs.

20 It is alternatively alleged (paras 78-80) that Mr Cincotta deposited the cheques or caused them to be deposited to credit of Perpetual’s NAB Applications Account by attending at the NAB’s Coffs Harbour Branch and making a deposit there, using a deposit transaction record which showed that the deposit was to be credited to Mrs Cincotta’s Perpetual Sub Account; then Mr Cincotta forwarded the deposit transaction record to PTAL or PIML, accompanied by an Investment Application Form which associated the deposit with Mrs Cincotta's Perpetual Sub Account.

21 After each deposit, it would seem within a few days in each case, Mr Cincotta withdrew substantially all the amount deposited and appropriated it for purposes other than those of the plaintiffs. Mr Cincotta caused money to be paid on redemptions out of the account on many occasions, so as to redeem, among others, the units obtained with the plaintiffs’ cheques, and caused the money to be deposited into a personal bank account of Patrice Cincotta at Westpac Banking Corporation Coffs Harbour Plaza.

22 The plaintiffs became aware of the misappropriations alleged on 2 March 2005 when contacted by investigators of ASIC. The Trustees have not accounted to the plaintiffs for their money, nor have Patrice Cincotta, Mr Cincotta or Morgan Brooks.

23 The Cash Management Fund (CMF) originated with statutory authority to PTAL to mix funds which it held on various trusts in the course of its business as a professional trustee and marshal them together for investment. However by 1992 the Cash Management Fund was also open for deposits not relating to trusts administered by PTAL. The CMF was established by a Foundation Deed Poll and commenced on 1 January 1984; it was then governed by s 16 of the Trustee Companies Act 1964 (NSW) and corresponding legislation in other States. A deed dated 21 October 1992 amended the 1984 Foundation Deed so as to include various prescribed deed covenants and produce compliance with Corporations Law provisions relating to the offer of prescribed interest products. In detail the entitlements of depositors were redeemable units in the fund, but the economic function and the depositors’ point of view was that they deposited money at interest and could get it out when they wanted it. Before 27 June 2000 the Cash Management Fund was conducted under provisions of the Corporations Law 1989 (C’th) dealing with prescribed interests, and was conducted under Security Dealers Licences as a Prescribed Interest Common Fund under a Deed registered and approved with ASIC.

24 There was a transition from PTAL to PIML when the constitution of the CMF was recast in May and June 2000. By a Deed of Retirement, Appointment and Amendment of 20 May 2000 PTAL retired as trustee of the CMF and PIML became trustee; these provisions took effect on 27 June 2000. From 27 June 2000 the fund was a Managed Investment Scheme operated by PIML as Single Responsible Entity, under a Scheme Constitution registered and approved by ASIC, under Chapter 5C of the Corporations Law and as required by the Managed Investments Act 1988 (C’th). When the Corporations Act 2001 (C’th) came into effect its corresponding Ch 5C governed the Managed Investment Scheme.

25 Before transition the stated investment profile appearing in prospectuses issued by PTAL was "to invest in short term government and bank backed securities and bank deposits offering you easy access with competitive interest rates." Prospectuses after transition contain a generally similar statement.

26 Since the transition (or earlier) the Cash Management Fund (CMF) has borne the name “Perpetual’s Cash Management Fund”. It may have had one or several other names earlier but is identifiably the same fund throughout.

27 The plaintiffs claim (2ASC para 35) that PIML assumed the responsibilities of PTAL. Plainly it was an object of the documents in the transition that PIML should stand in the shoes of PTAL with respect to obligations to persons having interests in the CMF, whether or not those interests related to investments made before or after the transition. The plaintiffs’ counsel contended that the responsibilities of PTAL are imposed on PIML by statutory provisions, now s 601FS of the Corporations Act, and by the corresponding provision in the Corporations Law. I accept this contention for the present purposes, as it was not disputed before me. There may be instances where moneys deposited into the fund before the transition were no longer represented by any part of the fund to the time of transition. If PTAL incurred any liability in respect of such events, that liability also passed to PIML.

28 Some of the payments upon which the plaintiffs rely were made before the transition and some after; in Heperu all were made after the transition. A curious aspect of the Heperu litigation was that the claims against PTAL related to six investments made from August 2001 to December 2002 when PIML and not PTAL was conducting the Cash Management Fund. PTAL did not dispute the claim on this ground and Heperu Pty Ltd and those representing it only adverted to the significance of PIML’s involvement after the judgment of the Court of Appeal had been published on 23 April 2009; this became a basis for a later application to the Court of Appeal. Returns filed with Australian Securities & Investments Commission on 1 September 2000 and later have always shown PIML as the party conducting that fund. The first report for the year ending 30 June 2000 contained a Directors’ report which stated that PIML had been the responsible entity since registration of the scheme as a Managed Investment Scheme on 27 June 2000 when PTAL retired as trustee. While to me it seems passing strange that PTAL accepted the allegation of its own involvement without dispute and did not refer the Court to its retirement and the introduction of PIML throughout the Heperu litigation until after the Court of Appeal’s decision, there can be no suggestion of concealment of this public fact.

29 The pleadings in 2ASC open with this foreword.

(i) The Defendants have been sued in relation to matters arising from the alleged misappropriation of the plaintiffs’ moneys by a certain Dominic Cincotta ("Cincotta") whereby Cincotta would obtain cheques and funds from the plaintiffs, promising the plaintiffs that their moneys would be invested with Perpetual, thereby generating interest income on the moneys invested. However, Cincotta, it is alleged, by the use of a cash management trust conducted by PTAL and PIML and Cincotta's bank accounts with St George and BCU was able to miss appropriate $1,592,188.40 of moneys belonging to the plaintiffs between 1996 and July, 2004. At no time did the investment of any of the plaintiffs’ moneys occur. ANZ is sued in the capacity of the first plaintiff's banker. Morgan Brooks is sued in its capacity as Cincotta's business principle in circumstances where it is alleged that Cincotta's actions bind Morgan Brooks. PTAL, PIML, St George and BCU are sued for allegedly paying the plaintiffs’ cheques and moneys for the benefit of Cincotta or others on his behalf.

30 In the 1992 Deed definitions of "Client" and "Voluntary Client" made it explicit that investment in the fund was available to persons who chose to invest money with PTAL pursuant to a prospectus, whether or not the money was otherwise the subject of a trust administered by PTAL. Similar provisions in the 2000 Deed operate by reference to definitions of "Unit Holder" and "Voluntary Holder".

31 On facts with a strong general similarity to those now alleged the Court of Appeal held in Heperu that there had been no conversion by PTAL of cheques deposited in similar circumstances, and treated it as significant that PTAL had given value for the cheques bona fide and without notice of any fraudulent dealing or other misdealings. The Court of Appeal's consideration included detailed attention to the events and circumstances in which Dr Landa the principal of Heperu Pty Ltd delivered the cheques to Mr Cincotta, the intentions of the principal with respect to ownership of the cheques and the terms of his communications with Mr Cincotta bearing on ownership. It cannot be supposed that all those matters will be exactly replicated when evidence in detail is offered in support of the claim which the plaintiffs now wish to make.

32 The High Court of Australia has reserved for the hearing of the appeal decision whether to grant special leave to appeal on proposed grounds relating to conversion of the cheques. While that decision related only to the grant of leave, it does illustrate that questions relating to conversion of the cheques in Heperu are still open to consideration. It seems to be in contention whether the Court of Appeal was in error in that they should have and did not take the same view of the law as was taken by Courts of Appeal in Queensland Voss v Suncorp – Metway Ltd (No 2) [2003] QCA 252, 1 Qd R 214) and in Victoria (NIML Ltd v MAN Financial Australia Ltd [2006] VSCA 128, 15 VR 156). The Queensland case related to liability in conversion of a banker, a position which the Trustees did not occupy. I do not have the benefit of disposition by the High Court of the appeal in Heperu, and I should not act on any assumption about what the High Court's disposition will be, but the claim that the Court of Appeal was in error is reasonably open to argument.

33 The lack of advertence to PIML’s position or to the transition meant that there was no examination by the Court of Appeal of whatever implications for conversion should arise from there not being a reference to PIML as payee by its own name or in any other way in the cheques which were paid into the CMF after the transition; considerations which would support viewing PTAL’s receiving a cheque drawn in favour of “Perpetual Trustees” and collecting its proceeds through the banking system cannot be readily applied to the last three cheques in Falzon, on the assumption that PIML received the cheques and collected the proceeds through the banking system. The view that Mr Cincotta’s action was apparently authorised presents itself for consideration differently and may be determined differently where it was PIML that received cheques, the words “Perpetual Trustees” being no part of its name. There is a strong case that, in the pre-transition cheques, “Perpetual Trustees” as the payee of a cheque was a reference to PTAL. The same cannot be said of a cheque proffered after the transition which named the payee as “Perpetual Trustees” or in some similar way in support of a finding that payment of the cheque to PIML was apparently authorised. What I have said does not exhaust the matters for consideration; there is also reference to “bearer” in two of these three cheques. The plaintiffs’ claim in Falzon raises, for the last three cheques but also in other respects, considerations which are not entirely identical which those on which the Court of Appeal acted in Heperu.

34 It was the view of the Court of Appeal in Heperu that in that case the plaintiffs clothed Mr Cincotta with apparent authority to deliver the cheques to Perpetual (meaning PTAL) and to pass title to the cheques to Perpetual on receipt, and that as a result ownership of the cheques passed to Perpetual; there was no conversion. This may be open to different considerations when the facts of the transition and the role of PIML are introduced. Another view may well be open as to the significance of there being apparent authority, as conversion relates to proprietorship and in principle may occur irrespective of the state of knowledge of an innocent recipient of the authority or lack of authority of the person with whom the recipient is dealing.

35 I conclude that claims relating to conversion of cheques should not be disposed of without detailed address to findings of facts and to their significance. Amendments relating to the conversion claim should be allowed.

36 The Court of Appeal did not consider any state of fact corresponding to the alternative allegations in which Mr Cincotta deposited cheques to the credit of PTAL or PIML at the NAB at Coffs Harbour, and the NAB credited PTAL or PIML with the proceeds; it those were the circumstances I find it difficult to suppose that any question of conversion of the cheques by PTAL or PIML could be involved.

37 In written submissions the plaintiffs’ counsel (paras 2.4, 2.5 and 2.6) contended to the effect that both pre-transition as to PTAL and post-transition as to PIML, the plaintiffs were entitled to rely on apparent authority given to Mr Cincotta to bind PTAL, or on the fact that Mr Cincotta was “otherwise engaged” by PIML with respect to the Cash Management Fund (referring to s 601FB of the Corporations Act); and it is said that special privileges were extended to Mr Cincotta by PIML during the post-transition period. This submission does not represent any allegation in 2ASC.

38 The documents of 1992 which operated before the transition established that the relationship between PTAL and an investor was that of trustee and cestui que trust. A trust relationship is also established in respect of the scheme post-transition, by the terms of s 601FC(2) of the Corporations Act, and by the terms of the constituent documents. The plaintiffs make several contentions and claims on the basis that PTAL and PIML were trustees for the plaintiffs of an interest in the CMF. There is no room to dispute that successively PTAL and PIML were trustees of the CMF, but the identification of the plaintiffs as beneficiaries of that trust is not supported in any express way, by any record or register maintained the trustees; all relevant interests were attributed to Mrs Cincotta.

39 The plaintiffs’ claims which refer to trusts fall into two parts. The first is that the plaintiffs are affected by Mr Cincotta’s knowledge of the interest of the plaintiffs in the cheques, of their instructions to him and their intentions with respect to dealings with the cheques and their proceeds. It is not I understand suggested that there was an actual agency relationship in which Mr Cincotta was authorised by the trustees to receive cheques from the plaintiffs or investors generally and place them into the CMF, but agency under contract law is not the only basis upon which a person is bound in equity by the knowledge or the conduct of the person whom he allows to manage some part of his affairs. The plaintiffs have referred to a wide range of facts relating to Mr Cincotta’s conduct in relation to investments in and borrowings from PTAL and companies associated with PTAL. A prominent consideration is that Mr Cincotta practised deceptions on the trustees in the course of his handling investments.

40 In the written submissions of the plaintiffs’ counsel it is alleged that PTAL and PIML are bound by conduct of Mr Cincotta; it is not said that Mr Cincotta had any actual authority or agency for the trustee but it said that there was apparent authority "because of the special privileges accorded to him by PTAL with respect to the CMF …" (WS 2.4) and "… Mr Cincotta was ‘otherwise engaged’ by PIML with respect to the CMF under Corporations Act s 601FB, because of the special privileges extended to him by PIML …". (WS 2.5) It is then said:

2.6 Mr Cincotta therefore inculpates both companies in the circumstances of his apparent authority or statutory engagement by them. Confluence between Mr Cincotta and both companies is alleged binding them to Mr Cincotta's fraud.

41 These passages and the submissions do not represent anything in 2ASC, which contains repeated allegations that Mr Cincotta acted as agent for the plaintiffs. It is plain from the terms of the allegations that Mr Cincotta acted in fraud of the plaintiffs, and although not explicitly stated it is also plain from those allegations that he acted in fraud of the trustees, as the meaning of the allegations includes that he deceived the trustees as to ownership of the cheques, the authority which he had to deal with them and the identity of the investors. There is no basis in the allegations for any contention to the effect that Mr Cincotta actually or apparently represented the trustees in any way which would bind them to his conduct. Whatever else may have happened, the fact that he was acting in fraud of the trustees would dispose of any such contention. If the submissions had related to any part of the proposed amendment I would not have upheld them.

42 The events surrounding payment of moneys to the trustees, including the terms of cheques and the ways in which cheques were dealt with, the terms of application forms and the directions that the proceeds were for the benefit of Mrs Cincotta and her Sub Account, establish beyond all contention that there was no express trust for any of the plaintiffs, whatever may have been the terms of the cheques. Only notice of the interest of the plaintiffs in the cheques could impose trust obligations with respect to the proceeds of the cheques, and in the circumstances in which the cheques were dealt with, that would require notice that a trust had arisen because Mr Cincotta was defrauding the plaintiffs and departing from conditions about how the cheques were to be dealt with imposed in his dealings with them. There is no allegation of such notice. If the Trustees were bound as a result of notice of such a trust it would not be a trust in accordance with the terms of the scheme, but would stand outside the scheme. The plaintiffs did nothing to communicate an intention that they should benefit from the proceeds of the cheques to the trustees, but left it to Mr Cincotta to make the communication, and he did not do so.

43 In the second part of the claim based on trust law the plaintiffs are said to fall within definitions of members of the scheme and related definitions upon the terms of the documents constituting the CMF. I refer to this as the “or otherwise” issue. The constituting documents have been much amended and are difficult to follow. The deed of 29 October 1992 does not deal exhaustively with the constitution of the fund, which had existed since 1984 and was governed by the Foundation Deed Poll and by statutory provisions including provisions of the Corporations Law and the Corporations Regulation. Clause 1 contains commitments to comply with requirements by and under the Corporations Law. Clause 4 contains covenants directed specifically to the protection of Clients. For a whole picture of the constitution of the CMF the documents at any particular time must be seen in the context of the statutory controls in force at that time. There have been a number of changes in the relevant statutes. Changes in the constitution documents and in legislation produce kaleidoscopic shifts.

44 The Deed made by PTAL on 21 October 1992 after referring to the legislation which then regulated the fund contained Recital C: “It is intended to set out in this deed the covenants relating to the administration of the fund required by the Corporations Law”. In clauses 4 and following PTAL gave covenants with respect to the conduct of the fund the terms of which show that the covenants were directed to the protection of the interest of “Clients” and “Voluntary Clients” which were defined terms. A Client may be an estate, trust or person for whom Perpetual holds money, with investment power, where Perpetual decides to place some of that money in the CMF, and also includes a Voluntary Client who responds to a prospectus and brings money to Perpetual for the specific purpose of investing in the CMF. Clause 2 contains a number of definitions including these:

"Client" means any estate, trust or person on whose account moneys are invested by Perpetual as part of the Fund and includes, without limiting the generality of the foregoing, a voluntary client.
"Voluntary Client" means a person:
(a) who invests or on whose behalf money is invested with Perpetual pursuant to a Prospectus issued in relation to the Fund;
(b) who directs Perpetual to invest as part of the Fund money already held by Perpetual for that person; or
(c) whose specific consent is required prior to Perpetual investing as part of the Fund money already held by Perpetual for that person,
and Perpetual has no authority to invest or deal with those moneys in any other way.

45 In 2000 Managed Investment Schemes were regulated by provisions of the Corporations Law; they were regulated by corresponding provisions of the Corporations Act when that Act came into effect and it is enough for most present purposes to refer to those. A person who was within these definitions or the later definitions of “Voluntary Holder” and “Unit Holder” would be a member of the Managed Investment Scheme within the definition in s 9 of the Corporations Act and would be a scheme member for the purposes of Ch 5C of the Corporations Act.

46 There are references in the deeds to prospectuses, which were required by statutory provisions, not by the constituting deeds. References to Clients and provisions for the protection of Clients appear throughout the deed; and also references to Voluntary Clients. Clause 8 contains provisions relating to meetings of Voluntary Clients, and for Voluntary Clients to apply for meetings; and balance sheets and similar documents are to be laid before such meetings and information relating to the affairs of the fund may be required. Clause 9 contains covenants in detail, to keep proper books of account in relation to the fund and to send statements of accounts with auditor’s reports to Voluntary Clients. Of course, proper books of account would identify the interest of each Client. Clause 10 contains a covenant to keep a register of clients. Clause 7 contains a covenant to redeem any interests of a Voluntary Client in the fund and deals with the amounts of the redemptions in cl 7.3; prima facie the redemption is to be at a price equal to the dollar amount deposited on account of that Client.

47 Clause 17 relates to payment by cheque, and provides for full satisfaction and discharge if the cheque is duly presented and paid. Moneys payable to the Client “… may be paid by crossed ‘not negotiable’ cheque made payable to the Client and sent through the post to the Client’s address as appearing in the register of Client’s (sic) maintained by Perpetual”. (It seems that some or all of the moneys payable on redemptions were paid by direct deposit and not by cheques in the process referred to in cl 17, and such payments would not be within the protection of cl 17 relating to satisfaction and discharge.)

48 Clause 5 entitled “Interests in the fund” contains a detailed regime under which interests in the fund are to be created. Clauses 5.1 and 5.2 create a regime in which PTAL is to deal with application moneys received from a Voluntary Client; the contemplation clearly is that application moneys from a Voluntary Client would be accompanied by a completed application form relating to a current Prospectus. In this regime if application money is not accompanied by a completed application form relating to a current Prospectus, PTAL is (5.1) to return the money or attempt to obtain the application form; (5.2) if Perpetual does not return the money it will hold the money on trust for the applicant until the application form is received, apply the money if the application form is received within 30 days or if it is not received within 30 days, return the money. (There are also provisions about interest). Clauses 5.4 and 5.5 regulate the price at which interests are to be created.

49 The provisions of the deed proceed on the assumption that there will be compliance with the statute law relating to prospectuses and with the provisions of cll 5.1 and 5.2 relating to application money. If the contemplated course were not followed but the investor sent money for investment in the fund without a completed application form relating to a current Prospectus, there would be failure to comply with the procedure in cll 5.1 and 5.2, and if the money were invested in the fund there would no doubt be breaches of the statute law related to prospectuses: and it would also be the case that the investor would not fall within paragraph (a) of the definition of Voluntary Client.

50 The deed contained other provisions which it is not necessary to notice at this point, relating to investment of the fund, brokerage and commission, termination of the fund, amendment of the deed and several other matters.

51 The deed dated 29 May 2000 provided for PTAL to retire and for PIML to become the new Responsible Entity for the continuing fund, and contained a number of provisions which (it should be supposed) responded to legislative changes. It provides in Clause 2 for amendments (“modified”) to the trust deed of 20 October 1992: the amendments are set out in Annexure 1 to the trust deed and produce an amended trust deed the terms of which are indicated in Annexures. PIML the new responsible entity made some further amendments, set out in Annexure 3. All these came into effect upon registration by ASIC on 27 June 2000. Annexure 1 is in two parts. Part A amends the rules and places the rules in the deed of covenants. Part B amends the deed of covenants and gives it the name “Deed in Relation to Perpetual’s Cash Management Fund”. Some hundreds of passages are amended and the discarded passages are lined through; the total effect is formidably difficult to follow and calls to mind a familiar expression relating to a Chinese gambling ticket; however the provisions now relevant can be perceived with application.

52 The defined expression “Client” is deleted and its place is taken by “Unit Holder”, defined in, for practical purposes, the same terms (if the reader makes an obvious correction of a typographical error). “Voluntary Holder” takes the place of “Voluntary Client” and affects the definition of “Unit Holder”. As amended the definitions became:

"Unit Holder" means any estate, trust or person on whose account moneys are invested or part of the Fund and includes without liability (sic) the generality of the foregoing, a Voluntary Holder.
"Voluntary Holder" means a person:
(a) who invests or on whose behalf money is invested with the Trustee pursuant to a Prospectus issued in relation to the Fund or otherwise;
(b) who directs the Trustee to invest as part of the Fund money already held by the Trustee for that person; or
(c) whose specific consent is required prior to the Trustee investing as part of the Fund money already held by the Trustee for that person,
and the Trustee has no authority to invest or deal with those moneys in any other way.

53 Apart from the substitution of the new expression “The Trustee” for “Perpetual” the only alteration within the definition of “Voluntary Holder” is the addition of the words “or otherwise” at the end of paragraph (a).

54 There are many other amendments to this deed, and almost all of them relate to terminology and references to persons. There are further large changes caused by the introduction of provisions formerly found in another document, the Consolidated Rules, and there has been a renumbering of clauses. The substance of most former provisions including Clause 5, Clause 10 and Clause 17 is not affected.

55 Some of the amendments which the plaintiffs seek are based on a protean view of the effect of introducing the words “or otherwise” in paragraph (a) of the definition of “Voluntary Holder”. There were several different expressions of the contention in written and oral submissions by plaintiffs’ counsel, but their effect is that the defined expression “Voluntary Holder” includes any person who is the true owner of money invested in the fund, even though there may have been no reference to that true owner in the completed application form relating to a current prospectus which accompanied the application money and went through the process referred to in former Clause 5: even though some other person was the applicant and was referred to in the completed application form: even though the Trustee had no knowledge of any interest of a person other than the applicant. The view contended for appears to need some development of the concept of ownership of and entitlement to the application money: that development was not made but it could well involve tracing or related concepts. A development which involves any element of knowledge by the recipient or notice to the recipient of the interests of a person other than the applicant in the money, even if available, would not assist the plaintiffs.

56 In 2ASC para 46 it is alleged that the definitions of Client and Unit Holder “… include those contributors, such as the plaintiffs, whose funds were received into the CMF without those contributors having filled in an Investment Application Form …”. That is to say, it is the pleaded contention that ownership of the funds (“whose funds”) is sufficient to bring the owner of the funds within the definitions, whether or not the trustee knew of that ownership and whether or not the owner had any involvement at all in the process of investment.

57 If the plaintiffs’ contention is correct it would expand the range of persons referred to as “Voluntary Holder” sufficiently widely to include the plaintiffs and thus include them in the expression “Unit Holder” for whom general provisions of the deed make it plain that the fund is held on trust. It would also bring the plaintiffs within references to members, interested persons, and other like expressions in legislative provisions which work for the protection of persons with interests in investment schemes.

58 In my opinion the wide effects which in the plaintiff’s contention were produced by this amendment and the addition of the words “or otherwise” were not so produced, and the contention that they were is not a reasonably arguable contention. In my opinion the words “or otherwise” relate and can only be understood to relate to the immediately preceding phrase “pursuant to a Prospectus issued in relation to the Fund” and to the process of investment. An effect of these words is that a person who invests money is no less a “Voluntary Holder” as defined if in the circumstances the law did not require use of a Prospectus, or if there was a failure to comply with the law relating to issuing prospectuses, or a failure to use a completed application form relating to a prospectus, or if there was failure of the Trustee to comply with provisions in former Cll 5.1 and 5.2 relating to interests in the fund and the process of dealing with application forms and money. The addition of the words “or otherwise” means that the Trustee is not relieved from responsibility if there is an illegality or an irregularity of one of those kinds in the process of investment, or if the investor did not use the form in a prospectus or did not act pursuant to a prospectus.

59 There may be classes of persons to whom statutory provisions relating to prospectuses do not apply, because their relationship to the trustee. Related party investors of this kind would appear in the register and the accounts as Unit Holders in the ordinary workings of the deed. The words “or otherwise” extend the definition of “Voluntary Holder” to such persons.

60 To be within the definition of “Voluntary Holder” a person must participate in the process of investment: must be a person who invests money with the trustee, or a person on whose behalf money is invested with the trustee. In the context of the provisions of the deed regulating the process of investment, requiring a register to be kept and requiring proper books of account to be kept and to be available, it is not a reasonably available view that a person such as the plaintiffs who did not invest money themselves and who owned money which was invested by someone else on behalf of yet another person could have been intended to be a “Voluntary Holder” and to be entitled to the protections afforded by the deed to a “Voluntary Holder”. Those protections included, among other examples, limits on dealing with money received without a completed application form, notice of proposed variations of investment policy, redemption on request, standing to apply for a meeting, sending statements of account, entry in a register, notice of proposed modifications or amendments and payment in a cheque payable to the “Unit Holder” and posted to the address appearing on the register. If the expression “Voluntary Holder” extended to persons who were not known to the Trustee to be interested and to investments which according to the terms on which they were made were made on behalf of some other person, this machinery could not operate.

61 Context strongly confirms what the definition of “Voluntary Holder” as amended plainly says, and it refers to a person who makes an investment but does so otherwise than pursuant to a prospectus; and to a person on whose behalf an investment is made by some other person, also otherwise than pursuant to a prospectus. A reading in which the obligations which PIML assumes to Voluntary Holders under the deed are assumed in favour of persons of whose interests, or even of whose existence or identity PIML does not know is not rationally available.

62 The remedies of persons who have equitable or legal interests in money which has been misappropriated to an investment purportedly on the part of some other person are not diminished by the provisions of the deed: but they are not what is now under consideration. Knowledge by the Trustee of or notice to the Trustee of an equitable interest competing with the interest of one of the “Unit Holders” on the register would transform the position; but that is not what is contended for. The view that the words “or otherwise” mean that the deed itself confers interests on the plaintiffs, and any consequential statutory entitlements which may flow from that, is not in my view rationally available and the power of amendment should not be exercised so as to enable it to be put.

63 In paras 85 and following there are allegations of conduct and omissions by PTAL and PIML to the effect that the Trustees did not respond appropriately to indications of irregularity from November 2003 onwards being complaints made about Mr Cincotta's dealings by Sophie Lander and Dr Barry Landa who were associated with Heperu Pty Ltd, not attributing significance to the high turnover of funds and short periods before redemption, or to suspect activity reports from banks and the Trustees and their staff, furnishing banks with indemnities in respect of collecting third-party cheques and cheques where the payee was insufficiently identified, departing from and not requiring compliance with requirements expressed in application forms for naming payees of cheque and other alleged failures.

64 In paras 101-105 it is alleged that the Trustees incurred liability in that Mr Cincotta was not authorised to deal with the plaintiffs’ cheques in the manner in which he did and that title to the cheques did not pass from the plaintiffs. For reasons stated earlier I am of the view that the claim that the Trustees are liable in conversion of the cheques is reasonably arguable and I propose to allow amendments to that effect.

65 In paras 106-107 it is alleged that the Trustees are liable for the proceeds of the cheques as money had and received to the use of the plaintiffs. The Court of Appeal rejected a strongly analogous case in Heperu. Restitution is a field where categorical statement of authoritative rules is hardly possible, the law is under development and in Heperu the High Court granted special leave relating to the claim for money had and received. In these circumstances, and notwithstanding my respectful regard for the ruling of the Court of Appeal, I treat this claim as reasonably arguable.

66 In paras 108-109 it is alleged that the trustees incurred liability to the plaintiffs in negligence. In Heperu the Court of Appeal held, on facts which while not entirely identical were very strongly analogous, that PTAL did not have a duty of care to persons in the same position as the plaintiffs. Notwithstanding the plaintiffs’ counsel’s observations which pointed out differences in detail in the supporting facts, and notwithstanding the difficulties of categorical conclusions about the existence of a duty of care in claims of economic loss, in my opinion the decision of the Court of Appeal in Heperu, in respect of which the High Court refused special leave to appeal, authoritatively established that there is no duty of care. This part of the plaintiffs’ case is not reasonably arguable and I will not grant leave to amend to raise the proposed claim in negligence.

67 In paras 110-117 the plaintiffs allege that the trustees are liable under provisions of four statutes which impose liability for misleading or deceptive conduct; ASIC Act 2001 (C’th) s 12DA, Corporations Act 2001 (C’th) s 1041H, Trade Practices Act 1974 (C’th) s 52 and Fair Trading Act 1987 (NSW) s 42. The allegations refer to statements in the Investment Application Forms which gave some indications of the processes which would be followed, the use by PTAL of the word “Trustees” in its name and the indication this gave about its exercise of the office of trustee. In Heperu the Court of Appeal considered and rejected a closely analogous contention. In that case it was not proved and in the present case it is not alleged that there was any interaction between what was said to be misleading or deceptive conduct and the actions of the plaintiffs. The analogy is irresistibly close and I find it altogether clear that the same conclusion should be reached in relation to the facts alleged by the plaintiffs. The presence of the word "trustee" in PTAL’s name could not contribute anything to the claim that there was misleading or deceptive conduct (see para 114 of 2ASC). I will not allow an amendment to raise these claims.

68 Paragraphs 118-130 of 2ASC make allegations which are directed to showing that the Trustees are liable for breach of trust and fiduciary duty under the general law, and in breach of a number of statutory provisions. There could be no doubt that they held or hold the CMF as trustees, but that confers no rights on any person other than a cestui que trust. The Trustees have and could have no duties to the plaintiffs as trustee or as fiduciary (and that word is used here and there) unless they were affected with notice of the plaintiffs’ interest in funds they received. No facts showing actual knowledge or notice in any way are alleged in these paragraphs. The observations which I earlier made relating to the deed of 1992 as amended and the "or otherwise" issue show my view that the references to trust and related concepts in the documents constituting the CMF do not extend to the plaintiffs. The statutory provisions referred to extensively in para 128 of 2ASC had no operation for the benefit of the plaintiffs. In my view the claim based on these paragraphs is not reasonably arguable and I will not allow an amendment.

69 Paragraphs 131-175 of 2ASC raise many allegations directed to showing that the trustees committed breaches of covenants in the 1992 Deed and of statutory provisions which bore on their responsibility as responsible entity or otherwise charged them with statutory responsibilities at different times. For reasons I have already stated I am of the view that it is not reasonably arguable that the plaintiffs were members of or otherwise participants in the CMF at any stage; statutory provisions for the protection of members, however expressed, do not avail the plaintiffs and the claims made in these paragraphs are not reasonably arguable. I am not prepared to allow an amendment to raise them.

70 Paragraphs 176-193 raise generally similar allegations relating to contraventions of ASIC Act and Fair Trading Act (NSW), which suffer in relevantly similar ways to the allegations in paras 110-117. I am not prepared to allow these amendments. In paras 187 and 188 of 2ASC it is alleged, without any particulars bearing on the acts or omission of the directors, that the directors of the trustees imprudently assisted and negligently enabled Cincotta to use the CMF as an instrument of fraud to the detriment of the plaintiffs; and otherwise did not act in the best interest of the trustees; and that this has constituted breach of s 180(1) of the Corporations Act. Without appropriate particulars this is not an allegation which should be pleaded or which the Court should allow to be made, or to stand if made. But further, the defendants’ counsel contends that s 180 does not confer a cause of action or remedy other than that conferred on ASIC under s 1317H. This may well be right but whether or not it is correct, so serious an allegation cannot be made without particulars. I am not prepared to allow paras 187 and 188.

71 The provisions of the 1992 Deed and of the rules then in force establish that PTAL was the trustee of an express trust for Clients including Voluntary Clients, and the effect of the transition including the amendments, the appointment of PIML as the trustee and the relevant statutory provisions is that PIML also became an express trustee for Unit Holders, in respect of investments made both before and after the transition.

72 If PTAL or PIML was trustee of the proceeds of each cheque or of the CMF units in a trust of which the plaintiff providing the cheque was the beneficiary, no limitation imposed by the Limitation Act (1969) can be seen to apply; unless the Court decided that it was appropriate to apply a limitation provision by analogy, a question which plainly enough is well open to debate. In such an exercise the date when the proceeds of the cheque were withdrawn from the CMF would not necessarily be treated as the accrual date; the view is reasonably open that withdrawals should be disregarded and payment out did not affect the liability of the trustee to its beneficiary. With respect to the statutory causes of action alleged, the question of an accrual date could not be answered without detailed examination of the event or without deciding when loss or damage occurred; no ready answer can be seen and leave to amend should not be refused on the basis that the statutory causes of action or any of them were plainly statute barred.

73 At several points submissions before me dealt with statutory time limitations on the commencement of the proceedings. For causes of action based on conversion or money had and received to the use of the plaintiffs the accrual dates are I suppose relatively clear, but for statutory causes of action of which damage are an element there is usually a range of arguable positions. My opinion on the proposed statutory causes of action makes it unnecessary to examine time limits. For the amendments which I have decided to allow I propose to leave it to the course of further pleadings to raise any issues relating to time limitations; it can be expected that the Trustees will plead any time limitations on which they rely and the plaintiffs will file a Reply setting up any grounds upon which these defences are not available. I do not regard it as unarguably clear what the outcome will be.

74 With respect to the amendments which I am prepared to make and the claim in Falzon against PTAL the amendment is taken to have effect as from the date on which the proceedings were commenced, in respect of any limitation period which had not then expired: see s 65(1) and (3) of the Civil Procedure Act. I do not see any ground to order otherwise; see subs (3). However the addition of PIML by the amendment does not appear to me to be an amendment to which s 65 applies, having regard to subs (2). The date of the commencement of the proceedings against PIML is taken to be the date of the order for joinder (or perhaps later): see UCPR 6.2.

75 The views I have expressed on the application in Falzon can be applied to the application in Venacom, where there are several further concerns with which I will deal. Counsel for the trustees opposed the amendment which would introduce into the Venacom litigation claims made by Mr Sendro in reliance on an assignment of rights made or purportedly made by the original plaintiffs to Mr Sendro as part of a settlement of some litigation between them. Mr Sendro is to become the sole plaintiff and the present plaintiffs are to leave the litigation. The substitution of Mr Sendro is authorised by Uniform Civil Procedure Rules 6.24(1) and 6.32(1)(d): there should be an express order for substitution as well as an order allowing amendment. Counsel contended that the assignment was not effective. This opens for consideration the large subject of the assignability of causes of action. A broad view of the assignability of choses in action seems to be supported by observations in Norman v Federal Commissioner of Taxation (1963) 109 CLR at 26 to 29 (Windeyer J): these observations have often been referred to and applied. Assignability of the claims by the Venacom plaintiffs for debt under the law relating to money had and received to the plaintiffs’ use, or in newer terminology restitution, does not in my view raise any substantial doubt. Notwithstanding Windeyer J’s view, for claims in tort such as claims for conversion of cheques, and for claims based on statutory causes of action there is room for argument; the law is far from settled. In Rickard Constructions Pty Ltd v Rickard Hales Moretti Pty Ltd [2004] NSWSC 1041, 220 ALR 267 McDougall J made an extensive review of the state of authority and the standing accorded to dicta against the assignability of causes of action in tort in Poulton v The Commonwealth (1953) 89 CLR 540 at 571 (Fullagar J) and on appeal at 602 (Williams, Webb and Kitto JJ). A quite different view has been established in England by two decisions of the House of Lords, Trendtex Trading Corporation v Credit Suisse [1983] AC 691 for causes of action in contract and Giles v Thompson [1992] 1 AC 142 for causes of action in tort. As citations by McDougall J show, the view taken in Trendtex has been followed in a number of decisions in this Court and other State Supreme Courts, while the contrary view has consistently been taken in the Federal Court of Australia.

76 There have been further developments since McDougall J spoke. It has been contended that references to Trendtex in the High Court in Campbells Cash and Carry Pty Ltd v Fostiff Pty Ltd [2006] HCA 41, 229 CLR 386 favour a wider view of assignability. In my opinion the references made by Gummow, Hayne and Crennan JJ at paras [79]-[81] pp 431, 432 were not expressions of opinion on the authority of Trendtex or of Poulton. These observations do not clearly establish any authoritative position; any more than do the observations in Poulton. I was also referred to Scholle Industries Pty Ltd v AEP Industries (NZ) Ltd [2007] SASC 322, 99 SASR 178 (White J) and Salfinger v New Guinea Mining (Australia) Pty Ltd (No 3) [2007] FCA 1532 (Heerey J) which show that a division of opinion continues. The review made in Mijac Investments Pty Ltd v Graham No. 2 [2009] FCA 773 (Gordon J) at 30-32 shows, to my mind, that this is not a well-settled field.

77 It is even more difficult to make categorical conclusions about the effectiveness of assignments of statutory causes of action. It cannot be said that a statute which confers a remedy on persons within a clearly identifiable class and does not deal with the assignment of that remedy has conferred a remedy on any other class of persons; on the other hand such a statute could not readily be said to exclude any general principle which supports assignment of causes of action.

78 A full address to assignability would require consideration of statutory machinery for assignment in Conveyancing Act 1919 s 12 and to any implications of legislation which has altered the law of Maintenance and Champerty – Maintenance and Champerty Abolition Act 1993, including the provisions of s 6 of that Act. In my opinion the proposed claim by Mr Sendro that the assignment to him was effective is reasonably arguable. In my opinion it would be wrong to refuse the application for amendment on this ground.

79 The Trustees' counsel contended that the assignment on which Mr Sendro relies only covers causes of action against PTAL and does not cover causes of action against PIML. Although PIML is not referred to by name the assignment is in general terms and the contention that its meaning extends to causes of action against PIML is in my opinion reasonably open to argument.

80 The conclusions I have expressed cannot be applied to the proposed amended documents without a further redrafting: I invite the plaintiffs to undertake redrafting if they decide to avail themselves of my readiness to allow amendments.

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