Henderson v Hewitt - [2006] WASC 42

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: HENDERSON & ANOR -v- HEWITT & ORS [2006] WASC 42

CORAM: SIMMONDS J

HEARD: 27 FEBRUARY 2006

DELIVERED : 16 MARCH 2006

FILE NO/S: CIV 1163 of 2000

BETWEEN: KEVIN LESLIE HENDERSON
First Plaintiff
HENDERSON CORPORATION PTY LTD
Second Plaintiff
AND
ANDREW MALCOLM RUPERT HEWITT
First Defendant
GIBRAE PTY LTD
Second Defendant
BARRINGTON PARTNERS (A FIRM)
Third Defendant
SAMIT PTY LTD
Fourth Defendant

Catchwords:

Civil procedure - Request for further and better particulars - Sufficient detail provided

Legislation:

Nil

Result:

Application dismissed

Category: B

Representation:

Counsel:

First Plaintiff                :     Mr A Metaxas
Second Plaintiff            :     Mr A Metaxas
First Defendant             :     No appearance
Second Defendant         :     No appearance
Third Defendant           :     Mr K E Yin
Fourth Defendant          :     No appearance

Solicitors:

First Plaintiff                :     Arthur Metaxas & Co
Second Plaintiff            :     Arthur Metaxas & Co
First Defendant             :     No appearance
Second Defendant         :     No appearance
Third Defendant           :     Murcia Pestell Hilliard
Fourth Defendant          :     No appearance

Case(s) referred to in judgment(s):

Henderson Corporation Pty Ltd -v- Hewitt [2005] WASC 165
N J & J Enterprises Pty Ltd v McMahon Fearnley (a firm) [2002] VSC 434
State of South Australia & Anor v Peat Marwick Mitchell & Co & Ors [1997] SASC 1629

Case(s) also cited:

Nil

SIMMONDS J:

Introduction

This is an application for an order for further and better particulars of claim and related orders. One of these is an order staying the action against the applicants, pending the provision of the particulars applied for.
The application raises the issue of the details required of a claim for relief for breaches of fiduciary duty against a professional partnership whose members have changed over the period to which the claim relates.

Background

The substituted statement of claim dated and filed 9 August 1995 is the basis for the following account. At the end of this account I briefly set out the background to the lodgement of that document.
The basis for the pleaded claim against the applicants lies in an oral Agreement, entered into "in or about mid 1993", between Henderson, the first plaintiff, or Henderson Corporation, the second plaintiff, or both, and Hewitt, the first defendant, or Gibrae Pty Ltd, the second defendant, by Hewitt as its agent, or both. Hewitt was a director of and shareholder in Gibrae. The Agreement was for transactions in shares and options in publicly listed corporations. Under the Agreement, Hewitt, Gibrae or another corporation in which Hewitt was a director and shareholder, Samit Pty Ltd, the fourth defendant, would buy and sell shares and options decided upon by Hewitt. The funds would be provided by Henderson or Henderson Corporation or both. Henderson or Henderson Corporation or both, on the one hand, and Hewitt or Gibrae or both, on the other, would share any profits, dividends or other income or gains from the purchases and sales. Hewitt or Gibrae or both would indemnify Henderson or Henderson Corporation or both for any losses resulting from the purchases and sales. Hewitt or Gibrae or both would maintain appropriate records, and would report monthly to Henderson or Henderson Corporation or both.
Pursuant to the Agreement over the period from "about 1 June 1993 to 1 September 1996" funds in a stipulated amount were provided by Henderson or Henderson Corporation or both, and six purchases on stipulated dates were made. The first such purchase was on 1 June 1993. The Agreement was terminated by notice dated 25 January 2000. Henderson or Henderson Corporation or both suffered losses from "the transactions entered into pursuant to the Agreement", losses which it is pleaded cannot be quantified until accounts are taken. In breach of the Agreement, Hewitt or Gibrae or both failed to provide monthly reports, and failed and refused to indemnify Henderson or Henderson Corporation or both for losses sustained under the Agreement.
The applicants, the third defendants, are a firm of accountants in which Hewitt was a partner, from 21 March 1986 to 30 June 1999. It is pleaded that "in or about 1990" the firm was retained by Henderson and Henderson Corporation to provide them with accountancy, taxation, financial and business advice, by Hewitt as a partner in the firm. By "about 1992" a relationship of trust and confidence had developed between Henderson and Hewitt, Henderson Corporation and Hewitt, Henderson and the firm, and Henderson Corporation and the firm, "to the extent that" there were certain manifestations of that development. By reason of these matters the firm owed fiduciary duties to Henderson and Henderson Corporation at the time of the representations and advice by Hewitt that led to the Agreement, and also when Hewitt purchased shares and options or caused them to be purchased "pursuant to the Agreement". Hewitt also owed fiduciary duties to Henderson and Henderson Corporation.
The representations by Hewitt that led to the Agreement were made "in the course of a meeting" at the firm's offices "in 1993", and were made by him "in his capacity as a partner" of the firm. The representations went to the knowledge Hewitt had as to what shares and options could be bought and sold for profit, and to the source of that knowledge, in his frequent communication with various stockbrokers and officers of publicly listed companies.
The advice by Hewitt that led to the Agreement was provided "at about the same time" as he made the representations, and was that Henderson and Henderson Corporation should embark upon a venture in the terms that became the Agreement. There is no pleading that the third defendant was a party to the Agreement.
It is pleaded that the firm breached its fiduciary duties to Henderson and Henderson Corporation in failing or neglecting to advise him or it or both that, instead of entering into the Agreement, he or it or both could enter into an alternative arrangement with a stockbroker under which they would not have to share profits from purchases and sales. The firm also breached its fiduciary duties in failing or neglecting to advise him or it or both that in making the representations and giving the advice that led to the Agreement Hewitt had a conflict of interest.
The relief claimed against the firm is principally equitable compensation for breach of fiduciary duty as well as an account of all moneys received by the firm or paid out by the firm in relation to the purchase and sale of shares and options from moneys received over the period of "about 1 June 1993 to 1 September 1996" from Henderson and Henderson Corporation, as well as an account of what moneys ought to have been received by the firm and what moneys ought to have been paid out by it in relation to the same investments.
The writ in these proceedings was dated 14 February 2000 and filed on 15 February 2000. The firm was named as a defendant to those proceedings. Subsequently the writ was amended to delete the firm as a defendant. As a result of my judgment in Henderson Corporation Pty Ltd -v- Hewitt [2005] WASC 165 writ was re-amended and the firm was rejoined as a defendant.
There have been several forms of the statement of claim in these proceedings, as my judgment indicates. As a result of my judgment, the current form of the statement of claim, the substituted statement of claim, with the claim against the firm as I have described it, was lodged. Counsel for the applicants led me to understand, and correspondence between the parties, with which I was supplied, as part of the materials annexed to the O 59 r 9 memorandum of conferral, confirmed, that there was a minute of proposed substituted statement of claim considered by the parties. There has, however, been no application for leave to file this document of which I am aware, and counsel for the plaintiffs disclaimed any intention to amend in terms of that document. In any event the request for further and better particulars relates to the current form of the statement of claim. I will therefore continue to focus on that form.
The third defendant has not yet filed a defence.

This application

The present application, by chamber summons for further and better particulars of statement of claim and stay of action pursuant to O 71 of the Supreme Court Rules, was filed on 17 November 2005. It seeks orders that:
1.The plaintiffs within 14 days file and serve on the defendants particulars of their statement of claim pursuant to the third defendant's request for further and better particulars of substituted statement of claim dated 29 August 2005 (there is an error in the referred to date of the request, which is given in the chamber summons as 9 August 2005);
2.Further and in the alternative, pending the provision of such particulars, and until further order, the plaintiffs' claim against the third defendant be stayed;
3.The plaintiffs within 14 days identify in writing to the defendants the individual partners of the third defendant against whom the plaintiffs are claiming; and
4.The plaintiffs pay the third defendant's costs of this application in any event.
The request for further particulars has four numbered requests. They fall into two groups.
Requests 1, 3 and 4 call for particulars of the facts, acts, circumstances, matters or things which the plaintiffs say found their plea that Hewitt at the time of making the representations prior to the Agreement was acting in his capacity as a partner of the firm (Request 1), that the firm was in a fiduciary relationship with the first or the second plaintiff or both of them at the time Hewitt made the representations and gave the advice (Request 3), and that the firm was in a fiduciary relationship with the first or the second plaintiff or both of them when Hewitt purchased shares and options or caused them to be purchased "pursuant to the Agreement" (Request 4).
Request 2 calls for particulars of the dates of the losses from the transactions entered into pursuant to the Agreement.
I deal with the requests by reference to those groupings.

Requests 1, 3 and 4

The third defendant says that, while there is some detail in the pleadings on which the pleaded capacity of Hewitt and the pleaded fiduciary duties might be rested, the third defendant is entitled to further particulars. This was particularly so because the Agreement was pleaded as entered into with Hewitt and not with the third defendant. However, the entitlement rested on the more general consideration that the third defendant should be provided with more detail than the pleadings set out.
I disagree that the third defendant is entitled to more detail. As counsel for the plaintiffs indicated, the substituted statement of claim, as to Hewitt, pleads his membership of the firm at the relevant time, the terms of the retainer, and the provision of services under it by Hewitt. While this is not pleaded in terms as the basis upon which the capacity in which he acted rests, it seems to me that that basis sufficiently emerges from the pleadings. The plaintiffs will of course be confined in the normal way to this basis for the capacity in which Hewitt acted.
As to the third defendant's fiduciary relationship at the time of the representation and advice, the substituted statement of claim pleads as that relationship's basis the same matter as well as the relationship of trust and confidence that developed between Hewitt and the third defendant, on the one hand, and the first and the second plaintiffs, on the other, manifested as the pleadings describe. It seems to me that there was nothing more the plaintiffs needed to say about the pleaded basis for the relevant fiduciary relationship. The plaintiffs will of course be confined in the normal way to the pleaded basis for the relationship.
As to the third defendant's fiduciary relationship at the time of the purchase and sale transactions, the substituted statement of claim pleads as that relationship's basis the terms of the retainer, the provision of services under it by Hewitt, the relationship of trust and confidence that developed between Hewitt and the third defendant, on the one hand, and the first and the second plaintiffs, on the other, manifested as the pleadings describe, the representations, the advice, the reliance on the representations and the advice by the first plaintiff or the second plaintiff or both in their entering into the Agreement, the terms of the Agreement, and the six transactions under it. It seems to me that there was nothing more the plaintiffs needed to say about the pleaded basis for the relevant fiduciary relationship. The plaintiffs will of course be confined in the normal way to the pleaded basis for the relationship.

Request 2

Although counsel for the plaintiffs at one point appeared to put the contrary to me, I do not consider this Request goes to a matter not directed to the third defendant. The matter goes to the losses for which, under the Agreement, Hewitt and Gibrae were required to indemnify. So far as the third defendant is concerned, the losses will go to determine the measure of the equitable compensation which is sought as one of the forms of relief for breach of their fiduciary duty.
Counsel for the third defendant put it to me that this Request was of importance both as the third defendant was entitled to have it met, and as it was of importance to determining which of the partners in the firm was liable for what loss. I will deal with the second point first.
The third defendant was named under O 71 r 1. That rule permits partners to be sued in the name of the firm of which they were partners "when the cause of action accrued". An action against a firm in the firm name is "sufficient to include all partners constituting the firm". However, the plaintiff in such an action should plead when the cause of action accrued, so that the relevant partners are capable of identification and are able to consider such as limitation issues: Seaman [71.0.2].
In my view, this does not require that the plaintiffs identify the individual partners of the third defendant against whom they are claiming. Plaintiffs in actions against partnerships whose constitution may have changed significantly over time will often not be in a position to identify the partners in that way. As is deposed in an affidavit of a member of the third defendant filed for the purposes of this application, the constitution of the third defendant changed on 14 July 1992 and again on 1 July 1993, and on a number of occasions thereafter, at least once and more often twice in each financial year, until 1999/2000, from which changes were less frequent.
However, it is necessary the plaintiffs provide the third defendant with the means to identify the partners liable. In that respect, I note that it appears to be established, by reference to partnerships law, that the critical date in an action of the present sort, so far as the partners liable are concerned, is the date of the breach of the fiduciary duty relied upon, not the date of the loss consequent on such breach. This is notwithstanding that the loss may have occurred at a later date. See State of South Australia & Anor v Peat Marwick Mitchell & Co & Ors [1997] SASC 1629, Olsson J, at [211], [212] and [220]. It follows, it seems to me, that the present Request does not go to the matter of the means of identification of the partners liable, except so far as the loss itself makes plain the relevant breach, which seems to me to be implausible.
In any event, it seems to me to be clear, as counsel for the plaintiffs confirmed, that the breach of fiduciary duty on which the claims for relief against the third defendant rest, is a failure or neglect to advise prior to the entry into the Agreement. That entry must have occurred no later than the date of the earliest transaction under it, which is pleaded as having occurred on 1 June 1993. This resolves the issue raised for the third defendant as to the identification of the partners sought to be made liable, at least as to the claim for equitable compensation and interest.
I also note the claim for relief by way of an accounting for moneys received and paid out by the third defendant as well as moneys that ought to have been received and paid out by the third defendant, in respect of investments under the Agreement. However, I do not read this claim as a plea of distinct breaches of a fiduciary duty to account but rather as relief for the breaches of fiduciary duty previously referred to, and thus to be asserted against the partners so identified. On accounting as a remedy, see the reference my judgment in Henderson (supra) at [151].
I have noted that it is pleaded the third defendant owed the plaintiffs fiduciary duties when Hewitt purchased shares and options or caused them to be purchased "pursuant to the Agreement". However, I do not understand the substituted statement of claim to plead breaches of those duties by the third defendant. The only breach of fiduciary duty pleaded is in relation to the representations and advice, as I have indicated.
I have also noted that the fiduciary duty pleaded includes ensuring regular monthly accounts of transactions under the Agreement, and that it is also pleaded that Hewitt breached the corresponding obligation under the Agreement. However, this is not pleaded as a breach of the third defendant's fiduciary obligation.
It follows that I do not consider this is a case in which it would be appropriate to grant a stay of proceedings against a firm proceeded against in its name for failure to provide the means to identify the partners liable: compare N J & J Enterprises Pty Ltd v McMahon Fearnley (a firm) [2002] VSC 434.
It is true that the dates of occurrence of the losses for which relief is sought may be of significance to the operation of any defences of a limitation sort to an action for breach of fiduciary duty. I canvassed the possibility of such defences in Henderson (supra), at [67] – [108]. Of course the third defendant would need to specifically plead matters going to show that there are defences of this kind. There have been, as I have indicated here and explore in detail in that judgment, significant delays in this action.
However, counsel for the plaintiffs indicated that the timing of the losses from transactions under the Agreement goes to matters the best information as to which they expect to lie with Hewitt or the third defendant. The plaintiffs have information that would tend to show losses, but not, or not clearly, when they were incurred. At present the best particulars they can provide are those in the pleadings, that is, the dates of purchase of the relevant securities, and the fact there were losses from those purchases.
As to the third defendant's position that in any event they are entitled to the particulars of when the losses from the transactions under the Agreement occurred, it seems to me that there is no such entitlement beyond the particulars the plaintiffs can presently provide as I have described them. The third defendant is entitled to such particulars as are necessary to enable them to plead their defence. However, normally particulars other than those will not be ordered before the defence has been filed: O 20 r 13(5), and Seaman at [20.13.12]. It is not suggested that there is any reason to order particulars other than those the plaintiffs can presently provide, putting aside the matter of identification of the partners liable.
However, counsel for the third defendant put it to me that, in view of the delays since the commencement of the action here, it would be appropriate in the exercise of my discretion to make the order sought for a stay of proceedings against the third defendant until the plaintiffs were in a position to supply better particulars of when the losses occurred than they can presently provide. It was said that the plaintiffs had had a substantial period in which to gather that information. Counsel for the third defendant confirmed, however, that it was not his position that there was any deliberate pleading or withholding of information such as would justify a stay of the sort granted in N J & J Enterprises (supra).

In my judgment in Henderson (supra), especially at [72] – [97], I reviewed the delays that had occurred in this action. I accept for this purpose that they have been significant, even allowing for those which might be excused. However, in the exercise of my discretion I need to consider what prejudice would be caused to the third defendant in not granting the order sought. I have already concluded that the third defendant is not prevented from pleading out its defence by not having the further particulars referred to. I note the submission of counsel for the plaintiffs that the information from which better particulars might be derived is peculiarly likely to be with Hewitt or the third defendant rather than the plaintiffs. While I am prepared to accept that the lapse of time may be expected to make it harder and perhaps impossible for the third defendant to perform the task of locating and retrieving that information for transactions the first of which was on 1 June 1993, I do not consider that that itself is sufficient for me to grant the order sought. The third defendant is in a position to plead that the action against them should not be permitted because of the delays that have supervened as I have indicated. However, the third defendant if they wish to rely on this matter should be required to plead it out. I refer again to my judgment in Henderson on the relevance of delay to an action for breach of fiduciary duty.
Again, I should add that the plaintiffs will of course be confined in the normal way to the pleaded basis for identifying the partners of the third defendant alleged to be liable.

Conclusion

It follows that the present application should be dismissed.
I will hear from the parties as to the order as to costs that should be made.