Holmes v Jefferis
[2022] SASCA 63
•30 June 2022
SUPREME COURT OF SOUTH AUSTRALIA
(Court of Appeal: Civil)
HOLMES v JEFFERIS
[2022] SASCA 63
Judgment of the Court of Appeal
(The Honourable President Livesey, the Honourable Justice Doyle and the Honourable Justice Bleby)
30 June 2022
APPEAL AND NEW TRIAL - APPEAL - GENERAL PRINCIPLES
EQUITY - EQUITABLE REMEDIES - ACCOUNTS AND INQUIRIES
EQUITY - TRUSTS AND TRUSTEES - POWERS, DUTIES, RIGHTS AND LIABILITIES OF TRUSTEES - ACCOUNTS
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - ENDING PROCEEDINGS EARLY - SUMMARY DISPOSAL - SUMMARY JUDGMENT FOR PLAINTIFF OR APPLICANT
The appellant was engaged for a time by the respondent as a bookkeeper in connection with the respondent’s physiotherapy practice. The bookkeeper banked monies received by the practice.
In 2016, the physiotherapist commenced a claim against the bookkeeper for monies had and received, claiming that there is a shortfall in practice proceeds for which the bookkeeper is responsible. The physiotherapist sought an order that an account be taken of all monies received by the bookkeeper.
The physiotherapist unsuccessfully sought summary judgment from a District Court master. On 8 February 2022, a judge of the District Court allowed the physiotherapist’s appeal, gave summary judgment and ordered that an account be taken before trial.
The bookkeeper now seeks leave to appeal against the decision of the judge, contending that the judge erred in ordering the taking of accounts before trial.
Held (the Court) granting leave to appeal and allowing the appeal:
1.The action should proceed to trial in the ordinary way.
2.Even if the bookkeeper was an admitted accounting party, it was necessary to consider whether a liability to account at this time had been established.
3.In the circumstances of this case, the general rule described in Doss v Doss (1843) 18 ER 464 applied, and it was necessary for the physiotherapist to first establish that a sum was owed by the bookkeeper.
4.It was also necessary to consider the likely purpose and course of an account, when compared to proceeding to trial in the ordinary way. The taking of an account before trial would likely only avoid a trial if it became a trial.
5.In these circumstances there was a reasonable basis for defending the claim for an account, and a summary order for an account should not have been ordered before trial.
Uniform Civil Rules 2020 (SA) rr 144.2(1), 144.3(1), 182.6, 213.1(1)(b); Judicature Acts 1873-1875 (UK), referred to.
Rowe v National Australia Bank Ltd (2019) 56 WAR 1, applied.
Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd (2018) 265 CLR 1; Anonymous (1412) 145 ER 47; (1388/89) 12 Rich II; Asset Risk Management Ltd v Hyndes [1999] NSWCA 201; Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (In Liq) (2000) 202 CLR 588; Barkley v Barkley Brown [2009] NSWSC 76; Clarke v Edwards [2012] SASC 213; Doss v Doss (1843) 18 ER 464; Duncan Davis (Sales) Pty Ltd v Davis [2008] VSC 127; Hancock v Rinehart [2015] NSWSC 646; Jefferis v Holmes [2022] SADC 12; Lang v Simon (1952) 53 SR (NSW) 508; London, Chatham & Dover Railway Co v South Eastern Railway Co [1892] 1 Ch 120; MacKenzie v Johnston (1819) 56 ER 742; Martin v Employers Mutual Ltd (2012) 112 SASR 436; Mellish v Royal African Co and Richard Edlin (1679) 22 ER 822; Milltec Australia Pty Ltd v Burnes [2006] NSWCA 13; Mulherin v Quinn Villages Pty Ltd [2007] QSC 231; North-Eastern Railway Company v Martin (1848) 2 Ph 758, 762; 41 ER 1136; Padwick v Stanley (1852) 68 ER 664; Roberts v Eckert [2020] SASC 27; Sharpe v Goodhew (unreported, Federal Court of Australia, Drummond J, No Q16 of 1989, 11 December 1992); Southern Equity Pty Ltd v Timevale Pty Ltd [2012] NSWSC 15; Turner v Wright (1862) 2 SCR (NSW) Eq 9; Warman International Ltd v Dwyer (1995) 182 CLR 544; Wombats Downunder Pty Ltd v G & W A Discenso Pty Ltd (No 2) [2011] SASC 3, considered.
HOLMES v JEFFERIS
[2022] SASCA 63Court of Appeal – Civil: Livesey P, Doyle and Bleby JJA
LIVESEY P and BLEBY JA:
Introduction
This is an appeal against an order for summary judgment given on admissions in the pleadings and, in consequence, an order for the taking of an account before trial.
The appellant bookkeeper was engaged for a time by the respondent physiotherapist, assisting with the generation of invoices and receipts, as well as banking, in connection with the respondent’s physiotherapy practice.
The physiotherapist’s claim against the bookkeeper is for monies had and received. The physiotherapist claims that there is a shortfall in practice proceeds for which the bookkeeper is responsible. The physiotherapist sought an order that an account be taken of all receipts and payments received by the bookkeeper. The physiotherapist also sought an order that the bookkeeper pay “such sums as have been received … [but] not accounted for” or, alternatively, for damages to be agreed or assessed.
The physiotherapist unsuccessfully sought summary judgment from a District Court master. A judge allowed the physiotherapist’s appeal and ordered that an account be taken. It will be necessary to return to the terms in which that order was made. The bookkeeper now appeals to this Court, recognising that leave to appeal is required pursuant to r 213.1(1)(b) of the Uniform Civil Rules 2020 (SA).
For the reasons that follow, leave to appeal should be given and the appeal allowed.
Introduction
The pleaded cases
The amended claim
The amended defence
The summary judgment application
The determination of the summary judgment application
The contentions of the parties
The taking of an account - Rowe v National Australia Bank Ltd
The historical derivation of an account; common law and equity
Must a sum be owed before an account is taken?
When is it appropriate to order an account?
Liability to account?
The exercise of discretion in this case
Comparing a trial with an account
Leave to appeal
Conclusion
The pleaded cases
The amended claim
By an amended statement of claim dated 21 September 2020,[1] filed some four or so years after the claim was commenced in the District Court of South Australia in 2016, the physiotherapist pleaded that the bookkeeper was engaged during February 2012 to assist her because of difficulties encountered caring for a member of her family whilst she was finalising her Doctoral thesis. The physiotherapist pleaded that the bookkeeper’s duties were to include the following:[2]
1.undertaking invoicing of patients attending for treatment;
2.receipting monies paid by cash, cheque, EFT or credit card;
3.issuing of receipts for monies paid;
4.banking of monies received; and
5.preparing quarterly BAS statements and providing information to the physiotherapist’s accountants.
[1] Statement of Claim Revision 2 (FDN 27, AMCCI-16-3355) (Revised Statement of Claim).
[2] Revised Statement of Claim, [11].
The physiotherapist pleaded that these arrangements applied between February 2012 and April 2016 in the course of a contractual relationship (the engagement). The physiotherapist pleaded that there were implied terms of the engagement, namely that the bookkeeper would:[3]
1.exercise due care and skill in carrying out the duties earlier mentioned;
2. act honestly and faithfully in the exercise of those duties;
3. only deal with the applicant’s monies for the benefit of the applicant or as authorised or directed by the applicant; and
4.properly account to the applicant as to the respondent’s handling of monies on behalf of the applicant.
[3] Revised Statement of Claim, [12A].
It is alleged that these terms were to be implied as a necessary incident of the duties of the bookkeeper.
The physiotherapist pleaded that the bookkeeper had access to her computer which had a password protected login. The applicant left the entirety of the bookkeeping processes and duties to the bookkeeper, whom she trusted and relied on. As a result, the physiotherapist alleged that the bookkeeper was:[4]
1.the physiotherapist’s agent in and about the receipt of monies and their banking and recording in the course of the physiotherapy practice;
2.a bailee of monies received (whether in cash or by cheque or otherwise) received in the physiotherapy practice;
3.a trustee of these monies; and
4.liable to account to the physiotherapist “truly and faithfully” as to the bookkeeper’s handling of these monies.
[4] Revised Statement of Claim, [14].
The physiotherapist pleaded that, from time to time, she was advised by the bookkeeper to make transfers of personal funds into the business and that around $13,000 was transferred each year to cover operating costs. It was alleged that this had not previously been done and that the physiotherapy practice had previously operated profitably. The physiotherapist also alleged that after the conclusion of the bookkeeper’s engagement no further transfers were required.
The physiotherapist pleaded that after the bookkeeper’s engagement concluded she discovered that records were missing and there were anomalies in the MYOB records of the physiotherapy practice. It is not necessary to go into detail about those allegations for the purposes of this appeal.
A key aspect of the claim made by the physiotherapist against the bookkeeper is that in the period 1 July 2012 to 4 April 2016 a total of $510,444.71 was banked into the bank account of the physiotherapist’s business. However, during the same period, the register of receipts of the physiotherapy practice in the MYOB records of the practice recorded total receipts of $558,361.37. The physiotherapist maintained that the practice appears to have received $47,916.66 more than was banked during that period.[5] This is described as the shortfall.
[5] Revised Statement of Claim, [30].
Following an investigation by a forensic accountant, Morris Forensic, various other anomalies were allegedly discovered, including several incidences of duplicated invoice numbers as well as the apparent deletion or purging of large portions of the physiotherapist’s financial records from MYOB. Again, for the purposes of this appeal, it is not necessary to go into detail about those allegations.
The physiotherapist pleaded that in October 2018 she requested that the bookkeeper account for the handling and disposition of monies received during the course of the engagement. The physiotherapist alleged that the bookkeeper did not provide the account requested.[6]
[6] Revised Statement of Claim, [32].
On these bases, it is alleged that the bookkeeper was liable to account and, failing a proper accounting, the entire sum of $47,916.66 should be regarded as monies had and received for the use of the bookkeeper.[7] Whilst various alternative claims are also made, again, for the purposes of this appeal, it is not necessary to go into the details. Ultimately, the physiotherapist claims that she sustained financial loss and damage as a result of the bookkeeper’s conduct “the amount of which [she] is unable to quantify without the … accounting”.[8]
[7] Revised Statement of Claim, [33].
[8] Revised Statement of Claim, [38].
The amended defence
By an amended defence dated 16 November 2020,[9] the bookkeeper pleaded that the physiotherapy practice was operated from a room at the rear of the physiotherapist’s residence until mid or late 2014 and thereafter from a converted garage located behind that residence. She pleaded that her work for the physiotherapist commenced after she had been a patient of the practice for around two years before March 2012. From time to time before March 2012,[10] the physiotherapist sought informal, ad hoc advice from the bookkeeper about the MYOB accounting program and completing Business Activity Statements for the Australian Taxation Office.[11]
[9] Defence (Revision 2) (FDN 29, AMCCI-16-3355) (Revised Defence).
[10] Although the year 2014 was pleaded in [8.2] of the Revised Defence, this was corrected in an affidavit of the physiotherapist’s solicitor dated 12 February 2021 (FDN 38, AMCCI-16-3355). In a series of exhibited emails, the bookkeeper’s solicitor confirmed that reference should be to 2012.
[11] Revised Defence, [8].
The bookkeeper pleaded that she and the physiotherapist initially agreed that bookkeeping duties would be undertaken for about one to two hours each fortnight and, initially, these duties were limited to reconciling bank statements with the MYOB accounting system. Indeed, the bookkeeper denies the allegations made regarding the duties she was to initially perform, pleading that the physiotherapist continued to invoice patients at the conclusion of each treatment as well as provide receipts, complete all banking and attend to payment of all bills and expenses.[12]
[12] Revised Defence, [11].
It is pleaded that only upon commencing her engagement as the physiotherapist’s bookkeeper did she begin to undertake various of the duties alleged. The bookkeeper pleaded that she spent from half an hour to an hour, and no more than three hours, each week at the practice between March 2012 and April 2016.[13] The bookkeeper pleaded that the physiotherapist was the only authorised signatory of the physiotherapy practice cheque account.[14]
[13] Revised Defence, [11.3].
[14] Revised Defence, [11.4].
The bookkeeper’s remuneration was met either from cash received or by means of cheques which the physiotherapist authorised.[15]
[15] Revised Defence, [12].
The bookkeeper admitted the implied terms earlier set out and it is this admission which generated the application for summary judgment.[16]
[16] Revised Statement of Claim, [12A]; Revised Defence, [12A].
The bookkeeper’s defence emphasised that the physiotherapist allowed others to access her computer and to assist her with her physiotherapy practice. Indeed, the bookkeeper pleaded that she did not know what the physiotherapist did in relation to bookkeeping processes and duties when the bookkeeper was not present. The bookkeeper pleaded that she was required to rely upon the physiotherapist’s business diary for a record of patient treatments and that there was some difficulty associated with that because the physiotherapist had a practice of only recording a patient’s Christian name, resulting in confusion and uncertainty.[17]
[17] Revised Defence, [13].
The bookkeeper also pleaded that the physiotherapist did not delete from her records patient treatments for patients who cancelled, and the physiotherapist did not always record those patients from whom she received cash payments. At times it was necessary for the bookkeeper to later issue tax invoices to those patients from whom the physiotherapist had agreed to accept a cash payment without an invoice.[18]
[18] Revised Defence, [13.4].
The bookkeeper admitted that she was an agent and a bailee but not a trustee.[19] Even then, the defence was careful to delineate the precise terms in which the bookkeeper admitted her agency and bailment.
[19] Revised Defence, [14].
The bookkeeper admitted that she was from 8 March 2012 an agent when performing her duties as a bookkeeper,[20] but only when she worked for the limited periods she attended the practice each week, and then only in relation to the receipt of cash payments from a cash tin money box. As to this cash tin, the bookkeeper pleaded that the physiotherapist placed cash payments into the cash tin and did not secure it in a protected location in her premises. The bookkeeper pleaded that it was left unattended on a desk in a room near the rear of the physiotherapist’s premises, near where they both worked.[21]
[20] Although the year 2014 was pleaded in [14.1] of the Revised Defence, this was corrected in an affidavit of the physiotherapist’s solicitor dated 12 February 2021 (FDN 38, AMCCI-16-3355). In a series of exhibited emails, the bookkeeper’s solicitor confirmed that reference should be to 2012.
[21] Revised Defence, [14.1].
The bookkeeper also pleaded that the physiotherapist used cash payments for personal and other uses which were not associated with the physiotherapy practice. Moreover, and importantly, the bookkeeper pleaded that she did not ever receive monies directly from any of the physiotherapist’s patients.[22]
[22] Revised Defence, [14.1.3].
In these circumstances, the bookkeeper pleaded that she was only a bailee of those cash payments and cheques which were found by the bookkeeper in the cash tin money box on those days that she went to bank the monies on behalf of the physiotherapist.[23] That is, the implication appears to be that the monies banked did not represent the entirety of the cash monies received by the physiotherapist in the course of her physiotherapy practice.
[23] Revised Defence, [14.2].
The bookkeeper pleaded that, during the course of her engagement, she made contact with the physiotherapist’s accountant to commence a new accounting cycle in MYOB because the books and MYOB records previously operated by the physiotherapist were deficient.[24]
[24] Revised Defence, [15].
The bookkeeper admitted that the physiotherapist received complaints from patients during the term of her engagement. The bookkeeper alleged that the physiotherapist received complaints from patients arising out of the physiotherapist’s deficient record keeping, coupled with her practice of accepting cash payments without an invoice being raised or receipts being issued.[25]
[25] Revised Defence, [17.1].
The bookkeeper addressed the question of patient complaints by maintaining that she addressed concerns in accord with instructions received from the physiotherapist, including by recording the receipt by the physiotherapist of cash payments even where those cash payments were not processed and banked because they were retained and expended by the physiotherapist for purposes unrelated to her physiotherapy practice. The bookkeeper denied deleting MYOB invoicing.[26]
[26] Revised Defence, [17].
The bookkeeper alleged that, from time to time, she advised the physiotherapist that she had insufficient funds in the bank account to pay taxation liabilities or other debts. The physiotherapist, according to the bookkeeper, operated a single bank account for her business and personal income and expenses, and she mixed her personal and business records.[27] A number of other allegations are made regarding the physiotherapist’s practices but, for the purposes of this appeal, it is not necessary to go into detail.
[27] Revised Defence, [18].
So far as the claimed shortfall or discrepancy of $47,916.66 is concerned, the bookkeeper did not admit that there is a shortfall but, if there was, it was a consequence of the physiotherapist spending cash monies received from patients before they were banked.[28] The implication is that these monies did not find their way into the cash tin or, if they did, the physiotherapist removed them before the bookkeeper attended each week and undertook banking.
[28] Revised Defence, [30].
In addition, the bookkeeper alleged that she received instructions to deposit some of the cash monies into a bank account held in the name of the physiotherapist’s son.[29]
[29] Revised Defence, [30.1.4].
Other explanations for the shortfall offered by the bookkeeper in her defence included that the physiotherapist agreed to discount or write off invoices without disclosing that to the bookkeeper, as well as the confusing way in which the physiotherapist maintained various of her practice records.[30] As for multiple invoicing, the bookkeeper alleged that she often raised multiple invoices only to be instructed by the physiotherapist to render one invoice so as to “save on postage and other costs”.[31]
[30] Revised Defence, [30.1.4]-[30.1.6].
[31] Revised Defence, [30.3].
Importantly, the bookkeeper alleged that, insofar as she was requested to account for the alleged shortfall or discrepancy, she was unable to account for it because of the various matters already alleged, including the various discrepancies and anomalies solely attributable to the conduct of the physiotherapist, for which the bookkeeper could not give an account because they remain “outside her knowledge or control”.[32]
[32] Revised Defence, [31].
The bookkeeper generally denied that the physiotherapist was entitled to the relief that she seeks, whether by way of an accounting or otherwise.
The summary judgment application
By an application dated 21 December 2020, the physiotherapist applied for judgment to be given in her favour upon admissions in the defence and for an account to be taken by a master of the District Court. In particular, the physiotherapist sought an account of:
1.all receipts and payments with regard to monies received directly and indirectly and managed by the bookkeeper for or on behalf of the physiotherapist during the term of engagement; and
2.all sums paid by the bookkeeper to or on behalf of the physiotherapist and which pursuant to the contract between them and/or in the course of the bookkeeper’s engagement are properly to be taken into account.
The application was made pursuant to rr 144.3(1) and 182.6 of the Uniform Civil Rules 2020 (SA). Those rules are in the following terms:
144.3—Judgment on admissions
(1)The Court may, on application by a party, give judgment in favour of an applicant based on admissions on a claim, cause of action or separate issue that arises in the same manner as it may grant summary judgment under rule 144.2(1).
182.6—Account or inquiry
(1)If a judgment includes a provision that accounts be taken or an inquiry be conducted to determine relief to be granted, it may include provisions about—
(a) the appointment of a party, an independent expert or another person to prepare the account or conduct the inquiry;
(b) the nature and extent of the accounting or inquiry;
(c) how the accounting or inquiry is to be undertaken including in relation to evidence being taken from persons to be examined; or
(d) how the account or a report about the result of the inquiry is to be prepared.
(2)A judgment may include an order that, on the filing of an account under this rule, a party must pay to another party an amount certified by the person preparing the account as owing.
(3)The Court may monitor the progress of the account or inquiry and may—
(a) require the person undertaking it to appear before the Court to explain any delay; or
(b) make orders to enforce cooperation by a party in relation to it.
The determination of the summary judgment application
As can be seen from the terms of r 182.6, the rule of court assumes that there is a judgment and that the judgment includes a provision that accounts be taken or an inquiry be conducted.
Accordingly, the physiotherapist sought judgment based on admissions pursuant to r 144.3(1) on the separate issue of taking an account pursuant to r 144.2(1). The summary judgment application was argued on 4 March 2021 and the master provided his decision to the parties on 13 April 2021.
The master, with respect correctly, posed the question as being whether there was “no reasonable basis” for contesting the claim for an account. Both parties relied on Rowe v National Australia Bank Ltd and it will be necessary to return to that decision.[33] The master, however, followed the ruling of Nicholson J in Roberts v Eckert to the following effect:[34]
In order for the defendant to have become entitled to an order for an account he would have had to prove at trial (and obtain a finding) that the plaintiff was an accounting party.[35] An order to account is not a mere direction to enquire into a situation in order to see if any money is due. It proceeds upon a finding that there is an entitlement and that an enquiry is necessary in order to work out the amount to which the moving party is entitled.[36]
[33] Rowe v National Australia Bank Ltd (2019) 56 WAR 1 (Rowe) (Quinlan CJ, Murphy JA and Sofronoff AJA, with whom Quinlan CJ agreed).
[34] Roberts v Eckert [2020] SASC 27, [43] (Nicholson J).
[35] Hancock v Rinehart [2015] NSWSC 646, [338] (Brereton J).
[36] See P Young, C Croft and M Smith, On Equity (Lawbook Co, 2009), [16.1300] and [16.1320].
The master concluded in these terms:
I have no doubt that an agent owes fiduciary duties to her or his principal. In some circumstances, that will include a duty to account. Account for what? In this case it must be said that it is the duty to account for the money to which the respondent is said to have been in control – or in respect of which she has said to have authority.
It seems to me that it must be arguable as she only had control of – or authority over – any amount for a short time once a week. She pleads that she banked that. I think that she is entitled to maintain a case that it is not proved – on the admissions in the pleadings – that for the rest of the week the money was in her possession or under her control – and that when the money was in her possession or under her control she banked it and the banking records are a sufficient accounting.
Further, the respondent also pleads that the applicant, from time to time, took money from the unsecured cash tin. That also seems to be a triable issue.
Accordingly, the master concluded that he could not say that there was no reasonable basis for resisting the claim. He dismissed the application for summary judgment.
The physiotherapist appealed to a judge of the District Court.
The judge effectively started with the admission earlier referred to, namely, that it was an implied term of the engagement that the bookkeeper would properly account to the physiotherapist as to the bookkeeper’s handling of monies on behalf of the physiotherapist.[37]
[37] Revised Defence, [12A]; Jefferis v Holmes [2022] SADC 12, [6].
The judge noted that the bookkeeper admitted that she was an agent and a bailee of monies in carrying out her functions.[38] Although the judge also found that the allegation that the bookkeeper was a trustee was admitted, that allegation was denied.[39]
[38] Revised Defence, [14]; Jefferis v Holmes [2022] SADC 12, [7].
[39] Revised Defence, [14.3].
The judge, with respect correctly, observed that whether judgment should be given on admissions was a discretionary matter. As for the rules of court regarding the taking of an account, like the master, the judge observed that the former rules were drawn in broader terms and that the present rule requires a judgment.[40]
[40] Cf Wombats Downunder Pty Ltd v G & W A Discenso Pty Ltd (No 2) [2011] SASC 3.
As the judge put it, the master found that the bookkeeper may have a defence to the claim that she misappropriated the physiotherapist’s money and, on that basis, the master was unable to find that there was no reasonable basis for resisting the claim to an account. As to this, the judge held:
I understand why the Master came to that conclusion but, with respect, it seems to me to be conflating two separate issues. The summary judgment application only sought an order for an account. It was not seeking judgment for the money claimed in the Statement of Claim. They are separate issues. It is permissible to seek summary judgment in respect of part of the claim and that is what was sought.
The judge referred to observations made by Quinlan CJ in Rowe to the effect that, where parties are in an established accounting relationship, particularly where the defendant is clearly an accounting party, equity may well order an account even where it is unknown whether a credit sum will be found to be owing.[41]
[41] Rowe v National Australia Bank Ltd (2019) 56 WAR 1, [5] (Quinlan CJ).
On this basis, the judge held that it was permissible to order the taking of an account even where it is not established that money may be owing. The judge held that there was no triable issue as to whether the bookkeeper is an accounting party. His Honour held that the ruling of Nicholson J in Roberts v Eckert needed to be put into context because, in that case, the relationship was not an established accounting relationship. The judge concluded:[42]
I am satisfied that the Master erred in deciding that it was not appropriate to order the taking of an account without first finding that monies were due to the appellant from the respondent. I allow the appeal. The matter should be remitted to a Master for consideration of the form of the account that is to be taken.
[42] Jefferis v Holmes [2022] SADC 12, [22].
The judge added:[43]
As an aside, the taking of an account is the pragmatic and sensible thing to do in this matter, in any event. The taking of the account will finalise the matter. It is unlikely that there would need to be a trial. The account will establish whether or not there are any monies owing to the applicant by the respondent. If an amount is owing, judgment will be entered in accordance with the findings of the account. If not, the proceedings will be dismissed. Having a trial simply for the purpose of getting into a position to order the taking of an account is not a prudent use of the resources of the Court, or of the parties.
[43] Jefferis v Holmes [2022] SADC 12, [23].
The contentions of the parties
Central to the challenge made by the bookkeeper on this appeal is the proposition that the judge failed to consider whether, even if the parties were in an established accounting relationship, it was appropriate that an account be ordered before trial. As to this, the bookkeeper contends that whether an account should be taken before trial, as well as the nature and scope of any account to be taken, remain triable issues.
It was, accordingly, an error to give summary judgment so as to facilitate the taking of an account in this case at this time.
For the physiotherapist, the reasons of the judge are defended on the basis that, properly understood, the likely nature and scope of the account in this matter will render a trial unnecessary.
In order to make good this proposition, the physiotherapist accepted or advanced two anterior propositions. The first is that physiotherapist accepts that the bookkeeper could only be an accounting party in respect of the practice proceeds on those occasions she accessed the cash tin for the purposes of banking its contents. It is only in that limited respect that the bookkeeper, whether as agent or as bailee, could be called on to account.
The second proposition advanced by the physiotherapist was that, though the judge left the form of the account that is to be taken to the master for determination, the likelihood is that the bookkeeper will maintain that the banking records represent a proper accounting of the monies taken from the cash tin and banked on behalf of the physiotherapist. It will then be a matter for the physiotherapist to cross-examine the bookkeeper by reference to the records that she generated concerning invoicing and receipts to demonstrate that the banking records were inaccurate and, thereby, the extent of the asserted shortfall. Proceeding in this way, according to the physiotherapist, will likely obviate the need for any trial.
The taking of an account - Rowe v National Australia Bank Ltd
Two questions arise on this appeal. The first is whether the bookkeeper is, in respect of the physiotherapist by whom she was engaged, an accounting party. There was little or no dispute between the parties that the bookkeeper, whether as agent or as bailee, was an accounting party.
The second question, highlighted by the bookkeeper, is whether this is a case in which it is proper to order the taking of accounts before trial. The appeal really turns on this question, which must be addressed in the context of whether it was appropriate to grant summary judgment to facilitate the taking of an account before trial.
The general approach to the taking of accounts was described by Judge Lunn in Clarke v Edwards in the following way:[44]
… 6R 251 is the successor to O15 and 33 of the Supreme Court Rules 1947 and 87R 85.02, and many earlier rules which dealt with, inter alia, inquiries ordered by the Court.[45] Accounts and inquiries was a composite expression used to describe a special procedure to deal with ancillary issues in an action which were not suited to being resolved by a formal trial. I can find no exposition of precisely what was meant by “accounts” and what by “inquiries”. In general, the practice seems to have been to have designated as accounts issues which were expressed in monetary terms and as inquiries any non-monetary issues. Thus traditionally the term “inquiry” was used for the ascertainment of factual issues such as who are the next of kin or creditors, who are the beneficiaries of a trust, what damage resulted from a particular cause or the like. In my view “report” in sub-r 251(1) and (3) means a report on inquiries as traditionally understood.
Historically, it seems accounts and inquiries were directed to be taken by a judgment after a trial which resolved the major issues in the action. However, the practice developed of allowing them to be ordered before trial (eg O15 of the Supreme Court Rules 1947) where it was clear they would be ordered and it was expedient to take them before trial.
[44] Clarke v Edwards [2012] SASC 213, [19]-[20] (Judge Lunn).
[45] For a history of inquiries ordered by Courts see Atkin’s Court Forms Second Edition Volume 33, 1989 pp 260 et seq.
As has been seen, the present rules assume that there is a judgment and that the judgment includes a provision that accounts be taken or that an inquiry be conducted. In the ordinary course, that judgment will be entered following a trial. Whilst that is not invariably so, care must be exercised when considering whether to order an account or an inquiry before trial.
In Associated Alloys Pty Ltd, the High Court explained that, before a party can be ordered to account, liability to account must be established.[46] In that case there was no proof that a party was a fiduciary owing trust obligations to the other party, with the result that the remedy of an account was denied.
[46] Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (In Liq) (2000) 202 CLR 588 (Associated Alloys Pty Ltd), [56] (Gaudron, McHugh, Gummow and Hayne JJ).
Rowe concerned the question whether a counterclaim in which an account was pleaded as between mortgagors and their bank disclosed a reasonable cause of action. The matter was complicated by the prolix and convoluted nature of the pleaded counterclaim.[47] Ultimately, the court ruled that the pleading seeking a general account should be struck out because mortgagors under a subsisting mortgage who seek an account must first offer to redeem.[48]
[47] Rowe v National Australia Bank Ltd (2019) 56 WAR 1, [9] (Quinlan CJ).
[48] Rowe v National Australia Bank Ltd (2019) 56 WAR 1, [143] and [152] (Murphy JA and Sofronoff AJA, with whom Quinlan CJ agreed).
Although the court accepted that it was not always necessary that a party seeking an account be in a position to demonstrate that some amount is owed, it is necessary to demonstrate that a liability to account has been established.[49]
[49] Rowe v National Australia Bank Ltd (2019) 56 WAR 1, [56] (Murphy JA and Sofronoff AJA, with whom Quinlan CJ agreed) following Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liq) (2000) 202 CLR 588.
As was explained by the majority in Rowe, Murphy JA and Sofronoff AJA, a plaintiff seeking an account must generally plead the relationship or circumstances by which it is alleged that the defendant is an accounting party, together with the material facts which justify the making of an order for an account at that particular time.[50] Those material facts will generally involve pleading that proper accounts have not been given. Examples include a solicitor who has received money from a client, and a co-tenant who has received the rents of a property and not yet accounted for those receipts to the other co-tenant. In those kinds of cases, the party seeking an account must plead that it is not in a position to know its lawful entitlement without an account.[51]
[50] Rowe v National Australia Bank Ltd (2019) 56 WAR 1, [87] (Murphy JA and Sofronoff AJA, with whom Quinlan CJ agreed).
[51] Rowe v National Australia Bank Ltd (2019) 56 WAR 1, [88]-[89] (Murphy JA and Sofronoff AJA, with whom Quinlan CJ agreed).
The Court in Rowe upheld the decision of a primary judge to strike out the pleading and ordered that leave to replead be granted on specified conditions.[52]
[52] Rowe v National Australia Bank Ltd (2019) 56 WAR 1, [164]-[165] (Murphy JA and Sofronoff AJA, with whom Quinlan CJ agreed).
The historical derivation of an account; common law and equity
The historical derivation of the action to account was described in some detail by the majority in Rowe:[53]
An account is one of the oldest common law actions, instances of which appeared as early as 800 years ago. The account was issued as a praecipe writ, in the form of an order from the king that the defendant “does account”. It involved two stages: (1) a decision that the defendant was liable to account (quod computet), which, if it entailed issues of fact, was decided by a jury, and (2) a taking of the account (by court-appointed auditors — with no power to order discovery), drawing with it liability and enforcement (quod recuperet).[54] The subject matter was not confined to money but included goods and other property, reflecting its origins at a time when goods and services were primary forms of payment.[55]
[53] Rowe v National Australia Bank Ltd (2019) 56 WAR 1, 21 [57] (Murphy JA and Sofronoff AJA, with whom Quinlan CJ agreed). See also Rapid Metal Developments (Australia) Pty Ltd v Rosato [1971] Qd R 82, 89 (Wanstall J).
[54] See, eg, Anonymous (1412) 145 ER 47; (1388/89) 12 Rich II.
[55] JA Watson, ‘The Duty to Account: Development and Principles’ (2016) 39 Sydney Law Review 3, 429, [2], [28], [95], [169], [173].
Their Honours observed that a defendant could be required to “account generally” or only in respect of “specific dealings”. The parties to this appeal proceeded on the basis that what was in contemplation was a general account.
An example of a general account is provided by Mellish v Royal African Co and Richard Edlin, where an order was made that an agent account generally concerning the agent’s dealings on behalf of a principal.[56] By contrast, Turner v Wright provides an example of a specific account, where an account was ordered of the number of cattle on a station purchased by a plaintiff, where the purchase price was to reflect the number of cattle at the time of purchase and a muster had not been undertaken as required under the contract.[57]
[56] Mellish v Royal African Co and Richard Edlin (1679) 22 ER 822.
[57] Turner v Wright (1862) 2 SCR (NSW) Eq 9.
By the eighteenthcentury the common law action for an account had largely fallen into desuetude, partly due to the rise of the common law action for what became known as money had and received, and so it fell to Chancery to effect bills for accounts in the exercise of its concurrent equitable jurisdiction. In the course of a lengthy exposition on the remedy of an account, the majority in Rowe concentrated on the remedy of an account in equity’s auxiliary jurisdiction, but also considered the three bases for the remedy of an account in equity. As they explained, where there is to be an account of profits in equity’s exclusive jurisdiction, the account is taken in vindication of the plaintiff’s underlying equitable right against the defendant.[58]
[58] Rowe v National Australia Bank Ltd (2019) 56 WAR 1, [97] ff (Murphy JA and Sofronoff AJA, with whom Quinlan CJ agreed). See also Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd (2018) 265 CLR 1.
The way this remedy was addressed before the Judicature Acts 1873-1875 (UK) (Judicature Acts) was explained by Lindley LJ (as he was) in London, Chatham & Dover Railway Co v South Eastern Railway Co:[59]
Before the Judicature Acts a suit for an account could be maintained in equity in the following cases:- (1.) Where the plaintiff had a legal right to have money payable to him ascertained and paid, but which right, owing to defective legal machinery, he could not practically enforce at law. Suits for an account between principal and agent, and between partners, are familiar instances of this class of case. (2.) Where the plaintiff would have had a legal right to have money ascertained and paid to him by the defendant, if the defendant had not wrongfully prevented such right from accruing to the plaintiff. In such a case a Court of law could only give unliquidated damages for the defendant’s wrongful act; and there was often no machinery for satisfactorily ascertaining what would have been due and payable if the defendant had acted properly. In such a case, however, a Court of Equity decreed an account, ascertained what would have been payable if the defendant had acted as he ought to have done and ordered him to pay the amount: M’Intosh v Great Western Railway Company … is the leading authority in this class of case. (3.) Where the plaintiff had no legal but only equitable rights against the defendant, and where an account was necessary to give effect to those equitable rights. Ordinary suits by cestuis que trust against their trustees and suits for equitable waste fell within this class. (4.) Combination of the above cases.
[59] London, Chatham & Dover Railway Co v South Eastern Railway Co [1892] 1 Ch 120, 140.
Quite apart from the common law action for an account, the equitable action for an account generally depended upon whether the plaintiff was pressing an equitable or a common law right.
Where the plaintiff was relying on an equitable right, the plaintiff was generally entitled to a decree for accounts if the account was necessary to give effect to the equitable right. Examples include cases where beneficiaries were pursuing suits against trustees.[60] For example, in MacKenzie v Johnston, a principal sought an account from his agent concerning dealings undertaken by the agent on behalf of the principal. The principal reposed trust and confidence in the agent. As Sir John Leech VC explained:[61]
The Defendants here were agents for the sale of the property of the Plaintiff, and wherever such a relation exists, a bill will lie for an account. The Plaintiff can only learn from the discovery of the Defendants … how they have acted in the execution of their agency …
[60] R P Meagher, J D Heydon and M J Leeming, Meagher, Gummow & Lehane’s Equity: Doctrines and Remedies (LexisNexis Australia, 4th ed, 2002), [25-015].
[61] MacKenzie v Johnston (1819) 56 ER 742, 743.
By contrast, in Padwick v Stanley, a solicitor sought an account from his client. The account was refused because although a principal is entitled to have an account taken in equity against his agent, the agent does not have a similar right against his principal: “…the agent reposes no such trust or confidence in the principal.”[62]
[62] Padwick v Stanley (1852) 68 ER 664, 664 (Sir George Turner VC).
Where the plaintiff was relying on a common law right, the Chancery Court generally refused to say when it would, and when it would not, grant the remedy of an account. As the Lord Chancellor held in North-Eastern Railway Company v Martin, it was “impossible with precision to lay down rules or establish definitions as to the cases in which it may be proper for this Court to exercise this jurisdiction”.[63]
[63] North-Eastern Railway Company v Martin (1848) 2 Ph 758, 762; 41 ER 1136, 1138 (Lord Cottenham LC).
In that case, a firm of surveyors and engineers sued a railway company for fees and expenses incurred in connection with work done for the company between 1845 and 1847. The firm rendered a bill consisting of hundreds of items against which credit was given for various amounts which the railway company had, from time to time, paid on account, leaving a balance for which the action was brought. The railway company sought to restrain the firm’s action at law on the basis that it was first entitled to an account in equity of the dealings between the firm and the railway company. Lord Cottenham dismissed the railway company’s suit for an injunction and for an account. The Lord Chancellor explained:[64]
The jurisdiction in matters of account is not exercised, as it is in many other cases, to prevent injustice which would arise from the exercise of a purely legal right, or to enforce justice in cases in which Courts of law cannot afford it; but the jurisdiction is concurrent with that of the Courts of law, and is adopted because, in certain cases, it has better means of ascertaining the rights of parties. It is, therefore, impossible with precision to lay down rules or establish definitions as to the cases in which it may be proper for this Court to exercise this jurisdiction. … It is, therefore, necessary for this Court to reserve to itself a large discretion, in the exercise of which due regard must be had, not only to the nature of the case, but to the conduct of the parties.
[64] North-Eastern Railway Company v Martin (1848) 41 ER 1136, 1138 (Lord Cottenham LC).
Where the order is sought in the exercise of equity’s auxiliary jurisdiction, the order will generally be made if proceedings at law for debt or money had and received would be deficient in some way.[65] The majority in Rowe gave various examples of situations where an account was ordered in equity in support of a legal right, particularly a right to have money ascertained and paid by the defendant if the defendant had not wrongfully prevented that right from accruing to the plaintiff. Where an account is then ordered, the account results in the creation of an equitable debt in place of the legal debt.[66]
[65] Rowe v National Australia Bank Ltd (2019) 56 WAR 1, [92] (Murphy JA and Sofronoff AJA, with whom Quinlan CJ agreed).
[66] Rowe v National Australia Bank Ltd (2019) 56 WAR 1, [90] (Murphy JA and Sofronoff AJA, with whom Quinlan CJ agreed).
The majority in Rowe cited the well-known text, Meagher, Gummow & Lehane’s Equity: Doctrines and Remedies regarding the 10 suggested categories of case in which equity may decree an account in support of a legal right:[67]
(1) mutual accounts, (2) fiduciary or quasi fiduciary relationship, (3) dissolution of partnership, (4) waste, (5) trespass, (6) intellectual property infringement, (7) protection of non-accrued contractual rights, (8) royalty agreements, (9) accounts otherwise too complicated to settle at common law, and (10) treasonable activities.
[67] J D Heydon, M J Leeming and P G Turner, Meagher, Gummow & Lehane’s Equity: Doctrines and Remedies (LexisNexis Australia, 5th ed, 2015), [26-030]-[26-075].
On the hearing of this appeal, the parties were agreed that this was a case coming within the second of the categories outlined in Meagher, Gummow & Lehane.
Recognised accounting parties at law include receivers (whether actual or constructive), partners, joint tenants and tenants in common, executors, employees, bailees, factors, and agents.[68] As earlier mentioned, there was really no dispute in this case that the bookkeeper was an accounting party. Whilst it will always be necessary to show that a party is an accounting party, the key question will remain whether there is an admitted or established liability to account at the time the order for an account is sought.
[68] Rowe v National Australia Bank Ltd (2019) 56 WAR 1, [59] (Murphy J and Sofronoff AJA, with whom Quinlan CJ agreed).
The majority in Rowe explained that, where there is an admitted or established liability to account, the only defences are (1) release, (2) that the defendant has already rendered proper accounts and that the account has already been paid or (3) that there are settled accounts between the parties.[69] In a passage relied on by the physiotherapist in this case, the majority concluded:[70]
Where it is clear that the defendant is an accounting party, and that an account must inevitably be ordered at trial, the plaintiff may apply for a summary order for an account, akin to a summary judgment application. As with summary judgment, an account would not be summarily ordered if there were some issue to be tried, such as whether the plaintiff has established an obligation on the part of the defendant to account, or whether the defendant has some arguable affirmative defence (such as settled accounts or a release).
(footnotes omitted)
[69] Rowe v National Australia Bank Ltd (2019) 56 WAR 1, [94] (Murphy J and Sofronoff AJA, with whom Quinlan CJ agreed).
[70] Rowe v National Australia Bank Ltd (2019) 56 WAR 1, [95] (Murphy J and Sofronoff AJA, with whom Quinlan CJ agreed).
Must a sum be owed before an account is taken?
Considerable attention was given on the hearing of this appeal to whether it is first necessary to demonstrate that a sum is owed before it is appropriate to order that an account be taken.
The parties addressed that issue by reference to the decision of the Privy Council in Doss v Doss where Dr Lushington spoke for the Privy Council in the following terms:[71]
We cannot make a Decree, ordering them to account, without first determining that they are liable to pay if anything be found due.
A Decree for an account is not, as appears to have been assumed, a mere direction to inquire and report. It proceeds, and must always proceed, upon the assumption that the party calling for it is entitled to the sum found due. It is a Decree affirming his rights, only leaving it to be inquired into, how much is due to him from the party accounting.
[71] Doss v Doss (1843) 18 ER 464 (Doss), 472.
Doss was a case concerning a disputed family banking business. There were two brothers in the bank and one of them, Ramchund, had managed the bank at Nagpore until his death. The other brother, Muttychund, and then later his sons following his death, sought an account from Ramchund’s sons of all Ramchund’s dealings with the bank. The account was premised on the basis that Ramchund’s sons would be liable for any amount found to be due on the taking of the account. Ramchund’s sons were targeted as they were Ramchund’s heirs and representatives and, on that basis, liable for his acts and debts. However, Ramchund’s sons defended the suit on the ground that they “became separate” from Ramchund in 1823 and, in addition, Ramchund had bequeathed his estate by will to his grandson, Hurry Doss.
In Doss there were contested questions as to whether a separation had occurred and whether the will was valid. Dr Lushington’s observations recognised that, in the circumstances of the case before him, a trial of the underlying facts in properly constituted proceedings was necessary before it could be established that the sons were an accounting party with a liability to account to the plaintiff.
A number of cases have since referred to Doss, or at least to the proposition that an account may not be ordered where there is uncertainty as to whether the defendant is an accounting party, liable to the plaintiff. For example, in Milltec Australia Pty Ltd v Burnes, Handley JA explained:[72]
A plaintiff is not entitled to an inquiry to discover whether or not he has a cause of action. The rights of the parties must be determined at the trial and any accounts or inquiries which are then ordered “follow merely consequentially”: McGrory v Alderdale Estate Co Ltd [1918] AC 503 at 511 and generally Spencer Bower Turner & Handley “Res Judicata” 1996 pp 76-8.
[72] Milltec Australia Pty Ltd v Burnes [2006] NSWCA 13 (Milltec Australia), [13] (Handley JA, with whom Hodgson JA and Campbell AJA agreed).
Nonetheless, the Court of Appeal in Rowe explained that Dr Lushington’s statement in Doss is not to be taken to express a rigid rule that a party calling for an account must always establish an entitlement to some, uncertain amount.[73] The entitlement to be paid some uncertain amount is not to be “elevated to a pre-condition to the exercise of the court’s jurisdiction to order an account”.[74]
[73] Rowe v National Australia Bank Ltd (2019) 56 WAR 1, [5] (Quinlan CJ).
[74] Rowe v National Australia Bank Ltd (2019) 56 WAR 1, [7] (Quinlan CJ).
Similarly, it will not invariably be necessary to plead that, upon the taking of an account, a credit sum will necessarily be found to be due:[75]
An account may be ordered in a variety of circumstances, and a plaintiff seeking an account from an accounting party may often not know whether [a credit sum will necessarily be found to be due]. Each case will depend upon its own circumstances, and ultimately the matters to be pleaded (and proved) will depend upon the basis upon which it is alleged that the defendant is an accounting party and the events which have happened leading to the claim for relief.
(footnotes omitted)
[75] Rowe v National Australia Bank Ltd (2019) 56 WAR 1, [89] (Murphy JA and Sofronoff AJA, with whom Quinlan CJ agreed).
In some cases, equity may order an account even where it is unknown whether a credit sum will be found owing, particularly where the defendant is clearly an accounting party. In that respect, it has been said that the categories of case in which the court may exercise the jurisdiction to order an account are not closed.[76]
[76] Rowe v National Australia Bank Ltd (2019) 56 WAR 1, [5] (Quinlan CJ), citing North-Eastern Railway Company v Martin (1848) 41 ER 1136, 1138 (Lord Cottenham LC).
Nonetheless, whether an amount is likely owed remains a relevant consideration when determining whether to order an account. As Quinlan CJ emphasised in Rowe, the discretion to order an account is not at large:[77]
It is necessary, in every case, that there be material facts that would justify the order for an account. In many cases, particularly those in which the defendant is not clearly an accounting party, the existence of an entitlement to some amount will be the critical material fact that justifies the order, and without which an account will not be ordered.
[77] Rowe v National Australia Bank Ltd (2019) 56 WAR 1, [6] (Quinlan CJ).
Whilst it is correct to say that Dr Lushington’s statement in Doss is neither a “rigid rule” nor a “universal truth”,[78] it will often guide a court when determining whether an account should be ordered.
[78] Mulherin v Quinn Villages Pty Ltd [2007] QSC 231, [20] (Muir J).
When is it appropriate to order an account?
In Southern Equity Pty Ltd v Timevale Pty Ltd the defendant was granted a licence to use intellectual property concerning a cartoon of a fictitious Australian pub in connection with a tourism venture known as “Aussie World” in consideration for the payment of a royalty. The royalty was based on revenues from the operation of the tourist facility. The action brought by Southern Equity, which held the benefit of an assignment of the intellectual property rights, alleged an underpayment of royalties. An account of the royalties payable was ordered by Brereton J:[79]
[Southern Equity’s claim] is a claim for debt — for moneys due and owing by Timevale under the Agreement. That relationship of debtor and creditor satisfies the prerequisites to ordering an account that the plaintiff be entitled to moneys from the defendant, and that the defendant be an “accounting party” [Doss v Doss (1843) 18 ER 464 at 472; Sharpe v Goodhew (unreported, Federal Court of Australia, Drummond J, No QI6 of 1989, 11 December 1992) at [5]]. Any account would be ordered for the purpose of calculating the amount of the debt, rather [than] assessing damages.
[79] Southern Equity Pty Ltd v Timevale Pty Ltd [2012] NSWSC 15 (Southern Equity), [112].
In the case of Sharpe v Goodhew, mentioned above, Drummond J had explained:[80]
The taking of an account is only appropriate once it has been established that the parties involved are in an accounting relationship with each other, that is, only once it has been established that one party is liable to pay to the other anything that is found, on the taking of the account, to be due to that other: Rapid Metal Developments (Australia) Pty Ltd v Rosato (1971) Qd R 82 at 88-90; Rockhampton Permanent Building Society v Petersen (1986) 1 Qd R 128 at 130 and Lang v Simon (1952) 53 SR (NSW) 508 at 514. Rules such as Order 39, rules 1 and 3 of the Federal Court Rules do not create a new cause of action or a new equity, nor do they confer a general right to an account in substitution for the trial of issues; these rules do not authorise the sending of the whole case to the Registrar, they only authorise the directing of such accounts as are subsidiary to determining the rights of the parties, thus emphasising that the main issue in suit cannot be disposed of by ordering the taking of an account: Rapid Metal Developments (Australia) Pty Ltd v Rosato at pages 88 and 89.
[80] Sharpe v Goodhew (unreported, Federal Court of Australia, Drummond J, No Q16 of 1989, 11 December 1992), [5].
In Southern Equity, Brereton J held that when determining whether to order an account the court will consider, first, whether it would otherwise be difficult for the plaintiff to establish the true state of affairs as the defendant is in possession and control of the relevant information and documents and, secondly, that the accounts are too complex to be resolved in a common law trial.
In Rowe, the majority cautioned that the older cases which suggest that an account will be ordered because accounts were otherwise too complicated to settle at law tended to be pre-Judicature Acts cases where the procedures available at law lacked the procedural and inquisitorial remedies otherwise available in equity.[81]
[81] Rowe v National Australia Bank Ltd (2019) 56 WAR 1, [92] (Murphy JA and Sofronoff AJA, with whom Quinlan CJ agreed).
Those concerns have been overtaken by the capacity of the court to administer law and equity concurrently, particularly since the action for an account at common law has perished. Accordingly, matters which might in earlier times have been the subject of an account in equity are routinely addressed by a judge in the course of a trial where the parties have the benefit of modern procedural advantages, including discovery and expert reports.[82]
[82] Rowe v National Australia Bank Ltd (2019) 56 WAR 1, [92] (Murphy JA and Sofronoff AJA, with whom Quinlan CJ agreed).
Indeed, when determining whether the case is a proper one for the ordering of an account ahead of the trial, the court must also consider and contrast the probable course of proceedings in a court of law. Although concerns about complexity might sometimes be regarded as “an artefact of the pre-Judicature Acts administration of law and equity”,[83] what is likely to be encountered at a trial, as distinct from during a process of taking an account before trial, is nonetheless relevant and important.
[83] Rowe v National Australia Bank Ltd (2019) 56 WAR 1, [9] (Quinlan CJ).
For example, in Lang v Simon, the plaintiff had been engaged by the defendant to manage a pig farm and did so over a number of years. The agreement was that the plaintiff would receive 50 per cent of the profits in addition to a wage in return for management of the farm. The plaintiff gave information to the defendant’s accountant and, eventually, requested that the defendant provide balance sheets for the pig farm. The defendant refused. The plaintiff was not paid anything by way of profit. The plaintiff alleged that there were profits and the defendant maintained that there were no profits but, rather, a loss. McLelland J ordered an account, mindful how a trial might proceed before a jury:[84]
It is, of course, necessary to envisage the probable course of proceedings in a court of law at nisi prius; the form in which the evidence would be presented to the jury; the manner in which the questions in dispute would be put before the jury; the probabilities of the jury and the jury room being in a position, after having determined all relevant facts and figures, to make out with all necessary accuracy the account for each year of operation … Having envisaged the course of proceedings … I have come to the conclusion that a jury would not be competent to examine the accounts in this case with all necessary accuracy, or, indeed, justly and fairly.
…
In the present case it is admitted on the pleadings that the defendant is liable to pay 50 per cent of profits if any profits are found to have been made. I do not think, therefore, that the principle mentioned by Dr Lushington would prevent the plaintiff from obtaining an account.
[84] Lang v Simon (1952) 53 SR (NSW) 508, 512-514.
Accordingly, when determining whether to order an account, the court will consider whether the defendant is a recognised accounting party liable to account to the plaintiff at the time of the order, together with the purpose and likely course of the account.
Even though the parties in this case stand in a fiduciary or quasi-fiduciary relationship, this case is very different to cases such as Asset Risk Management Ltd v Hyndes.[85] In that case, the New South Wales Court of Appeal made an order to account against the manager of the plaintiff company who admitted that he had stolen $46 million of company monies but declined to say what he had done with it.[86]
[85] Asset Risk Management Ltd v Hyndes [1999] NSWCA 201.
[86] See the decision of the High Court regarding the taking of accounts in agency generally, Warman International Ltd v Dwyer (1995) 182 CLR 544.
Similarly, in Barkley v Barkley Brown, an account was ordered in circumstances where it had been demonstrated that two beneficiaries of the deceased had received the benefit of various loans made by the deceased for which both were yet to account to the estate. It is noteworthy that the account in that case was made only following a trial in which it had been established that one of the beneficiaries held the deceased’s bank books and that both the beneficiaries had received the benefit of various loans for which they had not accounted.[87]
[87] Barkley v Barkley Brown [2009] NSWSC 76.
By contrast, in Duncan Davis (Sales) Pty Ltd v Davis Hansen J refused to order an account before trial in circumstances where there remained uncertainty over whether a company’s action against its former employee for monies received had been established:[88]
… there are issues as to whether the defendant had a duty to keep and render accounts … as to the defendant’s authority, the course of dealing in the business … and matters such as record keeping, that should be decided prior to ordering an account. Such matters, and others, will be relevant to the scope and nature of any account, if one is ordered, and the terms upon which it ought be undertaken. But, of course, an account may not be ordered, depending on the resolution of issues at the trial. I was referred to a number of cases which reflect hesitation in the ordering of an account pending trial, and of a consistent refusal to do so where there are preliminary issues or disputed questions of fact that must be determined before it could be said that a party will be liable for a balance found due. This is because the accounting is subsidiary to the issue of liability, the issues pertaining to which must first be determined. … in the present case the defendant contends that he dealt with moneys received in accordance with his authority and that the balance of all moneys was received … But, critically, there are issues which must be determined before properly being able to decide whether to order an account.
[88] Duncan Davis (Sales) Pty Ltd v Davis [2008] VSC 127, [51] (Hansen J).
The considerations described by Hansen J may be particularly important where it is suggested that the account should be taken ahead of, or indeed instead of, conducting a trial in the ordinary way.
Liability to account?
In some cases, the exercise of discretion to order an account will be influenced by the admitted existence of an accounting relationship and the inability of the plaintiff to otherwise ascertain the relevant information which will determine whether an amount is owed:[89]
Both under the old Chancery rule, and the new one, the necessity to have the accounts taken should appear on the pleadings, or be shown by evidence on affidavit (Daniell's Chancery Practice (6th ed.) Vol. 1 p. 570), for example, that the defendant is an accounting party (Walker v. Woodward (1826) 1 Russ. 107, 38 ER 42), or that, there being no dispute as to fundamentals upon which liability to pay would depend, and there being a relationship in consequence of which a balance will certainly lie on one side or the other, the balance cannot conveniently be ascertained except by taking an account.
[89] Rapid Metal Developments (Australia) Pty Ltd v Rosato [1971] Qd R 82, 89 (Wanstall J).
In other cases, there may be no good reason to proceed with an account before trial notwithstanding the existence of an admitted accounting relationship. That may be the appropriate conclusion where there remain contested facts which are better resolved by proceeding to trial in the ordinary way.[90]
[90] Rapid Metal Developments (Australia) Pty Ltd v Rosato [1971] Qd R 82, 89-90 (Wanstall J), “where the state of the account, and therefore the balance, depend upon the determination of disputed questions of fact … these questions must first be decided in the ordinary way upon evidence”.
In every case the question will be whether liability to account at the time it is sought has been established.[91]
[91] Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (In Liq) (2000) 202 CLR 588, [56] (Gaudron, McHugh, Gummow and Hayne JJ); Rowe v National Australia Bank Ltd (2019) 56 WAR 1, [56] (Murphy JA and Sofronoff AJA, with whom Quinlan CJ agreed).
The exercise of discretion in this case
The judge proceeded on the basis that there was “no triable issue in respect of whether the respondent [bookkeeper] is an accounting party”.[92] Though that proposition was not challenged in this Court, this case demonstrates why the existence of an established accounting relationship does not necessarily, and of itself, justify an order that accounts be taken before trial.
[92] Jefferis v Holmes [2022] SADC 12, [20].
In determining whether this was an appropriate case to grant summary judgment, it was necessary to go further than determining whether the bookkeeper was an admitted accounting party. It was necessary to consider whether a liability to account had been established at the time the order was sought. It was also necessary to consider precisely how the account before trial might proceed.
The failure to consider these matters vitiates the judge’s exercise of discretion.
In the circumstances of this case, the relationship of agent or bailee only arose in respect of the monies or cheques received from the physiotherapist. As has been seen, that generally occurred only once they were placed by the physiotherapist in the cash tin and accessed by the bookkeeper on those occasions when she attended the practice.
This is not a case where the physiotherapist had effectively outsourced her practice administration and banking. In that kind of case, the physiotherapist might well be at a loss to know what had been received from patients, as well as whether all of those receipts had been banked. An engagement of that kind might well generate an obligation to keep proper records and, from time to time, a liability to account in respect of receipts and banking.
In this case, by contrast, it was the physiotherapist and not the bookkeeper who obtained payments from patients. She, rather than the bookkeeper, was best placed to know what monies received from patients had been placed in the cash tin. The bookkeeper’s agency or bailment only commenced once she opened the tin and banked the contents. As the master recognised, with respect correctly, the bookkeeper was entitled to maintain that, for the rest of the week, there was no money in her possession or under her control and, when the money was in her possession or under her control, she banked it and the banking records represented a sufficient accounting.
In these circumstances it was, with respect, erroneous to conclude that an account should be taken because the bookkeeper was an admitted accounting party without also determining whether there was a liability to account at this time and, in this case, that depended on whether any monies were likely due to the physiotherapist. There was therefore a reasonable basis to defend the claim for an account and a summary order for accounts should not have been made. [93]
[93] Cf, Rowe v National Australia Bank Ltd (2019) 56 WAR 1, [95] (Murphy J and Sofronoff AJA, with whom Quinlan CJ agreed).
Comparing a trial with an account
Whether this was an appropriate case for an account before trial may also be tested by considering how the action might proceed at trial in a conventional way and contrasting that with the way in which an account before trial might proceed.
It might be thought that the weight of this case will fall on whether the physiotherapist can make good the pleaded starting point of practice receipts of $558,361.37. By contrast, one might think that the total of $510,444.71 banked will be relatively easily proved. Although this latter amount is not clearly admitted,[94] it will presumably be a matter for proof by recourse to banking statements for the relevant period.
[94] Revised Defence, [30.1.1].
In this case, the key issue must therefore be whether the physiotherapist has established the suggested shortfall. Self-evidently, that cannot be determined by looking at what the bookkeeper took from the cash tin and did or did not bank. The existence of the shortfall must be determined with the benefit of a finding made by the court about what was received by the physiotherapist from her practice. Whilst that will, at least to some extent, depend upon the records kept by the bookkeeper concerning receipts and banking, it will primarily depend upon the evidence of the physiotherapist as to what was in fact received by her from patients during the relevant period. What was received will be determined by a combination of matters. Apart from the physiotherapist’s oral evidence, she will no doubt point to practice records regarding patient appointments as well as any other written records concerning attendances and payments made.
In the course of that case, it will be open to the bookkeeper to challenge the physiotherapist’s evidence by pointing, amongst other matters, to the suggested explanations for the shortfall offered by the bookkeeper in her pleading.
Only once the physiotherapist’s case on these matters has been elicited will the court be in any position to make a finding as to whether the shortfall claimed by the physiotherapist has been established.
The bookkeeper will then have an opportunity to give evidence about her banking practices. The physiotherapist will have an opportunity to cross-examine the bookkeeper about those matters.
Though a trial in the conventional way may take time, it is clear enough that once the court has undertaken the necessary fact finding, the existence and amount of any shortfall will have been established.
By contrast, if the case is now diverted to an account, with the form of the account to be taken to be determined by a master, it is difficult to know exactly what form the account will take. Certainly, it cannot be assumed that the “taking of the account will finalise the matter” rendering it “unlikely that there would need to be a trial”.[95]
[95] Jefferis v Holmes [2022] SADC 12, [23].
If, as the physiotherapist concedes, the accounting can only be taken in respect of the monies that were physically in possession of the bookkeeper, it is not hard to predict that the bookkeeper will give relatively short evidence on the account, emphasising the reliability and accuracy of the banking records for the relevant period.
The only means available to the physiotherapist to challenge that evidence will be by reference to the physiotherapist’s own case regarding the monies received from patients in the course of the practice. Whilst the physiotherapist can certainly put propositions to the bookkeeper in cross-examination, including propositions based on forensic accounting material, those propositions cannot be made good without evidence from the physiotherapist and her forensic accountant. That will include proof of the matters relied on by both the physiotherapist and the accountant. Unless those matters are satisfactorily proved, it is difficult to see how the outcome of the accounting could result in any finding that an amount is owed.
Indeed, were the master to accede to this process, it would start to look like a conventional trial. The principal difference may well be that the ordinary order of evidence will have been altered: the bookkeeper will have gone into evidence first, followed by the evidence called from or on behalf of the physiotherapist.
It is difficult to see why the ordinary order of evidence should not be followed. It is the physiotherapist making the case for a shortfall and, ordinarily, the party making the positive averment should be dux litis: the party asserting must prove.[96]
[96] Martin v Employers Mutual Ltd (2012) 112 SASR 436, [27], [66] (White J, with whom Doyle CJ and Anderson J agreed), citing Commonwealth v Muratore (1978) 141 CLR 296, 303 (Jacobs J).
In short, the taking of an account will only obviate the need for a trial if it becomes a trial. It is, with respect, difficult to see how the taking of an account before trial in this case will become the pragmatic and sensible thing to do.
Leave to appeal
Whilst leave to appeal in relation to matters of practice and procedure is not normally encouraged, this is a proper case for the grant of leave for two reasons. First, the judge’s exercise of discretion miscarried. Secondly, and in any event, the determination of the appeal has important ramifications for the course of this litigation.
Conclusion
Even if there is no triable issue as to whether the bookkeeper is an accounting party, in the particular circumstances of this case it is difficult to see why an account should be ordered where there remains a dispute as to whether there is a liability to account at this time and as to whether any amount is or will ever be owed by the bookkeeper.
This therefore is a case which fits within the general rule described by Dr Lushington in Doss and by Handley JA in Milltec Australia: the physiotherapist is not entitled to an account or inquiry so as to discover whether or not she has a cause of action against the bookkeeper.
In these circumstances, we would grant leave to appeal and allow the appeal. This action should proceed to trial in the ordinary way.
DOYLE JA:I agree with the reasons of Livesey P and Bleby JA, and the orders they have proposed. I would merely add the following by way of emphasis, and as a summary of what I consider to be the central difficulty with a summary order for an account in the circumstances of the present case.
The admissions of agency and bailment by the bookkeeper were confined to her handling of the physiotherapist’s monies when undertaking the task of taking those monies from the cash tin and banking them. As such, the bookkeeper only admitted that she was an accounting party in respect of this aspect of her duties. Given the relatively menial nature of the agency and bailment that the bookkeeper admitted, it is not entirely clear to me that she came under an obligation to keep records and provide an account. But even if it be accepted from the pleaded admissions that the bookkeeper was an accounting party, it would follow from the limited scope of those admissions that any summary order for an account ought to have been confined to an account in respect of the bookkeeper’s activities in taking monies from the cash tin and banking them.
It may be accepted that any balance outstanding on an account confined in this way would be a sum due from the bookkeeper to the physiotherapist. But in circumstances where the factual issues raised on the pleadings suggest various potential explanations for the alleged shortfall that relate to events occurring outside of the banking task, it is difficult to see the utility in an account confined in this way. The bookkeeper has already foreshadowed that her position on the account will be that she banked everything she took from the cash tin, with the result that the bank statements are an adequate record of her activities. If the account is confined in this way, it will not obviate the need for a trial on the range of broader factual issues raised in the pleadings. Indeed, it is unlikely that the outcome of the accounting exercise will be of much assistance at all to the parties.
The respondent accepts that the account ordered summarily will be confined to a consideration of any shortfall arising during the banking task. However, her counsel contends that this will permit consideration of what monies were in the cash tin from time to time by reference to the practice receipts and hence what ought to have been in the cash tin. In other words, while accepting the confined nature of the ultimate issue in the accounting exercise, the respondent intends to pursue the range of matters raised in the pleadings on the basis that they have a potential evidential or forensic significance to that ultimate issue. Whether the respondent would be permitted to expand the accounting exercise in this way remains to be seen. If an accounting exercise of this broad nature were to be permitted, then it may well result in findings in relation to various of the matters that would otherwise need to be addressed at trial. But, as Livesey P and Bleby JA explain, the accounting exercise would only obviate the need for a trial to the extent that the respondent is permitted, in effect, to treat the accounting exercise as a trial of all of the issues raised in the pleadings.
In my view, a proper basis for a summary order for an account was not made out.
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