Iacullo v Iacullo

[2013] NSWSC 1517

Supreme Court

New South Wales

Medium Neutral Citation:	Dominic Iacullo and Lillian Iacullo v Luigi Iacullo & Ors [2013] NSWSC 1517
Hearing dates:	4-6 September 2013; further written submissions 17 and 23 September 2013
Decision date:	18 October 2013
Jurisdiction:	Equity Division
Before:	Black J
Decision:	Judgment that referee's report should be adopted in full by the Court and specified paragraphs should be struck out of amended cross-claim. Leave declined to file further amended cross-claim in present form. Parties to be heard as to directions which should be made so the matter can be set down for hearing.
Catchwords:	PROCEDURE - referral to referee - where matters in respect of transactions, assets and liabilities of five trusts were referred to a referee pursuant to r 20.14 Uniform Civil Procedure Rules 2005 (NSW) - whether referee's report giving an account of transactions, assets and liabilities of relevant trusts should be adopted. PROCEDURE - application for leave to file further amended cross-claim - strike-out application in respect of amended cross-claim - whether pleadings state with sufficient clarity the case that must be met - whether pleadings have a tendency to cause embarrassment in the proceedings. PROCEDURE - judgments and orders - application to stay other proceedings.
Legislation Cited:	- Civil Procedure Act 2004 (NSW) ss 56, 56(1), 58(1), 58(2) - Corporations Act 2001 (Cth) s 237 - Limitation Act 1969 (NSW) s 47(1) - Trade Practices Act 1974 (Cth) ss 52, 75B - Uniform Civil Procedure Rules 2005 (NSW) r 14, 14.28, 20.13, 20.14, 20.24
Cases Cited:	- Alexander v Perpetual Trustees WA Ltd [2004] HCA 7; (2004) 216 CLR 109 - Banque Commerciale SA v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279 - Bellevarde Constructions Pty Ltd v CPC Energy Pty Ltd [2008] NSWCA 228 - BestCare Foods v Origin Energy [2012] NSWSC 574 - Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWSC 1302 - Chocolate Factory Apartments Ltd v West Point Finance Pty Ltd [2005] NSWSC 784 - Commonwealth v Davis Samuel Pty Ltd (No 7) [2013] ACTSC 146 - Corbett Court Pty Ltd v Quasar Constructions (NSW) Pty Ltd [2008] NSWSC 1163 - Dare v Pulham [1982] HCA 70; (1982) 148 CLR 658 - Downer Connect Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd [2008] VSC 77 - Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 - Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) [2001] FCA 1628; (2001) 188 ALR 566 - Fortescue Metals Group Ltd v Australian Securities & Investments Commission [2012] HCA 39; (2012) 291 ALR 399; (2012) 91 ACSR 128 - Gunns Ltd v Marr [2005] VSC 251 - Iacullo v Iacullo (No 3) [2012] NSWSC 274 - Illawarra Hotel Company Pty Ltd v Walton Construction Pty Ltd [2013] NSWCA 6 - Kirby v Sanderson Motors Pty Ltd [2002] NSWCA 44; (2001) 54 NSWLR 135 - Leawell Pty Ltd as trustee for the Garton Smith Trust, Re Watershed Premium Wines Ltd v Watershed Premium Wines Ltd (No 2) [2009] FCA 1145; (2009) 180 FCR 392 - Levy v Bablis [2007] NSWSC 565 - Lewis v Condon; Condon v Lewis [2013] NSWCA 204 - Mainteck Services Pty Ltd v Stein Heurtey Australia Pty Ltd [2013] NSWSC 266 - McGuirk v University of New South Wales [2009] NSWSC 1424 - McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623 - New South Wales v Bovis Lend Lease Pty Ltd [2007] NSWSC 1045 - P&V Industries Pty Ltd v Porto [2006] VSC 131; (2006) 14 VR 1 - Ramage v Waclaw (1988) 12 NSWLR 84 - Sangain Pty Ltd v Italform Pty Ltd [2009] NSWSC 74 - Seven Sydney v Fuji Xerox [2004] NSWSC 902 - Shelton v National Roads & Motorists Assn Ltd [2004] FCA 1393; (2004) 51 ACSR 278 - Taylor v Lederman & Ors [2013] VSC 99 - Three Rivers DC v Governor and Company of the Bank of England (No 3) [2001] 2 All ER 513 - Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) (2012) 270 FLR 1 - Young v Hones [2013] NSWSC 580 - Young Investments Group Pty Ltd v Mann [2012] FCAFC 107; (2012) 91 ACSR 89
Category:	Interlocutory applications
Parties:	Dominic Iacullo (Second Defendant/First Cross-Claimant) Lillian Iacullo (Third Defendant/Second Cross-Claimant) Luigi Iacullo (Plaintiff/First Cross-Defendant) Badminton Investments Pty Ltd (Second Cross-Defendant) IMS Developments Pty Ltd (Third Cross-Defendant) Homeline Constructions Pty Ltd (Fourth Cross-Defendant) Michael Murr (Fifth Cross-Defendant) Pacificon Pty Ltd (Sixth Cross-Defendant) MMAI Pty Ltd (Seventh Cross-Defendant) Glad Con Pty Ltd (Eighth Cross-Defendant)
Representation:	D. A. Smallbone (Defendants/First and Second Cross-Claimants) L. Iacullo (in person) (Plaintiff/First and Second Cross-Defendants) F. G. Lever SC (Third, Fourth, Fifth, Sixth, Seventh and Eighth Cross-Defendants) Allsop Glover (Defendants/Cross-Claimants) L. Iacullo (in person) (Plaintiffs/First and Second Cross-Defendants) Carroll & O'Dea (Third, Fourth, Fifth, Sixth, Seventh and Eighth Cross-Defendants)
File Number(s):	07/257623

Judgment

1. These proceedings have a lengthy history to which I should refer before turning to the several Notices of Motion before the Court which deal with significant matters in respect of the future conduct of the proceedings. I have summarised part of that history in my earlier judgment delivered on 26 March 2012 ([2012] NSWSC 274).

1. The Cross-Claimants, Mr Dominic Iacullo (to whom I will refer without disrespect as to "Dominic") and Mrs Lillian Iacullo (to whom I will refer without disrespect as to "Lillian") brought an extensive Cross-Claim, now in the form of an Amended Cross-Claim ("AXC") against Mr Luigi Iacullo (to whom I will refer without disrespect as to "Luigi"), Badminton Investments Pty Limited (an entity associated with Luigi) ("Badminton"), and the Third-Eight Defendants, Mr Michael Murr and various entities associated with him (to whom I will refer collectively as the "Third-Eighth Cross-Defendants"). Luigi and Badminton are not presently legally represented in the proceedings.

1. The relief presently claimed in the AXC comprises some twenty six orders, including a declaration that Badminton holds monies or property received from the development of a property at Hogben Street, Kogarah on trust for the Cross-Claimants, an order for the administration of that trust and an order for an account; an order for the administration of a trust known as the IMS Unit Trust; an order for an inquiry into funds or assets received by Homeline Constructions Pty Limited ("Homeline Constructions") from IMS Developments Pty Limited ("IMS"); further orders for an accounting in respect of trusts known as the Pacificon Unit Trust, the Hogben Unit Trust, the Engadine Unit Trust, and the Gladstone Street Unit Trust; equitable compensation; and such further or other order as to the Court deems fit.

1. The earliest of the unit trusts in issue in the AXC, the IMS Unit Trust, was established in 1997, with IMS being the trustee of the trust. The IMS Unit Trust was initially established to carry out a single property development at Sutherland but was extended to additional developments in 1999. Further unit trusts were later established to carry out other property developments or, Dominic and Lillian contend, in one instance to take over a development initiated through IMS. Orders were made by Bryson AJ in September 2010 in relation to the production of documents for some of the unit trusts.

Whether the referee's report should be adopted

1. On 14 June 2011, Bergin CJ in Eq addressed the practical issue arising in respect of the claim for accounting in respect of five trusts over an extended period by making orders under Pt 20 r 14 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") referring questions arising in the Cross-Claim in respect of broadly, an account of the transactions, assets and liabilities of the relevant trusts to Dr Rodney J Ferrier ("referee") for inquiry and report and made various directions in respect of the conduct of the reference. In particular, her Honour directed that:

"An account be taken of the transactions, assets and liabilities of the [name of unit trust] and of all monies received and disbursed by [name of trustee] or any other person on its behalf in respect of the property comprised in the [name of unit trust] and that the dealings and transactions of [name of trustee] therewith."

1. By Notice of Motion filed on 16 February 2007, Dominic and Lillian sought an order that the reference be terminated and the accounting be returned to an Associate Justice or taken by a Judge and directions be made that require the accounting parties to bring in statements of the account. They advanced numerous criticisms of the conduct and utility of the reference in support of that application. By my judgment delivered on 26 March 2012, I declined to make orders terminating the reference but indicated that I proposed to amend the terms of reference to more closely reflect the scope of the referee's proposed approach. I also observed that:

"the process adopted by the referee will ultimately produce an accounting for the trusts by which the respective trustees are bound which should narrow the issues in dispute in the balance of the Cross-Claim".

1. I also indicated my expectation that "the Referee's findings will at least narrow the issues in dispute." As will emerge below, the first of those objectives have been achieved since the trustees have adopted the referee's statement of the accounts of the trusts. The second objective has been achieved only to a limited extent. Mr Smallbone, who appears for Dominic and Lillian, indicated in oral submissions that of the some 5,000 transactions reviewed by the referee some 1,600 are not contested by the Dominic and Lillian and some 3,400 are contested.

1. In my further judgment delivered on 5 April 2012, I observed that the Court had not yet determined the basis for any accounting that might ultimately be ordered and that:

"If an accounting were to take place in a traditional form, then it would be necessary for a determination to be made as to whether it would occur in common form, so that the trustees accounted for what had actually been received and disposed of and the Cross-Claimants could challenge the accounting by asserting that more was received or less was disposed of, or should take place on the basis of wilful default so that the trustees must also account for what should have been received if their duties had been properly discharged."

That question would be determined by the factual matters that are to be determined at a final hearing. I also made order amending the terms of the reference after hearing further submissions from the parties as to the form of those orders. I directed that the referee's report should:

"comprise a schedule, listing or other report of transactions, assets and liabilities of each trust prepared by Dr Ferrier in such form as he considers appropriate, by reference to the documents which are submitted to him in the course of the reference in respect of each Trust, and each such schedule is to identify any entry, transaction, asset or liability where adequate supporting or source documents were not available to Dr Ferrier to substantiate or support an entry, transaction, asset or liability. That report may include such additional materials as Dr Ferrier considers appropriate to explain his views."

1. The referee subsequently adopted a very comprehensive process in preparing his report. That report dealt separately with each of the five trusts and attached schedules dealing with the capital contributions, expenditure, incomes and distributions of each trust. The referee noted that, since in excess of 5,000 individual transactions were involved, and since between 10 and 15 years have elapsed since the trusts were established, it was not possible to examine source documents in relation to each transaction and identified the process that he had undertaken. This included extracting a list of transactions for each trust from detailed financial records provided by the parties, particularly printed MYOB records; providing an initial account to the Cross-Defendants and then providing that account and supporting source records to Dominic and Lillian so they could undertake an investigation of the accuracy of that initial account, and taking submissions as to that question; preparing a draft report on 31 October 2012; receiving further submissions in respect of that draft report and the draft accounts of the five trusts that he had prepared; and preparing a final report taking into account those further submissions. In the course of this process, the referee received several submissions from each of Dominic and Lillian and the Third-Eighth Cross-Defendants. The referee noted that the process had had adopted resulted in an account for each trust which most closely aligned with the "common form" of accounting, identifying what had been received and paid by the trustees and any assets or liabilities that remain owned or owed by the trustees. He also offered the parties an oral hearing to address contested matters which they did not choose to take up.

1. It is necessary to refer to the referee's report in some detail, to make clear the scope if his findings. The referee noted that he sought submissions to enable him to identify any transactions that had been incorrectly included in the accounts; that had not been, but should have been, included in the accounts; that were recorded with an incorrect amount or on an incorrect date in the accounts, or which were incorrectly described in the accounts or allocated to the incorrect category of income or expense. He observed, in relation to the IMS Unit Trust, that Dominic and Lillian had expressed no objection that any transaction was reflected in the account but did not occur or related to another entity; was not reflected in the account, but did occur; was reflected in the account for an incorrect amount or on the incorrect date; or was reflected in the account, but described incorrectly and/or allocated to the incorrect category of income or expense. The referee identified the transactions objected to by Dominic and Lillian and indicated whether additional supporting documentation, in addition to the MYOB records, was provided in relation to those transactions in paragraphs [21]-[23] of his report. The referee dealt with the corresponding issues in respect of the Engadine Unit Trust in paragraphs [27]-[30] of his report, the Pacificon Unit Trust in paragraphs [35]-[38] of his report, the Hogben Unit Trust in paragraphs [44]-[49] of his report and the Gladstone Street Unit Trust in paragraphs [58]-[67] of his report.

1. The referee noted that Dominic and Lillian objected to 178 transactions in the IMS Unit Trust, which they contended should not be considered bona fide transactions of the trust and should therefore be eliminated from the accounts. These included all transactions between the IMS Unit Trust and the builder, Homeline Constructions; all transactions between the IMS Unit Trust and related parties; all transfers of properties to related parties and all transactions with unrelated third parties for which no documentation was available; all transactions in which a transaction reference number was out of sequence; all payments to Homeline Constructions made before the receipt by the trust of a progress claim from Homeline Constructions; reduction of the loan account and transitory account to zero balances on the basis they are not supported by documentation; payments of construction costs from sale proceeds; repayment to the Murr Superannuation Fund of monies loaned to the IMS Unit Trust; and all transactions reflected in the short term loan account.

1. The referee determined many of those objections but did not determine any objection that actual transactions of the trust had no proper legal basis. The referee did not determine a dispute whether the IMS Unit Trust was legally entitled to undertake three further developments at Mill Street, Carlton, Harris Road, Five Dock and Old Princess Highway, Engadine, after completing its original development undertaken at a site at Vermont Street and Linden Street, Sutherland. The referee treated transactions between the IMS Unit Trust and Homeline Constructions as properly recorded in the accounts as trust transactions; he recorded transactions between the IMS Unit Trust and related parties in those accounts, noting that transactions which were unsupported by documentation would be identified in the accounts; he did not determine an objection by Dominic and Lillian that the sales of some properties were not at fair market value, which were outside his terms of reference, and he noted that no valuation evidence was in any event provided by Dominic and Lillian. The referee recorded payments to third parties as transactions that had occurred, but identified certain payments that were unsupported by documentation other than MYOB records; he rejected the submission that transactions that were apparently recorded out of sequence had not occurred; he rejected the submissions that the fact that payments made to Homeline Constructions before the receipt of a progress claim was evidence that the payment transaction did not occur and recorded such transactions in the accounts; he recorded transactions in which construction costs were paid from the proceeds of property sales as transactions entered into by the trust; he recorded repayments of amounts borrowed from the Murr Superannuation Fund as transactions entered into by the trust and noted that the recorded transactions did not indicate that the Murr Superannuation Fund received a cash benefit greater than it was entitled to receive by way of loan repayment; and he recorded transactions in the short term loan account as transactions of the trust if those transactions reflected the use of trust funds. He also identified transactions objected to by Dominic and Lillian and indicated whether additional supporting documentation was provided to him for those transactions.

1. The referee noted that Dominic and Lillian objected to 30 transactions in the Engadine Unit Trust. The referee undertook a similarly detailed analysis in respect of transactions of that trust, noting that all transactions with the builder, Homeline Constructions had been objected to by Dominic and Lillian, apparently on legal grounds; all transactions with related parties had been objected to, and an initial allocation of units to Badminton and the Murr Group in exchange for development costs was objected to because no development had been undertaken before these units were allotted. He did not determine the first of those objections, which he treated as raising a legal issue; he recorded transactions with related parties as transactions that had in fact occurred, and identified transactions which were unsupported by documentation other than MYOB records; and he accepted the Cross-Defendants' submissions as to the allotment of units to Badminton and the Murr Group as consistent with the accounting records of the trust.

1. The referee noted that Dominic and Lillian objected to 31 transactions in the Pacificon Unit Trust, which they submitted should not be treated as bona fide transactions of the Trust. The referee considered that transactions between the Pacificon Unit Trust and the IMS Unit Trust should be recorded in those accounts, without determining Dominic and Lillian's submission that it was not established whether they accorded with the terms of any legal arrangement between those trusts. The referee accepted that certain payments by the IMS Trust to Homeline Constructions were not related to the Engadine project and were properly recorded in the IMS Unit Trust rather than in the accounts of the Pacificon Unit Trust. He treated payments to Homeline Constructions which had built the development as properly recorded in the accounts, without determining whether the trust transactions were consistent with the building contract, in circumstances that Dominic and Lillian had objected to those transactions on the basis that the building contract had not been produced. He recorded transactions with related parties in the accounts, and identified transactions which were unsupported by documentation in his report.

1. The referee undertook a similarly detailed analysis in respect of the Hogben Unit Trust, but did not determine a legal dispute between the parties as to whether a joint venture agreement between the parties was in the form for which the Cross-Defendants contended, or whether the Hogben Unit Trust did or did not have title to residential and commercial units ultimately acquired by co-owners of the land. That dispute was outside the terms of reference. He also addressed a range of disputes in respect of the Gladstone Street Unit Trust.

1. The referee noted that the account he had prepared for each trust did not resolve submissions or claims to the effect that the trustee was not authorised, by the trust deed or otherwise, to make certain payments and also did not address general submissions that the development profits made by the trust were less than might have been expected. Neither of those matters were properly within the scope of the reference to him.

1. The referee's report was prepared under UCPR rule 20.14 which permits the Court to refer to a referee "for inquiry and report by the referee", relevantly, any question arising in the proceedings. The term "question" is defined in r 20.13 as including any question or issue arising in the proceedings, whether of fact or law, or both, and whether raised by pleadings, agreement of the parties or otherwise. Rule 20.24 provides that:

"20.24 Proceedings on the report

(cf SCR Part 72, rule 13)

(1) If a report is made under rule 20.23, the court may on a matter of fact or law, or both, do any of the following:

(a) it may adopt, vary or reject the report in whole or in part,

(b) it may require an explanation by way of report from the referee,

(c) it may, on any ground, remit for further consideration by the referee the whole or any part of the matter referred for a further report,

(d) it may decide any matter on the evidence taken before the referee, with or without additional evidence, and must, in any event, give such judgment or make such order as the court thinks fit.

(2) Evidence additional to the evidence taken before the referee may not be adduced before the court except by leave of the court."

1. Dominic and Lillian acknowledge that the principles concerning the adoption of reports are such that a referee's report will generally be considered to determine the questions referred to him, and will generally be adopted and acted on unless some error, miscarriage or other ground for rejecting, qualifying or not acting on the conclusions stated in the report is established. McDougall J summarised the principles applicable to the court's discretion in the adoption or rejection of a report in Seven Sydney v Fuji Xerox [2004] NSWSC 902 at [11]-[13] and in Chocolate Factory Apartments v Westpoint Finance [2005] NSWSC 784 at [6]-[8], where his Honour observed that:

"The principles to be applied, in exercising the discretion conferred upon the Court by Pt 72 r 13 to adopt, vary or reject in whole or in part a report of a referee, are well established. There are a number of cases to which, customarily, reference is made. They include Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549; the unreported proceedings in that case before Giles J (19 May 1992: the relevant considerations referred to by his Honour are sufficiently extracted in the decision of the Court of Appeal); Chloride Batteries Australia Ltd v Glendale Chemical Products Pty Ltd (1988) 17 NSWKLR 60; White Constructions (NT) Pty Ltd v Commonwealth (1990) 7 BCL 193; and Foxman Holdings Pty Ltd v NMBE Pty Ltd (1994) 38 NSWLR 615. As to the nature and content of the referee's obligation to give reasons, the relevant authorities include Xuereb v Viola (1989) 18 NSWLR 453 and Hughes Bros Pty Ltd v Minister for Public Works (Rolfe J, 17 August 1994 unreported; BC 9402885).

The relevant principles, distilled from those decisions, can be stated as follows:

(1) An application under Pt 72 r 13 is not an appeal either by way of hearing de novo or by way of rehearing.

(2) The discretion to adopt, vary or reject the report is to be exercised in a manner consistent with both the object and purpose of the rules and the wider setting in which they take their place. Subject to this, and to what is said in the next two sub paragraphs, it is undesirable to attempt closely to confine the manner in which the discretion is to be exercised.

(3) The purpose of Pt 72 is to provide, where the interests of justice so require, a form of partial resolution of disputes alternative to orthodox litigation, that purpose would be frustrated if the reference were to be treated as some kind of warm up for the real contest.

(4) In so far as the subject matter of dissatisfaction with a report is a question of law, or the application of legal standards to established facts, a proper exercise of discretion requires the judge to consider and determine that matter afresh.

(5) Where a report shows a thorough, analytical and scientific approach to the assessment of the subject matter of the reference, the Court would have a disposition towards acceptance of the report, for to do otherwise would be to negate both the purpose and the facility of referring complex technical issues to independent experts for enquiry and report.

(6) If the referee's report reveals some error of principle, absence or excessive jurisdiction, patent misapprehension of the evidence or perversity or manifest unreasonableness in fact finding, that would ordinarily be a reason for rejection. In this context, patent misapprehension of the evidence refers to a lack of understanding of the evidence as distinct from the according to particular aspects of it different weight; and perversity or manifest unreasonableness mean a conclusion that no reasonable tribunal of fact could have reached. The test denoted by these phrases is more stringent than "unsafe and unsatisfactory".

(7) Generally, the referee's findings of fact should not be reagitated in the Court. The Court will not reconsider disputed questions of fact where there is factual material sufficient to entitle the referee to reach the conclusions he or she did, particularly where the disputed questions are in a technical area in which the referee enjoys an appropriate expertise. Thus, the Court will not ordinarily interfere with findings of fact by a referee where the referee has based his or her findings upon a choice between conflicting evidence.

(8) The purpose of Pt 72 would be frustrated if the Court were required to reconsider disputed questions of fact in circumstances where it is conceded that there was material on which the conclusions could be based.

(9) The Court is entitled to consider the futility and cost of relitigating an issue determined by the referee where the parties have had ample opportunity to place before the referee such evidence and submissions as they desire.

(10) Even if it were shown that the Court might have reached a different conclusion in some respect from that of the referee, it would not be (in the absence of any of the matters referred to in subpara (6) above) a proper exercise of the discretion conferred by Pt 72 r 13 to allow matters agitated before the referee to be re-xplored so as to lead to qualification or rejection of the report.

(11) Referees should give reasons for their opinion so as to enable the parties, the Court and the disinterested observer to know that the conclusion is not arbitrary, or influenced by improper considerations; but that it is the result of a process of logic and the application of a considered mind to the factual circumstances proved. The reasoning process must be sufficiently disclosed so that the Court can be satisfied that the conclusions are based upon such an intellectual exercise.

(12) The right to be heard does not involve the right to be heard twice.

(13) A question as to whether there was evidence on which the referee, without manifest unreasonableness, could have come to the decision to which he or she did come is not raised "by a mere suggestion of factual error such that, if it were made by a trial judge, an appeal judge would correct it". The real question is far more limited: "to the situation where it is seriously and reasonably contended that the referee has reached a decision which no reasonable tribunal of fact could have reached; that is, a decision that any reasonable referee would have known was against the evidence and weight of evidence".

(14) Where, although the referee's reasons on their face appear adequate, the party challenging the report contends that they are not adequate because there was very significant evidence against the referee's findings with which the referee did not at all deal, examination of the evidence may be undertaken to show that the reasons were in fact inadequate because they omitted any reference to significant evidence.

(15) Where the court decides that the reasons are flawed, either on their face or because they have been shown not to deal with important matters, the court has a choice. It may decline to adopt the report. Or it may itself look at the detail of the evidence to decide whether or not the expense of further proceedings before the referee (which would be the consequence of non adoption) is justified.

The twelfth point restates the aphorism of Mahoney JA in Super at 567. The thirteenth, fourteenth and fifteenth points are drawn (and include direct quotations) from the judgment of Hodgson CJ in Eq (with whom Priestley JA agreed and with whom, as to the relevant principles, Fitzgerald AJ also agreed) in Franks v Berem Constructions Pty Ltd (NSWCA 2 December 1998, unreported; BC 9806367). If I may say so with respect, I regard what his Honour said as giving content, on the facts of the particular case, to the operation of relevant principles rather than as stating any new principle."

1. Those principles have thereafter been adopted by judges of the Court on many occasions: New South Wales v Bovis Lend Lease Pty Ltd [2007] NSWSC 1045 per Einstein J at [7]; Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWSC 1302 per White J at [12]; Corbett Court Pty Ltd v Quasar Constructions (NSW) Pty Ltd [2008] NSWSC 1163 per Hammerschlag J at [30]-[31]; Sangain Pty Ltd v Italform Pty Ltd [2009] NSWSC 74 per Rein J at [14], and see Mainteck Services Pty Limited v Stein Heurtey Australia Pty Ltd [2013] NSWSC 266. In Bellevarde Constructions Pty Ltd v CPC Energy Pty Ltd [2008] NSWCA 228 at [47]-[48], Spigelman CJ and Allsop P (with whom Campbell JA agreed) referred, expressly without criticism, to that approach and observed that:

"We would only add that the approach of a judge faced with the requested adoption of a referee's report should be determined according to the nature of the issues and the circumstances of the case.

Highly relevant to that general overall consideration is the historical context of the rules concerning references, the recognition of the reference as a special form of hearing or trial (though not one leading, without more, to a verdict or judgment) over which the Court has a power of review, and the recognition of the place of references within the wider modern framework of alternative dispute resolution: see the discussion of these matters in the reasons for judgment of Gleeson CJ in Super v SJP Formwork at 558-564. The history of references under an order of the Court in the disposition of justiciable controversies that is the subject of discussion by Stephen J and Jacobs J in Buckley v Bennell Design & Constructions Pty Ltd (1978) 140 CLR 1 at 1522 and 2838, respectively, by Gleeson CJ in Super v SPJ Formwork and by Brooking J in Nicholls v Stamer [1980] VR 479 illuminates the wide general power available to the Court in the review and adoption process."

1. In BestCare Foods v Origin Energy [2012] NSWSC 574 McDougall J observed at [15]-[18], in a passage subsequently adopted by Sackar J in Mainteck Services at [51], that:

"The discretions conferred by r 20.24 are not subject to limitations or conditions stated in the rule itself. It follows that they are to be exercised judicially, and in accordance with the dictates of, in particular, s 56 of the Civil Procedure Act 2005 (NSW) (see s 56(2)).

Nonetheless, over the years, guidelines relevant to the exercise of the r 20.24 discretions (or the equivalent discretions under SCR pt 72 r 13) have been developed in many decided cases. I sought to collect the principles emerging from those cases in my judgment in Chocolate Factory Apartments v Westpoint Finance [2005] NSWSC 784 at [6] to [8]."

1. The principles which determine whether the Court should adopt, vary or reject a referee's report were recently accepted by the Court of Appeal in Illawarra Hotel Company Pty Ltd v Walton Construction Pty Ltd [2013] NSWCA 6 at [15], where Barrett JA (with whom Meagher and Ward JJA agreed) also observed that:

"a judge considering whether or not to adopt a refereee's report is called upon to exercise a discretion - whether to give the court's imprimatur to a decision made outside the normal curial process by a person charged with the duty of assessing a particular question in the light of the evidence and coming to an informed conclusion, often as to matters lying within a field in which that person has special expertise."

1. By their Points of Cross-Claim filed on 16 April 2013, Dominic and Lillian now seek an order that the schedules to the referee's report stand as the Cross-Defendants' statement of the accounts of the five trusts subject to the order for reference made on 14 June 2011, as amended by the order of 5 April 2012, but not as a determination by the Court of the validity or accuracy of their statements of the accounts of the Trusts, and that the report be not otherwise adopted. Conversely, by Amended Notice of Motion filed on 14 June 2013, the Third-Eighth Cross-Defendants sought an order that the referee's report be adopted in full and used as evidence in the proceedings.

1. Dominic and Lillian's Points of Claim contend that the referee's report amounted to identification of the Cross-Defendants' contentions as to the transactions of the five trusts that were the subject of the reference, but did not go further than that and should not be adopted as a binding determination of any question of fact or of law. In Mr Smallbone's opening written submissions, Dominic and Lillian accept that the referee's report supplies a listing of transactions which are (they say) with some exceptions, supported by secondary accounting records of the five unit trusts and note that the Cross-Defendants have adopted those findings as their statements of the account. They point to an exception, that the referee has included in the Gladstone Street Unit Trust certain transactions, being unpaid invoices for building work and interest, between the Eighth Cross-Defendant, Glad Con Pty Limited ("Glad Con") and the proposed Ninth Cross-Defendant, Homeline Building Pty Limited ("Homeline Building"), which are not recorded in the MYOB records.

1. There seem to be several difficulties with the form of the order sought by Dominic and Lillian. The first is that it is outside the Court's power which does not extend to adopting a report so as to make it binding on some parties but not others in proceedings. The second is that it is superfluous, so far as the trustees of the trusts which have already adopted the schedules prepared by the referee as the accounts of the trusts and unjustified so far as other defendants who are not the trustees of the trusts and under any obligation to prepare accounts of the trusts. The third is that it takes no account of the application of the referee's expertise and the extensive process of taking submissions that went into preparing his report. The work undertaken by the referee involved a significant analysis of the underlying transactions in accordance with the orders previously made by the Court, so as to comprise not the Cross-Defendants' statement of the accounts of the five trusts (although they have adopted that statement) but the referee's statement of the account of the Trusts, having regard to the material which was made available to him and the extensive submission made by the parties.

1. Dominic and Lillian submit that the adoption of the referee's report in the manner for which the Third-Eighth Cross-Defendants contend, or in any manner beyond that which they concede, would involve a denial of their "substantive and procedural rights" to have an accounting and to have a trial of their claims in the proceedings in the First Cross-Claim. I do not accept that submission. So far as Dominic and Lillian seek an accounting in common form, the trustees have adopted the referee's statement of the relevant transactions, and can be required to verify that step on oath at a final hearing. Dominic and Lillian have the opportunity to seek to falsify or surcharge the relevant transactions and (although out of time and subject to the other matters that I note below) have filed documents indicating the transactions that they challenge. They do not presently have a "right" to an accounting on the basis of wilful default by the trustees, since whether any such wilful default on the part of the trustees is established is a matter for the final hearing. The adoption of the referee's report would not prevent them establishing that matter at the final hearing.

1. Dominic and Lillian also seek to reagitate, in their submissions as to whether the referee's report should be adopted, the numerous complaints as to the transactions of the trusts that they made before the referee, including complaints as to payments to the builders of the units that were developed by the trusts; payments of professional fees to officers of the trustees and their relations or related companies; loans relating to those payments; transfer of strata units to related parties at an alleged undervalue or as offsets against those payments; acquisition of property and funding of the development at Hogben Street; and an amount paid for an allegedly unauthorised "redemption" of Badminton's units in the Gladstone Street Unit Trust. So far as these allegations involve allegation of breach of any legal duty on the part of the trustees, they remain open to Dominic and Lillian notwithstanding the adoption of the referee's report, because the directions given to the referee by the Court and his report make clear that he was not required to determine the legal issues raised by Dominic and Lillian in their claims.

1. Dominic and Lillian also seek to reagitate the debate that previously took place before Bergin CJ in Eq in June 2011, and was determined by her Honour, as to whether the form of the accounting should have been inquisitorial, or adopted some other form. Dominic and Lillian claim that, by a letter of 11 November 2011, the referee reversed the onus by proceeding on the basis that it was for the Cross-Claimants to specify and prove error in the trust records. Dominic and Lillian also refer to a misunderstanding which, they contend, the referee had of his role, prior to the clarification of that role in my 2012 judgment. These submissions also reagitate issues which were put in the argument before me as to whether the reference should be vacated. Dominic and Lillian complain that the effect of the procedure before the referee, where the Third-Eighth Cross-Defendants had adopted the referee's list of transactions, was to require Dominic and Lillian to make submissions without the benefit of the Third-Eighth Cross-Defendants' statement of what their transactions had been and without requiring them to be cross-examined. I reject that submission. First, the Third-Eighth Cross-Defendants made their statement of what the transactions had been, by adopting the referee's list of transactions, and there was no necessity for them to be cross-examined at that point; and, second, the referee expressly offered the opportunity for an oral hearing for the parties to deal with contested matters, at which such cross-examination could have taken place, which Dominic and Lillian did not choose to take up.

1. Dominic and Lillian submit that the referee refused to direct himself on any question as to law and that his findings of fact were vitiated by his refusal to direct himself on any question of law or to consider whether any transaction to which he referred was one of the trusts, in law and in fact. The referee was not asked to determine any question of law, was not qualified to do so and properly did not seek to do so. In my view, the referee properly addressed the question referred to him, namely how the transactions of the trusts recorded in appropriate source documents should be recorded in their accounts. Dominic and Lillian in turn contend that it was not open to the referee to prepare an account without properly directing himself to the relevant law and making appropriate findings as to the (legal) character of payments and receipts. I reject that submission. The referee nominated by the parties and appointed by Bergin CJ in Eq was an accountant, not a lawyer, and the orders that I made in April 2012 recognised his qualifications and expertise by narrowing the task which he was required to undertake. Accounts could properly be prepared in a manner that reflected the transactions of the trusts, reserving any challenge which Dominic and Lillian might identify to the legal basis of transactions for determination by the Court. The referee adopted that approach in accordance with the orders made by the Court in April 2012.

1. Dominic and Lillian also complain that the referee recorded related party transactions as "transactions which occurred". It seems to me that the fact a transaction is with a related party does not provide any basis for treating it as non-existent, whether or not there may be any challenge to its legal basis. I can see no error in the referee's approach in that regard.

1. Dominic and Lillian complain that the referee did not determine their submissions that the payments of construction costs to the builders of the relevant properties could not be supported except with the informed consent of the trust beneficiaries. The question of any breach of the conflict rule or the profit rule is plainly a matter of law which was not within the scope of the reference and it is open to Dominic and Lillian to establish the relevant breach in the proceedings before the Court, if it is properly pleaded in the relevant Cross-Claim. It is, of course, implicit in that proposition that the referee's report cannot and does not dispose of all matters in issue in the proceedings. That is plainly the case where the referee was not asked to, and has not, determined questions of law. The Third-Eighth Cross-Defendants ultimately did not press a submission that they at one point seemed to have advanced to the contrary.

1. Dominic and Lillian also draw attention to an observation that I had made in my earlier judgment that the referee needed to form a view as to the adequacy of the records supporting the transactions of the trusts to be stated in its accounts. I noted that:

"The Cross-Claimants contend that they are being required to falsify and surcharge the account with the benefit of the trustees' own statement of the transactions, vouching or cross-examination. In my view, that misapprehends the task which the referee is undertaking. It will be open to the Cross-Claimants to respond that a transaction is not relevantly supported by documentation; the referee has made clear that he will record that position in his report; and the resulting dispute, including any inferences to be drawn from the trustee's failure to produce supporting documents or other evidence to support transactions in the course of the inquiry before the referee, is a matter to which the Court can have regard in determining whether to adopt or vary the referee's report and in dealing with remaining issues in the Cross-Claim. The Cross-Claimants also express an apprehension that they will be denied justice because of the principles of restraint in respect of findings of a referee, and that the Cross-Defendants are likely to assert that the Cross-Claimants are "stuck with the outcome". I do not regard this as a realistic possibility. I would not expect the referee to reach an affirmative view that accounts are properly stated if significant transactions recorded in them are not supported by appropriate source documentation and I see no significant risk that the Cross-Defendants will be bound by such a view."

1. Dominic and Lillian challenge the referee's assessment of the adequacy of source materials for the transactions reflected in the accounts that he prepared. This challenge is put in several overlapping submissions including at least the following:

• Dominic and Lillian criticise the approach adopted by the referee to determine the adequacy of supporting or source documents for particular transactions, by criticising a view which they attribute to the referee that he was not required to confirm the "accuracy" of MYOB entries by reference to source documents. They submit that the referee refused to go behind or consider whether he should go behind the MYOB records of the trust produced by one or more of the Cross-Defendants and misdirected himself by refusing or failing to consider the adequacy of records to substantiate transactions.

• Dominic and Lillian contend that the referee did not form a view as to whether the documents are supported by appropriate source documentation, but has merely recorded the transactions stated in the MYOB records of the trusts in the accounts he has prepared.

• Dominic and Lillian complain that the materials available in the reference were limited, because, for example, no itemised progress claims and few vouchers were available for expenses in respect of the IMS Unit Trust.

• Dominic and Lillian complain that the building contracts were not produced, except for a contract for the Gladstone Street Unit Trust development, and contend that there is a live issue as to when such contract or contracts were entered, whether they were varied, and their terms. Dominic and Lillian in turn contend that it could not be shown that payments properly related to the costs of construction of the relevant works without the contracts and specifications and proper progress claims being produced.

1. The referee did not, in terms, state that the source documents to which he refers are "adequate" or "appropriate". However, it seems to me plain that he in fact considered that question. His report identifies the matters that supported the adequacy of the source documents for the relevant purpose. He pointed to the number of transactions involved and the age of the transactions as relevant to the extent of examination of source documents that was necessary, and that observation seems to me to be plainly correct. He drew attention to the existence of contemporaneous MYOB records and to the fact that a substantial number of transactions in those records could be confirmed against other documents, although he also identified (as the terms of reference required) those that could not. He observed that at least some of the transactions to which Dominic and Lillian objected involved payments to related parties where a document had been provided in relation to the initial incurring of the liability and that, in principle, that meant that "documentary evidence has been provided to support both the incurrence of the liability and the payment of that liability".

1. Mr Smallbone drew attention to an observation made by the referee in an email dated 15 February 2012 (Ex A7, p 27) that:

"In particular, I do not intend to make any findings of law. Rather, I intend to confine the report to the preparation of an Account of the transactions which occurred for each trust. Any arguments which relate to the legal basis (rather than the existence) of a transaction should be put to the Court after my report has been completed.

Put briefly, my report will be limited to a listing of the transactions which occurred in relation to each trust, after taking into accounts the records which exist. My report will not amend those transactions in any way to, for example, exclude recording transactions which may not have a sound legal basis or for which documentary evidence other than the MYOB record does not exist."

The referee here correctly recognised that the matters referred to him did not include the determination of the legality or propriety of transactions as distinct from accounts recording the transactions that in fact occurred. The last statement, that the referee did not intend to exclude recorded transactions for which documentary evidence other than MYOB records did not exist did not prevent Dominic and Lillian putting submissions as to the inadequacy of such records, which the referee made clear he would record. The referee also noted in his email dated 15 February 2012 that he would have "primary regard" to submissions that relate to specified matters. It should be noted, first, that these matters were plainly referrable to the preparation of accounts in accordance with the reference and the referee's statement that he should have primary regard to them seems to me to have been appropriate; and, consistently with that statement, the referee addressed those matters in his report, noting that Dominic and Lillian had not made submissions as to several of those matters. My judgments of 26 March and 5 April 2013, and amendments to the scope of the reference, subsequent to that email, drew attention to the question of adequacy of documentation and it has not been established that the referee indicated that he would not, or did not, act in accordance with that judgment.

1. I requested Mr Smallbone to identify the specific submissions made by Dominic and Lillian before the referee as to the adequacy of documents to support particular transactions included in the accounts. The most striking aspect of Mr Smallbone's identification of these submissions was the fact that many of them were not squarely directed to the adequacy of documentation to support the existence of the relevant transactions, as distinct from an attack upon the propriety of the transactions. Mr Smallbone drew attention to a letter dated 27 February 2012, by which:

• Dominic and Lillian's solicitors contended that a contract between Homeline Constructions and IMS had not been produced and the documents produced did not disclose that claims and payments were made in accordance with a cost plus contract. That submission did not suggest that those payments had not been made so as to be recorded in the accounts for the IMS Trust, as distinct from attacking their contractual basis.

• Dominic and Lillian's solicitors also referred to several transactions described as "retention payable transactions" and contended that the documents produced for inspection did not support the "validity" of those transactions. Again, that submission appears to be an attack upon the propriety of the transactions, not upon whether they had occurred.

• Dominic and Lillian's solicitors also objected to the transfer of units to related parties on the basis that there was no evidence as to the basis upon which they were made, and advanced a submission that the transactions were related party transactions and the transferees were required to account for the greater of the amount received on resale of the properties or their then market value. This is again an attack upon the propriety or legal basis of the transactions, rather than upon whether the fact of transactions was properly established by underlying documents.

• A similar submission was made in respect of payments to related parties for services on the basis that there was no supporting documentation "as to the basis upon which" any payment was made, and on the basis that such payments were contrary to an alleged agreement of the beneficiaries of the IMS Unit Trust.

• A submission was made that other transactions do not appear to be "appropriately paid" and that there was no documentation that set out a "proper basis" for the payment. Again, no submission was squarely made that the supporting documentation did not evidence the fact of the transaction, as distinct from its appropriateness or propriety.

1. By letter dated 7 March 2012, Dominic and Lillian advanced a submission that entries made in the MYOB records that were out of sequence had the result that no reliance could be placed on the MYOB records generally, unless Dominic and Lillian accepted the validity of the transactions, as follows:

"The fact that the entries which are out of sequence relate to related party transactions which have the effect of reducing the profits of the trust indicates that reliance cannot be placed on the MYOB records to prove the profit of the unit trust without reference to other documents and evidence, unless the transactions are admitted to be valid."

The referee dealt with and did not accept that submission in his report.

1. By their submissions dated 30 March 2012, the Third-Eighth Cross-Defendants responded to the submission that there were no documents in respect of the trust transactions and drew attention to MYOB records incorporating, inter alia, general ledgers and trial balances; tax returns and financial statements prepared by external accountants; minutes of meetings; letters notifying trust distributions and providing the trustee with payment instructions for distributions; trust deeds and tax invoices. The Third-Eighth Cross-Defendants' submissions to the Referee dated 30 March 2012 also addressed, in some detail, the question of the documents that had been produced to support relevant payments and contended that, inter alia,:

• payments to Homeline Constructions were made by IMS upon receipt of tax invoices, and following approval from an external lender on receipt of certification of the value of the construction work from quantity surveyors;

• documentation in respect of several retention payable transactions was in fact produced for inspection and the value of those transactions were a substantial portion of the total disputed retention payable transactions;

• it was not surprising that all primary documents were not available where the relevant transactions had occurred some 11 years before, in 2001;

• so far as the question of sequencing of transactions in MYOB records were concerned, many users of MYOB manually selected journal numbers, rather than using automatically generated sequential numbers. The Third-Eighth Cross-Defendants attached correspondence from MYOB and external accountants confirming both the relevant functionality to select such numbers in MYOB and the existence of that practice.

1. By letter dated 14 May 2012, Dominic and Lillian's solicitors contended that:

• Invoices issued by Homeline Constructions to the trustee for payment did not set out the detail of the costs of the building work for which payment was sought. That submission does not seem to me to undermine the fact that a payment made in respect of such an invoice was made, and should be recorded in the relevant accounts; and that criticism may also have lesser weight where the Third-Eighth Cross-Defendants point to the reliance on a process of quantity surveyor certification of work done in any event.

• Drawdown notices issued to the lender by the trustee were executed by Luigi and Mr Murr, and in "many cases" this occurred "without any claim being made on the trustee by way of a progress claim or tax invoice". There is no reason to think that the referee did not have regard to this submission, which would also need to be read in the context of the quantity surveyor certification to which I referred above.

• In respect of the sequencing of the MYOB journal numbers, the books and records of the trust were prepared on a day-to-day basis by Peter El Murr who also maintained the books and records of Homeline Constructions. That does not, of course, provide any basis for the referee to disregard the existence of transactions apparently recorded in the MYOB records, where no suggestion of impropriety in the records was made beyond the existence of Mr El Murr's dual capacities.

• Payments to related parties were "in breach of the Trust Deed". Rather than contesting the existence of such payments, or whether they were properly supported by documentation, that submission impugns their propriety.

1. By a further submission dated 6 August 2012 Dominic and Lillian's solicitors submitted that the Third-Eighth Cross-Defendants had not produced a document setting out the terms of any arrangement between the IMS Unit Trust and the Pacificon Unit Trust in respect of the Engadine properties. They submitted that such a document must be produced before any accounting in respect of the Pacificon Unit Trust, to determine whether the accounting accorded with the terms of those arrangements. Again, it seems to me that that submission confuses the question of the existence of transactions which should be recorded in the trust's accounts and their propriety. They also submitted that, until the terms of the arrangement with IMS were determined, it was not possible to finally determine the assets, liabilities, incomes and outgoings of the Pacificon Unit Trust. By letter dated 9 August 2012 Dominic and Lillian's solicitors advanced submissions as to the form of invoices in respect of the Gladstone Street Unit Trust and the absence of particulars to allow determination of how claims were calculated. They questioned why certain invoices issued in late 2005 and early 2006 were not paid until December 2007, if they had been rendered on or about the dates they bear. They contended that certain expenses paid to Homeline Building and/or the Murr Group were "not expenses payable to any contract which had been disclosed"; that is another example of a submission that assumes the relevant payments were made, so that they should be recorded in the accounts, while contesting their propriety.

1. The referee did not in fact adopt the view that Dominic and Lillian attribute to him that he was not required at least to assess the adequacy of the MYOB records by reference to source documents, since he did confirm the accuracy of a large number of transactions by reference to source documents where they were available. The referee's report indicated that he had regard not only to the MYOB records of the five trusts but also to amounts reflected in bank and loan accounts of the trusts and amounts reflected in accounts held by others on behalf of the trust, such as amounts expended from deposits on the sale of properties. The referee also refers to the use of records discovered and made available by the Third-Eighth Cross-Defendants in preparing his report. To the extent that such documents were not available for some transactions, it seems to me to have been well within the referee's expertise to determine whether MYOB records of a trust were sufficient basis for an accounting of the relevant transactions, without the necessity to produce such source documents. Conversely, it would be a surprising result had the referee treated transactions as non-existent, where they were recorded as having in fact occurred in contemporaneous MYOB documents, simply because the source documents for transactions had not been retained, given the lapse of time between the transactions and the reference. As the Third-Eighth Cross-Defendants also point out, Dominic and Lillian's complaints in respect of the adequacy of source documents maintained by the trustees must have regard to the fact that Dominic and Lillian did not apply to join Mr Murr and the four trustee companies to the proceedings until May 2011. The five Unit Trusts in issue in the proceedings were in turn established for the development and sale of properties between 1997 and 2006, between 5 and 14 years prior to the joinder of the trustee companies as parties to the proceedings. In particular, the IMS Unit Trust developed and sold properties between 1997 and 2002, at least 9 years before the joinder of its trustee as party to the proceedings.

1. For completeness, I should note that there was a dispute between the parties as to whether the contract between Homeline and the Glad Con had been made available for inspection by Dominic and Lillian before they made submissions to the referee based on the proposition that that contract had not been made available. It is neither possible nor necessary to resolve that dispute for the purposes of this application. I declined to permit Mr Lever, who appears for the Third-Eighth Cross-Defendants, to tender the correspondence concerning that matter after the completion of closing submissions, in circumstances that Dominic and Lillian contended that, if that correspondence were to be tendered, they would seek to lead affidavit evidence in response that they had been unable to locate that contract in the course of inspection of documents made available by the Third-Eighth Cross-Defendants.

1. Dominic and Lillian contend that the referee misdirected himself by "failing or refusing to apply the rule that the accounting party bears the onus of proof of transactions set forth in its statement of transactions" and failed to engage in any appropriate fact-finding process and assumed that all transactions alleged by the Cross-Defendants were validly, lawfully and actually incurred. Dominic and Lillian also contend that the procedures and methods adopted in the reference were not appropriately adapted or suitable for the fair determination of disputed questions of fact in relation to the disputed transactions and that the referee misapprehended his task as the preparation of a statement of accounts of the trusts. I do not accept this submission. Dominic and Lillian have not at this point obtained an order for an accounting in a traditional form and the referee was not obliged to conduct the reference as though it were an accounting in a traditional form. The referee did not in fact assume that transaction were lawful and made clear that he was not asked to and did not determine that question. As I have noted above, he also undertook a process of verification as against source records in preparing the accounts, within the context that he had been asked to do so.

1. Dominic and Lillian also identify particular criticisms of aspects of the referee's report in respect of the allotment of units in the Engadine Unit Trust to Badminton and the Murr Group; to the treatment of transactions in the Hogben Unit Trust; and to the referee's failure to determine a dispute as to the validity and terms of the building contract in respect of the Gladstone Street development. The referee's report refers to several invoices not recorded in Glad Con's accounts in respect of the amount of $77,000 now claimed by Homeline Building (paragraph 53), to the submissions made by Dominic and Lillian in respect of those invoices (paragraph 54) and to a dispute as to whether the building contract was varied which he notes is a legal issue not within the scope of the reference to him (paragraphs 55-56). He includes the invoices in the accounts, but specifically on the basis that the associated legal questions are matters for determination by the Court. That approach is supported both by the terms of the contract relating to the Gladstone Street project and by the quantity surveyor's support which is consistent with the contract price for that project. I can see no error in the referee's treatment of that matter, where the relevant legal issues are reserved for the Court's decision.

1. Dominic and Lillian also contend that the fact that none of their objections were upheld in a complex accounting is "an indication that something has gone wrong somewhere". I do not accept that submission, which appears both to assume the merit of Dominic and Lillian's submissions and neglect the fact that many of those submissions primarily depended on issues of law that the referee was not required to determine and did not purport to determine.

1. Mr Lever accepted in oral submissions that, to the extent the referee's report is adopted, it is subject to the qualifications made in it in respect of matters that the referee has not determined. Mr Svelha, who appears for Homeline Building, in turn put in oral submissions that the referee's report identifies actual transactions that occurred in the assets and liabilities of the Gladstone Street Unit Trust, but adoption of that report would not prevent Dominic and Lillian raising causes of action that undermine the legal validity of particular transactions, including whether or not the Homeline Building contract was varied in the manner for which Dominic and Lillian contend.

1. I referred above to Illawarra Hotel Company Pty Ltd v Walton Construction Pty Ltd, where the Court of Appeal observed, inter alia, that the Court would have a disposition towards accepting a referee's report which showed a thorough, analytical and scientific approach to the assessment of its subject matter, since

"to do otherwise would be to negate both the purpose and the facility of referring complex technical issues to independent experts for inquiry and report".

In the present case, it seems to me that the referee's report was in fact thorough and analytical and applied his expertise, being that of an experienced accountant, to the assessment of the accounting issues that had been referred to him.

1. Their Honours also observed that a report would ordinarily be rejected if a referee's report revealed an error of principle, patent misapprehension of the evidence or perversity or manifest unreasonableness in fact finding. Their Honours also emphasised that the Court will not reconsider disputed questions of fact where there is factual material sufficient to entitle the referee to reach the conclusions that he or she did, and also emphasised the futility and cost of relitigating issues determined by a referee, where the parties have had opportunity to place evidence and submissions before the referee. Their Honours also noted that unreasonableness was not established by the mere suggestion of factual error, which would be corrected on an appeal from a trial judge, but instead turns upon whether the referee's decision was such that "any reasonable referee would have known was against the evidence and weight of evidence".

1. The parties had ample opportunity to place both evidence and submissions before the referee and each party took advantage of that opportunity, so far as submissions were concerned, although neither party chose to take up the opportunity of an oral hearing which the Court had contemplated the referee would permit and which the referee in fact offered to permit. To a significant extent, Dominic and Lillian's submissions before the referee focussed on issues that were not relevant to the preparation of the accounts of the trusts, recording the transaction that had in fact occurred, by focussing on the propriety of transactions rather than the question whether they had occurred. The criticisms advanced by Dominic and Lillian of the referee's reasoning process do not establish, in my view, that the referee's views were such that no reasonable tribunal of fact could have reached them, or that any reasonable referee would have known they were against the weight of the evidence. In particular, it does not seem to me to have been unreasonable for the referee to have relied substantially on MYOB records, given the age of the relevant transactions and the fact that many transactions recorded in the MYOB records were in fact supported by other records.

1. The Court of Appeal also noted in Illawarra Hotel Company that, even if the Court concluded that a referee's reasons were flawed, in that they had not dealt as fully as they should have with the adequacy of supporting documents for the accounts, the Court then has a choice whether to decline to adopt the report or to:

"itself look at the detail of the evidence to decide whether or not the expense of further proceedings before the Referee (which would be the consequence of non-adoption) is justified."

Even if I were satisfied that the referee's reasons should have expanded further on why the MYOB records provided a sufficient basis for the accounts, it seems to me that the evidence does not justify the expense of further proceedings before the referee concerning that or other matters. First, the fact that the MYOB records that were produced were contemporaneous records supports their reliability as a basis of the accounts; second, the referee's ability to verify many of the entries against other records also supports their reliability; third, there is no evidence that other records now exist that would allow the referee or the Court to form a different view from that which the referee has taken; and, fourth, it does not seem to me that transactions recorded in contemporaneous MYOB records could be disregarded simply because other primary records do not exist, many years later, to support them. It also seems to me that it would be inappropriate to return the matter to the referee in circumstances that the issue which Dominic and Lillian seek to agitate as to the adequacy of supporting documents was largely raised by them before him only tangentially, in attacking the propriety of transactions as distinct from their existence.

1. In summary, it seems to me that the referee's report addresses the question that the orders made by Bergin CJ in Eq on 14 June 2011, as amended by my order made on 5 April 2012, required him to address. In my view the Court should adopt that report in full. It should not, as Dominic and Lillian contend, limit the effect of that report to be a statement of accounts provided by the Third-Eighth Cross-Defendants, because that report reflects the application of the referee's expertise to the matters which he was asked to consider, notwithstanding that the Third-Eighth Cross-Defendants have adopted its findings. The adoption of that report, in accordance with its terms, does not preclude Dominic and Lillian from addressing issues that were not within the scope of the reference and have not been determined by the referee, and in particular any contention that particular transactions were unlawful. That report does, however, determine the proper content of the accounts of the trusts, so far as the matters agitated before the referee and Dominic and Lillian are not now free to agitate before the Court matters that they could have agitated before the referee but chose not to agitate before him.

Cross-Claimants' application for leave to file Further Amended Cross-Claim and Third-Eighth Cross-Defendants' strike-out application in respect of Amended Cross-Claim

1. The AXC sought relief in some 27 paragraphs and contained pleadings and particulars over 47 paragraphs, although some of those paragraphs contain numerous subparagraphs; for example, paragraph 11 contained 213 subparagraphs. By Notice of Motion filed on 10 May 2013, Dominic and Lillian seek orders, inter alia, that they be given leave to file and serve a Further Amended Cross-Claim ("FAXC") in a form served on the Cross-Defendants on 16 April 2013. The proposed FAXC seeks broadly corresponding relief to the AXC and some additional relief, and the pleading and particulars extend over some 353 paragraphs over 94 pages. It will be necessary to refer to both forms of the Cross-Claim, so far as the Third-Eighth Cross-Defendants seek to strike out the existing AXC and resist leave to file the proposed FAXC.

1. By Amended Notice of Motion filed on 14 June 2013, the Third-Eighth Cross-Defendants conversely sought orders refusing leave to Dominic and Lillian to file and serve the proposed FAXC and that the existing AXC be struck out. Alternatively they sought orders that, should Dominic and Lillian be granted leave to file the proposed FAXC, it should not include a large number of specified paragraphs and an order or declaration that, as a result of a deletion of those paragraphs, Dominic and Lillian were not entitled to the relief claimed by them in specified paragraphs of the proposed FAXC. In oral submissions the Third-Eighth Cross-Defendants confirmed that, as an alternative to their submission that the entire AXC should be struck out, they sought orders that the particular paragraphs of the AXC addressed in submissions and argument should be struck out.

1. I should first say something as to the approach to be adopted in determining the adequacy of the pleading in the AXC and the proposed FAXC. The parties paid little attention to that matter in submissions but the relevant principles are well established and did not require extensive submissions on their part. The role of pleadings includes to define the issues in the proceedings and provide the basis upon which evidence may be ruled admissible or inadmissible at trial upon the ground of relevance: Dare v Pulham [1982] HCA 70; (1982) 148 CLR 658 at 664. It is, of course, well-established that pleadings should state with sufficient clarity the case that must be met by a defendant and pleadings so as to define the issues for decision and ensure the basic requirements of procedural fairness, namely that a party should have the opportunity to meet a case against him or her: Banque Commerciale SA v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279 at 286, 296, 302-3. In Kirby v Sanderson Motors Pty Ltd [2002] NSWCA 44; (2001) 54 NSWLR 135 at 142-143, Hodgson JA (with whom Mason P and Handley JA agreed) in turn referred to:

"The requirement for a pleading to state material facts which is to be found in the Rules includes the cause or causes of action which are relied upon. Materiality of facts means how those facts are material to a cause of action."

1. In Gunns Ltd v Marr [2005] VSC 251 at [57], in a passage subsequently approved by Garling J in Young v Hones [2013] NSWSC 580 at [82], Bongiorno J observed that:

"Not only must the pleading inform the defendants of the case they must meet now, but it must clearly set out the facts which the plaintiffs must assert to make good their claim with sufficient particularity to enable any eventual trial to be conducted fairly to all parties. Vague allegations on very significant matters may conceal claims which are merely speculative. If this be not the case, the plaintiffs must put their allegations clearly."

1. In Downer Connect Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd [2008] VSC 77 at [2]-[4], Harper J (as he then was) observed that "one of the primary purposes [of pleadings] is to reveal to the opposite party how the party pleading puts its case", and then dealt with a common response to criticism of a pleading:

"A complaint that the pleadings do not achieve this end is often met with the response that the opposite party knows very well, from documents and perhaps other sources, what the case against it is. This is no answer at all, at least unless the relevant documents are properly incorporated into the pleading. It is, as a general proposition, true to say that each pleading should be sufficient in itself. And although an element in an adversarial process, pleadings are themselves intended to be the opposite of adversarial, at least to the extent that they must, if they are to perform one of their proper functions, inform the opposite party of the case that party will have to meet at trial.

But pleadings have another important audience: the Judge or Magistrate. In most cases, the opposite party will have the assistance of some knowledge of the factual background - some knowledge, in other words, of the facts against which the pleadings can be assessed. The tribunal of fact will never be in that position. The pleadings must therefore be drawn so as to allow the impartial and uninformed reader to know what the case is about. This end cannot be achieved unless the pleadings form a coherent narrative, of material fact, with the necessary detail included as particulars. They must be drawn with a careful eye to the evidence that will necessarily be called if the case is to be made out. If the party pleading does not have that evidence, then the case ought not go to trial. Indeed, it is generally true to say that it ought not to proceed beyond the point at which the party pleading appreciates, perhaps because the very act of pleading reveals it, that there is and will remain a gap in the evidence upon which the cause of action or defence is based and without which that cause of action or defence will fail."

That passage was in turn approved by Ferguson J in Taylor v Lederman & Ors [2013] VSC 99 at [3].

1. The relevant authorities were summarised in McGuirk v University of New South Wales [2009] NSWSC 1424 at [21]-[35], where Johnson J noted that the function of pleadings is to state with sufficient clarity the case that must be met by a defendant, and pleadings serve to define the issues for decision and ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her, and that proper pleading is of fundamental importance in assisting courts to achieve the overriding purpose of facilitating the just, quick and cheap resolution of the real issues in the proceedings, as prescribed by s 56 of the Civil Procedure Act 2005 (NSW): McGuirk above at [21], [24].

1. UCPR r 14.28 permits the Court to order that the whole or any part of a pleading be struck out if the pleading, relevantly, has a tendency to cause prejudice, embarrassment or delay in the proceedings or is otherwise an abuse of the process of the Court. The reference to "embarrassment" in this rule is to the concept described by Tamberlin J in Shelton v National Roads & Motorists Assn Ltd [2004] FCA 1393; (2004) 51 ACSR 278 at [18], namely that:

"Embarrassment in this context refers to a pleading that is susceptible to various meanings, or contains inconsistent allegations, or in which alternatives are confusingly intermixed, or in which irrelevant allegations are made that tend to increase expense. This is not an exhaustive list of situations in which a pleading may be embarrassing ..."

1. That observation was approved in McGuirk v University of New South Wales above at [30], [33], where Johnson J noted that a pleading is embarrassing when it is unintelligible, ambiguous, vague or too general, so as to embarrass the opposite party who does not know what is alleged against him, or if the allegations are made at such a level of generality that the defendant does not know in advance the case he has to meet, and that the appropriate remedy in such a case is to strike out the pleading rather than to order the provision of particulars, as it is not the function of particulars to take the place of the necessary averments in a pleading. His Honour also observed (at [35]) that it is not the court's function to settle a party's pleading; the court is confined to the function of ensuring that pleadings are within the rules and fulfil the functions for which they exist; and the co-mingling of objectionable matter with other matter may lead to the conclusion that the pleading as a whole would tend to embarrass the fair trial of the action and ought to be struck out. It is also important to bear in mind the observation of the plurality of the High Court in Fortescue Metals Group Ltd v Australian Securities & Investments Commission [2012] HCA 39; (2012) 291 ALR 399; (2012) 91 ACSR 128 at [27] that:

"The task of the pleader is to allege the facts said to constitute a cause of action or causes of action supporting claims for relief. Sometimes that task may require facts or characterisations of facts to be pleaded in the alternative. It does not extend to planting a forest of forensic contingencies and waiting until final address or perhaps even an appeal hearing to map a path through it."

1. In exercising the Court's power to strike out a pleading under UCPR r 14.28, or to decline leave to file a pleading, the Court must have regard to the role of pleadings and must give effect to the overriding purpose stated in s 56(1) of the Civil Procedure Act 2005 (NSW), namely "to facilitate the just, quick and cheap resolution of the real issues in the dispute or proceedings". Section 58(1) requires the Court to act in accordance with the dictates of justice, and s 58(2) requires that the overriding purpose specified in s 56(1) be taken into account.

1. The first issue which arises is the basis on which Dominic and Lillian can bring a claim in respect of Homeline Building. There was a dispute between the parties as to whether Dominic and Lillian had a "right" to bring such proceedings in equity in the relevant circumstances, which does not need to be determined. The Court has a discretion, to be exercised in accordance with ss 56-58 of the Civil Procedure Act, as to whether Dominic and Lillian should be permitted to bring a claim against Homeline Building since that claim can only be brought in these proceedings if the Court grants leave to file the proposed FAXC and to join Homeline Building as party to it notwithstanding the period for which the proceedings have already been on foot. In that sense, Dominic and Lillian plainly do not have any "right" to bring proceedings against Homeline Building in these proceedings.

1. Homeline Building points out that Dominic and Lillian are not parties to the building contract between Homeline Building and Glad Con as trustee of the Gladstone Street Unit Trust. Dominic and Lillian have not sought leave to bring proceedings on behalf of Glad Con under s 237 of the Corporations Act and Mr Smallbone made clear in submissions that they do not seek to bring such a claim. Homeline Building recognises that a beneficiary may have standing to bring proceedings in respect of trust property, in some circumstances. In Jacobs Law of Trusts in Australia, 7th ed, the authors observe at [2303] that:

"... Where a trustee refuses to institute proceedings against a debtor or to recover trust property, the beneficiary may wish to institute proceedings, either in the beneficiary's own name or in the name of the trustee. The rule here is that where relief is sought in the equitable jurisdiction of the Supreme Court against a third party, a beneficiary may sue in his or her own name, joining as defendants the trustee and any other beneficiaries, but only where there are special circumstances. ... If the circumstances are not exceptional or special, the beneficiary's remedy is to sue the trustee for the execution of the Trust and then apply for the appointment of the receiver, and for leave to sue in the name of the trustee or of the receiver."

1. In Ramage v Waclaw (1988) 12 NSWLR 84 at 91, Powell J observed that circumstances which might be regarded as "exceptional" or "special" included collusion between the trustee and debtor. His Honour referred to several cases which contemplated, for example, that such proceedings may be permitted where plaintiffs have a material interest in the due enforcement of claims and may be seriously prejudiced if they are abandoned or not duly prosecuted. Homeline Building also refers to the consideration of those principles and the concept of "special circumstances" in Alexander v Perpetual Trustees WA Ltd [2004] HCA 7; (2004) 216 CLR 109 at [55]-[56] and Lewis v Condon; Condon v Lewis [2013] NSWCA 204 at [109]-[111] per Leeming JA (with whom McColl JA and Sackville AJA agreed). Mr Svelha, who appears for Homeline Building, points out that the question whether Dominic and Lillian ought to be able to bring proceedings on behalf of Glad Con as trustee of the Gladstone Street Unit Trust needs to be determined in the context that they are a 20% unitholder in the trust, and the question whether such a claim should be permitted needs to be determined by reference to interests of unitholders as a whole and not only Dominic and Lillian.

1. Homeline Building rightly points out that Dominic and Lillian have neither sought to join all of the other beneficiaries of the Trust, which include, for example, Murr Alliance Pty Limited as trustee for the Murr Alliance Family Trust and RCA as trustee for the RCA Family Trust and Murr Group Pty Limited as trustee for the Murr Family Trust, which are not presently party to the proceedings. Even if an application had been made to join those parties to the proceedings, a significant question would have arisen as to whether that course would be consistent with the just, quick and cheap resolution of the matters in dispute, for the purposes of s 56 of the Civil Procedure Act, where those parties have no other interest in the matters in issue in what are likely to be complex and lengthy proceedings, and where RCA is not, so far as the evidence goes, an entity controlled by Murr.

1. Homeline Building also contends that there are numerous deficiencies in the pleading of the causes of action against Homeline Building, including misstatement of the duties owed by Glad Con as trustee of the Gladstone Street Trust; pleading dishonesty without a proper basis and without particularisation; pleading knowledge without identifying material facts and proper particularisation; failure to specify dates or periods of time; failure to plead the Gladstone Street Building Contract; and limitation issues with the proposed Cross-Claim.

1. In particular Homeline Building points out that the proposed FAXC involves various allegations of dishonesty or lack of honesty on the part of Glad Con, in relation to the Gladstone Street Building Contract, including that Glad Con engaged in a "dishonest design of assisting Murr and Homeline Building" at the expense of Dominic and Lillian (proposed FAXC [75], [82], [117]); "acted with a dishonest design of assisting and shielding Homeline Building ... Murr and Luigi" (proposed FAXC [89]), and acted dishonestly in accepting in the reference that it owed $770,000 plus interest to Homeline (proposed FAXC [117]); Murr and Luigi as directors of Glad Con had "dishonestly participated in causing that breach to occur" (proposed FAXC [83]-[84], [90]-[91]); and Murr had also acted dishonestly in relation to the reference after Luigi's resignation as a director of Glad Con (proposed FAXC [118]).

1. Homeline Building points out that, as I have noted above in respect of the proposed FAXC generally, Dominic and Lillian do not plead material facts to found the conclusory allegations of dishonesty or provide particulars of such dishonesty. Homeline Building also draws attention to the terms of the relevant trust deed and the width of the powers conferred on Glad Con as trustee. I have addressed these issues in dealing with the form of the proposed pleading above.

1. Homeline Building also contends that the claim by Dominic and Lillian against it in relation to the Gladstone Street Building Contract was not commenced within 6 years of entry into the relevant building contract, or within 6 years of practical completion of the relevant property or, indeed, within 6 years of the bulk of the payments made by Glad Con as trustee of the Gladstone Street Trust to Homeline Building and that, to invoke the extended limitation period for fraud or a fraudulent breach of trust under s 47(1) of the Limitation Act 1969 (NSW), Dominic and Lillian would need to establish a fraud of fraudulent breach of trust by Glad Con as trustee in entering into the Gladstone Street Building contract or in making the payments due under that contract. To the extent that allegations of dishonesty are made, and are necessary to give rise to an allegation of fraud so as to meet a limitations defence, they are not properly pleaded for the reasons noted above.

1. Homeline Building also points out, with considerable force, that it would be onerous and unfair for it to be joined to these proceedings which have been on foot for a number of years; where four of the five trusts in issue have nothing to do with it and where Dominic and Lillian seek to complain in these proceedings about the affairs of the Gladstone Street Unit Trust in respect of a wider range of matters other than the contract involving Homeline Building.

1. It is ultimately not necessary or appropriate to determine whether, had the proposed FAXC been adequately pleaded, Dominic and Lillian would have been granted leave to bring it against Homeline Building, because the deficiencies I have referred to above are such that it is not properly pleaded. It is preferable that that question be determined in the context of a properly pleaded claim, if one is ultimately prepared, rather than in the abstract and without reference to the terms of a proper pleading.

1. The next question is whether Homeline Building should be restrained from continuing the Common Law proceedings on Dominic and Lillian's application. Mr Smallbone contended that the Common Law proceedings should be stayed on the basis that, where a general administration is ordered in respect of a trust, actions at law should not proceed and such claims should be made in the administration proceedings. In McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623 at 635, Young J considered the circumstances in which orders for a general administration order can be made in respect of a trust and also pointed to the beneficiary's right to approach the Court for the appropriate order for performance of a trust, whether a specific order or a general decree. On the other hand, Mr Svelha submits that there should be no injunction restraining the Common Law proceedings brought by Homeline Building.

1. Mr Svehla contended that the principles on which Dominic and Lillian relied in respect of the administration of the trust reflected older authority in respect of deceased estates. I do not accept that submission. Mr Smallbone rightly responds that the decision in Burns Philp is authority that the equitable jurisdiction extends beyond deceased estates to trusts.

1. Mr Smallbone contends that Homeline Building's claim should now be brought forward in respect of the administration of the Gladstone Street Unit Trust, rather than as a separate claim against Glad Con. An immediate difficulty with that submission is that there is presently no administration of the trust; and Dominic's and Lillian's entitlement to any such administration would be a matter to be determined at the final hearing. Mr Smallbone contends that the Court should act to protect its jurisdiction, where Glad Con accepts that it owes the relevant amount to Homeline Building so that no-one but Dominic and Lillian dispute it, and contends that the Court's jurisdiction to determine the question in an administration suit will be defeated if the Common Law proceedings were allowed to mature to a judgment. Mr Smallbone contends that Dominic and Lillian may be prejudiced to the extent that Homeline Building can then execute against the assets of Glad Con or the Gladstone Street Unit Trust, pointing to the principle that the Court will not, in an administration suit, restrain execution of a judgment even if that judgment has not been enforced before a decree is made.

1. It is also not necessary for me to decide, given the other findings that I have reached, whether an order could have been made on an interlocutory basis so as to protect the proceeds of an existing cross-claim against Homeline Building, possibly on the basis that an undertaking as to damages was required from Dominic and Lillian. Where I have held that significant parts of the AXC should be struck out and that leave should not be granted to file the FAXC, and where it may be some time before Dominic and Lillian prepare an adequate pleading if they are ultimately able to do so, it seems to me that there would be a considerable injustice to Homeline as plaintiff and Glad Con as defendant in the Common Law proceedings to delay the determination of the claims between them, for an indeterminate period, so as to allow Dominic and Lillian to put their pleading in order.

Extension of time for objections, falsifications and surcharges

1. By orders made by consent on 7 May 2013, Dominic and Lillian were required to file and serve objections, falsifications and surcharges to the transactions dealt with in the schedules to the referee's report by 27 May 2013, and I directed that no further objections, falsifications or surcharges could be filed after that date without leave of the Court. I had suggested that course with a view to narrowing the issues in dispute if an accounting were ultimately to be ordered. I had anticipated that the number of transactions that were to be challenged by Dominic and Lillian might well have narrowed as a result of the submissions made by the parties before the referee and the referee's determination. It is now apparent that has not occurred, or at least has not occurred to a substantial extent.

1. Between 27 May 2013 and 31 May 2013, correspondence took place between the parties concerning the filing and serving of Dominic's and Lillian's objections, falsifications and surcharges. The objections served by Dominic and Lillian in respect of the IMS Unit Trust on 30 May 2013 included 1,021 objections and 68 surcharges, substantially exceeding the number of objections raised by Dominic and Lillian before the referee. By way of example, Dominic and Lillian's objections, falsifications and surcharges to the transactions in the IMS Unit Trust set out falsifications in relation to the IMS Unit Trust in Attachment 1 and surcharges in relation to the IMS Unit trust in Attachment 2. These falsifications related to over 1,000 items, on 11 bases, with many items being objected to on numerous alternative bases. This single set of falsifications in respect of one of the trusts in issue raised several thousand disputed issues including, for example, a challenge to a receipt of $2,300 by the trust on 30 June 1999 (which was by no means the lowest amount in dispute) which is sought to be falsified on eight grounds, namely that it was not admitted (apparently, notwithstanding the referee's report); its purpose was disputed; it was not authorised by the terms of the trust; it was in breach of the conflict rule; it was in breach of the profit rule; it was imprudent; it was not impartial; it was an unauthorised loan and proper records were not obtained or kept. A payment to AMI Insurance of $15.72 on 28 September 2000 is sought to be falsified on three grounds on the basis that it was not admitted (again, notwithstanding the referee's report); its purpose was disputed and proper records were not obtained or kept. A payment of $400 to RCA for bookkeeping on 29 March 2001 is sought to be falsified on nine grounds, namely waste; its purpose is disputed; the conflict rule; the profit rule; it was imprudent; it was not impartial; it was not authorised and proper records were not obtained or kept. The list of objections in respect of that trust comprises 68 items on various bases.

1. On 31 May 2013, Dominic and Lillian served 870 objections and 16 surcharges in relation to the Hogben Unit Trust; on 3 June 2013 they served 302 objections in relation to the Engadine Unit Trust and 244 objections in relation to the Pacificon Unit Trust; and on 3 June 2013 they served 883 objections and 25 surcharges in relation to the Gladstone Street Unit Trust. The Third-Eighth Cross-Defendants point out that Dominic and Lillian have, in total, notified more than 3,420 objections, falsifications and surcharges for the five trusts, which they contend are not grouped in categories as my direction had required. To some extent, there is categorisation of the relevant claims, by the schedule to which I have referred above, although particular objections are in multiple categories.

1. On 19 June 2013, I directed that submissions to be served by the Cross-Claimants should address the question of how their objections, falsifications and surcharges are to be addressed in a just, quick and cheap manner. Dominic and Lillian's submissions in reply identify the fact that certain of the claims, being those to related parties, can be categorised as payments to the builder, to Luigi's company, to Mr Murr and his various companies, to Peter El Murr and his companies, and as other payments to other Murr entities. That categorisation, which is not adopted in the objections and falsifications, does not substantially advance the question of how 3,420 objections and falsifications, each on multiple grounds, could be determined in a just, quick and cheap manner. Dominic and Lillian also acknowledge that particular objections may "stand or fall with the same objections to like payments" but the falsifications and objections are not structured in that manner. The Third-Eighth Cross-Defendants in turn contend that the preferable way forward is for the Cross-Claimants to prepare a properly pleaded and particularised Further Amended Cross-Claim treating each trust separately with properly particularised allegations against the Cross-Defendants, with each particularised allegation supported by reference to relevant accounting items under challenge, which should be categorised and listed collectively.

1. The purpose of my direction, to seek to narrow and clarify the issues in dispute if an accounting were ordered, has plainly not been achieved. The Court has now adopted a referee's report in respect of the five trusts, and the content of the objections, surcharges and falsifications that Dominic and Lillian seek to file appear to have no regard to the referee's findings that have now been adopted by the Court. It is common ground that the objections, surcharges and falsifications seek to raise numerous issues that were not raised before the referee, some of which appear to be legal issues that were not within the scope of the reference. Dominic and Lillian do not seek to distinguish, by the structure of their objections, surcharges and falsifications or in submissions before me, between matters not within the scope of the reference, matters already decided by the referee and sought to be reagitated and matters that were within the scope of the reference but were not raised within it.

1. Dominic and Lillian filed the objections, surcharges and falsifications out of time, contrary to my direction and without leave of the Court. After I raised a concern with that course in further directions, Dominic and Lillian filed a notice of motion dated 19 June 2013 which seeks an order that an extension of time be granted nunc pro tunc, for the filing and service of their objections, falsifications and surcharges to the transactions dealt with in the schedules to the referee's report, until 30 May 2013 in respect of the IMS Unit Trust and until 4 June 2013 in respect of the Hogben, Pacificon, Engadine and Gladstone Street Unit Trusts.

1. So far as the delay - which, of course, was relatively short - in filing the objections, falsifications and surcharges is concerned, Dominic and Lillian's solicitor gives evidence that Counsel was retained on behalf of Dominic and Lillian to prepare their objections, falsifications and surcharges to the transactions and that, when Dominic and Lillian consented to the orders made on 7 May 2013, they relied on Counsel's and the solicitor's advice as to the period of time which they estimated would be sufficient to prepare the objections, falsifications and surcharges. The solicitor also gives evidence that:

"Our estimate proved to be inadequate because we under-estimated the time which would be required to fully consider the schedules to Dr Ferrier's report, the submissions made to Dr Ferrier in respect of the draft schedules prepared by him in relation to each trust, the submissions in reply, the terms of the cross-claim, the evidence adduced on behalf of the cross-claimants and the contentions which had then been notified by the cross-defendants as to the effect of the report of Dr Ferrier and then draft and review the objections, falsifications and surcharges."

1. The time taken to prepare the objections, falsifications and surcharges might well have been reduced had more attention been devoted to how these matters could be organised into categories (as my direction had required) or, consistent with s 56 of the Civil Procedure Act 2005 (NSW), to identify those issues which could realistically be determined in a cost-effective manner. In submissions in reply, Mr Smallbone submits that the matters which are addressed in the objections, surcharges and falsifications by attacks on numerous individual items, some of small value, could be approached by the determination of several wider issues. However, Dominic and Lillian did not in fact adopt that approach in their objections, surcharges and falsifications and do not now seek to amend the objections, surcharges and falsifications to do so.

1. I have formed the view that I should nonetheless grant leave to Dominic and Lillian to file the objections, falsifications and surcharges in the form in which they seek to proceed with them, notwithstanding the concerns that I have expressed above. They will then be on the Court file so as to record the matters that Dominic and Lillian seek to have determined if an accounting is ordered in the traditional form at the final hearing. This course will not prevent the Cross-Defendants raising, prior to or at the final hearing, any issue as to abuse of process or case management arising from the manner in which those objections, falsifications and surcharges are presently structured, including whether they would reagitate accounting matters that have now been determined by the Court's adopting the referee's report or raise challenges to transactions that were within the scope of the reference but were not raised by Dominic and Lillian before the referee.

1. It would, of course, also be open to Dominic and Lillian to seek leave to file amended objections, falsifications and surcharges that are structured so as to identify matters to be determined in an efficient way, acknowledge the matters that have already been determined by the referee and exclude matters that were within the scope of the reference and were not raised before the referee when they had an opportunity to do so. It will be a matter for Dominic and Lillian and their legal advisers whether to take that course. If that course is to be taken, it would need to be taken promptly and may otherwise not be permitted.

Next steps

1. Following the delivery of this judgment I will hear the parties with a view to directions which should be made so that the matter can be set down for hearing during the first half of 2014, whether on the basis of the existing Amended Cross-Claim (after excising the paragraphs that I have struck out and any further paragraphs that should be struck out in consequence) or

any Further Amended Cross-Claim that Dominic and Lillian may seek and be granted leave to file. I will also hear the parties as to costs.

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Decision last updated: 21 October 2013