Nicholls v Kalmar Pty Ltd as trustee for the Kalmar Trust - [2021] WASC 95

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   NICHOLLS -v- KALMAR PTY LTD AS TRUSTEE FOR THE KALMAR TRUST [2021] WASC 95
CORAM:   MASTER SANDERSON
HEARD:   10 DECEMBER 2020 & 18 FEBRUARY 2021
DELIVERED          :   9 APRIL 2021
PUBLISHED           :   9 APRIL 2021
FILE NO/S:   CIV 2149 of 2019
BETWEEN:   CRAIG GORDON NICHOLLS
Plaintiff

AND

KALMAR PTY LTD AS TRUSTEE FOR THE KALMAR TRUST
First Defendant

SHARON LEE O'NEILL
Second Defendant

FIONA MARIE NICHOLLS
Third Defendant

REAMAR PTY LTD
Fourth Defendant

Catchwords:

Practice and procedure - Applications for security for costs and for time to amend statement of claim - Turns on own facts

Legislation:

Rules of the Supreme Court 1971 (WA)

Result:

Leave to amend statement of claim granted
Application for security for costs dismissed

Category: B

Representation:

Counsel:

Plaintiff	:	M Hotchkin
First Defendant	:	P Mendelow
Second Defendant	:	P Mendelow
Third Defendant	:	No appearance
Fourth Defendant	:	P Mendelow

Solicitors:

Plaintiff	:	Hotchkin Hanly
First Defendant	:	Lewis Blyth & Hooper
Second Defendant	:	Lewis Blyth & Hooper
Third Defendant	:	No appearance
Fourth Defendant	:	Lewis Blyth & Hooper

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

Nil

MASTER SANDERSON:

This was the return of two applications. The first in time was the first, second and fourth defendants' application for security for costs. This application was brought under O 25 of the Rules of the Supreme Court 1971 (WA) (RSC). The plaintiff has applied to amend the statement of claim in terms of a fourth amended statement of claim which is annexed to the plaintiff's chamber summons filed 1 December 2020. Essentially the first, second and fourth defendants say the plaintiff has had so much difficulty pleading his case and so much has been wasted by the first, second and fourth defendants in costs responding to the various iterations of the statement of claim, that leave to amend should not be given and if it is given, security for costs ought be ordered. It is convenient then to deal first with the application to amend the statement of claim.
The plaintiff pleads the second defendant was a director of the first defendant from 24 June 2014 and from 18 August 2015 was its sole director. In September 2015 she became the sole shareholder of the first defendant. The first defendant is trustee of the Kalmar Trust. This is a discretionary trust established in December 1992. At all material times it traded under the name 'Factory Direct Garages, Workshops and Patios'. The assets of the Kalmar Trust were derived from the efforts of Derek George Nicholls (the deceased). The deceased died on 18 August 2015. This case is concerned with the disposition of his assets.
The deceased was married to Jean Marita Nicholls. The couple divorced in or around 1997. They had five children – the plaintiff, the second defendant and the third defendant, and two other children having predeceased the deceased. Paragraphs 8 through to 11 of the amended pleading plead the terms of the original trust deed and three variations to that deed. Without going into detail it would seem that the Kalmar Trust is a standard family discretionary trust. Perhaps the only point to note is that by deed of variation dated 30 June 1998, the appointor and guardian of the trust was the deceased during his lifetime or any person who he might appoint and failing appointment, his legal personal representative or any person whom they may jointly appoint.
In or around June 2014 the deceased was diagnosed with terminal cancer. At that stage he was the sole director and shareholder of Kalmar Pty Ltd and he controlled the trust. On 24 June 2014 he appointed the second defendant as a director of Kalmar Pty Ltd. He appointed the second defendant as his attorney and he executed a will on 25 September 2014.
Paragraph 15 of the proposed pleading filed 1 December 2020 sets out various terms of the will. Paragraph 15(c) is of particular importance. It reads as follows:
Provided that Sharon carried out the Deceased's wishes regarding the property known as 5 Waterlilly Drive, Mariners Cove (the Holiday Home) within six months of his death, by distributing it in specie to Fiona and Craig equally, then Sharon was bequeathed the Deceased's shares in Kalmar and High Road and appointed the Appointor and Guardian of the Trust and the High Road Trust.
The will goes on to say that if Sharon did not carry out these wishes, the shares in Kalmar Pty Ltd and High Road were bequeathed to the plaintiff and the second and third defendants equally. Further, each of them was to be appointed appointors and guardians of the Kalmar Trust and the High Road Trust. By par 16 it is pleaded that as at the date of the will the net value of the business operated by the trust was around $10 million. Further, the value of the residuary estate was about $4.1 million. This was comprised of an unpaid present entitlement for the years ending 30 June 2014 and up until September 2014. By par 17 the plaintiff pleads 'the purpose of the Will'. With respect, the will speaks for itself and such a plea is unnecessary albeit inoffensive.
On or about 23 January 2015, the deceased 'purported' to assign to the second defendant his entitlement to the unpaid present entitlement owed to him by Kalmar Pty Ltd. The assignment was in writing. Quite why the assignment was not effective (if indeed that is the plaintiff's position) is not clear from the pleading.
By par 20 the plaintiff pleads that from time to time the second defendant caused the first defendant to pay to her certain amounts from the assigned unpaid present entitlement. Again it is not clear why that is said to be improper or relevant to the action. By par 21 it is pleaded the deceased did not inform the plaintiff either of the 'purported Assignment' or its effect.
This plea in particular was the subject of criticism by counsel for the first, second and fourth defendants. Counsel made the point that there was no duty on the deceased to advise the plaintiff about the assignment. It is difficult to argue with that proposition. However, for present purposes it is enough to note the plaintiff pleads the fact that he was not advised of the assignment and it would appear there is no dispute about that issue. By par 25 it is pleaded the second defendant did not inform the plaintiff until the filing of an amended defence on 11 December 2019, about the assignment of the unpaid present entitlement. Once again, counsel for the first, second and fourth defendants raised the question as to whether or not there was any duty to do so. There would appear to be an issue of fact between the parties on this question – that is, the date upon which the plaintiff was advised of the assignment. But it is not a factual dispute of any real importance.
Paragraph 27 appears to be the linchpin of the plaintiff's claim. He says because he did not know that if the holiday home was not transferred to him and the third defendant, the second defendant would not take control of the trust. He was therefore deprived of the opportunity to decline to accept transfer of the holiday home and thus, have control of the trust fall into the residuary estate to be divided between him and the second and third defendants. The plaintiff goes on to plead the second defendant had a fiduciary duty to inform the plaintiff as to the consequences of his not accepting the holiday home and as she did not do so, she was in breach of that fiduciary duty.
The pleading itself is somewhat complicated as to just what duties were owed by the second defendant to the plaintiff and why. But reduced to its essentials, the claim really amounts to this:
(1)Prior to his death, the deceased assigned to the second defendant his unpaid present entitlement held by the Kalmar Trust.
(2)The will of the deceased effectively gave the second defendant the assets of the trust if the plaintiff and the third defendant had the holiday house transferred to them.
(3)The plaintiff was unaware if the transfer of the holiday house did not occur, the control of the trust would pass to him and the second and third defendants as residuary beneficiaries.
(4)The second defendant, as executor of the deceased's estate, had a duty to inform the plaintiff about the consequences of accepting a transfer of the interest in the holiday home.
(5)As there was a breach of trust, the plaintiff is entitled to certain relief against particularly the second defendant but also affecting the other defendants.
It must be acknowledged that the plaintiff's claim is not without its difficulties. That is particularly the case with respect to claims in relation to the unpaid present entitlement. It is difficult to see how the second defendant, or indeed any of the defendants, had a duty to the plaintiff with respect to the assignment made by the deceased. If it is alleged that assignment was for some reason ineffective, that may have consequences for the estate. Presumably it would increase the residuary estate and that would benefit the plaintiff. But how that point is reached is problematic.
Two points can be made about the proposed pleading. First, it sets out with reasonable clarity the plaintiff's claim. The pleading style might be criticised as unduly complex but it is not difficult to understand what claim is being made by the plaintiff. Second, there really are no factual disputes raised by the statement of claim. As I indicated above, there may be a dispute as to when the plaintiff became aware of the assignment of the unpaid present entitlement to the second defendant by the deceased. But the fact is a document exists. This is one of those cases where it is a question of the law as it applies to uncontested facts. That being so, the amended pleading sets out the plaintiff's position with sufficient clarity to allow the defendants to understand the case they have to meet.
According, I would allow the plaintiff to amend his statement of claim in terms of the schedule attached to the chamber summons.
Turning then, to the issue of security for costs, the first, second and fourth defendants seek security in an amount of $100,000. The plaintiff says he cannot meet that order for security. The first, second and fourth defendants challenge the evidence but really based upon the plaintiff's evidence, it is clear, taking into account his indebtedness to his former solicitors, the plaintiff simply will not be able to provide security. His impecuniosity prevents him from doing so. Order 25 is clear - an order for security ought not be made simply based upon the inability of the plaintiff to meet any costs order.
As I indicated above, the real question here is whether or not the conduct of the litigation by the plaintiff and the costs incurred by the first, second and fourth defendants as a consequence of that conduct is such as to warrant an order for security. On balance, I am not satisfied it does. It is difficult to understand why the plaintiff's former solicitors had such difficulty drafting a statement of claim in what is a relatively straightforward action. The way counsel for the plaintiff put his client's case at the hearing made it clear he was across the issues and had drawn a pleading which adequately articulated the plaintiff's claim. But I am not satisfied the conduct of the plaintiff has been such as to warrant what is, in effect, the penalty of providing security for costs. It may be there would be circumstances in which an individual plaintiff conducted litigation in such a way that an order for security for costs was warranted. After all, the discretion in O 25 is unfettered. But I am not satisfied, in the circumstances of this case, that an order for security is warranted.
As a final point, counsel for the first, second and fourth defendants submitted that if leave to amend the pleading was granted then the usual rule that costs thrown away by reason of the amendment should be paid by the plaintiff in any event, be modified so that the costs thrown away be paid forthwith. Again, I am not satisfied that order should be made. As counsel for the plaintiff submitted, to make such an order would effectively be a sanction on the plaintiff. While it is true there has been difficulty on the part of the plaintiff's former solicitors in ensuring a satisfactory pleading, I am not satisfied that justifies an order that costs thrown away be paid forthwith.
Subject to hearing from the parties within seven days of the publication of these reasons, orders will be in the following terms:
(1)The first, second and fourth defendants' application for security for costs be dismissed.
(2)The plaintiff have leave to amend his statement of claim in terms of the minute annexed to his chamber summons.
(3)The plaintiff pay the costs thrown away by reason of the amendment in any event.
(4)The costs of both chamber summons be costs in the cause.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CB
Associate to Master Sanderson
9 APRIL 2021