Permanent Building Society (in Liq) v Aqua Vital Australia Ltd
[2000] WASC 225
•13 SEPTEMBER 2000
PERMANENT BUILDING SOCIETY (IN LIQ) -v- AQUA VITAL AUSTRALIA LTD [2000] WASC 225
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2000] WASC 225 | |
| Case No: | CIV:1063/1996 | 1 SEPTEMBER 2000 | |
| Coram: | MASTER SANDERSON | 13/09/00 | |
| 12 | Judgment Part: | 1 of 1 | |
| Result: | Leave to amend granted | ||
| PDF Version |
| Parties: | PERMANENT BUILDING SOCIETY (IN LIQ) AQUA VITAL AUSTRALIA LTD (ACN 009 125 651) |
Catchwords: | Practice and procedure Application for leave to amend statement of claim Equitable claim Whether limitation period has expired Approach to be adopted |
Legislation: | Limitation Act, s 47 Rules of the Supreme Court, O 21 r 5(2), O 21 r 5(5) |
Case References: | Barnes v Addy (1874) LR 9 Ch App 244 Dye v Griffin Coal Mining Co Pty Ltd (1998) 19 WAR 431 Morgan v Banning (1999) 20 WAR 474 R v McNeil (1922) 31 CLR 76 Royal Brunei Airlines SDN BHD v Tan [1995] 2 AC 378 Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514 Weldon v Neal [1887] 19 QBD 349 Clay v Clay (1999) 20 WAR 427 Commonwealth v Verwayen (1990) 170 CLR 394 Eaves v Hickson (1861) 54 ER 840 Elders Trustee and Executor Trustee Coy Ltd v EG Reeves Pty ltd (1988) 78 ALR 193 Equiticorp Industries Group Ltd v R [1996] 3 NZLR 586 Howarth v Adey [1966] 2 VR 535 Koorootang Nominees Pty Ltd v Australian & New Zealand Banking Group Ltd [1998] 3 VR 16 Metropolitan Bank v Heiron (1880) 5 ExD 319 Midgley v Midgley [1893] 3 Ch 282 Stone James v Pioneer Concrete (WA) Pty Ltd [1985] WAR 233 Syrimi v Hinds (1996) 6 NTLR 1 Taylor v Davies [1920] AC 636 Temwood Holdings Pty Ltd v Oliver [1999] WASC 213 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
AQUA VITAL AUSTRALIA LTD (ACN 009 125 651)
Defendant
Catchwords:
Practice and procedure - Application for leave to amend statement of claim - Equitable claim - Whether limitation period has expired - Approach to be adopted
Legislation:
Limitation Act, s 47
Rules of the Supreme Court, O 21 r 5(2), O 21 r 5(5)
Result:
Leave to amend granted
(Page 2)
Representation:
Counsel:
Plaintiff : Mr C J L Pullin QC & Mr N R Stagg
Defendant : Mr R S Davies
Solicitors:
Plaintiff : Freehills
Defendant : Blake Dawson Waldron
Case(s) referred to in judgment(s):
Barnes v Addy (1874) LR 9 Ch App 244
Dye v Griffin Coal Mining Co Pty Ltd (1998) 19 WAR 431
Morgan v Banning (1999) 20 WAR 474
R v McNeil (1922) 31 CLR 76
Royal Brunei Airlines SDN BHD v Tan [1995] 2 AC 378
Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514
Weldon v Neal [1887] 19 QBD 349
Case(s) also cited:
Clay v Clay (1999) 20 WAR 427
Commonwealth v Verwayen (1990) 170 CLR 394
Eaves v Hickson (1861) 54 ER 840
Elders Trustee and Executor Trustee Coy Ltd v EG Reeves Pty ltd (1988) 78 ALR 193
Equiticorp Industries Group Ltd v R [1996] 3 NZLR 586
Howarth v Adey [1966] 2 VR 535
Koorootang Nominees Pty Ltd v Australian & New Zealand Banking Group Ltd [1998] 3 VR 16
Metropolitan Bank v Heiron (1880) 5 ExD 319
Midgley v Midgley [1893] 3 Ch 282
Stone James v Pioneer Concrete (WA) Pty Ltd [1985] WAR 233
Syrimi v Hinds (1996) 6 NTLR 1
Taylor v Davies [1920] AC 636
Temwood Holdings Pty Ltd v Oliver [1999] WASC 213
(Page 3)
1 MASTER SANDERSON: This is the plaintiff's application for leave to amend its statement of claim in terms of a minute of further reamended statement of claim dated 2 August 2000. The application is brought under O 21 r 5. The relevant parts of that rule are in the following terms:
"(2) Where an application to the Court for leave to make the amendment mentioned in paragraph (3), (4) or (5) is made after any relevant period of limitation current at the date of issue of the writ has expired, the Court may nevertheless grant such leave in the circumstances mentioned in that paragraph if it thinks it just to do so.
…
(5) An amendment may be allowed under paragraph (2) notwithstanding that the effect of the amendment would be to add or substitute a new cause of action if the new cause of action arises out of the same facts or substantially the same facts as a cause of action in respect of which relief has already been claimed in the action by a party applying for leave to make the amendment."
2 Turning to the minute of further reamended statement of claim (which I will refer to as "the minute"), par 1 identifies the plaintiff as a society formed, registered and incorporated under the Building Societies Act 1976. Paragraphs 2 through to 8 identify the defendant and plead that Brian Laurence McGee ("McGee"), Adrian Aldo Nizzola ("Nizzola") and Glen John Wheeler ("Wheeler") were directors of the defendant at all material times. Further, par 4 and par 5 plead Nizzola and Wheeler were directors of a company identified as Capital Hall Ltd at all relevant times. By par 9 it is pleaded that the three directors owed the plaintiff fiduciary duties. By par 10 it is pleaded that Wheeler also owed the plaintiff a fiduciary duty to avoid a conflict of personal interest and duty to the plaintiff. None of these paragraphs is controversial.
3 Paragraph 11 pleads that at all material times Capital Hall was indebted to the defendant in the sum of $1,500,000 and this debt, together with interest, became due and payable on 7 August 1991. The debt, it is pleaded, was secured by a fixed and floating charge in favour of the defendant over the assets of Capital Hall. Paragraph 12 pleads that on 6 August 1991 a meeting of directors of the plaintiff took place at which Wheeler requested the plaintiff to provide Capital Hall with financial accommodation to enable it to repay the debt to the defendant. By par 13
(Page 4)
- it is pleaded that a further meeting took place on 12 August 1991 in which the manner of the financial accommodation to be provided to Capital Hall by the plaintiff was discussed by McGee, Nizzola and Wheeler. It is pleaded by par 14 and par 15 of the minute that on 16 August 1991 the plaintiff effectively discharged Capital Hall's liability to the defendant. In exchange, Capital Hall provided certain security to the plaintiff. It is pleaded by par 16 and par 17 that when the advance was made by the plaintiff Capital Hall had no way of making repayment of the advance and was not in a position to provide adequate security. Paragraph 18 pleads that the advance has not been repaid. By par 19 it is pleaded that an advantage was conferred on Capital Hall and Wheeler by the transaction and that the transaction was detrimental to the plaintiff.
4 Paragraphs 19A, B and C deal with the knowledge of McGee, Nizzola and Wheeler in relation to the transactions and plead that the purpose of the transaction was to advance Capital Hall and Wheeler to the detriment of the plaintiff. Paragraph 20 pleads that based upon the earlier paragraphs, McGee, Nizzola and Wheeler were in breach of their fiduciary duties. Paragraph 21 pleads that as a consequence of the breach of these duties the plaintiff has suffered loss and damage.
5 The minute does not amend any of the first 21 paragraphs of the statement of claim. These have stood for some time and are not presently the subject of the dispute. It is the amendments to par 22 to be found in the minute which cause the defendant concern. Paragraph 22 of the minute reads as follows:
"On 16 August 1991 the defendant received a benefit of $1,513,808.22 as pleaded in paragraph 15(a) from the plaintiff in circumstances where the defendant knew or ought to have known that it was received from the plaintiff as a result of the breaches of duties pleaded in paragraphs 19C and 20 and, or alternatively, by reason of the facts pleaded in paragraph 22(g) to (i) below, the defendant assisted, procured or induced the breaches of duty pleaded in paragraphs 19C and 20(a) and did so dishonestly in that the defendant knew or ought to have known of the breaches of fiduciary duties pleaded in paragraphs 19C and 20(a)."
6 (The section of the above paragraph underlined is the amendment proposed by the plaintiff and found in par 22 of the minute. For the purposes of this application I have omitted amendments to par 22 made by
(Page 5)
- earlier pleadings. These earlier amendments are of no relevance to the present application.)
7 It was common ground between the parties that what the plaintiff sought to do by amendment to par 22 was introduce a claim against the defendant based upon what is generally said to be the second limb of the principle in Barnes v Addy (1874) LR 9 Ch App 244. The classic and oft quoted statement of principle from that case was put by Lord Selborne LC in the following terms (at 251 - 252):
"That responsibility [of a trustee] may no doubt be extended in equity to others who are not properly trustees, if they are found … actually participating in any fraudulent conduct of the trustee to the injury of the cestui quetrust. But … strangers are not to be made constructive trustees merely because they act as the agents of the trustees in transactions within their legal powers, transactions, perhaps of which a Court of Equity may disapprove, unless those agents receive and become chargeable with some part of the trust property, or unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees."
8 Based upon this statement of principle there are then two forms of liability for breach of trust. These are sometimes referred to as the primary liability and the accessorial liability. What the amendment to par 22 seeks to introduce is the accessorial liability claim against the defendant. Clearly it is open to the plaintiff to make such a claim against the defendant given the pleaded facts. The first objection made by the defendant to such a plea being raised is that the limitation period has expired and therefore no amendment should be allowed. As this argument has been raised by the defendant, the plaintiff seeks leave to amend based on O 21 r 5(2) and (5). The first question to determine, then, is whether in fact the time limit for bringing the accessorial claim has expired.
9 In many cases there will be no issue as to whether or not the time limited for bringing an action has expired. For instance, in Dye v Griffin Coal Mining Co Pty Ltd (1998) 19 WAR 431 the claim concerned an accident which had occurred on 12 October 1990. The writ was issued within the six year time limit provided under the Limitation Act. However, the plaintiff sought to amend in August 1997 to plead matters which occurred between January 1990 and October 1990. There was no question but that the relevant time limit had expired. If leave to amend was granted it could only then be granted pursuant to O 21 r 5(5). The
(Page 6)
- position here is not so clear cut. There is no doubt that the actions of the defendant in relation to accessorial liability occurred in August 1991. By way of relief, the plaintiff claims equitable damages. Under the second limb of Barnes v Addy it is not possible to claim the defendant holds the property on constructive trust because receipt of the property is not dependent upon the fiduciary relationship between the plaintiff and the defendant. Liability is by definition accessorial. Consequently, although the claim is based in equity there is no fiduciary relationship which can lead to a constructive trust.
10 This, I think, calls into question whether s 47 of the Limitation Act has any application. Section 47(1)(b) is in the following terms:
"If the action or other proceeding is brought to recover money or other property and is one to which no existing statute of limitations applies, the trustee or person claiming through him shall be entitled to the benefit and be at liberty to plead the lapse of time as a bar to such action or other proceeding in the like manner and to the like extent as if the claim had been against him (otherwise than as trustee or person claiming through a trustee) in an action of debt for money had and received …"
11 The difficulty with this section is that it applies to a trustee or a person claiming through him. If the position was reversed and what the plaintiff now sought to do was to amend the statement of claim so as to claim the defendant was primarily liable under the Barnes v Addy principle, then the claim would be brought against the defendant as a trustee, albeit a constructive trustee. Then the defendant could rely upon s 47(1)(b). But that is not the case here.
12 Counsel for the defendant submitted that as a general statement of principle, statutes of limitation operate by analogy in a suit in equity: see Equitable Doctrines and Remedies, Meagher Gummow & Lehane, 3rd ed, par 3401. That being the case, this action was akin to an action for moneys had and received. The time limit that would operate in relation to such an action was six years and therefore by analogy, the limitation period in an action based on the second limb of Barnes v Addy was six years. But it is not in every case that a court will search out an analogy for the equitable remedy claimed. In R v McNeil (1922) 31 CLR 76 Isaacs J put the position in the following way (at 100):
"Where a Court of equity finds that a legal right, for which it is asked to give a better remedy than is given at law, is barred by
(Page 7)
- an Act of Parliament, it has no more power to remove or lower that bar than has a Court of Law. But where equity has created a new right founded on its own doctrines exclusively, and no Act bars that specific right, then equity is free. It usually applies, from a sense of fitness, its own equitable doctrine of laches and adopts the measure of time which Parliament has indicated in analogous cases, but, when a greater equity caused by fraud arises, it modifies the practice it has created and gives play to the greater equity."
13 There is a further complicating factor. In Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514 the majority (Mason CJ, Dawson, Gaudron and McHugh JJ) warned against making decisions on limitation questions in interlocutory proceedings. Their Honours said (at 533):
"We should, however, state in the plainest of terms that we regard it as undesirable that limitation questions of the kind under consideration should be decided in interlocutory proceedings in advance of the hearing of the action, except in the clearest of cases. Generally speaking, in such proceedings, insufficient is known of the damage sustained by the plaintiff and the circumstances in which it was sustained to justify a confident answer to the question."
14 The position here is rather more complicated than was the case in the Wardley decision. If I was to determine that the claim raised is not statute barred and that amendment should be permitted, then it is at least arguable that the defendant is precluded from raising a limitation defence - the effect of the decision being that the limitation defence was not open and therefore leave to amend was not required under O 21 r 5(2). In the face of that decision it would surely be an abuse of process to then argue that the claim was statute barred. Effectively I would have determined on an interlocutory application the limitation question.
15 In the circumstances it seems to me the better course is to assume without deciding that the claim the plaintiff seeks to add by amendment is made after any relevant period of limitation has expired and proceed accordingly. That is the approach I have adopted.
16 The defendant's position in relation to the minute was that the amendments were embarrassing and should not be permitted for that reason. As I understood the submissions put by counsel for the defendant,
(Page 8)
- and here I refer to both his written and oral submissions, it was not contended that the amendments pleaded a new cause of action which did not arise out of the same facts or substantially the same facts in respect of which relief had already been claimed. Counsel for the plaintiff approached the matter on the basis that this was the primary objection raised by the defendant. That is to say, it was said that the new cause of action did not arise out of the same or substantially the same facts as the earlier cause of action. Lest there be any confusion on this question, I propose to deal with the application on the basis that the defendant did not concede that the amendments fell within the ambit of r 5(5).
17 The operation of r 5(5) has caused considerable difficulty over the years and has been subject to a number of decisions. The most recent of these decisions is Morgan v Banning (1999) 20 WAR 474 where Wheeler J, in an instructive judgment, examined in some detail the power of the court to grant leave to amend after the expiration of a limitation period and the so-called rule in Weldon v Neal [1887] 19 QBD 349. Her Honour drew a distinction between amendments which amount to a recategorisation of facts and an amendment which gave rise to a different claim arising from different facts. The former is permitted under r 5(5); the latter is not. Her Honour also said (at 486):
"There may of course be circumstances where it is not clear how the amendments relate to the original cause of action and in such a case, it may be preferable that the issue be left for trial, just as the issue may be left for trial where it is not clear from the pleadings whether an action is time barred. If there is no new cause of action in that sense, but is rather a re-labelling, addition, modification or clarification of an existing cause of action raised in the endorsement, O 21, r 5(5) is applicable. When the discretion is exercised in that case, it is of course to be remembered that the effect of a refusal to permit amendment may be that a plaintiff will be unable to bring an issue before the court at all, and questions of justice to the plaintiff, delay, reasons for delay, prejudice to the defendant or other persons, possible abuse of process, among others will be relevant."
18 I have already quoted part of the amendment to par 22 proposed by the minute. The major part of the amendment to the paragraph is to be found under the headings "Particulars of Assistance, Procurement and Inducement" and "Particulars of Dishonesty". Because of the significance of these sub-paragraphs I will quote them in full.
(Page 9)
- "PARTICULARS OF ASSISTANCE, PROCUREMENT AND INDUCEMENT
(g) The defendant assisted the breach of fiduciary duty pleaded in paragraph 19C and 20 by:
(i) agreeing on 16 August 1991 to delay settlement from 9.30am to 11.30am, and then to 12.30pm and then until 2.30pm, and then again until 3.30pm on that day;
(ii) agreeing to and then executing a deed entitled 'Transfer of Mortgages' dated 16 August 1991, which provided that the defendant would accept a transfer and assignment of mortgages specified therein for the sum of $509,534.56 and to direct Capital Hall Ltd to pay that sum on the defendant's behalf to the plaintiff out of moneys due and owing by Capital Hall Ltd to the plaintiff, which, as the defendant was aware, had the effect that the plaintiff paid over only $1M at settlement and not $1.5M in order that it might comply with liquidity ratio requirements;
(iii) agreeing to and then executing a deed entitled 'Deed of Release' dated 16 August 1999 which provided that the defendant would, on the terms and conditions contained therein, release the charge pleaded in paragraph 11(b); and
(iv) by participating in the settlement of the transaction pleaded in paragraph 15 of the statement of claim by accepting payment from Capital Hall and by executing the 'Transfer of Mortgages' deed.
(h) The defendant procured or induced the said breaches of fiduciary duty by:
(i) writing to Glen Wheeler at Capital Hall Ltd on 2 August 1991, stating that unless written agreement in principle to a refinancing had been reached by 7 August 1991, Interlok would require
(Page 10)
- payment of $1.5M and take all steps as a secured creditor to enforce payment; and then
- (ii) agreeing to a deferral of that deadline of 7 August 1991 until 16 August 1991, to allow the transaction pleaded in paragraph 15 to take place, and then agreeing to delay settlement on 16 August 1991 from 9.30am to 11.30am, then to 12.30pm and then until 2.30pm but accompanied by a threat made orally by Fearis on behalf of the defendant that unless settlement commenced at 2.30pm, the defendant would immediately appoint a receiver, and then agreeing to a further extension until 3.30pm on that day.
PARTICULARS OF DISHONESTY
(i) The plaintiff relies on the particulars of knowledge in paragraph 22(a) to (f) to establish dishonesty."
19 It is the plaintiff's submission that all save one of these paragraphs is already included in the statement of claim. For instance, the particulars found in par 22(g)(i) relate to the delay in settlement. Paragraph 22(d)(vii) which is unamended by the minute is in the following terms:
"shortly after 12.30pm on 16 August 1991 the defendant by its solicitors sent a message by facsimile to the plaintiff's solicitors stating that the defendant was not prepared to wait any longer and that unless settlement of the transaction pleaded in par 15 commenced at 2.30pm on that day the defendant would immediately appoint a receiver;"
20 It can be seen that this paragraph is in a slightly different form to what is pleaded in par 22(g)(i). But in my view the pleadings are substantially similar. Both relate to a delay in settlement. The latter pleading is more detailed than the former but that does not adversely affect the plaintiff's position.
21 There is one paragraph in the new pleading which does not have any direct equivalent in the old pleading. That is par 22(g)(iii), dealing with the deed of release. It would appear that the deed of release is part of the transaction pleaded in par 15, although the reference in par 15 is to a
(Page 11)
- "deed of charge" which I understand to be something different and separate from the deed of release. Nonetheless, it is the case that par 15 pleads the essentials of the transaction. The deed of release is one aspect of that transaction.
22 In all the circumstances I am satisfied that the new cause of action arises out of substantially the same facts as the cause of action in respect of which relief has already been claimed. In my view then the amendments fall within the provisions of r 5(5).
23 The final point is whether or not the amendments themselves are proper or whether, as the defendant submits, they are embarrassing. Essentially the argument put by the defendant was that the particulars given in par 22(g) and par 22(h) were not proper particulars of a plea of accessorial liability. With respect it seems to me that the particulars set out with some clarity what it is alleged the defendant's did to bring it within the second limb of Barnes v Addy. In Royal Brunei Airlines SDN BHD v Tan [1995] 2 AC 378, Lord Nicholls summarised the accessory liability principle in the following way (at 392):
"Drawing the threads together, their Lordships' overall conclusion is that dishonesty is a necessary ingredient of accessory liability. It is also a sufficient ingredient. A liability in equity to make good resulting loss attaches to a person who dishonestly procures or assists in a breach of trust or fiduciary obligation. It is not necessary that, in addition, the trustee or fiduciary was acting dishonestly, although this will usually be so where the third party who is assisting him is acting dishonestly. 'Knowingly' is better avoided as a defining ingredient of the principle … "
24 What then the plaintiff must show is that the defendant acted dishonestly. It is the dishonesty of the defendant in its own right, not its knowledge of the actions of the trustee which is important. It is to that the particulars in par 22(g) and par 22(h) are directed. These are the particulars of assistance, procurement and inducement the plaintiff says were undertaken by the defendant. The dishonesty is to be found particularised in par 22(i) and by reference to the knowledge which is pleaded in par 22(a) to par 22(f). In my view, taken together, these particulars are consistent with the plea of accessorial liability and if established, would lead to a finding the defendant is liable to the plaintiff.
(Page 12)
25 In all the circumstances then I am satisfied that I ought give leave to the plaintiff to amend in terms of its minute. I will hear the parties as to the precise form of the orders.
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