Salmon v Albarran

[2019] NSWSC 243

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Salmon v Albarran & Ors [2019] NSWSC 243

Hearing dates:

28 November, 13 December 2017, 21 February and 13 March 2018

Date of orders:

13 March 2019

Decision date:

13 March 2019

Jurisdiction:

Equity

Before:

Slattery J

Decision:

See paragraph [155].

Catchwords:

PRACTICE AND PROCEDURE – Summary dismissal – plaintiffs file Amended Statement of Claim in February 2017 – defendants apply under Uniform Civil Procedure Rules 2005, r 14.28(1) to dismiss proceedings against them, on the basis that there is no real question to be tried – defendants propose to field a defence under Limitation Act 1969 – plaintiffs plead that the otherwise applicable limitation period was extended under Limitation Act, s 55 on the basis that the defendants concealed their cause of action from them until after the otherwise applicable limitation period expired – in reply, the defendants contend that uncontestable facts establish that the plaintiffs were well aware of the existence of their cause of action long before the applicable limitation period – whether or not the plaintiffs’ pleading raises a “real” issue for trial.

Legislation Cited:

Civil Procedure Act 2005, ss 56, 57, 58(1)
Corporations Act 2001, ss 420, 1317K, 588FF
Federal Court of Australia Act 1986, s 31A
Limitation Act 1969, ss 14, 23, 47, 55
Uniform Civil Procedure Rules 2005, r 14.28(1)

Cases Cited:

Beaman v Arts Ltd [1949] 1 All ER 465
Birtchnell v Equity Trustees Executors and Agency Co Ltd (1929) 42 CLR 384
Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd (2006) 236 ALR 720
Burdick v Garrick (1870) LR5ChApp. 233
Bradman v Allens Arthur Robinson (2009) 103 SASR 438
Commonwealth Bank of Australia v Smith (1991) 42 FCR 390
Dey v Victorian Railways Commissioners (1949) 78 CLR 62
George (a Bankrupt) v Fletcher (Trustee) [2010] FCAFC 53
General Steels Industries v Commissioner of Railways (1964) 112 CLR 125
In the matter of Galtari Pty Ltd (in liq) [2018] NSWSC 917
Jefferson Ford Pty Ltd v Ford Motor Co of Australia (2008) 167 FCR 372
Kovarfi v BMT& Associates Pty Ltd (No. 3) [2017] NSWSC 710
Kowalski v MMAL Staff Superannuation Fund Pty Ltd (2009) 259 ALR 319
Maguire & Tansey v Makaronis (1997) 188 CLR 449
Nelson v Rye [1996] 2 All ER 186
New South Wales v Williams (2014) 242 A Crim R 22
North American Land and Timber Co Ltd v Watkins [1904] 1 Ch 242
Queensland Pork Pty Ltd v Lott [2003] QCA 271
Spellson v George (1992) 26 NSWLR 666
Spencer v Commonwealth of Australia (2010) 241 CLR 118
Three Rivers District Council v Governor & Company of the Bank of England (No. 3) [2001] UKHL16
Wannanup Development Nominees v Growden [2011] WASC 113
Wardley Australia Limited v State of Western Australia (1992) 175 CLR 514
Wentworth v Rogers (No. 5) (1986) 6 NSWLR 534

Texts Cited:

JD Heydon, MJ Leeming and PG Turner, Meagher, Gummow & Lehane’s Equity: Doctrines & Remedies (5th ed, 2014, LexisNexis Butterworths) para 36-075

Category:

Consequential orders (other than Costs)

Parties:

First plaintiff- Owen Salmon
Second plaintiff: TCBS Group Holdings Pty Limited ACN 112 571 647
First defendant: Richard Albarran
Second defendant: Geoffrey McDonald
Fourth defendant: Robert William Joseph Elliott
Fifth defendant: Drew Anthony Townsend
Sixth defendant: David Kenney
Seventh defendant: Luigino Malacco
Eighth defendant: Paul Andrew Leroy

Representation:

Counsel

 

First, Second, Fourth to Eighth Defendants/Applicants: R. Elliott SC

  Solicitors
Plaintiff/Respondent: Owen Salmon in person
First, Second, Fourth to Eighth Defendants/Applicants: Matthew Curll, Hall and Wilcox Lawyers

File Number(s):

(2016/373218)

Publication restriction:

No

Judgment

1. Mr Owen Salmon and TCBS Group Holdings Pty Limited (“TCBS”) commenced these proceedings in November 2016 and filed their present pleading, the Amended Statement of Claim (“the pleading”), on 21 February 2017. The pleading joined eight defendants. Seven of these defendants (excluding the third defendant) now seek by Motion, filed on 12 October 2017, to strike out the pleading pursuant to Uniform Civil Procedure Rules 2005 (“UCPR”), r 14.28(1) on the bases that: (1) the causes of action it pleads are not maintainable by virtue of the operation of Limitations Act 1969, or Corporations Act 2001, s 1317K; or (2) the pleading does not disclose a reasonable cause of action or has the tendency to cause prejudice, embarrassment or delay in the proceedings.

2. The pleading makes allegations of some complexity. The pleaded allegations and the facts surrounding them will be elaborated below. But the essential point at issue, which the defendants raise in their Motion, may be shortly stated. The defendants contend that the causes of action in the pleading are statute barred. In answer, the plaintiffs seek to circumvent the defendants’ Limitations Act defence by relying on Limitation Act, s 55, which permits the extension of an otherwise applicable limitation period if a defendant conceals the plaintiffs’ cause of action from the plaintiff. The plaintiffs contend that the defendants concealed their cause of action from them and they did not discover this concealed cause of action until November 2016, shortly before they commenced these proceedings.

3. But the defendants’ have a counter argument on the Motion. They contend that it is demonstrable beyond argument (and principally from the plaintiffs’ own documents) that the plaintiffs were well aware of the cause of action they now plead, long before the plaintiffs say that they first “discovered” it. Moreover, the defendants contend that the plaintiffs had been propounding the existence of this very cause of action to various third parties, long before November 2016. It is not in contest that if the plaintiffs’ Limitation Act, s 55 allegations of concealment are not made out, then the plaintiffs’ primary cause of action against the defendants is barred under the Limitation Act.

4. Determination of this Motion will require the Court to examine an extensive range of pleaded allegations and evidentiary materials. The Court will examine the essential pleaded allegations, the parties’ dealings relating to those allegations, the applicable limitation periods, the plaintiffs’ Limitation Act s 55 case, and the detailed evidence that the defendants rely upon to say that the plaintiffs have long been aware of the causes of action that they now say were concealed from them. This case involves more detailed analysis of evidence than is commonly found in applications to strike out proceedings. But that is the nature of this case. The defendants say that, notwithstanding the need to examine that detail, the pleading should be struck out in the application of conventional legal principles.

5. The seven defendants who bring this Motion comprise all the remaining defendants in the proceedings. The third defendant takes no part in this Motion. If the defendants’ Motion is successful the proceedings can be wholly dismissed. If the defendants’ Motion fails, directions should be made for the matter to proceed to trial.

6. Mr Salmon appeared for himself. And the Court gave him leave to appear on behalf of the other plaintiff on the motion, TCBS. Mr R. Elliott SC, of counsel, appeared for the seven defendants, who propound the Motion as applicants. The proceedings were heard over some four days: 28 November 2017, 13 December 2017, 21 February 2018 and 13 March 2018. Although, they occupied the equivalent of about two full days of hearing.

7. Before proceeding to examine the factual background, the applicable legal principles may be stated.

Applicable Legal Principles

8. The law in relation to summary dismissal and the striking out of pleadings is frequently restated and applied. The principles have, for example, been recently restated by the Court of Appeal in this State in New South Wales v Williams (2014) 242 A Crim R 22 (at [71]); [2014] NSWCA 177, although in the context of applying to strike out a defence. But nevertheless, the Court of Appeal’s statement has wider application to summary dismissal of a plaintiff’s claim:

“71.   The requirement for establishing that there is no triable issue is a demanding one and the power to strike out a pleading on the basis that it discloses no reasonable defence, or is an abuse of process, should be exercised only in plain and obvious cases. The power should not be exercised in cases of doubt or difficulty or where the pleading raises a debatable question of law. Once it appears that there is a real issue, whether of fact or law, and that the rights of the parties depend upon it, a court should not dismiss a defence raising such an issue, either on the basis that no reasonable defence is disclosed or as an abuse of process (see Dey v Victorian Railways Commissioners [1949] HCA 1; 78 CLR 62 at 91; General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; 112 CLR 125 at 129-130; Commonwealth v Griffiths [2007] NSWCA 370; 70 NSWLR 268 at [11]-[12] and Spencer v Commonwealth[2010] HCA 28; 241 CLR 118 at 139-140).”

9. The classic statement of the principles that govern the Court’s power of summary dismissal is the following passage from General Steels Industries v Commissioner of Railways (1964) 112 CLR 125; [1964] HCA 69 (“General Steels”) at pp 128-130, which, together with passages from Dey v Victorian Railways Commissioners (1949) 78 CLR 62; [1949] HCA 1 at pp 90-91, is often quoted in whole or in part:

“The plaintiff rightly points out that the jurisdiction summarily to terminate an action is to be sparingly employed and is not to be used except in a clear case where the Court is satisfied that it has the requisite material and the necessary assistance from the parties to reach a definite and certain conclusion. I have examined the case law on the subject, to some of which I was referred in argument and to which I append a list of references. There is no need for me to discuss in any detail the various decisions, some of which were given in cases in which the inherent jurisdiction of a court was invoked and others in cases in which counterpart rules to Order 26, r. 18, were the suggested source of authority to deal summarily with the claim in question. It is sufficient for me to say that these cases uniformly adhere to the view that the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of a cause of action - if that be the ground on which the court is invited, as in this case, to exercise its powers of summary dismissal - is clearly demonstrated. The test to be applied has been variously expressed; "so obviously untenable that it cannot possibly succeed"; "manifestly groundless"; "so manifestly faulty that it does not admit of argument"; "discloses a case which the Court is satisfied cannot succeed"; "under no possibility can there be a good cause of action"; "be manifest that to allow them" (the pleadings) "to stand would involve useless expense".

At times the test has been put as high as saying that the case must be so plain and obvious that the court can say at once that the statement of claim, even if proved, cannot succeed; or " so manifest on the view of the pleadings, merely reading through them, that it is a case that does not admit of reasonable argument"; " so to speak apparent at a glance ".

As I have said, some of these expressions occur in cases in which the inherent jurisdiction was invoked and others in cases founded on statutory rules of court but although the material available to the court in either type of case may be different the need for exceptional caution in exercising the power whether it be inherent or under statutory rules is the same. Dixon J. (as he then was) sums up a number of authorities in Dey v. Victorian Railways Commissioners (1) where he says (2): " A case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court with or without a jury. The fact that a transaction is intricate may not disentitle the court to examine a cause of action alleged to grow out of it for the purpose of seeing whether the proceeding amounts to an abuse of process or is vexatious. But once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process." Although I can agree with Latham C.J. in the same case when he said that the defendant should be saved from the vexation of the continuance of useless and futile proceedings (1). in my opinion great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal. On the other hand, I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff's claim. Argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed.”

10. Here the facts are complex. The defendants particularly rely upon a statement of the House of Lords (Lord Hope) in Three Rivers District Council v Governor & Company of the Bank of England (No. 3) [2001] UKHL16, (at [95]) (“Three Rivers District Council”), as to the relevant scope of the inquiry upon a summary dismissal application, where the underlying facts are complex:

“I would approach that further question in this way. The method by which issues of fact are tried in our courts is well settled. After the normal processes of discovery and interrogatories have been completed, the parties are allowed to lead their evidence so that the trial judge can determine where the truth lies in the light of that evidence. To that rule there are some well-recognised exceptions. For example, it may be clear as a matter of law at the outset that even if a party were to succeed in proving all the facts that he offers to prove he will not be entitled to the remedy that he seeks. In that event a trial of the facts would be a waste of time and money, and it is proper that the action should be taken out of court as soon as possible. In other cases it may be possible to say with confidence before trial that the factual basis for the claim is fanciful because it is entirely without substance. It may be clear beyond question that the statement of facts is contradicted by all the documents or other material on which it is based. The simpler the case the easier it is likely to be take that view and resort to what is properly called summary judgment. But more complex cases are unlikely to be capable of being resolved in that way without conducting a mini-trial on the documents without discovery and without oral evidence. As Lord Woolf said in Swain v Hillman, at p 95, that is not the object of the rule. It is designed to deal with cases that are not fit for trial at all.”

11. The High Court of Australia cited this whole statement with approval in Spencer v Commonwealth (2010) 241 CLR 118, at p 130; [2010] HCA 28, (at [21]) (“Spencer”). But in Spencer, the High Court went on to discuss the application of the principle in a further passage (at [22] to [26]), dealing with the summary dismissal power of the Federal Court of Australia (Federal Court of Australia Act 1986, s 31A). But it should be noted that the test for summary dismissal in s 31A is less demanding than that in UCPR, r 14.28 which is under consideration here.

12. The discussion in Spencer, though speaking to the differently worded s 31A, bears upon the issues that arise in this case, in part, because it speaks to a situation like the present, where, on the application for summary dismissal, the Court was invited to consider apparently complex questions of fact and, therefore, Lord Hope’s caution in Three Rivers District Council is particularly relevant.

13. The High Court said the following in Spencer, (at [22] to [26]):

“22. The Federal Court and in the Court of Appeal of Queensland, the criterion of a "reasonable prospect" of success has been understood in analogous statutory settings to mean a "real" rather than "fanciful" prospect (White Industries Aust Ltd v Federal Commissioner of Taxation (2007) 160 FCR 298 at 312 [59] and cases there reviewed; Deputy Commissioner of Taxation v Salcedo [2005] 2 Qd R 232 at 235 per Williams JA). This exegesis adds little to the words of s 31A. The section authorises summary disposition of proceedings on a variety of bases under its general rubric. It will apply to the case in which the pleadings disclose no reasonable cause of action and their deficiency is incurable. It will include the case in which there is unanswerable or unanswered evidence of a fact fatal to the pleaded case and any case which might be propounded by permissible amendment. It will include the class of case in the longstanding category of cases which are "frivolous or vexatious or an abuse of process". The application of s 31A is not, in terms, limited to those categories.

23. Accepting that there are a number of ways in which s 31A may be applied to empower the Federal Court to dismiss a proceeding, it is to be distinguished, in its application to deficient pleadings, from rules (such as O 11 r 16 of the Federal Court Rules) which provide for the striking out of pleadings. As Lindgren J said in White Industries Aust Ltd v Federal Commissioner of Taxation (2007) 160 FCR 298 at 309 [47]. See also Imobilari Pty Ltd v Opes Prime Stockbroking Ltd (2008) 252 ALR 41):

‘evidence may disclose that a person has or may have a 'reasonable cause of action' or 'reasonable prospects of success', yet the person's pleading does not disclose this. In such a case O 11, r 16 empowers the Court to strike out the pleading but … s 31A(2) would not empower the Court to give judgment for the respondent against the applicant. A failure after ample opportunity to plead a reasonable cause of action may suggest that none exists and therefore that the applicant has no reasonable prospects of success, but the existence of a reasonable cause of action and the pleading of a reasonable cause of action remain distinct concepts.’

24. The exercise of powers to summarily terminate proceedings must always be attended with caution. That is so whether such disposition is sought on the basis that the pleadings fail to disclose a reasonable cause of action (General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 128-130 per Barwick CJ; [1964] HCA 69) or on the basis that the action is frivolous or vexatious or an abuse of process (Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91 per Dixon J; [1949] HCA 1). The same applies where such a disposition is sought in a summary judgment application supported by evidence. As to the latter, this Court in Fancourt v Mercantile Credits Ltd said ((1983) 154 CLR 87 at 99; [1983] HCA 25. See also Webster v Lampard (1993) 177 CLR 598 at 602-603 per Mason CJ, Deane and Dawson JJ; [1993] HCA 57):

‘The power to order summary or final judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried’.

More recently, in Batistatos v Roads and Traffic Authority (NSW) ((2006) 226 CLR 256 at 275 [46]; [2006] HCA 27) Gleeson CJ, Gummow, Hayne and Crennan JJ repeated a statement by Gaudron, McHugh, Gummow and Hayne JJ in Agar v Hyde ((2000) 201 CLR 552 at 575-576 [57]; [2000] HCA 41) which included the following:

‘Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways (Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91 per Dixon J; General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 130 per Barwick CJ), but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way.’

There would seem to be little distinction between those approaches and the requirement of a "real" as distinct from "fanciful" prospect of success contemplated by s 31A (In A v Essex County Council [2010] 3 WLR 509, the criterion of "real prospect of success" was variously equated to whether the plaintiff "could succeed at a trial", whether there was a "triable issue" and whether there was the "least doubt": at 523 [44] per Lord Clarke of Stone-cum-Ebony JSC, 541 [119] per Baroness Hale of Richmond JSC, 544 [133] per Lord Brown of Eaton-under-Heywood JSC and 552 [163] per Lord Kerr of Tonaghmore JSC). That proposition, however, is not inconsistent with the proposition that the criterion in s 31A may be satisfied upon grounds wider than those contained in pre-existing Rules of Court authorising summary dispositions.

25.   Section 31A(2) requires a practical judgment by the Federal Court as to whether the applicant has more than a "fanciful" prospect of success. That may be a judgment of law or of fact, or of mixed law and fact. Where there are factual issues capable of being disputed and in dispute, summary dismissal should not be awarded to the respondent simply because the Court has formed the view that the applicant is unlikely to succeed on the factual issue. Where the success of a proceeding depends upon propositions of law apparently precluded by existing authority, that may not always be the end of the matter. Existing authority may be overruled, qualified or further explained. Summary processes must not be used to stultify the development of the law. But where the success of proceedings is critically dependent upon a proposition of law which would contradict a binding decision of this Court, the court hearing the application under s 31A could justifiably conclude that the proceedings had no reasonable prospect of success.

26.   Where an application under s 31A requires consideration of apparently complex questions of fact, then the caution uttered by Lord Hope is relevant (see above at [21]). The importance of those considerations is amplified if the case involves resolution of issues of law and fact, or mixed law and fact.”

14. These principles have often been applied. The Courts have recognized that the mere presence of a factual controversy does not bar the Court from exercising its power of summary dismissal: George (a Bankrupt) v Fletcher (Trustee) [2010] FCAFC 53, (at [75]). The applicants/defendants have cited in submissions a certain statement in the Full Court of the Federal Court that, in order to decide whether a controversy is “implausible” or “tenuous”, the Court must look with a “critical eye” at the evidence and decide whether the “weight and quality” of the evidence going to the alleged disputed fact is such that a trial is warranted: Jefferson Ford Pty Ltd v Ford Motor Co of Australia (2008) 167 FCR 372; [2008] FCAFC 60 (at [23]). But such statements are grounded in the terms of s 31A and may be too broad for present purposes, and, in any event, some of them have been disapproved by later Full Court Federal Court authority: cf Kowalski v MMAL Staff Superannuation Fund Pty Ltd (2009) 259 ALR 319; [2009] FCAFC 117.

15. The relevant statements of principle from General Steels, and the cases that apply exactly the same test, reflect the idea that summary dismissal is not appropriate if there is a “real question to be tried”. To succeed an applicant for summary dismissal does not have to show that there is no question to be decided: rather the applicant must satisfy the Court that there is not a “real question” for trial. Summary dismissal is appropriate where the materials available clearly demonstrate that the assertion of fact or law being made cannot possibly succeed. And as Barwick CJ said in General Steels, in the passage cited above (at p 130), to demonstrate that, if a claim cannot succeed, “argument, perhaps even of an extensive kind, may be necessary”.

16. The expression “real question” that has long been part of the General Steels test is now reinforced by the modern command of Civil Procedure Act, s 56 to the Court - to facilitate the “just, quick and cheap” resolution of the “real” issues in the proceedings.

17. Whether or not an issue is a “real” one, must be assessed by a “practical judgment” (see Spencer (at [25])) in the context of the particular case, rather than by abstract, logical possibilities. The pleading of an issue does not itself make the question raised “real”. Notwithstanding the existence of a dispute on the pleadings, a disputed fact does not amount to a real question to be tried if the evidence before the Court demonstrates that there is “only one result which can be said to be reasonable”: Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd (2006) 236 ALR 720; [2006] FCA 1352 (at [38]).

18. In making its judgment about summary dismissal the Court will often look forward to what may happen at the possible trial of the factual issue in question. It should be remembered that a successful summary dismissal application will deny the unsuccessful respondent the fundamental procedural right of contesting the issue at a trial. It would be a grave error for a Court to deprive a respondent of the trial of an issue, on which the respondent could possibly succeed. But the Court can look behind the controversy of fact and consider whether in the light of the documents before it, what is now being asserted can be judged to be, or not to be, a “real” issue for trial. If there is not a realistic prospect of the respondent succeeding, there is not a “real” issue for trial.

19. There can be cases where the factual assertion in question is simply incapable of acceptance because it cannot, by any rational hypothesis or by any case that may be advanced at a later trial, be reconciled with an overwhelming body of documentary evidence which demonstrates the contrary.

20. Whether a particular factual contest is susceptible to the application of this principle will depend upon the nature and width of the factual controversy being asserted. As imply, narrower, more readily isolated disputes of fact may be more amenable to the application of this principle of summary dismissal.

21. Here, the defendants say that the relevant asserted fact is really a narrow one and can be disposed of according to this principle. The relevant asserted fact is that the plaintiffs say they were not able to make certain claims in these proceedings until after the expiry of the relevant limitation period, because they had not discovered the facts underlying those claims until after that expiry. But in response, the defendants say that the plaintiffs must have discovered the facts underlying the claim well before the expiry of the applicable limitation period. The defendants say that the documents available clearly and indisputably record the plaintiffs not only having knowledge of the underlying facts, but actually making those very claims against various other parties well prior to the expiry of the limitation period. A question to be considered is whether the plaintiffs can ever maintain, at trial, the controversy they say exists on the pleadings, in the face of the documents now deployed against them. The plaintiffs say that the controversy is wider than the plaintiffs’ characterization of it.

22. The Courts have granted summary dismissal where the unreality of one party’s case means that the parties and the Court should not have inflicted upon them the costs and delay associated with the trial: Queensland Pork Pty Ltd v Lott [2003] QCA 271. The principle has been applied in many kinds of cases, including where the expiry of a limitation period is in question, as it is here: see Bradman v Allens Arthur Robinson (2009) 103 SASR 438; [2009] SASC 80.

23. The defendants state that the summary dismissal claim here is a discrete one. They contend that the plaintiffs’ claim is that by virtue of Limitation Act 1969, s 55, the relevant limitation period in respect of the claims pleaded only began to run on 8 November 2016: pleading [101] and following. If that claim cannot be maintained, then the defendants say that all the plaintiffs’ causes of action are time barred and the proceedings can be dismissed.

24. The Limitation Act, s 55 issue is this. The plaintiffs must show at a trial of the issue that they did not discover, or could not with reasonable diligence have discovered, the deceit or the concealment of the subject of the cause of action until after a particular date. Here the plaintiffs claim that this date was not until December 2016.

25. But an essential assumption to the plaintiffs’ Limitation Act, s 55 claim is that they did not discover the deceit until 8 November 2016. This was the date when Mr Salmon claims that he received a copy of a letter of demand, dated 12 October 2005, from Mr Wily to Given Form Pty Limited (“Given Form”). He says that the receipt of this letter alerted him to the availability of the cause of action. The defendants maintain that this contention is fanciful and cannot realistically be regarded as having any prospect of success.

26. Finally, the issue of the possible amendment of the pleading can arise in this context. Defects in pleadings that would otherwise be struck out can sometimes be cured by amendment. It has often been said that, where a pleading can be cured by amendment, the Court ought to grant leave to amend rather than exercise the power to strike out: Wentworth v Rogers (No. 5) (1986) 6 NSWLR 534, at pp 536-7. But as was emphasized in In the matter of Galtari Pty Ltd (in liq) [2018] NSWSC 917, (at [77]) by Gleeson JA, when the Court is deciding whether to grant leave to re-plead, the Court must seek to act in accordance with the dictates of justice: Civil Procedure Act 2005, s 58(1). And for that purpose, the Court must have regard to the provisions of Civil Procedure Act, ss 56 and 57, and importantly to the facilitation of the just, quick and cheap resolution of the real issues in the proceedings (s 56(1)) and should also have regard to the matters set out in s 58(2)(b), to the extent to which the Court considers them relevant for the management of the proceedings.

Mr Salmon, Hall Chadwick and Given Form – 2003 to 2017

27. Analysis must start with the plaintiffs’ pleading, which is thorough, reasonably clear and well pleaded. Although the first plaintiff represented himself and the second plaintiff at this hearing, the pleading shows every sign of having been closely prepared with the benefit of legal advice.

28. But the pleading is lengthy. Setting its provisions out at length would not serve the objective of coming to grips with the real issues on this application. So these reasons take the approach of summarising the pleading’s relevant allegations, with references to the paragraphs of the pleading from which the summary is drawn.

The Plaintiffs’ Allegations in the Pleading

29. Mr Salmon is a director of the second plaintiff, TCBS, a company that provided management, accountancy and consulting services in Australia between 2003 and 2006: [4] and [5].

30. Mr Richard Albarran and Mr Geoffrey McDonald, the first and second defendants, were professionally qualified to be appointed receivers and managers, duly authorised to act under the Corporations Act in that capacity as external administrators to companies, where such appointments were required: [6]. Messrs Albarran and McDonald are also two of the equity partners of the accountancy firm practising under the name “Hall Chadwick”.

31. The fourth, fifth and sixth defendants, Mr Robert Brassil, Mr Robert Elliott and Mr Drew Townsend were also equity partners in the firm Hall Chadwick. All equity partners of Hall Chadwick agreed, under the Hall Chadwick Partnership Agreement (clause 7.2), to indemnify one another for the liabilities of the partnership: [8].

32. The third defendant, Mr Steven Brown, is a solicitor of the Supreme Court of New South Wales and a specialist insolvency practitioner: [7].

33. In February 2005, Business Australia Capital Finance Pty Limited (“Capital Finance”) and Business Australia Capital Mortgage Pty Limited (“Capital Mortgage”) retained TCBS to provide management and accounting services to them: [10]. Mr Ian Lazar was, at the time, a principal and director of both of these companies: [9].

34. On 24 February 2005, Mr Lazar on behalf of Capital Mortgage and Capital Finance engaged, in writing, TCBS to provide accounting and consultancy services to them. The agreement included that fees due to TCBS, or monies advanced by TCBS to Capital Mortgage and Capital Finance, would be secured by a fixed and floating charge to be issued by Capital Mortgage and Capital Finance: [12].

35. In 2004 and 2005, TCBS advanced funds to Capital Finance and Capital Mortgage: [11].

36. On 18 March 2005, each of Capital Finance and Capital Mortgage granted a fixed and floating charge in favour TCBS in the sum of $1,500,000, which were registered on 12 April 2005, in favour of TCBS: [13] – [15].

37. Liquidation of Capital Mortgage and Capital Finance. On 8 June 2005, the Australian Securities and Investments Commission (“ASIC”) appointed Mr Andrew Wily as the liquidator of a number of companies in which Mr Lazar was the principal. Capital Finance and Capital Mortgage were among these companies. At the time of Mr Wily’s appointment, Capital Finance and Capital Mortgage remained indebted to TCBS under the advances made to them: [16]

38. At the time Mr Wily was appointed as the liquidator of Capital Finance and Capital Mortgage, each of those companies (and several others associated with Mr Lazar) were engaged in litigation in the Federal Court of Australia to recover monies that they had advanced to a number of other companies incorporated in Nauru: [17].

39. The Federal Court of Australia proceedings settled. As a result, on 7 October 2005, the sum of $6,500,000 was paid into the Federal Court of Australia, on account of the claims brought by Mr Lazar’s companies, including Capital Finance and Capital Mortgage: [18].

40. Almost a year later, in August 2006, both Mr Salmon and TCBS sought advice from the third defendant, Mr Brown, as to whether or not TCBS’s charges were valid and enforceable and were advised that they were: [19] and [20].

41. On 9 August 2006, a further part of the Federal Court proceedings settled, enabling an additional amount of $4,500,000 to be paid to Mr Lazar’s companies, including Capital Mortgage and Capital Finance, of which Mr Wily was liquidator: [21].

42. On 4 August 2006, TCBS appointed Mr Albarran and Mr McDonald as receivers and managers to Capital Finance, and as receivers and managers to Capital Mortgage: [22] and [23]. The same day, a deed was executed between TCBS and Mr Albarran and Mr McDonald, which recorded the terms and conditions of their appointment as receivers and managers to each company: [24].

43. The terms and conditions of each of Mr Albarran’s and Mr McDonald’s appointments as receivers and managers included a term (clause 4) that the indemnities provided to them in that role would not extend to any act of wilful default or neglect of them as receivers and managers, or to that of any person for whom they were responsible as receivers and managers: [25] – [27].

44. On 10 August 2006, Mr Wily as the liquidator of Capital Mortgage and Capital Finance, commenced proceedings in this Court (Proceedings 4200/06 – “the 2006 Supreme Court proceedings) seeking: (1) a declaration that TCBS was not entitled to appoint Mr Albarran and Mr McDonald as receivers and managers to each of Capital Mortgage and Capital Finance; (2) a declaration that the deeds of charge in favour of TCBS were invalid as being contrary to Corporations Act, s 588FF, to the extent that any amount was owing to TCBS prior to 18 March 2005 (the date of execution of the charges); and (3) seeking orders removing Mr Albarran and Mr McDonald as receivers and managers: [28] and [31].

45. Mr Wily also sought an interlocutory injunction in the Supreme Court proceedings, restraining TCBS from instructing Mr Albarran and Mr McDonald from taking any further steps in the Federal Court proceedings, such as, for example, accessing the funds paid into Court on settlement: [29]. TCBS was also joined as a defendant to the 2006 Supreme Court proceedings and the pleadings were amended to seek this relief: [30] and [33].

46. On 30 August 2006 in this Court, Palmer J declined the interlocutory relief sought: [34].

47. It is necessary for completeness to mention a little of the pleading against Mr Brown in relation to these events, even though he is not a party to the present application. To defend the 2006 Supreme Court proceedings brought by Mr Wily, Mr Albarran and Mr McDonald retained Mr Brown as their solicitor. It was said to be a term of that retainer that Mr Brown would not act “in a manner that involved” a conflict of interest between Mr Brown’s own interests and those of TCBS, Mr Salmon and another company related to them: [36].

48. On instructions from Mr Albarran, Mr McDonald, Mr Salmon and TCBS, Mr Brown filed an Amended Cross-Claim against Mr Wily in the 2006 Supreme Court proceedings, seeking declarations that Mr Albarran’s and Mr McDonald’s appointments as receivers and managers to Capital Mortgage and Capital Finance were valid, as were the charges that those companies had given in favour of TCBS. The Amended Cross-Claim also sought relief avoiding Mr Wily’s decision to seek litigation funding to intervene in the Federal Court proceedings, and it sought the removal of Mr Wily as liquidator of Capital Mortgage and Capital Finance: [37].

49. The Given Form Allegations. At this point, the pleading introduces allegations in relation to Given Form, a company that is unrelated in shareholding or control to the parties in either the Federal Court or the 2006 Supreme Court proceedings. It assists the later discussion of the issues for determination to set out, at times from this point in these reasons, some of the correspondence and other documents that are referred to in the pleadings concerning Given Form.

50. On 12 October 2005, Mr Wily in his capacity as liquidator of Capital Mortgage and Capital Finance issued a demand in writing to the directors of Given Form, demanding that a loan purportedly advanced to Given Form by Capital Mortgage and Capital Finance in the sum of $640,000 be repaid immediately: [37].

51. This is the critical letter that the plaintiffs say did not come to their attention until 8 November 2016. The plaintiffs say this letter gave them the knowledge that Mr Albarran and Mr McDonald had concealed from them a cause of action against Mr Albarran and Mr McDonald, founding their right to an extended limitation period under Limitation Act, s 55. The plaintiffs’ allegations extend to allegations of concealment against the third defendant, Mr Brown, but these allegations are put to one side merely because Mr Brown is not a party to this Motion.

52. The 12 October 2005 letter is set out in full below:

“Dear Sir / Madam

RE:   BUSINESS AUSTRALIA CAPITAL MORTGAGE PTY LIMITED (IN LIQUIDATION) ACN 090 781 187

BUSINESS AUSTRALIA CORPORATE FINANCE PTY LIMITED (IN LIQUIDATION) ACN 079 163 581

I have been appointed Liquidator of the abovementioned companies and according to the Company records you have borrowed money from the Company which has not been repaid.

The following details relate to your debt outstanding:

Loan 1 dated 8 June 2004

(Repayment due 30 days after drawdown)         

The principal amount of your loans outstanding is      $100,000

Default Fee @ $20,000 per month (27 months)      $540,000

Total Outstanding                  $640,000

Total Owing  $640,000

Copies of the above loan agreements are attached for your information.

Would you please remit the total owing within 7 days from the date of this letter. If you do not respond to this letter then I may have no option other than to place the matter into the hands of my solicitors for further action.

Yours faithfully

FILE COPY

A H J Wily

LIQUIDATOR”

53. On 13 September 2006, Mr Brown, acting for the defendants/cross claimants (Mr Albarran, Mr McDonald and TCBM) in the 2006 Supreme Court proceedings, wrote to a barrister (Mr Julian O’Sullivan), who then represented those parties, and copied to Mr Salmon, seeking counsel’s advice about Given Form: [39]. In customary fashion, the advice sought was requested on the basis of facts that were advanced by Mr Brown to counsel. The facts advanced are repeated in extensive particulars in the pleading. But it is convenient instead to set out the letter of instruction itself in these reasons, then the particulars:

“Julian,

Can you please look at the above four letters from Leon and advise how you suggest we respond.

Concerning the issue I raised with you regarding Jim Byrnes, there have been further developments. Before going into the developments which may need to be responded to or dealt with some background.

While acting for BACF and BACM, a company which Lazar was interested in (read into this controlled) was placed into administration. Hall Chadwick were the Administrators. The company, Given Form was owed money. I was owed money. I obtained from BACF, BACM and Given Form a direction that money I was owed be paid from funds received by Given Form and payable to these companies. Given Form received funds I got paid. (As advised while I received the funds but prior to disbursing the funds, Given Form was placed into liquidation and Andrew Wily was appointed Liquidator. Hall Chadwick received a letter alleging payments to BACF/BACM may be recoverable. Hall Chadwick dispute this and since that time no more has been heard: until today.)

Brynes said John Meluiss (a partner with Ferrier Hodgson) had in an interview with ASIC said that he had told me that the money might belong to investors and could not be taken. I have no recollection of any such discussion. How Andrew Wily knows this to tell Jim Brynes is another matter.

Leon Nikolaidis telephoned Richard Albarran to raise the same issue. He said that he should get another firm or settle as the Given Form issue would be raised. Richard told him one he had not done anything wrong only used Etienne Lawyers and paid us and paid an amount pursuant to a written direction to pay. If he had done anything wrong then he was willing to answer for it just as he and Wily should be prepared to do if they at any time have done anything wrong. Leon apparently did not like that. Conversation ends.

(This afternoon after my conversation with Brynes I informed John of the issue along the lines did with you.) Later Andrew Wily telephoned John Myers advising him to get a new firm of lawyers as the Given Form issue when it comes to light would not be in his interests. John Myers said he did not know what any of this was about or how it affected him.

Should we write letters requiring Leon and Andrew to undertake not to again seek to intentionally interfere with our contractual relations with two clients, setting out the issue in detail so that there is a proper record of the issue and of their inappropriate behaviour.

In considering this note, that in the material produced by TCBS under the Notice to Produce is a table of matters in which the Given Form issue is noted and the fact that HC were Administrators is expressly stated along with the fact that from money to be received Etienne was to be paid. Nothing was hidden.

Your views please.”

54. The particulars to the pleading set out the facts that are said to found a conflict of interest that was allegedly concealed from Mr Salmon: [40]. The exact particulars, which are somewhat discursive, are not set out here but may be restated concisely in 10 points as follows: (1) Mr Brown was a creditor of Capital Finance and Capital Mortgage; (2) Capital Finance and Capital Mortgage were creditors of Given Form, to which in turn money was due to pay Capital Finance and Capital Mortgage; (3) in a three-way arrangement (allegedly made when Mr Albarran and Mr McDonald were administrators of Capital Finance and Capital Mortgage), Given Form and Capital Finance and Capital Mortgage agreed that Capital Finance’s and Capital Mortgage’s obligations to Mr Brown could be satisfied by Given Form paying some of the money owed directly to Mr Brown; (4) Given Form received the funds and paid Mr Brown, but was then placed in liquidation and Mr Wily was appointed its liquidator; (5) Hall Chadwick (presumably Albarran and Mr McDonald) received a letter alleging that certain payments made to Capital Finance and Capital Mortgage may be recoverable (presumably by the liquidator of Given Form) and they disputed the allegations; (6) in September 2006, Mr Wily’s lawyers suggested to Mr Albarran that he should (i) retain a different lawyer other than Mr Brown; (ii) settle Given Form’s claim against Capital Finance and Capital Mortgage, or (iii) face the prospect of the “Given Form issue” (meaning presumably Mr Albarran’s authorisation of, and Mr Brown’s alleged receipt of, money allegedly due from Given Form to Capital Finance and Capital Mortgage); (7) Mr Albarran disputed any wrongdoing in acting as a receiver and manager of Capital Finance and Capital Mortgage and in complying with the agreed direction to pay Mr Brown; (8) Mr Wily communicated with Mr Salmon’s business partner (Mr John Myers), suggesting that a legal firm other than Mr Brown’s firm should be retained, as the Given Form issue “when it comes to light would not be in [his] interests”; (9) Mr Brown sought advice about whether to write to Mr Wily to seek an undertaking that he not interfere with Mr Brown’s contractual relations with its two clients, Capital Finance and Capital Mortgage and to record Mr Wily’s “inappropriate behaviour; and (10) noting that documents produced by TCBS in the 2006 Supreme Court proceedings note the “given form issue”, the fact that Hall Chadwick were administrators and that money to be received would be used to pay Mr Brown’s firm.

55. The heart of this allegation in the particulars to the pleading is in item (6) above, that when he was administrator of Capital Finance and Capital Mortgage, Mr Albarran had diverted to Mr Brown money that was due from Given Form to Capital Finance and Capital Mortgage. It was an allegation of impropriety against Mr Albarran, Mr McDonald and Mr Brown.

56. Mr Salmon and TCBS did not have any dealings with Given Form: [41]. The plaintiffs were unaware of any evidence in the 2006 Supreme Court proceedings relating to Given Form, or of the contents of Mr Brown’s email, or of any aspect of the Given Form issue: [42].

57. The plaintiffs allege that Mr Albarran and Mr McDonald were administrators of Given Form between 3 November 2004 and 6 January 2005 and were reappointed as administrators for another period ceasing on 23 June 2005: [43] and [43]. They retained Mr Brown in relation to this administration.

58. The Settlement. Young CJ in Eq (as his Honour then was) heard the 2006 Supreme Court proceedings on 17 and 18 September 2006, during which period a settlement was reached in principle between the parties to those proceedings: [46]. The settlement in principle included that TCBS would be paid within six months of 18 September 2006 the sum of $1,300,000 out of the monies ($6,500,000) that had been paid into the Federal Court of Australia. The proceedings were adjourned to 19 September 2006, to allow the deeds of settlement to be finalised and a series of drafts was prepared: [47] and [48].

59. The final draft deed settling the 2006 Supreme Court proceedings included a clause identifying a number of releases and indemnities, including a release and indemnity in respect of Given Form: [49]. The clause in question (clause 3.5) provided that: “The Liquidator [Mr Wiley] releases the BA Companies [being Capital Finance and Capital Mortgage (both with Receivers and Managers Appointed and In Liquidation)] in respect of the money paid to them jointly and severally by the Deed Administrator of Given Form [Mr Albarran]”.

60. Mr Salmon and TCBS say that the release and indemnity, in relation to Given Form, had nothing to do with the 2006 Supreme Court proceedings, or with the controversy in relation to the TCBS charges, Mr Salmon, Capital Finance or Capital Mortgage: [49].

61. Mr Salmon and TCBS plead that the purpose of inserting the Given Form clause in the 19 September 2006 settlement was, as the pleading says, “as a mechanism of ensuring that the demand dated 12 October 2005 by Mr Wily against Given Form for $640,000 would not proceed, and if it did, to provide Given Form and the defendants [Mr Albarran and Mr McDonald] a mechanism to advance a complete defence against any proceedings brought by Mr Wily to recover those monies back in the liquidation of Capital Mortgage and Capital Finance”: [50].

62. Mr Salmon, Mr Myers, Mr Wily and Mr Brown celebrated the resolution of the proceedings together: [51].

63. The balance of the factual part of the pleading, ([52] to [60]), is closely connected with the plaintiffs’ allegations: (1) about the negotiations for the final deed of settlement, in which it is alleged Mr Wily and his associate Mr David Hurst contended that the proposed Given Form indemnity in the deed of settlement was unacceptable, but Mr Albarran and Mr Brown stipulated that they would not settle the proceedings without the deed dealing with Given Form; and (2) Mr Salmon’s and TCBS’s allegations of lack of knowledge of these negotiations or anything to do with Given Form. The precise terms on which these matters are alleged are potentially of importance, so they are set out here in full:

“52.   The plaintiffs plead that at no stage from the striking of the settlement orally on 18 September 2006 up to and including the draft Deed written by the third defendant was there ever any mention of Given Form.

53.   On 19 September 2006, the Deed as drafted by the third defendant was provided to Mr. Wily and his associate, Mr. David Hurst.

54.   Mr. Nikolaidis a solicitor representing Wily, Mr. Wily and Mr. Hurst all represented orally that the inclusion of Given Form in the Deed was unacceptable.

55.   The plaintiffs plead that the first and third defendants represented orally on 19 September 2006 in a conference room in the Supreme Court of New South Wales to Mr. Nikolaidis, Mr. Wily and Mr. Hurst that they would not take Given Form out of the Deed, they would not settle the proceedings without Given Form having been included or words to that effect.

56.   The plaintiffs further plead that Mr. Jim Byrnes who had assisted in negotiations was present during the entirety of the meeting. Mr. Salmon was outside of the room having been told by his legal representative to leave.

57.   As a consequence of the first and third defendants insisting upon the indemnity and release in favour of Given Form being included in the Deed the matter did not resolve and the proceedings continued.

58.   One of the charges was held to be invalid by his Honour Justice Young, the other charge was held to be valid.

Particulars

Judgment of his Honour Justice Young together with the Judgment on costs.

59.   As a consequence of the Judgment of his Honour Justice Young the remaining charge was to be valued and further proceedings brought to assess the quantum.

60.   The plaintiffs plead that the first and second defendants did not pursue the matter further.”

64. (1) The Tort of Deceit. Mr Salmon and TCBS allege that Mr Albarran, Mr McDonald and Mr Brown represented (orally and by email) to them that it was Mr Wily who refused to execute the deed of settlement and was the sole cause of the settlement not proceeding: [61]. This representation was false, as it was not Mr Wily but Mr Albarran and the other defendants who had caused the settlement not to proceed: [62].

65. The plaintiffs also allege that Mr Albarran, Mr McDonald and Mr Brown failed to disclose to them that they were insisting that the benefit of a full release and indemnity, in respect of Given Form, was being stipulated for in the deed of settlement and that this stipulation was contrary to a demand which Mr Albarran, Mr McDonald and Mr Brown had concealed from the plaintiffs, namely the demand of 12 October 2005 for $640,000: [63]. The plaintiffs further plead that each of Mr Albarran, Mr McDonald and Mr Brown continuously maintained the representation that the sole cause of the settlement of the 2006 Supreme Court proceedings was the conduct of Mr Wily, a representation which they knew to be false: [64]. The representations were fraudulent, as they were false to the knowledge of Mr Albarran, Mr McDonald and Mr Brown: [65].

66. The plaintiffs plead that Mr Albarran, Mr McDonald, Mr Brown intended the plaintiffs to rely upon these representations, and the plaintiffs did rely upon the representations, by accepting that the 2006 Supreme Court proceedings had not settled and by instructing these three defendants to maintain the proceedings before Young CJ in Eq (as his Honour then was), who held that only one of the charges in favour of TCBS was valid: [66] and [67]. As a result of Mr Albarran, Mr McDonald and Mr Brown’s conduct, the plaintiffs did not resolve the 2006 Supreme Court proceedings, but maintained them to the point that they were partially unsuccessful and suffered an order for costs that was ultimately enforced against them, whereby they sustained such substantial loss and damage, and they could not pursue the remaining valid charge: [68].

67. Mr Salmon and TCBS plead that had they known that the representations were false they would have: terminated Mr Brown’s retainer; revoked the appointment of Mr Albarran and Mr McDonald as receivers and managers; and settled the 2006 Supreme Court proceedings independently of these persons with Mr Wily, pursuant to the settlement deed, Mr Wily had proffered on 18 September 2006 excising the clause indemnifying Given Form. But because they did not have an opportunity to do this, they have suffered loss and damage and will continue to do so: [69] and [70].

68. (2) Conspiracy to Injure by Unlawful Means. The plaintiffs allege that between the oral agreement to settle, the 2006 Supreme Court proceedings reached in principle on 18 September 2006, on terms excluding any reference to Given Form in the presence of Mr Salmon, and the later presentation of the proposed deed of settlement to Mr Wily, Mr Albarran, Mr McDonald and Mr Brown are alleged to have agreed and conspired to include in the deed of settlement a release and indemnity in respect of Given Form, notwithstanding that Given Form had no connection with Mr Salmon, Capital Finance or Capital Mortgage and was not a party to the 2006 Supreme Court proceedings: [79].

69. The alleged conspiracy included an agreement to conceal from Mr Salmon, the attempt to include the release and indemnity in respect of Given Form: [80]. And the agreement to conceal the stipulation for the release and indemnity in respect of Given Form was both unlawful and contained the use of unlawful means to attain the desired ends in that it was dishonest, gained a secret and ulterior benefit, was an abuse of process of the Supreme Court, and was in breach of the receivers and managers duties under Corporations Act, s 420, as it diverted the funds away from other creditors: [81].

70. Following the collapse of the settlement of the 2006 Supreme Court proceedings Mr Albarran, Mr McDonald and Mr Brown are alleged to have further conspired to deceive the plaintiffs by falsely and fraudulently representing to them that the reason the settlement had failed was because Mr Wily had refused to execute the deed, and, in so doing, they falsely represented to Mr Salmon that "the Deed Mr Wily had refused to execute contained no more than the terms apparently agreed to on the afternoon of 18 September 2006": [83].

71. The plaintiffs further allege that following the failure of the settlement of the 2006 Supreme Court proceedings, the three principal defendants agreed and conspired to injure the plaintiffs by taking steps to ensure that TCBS was driven into liquidation and Mr Salmon was made bankrupt, so they could never pursue the three principal defendants for their conduct in aborting the settlement of the 2006 Supreme Court proceedings for their own ends: [84]. This separate alleged conspiracy was pursued by the three principal defendants by their effectively "running dead" in the balance of the 2006 Supreme Court proceedings, by their not presenting a proper case to the Court, and by their not prosecuting subsequent proceedings for the assessment of the quantum of TCBS’ losses (in respect of the charge Young CJ in Eq found to be valid) with appropriate dispatch: [85]. This meant that no funds were ever produced from the receivership of Capital Finance and Capital Mortgage for the benefit of the plaintiffs: [86]. This further conduct also involved the use of unlawful means in furtherance of the conspiracy to injure; namely dishonesty, the breach of Corporations Act, s 420 duties and the abuse of the processes of this Court: [87].

72. Ultimately, Mr Wily's administration of the liquidation of Capital Finance and Capital Mortgage continued, resulting in funds being available to pay Mr Wily’s fees, and those of Mr Albarran and Mr McDonald, but nothing was left to pay the debts of TCBS or its related company: [88].

73. (3) Wilful Default or Wilful Neglect of Their Duties as Receivers. The plaintiffs further allege that the facts already pleaded also amount to the three principal defendants stating to the plaintiffs that Mr Wily was the sole cause of the 2006 Supreme Court proceedings not resolving, whereas, in truth, the proceedings did not resolve because Mr Albarran and Mr McDonald, as deed administrators, were involved in the payment relating to Given Form and they received the subsequent demand of 12 October 2005, whereby they engaged in conduct constituting wilful default under their Deed of Appointment dated 4 August 2006, and they are therefore not entitled to any indemnity or release under that Deed of Appointment: [89].

74. (4) Breach of Duty as a Receiver, Including Breach of Fiduciary Duty. The plaintiffs plead that Mr Albarran and Mr McDonald owed a fiduciary duty to the plaintiffs not to permit their personal interests to conflict with their duties to carry out the receivership of Capital Finance and Capital Mortgage in good faith, and they owed a duty to exercise their powers as receivers in good faith in the interests of the secured creditor who appointed them and otherwise in the interests of creditors and shareholders generally: [90].

75. Mr Albarran and Mr McDonald breached those duties by the conduct previously pleaded, including stipulating in the negotiations for the settlement of the 2006 Supreme Court proceedings for the Given Form release and indemnity, insisting upon the Given Form release and indemnity even though Mr Wily had refused to entertain it, misleading the plaintiffs about the cause of the settlement not proceeding, subsequently "running dead" in the 2006 Supreme Court proceedings and failing to prosecute consequential assessment of quantum proceedings for the valid charge and then charging fees in excess of $800,000 for their conduct of their receivership: [91].

76. The plaintiffs’ plea of fraudulent concealment of these causes of action is set out in paragraphs [96] to [100] of the pleading. Those paragraphs of the pleading are reproduced here in full:

“94.   The third defendant continued to act as the solicitor for the first and second defendants in proceedings 4200/06 and, in the circumstances knew and/or was a party to the matters pleaded above, in particular to the conduct of the first and second defendants as pleaded in paragraphs 61 to 70 above, paragraphs 71 to 88 and paragraphs 90 to 92 above.

95.   In the circumstances the third defendant, possessed actual or constructive knowledge of the actions of the first and second defendant in breach of their fiduciary duty to the plaintiffs and is thereby liable, equally with the first, second, fourth, fifth and sixth defendants to make restitution in the form of equitable compensation for the losses suffered by the plaintiffs by reason of the breaches of duty pleaded above.

123. First, Mr Salmon argues that he has equitable causes of action available to him that are not subject to the Limitation Act and in substance stand outside ss 14 and 55. In my view, this argument is correct and is an important answer to the applicants/defendants’ case.

124. The provisions of Limitation Act, s 14 which provide a limitation period of six years from the date on which the cause of action first accrues to the plaintiffs for a cause of action in contract, in tort, to enforce a recognizance, or to recover money by virtue of an enactment (including of the Commonwealth) is subject to a number of exceptions. One of them is Limitation Act, s 23 which provides as follows:

“23.   Equitable Relief

Sections 14, 16, 17, 18, 20 and 21 do not apply, except so far as they may be applied by analogy, to a cause of action for specific performance of a contract or for an injunction or for other equitable relief.”

131. Mr Salmon and TCBS’ pleading a breach of duty as a receiver, including breach of fiduciary duty, are pleaded sufficiently clearly to raise a purely equitable claim for breach of fiduciary duty. The pleading also makes it quite clear that this purely equitable claim seeks restitution by way of equitable compensation for the losses allegedly suffered by the plaintiffs: the pleading [92].

132. Whilst there will no doubt be a contest in the proceedings whether the fiduciary duty exists (a matter not to be contested for present purposes for the sake of argument on the Motion), if a fiduciary duty is established it is arguable that it is not subject to the Limitation Act, s 14 and does not need to come within Limitation Act, s 55 in order to extend the limitation period using the statutory doctrine of concealed fraud.

133. This result follows from equity’s longstanding treatment of persons who occupy fiduciary position that they are treated for the purposes of limitation as trustees and time does not run in their favour: see Burdick v Garrick (1870) LR5ChApp. 233, North American Land and Timber Co Ltd v Watkins [1904] 1 Ch 242. Historically, actions by beneficiaries against trustees (and by analogy fiduciaries), for example, for the misappropriation of trust property, have been excluded from the position of the arbitrary time limits imposed by Limitation Acts and instead the Courts and the legislature (subject to Limitation Act, ss 47 and 48) have treated trustees as bearing a special responsibility which should persist indefinitely unless in all the circumstances it would be inequitable to allow the beneficiary to enforce his rights: Nelson v Rye [1996] 2 All ER 186 ; [1996] 1 WLR 1378 at 1389C-E. This general principle was cited with approval in the judgment of the plurality of the High Court in Maguire & Tansey v Makaronis (1997) 188 CLR 449 (“Makaronis”) at 463.

134. It is strongly arguable, in my view, that to the extent the plaintiffs rely upon an alleged breach of fiduciary duty in the execution of Mr Albarran’s and Mr McDonald’s powers under Corporations Act, s 420 that claim of breach is not subject to the limitation periods set by Limitation Act, s 14. Nor does it matter that the claim for a breach of fiduciary duty arises out of circumstances that also give rise to a claim in tort. A plaintiff is entitled to plead alternative causes of action in tort and contract and breach of trust or breach of fiduciary duty. The injured party cannot use the alternatives to receive duplicate relief but a plaintiff is entitled to field the alternative claims for relief to the plaintiff’s best advantage, even if that means the avoidance of limitation periods: Nelson v Rye [1996] 2 All ER 186; [1996] 1 WLR 1378 at 1389A-C.

135. These principles are often invoked in circumstances where trustees are alleged to have misappropriated property. But the principle is arguably not so limited. Moreover, the relief in this very case may be able to be framed on the facts pleaded as a dealing with a property to which TCBS was entitled, although the facts are not sufficiently well known for that to be clear as yet. And there is no injustice in this result because the defences of laches and acquiescence are well available to the defendants.

136. Of course, the Limitation Act does impose a 12 year limitation period in respect of fraudulent breaches of trust: Limitation Act, s 47. But on any view of this case, even if that limitation period is applied, the plaintiffs’ action has been commenced well within that time.

137. Of course Equity acts by analogy to the Common Law and will apply limitation statutes by analogy: JD Heydon, MJ Leeming and PG Turner, Meagher, Gummow & Lehane’s Equity: Doctrines & Remedies (5th ed, 2014, LexisNexis Butterworths) para [36-075]. And Limitation Act, s 23 recognises this as well. But whether there is an analogy or not between a breach of fiduciary duty relied upon in this case and any common law action seems to me to be a highly arguable matter suitable for final hearing rather than for summary dismissal. The plaintiffs’ equitable claim for relief is so interconnected with the other claims that they should also not be struck out.

138. Secondly, a helpful but odd feature of this Amended Statement of Claim is that it actually pleads fraudulent concealment. The conventional manner in which a Limitation Act, s 55 issue is raised is by way of reply in response to a plea by a defendant of the statute of limitations. Ordinarily, what would happen in a case such as this is that the defendants would put on a Defence pleading the statute of limitations and by way of reply the plaintiffs would plead circumstances that would raise Limitation Act, s 55. The plaintiffs here have taken the not unhelpful course of anticipating the defendants’ Limitation Act defence and pleading fraudulent concealment. But the fact they have done this should not obscure the reality that in a more conventionally pleaded case that it is the defendants, not the plaintiffs, who bear the onus of establishing that the limitation period has expired. This is not something which the plaintiffs have to disprove. It is something which the defendants have to establish.

139. In the course of argument the plaintiffs referred the Court to a recent decision of Parker J in Kovarfi v BMT& Associates Pty Ltd (No. 3) [2017] NSWSC 710 (“Kovarfi”). Like the present proceedings, Kovarfi was an application for summary dismissal. A similar argument was put, that the plaintiffs were well out of time. But the defendant’s summary judgment application was met by the plaintiff’s argument that any applicable limitation periods for actions in tort had ceased to run under Limitation Act, s 55, which provide as follows:

“55   Fraud and deceit

(1)   Subject to subsection (3) where:

(a)   there is a cause of action based on fraud or deceit, or

(b)   a cause of action or the identity of a person against whom a cause of action lies is fraudulently concealed,

the time which elapses after a limitation period fixed by or under this Act for the cause of action commences to run and before the date on which a person having (either solely or with other persons) the cause of action first discovers, or may with reasonable diligence discover, the fraud deceit or concealment, as the case may be, does not count in the reckoning of the limitation period for an action on the cause of action by the person or by a person claiming through the person against a person answerable for the fraud deceit or concealment.

(2)   Subsection (1) has effect whether the limitation period for the cause of action would, but for this section, expire before or after the date mentioned in that subsection.

(3)   For the purposes of subsection (1), a person is answerable for fraud deceit or concealment if, but only if:

(a)   the person is a party to the fraud deceit or concealment, or

(b)   the person is, in relation to the cause of action, a successor of a party to the fraud deceit or concealment under a devolution from the party occurring after the date on which the fraud deceit or concealment first occurs.

(4)   Where property is, after the first occurrence of fraud deceit or concealment, purchased for valuable consideration by a person who is not a party to the fraud deceit or concealment and does not, at the time of the purchase, know or have reason to believe that the fraud deceit or concealment has occurred, subsection (1) does not, in relation to that fraud deceit or concealment, apply to a limitation period for a cause of action against the purchaser or a person claiming through the purchaser.”

140. In dealing with this argument, Parker J made some observations (at [26] – [28]) which, in my view, are very apt for the present case:

“[26]   However, counsel argued that the section was clearly not engaged or alternatively that the alleged fraud was discoverable before September 2010 so that the present proceedings were out of time. There is a difficulty in evaluating these submissions. The onus of establishing that a claim is statute barred lies on the defendant. The limitation defence must be pleaded. Accordingly, in the ordinary course there is no obligation on the plaintiff to plead in the statement of claim grounds for extension or suspension of the limitation period. Rather, the plaintiff is entitled to plead the cause of action and no more. If the defendant wishes to raise a limitation defence then that must be pleaded and then the plaintiff can rely upon any extension by way of reply. Accordingly, the defendants are inviting me to determine that the case for an extension is hopeless in circumstances where the plaintiff, Mrs Kovarfi, has not been required formally and specifically to plead what that case is.

[27] It seems to me that the question of whether proceedings involve a cause of action “based on fraud” may involve factual issues. No doubt it ought to be possible to determine from the statement of claim itself whether the cause of action is based on “deceit” because this is a tort which has well-established elements which must be pleaded in order to sustain it. But it is not clear to me what additional content is created by the reference to “fraud” as well as deceit. It may be that a cause of action could be “based on fraud” because of facts that could be asserted about the circumstances in which the cause of action arose, but which are not necessarily elements of that cause of action. Whether that be so or not, it is plain that an allegation of “fraudulent concealment” for the purpose of s 55(1)(b) involves factual allegations, as does the question of whether or when a person might with reasonable diligence discover such fraud.

[28]   I acknowledge that there may be cases where it is clear beyond argument, having regard to the case framed in the statement of claim, that the claim being made is statute barred and accordingly that there may be circumstances in which the Court can be persuaded to make an order for summary dismissal of proceedings without requiring the defendant to take the formal step of pleading a defence. However, I do not think that this is one of those cases.”

141. In Kovarfi the plaintiff had done a somewhat similar thing to what has occurred here in anticipating the defence by pleading in the Statement of Claim circumstances that might bring the case within Limitation Act, s 55. His Honour then made an observation (at [30]) about that situation which in my view is also very apt for the present case:

“[30]Whatever might be the case if Mrs Kovarfi were legally represented, I do not think that I should treat these pleadings as a considered and exhaustive statement of the case that she might potentially make under s 55. As a litigant in person, Mrs Kovarfi is not entitled to special treatment from the Court but she is entitled to expect that the Court will not cut any corners in dealing with an application to dispose of her proceedings summarily. Accordingly, I would not dismiss the proceedings summarily on the ground that the proceedings are hopeless.”

142. In my view here, particularly because the Limitation Act, s 55 pleading has been fielded not in response to a pleaded Defence, but rather in anticipation of a defence, I too should not, at this point of the proceedings, regard it as an exhaustive statement of a case that these plaintiffs might potentially make under Limitation Act, s 55. Because of the strange inversion of the pleadings in this case, the Court should be very cautious about summary dismissal before these plaintiffs have had an opportunity to consider a properly and fully pleaded Defence by these defendants.

143. There is another reason to wait for the pleadings to be allowed take their conventional course in this case. An allegation of breach of fiduciary duty due to a conflict of interest, such as that alleged here, if made out to the prima facie level, throws upon the defendant the obligation to show by way of defence that the plaintiff had informed consent to the defendant acting with divided loyalty: Birtchnell v Equity Trustees Executors and Agency Co Ltd (1929) 42 CLR 384 at 398 (“Birtchnell”) and Makaronis at 446.

144. What is required for a fully informed consent is a question of fact in all the circumstances of each case and there is no precise formula which will determine in all cases are fully informed consent has been given: Spellson v George (1992) 26 NSWLR 666, at 669-60, 673-675, and 680 (“Spellson”); and Makaronis at 466. The circumstances of the case will often include the importance of obtaining independent and skilled advice from a third party: Commonwealth Bank of Australia v Smith (1991) 42 FCR 390, at 393 (“Smith”).

145. A breach fiduciary case should not be framed as one in which it must be established that the fiduciary has an obligation to obtain informed consent from the client. Rather the correct position is that the existence of an informed consent will go to negate what otherwise is a breach of duty: Makaronis at 467. The fiduciary bears the onus of showing the informed consent. Their claim should not be dismissed now.

146. In this case it appears that informed consent may well be in contest. If it is, then in fairness the plaintiffs should be entitled to see what is pleaded by the defendants as to informed consent before putting on their reply about fraudulent concealment and Limitation Act s55. It may be that the matters to which they are said to have given informed consent the plaintiffs will alleged were also not fully known to them and were concealed from them.

147. Thirdly, the way this application for summary dismissal has been argued, somewhat obscures an important issue addressed by the High Court in Wardley Australia Limited v State of Western Australia (1992) 175 CLR 514; [1992] HCA 55 at 533 that it is undesirable for limitation questions to be decided in interlocutory proceedings in advance of a hearing “except in the clearest of cases”. The summary dismissal application in this matter has largely been centred around the arguability of the Limitation Act, s 55 contention by the plaintiff. But exactly when and how the plaintiffs are alleged to have suffered loss by reason of the alleged tortious conduct of fraudulent misrepresentation has not been so fully explored in argument that the Court could say that this was “the clearest of cases”.

148. Indeed, the circumstances are far from it. When exactly the plaintiffs actually lost the opportunity they alleged to settle the proceedings on favourable terms by reason of the propounding of the Given Form release and indemnity is a highly contestable question. The date in question may be some time well after September 2006. This Court could not be confident to dismiss these proceedings on the basis that the primary limitation period commenced to run at that time.

149. An added complication in this case, as the plaintiffs point out, is that TCBS was deregistered for a period. The plaintiffs say that they wish to argue at final hearing that the limitation period does not run against TCBS during that period. In my view, such an argument could not be disposed of by way of summary dismissal.

150. Finally, as Parker J said in Kovarfi, fraudulent concealment may apply not just where fraud is an ingredient of the cause of action but where the cause of action is “based on fraud”. The plaintiffs’ action may involve concealed facts of which the plaintiffs are as yet unaware. Given the circumstances of this case, involving the alleged exclusion of the plaintiffs from the negotiations, there may be concealment implicit in the technique adopted in committing the tort: Beaman v Arts Ltd [1949] 1 All ER 465; [1949] 1 KB 550 at 560 per Lord Green MR.

151. The plaintiffs say they were not present at the critical moment when Messrs Albarran and McDonald allegedly stipulated for the Given Form release and indemnity. They say that they were not warned in advance that Messrs Albarran and McDonald were allegedly going to take this course. But until discovery takes place in this case the plaintiffs may not have a chance of relying upon that alleged concealment. It is all very well for the defendants to now say that the plaintiffs cannot point to any realistic scenario which would allow the limitation period to be extended. The plaintiffs may legitimately answer that by saying they do not yet have all the facts.

152. Finally, the pleading is clear and not embarrassing and there is no basis to strike it out pursuant to prayer 2 of the Motion.

Conclusions and Orders

153. The plaintiffs have been successful in resisting the relief sought in the Notice of Motion of 12 October 2017. The Motion should be dismissed. This means that the proceedings will need to continue to be prepared for trial. The first step in this direction will be for the defendants to file Defences. The Court will order the first, second and fourth to eighth defendants to file their Defences by 29 March 2019 and the proceedings will be listed before the Registrar for directions on 3 April 2019.

154. Mr Salmon has represented himself and TCBS in the proceedings. So far as the Court is aware, they have not incurred any legal costs associated with the Motion. But there may be some minor disbursements. And lawyers may have been engaged for limited purposes on aspects of the Motion. It would therefore still be appropriate to make an order for costs of the Motion. The appropriate order is that the costs of the Motion will be the plaintiffs’ costs of the proceedings. If it ever comes to a contested assessment of costs of the Motion it can be noted that Mr Salmon appeared without legal representation for all the hearing dates of the Motion.

155. For these reasons, the Court makes the following orders and directions:

1. The Notice of Motion of the first, second and the fourth to the eighth defendants dated 12 October 2017 for summary dismissal and striking out of the plaintiffs’ Amended Statement of Claim in these proceedings is dismissed.

2. Order that the plaintiffs’ costs of the Motion, if any, will be the plaintiffs’ costs in the proceedings.

3. Order the first, second, fourth, sixth, seventh and eighth defendants to file their Defences to the Amended Statement of Claim by 4pm on Friday, 29 March 2019.

4. Direct that the proceedings be listed before the Registrar in Equity for further directions at 9.00am on 3 April 2019.

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Amendments

14 March 2019 - coversheet- parties

Decision last updated: 14 March 2019