Sami Alfred Cassis and Gisele Cassis v Marcel Isador Kalfus

[2001] NSWSC 318

CITATION:	Sami Alfred Cassis and Gisele Cassis v Marcel Isador Kalfus [2001] NSWSC 318
FILE NUMBER(S):	SC 20589/96
HEARING DATE(S):	21-24/2/2000 29/2/2000 1/3/2000 18/12/2000 2/3/2001
JUDGMENT DATE:	27 April 2001
PARTIES :	Sami Alfred Cassis Gisele Cassis Marcel Isador Kalfus
JUDGMENT OF:	Dowd J at 1

COUNSEL :	Mr P Roberts SC- Plaintiffs Mr GC Lindsay SC- Defendant
SOLICITORS:	LMG Solicitors & Attorneys- Plaintiffs Mallesons Stephen Jaques- Defendant
CATCHWORDS:	Limitation period - Damages - Equitable remedies
LEGISLATION CITED:	Limitation Act 1969 Lord Cairns' Act (UK) Supreme Court Act 1970
CASES CITED:	A.S.A Constructions v Iwanov (1935) 1 NSWLR 512. Cia de Seguris Imperio v Heath (REBX) Ltd [2001] 1 WLR 112. Clough and Rogers v Frog 4 ALR 615. Cropper v Smith (1884) 26 Ch D 700. In Re Dawson (1966) 2 NSWLR 211. Knox v Gye (1872) LR 5 HL 656. Maguire v Makronis (1996-1997) 188 CLR 449. Scarcella v Lettice (2000) NSWCA 289. Sheldon v McBeth (1993) Aust Torts Reports 81-209. State of Queensland v JL Holdings Pty Limited (1996-1997) 189 CLR 146. Wardley Australia Limited v WA (1992) 175 CLR 514.
DECISION:	1. Defendant to have leave to file Defence to Fourth Amended Statement of Claim; 2. That the first plaintiff have leave to particularise such claims and the damages following therefrom in the Fourth Amended Statement of Claim as are not barred by the Statute of Limitations 1969; 3. Costs reserved.

THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

DOWD J

27 April 2001

20589/96

SAMI ALFRED CASSIS and GISELE CASSIS v MARCEL ISADOR KALFUS

REASONS FOR JUDGMENT

1    During the course of the hearing of this matter, the plaintiffs were granted leave to file a Fourth Amended Statement of Claim, as a result of which, the defendant sought leave to file a Further Amended Defence, which included a defence under the Limitation Act 1969.

2    The matter of the Limitation Act was reserved and not argued during the course of the hearing. At the conclusion of the hearing, the matter had still not been argued. I sought written submissions.

3    Notwithstanding the written submissions that were filed, the last of which was some fortnight after the last day of hearing. I considered that the question of the addition of the Limitation Act defence should be addressed by Counsel for the plaintiffs before considering the grant of leave. I therefore delivered a series of findings that I had already made on 18 December 2000, in order to assist the parties in further submissions, and to hear from the parties as to any matter which may have arisen as a result of such findings.

4    I endeavoured to arrange a hearing in early February 2001, involving additionally suggested dates in the Court Vacation in order to expedite this matter. The parties were not able to arrange to have the matter before me until 1 March 2001.

5    In that judgment of 18 December 2000, I specifically sought submissions as to way in which the Limitation Act affected personal injury claims, and the manner in which such a defence should be applied in relation to a claim for equitable relief.

6    I further sought submissions as to the various transactions included in the Fourth Amended Statement of Claim; the duties and any breach which arose as a result of the potential need to examine the question of damages flowing from different actions of the defendant in his capacity as Solicitor or Fiduciary; and to clarify the claim by way of Schedule as to the damages that may flow from the respective breaches alleged.

7    I also wished to hear from Counsel for the plaintiffs as to way in which damages may arise independently of the joint venture agreement for specific actions of the defendant, and how damages may be apportioned, as damages in the hearing had been presented as one whole indivisible issue.

8    One of the additional difficulties in these proceedings is that particulars under Pt 33 8A SCR were not filed prior to or during the hearing in respect of each of the plaintiffs. This was not carried out, notwithstanding that I pointed out during the hearing the necessity to file such particulars.

9    The plaintiffs’ Counsel correctly pointed out that para 129 of my judgment of 18 December 2000, does not correctly set out the plaintiffs’ claims. The particulars of the plaintiffs’ claim as set out in paras 58 and 59 of the plaintiffs’ submissions filed herein. These are:

“ Paragraph 58 :

· loss of salary (for the period 1 July 1993 to 15 October 2001) and interest thereon- see schedule- $448,719;

· moneys paid or payable by the First Plaintiff on the collapse of IGC:

a) monies paid in relation to obtaining of White and Vesaro mortgages (see Exhibit F p.115- Defendant’s letter of 23.12.93) $6,745 plus interest at 10% pa to date = $4,269 - total $11,014;
b) moneys paid to discharge White mortgage in March 1995, $288,675 less $70,000 attributed to home loan mortgage = $218,675 plus interest at 10% to date = $109,337 - total $328,012;
c) payments of White mortgage made personally by the First Plaintiff during late 1994 approximately $7,000 plus interest at 10% to date = $3,731 - total - $10,731;
d) the Roden judgment debt $106,250 plus interest of 10% on amount paid ($51,000) in or about 1996 to date = $20,4000 - total $126,650;
e) interest payable on unpaid portion of Roden judgment - as at 16 March 1999 $36,735 (Exhibit G) and continuing;
f) Roden’s legal costs estimated at $30,000;
g) the First plaintiff’s legal costs of defending the Roden judgment of $7,000 plus interest at 10% from 1995 to date = $3,500 - total $10,500; and
h ) moneys paid by the First Plaintiff to the creditors of IGC $48,000 paid in late 1994 plus interest at 10% to date = $25,584 - total $73,584.

Paragraph 59

Thus the First plaintiff claims:

· damages for salary foregone $448,719

· damages for moneys paid or payable $627,226

Total $1,075,945”

10    Additionally, the first plaintiff claims general damages for pain, and suffering, loss of enjoyment of life, and an impaired psychological state arising from the defendant’s conduct, and interest in past general damages. The first plaintiff also claims aggravated damages and exemplary damages.

11    The second plaintiff’s claim comprises the loss of value of the plaintiffs’ dwelling occasioned by the repayment of the White loan from the proceeds of the sale of Leeton Ave. The second plaintiff therefore claims the moneys paid to discharge the White mortgage in March 1995, of $288,675, less the $70,000 attributable to the home loan mortgage, giving a nett of $218,675 plus interest at 10% to date. It is accepted that this claim duplicates part of the claim of the first plaintiff.

12    The second plaintiff also claims general damages for pain, suffering and loss of enjoyment of life, and impaired psychological state arising from the defendant’s conduct, exemplary and aggravated damages and interest on past general damages.

Amendment to Defendant’s Defence Pleading the Limitations Act 1969

13    Notwithstanding the request, the plaintiffs’ submissions prior to the hearing of 1 March 2001 largely reflect what was put by Mr Roberts SC during the course of the hearing, being that no cause of action in negligence arose until actual loss was occasioned, and that this loss did not occur until 1994 for the first plaintiff and for the second plaintiff, 1995, when Leeton Ave was sold. The submission of the plaintiffs was that the placing of mortgages did not of themselves cause loss, and the plaintiffs contended that there was no limitation period for the commencement of proceedings for breach of fiduciary duty.

14    It was further contended that the second plaintiff’s claim was commenced shortly after her loss was occasioned, this being in 1995 when Leeton Ave was sold, and that there has been no conduct on her behalf which disentitles her to relief from the defendant’s breaches.

15    The principles upon which amendments to pleadings are permitted, have been set out by the High Court in the State of Queensland v JL Holdings Pty Limited (1996-1997) 189 CLR 146, a case concerning the problems of allowing amendments when proceedings have been subjected to a case management regime. That decision obliges courts to take into account principles of case management as a relevant consideration, but a party cannot be prevented from litigating an issue which is fairly arguable. Provided that a prejudice can be compensated by costs, a party should be permitted to raise an arguable defence: see also Clough and Rogersv Frog 4 ALR 615, at 618. Both of these cases applied Cropper v Smith (1884) 26 Ch D 700, when Bowen LJ at 710 said:

“The object of courts is to decide the rights of parties, and not to punish them for mistakes they made in the conduct of their cases… I know of no kind of error or mistake which, if not fraudulent or intended to overreach, the court ought not to correct, if it can be done without injustice to the other party…”.

16    I take into account that the amendment to the defendant’s Defence came as a result of the plaintiffs amendment to the Statement of Claim, and consequent upon the plaintiffs opening anticipating many issues as to the plaintiffs’ case for the first time, the defendant had conceded at T116 that the defendant would not be prejudiced because the defences would not take long to legally address because they are legally wrong and do not factually arise. In short, the argument of the plaintiffs is, as I have indicated, that the defendant’s defences under the Limitation Act have no merit.

17    The plaintiffs’ reliance on Wardley Australia Limited v WA (1992) 175 CLR 514, at 527-528, a decision as to the nature of economic loss which can be sustained. The majority judgment at page 527 says:

“In many instances, the disadvantageous character and effect of the agreement cannot be ascertained until some future date when its impact upon events as they unfold becomes known or apparent, and by then, the relevant limitation period may have expired”.

18    Clearly in these proceedings, the first plaintiff’s case is that he suffered damages immediately on the coming into effect of the contract, and thus his cause of action in contract and tort takes effect from February 1989.

19    It is necessary therefore to look at the limitation defences, to the actions in contract, tort and arising out of breach of fiduciary duty.

20    The claim in contract clearly envisages and seeks compensation for loss of the former employment when the first plaintiff entered into the joint venture. This was actual damage not contingent or prospective. His loss of employment with his former employer with CMA crystallises the cause of action in contract. In any event, an action in contract runs from the breach regardless of when the damage occurs (inter alia), although the time of the breach of contract is not always easy to determine: see Sheldon v McBeth (1993) Aust Torts Reports 81-209. In these proceedings, the actual breach alleged was, inter alia, the failure to properly advise the first plaintiff in 1989.

21    The Statute of Limitations, in contract, being six years, the claim in respect of the joint venture agreement is therefore barred.

22    Similarly, the action brought in tort against the defendant, which sounds in damages, it being specifically claimed from the date of the breach, the action having been in respect of negligent advice and failure to disclose relevant facts concerning the joint venture given in 1989, is similarly barred, damages being an element of the tort, there being several events giving rise to damage or detriment to the first plaintiff in 1989.

23    I have been referred to and take into account a decision of the Court of Appeal in Scarcella v Lettice (2000) NSWCA 289, which reaffirms that time commences to run when damage occurs, even though the plaintiff may not be aware of it.

24    Notwithstanding that I have asked Counsel for the first plaintiff to specify damages arising out of subsequent breaches as pleaded and claimed by the first plaintiff, Senior Counsel for the first plaintiff has declined to do so on the basis that the Limitation Act defences do not arise and his assertion that there is no statute of limitations for breach of fiduciary duty.

Equitable Compensation

25 Although variously described as equitable damages or equitable compensation, there are two distinct bases for monetary awards granted by the court in its equitable jurisdiction. The first of these arises under s68 of the Supreme Court Act 1970, which derives from the United Kingdom Lord Cairns’ Act where damages may be awarded in a claim seeking other equitable relief such as an injunction or specific performance. This applies different principles from common law damages, in that the time at which the damages are calculated may not necessarily correspond with the time of the breach, and the nature of and basis for the damages will vary with the nature of the case.

26    Needham J in A.S.A Constructions v Iwanov (1935) 1 NSWLR 512, held that a court could grant equitable damages pursuant to s68 of the Supreme Court Act 1970, even though the court could not decree specific performance. In that case, His Honour held that where a plaintiff has a completely constituted action at law, the court assessing damages under the Supreme Court Act should apply common law rules.

27    The other basis for compensation in equity, arises from the court’s inherent jurisdiction, and is in the form of a monetary award. It is sometimes called equitable damages, but equitable compensation is often used to distinguish it from damages under Lord Cairn’s Act and its derivative statutory provisions.

28    Equitable compensation was originally a remedy for breach of trust, as was described by Street J, as he then was, in In Re Dawson (1966) 2 NSWLR 211, at 218, a case involving a defaulting trustee. His Honour found that that trustee must make good the loss by restoring to the estate the assets which he or she deprived it of, and the trust property no longer being available, the trustee will be ordered to pay monetary compensation.

29    As I have referred to in my judgment of 18 December 2000, equitable compensation has developed into a recognisable remedy for breach of fiduciary duty. This, however, is still to be developed in Australian and other similar jurisdictions throughout the world.

30    Although a statute of limitations as such does not apply to actions for breach of fiduciary duty, most decisions such as Maguire v Makronis (1996-1997) 188 CLR 449 (to which the plaintiffs referred), was an issue primarily as a result of a prayer seeking to set aside a mortgage, and the claim was not a simple claim for damages as such. A limitation statute may however apply by analogy.

31 Section 23 of the Limitation Act 1969 provides that limitations do not apply to actions in tort or contract, except insofar 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”, which clearly contemplates equitable compensation as well as all other equitable remedies.

32    Equity has always applied a statute of limitations by analogy, illustrating the maxim that equity follows the law. As Lord Westbury said in Knox v Gye (1872) LR 5 HL 656, at 674:

“Where a court of equity frames its remedy upon the basis of the common law, and supplements the common law by extending the remedy to parties who cannot have an action at common law, there the court of equity acts in analogy to the statute; that is, it adopts the statute as the rule of procedure regulating the remedy it affords. Where the remedy in equity is correspondent to the remedy at law, and the latter is subject to a limit in point of time by the Statute of Limitations, a court of Equity acts by analogy to the statute, and imposes on the remedy it affords the same limitation”.

33    The practice book of Meagher, Gummow and Lehane states that there are numerous other decisions illustrating Equity acting by analogy: see R.P Meagher, W.M.C. Gummow and J.R.F. Lehane., Equity: Doctrines and Remedies 3rd ed (Sydney: Butterworths, 1992), at p785.

34    In consideration to application of the principles referred to by Needham J in A.S.A Constructions v Iwanov (1935) 1 NSWLR 512, that equitable damages should follow common law principles, I have also been referred to a recent decision of the United Kingdom Court of Appeal in Cia de Seguris Imperio v Heath (REBX) Ltd [2001] 1 WLR 112, at 121E, 123E-124C, 125A-B, 125F and 126A , a decision on the United Kingdom’s Limitation Act 1990, which is in similar terms to s23 of the Limitation Act 1969, to the effect that that equity follows the common law by analogy.

35    Although the manner of determination of damages may differ for equitable compensation, and although other equitable remedies may be available, the plaintiffs claims are, in effect, analogous to claims for damages at law, and are based on the same underpinning facts.

36 By the application of analogy therefore and s23 of the Limitation Act 1969, the first plaintiff is barred by the same argument as applies to the action in contract and tort in his action for breach of fiduciary duty for breaches occurring outside the limitation period.

37    The claim for aggravated damages for personal injury and exemplary damages, therefore are similarly statute barred.

38    In the second plaintiff’s claim, there was clearly a relationship established of solicitor and client between the second plaintiff and the defendant, in relation to the transfer of her house. Clearly however, any action in contract or in negligence, or breach of other duty, arose in 1989 at the time of the failure to proceed with the stamping and lodgement of the transfer, and the obtaining of the mortgagee’s consent for registration of the transfer. However, in any event detriment was suffered by the second plaintiff when the property was encumbered in 1989. This brings the cause of action beyond the Limitation Act 1969 limitation period, and therefore the defendant has a good defence to the action of the second plaintiff, in the pleading of the Limitation Act 1969.

39    Accordingly, on the basis that the defendant has a good defence, and for the other reasons that I have set out above, in applying JL Holdings v State of Queensland, the defendant should have leave to file the Defence to the Fourth Amended Statement of Claim to include the defence under the Limitation Act.

40    For the reasons I have set out above, the second plaintiff is therefore statute barred and the first plaintiff is statute barred for those causes of action beyond the six year period provided by the Limitation Act 1969.

41    Notwithstanding my invitation in the judgment of 18 December 2000 for the parties to set out each breach of duty respectively caused in the various activities carried out by the defendant, some of which are subsequent to the limitation period, I consider that the defeat of that part of the first plaintiff’s claim by the defence of the Statute of Limitations 1969 should not prevent the first plaintiff from particularising such damages as he may seek to argue, that he has suffered from the breach of the defendants’ solicitors retainer, or the failure to advise that he should obtain independent advice, or any negligence advice that may have been tendered, subsequent to the Limitation Act period.

42    I will allow a further period of twenty-eight days for such claim to be articulated. I will then determine any issues which may then arise.

43    I reserve any question of costs.

44    The orders that I therefore propose are:

1. The defendant is granted leave to file the Defence to the Fourth Amended Statement of Claim, including the defence under the Limitation Act 1969;

2. The first plaintiff have leave to particularise such claims and the damages following therefrom in the Fourth Amended Statement of Claim as are not barred by the Statute of Limitations 1969; and

3. Costs are reserved.

oOo

Last Modified: 05/04/2001