Temwood Holdings Pty Ltd v Oliver

[2001] WASC 296

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   TEMWOOD HOLDINGS PTY LTD -v- OLIVER & ORS [2001] WASC 296

CORAM:   MASTER SANDERSON

HEARD:   22 OCTOBER 2001

DELIVERED          :   30 OCTOBER 2001

FILE NO/S:   CIV 2008 of 1997

Consolidated with CIV 2173 of 1997, CIV 2244 of 1997 and CIV 1248 of 2000

BETWEEN:   TEMWOOD HOLDINGS PTY LTD

Plaintiff

AND

OSCAR NEIL BLACKBURNE OLIVER
First Defendant

ASEAN AUSTRALIAN ASSETS PTY LTD
Second Defendant

SLY AND WEIGALL (A FIRM)
Third Defendant

(BY ORIGINAL ACTION)

ASEAN AUSTRALIAN ASSETS PTY LTD
Plaintiff

AND

TEMWOOD HOLDINGS PTY LTD
Defendant

(BY COUNTERCLAIM)

Catchwords:

Practice and procedure - Application for leave to amend defence - Turns on own facts

Legislation:

Nil

Result:

Leave refused

Category:    B

Representation:

Original Action

Counsel:

Plaintiff:     Mr J C Giles

First Defendant             :     Mr M J McPhee

Second Defendant         :     Mr Mr J McPhee

Third Defendant           :     No appearance

Solicitors:

Plaintiff:     Solomon Brothers

First Defendant             :     Michell Sillar McPhee

Second Defendant         :     Michell Sillar McPhee

Third Defendant           :     No appearance

Counterclaim

Counsel:

Plaintiff:     Mr M J McPhee

Defendant:     Mr J C Giles

Solicitors:

Plaintiff:     Michell Sillar McPhee

Defendant:     Solomon Brothers

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

Muschinski v Dodds (1985) 160 CLR 583

The Hancock Family Memorial Foundation Ltd v Johanna Lacson Nominees Pty Ltd (2000) 201 CLR 347

Zobory v Federal Commissioner of Taxation (1995) 129 ALR 484

Case(s) also cited:

Agip (Africa) Ltd v Jackson [1990] Ch 265

Barnes v Addy (1874) LR 9 Ch App 244

Black v S Freedman & Co (1910) 12 CLR 105

Ciavarella v Balmer [1983] 153 CLR 438

Collings v Lee [2001] 2 All ER 332

Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371

Fosker v McKeown [2001] 1 AC 102

Hancock Family Memorial Foundation Pty Ltd v Porteous [2000] WASCA 29; (2000) 22 WAR 198

Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) 67 ALJR 537

Larking v Great Western (Nepean) Gravel Ltd (1940) 64 CLR 221

Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548

Lonrho v Fayed (No 2) [1992] 1 WLR 1

Maguire v Makaronis (1997) 188 CLR 449

Ninety Five Pty Ltd (In Liq) v Banque Nationale de Paris [1988] WAR 132

Rolled Steel Products (Holdings) Ltd v British Steel Corporation [1986] Ch 246

Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378

Sargeant v ASL Developments Ltd (1974) 131 CLR 634

Stambulich v Ekamper [2001] WASCA 283

Tang Man Sit v Capacious Investments Ltd [1996] AC 514

United Australia Ltd v Barclays Bank Ltd [1941] AC 1

Wendt v Bruce (1931) 45 CLR 245

Wickham Developments Ltd v Parker, unreported; Queensland Court of Appeal; 20 June 1995

1. MASTER SANDERSON:  This is yet another chapter in the interlocutory saga of these proceedings.  Reasons have been published on eleven previous occasions and it is therefore not necessary for me to repeat the facts of the case.  Steytler J set out the nature of the claims made by the plaintiff against the defendants in reasons given on 17 August 1998.  I would respectfully adopt that summary of the facts and incorporate it without repetition in these reasons.

2. Having said that, the short point which arises for determination in this matter does, I think, require the briefest of outlines of the aspect of the case dealt with on this application.  Counsel for the plaintiff summarised the position in this way (Transcript, page 654):

   "Mr Oliver is a director of AAA (the second defendant).  He is also a director of Temwood.  He causes Temwood to enter into the first management agreement which is detrimental to Temwood and advantageous to him …

   By that he has preferred AAA's interest to Temwood's consequently breach of fiduciary duty; that's step 1.  Step 2 of the argument is that AAA - because Oliver was the controlling mind and will of the company - knew what Oliver knew; therefore (AAA is) knowingly or dishonestly concerned, so we have got a cause of action against both.  Then the next step to that is by reason of the cause of action any property which AAA has received because of the breach of fiduciary duty is immediately imprest with the (constructive) trust."

3. This application is a pleading summons.  The first and second defendants seek leave to amend their defence in terms of a minute of proposed amended defence and counterclaim dated 17 October 2001 ("the minute").  The minute is a long and complex document.  It runs to 193 paragraphs and 87 pages.  In saying that, I am in no way criticising the pleader.  It is a response to a long and complex statement of claim.  The minute has been the subject of extensive negotiation between the solicitors for the parties and, to their credit, most matters have been agreed.  What remains in issue is the proposed new par 146A.  Because of the importance of this paragraph I will quote it in full.  I will not include the particulars.  The particulars run to six pages and were themselves the subject of criticism and complaint by counsel for the plaintiff.  Given the conclusion I have reached about par 146A itself, any issue on the particulars falls away and they are therefore not relevant to these reasons. 

   "146A.Further, or alternatively if (which is denied) there was any fraud, dishonesty or breach of fiduciary duty by the First and/or Second Defendant as alleged against them generally in the Statement of Claim and in particular in paragraphs 11C, 21, 22, 34B, 34C and 34D thereof, the First and Second Defendants say in any event, the Plaintiff, with full knowledge of all such alleged facts said to constitute the fraud, dishonesty or breach of fiduciary duty on the part of the First and/Second Defendant did not disaffirm the First and Second Management Agreements within a reasonable time; but rather affirmed those Agreements and are thereby bound by the terms of such Agreements, notwithstanding the allegations made against the First and Second Defendants by the Plaintiff."

4. What the first and second defendants are really saying is this.  Even if, which we deny, there was fraud or breach of fiduciary duty in Oliver causing Temwood to enter into the first management agreement, neither AAA nor Oliver will be liable to Temwood because Temwood never rescinded the agreement but in fact continued on and performed various aspects of the agreement.  Because there was no rescission of the agreement, no remedy for a constructive trust can lie.

5. The plaintiff says that this plea proceeds on a misunderstanding of the case put by the plaintiff against the first and second defendants.  The plaintiff accepts that there was no rescission of the first management agreement.  However, it is said that rescission of the agreement is unnecessary.  The plaintiff says that as soon as the fraud, dishonesty or breach of fiduciary duty occurred, the benefit of the first management agreement becomes imprest with a constructive trust.  That position can never be altered.  It matters not what occurred after the constructive trust was established.  The plaintiff is still entitled to the remedy it seeks.

6. Counsel for the plaintiff acknowledged that in certain circumstances, for a constructive trust to arise it was necessary for the contract pursuant to which the benefit arose, to be rescinded.  Reference was made to the decision of the High Court in TheHancock Family Memorial Foundation Ltd v Johanna Lacson Nominees Pty Ltd (2000) 201 CLR 347. This was contrasted with the position in Zobory v Federal Commissioner of Taxation (1995) 129 ALR 484. For the first and second defendants, it was said that there was no real difference between "institutional" and "remedial" constructive trusts and it was necessary for the first and second defendants to put before the Court the detailed pleading found in par 146A of the minute. Reference was made to Muschinski v Dodds (1985) 160 CLR 583 per Deane J at 613.

7. For the purposes of this application it is not necessary for me to consider in detail the arguments put by counsel.  Properly considered the position is this.  The first and second defendants say that the plaintiff is not entitled to relief by way of constructive trust because the contract has not been rescinded.  The plaintiff agrees that the contract has not been rescinded but says that fact does not preclude the plaintiff from the remedy that it seeks.  That being the case, what the first and second defendants seek to achieve by the present form of par 146A can be achieved by a simple pleading that the contract has not been rescinded.  As counsel for the plaintiff said during the course of his submissions, if that plea is made the reply will admit there has been no rescission but claim that the plaintiff is entitled to the relief in any event.  The issue between the parties will then be exposed and can be determined at trial.  All the matters referred to in the pleading by way of particulars are then unnecessary.  That, in my view, is the course that should be adopted.

8. As I understand the position the first and second defendants put their case on the basis that the contract has not been rescinded and in fact after the constructive trust is said to have arisen, the plaintiff performed elements of the contract.  It may be that this is a plea of election or acquiescence.  I do not understand the first and second defendants to be saying that such a defence stands apart from what are said to be the consequences of the plaintiff's failure to rescind the contract.  In other words, the failure to rescind the contract is the fatal flaw in the plaintiff's argument.  It is not said that independent of the failure to rescind there is a defence of election or acquiescence.  There may have been, on the first and second defendants' case, election or acquiescence on the part of the plaintiff, but that is represented by the failure to rescind.  In other words, all of the particulars which deal with acquiescence and election add nothing to the first and second defendants' position because it is the fact of the failure to rescind which is all important.

9. In the circumstances then I would refuse leave to amend in terms of par 146A as it stands at present.  I would allow the first and second defendants to bring in a minute which alleges simply a failure to rescind the contract as a grounds for denying the plaintiff relief.  The parties should confer on the terms of such an amendment and on the terms of the orders consequent upon these reasons.

10. I will hear the parties on the question of costs.