Veall v Hughes

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

TRUSTS, EQUITY AND PROBATE LIST

S ECI 2018 00730

ARTHUR ROWLAND VEALL	Plaintiff
v
DAVID HUGHES (in his capacity as Administrator of the Deceased Estate of ARTHUR KEITH VEALL) & ORS (according to the attached schedule)	Defendants

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JUDGE:	Ierodiaconou AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	10 March 2020
DATE OF RULING:	13 July 2020
CASE MAY BE CITED AS:	Veall v Hughes
MEDIUM NEUTRAL CITATION:	[2020] VSC 423

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PRACTICE AND PROCEDURE – Pleadings – Application to further amend statement of claim – Application for joinder of parties – Whether there is a proper basis – Whether leave should be given to amend – Whether leave should be given to proceed as a beneficiary of the deceased estate and trusts – Whether pleadings of fraud and dishonest sufficient to establish a cause of action – Particularity required when alleging fraud or dishonesty – Whether leave should be given to join parties – Whether Harman undertaking applies – No proper basis – No real prospect of success – Insufficient pleadings – Applications disallowed – Civil Procedure Act 2010 ss 18, 23-24, 42, 46, Supreme Court (General Civil Procedure) Rules 2015 rr 9.06, 13.02, 13.10, 36.01 – Mandie v Memart Nominees Pty Ltd [2016] VSCA 4 – Cargill Australia Ltd v Viterra Malt Pty Ltd (No 10) [2018] VSC 439.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr M O’Connor	Katherine Moorhouse Perks
For the First Defendant	Mr C G Juebner	K&L Gates
For the Second and Third Defendants	Dr P Bender	DTCH Lawyers

TABLE OF CONTENTS

Summary.............................................................................................................................................. 1

Background......................................................................................................................................... 1

Proper Basis......................................................................................................................................... 5

Administrator’s submissions....................................................................................................... 5
Analysis.......................................................................................................................................... 5
Applicable Principles – Amendment......................................................................................... 8

Amendment Application................................................................................................................ 11

Allegations in paragraphs 4 – 6: Mr Martin and Mr Woods................................................ 12
Allegations in paragraphs 7 – 11: Bethal................................................................................. 12
Allegations in paragraph 12: Corartie (dissolved)................................................................. 13
Allegations in paragraphs 13 – 14: AKV Nominees Pty Ltd (dissolved)........................... 13
Allegations in Part I of FASOC: Monies owed to the plaintiff as beneficiary of the AK Veall Family Trust..................................................................................................................................... 13
A:Allegations concerning approximately $30.5 million: Bethal knowingly concerned in the wrongful conduct, paragraphs 15 – 36............................................................... 13
Plaintiff’s submissions......................................................................................... 15
Administrator’s submissions.............................................................................. 15
Second and third defendants’ submissions...................................................... 16
Analysis................................................................................................................. 16

B:Allegations concerning approximately $23 million: paragraphs 37 – 46............ 19
Plaintiff’s submissions......................................................................................... 20
Second and third defendants’ submissions...................................................... 20
Analysis................................................................................................................ 21

Allegations in Part II of FASOC: Monies owing to the plaintiff as beneficiary paragraphs 47 – 55: Biretta Trust – Triton Energy Shares............................................................................... 23
Plaintiff’s submissions......................................................................................... 23
Second and third defendants’ submissions...................................................... 24
Analysis................................................................................................................. 25

Allegations in Part III of FASOC: Monies owing to the plaintiff as beneficiary of the Auspine Trust: paragraphs 56 – 65............................................................................................................. 27
Plaintiff’s submissions – Allegations in Parts III and IV of FASOC............. 28
Second and third defendants’ submissions...................................................... 29
Analysis................................................................................................................. 30

Allegations in Part IV of FASOC: Monies ($10 million) owing to the deceased / the estate out of the Kim Veall Trust: paragraphs 66 – 71........................................................................ 31
Plaintiff’s submissions......................................................................................... 31
Administrator’s submissions.............................................................................. 32
Second and third defendants’ submissions...................................................... 32
Analysis................................................................................................................. 32

Allegations in Part V of FASOC: Breach of the Keith and Beryl Veall Trust (the plaintiff’s claim as beneficiary) – the benefits bestowed by Bethal on Mr Martin and Mr Woods in breach of fiduciary duties: paragraphs 72 – 81............................................................................... 35
Plaintiff’s submissions......................................................................................... 35
Second and third defendants’ submissions...................................................... 35
Analysis................................................................................................................. 37

Allegations in Part VI of FASOC: Exclusion of the plaintiff and Ms Lodder as capital beneficiaries from of the Keith and Beryl Veall Trust (plaintiff or estate claim): paragraphs 82 – 93 38
Plaintiff’s submissions......................................................................................... 39
Administrator’s submissions.............................................................................. 39
Second and Third Defendant’s submissions.................................................... 40
Analysis................................................................................................................. 41

Allegations in Part VII of FASOC: Removal of Bethal as the Trustee of the Keith and Beryl Veall Trust (plaintiff claim): paragraph 94............................................................................... 45
Allegations in Part VIII of FASOC: Monies owed by Bethal to the estate: paragraphs 95 – 101.............................................................................................................................................. 45
Plaintiff’s submissions......................................................................................... 46
Administrator’s submissions.............................................................................. 48
Second and Third Defendant’s submissions.................................................... 48
Analysis................................................................................................................. 49

Allegations in Part IX of FASOC: Monies owed by Bethal to the estate – income and capital distributions made to the deceased out of the Keith and Beryl Veall Trust : paragraphs 102 – 111........................................................................................................................................ 55
Plaintiff’s submissions......................................................................................... 56
Administrator’s submissions.............................................................................. 57
Second and third defendant’s submissions...................................................... 58
Analysis................................................................................................................. 58

Allegations in Part X of FASOC: Deceased’s sporting trophies: paragraphs 112 – 114... 59
Plaintiff’s submissions......................................................................................... 60
Second and third defendant’s submissions...................................................... 60
Analysis................................................................................................................. 60

Allegations in Part XI of FASOC: Leave to bring proceedings as beneficiary of the estate or various trusts: paragraphs 115 – 124............................................................................................. 61
Plaintiff’s submissions......................................................................................... 62
Administrator’s submissions.............................................................................. 62
Second and third defendant’s submissions...................................................... 64
Analysis................................................................................................................. 65

Joinder Application......................................................................................................................... 65

Harman undertaking....................................................................................................................... 66

Second and third defendants’ submissions............................................................................. 66
Plaintiff’s submissions................................................................................................................ 67
Analysis........................................................................................................................................ 69

Next Steps.......................................................................................................................................... 70

HER HONOUR:

During his long lifetime, the deceased wove a network of family trusts to manage his wealth. Vast sums of money flowed into and around this network. The deceased’s son, the plaintiff, makes allegations of fraud and dishonesty in respect of this network. The independent administrator of the deceased estate has declined to agitate the plaintiff’s claims on these transactions, some more than 25 years old. This ruling determines the plaintiff’s application to join parties to the proceeding, further amend his statement of claim and to act on behalf of the estate.

Summary

The issues in dispute here and the findings follow.

(a) Is there a proper basis for the further amended statement of claim filed on 6 September 2019 (‘the FASOC’)? No.

(b) Should the plaintiff be given leave to amend? No.

(c) Should the plaintiff be given leave to join three additional parties? No.

(d) Should the plaintiff be given leave to proceed as a beneficiary of the deceased estate and certain trusts (and alleged trusts)? No.

(e) Does the Harman undertaking apply? Yes, in respect of documents relied upon that were discovered in other proceedings. No, in respect of documents exhibited to the defendants’ affidavits in this proceeding.

Background

Arthur Keith Veall (‘the deceased’) married twice. The children of the deceased’s first marriage are the plaintiff, Arthur Rowland Veall, and his sister Denise Lodder. The child of the deceased’s second marriage is Kim Louise Veall Biggins (‘Ms Veall’). She is not a party to this proceeding and the plaintiff seeks to join her as the sixth defendant. The deceased’s step-daughter, Lorraine Pennefather, is the third defendant. Ms Pennefather is the daughter of the deceased’s second wife, Beryl Veall.

The proposed fourth and fifth defendants are professional advisers, as discussed further below.

The plaintiff’s application is opposed by Mr Hughes, the first defendant, who is the administrator of the deceased estate (‘the administrator’). It is also opposed by the second and third defendants, being Bethal Nominees Pty Ltd (‘Bethal’) and Ms Pennefather; they are jointly represented.

The deceased died in October 2011, aged 91 years old.

There is a history of litigation regarding the deceased estate. The plaintiff’s counsel made reference to some of this previous litigation, as did his solicitor Ms Katherine Moorhouse Perks, whose affidavit makes selective reference to it.[1] For those reasons, I will briefly address some of that litigation.
[1]Affidavit of Katherine Moorhouse Perks sworn 21 December 2018.

In Veall v Veall,[2] the Court of Appeal held that the deceased lacked testamentary capacity and did not know or approve the last version of his will that he signed in December 2010, less than a year prior to his death. Accordingly, the plaintiff and his wife, Alexis Veall, were unsuccessful in seeking admission of that will to probate. Ms Moorhouse Perks referred to these proceedings in her affidavit. The judgment in those proceedings indicates that she was a witness for the plaintiff and his wife.
[2](2015) 46 VR 123. See also Veall v Veall [2014] VSC 38 (19 February 2014); Veall v Veall (No 2) [2014] VSC 99 (30 April 2014).

The plaintiff initiated another proceeding concerning the deceased estate: Re Veall.[3] In that proceeding, he applied for probate in respect of, alternatively, a 2009 will or a 2010 will. The plaintiff subsequently ceased to propound the 2010 will and consented to orders appointing Mr Hughes as administrator of the deceased estate.[4] Ms Moorhouse Perks acted for the plaintiff in that proceeding.
[3]Proceeding number S PRB 2015 14700.
[4]Re Veall [2016] VSC 232 [11] (McMillan J).

Mr Hughes was appointed as administrator on 20 November 2015.

The plaintiff commenced the current proceeding in the County Court of Victoria on 6 November 2017.[5] The proceeding was transferred to this Court on 16 July 2018 following an application by the administrator. At the time of the initiation and transfer, the plaintiff represented himself. The plaintiff was granted leave to file and serve an amended statement of claim on 14 September 2018 and did so on 25 September 2018 (‘amended statement of claim’).
[5]By writ and statement of claim.

On 27 March 2019, Mr Ian Hone, solicitor, began acting for the plaintiff in this proceeding.[6] Mr Hone had been a witness in the proceeding concerning the deceased’s testamentary capacity discussed above. He was replaced by Ms Moorhouse Perks, who began acting in this proceeding on 3 July 2019.[7]
[6]Notice of Appointment of Legal Practitioner filed that day.
[7]Notice of Change of Solicitor filed that day.

Turning now to the current application. On 5 April 2019, the following orders were made.

1.The Defendants’ summary dismissal and strike-out applications listed for 4 April 2019 be adjourned to a date to be fixed.
2.By 29 April 2019, the Plaintiff must provide a proposed further amended statement of claim (and any amended originating process/Form 5A Writ) (Proposed Pleading) to the Defendants.
3.By 4pm on 13 May 2019, the Defendants must inform the Plaintiff in writing if they (or any of them) oppose the Plaintiff obtaining leave to file and serve the Proposed Pleading (Opposition Notice).
4.If no Defendant serves an Opposition Notice by 4pm on 13 May 2019, then the Plaintiff has leave to file and serve the Proposed Pleading (including any amended originating process/Form 5A Writ), which must be filed and served on or before 20 May 2019.
5.If any Defendant serves an Opposition Notice by 4pm on 13 May 2019, then:
(a)the Plaintiff shall make any application for leave to file and serve the Proposed Pleading by filing and serving a summons and any supporting affidavit material and submissions by not later than 4pm on 27 May 2019;
(b)the Defendants shall file and serve any affidavit material and submissions in opposition by 4pm on 11 June 2019; and
(c)the summons shall be made returnable on a date after 11 June 2019 [sic] determined in consultation with the parties.

6. Costs be reserved.
7. There be liberty to apply.

On 15 July 2019, the plaintiff filed a summons (‘the summons’), seeking, amongst other things, the following orders.

1.The Plaintiff has leave to join each of Gary Albert Martin, John Abberly Woods and Kim Louise Veall as defendants to the proceedings.
2.The Plaintiff has leave to file and serve an amended Form 5A Writ and Statement of Claim in substantially the form of the document exhibited to the affidavit of Arthur Rowland Veall sworn on 3 June 2019 and marked ARV-1.
3.Should the Court deem it appropriate, the plaintiff be given leave to bring proceedings:
a.On behalf of the estate as per paragraph 118 of the proposed amended statement of claim.
b.As beneficiary of the Trusts as per paragraph 121 of the proposed amended statement of claim.

…

On 2 September 2019, Moore J made the following orders.

1. Order 5(a) of the Orders made on 5 April 2019 be amended such that:
a.the time for compliance with the order is retrospectively extended such that the Plaintiff is permitted to make any application for leave to file and serve a proposed further amended statement of claim by filing and serving a summons and any supporting affidavit material by not later than 4.00pm on 23 July 2019;
b.the time for the Plaintiff to file and serve any proposed amended originating process/Form 5A Writ is extended to not later than 4.00pm on 6 September 2019;
c.the time for the Plaintiff to file and serve any submissions is extended to not later than 4.00pm on 18 September 2019.

…

On the orders of Judicial Registrar Englefield made on 12 November 2019, paragraph 2 of the summons was amended to read:

That now for then, the Plaintiff has leave to file and serve an amended statement of claim in the form that was filed on 6 September 2019.

Proper Basis

The plaintiff says that there is a proper basis for the further amended statement of claim (‘FASOC’). There is no proper basis certificate filed by the solicitor because she took the view that it was a proposed statement of claim.

Administrator’s submissions

The FASOC does not engender any confidence that a proper basis exists for the plaintiff’s claims. There is no proper basis certificate. No reasonably competent solicitor could sign one in respect of this pleading. This pleading could not be certified. It is largely incomprehensible.

The plaintiff’s position on the FASOC is now a very different position to that previously taken.[8] They seem to rely on a document which is clearly deficient.
[8]Cf Transcript of Proceeding, Veall v Hughes (Supreme Court of Victoria, S ECI 2018 00730, Englefield JR, 12 November 2019) 26 (M O’Connor).

The administrator deposes that on the matters presently known to him, as there is no proper basis for the claims that the plaintiff seeks to pursue on behalf of the estate (in the FASOC), he has not sought to pursue them.[9] Those claims are hopeless. If the plaintiff continues the litigation, he has an obligation to articulate the claims with precision so that they can be answered with precision.
[9]Affidavit of administrator sworn on 7 October 2019 [8].

Analysis

Section 18 of the Civil Procedure Act 2010 (‘CPA’) requires there to be a proper basis for claims. This obligation applies equally to parties and their legal practitioners.

Overarching obligation—requirement of proper basis
A person to whom the overarching obligations apply must not make any claim or make a response to any claim in a civil proceeding that—
(a)is frivolous; or
(b)is vexatious; or
(c)is an abuse of process; or
(d)does not, on the factual and legal material available to the person at the time of making the claim or responding to the claim, as the case requires, have a proper basis.

Section 42 of the CPA requires certification of a proper basis.

Proper basis certification
(1)A legal practitioner acting for or on behalf of a party to the proceeding must file a proper basis certification which complies with this section in the following circumstances—
(a)on the filing of a party’s first substantive document in a civil proceeding;
(b)on the filing of any subsequent substantive document in a civil proceeding which—
(i)adds or substitutes a party; or
(ii)makes, adds or substitutes a claim or cause of action; or
(iii)makes, adds or substitutes a substantive defence or substantive matter by way of response or reply; or
(iv)makes, adds or substitutes a material allegation denial or non-admission of fact or law; or
(v)makes any significant amendment to a first substantive document or a subsequent substantive document;

(c) as provided for by rules of court;
(d)as directed by the court in any civil proceeding.

(1A)In the case of a civil proceeding which involves allegations of fact, a legal practitioner making a proper basis certification must certify that on the factual and legal material available—
(a)       each allegation of fact in the document has a proper basis;
(b)       each denial in the document has a proper basis;
(c)       there is a proper basis for each non-admission in the document.

…
(4) If a party is not represented by a legal practitioner—
(a)the proper basis certification must be completed personally by that party; and
(b)a reference in this section to “legal practitioner” is to be construed as a reference to that party.

Section 46 of the CPA gives the Court the power to take into account the failure to comply with certification requirements.

Court may take failure to comply into account
A court may take into account any failure by a person to comply with any certification requirement under this Part —
(a) in determining costs in the proceeding generally;
(b)in making any order about the procedural obligations of parties to the civil proceeding;

(c) in making any other order it considers appropriate.

The plaintiff filed a proper basis certificate dated 23 October 2017 when the proceeding was in the County Court. He has not filed any such certificate in this Court either in respect of the amended statement of claim (when he was representing himself) or the FASOC (when he was legally represented). Nor has his solicitor.

The plaintiff’s submission that the proper basis certificate was not filed because the FASOC was merely a ‘proposed’ claim must be rejected. It is inconsistent with the plaintiff’s submissions at a directions hearing prior to this application.[10] Ultimately, the parties agreed leave was required (retrospectively) for the filing of the FASOC. Proper basis certificates should have been filed by the plaintiff and Ms Moorhouse Perks and were not. Their conduct in failing to do so is in breach of the CPA.
[10]Transcript of Proceeding, Veall v Hughes (Supreme Court of Victoria, S ECI 2018 00730, Englefield JR, 12 November 2019) 26, 40–2. See also, paragraphs D–E in Other Matters of the orders made on 12 November 2019.

Given the findings below, it is perhaps unsurprising that the plaintiff and his legal practitioners have not filed a proper basis certificate in this Court. There is no proper basis for the FASOC. The application for amendment and joinder ought never have been made.

Applicable Principles – Amendment

The following principles are applicable to the application for amendment.

Rules 13.02 and 13.10 of the Supreme Court (General Civil Procedure) Rules 2015 (‘the Rules’) are applicable.

Content of pleading
(1) Every pleading shall—
(a)contain in a summary form a statement of all the material facts on which the party relies, but not the evidence by which those facts are to be proved;
(b)where any claim, defence or answer of the party arises by or under any Act, identify the specific provision relied on; and
(c)state specifically any relief or remedy claimed.

(2) A party may, by that party's pleading—
(a)raise a point of law;
(b)plead a conclusion of law if the material facts supporting the conclusion are pleaded.

...
Particulars of pleading
(1)Every pleading shall contain the necessary particulars of any fact or matter pleaded.
(2)Without limiting paragraph (1), particulars shall be given if they are necessary—
(a)       to enable the opposite party to plead;
(b)       to define the questions for trial; or
(c)       to avoid surprise at trial.

(3) Without limiting paragraph (1), every pleading shall contain particulars of any—
(a)misrepresentation, fraud, breach of trust, wilful default or undue influence which is alleged; or
(b)disorder or disability of the mind, malice, fraudulent intention or other condition of the mind, including knowledge or notice, which is alleged.

...

Rule 36.01 of the Rules is applicable.

(1) For the purpose of—
(a)determining the real question in controversy between the parties to any proceeding; or
(b)correcting any defect or error in any proceeding; or
(c)avoiding multiplicity of proceedings—

the Court may, at any stage order that any document in the proceeding be amended or that any party have leave to amend any document in the proceeding.

(2)       In this Order document includes—
(a)       originating process;
(b)       an indorsement of claim on originating process; and
(c)       a pleading.
(3)An indorsement of claim or pleading may be amended under paragraph (1) notwithstanding that the effect is to add or substitute a cause of action arising after the commencement of the proceeding.

…

In Mandie v Memart Nominees Pty Ltd,[11] the Court of Appeal outlined applicable principles in respect of amendment, as follows.[12]

The [CPA] has changed the litigation landscape. One of the main purposes of that legislation is to reform practice and procedure in civil proceedings, including by reforming the law relating to summary judgment. More than ever, the focus is now pointedly on efficiency and cost-effectiveness, albeit that they are not the only, nor the predominant, considerations. One consequence is that amendments that might have been permitted previously may no longer be allowed. As such, the older authorities that preceded the [CPA] which set out when a pleading amendment will be allowed must be approached with caution.
The power conferred on the court by s 63(1) of the [CPA] to dispose of claims before a trial facilitates one of the stated purposes of the Act. Subject to limited exceptions, if a claim or defence has no real prospect of success, then summary judgment may be given. It must follow that a proposed pleading amendment raising a claim or defence of that type should not be permitted. To grant leave in that circumstance would be futile as the claim or defence would be susceptible to a summary judgment application. This principle facilitates the administration of justice, as it enables courts to prevent claims or defences being pleaded where they will inevitably fail and thus avoid the cost and inconvenience that would otherwise arise if those claims or defences were permitted to be made only to be the subject of summary judgment subsequently.

[11][2016] VSCA 4.

[12]Ibid [42]–[43] (citations omitted) (emphasis added).

Elliott J summarised some of the applicable principles in Cargill Australia Ltd v Viterra Malt Pty Ltd (No 10),[13] as follows.[14]

In deciding whether to grant leave to a party to amend its pleadings, the court must consider whether the proposed amendments facilitate the identification of the real issues in dispute and the just resolution of the proceeding.
The power to grant leave to a party to amend its pleading to raise an arguable issue is a discretionary power. There is no right or entitlement for a party to amend its pleading subject to the payment of costs referable to the amendment. The nature and importance of the proposed amendments must be considered. This factor must be weighed against case management considerations such as cost, delay and the potential for unfair prejudice to other parties to the proceeding, the court and other litigants.

[13][2018] VSC 439.

[14]Ibid [17]–[18] (citations omitted) (emphasis added).

An issue in dispute is whether amendments pleading dishonesty should be allowed. After a review of applicable authorities, Sifris J (as His Honour then was) summarised the requirements for pleading dishonesty, as follows.[15]

Accordingly, in my opinion, if sufficient facts and circumstances are pleaded (with sufficient particularity) which if established by the evidence, might, or are capable of, supporting an inference of specific dishonest conduct, the pleading will be sufficient. It is not necessary to plead evidence or a path of reasoning. Of course the claim may fail if the facts are not made out, or other lesser remedies may be established, such as negligence. However, if the facts pleaded are only consistent with such lesser remedy, the pleading of dishonesty will not be sufficient. However, if the facts, circumstances and relevant context as pleaded might, if established by the evidence, rise to the level of dishonesty the pleading is sufficient whatever the result. In my view there is nothing in the authorities referred to that suggests otherwise.

[15]Finance & Guarantee Company Pty Ltd v Auswild (No 2) [2016] VSC 559 [40] (emphasis added).

Turning now to the application of these principles.

Amendment Application

It is unnecessary to recite all of the written and oral submissions. Key submissions are outlined below. For ease of reading, references to authorities are not duplicated but have been considered and, where necessary, reference is made to them in the Analysis sections which follow.

The FASOC is a complete rewrite of the amended statement of claim. Accordingly, and given the parties’ submissions, it is necessary to address each part of it. Each part is analysed in turn below. At the outset though, some general submissions of the parties are noted.

The plaintiff says that the FASOC contains new causes of action. There are new allegations of fact. The FASOC can stand on its own and the various affidavits filed are not required to understand it. He says the administrator should simply abide by the decision of the Court.

The administrator says that he takes an active interest in this application given that the plaintiff pleads that any loss is as a result of the administrator’s neglect and seeks damages against the administrator. There are also reputational issues for the administrator as he is a solicitor.

The administrator says that none of the allegations of fraud in the proceeding are properly pleaded or particularised. Fraud must be pleaded with full particulars. The principal allegation against the administrator is that he failed to well and truly administer the estate and/or act in good faith. There are no proper particulars of the allegations.

The second and third defendants submit that the FASOC is deficient, especially in relation to the allegations of knowledge and dishonesty and that accordingly leave should not be granted. Further, the plaintiff should not be given any more opportunities to file further versions of the statement of claim. He has had sufficient opportunities and caused the other parties to incur unnecessary costs. The matter should proceed to a hearing of the defendants’ summary judgment applications.

Turning now to the allegations in the FASOC and whether leave should be granted to amend.

Allegations in paragraphs 4 – 6: Mr Martin and Mr Woods

It is alleged that Gary Martin, a partner of Haines Norton and the proposed fourth defendant, was an accountant and general business consultant to the deceased, and to Corartie (AKV) Pty Ltd (‘Corartie’), Bethal, and AKV Nominees Pty Ltd (‘AKV Nominees’). Further, that he is a director and 50% shareholder in Bethal.

It is alleged that John Woods, the proposed fifth defendant, was a trusted business adviser to the deceased and is a director of Bethal.

Allegations in paragraphs 7 – 11: Bethal

It is alleged that Bethal was a trustee company with respect to the deceased’s wealth and assets, and trustee of the following: Kim Veall Trust until its vesting in 2008, Arthur Keith Veall Trust until its vesting in 1990, and Keith and Beryl Veall Trust. As at 30 June 1986, it held funds in trust of almost $43 million.

As to the office holders and members of Bethal, it is alleged that:

(a) for several months in 1989, Mr Martin was the company secretary, but otherwise for the period 1980 to 1995, the late Richard Holding was the company secretary;

(b) between 1988 and 1991, the directors of Bethal were Mr Holding, John Hutchins (deceased), and Ms Pennefather, and in an overlapping period of 1989 to 1993 they were members; and

(c) Ms Veall and Mr Martin are current members of Bethal.

It is alleged that between 1988 and 1991, Haines Norton was the auditor and accountant of Bethal.

Allegations in paragraph 12: Corartie (dissolved)

It is alleged that Corartie was a significant investment company for the deceased and as at 1985, held over $31 million in assets. It is alleged that in the period December 1985 – July 1989 its members voluntarily appointed Mr Hutchins and Peter Vince as liquidators. The company was dissolved in July 1989.

Allegations in paragraphs 13 – 14: AKV Nominees Pty Ltd (dissolved)[16]

[16]There appears to be a typographical error in the FASOC as the title to the paragraphs refers to AK Veall Nominees Pty Ltd but the substance refers to AKV Nominees Pty Ltd.

It is alleged that AKV Nominees was the trustee of the AK Veall Family Trust and the owner of all shares in Corartie AKV (Nominees) Pty Ltd. (This appears to be a typographical error in the pleadings and a reference to Corartie.) It is alleged that it was dissolved in 1993. It is alleged that at the time of deregistration, the directors were Ms Pennefather, Mr Holding, and Mr Hutchins. It is alleged that the latter two were non-beneficial shareholders together with Donald Norris (deceased).

It is alleged that Mr Martin was the auditor and accountant of AK Veall Nominees and its registered office was at Haines Norton.

Allegations in Part I of FASOC: Monies owed to the plaintiff as beneficiary of the AK Veall Family Trust
A: Allegations concerning approximately $30.5 million: Bethal knowingly concerned in the wrongful conduct, paragraphs 15 – 36

It is alleged that the AK Veall Family Trust deed was due to vest in June 2014, and the beneficiaries were the plaintiff, Ms Veall and Ms Lodder. It is alleged that AKV Nominees owed them fiduciary duties.

It is alleged that the final distribution from Corartie of approximately $29.2 million was to have been received, or was received, by AKV Nominees as trustee of the AK Veall Family Trust during the 1988/89 financial year. It was to be held on trust for the beneficiaries. It is alleged that AKV Nominees had approximately $30.5 million in capital reserves that year.

It is alleged that in January 1989, Bethal was indebted to Corartie in the amount of approximately $30.5 million. A cheque from Bethal in favour of Corartie was written in that amount and endorsed by AKV Nominees.

It is alleged that between 1990 and its dissolution in 1993, AKV Nominees, dishonestly, fraudulently and in bad faith to its beneficiaries: concealed the existence of the AK Veall Family Trust and the receipt of approximately $29.2 million from the plaintiff; concealed that the plaintiff was a beneficiary of the AK Veall Family Trust until the service of the affidavit of Ms Pennefather sworn on 28 November 2018 (‘Pennefather 28 November 2018 affidavit’); failed to account for it or distribute it to the beneficiaries and instead disbursed the funds to a third party knowing they were trust funds; vested the trust early and without notice to the beneficiaries; and applied for deregistration of the AK Veall Family Trust in January 1993 on the ground it had no assets. This was a breach of AKV Nominees’ fiduciary duties.

It is alleged that Bethal knowingly assisted AKV Nominees in the dishonest and fraudulent design with respect to the $29.2 million. It is alleged that Bethal is the alter ego of AKV Nominees and the assumed constructive trustee for the approximate $30.5 million (referred to above). It is alleged that Bethal either has a transmitted trustee or fiduciary obligation which it breached on its own or jointly with AKV Nominees.

Alternatively, it is alleged that the cheque for $30.5 million was never banked and Bethal retained the $30.5 million. It retains the $30.5 million on trust for the beneficiaries of the AK Veall Family Trust. As a trustee company of the deceased’s wealth, Bethal assumed the role of trustee.

By reason of her directorship of Bethal and AKV Nominees, it is alleged that Ms Pennefather knowingly assisted in the dishonest and fraudulent design with respect to the $29.2 million.

By reason of his advisory positions with the deceased, Corartie, Bethal and AKV Nominees, and being company secretary of Bethal in 1989, it is alleged that Mr Martin knowingly assisted in the dishonest and fraudulent design with respect to the $29.2 million.

The plaintiff seeks from Bethal, Ms Pennefather and/or Mr Martin, one third of the $30.5 million plus interest or an account of profits with respect to that amount.

Plaintiff’s submissions

It is clear that Bethal owed Corartie $30 million in 1989: exhibit ‘ARV-8’ to the plaintiff’s affidavit sworn 3 June 2019 (‘plaintiff’s 3 June 2019 affidavit’). A letter from the liquidator to Ms Moorhouse Perks dated 29 June 2016 refers to the cheque written from Bethal, it was then indorsed over to AKV Nominees and distributed to them: exhibit ‘ARV-9’ to the plaintiff’s 3 June 2019 affidavit. Reliance is placed upon the AK Veall Family Trust deed, the return from the liquidator dated 10 April 1989 relating to the final meeting of Corartie and the liquidator’s accounts.

The allegation is that Bethal assisted in the dishonesty. The directors must have been aware of the wrongful retention of monies. Bethal is the alter ego of AKV Nominees as all directors are the same. They have full knowledge of what is occurring between the two companies. Bethal’s fraudulent breach of trust with particulars is pleaded: [22], [24]–[26], [29], [31]–[33] of the FASOC. So too is the wrongful conduct by Mr Martin and Ms Pennefather: [34]–[35].

Alternatively, the claim against Bethal is made not in fraud but as a beneficiary to recover trust property with particulars at [32]–[33], [36(a)].

In the circumstances, Bethal assumed the role of trustee and retained $30.6 million on trust. An institutional constructive trust is pleaded relying on Nolan v Nolan.[17]

Administrator’s submissions

[17][2004] VSCA 109 (Ormiston, Chernov and Eames JJA).

There is a reference to “Bethal as trustee company” throughout this pleading. It is vague and ambiguous. Bethal is trustee of three trusts that are the subject of the pleading. If a trustee company assumes a role, it assumes it not as a constructive trustee, but as an express trustee. It does not make sense.

Second and third defendants’ submissions

Various allegations of fraud are made against AKV Nominees, a deregistered company, but they are bare assertions without any details. For instance, the allegation the company disbursed funds to a third party knowing the funds to be trust funds. The third party is not identified, nor is the date of the purported disbursement or the means of purported disbursement.

The particulars contend the directors of Bethal “must have been aware” that the funds were wrongly disbursed to an unidentified third party or wrongfully retained by Bethal in an unspecified manner and in an unspecified place. The facts which establish knowledge are not pleaded.

Bethal is alleged to be the ‘alter ego’ of the former trustee. No material facts or particulars are given to explain how this is so, despite alleging this as part of Bethal’s alleged fraud. The same issue arises with the claim against Ms Pennefather. At its highest it can be said to arise from simply being a director of Bethal and AKV Nominees and a ‘failure to question’ or ‘failure to… notify’ about certain things. Those matters are incapable of establishing involvement in any fraud by Ms Pennefather or any knowledge of fraud. Similar issues arise with the claim against Mr Martin which merely point to the services he provided to the deceased and because he was an accountant and secretary of Bethal. No fraud can be established from those particulars. Both Mr Martin and Ms Pennefather deny any such fraud.

Analysis

The amendment is disallowed for three reasons.

Firstly, there are insufficient facts and circumstances pleaded which, if established by the evidence, might support an inference of specific dishonest conduct. The pleading does not comply with rr 13.02 and 13.10. It places the defendants in a position where they must guess at how those inferences must be drawn. It is not capable of proper response. Drilling down:

(a) the characterisation of Bethal is confusing – it is alleged to be a trustee company for the deceased’s wealth[18] and Corartie is alleged to have been a significant investment company for the deceased.[19] Bethal is also alleged to be an assumed constructive trustee and an ‘alter ego’ of AKV Nominees.[20] There is then the allegation of transmitted trustee and/or fiduciary obligations. The facts pleaded are not capable of supporting the allegation that Bethal is a constructive trustee in respect of the Corartie funds.
[18]FASOC [7(b)], [31].
[19]Ibid [12(c)].
[20]Ibid [25].

(b) there are insufficient material facts pleaded to support the allegation of dishonesty against Bethal. There are allegations of dishonesty against AKV Nominees, a deregistered company. It is not a party to these proceedings. The allegations of ‘dishonest and fraudulent design’ against Bethal hinge on the conclusion that it ‘must have been aware’ of the dishonesty of AKV Nominees by reason of common directorships between Bethal and AKV Nominees and being the ‘alter ego’ of AKV Nominees. The material facts to support this conclusion are not pleaded. Further, it is not evident how the indorsement of the cheque and alleged failure by AKV Nominees to bank it constitutes fraud or a breach of fiduciary duties.

(c) there are insufficient material facts pleaded to support the allegation of dishonesty against Ms Pennefather – dishonesty cannot be inferred simply because of her directorship and alleged failure to question.

(d) there are insufficient material facts pleaded to support the allegation of dishonesty against Mr Martin – dishonesty cannot be inferred simply because of his offices and advisory position.

Secondly, it would be futile to allow the pleading because it has no real prospect of success. A conclusion has been reached by the plaintiff that the $30.6 million cheque from Bethal in favour of Corartie and endorsed by AKV Nominees should have been banked for payment by AKV Nominees, and then distributed to the beneficiaries of the AK Veall Family Trust prior to its vesting. The plaintiff relies on the AK Veall Family Trust financial statement for the year ended 30 June 1989 and Corartie’s account of payments and the liquidator’s form 106 on the statement of position of winding up. More is needed to establish fraud: dishonesty. There is no evidence of any dishonesty in respect of the plaintiff’s claim. The documents show debt and the forgiving of debt. The movement of monies between the entities is unsurprising. The deceased was clearly concerned to minimise his taxation obligations – he sought and received advice about that. For instance, an advice dated 5 August 1985 is directed at what steps the deceased and the plaintiff need to take to ensure that they cease to be residents of Australia for the purpose of the taxation legislation.[21]
[21]Exhibit ‘LEP-3’ to the Pennefather 28 November 2018 affidavit, 34–5.

Although this claim is made separately, it overlaps with that in Part B, which is discussed next. Further financial documents are analysed in Part B.

While the plaintiff is named as one of the beneficiaries to the AK Veall Family Trust, cls 5 – 11 and 15 of the deed give the trustees wide and discretionary powers including with respect to loans and distributions.[22]
[22]AK Veall Family Trust Deed of Settlement dated 26 June 1974 forms Exhibit ‘LEP-2’ to the Pennefather 28 November 2018 affidavit, 7.

As to the allegations of concealment, even if they were proven, they have no real prospect of establishing a cause of action in respect of the relief sought.

Thirdly, the plaintiff seeks leave as a beneficiary to bring his claims in relation to the AK Veall Family Trust. As discussed further below, such leave should not be given.

B: Allegations concerning approximately $23 million: paragraphs 37 – 46

It is alleged that between 1989 and 1992, AKV Nominees (as trustee for the AK Veall Family Trust) was owed approximately $23 million by Bethal. On or around 31 July 1992, AKV Nominees and Bethal were aware that the amount was to be assigned to the beneficiaries of the AK Veall Family Trust in equal shares. It is alleged that AKV Nominees, dishonestly, fraudulently and in bad faith to its beneficiaries: concealed the existence of the AK Veall Family Trust and the proposed assignment to the beneficiaries; concealed that the plaintiff was a beneficiary of the AK Veall Family Trust until the service of the Pennefather 28 November 2018 affidavit; failed to account for it or distribute it to the beneficiaries; vested the trust early and without notice to the beneficiaries; and applied for deregistration of the AK Veall Family Trust in January 1993 on the ground it had no assets. This was a breach of AKV Nominees’ fiduciary duties.

It is alleged that Bethal knowingly assisted AKV Nominees in the dishonest and fraudulent design with respect to the $23 million. It is alleged that Bethal is the alter ego of AKV Nominees and the assumed constructive trustee for the $23 million. It is alleged that Bethal either has a transmitted trustee or fiduciary obligation which it breached on its own or jointly with AKV Nominees.

By reason of her directorships discussed above, it is alleged that Ms Pennefather knowingly assisted in the dishonest and fraudulent design with respect to the $23 million.

By reason of his advisory and company secretary positions discussed above, it is alleged that Mr Martin knowingly assisted in the dishonest and fraudulent design with respect to the $23 million.

The plaintiff seeks from Bethal, Ms Pennefather and/or Mr Martin, one third of the $23 million plus interest or an account of profits with respect to that amount.

Plaintiff’s submissions

There was a plan to assign approximately $23 million to the plaintiff, Ms Lodder and Ms Veall as beneficiaries of the AK Veall Family Trust in equal shares. There is a document of notice of intention to register an assignment or transfer of book debt dated 31 July 1992. This shows that they were owed certain monies. The assignment was never registered. The monies were not distributed to the beneficiaries and the AK Veall Family Trust deregistered. The existence of the AK Veall Family Trust was concealed. The particulars of fraud by Bethal, Mr Martin and Ms Pennefather are pleaded and particularised at [38]–[41], [44]–[45].

Alternatively, the claim against Bethal is made not in fraud but as a beneficiary to recover trust property with particulars at [38]–[41].

Bethal has not provided any answer or explanation with respect to returning the $23 million although they are liable to return trust property. They have not propounded any reason for the claim to recover the trust property not proceeding.

Second and third defendants’ submissions

The deficiencies in the pleading are the same as with the $30 million claim in respect of the AK Veall Family Trust, as is the lack of evidence of fraud.

It is plain from the 30 June 1989 financial accounts of the AK Veall Family Trust that this $23 million claim is double counting part of the $30 million claim. The plaintiff is claiming the same amount twice dressed up in a different cloak. The documents that do exist suggest the plan was for this $23 million loan to be forgiven as part of the winding up of the AK Veall Family Trust in the early 1990s: letter dated 9 April 1992 from Mr Hutchins and the assignment of debt document. The letter concerns the winding up and release of the trust for the $23 million debt. It is consistent with the other documents and is signed. A memo dated 29 April 1992 refers to the need to explain the proposal to the deceased with a view to completion by 30 June 1992.[23] There is also a notice of intention to register an assignment of transfer of the book debt that is a sealed document.
[23]Exhibit ‘LEP-3’ to the Pennefather 28 November 2018 affidavit, 115.

The AK Veall Family Trust balance sheet as at 30 June 1988 contains provision for loss on the loan.[24] The documents suggest this loan amount was owed by Bethal as trustee of the Kim Veall Trust, a trust that vested in 2008. The 30 June 1989 accounts refer to the $23 million loan (note 3, receivables).[25] When added to the unsecured loan, it adds up to $30 million. The plaintiff seems to have done a double accounting on the claim made. There is provision for loss on the $23 million loan. There are unsigned minutes of a meeting of directors of Bethal on 23 June 1989.[26] They record a resolution that assets be approved and distributed.
[24]Ibid 81.
[25]Ibid 96.
[26]Ibid 103.

There is a deed of assignment and forgiveness which states at cl 4 that the assignees forgive the debt.[27] Clause 6.3 is a handwritten assignment of the distribution of debt signed by Mr Hutchins, a director of the company, on the company seal register.
[27]Ibid 106.

The AK Veall Family Trust accounts refer in cl 1 to assets as at 30 June 1991.[28] Clause 4(a) states that the trustee formally forgives the Kim Veall Trust loan. Clause 4(d) states the trustees will bring forward distribution and formally wind up the trust.[29]
[28]Ibid 113.
[29]Ibid 114.

The plaintiff appears to accept that he has no standing to bring the claim.

Analysis

The amendment is disallowed for three reasons.

Firstly, there are insufficient facts and circumstances pleaded which, if established by the evidence, might support an inference of specific dishonest conduct. The same analysis applies as above. Here, it is not evident how the non-distribution of monies to the plaintiff constitutes fraud or a breach of fiduciary duties.

Secondly, it would be futile to allow the pleading because it has no real prospect of success. In support of his conclusion that $23 million should have been distributed to him and other beneficiaries, the plaintiff relies on a notice of intention to register an assignment or transfer of book debt dated 31 July 1992.[30] It states that AKV Nominees gives notice that on 19 June 1992 it made an assignment of the whole of the book debt due to it by Bethal, approximately $23 million, to the plaintiff, Ms Lodder and Ms Veall in full satisfaction of all debts owed by the AK Veall Family Trust to them. It is stamped with the company seal and signed by Mr Holding, director. Minutes of a director meeting of Bethal on the same date resolve approval be given to the affixing of the company seal on the deed of assignment of debt dated that day.[31] The minutes are signed by Mr Holding, Chairman. There is a handwritten note on the Bethal seal register signed by “RH” dated 22 June 1992 referring to the plan to reassigning and distribution of debt.[32] A signed letter dated 9 April 1992 from accountant Mr Hutchins refers to winding up the AK Veall Family Trust and releasing the Kim Veall Trust of a debt in the amount of approximately $23 million debt (‘the 9 April 1992 letter’).[33] As the defendants say, the financial documents exhibited suggest the amount was owed by Bethal as trustee of the Kim Veall Trust and the AK Veall Family Trust forgave that loan. The same analysis applies as above: there is no evidence of any dishonesty and the concealment allegations do not take the matter further.
[30]Ibid 116.
[31]Exhibit ‘AKV- 18‘ to the plaintiff’s affidavit sworn 3 June 2019 (‘plaintiff’s 3 June 2019 affidavit’), 158.
[32]Exhibit ‘LEP-3’ to the Pennefather 28 November 2018 affidavit, 109.
[33]Ibid 110. The plaintiff founds his Biretta Trust claim on this document, as discussed below.

Thirdly, the plaintiff seeks leave as a beneficiary to bring his claims in relation to the AK Veall Family Trust. As discussed further below, such leave should not be given.

Allegations in Part II of FASOC: Monies owing to the plaintiff as beneficiary paragraphs 47 – 55: Biretta Trust – Triton Energy Shares

It is alleged that in mid-1990, either Biretta Inc Co. or the Swiss Banking Corporation, held 388,676 shares in Triton Energy (a company) on trust for the plaintiff, Ms Lodder and Ms Veall (‘the Biretta beneficiaries’). It is alleged that at that time, Bethal instructed the shares be sold and received proceeds of the share sale in the amount of approximately $3.9 million. It is alleged that Bethal was aware the proceeds were to be distributed to the Biretta beneficiaries and held the monies on constructive trust for them. It is alleged that Bethal dishonestly, fraudulently and in bad faith to its beneficiaries: concealed the existence of the Biretta Trust and receipt of the share sale proceeds; concealed that the plaintiff was a beneficiary of the Biretta Trust until the service of the Pennefather 28 November 2018 affidavit; failed to account for it or advise the beneficiaries it held the monies on trust for them. This was a breach of Bethal’s fiduciary duties.

By reason of her directorships discussed above, it is alleged that Ms Pennefather knowingly assisted in the dishonest and fraudulent design with respect to the share sale proceeds.

By reason of his advisory and company secretary positions discussed above, it is alleged that Mr Martin knowingly assisted in the dishonest and fraudulent design with respect to the share sale proceeds.

The plaintiff seeks from Bethal, Ms Pennefather and/or Mr Martin, half of the share proceeds of $3.9 million plus interest or an account of profits with respect to that amount.

Plaintiff’s submissions

The Biretta Trust was not disbursed to the known beneficiaries. Its existence was concealed by Bethal until a memorandum was said to have been discovered in an old drum in September 2018. The memorandum is particularised at [47] and relied upon with respect to the Triton Energy shares being held 7/14 for the benefit of the plaintiff.

Bethal knowingly received the Biretta Trust monies. As a trustee it is liable to return trust property however it provides no answer or explanation with respect to returning the $3.9 million in trust property.

The plaintiff deposes as to the missing Triton funds in his affidavit. Mr Martin denies any fraud in his affidavit. He was the accountant at the time and had direct knowledge of these matters yet provides a vague, hearsay and inadequate explanation of what happened to ‘most of the funds’.

The allegations of fraud by Bethal, Mr Martin and Ms Pennefather are pleaded with full particulars at [51]–[52], [55] and [A(c)].

Alternatively, the claim against Bethal is made not in fraud but as a beneficiary to recover trust property with particulars at [51], [55(a)] and [A(c)].

Second and third defendants’ submissions

The bare assertion of Bethal dishonestly and fraudulently concealing facts from the plaintiff is without any detailed material or facts or particulars to explain or support it. Similarly the claims that Ms Pennefather and Mr Martin were involved in the alleged fraud is also devoid of any material facts or particulars in support. Being a director of a company alone is hardly sufficient to establish involvement in a serious alleged fraud against that person. In respect of Mr Martin, the particulars are restricted, predominantly to simply having provided past accounting and company secretarial services. Those particulars do not establish involvement in any alleged fraud. The plaintiff’s affidavit in support of his application contains no evidence of any involvement by Ms Pennefather and Mr Martin in any fraud relating to the Triton shares and they both deny it.

The reference in the pleading to other parts of it do not appear to relate to the allegation but other allegations. How can a claim regarding one trust establish fraud in another?

It is unclear whether the plaintiff is seeking monies for himself or the beneficiaries. It is impossible to tell because they do not have a trust deed for the Biretta trust.

Further, a finding of fraud is a finding of seriously wrong conduct and will not be made lightly. Saying that particulars will be provided after discovery is inadequate to make a serious allegation of fraud against multiple persons. It concedes the plaintiff is unable to provide full particulars at the time of pleading. It is apparent from the plaintiff’s evidence and pleading that he has no real personal knowledge of any alleged fraud surrounding the Triton Energy shares.

Mr Martin deposes that the Triton share certificates were, in fact, held as security by the Swiss Bank Corporation for a guarantee that the deceased’s advisor had given, and the Bank called upon that guarantee. Supporting documentation supports that. There is no proper basis for the claim.

Analysis

The amendment is disallowed for three reasons.

Firstly, there are insufficient facts and circumstances pleaded which, if established by the evidence, might support an inference of specific dishonest conduct. The same analysis applies as above. Here, is not evident how receipt of share sale proceeds constitutes fraud or a breach of fiduciary duties.

Secondly, it would be futile to allow the pleading because it has no real prospect of success. A conclusion has been reached by the plaintiff that the share sale proceeds should have been distributed to him (and others) on the basis of several documents addressed below.[34]
[34]As discussed below, the plaintiff does not have leave to rely on certain documents covered by the Harman undertaking.

A facsimile memorandum dated 6 June 1990 from the deceased (and signed on his behalf) to Brierley Investments offers 388,676 Triton Energy shares for sale.[35] Another facsimile memorandum of the same date from Mr Hutchins to Swiss Auditing and Fiduciary Company refers to the deceased and his wife attempting several telephone calls without success concerning the sale and concludes that the sale offer has now been accepted.[36] A further facsimile memorandum of that date from Swiss Auditing and Fiduciary Company asks the deceased to confirm directly the sale of the shares and states that there is only 357, 249 shares and the price will be US $3,929,739.[37]
[35]Exhibit ‘ARV-19’ to the plaintiff’s 3 June 2019 affidavit, 160.
[36]Ibid 161.
[37]Ibid 162.

Almost two years later, the 9 April 1992 letter (referred to above with respect to other allegations) states the following:

I also enclose some notes on Biretta Inc. Co. which summarised mean that the income of this Company was not subject to Australian tax for the 1989 and 1990 years and that on the basis that the dividends on the Triton shares transferred to Biretta by Bethal have been returned in all years as income of Bethal, that there is no tax problem in the 1991 and 1992 years.

An unsigned, perhaps draft account for the Biretta Trust for years ending 1989 and 1990, states that for the financial years 1991 and 1992 the following is assumed:[38]

That [the plaintiff, Ms Veall and Ms Lodder] as the nominated beneficiaries of the Trust are “attributable tax payers” for the purposes of Part X. [sic] Alternatively perhaps the [deceased and/or his wife Beryl] as the real “controller” is the attributable taxpayer – supported by the fact that the funds were remitted to their account with Bethal and the trust wound up on their instructions.

[38]Exhibit ‘LEP-3’ to the Pennefather 28 November 2018 affidavit, 111 [2(b)].

The same document, after setting out the potential taxable income to the plaintiff, Ms Veall and Ms Lodder, states:[39]

Alternatively, if it is to be considered that the 255,242 Triton shares transferred to the company on 1.9.88 were always the property of Bethal, the dividends from those shares would have been included in Bethal’s income as follows…
This would leave a loss of $US9,076 to be attributed to the beneficiaries in the 1991 year with no tax payable.

[39]Ibid 112 [5]–[6].

The documents do not support the allegations of dishonesty against Bethal. In respect of the allegations against Ms Pennefather and Mr Martin, the same analysis applies as above. There is no real prospect of the claim against them succeeding.

Thirdly, the plaintiff seeks leave as a beneficiary to bring his claims in relation to the AK Veall Family Trust. As discussed further below, such leave should not be given.

Allegations in Part III of FASOC: Monies owing to the plaintiff as beneficiary of the Auspine Trust: paragraphs 56 – 65

It is alleged that Corartie purchased shares in Auspine, an ASX listed company subsequently known as Gunns Limited, in the 1970s. It is alleged that by June 1984, it held 15% of the issued shares. It is alleged that in 1985 Corartie transferred those shares to Bethal without any proper consideration and to be held on trust for the following beneficiaries: the plaintiff, Ms Lodder and Ms Veall in equal shares. Upon transfer, Bethal then held those shares on constructive trust for the beneficiaries in equal shares (‘the Auspine Shares Trust’).

In June 2007, Bethal sold the Auspine shares and received sale proceeds of approximately $36 million. Out of the share sale proceeds, it: purchased Qantas shares for $557,000, placed $5.45 million in a term deposit, and created three accounts of $10 million for each of the beneficiaries. In or around May 2008, the deceased gave an oral instruction to Mr Woods and Mr Martin to disburse $10 million to each of the beneficiaries.

It is alleged that Bethal dishonestly, fraudulently and in bad faith to its beneficiaries (other than Ms Veall): concealed the existence of the Auspine Shares Trust and receipt of the share sale proceeds; concealed that the plaintiff was a beneficiary of the Auspine Trust until the service of the Pennefather 28 November 2018 affidavit; failed to account for it or distribute it to the beneficiaries (other than Ms Veall) and disbursed the funds to a third party. It is alleged that most of the funds were disbursed to Ms Veall and her related entities. This was a breach of Bethal’s fiduciary duties.

It is alleged that Ms Veall, Ms Pennefather, Mr Martin and Mr Woods assisted in the dishonest and fraudulent design with respect to the share sale proceeds. The plaintiff seeks from them $10 million plus interest, $2 million plus interest and an account of profits on the share sale proceeds.

Plaintiff’s submissions – Allegations in Parts III and IV of FASOC

The Auspine shares, which were originally owned by Corartie, were transferred without any adequate consideration. The shares were sold and some of the monies placed in term deposit. The deceased instructed Bethal to disburse $10 million of the share proceeds to the plaintiff, Ms Lodder and Ms Veall. Those monies were held on trust for them. Contrary to the deceased’s instructions, Bethal did not disburse the $10 million to the plaintiff, Ms Lodder and Ms Veall.

Out of $36 million in Auspine shares that Bethal were instructed to divide, $10 million was sent to the Kim Veall Trust to be held on constructive trust for the deceased. What happened to it? It is not known. Some money was properly disbursed, for instance to pay for real estate for Ms Lodder. $2.5 million went to the gifting reserve.

The plaintiff deposes to the missing Auspine share funds in his affidavit and the deceased’s instructions and intention for the shares to be distributed evenly to the beneficiaries, which were instructions Bethal disobeyed. Mr Martin denies this. His evidence will be a matter of contested evidence at trial.

Bethal as trustee is liable to return the trust property but simply provides no answer or explanation with respect to returning the $36 million. Its fraudulent breach of trust, and knowing concern in the wrongful conduct by Mr Martin and Ms Pennefather, is pleaded with particulars at [59]–[64]. Alternatively, the claim against Bethal is made not in fraud but as a beneficiary to recover trust property with particulars at [63(e), (f)], [65] and [B(a)].

The accounts for the period from 2008 – 2002 were done in two tranches, and it was the first time any accounting was done for the existence of these funds. The accounts were not done until mid-2012. The accounts for years 2010 and 2011 remain unsigned. There was dishonest accounting at a time when the deceased was elderly and in frail health.

Ms Veall and the directors participated in the dishonest and fraudulent design with respect to the share sale proceeds. The plaintiff seeks that they return the $10 million in trust funds.

Second and third defendants’ submissions

There is no documentary evidence filed in support of the existence of any Auspine Trust. It is alleged that the Auspine shares were held by Bethal on the understanding they were held on trust. Whose understanding? What are the facts that would establish the understanding? The third party referred to in [63(e)] is not identified, nor are material facts or the related entities to which reference is made.

There are no details as to what Bethal is supposed to have done, how it is supposed to have taken ‘advantage of’ the deceased, and where these purportedly misappropriated funds are supposed to have gone.

There are serious allegations made of fraud against multiple individuals (including Ms Veall, Ms Pennefather and Mr Martin) but not a single fact is pleaded to establish fraud. The only details given are that they are supposed to have not disbursed funds to the deceased and are supposed to have retained control of the funds and used them for their benefit. No details are given of the allegations including how and when those individuals are supposed to have retained these funds and how and when they are supposed to have used them ‘for their benefit’. Bethal and the individuals deny fraud.

Further, Mr Martin and Mr Woods deny that any oral instructions were given to them by the deceased to disburse $10 million to each of the deceased’s children, including the plaintiff. At any rate, the deceased was not the trustee of the Kim Veall Trust.

The plaintiff appears to accept that he would have no standing to bring this claim without the Court’s leave.

Analysis

The amendment is disallowed for three reasons.

Firstly, there are insufficient facts and circumstances pleaded which, if established by the evidence, might support an inference of specific dishonest conduct. The same analysis applies as above. Here, is not evident how receipt of Bethal’s receipt of the Auspine share transfer from Corartie and then receipt of proceeds from the sale of those shares constitutes fraud or a breach of fiduciary duties.

Secondly, it would be futile to allow the pleading because it has no real prospect of success. A conclusion has been reached by the plaintiff that the share sale proceeds should have been distributed to him (and others) on the basis of an alleged instruction from the deceased to disburse the funds and on the basis of several documents, which I shall now address.

The plaintiff deposes as to the creation of three trust accounts with deposits of $10 million each, funded from the share sales, for him and two of his siblings; further:[40]

My father instructed directors of Bethal being Mr Woods and Mr Martin in May 2008 and before to distribute the 10 million to each of the Veall children.
Bethal have fraudulently not paid me my $10 million in trust funds nor have they accounted for the $10 million.

[40]Plaintiff’s 3 June 2019 affidavit [47]–[48].

The plaintiff pleads Bethal was a trustee company to manage the deceased’s wealth. It is unsurprising that term deposits were established by Bethal in the name of the deceased’s adult children. This of itself does not give rise to an entitlement to those monies. The plaintiff’s assertion above concerning the deceased’s instructions is hearsay evidence. The plaintiff does not depose as to his information and belief. I reject the plaintiff’s suggestion this is an evidentiary contest for trial. There is no admissible evidence before me that the deceased gave the instructions the plaintiff alleges. Indeed, the evidence is to the contrary. Mr Martin denies being given the alleged oral instructions and says that he has spoken to Mr Woods who also denies the allegations.[41] He denies there was ever an Auspine Trust and has made inquiries with other directors who are unaware of any such trust. Mr Martin deposes that the Auspine shares were held by Bethal as a trustee of the Kim Veall Trust.
[41]Affidavit of Gary Martin sworn 4 October 2019 (‘Martin 4 October 2019 affidavit’) [11]–[12].

The documents do not support the allegations of dishonesty against Bethal. In respect of the allegations against Ms Veall, Ms Pennefather, Mr Martin and Mr Woods, the same analysis applies as above. There is no real prospect of the claim against them succeeding.

Thirdly, the plaintiff seeks leave as a beneficiary to bring his claims in relation to the alleged Auspine Trust. As discussed further below, such leave should not be given.

Allegations in Part IV of FASOC: Monies ($10 million) owing to the deceased / the estate out of the Kim Veall Trust: paragraphs 66 – 71

It is alleged that Bethal was the trustee of the Kim Veall Trust. It is alleged that on or before its early vesting in July 2008, there was $10 million held on constructive trust for the deceased (‘the deceased $10 million trust’). It is alleged that Bethal dishonestly, fraudulently and in bad faith to the deceased failed to account for or transfer the $10 million to him and instead used the monies as its own. This was a breach of Bethal’s fiduciary duties.

It is alleged that Ms Veall, Ms Pennefather, Mr Martin and Mr Woods assisted in the dishonest and fraudulent design with respect to the $10 million. The plaintiff, on behalf of the estate, seeks from them $10 million plus interest and an account of profits.

Plaintiff’s submissions

The Kim Veall Trust financials reveal that as at 30 June 2007, the Kim Veall Trust had net funds of approximately $28.3 million. No financials have been produced for the trust for the years ended 30 June 2008 and 30 June 2009. Do they exist?

Bethal as trustee is liable to return the trust property but simply provides no answer or explanation with respect to returning the $10 million to the deceased estate.

Mr Martin has not accounted for the remaining $4.7 million of the deceased’s money (ie. $10 million, $1.3 million, $1.5 million, $2.5 million). The administrator has not obtained an account.

Ms Veall’s evidence in a 2012 affidavit and Bethal’s meeting minutes of 17 July 2008 evidences division of the Kim Veall Trust funds into three parts with one third to the deceased.

Alternatively, the claim against Bethal is made not in fraud but as a beneficiary to recover trust property with particulars: [68], [71], [A(c))].

Administrator’s submissions

The source of the $10 million in [67] is not disclosed; given that it is later alleged that the sum has been defrauded, it is incumbent upon the plaintiff to plead something more about the existence of the sum. It is necessary for the plaintiff to plead the facts which establish the funds existed and were defrauded.

Second and third defendants’ submissions

Fraud is pleaded but the material facts and particulars in support of it are inadequate. There is a conclusion only by reference to a document exhibited to the affidavit of Mr Sweeney sworn 1 November 2018 (‘the Sweeney 1 November 2018 affidavit’). It is a proposed response to queries of Bethal prepared by Mr Sweeney and it is apparent that it contains incomplete information as it states “G Martin to complete”. Yet this uncompleted document is said to found the allegations of fraud and failure to account. There is no evidence of any fraud involving the vesting of the Kim Veall Trust.

The particulars of the allegations against Bethal, Ms Pennefather and other individuals are scant. What are the particular facts used to establish the monies were used for their benefit? How were they used?

Analysis

The amendment is disallowed for three reasons.

Firstly, there are insufficient facts and circumstances pleaded which, if established by the evidence, might support an inference of specific dishonest conduct. The same analysis applies as above. Here, is not evident how the holding of $10 million in the Kim Veall Trust and its early vesting constitutes fraud or a breach of fiduciary duties.

Secondly, it would be futile to allow the pleading because it has no real prospect of success. A conclusion has been reached by the plaintiff that the $10 million has gone missing and the deceased estate is entitled to it and did not receive it on the basis of several documents, which I shall now address.

The plaintiff’s pleadings rely on the minutes of Bethal’s meeting on 17 July 2008 to confirm that one third of the fund of the Kim Veall Trust was for the deceased.[42] It is not in dispute that there was money and assets in the Kim Veall Trust for the benefit of deceased. The evidence of Mr Martin is that a decision was made by the deceased and directors of Bethal to transfer the funds into the Keith and Beryl Veall Trust.[43] This is consistent with the February, March and May 2008 meeting minutes of Bethal as trustee of the Kim Veall Trust, which are analysed further below in response to the plaintiff’s claim that he was wrongfully excluded as a capital beneficiary of the Keith and Beryl Veall Trust.
[42]The 17 July 2008 minutes are not in evidence. The plaintiff also seeks to rely on evidence in another proceeding in the form of an affidavit of Kim Veall sworn 9 July 2012. See below regarding documents covered by the Harman undertaking.
[43]Affidavit of Gary Martin sworn 8 February 2019 [3]–[6].

Mr Sweeney deposes that he met with the administrator on 13 February 2017 who raised a number of queries with him. Mr Sweeney exhibits a document titled ‘Notes of proposed response to David Hughes’ queries’ to the Sweeney 1 November 2018 affidavit and deposes that they are “notes of Bethal’s proposed response that I settled” in or about March 2017. Mr Sweeney deposes that the notes were prepared in response to queries from the administrator arising out of the meeting on 13 February 2017. The plaintiff relies on the following part of these notes to allege that $10 million is missing that was held on trust:[44]
[44]Exhibit ‘PFS-41’to affidavit of Patrick Sweeney sworn 1 November 2018, 155–6 [2(a)].

On or before the vesting of the [Kim Veall Trust], approximately $10M was paid out to [the deceased] as follows:
–$1.3m upon [date] to acquire the Kilsyth South property for [the plaintiff]
–$1.5 M on [date] to acquire the # property for [Ms Lodder],
G. Martin to complete
________
$10M

The remainder of the $30M after payments to [the deceased] was paid to [Ms Veall] and [Beryl Veall, the deceased’s wife] on vesting the [Kim Veall Trust], [the deceased] having no entitlement or interest in these payments.
Part of the $10 M paid to [the deceased] on the vesting of the [Kim Veall Trust], a sum of $2.5 M, was paid by [the deceased] into the Keith and Beryl Veall Trust (as a gift?). The amount of this contribution by [the deceased] was part of the $2.892 M paid by Bethal to the administrator of the Estate of [the deceased] in December 2015.

These notes by Bethal’s solicitor are incapable of giving rise to the inference of fraud. All they evidence is a solicitor, Mr Sweeney, in the process of obtaining instructions. As the defendants say, it is apparent that this document is incomplete: it states “G Martin to complete”. It is apparent, too, from the title of the document which contains the word ‘proposed’ and Mr Sweeney’s evidence.

The plaintiff also says there are missing financial accounts for the Kim Veall Trust and that the administrator ought to have sought them. The accounts, which are said to be missing from more than a decade ago, do not lead to a specific inference of fraud.

The documents do not support the allegations of dishonesty against Bethal. In respect of the allegations against Ms Veall, Ms Pennefather, Mr Martin and Mr Woods, the same analysis applies as above. There is no real prospect of the claim against them succeeding.

Thirdly, the plaintiff seeks leave as a beneficiary to bring his claims in relation to the alleged $10 million trust. As discussed further below, such leave should not be given.

Allegations in Part V of FASOC: Breach of the Keith and Beryl Veall Trust (the plaintiff’s claim as beneficiary) – the benefits bestowed by Bethal on Mr Martin and Mr Woods in breach of fiduciary duties: paragraphs 72 – 81

It is alleged that the plaintiff was an income beneficiary of the Keith and Beryl Veall Trust; it was established in February 2008. As its trustee, Bethal owed fiduciary duties to the beneficiaries. It is alleged that Bethal has paid Mr Martin and Mr Woods, and their related entities, substantial annual fees for services to the trust since 1989. Fees allegedly paid between 1988 and 2016 are particularised. It is alleged that the nature of, and profit from, the relevant service agreements was not disclosed to the beneficiaries, nor was informed consent obtained from them for such agreements.

Bethal breached its fiduciary duties to the beneficiaries: it preferred its own interests over that of the beneficiaries, placed itself in a position of conflict, and permitted third parties, Mr Woods and Mr Martin to make a profit without having given full and frank disclosure and obtaining informed consent from the beneficiaries. Mr Martin and Mr Woods were knowing recipients of the fees and knowingly involved in Bethal’s breaches. The beneficiaries are entitled to an account of profits or damages from Bethal, Mr Martin and Mr Woods.

Plaintiff’s submissions

These claims are brought by the plaintiff as a beneficiary under the Keith and Beryl Veall Trust. He seeks leave to bring an action to prevent the ongoing breaches. The plaintiff deposes that Mr Martin and Mr Woods profited from their position and there was no consent given by the beneficiaries to Bethal as trustee for this. It is unclear why Bethal has not engaged independent professionals but rather its own directors to provide ‘professional services’. In his affidavit, Mr Martin confirms that he charged for the professional services that he provided. Neither he nor anyone else from Bethal has explained the basis upon which Bethal engaged their services.

The claim for $3.8 million is inconsistent with the plaintiff’s obligation to narrow the issues in dispute pursuant to s 23 of the CPA. As the defendants submit, it is also a breach of the plaintiff’s obligation in s 24 to ensure costs are reasonable and proportionate. In paragraph 10(a) of the writ filed on 23 October 2017, the plaintiff alleged $3.8 million had been retained by Bethal. In the amended statement of claim filed on 25 September 2018 this claim was excluded. In paragraph 5 of that claim it was pleaded that the administrator obtained repayment of the $2.89 million and by reason of that and other matters the “duties as administrator have been completed.” Alternatively, a claim for interest or an account of profits is made on the $2.89 million. The claim for the amount of $2.89 million in the FASOC is contrary to this. It is not properly explained by the fact that the plaintiff was previously self-represented and is now legally represented.

For completeness, the second and third defendants relied upon Ashby v Commonwealth (No 4)[65] as authority that the plaintiff’s decision to re-agitate the $3.8 million claim is an abuse of process. I do not consider that Ashby (No 4) is authority for the proposition that such circumstances constitute an abuse of process.
[65](2012) 209 FCR 65 [4] (Rares J) (‘Ashby (No 4)’). Noting also this authority was overturned on appeal.

Thirdly, the plaintiff seeks leave as a beneficiary to bring his claims as a beneficiary of the deceased estate. As discussed further below, such leave should not be given.

Allegations in Part IX of FASOC: Monies owed by Bethal to the estate – income and capital distributions made to the deceased out of the Keith and Beryl Veall Trust : paragraphs 102 – 111

It is alleged the periodic payments were made to the deceased during the period February 2008 until the death of the deceased in October 2011 totalling approximately $1.06 million. It is alleged that these payments were made from the Keith and Beryl Veall Trust. In a meeting on 11 November 2010, Bethal recorded these as the payments as income distributions with the deficit funded from capital. It is alleged that on 1 December 2010 Bethal dishonestly, fraudulently and in breach of trust and fiduciary duties treated the deficit in periodic payments after income as drawings rather than capital distributions.

It is alleged that Bethal falsely, dishonestly, fraudulently, in bad faith and breach of its fiduciary duties, advised the deceased that he needed to pay $60,000 in tax per quarter in the period 2008 until 2011.

It is alleged that from at least August 2010, the deceased lacked capacity and was acting through his attorney, the plaintiff.

It is alleged that Ms Veall, Ms Pennefather, Mr Martin and Mr Woods knowingly assisted in the dishonest and fraudulent design with respect to the $1.06 million. They owe approximately $1.04 million plus interest to the deceased estate. In the alternative, an account of profits is sought.

Plaintiff’s submissions

The FASOC at [103] clearly sets out the periodic payments recorded as drawings. The periodic payments were reversed from capital distributions to drawings. This is clearly dishonest.

The plaintiff deposes that the treatment of the periodic payments as ‘drawings’ rather than capital distributions is fraudulent treatment. Mr Martin’s affidavit sworn 29 November 2018 provides no explanation as to why Bethal failed to obtain the informed consent of the deceased in treating the capital distributions as drawings. He deposes at [10(b)] that the drawings “are periodic payments made to the deceased such periodic payments being of an amount that was within the cash constraints of the Trust from time to time, to meet the general living expenses of the ensuing period”. These distributions cannot be a ‘debit’ against a ‘beneficiary entitlement account’. Bethal’s minutes confirm these payments were to be capital distributions rather than loans to the Trust’s primary beneficiaries. They cannot be changed to a loan to the deceased by the Trust when he was under a mental incapacity impairment and with an attorney appointed to the knowledge of the trustee. The trustee cannot in breach of its fiduciary obligations to its mentally impaired beneficiary, acquire for itself a further $1.06 million of the deceased’s funds. The estate is owed those monies plus interest or an account on those monies wrongfully retained by Bethal.

The defendants have misunderstood the case. The administrator has adopted the position that the Schedule (referred to above) sets out the loans and advances made. This document does not come into existence until 12 months after the death of the deceased.

The FASOC pleads that the deceased was owed duties. He signed off on trust accounts for three years at a time when the Court of Appeal held he lacked testamentary capacity. In answer to the defendants’ submission, the issue of the interest-free loan of $2.8 million by the deceased to Bethal raises the issue of his capacity.

In reply to the defendants, the plaintiff says that the administrator relies on the taxation returns for financial years ending 30 June 1996 – 30 June 2010 in his affidavit sworn 20 November 2018 at [17(a)] on the basis that “no interest was declared in any of those years from the Trust”. Despite numerous previous requests, the plaintiff has not been provided with these documents. The deceased’s income from the Keith and Beryl Veall Trust for the financial years of 2008 – 2011 was in the range of nil to a maximum of approximately $74,000, according to Mr Martin and the Schedule. Notwithstanding this, Bethal required the deceased remit approximately $60,000 per quarter in tax after the Keith and Beryl Veall Trust was established. Bethal’s meeting minutes of 11 November 2010 and the Martin affidavit [10(e)] show that $52,555 was paid by the Keith and Beryl Veall Trust to meet the deceased’s quarterly tax instalment and $240,000 per annum was required to meet his annual tax obligations. Outside of that trust, on what income (and on what assets) was the deceased generating a $240,000 per annum tax bill in the financial years 2009-2011? It is not explained in the affidavits of Mr Martin, and the administrator has not obtained a proper account.

Administrator’s submissions

In respect of the allegations in [102]–[103] that Bethal treated periodic payments totalling $1 million to the deceased, the frequency of these payments is not identified, nor the obligation to make the payments. What is the relevance of the pleading that the payments were represented as being drawings rather than capital distributions? How is the word ‘drawings’ used here? What is the relevance that the deceased paid quarterly tax? What is the relevance of the allegation that the deceased was under a legal disability? There is no allegation that there was an obligation to make periodic payments. How is the deficit pleaded? There are conclusionary assertions in [109]. The pleading is hopeless and incomprehensible.

Second and third defendant’s submissions

This is a confusing claim about payments made to the deceased prior to his death. As the Martin affidavit clarifies, those payments represented repayments of amounts owing by Bethal to the deceased and income distributions from the trust to the deceased.

The evidence allegedly in support of the claim appears to be Bethal meeting minutes dated 11 November 2010. They do not support the claim. There is no reference to the $1.06 million or to a resolution to make capital distributions under the powers in the deed. Point 6 of the minutes refers to income distributions to both the deceased and his wife. There is no recording of any resolution to make capital distributions to the deceased pursuant to the powers in the trust deed. The only reference to capital in the document is a comment at point 6 that ‘deficit required to be funded from capital’. There is no reference here to capital distributions. Funding a loan repayment from trust capital does not mean that it is a capital distribution to a beneficiary of a trust. The plaintiff’s claim appears to be based on this misconception and is futile.

The pleading fails to explain how the allegation that the directors fraudulently advised the deceased he was to pay $60,000 in tax each quarter is relevant to the $1.06 million claim. There is a failure to give sufficient material facts and particulars.

The plaintiff appears to accept that he has no standing to bring the claim.

Analysis

The amendment is disallowed for three reasons.

Firstly, there are insufficient facts and circumstances pleaded which, if established by the evidence, might support an inference of specific dishonest conduct. The same analysis applies as above. Here, is not evident how Bethal’s alleged treatment of the deficit in periodic payments after income as drawings rather than capital distributions, or advice to the deceased to pay tax constitutes fraud, dishonesty or a breach of fiduciary obligations. No obligation upon the Keith and Beryl Veall Trust to make the periodic payments is identified.

There are insufficient facts and circumstances pleaded to support an inference of dishonest conduct by Ms Veall, Ms Pennefather, Mr Martin and Mr Woods.

Secondly, it would be futile to allow the pleading because it has no real prospect of success. The plaintiff’s allegation that the periodic payments to the deceased totalling $1.06 million were income distributions with the deficit to be funded from capital relies on the minutes of Bethal’s meeting as trustee of the Keith and Beryl Veall Trust on 11 November 2010.[66] The deceased is recorded as being in attendance. Item 6 relates to distributions. The document is in poor copy and appears incomplete.[67] Even so, it does not support the plaintiff’s case. There is no reference to $1.06 million.
[66]Exhibit ‘ARV-30’ to the plaintiff’s 3 June 2019 affidavit, 245.
[67]See for instance line 50 which is incomplete.

The plaintiff also refers to the Martin 29 November 2018 affidavit (as cited above). Following the reference cited above, Mr Martin deposes “These amounts are recorded as debits to the AKV Loan Account, that is, as amounts in favour of Bethal.” There is no inference of dishonesty that arises from this.

As for the allegations concerning taxation, there is no real prospect of this succeeding in establishing fraud, dishonesty or breach of fiduciary duties. Even if the deceased paid an excessive amount of taxation, this is not a basis for such causes of action.

Thirdly, the plaintiff seeks leave as a beneficiary to bring his claims as a beneficiary of the deceased estate. As discussed further below, such leave should not be given.

Allegations in Part X of FASOC: Deceased’s sporting trophies: paragraphs 112 – 114

It is alleged that Ms Veall has wrongfully retained estate property and refuses to yield it up. The property is identified as the deceased’s sporting trophies. On 4 December 2018, the administrator refused to take action regarding this. A declaration that they are estate property is sought, together with an order that Ms Veall deliver them up.

Plaintiff’s submissions

The ownership of the trophies is a matter to be determined on evidence by the Court.

Second and third defendant’s submissions

There are no particulars to support this allegation. It has not been properly pleaded. The plaintiff appears to accept that he would have no standing to bring this claim without the Court’s leave. The trophies were properly obtained by Ms Veall prior to the death of the deceased and are not deceased estate property. As Mr Martin deposes, the administrator properly adjudicated on the matter in 2018 based on statutory declarations from Ms Veall and the plaintiff.

Analysis

The amendment is disallowed for three reasons.

Firstly, there are insufficient facts and circumstances pleaded which, if established by the evidence, might establish that Ms Veall has wrongfully retained the sporting trophies. In particular, it is not alleged how the trophies form part of the deceased estate and why Ms Veall should not retain them.

Secondly, it would be futile to allow the pleading because it has no real prospect of success. It is alleged that the sporting trophies are the property of the deceased estate. The administrator has determined they are not. Ms Veall provided a statutory declaration concerning the trophies to the administrator.[68] The administrator then confirmed by letter dated 4 December 2018 to the plaintiff (and others) that he had “viewed the photographs and drawings mentioned in [Ms Veall’s] statutory declaration and is satisfied that the trophies were gifted to [Ms Veall] by the deceased many years before his death and that they do not form part of the Estate.”[69]
[68]Exhibit ‘GAM-16’ to the Martin 4 October 2019 affidavit.
[69]Exhibit ‘GAM-17’ to the Martin 4 October 2019 affidavit.

Thirdly, the plaintiff seeks leave as a beneficiary to bring his claims as a beneficiary of the deceased estate. As discussed further below, such leave should not be given.

Allegations in Part XI of FASOC: Leave to bring proceedings as beneficiary of the estate or various trusts: paragraphs 115 – 124

It is alleged that the administrator has failed to well and truly administer the deceased estate and act in good faith. It is alleged that he failed to:

(a) obtain a proper account from Bethal of monies owing to the deceased from the Kim Veall Trust and Keith and Beryl Veall Trust;

(b) obtain equitable compensation or interest for Bethal’s use of the deceased’s funds;

(c) conduct reasonable inquiries to determine whether the deceased had a right to obtain a proper account, equitable compensation or interest in relation to the deceased $10 million trust, the deceased $3.8 million trust, the $1.06 million deficit claim, the $5 million gifting reserve claim;

(d) pay reasonable liabilities of the estate being an amount of approximately $43,000 set out in a letter from Ms Moorhouse Perks dated 5 August 2016;

(e) obtain trust property, being sporting trophies, from Ms Veall;

(f) make proper inquiries as to offshore accounts held by the deceased; and

(g) obtain an account from Bethal as to the source of the approximate $2.9 million allegedly loaned to Bethal by the deceased at a time when the onshore Australian bank accounts of the deceased did not have any sums of those amounts deposited in them and the deceased lacked capacity to manage his own affairs.

It is alleged that any causes of action of the deceased survived for the benefit of his estate.

In respect of any cause of action of the deceased estate that has been lost by the effluxion of time, it is alleged that such loss was due to the neglect of the administrator. In that event, it is alleged that the administrator ought pay damages, to be assessed.

The plaintiff seeks leave as a beneficiary to bring his claim in relation to the AK Veall Family Trust, the Biretta Trust, the Auspine Trust, the Keith and Beryl Veall Trust, and the $5 million gifting reserve. He says the administrator is unwilling to prosecute the estate’s claims for breach of trust, breach of fiduciary duties and recovery of estate property in relation to the deceased $10 million trust, the deceased $3.8 million trust, the $1.06 million deficit claim, the $5 million gifting reserve claim and sporting trophies claim. Leave is sought to prosecute those claims.

Turning now to the question of whether the plaintiff should be given leave to bring claims as a beneficiary of the estate or trusts.

Plaintiff’s submissions

The administrator has failed to administer the estate. He is unwilling to prosecute estate claims. Leave is sought to bring proceedings on the basis that the administrator will not. Relevantly, the proceeding is effectively in its early stage. Very little has occurred to progress it although it commenced in the County Court in 2017.

Leave should be granted because there are special circumstances relevant to the trust estate. It is alleged Bethal has failed to account and wrongfully retained and profited from the retention of trust funds in breach of its fiduciary obligations. The plaintiff’s case has reasonable prospects of success and the trustee is unwilling to prosecute it.

The plaintiff’s claims, in his capacity as beneficiary and on behalf of the deceased estate, should be brought in the same proceedings because they arise out of the relationship between the parties at the time.

Administrator’s submissions

The administrator has not pursued the claims that the plaintiff seeks leave to bring on behalf of the estate because there is no proper basis for such claims and no reasonable prospect of success. The claims are poorly pleaded and not particularised. The claims appear to be frivolous, vexatious and arise from an acrimonious breakdown of relationships within the Veall family. Permitting the plaintiff to pursue such claims will prolong and delay the administration of the estate by many years. Leave should be refused.

In respect of the allegation that the administrator failed to obtain a proper account from Bethal: the pleading should identify precisely what is owed and pursuant to what underlying facts. It should identify precisely what the administrator ought to have done in respect of the alleged debt.

In respect of the allegation of failure to obtain equitable compensation or interest: the pleading does not identify the funds in respect of which compensation or interest is claimed, nor the basis upon which the administrator sought compensation or interest. If there is any interest payable, at what rate and for what period was it chargeable? What is the obligation that might give rise to equitable compensation?

In respect of the allegation of failure to conduct proper inquiries: this seems to overlap with the allegation in sub-paragraph (a). The administrator does not understand why the allegations have been broken up in this way. They are unclear. The various transactions are in adequately pleaded.

In respect of the allegation of failure to pay reasonable liabilities: the source of the obligation to make payment of the liabilities is not identified, nor when they were due for payment. It is like pleading a breach of contract without identifying the contract.

In respect of the allegation of failure to recover sporting trophies: the pleading does not identify the existence of the trophies, their ownership by the deceased estate, their possession by Ms Veall or any decision being made to prefer the interests of one beneficiary over another.

In respect of the allegation of failure to make proper inquiries of offshore accounts: the pleading does not allege, as a material fact, the existence of offshore accounts of the deceased. What are the allegations? The alleged failure stands in a vacuum.

In respect of the allegation of failure to obtain an account from Bethal as to the source of the approximate $2.9 million loan: this pleading is confusing. There are no allegations as to the existence of the loan or the accounts and their balance at the relevant time.

Second and third defendant’s submissions

The application for leave should have been made prior to or at the commencement of the proceeding. Leave was required at the outset and the plaintiff cannot refer to differing New South Wales authority. It does no good for the plaintiff to cast the proceedings as being in the early stages of litigation almost two years after the proceeding was filed. The plaintiff is trying to change his case and raise entirely new claims that are not properly pleaded and have no proper basis.

Even if the plaintiff did seek leave, it should not be granted as there are no special or exceptional circumstances and no real merit. The proper refusal of an executor or administrator to bring a claim is insufficient to found special or exceptional circumstances. The claims are not properly pleaded and have no proper basis. If there is no real basis to bring the proceeding, then that is why leave should not be granted.

There is no evidence that the AK Veall Family Trust exist anymore. There is no evidence of the existence of the Biretta Trust. There is no evidence of the existence of any Auspine Trust or any gifting reserve trust such that the Court could grant leave to bring proceedings.

The prayer for relief is inadequate. It seeks various amounts in the millions of dollars but fails to identify whether the plaintiff is seeking orders for those amounts to be paid to him personally, to the estate, to existing or non-existing trusts, or to the beneficiaries of the existing or non-existent trusts or otherwise.

The administrator made proper enquiries regarding the claims and the second and third defendants have fully cooperated through their solicitor. This included the solicitor making inquiries and receiving a response on amounts owing by the second defendant as trustee for the Keith and Beryl Veall Trust to the estate of the deceased on 26 September 2016 and 8 and 9 November 2016. Interest from the trust was not declared in the deceased’s income tax returns during the 30 June 1996 to 30 June 2011 income years. The administrator properly declined to make a claim against Bethal for interest on loans made by the deceased to Bethal as trustee as he does not consider there is any proper basis and the trust deed does not provide for the payment of interest. The plaintiff cannot point to the administrator rejecting any particular grievances, therefore any claim on behalf of the estate is clearly premature.

Analysis

It is common ground that leave for a beneficiary to act on behalf of a trust or deceased estate may only be granted in special or exceptional circumstances.

Here, the plaintiff has not established special or exceptional circumstances exist. Moreover, leave should not be given in circumstances where the pleadings are defective, the administrator has provided a plausible explanation on oath for not taking action in relation to various matters, the plaintiff has not established a proper basis for making the claims and they have no real prospect of success.

The parties made extensive submissions about whether the action was statute-barred. Given the findings above, it is unnecessary to address that question.

Joinder Application

The plaintiff applies to join Mr Martin, Mr Woods and Ms Veall as the fourth – sixth defendants to this proceeding pursuant to r 9.06 of the Rules.

Given the findings above disallowing the amendment of the claim, including the allegations against the proposed fourth – sixth defendants, it follows that the plaintiff has not established the proposed defendants are proper or necessary parties to this proceeding, nor that their joinder would ensure the effectual and complete determination of the proceeding. It is not just or convenient to make the joinder orders given the amendments are disallowed. Indeed, it would be contrary to the just, efficient, timely and cost-effective resolution of the proceeding to do so.

Harman undertaking
Second and third defendants’ submissions

The Harman undertaking may apply to documents within the same proceeding. A litigant is bound by the Harman undertaking not to use affidavits or witness statements otherwise than for the purpose of the proceeding in which they were served and unless received into evidence. The plaintiff seeks to amend his pleadings to rely on information exhibited to affidavits filed on behalf of the defendants in this proceeding. The claims (discussed immediately below) have no reasonable relationship with claims made to date and raise entirely new factual matters and legal claims. Accordingly, the use of the documents exhibited to the affidavits filed on behalf of the defendants, and which have not been received into evidence, is in breach of the Harman undertaking.

The plaintiff’s claim that there are monies owing to him as a beneficiary of the Biretta Trust[70] has arisen from material exhibited to the Pennefather 28 November 2018 affidavit: Exhibit ‘LEP-3’. In [41] of the plaintiff’s 3 June 2019 affidavit, the plaintiff deposes that he did not know of the existence of the Biretta Trust and various other matters until the service of the Pennefather 28 November 2018 affidavit.
[70]FASOC [47]–[48].

The plaintiff’s claim that Bethal holds $10 million on constructive trust for the deceased on the vesting of the Kim Veall Trust in 2008 and fraudulently failed to account for it, is based on an exhibit to the Sweeney 1 November 2018 affidavit.

The plaintiff’s claim regarding the Auspine Shares Trust may also be based on the documents exhibited in the Pennefather 28 November 2018 affidavit. He relies upon a document whose source is not disclosed. The pleading is that there was concealment of the plaintiff being a beneficiary of the Auspine Trust until the service of that affidavit.

The plaintiff’s claim that Bethal breached its fiduciary duties because Mr Martin and Mr Woods and/or their related entities were paid accounting and professional fees relies on financial statements of the Keith and Beryl Veall Trust exhibited to the plaintiff’s 3 June 2019 affidavit. The financial statements for the years 2008–2012 and 2016 appear to have been taken from those exhibited to the Martin 29 November 2018 affidavit. The 2014 financial statements appear to have come from prior litigation as they have court book page numbers stamped on them.

The plaintiff’s claim of a $5 million ‘gifting reserve’ in the 30 June 2008 accounts of the Keith and Beryl Veall Trust appears to have arisen from the financial statements exhibited to the Martin 29 November 2018 affidavit.

The plaintiff’s claim of $1.06 million against Bethal and its individual directors, in respect of payments to the deceased out of the Keith and Beryl Veall Trust, appears to be based on minutes of a meeting of Bethal on 11 November 2010. They are exhibited to the affidavit of Ms Moorhouse Perks. This document looks like it comes from a court book in prior proceedings.

The Sweeney 1 November 2018, Pennefather 28 November 2018 and Martin 29 November 2018 affidavits have not been received into evidence. Although not produced as part of the discovery process, the documents they exhibit should be treated as if they have been produced under compulsion. Voluntary production ought not be a disadvantage.

The administrator did not make any submissions on this issue.

Plaintiff’s submissions

The plaintiff is mindful of his obligations under the Harman undertaking and there is no issue of concern. Most of the documents are in the plaintiff’s possession and have surfaced in previous proceedings. These are primarily in the proceeding concerning the deceased’s testamentary capacity and exhibited in a court book. The entire court book was tendered. The decision of the trial judge refers to many of those documents.[71] The documents tendered in the previous proceedings were in respect to the deceased’s will; including financial statements, minutes and other documents. The Harman undertaking does not apply to documents in other proceedings once they have been tendered.
[71]Veall v Veall [2014] VSC 38 (Ginnane J).

The documents exhibited to the Pennefather 28 November 2018 affidavit and Sweeney 1 November 2018 affidavit are not subject to the Harman undertaking. There are documents that were said to have been recently found in a drum and not previously seen by the parties. They were voluntarily exhibited for some forensic advantage. They were not produced in response to discovery.

Ms Pennefather’s affidavit produces documents that were, in turn, produced by the plaintiff in earlier proceedings. She is now objecting to them being used. Exhibit ‘LEP-4’ is a bundle of documents relating to AKV Nominees and the AK Veall Family Trust that the plaintiff’s solicitors provided to the administrator’s solicitors in or about 2016 in relation to earlier proceedings concerning the deceased estate. If the second and third defendants say the material is not relevant here, why was it exhibited to the affidavits? On the pleadings the documents are relevant to the proceedings.

The principles of the Harman undertaking do not apply to documents disclosed in the same proceedings. The implied undertaking is that any document disclosed is not to be used for any purpose otherwise than in relation to the litigation in which it is disclosed. It is not a collateral or ulterior purpose to use documents disclosed in the same proceeding to add new causes of action.

If there are any concerns regarding the Harman undertaking, the plaintiff could agree to excise those documents or seek leave to rely upon them. The matter should not be dealt with in this application.

Analysis

The submission that the Harman undertaking does not apply to documents tendered into evidence is inconsistent with the authorities. So too the submission that the Harman undertaking applies to documents produced in the same proceeding. Indeed, as the authorities demonstrate, including that relied upon by the second and third defendants for their submission,[72] there are circumstances where documents discovered in a proceeding may result in further causes of action being added and joinder of other parties. I adopt the useful outline of authorities by Almond J in Connective Services Pty Ltd v Slea Pty Ltd.[73]
[72]Mann v Medical Defence Union [1997] FCA 45 (Ryan J).
[73](2017) 53 VR 130, 137–46 [18]–[42] (citations omitted) (emphasis in original). His Honour’s ruling was appealed but not in relation to his Honour’s analysis of the Harman principle.

I make the following findings.

Firstly, there is no bar to the plaintiff using, for the purpose of this proceeding, documents which the defendants have produced in this proceeding.

Secondly, the unidentified documents which the plaintiff relies upon that are sourced from the court books of other parties in earlier proceedings are protected by the Harman undertaking. These include documents exhibited to the plaintiff’s 3 June 2019 affidavit, some of which appear to bear court book page numbers from earlier proceedings.[74] As there was no consent from the other parties to the earlier litigation, the plaintiff ought to have made an application to be released from the Harman undertaking. In that regard, the authorities in Ah Choo Teo v Pacific Media Group[75] are instructive.
[74]See, for instance, documents which appear to have court book numbering from previous proceedings that are contained in Exhibits ‘ARV-2’, ‘ARV-3’ and ‘ARV-4’ to the plaintiff’s 3 June 2019 affidavit.
[75][2016] VSC 626 [25]–[28] (citations omitted).

Thirdly, the plaintiff relies on the affidavits of other parties filed in the earlier proceedings in respect of evidence.[76] He cannot do so without leave.[77]
[76]Plaintiff’s affidavit sworn 21 December 2018 [14]–[17], [33].
[77]I have not addressed ss 91–92(1) of the Evidence Act 2008 as no submissions were made about it.

For completeness, if the second and third defendants wish to rely on documents protected by the Harman undertaking, then the same analysis applies.

Next Steps

Given the findings above, and in particular the finding that there is no proper basis for the FASOC, the plaintiff will need to consider whether he continues to agitate this proceeding.

If the plaintiff decides to agitate his claim as it was prior to the FASOC, namely the amended statement of claim filed on 25 September 2018, the next step is to hear the defendants’ applications for summary dismissal in respect of the September 2018 claim.

The parties will be given an opportunity to make submission on the orders consequential to this ruling, including costs.

SCHEDULE OF PARTIES

S ECI 2018 00730
BETWEEN:
ARTHUR ROWLAND VEALL	Plaintiff
- v -
DAVID HUGHES (in his capacity as Administrator of the Deceased Estate of ARTHUR KEITH VEALL)	First Defendant
BETHAL NOMINEES PTY LTD	Second Defendant
LORRAINE PENNEFATHER	Third Defendant

[2020] VSC 423

13 July 2020