Vordermeier v Alguna P/L & Kenmore Corp P/L (No 3) No. DCCIV-96-1571 Judgment No. D3732
[1997] SADC 3732
•19 December 1997
VORDERMEIER v ALGUNA DEVELOPMENTS PTY LTD & KENMORE DEVELOPMENTS CORP PTY LTD (NO 3)
Civil
Judge LunnREASONS ON PLAINTIFFS’ APPLICATION FOR JUDGMENT FOR RELIEF NOT PLEADED
The plaintiffs sued the defendant Alguna Developments Pty Ltd (“Alguna”) for specific performance of an alleged agreement whereby Alguna would transfer back to them one of two home units which it had built on vacant land which the plaintiffs had transferred to it. In their Statement of Claim the plaintiffs asserted an oral agreement with Alguna under whose terms they claimed they had transferred the vacant land to Alguna. By its defence Alguna pleaded another agreement relating to the transfer of that land in different terms. For reasons which I published on 4 December 1997 (D3719) I found that the plaintiffs had transferred their land to Alguna on which Alguna had erected two home units, but I did not find that there was any concluded or enforceable contract between the parties about precisely what was to happen to the home units. Reference should be made to these earlier reasons where the history is set out in detail. The plaintiffs have now orally applied that judgment be entered for them on the basis that there is a resulting or constructive trust over one of the units in their favour, although no claim to such a trust was expressly pleaded by them.
Availability of relief not pleaded
Rule 46.04(4) provides:
“(a) At the trial, subject to subrule (b) hereof, the Court:
(i). shall grant all such relief on any cause of action to which the parties might be entitled on the evidence whether or not the relief granted is expressly requested in the pleadings ....
(b)... Nothing in subrule (a) hereof allows the Court to grant relief .... if to do so would infringe the principles of caseflow management as set out in Rule 2 or if by reason of surprise, the course of the trial or for any other reason, it would otherwise be unfair to do so.”
Subrule (4)(a)(i) is mandatory in its terms and it does not give any discretion to the Court to refuse such relief. Subject to the matters in (b) the entitlement to relief under (a)(i) turns on the evidence received at the trial and not upon the pleadings. The pleadings are only indirectly relevant insofar as under (4)(a)(ii) the admissibility of the evidence at the trial is dependent in part upon it being within the pleadings. There is no obligation under R46 to plead causes of action, but only facts, although it is obviously convenient if relevant causes of action are identified.
......... The general law on relief being granted for causes of action available on the facts pleaded but not expressly mentioned in either the pleadings or in submissions was dealt with at length by Perry J in S P Hywood Pty Ltd v Standard Chartered Bank Ltd, 11/12/92, Jud No S3764, unreported, where it was said in the context of pleadings under the now repealed Local Court Rules:
“There was, of course, no requirement to plead a cause of action, and indeed, an express reference to a cause of action would be contrary to the rules as to pleading. It was incumbent, notwithstanding the manner in which the case was argued, for the learned Magistrate to give such relief on whatever cause of action entitled the defendant to relief against the third party, having regard to the facts established by the evidence. Rule 67(b)(a)(ii) of the Local Court Rules, which were then of application to the hearing, obliged the pleader simply to plead a statement in summary form of the material facts on which the party relies. Rules to that effect have been, of course, common to most jurisdictions since the Judicature Act. Furthermore, s.35(e) of the Local and District Criminal Courts Act, as it was, provided:
‘35e. A local court in every cause or matter pending before it shall have power to grant, and shall grant, either absolutely, or on such reasonable terms and conditions as it deems just, all such remedies whatsoever as any of the parties thereto may appear to be entitled to in respect of every claim properly brought forward by them respectively, in such cause or matter, so that, as far as possible, all matters so in controversy between the parties may be completely and finally determined, and all multiplicity of legal proceedings concerning any of such matters avoided.’
In Creedon v Measey Investments Pty Ltd (1988) 91 FLR 318, Martin J put the matter in this way (320):
‘Order 23, r 4 of the former rules provided that every pleading shall contain, and contain only, a statement in a summary form of the material facts on which the party pleading relies for his claim or defence.
In Williams v Milotin (1956) 97 CLR 465 at 474 the High Court said:
'When you speak of a cause of action you mean the essential ingredients in the title to the right which it is proposed to enforce.'
That case and others are cited by Williams in "Civil Procedure in Victoria" Vol 1 at 13.02.30,for the proposition that:
'The pleader is not bound to state the legal effect of the facts upon which he relies; he is only bound to state the facts themselves.'
The learned author goes on:
'It is sufficient if the pleader states the material facts, and at the trial he is free to present in argument whatever legal consequences are appropriate to the facts as found by the Court.'
It is not necessary that the plaintiff plead a conclusion of law, that is, that the facts disclose as a matter of law the fourth defendant is vicariously liable for the alleged negligence of the third defendant. However, the plaintiff must plead the 'essential ingredients'."
It is clear on the authorities that the trial judge is not limited to a consideration of the particular cause of action which might be identified by counsel. In Drane v Evangelou & Ors (1978) 1 WLR 455, Lord Denning MR said (458):
"Now there is an appeal to this court. The first point taken on behalf of the defendants was a pleading point. The amended particulars of claim alleged that the landlord had
'interfered with the right of the plaintiff and his de facto wife Ann Watts to quiet enjoyment of the said premises by unlawfully evicting them from the said premises on Tuesday October 14, 1975.'
Counsel for the defendant submitted that that claim was for breach of a convenant for quiet enjoyment. He cited a passage from Woodfall on Landlord and Tenant, 27th ed. (1968), para 1338:
'Since the claim is in contract, punitive or exemplary damages cannot be awarded.'
The judge at once said:
'What about trespass? Does the claim not lie in trespass?'
Counsel for the defendant urged that trespass was not pleaded. The judge then said:
'The facts are alleged sufficiently so it does not matter what label you put upon it.'
The judge was right. The plaintiff in the particulars of claim gave details saying that three men broke the door, removed the plaintiff's belongings, bolted the door from the inside: and so forth. Those facts were clearly sufficient to warrant a claim for trespass. As we said in In re Vandervell's Trusts (No. 2) [1974] Ch 269, 321-322:
'It is sufficient for the pleader to state materials facts. He need not state the legal result. If, for convenience, he does so, he is not bound by, or limited to, what he has stated. He can present, in argument, any legal consequence of which the facts permit'."
Furthermore, it is open to an appeal court to substitute a judgment on what appears to be the proper cause of action, even though attention was confined to another (1928)1 KB 421. In that case, an action was brought by the plaintiff against builders who had allegedly been responsible for allowing rubbish from a building which they were demolishing to fall on a roof, with a result that it was carried down by a drainpipe and choked a gully in the basement of the plaintiff's adjoining premises. Following a heavy downpour of rain, the basement was flooded. The plaintiff had moved into the premises after the builders had completed their work which resulted in the accumulation of the rubbish. The case was argued at first instance solely as a case in negligence. The trial judge found liability in negligence, but on appeal the Court of Appeal held that the action in negligence did not lie, as the defendants owed no duty to the plaintiff, who was not in occupation of the adjoining premises at the relevant time.
However, the Court of Appeal was of the view that there was clearly an action in trespass. Notwithstanding the fact that trespass was not argued in the court below, they upheld the judgment on that footing. See per Scrutton LJ at p.426 (referring to Hudson v Nicholson 5 M & W 437):
"The plaintiff brought an action upon the case and delivered a declaration which contained no allegation of vi et armis and was in point of form framed in case and not in trespass. The question arose whether the plaintiff, who at the time of the wrongful act was not in possession, could bring an action on the case. Lord Abinger CB in delivering judgment said:
'I still adhere to the opinion that this is properly the ground of an action of trespass, and not of case. It is not similar to those cases that have been cited, of trespass to a personal chattel, where trespass and case are concurrent remedies, and where a party may waive the trespass and go for the consequential damage.'
The point having been raised after verdict the Court of Exchequer discharged a rule for a new trial. It follows from that case that if the present action had been brought in trespass there would have been no answer to the claim. But a plaintiff is not now bound to state the legal effect of the facts on which he relies; he is only bound to state the facts themselves, and we cannot see that the respondent has suffered any injustice in the way of being shut out from giving evidence which he might have given if the action had been treated as an action of trespass. We therefore think that the judgment should stand as a judgment in an action of trespass and that the appeal should be dismissed, but without costs."
See generally Cairns' Australian Civil Procedure, 3rd Ed, p.109:
"Now that the rules expressly require a party to plead only the facts, there is no need to name any particular cause of action or defence. Before the Common Law Procedure Act 1852 (UK) the plaintiff had to indorse the cause of action on the writ. Under the present rules, the position is different. Once a party has pleaded a claim or defence, the cause of action, or the nature of the defence, appears from the pleadings. The court gives whatever judgment is justified by the proved facts. Although it is usual for a party to plead the claim for a particular cause of action, that formulation is not binding on the court.
Pleadings in personal injury cases are cast in terms of allegations and particulars that are relevant only to a breach of a duty of care, or breach of a statutory duty. Likewise, allegations in contractual disputes are cast in terms relevant only to contract. None of this is binding on the court. So long as the facts proved show the plaintiff to be entitled to relief, the plaintiff obtains judgment. In giving judgment, the court does not necessarily accept the cause of action on which the plaintiff pleaded the claim. The plaintiff alleges the facts, the defendant admits or denies those facts, or alleges additional facts. Finally, the court applies the law to the facts as proved." (citing Williams v Milotin and Creedon v Measey Investments Pty Ltd, (supra).)
See also the passage in the same work at p.115:
"Since the first requirement of pleading is that only material facts are to be alleged, then obviously matters of law, or legal conclusions or inferences, must not normally be alleged in the pleadings. The pleader alleges the facts, in turn the court finds what facts are proved, and then draws any legal inferences that arise on the findings. Judgment is given on the basis of the findings of fact and the allegations in the pleadings. The legal result of the facts is a matter entirely for the court. A party must not plead matters of law or legal conclusions. For the plaintiff to allege a particular cause of action is usually an improper assertion of a matter of law. So long as the facts alleged in the pleadings show a cause of action, the pleading is sufficient. The plaintiff need not allege which cause of action is asserted."
With respect to that passage, I do not know that I would agree that it is necessarily improper to allege a particular cause of action. A common form of pleading is to assert an entitlement for damages "for negligence" or "for breach of contract". Such an assertion in a statement of claim can draw the attention of the opposing party to the principal cause of action relied upon. But such a plea in no way circumscribes the nature of the available relief. The trial judge is free to give judgment on any available cause of action whatever, irrespective of any mention of particular causes of action in the pleadings. Of course, it must be observed that the pleading of the material facts will often operate to confine the evidence in such a way as to have the practical effect of limiting the options of the trial judge in fashioning relief at the end of the trial.
But what must be kept steadfastly in mind is that all causes of action are at large at the end of the trial, in the sense that judgment may be given upon any cause of action open on the evidence as proved, irrespective of the manner in which the plaintiff's case has been presented, or argued.
Notwithstanding these observations, it is true that there may be cases where the suggestion that a particular cause of action is available might catch a party by surprise, and if it had been adverted to earlier, might have affected the course of the trial. That will not often be the case, as parties should go to trial well knowing that judgment may be entered on any available cause of action. In any event, there was no reason in this case for any party to think that the Third Party claim fell to be resolved only by reference to the tort of conversion.
There was no allegation of any particular cause of action in the third party pleadings. The words "misappropriated the money" when they appear in the schedule to the Third Party Notice were not apt to define any particular cause of action. When the parties had finished calling their evidence, the question of the cause of action against Standard Chartered Bank was at large. It was not circumscribed by reason of the fact that counsel for the appellants sought only to argue the case in conversion. A party is not denied a remedy if counsel choose to rely on one legal argument rather than another.
In my opinion, the learned Special Magistrate should have found that the third party Standard Chartered Bank was liable to the defendant Harwood for damages, if not in conversion, in negligence, or for money paid on a mistake of fact.
Here, the justice of the case calls for the substitution of a judgment against the third party on the ground that the evidence proved an entitlement to such a judgment on the basis of either negligence or as moneys paid under a mistake of fact.”
All of that applies to R46.04(4) subject to the reference to caseflow management in (b). (See also Callaghan v Callaghan (1995) 64 SASR 396 where the action was decided on a cause of action apparently not specifically pleaded.) Indeed, even if it is necessary to align the cause of action relied upon for judgment with the pleadings, there is a discretion to amend the pleadings after the evidence is closed, and even after reasons for judgment have been published: “Civil Procedure South Australia”, vol 1, para R53.01.45.
Counsel for Alguna relied upon various remarks by the High Court of Australia in Banque Commerciale SA v Akhill Holdings Ltd (1989) 169 CLR 279 particularly at 286-7 that a cause of action which was not pleaded could not be relied upon, but that decision must be read subject to the provisions of R46.04(4) and on the basis that it involved a serious unpleaded allegation of fraud. It is not relevant to this matter.
Alleged unfairness in granting relief not sought in the pleadings
Counsel for Alguna submitted that if the plaintiffs had expressly pleaded in the alternative claims based on a resulting or a constructive trust Alguna would have adduced additional evidence on those matters. However, the trust is alleged to arise out of a course of dealings which was fully canvassed in the evidence. While for obvious forensic reasons the parties adopted at trial the position that their particular version of the contract was correct, there was always the potential for the Court to find, as it has, a midway position that neither party has made out its version of the agreement. Any relief which is to be granted in that event must arise out of alternative causes of action which are not contractual. Alguna should have foreseen this possibility and have conducted its case so as to meet it if it had wanted to do so. The plaintiffs are not now seeking to allege any new facts, but merely to construct a different cause of action out of the facts which were before the Court on the allegations about the contracts. The plaintiffs do not seek to rely on any additional facts which were not adduced in evidence at the trial. At the trial there was no objection taken to any of the evidence which is material for the present purposes on the grounds that it was outside the pleadings. Thus there is no consequent unfairness.
Counsel for Alguna submitted that there was special unfairness to it in that its present controllers, who were not associated with it at the time of the relevant dealings with the plaintiffs, had since acted in conducting the affairs of Alguna without knowledge of the alleged trust. This was not pleaded by Alguna. It would have been equally relevant as an alternative defence to the plaintiffs’ plea based on contract. There is no unfairness in Alguna not now being permitted to raise it when it did not raise it in answer to the claim pleaded in contract.
Counsel for Alguna submitted that it could not raise defences based on illegality or want of clean hands against the claim for equitable relief for enforcement of the trust. No basis of illegality was suggested, and I am not aware of any. Section 86 of the Law of Property Act, even if it applied, would not have made the transfer illegal. It was not suggested that there was any basis for s86(3) of the Bankruptcy Act 1966 to apply.
In relation to the submission of want of clean hands Alguna is not precluded from raising that insofar as it is available on the evidence, and I will deal with it below. Such a defence was available to the claim for specific performance which was sought in the statement of claim, but it was not expressly pleaded or referred to at the trial. Procedural fairness required that I should give the parties the opportunity to make submissions on any defence of want of clean hands or the like, and I have done so.
Counsel for Alguna also submitted that to permit the unpleaded relief would infringe the principles of caseflow management contrary to subrule (4)(b). I do not agree. The plaintiffs do not have to amend their pleadings in order to seek the further relief, and thus R2.05 is of no application. It was submitted that relief based on a trust would require an inquiry being ordered about various financial aspects of the matter, which is correct, but such an inquiry would also probably have been needed if the plaintiffs’ allegations in contract had succeeded. While the granting of any relief based on a trust will prolong and complicate the matter it does not so infringe the principles of caseflow management that the relief should be denied on that ground.
In the alternative to R46.04(4) the plaintiffs also relied on R84.01(1) which provides:
“(1) The Court may at any stage of any proceedings on the application of any party, direct the entry of such judgment or make such order as the nature of the case requires, notwithstanding that the applicant does not make a claim for relief extending to that judgment or order in the summons, provided that such judgment or order can be made without injustice to any other party.”
This rule leads to the same result as R46.04(4). I reject the contention of Alguna that it should not apply because the relief sought would allegedly work an injustice to the present controllers of Alguna. “Other party” in this rule can only mean a party to the action and not any other person at large. “Other” is to be read in conjunction with “any party” near the beginning of the rule. In the context of the whole of the Rules it means only a party who is before the Court, and not some stranger to the action who may be indirectly affected by it.
Resulting or constructive trust
I am satisfied on the findings which I have earlier made on the evidence that the plaintiffs did not, and did not intend to, divest themselves wholly of their beneficial interest in the land when it was transferred to Alguna. The intention was that subject to having to meet a proportion of the expenses the plaintiffs would retain a beneficial interest in one of the two home units which were to be, and which were, constructed on the land by Alguna. While any resulting trust is rebutted in relation to the unit which Alguna was to keep, it does not prevent such a trust being imposed on the other unit: Standing v Bowring (1885) 31 Ch D 282. If this conclusion about a resulting trust is incorrect, I would also find that a constructive trust to similar effect is to be imposed in the circumstances.
Alleged want of clean hands by the plaintiffs
What I found in my earlier reasons was that the plaintiffs transferred the land to Alguna “to make it unavailable for imminent claims of other creditors”. I did not find, as counsel for Alguna has submitted, that it was done to defeat the claims of the creditors. Mr Vordermeier did not dispose of his undivided moiety in the vacant land in the sense of divesting himself of all of his beneficial entitlement, but he merely translated that undivided moiety in the land into an equitable entitlement to an undivided moiety in a unit to be built on the land. (On the evidence, such as it is on the topic, I do not find that the prospective worth of one completed unit was not roughly about equal to the value of the land transferred.) If he had not done this it would have been relatively easy for any of his creditors to have executed against his half interest in the vacant land. By entering into the arrangement with Alguna he made it more difficult for his creditors to satisfy their debts out of his future equitable interest in the home unit presumably by either equitable execution or bankruptcy. It is not necessary for me to decide whether this was defrauding his creditors. Even assuming for present purposes that impeding his creditors’ recovery of their debts, although not necessarily ultimately defeating them, amounts to fraud, and assuming at that time there was some creditor who was impeded by it in its recovery of a debt from him: Byrne v Ross (1936) SASR 21, that is not sufficient here to deprive the plaintiffs of their right to claim a resulting trust.
In Nelson v Nelson (1995) 184 CLR 538 the High Court held that a Court had a discretion about holding whether in the particular circumstances of a case an illegal purpose was a bar to enforcing a resulting trust. Here there is no illegal purpose, but, at the best for Alguna, a purpose of defrauding creditors which is contrary to public policy: (Greig & Davis “The Law of Contract”, pp1134-5). If the Court has a discretion where there is an illegal purpose, it cannot have any less discretion where there has been a lack of clean hands through conduct being contrary to public policy. At its highest, a fraud to impede creditors is not nearly as serious as a fraud to defeat them. After taking into account the unconscionable benefit which Alguna would receive if the plaintiffs were deprived of their remedy on a resulting trust, it is clear in accordance with what was said in Nelson v Nelson that a refusal to enforce the plaintiffs’ rights would be disproportionate to the seriousness of their misconduct, and would unjustifiably benefit Alguna. (See also Fitzgerald v Leohardt (1997) 71 ALJR 653).
While it is conceded that the plaintiffs will have to pay one half of the amount properly borrowed for the building costs as a condition of obtaining title to their unit it may be that there are other incidental expenses which they should also be required to meet in a similar way. There will need to be an inquiry about any such expenses which may be sought by Alguna. When any such expenses have been identified I will then have to rule whether in the circumstances the plaintiffs should be required to pay them, or some of them, as a condition of them obtaining their unit. Insofar as the plaintiffs have been kept out of the benefit of their unit since it was available for transfer to them there may also be some cross claim against Alguna. Again I will direct, if requested, an inquiry concerning that claim.
I will hear the parties further on what orders should now be made.
VORDERMEIER v ALGUNA DEVELOPMENTS PTY LTD & KENMORE DEVELOPMENTS CORP PTY LTD (NO 3)
Civil
Judge LunnREASONS ON PLAINTIFFS’ APPLICATION FOR JUDGMENT FOR RELIEF NOT PLEADED
The plaintiffs sued the defendant Alguna Developments Pty Ltd (“Alguna”) for specific performance of an alleged agreement whereby Alguna would transfer back to them one of two home units which it had built on vacant land which the plaintiffs had transferred to it. In their Statement of Claim the plaintiffs asserted an oral agreement with Alguna under whose terms they claimed they had transferred the vacant land to Alguna. By its defence Alguna pleaded another agreement relating to the transfer of that land in different terms. For reasons which I published on 4 December 1997 (D3719) I found that the plaintiffs had transferred their land to Alguna on which Alguna had erected two home units, but I did not find that there was any concluded or enforceable contract between the parties about precisely what was to happen to the home units. Reference should be made to these earlier reasons where the history is set out in detail. The plaintiffs have now orally applied that judgment be entered for them on the basis that there is a resulting or constructive trust over one of the units in their favour, although no claim to such a trust was expressly pleaded by them.
Availability of relief not pleaded
Rule 46.04(4) provides:
“(a) At the trial, subject to subrule (b) hereof, the Court:
(i). shall grant all such relief on any cause of action to which the parties might be entitled on the evidence whether or not the relief granted is expressly requested in the pleadings ....
(b)... Nothing in subrule (a) hereof allows the Court to grant relief .... if to do so would infringe the principles of caseflow management as set out in Rule 2 or if by reason of surprise, the course of the trial or for any other reason, it would otherwise be unfair to do so.”
Subrule (4)(a)(i) is mandatory in its terms and it does not give any discretion to the Court to refuse such relief. Subject to the matters in (b) the entitlement to relief under (a)(i) turns on the evidence received at the trial and not upon the pleadings. The pleadings are only indirectly relevant insofar as under (4)(a)(ii) the admissibility of the evidence at the trial is dependent in part upon it being within the pleadings. There is no obligation under R46 to plead causes of action, but only facts, although it is obviously convenient if relevant causes of action are identified.
......... The general law on relief being granted for causes of action available on the facts pleaded but not expressly mentioned in either the pleadings or in submissions was dealt with at length by Perry J in S P Hywood Pty Ltd v Standard Chartered Bank Ltd, 11/12/92, Jud No S3764, unreported, where it was said in the context of pleadings under the now repealed Local Court Rules:
“There was, of course, no requirement to plead a cause of action, and indeed, an express reference to a cause of action would be contrary to the rules as to pleading. It was incumbent, notwithstanding the manner in which the case was argued, for the learned Magistrate to give such relief on whatever cause of action entitled the defendant to relief against the third party, having regard to the facts established by the evidence. Rule 67(b)(a)(ii) of the Local Court Rules, which were then of application to the hearing, obliged the pleader simply to plead a statement in summary form of the material facts on which the party relies. Rules to that effect have been, of course, common to most jurisdictions since the Judicature Act. Furthermore, s.35(e) of the Local and District Criminal Courts Act, as it was, provided:
‘35e. A local court in every cause or matter pending before it shall have power to grant, and shall grant, either absolutely, or on such reasonable terms and conditions as it deems just, all such remedies whatsoever as any of the parties thereto may appear to be entitled to in respect of every claim properly brought forward by them respectively, in such cause or matter, so that, as far as possible, all matters so in controversy between the parties may be completely and finally determined, and all multiplicity of legal proceedings concerning any of such matters avoided.’
In Creedon v Measey Investments Pty Ltd (1988) 91 FLR 318, Martin J put the matter in this way (320):
‘Order 23, r 4 of the former rules provided that every pleading shall contain, and contain only, a statement in a summary form of the material facts on which the party pleading relies for his claim or defence.
In Williams v Milotin (1956) 97 CLR 465 at 474 the High Court said:
'When you speak of a cause of action you mean the essential ingredients in the title to the right which it is proposed to enforce.'
That case and others are cited by Williams in "Civil Procedure in Victoria" Vol 1 at 13.02.30,for the proposition that:
'The pleader is not bound to state the legal effect of the facts upon which he relies; he is only bound to state the facts themselves.'
The learned author goes on:
'It is sufficient if the pleader states the material facts, and at the trial he is free to present in argument whatever legal consequences are appropriate to the facts as found by the Court.'
It is not necessary that the plaintiff plead a conclusion of law, that is, that the facts disclose as a matter of law the fourth defendant is vicariously liable for the alleged negligence of the third defendant. However, the plaintiff must plead the 'essential ingredients'."
It is clear on the authorities that the trial judge is not limited to a consideration of the particular cause of action which might be identified by counsel. In Drane v Evangelou & Ors (1978) 1 WLR 455, Lord Denning MR said (458):
"Now there is an appeal to this court. The first point taken on behalf of the defendants was a pleading point. The amended particulars of claim alleged that the landlord had
'interfered with the right of the plaintiff and his de facto wife Ann Watts to quiet enjoyment of the said premises by unlawfully evicting them from the said premises on Tuesday October 14, 1975.'
Counsel for the defendant submitted that that claim was for breach of a convenant for quiet enjoyment. He cited a passage from Woodfall on Landlord and Tenant, 27th ed. (1968), para 1338:
'Since the claim is in contract, punitive or exemplary damages cannot be awarded.'
The judge at once said:
'What about trespass? Does the claim not lie in trespass?'
Counsel for the defendant urged that trespass was not pleaded. The judge then said:
'The facts are alleged sufficiently so it does not matter what label you put upon it.'
The judge was right. The plaintiff in the particulars of claim gave details saying that three men broke the door, removed the plaintiff's belongings, bolted the door from the inside: and so forth. Those facts were clearly sufficient to warrant a claim for trespass. As we said in In re Vandervell's Trusts (No. 2) [1974] Ch 269, 321-322:
'It is sufficient for the pleader to state materials facts. He need not state the legal result. If, for convenience, he does so, he is not bound by, or limited to, what he has stated. He can present, in argument, any legal consequence of which the facts permit'."
Furthermore, it is open to an appeal court to substitute a judgment on what appears to be the proper cause of action, even though attention was confined to another (1928)1 KB 421. In that case, an action was brought by the plaintiff against builders who had allegedly been responsible for allowing rubbish from a building which they were demolishing to fall on a roof, with a result that it was carried down by a drainpipe and choked a gully in the basement of the plaintiff's adjoining premises. Following a heavy downpour of rain, the basement was flooded. The plaintiff had moved into the premises after the builders had completed their work which resulted in the accumulation of the rubbish. The case was argued at first instance solely as a case in negligence. The trial judge found liability in negligence, but on appeal the Court of Appeal held that the action in negligence did not lie, as the defendants owed no duty to the plaintiff, who was not in occupation of the adjoining premises at the relevant time.
However, the Court of Appeal was of the view that there was clearly an action in trespass. Notwithstanding the fact that trespass was not argued in the court below, they upheld the judgment on that footing. See per Scrutton LJ at p.426 (referring to Hudson v Nicholson 5 M & W 437):
"The plaintiff brought an action upon the case and delivered a declaration which contained no allegation of vi et armis and was in point of form framed in case and not in trespass. The question arose whether the plaintiff, who at the time of the wrongful act was not in possession, could bring an action on the case. Lord Abinger CB in delivering judgment said:
'I still adhere to the opinion that this is properly the ground of an action of trespass, and not of case. It is not similar to those cases that have been cited, of trespass to a personal chattel, where trespass and case are concurrent remedies, and where a party may waive the trespass and go for the consequential damage.'
The point having been raised after verdict the Court of Exchequer discharged a rule for a new trial. It follows from that case that if the present action had been brought in trespass there would have been no answer to the claim. But a plaintiff is not now bound to state the legal effect of the facts on which he relies; he is only bound to state the facts themselves, and we cannot see that the respondent has suffered any injustice in the way of being shut out from giving evidence which he might have given if the action had been treated as an action of trespass. We therefore think that the judgment should stand as a judgment in an action of trespass and that the appeal should be dismissed, but without costs."
See generally Cairns' Australian Civil Procedure, 3rd Ed, p.109:
"Now that the rules expressly require a party to plead only the facts, there is no need to name any particular cause of action or defence. Before the Common Law Procedure Act 1852 (UK) the plaintiff had to indorse the cause of action on the writ. Under the present rules, the position is different. Once a party has pleaded a claim or defence, the cause of action, or the nature of the defence, appears from the pleadings. The court gives whatever judgment is justified by the proved facts. Although it is usual for a party to plead the claim for a particular cause of action, that formulation is not binding on the court.
Pleadings in personal injury cases are cast in terms of allegations and particulars that are relevant only to a breach of a duty of care, or breach of a statutory duty. Likewise, allegations in contractual disputes are cast in terms relevant only to contract. None of this is binding on the court. So long as the facts proved show the plaintiff to be entitled to relief, the plaintiff obtains judgment. In giving judgment, the court does not necessarily accept the cause of action on which the plaintiff pleaded the claim. The plaintiff alleges the facts, the defendant admits or denies those facts, or alleges additional facts. Finally, the court applies the law to the facts as proved." (citing Williams v Milotin and Creedon v Measey Investments Pty Ltd, (supra).)
See also the passage in the same work at p.115:
"Since the first requirement of pleading is that only material facts are to be alleged, then obviously matters of law, or legal conclusions or inferences, must not normally be alleged in the pleadings. The pleader alleges the facts, in turn the court finds what facts are proved, and then draws any legal inferences that arise on the findings. Judgment is given on the basis of the findings of fact and the allegations in the pleadings. The legal result of the facts is a matter entirely for the court. A party must not plead matters of law or legal conclusions. For the plaintiff to allege a particular cause of action is usually an improper assertion of a matter of law. So long as the facts alleged in the pleadings show a cause of action, the pleading is sufficient. The plaintiff need not allege which cause of action is asserted."
With respect to that passage, I do not know that I would agree that it is necessarily improper to allege a particular cause of action. A common form of pleading is to assert an entitlement for damages "for negligence" or "for breach of contract". Such an assertion in a statement of claim can draw the attention of the opposing party to the principal cause of action relied upon. But such a plea in no way circumscribes the nature of the available relief. The trial judge is free to give judgment on any available cause of action whatever, irrespective of any mention of particular causes of action in the pleadings. Of course, it must be observed that the pleading of the material facts will often operate to confine the evidence in such a way as to have the practical effect of limiting the options of the trial judge in fashioning relief at the end of the trial.
But what must be kept steadfastly in mind is that all causes of action are at large at the end of the trial, in the sense that judgment may be given upon any cause of action open on the evidence as proved, irrespective of the manner in which the plaintiff's case has been presented, or argued.
Notwithstanding these observations, it is true that there may be cases where the suggestion that a particular cause of action is available might catch a party by surprise, and if it had been adverted to earlier, might have affected the course of the trial. That will not often be the case, as parties should go to trial well knowing that judgment may be entered on any available cause of action. In any event, there was no reason in this case for any party to think that the Third Party claim fell to be resolved only by reference to the tort of conversion.
There was no allegation of any particular cause of action in the third party pleadings. The words "misappropriated the money" when they appear in the schedule to the Third Party Notice were not apt to define any particular cause of action. When the parties had finished calling their evidence, the question of the cause of action against Standard Chartered Bank was at large. It was not circumscribed by reason of the fact that counsel for the appellants sought only to argue the case in conversion. A party is not denied a remedy if counsel choose to rely on one legal argument rather than another.
In my opinion, the learned Special Magistrate should have found that the third party Standard Chartered Bank was liable to the defendant Harwood for damages, if not in conversion, in negligence, or for money paid on a mistake of fact.
Here, the justice of the case calls for the substitution of a judgment against the third party on the ground that the evidence proved an entitlement to such a judgment on the basis of either negligence or as moneys paid under a mistake of fact.”
All of that applies to R46.04(4) subject to the reference to caseflow management in (b). (See also Callaghan v Callaghan (1995) 64 SASR 396 where the action was decided on a cause of action apparently not specifically pleaded.) Indeed, even if it is necessary to align the cause of action relied upon for judgment with the pleadings, there is a discretion to amend the pleadings after the evidence is closed, and even after reasons for judgment have been published: “Civil Procedure South Australia”, vol 1, para R53.01.45.
Counsel for Alguna relied upon various remarks by the High Court of Australia in Banque Commerciale SA v Akhill Holdings Ltd (1989) 169 CLR 279 particularly at 286-7 that a cause of action which was not pleaded could not be relied upon, but that decision must be read subject to the provisions of R46.04(4) and on the basis that it involved a serious unpleaded allegation of fraud. It is not relevant to this matter.
Alleged unfairness in granting relief not sought in the pleadings
Counsel for Alguna submitted that if the plaintiffs had expressly pleaded in the alternative claims based on a resulting or a constructive trust Alguna would have adduced additional evidence on those matters. However, the trust is alleged to arise out of a course of dealings which was fully canvassed in the evidence. While for obvious forensic reasons the parties adopted at trial the position that their particular version of the contract was correct, there was always the potential for the Court to find, as it has, a midway position that neither party has made out its version of the agreement. Any relief which is to be granted in that event must arise out of alternative causes of action which are not contractual. Alguna should have foreseen this possibility and have conducted its case so as to meet it if it had wanted to do so. The plaintiffs are not now seeking to allege any new facts, but merely to construct a different cause of action out of the facts which were before the Court on the allegations about the contracts. The plaintiffs do not seek to rely on any additional facts which were not adduced in evidence at the trial. At the trial there was no objection taken to any of the evidence which is material for the present purposes on the grounds that it was outside the pleadings. Thus there is no consequent unfairness.
Counsel for Alguna submitted that there was special unfairness to it in that its present controllers, who were not associated with it at the time of the relevant dealings with the plaintiffs, had since acted in conducting the affairs of Alguna without knowledge of the alleged trust. This was not pleaded by Alguna. It would have been equally relevant as an alternative defence to the plaintiffs’ plea based on contract. There is no unfairness in Alguna not now being permitted to raise it when it did not raise it in answer to the claim pleaded in contract.
Counsel for Alguna submitted that it could not raise defences based on illegality or want of clean hands against the claim for equitable relief for enforcement of the trust. No basis of illegality was suggested, and I am not aware of any. Section 86 of the Law of Property Act, even if it applied, would not have made the transfer illegal. It was not suggested that there was any basis for s86(3) of the Bankruptcy Act 1966 to apply.
In relation to the submission of want of clean hands Alguna is not precluded from raising that insofar as it is available on the evidence, and I will deal with it below. Such a defence was available to the claim for specific performance which was sought in the statement of claim, but it was not expressly pleaded or referred to at the trial. Procedural fairness required that I should give the parties the opportunity to make submissions on any defence of want of clean hands or the like, and I have done so.
Counsel for Alguna also submitted that to permit the unpleaded relief would infringe the principles of caseflow management contrary to subrule (4)(b). I do not agree. The plaintiffs do not have to amend their pleadings in order to seek the further relief, and thus R2.05 is of no application. It was submitted that relief based on a trust would require an inquiry being ordered about various financial aspects of the matter, which is correct, but such an inquiry would also probably have been needed if the plaintiffs’ allegations in contract had succeeded. While the granting of any relief based on a trust will prolong and complicate the matter it does not so infringe the principles of caseflow management that the relief should be denied on that ground.
In the alternative to R46.04(4) the plaintiffs also relied on R84.01(1) which provides:
“(1) The Court may at any stage of any proceedings on the application of any party, direct the entry of such judgment or make such order as the nature of the case requires, notwithstanding that the applicant does not make a claim for relief extending to that judgment or order in the summons, provided that such judgment or order can be made without injustice to any other party.”
This rule leads to the same result as R46.04(4). I reject the contention of Alguna that it should not apply because the relief sought would allegedly work an injustice to the present controllers of Alguna. “Other party” in this rule can only mean a party to the action and not any other person at large. “Other” is to be read in conjunction with “any party” near the beginning of the rule. In the context of the whole of the Rules it means only a party who is before the Court, and not some stranger to the action who may be indirectly affected by it.
Resulting or constructive trust
I am satisfied on the findings which I have earlier made on the evidence that the plaintiffs did not, and did not intend to, divest themselves wholly of their beneficial interest in the land when it was transferred to Alguna. The intention was that subject to having to meet a proportion of the expenses the plaintiffs would retain a beneficial interest in one of the two home units which were to be, and which were, constructed on the land by Alguna. While any resulting trust is rebutted in relation to the unit which Alguna was to keep, it does not prevent such a trust being imposed on the other unit: Standing v Bowring (1885) 31 Ch D 282. If this conclusion about a resulting trust is incorrect, I would also find that a constructive trust to similar effect is to be imposed in the circumstances.
Alleged want of clean hands by the plaintiffs
What I found in my earlier reasons was that the plaintiffs transferred the land to Alguna “to make it unavailable for imminent claims of other creditors”. I did not find, as counsel for Alguna has submitted, that it was done to defeat the claims of the creditors. Mr Vordermeier did not dispose of his undivided moiety in the vacant land in the sense of divesting himself of all of his beneficial entitlement, but he merely translated that undivided moiety in the land into an equitable entitlement to an undivided moiety in a unit to be built on the land. (On the evidence, such as it is on the topic, I do not find that the prospective worth of one completed unit was not roughly about equal to the value of the land transferred.) If he had not done this it would have been relatively easy for any of his creditors to have executed against his half interest in the vacant land. By entering into the arrangement with Alguna he made it more difficult for his creditors to satisfy their debts out of his future equitable interest in the home unit presumably by either equitable execution or bankruptcy. It is not necessary for me to decide whether this was defrauding his creditors. Even assuming for present purposes that impeding his creditors’ recovery of their debts, although not necessarily ultimately defeating them, amounts to fraud, and assuming at that time there was some creditor who was impeded by it in its recovery of a debt from him: Byrne v Ross (1936) SASR 21, that is not sufficient here to deprive the plaintiffs of their right to claim a resulting trust.
In Nelson v Nelson (1995) 184 CLR 538 the High Court held that a Court had a discretion about holding whether in the particular circumstances of a case an illegal purpose was a bar to enforcing a resulting trust. Here there is no illegal purpose, but, at the best for Alguna, a purpose of defrauding creditors which is contrary to public policy: (Greig & Davis “The Law of Contract”, pp1134-5). If the Court has a discretion where there is an illegal purpose, it cannot have any less discretion where there has been a lack of clean hands through conduct being contrary to public policy. At its highest, a fraud to impede creditors is not nearly as serious as a fraud to defeat them. After taking into account the unconscionable benefit which Alguna would receive if the plaintiffs were deprived of their remedy on a resulting trust, it is clear in accordance with what was said in Nelson v Nelson that a refusal to enforce the plaintiffs’ rights would be disproportionate to the seriousness of their misconduct, and would unjustifiably benefit Alguna. (See also Fitzgerald v Leohardt (1997) 71 ALJR 653).
While it is conceded that the plaintiffs will have to pay one half of the amount properly borrowed for the building costs as a condition of obtaining title to their unit it may be that there are other incidental expenses which they should also be required to meet in a similar way. There will need to be an inquiry about any such expenses which may be sought by Alguna. When any such expenses have been identified I will then have to rule whether in the circumstances the plaintiffs should be required to pay them, or some of them, as a condition of them obtaining their unit. Insofar as the plaintiffs have been kept out of the benefit of their unit since it was available for transfer to them there may also be some cross claim against Alguna. Again I will direct, if requested, an inquiry concerning that claim.
I will hear the parties further on what orders should now be made.
VORDERMEIER v ALGUNA DEVELOPMENTS PTY LTD & KENMORE DEVELOPMENTS CORP PTY LTD (NO 3)
Civil
Judge LunnREASONS ON PLAINTIFFS’ APPLICATION FOR JUDGMENT FOR RELIEF NOT PLEADED
The plaintiffs sued the defendant Alguna Developments Pty Ltd (“Alguna”) for specific performance of an alleged agreement whereby Alguna would transfer back to them one of two home units which it had built on vacant land which the plaintiffs had transferred to it. In their Statement of Claim the plaintiffs asserted an oral agreement with Alguna under whose terms they claimed they had transferred the vacant land to Alguna. By its defence Alguna pleaded another agreement relating to the transfer of that land in different terms. For reasons which I published on 4 December 1997 (D3719) I found that the plaintiffs had transferred their land to Alguna on which Alguna had erected two home units, but I did not find that there was any concluded or enforceable contract between the parties about precisely what was to happen to the home units. Reference should be made to these earlier reasons where the history is set out in detail. The plaintiffs have now orally applied that judgment be entered for them on the basis that there is a resulting or constructive trust over one of the units in their favour, although no claim to such a trust was expressly pleaded by them.
Availability of relief not pleaded
Rule 46.04(4) provides:
“(a) At the trial, subject to subrule (b) hereof, the Court:
(i). shall grant all such relief on any cause of action to which the parties might be entitled on the evidence whether or not the relief granted is expressly requested in the pleadings ....
(b)... Nothing in subrule (a) hereof allows the Court to grant relief .... if to do so would infringe the principles of caseflow management as set out in Rule 2 or if by reason of surprise, the course of the trial or for any other reason, it would otherwise be unfair to do so.”
Subrule (4)(a)(i) is mandatory in its terms and it does not give any discretion to the Court to refuse such relief. Subject to the matters in (b) the entitlement to relief under (a)(i) turns on the evidence received at the trial and not upon the pleadings. The pleadings are only indirectly relevant insofar as under (4)(a)(ii) the admissibility of the evidence at the trial is dependent in part upon it being within the pleadings. There is no obligation under R46 to plead causes of action, but only facts, although it is obviously convenient if relevant causes of action are identified.
......... The general law on relief being granted for causes of action available on the facts pleaded but not expressly mentioned in either the pleadings or in submissions was dealt with at length by Perry J in S P Hywood Pty Ltd v Standard Chartered Bank Ltd, 11/12/92, Jud No S3764, unreported, where it was said in the context of pleadings under the now repealed Local Court Rules:
“There was, of course, no requirement to plead a cause of action, and indeed, an express reference to a cause of action would be contrary to the rules as to pleading. It was incumbent, notwithstanding the manner in which the case was argued, for the learned Magistrate to give such relief on whatever cause of action entitled the defendant to relief against the third party, having regard to the facts established by the evidence. Rule 67(b)(a)(ii) of the Local Court Rules, which were then of application to the hearing, obliged the pleader simply to plead a statement in summary form of the material facts on which the party relies. Rules to that effect have been, of course, common to most jurisdictions since the Judicature Act. Furthermore, s.35(e) of the Local and District Criminal Courts Act, as it was, provided:
‘35e. A local court in every cause or matter pending before it shall have power to grant, and shall grant, either absolutely, or on such reasonable terms and conditions as it deems just, all such remedies whatsoever as any of the parties thereto may appear to be entitled to in respect of every claim properly brought forward by them respectively, in such cause or matter, so that, as far as possible, all matters so in controversy between the parties may be completely and finally determined, and all multiplicity of legal proceedings concerning any of such matters avoided.’
In Creedon v Measey Investments Pty Ltd (1988) 91 FLR 318, Martin J put the matter in this way (320):
‘Order 23, r 4 of the former rules provided that every pleading shall contain, and contain only, a statement in a summary form of the material facts on which the party pleading relies for his claim or defence.
In Williams v Milotin (1956) 97 CLR 465 at 474 the High Court said:
'When you speak of a cause of action you mean the essential ingredients in the title to the right which it is proposed to enforce.'
That case and others are cited by Williams in "Civil Procedure in Victoria" Vol 1 at 13.02.30,for the proposition that:
'The pleader is not bound to state the legal effect of the facts upon which he relies; he is only bound to state the facts themselves.'
The learned author goes on:
'It is sufficient if the pleader states the material facts, and at the trial he is free to present in argument whatever legal consequences are appropriate to the facts as found by the Court.'
It is not necessary that the plaintiff plead a conclusion of law, that is, that the facts disclose as a matter of law the fourth defendant is vicariously liable for the alleged negligence of the third defendant. However, the plaintiff must plead the 'essential ingredients'."
It is clear on the authorities that the trial judge is not limited to a consideration of the particular cause of action which might be identified by counsel. In Drane v Evangelou & Ors (1978) 1 WLR 455, Lord Denning MR said (458):
"Now there is an appeal to this court. The first point taken on behalf of the defendants was a pleading point. The amended particulars of claim alleged that the landlord had
'interfered with the right of the plaintiff and his de facto wife Ann Watts to quiet enjoyment of the said premises by unlawfully evicting them from the said premises on Tuesday October 14, 1975.'
Counsel for the defendant submitted that that claim was for breach of a convenant for quiet enjoyment. He cited a passage from Woodfall on Landlord and Tenant, 27th ed. (1968), para 1338:
'Since the claim is in contract, punitive or exemplary damages cannot be awarded.'
The judge at once said:
'What about trespass? Does the claim not lie in trespass?'
Counsel for the defendant urged that trespass was not pleaded. The judge then said:
'The facts are alleged sufficiently so it does not matter what label you put upon it.'
The judge was right. The plaintiff in the particulars of claim gave details saying that three men broke the door, removed the plaintiff's belongings, bolted the door from the inside: and so forth. Those facts were clearly sufficient to warrant a claim for trespass. As we said in In re Vandervell's Trusts (No. 2) [1974] Ch 269, 321-322:
'It is sufficient for the pleader to state materials facts. He need not state the legal result. If, for convenience, he does so, he is not bound by, or limited to, what he has stated. He can present, in argument, any legal consequence of which the facts permit'."
Furthermore, it is open to an appeal court to substitute a judgment on what appears to be the proper cause of action, even though attention was confined to another (1928)1 KB 421. In that case, an action was brought by the plaintiff against builders who had allegedly been responsible for allowing rubbish from a building which they were demolishing to fall on a roof, with a result that it was carried down by a drainpipe and choked a gully in the basement of the plaintiff's adjoining premises. Following a heavy downpour of rain, the basement was flooded. The plaintiff had moved into the premises after the builders had completed their work which resulted in the accumulation of the rubbish. The case was argued at first instance solely as a case in negligence. The trial judge found liability in negligence, but on appeal the Court of Appeal held that the action in negligence did not lie, as the defendants owed no duty to the plaintiff, who was not in occupation of the adjoining premises at the relevant time.
However, the Court of Appeal was of the view that there was clearly an action in trespass. Notwithstanding the fact that trespass was not argued in the court below, they upheld the judgment on that footing. See per Scrutton LJ at p.426 (referring to Hudson v Nicholson 5 M & W 437):
"The plaintiff brought an action upon the case and delivered a declaration which contained no allegation of vi et armis and was in point of form framed in case and not in trespass. The question arose whether the plaintiff, who at the time of the wrongful act was not in possession, could bring an action on the case. Lord Abinger CB in delivering judgment said:
'I still adhere to the opinion that this is properly the ground of an action of trespass, and not of case. It is not similar to those cases that have been cited, of trespass to a personal chattel, where trespass and case are concurrent remedies, and where a party may waive the trespass and go for the consequential damage.'
The point having been raised after verdict the Court of Exchequer discharged a rule for a new trial. It follows from that case that if the present action had been brought in trespass there would have been no answer to the claim. But a plaintiff is not now bound to state the legal effect of the facts on which he relies; he is only bound to state the facts themselves, and we cannot see that the respondent has suffered any injustice in the way of being shut out from giving evidence which he might have given if the action had been treated as an action of trespass. We therefore think that the judgment should stand as a judgment in an action of trespass and that the appeal should be dismissed, but without costs."
“(1) The Court may at any stage of any proceedings on the application of any party, direct the entry of such judgment or make such order as the nature of the case requires, notwithstanding that the applicant does not make a claim for relief extending to that judgment or order in the summons, provided that such judgment or order can be made without injustice to any other party.”
This rule leads to the same result as R46.04(4). I reject the contention of Alguna that it should not apply because the relief sought would allegedly work an injustice to the present controllers of Alguna. “Other party” in this rule can only mean a party to the action and not any other person at large. “Other” is to be read in conjunction with “any party” near the beginning of the rule. In the context of the whole of the Rules it means only a party who is before the Court, and not some stranger to the action who may be indirectly affected by it.
Resulting or constructive trust
I am satisfied on the findings which I have earlier made on the evidence that the plaintiffs did not, and did not intend to, divest themselves wholly of their beneficial interest in the land when it was transferred to Alguna. The intention was that subject to having to meet a proportion of the expenses the plaintiffs would retain a beneficial interest in one of the two home units which were to be, and which were, constructed on the land by Alguna. While any resulting trust is rebutted in relation to the unit which Alguna was to keep, it does not prevent such a trust being imposed on the other unit: Standing v Bowring (1885) 31 Ch D 282. If this conclusion about a resulting trust is incorrect, I would also find that a constructive trust to similar effect is to be imposed in the circumstances.
Alleged want of clean hands by the plaintiffs
What I found in my earlier reasons was that the plaintiffs transferred the land to Alguna “to make it unavailable for imminent claims of other creditors”. I did not find, as counsel for Alguna has submitted, that it was done to defeat the claims of the creditors. Mr Vordermeier did not dispose of his undivided moiety in the vacant land in the sense of divesting himself of all of his beneficial entitlement, but he merely translated that undivided moiety in the land into an equitable entitlement to an undivided moiety in a unit to be built on the land. (On the evidence, such as it is on the topic, I do not find that the prospective worth of one completed unit was not roughly about equal to the value of the land transferred.) If he had not done this it would have been relatively easy for any of his creditors to have executed against his half interest in the vacant land. By entering into the arrangement with Alguna he made it more difficult for his creditors to satisfy their debts out of his future equitable interest in the home unit presumably by either equitable execution or bankruptcy. It is not necessary for me to decide whether this was defrauding his creditors. Even assuming for present purposes that impeding his creditors’ recovery of their debts, although not necessarily ultimately defeating them, amounts to fraud, and assuming at that time there was some creditor who was impeded by it in its recovery of a debt from him: Byrne v Ross (1936) SASR 21, that is not sufficient here to deprive the plaintiffs of their right to claim a resulting trust.
In Nelson v Nelson (1995) 184 CLR 538 the High Court held that a Court had a discretion about holding whether in the particular circumstances of a case an illegal purpose was a bar to enforcing a resulting trust. Here there is no illegal purpose, but, at the best for Alguna, a purpose of defrauding creditors which is contrary to public policy: (Greig & Davis “The Law of Contract”, pp1134-5). If the Court has a discretion where there is an illegal purpose, it cannot have any less discretion where there has been a lack of clean hands through conduct being contrary to public policy. At its highest, a fraud to impede creditors is not nearly as serious as a fraud to defeat them. After taking into account the unconscionable benefit which Alguna would receive if the plaintiffs were deprived of their remedy on a resulting trust, it is clear in accordance with what was said in Nelson v Nelson that a refusal to enforce the plaintiffs’ rights would be disproportionate to the seriousness of their misconduct, and would unjustifiably benefit Alguna. (See also Fitzgerald v Leohardt (1997) 71 ALJR 653).
While it is conceded that the plaintiffs will have to pay one half of the amount properly borrowed for the building costs as a condition of obtaining title to their unit it may be that there are other incidental expenses which they should also be required to meet in a similar way. There will need to be an inquiry about any such expenses which may be sought by Alguna. When any such expenses have been identified I will then have to rule whether in the circumstances the plaintiffs should be required to pay them, or some of them, as a condition of them obtaining their unit. Insofar as the plaintiffs have been kept out of the benefit of their unit since it was available for transfer to them there may also be some cross claim against Alguna. Again I will direct, if requested, an inquiry concerning that claim.
I will hear the parties further on what orders should now be made.
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