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  • Unreported Judgment

Baker v Hallett

 

[2004] QSC 132

 

SUPREME COURT OF QUEENSLAND

 

PARTIES:

FILE NO/S:

Trial Division

PROCEEDING:

Application – Leave to Proceed & Leave to Amend Summons

ORIGINATING COURT:

DELIVERED ON:

7 May 2004

DELIVERED AT:

Brisbane

HEARING DATE:

15 March 2004

JUDGE:

Holmes J

ORDERS:

1. The plaintiff has leave to proceed against the defendants in actions numbers 1185/94, 1187/94 and 1188/94;

2. The plaintiff has leave to amend the writ of summons in action number 1185/94 in terms of the relief claimed in the document headed “Amended Claim” which is annexure ECPE4 to the affidavit of Edward Campbell Patrick Earl filed in that proceeding on 26 November 2003.

3. The plaintiff has leave to amend the writ of summons in action number 1188/94 in terms of the relief claimed in the document headed “Amended Claim” which is annexure ECPE4 to the affidavit of Edward Campbell Patrick Earl filed in that proceeding on 26 November 2003.

4. The application for leave to amend the writ of summons in action number 1187/94 is dismissed.

CATCHWORDS:

PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PRACTICE UNDER THE RULES OF COURT – TIME – DELAY SINCE LAST PROCEEDING –  where the plaintiff commenced proceedings against his former partner in 1994 for wrongful distribution of moneys  held in trust – where trust money had been paid to the current defendants under the distribution of the fund – where the plaintiff now alleges that the current defendants conspired with his former partner to wrongfully deprive the plaintiff of his entitlement under the fund – whether leave to proceed against the current defendants pursuant to r 389(2) of the Uniform Civil Procedure Rules 1999 should be granted

PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PRACTICE UNDER THE RULES OF COURT – AMENDMENT – where the plaintiff seeks leave to amend the writ of summons so as to allege that the defendants conspired in respect to the wrongful distribution of the trust – whether leave to amend the writ of summons pursuant to rr 375–377 of the Uniform Civil Procedure Rules 1999 should be granted

Justice and Other Legislation (Miscellaneous Provisions) Act 2002 (Qld), s 67

Law Reform Act 1995 (Qld), s 6(b)

Limitation of Actions Act 1974 (Qld), s 27(2), s 38(1Supreme Court of Queensland Act 1991 (Qld), s 81

Trusts Act 1973 (Qld), s 109

Uniform Civil Procedure Rules 1999 (Qld), r 375, r 376, r 377, r 389

Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541, considered

Draney v Barry [2002] 1 Qd R 145, applied

King v Victor Parsons & Co [1973] 1 WLR 29, applied

Kitchen v Royal Air Force Association [1958] 2 All ER 241, applied

Re Selous [1901] 1 Ch 921, considered

Seymour v Seymour (1996) 40 NSWLR 358, applied

Thomas v State of Queensland [2001] QCA 336, followed

Tyler v Custom Credit Corp Ltd & Others [2000] QCA 178, applied 

COUNSEL:

DV McMeekin SC for the plaintiff

AJ Morris QC for the defendant in SC No 1188 of 1994

MP Amerena for the defendant in SC No 1185 of 1994

CJ Callaghan (sol) for the defendant in SC No 1187 of 1994

SOLICITORS:

Baker Johnson Lawyers for the plaintiff

Walsh Halligan Douglas for the defendant in SC No 1188 of 1994

Hyland Lawyers for the defendant in SC No 1185 of 1994

Callaghan Lawyers for the defendant in SC No 1187 of 1994

The application and the proceedings as commenced

[1] The applicant plaintiff in these proceedings seeks, in each case, leave to proceed pursuant to r 389(2) of the Uniform Civil Procedure Rules 1999 and to amend the writ of summons pursuant to r 377 of the Rules. The proceedings began in this way: the plaintiff sued James Beresford Loel, a former partner with him in a solicitor’s firm, and a co-trustee with him of a superannuation fund, for wrongful distribution of the moneys held in trust in the fund. Each of the three respondent defendants here was said to have been a recipient of some of those moneys. The writs issued in the actions in August 1994 claimed a declaration in each case that the defendant was liable to refund to the superannuation fund a specific amount paid to him or her, or to make compensation for that amount; as an alternative remedy an account was sought. One of the defendants was incorrectly named in the title to the writ against her: Sharon “James” is in fact Sharon Janes.

[2] From the material relied on here, it seems that what underlay the four actions was the break up of the partnership between Mr Loel and the plaintiff, with a consequent need to distribute the proceeds of the superannuation fund they had set up by deed dated 1 June 1981. Under that deed, the plaintiff and Mr Loel were trustees of the fund, and Barnstaple Pty Ltd, of which both were directors, was named as “principal employer”. That deed was replaced by a deed of 10 June 1982, which recited that it was intended to continue the existing fund with alterations so as to conform to the Commissioner of Taxation’s requirements for such funds. Each of the defendants was an employee of the partnership, Mr Pattison and Mr Hallett as solicitors, and Ms Janes as a secretary, and all were members of the fund.

[3]  There was some dispute between the plaintiff and Mr Loel as to how the distribution on the dissolution of the partnership should occur. Mr Loel distributed the funds as follows: to himself, $85,318.24, to the plaintiff, $140,270.50, to the plaintiff’s wife, G Baker, $34,795.78, to Mr Hallett, $59,080.34, to Mr Pattison $32,258.86, and to Ms Janes, $40,232.62. The plaintiff and his wife did not accept the monies which were to be distributed to them, the plaintiff arguing that he was entitled to a larger share under an arrangement made between him and Mr Loel.

[4] The statement of claim in each action, delivered on 10 April 1995, alleged that Mr Loel, in making the distribution, dealt with the fund in breach of trust. He had purported to rely on a rule of the relevant superannuation deed, r 1.7, which enabled payment of the benefit in the trustees’ discretion provided that the principal employer had advised in writing at the time the fund was established that a particular schedule to the deed did not apply. Because no such advice had been given, it was pleaded, Mr Loel had acted in breach of r 1.7. It was not alleged in that original pleading that any of the defendants who are respondents to this application were party to any wrongdoing.

The orders made in 1995 and their effect

[5] In 1995, the plaintiff applied for leave to proceed against the respondents in terms of s 109(2) of the Trusts Act 1973 and to consolidate the four actions, including that against Mr Loel. Section 109(2) provides:

Remedies for wrongful distribution of trust property

…..

 

(2)Except by leave of the court, no person who has suffered loss by reason of the wrongful distribution of trust property or of the estate of a deceased person may enforce any remedy against any person to whom such property or estate has been wrongfully distributed until the person has first exhausted all remedies which may be available to the person against the trustee or personal representative.”

[6] At the same time there was a striking out application by all defendants other than Mr Loel. In the event, the learned Judge on that application, Derrington J, concluded that the plaintiff’s rights against those defendants had not accrued, and would not accrue, until he had exhausted his rights against Mr Loel. He gave leave to commence proceedings against all defendants, but stayed the actions against them until the conclusion of the actions brought against Mr Loel and the exhaustion by the plaintiff of any remedies granted in those actions.

[7]  It was not until 27 November 2002 that the action against Mr Loel was concluded by settlement immediately before trial. A consent judgment in the amount of $114,500, with further amounts for interest, was given on 22 January 2003. The plaintiff issued a bankruptcy notice in January 2003.  Mr Loel entered a Part X arrangement on 1 May 2003. The trustee of his estate advised that the plaintiff would receive a dividend in the amount of $7,629.44 in respect of his claim for debt, interest and costs. 

The Loel-Pattison-Hallett correspondence

[8] Shortly prior to the date set for trial, documents were produced under a subpoena issued to Mr Pattison. They were then relied on by the plaintiff in drawing an amended claim and statement of claim against the three defendants other than Mr Loel. The proposed amended claim in each action seeks damages for conspiracy.  The statement of claim as amended most unsatisfactorily pleads, in support of the conspiracy allegation, the content of the correspondence produced by Mr Pattison, rather than identifying the overt acts which manifest the conspiracy. That correspondence consists of the following:

 a letter from Mr Pattison to Mr Hallett dated 6 July 1989, in which Mr Pattison notes that he has received a payment from the superannuation fund from which PAYE tax has been deducted and observes that the tax liability is likely to be greater than that amount. A similar problem is likely to arise in relation to Ms Janes. He proposes that no further distribution be made until “all tax liability is assessed and taken care of”. 

 a letter from Mr Pattison to Mr Hallett dated 12 July 1989 regarding his discussion with a Mr Wenk. That letter notes that Mr Loel had sought advice as to a division of the funds. Mr Pattison’s entitlement was of the order of $30,000, but in accordance with taxation requirements he had been paid in the first instance approximately $14,000.  He proposes to repay that amount to Mr Loel on provision of tax stamps, a statement of termination payment and group certificate, an indemnity from Mr Loel in relation to any claim in consequence of the distribution and a loan agreement in respect of the money. Heavy reliance was placed by the plaintiff on these passages in the letter:

“As discussed with Cameron Wenk and I believe Cameron was in the most part in agreement with me, the re-transfer of monies to the Trustee’s hands will enable Mike Baker, in the event of his ever commencing proceedings to establish that the Trustee’s actions were in fact solely for the benefit of the individual trustee and would then make the transaction able to be attacked.

In simple terms I am prepared to pay the net sum received by me from AMP in the sum of $13,188.53 to James Loel by way of a Loanback to the Trustee from a beneficiary.  It is hoped that this will give some possible substance to the transaction in an effort to stave-off any possible action.  However it is one which can certainly be attack [sic], and I think that great caution must be used.

[The request for documentation follows]

….

I don’t believe I am being unreasonable in these requests as it is very necessary for me to satisfy the Income Tax Commissioner as to the monies that were received and the payment of tax on those monies and I simply don’t have any documentation in that regard.  The Loan Agreement will in fact, be of benefit to the Trustee to try and substantiate the payment back and as I believe the whole series of transactions, by way of the payment back, may now come under serious attack, I seek the Indemnity.”

 two identical letters from Mr Loel to Mr Pattison dated 18 and 21 August 1989, referring to the earlier letter to Mr Hallett, agreeing with its content, and enclosing a draft deed to deal with the matters raised. The letters go on to say that Mr Loel wishes to reach a similar agreement with Ms Janes, asks for Mr Pattison’s assistance in that regard and encloses a deed for Ms Janes’ consideration. 

 a letter from Mr Pattison to Mr Loel dated 23 August 1989, indicating his agreement to the deed and informing Mr Loel that he had given the proposed deed to Ms Janes with the recommendation that she execute it. 

 a letter from Mr Loel to Mr Pattison dated 28 August 1989, forwarding loan agreements and indemnities for himself and Ms Janes and giving an undertaking to forward requested documents for tax purposes upon receipt of the loan agreements and indemnities and cheques in payment of the loan in each case. 

 a letter from Mr Pattison to Mr Loel dated 4 September 1989, returning the loan agreement and indemnity but requiring the other agreed documents before forwarding his cheque. 

 a letter from Mr Loel to Mr Pattison dated 6 September 1989, forwarding the requested documents.

 a letter from Mr Pattison to Mr Loel dated 11 September 1989, forwarding his cheque in the sum of $13,188.53.

The current applications

[9] The plaintiff now seeks leave to proceed against the three defendants and leave to amend so as to allege that each conspired with Mr Loel in respect of the wrongful distribution. An amended statement of claim was filed on 1 September 2003, alleging conspiracy to deprive the plaintiff of his entitlement to a 65% share of the fund (arising under an agreement made between him and Mr Loel); although nothing was done at that stage about amendment of the originating process.  Instead, an application was made by the defendants to strike out the proposed amendments to the statement of claim and a cross application was made by the plaintiff for leave to deliver it. On 5 November 2003, I made orders that the plaintiff file and serve applications to amend the writ of summons (to reflect the relief now sought as a result of the proposed amendments) and for leave to proceed. 

[10] These applications are now made in accordance with that order, although, oddly, no proposed amended writ of summons is anywhere exhibited. One assumes that it is intended to amend the relief sought in the writ of summons along the lines of what is contained in a proposed claim exhibited to an earlier affidavit, so as to claim damages for conspiracy. But a further amended statement of claim is now proposed, which expands on the particulars of conspiracy pleaded in each case to allege, in summary, that each defendant knew that he or she had no entitlement to the money distributed and knowingly took part in a sham transaction enabling Mr Loel to defraud the trust fund by receiving payment and paying the funds back to him, the predominant purpose of the transaction being to injure the plaintiff as the principal beneficiary of the trust fund. 

[11] More particularly, it is pleaded that “in or about June 1981 the plaintiff and Mr Loel agreed that they would be entitled to the assets of the superannuation fund in the proportions of 65% and 35% respectively”. But for the agreement between the plaintiff and Mr Loel,  Messrs Hallett and Pattison and Ms Janes would have been, respectively, entitled to the sums of $459.38, nothing, and $223.21, pursuant to rr 1.7 and 1.8 of the deed. After the payments were made, it is alleged, Mr Pattison and Mr Hallett, in accordance with the thrust of the letters set out above, repaid to Mr Loel the amount distributed to them after the income tax liability was met, and Mr Pattison also entered a loan agreement and indemnity with Mr Loel in order to disguise the return of the moneys to the latter. But as to Ms Janes, the pleading is confusing: at one point in the further amended statement of claim it is said that she neither returned the money nor entered a deed of loan and indemnity, but at another it is asserted that she did pay the money back to Mr Loel. Counsel for the plaintiff conceded that the earlier allegation was in fact correct. 

[12] By reason of the defendants’ lack of entitlement and the correspondence, the further amended statement of claim somewhat inconsequentially pleads, Mr Loel acted in breach of trust and/or fraudulently and each of the three remaining defendants conspired with him and/or each other to deprive the plaintiff of his entitlement under the fund. It is pleaded that the conspiracy can be inferred from: the fact that the defendants were not entitled to the money and their knowledge, actual or constructive, that they were not entitled to it; their being “privy” to the correspondence set out above; their payment back to Mr Loel of the distributions (obviously wrongly alleged in the case of Ms Janes); and the sham nature of the original payments, giving the appearance that Mr Loel was acting in his capacity as trustee. In the case of Ms Janes, a further basis for drawing the inference is said to be the fact that she was employed as Mr Pattison’s secretary/typist and that he acted as her solicitor. 

Leave to proceed

[13] The factors relevant in considering whether leave to proceed ought to be granted were set out in Tyler v Custom Credit Corp Ltd & Others[1] by Atkinson J, with whom the other members of the Court of Appeal agreed, as including: the lapse of time since the events giving rise to the proceeding; delay in its prosecution, the reasons for it, and any prejudice consequent on it; the applicant’s prospects of success; and how far the litigation has progressed, and whether it would be ended if leave were not given.

Delay

[14] The point is made for the defendants that almost 15 years have now elapsed since the distribution of the funds the subject of these proceedings in July 1989. No action was brought by the plaintiff in respect of the disbursement until August 1994, a delay which is not explained. Although the plaintiff was, plainly enough, prevented by the existence of the stay from proceeding against the defendants until his action against Mr Loel was concluded, there has also been considerable delay in that litigation since the orders of Derrington J were made.

[15] An amended statement of claim was served on Mr Loel in August 1995, and his defence was promptly delivered. In November 1995, Mr Loel was given a notice requiring discovery on oath, which seems to have resulted in an order against him on 13 March 1996.  Magistrates Court proceedings were then taken to recover the costs of that application, which would appear to have had no bearing on the action  itself. Nonetheless, it does not appear that any further step was taken in it until 16 September 1997, when it was remitted to the District Court.

[16]  In November 1997, there was a request by Mr Loel’s solicitors for discovery of certain documents, at the same time indicating that interrogatories would be delivered. That led to an argument between the parties as to whether the matter should be set down for trial; Mr Loel appears to have prevailed. In January 1998 consent orders were made, and interrogatories were delivered the following month.  They were not, however, answered until late February 2000, at which stage the plaintiff also served a further amended statement of claim. All that seems to have happened in the intervening period is that the plaintiff had commissioned an accountant’s report in November 1999, which was received in final form in January 2000. Whatever the rights and wrongs of the applications to dispense with certificate of readiness, there seem therefore to have been at least two significant periods, between March 1996 and September 1997, and between February 1998 and February 2000, when the plaintiff was a cause of delay in the action.

[17] In March 2000, Mr Loel changed his solicitors. There was some delay over the next six months in relation to the pleadings, largely in connection with a successful application by Mr Loel’s solicitors for further and better particulars of the amended statement of claim and an application for further disclosure. There were lengthy arguments about disclosure, concerning the rate at which copying should be paid and whether some of the documents had gone missing. That process seems to have taken about a year. In May 2000, the plaintiff unsuccessfully sought to strike out parts of the defence. In June 2001, an amended defence and counterclaim was served and a reply filed soon after. In July 2001, the defendants sought further and better particulars of the reply, and those were delivered. Mr Loel’s solicitors then contended that the further and better particulars were deficient and disclosure incomplete. On the basis of those contentions they refused to sign a request for trial date delivered in March 2002. In August 2002, the action was placed on the callover list. It was given a trial date of 25 November 2002, but was settled by consent on that day. 

[18] Any delay between March and November 2002 would seem in all probability to have been the result of delay on the part of Mr Loel’s solicitors. But taking matters as a whole, the protracted time taken to bring the action against Mr Loel to trial seems to have resulted from diversions and delays by both parties. Given that the plaintiff’s own firm seems to have acted for him at all times, the delays on his part cannot be sheeted home to anyone else.

Prejudice

[19] Each of the defendants argued that there would be prejudice to him or her if leave to proceed were given and the amendments sought were permitted. There was, it was said, no reason to suppose at the time the original statement of claim was delivered that there would be allegations of conspiracy made. Witnesses had not, therefore, directed their minds to such issues, and contemporaneous documents might not have been kept. The issue of whether the 65/35 agreement alleged by Mr Baker existed was likely to come down to a question of credit which would be extremely difficult to resolve 15 years later. The defendants would now have to recall their intentions at the relevant time 15 years after the event. In the case of Mr Pattison, there clearly was some involvement of Mr Wenk, who was an insurance consultant; both Mr Pattison and Mr Wenk would now have to try to recollect what they could of the circumstances of their discussions.

[20] Mr McMeekin SC, for the plaintiff submitted that prejudice was lacking: the defendants had known from the commencement of the litigation that it was possible the plaintiff would look to them for relief, if his claim as against Mr Loel went unsatisfied. No defendant actually swore in an affidavit that his or her recall was diminished or that documents had been lost. Recollections of the transactions were likely to have endured, given what was, on the plaintiff’s case, a peculiar set of events. 

[21] It does seem probable, although no defendant has sworn to it, that difficulties will be encountered in terms of recollecting and establishing the circumstances in which the defendants received the monies from Mr Loel, and, in the cases of Mr Pattison and Mr Hallett, repaid them. Those proportions of those difficulties may not now be capable of precise identification, for the reasons explained by McHugh J in Brisbane South Regional Health Authority v Taylor[2]. But there is this to be said on the plaintiff’s side of the prejudice argument: on his case, the repayment of the funds was not known to him and, the inference would seem obvious from the correspondence, was actively concealed from him; so that it was not until Mr Pattison produced the documents subject to the subpoena he had any means of discovering what had really occurred. In those circumstances it is difficult, I think for the defendants to rely on the delay in alleging conspiracy as causing prejudice to them; so that this factor does not tell strongly against the plaintiff. 

Prospects of success

[22] Mr Amerena, for Mr Pattison, made a number of submissions concerning deficiencies in the plaintiff’s case which, he said, must lead to a conclusion that the prospects of success were so poor he should not be permitted to proceed. Those prospects, he said, depended on the plaintiff’s ability to prove a loss, and, it followed, an entitlement; and that in turn required proof of the agreement to distribute the fund in 65/35 proportions, as alleged in the more recent pleadings.  There were a number of arguments against any such agreement having been made or, if it were made, its being effective. It had not originally been pleaded, and the plaintiff had never sworn to its existence.

[23] If such an agreement existed, Mr Amerena said, it was an attempt to defraud the revenue: the trust deed purported in its recital to conform with the requirements of the Commissioner of Taxation which at the relevant time took the form of a set of guidelines for contributions to investments made and benefits paid by employee superannuation funds. Alternatively, it was an attempt to defraud the other beneficiaries of the fund in order to defeat the beneficial interests created for them by the trust deed. 

[24] If not illegal, the agreement was ineffective. The plaintiff and Mr Loel could not be trustees for themselves; Mr Amerena relied on Re Selous[3] for that proposition. It was extinguished or discharged by the terms of the 1982 deed; and adherence to it would contravene the duties of the plaintiff and Mr Loel as trustees to observe the terms of the trust. The allegation of the agreement amounted to a claim that the trustees could validly fetter the discretions vested in them by the trust deed in advance of the time when that discretion fell to be exercised. In any event, there was some evidence that the plaintiff had ratified the distribution made by Mr Loel; and that distribution was made, not under r 1.7 of the deed as pleaded by the plaintiff, but pursuant to cl 11.2, which provided for determination of the benefit payable in the event of the employer ceasing business.

[25] Turning to the allegation of conspiracy, Mr Amerena argued that what was pleaded was an agreement after the distribution of funds, consistent with a desire to withdraw from any possible argument between the plaintiff and Mr Loel rather than any conspiracy involving the distribution itself. Any damage was caused by the distribution, not by any agreement to conceal the distribution after the event. The claim included damages in an amount of $45,000 for the costs of the Loel proceedings; those were the result of the pursuit of Mr Loel, not any agreement between the defendants and Mr Loel. Finally, Mr Amerena said, conspiracy to commit a breach of trust was not known to the law. An unlawful means conspiracy had to be based on conspiracy to commit a criminal offence, a breach of contract or a tort; breach of trust or fiduciary duty would not suffice.

[26] Many of the points made by Mr Amerena about the merits of the plaintiff’s claim, although they appear compelling, are not capable of resolution here, and the question of the plaintiff’s prospects can only be a matter of general impression. The 65/35 agreement is nowhere sworn to; but it does appear to have been relied on as early as May 1995, when an amended statement of claim including the allegation as to the agreement was annexed to an affidavit in the application before Derrington J. Without reaching any conclusion on the point, I am unconvinced that any such agreement must have been ineffective because the plaintiff and Mr Loel could not be both trustees and beneficiaries; it does not seem to me that the interest of each in the fund as a beneficiary was necessarily coextensive with his title as trustee as to the entirety of the fund.

[27] What creates greater difficulty is the failure of the pleadings to make any attempt at reconciling the existence of the agreement with the existence of the trust deed for the superannuation fund. It is quite unclear which came first, the original Deed or the alleged 65/35 agreement; and the terms of the original Deed are not in any event in evidence. The further amended statement of claim is devoid of any explanation of how the 1982 Deed might have affected the agreement, or the agreement the Deed. 

[28] As it stands, the pleading alleges an agreement between the plaintiff and Mr Loel as to their respective entitlements to the assets of the fund which is not expressed, for example, to be subject to the accruing of entitlements by other members of the fund.  While acknowledging entitlements on the part of Mr Hallett and Ms Janes under rules 1.7 and 1.8 of the Deed, albeit in very small amounts, it then asserts, in effect, that by virtue of the 65/35 agreement they had no entitlement at all. That does smack of sham, or an impermissible fettering of discretion. At the same time the pleading seems to accept the existence of an effective trust deed; it alleges breaches of its rules by Mr Loel.

[29] It seems to me not impossible that the agreement between Mr Loel and the plaintiff could co-exist with the trust Deed, subject to any entitlements which might accrue to the beneficiaries under the latter, although that is not how matters are presently pleaded. But for present purposes I would not be prepared to proceed on the basis that the Deed must have extinguished any rights under the alleged agreement, or to conclude at this stage that the plaintiff would be precluded relief by illegality. (Whether the plaintiff ratified the distribution by Mr Loel is a question best left for trial, but the evidence of it is relatively slight.) The conclusion I come to is that the pleading is unsatisfactory, rather than that the claim of an agreement and consequent entitlement of the plaintiff is without merit.

[30] As to the question of conspiracy, the further amended statement of claim does, I think, make it clear that what is alleged is a conspiracy for an unlawful purpose – that is, with the predominant purpose of injuring the plaintiff – so that the question of whether a breach of trust can amount to unlawful means becomes irrelevant. It seems to me that the correspondence and the alleged actions of Mr Hallett and Mr Pattison in repaying the money are capable of being construed as reflecting an understanding among the three that the funds always were to be returned to Mr Loel, and that it was necessary to conceal that fact. I would not be prepared to say that that claim was without real prospect of success. As against Ms Janes who did not return the monies or enter into any of the documentation which might have provided a facade for such return, the case is rather different, and I would think it has little prospect of success. (The allegation that she was “privy to the correspondence” between Messrs Pattison, Loel and Hallett is singularly vague and unconvincing.) But there remains the claim to trace the monies paid to her as a recipient of wrongfully distributed trust funds. That claim, it seems to me, cannot be said to be without prospect. 

[31] Mr Amerena is, I think, quite right in saying that the costs of the proceeding against Mr Loel can hardly be regarded as part of the damage caused by the conspiracy, and there are other curious features of how the claim for damages is formulated; but that has no real bearing on whether leave to proceed should be granted. In a similar vein, Mr Morris QC, for Mr Hallett, pointed to s 6(b) of the Law Reform Act 1995, which, where joint tortfeasors are sued separately, precludes recovery from those later sued of any amount greater than the damages awarded in the first judgment given.  Mr Morris says that the amount sought to be recovered in the three actions are, in the aggregate in excess of the amount of the judgment against Mr Loel. However, that again seems to me to bear on what may be recovered, not whether the claim should proceed.  Nor do I think it necessarily dictates the way that the claims must presently be formulated; it might be for example that the plaintiff succeeds against one defendant and fails against another, which would itself limit the amount to be recovered.

[32] Another consequence of the defendants being sued in tort, was, Mr Morris said, that the relevant limitation period commenced to run when the first loss was suffered on distribution of the fund in 1989 and had long since expired. For reasons I will deal with in connection with the application for leave to amend, I do not think that matter fatal to prospects.  I should say, too, that Mr Morris pointed to a number of deficiencies in pleading, some of which are manifest. But there is enough, I think, purely as a matter of pleading, to make out conspiracy against Mr Hallett and Mr Pattison.  It is pleaded that they were aware of their lack of entitlement to the funds paid; that they were aware the payments to them were a sham in order to make it appear that Mr Loel was acting properly as a trustee, rather than defrauding the trust fund; that the funds were repaid by them to Mr Loel, and in the case of Mr Pattison that he entered a Deed of Loan to disguise that fact; that their predominant purpose was to injure the plaintiff; and that as a result of the conspiracy he has suffered loss.  In the case of Ms Janes, there remains sufficient of the original pleading to support the claim for recovery from her as a recipient of wrongfully distributed trust funds.

[33] Finally, Mr Amerena pointed out that this was not a case where there were counter-claims, the litigation would be resolved if the plaintiff were refused leave to proceed. As to the progress of the litigation no defences had been filed yet. Other issues raised in Tyler did not arise; there was no disobedience to court orders and no question of impecuniosity on the part of the plaintiff.

[34] Weighing all factors, I conclude that there is sufficient prospect of success, and not so great a prejudice caused by the undoubted delay, to turn the balance in favour of granting leave to proceed. There remains, then, the issue of whether an amendment to the originating process should be permitted. 

Application for leave to amend

[35] The question was raised whether the application for leave to amend fell within r 376 or r 377 of the Uniform Civil Procedure Rules 1999, the former rule applying where the application is made after the end of the limitation period.

[36] Mr McMeekin relied on s 27(2) of the Limitation of Actions Act 1974, which sets for a beneficiary’s action in respect of a breach of trust a limitation period of 6 years from the date on which the right of action accrued, unless some other period of limitation is prescribed by the Act.  He said the right of action had accrued only when the remedies against Mr Loel had been exhausted; the earliest date on which that could be said to have occurred was 1 May 2003, when Mr Loel entered a Part X arrangement.  But counsel for the defendant pointed out that the conspiracy claim was a claim in tort, not for a breach of trust.  Consequently the limitation period commenced to run when the damage was first incurred; in this case at the time of the alleged wrongful distribution of the monies in October 1998.

[37] In response, Mr McMeekin argued that s 38(1) of the Limitation of Actions Act operated to extend the limitation period where “the right of action is concealed by the fraud of [the defendant]”; so that here the period of limitation did not begin to run until the plaintiff became aware, by dint of the letters passing between Messrs Pattison, Loel and Hallett, that the funds distributed had been repaid to Mr Loel.  The covert repayment of the funds had served to disguise the fact that Mr Loel had acted to deprive the plaintiff of his entitlement and that the defendants had conspired with him to do so.

[38] Alternatively, Mr McMeekin said, if the relevant limitation period had ended, the court’s discretion under r 376(4) of the rules should be exercised in favour of the plaintiff: the amendment was appropriate and the new cause of action arose out of substantially the same facts as the cause of action originally pleaded.  In addition, he submitted, s 81 of the Supreme Court of Queensland Act 1991 conferred an additional power to permit the amendment.

[39] There is, I think, an inference available from the letters passing between Messrs Hallett, Pattison and Loel that there was an act of concealment by the three of the payment back of the funds to Mr Loel; that is to say, of at least one of the overt acts of the alleged conspiracy. That inference does not extend to Ms Janes, who was not a party to any of the correspondence, and against whom the most that could be alleged was the unsupported and unexplained allegation that she was “privy” to it. If the inference I have posited is to be drawn against the three men, it may well amount to fraud concealing the plaintiff’s right of action in conspiracy, in the sense in which fraud is used in the authorities: not in the common law sense[4], but as involving “a consciousness that was is being done is wrong or that to take advantage of the relevant situation involves wrongdoing”[5]. But I would not be prepared to make a positive finding to that effect purely on the basis of the letters, which admit of more than one interpretation. Nonetheless, the fact that that position is arguable is of relevance in turning to consider whether amendment should be allowed under the Uniform Civil Procedure Rules 1999. 

[40] The rules relevant, for present purposes, to amendment out of time are r 375, which provides:

“(1)At any stage of a proceeding, the court may allow or direct a party to amend a claim, anything written on a claim, a pleading, an application or a document in a proceeding in the way and on the conditions the court considers appropriate.

(2)Subject to rule 376, the court may give leave to make an amendment even if the effect of the amendment would be to include a cause of action arising after the proceeding was started.”

and r 376(4) and (5):

“(4)The court may give leave to make an amendment, even if the effect of the amendment is to include a new cause of action, if –

(a)the court considers it appropriate; and

(b)the new cause of action arises out of the same facts or substantially the same facts as a cause of action for which relief has already been claimed in the proceeding by the party applying for leave to make the amendment.

(5)This rule does not limit the court’s powers under rule 375.”

[41] I doubt that s 81 of the Supreme Court of Queensland Act 1991 can now be regarded as adding to the discretion conferred by rr 375 and 376, in light of its amendment[6] in 2002, which clarifies the effect of those rules by providing that “the rules of court may limit the circumstances in which amendments may be made.” That amendment appears to have been designed to address views expressed in Draney v Barry[7] as to the effect of s 81. Nonetheless, that decision still stands for the proposition, adopted by the majority, that the discretion to give leave to amend to add a new cause of action extends beyond cases falling within r 376(4).

[42] The apparent concealment from the plaintiff of the circumstances of the arrangement between Messrs Loel, Pattison and Hallett constitutes in my view a powerful factor making it appropriate to permit amendment as against Mr Pattison and Mr Hallett. Whatever the reasons for that concealment, it certainly prevented the plaintiff from discovering the occurrence of the events which found his conspiracy claim, and precluded his bringing it earlier. Whether it can be said that the cause of action in conspiracy arises out of “substantially the same facts” as the claim of breach of trust is less clear.  Thomson JA’s discussion of the phrase in Draney v Barry[8] is of some assistance:

“I do not think that ‘substantially the same facts’ should be read as tantamount to the same facts, and consider that the need to prove some additional facts is not necessarily fatal to a favourable exercise of discretion under Rule 376(4).  If the necessary additional facts to support the new cause of action arise out of substantially the same story as that which would have to be told to support the original cause of action, the fact that there is a changed focus with elicitation of additional details should not of itself prevent a finding that the new cause of action arises out of substantially the same facts.  In short, this particular requirement should not be seen as a straitjacket.”

[43] This is a case, in my view, of substantially the same story with additional facts and a changed focus. I will grant leave to amend pursuant to r 376(4) in respect of the originating process as against Mr Hallett and Mr Pattison; but not as against Ms Janes.  I should say, in any event, that if I am wrong as to the conspiracy action falling within the description of arising out of “substantially the same facts”, it seems to me an appropriate case for amendment pursuant to the broader power conferred by r 75, given the aspects of apparent concealment which I have dealt with at some length.

[44] The orders are:

1. The plaintiff has leave to proceed against the defendants in actions numbers 1185/94, 1187/94 and 1188/94;

2. The plaintiff has leave to amend the writ of summons in action number 1185/94 in terms of the relief claimed in the document headed “Amended Claim” which is annexure ECPE4 to the affidavit of Edward Campbell Patrick Earl filed in that proceeding on 26 November 2003.

3. The plaintiff has leave to amend the writ of summons in action number 1188/94 in terms of the relief claimed in the document headed “Amended Claim” which is annexure ECPE4 to the affidavit of Edward Campbell Patrick Earl filed in that proceeding on 26 November 2003.

4. The application for leave to amend the writ of summons in action number 1187/94 is dismissed.

[45] I will hear the parties as to costs.

Footnotes

[1] [2000] QCA 178

[2] (1996) 186 CLR 541 at 554.

[3] [1901] 1 Ch 921.

[4] King v Victor Parsons & Co [1973] 1 WLR 29 at p 33; Kitchen v Royal Air Force Association [1958] 2 All ER 241 at 249

[5] Seymour v Seymour (1996) 40 NSWLR 358 at 372.

[6] Section 81(3), inserted by the Justice and Other Legislation (Miscellaneous Provisions) Act 2002 s 67 which came into effect on 16 August 2002.

[7] [2002] 1 Qd R 145.

[8] At p 164; cited with approval in Thomas v State of Queensland [2001] QCA 336.

Close

Editorial Notes

  • Published Case Name:

    Baker v Hallett; Baker v Pattison; Baker v James

  • Shortened Case Name:

    Baker v Hallett

  • MNC:

    [2004] QSC 132

  • Court:

    QSC

  • Judge(s):

    Holmes J

  • Date:

    07 May 2004

Litigation History

No Litigation History

Appeal Status

No Status