DISTRICT COURT OF QUEENSLAND

1. [1]
   Almost 2 decades ago, when interest rates in Australia were high, John Keating, a client of the defendant Mr Richardson, a solicitor, devised the Hadkeato Scheme. It was a get rich quick scheme to exploit the differential in interest rates charged on loans in Australia and offshore.  Mr Keating introduced the scheme to Mr Hampton and the other two plaintiffs at a meeting in the office of Mr Robson, a real estate agent, in July 1990. Funds borrowed offshore at a lower interest rate than could be obtained here were to be lent in Australia at market rates.  The difference in interest paid offshore and interest income received in Australia was to return a windfall profit within a short period. Mr Keating gave the plaintiffs the opportunity to participate by contributing to a “blocking fee” to facilitate the funds being raised offshore. 

2. [2]
   They took up the offer. Their contributions were paid into the trust account of Mr Richardson’s firm. There was no windfall. Mr Hampton and Mr Wyatt received back only a portion of their contribution. Mr Herford received none.

3. [3]
   This action arises out of the circumstances in which Mr Richardson dispersed the blocking fee from the trust account. The plaintiffs claim he breached his duty to them as trustee. Mr Richardson was present at the meeting in July 1990, he says as Mr Keating’s lawyer. The Plaintiffs claim that Mr Richardson made statements about the conditions under which the blocking fee would be paid out of the trust account and those conditions were not met.

4. [4]
   Mr Richardson denies making those statements. His case is that Mr Keating, the Plaintiffs and two other men, Mr Boland and Mr Drought, formed a syndicate. Mr Keating gave instructions on behalf of the syndicate and he received funds and dispersed them on Mr Keating’s instructions.

5. [5]
   The action was not commenced until almost 18 years had passed. Mr Richardson claims he is prejudiced by inordinate delay, and that it would be inequitable or unfair to permit the matter to go further. He destroyed his files regarding the transaction in 2007. One of the syndicate members is deceased and he does not know the whereabouts of other potential witnesses. Mr Richardson applied for orders preventing the claim from proceeding.

6. [6]
   The Plaintiffs were represented by a solicitor, Mr Suthers. The first plaintiff, Mr Hampton, told the court he had terminated Mr Suther’s instructions and wished to appear for himself. Mr Suthers appeared by telephone. He had filed a notice of discontinuance of proceedings by the second plaintiff, Mr Wyatt. He said he had no contact with Mr Herford, having always received instructions through Mr Hampton. He sought leave to withdraw as the solicitor on the record for Mr Herford and to withdraw from the hearing.

7. [7]
   Mr Hampton said he had spoken to Mr Herford recently and urged him to contact Mr Suthers about the application. Mr Herford did not ask Mr Hampton to represent him. Satisfied Mr Herford was aware of the application and appeared not to want to participate; I excused Mr Suthers from further involvement in the hearing.

What is the reason for the delay?

8. [8]
   In his affidavit, Mr Hampton attested to personal difficulties which he submitted prevented him from focusing on the legal issues. It seems his marriage did not survive and he is estranged from his children. He clearly attributes those events to the transaction and its aftermath. In exercising its discretion, the court must pay due regard to Mr Hampton’s misfortune.

9. [9]
   In weighing that in the balance, the court should consider to what extent his misfortune prevented Mr Hampton from commencing action earlier than he did. Mr Hampton said Mr Richardson had notice of his intention to bring proceedings because Mr Suthers wrote to him in 1993. That letter^[1] requested documents but did not make any complaint or put Mr Richardson on notice that Mr Hampton might make a claim.

10. [10]
    Mr Hampton told the court he complained to the Queensland Law Society (QLS) in 1993, the Office of the Lay Observer in 1995 and the Legal Services Commission (LSC) in 2006 before commencing the claim. It seems that all complaints were either dismissed or not proceeded with further.

11. [11]
    Mr Hampton recently complained to the Crime and Misconduct Commission (CMC) alleging the QLS and LSC failed to act or deliberately covered up Mr Richardson’s misconduct. He also alleged officers of the Queensland Police Service (QPS) had failed to investigate the alleged fraud. On 15 April 2009, the CMC advised Mr Hampton it would take no further action on the complaint about the QPS. It referred to the LSC the concerns raised about the QLS and the LSC, subject to monitoring by the CMC.

12. [12]
    The history of complaints is relevant if it reveals Mr Richardson knew Mr Hampton might take action, such that he was not taken by surprise or prejudiced by the delay. It is clear Mr Richardson knew of Mr Hampton’s complaint to the QLS. He wrote to the QLS about it in January 1994 strenuously denying any wrongdoing.^[2]

13. [13]
    This is at odds with the statement in his affidavit that “I had no warning from the Plaintiffs that they intended to take action against me.  Nor had the Plaintiffs indicted to me (or anyone else as far as I was aware) at any time that they had any complaint about my conduct in this matter”.^[3]  Nevertheless, there is nothing to suggest Mr Richardson was aware of any later complaint or of Mr Hampton’s intention to commence proceedings when he destroyed his files, some 13 years after he wrote to the QLS.

14. [14]
    The history of complaints would also be relevant if it provided some justification for Mr Hampton deferring civil proceedings pending their outcome. However, Mr Hampton was clearly contemplating civil proceedings when he was in contact with the Lay Observer. In his letter to Mr Hampton of 6 April 1995, Mr Munro, the Lay Observer, said “I have also noted that you are contemplating legal action against the solicitors seeking the return of the monies which were deposited to his trust account…”.^[4]

15. [15]
    During the hearing, Mr Hampton said he had an epiphany around the time he approached the LSC in 2006.  He then realised that he had been approaching the claim incorrectly as a member of a syndicate and that he was, in fact, an individual investor and had a claim as such.  It was after this realisation that he approached Mr Suthers and proceedings were commenced in 2008.  How this explained the delay to that point was not made explicit.  Presumably it related to his assessment of his prospects of success but that is mere speculation.

16. [16]
    In the end, Mr Hampton’s explanation for his lengthy delay is not convincing. While his personal and family situation would understandably have distracted him, Mr Hampton has not provided the court with specific information about when he was experiencing these problems and how they prevented him from taking action for such a long time. He had legal proceedings in mind as long ago as 1995. It was only 13 years later that he acted. More than non specific general statements about personal circumstances are required to explain a delay of that order.

 What is the effect of the delay?

17. [17]
    For some 17 years, Mr Richardson kept his records about the transaction: several boxes of file notes, correspondence and trust account documents. In 2007, well after the period client files are routinely retained, he destroyed them. In the circumstances, the destruction was unremarkable and Mr Hampton has not alleged there was anything improper in Mr Richardson disposing of them.

18. [18]
    The only documents he now has are those he obtained from the QLS. The Plaintiffs hold two receipts for payments made into the trust account but claim they incorrectly record the reason the money was deposited into the trust account. This indicates the importance that file notes and other records might have assumed in resolving this dispute.

19. [19]
    There is considerable prejudice to Mr Richardson because he no longer holds contemporaneous records. It is likely they would bear light on who said what at the crucial meetings; his role; his instructions concerning the blocking fee and the source of those instructions.

20. [20]
    Determining a dispute about statements said to have been made can be difficult in the absence of records. Questions of the credibility of a witness and the reliability of their evidence become paramount. The difficulty is compounded by the impact of delay on a witness’s ability to recall details of conversations. Deterioration of memory diminishes the prospects of a fair trial of the claim. The longer the delay, the more adverse the likely impact on the integrity of the trial process. This is one factor recognised by the imposition of limitation periods.^[5]

21. [21]
    Here there is also the impediment that witnesses are no longer available. One syndicate member, Mr Drought, has passed away. The whereabouts of Mr Robson, a witness to the first meeting, are unknown. Both were present when the statements alleged against Mr Richardson were said to have been made.

22. [22]
    Presumably the other syndicate members, Mr Keating, Mr Wyatt and Mr Boland are available. Mr Keating was the source of Mr Richardson’s instructions. Mr Wyatt has discontinued his proceedings against Mr Richardson. Mr Boland was never a party, although he did make his own complaint to the QLS, which was also dismissed.

23. [23]
    Mr Hampton provided a document apparently signed by Mr Boland in which he confirmed Mr Hampton’s allegations against Mr Richardson. That is surprising. In Mr Boland’s complaint to the QLS he alleged quite different conditions applied to payment of the blocking fee from the trust account than those alleged in these proceedings.^[6]

24. [24]
    This case is founded on allegations of fraud and misrepresentations. At its core are statements attributed to Mr Richardson. The destruction of relevant documents and the absence of material witnesses is a significant disadvantage to Mr Richardson in his defence of this claim.

What orders should be made?

25. [25]
    Mr Richardson submitted the Statement of Claim should be struck out because delay prejudiced a fair trial.^[7]  I am satisfied that there is a basis for striking out the pleadings.

26. [26]
    Alternatively, Mr Richardson submitted the pleadings should be struck out as an abuse of process. The action seeks equitable compensation for breach of trust. The limitation period for such a claim is six years.^[8] In reply, an allegation of fraud was raised for the first time in these proceedings. There is no limitation period for an action based on fraud. Given its timing, the conclusion the plea was raised to avoid the limitation defence is compelling.

27. [27]
    Assuming, for the moment, that the effect of the pleadings is to mount a cause of action for damages for fraudulent breach of trust, even where a statutory limitation period does not apply strictly, it may, by analogy preclude relief.^[9]  The analogy is to the period that would apply to an equivalent common law action involving fraud, in this case fraudulent misrepresentation.^[10]

28. [28]
    Although there is no limitation period for fraudulent misrepresentation (or any other common law fraudulent claim), a time limit is set under s 38 of the Limitation of Actions Act 1974. That section provides that, where the right of action is concealed by fraud, a limitation period does not to begin to run until the Plaintiff has, or with reasonable diligence could have, discovered the fraud.  If there was a fraudulent breach, reasonably, the Plaintiffs could be expected to have discovered it when or shortly after the money was paid out in 1990. Mr Richardson has asked the plaintiffs to state when the fraud came to their attention and has received no reply.^[11]

29. [29]
    In those circumstances, Mr Richardson argues, pleading fraud merely to defeat a limitation defence constitutes an abuse of process and the claim should be struck out.

30. [30]
    Alternatively, Mr Richardson seeks judgment pursuant to r 293^[12] arguing the plaintiffs have no reasonable prospects of succeeding and that there is no need for a trial.  There is a substantial factual contest which would ordinarily preclude summary judgment.  Mr Richardson contends that is irrelevant because relief would be denied, in any case, because of delay.

31. [31]
    The Plaintiffs’ claim is equitable. Delay (or laches) grounds a defence to an equitable claim for compensation. In considering whether it is a complete defence to the claim consideration must be give to the length of the delay; the nature of the acts done during this period which might be of prejudice to the defendant; the justice of the matter.^[13]

32. [32]
    Mr Richardson has a solid foundation for raising that defence. The plaintiffs delayed commencing proceedings for almost 18 years after they can be assumed to have become aware of the alleged fraud. Mr Hampton contemplated civil proceedings as early as 1995 but did not act on it until 13 years later. The non-specific assertions about the impact of his personal circumstances are insufficient answer to such a lengthy delay. In the meantime he pursued a complaint against Mr Richardson which was investigated and dismissed for lack of evidence. There is no suggestion there is further evidence which might now cast doubt on the conclusion reached by the QLS. Rather, the court would be in a poorer position to assess the matter than was the QLS because documents have been destroyed, some witnesses are no longer available and those that are may be presumed to have some dimming of memory given the substantial passage of time.

33. [33]
    Mr Richardson is gravely prejudiced. A trial is not required to establish the nature and extent of the prejudice. It is impossible for Mr Richardson to properly defend this claim given what has transpired since the transaction occurred. Particularly, delay has resulted in a loss of evidence with a considerable potential to “cast a different complexion on the matter”.^[14] The consequences of the considerable delay render it unjust for the court to grant equitable relief. I am satisfied that laches is a complete defence to the plaintiff’s claim.

34. [34]
    While other relief is available, I am satisfied it is appropriate to grant the relief which will finally determine these proceedings. That is, entering judgment for the defendant. Given the plaintiff’s conduct of these proceedings, including the way in which the allegation of fraud was raised, I am not persuaded there are any discretionary factors which count against granting judgment. In those circumstances, I am persuaded the appropriate order is to enter judgment for the defendant against the first and second plaintiffs with costs assessed on a standard basis.