Banque Commerciale SA (En Liqn) v Akhil Holdings Ltd

High Court of Australia Mason C.J. Brennan, Dawson, Toohey and Gaudron JJ. Banque Commerciale SA (En Liqn) v Akhil Holdings Ltd [1990] HCA 11

ORDER Appeal allowed with costs. Set aside the orders of the Court of Appeal in so far as they apply to the appellant and in lieu thereof order that the respondent's appeal to that Court be dismissed with costs in so far as it applies to the appellant. Order that judgment in the respondent's action against the appellant be entered in favour of the appellant with costs.

The respondent, Akhil Holdings Ltd. ("Akhil"), commenced action by statement of claim in the Supreme Court of New South Wales in September 1978 against the appellant, Banque Commerciale S.A. ("the Bank"). Deauville Nominees Pty. Ltd. ("Deauville") and Maurice Messara were also defendants to the action. Deauville was a company controlled by Mr. Messara. It was pleaded in the statement of claim that Mr. Messara caused and procured the Bank to transfer from its ownership certain shares held as trustee for Akhil. It was further pleaded that between October 1970 and July 1971 some shares were transferred to purchasers for value and that in about December 1970 other shares were transferred to Deauville.

The Bank, Deauville and Mr. Messara, by separate defences filed in the action, each pleaded that the action was statute-barred. No reply was filed to the Bank's defence, but the defences of Deauville and Mr. Messara each attracted a reply pleading, inter alia, that Akhil's claim was "an action in respect of a fraudulent breach of trust by the [Bank] who was privy or a party to the breach of trust while a trustee". A copy of the pleading as filed against Mr. Messara - Amended Reply to Defence of Third Defendant - was, on 30 March 1983, served on the Bank's solicitors.

In July 1984 the Bank's solicitors filed a notice that they no longer acted for the Bank. The matter came on for hearing in July 1985. The Bank was neither present nor represented. Judgment was given for the defendants, it being held that Akhil had failed to establish a beneficial interest in the shares in question.

Akhil appealed to the Court of Appeal of the Supreme Court of New South Wales. The Bank was represented at the appeal and the title of the proceedings was then changed to reflect the fact that the Bank had been placed in liquidation in March 1983. The Bank sought to uphold the judgment given in its favour at first instance on the basis of its defence that the action was statute-barred. The Court of Appeal made various findings of fact, including that the Bank was party to a fraudulent breach of trust, and held that Akhil was entitled to judgment against all three defendants in the action. Accordingly, the judgment entered at first instance was set aside and the matter remitted for further hearing as to damages. From that decision and consequential orders the Bank brings the present appeal.

It is not in issue that the action against the Bank was statute-barred after six years unless, in terms of the proviso to s. 69(1) of the Trustee Act 1925 N.S.W. ("the Act"), there was a "fraudulent breach of trust to which the trustee was party or privy". Nor is it in issue that, as appeared from the statement of claim, the breaches of trust of which Akhil complained against the Bank occurred more than six years before action was commenced. In this context, it is argued on behalf of the Bank that the finding of fraud against it was not open on the pleadings and that, but for that finding, its plea that the action was statute-barred must result in judgment in its favour. On behalf of Akhil it is argued that the Bank was not entitled to rely on its plea in the Court of Appeal and, if it was, the Court of Appeal was nonetheless entitled to make the finding that the Bank was party to a fraudulent breach of trust.

The argument that the Bank was not entitled to rely on its defence that the action was statute-barred was put on two bases: first, it was said that the Bank, by not attending the hearing of the action, was precluded from relying on the plea; alternatively, it was argued that the Bank could rely on its plea only if it established that it was not party to a fraudulent breach of trust.

It is convenient to deal with the argument that the Bank was precluded from relying on its pleaded defence by first considering the effect and status of the defence at the hearing. The filing of a defence is a formal step in proceedings. The defence is part of the pleadings which identify the issue for decision. More significantly in the present case, it is a step which precludes a plaintiff from entering default judgment. The position with respect to entry of default judgment in proceedings commenced by statement of claim in the Supreme Court of New South Wales is regulated by Pt. 17 of the Supreme Court Rules 1970 (N.S.W.) ("the Rules"). Part 17 specifies the various forms of judgment which a plaintiff may enter upon default by a defendant, including, "[w]here the plaintiff's claim is for unliquidated damages only, judgment for damages to be assessed and for costs" (r. 5) and "[w]hatever claims for relief are made such judgment as the plaintiff appears to be entitled to on his statement of claim" (r. 9). Part 17, r. 9 is subject to an exception, not presently material, relating to judgment for the possession of land.

In Pt. 17, r. 2 there are set out those matters which constitute default for the purposes of that Part. They follow the familiar concepts of default, namely, failure to file an appearance within the time limited (r. 2(a) and (b)), failure to file a defence within the time limited (r. 2(c)) and failure to verify a defence, if such be required by the Rules, within the time limited (r. 2(d)). Particular provision is made in Pt. 17, r. 2(a) and (b) with respect to the effect of motions to set aside the originating process. A defence having been filed (or verified, if that is required), there is no default under Pt. 17, r. 2 and the plaintiff is in no position to obtain judgment by default. Any judgment which the plaintiff might thereafter obtain necessarily depends upon the plaintiff's establishing entitlement to relief, albeit that some part of his or her case might be established by the pleadings or that, in certain circumstances, he or she might be entitled to summary judgment.

The filed defence of the Bank put Akhil to proof of its entitlement to the relief claimed against the Bank. The evidence led to that end also disclosed those facts which established the Bank's defence that the breaches occurred more than six years before action was commenced. Had there been a finding at first instance that Akhil's case was otherwise made out, the evidence establishing the defence would, in our view, have precluded a finding that Akhil had established an entitlement to relief. In the not wholly dissimilar area of summary judgment, Pt. 13, r. 2 makes entitlement to summary judgment dependent upon evidence of the facts upon which the claim is based and evidence "by the plaintiff or by some responsible person that, in the belief of the person giving the evidence, the defendant has no defence to the claim , or no defence except as to the amount of any damages claimed". In the light of Pt. 13, r. 2, it would be anomalous if a plaintiff could, in the absence of the defendant from the trial, assert entitlement to judgment in circumstances where the evidence established a pleaded defence, that defence not having been withdrawn or circumstances not having arisen requiring it to be treated as if withdrawn.

In the present case there was no formal withdrawal of the Bank's defence under Pt. 21, r. 3 of the Rules. Nor was there any express withdrawal by less formal means. And there is no matter, other than the Bank's failure to attend the hearing, by reason of which it might be said that the defence should be treated as withdrawn.

If the defence is to be treated as withdrawn from the trial it can only be on the basis that the Bank's non-attendance gave rise to what is referred to in Spencer Bower and Turner, Law Relating to Estoppel by Representation, 3rd ed. (1977), at pp. 333-340 , as an estoppel by election in the conduct of litigation. An estoppel of that nature depends on a party showing by "conduct that he does not intend [to take the point], but lies by and thereby puts the other party in a worse position": Murray v. Munro [1] , per Griffith C.J. In the present case, where proof of Akhil's case involved proof of the Bank's pleaded defence, there could be no suggestion that Akhil was put in a worse position than it would have been had the Bank participated in the hearing and actively asserted its defence. Accordingly, had the hearing resulted in a finding that breaches of trust occurred at or about the times asserted in the statement of claim, Akhil would not have been entitled to judgment against the Bank on the basis that the pleaded defence was to be treated as withdrawn. The position must be the same on appeal.

It is necessary to note the decision in Water Board v. Moustakas [2] . In that case an appellant was precluded from making a case that had not been made at trial, although the elements of that case had been pleaded and particularized. The decision in that case was rested on the rule that, unless all facts have been determined beyond controversy or the question is one of construction or law and it is expedient and in the interests of justice to entertain the point, a party may not take a point for the first time on appeal. See, generally, Suttor v. Gundowda Pty. Ltd. [3] ; University of Wollongong v. Metwally [No. 2] [4] ; Coulton v. Holcombe [5] ; O'Brien v. Komesaroff [6] . Some aspects of that rule appear to derive from public policy considerations directed to ensuring the finality of litigation. On the other hand, some aspects of the rule may have their genesis in estoppel by election in the conduct of litigation, although, if so, the relevant consideration is not that the other party is put in a worse position but that he or she may have been so placed. See, for example, Moustakas [7] , where the refusal to allow the appellant to raise a new case was rested on "the possibility that the [other party] may, if it had been raised below, have wished to call evidence in response to it". So far as the rule may derive from public policy, the relevant consideration is that the case sought to be made on appeal is a new or different case from that which emerged at the trial. See Browne v. Dunn [8] , cited with approval in Rowe v. Australian United Steam Navigation Co. Ltd. [9] ; Moustakas [10] . In the present case there is no basis upon which it could be suggested that Akhil may have wished to call evidence to show that the breaches by the Bank occurred at a time inside the six-year period of limitation. Nor, by reason that the trial judge would not have been free either to disregard the defence or to treat it as withdrawn from the trial, can it be said that the case sought to be made on appeal is new or different from that which emerged at the trial. Accordingly, neither the decision in Moustakas nor the rule upon which it rests prevented the Bank from relying on its pleaded defence in the Court of Appeal.

1. (1988) 62 A.L.J.R. 209; 77 A.L.R. 193. 2. (1950) 81 C.L.R. 418, at p. 438. 3. (1985) 59 A.L.J.R. 481, at p. 483; 60 A.L.R. 68, at p. 71. 4. (1986) 162 C.L.R. 1, at pp. 7-8. 5. (1982) 150 C.L.R. 310, at p. 319. 6. (1988) 62 A.L.J.R., at p. 212; 77 A.L.R., at p. 197. 7. (1893) 6 R. 67, at pp. 75-76. 8. (1909) 9 C.L.R. 1, at pp. 24-25. 9. (1988) 62 A.L.J.R., at pp. 210-211; 77 A.L.R., at pp. 195-197.

The argument that the Bank was not entitled to rely on its defence unless it established that it had not been fraudulent is based upon the proposition that the proviso to s. 69(1) of the Act is, in substance, an exception which must be negatived before a trustee can rely on a limitation defence. In Vines v. Djordjevitch [11] , the Court noted the technical distinction between a proviso and an exception and observed that "[t]he distinction has perhaps come to be applied in a less technical manner, and now depends not so much upon form as upon substantial considerations". The Court added that "whether the form is that of a proviso or of an exception, the intrinsic character of the provision that the proviso makes and its real effect cannot be put out of consideration in determining where the burden of proof lies".

The substance of the proviso to s. 69(1) of the Act is to allow a limitation defence to be defeated. This is in itself a consideration of substance for placing the onus of proof on the party seeking to defeat the defence. See Vines v. Djordjevitch [12] , and the cases there cited. It is also a significant matter of substance that it is fraud that may defeat the defence.

It has long been recognized that fraud may take a variety of forms and is, on that account, incapable of precise definition. See, e.g., Draper v. Dean [13] ; Reddaway v. Banham [14] ; Allcard v. Skinner [15] . The variety of matters which may constitute fraud prevents any construction of the proviso to s. 69(1) of the Act which would require a defendant to negate fraud. That variety effectively deprives a party who may or may not have acted fraudulently from ascertaining precisely what must be negatived. Indeed, it is this feature of fraud which underlies the rule of practice, now embodied in Pt. 15, r. 13 and Pt. 16, r. 2 of the Rules, that fraud must be pleaded specifically and with particularity. See Wallingford v. Mutual Society [16] , per Lord Hatherley; Middleton v. O'Neill [17] , per Jordan C.J. And the same feature necessitates that the proviso be construed as requiring a plaintiff to establish fraud to defeat a limitation defence. It may be noted that in In re Gurney; Mason v. Mercer [18] Romer J. stated that s. 8 of the Trustee Act 1888 U.K., which makes similar provision to that contained in the proviso, would have no application to the action there under consideration "unless the Plaintiff shews that her claim is one of the excepted claims".

1. (1679) Finch 439 [ 23 E.R. 239]. 2. [1896] A.C. 199, at p. 221. 3. (1887) 36 Ch. D. 145, at p. 183. 4. (1880) 5 App. Cas. 685, at p. 701. 5. (1943) 43 S.R.(N.S.W.) 178, at p. 184. 6. [1893] 1 Ch. 590, at p. 593.

Counsel for the respondent did not maintain that the amended statement of claim contained an allegation of "fraud or fraudulent breach of trust" by the appellant within the meaning of s. 69(1) of the Act. The section itself does not disclose what is meant by those expressions. But it would be surprising if the legislature had meant to exclude from the operation of s. 69(1) breaches of trust which were not fraudulent in the ordinary sense of the word, that is, committed with dishonesty or at least some knowledge of the impropriety of the conduct involved: Joliffe v. Baker [19] . In any event, the protection of the section is directed at "the relief of trustees from what may be called innocent or negligent breaches of trust": Re Sale Hotel and Botanical Gardens Co.; Hesketh's Case [20] . The allegations against the Bank made in the amended statement of claim are consistent with an allegation of innocent or negligent breach of trust. In these circumstances it is not possible to conclude that fraud or fraudulent breach of trust within the meaning of s. 69(1) was pleaded against the Bank.

1. (1883) 11 Q.B.D. 255, at p. 270. 2. (1897) 77 L.T. 681, at p. 682.

The argument that, notwithstanding that fraud was neither pleaded nor particularized against the Bank, the Court of Appeal was entitled to make a finding of fraud on the part of the Bank was made by reference to service on the Bank's solicitors of the Amended Reply to Defence of Third Defendant (Mr. Messara). As previously noted, that pleading asserted that the action was for "fraudulent breach of trust by the [Bank] " In substance the argument was that, the allegation of fraud having been brought to the notice of the Bank, and the Bank nonetheless having elected not to be present at the hearing, it should not now be allowed to claim the benefit of the rule that, in general, relief should be restricted to that available on the pleadings.

The function of pleadings is to state with sufficient clarity the case that must be met: Gould and Birbeck and Bacon v. Mount Oxide Mines Ltd. (In liq.) [21] , per Isaacs and Rich JJ. In this way, pleadings serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision. The rule that, in general, relief is confined to that available on the pleadings secures a party's right to this basic requirement of procedural fairness. Accordingly, the circumstances in which a case may be decided on a basis different from that disclosed by the pleadings are limited to those in which the parties have deliberately chosen some different basis for the determination of their respective rights and liabilities. See, e.g., Browne v. Dunn [22] ; Mount Oxide Mines [23] .

1. (1916) 22 C.L.R. 490, at p. 517. 2. (1893) 6 R., at p. 76. 3. (1916) 22 C.L.R., at pp. 517-518.

Ordinarily, the question whether the parties have chosen some issue different from that disclosed in the pleadings as the basis for the determination of their respective rights and liabilities is to be answered by inference from the way in which the trial was conducted. It may be that, in a clear case, mere acquiescence by one party in a course adopted by the other will be sufficient to ground such an inference. In the present case, the Bank not having been present at the hearing, there could be no acquiescence by it in such course, if any, by which Akhil might have attempted to extend the issues at the hearing to encompass a case of fraud as against the Bank. Nor, in our view, can acquiescence be inferred from the Bank's failure to participate in the hearing coupled with its knowledge that an allegation of fraud on its part had been raised in the amended reply to the defence filed against Mr. Messara. That was a bare and unparticularized assertion. In that context, a choice by the Bank to have its liability determined on the basis of fraud would be tantamount to a decision to forego the right to be informed of the case to be made against it. The facts will not support such an inference. Accordingly, Akhil was entitled only to such relief as was available on the pleadings. In particular, it was not entitled to relief on the basis that the Bank was party to a fraudulent breach of trust. The Bank is therefore entitled to judgment in the action on the basis that its defence that the action was statute-barred was made out.

The appeal should be allowed. The orders of the Court of Appeal should be set aside in so far as the appeal was allowed and judgment entered against the Bank. In lieu thereof it should be ordered that the appeal as against the Bank be dismissed with costs.

In Thorp v. Holdsworth [24] , Jessel M.R. stated the object of pleadings:

The whole object of pleadings is to bring the parties to an issue, and the meaning of the rules of Order XIX. was to prevent the issue being enlarged, which would prevent either party from knowing when the cause came on for trial, what the real point to be discussed and decided was. In fact, the whole meaning of the system is to narrow the parties to definite issues, and thereby to diminish expense and delay, especially as regards the amount of testimony required on either side at the hearing. When the pleadings bring the parties to the issue, the court's function is to determine that issue and to grant relief founded on the pleadings unless the parties are allowed to alter the issues at the trial without amendment of the pleadings (as to which, see the observations in London Passenger Transport Board v. Moscrop [25] ). The rule is clearly laid down in the judgment of this Court in Dare v. Pulham [26] : Apart from cases where the parties choose to disregard the pleadings and to fight the case on issues chosen at the trial, the relief which may be granted to a party must be founded on the pleadings (Gould and Birbeck and Bacon [v. Mount Oxide Mines Ltd. (In liq.)] [27] ; Sri Mahant Govind Rao v. Sita Ram Kesho [28] ). 1. (1876) 3 Ch. D. 637, at p. 639. 2. [1942] A.C. 332, at pp. 340, 347, 351, 356. 3. (1982) 148 C.L.R. 658, at p. 664. 4. (1916) 22 C.L.R. 490, at pp. 517, 518. 5. (1898) L.R. 25 Ind. App. 195, at p. 207.

Non-appearance of a defendant at the trial does not allow the plaintiff a free rein to amend the pleadings to raise issues of which the absent defendant has had no notice or to obtain relief not founded on the pleadings: Stone v. Smith [29] ; Barker v. Furlong [30] . The reason why the court does not allow substantive amendments to pleadings so as to allow the plaintiff further or other relief against an absent defendant can be gleaned from analogous cases where the court has not allowed substantive amendments of the writ against a defendant who has failed to enter an appearance unless the writ is re-served: Gee v. Bell [31] ; Law v. Philby [No. 2] [32] ; Kingdon v. Kirk [33] . The reason is not that the court has no jurisdiction to amend the writ in the defendant's absence; the reason is that the risk of injustice to the absent defendant must be avoided, as Romer L.J. explained in Jamaica Railway v. Colonial Bank [34] :

The Court has always borne in mind that an absent defendant served with the original writ may have acted upon the supposition that he thereby gathers substantially what the case made against him is, and relies upon it that that case and no other substantially different case will be made against him, and on that footing does not choose to appear. Accordingly the Court has refused to act upon a rule, which in terms covered a defendant who had not appeared, in cases in which the Court came to the conclusion that it would not be just to enforce the rule against such a defendant - not that the Court had no jurisdiction to proceed, but that it did not think it right to proceed in such a case. And [35] : Again, it has been held in favour of a defendant who has not appeared that, if a writ be amended by altering the claim indorsed on it so as substantially to increase the claim against the defendant, the Court, in the exercise of its discretion, will not allow the plaintiff to obtain as against such a defendant the relief sought by the amended indorsement or extended claim unless the defendant be re-served personally with the amended writ. 1. (1887) 35 Ch. D. 188. 2. [1891] 2 Ch. 172, at pp. 178-179. 3. (1887) 35 Ch. D. 160. 4. (1887) 56 L.T. 522. 5. (1887) 37 Ch. D. 141. 6. [1905] 1 Ch. 677, at p. 690. 7. [1905] 1 Ch., at p. 691.

In the present case, the defendant Bank (the appellant) pleaded in its defence that "the Plaintiff's claim [was] barred by the provisions of the Limitation Act, 1969 and the provisions of Section 69 of the Trustee Act, 1925." In the absence of any reply to this pleading the Bank was entitled to succeed as the breaches of trust alleged against the Bank were alleged to have occurred more than six years before the proceedings were commenced. There was no issue of fact which the Bank was required to prove to make good its defence based upon the statutes. As of right it was entitled to judgment at the trial and the order that "the proceedings be dismissed with costs" was rightly made - albeit for reasons which the Court of Appeal held to be erroneous.

The Court of Appeal found that the Bank had committed breaches of trust the last of which occurred on or before 27 November 1970, a date more than six years before the proceedings commenced. The Court of Appeal held that s. 69 of the Trustee Act 1925 N.S.W. rather than ss. 47 and 48 of the Limitation Act 1969 N.S.W. was the provision governing the time within which proceedings had to be brought against the bank. That view may be correct; at all events it was not challenged by either party in this Court. Holding that s. 69(3) of the Trustee Act imposed a six-year limitation period on the bringing of a suit for breach of trust, the Court of Appeal considered the application of sub-s.(1) to which sub-s.(3) is subject:

In any action suit or other proceeding against a trustee or any person claiming through him, the provisions of this section shall have effect:

Provided that this section shall not affect any action suit or other proceeding where the claim is founded upon any fraud or fraudulent breach of trust to which the trustee was party or privy, or is to recover trust property, or the proceeds thereof still retained by the trustee, or previously received by the trustee and converted to his use.

Although no issue of fraud on the part of the Bank had been raised in the pleadings between the plaintiff and the Bank, the Court of Appeal allowed the plaintiff (the appellant in that Court) to raise that issue in order to take advantage of the proviso to sub-s. (1). The issue of fraud on the part of the Bank had been raised on the pleadings between the plaintiff and the Bank's co-defendants (though in terms relevant to the Limitation Act, not the Trustee Act). The Bank had notice that that issue was raised by the plaintiff's reply to its co-defendants' defences but it had not been raised in the pleadings against the Bank. The notice was not tantamount to a reply to the Bank's defence. The Court of Appeal, allowing the issue to be raised before it, found the Bank guilty of fraud on the evidence admitted at the trial. But it was too late to raise that issue against the Bank on appeal and to decide it on the evidence at the trial. If recent authority for such a long-established proposition be needed, reference may be made to what was said by Mason C.J., Wilson, Brennan and Dawson JJ. in Water Board v. Moustakas [36] .

1. (1988) 62 A.L.J.R. 209, at p. 211; 77 A.L.R. 193, at p. 196.

The judgment of the Court of Appeal must be set aside and the judgment of the trial judge restored. It is implicit in what I have said that I agree with Mason C.J. and Gaudron J. that the onus of proving fraud in a case under s. 69(1) of the Trustee Act rests on the party who alleges it. The appeal should be allowed.

In this action the plaintiff, Akhil Holdings Ltd. ("Akhil"), sued the defendants, Banque Commerciale S.A. ("Banque Commerciale"), Deauville Nominees Pty. Ltd. ("Deauville") and Maurice Jean Messara ("Messara"), for damages for breach of trust and conversion. The claim concerned certain shares in a mining company which Akhil alleged had been issued to Banque Commerciale, a Swiss bank, to hold in trust for it. The shares, so Akhil alleged, had in breach of trust been transferred to Deauville or through Deauville to various transferees. Deauville was controlled by Messara and it was alleged that he procured these transfers. The trial judge found that the shares were not impressed with the trust alleged and dismissed the claim.

The Court of Appeal reversed the finding of the trial judge that there was no trust, found a breach of trust and ordered an inquiry as to damages in relation to all three defendants. Banque Commerciale now appeals to this Court against the judgment of the Court of Appeal. It does not dispute that the Court of Appeal was entitled on the evidence to find fraud, but says that the claim against it was statute barred under s. 69 of the Trustee Act 1925 N.S.W.. That section applied the normal limitation period for an action of debt for money had and received, namely, six years. Sub-section (1) provided:

In any action suit or other proceeding against a trustee or any person claiming through him, the provisions of this section shall have effect:

Provided that this section shall not affect any action suit or other proceeding where the claim is founded upon any fraud or fraudulent breach of trust to which the trustee was party or privy, or is to recover trust property, or the proceeds thereof still retained by the trustee, or previously received by the trustee and converted to his use.

All three defendants had filed defences pleading that the plaintiff's claim was barred under either the Limitation Act 1969 N.S.W. or the Trustee Act. It was subsequently common ground that only the latter Act was capable of application to Banque Commerciale. The plaintiff, Akhil, delivered a reply to the other two defendants, Deauville and Messara, alleging that the plaintiff's claim was an action on a cause of action in respect of a fraudulent breach of trust by Banque Commerciale which was privy or a party to the breach of trust while a trustee, an allegation which the Court of Appeal found to be established by the evidence. For reasons which are not apparent, no reply was delivered by Akhil to Banque Commerciale, which failed to appear upon the trial of the action. Banque Commerciale was placed in liquidation on 30 March 1983, but was on that date served with a copy of an amended reply to the defence of Messara alleging fraud on its part. Just how this happened is unexplained, although the Supreme Court Rules 1970 (N.S.W.) (Pt. 15, r. 28) now provide for a party who files a pleading to serve the pleading on each other party to the proceedings. The action in question having been commenced in 1978, it would appear that, strictly speaking, the rule had no application to it.

Banque Commerciale did, however, appear on the appeal to support a notice of contention asserting that the judgment below could be supported upon the basis that the claim against it was statute barred. That point, which is the sole point of the appeal to this Court, was dealt with by the Court of Appeal in the following terms:

At this stage it is appropriate to say something about the position of the Bank. Although it filed the defence previously indicated (relying on the limitation period) it did not appear at the trial. It therefore did not appear to support its defence. The trial was conducted in its absence. In these circumstances, any complaint by the Bank (faintly voiced on the appeal) about the issues which were litigated at the trial when, at the trial, the statement of claim was amended, cannot be entertained. The Bank by absenting itself must be taken to have waived any objection which it might have voiced had it appeared.

The reference to the amendment of the statement of claim at the trial is a reference to an amendment made on 17 February 1986, the trial having commenced on 22 July 1985. The amendment made no difference in substance to the allegations against Banque Commerciale. At the time it was made it appears that the calling of evidence had been completed or substantially completed. Before the amendment the statement of claim alleged that the transfers of the shares made by Banque Commerciale were "without the authority and consent of the plaintiff and were not within the knowledge of the plaintiff". After the amendment, the allegation was that the transfers were made by Banque Commerciale and Deauville, as the case may be, "without the authority and consent of the Plaintiff and in breach of trust and were not within the knowledge of the Plaintiff". Defences to the amended statement of claim were filed by Deauville and Messara on 17 February 1986 and the trial was completed on 19 February 1986. The trial judge delivered judgment on 8 July 1986.

It was submitted on behalf of Banque Commerciale that Akhil was precluded from relying upon the proviso to s. 69(1) of the Trustee Act because its application depended upon Akhil's being able to establish that its claim was founded upon a fraud or fraudulent breach of trust to which Banque Commerciale was privy and Akhil had not pleaded fraud against Banque Commerciale. Reliance was placed upon Pt. 15, r. 13 of the Supreme Court Rules which was as follows:

In a defence or subsequent pleading the party pleading shall plead specifically any matter, for example, performance, release, any statute of limitation, fraud, or any fact showing illegality -

(a) which he alleges makes any claim, defence or other case of the opposite party not maintainable;

(b) which, if not pleaded specifically, may take the opposite party by surprise; or

(c) which raises matters of fact not arising out of the preceding pleading.

However, that rule is merely a rule of pleading which must give way to considerations of a more fundamental kind if the justice of the case requires it. Pleadings are but a means to an end and not an end in themselves and, as was pointed out in Pirie v. Richardson [37] , the rule prescribes no consequence for the failure to observe it. The basic function of pleadings was described by Isaacs and Rich JJ. in Gould and Birbeck and Bacon v. Mount Oxide Mines Ltd. (In liq.) [38] :

Undoubtedly, as a general rule of fair play, and one resting on the fundamental principle that no man ought to be put to loss without having a proper opportunity of meeting the case against him, pleadings should state with sufficient clearness the case of the party whose averments they are. That is their function. Their function is discharged when the case is presented with reasonable clearness. Any want of clearness can be cured by amendment or particulars. But pleadings are only a means to an end, and if the parties in fighting their legal battles choose to restrict them, or to enlarge them, or to disregard them and meet each other on issues fairly fought out, it is impossible for either of them to hark back to the pleadings and treat them as governing the area of contest. 1. [1927] 1 K.B. 448, at p. 453. 2. (1916) 22 C.L.R. 490, at p. 517.

If Banque Commerciale had appeared at the trial, Akhil's failure to file a reply against it alleging fraud could not have determined the ultimate area of contest between the parties. Nor could it have done so when Banque Commerciale failed to appear. Part 34, r. 5(1) of the Supreme Court Rules deals with the absence of a party and empowers the court to proceed with the trial generally or so far as concerns any claim for relief in the proceedings. Upon any view of the pleadings, evidence of fraudulent conduct on the part of Banque Commerciale was admissible against the other two defendants who had been given notice of such an allegation by way of reply. Once admitted, the evidence could not be confined to those two parties. Had Banque Commerciale appeared at the trial and objected to the admission of evidence of fraud, the evidence could not have been excluded. No doubt steps would have been adopted to avoid prejudice, if any, to Banque Commerciale, by way of surprise, but it is not apparent that there was any surprise having regard to the notice, however informal, which Banque Commerciale received of the allegation of fraud against it by the service upon it of Akhil's reply to Messara's defence.

Pirie v. Richardson was a case in which the former partners of a firm were sued as joint contractors and only one partner pleaded a defence which was ultimately successful. It was held that there was but one cause of action against the joint contractors and the defence pleaded by one enured to the benefit of the others. Lord Hanworth M.R. observed [39] :

It appears to me that that reading of Order XIX., r. 15 [the equivalent of Pt. 15, r. 13 in New South Wales], which is binding on this Court, indicates that effect ought to be given to a matter which is brought to the attention of the Court even though it has not been so brought by all of the defendants in their pleading. They may not in terms have pleaded the matter, but if there is no surprise and the point is effective for one joint contractor it ought to be effective for the other joint contractors. See also In re Robinson's Settlement; Gant v. Hobbs [40] . 1. [1927] 1 K.B., at p. 453. 2. [1912] 1 Ch. 717.

In this case, the fraud pleaded against both Deauville and Messara, namely, a fraudulent breach of trust by Banque Commerciale, was precisely the same as the fraud which would have been pleaded against Banque Commerciale had a reply to its defence been filed. The matter was pleaded in the action, evidence was admissible in support of it and the evidence once in, if it disclosed fraud on the part of Banque Commerciale, as it was held to do, could scarcely have been disregarded in the case of one of the parties. That is the more so when the relevant defence of Banque Commerciale was raised under a statutory provision which provided that it should have no application to a claim founded on fraud. It is hardly to be supposed that the statutory limitation period should have been imposed in the face of admissible evidence which established its inapplicability, particularly when that evidence was of fraud.

By failing to appear at the trial, Banque Commerciale assumed all of those risks which were inherent in its so doing. And it simply could not be assumed by Banque Commerciale that, because of the failure of Akhil to plead fraud in terms against it by way of reply, evidence of its fraudulent breach of trust would inevitably be inadmissible at the trial so as to leave its statutory defence unaffected.

Moreover, the failure by Akhil to reply to Banque Commerciale's defence alleging fraud was, in this case, not a matter of substance. The replies which were filed against Deauville and Messara were of a formal nature merely alleging that the breach of trust pleaded in the statement of claim was a fraudulent breach of trust by Banque Commerciale which was privy or a party to the breach of trust while a trustee. The substance of the allegation was contained in the statement of claim. The mere labelling of an allegation as fraud amounts to little. As Lord Hatherley said in Wallingford v. Mutual Society [41] :

Now I take it to be as settled as anything well can be by repeated decisions, that the mere averment of fraud, in general terms, is not sufficient for any practical purpose in the defence of a suit. Fraud may be alleged in the largest and most sweeping terms imaginable. What you have to do is, if it be matter of account, to point out a specific error, and bring evidence of that error, and establish it by that evidence. Nobody can be expected to meet a case, and still less to dispose of a case, summarily upon mere allegations of fraud without any definite character being given to those charges by stating the facts upon which they rest. 1. (1880) 5 App. Cas. 685, at p. 701.

Whilst fraud must be pleaded with some particularity, it is not necessary that the word "fraud" be actually used if the conduct relied upon and its fraudulent nature be otherwise sufficiently apparent: Blay v. Pollard and Morris [42] ; Davy v. Garrett [43] ; Reddaway v. Banham [44] ; Angelides v. James Stedman Hendersons Sweets Ltd. [45] . As Thesiger L.J. said in Davy v. Garrett [43] :

It may not be necessary in all cases to use the word "fraud" - indeed in one of the most ordinary cases it is not necessary. An allegation that the Defendant made to the Plaintiff representations on which he intended the Plaintiff to act, which representations were untrue, and known to the Defendant to be untrue, is sufficient. The word "fraud" is not used, but two expressions are used pointing at the state of mind of the Defendant Similarly, Lord Macnaghten in Reddaway v. Banham [6] , stated: It is stated in the judgment of the Master of the Rolls that the learned counsel did not appear to have asked the judge to leave to the jury the question whether the defendants had done anything fraudulently. "Indeed", his Lordship adds, "no such question seems to have been raised by the pleadings." If your Lordships turn to the pleadings, you will observe that the question was raised directly. It is quite true that the word "fraud" is not to be found in the statement of claim. But the whole gist of the action was that the defendants were endeavouring to palm off their goods as the goods of the plaintiffs That is, as it seems to me, a charge of dishonesty, and I must say I think the charge was established. And if the fraud alleged by a plaintiff against a defendant is sufficiently particularized in the statement of claim, the repetition of those particulars in any reply is unnecessary. Perhaps Pt. 15, r. 13 required an allegation of fraud to be specifically pleaded even where the facts alleged to constitute the fraud were pleaded elsewhere and were in issue. But if it did, in a case such as the present one it cannot have been a matter of substance and the failure to observe the rule should not have resulted in shutting the plaintiff out from relief against one of the defendants. 1. [1930] 1 K.B. 628, at pp. 634, 636, 641. 2. (1877) 7 Ch. D. 473, at p. 489. 3. [1896] A.C. 199, at p. 219. 4. (1927) 40 C.L.R. 43, at pp. 82-83. 5. (1877) 7 Ch. D. 473, at p. 489. 6. [1896] A.C., at p. 219.

In this case, Akhil had from the beginning pleaded that the shares which it identified in its statement of claim were held in trust by Banque Commerciale for it as nominee. It had from the beginning pleaded that the transfers of the shares made by Banque Commerciale were without its authority and consent and were not within its knowledge. The amendment of the statement of claim made no alteration in substance to its allegations against Banque Commerciale. Those were the facts upon which Akhil necessarily relied to prove its case of fraudulent breach of trust and those were the facts which, in the absence of any explanation by the defendants, were held to establish that case. It was on the basis of these facts that the Court of Appeal found that Banque Commerciale had acted fraudulently, and, apart from the failure to plead fraud by way of reply, it was not argued in this Court that the Court of Appeal had erred in arriving at that finding. There was no additional act of dishonesty upon which Akhil relied as against Banque Commerciale, other than the transfer of its property without its knowledge, authority or consent. This was sufficient for the Court of Appeal to find that there had been a deliberate action by the trustee to deprive the beneficiary of its property. In the particular circumstances of this case, the nature of the conversion and breach of trust alleged against Banque Commerciale clearly implied a knowledge of the impropriety of the transfer. It could hardly be said that Banque Commerciale was in ignorance of the facts alleged against it and the failure of Akhil to label those facts as fraud was, to my mind, little more than a technical defect in the proceedings, having regard to the nature of the defence raised by all three defendants and the express allegation of fraud against Deauville and Messara.

It is, of course, the purpose of pleadings to define the issues between the parties so that they may know the case which they have to meet and in order that the proceedings upon trial may be conducted in an orderly fashion by reference to those issues. The defined issues provide the basis upon which evidence may be ruled admissible or inadmissible upon the ground of relevance. But modern pleadings have never imposed so rigid a framework that if evidence which raises fresh issues is admitted without objection at trial, the case is to be decided upon a basis which does not embrace the real controversy between the parties. Special procedures apart, cases are determined on the evidence, not the pleadings. It is incumbent upon the trial judge to see that the pleadings or particulars are amended so that the record reflects the proceedings as they have been conducted, but his failure to do so will not result in the invalidity of those proceedings: Dare v. Pulham [7] ; Water Board v. Moustakas [8] ; Leotta v. Public Transport Commission (N.S.W.) [9] ; Maloney v. Commissioner for Railways (N.S.W.) [10] . Whether leave to amend the pleadings ought to be given in the course of a trial, without notice to a party who does not appear at the trial, can only be determined in each instance having regard to any possible prejudice to that party: see In re Robinson's Settlement; Gant v. Hobbs [11] , per Buckley L.J. In determining whether there is any prejudice, it will, of course, be borne in mind that a party who fails to appear has voluntarily relinquished the right to be heard in relation to those steps which form the ordinary incidents of a trial.

1. (1982) 148 C.L.R. 658, at p. 664. 2. (1988) 62 A.L.J.R. 209, at p. 211; 77 A.L.R. 193, at p. 197. 3. (1976) 50 A.L.J.R. 666, at p. 668; 9 A.L.R. 437, at p. 446. 4. (1978) 52 A.L.J.R. 292, at p. 294; 18 A.L.R. 147, at p. 151. 5. [1912] 1 Ch., at p. 728.

The relief granted must not, however, exceed the relief claimed and no amendment of the relief claimed ought be allowed at a trial in the absence of the party against whom it is claimed. That is because that party may have chosen to absent himself having regard to the relief claimed and he should be given the opportunity to be heard if there is to be any alteration to the nature of that relief: Stone v. Smith [12] ; Barker v. Furlong [13] ; Gee v. Bell [14] ; Kingdon v. Kirk [15] ; Jamaica Railway v. Colonial Bank [16] . In this case the relief granted against Banque Commerciale did not exceed that claimed in the pleadings.

1. (1887) 35 Ch. D. 188. 2. [1891] 2 Ch. 172. 3. (1887) 35 Ch. D. 160. 4. (1887) 37 Ch. D. 141. 5. [1905] 1 Ch. 677, at p. 691.

The finding of fraud made against Banque Commerciale was made upon the basis of facts alleged by Akhil in its statement of claim. The issue was specifically raised in the replies delivered by Akhil to Deauville and Messara. Banque Commerciale had notice of the reply delivered to Messara. Evidence was admissible at the trial to establish fraud on the part of Banque Commerciale and the Court of Appeal held that it was established. The limitation period laid down by s. 69 of the Trustee Act was inapplicable to a claim founded upon fraud. If in these circumstances Akhil was in breach of Pt. 15, r. 13 of the Supreme Court Rules by failing to file and serve a reply upon Banque Commerciale identifying the conduct of that party as fraudulent, then it was a breach of a technical kind only and, in my view, insufficient to deprive Akhil of the relief which it claimed against Banque Commerciale.

I have had the advantage of reading the reasons for judgment of Toohey J. Whilst I am of the view that the appeal should be dismissed, if that view were not to prevail, I should favour the course which he proposes, namely, that the matter should be sent back to the Court of Appeal to determine whether and, if so, on what terms Akhil should now be permitted to raise fraud by way of reply.

This appeal turns on the pleadings in an action in the Supreme Court of New South Wales.

In September 1978 Akhil Holdings Ltd. ("Akhil Holdings") brought action against Banque Commerciale S.A., En Liquidation ("the Bank") and against Deauville Nominees Pty. Ltd. ("Deauville") and its managing director, Maurice Messara ("Messara"). Put shortly, the claim was for breach of trust.

The background to the litigation may be summarized in this way. Akhil Holdings was a company incorporated in Fiji and it was controlled by Mr. Akhil. It held valuable mining rights in Fiji relating to manganese. In 1961 or 1962 Akhil met Messara who, in the words of the primary judge, "guided the activities" of Deauville. In 1968 the two men entered into negotiations for the sale by Akhil Holdings of its mining interests to a company, to be formed as a public company. Southland Mining Ltd. ("Southland") was formed. Later an option agreement was entered into, the effect of which was that Deauville and Messara might acquire Akhil Holdings' mining interests for a consideration in the form of shares in Southland. The option was duly exercised and Akhil Holdings directed Southland to issue 1,000,000 shares to it and 600,000 shares to the Bank as nominee for Akhil Holdings. Accordingly, shares were issued to Akhil Holdings and to the Bank. Later the 600,000 shares, which were 25c shares, were converted to 1,500,000 10c shares, of which the Bank was the registered holder.

Akhil Holdings claimed that between October 1970 and July 1971 Messara procured the Bank to lodge with Southland transfers to various purchasers of 25,000 of the shares it held as nominee for Akhil Holdings. It further claimed that in or about December 1970 Messara procured the Bank to transfer to Deauville 1,475,000 of the shares held by it as nominee for Akhil Holdings. These transfers were alleged to have been made by the Bank "without the authority and consent of the plaintiff and were not within the knowledge of the plaintiff" (par. 15 of the statement of claim as originally filed). Akhil Holdings sought damages against the Bank, Deauville and Messara for conversion of the 1,500,000 shares to the use of Deauville and the other transferees, alternatively a declaration that Deauville held its 1,475,000 shares in Southland as trustee for Akhil Holdings.

Each defendant filed a defence to the statement of claim. As part of its defence the Bank pleaded that "the Plaintiff's claim is barred by the provisions of the Limitation Act, 1969 and the provisions of Section 69 of the Trustee Act, 1925 ". Deauville and Messara also relied upon those two statutory provisions in their defences.

Akhil Holdings filed no reply to the defence of the Bank. It did file a reply to the defences of the other two defendants. In each of those replies it asserted that its action was "in respect of a fraudulent breach of trust by the [Bank] who was privy or a party to the breach of trust while a trustee" or was an action for conversion to the Bank's own use of trust property and that action was commenced within twelve years from the date on which it discovered the facts giving rise to the cause of action. This is the language of the Limitation Act 1969 N.S.W.. Section 47 of that Act provides a limitation period of twelve years in the case of an action in respect of fraud or fraudulent breach of trust against a person who is, while a trustee, a party or privy to the fraud or breach of trust and for a remedy for the conversion to a person's own use of property received by him while a trustee. The twelve-year period runs from the date on which the plaintiff "first discovers or may with reasonable diligence discover the facts giving rise to the cause of action and that the cause of action has accrued".

The Limitation Act repealed s. 69 of the Trustee Act 1925 N.S.W.. That section, which otherwise fixed a six-year limitation period, does not affect an action "where the claim is founded upon any fraud or fraudulent breach of trust to which the trustee was party or privy, or is to recover trust property, or the proceeds thereof still retained by the trustee, or previously received by the trustee and converted to his use" (proviso to s. 69(1)). Prior to the coming into force of the Limitation Act, there was, it seems, no relevant limitation period where the proviso to s. 69(1) of the Trustee Act was applicable: see New South Wales Law Reform Commission, Report on the Limitation of Actions (1967), par. 230. Where the proviso was not applicable, s. 69(3) equated, for limitation purposes, action against a trustee with an action of debt for money had and received, hence a limitation period of six years. The Limitation Act did not commence until 1 January 1971. The appeal was conducted on the footing that Akhil Holdings' claim against the Bank was subject to a six-year limitation period unless its claim was one in fraud or fraudulent breach of trust against the Bank.

As mentioned earlier, Akhil Holdings' action was commenced in September 1978. It is not in issue that, if there were breaches of trust on the part of the Bank, those breaches were outside the limitation period of six years. In the case of the other two defendants, it is enough to note that some of the breaches alleged fell within and some fell without that limitation period.

Although no reply was filed to the defence of the Bank, a copy of an amended reply to Messara's defence was served on the Bank's solicitors. At the relevant time Pt. 15, r. 28(1) of the Supreme Court Rules (N.S.W.) ("the Rules") required that a party who files a pleading "shall, on the date of filing, serve the pleading on each other party to the proceedings". But the provision applied only to proceedings commenced on or after 23 May 1980. It therefore had no application to the proceedings in question though, in the course of argument before this Court, the appellant appeared to accept that it did. As it happened, the Bank was not served with a copy of the reply until some twenty days after it was filed; however, nothing was said to turn on that aspect. In the view I have taken of the matter, the point is not crucial.

On 23 July 1984 the solicitors for the Bank, which had on 30 March 1983 gone into liquidation, filed notice of ceasing to act. The Bank took no further part in the action which went to trial. Akhil Holdings' claim against all three defendants was dismissed because, in the view of the primary judge, the plaintiff failed to establish that it was a beneficiary of the shares said to have been held in trust by the Bank. It should be noted that, on 17 February 1986, when the hearing had virtually concluded, Akhil Holdings filed an amended statement of claim pursuant to the leave of the trial judge. There is no suggestion that any notice of the proposed amendment was given to the Bank. So far as relates to the Bank, the relevant amendments were to par. 15 of the statement of claim, to allege that the transfers of the shares were made "without the authority and consent of the Plaintiff and in breach of trust and were not within the knowledge of the Plaintiff" (emphasis added).

Akhil Holdings appealed to the Court of Appeal. The Bank appeared by counsel on the hearing of the appeal. It adopted the submissions of Deauville and Messara in answer to the challenge to the findings of the trial judge. But it also filed a notice of contention seeking to uphold the dismissal of the action against it by relying upon the limitation provisions pleaded in its defence. The Court of Appeal upheld Akhil Holdings' appeal against the dismissal of its claim against the three defendants. It is unnecessary to detail the Court's reasons for reaching that conclusion but it involved overturning the trial judge's finding that Akhil Holdings had failed to establish that it was the beneficiary of the shares in question and holding that the Bank was party to a fraudulent breach of trust.

The Court of Appeal dealt with the limitations defence in this way. The Court said that there had been a breach of trust on the part of the defendants and added: "In the relevant sense, this was a fraudulent breach of trust. Accordingly, the ordinary limitation period of six years was not available to the respondents " The Court then turned to a further aspect of the limitations defence, namely, an argument by Akhil Holdings that s. 69(3) of the Trustee Act did not apply because there had been "concealed fraud" on the part of the defendants. The Court declined to deal with this answer to the limitations defence, upholding the submission of the defendants that no such case had been pleaded against any of them. In referring to "concealed fraud", the Court of Appeal said: "It is true that fraud must, by conventional practice, be alleged and pleaded with particularity. The reply did raise the proviso to s. 69(1) of the Trustee Act." The Bank rightly points out that this could not be said in relation to it for there was no reply to its defence. In dealing with the question of fraud in relation to the proviso to s. 69(1), the Court of Appeal did not mention expressly the replies to the defences of Deauville and Messara or the absence of a reply to the defence of the Bank. Rather, it said, apparently in relation to all defendants: "To circumvent the limitations defence, Akhil Holdings invoked the proviso "

Thus the Bank's complaint is that it had put on record a defence of limitations, that notwithstanding its non-appearance at trial limitations was an issue Akhil Holdings had to meet, that the trial judge found it unnecessary to deal with this issue but that the Court of Appeal dealt with it and fixed the Bank with an answer to its defence which Akhil Holdings had not raised by way of reply and had not been called upon to do so. Further, that the Bank had been given no opportunity to be heard in relation to the answer or to call evidence if it so desired.

As the Rules stood at relevant times, Pt. 15, r. 13 read:

In a defence or subsequent pleading the party pleading shall plead specifically any matter, for example, performance, release, any statute of limitation, fraud, or any fact showing illegality -

(a) which he alleges makes any claim, defence or other case of the opposite party not maintainable;

(b) which, if not pleaded specifically, may take the opposite party by surprise; or

(c) which raises matters of fact not arising out of the preceding pleading.

The current rule is r. 13(2) which is not materially different.

The matters contained in Akhil Holdings' reply to the defences of Deauville and Messara raised a question of fraud which fell at least within pars (a) and (b) of r. 13. The real questions in this appeal go to the consequences of Akhil Holdings' failure to plead those matters in a reply to the Bank's defence and the implications (if any) arising from the Bank's failure to appear on the trial of the action in which the matters were raised against the other defendants.

In In re Robinson's Settlement; Gant v. Hobbs [17] , Buckley L.J. said of the English rule comparable to r. 13:

The effect of the rule is, I think, for reasons of practice and justice and convenience to require the party to tell his opponent what he is coming to the Court to prove. If he does not do that the Court will deal with it in one of two ways. It may say that it is not open to him, that he has not raised it and will not be allowed to rely on it; or it may give him leave to amend by raising it, and protect the other party if necessary by letting the case stand over. The rule is not one that excludes from the consideration of the Court the relevant subject-matter for decision simply on the ground that it is not pleaded. It leaves the party in mercy and the Court will deal with him as is just. 1. [1912] 1 Ch. 717, at p. 728.

There can be no quarrel with Buckley L.J.'s exposition and in the ordinary situation of one plaintiff and one defendant a trial judge will readily determine the proper course to be followed. But this is not an ordinary situation. There was more than one defendant; each defendant filed a limitations defence; an answer to those defences was fairly raised against only two of the three defendants; the trial judge found it unnecessary to deal with those defences; one defendant did not appear at trial but put squarely on record its intention to rely upon its limitations defence before the Court of Appeal; and the Court of Appeal rejected its defence, apparently in reliance upon a reply which had been made, not to that defendant's defence but to the defence of the other defendants.

Axiomatic though it may be to say it, the primary function of pleadings is to define the issues for decision in the litigation: see generally Dare v. Pulham [18] . By defining, the pleadings thereby limit the issues for decision, subject of course to the court's power to grant an amendment. When this case went to trial, each defendant had put on record a defence of limitations. Limitations was therefore an issue in the case though the evidential onus lay initially on the defendants. Once the evidence disclosed, as it did, that the claim was either in whole or in part statute barred against one or more of the defendants, the onus then lay on the plaintiff to show that a six-year limitation period was not applicable. I agree with what Mason C.J. and Gaudron J. have to say as to this onus and have nothing to add. It is common ground that, unless the matters relied upon in the replies could be made good, the entire claim against the Bank was statute barred. It follows that the plaintiff must fail against the Bank unless it could rely upon the proviso to s. 69(1) of the Trustee Act or s. 47 of the Limitation Act to the extent to which each was relevant. As it happened, the trial judge accepted evidence that 25,000 shares were sold through stockbrokers in June 1970 and that the remaining 1,475,000 shares were transferred from the Bank to Deauville in November 1970. At the same time the Court of Appeal spoke of the transfer of the latter shares being "actually registered" on 11 December 1970. On either footing the relevant statute was the Trustee Act.

The situation did not change because of the Bank's failure to appear on the hearing of the action. So long as it had a defence on the record (as it did at all times), there could be no entry of default against the Bank. There is nothing in Pt. 17 of the Rules, the default provisions, which relieved Akhil Holdings of the obligation to make good its case against the Bank. No doubt that task was made easier by the absence of cross-examination and contrary testimony. But nothing in the conduct of the Bank could have led to a conclusion that it did not intend to rely upon its defence or that in some way it had waived that defence. There have been many decisions in which the courts have been called upon to consider the consequences if a party to litigation does not pursue at trial a particular issue that was open on the pleadings: see for instance Niemann v. Smedley [19] ; O'Brien v. Rosedale Corporation [20] ; Browne v. Dunn [21] ; Davis v. Commercial Bank of Windsor [22] ; Water Board v. Moustakas [23] ;Saffron v. Societe Miniere Cafrika [24] . But these decisions involved the way in which a trial was conducted and arguments presented. Here the Bank did not appear at the hearing; its absence did not affect the course of the trial and the issues as pleaded remained the issues between it and Akhil Holdings. Likewise, no question of election could arise. The failure of the Bank to appear at trial did not constitute any representation on its part that the issues for determination were other than the issues as pleaded; as to election in such circumstances, see Spencer Bower and Turner, Law Relating to Estoppel by Representation, 3rd ed. (1977), pp. 316-333.

1. [1973] V.R. 769, at pp. 776-777. 2. [1969] V.R. 645, at pp. 647-648. 3. (1893) 6 R. 67. 4. (1899) 32 N.S.R. 366, at pp. 383-384. 5. (1988) 62 A.L.J.R. 209, at p. 211; 77 A.L.R. 193, at p. 197. 6. (1958) 100 C.L.R. 231, at p. 240.

Part 34, r. 5(1) of the Rules deals expressly with the position if, when a trial is called on, "any party is absent". Rule 5(1)(b) empowers the Court to "proceed with the trial generally or so far as concerns any claim for relief in the proceedings". The plaintiff may prove his claim so far as the burden of proof lies on him; having done so, he is entitled to the relief claimed and to any relief consistent therewith: Barker v. Furlong [25] ; Gee v. Bell [26] ; Stone v. Smith [27] ; Jamaica Railway v. Colonial Bank [28] . The character of the trial does not alter because of the defendant's absence.

1. [1891] 2 Ch. 172. 2. (1887) 35 Ch. D. 160. 3. (1887) 35 Ch. D. 188. 4. [1905] 1 Ch. 677.

The position of the appellant and the respondent before the Court of Appeal may be tested to some extent by considering their position before the trial judge. That position had been defined by the statement of claim and the defence filed by the parties. Had the evidence disclosed that Akhil Holdings' claim fell within the ordinary limitation period of six years, nothing would have remained of the Bank's limitations defence. Had the evidence disclosed otherwise the claim would have been defeated by the defence, unless Akhil Holdings could bring its claim within the proviso to s. 69(1) of the Trustee Act. As the pleadings stood between Akhil Holdings and the Bank, the trial judge could not have allowed the former to attempt to do so or at any rate could not have allowed such an attempt without notice to the Bank of intention to seek leave to file a reply. This was no technical change in the pleadings; it was a different case against the Bank which may have involved evidence on one or both sides had the Bank wished to contest the reply. The situation was no different because the Bank had not appeared at trial. It was entitled to absent itself and take its chance on the pleadings as they stood for those pleadings defined the issues between the parties. And that must mean the pleadings between Akhil Holdings and the Bank, not pleadings between other parties of which the Bank might have been aware. The only significance of service on the Bank of a copy of the reply to Messara's defence was that the trial judge might have been more easily persuaded to entertain an application by the plaintiff for leave to file a reply.

It is not possible to distil from the statement of claim, whether in its original form or in its amended form, a claim in fraud or fraudulent breach of trust against the Bank. It is not a matter of whether the appropriate label was attached to the statement of claim. Nowhere in that pleading does the plaintiff set up a case of fraud or fraudulent breach of trust against the Bank. A conversion of property may occur without fraud; so too may a breach of trust. Indeed both s. 69 of the Trustee Act and s. 47 of the Limitation Act recognize a distinction by referring expressly to a fraudulent breach of trust. The original statement of claim alleged, so far as the Bank is concerned, an absence of authority, consent and knowledge on the part of Akhil Holdings. The amended statement of claim contained that allegation, adding no more than that the transfers of the shares were made in breach of trust. Neither pleading asserts on the part of the Bank bad faith, knowledge or intention to deceive the plaintiff - components that might be expected if the case against the Bank were one of fraud.

When the case reached the Court of Appeal the Bank was, if anything, in a stronger position than it had been during the trial of the action. It appeared by counsel and put on record by notice of contention its intention to challenge the appeal in reliance upon its limitations defence. To allow the appeal against the Bank on the ground inter alia that there was an answer to that plea in the matters raised in the appellant's reply to other respondents was to decide the appeal by reference to a consideration that had not been in issue between Akhil Holdings and the Bank. In effect the Court of Appeal transposed from the trial something which had not been an issue between Akhil Holdings and the Bank, made it an issue between those parties before that Court and disposed of it adversely to the Bank.

However relaxed a view one may take of the function of pleadings, it is not possible to justify the course taken by the Court of Appeal. But it does not follow that the appeal should simply be allowed, with the consequence that judgment is entered for the appellant. In my view, the matter should go back to the Court of Appeal, where Akhil Holdings' answer to the limitations defence was crucial, to enable the parties to make submissions as to whether, and if so on what terms, Akhil Holdings should now be permitted to raise by way of reply to the Bank's defence the matters raised in its reply to the defences of the other defendants. It may be, for instance, that the Bank cannot point to any evidence it could have called, any question it could have asked in cross-examination or any step it could have taken had a reply been filed at the outset. In that event leave to file a reply, even at this stage, may be appropriate and Akhil Holdings' claim against the Bank dealt with on that basis, subject to such terms as to costs as the Court of Appeal may think proper. If the Bank can so point or otherwise satisfy the Court of Appeal that it would be prejudiced by leave to file a reply at this stage, a different approach may be warranted. The overriding consideration is to do justice between the parties; the arguments addressed to this Court were not such as to enable a resolution of that dilemma.