Black v Black

EX TEMPORE Judgment 1HIS HONOUR: There are before the Court two notices of motion for determination. The first is a notice of motion filed by the plaintiff on 3 June 2013. By that notice of motion the plaintiff seeks leave to file an amended statement of claim in the form of the document which is annexure H to the affidavit of Bruce Dennis sworn 3 June 2013. 2The second notice of motion is an amended notice of motion filed today with leave which seeks two forms of relief. The first is a declaration that the proceedings are statute barred pursuant to the operation of s 14 and s 52(1)(e) of the Limitation Act 1969 (NSW). In the alternative, in paragraph 2, the defendant seeks that the proceedings be dismissed pursuant to rule 12.7 of the Uniform Civil Procedure Rules 2005 and/or rule 13.4 of the Uniform Civil Procedure Rules. There are consequent orders sought. The Court would not in any event make a declaration on a notice of motion of the type sought in order 1. If the Court were minded to deal with the limitation issue, it would have to be on the basis of the claim made in paragraph 2. That would be that if it was sufficiently clear that the plaintiff's claim was statute-barred, then summary dismissal could be given against him. 3The statement of claim in these proceedings was filed on 8 November 2012. The effect of paragraph 8 of the statement of claim is that in substance it alleges that the plaintiff's loss occurred in November 2002. That being the case, as the claim which the plaintiff seeks to make is a claim for solicitor's negligence in tort, the cause of action would arise in November 2002 and the limitation period would expire in November 2008. 4It would follow that the plaintiff's claim would be statute-barred given that the statement of claim was filed in November 2012. However, as the Court understands it, the defendant accepts that if the plaintiff's notice of motion seeking leave to amend the statement of claim is permitted on the basis that the amended pleading alleges requisite matters under s 55 of the Limitation Act, then it would not be appropriate or necessary for the Court to have to deal with the defendant's summary dismissal motion at this stage. 5It is therefore necessary to address the plaintiff's application for leave to amend its statement of claim. 6By way of background, as appears from the pleadings in paragraph 2, the plaintiff was born on 9 November 1988. The plaintiff is the son of the defendant. 7On 9 November 1988 a trust was established called the Clayton Errol Eric Black Trust ("the Trust"). The plaintiff is the sole beneficiary. 8On 12 March 1997 the defendant became the trustee of the Trust and on the 12 March 1998 he, it is alleged, effectively appointed himself as solicitor for the Trust and acted on a transaction whereby the defendant as trustee made a loan of $230,000 to a company called Halfoak Pty Limited for six months. 9It is alleged that the defendant was negligent in implementing the loan for the Trust. 10In November 2002 at the time the loan was repayable, there was default by Halfoak and the Trust was unable to recover the amount of the loan. Apparently on 9 November 2006 the plaintiff turned 18. 11It is necessary to look more closely at the draft amended statement of claim. It is alleged in paragraph 1 that at all material times the defendant was a solicitor. In paragraph 2, it is alleged that the plaintiff was born on 9 November 1988 as the defendant's only child. 12The creation of the Trust on 9 November 1988 is pleaded in paragraph 3. The trust had a vesting date of 2014. Initially a person other than the defendant was the sole trustee. 13It is alleged in paragraph 4 that on 12 March 1997 the defendant replaced the original trustee as trustee of the Trust. 14Paragraph 5 alleges the making of the loan to Halfoak Pty Limited of $230,000 on 12 March 1998. That paragraph also alleges that the defendant appointed himself as solicitor for the trustee, "thereby assuming the role and responsibility for documenting and securing the loan, its repayment, terms of principal and interest thereon as fully as possible." And then it adds, "for the protection of the plaintiff [as the Trust's sole beneficiary] who the defendant knew or ought to have known would have relied on his advice and skill as a solicitor had the plaintiff been able to be fully seized of the circumstances comprising the loan." 15Counsel for the defendant has made it clear that although this may be an unusual allegation of a duty of care, no challenge to it is made for the purposes of the present application. 16It is to be noted that although the defendant was the trustee of the Trust, there is no claim pleaded against the defendant for breach of trust, nothing is made of the equitable rules concerning fraudulent concealment of breach of trust and nothing arises on the pleading concerning the limitation pleading that applies for contravention of deeds. 17It is in paragraph 6 that the plaintiff alleges the nature of the defendant's alleged negligence which may be summarised briefly as failing to obtain a registered first mortgage, failing to obtain an independent licensed valuer's valuation and failing to lodge a caveat. 18The consequence was, as is alleged in paragraph 8, that in the absence of security benefiting the trust, Halfoak Pty Limited was able to sell its real property in about November 2002 without paying out its mortgage to the Trust. It is said that as of 21 December 2004 the amount of the loan plus interest was $305,583.25, that being the occasion when the defendant obtained some form of judgment against Halfoak which did not yield any fruit. 19The allegations in the draft further amended statement of claim from the second paragraph within numbered paragraph 8 to paragraph 12 is almost entirely part of the amended pleading which the plaintiff seeks leave to be able to file. It is not necessary to go into the detail of those allegations. They may be summarised by noting that the defendant and the plaintiff's mother became divorced in about 1991. The defendant and the plaintiff became totally estranged from about early 2003 and while there were some ineffective attempts at reconciliation, there was very little personal or telephone contact between the plaintiff and the defendant until about August 2009. That, of course, is a date after the expiration of the limitation period. 20It is in paragraph 13 and following that the plaintiff starts to make various allegations, apparently designed to attract the operation of s 55 of the Limitation Act to cause the result that the limitation period ceased to run against the plaintiff for a time which would have the result that the filing of the statement of claim was not statute-barred at the time of filing. 21In paragraph 13 the plaintiff seeks to add: "From late 2006 or early 2007 the defendant sent occasional letters to the plaintiff requesting a reconciliation but never told the plaintiff of the loss suffered by the Trust, what his rights were, what he should do about it and that there were time limitations within which he had to act." Particulars are then given of that allegation. 22Paragraph (a) refers to letters sent by the defendant to the plaintiff in 2007, 2008 and 2009. Those letters are not identified by date. It is said that they make no reference to the loss suffered by the defendant and the plaintiff's rights. 23Paragraph (b) of the particulars says, "Letters sent by the defendant to the plaintiff in 2007, 2008 and 2009 were cryptic and did not explain about the loss suffered by the Trust, and were such that a person of little worldly experience would not understand the urgency and the need to act to seek legal advice." 24I am of the view that those particulars are embarrassing. They seem to imply that in some or all of the correspondence there was information which read by a person of experience may have been capable of conveying the information that the trust had suffered a loss but the assertion made by the plaintiff is that the letters were cryptic and apparently not likely to be understood by a person of little worldly experience. I will return to the issue of the possible inadequacy of aspects of the pleading in due course. 25Paragraph 14 then says: "When the defendant received no response to the letters particularised above, he should have realised that the plaintiff may still be traumatised by his parents' divorce and not contact him so accordingly, should have told an adult representing the plaintiff [during his minority] of the loss suffered by the Trust and the need for urgent action by him to seek legal advice as to his rights. After his majority, the defendant should have said this to the defendant himself." 26As is the case for particular subparagraph (b) of paragraph 13, this pleading implies that there was something in the correspondence which was capable of conveying that the Trust had suffered a loss and something about the consequences of that loss as it is said against the defendant that he should have realised that the absence of a response may mean that the plaintiff had not properly understood the communication. I will also return to this aspect of the pleading later. 27It is said in paragraph 15, that in about August 2009 the parties began to reconcile and again that: "the defendant still did not tell the plaintiff of the loss suffered by the Trust and the urgency for the plaintiff to seek legal advice as to his rights until 2010." 28It seems to be suggested by that allegation that at some time in 2010 the defendant did inform the plaintiff about the loss and the possible legal rights that the plaintiff might have. 29In paragraph 16 the plaintiff pleads that he only discovered the details of the Trust making the unrecoverable loan in 2010. 30The plaintiff then seeks to add the following allegations as a second paragraph within paragraph 16 of the draft amended statement of claim: "Accordingly the defendant breached his duty of care to the plaintiff pursuant to s 55 of the Limitation Act 1969 (NSW) in deceptively keeping from the knowledge of the plaintiff [or those in charge of his interests] the details of the defendant's effecting of the loan in the manner set out in paragraphs 5 to 8 above, so as to mislead the plaintiff into thinking that at all times the said trust monies were in no jeopardy when the defendant's continuing duty [which he did not discharge until 2010] was to inform the plaintiff of the Trust's loss." 31I propose to consider this additional allegation first as a matter of pleading and then address the underlying substantive legal principles. 32Insofar as the plaintiff wishes to plead that, "Accordingly the defendant breached his duty of care to the plaintiff", there appears to be an allegation intended to be made that the defendant owed a separate duty of care to the plaintiff of some continuing nature to inform the plaintiff of the loss that had been suffered by the trust and the rights that the plaintiff might have as a result. I will return shortly to the legal basis of that allegation. 33However, insofar as the plaintiff seeks to add immediately "[pursuant to s 55 of the Limitation Act 1969 (NSW)]", the plaintiff appears to be making an allegation that the duty of care alleged arises out of s 55 of the Limitation Act when it clearly does not and the pleading appears to conflate two aspects of the plaintiff's claim that are separate and significant. 34If the plaintiff wishes to plead a new breach of duty of care that is new in the sense that it is additional to the duty of care pleaded in paragraph 5 of the original statement of claim, that has to be done separately. 35The defendant is entitled to a pleading which clearly pleads the basis of any new duty of care. 36Further, as indicated, the suggestion that the duty of care arises out of s 55 of the Limitation Act is not correct in legal principle. 37If the plaintiff wishes to plead in the proper way facts and circumstances which activate s 55 of the Limitation Act, then the plaintiff should do so clearly and separately, and give proper particulars of that pleading. 38Furthermore, the new paragraph sought to be added to paragraph 16 goes on after the reference to s 55 to say "in deceptively keeping from the knowledge of the plaintiff the details of the defendant's effecting of the loan in the manner set out in paragraphs 5 to 8 above". 39Counsel for the plaintiff in submissions suggested that the plaintiff was intending by the draft amended statement of claim to plead a separate standalone claim of deceit against the defendant. 40Section 55 of the Limitation Act 1969 says in part in subclause 1: "Subject to subsection (3) where: (a) there is a cause of action based on fraud or deceit, or (b) a cause of action or the identity of a person against whom a cause of action lies is fraudulently concealed." 41I will not read the balance of the subclause, which specifies certain circumstances which have an effect of extending the limitation period. 42Counsel for the plaintiff suggested to the Court that the draft amended statement of claim was not only intended to attract s 55(1)(b) on the basis that the cause of action is fraudulently concealed but also to plead separately a cause of action based on fraud or deceit. 43In relation to that second matter, the Court cannot see in the draft amended statement of claim any true allegation of a separate cause of action in deceit and if the plaintiff thinks that there is such a cause of action it has not separately and properly been pleaded. 44The consequence is that paragraph 16, with respect, either mixes up two things or three things. It mixes up a new claim of breach of duty of care with a pleading intended to invoke s 55(1)(b) of the Limitation Act. If it is intended also to plead a claim in deceit, it is not done with sufficient clarity and it is done with inadequate particulars. 45The defendant relied upon the decision of the High Court of Australia in Commonwealth v Cornwell (2007) 229 CLR 519 in the judgment of Gleeson CJ, Gummow, Kirby, Hayne, Heydon and Crennan JJ, where their Honours referred with apparent approval to the decision of McClelland J in Hamilton v Kaljo concerning s 55(1)(b) of the Limitation Act: "For my own part, I would regard it as a misuse of language, and unsound, to apply the statutory expression 'fraudulently' in s 55 to any conduct which did not involve some form of dishonesty or moral turpitude." 46Their Honours also referred, again with apparent approval, to an extract from the judgment of Acting Chief Justice Mahoney in the New South Wales Court of Appeal in Seymour v Seymour (again I omit the citation): "In my opinion, there must be in what is involved a consciousness that what is being done is wrong or that to take advantage of the relevant situation involves wrongdoing. At least, this is so in the generality of cases." 47Counsel for the plaintiff relied on an aspect of the New South Wales Court of Appeal decision in Walmsley v Cosentino [2001] NSWCA 403. In that case Powell JA, with whom Priestley JA and Beazley JA agreed, in [47] referred to observations made by Dean J in Hawkins v Clayton in the High Court. His Honour extracted a passage from that judgment at 590. "If a wrongful action or breach of duty by one person not only causes unlawful injury to another but, while its effect remains, effectively precludes that other from bringing proceedings to recover the damage to which he is entitled, that other person in [sic] doubly injured. There can be no acceptable or even sensible justification of a law which provides that to sustain the second injury will preclude recovery of damages for the first. It would, e.g., be a travesty of justice and common sense if the law provided that a cause of action lay for damages for false imprisonment but then went on to provide that that cause of action would be lost it the false imprisonment continued for six years after the cause of action first accrued. Likewise, it would be a travesty of justice and common sense if the law imposed a duty upon a solicitor to take positive steps to inform a third person of the contents of a document of which the solicitor was alone aware and then provided that any cause of action against the solicitor for damage caused by a negligent failure to perform that duty would be lost if the negligence continued for six years. It is arguable that the notion of unconscionable reliance upon the provisions of a Statute of Limitations which provides the foundation of the long established equitable jurisdiction to grant relief in a case of concealment of a cause of action until after the limitation period has expired (cf. s 55(1) of the Limitation Act) should, by analogy, be extended to cover cases such as these where the wrongful act at the one time inflicts the injury, and while its effect remains, precludes the bringing of an action for damages. It seems to me, however, that the preferable approach is to recognise that it could not have been the legislative intent that the effect of provisions such as s 14(1) of the Limitation Act should be that a cause of action for a wrongful act should be barred by lapse of time during a period in which the wrongful act itself effectively precluded the bringing of proceedings. On that approach, the reference in s 14(1) of the Act to the cause of action first accruing, should be construed as excluding any period during which the wrongful act itself effectively precluded the institution of proceedings." 48The effect of the suggestion made by Dean J was that if a solicitor, for example, breached a duty of care to a client and an aspect of that duty was to inform the client that the breach had happened then the limitation period would not necessarily begin to run once and for all from the time of the original breach. But the effect of the continuing failure of the solicitor to advise the client that the breach had occurred would have the effect that one aspect of the claim which the client had against the solicitor would be such that the limitation period would not begin to run. 49It is to be noted that Powell JA said, after setting out the extract from the judgment of Dean J, at [48]: "The status to be accorded to the exception suggested by Dean J is, to say the least, unclear, if only because although in Hawkins v Clayton each of Brennan J and Gaudron J concurred in the order proposed by his Honour, neither agreed with the basis upon which his Honour founded his Judgment, and each of them proceeded upon the basis that no cause of action accrued to Mr Hawkins until he assumed the officer of executor." I will come back to the significance of that. 50Powell JA also referred to the judgment of Acting Chief Justice Mahoney in Seymour v Seymour to which the High Court had also referred to in Cornwell. Powell JA (at [51]) refers to an extract from Mahoney ACJ's judgment at 372 in the following terms: "In my opinion, the section is not confined to simply common law fraud. It extends to conduct beyond that. On the other hand, it is not, I think, sufficient merely that for the defendant to take advantage of the statute of limitations would be unconscionable or inequitable in the wide sense of these terms. Terms such as unconscionable and inequitable now are used to describe conduct which in previous times, would not have fallen within them." I omit the authority cited by his Honour. 51Mahoney ACJ went on to say: "Nor, in my opinion, is ' fraudulently' wide enough to include everything which would fall within the description of 'equitable fraud'. Equitable fraud is a doctrine which depends, for this purpose, too much upon nice distinctions which have been drawn in other times." 52Mahoney ACJ then recited the passage which has been extracted by the High Court in Commonwealth v Cornwell. That is to say, and I quote only in part: "[T]here must be in what is involved a consciousness that what is being done is wrong or that to take advantage of the situation involves wrongdoing". 53It is appropriate to have regard to the particulars to paragraph 16 of the draft amended statement of claim. Paragraph (a) of the particulars says: "The defendant was deceptive in not informing the plaintiff of the loss of the Trust's funds in 2006 which he conceded, he did not do, giving as his reason that he did not want knowledge of this loss to cause further estrangement from the plaintiff." 54Taken at face value this allegation suggests that at some time when the plaintiff raised with the defendant his entitlement to the trust fund the defendant has stated that he did not tell the plaintiff because he did not want knowledge of this loss to cause further estrangement from the plaintiff. 55Paragraph (a) of the particulars is a bare assertion without any identification of the time or circumstances or the parties present when this alleged statement was made. 56It is a significant statement because if the plaintiff were able to prove that this statement was made it would at least make arguable a case that the defendant had some consciousness that he had done wrong to the plaintiff and that he concealed the wrong because of his own personal desire to secure some form of rapprochement with the plaintiff. 57The argument was put by counsel for the defendant that the plaintiff had to allege and ultimately prove a consciousness by the defendant, and a knowledge, of the very particular cause of action that the plaintiff ultimately sought to bring against him and some wrongful determination not to inform the plaintiff of the possibility of that action. 58The Court is of the view that that is too technical an approach and it is sufficient for the defendant to be conscious of some wrongdoing which may give rise to a cause of action against him and a knowing failure to advise and thus a concealment of that cause of action. 59It should be borne in mind when McClelland J in Hamilton v Kaljo talks about some form of dishonesty or moral turpitude, or Mahoney ACJ in Seymour v Seymour talks about a consciousness that what is being done is wrong, that, in this case, the defendant was not merely a solicitor acting professionally in this matter. He was the plaintiff's father and he was the trustee of a trust in which the plaintiff was the only beneficiary and it would at least be open for the plaintiff at trial to prove that by reason of the fact, as alleged, that the defendant was father, trustee and solicitor, the failure to disclose the loss to the Trust of the plaintiff did involve some moral turpitude and wrongdoing. And, as I have already said, there is some suggestion in particular (a) of a consciousness of the breach. 60The Court would add that, given the nature of the loan that was made by the defendant as trustee to Halfoak Pty Limited and the fact, as alleged in paragraph 8, that the trustee/defendant pursued Halfoak to judgment, which judgment did not lead to any successful execution, that the defendant must have been conscious that his own conduct had led to the Trust suffering a loss. That is at least arguable. 61It is also arguable that as the defendant was a solicitor he would, if he had an ordinary level of professional competence, realise that when he had lent the money on an unsecured basis to Halfoak Pty Limited that was likely to make him liable to the Trust. 62What follows from all of this in relation to paragraph 16 of the draft amended statement of claim is that the Court is of the view that there are allegations made in paragraph 16 which are capable of establishing the requirements of s 55(1)(b) of the Limitation Act. The word 'capable' is used in the sense that if properly pleaded and proved at the trial then it may be that the plaintiff would get over the apparent limitation problem that his existing statement of claim presents to him. 63However, for the reasons I have given the Court is of the view that necessary allegations are jumbled when they should be separate and the particulars are not sufficiently clear. 64I then should pass to paragraph 17 of the draft amended statement of claim. That is drafted similarly to paragraph 16 in that it says: "Further or in the alternative, the defendant breached his duty of care to the plaintiff [pursuant to s 55 Limitation Act 1969 (NSW)] in deceptively keeping from the knowledge of the plaintiff [or those in charge of his interest] that he should seek independent legal advice on the loan transaction and consequent loss of the Trust funds". 65It is in the words "that he should seek independent legal advice on the loan transaction and consequent loss of the trust funds" that paragraph 17 differs from paragraph 16. 66I am of the view that there are aspects of paragraph 17 which are simply hard to follow. The fact is that, as alleged in the statement of claim, the defendant as trustee made the loan. The defendant as solicitor acted for the defendant as trustee where notionally the defendant was his own client. The plaintiff as beneficiary took no part in the transaction. It may be as alleged in paragraph 5 of the original statement of claim that the defendant owed a duty of care to the plaintiff even though he was only the beneficiary. But the fact remains that the plaintiff had no part in the transaction, so it is difficult to understand how, at that stage, it arises that the defendant should have advised the plaintiff to seek independent legal advice on the loan transaction. In short, the plaintiff had nothing to do with the loan transaction. 67That said, paragraph 17 is subject to the same vices as is paragraph 16 with the additional vice that it is alleging a breach of duty that happened once and for all at the time of the original loan and which led to damage being suffered in November 2002. 68In all those circumstances the position which the Court reaches is this. The defendant has put an argument that the allegations sought to be made in the draft amended statement of claim are incapable of satisfying the requirements of s 55(1)(b) of the Limitation Act. For reasons that I have given, particularly based upon paragraph (a) of the particulars to paragraph 16, there is enough in this draft pleading to suggest that the plaintiff may have an arguable case which satisfies s 55(1)(b). On the other hand, the Court would not give leave on the plaintiff's notice of motion to file the draft amended statement of claim in the form it is in at the present. That conclusion is based upon the comments which the Court has made about particular (b) of paragraph 13 in so far as it refers to the cryptic meaning of letters; the first three lines of paragraph 14, which concerns the significance of the defendant receiving no response to the letters; further what has been said concerning paragraph 16 and the conflation of different allegations, which is repeated in paragraph 17; and finally the fact that particular paragraph (a) of paragraph 16 is a crucial allegation and full and proper particulars are not given. 69The Court is aware from the affidavits that have been filed in these proceedings that the parties have engaged in substantial correspondence about the adequacy, not only of the original statement of claim, but also of the various drafts of the proposed amended statement of claim. 70That said, the plaintiff accepts that this issue does raise matters of some difficulty which would not be completely easy to deal with in an amended pleading. Consequently, if the plaintiff, by its counsel, asks for it, the Court would give additional time to address the matters dealt with in this judgment for the purpose of providing a properly pleaded claim. 71Counsel for the defendant, as an alternative to his submission that there was nothing in the draft amended statement of claim which could satisfy s 55(1)(b), did assert, in the Court's view correctly, that the defendant should not be put in the position of having to go to trial with the draft amended statement of claim in its present form. 72That leads, ultimately, to the proposition that it is a matter for the plaintiff to seek time to further amend his statement of claim. The Court would be minded to give that additional time because it would not be just to the plaintiff, given what is particularised in paragraph 16, to simply dismiss the application to amend the statement of claim as it would then follow that the plaintiff's claim, which may be a good one, would be dismissed on the basis of the defendant's amended notice of motion. 73The Court would add that the merits of this case are not irrelevant. It does appear that the defendant, being the father of the plaintiff, the trustee of the plaintiff, and the solicitor for the Trust, at least on the face of the draft pleading, made a serious error which has caused the plaintiff substantial loss. The Court would not readily prevent the plaintiff from having an opportunity to properly plead his case, so that, whether he wins or losses, his claim can properly be tested in court. 74The Court proposes to make the following orders: (1)That the plaintiff serve any further amended draft statement of claim by 4pm Wednesday 17 July 2013. (2)That by 4pm Wednesday 17 July 2013 the plaintiff will deliver to my associate a copy of any further draft amended statement of claim, which can be done by email. (3)That the plaintiff's notice of motion filed on 3 June 2013 is stood over to 10am on 19 July 2013 before me in the applications list. The defendant's amended notice of motion filed 5 July 2013 is stood over to 10am, 19 July 2013 before me in the applications list. (4)On 19 July 2013 the matter will be dealt with on a mention basis if the defendant tells the Court that it has not had sufficient time to properly prepare for any contested application but if the defendant is prepared to proceed upon that date, then subject to availability of Court time the matter will be dealt with. (5)The Court reserves the costs of today. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 29 July 2013