Bristol and West Building Society v Mothew [1998] FCA 296 | Case summary

THE COURT ORDERS THAT: 1. Paragraphs 208 to 220 inclusive of the Further Amended Statement of Claim be struck out. 2. The applicant have leave to replead within 28 days, but in that event the applicant is to pay the costs of the sixth respondents thrown away by the repleading in any event. 3. The costs of the motion filed 24 June 1997 shall be the sixth respondents' costs in the cause. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT In this matter, the sixth respondents, the firm of solicitors and its partners Mallesons Stephen Jaques ("Mallesons"), have moved on an amended notice of motion filed 24 June 1997 to strike out, pursuant to Order 11 rule 16 or Order 20 rule 2(1), allegations against them contained in the further amended statement of claim filed 3 June 1997. The further amended statement of claim is a massive document divided into 260 paragraphs, some of which are subdivided further into subparagraphs. By it, numerous claims are made against numerous respondents arising out of alleged conspiracy, fraud, breaches of fiduciary duty, breaches of statutory obligations attaching to corporations and their officers, negligence and breaches of contract. Remedies sought include damages, exemplary damages, equitable compensation and the taking of accounts. The seed bed of this veritable thicket of litigation is alleged to have been sown by a conspiracy between a number of the respondents aimed at the obtaining of control of the applicant Moage Limited ("Moage") and of two other companies, Claremont Petroleum NL ("Claremont") and Beach Petroleum NL ("Beach") and at the appropriation of their assets which included over fifty-two million dollars in cash. The parties to the conspiracy pleaded included many of the respondents, but notably did not include Mallesons. Allegations that may come to assume some importance in this motion are those of conspiracy and "participation in the Scheme" made (in paragraphs 97, 98, 164 and 202) against Atlantic Capital Corporation, a company also claimed to have "aided, abetted, counselled, procured" and been "knowingly concerned in and a party to" breaches of statutory obligations of directors and officers of Moage, of which the respondents Jagelman and Crane were alleged to have been guilty. The case against Mallesons is set out in a relatively small group of paragraphs. By paragraphs 85 and 86 it is stated that they were "a prominent firm of solicitors" who "[s]ince at least October 1985 ... were Moage's principal solicitors". By paragraphs 208 to 220 inclusive, which are curiously and inaccurately headed "BREACH OF CONTRACT AND DUTY OF CARE", a series of allegations are made against Mallesons. It is necessary to examine the matters that are so pleaded. Paragraph 208 reads: "In 1985, Moage engaged [Mallesons] to act as its solicitors and thereby Moage and [Mallesons] entered into a contract for the rendering of legal services by Moage to [Mallesons]." Apart from the obvious solecism in the last few words of this paragraph, it should be noted that the allegation itself is in the most general terms. Just what the nature of the alleged engagement in 1985 was, what it related to, and how this engagement in 1985 could be held to have affected any engagement some two years later are questions to which the pleading does not at all condescend. Paragraph 209 then pleads that in August 1997 "Moage by its chairman and agent Jagelman engaged [Mallesons] by its partner and agent Rodney Halstead ("Halstead") and thereby Moage and [Mallesons] entered into a contract pursuant to which [Mallesons] would render advice to Moage concerning the recent purchase of shares in Moage by [Independent Resources Ltd, referred to as "IRL"] and the proposed purchase of further shares in Moage by [a Swiss bank known as Rahn & Bodmer]". Paragraph 210 alleges express or implied terms of Moage's retainer of Mallesons, by each of the contracts pleaded, that Mallesons would "exercise all reasonable care, skill and diligence in acting for Moage", would "not allow themselves to be placed in a position of conflict of interest in the performance of the retainer", would "give proper advice to Moage in Moage's best interests", and would "disclose to Moage all information and knowledge of [Mallesons] which was material to be known by Moage in relation to the subject matter of the retainer". Paragraph 211 asserts the conclusion: "In the premises, as Moage's solicitors, [Mallesons] owed to Moage a duty of care and a fiduciary and equitable duty to act as alleged in paragraph 210 herein." Paragraphs 212 to 220 inclusive then allege: "212. The facts which Jagelman disclosed to [Mallesons] on engaging [Mallesons] and which were already known to Halstead were; 212.1 that Jagelman and persons which [sic] whom he was associated were major shareholders of Moage owning or controlling approximately 20% of Moage's issued share capital and that Jagelman was Chairman of directors of Moage; 212.2 on 3 August 1987 IRL acquired 4,518,000 shares in Moage at $1.50 per share from persons other than Jagelman and his associates; 212.3 that IRL's purchases of Moage shares constituted 19.99% of the issued share capital of Moage; 212.4 that the share price paid by IRL for Moage shares of $1.50 per share was substantially higher than the prevailing market price of Moage's shares prior to IRL's purchases; 212.5 that a Swiss Bank called Rahn & Bodmer had approached Jagelman to purchase his shareholding in Moage for a price of $2.43 per share, which was substantially higher than the prevailing market price of shares in Moage at the time and substantially higher than the price paid by IRL as pleaded in paragraph 212.2 herein; 212.6 that Jagelman had enquired of Rahn & Bodmer whether it was associated with IRL; 212.7 that Jagelman had not been told for whom Rahn & Bodmer was acting but had been told that Rahn & Bodmer's client was not IRL or any of its associates; 212.8 that it was Jagelman's intention to sell his shares in Moage to Rahn & Bodmer and to resign as a director of Moage after the sale (subject to any advice received from [Mallesons]). 213. [Mallesons] gave advice to Jagelman on behalf of Moage that in [Mallesons'] opinion the sale of Jagelman's shares in Moage to Rahn & Bodmer was not in any way unlawful or improper. 214. On 13 September 1987, [Mallesons] rendered a fee account in the sum of $2,506.00 to Moage for the advice that it gave to Moage which stated as follows: 'TO OUR professional costs and charges for advising you with respect to the following: the implications of substantial shareholding notices lodged with you advising of the purchase by Independent Resources Limited of a substantial shareholding in the company; advising your Chairman with respect to his duties as a director of the Company in relation to proposals for the acquisition of shares in the Company having regard to the interests of shareholders generally.' 215. On 30 September 1987, Moage paid [Mallesons'] fee account. 215A Prior to 18 August 1987 [Mallesons] was retained by [Atlantic Capital Corporation] to advise [Atlantic Capital Corporation] and document certain loans of US$21,802,942.50 to fund Cawston, Coninvest, Sunstone and Norseman [these names refer to four companies, alleged to be conspirators, which were controlled by one M K Johnson or by a trust known as the Ska Trust, itself controlled by him, Mr Johnson being also one of the alleged conspirators] in purchasing Moage shares and options and, by its partners A J Holland and/or J Stumbles and/or C Humphry and/or Halstead and/or L Warnick was aware of the following facts, each of which was material to be known by Moage in the matter made the subject matter of their retainer by Moage, namely: 215A.1 Rahn & Bodmer were purchasing the Moage shares and options on behalf of four companies namely Cawston, Coninvest, Sunstone and Norseman; 215A.2 [Atlantic Capital Corporation] provided loans to Cawston, Coninvest, Sunstone and Norseman to buy the Moage shares and options; 2.15A.3 [scilicet 215A.3] [Atlantic Capital Corporation] had previously provided a loan to IRL of $25,500,000.00 to fund IRL's acquisition of shares in CAL [a company Coronet Australia Ltd which was alleged in paragraph 64.2 to have been 'in September 1987 in the process of being taken over by IRL', and was also alleged in paragraph 64 to have been in control of another company Coronet Investments Limited 'which in September 1987 was caused by its management to act in accordance with the directions of Johnson in relation to transactions involving purchases of shares in Moage']; 215A.4 the four companies that purchased Moage shares and options were incorporated in the following jurisdictions: • Cawston in Panama; • Coninvest in Liechtenstein; • Sunstone in the Island of Nevis; • Norseman in the Republic of Liberia. 215A.5 Cawston, Coninvest, Sunstone and Norseman were purchasing 3,276,000 Moage shares and 4,292,000 Moage options; 215A.6 2,454,359 Moage options were to be purchased by Cawston, Coninvest, Sunstone and Norseman in Hong Kong at or about the same time as those four companies purchased the Moage shares and 1,837,641 Moage options in Australia; 215A.7 Of the US$21,802,942.50 which was being loaned by [Atlantic Capital Corporation] to fund Cawston, Coninvest, Sunstone and Norseman in purchasing the Moage shares and options, US$7,457,042.00 was to be applied in purchasing 3,276,000 Moage shares and 1,837,641 Moage options in Australia and US$14,345,901.00 to purchase 2,454,359 Moage options in Hong Kong; 215A.8 Pennant Pacific Resources Inc ("PPR") was taken over in 1986 by a group including Malcolm Johnson; 215A.9 PPR had as at 12 September 1986 a direct relevant interest in 51% of the issued capital of IRL, which was a controlling interest; 215A.10 Through 1986 and 1987 Malcolm Johnson was at least one of the persons who provided instructions in relation to the affairs of, or on behalf of, PPR and was closely involved with PPR. 215B By reason of the aforementioned retainer of [Mallesons] by [Atlantic Capital Corporation] and the aforementioned knowledge of [Mallesons], [Mallesons] was in a position of conflict of duty to Moage and [Atlantic Capital Corporation]. 215C In breach of duty, [Mallesons] failed to eschew its conflict of duty. 216. In the alternative, in breach of Contract and their duty of care and their fiduciary duty to Moage the advice given to Moage was deficient and negligently given. 217. Particulars 217.1 [Mallesons] failed to advise Jagelman that in his capacity as a director of Moage it was his duty to make immediate and proper enquiries or investigations to determine whether or not Rahn & Bodmer and IRL were purchasing shares in IRL [sic] in association and that until he had done so he should not sell his shares to Rahn & Bodmer. 217.2 [Mallesons] failed to advise Moage by its independent directors, Woollett and Lane, what avenues were available to Moage to determine whether or not Rahn & Bodmer and IRL were purchasing shares in Moage in association and challenge any illegal transaction involving purchases of Moage's shares. 217.3 [Mallesons] should have advised Moage by its independent directors; 217.3.1 to make enquiries or investigations or take steps to satisfy itself that Rahn & Bodmer and IRL were not acting in concert; 217.3.2 in the event that Moage was not satisfied with the enquiries it made, to notify the NCSC and/or bring legal proceedings in its own name to require compliance by Rahn & Bodmer and IRL with Part IV Division 4 of the CASC [Companies (Acquisition of Shares) (Victoria) Code]. 218. In the alternative, [Mallesons] placed themselves in a position of conflict in choosing to advise Jagelman in his private capacity as a seller of Moage's shares, and also in his capacity as a director of Moage representing Moage. 219. Further or in the alternative, because of the conflict of interest, [Mallesons] should have immediately notified Moage that Moage should obtain independent advice as to its own position. 219A Further and in the alternative, [Mallesons] should have made known each of the facts set forth in paragraphs 215A.1-10 which were material to be known by Moage, if it was to act for Moage at all, and in breach of duty failed to disclose that information on or before 18 August 1987, or at all, and continued in that breach at all material times thereafter. 220. As a consequence of [Mallesons'] breach of fiduciary duty, breach of contract and breach of duty of care owed to Moage, the Johnson Group was successful in obtaining control of the board of directors of Moage and Moage sustained loss and damage. Particulars The applicant repeats the particulars of paragraphs 159 to 162 above. [These are particulars of the losses alleged to have been suffered by Moage.]" It will be seen that, although a very broad allegation appears in paragraph 208, the only specific allegation of a retainer of Mallesons by Moage, upon which the claims made against Mallesons must turn, is the retainer alleged in paragraph 209. The persons by whom this retainer was concluded were, on behalf of Moage, its chairman Jagelman, and, on behalf of Mallesons, its partner Rodney Halstead. Thus, it might be thought that any allegations of breach of fiduciary duty made against Mallesons would need to take account of Halstead's state of mind. Paragraph 212 recognizes this by concentrating upon the facts which were disclosed to and known by Halstead. However, there is no allegation that, by reason of these matters, Mallesons was placed in any position of conflict of interest and duty, or otherwise came to commit a breach of fiduciary duty. Indeed, so far as the further amended statement of claim might be thought to suggest collusion between IRL and the Swiss bank Rahn & Bodmer (although Rahn & Bodmer is not named as a conspirator), paragraph 212.7 states that one of the facts "known to Halstead" was that Jagelman "had been told that Rahn & Bodmer's client was not IRL or any of its associates". Nor does the pleading allege that Halstead or Mallesons had any reason to think, much less that they did think, that Jagelman was recreant to his duty as a director and chairman of Moage, or that information which he already had needed to be communicated to anyone else on behalf of Moage. Any conflict between Jagelman and Moage was necessarily known to Moage through Jagelman, and there is no allegation that Moage did not know the matters alleged in paragraph 212, or know that Mallesons was acting for Jagelman. Given these features of the pleading, it does not seem to me that it can be sustained as a pleading of breach of fiduciary duty based on conflict of interest which should have prevented Mallesons acting as they did for both Moage and Jagelman. Cf. Bristol and West Building Society v Mothew (infra, at 18-19). The other basis on which breach of fiduciary duty is alleged against Mallesons is stated in paragraph 215B, where it is put as the retainer of Mallesons by Atlantic Capital Corporation "and the aforementioned knowledge of [Mallesons]", that is the knowledge pleaded in paragraph 215A. This paragraph asserts that Mallesons was aware of a series of facts knowledge of which is apparently said to have arisen out of the firm's retainer by Atlantic Capital Corporation to advise it "and document certain loans ... to fund Cawston, Coninvest, Sunstone and Norseman in purchasing Moage shares and options". The knowledge is said to have been gained "by its partners A J Holland and/or J Stumbles and/or C Humphry and/or Halstead and/or L Warnick". Paragraph 215A is objectionable in more than one way. I have said the awareness it pleads is apparently said to have arisen from the retainer by Atlantic Capital Corporation. But it does not plainly say so. If awareness is alleged by virtue of some other matter or matters, those matters, and their effect, should be stated. If not, the pleading seems extraordinarily equivocal. It says "[Mallesons] was retained by [Atlantic Capital Corporation] ... and, by its partners ... was aware". The reader is left to assume the conjunction involves causation, but the pleader might still retreat down the line of his own obscurity. That the pleading should also focus on repositories of knowledge at Mallesons so loosely alleged seems to me equally unsatisfactory. The form of words used leaves it entirely possible that the partner Halstead, who actually dealt with the relevant Moage retainer, had either no knowledge himself of the matters involved in the Atlantic Capital Corporation retainer, or knew only an insignificant part of them. It is not alleged that the other partners in this very large firm who are mentioned, or any of them, had anything to do with the retainer by Moage. Nor is it alleged (at least in any clear way) that any one of the partners, including Halstead, had knowledge of all or a significant portion of the matters referred to. Consistently with this pleading, each of them may have held in his mind a part of the knowledge, like a piece of a jigsaw puzzle, without having any idea what the whole signified. The possible permutations and combinations of what would be involved in a full statement of how the knowledge in question is alleged by this pleading to have been held by partners of Mallesons would require many pages to state. No respondent should be left to compute his alleged liability from such a complex of possibilities. Although Lord Reid declared in John G. Stein & Co. Ltd. v O'Hanlon [1965] AC 890 at 904 that "[t]he symbol 'and/or' is not yet part of the English language", it has long been recognized as a loose expression conveying a vague meaning. An early version of it is to be found in Cuthbert v Cumming (1855) 24 LJ Ex 198, where Alderson B said (at 199) "the contract on the face of the charter-party was, that the parties were to 'load a full and complete cargo of sugar, molasses, other lawful produce,' so that, according to the contract, the parties were either to load a full and complete cargo of sugar and molasses, and other lawful produce, or a full cargo of sugar and molasses, or a full cargo of other lawful produce, leaving it open in every way by reason of the words 'and' and 'or' being introduced into the charter-party". Similarly, in Furness v Charles Tennant, Sons, & Co. (1892) 8 TLR 336, Lord Herschell construed a charter-party requiring the loading of "a full and complete cargo of sugar in hogsheads and (or) bags, or other lawful merchandise" as entitling the charterers "to discharge their obligation by loading a cargo of sugar either in hogsheads or in bags, or partly in hogsheads and partly in bags." But the expression, or symbol, as Lord Reid preferred to call it, has been found to create difficulties. In Millen v Grove [1945] VLR 259 at 260 Gavan Duffy J referred to a notice to quit as having "invited trouble by the common and deplorable affection for the form 'and/or'". In Looke v Parbury Henty & Co Pty Ltd [1950] VLR 94 at 98 Barry J said: "I agree that the expression 'and/or' is commonly an indication that the draftsman is not clear in his own mind about the matters with which he has to deal (cf. Piesse, Elements of Drafting, pp. 52-57)". In Neame v Neame's Trs. [1956] SLT 57, the majority of the court read "and/or", in a deed, as meaning nothing more than "and". The Lord President, Lord Clyde, said (at 62): "But it would be most unfortunate if a confusing expression such as 'and/or' were to become a common feature in Scottish marriage contracts or testamentary settlements." Lord Carmont, who differed from the majority, went further, and said (at 64) that in his opinion "the obscurity is radical". Lord Russell concluded his judgment with the comment (at 64): "I would venture to add that in my judgment the phrase 'and/or' is at best a loose and ambiguous term which would be better not to be used in formal legal writs affecting patrimonial interests." Lord Sorn joined the chorus of disapproval when he said (also at 64): "The expression 'and/or' is not a happy one and, if occurring in a simple gift, might give rise to a serious problem of construction." In my opinion, the expression is particularly unhappy when it is used in a statement of claim, which should express precisely the foundation of the proceeding. In the present case, as has been explained, an almost endless series of additional and alternative allegations would be conveyed by an analysis of the claim made in this way. The difficulty is by no means confined to a question of the form of the allegation or allegations made. It affects the substance. For there may be a great difference between a claim based on breach of fiduciary duty, or even negligence, which is reliant on the possession of knowledge of facts by the solicitor handling the matter, and a similar claim which is reliant on the possession of the same knowledge by some other member of the firm. In the latter case, the solicitor handling the matter may never have had any reason to be concerned about something which turns out to be the very core of the allegation against the firm. Whether there would then be liability would depend upon a legal rule quite different in nature from the rule which would apply in a case where the solicitor himself had personal knowledge. It is therefore important that the pleading should make clear what knowledge is alleged to have been held by Halstead, the partner responsible for Moage's work. There is another matter which should be borne in mind when this pleading is read. No implication of involvement by a solicitor in his client's misconduct arises merely from an allegation that the solicitor performed legal work related to the client's activities. It is the nature of legal practice that solicitors act for all sorts of clients, whose real motives and intentions may be concealed from their advisers. Therefore, if a knowledge of the impropriety of what a client is doing is to be alleged against a solicitor, the allegation should be made in clear terms; the reader of a pleading should not be left to spell out such an allegation by inference from the engagement of the solicitor to act in the client's affairs. In R v Ryan (1984) 55 ALR 408 at 411-412, Street CJ referred to "the delicacy of the position in which a solicitor can be placed when acting for a person whose probity is, to say the least, questionable". He cited R v Tighe and Maher (1926) 26 SR(NSW) 94 at 108-109, where Sir Philip Street CJ (with whom Gordon and Ferguson JJ concurred) said: "In acting for a client, a solicitor is necessarily associated with him, and is compelled to some extent to appear as if acting in combination with him. So he may be, but combination is one thing and improper combination, amounting to a conspiracy to commit a crime or a civil wrong, is another thing. ... [B]efore a solicitor can be convicted of conspiring with his client to commit a wrong, it must be proved that he did things in combination with him, over and above what his duty as a solicitor required of him, which lead irresistibly and conclusively to an inference of guilt." The loosely framed drafting of paragraph 215A simply sweeps these problems under the carpet by alleging that Mallesons was aware of facts by Holland and/or Stumbles and/or Humphry and/or Halstead and/or Warnick. But there is a real question whether the knowledge of, say, Holland could affect the question whether Halstead was in breach of fiduciary duty or negligent. Light is thrown on this aspect of the matter, so far as fiduciary duty is concerned, by the decision of the Court of Appeal in Bristol and West Building Society v Mothew [1998] Ch 1. There, a solicitor acted both for the purchasers of a house and for the mortgagee. By an oversight and carelessly, but not dishonestly or intentionally, the solicitor, who knew that the purchasers were arranging for a second charge on the property, informed his client the mortgagee otherwise. The Court of Appeal held that the solicitor had not preferred one client to the other, and thus was not acting in breach of fiduciary duty, although he was liable in negligence for any loss sustained by the mortgagee. Millett LJ, who delivered the leading judgment, said (at 18): "The nature of the obligation determines the nature of the breach. The various obligations of a fiduciary merely reflect different aspects of his core duties of loyalty and fidelity. Breach of fiduciary obligation, therefore, connotes disloyalty or infidelity. Mere incompetence is not enough. A servant who loyally does his incompetent best for his master is not unfaithful and is not guilty of a breach of fiduciary duty." His Lordship also said (at 19): "Conduct which is in breach of this duty [ie the duty not to prefer the interests of one client to those of another] need not be dishonest but it must be intentional. An unconscious omission which happens to benefit one principal at the expense of the other does not constitute a breach of fiduciary duty, though it may constitute a breach of the duty of skill and care. This is because the principle which is in play is that the fiduciary must not be inhibited by the existence of his other employment from serving the interests of his principal as faithfully and effectively as if he were the only employer. I shall call this 'the no inhibition principle.' Unless the fiduciary is inhibited or believes (whether rightly or wrongly) that he is inhibited in the performance of his duties to one principal by reason of his employment by the other his failure to act is not attributable to the double employment." Millett LJ went on (at 21) to refer to "an inadvertent failure which owes nothing to the double employment". He said: "Where such failure is to the advantage of the other party, the court will jealously scrutinise the facts to ensure that there has been nothing more than inadvertence, but there can be no justification for treating an unconscious failure as demonstrating a want of fidelity." Otton LJ agreed (at 24), while Staughton LJ said (at 26): "It seems to me wrong that a breach of contract or tort should become a breach of fiduciary duty in that way [ie. because the solicitor was acting for two clients with differing interests]. I am glad to find that the authorities relied on by Millett L.J. show that it is wrong. In my judgment Mr. Mothew was in breach of a duty of care and nothing more. True he was in a situation where he owed duties to two clients, and those duties might conflict with each other. But he did not prefer the interest of one client to that of another; at most he was guilty of negligence which had that unintended effect." This appears to me to be entirely consistent with the remarks of Brennan CJ, Gaudron, McHugh and Gummow JJ in Maguire v Makaronis (1997) 188 CLR 449 at 469, requiring, for the availability of the remedy of compensation for loss sustained by a fiduciary's breach of duty, that there be "a sufficient connection (or 'causation') between breach of duty and ... the loss sustained". Nowhere in the further amended statement of claim brought by Moage is it alleged that Mallesons intentionally preferred the interests of Atlantic Capital Corporation to those of Moage. And if one looks for an actual mind the intention of which is to be attributed to Mallesons, and fastens on the solicitor acting for Moage, Halstead, nowhere is it alleged that he had any such intention. Nor is it clearly alleged that he had any knowledge which could possibly have led to his forming any such intention. On the basis of the decision in Bristol and West Building Society v Mothew, counsel for Mallesons argued that the claim of breach of fiduciary duty could not possibly succeed, while he contended that any claim in negligence or breach of contract would necessarily be barred by the Limitation Act 1969 (NSW). Reference was made to s 14 of the Limitation Act, which bars after a period of six years "a cause of action founded on contract" and "a cause of action founded on tort, including a cause of action for damages for breach of statutory duty". It was pointed out that s 23 removes from the application of s 14 a cause of action for equitable relief, "except so far as [s 14] may be applied by analogy". Reference was also made to s 15, which is not mentioned in or made subject to s 23. Section 15 provides: "An action on a cause of action for an account founded on a liability at law to account is not maintainable in respect of any matter if brought after the expiration of a limitation period of six years running from the date on which the matter arises." Counsel submitted that the words in this section, "liability at law", refer to a legal liability, whether upon common law or equitable principles, since an account at common law had fallen into disuse long before the passing of the Limitation Act. However, the expression "liability at law" has a well understood meaning, and the establishment by s 15 of a limitation period of six years in respect of an action for an account founded on a liability at law does, upon ordinary principles, ensure that the same limitation will apply in equity by analogy in respect of a suit for an account in equity: Ashburner's Principles of Equity, 2nd ed (1933) 503-504. That this was in fact the intention when the Limitation Act was enacted is made clear by the comment upon s 15 appearing in paragraph 112 of the "NOTE ON LIMITATION BILL" contained in the report of the Law Reform Commission of New South Wales (LRC 3) of October 1967. Paragraph 112 states: "We have attempted to draw what we think is the right line in section 15 of the Bill. It will apply directly to an action, whether at law or in equity, for an account founded on a legal liability to account: it will be applicable by analogy to an action in equity for an account on an equitable liability to account. Section 23 of the Bill, the counterpart of section 2(7) of the Imperial Act of 1939, does not apply to section 15 of the Bill." There was also debate about the application of the doctrine of fraudulent concealment, which is reflected in s 55 of the Limitation Act. Counsel for Moage stated that this would be pleaded in reply, if the action proceeds, to any defence under the Limitation Act. That would involve an allegation, as to the state of mind of Mallesons, going beyond anything presently alleged. For it has been held that the doctrine of fraudulent concealment requires that the concealment be wilful: Inca Ltd v Autoscript (New Zealand) Ltd [1979] 2 NZLR 700 at 711, per Mahon J. On this decision, McLelland J commented in Hamilton v Kaljo (1989) 17 NSWLR 381 at 386: "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." If the fate of the motion depended upon the application of a time bar to the claim for breach of fiduciary duty, or to the claim for negligence, I would have great difficulty in finding that the sixth respondents had discharged the heavy onus upon an applicant for summary judgment: General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125. It was pointed out in the joint judgment in Maguire v Makaronis at 463, with reference to a case against a solicitor involving claims founded in contract, tort, and for breach of fiduciary duty, that "periods of limitation may differ". Their Honours said: "The courts and legislatures have tended to save from the imposition of arbitrary time limits complaints of breach of trust or other fiduciary duty." They referred, with apparent approval, to Nelson v Rye [1996] 1 WLR 1378 at 1389, where Laddie J said: "If the cause of action here is one for breach of fiduciary duty or breach of trust, it does not avail Mr Rye to argue that the relationship arose out of a contract and that the relationship between him and Mr Nelson can be treated as one between debtor and creditor. If Mr Nelson had chosen to sue for breach of contract alone, then the limitation period for contractual claims would have applied. He has not done so." See also Williams v Minister, Aboriginal Land Rights Act 1983 (1994) 35 NSWLR 497 at 509; Gregg v Tasmanian Trustees Ltd (1997) 143 ALR 328 at 365. In their joint judgment in Wardley Australia Limited v The State of Western Australia (1992) 175 CLR 514, Mason CJ, Dawson, Gaudron and McHugh JJ said (at 533): "We should, however, state in the plainest of terms that we regard it as undesirable that limitation questions of the kind under consideration should be decided in interlocutory proceedings in advance of the hearing of the action, except in the clearest of cases. Generally speaking, in such proceedings, insufficient is known of the damage sustained by the plaintiff and of the circumstances in which it was sustained to justify a confident answer to the question." But the deficiencies in the pleading to which I have pointed are so great that it should not be allowed to stand in its present form. Serious uncertainty and unfairness would attend the proceeding if the applicant were not compelled to fix upon some clear claim or claims, if, now that the issues have been rather more exposed by argument, it determines to pursue allegations of breach of fiduciary duty and negligence against Mallesons. I think the better course, rather than attempt to tinker with the details of the pleading, is to strike out the paragraphs pleaded against Mallesons, giving the applicant leave to replead within 28 days, subject to an order that it pay Mallesons' costs thrown away by the repleading in any event. The costs of the motion should be Mallesons' costs in the cause.

Bristol and West Building Society v Mothew

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Judgment (12 paragraphs)

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