Butterfield Services Pty Ltd v Bentley

Sufficiency of specificity of pleading 16In order to understand this basis, it is necessary to set out the whole of the allegation of fraud in the proposed pleading: "8.A. From about 1 July 1995, Dr Bentley has carried on, and continues to carry on practice in medicine at locations other than the Bondi Health Care Centre, and within a 3 kilometre radius of the Bondi Health Care Centre without the agreement of the Trust and without its prior consent in writing. Particulars Dr Bentley carried on, or continues to carry on practice in medicine: i. On his own account through home visits (Home Visiting Service). ii. Through the referral service at Eastern Suburbs Medical Service (ESMS). iii. At Cooper Street Clinic at 1a Cooper Street, Double Bay, New South Wales. iv. At Uclinic at Level 1, 421 Bourke Street, Surry Hills, New South Wales. Further particulars will be provided following discovery. 8.B. The Trust was unaware that Dr Bentley was carrying on practice in medicine through his Home Visiting Service, and ESMS, and that he was not accounting to it for that work. 8.C. Dr Bentley knew that the Trust was unaware that he was carrying on practice in medicine through his Home Visiting Service, and ESMS, and that he was not accounting to it for that work, and he took active steps to conceal those breaches of the Licence Agreement from the Trust. Particulars i. From 1995 the Trust has had an agreement with DH Beran Pty Ltd (trading as ESMS) for Bondi Health Care Centre patients to be attended to after hours by doctors working through ESMS. ii. It was a term of that agreement that each time an ESMS doctor attended a Bondi Health Care Centre patient, the ESMS would provide a duplicate Home Visits After Hours-Patient Report to the Bondi Health Care Centre after the attendance. iii. Dr Bentley was working through the ESMS. iv. From as early as late 2006, and possibly earlier, Dr Bentley was diverting duplicate Home Visits After Hours-Patient Reports so that they did not arrive at the Bondi Health Care Centre and the Trust would not be aware that he was carrying on practice in medicine through the ESMS, and not accounting to the Trust for that work. v. From as early as 2007 and possibly earlier, Dr Bentley removed injectable nutrients, Kleenex tissues, and, later, pathology stock from the Bondi Health Care Centre for use in his Home Visiting Service but did not inform Trust staff so that the Trust would not be aware that he was carrying on practice in medicine through his Home Visiting Service, and not accounting to it for that work. vi. From as early as 2007, and possibly earlier, Dr Bentley was providing his wife's mobile telephone number to Bondi Health Care Centre patients so that they would contact Dr Bentley or his wife to arrange home visits either through Dr Bentley's Home Visiting Service or the ESMS, thereby avoiding alerting Trust staff to the fact that he was carrying on practice in medicine through his Home Visiting Service and the ESMS, and not accounting to the Trust for that work. vii. Dr Bentley did not inform Trust staff that he was to be interviewed at the Bondi Health Care Centre on 28 May 2009 by a Medicare Australia officer in the presence of a solicitor from TressCox Lawyers, in relation to anomalies in his Medicare practice profile report prior to the interview taking place, so as to avoid alerting Trust staff to the fact that he was carrying on practice in medicine through his Home Visiting Service and the ESMS, and not accounting to the Trust for that work. 8.D. By virtue of the matters set out in paragraphs 2E, 2F, 6, 6A and 8A to 8C above, Dr Bentley fraudulently concealed (within the meaning of s 55(1) of the Limitation Act 1969) causes of action that the Trust had against him for breach of the Licence Agreement arising from his carrying on practice in medicine through his Home Visiting Service and the ESMS and failing to account to the Trust for such work." (emphasis added) 17The plaintiff submitted that, if the amendment with regard to the allegation of fraud is not permitted, then the plaintiff will be effectively shut out of court with regard to any claim for breach of contract said to have taken place before 2005, that being the inevitable consequence of the operation of the Limitation Act. It submitted that that would be a large step to take at an interlocutory stage. 18It was also submitted that the plaintiff has pleaded in the proposed pleading as much of the alleged fraud of the defendant as it is aware. It was submitted that, in the circumstances of fraudulent concealment, by definition a party complaining of such conduct will not always, at least at the beginning of litigation, be in a position to particularise with absolute clarity the behaviour of which complaint is made. 19The defendant relied upon rr 14.14(3) and 15.3 of the Uniform Civil Procedure Rules. The defendant also placed emphasis on statements of high authority to the effect that the common law requires that fraud be pleaded with particularity, as a matter of fairness, and that rr 14.14(3) and 15.3 reflect that common law rule. 20Emphasis was separately placed upon that part of the pleading that asserts that the fraudulent conduct occurred "from as early as" either 2006 or 2007, "and possibly earlier". The submission was made that, at the least, those allegations were wholly unsatisfactory in their nebulousness. And yet it is those allegations that are central to this dispute, in light of the fact that the issue in question applies to events prior to 2005.

Determination 21The rules relied upon by the defendant are as follows: "14.14 General rule as to matters to be pleaded specifically (cf SCR Part 15, rule 13; DCR Part 9, rule 9) (1) In a statement of claim, the plaintiff must plead specifically any matter that, if not pleaded specifically, may take the defendant by surprise. (2) In a defence or subsequent pleading, a party must plead specifically any matter: (a) that, if not pleaded specifically, may take the opposite party by surprise, or (b) that the party alleges makes any claim, defence or other case of the opposite party not maintainable, or (c) that raises matters of fact not arising out of the preceding pleading. (3) Matters which must be pleaded pursuant to subrule (2) include (but are not limited to) fraud, performance, release, statute of limitation, extinction of right or title, voluntary assumption of risk, causation of accident by unknown and undiscoverable mechanical defect and facts showing illegality. ... 15.3 Allegations of behaviour in the nature of fraud (cf SCR Part 16, rule 2; DCR Part 9, rule 20) A pleading must give particulars of any fraud, misrepresentation, breach of trust, wilful default or undue influence on which the party relies." 22In Banque Commerciale SA, En Liquidation v Akhil Holdings Limited [1990] HCA 11; (1990) 169 CLR 279 it was said at 285 (footnotes omitted): "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; Reddaway v. Banham; Allcard v. Skinner. 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." 23The common law rule was also stated by Kirby P (with whom Hope and Samuels JJA agreed) in Wentworth v Rogers (No. 5) (1986) 6 NSWLR 534 at 538: "As in all actions based on fraud, particulars of the fraud claimed must be exactly given and the allegations must be established by the strict proof which such a charge requires: Jonesco v Beard [1930] AC 298 at 301; McHarg v Woods Radio Pty Ltd (at 497)." 24Finally, in Spies v Commonwealth Bank of Australia (1991) 24 NSWLR 691 at 693 Mahoney JA said (in the course of agreeing with Clarke and Handley JJA): "The making of a charge of fraud is a matter of some gravity. Fraud should not be charged casually or without sufficient cause. In Rajski v Bainton (1990) 22 NSWLR 125 at 135-136, I said: 'Where a case is based upon fraud or a fortiori allegations of this kind, it is required to be pleaded precisely and the proof offered is to be proof of the case as so pleaded: see Pickin v British Railways Board [1973] QB 219 at 229; on appeal [1974] AC 765; see generally Kerr on Fraud and Mistake, 7th ed (1952) at 644 et seq and the cases there referred to and Minister Administering the Crown Lands Consolidation Act and The Western Lands Act v Tweed Byron Local Aboriginal Land Council (Court of Appeal, 7 May 1990, unreported) [now reported (1990) 71 LGRA 201]. The reasons for this are obvious and have long been accepted. If a person is to be charged with doing or writing something which will involve him in serious consequences, he is not to be condemned casually or 'by inexact proofs, indefinite testimony, or indirect inferences': Briginshaw v Briginshaw (1938) 60 CLR 336 at 362; seeMcDonald v McDonald (1965) 113 CLR 529 and Gamser v Nominal Defendant (1977) 136 CLR 145. To this I shall return subsequently. And charges of this kind are not to be made unless the person who makes them, in a pleading or otherwise, has satisfied himself that there is expected to be available the evidence to prove them. The former practice of requiring a statement of claim to be signed by counsel or solicitor was directed, at least in part, to this: a lawyer who signed a statement of claim making such allegations without being satisfied in this way was liable to be condemned in costs or dealt with for misconduct.' As a matter of principle, therefore, if a charge of fraud is to be made, it should be made in a formal and precise form and after appropriate consideration." 25Separately, with regard to an allegation of fraudulent concealment, it has been said that what must be shown is that the conduct involved a "consciousness that what is being done is wrong" (see Seymour v Seymour (1996) 40 NSWLR 358 at 372), rather than any lesser state of mind. 26In short, it is well established that an allegation of fraud in civil proceedings must be pleaded with particularity and formality. However, I do not accept that that rule must be applied so strictly as to effectively shut out of court a plaintiff in the circumstances that pertain here. By its nature, an allegation of fraudulent concealment that has led to a delay on the part of the plaintiff in bringing an action for breach of contract must be founded upon ignorance on the part of the plaintiff that existed for some time and, with regard to precise particulars, may continue to exist. 27Here, the nub of the allegations of the plaintiff is that the defendant engaged in conduct that he had agreed he would not engage in, by way of the terms of the licence agreement. It is also alleged that he did not bring those matters to the attention of the plaintiff because he well knew that he was in breach of the contract. It is further alleged that, at a later stage, the defendant took active steps to hide the breaches that were occurring. 28The question for determination at this stage is not, of course, whether the plaintiff can prove the claim of fraudulent concealment. The question with regard to this first aspect of the first basis of resistance is merely whether the plaintiff has sufficiently pleaded it to permit the proposed pleading. I consider that it has done so. 29It may be that, once all interlocutory steps in the proceedings have been undertaken, the question of the specificity of the allegation of fraud is liable to be revisited. But at this stage, I do not consider it appropriate for me to shut the plaintiff out of court with regard to any claim predating 2005 founded upon the asserted lack of particularity in the proposed pleading with regard to the allegation of fraud. 30It follows that I reject the first aspect of the first ground of resistance to the grant of leave.

Fraud - hopeless case? 31The second aspect of the first basis of resistance to the grant of leave to amend was founded on the proposition that, on the evidence before me, the allegation of fraudulent concealment is, in short, doomed to failure. 32In that regard, the plaintiff submitted that I am not able to determine evidential questions at this interlocutory stage. He submitted that, although there was placed before me a great deal of evidence going to the question as to whether or not the plaintiff was in truth ignorant at the relevant times of the alleged conduct (including undertaking other employment) of the defendant, in the absence of cross-examination it would be impossible for me to make determinations as to credit. In the absence of determinations as to credit, it would be impossible for me to make an assessment as to where the truth lies with regard to the degree of knowledge, if any, that officers of the plaintiff possessed with regard to the activities of the defendant. 33The defendant, whilst accepting the limitations on the determination of evidentiary questions at this interlocutory stage, submitted that this was the rare case in which it was clear that the allegation of the plaintiff was, on the evidence, simply untenable. It was submitted that the documents placed before me show that it is clear that the plaintiff was, in truth, aware of the work of the defendant about which complaint is now made. 34In particular, it was submitted that documents created with regard to the medical treatment of various patients by the defendant were indeed provided to the plaintiff, thereby rebutting the allegation of concealment. 35It was also submitted that there is evidence that the defendant had, to the knowledge of the officers of the plaintiff, excused himself from meetings concerning business dealings between the Eastern Sydney Division of General Practice (a separate entity not party to the proceedings) and ESMS (the entity through which the plaintiff alleges the defendant was practising medicine in breach of the agreement) due to an apparent conflict of interest. This evidence, it was submitted, demonstrated that the defendant had put the plaintiff on notice of his association with ESMS, and thereby rebuts any suggestion of concealment. 36Finally, it was submitted that the position of the plaintiff with regard to the alleged fraudulent concealment, as demonstrated in correspondence from its solicitor, is contradictory and confused.

Determination 37It may be accepted that the case for the plaintiff with regard to its lack of knowledge of the alleged activities of the defendant is by no means free of difficulties. 38However, not to permit the amendment would, as I have indicated, effectively shut the plaintiff out of court, because the Limitation Act could not otherwise be overcome. 39Whilst the motion before me is neither an application for summary judgment, nor an application to strike out a pleading, I consider that the principles that inform those applications are relevant, as a practical matter, to the determination of this basis of resistance of the defendant to the granting of leave to amend. That is because, as I have said, if the amendment is not permitted the claim of the plaintiff with regard to events prior to 2005 will be "struck out" by application of the Limitation Act. 40In General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at 129, Barwick CJ said of an application for summary dismissal: "The test to be applied has been variously expressed; 'so obviously untenable that it cannot possibly succeed'; 'manifestly groundless'; 'so manifestly faulty that it does not admit of argument'; 'discloses a case which the Court is satisfied cannot succeed'; 'under no possibility can there be a good cause of action'; 'be manifest that to allow them' (the pleadings) 'to stand would involve useless expense'". 41In Brimson v Rocla Concrete Pipes Ltd (1982) 2 NSWLR 937 at 944, Cross J said: "Where the court is asked to reject a plaintiff's case, either under its statutory rules or its inherent jurisdiction, the fundamental principle is that prima facie a plaintiff is entitled to have his case come to trial; and applications to deprive him of that right will succeed only in the clearest of cases. True, the court will not look merely at the suggested weakness of the plaintiff's case but - though to a less extent - at the suggested strength of the defendant's case; and, true, forensic argument and subsequent judicial reflection are not necessarily inconsistent with a firm conclusion that the cause of action should not be allowed to proceed. But fatal defects in the plaintiff's case must be very clear before the court will intervene in this fashion." 42In Shaw v State of New South Wales [2012] NSWCA 102, the Court of Appeal reaffirmed the high degree of certainty necessary before such an application would be granted. 43In light of the fact that a denial of the present application to amend would effectively deprive the plaintiff its ability to prosecute its case, I consider that those principles should be applied by me in the circumstances. 44Correctly, the parties did not seek to litigate the whole trial before me on this interlocutory application. In particular, no witness was called to give oral evidence and there was no cross-examination. 45In the circumstances, and on the evidence placed before me, I am unable affirmatively to determine that the plaintiff's case with regard to fraudulent concealment on the part of the defendant is doomed to failure. It follows that I cannot be affirmatively satisfied that the Limitation Act will inevitably prevent the plaintiff from prosecuting its claim for the breaches of contract occurring before 2005 contained in the proposed pleading. 46It follows that I reject the second aspect of the first basis of resistance to amendment.

Second basis - prejudice to defendant 47The plaintiff submitted that the proceedings are, in truth, at a very early stage. An originating process has been filed, a defence has being filed, there has been some preparation for discovery, and some subpoenas have been issued and returned. As I have indicated, discovery has not yet taken place. 48Secondly, he submitted that the delay on the part of the plaintiff has not been extensive when one considers the general conduct of litigation. Nor is it unusual for pleadings to be reformulated throughout the course of civil litigation. 49Thirdly, the plaintiff accepted that that there will quite possibly be documents, and perhaps witnesses, that are no longer available to the defendant. But he submitted that that loss could affect the plaintiff, who bears the burden of proof, just as much as the defendant. At the moment the effects on the two parties are not clearly discernible. 50Fourthly, the plaintiff submitted that it was prepared to consent to a number of orders that would protect the position of the defendant and very substantially ameliorate any prejudice. First, the plaintiff could provide additional security for the defendant's costs. Secondly, the plaintiff would pay the costs of the defendant thrown away by the amendment. 51The defendant submitted that he would be placed in the position of searching for documents from almost 20 years ago. That is precisely the outcome that the Limitation Act is designed to avoid. 52Secondly, it was submitted that there are already examples of documents that, as one would expect, have become unavailable to the defendant, making it impossible to defend an expanded claim properly. 53Thirdly, it was submitted that the defendant is suffering understandable anxiety and stress as a result of the proceedings, and that will be exacerbated by the temporal enlargement of the allegations against him.

Determination 54I accept that, inevitably, there will be some prejudice to the defendant arising from unavailability of evidence. If it is found to be significant, the unavailability of such evidence would be able to be relied upon before the tribunal of fact at a hearing. 55I do not consider, however, that that prejudice is so great that the plaintiff should be shut out of litigating this claim at this early stage. 56After all, the postponement of the statutory bar provided for by s 55 of the Limitation Act with regard to breach of contract must, very often, involve the loss of evidence when claims are permitted to be made more than six years after the alleged breach. 57At this interlocutory stage and on the material before me, I am unable to be affirmatively satisfied that the prejudice to the defendant is so great that the claim with regard to breaches before 2005 should be effectively terminated. 58Separately, I considered that the orders proposed by the plaintiff substantially protect the position of the defendant with regard to costs arising from the proposed amendment. 59It follows that I reject the second ground for resistance to the application for leave.

Third basis - failure to quantify damages sought 60This basis of resistance to leave was founded upon the proposition that the plaintiff had not quantified damages, even though the proceedings have been on foot for quite some time. It seems that the current claim is thought to be in the order of $75,000, although the plaintiff suggests that it could become very much more than that. 61The plaintiff submitted that a claim for breach of contract carries with it no requirement that liquidated damages be pleaded. It was submitted that fraudulent concealment, if it occurred, would mean that the plaintiff it is not aware precisely of what has been allegedly done by the defendant contrary to the contract and to the disadvantage of the plaintiff. It was submitted that the picture will become clearer once there has been discovery and further interlocutory steps undertaken. 62The defendant submitted that the proceedings have been on foot for quite some time. In light of the complete lack of clarity with regard to quantum, one is unable to even determine whether the matter should be in the Supreme Court at all; if the claim is in truth for something in the order of $75,000, one would hardly expect that to be the case.

Determination 63I do not consider that, as a matter of law, the plaintiff is required to quantify unliquidated damages said to arise from a breach of contract. 64Indeed, r 14.13 of the Uniform Civil Procedure Rules relevantly states that: "14.13 Pleading not to claim an amount for unliquidated damages (cf SCR Part 15, rule 12A; LCR Part 5, rule 1) (1) A pleading must not claim an amount for unliquidated damages. ..." 65Separately, as a matter of evidence, I do not see how the plaintiff can realistically be expected to quantify damages at this early stage. 66I am not persuaded that the third ground resistance should lead to my refusal to grant leave to amend.

Conclusion 67In summary, I consider that, as a general matter, the plaintiff has demonstrated that leave should be granted to it to amend the statement of claim. None of the specific grounds for resistance, either individually or in combination, persuades me that I should refuse to grant leave to the plaintiff to file the proposed pleading. I consider that the allegation of fraud is sufficiently specific; I do not consider that the case of the plaintiff alleging fraud against the defendant is doomed to failure; although I accept that there is prejudice to the defendant, I do not consider that it is so pronounced that the plaintiff should be shut out of court; and, finally, the failure on the part of the plaintiff at this stage to quantify the damages sought does not sound against the grant of leave. 68In short, I propose to grant leave, subject to the orders that the plaintiff proposed in order to protect the position of the defendant.

Costs of this motion 69After I reserved my decision in this matter, I invited the parties to make submissions as to the appropriate orders as to the costs of this motion. I received helpful written submissions and proposed orders from the parties. 70It is true that the usual position is that costs follow the event, (see r 42.1 of the Uniform Civil Procedure Rules), and that would entitle the plaintiff to the costs of this motion. But it is also true that, on an application to amend, the general principle is that the amending party ought pay the costs of the amendment, including the motion to amend. On the other hand, even though it was not unreasonable for the defendant to have opposed the motion of the plaintiff, the defendant was ultimately unsuccessful in its opposition to the motion. And the costs of the motion would have been substantially reduced had the motion been consented to by the defendant. 71Seeking to balance all of those aspects of the matter, I consider that the appropriate order with regard to costs of the hearing of this motion is that costs be in the cause. 72Separately, it seems that on 2 July 2012, this motion was listed before the Registrar but was not referred for hearing. Costs of that occasion were reserved. The written submissions of the parties about costs do not permit me to determine with precision which party (if any) should pay the costs of that occasion. 73It would not be consonant with the principles underpinning s 56 of the Civil Procedure Act for me to embark upon a detailed investigation of those issues at this interlocutory stage. If it is truly found to be necessary, the parties can place before the judge who ultimately determines the matter detailed submissions about that occasion. In short, I consider that the costs of that day should remain reserved.

Orders (1)The plaintiff has leave to file by 4pm on Thursday 12 September 2013 an amended statement of claim, in the form provided to the defendant's solicitors on 14 December 2012. (2)Without admission by the plaintiff in respect of the need for security for the defendant's costs to be provided, the plaintiff is to provide additional security for the defendant's costs of these proceedings in the sum of $30,000 ("the Additional Security") by Friday 6 September 2013. The Additional Security is to be provided by an increase of $30,000 in the sum secured under the first registered mortgage no. AG695848 in favour of the defendant, in respect of the property contained in folio identifier 6/SP10414 located at and known as Unit 6, 65A Elizabeth Bay Road, Elizabeth Bay NSW owned by Mr William Herd. The Additional Security will be provided in the form of a variation of mortgage to registered mortgage no. AG695848 to increase the total sum secured to $126,605. (3)The plaintiff is to pay the defendant's costs thrown away (if any) by reason of the amendments. (4)The costs of the motion are to be costs in the cause, except for the costs of 2 July 2012 which are to remain reserved. (5)The matter is listed at 9am on Friday 13 September 2013 in the Common Law Registrar's List.

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: 30 August 2013