309 For this reason, the plaintiffs' claim of misleading conduct based upon the first pleaded representation fails.

310 As to the second representation pleaded, Mr Christou's evidence (exhibit 2 par 165) was that one of Messrs Joyce or Lingard, in the company of the other, told him that if he signed the January 2002 Agreement they would pay him 50% of the fees collected from his section. That evidence does not mirror the second pleaded representation in that there is no evidence that Mr Christou was told that he would be paid 'each month'.

311 The fact that a statement as to the future does not come to pass in accordance with its terms does not of itself make the statement misleading; see, for example, Hatt v Magro [2007] WASCA 124; (2007) 34 WAR 255 [33].

312 Payments were not made to Mr Christou in the months of February and March 2002. However, that provides no evidence that Messrs Joyce and Lingard did not intend, as at 24 January 2002, that Mr Christou would be paid 50% of his section's collections or that there were not reasonable grounds for a representation to that effect. On the evidence, nothing was said to Mr Christou, up to 24 January 2002, as to the timing of such payments. Further, there is evidence as to particular reasons why, in the circumstances as they developed in February and March 2002, the payments of 50% collections to Mr Christou were not paid until later; see exhibit 1 pages 572 - 575.

313 I am satisfied that, at the relevant time, namely 24 January 2002, Messrs Joyce and Lingard had reasonable grounds for representing that Mr Christou would be paid an amount equal to 50% of his collections. That, I find, was their intention. Of course, that, of itself, does not establish the existence of reasonable grounds: Cummings v Lewis (1993) 41 FCR 559. Here, the subject matter of the representation was a matter within the power or control of Messrs Joyce and Lingard. Further, over the 10 months preceding January 2002 Mr Christou had, as they knew, been paid 50% of his collections, albeit with a delay in payment in respect of the months from October to December 2001 due to the issues which had arisen in respect of the NFI Superannuation Trust tax returns. The plaintiffs' solicitors letter of 14 December 2001 had not complained that payment of the 50% of his collections had not been made.

314 Finally, in relation to the January 2002 Agreement, the plaintiffs plead that, by various conduct in breach of that agreement, Messrs Joyce and Lingard wrongfully repudiated the January 2002 Agreement and that, by the letter of 21 March 2002, Mr Christou terminated the January 2002 Agreement.

315 The letter of 21 March 2002 purported to avoid the January 2002 Agreement on the grounds of misleading conduct. It did not purport to terminate it for wrongful repudiation. However, had Messrs Joyce and Lingard wrongfully repudiated the agreement by March 2002, the fact that the terms of the letter of 21 March 2002 were cast as they were would not, I think, have been fatal to its character as an acceptance of the repudiation; cf Shepherd v Felt & Textiles of Australia Ltd [1931] HCA 21; (1931) 45 CLR 359; Foran v Wight [1989] HCA 51; (1989) 168 CLR 385.

316 However, I am not satisfied that, as at 21 March 2002, Messrs Joyce and Lingard had, by breach or otherwise, repudiated the January 2002 Agreement. As to the principles regarding when a breach of contract gives rise to a right to terminate, see Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61 [44] - [56]. Any breach which may have occurred by March 2002 falls well short of being of a sufficiently serious character to have given rise to a right to terminate.

317 In their reply the plaintiffs plead various alleged breaches occurring after March 2002. Given that the plaintiffs rely, in their reply, solely on termination by their letter of 21 March 2002, and no other basis was put forward in submissions at trial, it is not necessary to deal with whether the various species of pleaded conduct occurring after March 2002 constituted a breach of contract; if so, whether such conduct occurred; and if so, whether such breaches as are established were sufficiently serious to have given rise, at some later point in time, to a right of termination.

318 For these reasons I find that the January 2002 Agreement has not been terminated for breach or repudiation on the parts of Messrs Joyce or Lingard. The agreement remains on foot.

319 That leaves the conclusion, already reached, that by the January 2002 Agreement, the plaintiffs consented to the breaches of which they now complain.

320 As already explained, consent is a prima facie defence only. All the circumstances must be considered in determining whether it is just and equitable that the beneficiary be permitted to sue for breach of trust.

321 In this context it is, I think, relevant that on 21 January 2002 and on 23 January 2002 Mr Christou expressly stated that, contrary to the proposal from Messrs Joyce and Lingard, he wanted the interest of Messrs Joyce and Lingard in E Genius to be transferred to him regardless of whether the practice was sold, in settlement of issues relating to past and future profit entitlements. His notes of the meeting of 23 January include a statement that he would take over 100% of E Genius 'for past and future entitlements'. As already mentioned, these matters are not relevant to the question of construction. However, they are evidence of what Mr Christou understood and intended, and seem to me to bear upon the question of whether, in all the circumstances, equitable relief should be refused on grounds of consent.

322 Further, at the time of the meeting Mr Christou had solicitors acting for him (ts 662) and, as he accepted in his evidence (ts 664), he made a choice to enter into the agreement. There is no evidence to suggest that his will was overborne in the negotiations for the agreement. Indeed, there is evidence, which I accept, that Mr Christou was agitating for the conclusion of an agreement before his departure for Singapore on 25 January 2002. The negotiations proceeded over several days and Mr Christou succeeded, in the course of those negotiations, in obtaining some concessions from Messrs Joyce and Lingard. For example, Mr Christou succeeded in negotiating the unconditional transfer to him of all of Messrs Joyce and Lingard's rights in E Genius.

323 I am satisfied that, by the January 2002 Agreement, the plaintiffs consented to payments of trust funds in accordance with the terms of cl 1(vi) and thus not equally to all beneficiaries, and that, in all the circumstances, it is fair and equitable that the plaintiffs' claims should fail on grounds of consent.

324 These conclusions lead to the dismissal of the plaintiffs' monetary claims against the beneficiary defendants. There are additional reasons why I would dismiss those claims. I would dismiss the claims of knowing assistance, under the second limb of Barnes v Addy, on the ground that I am not satisfied that the trustee acted with a dishonest and fraudulent design. I would dismiss the claims under both limbs of Barnes v Addy on the further ground that I am not satisfied that the beneficiary defendants knew, in the relevant sense, of the breach of trust. I will deal with those points in turn.

325 Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 81 ALJR 1107[160] - [180] establishes that assistance liability under the second limb of Barnes v Addy applies only where the trustee (or other fiduciary) acts with a dishonest and fraudulent design (and the defendant assists with knowledge of that).

326 The allegation that a trustee has acted with a dishonest and fraudulent design is a serious allegation which must be pleaded and particularised: Farah Constructions [170]. A party alleging a dishonest and fraudulent design is confined to the matters pleaded and particularised in support of that allegation. The plaintiffs' pleadings and particulars of the allegation of fraudulent and dishonest design on the part of SPA and SAA are summarised earlier in these reasons under the heading 'Outline of the plaintiffs' claims'.

327 The seriousness of an allegation of dishonest and fraudulent design engages the principles in Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336: Farah Constructions [170].

328 The plaintiffs' pleaded case fixes upon conduct in February and March 2001. It is said that at those times SPA 'distributed income' of the trust to some of the defendants but not to the plaintiffs, and that that occurred prior to any alleged agreement to the effect that income of the trust could be distributed unequally.

329 I am not satisfied that the making of the payments in February and March 2001 to some of the defendants, but not to the plaintiffs, provides an adequate foundation, in all the circumstances, for the inference that the relevant subsequent conduct of SPA (by Messrs Lingard and Joyce) was done with the dishonest and fraudulent intention of intending to act in breach of cl 22.1, and to pay some of the income to which Mr Christou was entitled to Messrs Joyce and Lingard or to Demandem and Glenlea. That is so, taking into account a number of matters.

330 First, the payments made in February and March 2001 are, in my opinion, properly characterised as drawings and not as distributions of income. Distribution of income occurs at the end of an accounting period, ie a financial year, after the accounts have been prepared and the income of the trust ascertained. The monthly payments that were regularly made from 1999 onwards were not of this character. They were advances against anticipated income, the payment of which would be reflected in the loan account for the recipient.

331 Mr Christou accepted, in his evidence, that this was so (ts 640 - 643), although he sought to modify his concession when it was put to him in the context of his plea of fraud and dishonesty against Messrs Joyce and Lingard (ts 644 - 645).

332 In the course of closing submissions, counsel for the plaintiff made reference to cl 22.6 of the Stanton Partners Trust Deed and cl 11.5 of the NFI Trust Deed. These clauses empower the trustee to make interim distributions of income to unit holders in proportion to the units held. It was submitted on behalf of the plaintiffs that these clauses made it clear that all payments had to be made equally, from which it was to be inferred that the defendants knew of this requirement and acted dishonestly in making unequal payments.

333 I do not accept that submission. The clauses relating to interim distributions were not put to Mr Joyce or Mr Lingard, and were not pleaded or otherwise mentioned at the hearing prior to closing submissions. There was no direct evidence, and I would not draw the inference, that Messrs Joyce or Lingard were aware of those clauses in making or not making payments in the course of 2001, or that they thought that the payments being made were interim distributions. In any event, I do not accept that the regular monthly payments made were interim distributions of income, rather than drawings. It seems to me clear on the evidence that, at all relevant times, the parties treated the regular monthly payments as drawings.

334 Next, the plaintiffs invite an inference of dishonesty from the payments made and not made in February and March 2001, before any relevant agreements were made. The question of dishonesty is directed to the time the trustee is said to have acted in breach of trust. In that respect, all relevant conduct occurred after both the oral agreement of April 2001 and the January 2002 Agreement. The accounts for 2001 were prepared after the making of the January 2002 Agreement.

335 It is, of course, possible that, in some circumstances, earlier conduct could be found to colour the intention with which conduct after the making of the agreements occurred. However, in the circumstances of this case I am not satisfied that an inference of that kind should be drawn.

336 I accept the evidence of Messrs Joyce and Lingard that each of them believed that the January 2002 Agreement authorised the making of unequal distributions of the income of SPA and SAA.

337 Submissions and cross-examination on behalf of the plaintiff emphasised the absence of express terms in the January 2002 Agreement that Messrs Joyce and Lingard were entitled to the balance of what would have been the plaintiff's one-third share of income over and above the amount calculated in accordance with the agreed formula and, if so, how that was to occur. The understanding, on the part of Messrs Lingard and Joyce, that they were entitled to the balance of what would have been the plaintiffs' share of income, was a reasonable one. Indeed, it is the construction of the January 2002 Agreement which I have adopted.

338 For these reasons I am not satisfied that the trustees acted with a fraudulent and dishonest design.

339 I turn to the question of the knowledge of the beneficiary defendant.

The knowledge of Messrs Lingard and Joyce and of Demandem and Glenlea

340 The plaintiff makes claims against the beneficiary defendants under both limbs of the rule in Barnes v Addy. Both limbs have requirements of knowledge on the part of a defendant. As will appear, the knowledge required for liability under each limb appears to be the same. For the reasons which follow, I am not satisfied that the beneficiary defendants had the knowledge required for liability to be established.

341 Farah Constructions [177] establishes that the element of knowledge for the purpose of assistance liability under the second limb of Barnes v Addy is satisfied by the first four, but not the fifth, categories of knowledge set out in Baden v Societe Generale Pour Favoriser Le Developpement du Commerce et de L'Industrie en France SA [1993] 1 WLR 509, 575 - 576, 582. Thus knowledge will be established if there is actual knowledge; a wilful shutting of one's eyes to the obvious; a wilful and reckless failure to make such enquiries as an honest and reasonable person would make; or knowledge of circumstances which would indicate the facts to an honest and reasonable person.

342 The element of knowledge or notice for the purposes of recipient liability under the first limb of Barnes v Addy is also satisfied by the first four but not the fifth categories of knowledge set out in the Baden case; Hancock Family Memorial Foundation Ltd v Porteous [1999] WASC 55; (1999) 151 FLR 191 [79]; Kalls Enterprises Pty Ltd (in liq) v Baloglow [2007] NSWCA 191.

343 I have found that Messrs Joyce and Lingard believed that the January 2002 Agreement authorised the unequal distribution of income of SPA and SAA, and that they were correct in that belief. In those circumstances, the beneficiary defendants believed correctly, and so by definition reasonably, that the plaintiffs had consented to the breaches of trust committed by SPA and SAA. Even if, contrary to my opinion, the belief of the beneficiary defendants had not been correct, it would, nonetheless, have been a reasonable belief. In circumstances where a person reasonably believes that the relevant beneficiary has consented to a breach of trust, in my opinion equity does not attach liability to a recipient of funds paid in breach of that trust.

Conclusion on claims against the beneficiary defendants

344 For the reasons explained above, the monetary claims against the beneficiary defendants fail on the grounds that:

1. by the January 2002 Agreement, the plaintiffs consented to SPA and SAA's breaches of trust; and
2. the requirements of knowledge, on the part of the beneficiary defendants, for liability under each of the two limbs of Barnes v Addy are not satisfied.

345 Further, the claim based on the second limb of Barnes v Addy fails on the additional ground that I am not satisfied that the trustees acted with a fraudulent and dishonest design.

346 That brings me to the plaintiffs' claim for an order winding up the partnership.

347 It is, as I have said, not in dispute that the partnership was terminated on 3 July 2003 and that no steps have been taken to wind up the partnership. The defendants submit that the Licence Agreement remains on foot, with the consequence that there are no steps to be taken in winding up the partnership. They submit that, when the proper construction of the Licence Agreement is taken into account, there is no utility in winding up the partnership.

348 In order to understand the parties' competing contentions, some provisions of the Licence Agreement should be set out or summarised.

349 By cl 4.1 the Partners (ie Messrs Joyce, Lingard and Christou) granted an exclusive licence to SPA to use the Goodwill (as defined) and carry on the Practice (as defined) according to the terms of the Licence Agreement.

350 Goodwill is defined to mean the goodwill of the Practice, including the personal connections of the Partners and the name 'Stanton Partners', but does not include any of the other assets of the Practice, including the debtors; the equipment; stock or consumables; or the work in progress as at the date of the agreement.

351 'Practice' is defined to mean the accountancy practice carried on by the Partners (and includes a reference to the accountancy practice as carried on by SPA in accordance with the terms of the Licence Agreement).

352 Clause 4.2 provides that the licence contained in the agreement is extended on the terms and conditions of the agreement solely to SPA, who shall have no right to license or grant to others any rights or interest in the licence or the Goodwill, other than as expressly permitted under the Licence Agreement.

353 Clause 4.3 provides that, as between SPA and the Partners, SPA recognised and acknowledged the Partners' sole and exclusive ownership of and right to use the Goodwill, and that nothing contained in the agreement should be construed to vest in SPA any right, title or interest in the Goodwill now or in the future.

354 Clause 5 provides that the licence was to continue indefinitely until terminated:

5.1 By either the Partners or the Licensee by not less than three months prior written notice to the others;

5.2 under clause 9 (Default).'

355 Clause 9.1 is a provision for termination for breach of the agreement. Clause 9.2 provides for a right of termination upon the happening of stipulated insolvency events.

356 Clause 9.3 provides that if the agreement is terminated under any of its provisions then SPA shall immediately cease using the name in any manner and cease indicating in any way that it is connected with the Practice and the Goodwill of the partnership. The clause also stipulates that the Partners may circulate to the clients of the Practice a notification that the licence has been terminated and, if the Partners so elect, that they are resuming the carrying on of the Practice. The notification may also give such other information as the Partners may decide.

357 It is common cause that the termination of the partnership does not, of itself, terminate the Licence Agreement. That is apparent from cl 5.

358 The defendants submit that the power of termination of the Licence Agreement in cl 5 is exercisable only by all three partners acting together. Further, they submit that a person appointed to wind up the partnership would not have power to exercise the power of termination under cl 5. For that purpose, they say, an application would need to be made to the court for the appointment of a receiver whose express powers included the exercise of the power of termination.

359 Further, the defendants point to the limited subject matter of the Licence Agreement. The subject matter of the agreement is the goodwill, as defined, and the right to carry on the practice. The definition of 'goodwill' excludes other assets of the practice including debtors, equipment, stock, consumables and work in progress. The defendant says that whatever assets SPA and SAA have other than goodwill, are not the subject of the Licence Agreement and would not revert to the partnership upon termination of the Licence Agreement. Further, there is said to be no evidence that the partnership owns any assets in addition to its rights under the Licence Agreement.

360 I accept the defendants' submissions set out in the immediately preceding paragraph, but I do not accept the first step of the defendants' submissions. In my opinion, any one of the Partners can exercise the power of termination under cl 5. Clause 3.5 of the Licence Agreement is in terms that 'Partners' includes a reference to each of them. When cl 5 is read with cl 3.5, the ordinary meaning of the language of the clauses is that the power of termination is exercisable by each of the Partners. In my view, such a reading of cl 5 does not produce results which are so inconvenient or unlikely to have been intended as to warrant any departure from the ordinary meaning of the language of these clauses.

361 My acceptance of the defendants' submissions at [359] of these reasons is not, to my mind, a sufficient reason to decline to order a winding up of the partnership. However, those matters will be relevant to the conduct of the winding up. On the evidence, the only assets of the partnership are its reversionary rights, under the Licence Agreement, to the goodwill of the Stanton Partners accounting practice; and the partnership's other rights, including any rights to payment under the Licence Agreement. (Whether any right to payment is unenforceable for any reason does not arise for decision in this action.) There is no evidence of the partnership having any rights by way of debtors or work in progress. Because SPA conducts the practice, it is SPA which owns those rights. The practice has been carried on by SPA, pursuant to the Licence Agreement, on SPA's own account, not on behalf of the partnership. If the Licence Agreement were terminated, SPA could no longer conduct its practice in the name 'Stanton Partners'. However, it would be free to complete any unfinished work, to bill for that work, and to collect invoices already rendered. Further, if existing clients requested it to perform further work (under its new practice name), it would be free to do so.

362 The plaintiffs submit, and I have accepted, that the partnership's rights under the Licence Agreement are assets of the partnership. The plaintiffs seek, by the application for an order for winding up, for those assets to be sold. It may be accepted, as is emphasised on behalf of the defendants, that the most likely or commercially attractive context for a sale of such rights is or may be as part of a sale of the whole of the rights and assets associated with the accounting practice, and that such a sale would require agreement from various other parties including SPA and SAA. Further, I have found that the partnership has only the limited assets identified in the previous paragraph of these reasons. Nonetheless, in circumstances where the partnership was terminated in 2003, and a partner wishes the affairs of the partnership to be wound up, it seems to me appropriate to order a winding up to permit a realisation of the assets of the partnership. How, whether and in what form the assets of the partnership are able to be sold will depend upon whether agreement is reached between the various parties. If no agreement is reached with SPA and SAA, the person winding up the affairs of the partnership may seek to sell the partnership's rights under the Licence Agreement.

363 Further, one of the partners, in particular Mr Christou, may elect to exercise his right to terminate the Licence Agreement under cl 5. In that regard, as was submitted by the defendants, the authority of each partner to bind the firm continues, notwithstanding the dissolution of the partnership in 2003, so far as may be necessary to wind up the affairs of the partnership and to complete transactions begun but unfinished at the time of the dissolution: Partnership Act 1895 (WA) s 49. The Licence Agreement is of the character referred to in s 49, namely a transaction begun but unfinished at the time of dissolution.

364 In all the circumstances, an order for winding up seems to me to be appropriate.

365 The plaintiffs did not pursue the contention, made in written submissions, that the winding up of the partnership should include the winding up of SPA and SAA. I would, in any event, have rejected such a contention. SPA and SAA are not part of the assets of the partnership.

366 The defendants also pointed to the sale contract dated 28 June 2004 between SPA, SAA and Stantons International Pty Ltd, the subject matter of the interim injunction and undertakings already referred to. The defendants submit that, upon the determination of the trial, the parties will be free to implement that agreement. The plaintiffs say that the undertaking given on 1 July 2004 was in terms that there be an undertaking until further order, so that an application, on the part of the defendants, to be relieved of their undertaking would be necessary. The defendants respond to that by submitting that the undertakings are interlocutory in character and so would not continue after the trial of this action. I accept the submission on behalf of the defendants as to the interlocutory character of the undertakings. In the context of an application for an interlocutory injunction, any undertaking offered is, in my opinion, absent other considerations, to be construed as in satisfaction of the application for an interlocutory injunction and so itself is interlocutory in character, in the same way as any interlocutory injunction would have been.

367 However, that does not detract from my view that it is appropriate to order the winding up of the partnership.

368 In light of my findings as to the construction of the Licence Agreement and as to the limited assets of the partnership, the precise terms of the orders for a winding up of the partnership will need to be reformulated and may require further submissions.

369 I turn, finally, to the fifth and sixth defendants' counterclaim.

370 Demandem and Glenlea bring a counterclaim against Mr Christou. They do so pursuant to an assignment, by SPA, of SPA's relevant rights against Mr Christou.

371 The counterclaim arises out of the acquisition and sale by SPA of instalment receipts in Telstra Corporation Ltd (Telstra).

372 In about October 1999, Messrs Joyce, Christou and Lingard agreed that SPA would purchase some instalment receipts in Telstra. It was agreed that Mr Christou would arrange for the acquisition and would generally have the management, on behalf of SPA, of the investment.

373 SPA held the investment in Telstra on trust for the family trusts of the three individuals. That was so either by virtue of the initial terms of the acquisition or by force of the Deed of Declaration of Trust dated 22 May 2000. It is not necessary to determine the detail of the beneficial entitlements including, in particular, when any trust came into existence, because the beneficial interests in the shares are not part of the cause of action or the defence which is the subject matter of this counterclaim.

374 The counterclaim as pleaded included a complaint as to whether, upon the sale of the instalment receipts, Mr Christou caused the proceeds of sale to be paid to or at the direction of SPA. However, the evidence at trial established that the proceeds of sale of the instalment receipts were paid to the direction of SPA, and counsel for the defendants did not, at trial, pursue that part of the counterclaim.

375 The counterclaim, as pursued at trial, relates to the timing of the sale of the instalment receipts.

376 The counterclaim pleads that, on or around 15 August 2000, Messrs Joyce and Lingard instructed Mr Christou to cause the instalment receipts to be sold, so that SPA thereby resolved to sell them. It is pleaded that, in breach of his duty to SPA, Mr Christou failed to sell on 15 August 2000 when instructed; and that on 20 August he was instructed, again, to sell; and ultimately the instalments receipts were sold on 24 August 2000.

377 The price of the instalment receipts fell between 16 August 2000, when it is said that Mr Christou ought to have sold the instalment receipts, and 24 and 25 August 2000, when the receipts were in fact sold.

378 In his defence to counterclaim Mr Christou denies that he was instructed, on 15 August 2000, to sell the instalment receipts. He pleads that it was agreed on 23 August 2000, by Messrs Joyce, Lingard and Christou, that the instalment receipts should be sold, which occurred on the following day or two.

379 Thus the issue arises as to when the instruction to sell was first given.

380 In each case, the evidence of the three witnesses is consistent with that party's pleaded case.

381 Mr Lingard's evidence was to the following effect. On 15 August 2000 he and Mr Joyce met with Mr Christou and instructed Mr Christou to sell the instalment receipts straightaway. Mr Lingard said words to the effect that he thought it was likely that the share price would fall and that he required funds in order to complete the purchase of a property he had bought in Swanbourne.

382 Mr Joyce's evidence was that around 15 August 2000 he and Mr Lingard met with Mr Christou and instructed Mr Christou to sell the instalment receipts immediately, and that Mr Lingard said words to the effect that this was because he required funds in order to complete the purchase of the property he had purchased.

383 Both Mr Lingard and Mr Joyce said in their evidence that they had subsequent discussions with Mr Christou, who said that he had not sold the instalment receipts, to which they said that he should sell them immediately to prevent any further loss (the price by then having gone down).

384 Mr Christou's evidence was that he sold them the day after it was agreed that they would be sold. In cross-examination, he denied that he had received an instruction on or about 15 August 2000 to sell the shares.

385 The counterclaim turns on a resolution of the conflict in the oral evidence.

386 The plaintiffs submit that the grounds alleged by the defendants as to the need to sell immediately did not in fact exist. First, the plaintiffs say that as at 15 August 2000, the price of the instalment receipts had not been dropping. Secondly, they say that the need for funds to purchase the Swanbourne property was not immediate.

387 As to the first point, in the week or two leading up to 15 August 2000, there was no immediate observable decline in the price of Telstra shares (see exhibit A). However, one of Mr Lingard's stated reasons for wanting to sell was his belief that it was likely that the price would decline. As to the second point, it is true that the purchase by Mr Lingard of the Swanbourne property did not give rise to an urgent need for funds as at 15 August 2000. Nonetheless, it is, I think, plausible that it provided a catalyst for a request to sell the instalment receipts.

388 In determining the counterclaim, I prefer the evidence of Mr Lingard to the evidence of Mr Christou. Mr Lingard was not cross-examined in relation to his evidence as to the counterclaim. Further, there was nothing arising from any aspect of Mr Lingard's evidence generally which seemed to me to give rise to any reason to doubt the accuracy or reliability of Mr Lingard's evidence. In my opinion, the same could not be said in respect of Mr Christou's evidence generally. I have already made observations regarding Mr Christou's evidence as to the meeting of 24 January 2002, and regarding his evidence, in cross-examination, as to the character of the regular monthly payments made by SPA. I refer also to his unwillingness to answer the question whether he had prepared a document, for Messrs Lingard and Joyce, reflecting losses incurred on the Telstra investment up to 30 June 2000 (ts 623 - 624). Generally, I found his evidence as to the degree of consultation and reporting by him to Messrs Joyce and Lingard in relation to the Telstra investment to be unsatisfactory. I do not accept that he consulted Messrs Lingard and Joyce in acquiring put options in an attempt to protect the Telstra investment, or in the refinancing of that investment.

389 Accordingly, I find that on 15 August 2000 Messrs Lingard and Joyce instructed Mr Christou to sell the Telstra instalment receipts.

390 No reason is advanced by Mr Christou to explain why, in such circumstances, the instalment receipts were not sold the following day, as could have occurred by the giving of instructions to the broker.

391 I find that Mr Christou's failure to act on the instructions given on 15 August 2000 was a breach of his duty of reasonable care and diligence as a director of SPA. Reasonable care and diligence on the part of Mr Christou required him, in the circumstances, to act without delay on the instruction to sell.

392 I calculate the loss flowing from Mr Christou's breach as follows. When the instalment receipts were sold on 24 and 25 August, the gross sale proceeds totalled $1,431,860. On my findings, the instalment receipts should have been sold on 16 August 2000. According to exhibit A, the instalment receipts traded within a range from $4.20 to $4.38 on that day. Taking the mid point of $4.30, the instalment receipts would have produced gross proceeds of sale of $1,581,400. The difference between those sums is $150,540. Taking into account that higher sale proceeds would have produced greater transaction costs associated with sale, without attempting absolute precision in that regard (which the evidence does not permit), I assess damages in the sum of $150,000.

393 Demandem and Glenlea sue on the counterclaim pursuant to an assignment by SPA of SPA's rights against Mr Christou. Although the plaintiffs plead three matters in relation to the assignment, only one of these matters was pursued by way of submission at trial. The plaintiffs contend that the assignment should not be enforced because it is prejudicial to the administration of justice in that it is contrary to the undertaking given on behalf of the second defendant before the Full Court on 21 September 2004.

394 I do not accept that submission. The terms of the undertaking or assurance are set out earlier in these reasons. The subject matter of the undertaking seems to me to have been the conduct of the defence by the various defendants of the claims made by the plaintiffs in the action. The counterclaim is not part of that subject matter. Further, I do not consider that the assignment is contrary to the intent or spirit of the undertaking. The assignment by SPA enables any complaints by the beneficiary defendants in relation to Mr Christou's management of the investment in Telstra instalment receipts to be ventilated between the beneficiary defendants and Mr Christou, and without SPA being required to take any active role in relation to such disputes.

395 No issue was raised by Mr Christou, by pleading or submissions, as to whether the assignment amounted to an assignment of a bare right to litigation and, if so, whether, on that account, it was unenforceable.

396 For the reasons given, I would give judgment for Demandem and Glenlea on their counterclaim against Mr Christou in the sum of $150,000.

397 I would summarise my major conclusions as follows:

(a) the defence based on s 65(7) of the Trustees Act fails;

(b) on the pleadings, no other defence is available to SPA and SAA;

(c) SPA and SAA breached their respective trusts by the making of unequal payments;

(d) SPA and SAA should be granted leave to rely upon the January 2002 Agreement as a defence, should the beneficiary defendants' defence in that regard succeed;

(e) because the beneficiary defendants' defence based on the January 2002 Agreement succeeds, the claims against SPA and SAA fail on grounds of consent and acquiescence.

1. The claims against Mr Joyce, Mr Lingard, Demandem and Glenlea fail because:

(a) by the January 2002 Agreement, the plaintiffs consented to SPA and SAA breaching their respective trusts by the making of unequal payments (and, as to the period February 2001 to December 2001, acquiesced in such conduct);

(b) the requirements of knowledge, on the part of the beneficiary defendants, for liability under each of the two limbs of Barnes v Addy are not satisfied.

(c) Further, the claim based on the second limb in Barnes v Addy fails on the additional ground that I am not satisfied that the trustees acted with a fraudulent and dishonest design;

1. An order for winding up of the partnership should be made;
2. Demandem and Glenlea are entitled to judgment on their counterclaim against Mr Christou in the sum of $150,000.

398 I will hear from the parties as to the precise orders necessary to give effect to these reasons.

A previous version of these reasons was published on 28 February 2008. After having heard argument as to the orders which should flow from my reasons it seemed to me that certain passages in my reasons did not, or may be read in a way which did not, reflect my reasoning. Paragraphs [204], [303], [304] and [337] have been revised to ensure that they reflect my reasoning. The revisions made are as follows:

SPA breached the Stanton Partners Trust in that it made unequal payments of the income of the Trust in the years 2001 and 2002, in the amounts already referred to.

(2) In par [303] the word 'distribution' has replaced 'payments'.

(3) In par [304](e) the words 'and payments' originally followed distribution, and have been deleted.

(4) In par [337] the words 'over and above the amount calculated' have replaced the words 'after the plaintiffs were paid'.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : CORPORATE SYSTEMS PUBLISHING PTY LTD -v- LINGARD [No 4] [2008] WASC 21 (S)

HEARD : 17 - 19 & 21 SEPTEMBER, 5 - 8 & 12 NOVEMBER 2007 & 15 FEBRUARY 2008

BETWEEN : CORPORATE SYSTEMS PUBLISHING PTY LTD (ACN 009 412 622)

STANTON PARTNERS AUSTRALASIA PTY LTD (ACN 085 103 206)

STANTON ACCOUNTANTS & ADVISORS PTY LTD (ACN 085 059 909)

Practice and procedure - Trial of action - Final orders to be made - Turns on own facts

Practice and procedure - Pleadings - Amendment of pleadings - Whether leave should be granted to amend pleadings after delivery of reasons for decision

1 On 28 February 2008 I delivered reasons for decision after the trial of the plaintiffs' action and the fifth and sixth defendants' counterclaim.

2 Having received an advance copy of the reasons, on 28 February 2008 the parties each provided minutes of proposed orders. The orders proposed by each party were in markedly different terms. Thereafter, the parties filed a series of written submissions in support of the orders sought. These supplementary reasons relate to the orders to be made in the plaintiffs' action and the fifth and sixth defendants' counterclaim, following delivery of my reasons on 28 February 2008.

3 I propose to deal with the orders to be made under the following headings:

1. the plaintiffs' monetary claim against the second and third defendants;
2. the plaintiffs' monetary claims against the beneficiary defendants;
3. the winding up of the partnership;
4. the costs of the action;
5. the fifth and sixth defendants' counterclaim.

The plaintiffs' monetary claim against the trustee defendants

4 First, I deal with an uncontroversial matter. An order should be made granting leave to the second and third defendants to amend their defence, as I concluded in the reasons [208] - [226]. Order 1 will be in these terms:

1. The second and third defendants have leave to amend their defence by inserting a new paragraph in terms that, in the event that the defence in pars 9, 23 and 32D of the first and fourth to sixth defendants' defence is made out, then the second and third defendants rely on such defence.

5 There were substantial issues between the parties as to the orders which should flow from my reasons on the plaintiffs' monetary claim against the second and third defendants. The plaintiffs sought an order that judgment be entered for the plaintiffs in the amount of $540,661.05 against the second and third defendants. The defendants invited an order that the claims against the second and third defendants be dismissed. For the reasons which follow, I do not accept the submissions of either of the parties as to the orders which should be made.

6 In the reasons, I came to the following relevant conclusions:

(1) Both the Stanton Partners Trust Deed and the NFI Trust Deed required equal distributions of the income of the trust to unitholders [194].

(2) Subject to the question of the effect of the January 2002 Agreement:

(a) SPA breached the Stanton Partners Trust by failing to distribute the income of the Trust in the 2001 and 2002 financial years equally between the three beneficiaries, in that the payments of partner's salary ($422,474 in 2001 and $1,474,105 in 2002) were, properly characterised, income of the Trust which should have been distributed equally; and

(b) SAA breached the NFI Trust in that it distributed the net income of the Trust for the 2002, 2003 and 2004 financial years in unequal amounts, as reflected in the NFI tax returns for those years [204].

(3) By the January 2002 Agreement, the plaintiffs consented to the distribution to the plaintiffs of the income of SPA and SAA in an amount equal to 50% of Mr Christou's fee collections, in satisfaction of the plaintiffs' entitlement under the trust deeds to equal distributions of income. The balance of what would have been the plaintiffs' share of income was to be distributed equally between Messrs Joyce and Lingard or their private companies. (There was an immaterial qualification relating to Mr Christou attaining average collections over a 12 month period of $100,00 per month) [303] and [304(e)].

7 Thus, I did not find that the plaintiffs consented to receiving no distribution of income of the two trusts. What they consented to, by the January 2002 Agreement, was to receiving an amount calculated as 50% of net collections in satisfaction of their entitlement to an equal distribution of income. Thus, to the extent that the trustees did not distribute the excess of an equal share of net income above the amount representing 50% of collections, the January 2002 Agreement provides a defence of consent. However, the agreement would not provide a defence of consent in respect of any amount by which distributions made to the plaintiffs were less than 50% of Mr Christou's collections (and less than an equal one-third share).

8 The plaintiffs claim that they are entitled to judgment in the sum of $540,661.05, on the basis that it represents the amount by which distributions to the plaintiffs fell short of the amount calculated as 50% of Mr Christou's net collections. For reasons to be developed, I accept that the plaintiffs are entitled to judgment in an amount representing the extent (if any) to which distributions of the plaintiffs' equal share of income fell short of the amount due based on the 50% formula, but I do not accept that the sum claimed by the plaintiffs represents that amount.

9 The defendants submit that, for a number of reasons, no orders in favour of the plaintiffs should be made.

10 First, the defendants point to passages in the reasons in which it is concluded that the plaintiffs' monetary claims should be dismissed: [5], [228], [323], [324] and [397]. These passages state a conclusion that the plaintiffs' monetary claims should be dismissed by reason of the consent constituted by the January 2002 Agreement. However, in submissions at trial, while numerous issues were raised respecting whether the January 2002 Agreement gave rise to a defence of consent, attention was not given to whether distributions were made to the plaintiff in an amount equal to 50% of collections and whether, to the extent that that was not so, the agreement could give rise to any defence. On the findings which I have made, this seems to me to remain an issue. The plaintiffs should not be foreclosed from putting submissions on the point.

11 Secondly, the defendants complain that the plaintiffs did not plead, whether in the alternative or otherwise, any claim of the sort which would support the orders now sought. The defendants say that there was no monetary claim in respect of amounts said to be unpaid under the 50% formula.

12 I accept that no claim of the kind referred to was pleaded by the plaintiffs. However, I accept the submissions of the plaintiffs that it was not incumbent upon the plaintiffs to plead a claim in this respect, because the Agreement was relied on by the defendants as a defence. The plaintiffs' claim pleaded a breach of trust. In some respects (although not in all respects pleaded by the plaintiffs) I made findings of breach of trust, set out in [6(2)] of these reasons. The defendants pleaded the January 2002 Agreement as a defence. The defendants succeeded in relation to a defence based upon the Agreement in that I found that it gave rise to a defence of consent. Consent is by its nature a positive defence [207]. In my opinion, it was for the defendants to prove that the consent of the plaintiffs, arising from the Agreement, to breaches of trust extended to authorise all breaches of trust that were established by the plaintiffs.

13 However, in that context, it is important to give careful attention to the proper identification of the trustees' obligations and any breaches of those obligations. The relevant obligations of the trustees were to make distributions of income in equal amounts [14], [18], [194], [199] and [202]. Although the plaintiffs' case complained of the making of unequal payments, the breaches of trust which I have found to have occurred related to the making of distributions in unequal amounts [199], [202], [204] (the conclusion at [397](1)(c) and (2)(a) mistakenly refers to payments when it should refer to distributions). In this regard, I also refer to the discussion, in the reasons, of the distinction between drawings and distributions: see, for example, [330], [333].

14 The breaches by SAA were the distributions of net income for the 2002, 2003 and 2004 financial years in unequal amounts, as reflected in the NFI tax returns for those years. The breaches I have found in respect of the Stanton Partners Trust relates to the financial years 2001 and 2002. In those years, the accounts of the company reflected equal distributions of what was stated in the accounts to be the net income of the trust. However, I found [197] - [199] that the amounts shown in the accounts for those years as partners' salary were, properly characterised, part of the income of the trust which should have been distributed equally, but were not, in that they were paid to Demandem and Glenlea and accounted for as salary.

15 The plaintiffs' calculation of the amount which they now claim to be entitled to, in light of the reasons, is based upon evidence as to payments made to the plaintiffs. For the reasons I have given, attention is not to be directed to the amount of payments made to the plaintiffs, but rather to the amount of distributions of income made to them. Consequently, I do not accept the basis of the plaintiffs' calculation of the amount they now claim to be entitled to.

16 However, to the extent that the amount of income distributed to the plaintiffs fell short of the amount calculated under the 50% formula (and fell short of the plaintiffs' one-third share), then, in my opinion, the plaintiffs are entitled to judgment in such an amount. I turn to identifying the amounts actually distributed to the plaintiffs and the amounts to which they were entitled under the 50% formula.

17 The evidence as to the amounts distributed to the plaintiffs is of a different character in respect of the two trusts. The evidence respecting the Stanton Partners Trust is the financial statements of the company. The evidence respecting the NFI Trust is the tax returns of that company. Because of that difference, there may be thought to be a degree of artificiality in the exercise I now undertake. Nonetheless, it seems to me that the exercise must be undertaken and must be done with such evidence as is available.

18 The plaintiffs are content for the court to proceed on the basis of the defendants' evidence as to the amounts to which the plaintiffs were entitled under the 50% formula. Mr Joyce's witness statement (exhibit B, par 136) referred to and tendered a document entitled 'Summary' that set out Mr Christou's collections for each financial year and calculated an amount for 50% of collections net of disbursements (exhibit 1, page 838). That evidence is to the effect that, under the 50% formula, the plaintiffs' entitlements in respect of each financial year were as follows:

19 I turn to the amounts distributed to the plaintiffs. For the 2001 financial year, the plaintiffs received a distribution of $194,080.61 from SPA [37], and $245,408 from SAA [45], (exhibit 19). The total of those sums comfortably exceeds the amount to which the plaintiffs were entitled under the 50% formula. The plaintiffs are not entitled to any relief in respect of the 2001 financial year.

20 In the 2002 financial year, distributions to the plaintiffs were made in amounts of $19,253.79 by SPA [38], and $91,847 by SAA [46]. Thus, the distributions made in favour of the plaintiffs totalled $111,100.79. According to the 50% formula, the plaintiffs were entitled to distributions in the sum of $233,500.17. Thus, to the extent of the difference - $122,399.38 - the defence of consent does not apply. It is necessary to consider the position of the two trusts separately.

21 SPA's breach of trust in respect of the 2002 financial year was its failure to distribute the amount of $1,474,105 (shown in the accounts as partners' salaries) equally between the beneficiaries. Mr Christou's one-third of that sum is $491,368.33. To the extent of the sum of $122,399.38, the defence of consent does not excuse the breach. Mr Christou is entitled to judgment against SPA in that sum. Because the 'partners' salaries' were paid to Demandem and Glenlea, it is appropriate to order payment of the amount by SPA to Mr Christou, rather than simply declaring that he is entitled to a further distribution in that amount. Thus, order 2 will be in these terms:

1. The second defendant do pay to the second plaintiff the sum of $122,399.38, and interest thereon at 6% per annum from 30 June 2002 until judgment.

22 SAA's breach of trust in respect of the 2002 financial year was in distributing $239,862 of its income to each of Demandem and Glenlea, but only $91,847 to Corporate Systems. Thus, the distribution to Corporate Systems should have been its equal one-third share - $190,523.66, whereas the distribution to it was $91,847. SAA is liable in respect of the difference of $98,676.66.

23 Corporate Systems is, consequently, entitled to judgment against SAA in the sum of $98,676.66.

24 The plaintiffs submitted that, on the defendants' case (which was, it said, accepted), the plaintiffs' entitlement to distribution based on the 50% formula is not conditioned upon or limited by the extent of the income of the trust for that year. That would be relevant if the plaintiffs were enforcing the January 2002 Agreement. However, as I have said, the plaintiffs' claims are not of that character. Their claims are for breach of the obligation to distribute income equally. Thus against SAA, in respect of the 2002 financial year, Corporate Systems is entitled to judgment in the sum of $98,676.66 (not $122,399.38).

1. The third defendant do pay to the first plaintiff the sum of $98,676.66, and interest thereon at 6% per annum from 30 June 2002 until judgment.

26 It will be seen that orders 2 and 3 included a provision for payment of simple interest on the sum awarded, calculated from the end of the relevant financial year. The defendants opposed interest on the basis that the plaintiffs were not entitled to payment of any sum, but only to an order that a distribution be made by an accounting entry. Because there was the evidence that interest was charged on loan amounts, interest should not, it was submitted, be awarded. As I have given judgment for payment of a sum of money, I consider an award of interest to be appropriate.

27 The plaintiffs' entitlement under the trust deeds and the January 2002 Agreement is to distributions totalling the sum calculated by the 50% formula. Payment to either Mr Christou or Corporate Systems would satisfy the entitlements of both. If, for example, order 2 is satisfied, any entitlement under order 3 would disappear. Thus, order 4 will be in these terms:

1. Satisfaction of order 2 discharges order 3 and satisfaction of order 3 discharges, to the extent of the payment made, order 2.

28 In the 2003 financial year (and subsequently) I found, accepting Mr Joyce's evidence, that the income of SPA was not distributed, but was retained, as is reflected in the accounts [200]. No amount was distributed to the plaintiffs by SAA in the 2003 financial year [46]. In respect of the 2003 financial year, I found that no breach was established in respect of SPA, but a breach was established in respect of SAA [200] - [204]. (In their written submissions in reply dated 14 March 2008, the plaintiffs made reference to and attached copies of correspondence between the parties' solicitors relating to the sum of $226,136 in respect of the 2003 financial year. I made findings in relation to that issue [200] - [201]. The correspondence was not put before me at trial, including on 15 February 2008 when the question of the evidence supporting the claim that a distribution was made in 2003 in the sum of $226,136 was specifically raised with the parties. Consequently, I have not had regard to the correspondence attached to the plaintiffs' submissions of 14 March 2008.)

29 The January 2002 Agreement permitted the defendants to deal with the income of SPA and SAA in a global fashion; so long as the plaintiffs received distributions in amounts totalling the sum calculated under the 50% formula, there could be no complaint by the plaintiffs.

30 I note that a one-third share of the income of SPA for the 2003 financial year exceeds the amount of $183,650.32, that is the amount which the plaintiffs are entitled to under the 50% formula.

31 In the circumstances I have outlined, I would grant declaratory relief in respect of the 2003 financial year.

32 At trial, less attention was directed to the accounts of SPA for the 2004 and subsequent financial years, because no claim of breach was made in relation to those years. (An application to amend to add such a claim, made by the plaintiffs on resumption of the trial in November 2007, was refused.) Nonetheless, had I found that the Agreement did not give rise to a defence of consent, I would have been inclined to make a declaration that the plaintiffs were entitled to a one-third share of the income of the trusts of which each was a beneficiary [229]. For corresponding reasons I would make a declaration in respect of the 2004 and subsequent years in terms similar to that for the 2003 year. I note that the accounts for SPA for these years suggest or may suggest that the distribution to Corporate Systems exceeded the amount to which it was entitled under the 50% formula. The making of declarations should not be thought to cast any doubt on whether that is so. I do not consider that issue was joined at trial in respect of the amount of distributions in the financial years 2004 onwards, so I do not make any findings in that regard.

33 For these reasons, order 5 will be in these terms:

1. The court declares that the plaintiffs are entitled to a distribution of their respective shares of the income of SPA and SAA for the following financial years in amounts which total the following sums:

The claims against the beneficiary defendants

34 The plaintiffs sought orders that judgment be entered for the plaintiffs in respect of the amounts owed by the second and third defendants, and interest thereon, against the beneficiary defendants.

35 Given the findings I have made in the reasons, I do not consider the plaintiffs are entitled to judgment against the beneficiary defendants. The claim based on knowing assistance failed because of the absence of a dishonest and fraudulent design on the part of the trustee [325] - [338].

36 In its submissions following delivery of the reasons, the plaintiffs sought to reformulate the fraudulent and dishonest design said to have been engaged in by the trustees. I would not be prepared to permit that course. A party alleging a dishonest and fraudulent design is confined to the matters pleaded and particularised in support of that allegation [326]. In any event, I would not be prepared to make findings of the (new) fraudulent and dishonest design invited by the plaintiffs, which were not put to Mr Lingard or Mr Joyce.

37 As to the claim based on recipient liability, I was not satisfied that the beneficiary defendants had the knowledge required for liability to be established [340]. I would not be prepared to make the finding now invited by the plaintiffs: that Messrs Lingard and Joyce knew at the relevant time that the payments made to Demandem and Glenlea (characterised in the accounts as partners' salary, but on my findings properly characterised as part of the income of the Stanton Partners Trust), were made in circumstances where the distributions to the plaintiffs were insufficient to cover their entitlements under the 50% formula. No such allegation was put to Mr Lingard or Mr Joyce and I would not draw an inference to the effect sought by the plaintiffs.

38 For these reasons I would not make any orders against the beneficiary defendants.

39 I found that the partnership ought be wound up [362] - [364].

40 The plaintiffs seek orders in the following terms:

1. Pursuant to s 50 of the Partnership Act 1895 (WA) the partnership of the second plaintiff, first defendant and fourth defendant be wound up under the direction of the court.
2. Pending the winding up of the partnership, the second defendant, pursuant to the licence agreement dated 12 November 1998, continue to operate the practice as defined in the licence agreement.

41 The defendants propose an order that the business and affairs of the partnership known as Stanton Partners be dissolved pursuant to s 50 of the Partnership Act.

42 There appears to be a little dispute in substance as to the first of the orders sought by the plaintiffs in respect of the partnership. Order 6 will be in the following terms:

1. Pursuant to s 50 of the Partnership Act 1895 (WA) the business and affairs of the partnership of the second plaintiff, first defendant and fourth defendant known as Stanton Partners be wound up.

43 The plaintiffs sought an order in terms that the winding up be 'under the direction of the court', submitting that such an order would allow applications to be made to the court as and when required. In the event that the need for an application to the court arises in the course of the winding up of the partnership, such an application is to be made by way of new proceedings.

44 I would not be prepared to make an order in terms of the second order sought by the plaintiffs. The order for winding up of the partnership does not warrant an order compelling the second defendant to continue to operate the Practice (as defined in the licence agreement), under the licence agreement. Apart from anything else, the licence agreement is, as explained in the reasons, terminable by either party by not less than three months' written notice [354]. It would not be appropriate to make an order precluding the exercise by any party of that right.

45 Order 7 is not controversial and will be in the following terms:

46 The plaintiffs sought orders that the trustees pay both the plaintiffs' costs and the beneficiary defendants' costs of the action. The plaintiffs relied upon O 66 r 4 of the Rules of the Supreme Court 1971 (WA), and submitted that in a claim arising out of a trust the successful applicant's costs are usually paid from the trust fund. The plaintiffs also pointed to the fact that they succeeded in establishing breaches of trust; that the consent defence was, they submitted, only partially successful; and the fact that the trustees' defence was amended at a late stage (to plead reliance on the January 2002 Agreement to the extent that the beneficiary defendants' defence succeeded in that regard).

47 I do not accept the plaintiffs' submissions that the trustees should pay the costs of the plaintiff beneficiaries and the beneficiary defendants.

48 In substance, this litigation involved a contest between the plaintiffs, on the one hand, and the beneficiary defendants, on the other. The central issues related to the existence, enforceability, conditionality, construction and effect of the January 2002 Agreement. In my judgment, the beneficiary defendants have been substantially successful in the contest. A beneficiary whose claim of breach of trust fails on the ground that the beneficiary had consented to the breach of trust should not necessarily expect that the costs of the action will be paid by the trustee. Given the equal beneficial entitlements of the three parties, an order that the costs of the action be paid by the trustee defendants would, in substance, have the result that two-thirds of those costs would be borne by the beneficiary defendants. To my mind, that would not be a just exercise of the costs discretion in this case. Rather, the plaintiffs should pay the beneficiary defendants' costs of the action. However, because the plaintiffs had a measure of success in certain respects, I would not order that the plaintiffs pay the whole of the beneficiary defendants' costs, rather, order 8 will be in these terms:

1. The plaintiffs pay 80% of the first and fourth to sixth defendants' costs of the action, including reserved costs, such costs to be taxed if not agreed and to be taxed as one set of costs.

49 The defendants sought that the costs order in their favour include a specific provision including the costs of the appeal in appeal proceedings FUL 24 of 2004. However, there is no need or occasion for any orders in that regard; the Full Court made orders on 15 June 2004 that the applicants (the plaintiffs in this action) pay the respondents' costs of the application to be taxed if not agreed. Nor is there any need to provide for the costs of the application to the Full Court in CIV 1936 of 2004. The order of the Full Court was that the costs of the application be costs in this action. By force of that order the costs of that application will be governed by order 8.

50 The trustee defendants were very much secondary players in the defence of the action. It is to be expected that the costs incurred on behalf of the trustee defendants are relatively insignificant. The argument which they advanced in respect of s 65(7) of the Trustees Act was not successful. It seems to me appropriate that there be no order as to the costs of the trustee defendants. Order 9 will be in these terms:

1. There be no order as to the costs of the second and third defendants.

51 In the reasons I upheld the fifth and sixth defendants' counterclaim against Mr Christou. The fifth and sixth defendants brought the counterclaim pursuant to an assignment, by SPA, of SPA's relevant rights against Mr Christou. At [371] - [392] I dealt with the merits of the counterclaim, finding that Mr Christou breached his duty of reasonable care and diligence as a director of SPA causing loss and damage to SAA which I assessed in the sum of $150,000. I then dealt with the plaintiffs' pleadings and submissions in relation to the assignment by SPA of SPA's rights against Mr Christou [393] - [394]. I rejected the point raised by the plaintiffs in relation to the enforceability of the assignment.

52 In concluding that section of my reasons, I recorded [395] that no issue was raised by Mr Christou, by pleading or submissions, as to whether the assignment amounted to an assignment of a bare right of litigation and, if so, whether, on that account, it was unenforceable. Based upon that observation, following delivery of my reasons for decision, the plaintiffs applied for leave to amend Mr Christou's defence to counterclaim to plead that the assignment by SPA was unenforceable as an assignment of a bare right to litigation.

53 The plaintiffs did not, on the delivery of the reasons, advance any substantive submissions in relation to the merits of the defence which they now seek to raise. The plaintiffs seek that leave be given and that, subsequently, they be given an opportunity to put on submissions in support of the plea that the assignment was unenforceable. In their final written submissions in reply to the defendants' submissions as to the orders to be made following the reasons, the plaintiffs referred to the proposition that 'the prohibition against assigning a bare right to litigation still remains a fundamental principle of our law': Trendtex Trading Corporation v Credit Suisse [1982] AC 679, 703; Clairs Keeley v Treacy [2003] WASCA 299; (2003) 28 WAR 139 [141].

54 In Trendtex (703) it was held that an assignee who has a genuine commercial interest in taking the assignment and enforcing it for his own benefit, can enforce an assignment without infringing any prohibition against assigning a bare right of litigation.

55 That principle has been applied and considered in many cases in Australia: see, for example, Re Timothy's Pty Ltd and the Companies Act [1981] 2 NSWLR 706, 711; Beatty v Brashs Pty Ltd [1998] 2 VR 201; Re Daley; ex parte National Australia Bank Ltd [1992] FCA 395; (1992) 37 FCR 390, 394; Monk v Australia and New Zealand Banking Group Ltd (1994) 34 NSWLR 148.

56 There is, at the least, doubt as to whether a claim for damages in tort can be effectually assigned to a party with a 'genuine commercial interest'; compare Monk and National Mutual Property Services (Australia) Pty Ltd v Citibank Savings Ltd [1995] FCA 1628; (1995) 132 ALR 514.

57 There may also be room for doubt as to whether a genuine commercial interest would permit an effective assignment of a claim by a company for breach of duty by its director (see, generally, Meagher RP, Gummow WMC and Lehane JRF, Equity: Doctrines and Remedies (4th ed, 2002) [6-480]).

58 The decision of the High Court in Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd [2006] HCA 41; (2006) 229 CLR 386 does not determine the questions which would arise in this case if leave were granted.

59 In determining whether an assignee has a genuine interest in taking the assignment, the court may look at the totality of the circumstances surrounding the transaction: Seddon NC and Ellinghaus MP, Cheshire & Fifoot's Law of Contract (8th Aust ed, 2002) [8.7].

60 In opposing the plaintiffs' application to amend their defence to counterclaim, the fifth and sixth defendants submit that they would plead by way of reply that they had a genuine commercial interest in taking the assignment and say that they would adduce evidence in support of that plea. While the defendants have not identified such evidence with any specificity, I am unable to be satisfied that the granting of leave to amend Mr Christou's defence to counterclaim would not give rise to the need for the trial to be re-opened so that further evidence could be led.

61 Mr Christou's application for leave to amend his defence to the counterclaim, after the delivery of reasons after trial, must be viewed in the context of the history of this litigation. The action was commenced in 2003. In September 2007 the action came on for trial. It was listed to be heard in five days from 17 to 21 September 2007. The plaintiffs opened their case on 17 September 2007. Following submissions from both parties on 18 September 2007, I made rulings, as a result of which the plaintiffs applied for leave to amend their statement of claim to plead a fraudulent and dishonest design on the part of the trustees. The plaintiffs first attempted to move for an amendment on 19 September 2007 and were ultimately granted leave on 21 September 2007. The result was that the trial was adjourned to November 2007.

62 When account is taken of the history of the matter, the circumstances in which the application is made and the prospect that the proposed amendment may give rise to the need for the re-opening of the trial for further evidence to be adduced, I would not grant leave to Mr Christou to amend his defence to the counterclaim.

63 That leaves the question of the appropriate orders to be made in consequence of the success of the counterclaim.

64 I assessed damages on the counterclaim in the sum of $150,000. Notwithstanding that, the plaintiffs propose that judgment be entered for the fifth and sixth defendants on the counterclaim in the amount of $100,000, and for the first plaintiff in the amount of $50,000, against Mr Christou. In support of that submission, the plaintiffs point to cl 2.2 of the deed of assignment between SPA, Demandem and Glenlea (exhibit 1 page 706). By that clause, Demandem and Glenlea agree that they would hold one-third of the net proceeds of SPA's claim against Mr Christou, after deduction of all legal costs associated with its enforcement, in trust for Corporate Systems. It does not seem to me to be appropriate to make an order which seeks, in effect, to enforce, in a pre-emptive way, the trust arising from cl 2.2 of the deed of assignment. Rather, the appropriate order is that Mr Christou pay damages in the sum of $150,000 to Demandem and Glenlea. It will then be for those companies to perform their obligations arising from cl 2.2 of the trust deed.

65 It is not in dispute that there should be an order that the second plaintiff pay the fifth and sixth defendants' costs of the counterclaim to be taxed if not agreed, or that interest should be payable on the damages, calculated from about when the proceeds of sale on 16 August 2002 should have been received. Orders 10 and 11 will be in these terms:

1. The second plaintiff pay the sum of $150,000 to the fifth and sixth defendants, together with interest thereon at 6% per annum from 20 August 2002 until judgment.
2. The second plaintiff pay the fifth and sixth defendants' costs of the counterclaim to be taxed if not agreed.

66 For the reasons given, I make orders in the following terms:

1. The second and third defendants have leave to amend their defence by inserting a new paragraph in terms that, in the event that the defence in pars 9, 23 and 32D of the first and fourth to sixth defendants' defence is made out, then the second and third defendants rely on such defence.
2. The second defendant do pay to the second plaintiff the sum of $122,399.38, and interest thereon at 6% per annum from 30 June 2002 until judgment.
3. The third defendant do pay to the first plaintiff the sum of $98,676.66, and interest thereon at 6% per annum from 30 June 2002 until judgment.
4. Satisfaction of order 2 discharges order 3 and satisfaction of order 3 discharges, to the extent of the payment made, order 2.
5. The court declares that the plaintiffs are entitled to a distribution of their respective shares of the income of SPA and SAA for the following financial years in amounts which total the following sums:

1. Pursuant to s 50 of the Partnership Act 1895 (WA) the business and affairs of the partnership of the second plaintiff, first defendant and fourth defendant known as Stanton Partners be wound up.
2. The plaintiffs' claims be otherwise dismissed.
3. The plaintiffs pay 80% of the first and fourth to sixth defendants' costs of the action, including reserved costs, such costs to be taxed if not agreed and to be taxed as one set of costs.
4. There be no order as to the costs of the second and third defendants.
5. The second plaintiff pay the sum of $150,000 to the fifth and sixth defendants, together with interest thereon at 6% per annum from 20 August 2002 until judgment.
6. The second plaintiff pay the fifth and sixth defendants' costs of the counterclaim to be taxed if not agreed.