Geoffrey Francis PAGE v Hugh Stanely McKENSEY & Ors

Geoffrey Francis PAGE v Hugh Stanely McKENSEY & Ors - [2004] NSWCA 437 - NSWCA 2004 case summary — Zoe

[13]

The retiring partners will retire with effect from 30 September 1987. 2. The firm formed by the retiring partners (the new firm) will enter into a "friendly firm" agreement with DH&S. This agreement will provide the terms on which they will be entitled to have access to DH&S technical material, brochures, etc and DH&S education. The new firm will be given permission to print on their letterhead in small print that they are a correspondent firm of Deloitte Haskins & Sells. 3. The retiring partners will take over all the clients of the Newcastle office and will be entitled to purchase the net work in progress at 30 September 1987 relating to those clients at a valuation to be approved by D W Elliott. 4. Debtors at 30 September 1987 will be valued net of provisions agreed to be necessary between H S McKensey and D W Elliott. The provisions will be created on the same basis as the provisions at 30 June 1987. The debtors will remain the property of DH&S but in a spirit of co-operation the retiring partners will assist DH&S to collect the debts outstanding. Any debts still unpaid at 28 February 1988 by clients that the new firm shall serve after 1 October 1987 and shall advise DH&S that it intends to continue to serve after 28 February 1988 will be paid by the retiring partners. The retiring partners will pay to DH&S their proportionate share of any losses incurred on debts (net of agreed provisions) outstanding at 30 September 1987. Any recoveries of bad debts which were written off prior to 30 September 1987 will be to account of the DH&S firm. 5. Furniture and equipment will be purchased by the new firm for a value of $50,000. In the case of leased furniture and equipment, including nominated vehicles and all computers under the staff computer purchase plan, they will take over the leases. The new firm will take over the lease of the office premises at Hunter Mall Chambers, Keightley Street, Newcastle, but if the lessor will not agree to this, the new firm will take a sub-lease from DH&S on the same terms as the lease held by DH&S. 6. The retiring partners will not be requested to pay any sum for goodwill. 7. All staff at the Newcastle office will terminate their employment with DH&S as at 30 September 1987 but shall be entitled to be employed by the new firm as from that date. DH&S will pay all entitlements to annual leave to the employees as of 30 September 1987. In addition, for all employees with in excess of 5 years' service, DH&S will pay the new firm the calculated long service leave entitlement net of tax. Any balances remaining in the DH&S Staff Superannuation Funds in respect of staff transferring will be transferred to a superannuation fund nominated by the new firm. 8. The retiring partners will be entitled to be paid their fixed capital accounts and subordinated loan accounts as at 30 September 1987 and will be paid an estimate of their current accounts representing undrawn profits at that date by 31 September 1987 in monthly instalments. 9. The retiring partners will forego all pension entitlements of the DH&S firm but will have the balance in the DH&S Services Superannuation fund transferred to a fund of their choice or paid to them. 10. DH&S will settle all outstanding creditors as at 30 September 1987 other than lease liabilities in respect of premises and equipment, etc being taken over by the new firm. Proper adjustments shall be made between DH&S and the new firm for accruals and prepayments. However, the retiring partners will pay to DH&S on 1 October 1987 an amount equal to the sum of their respective capital and subordinated loan accounts on account of the purchase price of the assets enumerated above and will pay the remaining balance by 30 November 1987 out of borrowings external to DH&S by the new firm. 11. The new firm will be entitled to acquire from DH&S the business name Forsythe McKensey & Co at no charge. 12. DH&S will process the work in progress and debtors records of the new firm for a period of 6 months from 1 October 1987 for a charge of $750.00 per month. The arrangement will be subject to a review at the end of that period but may be terminated by the new firm by the giving of one month's notice. 13. Although the new firm will take over the present clients of DH&S Newcastle office, no warranty or representation is made by DH&S that work which has in the past been referred to Newcastle office will continue to be referred. This decision will be a decision of the client and of the engagement partner in the controlling office, however DH&S will use its best endeavours to refer audit work carried out in the Newcastle area to the new firm. 14. In consideration of the foregoing, the new firm will pay an annual fee of $30,000 for a period of 10 years.

[19]

(e) Nevertheless, the memorandum addressed several aspects of the "friendly" relationship between Deloittes and Forsythes (see especially pars 2, 3 and 13). 6 During October 1987, Page and McKensey discussed the terms upon which Page might become a partner in Forsythes. Page was aware that McKensey and Lewis had withdrawn from Deloittes and that Deloittes had ceased to operate a Newcastle office. It was important to Page that Deloittes were ceding their Newcastle clients to Forsythes and that there would be a "friendly firm" relationship between Deloittes and the firm he was proposing to enter. Page on the one hand and his prospective partners on the other were proposing to bring "their" respective clients into the new firm. The financial negotiations disclose that Page contributed an agreed value of $387,500 for his then 30% share of Forsythes. 7 On 30 November 1987, Page and the third respondent (hereafter Nelson) became partners in Forsythes with McKensey and Lewis. (Nelson has generally supported Page in the various proceedings.) On 1 July 1989 the fifth respondent (hereafter Hewitt) joined the partnership. On 1 July 1990 the fourth respondent (hereafter Hicks) joined the partnership. 8 The Forsythes partnership was technically dissolved on 30 June 1992 when Page left the firm (which had no contractual arrangement addressing that contingency). The respondents continued to use the name Forsythes and to all intents and purposes continued the partnership business. Page set up business on his own account taking substantial clients with him. 9 In 1992 Page sued the present five respondents in the Equity Division for an account as on the dissolution of the partnership (hereafter the 1992 proceedings). Those proceedings were heard in two phases by Windeyer J. 10 The contested phase resulted in a judgment unfavourable to Page given on 17 December 1993 (Page v McKensey & Ors, No 4206/92, Windeyer J, unreported). The matter in dispute was the value of the goodwill of Forsythes as at 30 June 1992. Since there was no relevant partnership agreement, the valuation exercise was conducted on the basis of applying to the former partners the principles established in Trego v Hunt. Windeyer J valued the goodwill (limited to the right to use the name Forsythes) at $150,000. On this basis, Page owed $21,348 to his former partners having regard to his then share in the partnership (22.11%) and the sum in excess of $100,000 that he owed the partnership in his loan account, some of which stemmed from the time he joined Forsythes. Subsequently Windeyer J ordered Page to pay the costs of the defendants in the 1992 proceedings. 11 Page's appeal to this Court was dismissed with costs on 28 February 1995 (Page v McKensey & Ors, NSWCA unreported, CA 40034/1994, 28 February 1995). The Court of Appeal found no error in the principles applied by Windeyer J in valuing the goodwill. 12 Page sought to reopen this appeal by motion which came before Priestley JA on 29 January 1996. The motion was dismissed. Priestley JA informed Page that the only way he could attack the judgment of Windeyer J on the basis of fraud was to institute fresh proceedings. 13 Meanwhile, there had been a falling out between the continuing partners of Forsythes. In 1995 McKensey, Lewis and Hicks sued Nelson and Hewitt on various bases (hereafter the 1995 proceedings). Those proceedings came to trial before Einstein J in late 1997. 14 The only issue in the 1995 proceedings that is of possible relevance to the present litigation arose in a cross-claim filed by Nelson and Hewitt. The cross-claimants alleged that McKensey and Lewis were guilty of fraud, unconscionable conduct, misleading and deceptive conduct and breaches of fiduciary duty. The key allegation was that McKensey and Lewis had failed to advise Nelson and Hewitt, when they joined Forsythes, of the true nature of the firm's liability to pay the $30,000 annual fee to Deloittes. It does not appear that the claim or the evidence before Einstein J ever rose as high as suggesting that there was positive misrepresentation. His Honour nevertheless found a breach of fiduciary obligation in the failure by McKensey and Lewis to have advised Nelson and Hewitt that the payments being made to Deloittes were, in part, consideration for benefits personally obtained by McKensey and Lewis before Nelson (and later Hewitt) joined the partnership. This finding and the ensuing order for equitable compensation were set aside in the Court of Appeal (see McKensey v Hewitt [1999] NSWCA 426). This Court held that the fiduciary duties of the partners did not impose an obligation to make positive disclosure in relation to the terms of the Deloittes Retirement Agreement. 15 Page was not a party to the 1995 proceedings. It will be seen below that the present proceedings launched in 1996 raised many allegations similar to those raised by the cross-claimants Nelson and Hewitt in the 1995 proceedings. Had the orders of Einstein J withstood challenge in the Court of Appeal Page would have been in the box seat in his separate litigation as originally formulated. 16 In 1997 Page launched further proceedings against his former partners in Forsythes. In proceedings 3947/97 Page sought to have the judgment of Windeyer J in the 1992 proceedings set aside. These 1997 proceedings were subsequently set down for a four day hearing in late 2000. Approximately two weeks prior to the commencement of the trial Page sought to discontinue the proceedings. Leave to discontinue, with an adverse costs order, was granted by Windeyer J on 24 November 2000.

[22]

The relief now sought 21 This appeal challenges the orders made by Gzell J. Page seeks to reinstate the 1996 proceedings, with leave to amend his statement of claim in a yet further refined form. 22 According to the notice of appeal and the written submissions, Page seeks leave to propound a further version of the statement of claim, but one that still contains the multiple causes of action in the pleading rejected by the Master and Gzell J (Orange 57, 81). During the hearing of the appeal it emerged that Page only wishes to press a much narrower claim than that advanced before the Master and Gzell J and adverted to in his written submissions in this Court. He now seeks to continue the 1996 proceedings only against McKensey and Lewis and only in relation to a claim for damages for deceit based upon McKensey's October 1987 representations that were the inducement for him becoming a partner of Forsythes on 30 November 1987. 23 In light of these developments, Page does not oppose the dismissal of the appeal as against Hicks, who is represented by the lawyers who represent McKensey and Lewis. Nelson was self-represented in this Court and an order dismissing the appeal against him, with costs, was made during the hearing. Hewitt filed a submitting appearance. 24 To assist the Court in understanding the cause of action Page still wishes to pursue against McKensey and Lewis, Page's senior counsel, Dr Birch SC produced a further version of the proposed amended statement of claim. This was done at the request of the Court. 25 The proposed amendment pressed in this Court confines itself to a claim for damages for deceit against McKensey and Lewis based upon McKensey's allegedly fraudulent misrepresentations in November 1987. Those representations are said to have induced Page to have become a partner in Forsythes on 30 November 1987 on the terms that he did. The representations are pleaded in the following terms: (a) the Deloittes Goodwill was wholly owned by the first and second defendant and was without any attached liability; (b) That the Deloittes Goodwill was worth $1,050,000; (c) That there existed a Restraint of Trade covenant within the "Friendly Firm Agreement" whereby Deloittes was prevented from acting in competition with Partnership No 2 and subsequent Partnerships in the Newcastle and Hunter Valley areas ("the restrictive covenant"); (d) That there existed a Restraint of Trade covenant with other prior Newcastle Deloitte Partners preventing them from acting in competition with Partnership No 1 and subsequent Partnerships in the Newcastle and Hunter Valley areas; and (e) That Deloittes would continue to refer clients to Partnership No 1 and subsequent Partnerships. (f) Deloittes had entered a friendly firm agreement with the defendants.

[23]

[Partnership No 1 refers to Forsythes at its inception on 30 September 1987. Partnership No 2 refers to Forsythes as formed on 30 November 1987 when Page and Nelson joined McKensey and Lewis.] 26 These representations are pleaded to be fraudulent and false because McKensey and Lewis knew at the time that (a) They did not own the goodwill as they had not paid for it; (b) There was a liability attaching to the Goodwill still owing to Deloittes; (c) No restrictive covenant existed preventing Deloittes from competing with Partnership No 1 and any subsequent Partnerships; (d) No friendly firm agreement had been entered into between Deloittes and the defendants; and (e) The representations were made to induce the plaintiff to join the partnership, to pay [$387,500] for his share and, from time to time, to remain in subsequent partnerships. 27 Dr Birch submitted that such a claim may be discerned within the four corners of the pleadings propounded before the Master and Gzell J. The current proposal may be the product of radical blue-pencilling, but involves no change of substance to one of the causes of action pleaded in the alternative in the earlier documents. It is also said to be consistent with the nub of complaint enunciated by Page when he represented himself before the Master and consistent with the affidavit evidence read on his behalf before Gzell J. 28 It will be seen that the current proposal differs substantially from that laid before the Master and in one significant respect from that laid before Gzell J. 29 As indicated, Page "paid" $387,500 for his share in the Forsythes' partnership. It was paid by bringing the goodwill of Page's own practice into Forsythes and by debiting Page's loan account in Forsythes with the balance being the "cash" contribution. Page told the Master that, had he known the real facts in relation to the Deloittes' Retirement Agreement (in particular the absence of a restrictive covenant from Deloittes), the market value of the share in Forsythes that he was acquiring would have been far less than what he paid (Black 273T). This remains the nub of his fraud-based claim against McKensey and Lewis.

[44]

• The pleading was embarrassing in form. 48 Page was pressing to set aside the judgment of Windeyer J at all times until he abandoned this claim in his amended written submission filed in the present appeal in September 2004 (Orange 57). He no longer seeks to set aside the orders of Windeyer J or to press claims based on alleged breaches of fiduciary duty or misleading or deceptive conduct. It is also now accepted that the Master correctly found that any claims based on s42 of the Fair Trading Act were statute-barred and therefore doomed to failure. It is therefore unproductive to explore the extent to which these are concessions properly made to the effect that the Master's reasons for striking out those portions of the proposed pleading were correct. The issue is now entirely academic except in so far as the propounding of these claims in the courts below provided justification for rejecting the pleading as a whole. Putting Page's case at its highest, the 1987 deceit claim was until September 2004 buried under a pile of debris that was either untenable or is no longer sought to be justified. 49 Although the Master recognised that Page was not a party to the proceedings before Einstein J, he nevertheless concluded that it would be an abuse of process for Page to seek to litigate the issues determined in those proceedings by Einstein J and the Court of Appeal. The Master applied the principles in Reichel v Magrath (1889) 14 App Cas 655 and Hunter. Gzell J found that the Master had erred in this portion of his judgment. The parties have sought to defend and attack his Honour's conclusions in this regard. Once again, the matter is largely academic because (a) the correctness of the decision of the Court of Appeal in 1999 is not challenged, and can therefore stand as a precedent even if not binding through the principles of issue estoppel or abuse of process; (b) the portions of the pleading directly affected by the Master's observations concerning abuse of process are (with one exception and subject to further amendment) no longer pressed; and (c) the form of the pleading before the Master was embarrassing in relation to the presently relevant fraud claim. On one view of the matter, proposition (a) was really the point that the Master was seeking to make (see par 51 of his Reasons). 50 Examination of the Master's reasons as a whole indicates that, although he observed that there was a pleading of misrepresentation referable to the events of October-November 1987 (see par 27), he was not asked to and he did not consider whether such a claim should be permitted to go forward in isolation. 51 Page submits that the Master erred in treating the whole pleading as an abuse of process and in not dealing separately with so much of it as claimed damages for the 1987 deceit. 52 Having regard to the structure and form of the pleading as a whole it was in my view entirely understandable that the Master should have paid no attention to a discrete claim for damages stemming from the alleged misrepresentation occurring in about October 1987. It was only when the earlier pleadings were blue-pencilled in this Court that such complaint came into separate focus. This observation is not however intended to be determinative of the present application, because it will be necessary to turn to the proceedings before Gzell J. 53 But before leaving the Master's reasons, and in substantial justification of his conclusions as a whole, it must be observed that the pleading proffered by Page to the Master relating to the October 1987 misrepresentations:

[49]

The appeal to Gzell J 54 As indicated, Page was represented by counsel when he appealed to Gzell J against the Master's orders. 55 Substantial additional affidavit evidence was introduced, including an affidavit by Page on which he was cross-examined. 56 Page's counsel before Gzell J (Mr Duncan) conceded that the Master was entitled to strike out the August 1996 version of the statement of claim. But the Master erred, it was submitted, in not permitting Page the "final opportunity to lodge an amended statement of claim on the cause of action" that had never been litigated (Black 41). 57 Before Gzell J, Page proffered a slightly varied form of his proposed pleading (Red 21). Nevertheless, it had most of the hallmarks that had proved substantial obstacles before the Master and that are no longer pressed in this Court. Thus, it claimed relief against all five respondents, basing the relief in large part upon things that were done or omitted or represented during the currency of the Forsythes partnership. The principal claims for relief remained the setting aside of the orders of Windeyer J with consequential declarations and orders touching the accounting as between the former partners. 58 The portions of the pleading proffered to Gzell J referable to the allegation of fraudulent misrepresentation in late 1987 were much closer to those now pressed than the allegations in the pleading proffered to the Master. But the amendment sought from Gzell J was different in one important respect from that sought in this Court. The pleading now pressed is set out at pars 25 and 26 above. The representation alleged in sub-par (f) (Deloittes had entered a friendly firm agreement with the defendants) and the assertion that this statement was both false and fraudulent were not part of the pleading offered to Gzell J. 59 What was placed before Gzell J was a lengthy affidavit of Page sworn on 10 October 2002 (Blue 91). It deposed to several conversations with McKensey before Page joined Forsythes. Page was told that McKensey and Lewis had bought the Deloittes Newcastle practice and that they would be calling it Forsythes. 60 There were discussions about valuing the clientele that the negotiating parties would bring to the new firm. Statements attributed to McKensey include: Vic [Lewis] and I were not required to pay Deloittes for the Newcastle and Hunter Valley fees or goodwill of the practice. (Blue 98) The Restrictive Covenants will be in place soon. (Blue 99)

[53]

[I observe that this might possibly have been a true statement as to the then intended effect of the Deloittes Agreement that was not finalised until 6 November 1987.] 64 Page stated that McKensey told him on 13 November 1987 that the Friendly Firm Agreement containing the restrictive covenant had been signed on 6 November 1987 (Blue 117). McKensey declined to make a copy available "as it contains some confidential issues that relate to our retirement". McKensey nevertheless assured Page that "the Friendly Firm Agreement has been signed, the restrictive covenant is in place" (Blue 117). It said it was for a period of 10 years and that its area included Newcastle and the Hunter Valley (Blue 117-18). Page was never provided with a copy of the Deloittes Retirement Agreement (Blue 115). 65 In the written submissions in this Court Page identifies this conversation of 13 November 1987 as the key misrepresentation that the defendants had on 6 November 1987 signed a restrictive covenant with Deloittes which prevented the latter from competing for the new partnership's clients (Orange 45. See also what Page told the Master (par 41 above)). In other words, the true import of the Deloittes' Retirement Agreement was fraudulently misrepresented. Senior counsel for Page confirmed at the hearing that the sum paid by Page to enter the Forsythes partnership in 1987 is said to have been excessive to the extent that McKensey misrepresented the true effect of the Deloittes arrangements (CA Tr pp49-50). 66 Returning to the affidavit, Page deposed that the issue of the restrictive covenant with Deloittes was foremost in his mind throughout the negotiations (Blue 122). He said that he discovered that there was no friendly firm agreement and no restrictive covenant by the Deloittes partners in early 2001 when he read an affidavit of McKensey dated 26 June 1997 that had been filed in the 1995 proceedings (Blue 122, 126). 67 Page nevertheless swore that he received a copy of the Deloittes Retirement Agreement in mid-to-late 1995 (Blue 126). This is consistent with what he represented to the Master (see par 12 of the amended statement of claim proffered to the Master). For reasons developed more fully below, the importance of this date is that it was in 1995 that Page was armed with the knowledge that the Deloittes Retirement Agreement was not as he says it was represented in the now vital conversation of 13 November 1987. In fact, the evidence (referred to below) discloses that Page first inspected the Deloittes Retirement Agreement in 1993.

[54]

The reasons of Gzell J 68 Gzell J dismissed Page's appeal (see Page v McKensey & Ors [2003] NSWSC 759). 69 His Honour summarised the further amended statement of claim which Page was then seeking leave to file. His summary includes reference (at [19]) to the alleged misrepresentation that had induced Page to enter the Forsythes partnership. 70 Gzell J held that the Master had erred in finding that it was an abuse of process for Page to seek in effect to re-litigate issues resolved in the 1995 Court of Appeal decision in the proceedings on appeal from Windeyer J to which Page was not a party. Nevertheless, Page was held estopped by res judicata in that he was a privy to that decision by reason of having been a partner to those who were parties to the litigation. 71 In written submissions in this Court, Page (citing Powell v Wiltshire [2004] 3 WLR 666 and other authorities) submits that the Judge was wrong on the latter finding; and the respondents contend that the Master was correct in his ruling on abuse of process. The correctness of either position is of no present moment given that Page no longer seeks to set aside the orders of Windeyer J or to obtain relief incompatible with those orders and the issues that they resolved. 72 At pars [50]-[51] of his reasons, Gzell J held that the appeal from the Master had to fail for an additional reason. His Honour stated that counsel then appearing for Page had conceded that the Master was entitled to refuse leave to file the further amended statement of claim proffered to him. This appears to be a misunderstanding on his Honour's part. Examination of the transcript does not support the conclusion that Mr Duncan made any such concession as regards the 1987 fraud claim (see Black 81-2). What had been conceded was the inevitability that the earlier Amended Statement of Claim filed in August 1996 could not be supported (Black 41). 73 His Honour was however on firm ground in stating that "the Master could not be expected to consider granting leave to re-plead to raise an allegation of fraud when that matter was not raised in the proceedings before him". This view was certainly open in relation to the form of the statement of claim that had been placed before the Master. 74 Gzell J indicated (at [52]ff) that even if it were open to him to set aside the Master's order, he would not give leave to file the second further amended statement of claim placed before him. At pars [53]-[83] Gzell J gave his reasons for this conclusion, before restating and summarising it in the following terms: There is public interest in the finality of proceedings. In light of the history of the contentions between the appellant and the first and second respondents, public interest, in my view, far outweighs leave being granted to the appellant to file the second further amended statement of claim or any other amended pleading in these proceedings.

[61]

(e) rejected other aspects of the proposed further amended statement of claim that are no longer pressed ([69]-[71]); 77 Gzell J recognised that the pleading contained a separate allegation of fraudulent misrepresentation against McKensey and Lewis ([54]-[56], [72]). He observed (correctly) that such allegation was coupled with allegations of misrepresentations to similar effect during the time of Page's membership of Forsythes ([54] and that it was proffered as a basis for setting aside Windeyer J's orders ([58], [72]-[73]). Gzell J was critical of the pleading of fraudulent misrepresentation because it was said to have occurred "at all material times" both prior to the formation of the Forsythes partnership and thereafter. This did not satisfy the law's requirement of specificity and particularity for such an allegation (see at [74]). 78 Gzell also referred to allegations and evidence as to when Page knew or ought to have known of the true import of the Deloittes Retirement Agreement and the absence of restrictive covenants or a friendly firm agreement ([55], [59]-[61], [75]-[80]). His Honour referred to evidence that Page had inspected the Deloittes' Retirement Agreement on 17 February 1993. This gave Page the means to determine the nature of the annual fee of $30,000 payable to Deloittes and should have put him on notice that any representations that the payments were contingent service fees was erroneous ([61]). Gzell J expressed doubts that Page overcame the limitation problems on the basis that, as Page alleged, it was not until April 2001 that he discovered the falsity of the key representations ([78]-[79]). 79 His Honour also expressed doubts about the reliance aspects of the alleged representations concerning the ownership and value of the Deloittes goodwill ([81]-[82]). 80 It is clear that Gzell J recognised that the amendment placed before him included a claim for damages based on McKensey's allegedly fraudulent misrepresentation of October 1987 (see at [72]). It is also clear that his Honour was seized of the fact that there was a claim for damages against McKensey and Lewis buried amongst the debris of other claims (see at [83]). Nevertheless, his Honour refused leave to file any further pleading for a combination of reasons.

[62]

Analysis 81 The critical parts of the proposed form of the pleading are set out at pars 25-26 above. As summarised in the written submissions (Orange 44-5) and by Dr Birch (CA Tr pp8, 11-12), the gravamen of Page's continuing complaint is that it was fraudulently represented to him that: - the annual payments were for services and benefits that Deloittes would continue to offer the Forsyth practice; - that a Friendly Firm Agreement had been signed; and - that Deloittes had covenanted not to compete in the Newcastle and Hunter Valley areas. 82 Page accepts that it is too late now to rescind the partnership agreement. He seeks damages calculated by reference to the difference in value between what he got on 30 November 1987 (in the form of a 30% share in Forsythes for the negotiated consideration of $387,500) and what he actually received in consequence of the falsity of the representations. He says that his share in Forsythes was less than what he paid for it and to the extent that Deloittes were not restrained from competing for the 10 year period. 83 As Dr Birch pointed out, Page now embraces Meagher JA's clearly correct observation in 1999 that the annual tribute to Deloittes was in consideration of the entire promises in the Deloittes Retirement Agreement. 84 In my view, leave to appeal should be refused for two independent reasons. 85 The first reason is that I find no fault with Gzell J's discretionary decision to refuse leave for the amendment sought before him, without proposing to blue-pencil and reformulate the proffered further amended statement of claim or offering Page an unsought further opportunity to replead. 86 Gzell J identified numerous problems with the amendment sought at the hearing before him. I have summarised them above. Their cumulative weight was most substantial. Page's only criticism of Gzell J's reasoning at [52]-[84] relates to the "considerable doubt" expressed by his Honour (at [79]. See also [61]) as to Page's claim that he did not discover the absence of a friendly firm agreement until 2001. I deal with this limitation issue independently as my second reason for refusing leave. But I state now that I see no error in his Honour's doubts or the relevance of giving effect to them as one of a group of factors leading to the refusal to permit the composite amendment sought. 87 During the hearing before him, Gzell J proposed to Page's counsel, Mr Duncan, that Page could press only the 1987 fraud claim, leaving the outcome of the proceedings before Windeyer J unaffected (Black 82). The issue was debated for some time, interspersed with debate about other difficulties with the pleading then under consideration. The proceedings were part heard and adjourned overnight. The next day Mr Duncan confirmed that "I must press for Justice Windeyer's judgment to be set aside" (Black 119). 88 It was not incumbent on Gzell J to propose allowing a small portion of the proffered amendment to go forward, when this was not sought (see Black 119) and when the pleading and limitation problems associated with the 1987 fraud cause of action identified by Gzell J remained. To put the proposition in terms referable to House v The King (1936) 55 CLR 499, Gzell J did not err in principle when he refrained from offering an unsought further opportunity to propound a radically different pleading. It is relevant that Gzell J was exercising appellate jurisdiction and that Page was by then represented. 89 Indeed, I consider Page's cause of action to be even less tenable than Gzell J may have found it necessary to adumbrate. I would add the following, not that I suggest that any are independent knock-out points:

[67]

(5) The loss stemming from the falsity of the "Friendly Firm Agreement" representation stems from the substance of the represented "Friendly Firm Agreement" as distinct from its mere promised existence. I recognise that (despite his affidavit), Page hints at wanting to argue that the represented "Friendly Firm Agreement" actually in place was a contract separate from the Deloittes Retirement Agreement (eg Orange 49, 54). But, as well as being unsupported by Page's affidavit, no damages would flow from this matter alone. Page would need to show a substantial and valuable difference between the terms of the "Friendly Firm Agreement" as represented and the terms actually procured by the Deloittes Retirement Agreement. The onus would rest firmly on him to establish the substance of the dishonest representation and its impact on the true value of the partnership share that he acquired. 90 In short, for these reasons and the reasons given by Gzell J, I am not persuaded that even the most stringent order for costs would eliminate the prejudice the remaining defendants would suffer if forced to trial on this very old issue. To my mind, it is contrary to the interests of the administration of justice in all of the circumstances for this case to go forward given the many years that have elapsed since the events and since the time when Page ought to have pressed single-mindedly the claim he now presses. 91 My second reason for refusing leave is that I regard the limitation barrier to be insurmountable, ie going beyond a doubtful factor to be added to a basket of other difficulties. 92 A court will not permit an amendment that is doomed to fail. Page bore the persuasive onus of establishing a viable claim, if he was to be granted leave to amend, once the limitation issue had been raised, as it had. 93 Under s14 of the Limitation Act 1969, Page's cause of action would, prima facie, have become statute-barred by 30 November 1993. However, s55 of that Act would suspend the running of time until the date on which Page first discovered, or ought with reasonable diligence to have discovered, the fraud complained of. 94 Page submitted that it was only in 2001, when he obtained access to affidavits filed in the 1995 proceedings, that he discovered there was no friendly firm agreement with Deloittes and no restrictive covenant from Deloittes. These in essence were the matters that falsified the representations that induced him to enter (and remain in) the Forsythes partnership. Because these matters were only discovered after the conclusion of the 1992 proceedings they were the "fraud" upon which Page was seeking to have the orders made by Windeyer J set aside. 95 The respondents contend that Page had the opportunity to discover the relevant truth in 1993. 96 Before Gzell J, Page's counsel had conceded that if the judge took the view that Page knew the relevant facts earlier than 2001 "we are sunk" (Black 121). This in my view was a proper concession. 97 As I pointed out above, Page has identified the conversation of 13 November 1987 as the key misrepresentation. The nub of the complaint is that McKensey misrepresented the true terms of the Deloittes Retirement Agreement that had been signed a week earlier. The falsity of this (alleged) representation was made patent when Page got access to the Deloittes Retirement Agreement. 98 Page gave sworn evidence that he inspected a copy of the Deloittes Retirement Agreement on about 10 February 1993 (Black 63, Blue 558). He said that it was the first time he was aware of this agreement (Black 65). Page also inspected in 1993 a group of letters that included a letter from McKensey to Deloittes dated 10 July 1991 complaining that no friendly firm agreement as contemplated by cl 2 of the Deloittes Retirement Agreement had been entered into (Black 65, Blue 583). 99 McKensey's affidavit of 26 June 1997 (Blue 651) that Page saw in 2001 (Blue 122, 130-1) sets out information about the Deloittes Retirement Agreement and states (at 657) that some of the benefits proposed to be formalised under the "friendly firm" agreement contemplated in cl 2 were provided in part by Deloittes (such as training). However, no draft "friendly firm" agreement was ever received from Deloittes. Reading this affidavit in 2001 may have revealed definitively that there was no agreement with Deloittes beyond the Deloittes Retirement Agreement, but Page's evidence before Gzell J had never suggested that the representation about restrictive covenants was made in the air. 100 Gzell J found (at [61] that Page had the means in 1993 by which to determine the nature of the annual fee of $30,000 payable to Deloittes and that he should have been put on notice that any representations that the payments were contingent service fees was erroneous. Later, his Honour held (at [79]) that the documents inspected by Page in February 1993 showed that there was no friendly firm agreement. Accordingly, Gzell J was not satisfied that Page was ignorant of that fact at that time, albeit that the full import of this omission was not brought home to him until early 2001. 101 These findings were entirely supported by the evidence from Page's own mouth. They are tantamount to a finding that Page ought with reasonable diligence to have discovered in 1993 the falsity of the representations of which he now complains. This is enough to defeat his claim on limitation grounds, whether or not one infers (as I would) that Page actually discovered the relevant facts at that earlier time (see Limitation Act, s55(1)). Six years from February 1993 is February 1999. Page made his first serious attempt to formulate his 1987 fraud claim when he was before Master McLaughlin in March 2002. It would, in my view, be unjust to permit the claim to be tacked onto the 1996 proceedings without an order (pursuant to Pt 20 r4(5A)) preventing the proceedings on the claim being considered as commenced earlier than March 2002. On this basis, the claim would be statute-barred. Accordingly, it ought not to be allowed to go forward in a futile amendment. 102 In addition to the orders made during the hearing in Nelson's favour (par 32), the appeal should otherwise be dismissed with an order that Page should pay the costs of the first, second and fourth respondents. I note but decline Hicks' claim for costs on an indemnity basis. 103 HODGSON JA: I agree with Mason P. 104 PEARLMAN AJA: I agree with Mason P.

Parties

Applicant/Plaintiff:

Geoffrey Francis PAGE

Respondent/Defendant:

Hugh Stanely McKENSEY & Ors

Cases Cited (8)

CITATION : Geoffrey Francis PAGE v Hugh Stanely McKENSEY & Ors [2004] NSWCA 437 HEARING DATE(S) : 29 September 2004 JUDGMENT DATE : 1 December 2004

CATCHWORDS : Fraudulent misrepresentation - deceit - appeal from interlocutory orders - whether leave should be granted - limitation period - date at which appellant ought reasonably to have discovered relevant facts - res judicata. (ND) Evidence Act 1995, s140 LEGISLATION CITED : Fair Trading Act 1987 Limitation Act 1969, ss14, 55(1) Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 40 NSWLR 622 House v The King (1936) 55 CLR 499 Hunter v Chief Constable of the West Midlands Police [1982] AC 529 Jennings v Jennings [1898] 1 Ch 378 Martin v Abbott Australasia Pty Ltd [1981] 2 NSWLR 430 McKensey v Hewitt [1999] NSWCA 426 CASES CITED : Page v McKensey & Ors [2003] NSWSC 759 Page v McKensey & Ors, No 4206/92, Windeyer J, unreported Page v McKensey & Ors, NSWCA unreported, CA 40034/1994, 28 February 1995 Port Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589 Powell v Wiltshire [2004] 3 WLR 666 Reichel v Magrath (1889) 14 App Cas 655 Trego v Hunt [1896] AC 7 Wickstead v Browne (1992) 30 NSWLR 1 PARTIES : Geoffrey Francis PAGE Hugh Stanley McKENSEY & Ors FILE NUMBER(S) : CA 40860/03 Appellant: C Birch SC/ M Duncan COUNSEL : 1st, 2nd, 4th Respondent: C D Wood 3rd Respondent: In Person 5th Respondent: Submitting Appellant: Shaw McDonald SOLICITORS : 1st, 2nd, 4th Respondent: Bowen-Thomas & Barlow 3rd Respondent: N/A 5th Respondent: Hewitts Commercial Lawyers

(1986) 40 NSWLR 622

(1936) 55 CLR 499

(1981) 147 CLR 589

(1992) 30 NSWLR 1

[2003] NSWSC 759

[1999] NSWCA 426