First Plaintiff by Counterclaim : Mr M J McCusker QC &

Second Plaintiff by Counterclaim : Mr M J McCusker QC &

First Defendant by Counterclaim : Mr D Grace QC & Mr M L Bennett

Second Defendant by Counterclaim : Mr D Grace QC & Mr M L Bennett

Third Defendants by Counterclaim : Mr D Grace QC & Mr M L Bennett

Humphrey v Collier [1946] VicLawRp 60; [1946] VLR 391

Jones v Peters [1948] VicLawRp 56; [1948] VLR 331

Residues Treatment Trading Co Ltd v Southern Resources Ltd (1989) 52 SASR 54

Union Bank of Australia Ltd v Puddy [1949] VR 242

William H Muller & Cl Algemeene etc v Ebbw Vale Steel Iron & Coal Co Ltd [1936] 2 All ER 1363

1 The trial of this action commenced on 4 November 2003. At the conclusion of the plaintiffs' opening counsel for the defendants submitted that the claim should be struck out as failing to disclose a reasonable cause of action or, alternatively, on the ground that there was no case to answer. These submissions were based upon an analysis of the pleadings and the provisions of certain trust deeds which allegedly underpinned the case being advanced by the plaintiffs.

2 I heard the application and ruled eventually that there was a case to answer. Before ruling upon the no case submission, I did not require the defendants to make an election not to call evidence, notwithstanding that such an election is usually required in civil cases. I was of the view that because the application raised a succinct point of law and allegations akin to fraud were reflected on the pleadings the case fell within an exception to the general practice. I deal with this aspect of the matter in more detail below.

3 The trial continued over many days and the plaintiffs' witnesses were exposed to lengthy cross-examination.

4 When the plaintiffs closed their case, counsel for the defendants foreshadowed a further application for an order that the case be dismissed upon the basis that the defendants had no case to answer. On this occasion, as on the previous occasion, counsel for the plaintiffs contended that the no case submission should not be dealt with until the defendants, as the moving parties, had made an election not to call evidence. I will turn to the principles bearing upon this threshold issue in a moment.

5 Counsel for the defendants did not fully develop his line of argument in support of the foreshadowed submission of no case to answer. However, in the course of discussion about the procedure to be followed, the nature of his proposed plea became apparent. The line of argument was different to the no case submission made at the commencement of the trial, and I was therefore persuaded that, subject to resolution of the threshold issue concerning the obligation to elect, the defendants were not estopped from making a further application.

6 After hearing from counsel for the respective parties at some length, I ruled in regard to the threshold issue that on this occasion the general practice should be applied with the result that I declined to entertain or rule upon the foreshadowed no case submission until an election was made. Counsel for the defendants intimated that his clients were not willing to elect, and therefore, having regard to the ruling against them on the threshold issue, he said that the defendants would not pursue the foreshadowed no case submission.

7 It followed from this that the defendants did not put their foreshadowed no case submission to the Court and they were therefore not required to elect. The foreshadowed no case submission did not become the subject of any ruling. The trial continued, and the defendants proceeded to call the first of their witnesses. I undertook to provide reasons for my ruling upon the threshold issue. These are my reasons.

8 In order to understand these events fully, and the nature of the threshold issue, it will be useful to look briefly at the matters in issue between the parties.

9 It is apparent from the pleadings that the first three defendants, Wilden Pty Ltd, Magenta Nominees Pty Ltd and Tace Pty Ltd, are the trustees of unit trusts known respectively as The Balga Trust, The Kelmscott Trust and The Summerfield Trust. These were constituted by trust deeds in similar form. The other defendants are said to be directors of or otherwise linked to the trustee company.

10 The plaintiffs are some of the unit holders in the trusts. In each case the trust deed permits unit holders to require the trustee to repurchase units. Clause 7.4 provides that the price payable on the repurchase of a unit (which is called the "current repurchase value") when there is no agreed value is to be determined by an independent qualified valuer nominated by the President of the Australian Institute of Valuers (Inc) (WA Division).

11 The "current repurchase value" is defined in the deed by reference to a formula. It can best be described as the net asset backing of a unit. In each case the principal asset of the trust was a suburban shopping centre.

12 By cl 7.5 the trustee has the option to arrange for some person to effect a purchase of the subject units or to effect the repurchase by borrowing or releasing sufficient trust funds to provide the price. By cl 7.6, if the trustee has not effected a purchase or repurchase of the units within 90 days after receipt of the repurchase request, the trustee shall offer for sale such part of the trust fund as shall be necessary to provide the price payable on repurchase of the units. The price for the units shall be paid within 7 days after receipt of the proceeds of any such sale. The trustee shall offer the trust assets for sale at a price to be determined by an independent qualified valuer nominated as aforesaid.

13 The plaintiffs alleged that in the early 1990s they lodged repurchase requests with the trustees and that a price was not agreed. The defendants say that valuers were appointed to assess the value in the prescribed manner but this is disputed by the plaintiffs. There is a dispute as to whether the trustees complied with the prescribed repurchase procedure and as to whether the valuers brought an independent discretion to bear on the materials before them, or whether they simply adopted figures in certain audited accounts.

14 The plaintiffs contend that the trustees have failed to complete the repurchase of the plaintiffs' units in terms of the relevant repurchase procedure or at all. They allege also breaches of trust in that the defendants have allegedly failed to make adequate disclosure to the plaintiffs of their conduct of the affairs of the trusts. There are various other matters in issue including also claims of misleading conduct under the Trade Practices Act 1974 (Cth). However, it could be said that the repurchase procedure/compliance issue lies at the heart of the controversy between the parties.

15 The initial application to dismiss the plaintiffs' claim was based upon an interpretation of the relevant trust deeds. The plaintiffs allege in their statement of claim that they submitted repurchase requests to the various trustee companies. The plaintiffs' primary contention on the pleadings is that cl 7.6 of the relevant trust deeds creates an obligation upon the trustee to implement the cl 7.4 and related procedures within 90 days after receipt of a repurchase request. If the units have not been acquired within that period the trustee is obliged to offer trust assets for sale so that a repurchase of units by the trust can be effected.

16 The defendants' case in regard to this issue is that where the price is not agreed cl 7.4 does not expressly oblige the trustee to have a valuer determine the current repurchase value of the units. Clause 7.4 allows for the appointment of an independent qualified valuer if a price for the units cannot be agreed, but it is silent as to whether the appointment should be initiated by the unit holder requesting repurchase or by the trustee in receipt of the request. This means that, on the plaintiffs' pleaded case, it could not be said that the trustee was in breach of any duty in that regard. Moreover, cl 13.4 of the trust deed provides that the trustee shall not be responsible for any breach of duty whatsoever, unless it shall be proved to have been "committed, made or omitted in personal conscious fraudulent bad faith" by the trustee.

17 The defendants argued that the question of whether the trustees could be held responsible for breaches of duties of the kind contended for by the plaintiffs in regard to the repurchase procedure/compliance issue was essentially a question of construction. This was a matter of law which could be dealt with upon the hearing of a no case submission, without requiring an election by the defendants to call no evidence.

18 In making the initial application, which was confined to the issue I have just described, counsel for the defendants relied upon various authorities including Prentice v Cummins (No 4) [2002] FCA 1215. In that case Sackville J proceeded on the basis that it was open to the moving party to make a no case submission with respect to several but not all of the issues in a case. His Honour applied the general rule of practice whereby a decision will not be given on a no case submission unless the moving party elects to give no evidence. He was therefore not required to resolve the further question as to whether an election would prevent the moving party from calling evidence on any issue in the proceedings.

19 His Honour acknowledged that departures from the general practice included cases in which the no case submission could be addressed without assessing the credit of any witness or in which fraud was alleged, for it might be unreasonable to require that a respondent submit to cross-examination concerning fraud before sufficient evidence of fraud was adduced to establish a prima facie case.

20 In ruling upon the initial application I applied the reasoning outlined by Sackville J in Prentice v Cummins (supra). In effect, I held that a submission of no case could be made directed to a principal issue. I was persuaded that the presence in the pleadings of allegations of fraud, and a comparatively narrow legal issue concerning the nature and scope of the trustee's duties, justified a departure from the general practice in circumstances where no evidence had been adduced: Compaq Computer Australia Pty Ltd v Merry, Payes, Bunnett, Sharp, Bassat, Kras, Horman & Thomson [1998] FCA 968; (1998) 157 ALR 1 at 9. Hence, as I indicated in earlier discussion, I decided to rule upon the initial no case submission but without requiring the defendants to elect. It followed that I was not required to determine whether an election would prevent them calling evidence on any issue in the proceedings. In the end, I was persuaded that there was a case to answer in that the plaintiffs had an arguable case in regard to the principal issue. I was of the view that under cl 7.4 of the trust deed, in circumstances where a price had not been agreed, the trustee was arguably under a duty to initiate the appointment of an independent qualified valuer. It was therefore open to the plaintiffs to go further and contend that the trustee had failed to comply with other facets of the repurchase procedure.

21 For present purposes, for ease of reference, I will continue to characterise the various allegations made by the plaintiffs concerning an alleged lack of compliance with the steps allowed for by cl 7 of the trust deed as the repurchase procedure/compliance issue. However, I recognise that in due course it will be necessary to define the matters in issue with more precision.

22 The foreshadowed application to dismiss was made many days later in somewhat different circumstances. It was made against the background of the plaintiffs having presented all the evidence they intended to call, including evidence establishing that repurchase requests were made and that certain valuations were brought into existence which purported to value trust assets and the units the subject of the repurchase requests.

23 It became apparent that if the defendants were permitted to develop their argument in support of the foreshadowed no case submission, they would contend that the steps taken by the trustees in response to the repurchase requests and the resulting valuations represented, quite clearly, having regard to the evidence presented to the Court, a proper compliance with the trustees' obligations. In other words, if the duties contended for by the plaintiffs did exist, they had been performed. The defendants would be seeking to persuade the Court that in regard to the repurchase procedure/compliance issue the plaintiffs could not succeed. There was no case to answer.

24 Counsel for the plaintiffs made it clear that if the no case submission was pursued, this line of argument would be opposed. However, as I have indicated in earlier discussion, counsel for the plaintiffs insisted that there was a threshold issue to be resolved first as to whether the defendants should be required to make an election before being permitted to advance the foreshadowed no case submission. Accordingly, let me now turn to the legal principles bearing upon the threshold issue.

25 The legal principles bearing upon the threshold issue are conveniently summarised in Rasomen Pty Ltd (t/as Shell Fairview Park) v Shell Company of Australia Ltd (1997) 144 ALR 497. The general rule of practice is that a decision will not be given on a submission of no case to answer unless the moving party elects to call no evidence. However, the trial Judge has a discretion to depart from the general rule where particular circumstances require it. In deciding which course to follow the Judge will be guided by the nature of the case, the stage it has reached, the particular issues involved and the evidence that has been given. The imposition of a requirement that the moving party makes an election before the Judge entertains the submission, or before the Judge rules on it, will depend on the just and convenient disposition of the litigation.

26 Further, there is no general rule that requires that a party seeking to make a submission of no case must elect to adduce no further evidence if some evidence has already been led, or if exhibits have been tendered during cross-examination. In a particular case, the fact that the respondent has taken steps of this kind will be one of the circumstances to be taken into account in the exercise of the discretion.

27 These principles were applied recently by the Full Court in this State in BHP Steel (RP) Pty Ltd t/as BHP Reinforcing Products v ABB Engineering Construction Pty Ltd [2001] WASCA 294. In that case, Kennedy J made these observations at par 7:

"The general practice in civil cases tried by a Judge without a jury in Western Australia is for the Judge to require a defendant who wishes to make a submission of no case to elect whether to call evidence, and to decline to rule on the submission until that election is made. The primary reason for this practice is to avoid a new trial if an appeal against a decision of no case to answer is successful. The trial Judge does, however, have a discretion and he or she may, in special circumstances, decide not to require the defendant to make an election - see Ralph M Lee (WA) Pty Ltd v Fort (1991) 4 WAR 176 at 180. This practice accords with that in the United Kingdom, as to which see Alexander v Rayson [1936] 1 KB 169 at 178 and Young v Rank [1950] 2 KB 510 at 511 - 515."

28 In the same case Kennedy J approved the reasoning of Tadgell J in Protean (Holdings) Ltd v American Home Assurance Co [1985] VicRp 18; [1985] VR 187 concerning the procedure to be followed. Tadgell J summarised the position in that case at 237 as follows:

"When, in the course of a trial by a judge sitting alone, a party indicates that he desires to submit that he has no case to answer upon a contested issue, he is really inviting the Judge to rule that he should not have to adduce evidence, or further evidence, on that issue in order to have it finally decided in his favour. Usually, but not inevitably, the invitation will be issued at the end of the evidence called against the party desiring to make the submission (whom I shall call 'the moving party') and before that party calls any evidence on the relevant issue in answer to that of the other party (whom I shall call 'the respondent party'). It might be issued after the moving party has called some but not all of his evidence. The judge is entitled, for reasons that seem appropriate to him, to decline out and out to entertain such a submission at the stage at which he is asked to do so. Normally, however, the Judge would not feel justified in refusing outright to hear a submission of no case if to hear it would carry the prospect of justly facilitating the disposition of the litigation. Usually there would be three courses open to him, short of refusing altogether to entertain the submission, namely:-

1. He might decline to entertain the submission at that stage unless the moving party were to elect before making it not to call any evidence, either generally or on the issue on which the ruling was sought; or

2. He might allow the submission to be made without putting the moving party to any election at that stage but leaving, until he had heard it, the question whether or not he would rule on it without requiring an election to be made; and having heard the submission, and any answer to it by the respondent party, he could either rule on it or not, perhaps requiring an election to be made as a prerequisite to his doing so; or

3. He might indicate that he would both entertain the submission and rule on it without requiring an election to be made by the moving party."

29 It will be apparent from earlier discussion that in the present case counsel for the plaintiffs argued that I should follow the first of the three alternative courses; counsel for the defendants contended for the second course.

30 Before leaving the decided cases I note that in J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA) (No 2) (1992) 111 ALR 377 French J observed that the question of whether a defendant is at liberty to advance a no case submission without electing is ultimately a discretionary matter for the trial Judge. It is permissible to take account of case management factors including the convenience and economy in time and money that might be achieved in an appropriate case. A court might entertain a no case submission based upon a proposition of law rather than one which goes to the adequacy of the evidence adduced against the party seeking to make the submission.

31 In Compaq Computer Australia Pty Ltd v Merry (supra) Finkelstein J declined to rule on whether the respondent should be put to their election until he had heard argument both in relation to the no case submission and on whether the respondent should be required to make an election. He said at page 6 that he took this course because it seemed to him that some development of the argument whether there was a case to answer (an argument that would expose the precise way in which the respondents attacked the opposing case) would assist in the resolution of the issue whether he should require the respondents not to call evidence. In the event, Finkelstein J decided to rule upon the no case submission without requiring the respondents to elect not to call any evidence.

32 His Honour referred at page 7 of the judgment to the circumstances in which a no case submission could be made. They were, first, where no reference at all to the evidence is required; second, where a reference to the evidence is required only to establish that there is an evidentiary hiatus or failure to adduce any evidence as to an essential element in the cause of action; third, where it is argued that on a consideration of the evidence adduced by the plaintiff taken at its highest from the plaintiff's point of view, the evidence could not support the causes of action pleaded; fourth, the situation where the evidence supporting the claim was so weak and unreliable that it should be dismissed without calling upon the defendants.

33 Finkelstein J was of the view that as to the first category, when the no case submission is based on some proposition of law that does not require attention to the evidence, it will often be the case that the moving party is not put to his election. On the other hand, the authorities show that cases in the second category do fall within the general rule, although departure from it may be more readily allowed by the Court in the exercise of its discretion. He appeared to accept that the general practice should be applied to cases in categories three and four.

34 His Honour then went on to describe the factors that persuaded him not to put the respondents to their election in the case before him. The relevant factors included the presence of allegations of fraud. This meant that the respondent should not be required to call evidence or submit themselves to cross-examination if a sufficient case of wrong-doing had not been established against them. The efficient disposition of the case was a factor also in that if the respondents did go into evidence they were likely to call a considerable number of witnesses. In addition, the claimants' case appeared to be weak. Accordingly, he concluded that "both the interests of justice and the efficient disposition of this case indicate that the respondents should not be put to their election".

35 The general rule of practice is that a decision will not be given on a submission of no case to answer unless the moving party elects to call no evidence. However, the trial Judge has a discretion to depart from the general rule where particular circumstances require it. It seems that the primary reason for this practice is to avoid a new trial if an appeal against a decision of no case to answer is successful.

36 It is true that at an earlier stage of the trial, in response to the initial application, I was persuaded to depart from the general practice. In effect, I followed the second course of action outlined by Tadgell J in Protean (supra) and heard submissions from the parties directed to the threshold issue concerning the obligation to elect and to the defendants' no case submission. I held that the defendants were at liberty to make a submission of no case without being required to elect. In the end, I dismissed their application upon the basis that there was a case to answer.

37 The foreshadowed application which is now before me gives rise to different considerations. It is not confined to a comparatively narrow issue of law and there is now before me a substantial body of evidence adduced by the plaintiffs concerning their allegations of breaches of trust and related impropriety. For present purposes, I consider that there is no need for me to express any view about the strength or weakness of the evidence adduced in support of the plaintiffs' case. It is sufficient to note that the presence of such evidence, including the lengthy cross-examination of the plaintiffs' witnesses, will give rise to complications if a ruling was made that there was no case to answer, and that ruling was taken on appeal. If the defendants were not required to make a binding election not to call evidence, an appeal might not lead to a decisive or satisfactory outcome. The parties might be put to the expense of a new trial at which the plaintiffs' evidence would have to be presented again.

38 Further, I am conscious that on this occasion, unlike the circumstances underlying the initial application, a no case submission of the kind foreshadowed by counsel for the defendants would require me to review a body of evidence adduced by the plaintiffs concerning the issue of whether the repurchase procedure was complied with.

39 Counsel for the defendants sought to persuade me that it was open to me to construe the valuation reports prepared by certain expert witnesses in much the same way as one would construe the provisions of a trust deed in order to resolve certain aspects of the repurchase procedure/compliance issue. However, I have to say that I am not persuaded to this point of view. The parol evidence rule has a limiting effect upon the interpretation of a written instrument with the result that a narrow point of law concerning the effect of the instrument can be identified with particularity. On the other hand, the stance adopted by an expert witness is inevitably influenced by the nature of his instructions and the assumptions underlying his opinion, many of which may be questionable or dependent upon the resolution of other evidentiary issues. I am therefore of the view that the present case cannot be regarded as falling within the first and second categories described by Finkelstein J in the Compaq case (supra) that is, where no reference at all is required to the evidence or required only to establish that there is an evidentiary hiatus as to an essential element in the cause of action. Finkelstein J was prepared to accept that an election might not be required in respect of the first and second categories but he was of the view that the general practice requiring an election should be applied where the ruling was likely to depend upon a review of the evidence.

40 I am conscious also that although the issue to be addressed by the foreshadowed application lies at the heart of the controversy between the parties, there are other substantial matters in issue between the parties including claims based upon provisions of the Trade Practices Act and claims referable to alleged breaches of trust. These are ancillary to the plaintiffs' primary contention that the defendants failed to comply with the duties imposed upon them by the repurchase procedure.

41 The decided cases, and especially Prentice v Cummins (supra), allow that a no case submission can be made and dealt with, notwithstanding that it is not directed to all of the issues in the case. However, I am of the view that in weighing up the various factors bearing upon the threshold issue, it is both necessary and desirable to keep in mind that a no case submission which does not have the potential to dispose of all of the issues must be treated with caution, especially when it is made upon the closure of the plaintiffs' case, after a substantial body of evidence has been received concerning all the issues. The decided cases establish that in deciding which course to follow in regard to the election issue, the Judge will be guided by the nature of the case, the stage it has reached, the particular issues involved and the evidence that has been given.

42 Finally, I am conscious that in a case of this complexity, involving three discrete trusts, and in which the book of pleadings contains 338 pages, it will take a considerable amount of precious trial time for the no case submission to be fully developed by counsel for the defendants, and then addressed by counsel for the plaintiffs. As I have noted, the no case submission, if successful, will not dispose of all issues, and the trial is likely to run on in any event.

43 When I draw these various considerations together, I am of the view that the general practice should be applied. The defendants have not satisfied me that circumstances exist which justify a departure from the general practice. I consider that, in the absence of an election not to call evidence, the foreshadowed submission does not have the potential to produce a decisive result or to avoid a new trial if an appeal against a ruling of no case to answer is successful. The nature of the issue to be argued on this occasion, and the fact that a large body of evidence has now been received after many days of trial, serves to distinguish the ruling made on this occasion from the ruling made in response to the initial application.

44 In effect, I consider that on this occasion, bearing in mind case management principles and the time that would be required by counsel for the defendants to develop fully the proposed no case submission, it is appropriate to deal with the matter by following the first course described by Tadgell J in Protean (supra). I decline to entertain the no case submission unless the defendants elect before making it not to call any evidence, either generally or on the issue on which the ruling is sought.

45 As I have indicated, I conveyed my decision in regard to the threshold issue to the parties at the hearing. This led to a decision by the defendants not to pursue the no case submission. It follows that these reasons are limited to my ruling upon the threshold issue. They should not be regarded as expressing any view about the merits of the foreshadowed no case submission or the merits of the respective cases generally.