Karuah Local Aboriginal Land Council v Mymurra Pty Ltd

Borg-Warner Acceptance Corp (Australia) Ltd v Diprose (1987) 4 BPR 9408 Bristol & West Building Society v Mothew [1998] Ch 1 Darkinjung Pty Ltd v Darkinjung Local Aboriginal Land Council (2006) 203 FLR 394 Fenton v Fenton (1966) 85 WN (NSW) (Pt 1) 430 Fouche v Superannuation Fund Board (1952) 88 CLR 609 General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125 Government Employees Superannuation Board v Martin (1977) 19 WAR 224 Haywood v Roadknight [1927] VLR 512 CASES CITED : Kings North Trust Ltd v Bell [1986] 1 WLR 119 Lamerand v Lamerand (No 2) [1962] NSWR 248 Lisciandro v Official Trustee in Bankruptcy (1996) 69 FCR 180 Louth v Diprose (1992) 175 CLR 621 McKenzie v McDonald [1927] VLR 134 NSW Trotting Club Ltd v Glebe MC (1937) 37 SR (NSW) 288 Philliponi v Leithead (1958) 59 SR (NSW) 352 Rawlings v Lambert (1860) 1 J & H 458; 70 ER 826 Toll (FCGT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 Vercorp Pty Ltd v Lin [2007] 2 Qd R 180

Karuah Local Aboriginal Land Council (P) PARTIES : Mymurra Pty Ltd (D1) R P Hawks Nest Pty Ltd (D2)

COUNSEL : D A Smallbone (P) M J Watts (D)

SOLICITORS : Bilbie Dan (P) Grogan & Webb (D)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

5361/04 - KARUAH LOCAL ABORIGINAL LAND COUNCIL v MYMURRA PTY LTD JUDGMENT 1 HIS HONOUR: These proceedings were commenced in 2004 and late last year were referred to me to case manage because the proceedings were appearing too many times in the Registrar's list without progress towards a final hearing being apparent. 2 I had the matter before me on 20 November 2007. The defendants' lawyers have stated that this was for the purpose of fixing a date for hearing. This is not quite correct. The purpose was to ensure that interlocutory distractions were ended, that the case was fully prepared for hearing as soon as possible and only after that had been done to fix a hearing date. 3 The matter was adjourned to 11 December 2007. On that day I noted that the plaintiff will be filing a notice of motion for leave to amend its statement of claim by a certain date which motion was to be returnable before me on 29 January 2008. 4 A notice of motion was duly filed on 14 December 2007 seeking:

(1) an order that the plaintiff have leave to file an amended statement of claim; and

(2) that the cross-claim be dismissed with costs. 5 On 29 January 2008, the motion was listed for hearing. Mr D A Smallbone of counsel appeared for the plaintiff and Mr M J Watts of counsel appeared for the defendants. After some discussion, I invited both counsel to make further submissions and stood the matter over to 26 February 2008. 6 Various drafts of the proposed amendments to the statement of claim have circulated. For clarity, I note that the document that I am considering is marked "Revised draft" in red and I have initialled it in the top right-hand corner. The document is unverified. 7 I need to sketch briefly the nature of the case before dealing with the details of the proposed amendments. 8 The case is brought by an Aboriginal land council claiming that it is under no obligation to the defendants, related companies each apparently controlled by a Mr Burke, with respect to land it owns at North Hawks Nest on Port Stephens. 9 This claim is made notwithstanding that there are documents in existence purporting to give the defendants or one of them certain rights over the land. 10 The principal documents are a Memorandum of Understanding of 14 October 2001 (the MOU) and a Development Management Deed of Agreement of 26 September 2002 (the DMDA). 11 The statement of claim and the DMDA divide the land into two categories, Lots 176 and 177 in DP 47946 being designated as the "North Hawks Nest Land" and Lots 178 and 180 in DP 47946 being designated as the "Development Land". 12 Mr Watts opposes the proposed amendments on a number of grounds: (a) he says that to allow them at this stage would be to decide contrary to the principle in s 56 of the Civil Procedure Act 2005; (b) Mr Watts objects to some of the pleadings on the merits; (c) he says the amendments are bad in form because of their prolixity; and (d) he says that it would be unfair to allow some amendments after four years as a vital witness is now too ill to testify about the relevant events. 13 I will consider the matters raised under the following heads:

(1) The overriding purpose of the Civil Procedure Act 2005 and the Uniform Civil Procedure Rules ;

(4) Prejudice caused by the illness of a key witness;

(5) The result of the application to amend the statement of claim;

(8) Orders to be made. 14 (1) Mr Watts says that this is a 2004 action and a set of complicated amendments virtually raising a new case is being introduced in the case four years after it commenced without any reason. 15 He points to s 56 of the Civil Procedure Act 2005 which states in subsection (1) that the overriding purpose of the Act and rules of court is "to facilitate the just, quick and cheap resolution of the real issues in the proceedings." Mr Watts says that to allow these very detailed amendments four years after the proceedings were commenced would be quite contrary to the overriding purpose. 16 During oral argument, the reason for the present amendments became plain. Mr Smallbone had just come into the case and the previous lawyers had not thought of the ways of putting the case that had occurred to Mr Smallbone and which form the principal parts of the amendments. 17 Although there appear to be some English decisions which say that the overriding purpose of court rules may mean from time to time that arguable cases are to be shut out and not heard on the merits, it does not seem to me that in Australia, or particularly New South Wales, courts have gone that far. Indeed, where the Court of Appeal has directed its collective mind to strike out applications, the majority of the judges still apply the principle in General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125. 18 Until the High Court or perhaps the Court of Appeal decide otherwise, I believe that a single judge should not refuse to allow an arguable case to go to trial even if it is the subject of a late amendment unless perhaps: (i) the majority of the prejudice cannot be met by an order for costs; and (ii) that there is insufficient time for the opponent to meet the amendment before the hearing. 19 In the instant case, there is no reason at all why an order for costs should not be made if the amendments are allowed in the usual form, that is, the plaintiff is to pay the costs of and occasioned by the amendment. Furthermore, as the hearing date has not yet been fixed, there is no problem about meeting the plaintiff's amended case. There is one proviso to what I have said in the last sentence, and that is that the absence of Mr Fisher, the previous solicitor of the first defendant, may mean that one of the amendments should not proceed. However, I will deal with that when I get to the detail of the matter. 20 (2) Accordingly I pass to the merits of the amendments. 21 The plaintiff claims:

A. A declaration that the DMDA purportedly entered into between the parties on 26 September 2002 is null and void;

B. In the alternative a declaration that upon the true construction of the document and any events which have happened, the contract was terminated by frustration between 12 and 16 May 2003.

(Notice has been given that it is proposed to amend B to read that "upon the true construction of the agreement and the Aboriginal Land Rights Act 1983 and in the events which have happened, the contract has been terminated.")

C. A declaration that the plaintiff is entitled to avoid the DMDA and that it has been avoided, or an Order that it be rescinded.

(There are then orders for costs etc sought) 22 The amendments fall into eight groups:

(c) Amendments to add paras 20A to 20E that since the proceedings were commenced, there was no reasonable prospect of approval being granted by the peak Aboriginal land body;

(d) A pleading that the DMDA was ultra vires the plaintiff (para 23);

(e) A pleading that the DMDA is void in that it infringes the rule against restraints on alienation of land (para 25A);

(f) Amendments to add para 25B and amendments to para 26 alleging that the DMDA is void for uncertainty;

(g) Amendments to add paras 25C to 25L alleging that the DMDA came about as a result of breach of equitable duty by officers of the plaintiff of which the first defendant ought to have known; and

(h) A pleading that the first defendant took advantage of the plaintiff's special disability in having the plaintiff enter into the DMDA (paras 25M to 25P). 23 In his written submissions, Mr Watts says that he has no objection to (a). He would not oppose paras 16D and 16F if particulars were furnished. He does not object to para 20A though he does object to the rest of (c) and he is happy for various other minor changes which I have not mentioned. 24 As to the matter of particulars, the defendants had submitted a whole host of questions which the plaintiff declines to answer. 25 In their letter of 11 December 2007, the plaintiff's solicitors wrote (immediately before wishing the defendants' solicitors the "compliments of the season") a letter the final paragraph of which read as follows: "In relation to your criticism of the particulars, we note that you have the benefit of the affidavits which have already been served by the respective parties in these proceedings and we consider that any competent practitioner will have no difficulty in understanding the case to be met. We do not propose to wade through all 11 pages and spend hours of billable time uselessly entering upon a laborious and unnecessary process of supplying particulars of things that are asked simply because they are questions that can be thought of, and of things that are in many instances not seriously in dispute or, to the extent disputed, should be perfectly obvious matters. We draw attention to the much overlooked decision of the Full Court in Philliponi v Leithead (1959) 59 SR (NSW) 352, and especially the ratio in the final paragraph at p. 361. It is not for us or for the Court to be asked to trawl through the list and work out what, if anything, in these requests is really necessary for the defendants to ask." 26 In Philliponi v Leithead (1958) 59 SR (NSW) 352 at 360, the Court said that "an applicant for particulars must always show that circumstances exist which make it desirable and proper that particulars should be furnished". 27 I do not know whether the defendants can meet that test in the present circumstances. My feeling is that they would be well advised to reformulate the request and pare it down before any attempt to seek an order that the particulars be supplied. 28 Hopefully, if this is done, the reluctance to supply further particulars will evaporate. If it does not, then the defendants will need to take out a motion. 29 I do not consider that the defendants have identified before me any discrete matter about which they must have further particulars before they can file an amended defence if the proposed amendments were allowed. 30 As to the group (c) amendments, in many respects, the amendments being sought seek to enlarge the envelope of liability. However, they are, or alternatively would be if they were in proper form, fairly arguable. The group (c) amendments (and also those in group (b)) seek to expand in various ways the previous defence that the peak Aboriginal land rights body whose consent would appear to be necessary before the DMDA can be consummated, has not given its consent nor would it ever give its consent. Accordingly, s 40D of the Aboriginal Land Rights Act 1983 would prevent consummation of the DMDA. 31 The fact of non-approval to date has already been pleaded in para 20. I cannot see how the expansion of these contentions should be shut out. However, para 20B which is accompanied by four pages of particulars, is to my mind, currently embarrassing. It reads: "There is and was at all material times since these proceedings were commenced no reasonable prospect of such approval being obtained in respect of any of the North Hawks Nest Land and the Development Land."

"Such approval" means approval by the peak body under s 40D. 32 This matter, if it be correct, would not go to the previous prayer B because that says that the contract was frustrated between 12 and 16 May 2003, 16 May 2003 being the date when the peak body resolved not to approve of the disposition of the North Hawks Nest Land. 33 However, if prayer B is amended as suggested above to remove the words "was terminated by frustration … 16 May 2003" and the words "has been terminated", what is said in the preceding paragraph ceases to be relevant. 34 Mr Smallbone says that the point of para 20B is that, whilst often one knock-back by an approving authority does not constitute a refusal of approval by that authority, facts and circumstances may show that in any instant case there was a refusal. 35 If that statement is correct, then, he says, it is necessary to plead the material facts which would lead to that conclusion. 36 These submissions appear to be correct. 37 However, I would have thought that it would be necessary to delete the words "since these proceedings were commenced" and substitute some other time. 38 It is also necessary to adjust para 22 to plead the acts, facts and circumstances which the plaintiff says would lead the court to the conclusion that the DMDA has terminated. 39 The present does not appear to be a case where termination occurs without a party performing an act or making a statement that the party terminates the agreement or considers that it has terminated or has been terminated. 40 Thus, with the modifications I have noted, group (c) amendments should be allowed. 41 Amendments in group (d) raise the issue of ultra vires. 42 The existing para 23 pleads that the representatives of the plaintiff who signed the DMDA were not authorised by a particular resolution of 24 September 2002 to do so. The gravamen of the paragraph is that the resolution to "sign off" on the MOU was not sufficient to authorise the execution of the DMDA. 43 The proposed amendments are to add "or by any resolution" and to add a sub-paragraph to the effect that the plaintiff had no power to give authorisation. 44 The decision of Barrett J in Darkinjung Pty Ltd v Darkinjung Local Aboriginal Land Council (2006) 203 FLR 394 at 424 makes it clear that the doctrine of ultra vires applies to local Aboriginal land councils. 45 The defendants' objections seem to be on the basis that to raise this issue at this stage would cause delay in that further discovery would be needed and, alternatively that it is futile. 46 I am not convinced that either of these objections have been sustained. I cannot see why further discovery would be necessary. The case is being tried on affidavits and the plaintiff will need to produce its evidence in advance of the trial as to what it is relying on to show lack of authority. 47 As to futility, Mr Smallbone in his written submissions of 30 January 2008 at para 14 shows that the basal argument is that it is ultra vires for a local Aboriginal land council to fetter its ability to exercise its statutory functions for an indefinite period of time and that the DMDA, if valid, would have that effect. 48 The point involves construction of ss 51-52D of the Aboriginal Land Rights Act and whether cases such as NSW Trotting Club Ltd v Glebe MC (1937) 37 SR (NSW) 288 can be applied by analogy. 49 I am content to allow this group of proposed amendments. 50 As to amendments in group (e), the rule against the restraints on alienation of land is probably now in a state of flux; see eg the recent decision of Douglas J in Vercorp Pty Ltd v Lin [2007] 2 Qd R 180. Paragraph 25A does not require trial of any question of fact and I cannot see why it should not be allowed. 51 As to amendments in group (f), again the question as to whether a document is void for uncertainty is one that does not require any facts, at least in the normal case. However, to my mind para 25B does not sufficiently plead voidness for uncertainty. It alleges that the contract was void because four so-called vital facts were missing. What it must do is to allege that the whole agreement is void for uncertainty and then give particulars as to why, but one must have a look at the document as a whole and not solely focus on four items. Accordingly, I would not allow para 25B in its current form. 52 Paragraphs 26(xiv) to (xvi) are in the same plight. 53 The group of paragraphs which I have labelled (g) are under the heading "Breach of Equitable Duty". Essentially, the claim is that the plaintiff is "a single-organ statutory corporation" in which only some of the members have voting rights. It is alleged that each of the voting members owed a fiduciary duty to the plaintiff and owed it equitable duties to adhere to the terms of its statutory object and to use reasonable care. Because the agreement was manifestly improvident, and the first defendant knew or ought to have known, or an honest and reasonable man in the circumstances of the first defendant would have known, that there had been a failure of these duties, it was unconscionable for the first defendant to rely on the DMDA. 54 Again the law is in a state of flux. However, I consider that the present pleading is defective because it fails to differentiate between fiduciary duties and common law duties to take reasonable care and skill. It equates a "single-organ statutory corporation" which is incorporated for the purposes of holding Aboriginal lands with a statutory trustee such as one considered by the High Court in Fouche v Superannuation Fund Board (1952) 88 CLR 609 and by Ipp J in Government Employees Superannuation Board v Martin (1977) 19 WAR 224. 55 Although some support is given by Barrett J in Darkinjung Pty Ltd v Darkinjung Local Aboriginal Land Council (2006) 203 FLR 394 that this equation is possible in certain circumstances, I do consider that further facts need to be pleaded in order to get into this area. 56 Next, the alternative pleading of "knew", "ought to have known" or "an honest and reasonable man … would have known" is: (i) embarrassing in a pleading which has to be verified; and (ii) required to be properly particularised . 57 Although Part 14 r18(2) of the Uniform Civil Procedure Rules allows alternative claims to be made in pleadings that are inconsistent with each other, there is some limitation where the pleading has to be verified; see eg Fenton v Fenton (1966) 85 WN (NSW) (Pt 1) 430. 58 The pre-Judicature Act position in England was that a plaintiff was not able to raise two inconsistent states of fact and ask for relief in the alternative, but could state the facts and ask for alternative relief according to the conclusion of law which the court might draw from them: Rawlings v Lambert (1860) 1 J & H 458; 70 ER 826. 59 In Lamerand v Lamerand (No 2) [1962] NSWR 248, Jacobs J said that modern procedures had superseded a lot of what was said in Rawlings and that the modern rule was that a plaintiff in a verified pleading could (at least if it did it in proper form) make two inconsistent alternative claims so long as the defendant could fairly plead to the claim without embarrassment. 60 However, a plaintiff making alternative claims whether internally consistent or not, must state the material facts from which the court can conclude that the ultimate fact is made out. 61 In the instant case, there should be at least pleading (I do not think mere particulars are sufficient) of the material facts from which the court might conclude that the relevant defendant: (i) knew; or (ii) ought to have known the relevant matter. (I doubt whether one can detail what a reasonable person would have known, but particulars might need to be given of this). 62 The other matter of concern is that the pleader seems to have rolled up matters of alleged breach of fiduciary duty with allegations of breach of a duty to use due care and skill. There is, of course, great debate as to how far it is proper to merge fiduciary duties and duties of care and skill and how far some of the latter can be equitable duties; see eg Bristol & West Building Society v Mothew [1998] Ch 1. 63 There is then the problem that the allegations of breach of fiduciary duties are levelled at voting members rather than persons who are directors or officers. There may be a question of law as to whether such people do owe their corporation any fiduciary duties, or, if they do, the extent of those duties. 64 Thus, there should be some additional pleadings here, but what is submitted is largely inappropriate. 65 Further matters as to group (g) and aspects of group (h) are set out in section (4) below. 66 As to group (h), the way the amended pleading is currently drawn, what is really asserted is material that would be an arguable defence to a cross-claim seeking to enforce the DMDA. Whilst it is sometimes necessary to amend a claim rather than put in a defence to a cross-claim, it seems to me that the matters are really matters of defence only. 67 There is, of course, an equity to set aside an agreement obtained by unconscionable conduct of the defendant; see eg Louth v Diprose (1992) 175 CLR 621, but it needs to be carefully pleaded. 68 In particular one cannot assume that all foreigners, people under 21, housewives, Aboriginal people or any other group are ipso facto to be classed as people with a special disability, even though they may be illiterate in the English language. 69 There are cases where the status of the plaintiff combined with other pleaded facts may permit a court to hold that an agreement is unconscionable. 70 The proposed amended pleading contains a suggestion without it becoming crystal clear that the plaintiff was infiltrated by a Mr Rogers who was in fact an agent of the first defendant and who undermined the plaintiff's decision-making. 71 We here appear to get into the rather rough territory where the court has to consider the ramifications of a lender or purchaser using an agent who is personally close to the guarantor/vendor to obtain an advantage; see eg cases such as Kings North Trust Ltd v Bell [1986] 1 WLR 119, followed by Cohen J in this court in Borg-Warner Acceptance Corp (Australia) Ltd v Diprose (1987) 4 BPR 9408, but rejected by the Full Federal Court in Lisciandro v Official Trustee in Bankruptcy (1996) 69 FCR 180. 72 The facts pleaded again suggest that there may be a case of equitable fraud, a case of a person making use of a fiduciary relationship against the beneficiary's interest so that this would constitute an equity under the decisions of Dixon AJ, as his Honour then was, in McKenzie v McDonald [1927] VLR 134 and Haywood v Roadknight [1927] VLR 512. However, at present, the most that can be said is that there is a hint of this in the pleadings. If this is what the plaintiff wishes to plead, it must be pleaded directly. 73 Again, if it is intended to say that the matters pleaded and particularised in group (h) should lead to a rescission, then additional facts would need to be pleaded. 74 Furthermore, the same problem occurs with respect to the pleading of knowledge or deemed knowledge of the first defendant in para 25N. 75 There is another problem with the core allegation that the persons who signed the DMDA on behalf of the plaintiff never read the document before they signed it and so were unaware of its terms. 76 The recent High Court decision of Toll (FCGT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 185 [57] strongly suggests that outside the defence of non est factum at law or equitable fraud in equity, the fact, if it be the fact, that a person has not read a document before signing it is irrelevant. 77 Mr Smallbone says that the Toll case does not prevent a person relying on the fact that the opponent knew that he or she had not read a document combined with other circumstances to show that there has been equitable fraud. This is probably the case. 78 Accordingly, I would not be prepared to give leave to amend the statement of claim by including group (h), ie paras 25M to 25P in their present form. 79 (3) As to prolixity, it is certainly the case that the statement of claim including the proposed amendments has become quite a bulky document. Part 14 r8 mandates that pleadings are to be as brief as the nature of the case allows. However, this statement just points up the fact that the court has to consider the nature of the case before passing judgment on prolixity. 80 It seems to me odd that the defendants who have asked for extended particulars are complaining at the same time that there is too much detail in the statement of claim. 81 To my mind, the statement of claim if amended as proposed would not fall foul of Part 14 r8. 82 (4) The defendants further say as to groups (g) and (h) that, if the proposed amendments were allowed, they would be prejudiced because the solicitor who was at all material times acting for the first defendant with respect to the DMDA was a Mr Andrew Fisher. Mr Fisher continued to be the solicitor most actively concerned with the defendants up until his retirement due to ill health in July 2006. 83 Mr Webb, a partner in the firm of solicitors acting for the defendants in these proceedings swore that he has tried to make contact with Mr Fisher, but Mr Fisher no longer holds a practising certificate as a solicitor and to date Mr Webb has been unable to contact him. 84 I am invited to infer that Mr Fisher's evidence would now be unavailable to the defendants whereas it would have been available had the proposed amendments in groups (g) and (h) been made before July 2006. 85 Mr Smallwood had two answers to this proposition, first, as the claims in groups (g) and (h) were basically claims in equity, the defence of laches could be pleaded to meet any prejudice caused because of Mr Fisher's absence. Secondly, the material was insufficient to show that on the balance of probabilities, Mr Fisher would not reappear in time to give evidence at the trial. 86 I agree with Mr Smallwood on those matters. I do not consider that this aspect tells against me granting the proposed amendments in group (g) or (h). 87 (5) It follows that I would not give leave to make the proposed amendments to the statement of claim in its present form except as indicated. 88 Essentially I have considered that, whilst some of the claims being made by the plaintiff by the proposed amendments are questionable, few of them can be classed as so unarguable that they should not be allowed to proceed to trial or at least a full hearing on a preliminary point of law. 89 I consider that the appropriate course is to stand the matter over for three weeks and that the plaintiff can in that time tender its final version of the proposed statement of claim and I will have the matter mentioned before me in about three weeks' time to deal with any problems that may still be apparent. 90 I would also ask counsel to consider whether, if the facts (or even the majority of the facts) supporting contentious claims are admitted, it may well be that separate preliminary questions of law should be stated to deal with those matters. I do not consider that any of them is so lacking in substance that it should be struck out. 91 (6) As to the cross-claim, there has been some confusion. 92 First, it seems to have been overlooked that an amended cross-claim was filed in 2005. 93 Next, the defendants indicated in 2006 that they intended to abandon the cross-claim. However, this was never followed up by any formal step and, it would appear that a different approach was taken in 2007. 94 It would seem to me that probably some form of cross-claim must be before the court to enable the court to deal fully with all the questions arising between the parties over the land in order to fulfil its statutory duty. 95 Thus, I do not consider that the grounds have been made out to strike out the cross-claim at this stage. Indeed, until the plaintiff puts its case in order with a final version of the claim, it is really premature to consider whether the present form of the cross-claim is or is not appropriate, or whether the defendants have been guilty of delay in prosecuting the cross-claim. 96 (7) As to costs, I have already indicated that generally the costs of and occasioned by the amendments must be paid by the plaintiff. The only doubt I have is as to the costs of the actual motion before me. On the motion, the plaintiff has substantially succeeded. 97 I would be willing to consider whether the appropriate order is as I noted in the previous paragraph save that the costs of the motion be costs in the cause. 98 (8) It may be that after considering these reasons, the parties may consider that a further attempt should be made to deal with the proceedings by mediation. Even though that will involve expense, predictably the ongoing running of this case will cost very much more. 99 Unfortunately, this case is not yet at the point where the court can merely allot three or four days to hear the suit on a final basis. Just as there is no use entering a race without training and preparation, the parties need to finalise the preparation, ensure that witnesses are available and put forward a realistic estimate of the time required for the hearing before a hearing date can be set. 100 Accordingly, I simply publish these reasons and the only order I make is that the matter be listed before me on Tuesday 22 April 2008 at 9.30am for mention.

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