Katrina June Harris v Paul Edward Harris & Ors

EX TEMPORE Judgment 1HIS HONOUR: The plaintiff applies, by motion filed on 4 July 2013, for leave to amend her statement of claim in a form which appears annexed to the affidavit of Andrew Chapman sworn 1 July 2013 (the "proposed amended statement of claim"). Some parts of the proposed amended statement of claim are not opposed by the defendants. Other parts are. 2It is necessary for me briefly to set out the procedural history of how this application has come to be made. 3The proceedings, then constituted by an amended summons filed on 12 April 2012, came on for hearing before Hallen J on 6 February 2013. There is no doubt that what his Honour was conducting on that occasion was a hearing of the proceedings on a final basis. No order had been made for a determination of separate questions. 4However, a number of prayers in the amended summons were in the nature of applications for accounts, information and the books and records from the trustee of the two family trusts which are the subject of the proceedings. Those trusts were referred to as the "Harris family trust" and the "new Harris family trust". 5In the course of preparing the matter for hearing, as sometimes happens in cases of this kind, the preparation of the evidence on the part of the trustee and those associated with the trustee, necessarily went some, if not all, of the way towards providing the plaintiff with what she was seeking by way of further information. I interpose that the plaintiff and the natural defendants were all discretionary objects of the family trusts, of which the third defendant was trustee. 6So it was that when the matter came on before Hallen J, in a practical sense the need for a number of the prayers for relief in the amended summons fell away. Rather than proceeding to a contested hearing, discussion ensued between his Honour and the parties as to what was really left in the proceedings. 7After discussion with the parties, his Honour made a series of orders dismissing some paragraphs of the amended summons, or noting that other paragraphs would not be proceeded with. Relevantly for present purposes, his Honour made this direction: 6. Direct the plaintiff to file and serve a statement of claim relating only to matters raised in paragraphs 7 and 8 of the amended summons by 4pm on Friday 1 March 2013. 8Those paragraphs of the amended summons were: 7. Order that any amount certified on taking the account to be due to the Plaintiff or any other party be paid to him or her. 8. A declaration that all moneys advanced by the Third Defendant to the Plaintiff were distributions of the trust, and no moneys are owed by the Plaintiff to the Third Defendant. 9The parties have today informed me that even paragraph 8 of the amended summons has, for all practical purposes, fallen away. All that is really left is whatever was comprehended by paragraph 7 of the amended summons. 10Hallen J's order 6 needs to be construed, in the absence of a judgment, by reference to the amended summons and the relevant discussion between the parties. It must be said, with the utmost respect, that it is not entirely clear what the effect of allowing a statement of claim to be brought in, in relation to the matters relating to paragraph 7 of the amended summons really comprehended, at least if one only looks at the terms of that paragraph. Further elucidation is provided by the exchange between the bench and Ms N Obrart of Counsel for the plaintiff recorded at page 16 of the transcript (lines 5-50) of the hearing before his Honour: HIS HONOUR: 8, well you want to allege that presumably, but that is not going to take it any further. I am just wondering what is left in here. I can see advantages and disadvantages to both courses. OBRART: To address your Honour's question as to what in the summons could be a springboard or a basis for the order that the matter continue on pleadings, it would be order 7 amended by removal of the words "on taking of account". HIS HONOUR: No, there may be another way of doing it, and just say "The only issue is if there is any amount due and payable to the plaintiff." But I am just not entirely sure that there is any benefit to this, if the defendant says "I am not going to take any point about it." That way you just start afresh, you make your claims and there are the pleadings and all the affidavits. I do not want to have to redraft affidavits and all of that. That is my only hesitation, and why incur the cost of another filing fee for a statement of claim? OBRART: Your Honour, I think the costs largely go beyond a filing fee cost. Affidavits would have to be redrafted and there is a lot of material, because the relevant transactions were the subject of a complaint of circular transactions and all the old transactions have to be identified. They are not simple transactions. So the evidence is bulky at present and will be bulky in the new proceedings. So in the plaintiff's submission there will be a fair amount of additional costs. HIS HONOUR: So you are prepared to have noted that as a result of the events that have happened, the only matter left to be agitated is whether any amounts, out of one or other or both trusts, are to be paid to the plaintiff? OBRART: Yes, your Honour. HIS HONOUR: And as to orders 1, 2, 4 and 5, they have been dealt with by the events that have occurred and the agreements that have been noted, et cetera? OBRART: Yes, Your Honour. HIS HONOUR: Order 6 will be dismissed, is that right? OBRART: Yes, your Honour. HIS HONOUR: So it is 7 and 8 that would be the subject, in effect, of any pleadings. OBRART: Yes, your Honour. 11The intention underlying his Honour's order is best encapsulated by his Honour's reference at line 18 of the transcript to the notion of "start[ing] afresh". 12I understand that to mean that the plaintiff had reached a point where a great deal of information, which had previously not been available to her, had become available to her. She was now being afforded an opportunity by the Court to formulate such claim as she wished to make for substantive relief in the form of payment of moneys said to be owing to her on such bases as she may be advised to allege, derived from the information that had become available. 13Albeit out of time, the plaintiff did file a statement of claim in accordance with his Honour's orders. Before any order had been made for the filing of the defence, the plaintiff then propounded the proposed amended statement of claim. 14The defendants have raised a number of objections to the form of the proposed amended statement of claim. In summary, those objections are either or both that some of the amendments fall outside the scope of Hallen J's order 6 which I have set out above, or that they are embarrassing in the technical sense. 15The power which the plaintiff invokes is that conferred upon the Court by s 64 of the Civil Procedure Act (2005) NSW (the "CP Act"). I had occasion to consider the Court's power of amendment under that section in some detail in Macquarie International Health Clinic Pty Limited v Sydney Local Health District [2003] NSWSC 764 at paras [48]-[55]. I have approached this matter in accordance with the understanding of the applicable legal principles which I set out in my earlier judgment. 16In summary, those principles are that if I am satisfied that an amendment is required (that is to say necessary) for any of the purposes set out in s 64(2) of the CP Act, I am required to allow that amendment subject to s 58. Section 58 then directs one to other mandatory considerations under s 56 and s 57, as well as the discretionary considerations set out in s 58(2). 17The present application really raises two questions. The first question is whether amendments to raise the issues set out in those amendments ought to be allowed, and, second, if the answer to the first question is "yes", whether amendments ought to be allowed in the form in which they appear in the proposed amended statement of claim. 18I have come to the view that the first of those questions ought to be answered "yes". The parties have indicated that they do not require me to give detailed reasons as to how I have applied the principles referred to above to arrive at that result. 19That being said, the answer to the second question must be "no" as some of the proposed amendments cannot be allowed in their current form. Therefore it is appropriate that in these reasons I deal with questions of form, because a number of the criticisms raised by the defendants about the form of the proposed amended statement of claim have force. I will deal with those in turn. 20First, I accept the defendants' submission that in its current form, proposed prayer 11B(e) of the proposed amended statement of claim cannot stand. It provides: That trustees of the New Harris Family Trust restore to the Third Defendant, all monies received pursuant to or in consequence of the 2008 Purported Resolution and/or the 2009 Purported Resolution to be held by the third defendant upon the trust of the Harris family trust. 21There is no allegation in the proposed amended statement of claim that the trustees of the new Harris family trust received money in consequence of the purported resolutions referred to in the prayer for relief. Therefore, that prayer ought not be allowed in the absence of the pleading of material facts that support it. Accordingly, the plaintiff will either have to include in a further version of the amended statement of claim material facts that would support a prayer for relief of that kind, or simply not press such a prayer. 22The next difficulty in the proposed amended statement of claim relates to proposed paragraphs 34A - 34F dealing with what is referred to as the "Primrose transfer". 23Paragraphs 34A - 34C provide: 34A Up to 28 March 2007, the Third Defendant held shares in Paul Harris Pty Limited ('Primrose Shares') as an asset of the Harris Family Trust. 34B On 28 March 2007 the Third Defendant transferred the Primrose Shares to the First Defendant ('Primrose Transfer'). 34C The Primrose Transfer was not effected in accordance with Clause 6(h) of the Trust Deed. 24The difficulty with this pleading is that it gives absolutely no indication of how it is said that the Primrose transfer was not effected in accordance with clause 6H of the trust deed. I do not regard this as merely a matter of particulars. 25It will be necessary, if this allegation is to be pressed, for the relevant provisions of clause 6H to be identified, and material facts to be pleaded to demonstrate what is at the moment nothing more than a conclusion that the Primrose transfer was allegedly not effected in accordance with the relevant provisions of the trust deed. 26This difficulty affects the balance of this part of the pleading, and will need to be attended to. 27Furthermore, paragraph 34F provides: 34F The First and/or Second Defendant breached the Director's Duty of Good Faith and/or the Director's Duty of Proper Purpose by: (a) the transfer of Primrose Shares to the First Defendant; (b) Knowingly assisting the Third Defendant in breaching the Trust Deed and or the Third Defendant's Fiduciary Duty; and/or (c) Effecting the Primrose Transfer. 28The difficulty with this allegation is that it asserts breach of duties owed not to the plaintiff but to the corporate third defendant. If this allegation is to be pressed, then, as counsel for the plaintiff ultimately seemed to accept, an application for leave under the Corporations Act 2001 (Cth) will have to be brought. 29Next, paragraph 81 of the proposed amended statement of claim provides: The First and Second defendants profited from breaches of trust and fraud on the trust powers pleaded above and are liable to account for the profits obtained thereby. 30This pleading is clearly embarrassing in its generality. There is no anterior allegation of profiting by the first and second defendants, the breaches of trust referred to are not properly identified nor, in my view, can one discern precisely how it is said the liability to account arises. Paragraph 81 cannot stand in its present form. If an allegation is to be made of that kind, it will be necessary for the pleading to be teased out so that all the relevant material facts are identified so that the defendants know exactly what case they are to meet. 31Paragraphs 82 and following of the proposed amended statement of claim raise a claim for oppression. Counsel for the plaintiff fairly conceded that this was something not in contemplation at the time the matter was before Hallen J. However, because of the view I have come to in answer to what I have referred to above as the "first question", I would allow a pleading including this claim to be filed. 32The particular difficulty in it at the moment relates to paragraph 91(d) which is: "Ordering restitution to the Third Defendant of the Pittwater Net Proceeds to be held by the Third Defendant upon terms of the Harris Family Trust". A similar problem occurs in paragraph 91(f) which is: "Ordering restitution to the Third Defendant of the proceeds of the distribution referred to in the preceding sub-paragraph to be held by the Third Defendant upon the terms of the Harris Family Trust". 33Both of the subparagraphs suffer from the vice that they do not identify from whom it is said restitution should be ordered. That matter would have to be pleaded with particularity and, to the extent that this has not already been done in the antecedent paragraphs, material facts pleaded as to how it is said that the particular parties ultimately included in those paragraphs are liable to make the restitution sought. 34Paragraphs 94 and following of the proposed amended statement of claim make a claim under the heading of "Failure to Apply Trust Fund on Vesting Day". Paragraph 97 of the proposed amended statement of claim commences with the chapeau, "On the Vesting Day the Trust Fund included interest in the following entities and land", and goes on to list a number of corporations and one piece of property. However, the allegation is completely devoid of any specificity as to the nature of the interest said to have been held by the trust fund in those entities and land. Again, I do not think this is merely a matter of further particulars. 35Any ultimately filed amended statement of claim will have to be verified by the plaintiff. In so far as she wishes to make allegations (which I am informed by counsel that the defendant will be seriously in contest) that certain assets were held in the relevant trust fund, then those allegations should be made with particularity in the substance of the pleading so that they may be pleaded to with precision. 36Finally, paragraph 103 of the proposed amended statement of claim provides: "The First and or Second Defendants breached the Director's Duty of Good Faith and or the Director's Duty of Proper Purpose by knowingly assisting the Third Defendant in breaching the Trust Deed and or the Third Defendant's Fiduciary Duty". 37This allegation suffers from the same difficulty as paragraph 34F of the proposed amended statement of claim, namely it asserts breach of a duty owed to the corporate third defendant. Again, insofar as the claim in paragraph 103 is to be asserted, leave under the Corporations Act 2001 (Cth) will be required. 38The appropriate course today is for the present motion to be dismissed, but on the basis that leave is granted to the plaintiff to file a further motion seeking to bring in a further version of a proposed amended statement of claim which deals with, as best as the plaintiff is able, the matters that have persuaded me that the document in its current form ought not be filed. That motion should also include, to the extent necessary, any application that is to be made under the Corporations Act 2001 (Cth) for leave to bring proceedings on behalf of the corporate third defendant. 39In relation to costs, it is clear that costs should follow the event insofar as I propose to dismiss the motion that is before me. 40The defendants have asked for any costs order that I make to be assessed and payable forthwith. While I appreciate that what has occurred over the last few months would have been a source of intense frustration to them, I am not satisfied that the circumstances are such as to displace what would be the ordinary position under the rules that an interlocutory costs order of this kind would not be assessed or payable until the conclusion of the proceedings. Accordingly, I decline the application for the costs order that I will make to be assessed and payable forthwith. 41Because I am not permitting the proposed amended statement of claim to be filed, no question arises of an order being made in favour of the defendants for their costs thrown away by reason of any of the proposed amendments. That aspect of the matter will be dealt with if, and to the extent that, the judicial officer who comes to deal with the next notice of motion for leave to amend allows amendments to be made. In that event, I do not understand the plaintiff will resist the usual order if any amendments are allowed, that the defendants should have their costs of that application and of any costs thrown away by reason of the amendments. 42Finally, in relation to the question of the costs of the plaintiff's motion, the defendants draw attention to their solicitors' letter of 2 July 2013 to the plaintiff's solicitor. That letter alleged a number of the deficiencies which, as a matter of pleading, I have accepted were well made. The letter also objects, at the level of principle, to the filing of much of the proposed amended statement of claim as going beyond what is described as "the scope of the leave granted by Hallen J". The letter concludes with a statement to the effect that if, notwithstanding the contents of the letter, the plaintiff sought leave to file the proposed amended statement of claim, that application would be opposed, and the letter relied upon in support of an application for indemnity costs. The defendants apply for the costs of the motion on the indemnity basis. 43I decline to order costs on the indemnity basis. I accept the plaintiff's submission that, given the fundamental objection raised by the defendants based upon what they submitted was "the scope of the leave granted by Hallen J", there was no alternative but for the plaintiff to bring the application. While I have accepted a number of the criticisms of the form of the pleading made by the defendants, nevertheless the plaintiff has satisfied me that she is not to be constrained by what, on one view, appeared to be a limited scope of leave granted by Hallen J, and that she should be afforded the opportunity to agitate all of the topics raised in the proposed amended statement of claim. 44There is no doubt that the defendants are entitled to their costs, given that the document the subject of the motion is not to be filed. However, given their solicitors' letter raised the more fundamental objection which I have not accepted, the letter does not provide a proper basis for me to displace the usual situation of costs being assessed on the ordinary basis. 45The Court's orders are: (1)The plaintiff's notice of motion filed 4 July 2013 is dismissed. (2)The plaintiff is granted leave to file and serve a notice of motion for leave to amend its statement of claim in such form as she may be advised and, to the extent necessary, for leave under the Corporations Act 2001 (Cth) such motion to be filed on or before Friday 11 October 2013 with any affidavit in support. (3)The plaintiff pay the defendants' costs of and incidental to the plaintiff's notice of motion filed 4 July 2013. (4)The motion referred to in order (2) above, and the proceedings generally, are listed for directions before the Registrar on Friday 18 October 2013.