On 9 March 2018, the Court published its primary judgment dealing with a notice of motion by the defendants to strike out and dismiss the plaintiffs' further amended statement of claim (FASOC) and a notice of motion by the plaintiffs seeking leave to file a second further amended statement of claim (2FASOC): Mahommed v Unicomb [2018] NSWSC 291.
At [193], I asked the parties to bring in short minutes of order to give effect to the reasons for judgment.
I indicated that I would hear the parties concerning the appropriate costs orders to be made.
At a directions hearing on 5 June 2018, I was advised that the second defendant, Greenhills Securities Pty Ltd (Greenhills), was of the view that in the primary judgment the Court had not dealt with an aspect of its claim, being that the claim made against it by the second plaintiff, Loire Consultants Pty Ltd (Loire), in pars 15 to 20 of the FASOC should be struck out.
It appeared then to be, and has subsequently proved to be, exceedingly unhelpful that Greenhills delayed as long as it did in advising the Court that it may be necessary to revisit the primary judgment. As will be obvious from a reading of the primary judgment, the pleading issues raised by the notices of motion were exceedingly complex. The delay has exacerbated the difficulty in the Court determining the circumstances that led the Court to determine only the issues dealt with in the primary judgment.
The point now taken by Greenhills is that, while at the hearing of the notices of motion it accepted that the claim made against it by Mr Mohammed was sufficiently well pleaded to go to trial, Greenhills did not concede that the claim pleaded against it by Loire in pars 15 to 20 of the FASOC had been properly pleaded. Greenhills' position was that those paragraphs should have been struck out.
This matter was dealt with at the hearing at T 7.47, where it does appear that counsel only said that the claim between Mr Mohammed and Greenhills could proceed.
In the circumstances, there is no point in the Court entering upon a detailed analysis of what has happened. In their written submissions for the hearing of the motions dated 15 November 2017, the defendants dealt with the FASOC between Loire and both defendants in Part D. Towards the end of those submissions, in par 59, the defendants submitted: "In the light of the above, in so far as the FASOC seeks to advance claims by Loire against Mrs Unicomb and Mr Unicomb, the FAS should be struck out. It is not a pleading to which the Court should require the defendants to plead…"
The reference to Mr Unicomb in this submission, I now appreciate, must have been an error, as Mr Unicomb is not a party to these proceedings. It must have been intended to refer to Greenhills. I can only suspect that the reference to the Unicombs, and not Greenhills, caused the Court to think that the defendants were only complaining about the claim made by the plaintiffs in the FASOC against Mrs Unicomb. Be that as it may, when the defendants' submissions are looked at as a whole, it is sufficiently clear that Greenhills did maintain a submission that the pleading of the claim by Loire against it was inadequate, and should be struck out.
I will now deal with that aspect of Greenhills' claim that was omitted from the primary judgment.
It is appropriate to begin by referring to the part of Mr Mohammed's claim against Greenhills that Greenhills accepts has been adequately pleaded.
In par 1 of the FASOC, the plaintiffs allege that Mr Mohammed is the assignee from, among other parties, Loire, "of their debts and legal choses in action against the defendants in respect of the advance by Loire to Greenhills of $207,594.27 on about 5 March 2010". The assignment was made by deed on 12 November 2015.
After a number of introductory allegations (pars 2 to 8), the plaintiffs plead in pars 9 to 13 a claim based upon the allegation that Mr Unicomb arranged a loan to Loire from Eclipse Prudent Mortgage Corporation Ltd (Eclipse), which loan was secured over the property of the trust of which Loire was trustee. The plaintiffs then allege in par 10 that, on about 5 March 2010, Loire advanced the sum of $207,594.27 to Greenhills. Then in par 11, Mr Mahommed makes a claim as assignee from Loire against Greenhills for repayment of the debt.
Paragraph 12 is pleaded "Further or alternatively" to the claim in par 11. It alleges that the $207,594.27 was, relevantly, paid to Greenhills "at the oral or implied request of Greenhills", and that Greenhills agreed to repay the sum to Loire on demand.
Paragraph 13 alleges that both Loire and Mr Mohammed requested Greenhills to repay the sum.
The difference between the claim pleaded in pars 10 and 11 on the one hand, and the claim pleaded in pars 12 and 13 on the other hand, is that the former alleges an express loan, while the latter only alleges that the money was paid to Greenhills at its oral or implied request, so that there was an implied agreement to repay it.
As the FASOC alleges in par 1, as stated above, that Loire's "debts and legal choses in action" had been assigned to Mr Mohammed, it may be that Mr Mohammed was the only party who was entitled to make the request alleged in par 13.
It is not necessary to mention par 14 of the FASOC, because, as Greenhills acknowledged in its submissions, that is only an allegation against Mrs Unicomb.
We then come to the paragraphs of the FASOC about which Greenhills now complains. As stated in Greenhills' 12 June 2018 submissions, Greenhills relies on pars 29 and 44 to 59 of its submissions dated 15 November 2017, and certain identified parts of the transcript of the hearing.
Paragraph 15 of the FASOC commences a claim that is described as being "Further or alternatively to the matters set out above". It contains an allegation by Mr Mohammed that Mr Unicomb owed fiduciary duties to Loire and the holders of units in the unit trust of which it was trustee "and clients".
No particulars are given in the FASOC of the allegations in par 15 concerning the basis of the fiduciary duties owed by Mr Unicomb to Loire.
The relevant time frame is shown in par 16 to be 5 March 2010, when the money borrowed by Loire from Eclipse was paid directly into the bank account of Greenhills. According to par 19, the money received by Greenhills was paid out between 5 March 2010 and 30 April 2010.
As pleaded in par 5(b) of the FASOC, Mr Unicomb was a director of Loire between 19 November 2009 and 23 November 2009, and from about 31 October 2010 to 22 August 2014. Consequently, his alleged directorship could not have been the source of the fiduciary duties alleged in par 15 in respect of the time period mentioned above.
However, in par 5(d) of the FASOC, there is an allegation that Mr Unicomb "was at all material times" the tax accountant and investment adviser to Loire, the trust of which it was trustee "and all clients involved in the business affairs of that trust".
The allegation in par 5(d) appears to be an adequately pleaded foundation for the existence of the fiduciary duties alleged in par 15 in the context of the allegations in the FASOC concerning the conduct of Mr Unicomb.
It is alleged in par 16 of the FASOC that, in breach of the fiduciary duties, Mr Unicomb "dishonestly or fraudulently and with the design that such funds be used or disbursed other than solely for the purposes of Loire" on about 5 March 2010 caused Eclipse to pay the loan funds borrowed by Loire directly into the bank account of Greenhills.
Greenhills' complaint about this paragraph is found in pars 45 to 47 of its original submissions. It alleges that par 16 does not contain the level of detail required. The substantive point made was that it had earlier been pleaded that the funds borrowed from Eclipse were a loan repayable on demand, and the question is asked why is it alleged that the payment involved a breach of fiduciary duty, dishonesty and fraud. Greenhills submitted that it is not sufficient to plead the allegations by simply stating a conclusion.
I do not accept the first complaint made by Greenhills. It is true that if the debt claim by Mr Mohammed succeeds, that claim may be inconsistent with the breach of duty claim that is subsequently made in the alternative. However, it must be remembered that the claim is pleaded in the alternative. It is possible that the Court will not find that Greenhills became indebted to Loire (by a debt that has been assigned to Mr Mohammed).
As to the balance of the complaint, I do not accept that it is realistic to consider each paragraph in the FASOC in isolation from the others. In my view it is tolerably clear that par 16 should be read with pars 17 to 20 in order to understand the nature of the breach of fiduciary duty and dishonesty or fraud that is alleged against Mr Unicomb, and for which Greenhills is sought to be made liable.
Paragraph 17 is an allegation that the deposit of the funds of Loire "was made to and received by Greenhills Securities upon the express trust and representations made by Mr Unicomb on its behalf to Mr Dixon on behalf of Loire", on the basis that the funds "would be used or applied exclusively in or towards the development, subdivision and realisation of the Lovedale Road Property". That property is alleged in par 8 to have been acquired by Loire on about 9 October 2009 as trustee of the Lovedale Unit Trust. The balance of par 17 alleges, in substance, that Mr Unicomb represented to Mr Dixon on behalf of Loire that the funds should be paid into Greenhills' bank account because Loire did not have a bank account of its own, and that Mr Unicomb's accountancy firm would provide or procure all accounting, banking and taxation services for Loire.
Paragraph 17 is a reasonably clear allegation that Mr Unicomb, who was the tax accountant and investment adviser to Loire, represented to Mr Dixon on behalf of Loire that the money borrowed by Loire from Eclipse should be paid into Greenhills' bank account, because Loire did not have one, and the money would be managed by Mr Unicomb's accountancy firm to be applied exclusively towards the development of the Lovedale Road Property.
It is a relatively straightforward matter to understand how, upon receipt of the money loaned by Eclipse to Loire, Greenhills would hold the money on trust for Loire to be expended for the purposes stated.
Greenhills argued that the allegation that the funds were received "upon the express trust and representations" is unclear. In stating the point this way, Greenhills has omitted the words found at the beginning of par 17 "made by Mr Unicomb on its behalf to Mr Dixon on behalf of Loire". The allegation is that Mr Unicomb procured Mr Dixon's agreement on behalf of Loire to pay the money borrowed by Loire from Eclipse directly to Greenhills, by representing that Greenhills, which had a bank account while Loire did not, would use the money for the stated benefit of Loire. That in my view as a pleading matter is an adequate basis for alleging that Greenhills upon receiving Loire's money held the money on trust to expend it for the benefit of Greenhills.
Greenhills also submitted that the matters specifically alleged in sub-pars (a) to (e) "tend to suggest a banking, ie debtor-creditor, relationship…not an express trust". I do not agree. As a matter of pleading, there is every possibility that the proper way to analyse the circumstances in which a company allegedly controlled by Loire's tax and investment adviser received Loire's money, because Loire did not have a bank account, for the purpose of expending the money only for Loire's benefit is that a trustee relationship was created.
Paragraph 18 then contains an allegation that, to the extent that there was a failure of the express purpose for which the trust funds were paid to Greenhills, Greenhills held such funds upon a resulting or constructive trust in favour of Loire. The effect of that allegation is that, to the extent that the funds were not expended for Loire's proper purposes as identified in par 17, the funds would be held upon a resulting or constructive trust in favour of Loire.
In par 17(a), there is an allegation that, between about 5 March 2010 and 13 April 2010, Mr Unicomb dishonestly and fraudulently and in breach of the fiduciary duties, caused Greenhills to use the funds other than for the agreed purposes, but substantially for the benefit of Mrs Unicomb, Greenhills and other persons. In par (2)(c) of the particulars, there is a list of the payments that were made.
Greenhills claimed that par 18 should be struck out, because it was dependent on par 17, the reference to "all the circumstances" is not a proper pleading of the material facts, and it is not apparent how the resulting or constructive trust is later said to result in any remedy. For the reasons that I have given above, I do not accept that par 17 has been pleaded inadequately. It seems sufficiently clear that "all the circumstances" are meant to be confined to the circumstances otherwise pleaded in the FASOC. Finally, if the money borrowed by Loire from Eclipse was paid into Greenhills's bank account, because Loire did not have one, to be paid out only for identified purposes for Loire's benefit, it is not a controversial allegation to allege that if the money had not been paid out for those purposes, it would be held on a resulting or constructive trust for Loire. I appreciate that the particulars to par 19 appear to suggest that all bar $13,182.28 of the money received by Greenhills was paid out for purposes that did not benefit Loire, but the allegation in par 18 is still legitimate in relation to that balance.
Paragraph 19(b) is an allegation concerning Greenhills' involvement in Mr Unicomb's conduct.
Paragraph 5(c) alleges that Mr Unicomb was a director of Greenhills only from 26 November 2010, which is too late to be relevant to the events that allegedly occurred between 5 March 2010 and 30 April 2010.
However, par 5(f) is an allegation that, at all material times, Mr Unicomb was the "controlling mind, director or de facto director of Greenhills".
The effect of par 19(b) is to allege that Greenhills, with knowledge of Mr Unicomb's design to wrongly use the funds of Loire, assisted him in that design, by using or disbursing the funds other than for the agreed purposes of Loire. Further, there is an allegation that Greenhills "dishonestly and fraudulently disbursed" the funds for purposes other than the agreed ones.
Particulars are given of the "actual or, alternatively constructive knowledge" of Greenhills, and also the basis upon which Greenhills' knowledge "is to be found or inferred".
It appears in substance that what is being alleged is that Mr Unicomb was the controlling mind of Greenhills (notwithstanding that Mrs Unicomb was the sole director of the company), and with knowledge of the basis upon which the money borrowed by Loire from Eclipse had been paid into Greenhills' bank account, had caused that money to be paid out for the benefit of Mrs Unicomb, Greenhills and other persons, and not for Loire's benefit, being the development of the Lovedale Road Property. So far as Greenhills is concerned, the effective allegation is that Mr Unicomb's knowledge was Greenhills' knowledge.
Greenhills argued that par 19 is bad because pars 16 and 17 are liable to be struck out, and it cannot stand by itself. I have already rejected the premise of this submission. Greenhills also submitted that the particulars to par 19 are unacceptable because they are in broad, opaque terms, or do not assist in identifying the facts actually relied upon to establish knowledge.
I do not accept that any inadequacy in the particulars requires the allegation in par 19 to be struck out. Particular (1)(a) may be sufficient in so far as its reference to par 5 would pick up the allegation in par 5(f) that I have referred to above. The allegation in par (1)(b) of the particulars to par 19 is very specific and obscure, but there was no evidence that has been brought to the Court's intention concerning the precise effect of the particular, and this complaint is not a proper ground for striking out the allegation in the paragraph. The thrust of the particulars in par (2) is that Greenhills and Mrs Unicomb, in so far as they may have received payments or benefits from Loire's money, failed to make enquiry of Mr Unicom that an honest and reasonable person would make. It may be that Greenhills is entitled to further particulars, and I accept that par (2)(b) is not very informative.
Paragraph 20 of the FASOC alleges:
By reason of the matters in paragraphs 15 to 19 above, Loire Consultants suffered loss and damage and claims against each of the defendants equitable compensation or damages.
It may be noted that while Mr Mohammed as assignee from Loire pleads the claim against Greenhills in debt in his own name as assignee, par 20 is a claim by Loire for equitable compensation or damages from Greenhills for its involvement in Mr Unicomb's breach of fiduciary duties owed to Loire, or for breach of the trusts alleged in pars 17 and 18.
As Greenhills noted in par 22 of its 12 June 2018 submissions, the assignment pleaded in par 1 of the FASOC was said to be an assignment of "debts and legal choses in action" to Mr Mohammed, but the claims in pars 15 to 20 of the FASOC appear to be in essence equitable claims.
The deed of assignment was in evidence on the hearing of the notices of motion. In recital C, the deed of assignment described the payment of $207,594.27 made by Loire to Greenhills on 12 March 2010 as "Debt 4". A total of five Debts were identified in the recitals. Recital J recited that each relevant assignor "has agreed hereby to assign to [Mr Mohammed] all of his or its rights, title or interest in, to and in respect of all LRUT Debts, including Debts 1-5 and all associated choses in action, rights to claim interest and costs and other rights and claims". That assignment is made by cl 1.
While in the context of dealing with this dispute as to the adequacy of the pleading in the FASOC it is not necessary for the Court to determine the issue, it appears that the alternative claim made by Loire against Greenhills in par 20 of the FASOC has been made on the basis that it is a claim against Greenhills for involvement in breach of fiduciary duty and for breach of trust that would not be considered to be an associated chose in action to Debt 4.
I have concluded that Greenhills' claim that pars 15 to 20 of the FASOC should be struck out for being defectively pleaded should be rejected. There may be aspects of the pleading that leave something to be desired as a matter of drafting, but I am satisfied that the paragraphs plead the facts that are material to Loire's claim for compensation sufficiently to survive a strikeout application. As I have observed, Loire may be entitled to some further particulars.
In the primary judgment, I indicated at [190] that an order should be made striking out the FASOC against Mrs Unicomb and refusing the plaintiffs' leave to file the 2FASOC against her. I also foreshadowed six other orders, which would give the plaintiffs one more limited opportunity to plead proper claims against the defendants.
The sixth proposed further order was: "In principle, Loire should be permitted to pursue a claim against Greenhills to recover Debt 4, on the same basis as Mr Mohammed seeks recovery of Debt 5 (about which Greenhills does not complain)". An outline of the six Debts the subject of the 2FASOC is set out at [38] of the principal judgment. Debts 1 to 3 involved payments made to or for the benefit of Mr Unicomb. I will put aside Debt 6, as for the reasons set out at [38], the manner in which the claim in respect of that Debt has been pleaded is obscure. Debts 4 and 5 are in a different position to the other claims, because they involve allegations that money to which Loire was entitled was paid to Greenhills. The fact of receipt of the money by Greenhills would naturally give rise to the possibility of legitimate claims for its return, because in the absence of some justification for the payment being made, Loire would be entitled to claim the repayment of the money. The money may have been recoverable on as simple a basis as a claim for money had and received.
The effect of the principal judgment in relation to the claims in the 2 FASOC that were not also made in the FASOC is that the plaintiffs' application for leave to file the draft pleading is rejected as against both defendants. I gave the plaintiffs a limited opportunity to try once more to plead additional claims against Mrs Unicomb. I gave the plaintiffs the right to seek leave to plead the same sort of claim against Greenhills in respect of Debt 4 that they had already pleaded in the FASOC in respect of Debt 5.
There remains for consideration the submissions made by Greenhills concerning the amendments contained in the draft 2FASOC to pars 16 to 19 of the FASOC. Those submissions are as set out in par 48 (as to par 16 of the FASOC), par 50 (par 18) and pars 54 to 57 (par 19) of Greenhills' 15 November 2017 submissions.
As to par 16 of the 2FASOC, Greenhills cannot complain about the removal of the fraud allegation.
As the submission made by Greenhills in relation to par 17 of the 2FASOC was only that it did not take Loire's case any further than the original par 17, given my acceptance of the original paragraph, Greenhills' submission is not a proper basis for rejecting the application for leave to amend the paragraph.
Greenhills made the same submissions in relation to the proposed amendments to par 18 that it made in relation to the proposed amendments to par 17. The result will be the same as for that paragraph.
The essence of the submissions made by Greenhills in relation to the proposed amendments to par 19 was that, in various ways, the changes proposed to the particulars increased the confusion and the inadequacy found in the original particulars. That submission may be true to some extent but on balance I do not consider that the further particulars are so inadequate as to warrant the Court rejecting them as amendments to par 19 of the FASOC.
I do not know what, if anything, has been done by the plaintiffs concerning the steps that are set out at [190] of the primary judgment. While I am prepared to give the plaintiffs leave to make the limited amendments contained in the draft 2FASOC that relate directly to the allegations in the FASOC that I have considered above, I would not actually make the order granting leave until the plaintiffs have submitted to Greenhills and to the Court by my associate a final draft of the 2FASOC that includes all of the permitted amendments and further amendments sought by the plaintiffs that are consistent with [190] of the primary judgment.
As I am unsure about the stage that these proceedings have reached, I propose to defer ruling on the costs orders that should be made in respect of the notices of motion dealt with in this and the primary judgment, until I have been provided with the information necessary to understand what the present position of the matter is in relation to the pleadings.
I understand that the defendants' submissions on costs are set out in pars 25 to 31 of its submissions dated 12 June 2018. I am not aware of receiving any submissions from the plaintiffs on the issue of costs.
It is regrettable that due to the misunderstanding referred to at the beginning of these reasons the Court has been required to deliver two judgments dealing with the notices of motion referred to at par 1 of the principal judgment.
It will be necessary for the parties to consider both judgments in order to propose appropriate short minutes of order to deal with both the orders that should be made on the notices of motion, and the orders for the future case management of the proceedings.
I will invite the parties to inform the Court of the present overall state of the proceedings so that the Court can be satisfied that the proceedings can be put on a proper footing for the future.
[3]
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Decision last updated: 28 September 2018