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[2017] QSC 19
Supreme Court of Queensland
2017-02-28
Applegarth J
Original judgment source is linked above.
LIMITATION OF ACTIONS - GENERAL MATTERS - claim for equitable compensation for being knowingly involved in a company director's breach of duty as a director - where the relevant facts for the purpose of deciding a limitation defence are not in dispute or uncertain - where the facts which gave rise to the claim for equitable compensation were known to the plaintiff more than six years before the claim was commenced - whether the limitation period for closely analogous claims under statute should be applied by analogy to the claim for equitable compensation
EQUITY - GENERAL PRINCIPLES - EQUITABLE DEFENCES - LACHES AND DELAY - whether the plaintiff's claim for equitable compensation is time-barred by analogy with statutory limitation periods - whether a recent decision of an intermediate appellate court on applying limitation periods by analogy should be followed
Competition and Consumer Act 2010 (Cth) sch 2
Corporations Act 2001 (Cth) s 181, s 182, s 1317K
Land Title Act 1994 (Qld) s 184
Limitation of Actions Act 1974 (Qld) s 5, s 10, s 27
Trade Practices Act 1974 (Cth) s 52, s 82
Trusts Act 1973 (Qld) s 5
Uniform Civil Procedure Rules 1999 (Qld) r 293
Adler v Australian Securities and Investments Commission [2003] NSWCA 131, cited
Auzhair Supplies Pty Ltd v Gerace [2014] HCASL 231
Barker v Duke Group Ltd [2005] SASC 81; (2005) 91 SASR 167, cited
Cassis v Kalfus [2001] NSWCA 460, cited
Cia de Seguros Imperio v Heath (REBX) Ltd [2000] EWCA Civ 219; [2001] 1 WLR 112 cited
Farah Constructions v Say-dee Pty Ltd (2007) 230 CLR 89, cited
Gerace v Auzhair Supplies Pty Ltd [2014] NSWCA 181; (2014) 87 NSWLR 435, followed
Hasler v Singtel Optus Pty Ltd [2014] NSWCA 266; (2014) 87 NSWLR 609, cited
Hillcrown Pty Ltd v O'Brien [2011] QCA 129, cited
Issa v Issa [2015] NSWSC 112, cited
J Wright Enterprises Pty Ltd (in liquidation) v Port Ballidu Pty Ltd [2010] QSC 213; [2010] QSC 214, cited
KM v HM [1992] 3 SCR 6, cited
Knox v Gye (1872) LR 5 HL 656, cited
Nolan v Nolan [2004] VSCA 109, cited
Paragon Finance Plc v DB Thakerar & Co [1998] EWCA Civ 1249; [1999] 1 All ER 400, cited
R v McNeill [1922] HCA 33; (1922) 31 CLR 76, cited
Sze Tu v Lowe (2014) 89 NSWLR 317, cited
Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514, cited
Williams v Central Bank of Nigeria [2014] UKSC 10; [2014] AC 1189, cited
Williams v Minister, Aboriginal Land Rights Act 1983 (1994) 35 NSWLR 497, cited
D G Clothier QC for the applicant/first and second defendants
D A Savage QC and I A Erskine for the respondent/plaintiff
Barry Nilsson for the applicant/first and second defendants
Creagh Weightman Lawyers for the respondent/plaintiff
[1] The plaintiff owned land that was mortgaged by a rogue director, O'Rourke, without its consent. He used an old power of attorney to register the mortgage, and subsequently used the money borrowed on the security of the mortgage for his own benefit.
[2] The solicitor's firm and the solicitor who acted for the lender in the transaction (the first and second defendants) are alleged to have been knowingly concerned in O'Rourke's misconduct. The solicitor:
- (a) registered an old, general power of attorney;
- (b) altered the already executed mortgage in registrable form by hand to recognise execution by an attorney; and
- (c) lodged the altered document for registration.
Because of the registration of the mortgage, the plaintiff suffered loss, including:
(a) payments made pursuant to the mortgage;
(b) legal costs in litigation commenced by the lender; and
(c) its liability under the mortgage (which had the protection of indefeasibility).
[3] In this proceeding the plaintiff sues the first and second defendants to recover its loss. Its claim seeks:
- (a) equitable compensation for their knowing involvement in O'Rourke's breach of duty;
- (b) compensation pursuant to statute for their being knowingly concerned in O'Rourke's misleading and deceptive conduct; and
- (c) damages for negligence.
[4] Their pleaded case, under both equitable and statutory claims, relies on essentially the same facts:
(a) a duty O'Rourke was subject to as a director, which arose both as a fiduciary duty under the general law and as a statutory duty under the Corporations Act 2001 (Cth);
(b) his breach of those duties;
(c) that the first and second defendants were concerned in and aided and abetted O'Rourke in his breach of his director's duties;
(d) that the conduct of O'Rourke which amounted to a breach of his director's duties constituted misleading and deceptive conduct, in contravention of statute;
(e) that the conduct of the first and second defendants, relied upon in
(c), meant that they aided and abetted, or otherwise were knowingly concerned in O'Rourke's contravention of statute;
(f) as a result of O'Rourke's breach of duty and contravening conduct, and also the first and second defendants' knowing involvement in that conduct, the plaintiff suffered loss and damage.
[5] The first and second defendants contend that the claims brought against them are time-barred. The statutory claim is said to be barred directly by statute. The equitable claim is said to be barred by "clear analogy with statutory limitation periods for equivalent claims at law". As the claims are time-barred, they therefore seek summary judgment. In doing so, they note that there is no plea by the plaintiff (or evidence) that there was concealed fraud or any other circumstance of unconscionability which denied the plaintiff the opportunity to sue within the limitation period. On the contrary, they allege the plaintiff had the opportunity to sue the first and second defendants within the limitation period, but failed to do so because of the alleged negligence of the third defendant. According to the first and second defendants, the alleged negligence of the third defendant is irrelevant to their application. Instead, what is relevant is that the plaintiff does not claim that any unconscionable conduct by the first and second defendants denied it the opportunity to sue. In any event, the first and second defendants point to uncontroversial evidence that the plaintiff's knowing involvement claim against the first and second defendants is based on facts that preceeded this action by more than six years.
[6] The following substantial issues arise:
- The relevant principle governing the circumstances in which equity applies by analogy a limitation period for a corresponding remedy at law. This issue includes the authority of Gerace v Auzhair Supplies Pty Ltd[1] and the application of what the plaintiff's submissions describe as "the discretion" to apply a limitation period by analogy.
- The application of the principle to the facts of this case. This issue includes whether the relevant facts are in dispute or uncertain, so as to not enable the Court on this application to determine the nature of the equitable claim and whether it is sufficiently analogous with the statute-barred claim to engage the principle.
- When the limitation period began and whether it had expired prior to the commencement of this proceeding. This issue includes:
- when the claimed loss was first suffered;
- when the plaintiff knew of the facts which gave rise to its equitable claim against the first and second defendants;
- whether the facts giving rise to the plaintiff's claim only became facts when judgment was given in other proceedings on 17 May 2010. According to the plaintiff, O'Rourke's breaches and the first and second defendants' knowing involvement in them were "mere allegations" and not facts until they were ruled on by the Court;
[7] The plaintiff's claim for equitable compensation concerns alleged knowing assistance in a breach of fiduciary duty. No statutory limitation period directly applies to that claim for equitable relief. However, such a claim may be subject to a statutory bar by analogy. This will be the case where there is a sufficient correspondence between the remedy in equity and the remedy at law. What is regarded by courts of equity as a sufficiently close similarity for this purpose involves a question of degree.[2]
[8] The circumstances in which a court will not apply a limitation period by analogy were discussed in 2014 by the New South Wales Court of Appeal in Gerace. That consideration occurred in the context of an argument by the appellants that equity applies the limitation statute applicable to a corresponding legal remedy "unless there is an equitable ground, such as concealed fraud, which makes it unconscionable for the respondent to be permitted to rely on the running of the statute as a bar."[3] The respondent argued that equity exercises a "residual discretion" not to apply the statutory bar. According to the respondent, regard can be had to any circumstances that, when applying the equitable doctrine of laches, will be taken into account in determining whether the delay constituted laches.
[9] Meagher JA (with whom Beazley P and Emmett JA agreed) undertook a comprehensive review of the authorities. Included was the 1872 case of Knox v Gye[4] in which Lord Westbury stated:
"... where the remedy in Equity is correspondent to the remedy at Law, and the latter is subject to a limit in point of time by the Statute of Limitations, a Court of Equity acts by analogy to the statute, and imposes on the remedy it affords the same limitation. This is the meaning of the common phrase, that a Court of Equity acts by analogy to the Statute of Limitations, the meaning being, that where the suit in Equity corresponds with an action at Law which is included in the words of the statute, a Court of Equity adopts the enactment of the statute as its own rule of procedure. But if any proceeding in Equity be included within the words of the statute, there a Court of Equity, like a Court of Law, acts in obedience to the statute."
[10] Meagher JA considered the principles by reference to which equity declines to apply a statutory limitation period or postpones the time from which the limitation period, applicable by analogy, is taken to commence. The authorities did not support the proposition that equity applies a limitation statute as part of the law of laches and allows as exceptions to the application of the statute any exceptions that are allowed in the law of laches.[5]
[11] A 1992 Canadian decision[6] supported the view that there is a "residual discretion" to decline to apply a statute by analogy. The remarks of La Forest J in that case were cited with approval by Kirby P in Williams v The Minister, Aboriginal Land Rights Act 1983.[7] However, the correctness of the statements of La Forest J was questioned in a later decision of the New South Wales Court of Appeal[8] and by the learned authors of Meagher, Gummow and Lehane's Equity: Doctrines and Remedies.
[12] After reviewing the authorities Meagher JA concluded:
"The authorities referred to above, and in particular R v McNeil, show that in purely equitable proceedings, where there is a corresponding remedy at law in respect of the same matter and that remedy is the subject of a statutory bar, equity will apply the bar by analogy unless there exists a ground which justifies its not doing so because reliance by the defendant on the statute would in the circumstances be unconscionable. They do not support the proposition that equity retains any broader discretion whether to apply the bar."[9]
The circumstances in which equity declines to apply a limitation statute by analogy were said to include "where fraudulent conduct of the defendant has denied the plaintiff the opportunity to sue within the statutory period".[10] Equity will not permit a defendant to rely upon a statutory bar by analogy where there has been fraudulent concealment.[11]
[13] The plaintiff in this matter questions the authority of Gerace and argues that there is a residual discretion to not apply the limitation statute if it is otherwise engaged. Unsurprisingly, the first and second defendants submit that I should follow Gerace, being the decision of an intermediate appellate court in relation to non-statutory law unless I am convinced that it is plainly wrong.[12] Relevantly, an application for special leave to appeal the decision is Gerace was refused on 10 December 2014. Hayne and Crennan JJ saw "no reason to doubt the correctness of the decision of the Court of Appeal" and concluded that an appeal to the High Court would enjoy insufficient prospects of success to warrant a grant of special leave to appeal.[13] The decision in Gerace was followed in Sze Tu v Lowe[14] and taken to establish that where a limitation statute applies by analogy, equity does not retain a general discretion to decline to apply it.[15]
[14] The plaintiff submits there has been no occasion where Gerace has been considered or followed in Queensland. However, that is not a reason to not follow the decision, particularly where the limitation statute in Queensland,[16] like the limitation statute considered in Gerace, recognises that limitation periods "may be applied by analogy" to a claim for equitable relief. The Limitation of Actions Act 1974 should be taken to have been enacted against the background of the pre-1974 authorities more recently discussed in Gerace. A passing reference in the Queensland Law Reform Commission's 1998 review of the 1974 Act[17] to the Canadian decision in KM v HM does not call for a different conclusion.
[15] The plaintiff's submissions note the comments of White J in the 2015 case of . These raised the possibility that the High Court decision in left open the possibility of declining to apply a statute of limitations by analogy where to do so "would be unjust". White J did not explore what was meant by "unjust" in that context, for example, whether it connoted that it would be "inequitable" to rely on the limitation provision. White J thought it arguable that the statement in that equity does not retain a residual discretion not to apply a statute of limitations in its exclusive jurisdiction was not part of the ratio of . His Honour concluded:
"If the circumstances of the case make it unjust to apply the statute of limitations by analogy to prevent a plaintiff from obtaining an equitable remedy arising from the defendant's breach of fiduciary duty so that it would be against conscience for the court to apply a rule founded on the analogy, it is arguable that it would be unconscientious for the defendant to rely on the analogical application of the statute. That is not a question which should be determined on an application for summary dismissal. The resolution of the question may depend upon findings of fact in relation to the nature and extent of any breach of fiduciary duty that is established."
[16] Those observations do not support the existence of a broad, residual discretion not to apply a statute of limitations by analogy because, in some broad sense, to do so would create some sort of practical injustice for the plaintiff. They suggest that a court might decline to apply a limitation period by analogy if it would be against the conscience of the court to do so. In any event, any doubt expressed by White J in Issa v Issa about whether Gerace concludes the question of whether a residual discretion exists does not persuade me that Gerace is plainly wrong. Therefore, I should follow it.
[17] The essential facts are those pleaded by the plaintiff and reflect those pleaded by it in proceedings commenced in late 2007 by a lender against it. They relate to events in 2006 when one of the plaintiff's then directors, O'Rourke, obtained money by mortgaging the plaintiff's property without its consent. O'Rourke lived in Australia and the plaintiff's other two directors at the time lived overseas.
[18] On 28 July 2006, O'Rourke executed a loan agreement and a mortgage over a property which the plaintiff owned at South Brisbane, purportedly on behalf of the plaintiff, and which was witnessed. The mortgage was in favour of J Wright Enterprises Pty Ltd and was in connection with a loan of $445,000, which was repayable with interest within two months of the advance. The words "Trevor James O'Rourke - Director" were typed below O'Rourke's signature. However, the words "its duly constituted attorney under power of attorney No 709812208" were written in hand below these words. A power of attorney dated 20 November 1997 existed. It had been prepared before the two other directors became directors. The overseas directors knew nothing of the loan or the mortgage. Since O'Rourke was not able to secure the signature of another director of the plaintiff, he relied upon the power of attorney executed some nine years earlier to effect the transactions.
[19] The plaintiff has maintained since 2008 that the handwritten words indicating that O'Rourke signed the mortgage as the plaintiff's duly constituted attorney under the power of attorney were inserted by Grant (the second defendant) after the mortgage had been signed by O'Rourke and witnessed. The plaintiff alleges that Grant (who was employed at the time by the lender's solicitors, the first defendant) thereby aided and abetted O'Rourke's misconduct. Grant's handwriting was alleged by the plaintiff to amount to a fraudulent misrepresentation that the mortgage was executed pursuant to a power of attorney, and that the circumstances were such as to alert Grant to the fact that O'Rourke was acting without authority. Grant, acting as the employed solicitor for the lender, registered the old power of attorney and lodged the mortgage for registration after altering the mortgage to represent that it had been executed by O'Rourke as attorney.
[20] The loan agreement named the plaintiff, O'Rourke and his wife as borrowers and O'Rourke used the money for his own benefit. O'Rourke went bankrupt in February 2008, having failed to repay the mortgage debt. The plaintiff refused to repay the moneys that were secured by the mortgage and was sued by J Wright, which also sought to recover possession of the property. The third defendant in this proceeding represented the plaintiff in that proceeding. In that proceeding the plaintiff contended that O'Rourke entered into the transaction for his own benefit, had no authority from the plaintiff to enter into the transaction and that the mortgage did not benefit from the indefeasibility provisions of the (Qld). This was because Grant's handwritten insertion amounted to a fraudulent misrepresentation as to the regular execution of the mortgage pursuant to the power of attorney, so that the fraud exception to indefeasibility was engaged.
[24] The matters relied upon by the plaintiff in its pleading in the proceeding are effectively repeated in the claims made by it against the first and second defendants in this proceeding. As outlined in the introduction to this judgment, the plaintiff alleges a breach of duty by O'Rourke. The relevant duty or duties are said to be "imposed by law" upon O'Rourke as director, either as fiduciary duties or as statutory duties under the Corporations Act 2001 (Cth). O'Rourke's breaches of duty, as pleaded, reflect the misconduct alleged in the earlier proceedings, and include his reliance upon a power of attorney which he knew did not authorise him to enter into the loan agreement or the mortgage.
[25] Paragraphs 16 to 18 of the pleading allege O'Rourke's breach of duty. The same conduct of O'Rourke is alleged to have conveyed to the Registrar of Titles a false impression, statement or representation that the mortgagor knew or approved the registration of the mortgage signed by him. This conduct is alleged to have contravened s 52 of the Trade Practices Act 1974 (Cth) ("TPA").
[26] Part V of the plaintiff's pleading concerns the conduct of the second defendant (and by him, the first defendant) in causing the unregistered power of attorney to be registered and in inserting the words in the mortgage that it had been executed by O'Rourke under that power of attorney. The conduct of the second defendant (any by him the first defendant) is alleged in this part of the pleading to have aided and abetted O'Rourke in his breach of his director's duties. The same matters (which are pleaded in paragraphs 19, 20 and 21 of the pleading) are relied upon in support of the conclusion that the first and second defendants aided and abetted or were otherwise knowingly concerned in O'Rourke's contravention of the .
[28] The first and second defendants plead limitation defences. These are based upon the proposition that the plaintiff suffered loss more than six years before the commencement of this proceeding, including the payment of $229,454 in November 2006 and incurring a liability to pay, which included paying legal costs before 30 July 2009. The first and second defendants also plead that the plaintiff's claim for equitable compensation is barred by analogy. Amongst other things, they rely upon statutory limitation periods under the Limitation of Actions Act 1974 (Qld) and relevant provisions of the TPA.[26] They also plead that the alleged conduct of the first and second defendants was discovered, or could with reasonable diligence have been discovered, by the plaintiff (including through its agent the third defendant) more than six years before the commencement of the proceeding.
[29] The plaintiff's reply to the defence of the first and second defendants asserts that insofar as the action is one for negligence or breach of the TPA/ACL, the cause of action arose on 17 May 2010. It also denies that the claim for equitable compensation is barred by analogy on the basis that the allegations in paragraph 25(b) of the defence were untrue or were an inaccurate statement of the law. Importantly, the reply does not allege when the plaintiff first became aware (either itself or through its then solicitors) of the facts upon which it now claims against the first and second defendant. The reply does not specifically deny that the plaintiff became aware (either directly or through its then solicitors) of the facts upon which its claims for relief against the first and second defendant in these proceedings are based, more than six years before the proceeding was commenced. Indeed, the plaintiff positively pleads in its statement of claim that its then solicitors (the third defendant) "well knew of" the facts pleaded in paragraphs 16 to 18 of the pleading comprising O'Rourke's breach of duties and the facts pleaded in paragraphs 19 to 21of the pleading comprising the second defendant's involvement in those breaches of duty by or about the date of completion of disclosure in the J Wright litigation or alternatively, by no later than 25 May 2009.
Application of the relevant principle to the facts
[32] In many instances it is not possible, at an interlocutory stage in a proceeding in which a limitation defence is raised, for a court to conclude whether the limitation defence is established. For example, the date upon which loss was first suffered may be contentious or, where relevant, the date upon which the plaintiff became aware of the facts upon which a right to relief was founded may be uncertain. However, that is not always the case and, in some circumstances, it is possible for a court to conclude that a limitation defence is clearly established.
[33] The plaintiff's submissions raise the issue of whether the Court is able, at this stage, to determine the nature of the equitable claim and to determine whether it so closely resembles the statute-barred claim that the analogy will apply. In my view, the Court is in a position to do so. The facts upon which the plaintiff claims equitable compensation are apparent from its pleading. For the purpose of the argument one assumes that the plaintiff will prove those facts at any trial. The essential issue is whether there is a sufficiently close correspondence between:
- (a) the breach of director's duty and the first and second defendant's alleged knowing involvement in it, which found the plaintiff's claim for equitable compensation; and
- (b) the breach of the same director's duty and the first and second defendants' knowing involvement in it, which would found a claim against the first and second defendants for being knowingly concerned in O'Rourke breach of his statutory duties as a director
so as to apply the limitation statute which is applicable to the former claim by analogy.
[34] In my view, the facts underlying the claim for breach of fiduciary duty by O'Rourke and the first and second defendants' knowing involvement in it closely resemble the time-barred statutory cause of action for compensation in respect of the breach of director's duty by O'Rourke, and the first and second defendants being "knowingly concerned" in it. The content of O'Rourke's fiduciary duty as a company director and his statutory duty as a company director are pleaded by the plaintiff to be the same. If the plaintiff had pursued relief under the Corporations Act for a breach of O'Rourke's duties as a director and for the first and second defendants being knowingly concerned in those breaches of duty, then the same conduct relied upon by the plaintiff as constituting a breach of his fiduciary duty would have been conduct which breached his statutory duties as a director. O'Rourke would have been liable under the provisions of the Corporations Act for breaches of duty imposed by s 181 and s 182. The same conduct of the first and second defendants which is alleged to have amounted to being knowingly involved in O'Rourke's breach of fiduciary duty would have amounted to their being knowingly concerned in his contravention of the Corporations Act. The conduct would have caused the same loss for which compensation is available under statute as the loss for which equitable compensation is sought.
[35] A cause of action under the Corporations Act would have been met by a limitation defence. Civil claims for compensation in respect of a contravention, and being knowingly involved in such a contravention, are subject to the statutory limitation period of six years contained in of the . That six year statutory limitation period would run from the date of the contravention. That six year time-bar should be applied by analogy unless there exists a ground which makes it unconscionable to permit the first and second defendants to rely on the time limitation.
Would reliance by the first and second defendants on statutory limitation periods be unconscionable in the circumstances?
[41] As noted, the plaintiff does not allege that concealed fraud or any other circumstances of unconscionability on the part of the first and second defendants denied it the opportunity to sue within any of the periods of limitation I have mentioned. The first and second defendants are not sued for fraud and the causes of action pursued against them for being knowingly concerned in O'Rourke's breaches of his director's duties do not include fraud as an element of the cause of action. Though the claims for compensation based upon O'Rourke's breaches of fiduciary duty may be coloured by allegations of dishonesty, this does not alter the fact that the claims for equitable compensation and claims at common law or for contravention of statute and knowing participation in them are clearly analogous. Any dishonesty colours all of the claims.
[42] The fact that the various claims which are closely analogous arise as a result of dishonest conduct on the part of one or more of the relevant actors does not make it unconscientious for the first and second defendants to rely upon a limitation defence by way of analogy. This is because the conduct of O'Rourke and the conduct of the first and second defendants was known to the plaintiff by 2008 at the latest. The plaintiff knew of the relevant conduct and its character and pleaded it in the J Wright proceeding in 2008. Practically identical allegations are pleaded in this proceeding, along with the allegation against the third defendant that the third defendant knew of the facts comprising O'Rourke's breach of duties and the first and second defendants' involvement in them by no later than 25 May 2009 when a third amended defence was filed in the J Wright litigation.
[43] The plaintiff in this proceeding and in the argument before me has not alleged that this is a case of concealed fraud or that the first and second defendants fraudulently concealed their wrongdoing during 2008, or thereafter. They do not allege fraudulent conduct by the first or second defendant denied the plaintiff the opportunity to sue within the limitation period which is raised against them. Apart from not pleading or advancing any evidence in support of a case of fraudulent concealment, the plaintiff has not pleaded or advanced any other ground of unconscionability in the first and second defendant placing reliance upon statutes of limitation. In fact, it alleges that its then solicitor knew in 2008 of the facts which found its present claim against the first and second defendants. Moreover, the matter set out in the annexure to the first and second defendants' submissions (which are not disputed) show that the plaintiff knew of those facts by May 2008 when it instructed the third defendant to file an amended defence in the J Wright proceeding. The facts that the plaintiff knew in 2008 are not in dispute. In short, it knew about O'Rourke's conduct and the conduct of the first defendant (by the second defendant) which founds its present claim for equitable compensation against the first and second defendants.
[51] For completeness, and having regard to the observations of White J in Issa v Issa upon which reliance was placed by the plaintiff, if a "residual discretion" not to apply a limitation statute by analogy exists in circumstances in which it would be "unconscientious" for the defendant to rely upon the application of the statute by analogy, then for similar reasons it is not unconscientious for the first and second defendants to rely upon the limitation statutes which apply to analogous claims.
[52] If a discretion exists, then it is arguable that the six year limitation period should run, not from the date of the conduct of the first and second defendants by which they were knowingly concerned in the contravention of statute, and should not even run from the date that loss was first suffered, but, in accordance with equitable principles, should run from when the plaintiff became aware of the facts upon which its right to relief is founded. However, this would not assist the plaintiff to avoid a time bar. This is because, as noted, the plaintiff knew in 2008 about O'Rourke's conduct and the conduct of the first defendant (by the second defendant) which founds its present claim for equitable compensation against the first and second defendants.
When did the limitation period start to run and had it expired by 30 July 2015?
[53] The relevant conduct which is the subject of the claim for equitable compensation in this proceeding, being O'Rourke's conduct in breach of his duties as a director and the first and second defendants' knowing involvement in this breach, occurred in or around July-August 2006. The statutory limitation period of six years in relation to O'Rourke's contravention of his statutory duties as a director and other parties being concerned in that contravention ran from the date of that contravention.
[54] It seems that the plaintiff first suffered loss when the mortgage was registered over its property on 1 August 2006 and it became liable under that registered mortgage. In any event, it appears that an actual payment of $229,454 was made under that mortgage on 20 November 2006. Further, it incurred costs in connection with the registration of the mortgage, being costs incurred in its defence of the J Wright litigation in early 2008. Its pleading in this proceeding refers to legal costs incurred by it in 2008. It suffered loss by no later than 2008. Accordingly, it suffered loss more than six years prior to the commencement of proceedings on 31 July 2015.
[55] Importantly, it knew of the relevant facts by no later than mid-2008. Its knowledge of those facts is demonstrated by the undisputed contents of the annexure to the first and second defendants' submissions and the affidavit material upon which that annexure is based.
[56] In response, the plaintiff submits that those facts concerning the conduct of O'Rourke and the conduct of the first and second defendants in causing the mortgage to be registered and thereby causing the plaintiff loss were not "facts" until they were ruled upon by the Court in the J Wright litigation when judgment was delivered on 17 May 2010. I am unable to agree. These matters did not only become facts when they were subject to judicial findings in a judgment. They were facts known to the plaintiff. They were specifically pleaded in the J Wright litigation as facts, based upon the plaintiff's specific instructions. Facts do not cease to be facts simply because they are not admitted or are contested in proceedings. They did not only become facts when they were the subject of findings in a judgment on 17 May 2010.
[57] In summary, for the purpose of its claim for equitable compensation, time began to run no later than when the plaintiff became aware of the facts upon which its right to relief is founded. The plaintiff knew of the facts which gave rise to its equitable claim against the first and second defendants by no later than 2008.
[60] In order to grant summary judgment under r 293 the Court must be satisfied that the plaintiff has no real prospect of succeeding on all or part of its claim, and there is no need for a trial of the claim or a part of the claim. The power to order summary judgment should be exercised with great care.
[61] The plaintiff's claim for compensation based upon the first and second defendants' alleged knowing involvement in O'Rourke's breach of the TPA, and its claim in negligence are time-barred directly by statute. The plaintiff's claim for equitable compensation against the first and second defendants based upon O'Rourke's breach of fiduciary duty as a director is time-barred.
[62] I have applied the principle stated in Gerace to facts which are not disputed, including facts pleaded in the plaintiff's third amended statement of claim filed 21 November 2016 (which should be assumed in the plaintiff's favour for the purpose of this application). The result is that the claims which are pursued by the plaintiff against the first and second defendants in these proceedings are time-barred. The plaintiff therefore has no real prospect of succeeding, and, in the circumstances, there is no need for a trial of its claim against the first and second defendants. Subject to what follows, the first and second defendants have established an entitlement to summary judgment in respect of the plaintiff's claim.
An afterthought: a new case is previewed based upon an alleged breach of trust
[63] On 4 October 2016, Martin J made directions by consent in relation to a foreshadowed application by the first and second defendants, and, also an application by the third defendant which was listed for hearing on 11 November 2016. So far as the first and second defendants were concerned, directions were made for them to file an application to strike out the second amended statement claim and/or for summary judgment by 14 November 2016. This was done. The first and second defendants were directed to file an outline of submissions by 5 December 2016 and the plaintiff was to file its outline of submissions in response by 19 December 2016. In fact the first and second defendants' submissions were not filed until 16 December 2016. The matter was set down for hearing in the Civil List on 2 February 2017. The plaintiffs still had not filed their submissions the day before the hearing and therefore I directed them to deliver their submissions on the afternoon before the hearing. Their submissions were filed by leave on the day of the hearing. They contained no reference to any claim for breach of trust or to s 27 of the Limitation of Actions Act 1974 (Qld). That section relevantly provides:
(1) A period of limitation prescribed by this Act shall not apply to an action by a beneficiary under a trust, being an action -
- (a) in respect of a fraud or fraudulent breach of trust to which the trustee was a party or privy; or
- (b) to recover from the trustee trust property or the proceeds thereof in the possession of the trustee, or previously received by the trustee and converted to the trustee's use.
(2) Subject to subsection (1), an action by a beneficiary to recover trust property or in respect of a breach of trust, not being an action for which a period of limitation is prescribed by any other provision of this Act, shall not be brought after the expiration of 6 years from the date on which the right of action accrued.
[64] The absence of any reference to s 27 is hardly surprising. In this proceeding:
- the plaintiff is not alleged to be a "beneficiary under a trust";
- O'Rourke is not alleged to have been a trustee;
- the claim is not for a breach of trust (fraudulent or otherwise) to which O'Rourke was a party or privy; and
- the first and second defendants are not alleged to have received trust property, or to have knowingly assisted a breach of trust.
[65] Despite the absence of any reference to, or reliance upon, s 27 in the plaintiff's pleading or written submissions, in oral submissions senior counsel for the plaintiff referred to it. Particular reference was made to the fact that it contains an express exclusion from any limitation period which might be imposed by the Act, for example, a limitation period which would arise by application of s 10. Section 10 was submitted to be not applicable to actions for fraudulent breach of trust. So much may be accepted. However, the problem for the plaintiff is that this proceeding is not a claim by a beneficiary under a trust in respect of a fraud or a fraudulent breach of trust to which the trustee is a party or privy. Counsel for the plaintiff accepted that fact.
[66] Counsel for the plaintiff ventured in oral argument that O'Rourke, in taking the money the subject of the loan, along with his wife, was a person who held those funds on trust for the plaintiff because his receipt of them was in breach of fiduciary obligation.
[67] Faced with this new argument, counsel for the first and second defendants in reply stated that he was aware of an authority of the United Kingdom Supreme Court, namely
Williams v Central Bank of Nigeria, which was to the effect that did not apply to a claim against a participant in a breach of trust. Counsel offered to find the relevant authorities and to make supplementary submissions.
"It is unreal to refer to a person who receives property dishonestly as a "trustee", i.e. a person in whom trust is reposed, given that the trust is said to arise simply as a result of dishonest receipt."
[72] The decision in Williams commands respect and I should follow it. The provision under consideration in that case, like the provision under consideration in Nolan v Nolan, is materially identical to s 27(1)(a) of the Queensland Act. As a result, the words "trust" in the section does not include what has sometimes been referred to as a remedial constructive trust of the kind which might be imposed upon a party who knowingly received trust assets or dishonestly assisted in a breach of trust.
[73] This proceeding is one in which O'Rourke is alleged to have had duties imposed upon him as a company director. However, a company director is not a trustee, save in a metaphorical sense.[42] The claim made by the plaintiff is not one which alleges that O'Rourke was a "trustee" and the plaintiff was a "beneficiary". O'Rourke is not alleged to have been a trustee and to have breached his duties as a trustee. The first and second defendants are not alleged to have received trust property or induced or procured O'Rourke to breach a fiduciary duty imposed upon him in his position as a trustee.
[74] The plaintiff does not argue that the claim in this proceeding is one "in respect of" a fraud or fraudulent breach of trust to which the trustee was a party or privy. Such an argument is foreclosed by the interpretation given to the words "in respect of" in Williams. I respectfully adopt what was said by Lord Sumption[43] and by Lord Neuberger[44] about the meaning to be given to the expression "in respect of" in its statutory context. The relevant provision is concerned with actions against the trustee. A provision such as s 27(1)(a) of the Queensland Act can only be invoked by a beneficiary against a trustee, and not against a knowing recipient or a dishonest assister.
[75] In summary, the plaintiff's claim against the first and second defendants is "for equitable compensation or damages for Frews' involvement in O'Rourke's breach of duties". The breach of duties referred to are O'Rourke's breach of duties as director. His action is not one made by "a beneficiary under a trust". The action is not against a trustee (as that term should be understood in the context of s 27) in respect of a fraud, or fraudulent breach of trust to which the trustee was a party or privy. The section does not apply to a defendant who is alleged to have participated in a breach by a director of the director's fiduciary duties. Section 27(1)(a) does not apply to the plaintiff's claim.
"It should not, however, be thought that a similar course will be followed in all cases in which, as here, the announced intention to amend comes late and is unaccompanied by an affidavit deposing to the existence of further available facts or even an identification of what the facts might be."
[79] In deciding whether to exercise my discretion to dismiss the application on the basis of the plaintiff's unclaimed and unpleaded new case about a trust, I have regard to the philosophy of civil litigation and, more generally, the interests of justice. The plaintiff should not be punished because the foreshadowed claim is something of an afterthought. However, the "proposed new claim" is one which is outlined in only the broadest possible terms. Whilst the proposition that O'Rourke held the moneys which he received on trust is fairly easy to fathom, the alleged role of the first and second defendants in allegedly inducing a breach of that trust is not. The time at which the trust came into existence and what the first and second defendants then did to induce a breach of trust are not identified in even a general way, let alone in a draft pleading. A general allusion to such a possible claim in the course of oral submissions is not an appropriate basis upon which to decline to grant an application which should be granted on its merits, based upon the issues which were formulated in advance of the hearing.
[80] In addition, the very late floating of the idea of a claim for breach of trust does not permit any consideration of the implications of such a new claim upon the pleaded case against the third defendant, which is currently the subject of a reserved decision by another judge. A third amended statement of claim was filed on 21 November 2016 pursuant to leave granted by that judge on 11 November 2016. It was filed when the plaintiff was on notice of the first and second defendants' limitation defences and arguments. In my view, the plaintiff has had ample opportunity to formulate what is described as its proposed new claim being "an institutional constructive trust case as against persons inducing breach of trust." One is left to guess what the nature of that case is as against the first and second defendants and how it might overcome a limitation defence in circumstances in which the claim against the first and second defendants does not have the advantage of s 27(1)(a).
[81] In the circumstances, it is appropriate to determine the application for summary judgment in respect of the plaintiff's claim on the merits of that claim.
[82] The plaintiff's claim against the first and second defendants for their alleged involvement in the misleading and deceptive conduct of O'Rourke is subject to a six year limitation period.[49] The statutory cause of action for contravention of the TPA runs from the date upon which loss was first suffered.[50] On the plaintiff's own pleaded case, it suffered loss more than six years prior to the commencement of this proceeding on 30 July 2015. This part of the claim is time-barred.
[83] The plaintiff's purely equitable claim for compensation for the first and second defendants' alleged involvement in breaches by O'Rourke of his duties as a director is barred by analogy with statutory limitation periods for claims at law for knowing involvement in a breach of a director's duty. The analogy is based on the identical content of the relevant duty. According to the plaintiff, O'Rourke owed the same duty as a fiduciary as he owed under the Corporations Act. The first and second defendants are alleged to have been knowingly concerned in O'Rourke's breach of duty. O'Rourke's breaches, and their knowing involvement in them, are alleged to have caused loss. The loss claimed in this proceeding as equitable compensation would be the same loss sought as compensation under the statutory remedy. The close resemblance between the purely equitable claim and an available claim under statute means that the statutory limitation period should be applied by analogy. The purely equitable claim, like the analogous statutory claim, is time-barred.
[84] The plaintiff's claims a third cause of action in negligence, and the six year period ran from when loss was first suffered. This part of the claim also is time-barred.
[85] In the result, each of the three causes of action relied upon in the claim is time-barred.
[86] The power to grant summary judgment should be exercised with great care. However, in circumstances in which each of the causes of action relied upon by the plaintiff in its claim is time-barred, the plaintiff has no real prospects of succeeding on its claim, and there is no need for a trial of the claim.
[87] I propose to order as follows:
- Judgment for the first and second defendants pursuant to r 293 of the Uniform Civil Procedure Rules 1999 (Qld) for the whole of the plaintiff's claim;
- The plaintiff pay the first and second defendants' costs of and incidental to the application and the proceeding to be assessed on the standard basis.
[88] I will hear the parties, if required, as to the form of orders and whether there is any ground upon which to make a different order as to costs.
[1] (2014) 87 NSWLR 435; [2014] NSWCA 181 ("Gerace").
[2] Cia de Seguros Imperio v Heath (REBX) Ltd [2000] EWCA Civ 219; [2001] 1 WLR 112 at 120, citing Spry's Equitable Remedies 5th ed (1997) at 419-420.
[3] [2014] NSWCA 181; (2014) 87 NSWLR 435 at 442 [17].
[4] (1872) LR 5 HL 656 at 674.
[6] KM v HM [1992] 3 SCR 6.
[8] Cassis v Kalfus [2001] NSWCA 460.
[12] Farah Constructions v Say-dee Pty Ltd (2007) 230 CLR 89 at 152 [135].
[13] Auzhair Supplies Pty Ltd v Gerace [2014] HCASL 231.
[16] Limitations of Actions Act 1974, s 10(6)(b).
[17] Queensland Law Reform Commission_, Review of the Limitation of Actions Act 1974 (Qld),_ Report No 53 (1998) at 107.
[20] [2015] NSWSC 112 at [56].
[21] c.f. Gerace at 463 [105] per Emmett JA.
[25] J Wright Enterprises Pty Ltd (in liquidation) v Port Ballidu Pty Ltd [2010] QSC 213; [2010] QSC 214.
[26] Now the Competition and Consumer Act 2010 (Cth) sch 2 ('Australian Consumer Law').
[27] The plaintiff cites in this regard Adler v Australian Securities and Investments Commission [2003] NSWCA 131 at [707] - [709].
[28] Meagher, Gummow and Lehane's Equity: Doctrines and Remedies [36-100].
[30] [2014] UKSC 10; [2014] AC 1189 ("Williams").
[31] See Sze Tu v Lowe (2014) 89 NSWLR 317 at [330] - [338]. See also the terms of the relevant Australian statutes contained in Heydon & Leeming Jacob's Law of Trusts in Australia, 7th ed at [225] - [227] and Meagher, Gummow and Lehane's Equity: Doctrines and Remedies, 5th ed at [36-045] - [36-050].
[32] See for example Nolan v Nolan [2004] VSCA 109 at [15] - [16] and [53] - [82].
[33] [1998] EWCA Civ 1249; [1999] 1 All ER 400 at 413.
[37] See Nolan v Nolan [2004] VSCA 109; Barker v Duke Group Ltd [2005] SASC 81; (2005) 91 SASR 167.
[42] Clay v Clay (2001) 202 CLR 410 at [41], and see Barker v Duke Group at [75] - [76].
[46] Hasler v Singtel Optus Pty Ltd at 626 [74].
[47] Hillcrown Pty Ltd v O'Brien [2011] QCA 129.
[49] Formerly s 82(2) of the TPA; now s 236(2) of the Australian Consumer Law.
[50] Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514.
Port Ballidu Pty Ltd
Frews Lawyers & Ors [2017] QSC 19
(2005) 91 SASR 167
(2007) 230 CLR 89
(2014) 87 NSWLR 435
(2014) 87 NSWLR 609
(1922) 31 CLR 76
(2014) 89 NSWLR 317
(1992) 175 CLR 514
(1994) 35 NSWLR 497
(2001) 202 CLR 410
[21] The proceedings, which were commenced on 24 December 2007, progressed during 2008. For the reasons summarised in the annexure to the submissions of the first and second defendant, the plaintiff and its then solicitors were aware in 2008 of O'Rourke's misconduct and of the first and second defendants' alleged knowing involvement in it. As early as 17 March 2008 the plaintiff's then solicitors were noting that the second defendant had falsely represented to the Registrar of Titles that the mortgage had been signed by O'Rourke in his capacity as attorney in circumstances in which it had not been. Consideration was given over the following months to these issues and the solicitors sought the plaintiff's instructions to allege fraud against the solicitors. Specific instructions were sought in relation to the allegations contained in a draft pleading. The plaintiff's managing director, Mr Godwin, having reviewed the amended defence, specifically instructed the third defendant on 15 May 2008 that it was in order to file it. There was disclosure of documents in the proceeding in late 2008.
[22] In summary, by mid-2008 the plaintiff and its then solicitors were aware of the facts which gave rise to a pleading of O'Rourke and Grant's conduct in connection with the mortgage and its registration.
[23] Judgment in the 2007 proceeding between J Wright and the present plaintiff was delivered on 17 May 2010, and final orders were made on 18 June 2010.[25] The Court accepted many of the plaintiff's contentions. It found that O'Rourke had no authority to enter into the transaction or to execute the loan agreement and mortgage. It found that the loan agreement was not binding on the plaintiff. However, although it found that Grant inserted the handwritten words which the plaintiff contended he had written and was inclined to find that this amounted to a "statutory fraud", it concluded that any fraud could not be sheeted home to J Wright so as to enable the plaintiff to take advantage of the fraud exception to indefeasibility.
[27] O'Rourke's breach of his director's duties and contravention of the TPA, as well as the first and second defendant's conduct in being knowingly concerned in those breaches and contraventions, are alleged to have caused the plaintiff to suffer the loss and damage pleaded in paragraphs 32 to 34 of the pleading. Paragraph 36(c) alleges that the plaintiff suffered loss and damage "merely by reason of the lodgement, and subsequent registration, of the mortgage". Paragraph 36(d) pleads that the plaintiff incurred costs, including legal costs and outlays in the previous litigation, and particulars indicate that these include actual legal costs that were incurred and paid in 2008.
[30] As the annexure to the second and third defendants' submissions show, the plaintiff was well aware of the facts upon which its claims against the first and second defendants are based more than six years before this proceeding was commenced on 30 July 2015. They knew in May 2008, if not earlier, of O'Rourke's misconduct and how Grant's conduct in connection with the execution of the mortgage had allowed it to be registered. In fact, the plaintiff took the view that the conduct of the first and second defendant facilitated a breach by O'Rourke of his duties as a director, and amounted to fraudulent conduct in relation to the registration of the mortgage. They specifically instructed the third defendant in May 2008 to plead such a case in the J Wright litigation. They did so in the context of relying on fraud in procuring the registration of the mortgage so as to render it unenforceable against the plaintiff.
[31] Incidentally, according to the plaintiff it requested advice as to whether the second defendant (J Wright's solicitors) should be joined in those proceedings, but no specific advice was provided. For present purposes it is sufficient to conclude that in 2008 the plaintiff knew of the conduct of the second defendant as the employed solicitor of the first defendant which gave rise to allegations of fraud in the J Wright proceeding, being the same conduct which is relied upon in this proceeding to found a claim for equitable compensation against the first and second defendants.
[36] There is a similar, close correspondence between the equitable claim for compensation against the first and second defendants and the pleaded claim for compensation for their being knowingly concerned in O'Rourke's contravention of the TPA. The same conduct is pleaded and the same compensation is sought.
[37] The plaintiff points to an authority to the effect that different approaches to causation may apply in the case of equitable claims against fiduciaries and claims for compensation based upon contravention of statute, such as a breach of a director's statutory duties or conduct in contravention of a statute such as the TPA.[27] However, the plaintiff does not explain in its submissions why this might make any difference in this case, being a case in which the causal nexus between O'Rourke's conduct, the conduct of the first and second defendants, and the loss which the plaintiff suffered appear to be the same, based on the same facts.
[38] More generally, the fact that a claim for equitable compensation for breach of fiduciary duty and a corresponding claim for compensation under statute have different elements in law does not lead to the conclusion that the claims do not closely resemble each other. Were it otherwise, it would never be possible to establish that a claim for compensation pursuant to statute closely resembles a claim for equitable compensation.
[39] In summary, I conclude that it is clear that the plaintiff's claim for equitable compensation against the first and second defendants is closely analogous to both a cause of action arising from breach of O'Rourke's statutory duties as a director (which has not been pleaded) and the cause of action for compensation based on the first and second defendants being knowingly concerned in O'Rourke's misleading conduct.
[40] Subject to the issue of whether it would be unconscionable or unconscientious for the defendants to rely upon such a limitation period in respect of the claim for equitable compensation, I consider that the statutory six year period should be applied by analogy.
[44] The plaintiff's written submissions note that, in equity, time will begin to run (and so the cause of action accrues) once the plaintiff becomes aware of the facts upon which the right to relief is founded.
[45] The plaintiff does not contest the correctness of the submission on behalf of the first and second defendants that the relevant knowledge is sufficiently held if it is knowledge of the facts themselves without being knowledge of the legal rights flowing from those facts. This is consistent with principles in connection with concealed fraud, which operate to suspend the commencement of the limitation period until the plaintiff actually knows that fraud has been committed or has "actual knowledge of facts which give rise to such an action".[28] In that context, knowledge of an agent derived in the course of the agency is knowledge of the principal.[29] The relevant inquiry is not about when the plaintiff becomes aware of its legal rights but when it knows of facts upon which its legal rights are founded.
[46] In that regard, I should accept for the purposes of this application, the evidence from the plaintiff's current sole director, Mr Godwin, that during 2008, despite requests, the plaintiff was not given advice about the liability of the first and second defendants, apart from the effect of their actions in the context of s 184 of the Land Title Act (namely fraud raised in connection with the indefeasibility point). Mr Godwin says that it was not until the judgment was handed down on 10 May 2010 that the plaintiff had any knowledge that the effect of the conduct of the second defendant was sufficient to give rise to a cause of action against him. He says this became clear to him by the finding that the second defendant had committed "statutory fraud", as found at paragraph [92] of the judgment. He then decided to seek advice with respect to the liability and potential liability of the first defendant for the "statutory fraud" of the second defendant. After taking advice from the plaintiff's current solicitors, the current action was commenced on 30 July 2015.
[47] This evidence does not gainsay the proposition that the plaintiff (either itself or through its then solicitors, the third defendant) were aware of the "facts" which give rise to their present claims against the first and second defendants. The evidence of Mr Godwin is to the effect that, despite requests, the plaintiff was not advised about the nature of its legal rights against the first and second defendants, which might be founded upon those facts.
[48] The plaintiff does not advance an argument that the plaintiff's lack of awareness of its legal rights, as distinct from its knowledge of the facts upon which those rights are founded, makes it unconscionable for the first and second defendants to rely on limitation statutes.
[49] In my view, it is not unconscionable for the first and second defendants to rely upon those statutes in the circumstance in which there is no case of fraudulent concealment, and the plaintiff knew in 2008 of the facts upon which the relief it currently pursues is founded.
[50] I conclude that the unconscionability exception to applying a time limit by analogy, as recognised in Gerace, does not apply.
[58] The plaintiff's statutory claim in respect of a contravention of the TPA is statute-barred because it first suffered actual loss more than six years before this proceeding was commenced. So too is its claim in negligence.
[59] Its purely equitable claim is subject to statutory limitation periods by analogy with closely corresponding claims at law, in particular, the first and second defendants' knowing involvement in O'Rourke's breach of his statutory duties which the current proceeding relies upon as also amounting to a breach of O'Rourke's fiduciary duty as a director. The limitation period in respect of O'Rourke's contravention of his duties as a director, and the first and second defendants' alleged knowing involvement in those contraventions, had expired well prior to 30 July 2015. The application by analogy of statutory limitation periods of six years to the plaintiff's claim for equitable compensation results in it being time-barred.
[68] The defendants' supplementary submissions rely upon Williams and Australian authorities in contending that s 27(1)(a) requires a pre-existing trust, trustee and beneficiary and that the action be by the beneficiary under the trust in respect of a fraud or fraudulent breach of trust by the trustee. A third party who knowingly assists a fraud or fraudulent breach of trust by a trustee is not a "trustee" within the meaning of s 27(1). The authorities are to the effect that the provision is confined to actions against trustees in accordance with the definition of "trust" and "trustee". Section 5 of the Limitation of Actions Act 1974 (Qld) provides that those terms have the meaning given by the Trusts Act 1973 (Qld). That Act defines "trust" as including "implied, resulting ... and constructive trusts". The statute is different from some other statutes which define "trust" to include constructive trusts "whether or not the trust arises only by reason of a transaction impeached".[31]
[69] Substantial authority supports the first and second defendants' position. Many authorities discuss the different meaning of "constructive trust".[32] Reference often is made to the judgment of Millet LJ in Paragon Finance Plc v DB Thakerar & Co[33] that there is a "distinction between an institutional trust and a remedial formula - between a trust and a catch-phrase." Millet LJ noted that the expressions "constructive trust" and "constructive trustee" have been used by lawyers to describe two entirely different situations.[34] The two categories of constructive trust were considered by Lord Sumption in Williams[35] in the context of a limitation statute which is materially identical to s 27 of the Queensland Act. Lord Neuberger, in a separate judgment, reached the same conclusion, namely that a "trustee" in the section which is identical to s 27(1)(a) does not include a party who is liable to account in equity simply because he was a dishonest assister and/or a knowing recipient.[36] The decision is authority for the proposition that, for the purposes of s 27(1)(a), a "trust" does not include a constructive trust of what is sometimes styled the "remedial" kind.
[70] The position adopted by the Supreme Court of the United Kingdom generally reflects Australian authorities. They are to the effect that the provision applies to a party who has assumed the role of trustee, including a trustee who is not expressly appointed as such. The section does not apply to constructive trusts imposed remedially following breach of an equitable duty.[37] In Barker v Duke Group Ltd, the relevant limitation provision[38] did not apply to defendants who were alleged to have participated in a breach by the directors of the directors' fiduciary duties. They were not to be treated as trustees for the purpose of the limitation statute.
[71] The analysis of the term "constructive trustee" adopted by Lord Sumption and Lord Neuberger in Williams has been considered by the New South Wales Court of Appeal in Hasler v Singtel Optus Pty Ltd.[39] Leeming JA (with whom Barrett and Gleeson JJA agreed) adopted what was said by Lord Sumption and Lord Neuberger in Williams. As Lord Sumption said in Williams[40], in its second meaning, the phrase "constructive trustee", refers to something different to a person who has lawfully assumed fiduciary obligations in relation to trust property, but without a formal appointment. In its second meaning, it comprises persons who never assumed and never intended to assume the status of a trustee, whether formally or informally, but have exposed themselves to equitable remedies by virtue of their participation and unlawful misapplication of trust assets. As Lord Neuberger stated in Williams[41]:
[76] In the face of the authorities relied upon by the first and second defendants in their supplementary submissions, the plaintiff submits that the new claim it proposes to make is of "the institutional type" (to adapt the term adopted in Nolan[45]), being the holding of trust property, namely the money raised on the security of the mortgage, and an obligation to account. However, even if it be assumed that O'Rourke was a trustee of the money after he received it, this does not make the first and second defendants a "trustee" for the purposes of s 27(1)(a). The plaintiff's supplementary submissions contend that the proposed new claim is "an institutional constructive trust case as against persons inducing breach of trust". I accept for the purpose of argument that third parties may be held liable if they induce or procure a breach of fiduciary duty.[46] The grounds upon which the first and second defendants are alleged to have induced or procured a breach of trust are not identified. When did the trust come into existence? What did the second and third defendants do after that time? The basis upon which they might be alleged to have knowingly participated in or dishonestly assisted in a breach of trust after that time is unclear. Even if I was to assume, in the absence of a draft pleading and a draft amended claim, that the plaintiff intended to claim that the first and second defendants dishonestly assisted in a breach of trust by O'Rourke, this would not make the first and second defendants a "trustee" for the purposes of s 27(1)(a).
[77] Moreover, even if I was to conclude that the plaintiff has a theoretical claim against O'Rourke for breach of trust and that it might plead a case that the first and second defendants induced a breach of trust or knowingly assisted a breach of trust, I am not persuaded that this makes it appropriate to dismiss the first and second defendants' application for judgment in the present claim.
[78] The first and second defendants applied pursuant to Court directions to dismiss "the plaintiff's claim against them". The Court made directions for that application to be heard and determined and the argument was concerned with the plaintiff's claim for equitable compensation against the first and second defendants for their alleged involvement in O'Rourke's breach of his director's duties. In some instances it will be appropriate to decline an application for summary judgment under r 293 on the basis that, whilst there is a flaw in the plaintiff's pleaded case, the flaw can be addressed by amendment to the plaintiff's pleading and the plaintiff's claim should be permitted to continue on the basis of amended pleadings. The same may apply in the context of an application to strike out a pleading. For example, in Hillcrown Pty Ltd v O'Brien,[47] the respondents did not strenuously oppose the appellants being given an opportunity to plead additional facts to support a plea of frustration. That course was thought appropriate to avoid a possibility of injustice which might arise if the appellants were deprived of an opportunity to advance an arguable case of frustration. The appellants' claim was essentially the same and a deficiency in a pleading was capable of being cured by amendment. Even in that context Chesterman JA observed:[48]