Salmon v Albarran & Ors [2019] NSWSC 243 | Case summary

Supreme Court of NSW|2017-12-13|Before: Slattery J

ACN 112 571 647 First defendant: Richard Albarran Second defendant: Geoffrey McDonald Fourth defendant: Robert William Joseph Elliott Fifth defendant: Drew Anthony Townsend Sixth defendant: David Kenney Seventh defendant: Luigino Malacco Eighth defendant: Paul Andrew Leroy Representation: Counsel

First, Second, Fourth to Eighth Defendants/Applicants: R. Elliott SC

Solicitors Plaintiff/Respondent: Owen Salmon in person First, Second, Fourth to Eighth Defendants/Applicants: Matthew Curll, Hall and Wilcox Lawyers File Number(s): (2016/373218) Publication restriction: No

Judgment

Mr Owen Salmon and TCBS Group Holdings Pty Limited ("TCBS") commenced these proceedings in November 2016 and filed their present pleading, the Amended Statement of Claim ("the pleading"), on 21 February 2017. The pleading joined eight defendants. Seven of these defendants (excluding the third defendant) now seek by Motion, filed on 12 October 2017, to strike out the pleading pursuant to Uniform Civil Procedure Rules 2005 ("UCPR"), r 14.28(1) on the bases that: (1) the causes of action it pleads are not maintainable by virtue of the operation of Limitations Act 1969, or Corporations Act 2001, s 1317K; or (2) the pleading does not disclose a reasonable cause of action or has the tendency to cause prejudice, embarrassment or delay in the proceedings.
The pleading makes allegations of some complexity. The pleaded allegations and the facts surrounding them will be elaborated below. But the essential point at issue, which the defendants raise in their Motion, may be shortly stated. The defendants contend that the causes of action in the pleading are statute barred. In answer, the plaintiffs seek to circumvent the defendants' Limitations Act defence by relying on Limitation Act, s 55, which permits the extension of an otherwise applicable limitation period if a defendant conceals the plaintiffs' cause of action from the plaintiff. The plaintiffs contend that the defendants concealed their cause of action from them and they did not discover this concealed cause of action until November 2016, shortly before they commenced these proceedings.
But the defendants' have a counter argument on the Motion. They contend that it is demonstrable beyond argument (and principally from the plaintiffs' own documents) that the plaintiffs were well aware of the cause of action they now plead, long before the plaintiffs say that they first "discovered" it. Moreover, the defendants contend that the plaintiffs had been propounding the existence of this very cause of action to various third parties, long before November 2016. It is not in contest that if the plaintiffs' Limitation Act, s 55 allegations of concealment are not made out, then the plaintiffs' primary cause of action against the defendants is barred under the Limitation Act.
Determination of this Motion will require the Court to examine an extensive range of pleaded allegations and evidentiary materials. The Court will examine the essential pleaded allegations, the parties' dealings relating to those allegations, the applicable limitation periods, the plaintiffs' Limitation Act s 55 case, and the detailed evidence that the defendants rely upon to say that the plaintiffs have long been aware of the causes of action that they now say were concealed from them. This case involves more detailed analysis of evidence than is commonly found in applications to strike out proceedings. But that is the nature of this case. The defendants say that, notwithstanding the need to examine that detail, the pleading should be struck out in the application of conventional legal principles.
The seven defendants who bring this Motion comprise all the remaining defendants in the proceedings. The third defendant takes no part in this Motion. If the defendants' Motion is successful the proceedings can be wholly dismissed. If the defendants' Motion fails, directions should be made for the matter to proceed to trial.
Mr Salmon appeared for himself. And the Court gave him leave to appear on behalf of the other plaintiff on the motion, TCBS. Mr R. Elliott SC, of counsel, appeared for the seven defendants, who propound the Motion as applicants. The proceedings were heard over some four days: 28 November 2017, 13 December 2017, 21 February 2018 and 13 March 2018. Although, they occupied the equivalent of about two full days of hearing.
Before proceeding to examine the factual background, the applicable legal principles may be stated.

Applicable Legal Principles

The law in relation to summary dismissal and the striking out of pleadings is frequently restated and applied. The principles have, for example, been recently restated by the Court of Appeal in this State in New South Wales v Williams (2014) 242 A Crim R 22 (at [71]); [2014] NSWCA 177, although in the context of applying to strike out a defence. But nevertheless, the Court of Appeal's statement has wider application to summary dismissal of a plaintiff's claim: "71. The requirement for establishing that there is no triable issue is a demanding one and the power to strike out a pleading on the basis that it discloses no reasonable defence, or is an abuse of process, should be exercised only in plain and obvious cases. The power should not be exercised in cases of doubt or difficulty or where the pleading raises a debatable question of law. Once it appears that there is a real issue, whether of fact or law, and that the rights of the parties depend upon it, a court should not dismiss a defence raising such an issue, either on the basis that no reasonable defence is disclosed or as an abuse of process (see Dey v Victorian Railways Commissioners [1949] HCA 1; 78 CLR 62 at 91; General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; 112 CLR 125 at 129-130; Commonwealth v Griffiths [2007] NSWCA 370; 70 NSWLR 268 at [11]-[12] and Spencer v Commonwealth[2010] HCA 28; 241 CLR 118 at 139-140)."
The classic statement of the principles that govern the Court's power of summary dismissal is the following passage from General Steels Industries v Commissioner of Railways (1964) 112 CLR 125; [1964] HCA 69 ("General Steels") at pp 128-130, which, together with passages from Dey v Victorian Railways Commissioners (1949) 78 CLR 62; [1949] HCA 1 at pp 90-91, is often quoted in whole or in part: "The plaintiff rightly points out that the jurisdiction summarily to terminate an action is to be sparingly employed and is not to be used except in a clear case where the Court is satisfied that it has the requisite material and the necessary assistance from the parties to reach a definite and certain conclusion. I have examined the case law on the subject, to some of which I was referred in argument and to which I append a list of references. There is no need for me to discuss in any detail the various decisions, some of which were given in cases in which the inherent jurisdiction of a court was invoked and others in cases in which counterpart rules to Order 26, r. 18, were the suggested source of authority to deal summarily with the claim in question. It is sufficient for me to say that these cases uniformly adhere to the view that the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of a cause of action - if that be the ground on which the court is invited, as in this case, to exercise its powers of summary dismissal - is clearly demonstrated. The test to be applied has been variously expressed; "so obviously untenable that it cannot possibly succeed"; "manifestly groundless"; "so manifestly faulty that it does not admit of argument"; "discloses a case which the Court is satisfied cannot succeed"; "under no possibility can there be a good cause of action"; "be manifest that to allow them" (the pleadings) "to stand would involve useless expense". At times the test has been put as high as saying that the case must be so plain and obvious that the court can say at once that the statement of claim, even if proved, cannot succeed; or " so manifest on the view of the pleadings, merely reading through them, that it is a case that does not admit of reasonable argument"; " so to speak apparent at a glance ". As I have said, some of these expressions occur in cases in which the inherent jurisdiction was invoked and others in cases founded on statutory rules of court but although the material available to the court in either type of case may be different the need for exceptional caution in exercising the power whether it be inherent or under statutory rules is the same. Dixon J. (as he then was) sums up a number of authorities in Dey v. Victorian Railways Commissioners (1) where he says (2): " A case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court with or without a jury. The fact that a transaction is intricate may not disentitle the court to examine a cause of action alleged to grow out of it for the purpose of seeing whether the proceeding amounts to an abuse of process or is vexatious. But once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process." Although I can agree with Latham C.J. in the same case when he said that the defendant should be saved from the vexation of the continuance of useless and futile proceedings (1). in my opinion great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal. On the other hand, I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff's claim. Argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed."
Here the facts are complex. The defendants particularly rely upon a statement of the House of Lords (Lord Hope) in Three Rivers District Council v Governor & Company of the Bank of England (No. 3) [2001] UKHL16, (at [95]) ("Three Rivers District Council"), as to the relevant scope of the inquiry upon a summary dismissal application, where the underlying facts are complex: "I would approach that further question in this way. The method by which issues of fact are tried in our courts is well settled. After the normal processes of discovery and interrogatories have been completed, the parties are allowed to lead their evidence so that the trial judge can determine where the truth lies in the light of that evidence. To that rule there are some well-recognised exceptions. For example, it may be clear as a matter of law at the outset that even if a party were to succeed in proving all the facts that he offers to prove he will not be entitled to the remedy that he seeks. In that event a trial of the facts would be a waste of time and money, and it is proper that the action should be taken out of court as soon as possible. In other cases it may be possible to say with confidence before trial that the factual basis for the claim is fanciful because it is entirely without substance. It may be clear beyond question that the statement of facts is contradicted by all the documents or other material on which it is based. The simpler the case the easier it is likely to be take that view and resort to what is properly called summary judgment. But more complex cases are unlikely to be capable of being resolved in that way without conducting a mini-trial on the documents without discovery and without oral evidence. As Lord Woolf said in Swain v Hillman, at p 95, that is not the object of the rule. It is designed to deal with cases that are not fit for trial at all."
The High Court of Australia cited this whole statement with approval in Spencer v Commonwealth (2010) 241 CLR 118, at p 130; [2010] HCA 28, (at [21]) ("Spencer"). But in Spencer, the High Court went on to discuss the application of the principle in a further passage (at [22] to [26]), dealing with the summary dismissal power of the Federal Court of Australia (Federal Court of Australia Act 1986, s 31A). But it should be noted that the test for summary dismissal in s 31A is less demanding than that in UCPR, r 14.28 which is under consideration here.
The discussion in Spencer, though speaking to the differently worded s 31A, bears upon the issues that arise in this case, in part, because it speaks to a situation like the present, where, on the application for summary dismissal, the Court was invited to consider apparently complex questions of fact and, therefore, Lord Hope's caution in Three Rivers District Council is particularly relevant.
The High Court said the following in Spencer, (at [22] to [26]): "22. The Federal Court and in the Court of Appeal of Queensland, the criterion of a "reasonable prospect" of success has been understood in analogous statutory settings to mean a "real" rather than "fanciful" prospect (White Industries Aust Ltd v Federal Commissioner of Taxation (2007) 160 FCR 298 at 312 [59] and cases there reviewed; Deputy Commissioner of Taxation v Salcedo [2005] 2 Qd R 232 at 235 per Williams JA). This exegesis adds little to the words of s 31A. The section authorises summary disposition of proceedings on a variety of bases under its general rubric. It will apply to the case in which the pleadings disclose no reasonable cause of action and their deficiency is incurable. It will include the case in which there is unanswerable or unanswered evidence of a fact fatal to the pleaded case and any case which might be propounded by permissible amendment. It will include the class of case in the longstanding category of cases which are "frivolous or vexatious or an abuse of process". The application of s 31A is not, in terms, limited to those categories. 23. Accepting that there are a number of ways in which s 31A may be applied to empower the Federal Court to dismiss a proceeding, it is to be distinguished, in its application to deficient pleadings, from rules (such as O 11 r 16 of the Federal Court Rules) which provide for the striking out of pleadings. As Lindgren J said in White Industries Aust Ltd v Federal Commissioner of Taxation (2007) 160 FCR 298 at 309 [47]. See also Imobilari Pty Ltd v Opes Prime Stockbroking Ltd (2008) 252 ALR 41): 'evidence may disclose that a person has or may have a 'reasonable cause of action' or 'reasonable prospects of success', yet the person's pleading does not disclose this. In such a case O 11, r 16 empowers the Court to strike out the pleading but … s 31A(2) would not empower the Court to give judgment for the respondent against the applicant. A failure after ample opportunity to plead a reasonable cause of action may suggest that none exists and therefore that the applicant has no reasonable prospects of success, but the existence of a reasonable cause of action and the pleading of a reasonable cause of action remain distinct concepts.' 24. The exercise of powers to summarily terminate proceedings must always be attended with caution. That is so whether such disposition is sought on the basis that the pleadings fail to disclose a reasonable cause of action (General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 128-130 per Barwick CJ; [1964] HCA 69) or on the basis that the action is frivolous or vexatious or an abuse of process (Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91 per Dixon J; [1949] HCA 1). The same applies where such a disposition is sought in a summary judgment application supported by evidence. As to the latter, this Court in Fancourt v Mercantile Credits Ltd said ((1983) 154 CLR 87 at 99; [1983] HCA 25. See also Webster v Lampard (1993) 177 CLR 598 at 602-603 per Mason CJ, Deane and Dawson JJ; [1993] HCA 57): 'The power to order summary or final judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried'. More recently, in Batistatos v Roads and Traffic Authority (NSW) ((2006) 226 CLR 256 at 275 [46]; [2006] HCA 27) Gleeson CJ, Gummow, Hayne and Crennan JJ repeated a statement by Gaudron, McHugh, Gummow and Hayne JJ in Agar v Hyde ((2000) 201 CLR 552 at 575-576 [57]; [2000] HCA 41) which included the following: 'Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways (Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91 per Dixon J; General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 130 per Barwick CJ), but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way.' There would seem to be little distinction between those approaches and the requirement of a "real" as distinct from "fanciful" prospect of success contemplated by s 31A (In A v Essex County Council [2010] 3 WLR 509, the criterion of "real prospect of success" was variously equated to whether the plaintiff "could succeed at a trial", whether there was a "triable issue" and whether there was the "least doubt": at 523 [44] per Lord Clarke of Stone-cum-Ebony JSC, 541 [119] per Baroness Hale of Richmond JSC, 544 [133] per Lord Brown of Eaton-under-Heywood JSC and 552 [163] per Lord Kerr of Tonaghmore JSC). That proposition, however, is not inconsistent with the proposition that the criterion in s 31A may be satisfied upon grounds wider than those contained in pre-existing Rules of Court authorising summary dispositions. 25. Section 31A(2) requires a practical judgment by the Federal Court as to whether the applicant has more than a "fanciful" prospect of success. That may be a judgment of law or of fact, or of mixed law and fact. Where there are factual issues capable of being disputed and in dispute, summary dismissal should not be awarded to the respondent simply because the Court has formed the view that the applicant is unlikely to succeed on the factual issue. Where the success of a proceeding depends upon propositions of law apparently precluded by existing authority, that may not always be the end of the matter. Existing authority may be overruled, qualified or further explained. Summary processes must not be used to stultify the development of the law. But where the success of proceedings is critically dependent upon a proposition of law which would contradict a binding decision of this Court, the court hearing the application under s 31A could justifiably conclude that the proceedings had no reasonable prospect of success. 26. Where an application under s 31A requires consideration of apparently complex questions of fact, then the caution uttered by Lord Hope is relevant (see above at [21]). The importance of those considerations is amplified if the case involves resolution of issues of law and fact, or mixed law and fact."
These principles have often been applied. The Courts have recognized that the mere presence of a factual controversy does not bar the Court from exercising its power of summary dismissal: George (a Bankrupt) v Fletcher (Trustee) [2010] FCAFC 53, (at [75]). The applicants/defendants have cited in submissions a certain statement in the Full Court of the Federal Court that, in order to decide whether a controversy is "implausible" or "tenuous", the Court must look with a "critical eye" at the evidence and decide whether the "weight and quality" of the evidence going to the alleged disputed fact is such that a trial is warranted: Jefferson Ford Pty Ltd v Ford Motor Co of Australia (2008) 167 FCR 372; [2008] FCAFC 60 (at [23]). But such statements are grounded in the terms of s 31A and may be too broad for present purposes, and, in any event, some of them have been disapproved by later Full Court Federal Court authority: cf Kowalski v MMAL Staff Superannuation Fund Pty Ltd (2009) 259 ALR 319; [2009] FCAFC 117.
The relevant statements of principle from General Steels, and the cases that apply exactly the same test, reflect the idea that summary dismissal is not appropriate if there is a "real question to be tried". To succeed an applicant for summary dismissal does not have to show that there is no question to be decided: rather the applicant must satisfy the Court that there is not a "real question" for trial. Summary dismissal is appropriate where the materials available clearly demonstrate that the assertion of fact or law being made cannot possibly succeed. And as Barwick CJ said in General Steels, in the passage cited above (at p 130), to demonstrate that, if a claim cannot succeed, "argument, perhaps even of an extensive kind, may be necessary".
The expression "real question" that has long been part of the General Steels test is now reinforced by the modern command of Civil Procedure Act, s 56 to the Court - to facilitate the "just, quick and cheap" resolution of the "real" issues in the proceedings.
Whether or not an issue is a "real" one, must be assessed by a "practical judgment" (see Spencer (at [25])) in the context of the particular case, rather than by abstract, logical possibilities. The pleading of an issue does not itself make the question raised "real". Notwithstanding the existence of a dispute on the pleadings, a disputed fact does not amount to a real question to be tried if the evidence before the Court demonstrates that there is "only one result which can be said to be reasonable": Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd (2006) 236 ALR 720; [2006] FCA 1352 (at [38]).
In making its judgment about summary dismissal the Court will often look forward to what may happen at the possible trial of the factual issue in question. It should be remembered that a successful summary dismissal application will deny the unsuccessful respondent the fundamental procedural right of contesting the issue at a trial. It would be a grave error for a Court to deprive a respondent of the trial of an issue, on which the respondent could possibly succeed. But the Court can look behind the controversy of fact and consider whether in the light of the documents before it, what is now being asserted can be judged to be, or not to be, a "real" issue for trial. If there is not a realistic prospect of the respondent succeeding, there is not a "real" issue for trial.
There can be cases where the factual assertion in question is simply incapable of acceptance because it cannot, by any rational hypothesis or by any case that may be advanced at a later trial, be reconciled with an overwhelming body of documentary evidence which demonstrates the contrary.
Whether a particular factual contest is susceptible to the application of this principle will depend upon the nature and width of the factual controversy being asserted. As imply, narrower, more readily isolated disputes of fact may be more amenable to the application of this principle of summary dismissal.
Here, the defendants say that the relevant asserted fact is really a narrow one and can be disposed of according to this principle. The relevant asserted fact is that the plaintiffs say they were not able to make certain claims in these proceedings until after the expiry of the relevant limitation period, because they had not discovered the facts underlying those claims until after that expiry. But in response, the defendants say that the plaintiffs must have discovered the facts underlying the claim well before the expiry of the applicable limitation period. The defendants say that the documents available clearly and indisputably record the plaintiffs not only having knowledge of the underlying facts, but actually making those very claims against various other parties well prior to the expiry of the limitation period. A question to be considered is whether the plaintiffs can ever maintain, at trial, the controversy they say exists on the pleadings, in the face of the documents now deployed against them. The plaintiffs say that the controversy is wider than the plaintiffs' characterization of it.
The Courts have granted summary dismissal where the unreality of one party's case means that the parties and the Court should not have inflicted upon them the costs and delay associated with the trial: Queensland Pork Pty Ltd v Lott [2003] QCA 271. The principle has been applied in many kinds of cases, including where the expiry of a limitation period is in question, as it is here: see Bradman v Allens Arthur Robinson (2009) 103 SASR 438; [2009] SASC 80.
The defendants state that the summary dismissal claim here is a discrete one. They contend that the plaintiffs' claim is that by virtue of Limitation Act 1969, s 55, the relevant limitation period in respect of the claims pleaded only began to run on 8 November 2016: pleading [101] and following. If that claim cannot be maintained, then the defendants say that all the plaintiffs' causes of action are time barred and the proceedings can be dismissed.
The Limitation Act, s 55 issue is this. The plaintiffs must show at a trial of the issue that they did not discover, or could not with reasonable diligence have discovered, the deceit or the concealment of the subject of the cause of action until after a particular date. Here the plaintiffs claim that this date was not until December 2016.
But an essential assumption to the plaintiffs' Limitation Act, s 55 claim is that they did not discover the deceit until 8 November 2016. This was the date when Mr Salmon claims that he received a copy of a letter of demand, dated 12 October 2005, from Mr Wily to Given Form Pty Limited ("Given Form"). He says that the receipt of this letter alerted him to the availability of the cause of action. The defendants maintain that this contention is fanciful and cannot realistically be regarded as having any prospect of success.
Finally, the issue of the possible amendment of the pleading can arise in this context. Defects in pleadings that would otherwise be struck out can sometimes be cured by amendment. It has often been said that, where a pleading can be cured by amendment, the Court ought to grant leave to amend rather than exercise the power to strike out: Wentworth v Rogers (No. 5) (1986) 6 NSWLR 534, at pp 536-7. But as was emphasized in In the matter of Galtari Pty Ltd (in liq) [2018] NSWSC 917, (at [77]) by Gleeson JA, when the Court is deciding whether to grant leave to re-plead, the Court must seek to act in accordance with the dictates of justice: Civil Procedure Act 2005, s 58(1). And for that purpose, the Court must have regard to the provisions of Civil Procedure Act, ss 56 and 57, and importantly to the facilitation of the just, quick and cheap resolution of the real issues in the proceedings (s 56(1)) and should also have regard to the matters set out in s 58(2)(b), to the extent to which the Court considers them relevant for the management of the proceedings.

Mr Salmon, Hall Chadwick and Given Form - 2003 to 2017

Analysis must start with the plaintiffs' pleading, which is thorough, reasonably clear and well pleaded. Although the first plaintiff represented himself and the second plaintiff at this hearing, the pleading shows every sign of having been closely prepared with the benefit of legal advice.
But the pleading is lengthy. Setting its provisions out at length would not serve the objective of coming to grips with the real issues on this application. So these reasons take the approach of summarising the pleading's relevant allegations, with references to the paragraphs of the pleading from which the summary is drawn.

The Plaintiffs' Allegations in the Pleading

Mr Salmon is a director of the second plaintiff, TCBS, a company that provided management, accountancy and consulting services in Australia between 2003 and 2006: [4] and [5].
Mr Richard Albarran and Mr Geoffrey McDonald, the first and second defendants, were professionally qualified to be appointed receivers and managers, duly authorised to act under the Corporations Act in that capacity as external administrators to companies, where such appointments were required: [6]. Messrs Albarran and McDonald are also two of the equity partners of the accountancy firm practising under the name "Hall Chadwick".
The fourth, fifth and sixth defendants, Mr Robert Brassil, Mr Robert Elliott and Mr Drew Townsend were also equity partners in the firm Hall Chadwick. All equity partners of Hall Chadwick agreed, under the Hall Chadwick Partnership Agreement (clause 7.2), to indemnify one another for the liabilities of the partnership: [8].
The third defendant, Mr Steven Brown, is a solicitor of the Supreme Court of New South Wales and a specialist insolvency practitioner: [7].
In February 2005, Business Australia Capital Finance Pty Limited ("Capital Finance") and Business Australia Capital Mortgage Pty Limited ("Capital Mortgage") retained TCBS to provide management and accounting services to them: [10]. Mr Ian Lazar was, at the time, a principal and director of both of these companies: [9].
On 24 February 2005, Mr Lazar on behalf of Capital Mortgage and Capital Finance engaged, in writing, TCBS to provide accounting and consultancy services to them. The agreement included that fees due to TCBS, or monies advanced by TCBS to Capital Mortgage and Capital Finance, would be secured by a fixed and floating charge to be issued by Capital Mortgage and Capital Finance: [12].
In 2004 and 2005, TCBS advanced funds to Capital Finance and Capital Mortgage: [11].
On 18 March 2005, each of Capital Finance and Capital Mortgage granted a fixed and floating charge in favour TCBS in the sum of $1,500,000, which were registered on 12 April 2005, in favour of TCBS: [13] - [15].
Liquidation of Capital Mortgage and Capital Finance. On 8 June 2005, the Australian Securities and Investments Commission ("ASIC") appointed Mr Andrew Wily as the liquidator of a number of companies in which Mr Lazar was the principal. Capital Finance and Capital Mortgage were among these companies. At the time of Mr Wily's appointment, Capital Finance and Capital Mortgage remained indebted to TCBS under the advances made to them: [16]
At the time Mr Wily was appointed as the liquidator of Capital Finance and Capital Mortgage, each of those companies (and several others associated with Mr Lazar) were engaged in litigation in the Federal Court of Australia to recover monies that they had advanced to a number of other companies incorporated in Nauru: [17].
The Federal Court of Australia proceedings settled. As a result, on 7 October 2005, the sum of $6,500,000 was paid into the Federal Court of Australia, on account of the claims brought by Mr Lazar's companies, including Capital Finance and Capital Mortgage: [18].
Almost a year later, in August 2006, both Mr Salmon and TCBS sought advice from the third defendant, Mr Brown, as to whether or not TCBS's charges were valid and enforceable and were advised that they were: [19] and [20].
On 9 August 2006, a further part of the Federal Court proceedings settled, enabling an additional amount of $4,500,000 to be paid to Mr Lazar's companies, including Capital Mortgage and Capital Finance, of which Mr Wily was liquidator: [21].
On 4 August 2006, TCBS appointed Mr Albarran and Mr McDonald as receivers and managers to Capital Finance, and as receivers and managers to Capital Mortgage: [22] and [23]. The same day, a deed was executed between TCBS and Mr Albarran and Mr McDonald, which recorded the terms and conditions of their appointment as receivers and managers to each company: [24].
The terms and conditions of each of Mr Albarran's and Mr McDonald's appointments as receivers and managers included a term (clause 4) that the indemnities provided to them in that role would not extend to any act of wilful default or neglect of them as receivers and managers, or to that of any person for whom they were responsible as receivers and managers: [25] - [27].
On 10 August 2006, Mr Wily as the liquidator of Capital Mortgage and Capital Finance, commenced proceedings in this Court (Proceedings 4200/06 - "the 2006 Supreme Court proceedings) seeking: (1) a declaration that TCBS was not entitled to appoint Mr Albarran and Mr McDonald as receivers and managers to each of Capital Mortgage and Capital Finance; (2) a declaration that the deeds of charge in favour of TCBS were invalid as being contrary to Corporations Act, s 588FF, to the extent that any amount was owing to TCBS prior to 18 March 2005 (the date of execution of the charges); and (3) seeking orders removing Mr Albarran and Mr McDonald as receivers and managers: [28] and [31].
Mr Wily also sought an interlocutory injunction in the Supreme Court proceedings, restraining TCBS from instructing Mr Albarran and Mr McDonald from taking any further steps in the Federal Court proceedings, such as, for example, accessing the funds paid into Court on settlement: [29]. TCBS was also joined as a defendant to the 2006 Supreme Court proceedings and the pleadings were amended to seek this relief: [30] and [33].
On 30 August 2006 in this Court, Palmer J declined the interlocutory relief sought: [34].
It is necessary for completeness to mention a little of the pleading against Mr Brown in relation to these events, even though he is not a party to the present application. To defend the 2006 Supreme Court proceedings brought by Mr Wily, Mr Albarran and Mr McDonald retained Mr Brown as their solicitor. It was said to be a term of that retainer that Mr Brown would not act "in a manner that involved" a conflict of interest between Mr Brown's own interests and those of TCBS, Mr Salmon and another company related to them: [36].
On instructions from Mr Albarran, Mr McDonald, Mr Salmon and TCBS, Mr Brown filed an Amended Cross-Claim against Mr Wily in the 2006 Supreme Court proceedings, seeking declarations that Mr Albarran's and Mr McDonald's appointments as receivers and managers to Capital Mortgage and Capital Finance were valid, as were the charges that those companies had given in favour of TCBS. The Amended Cross-Claim also sought relief avoiding Mr Wily's decision to seek litigation funding to intervene in the Federal Court proceedings, and it sought the removal of Mr Wily as liquidator of Capital Mortgage and Capital Finance: [37].
The Given Form Allegations. At this point, the pleading introduces allegations in relation to Given Form, a company that is unrelated in shareholding or control to the parties in either the Federal Court or the 2006 Supreme Court proceedings. It assists the later discussion of the issues for determination to set out, at times from this point in these reasons, some of the correspondence and other documents that are referred to in the pleadings concerning Given Form.
On 12 October 2005, Mr Wily in his capacity as liquidator of Capital Mortgage and Capital Finance issued a demand in writing to the directors of Given Form, demanding that a loan purportedly advanced to Given Form by Capital Mortgage and Capital Finance in the sum of $640,000 be repaid immediately: [37].
This is the critical letter that the plaintiffs say did not come to their attention until 8 November 2016. The plaintiffs say this letter gave them the knowledge that Mr Albarran and Mr McDonald had concealed from them a cause of action against Mr Albarran and Mr McDonald, founding their right to an extended limitation period under Limitation Act, s 55. The plaintiffs' allegations extend to allegations of concealment against the third defendant, Mr Brown, but these allegations are put to one side merely because Mr Brown is not a party to this Motion.
The 12 October 2005 letter is set out in full below: "Dear Sir / Madam RE: BUSINESS AUSTRALIA CAPITAL MORTGAGE PTY LIMITED (IN LIQUIDATION) ACN 090 781 187 BUSINESS AUSTRALIA CORPORATE FINANCE PTY LIMITED (IN LIQUIDATION) ACN 079 163 581 I have been appointed Liquidator of the abovementioned companies and according to the Company records you have borrowed money from the Company which has not been repaid. The following details relate to your debt outstanding: Loan 1 dated 8 June 2004 (Repayment due 30 days after drawdown) The principal amount of your loans outstanding is $100,000 Default Fee @ $20,000 per month (27 months) $540,000 Total Outstanding $640,000 Total Owing $640,000 Copies of the above loan agreements are attached for your information. Would you please remit the total owing within 7 days from the date of this letter. If you do not respond to this letter then I may have no option other than to place the matter into the hands of my solicitors for further action. Yours faithfully FILE COPY A H J Wily LIQUIDATOR"
On 13 September 2006, Mr Brown, acting for the defendants/cross claimants (Mr Albarran, Mr McDonald and TCBM) in the 2006 Supreme Court proceedings, wrote to a barrister (Mr Julian O'Sullivan), who then represented those parties, and copied to Mr Salmon, seeking counsel's advice about Given Form: [39]. In customary fashion, the advice sought was requested on the basis of facts that were advanced by Mr Brown to counsel. The facts advanced are repeated in extensive particulars in the pleading. But it is convenient instead to set out the letter of instruction itself in these reasons, then the particulars: "Julian, Can you please look at the above four letters from Leon and advise how you suggest we respond. Concerning the issue I raised with you regarding Jim Byrnes, there have been further developments. Before going into the developments which may need to be responded to or dealt with some background. While acting for BACF and BACM, a company which Lazar was interested in (read into this controlled) was placed into administration. Hall Chadwick were the Administrators. The company, Given Form was owed money. I was owed money. I obtained from BACF, BACM and Given Form a direction that money I was owed be paid from funds received by Given Form and payable to these companies. Given Form received funds I got paid. (As advised while I received the funds but prior to disbursing the funds, Given Form was placed into liquidation and Andrew Wily was appointed Liquidator. Hall Chadwick received a letter alleging payments to BACF/BACM may be recoverable. Hall Chadwick dispute this and since that time no more has been heard: until today.) Brynes said John Meluiss (a partner with Ferrier Hodgson) had in an interview with ASIC said that he had told me that the money might belong to investors and could not be taken. I have no recollection of any such discussion. How Andrew Wily knows this to tell Jim Brynes is another matter. Leon Nikolaidis telephoned Richard Albarran to raise the same issue. He said that he should get another firm or settle as the Given Form issue would be raised. Richard told him one he had not done anything wrong only used Etienne Lawyers and paid us and paid an amount pursuant to a written direction to pay. If he had done anything wrong then he was willing to answer for it just as he and Wily should be prepared to do if they at any time have done anything wrong. Leon apparently did not like that. Conversation ends. (This afternoon after my conversation with Brynes I informed John of the issue along the lines did with you.) Later Andrew Wily telephoned John Myers advising him to get a new firm of lawyers as the Given Form issue when it comes to light would not be in his interests. John Myers said he did not know what any of this was about or how it affected him. Should we write letters requiring Leon and Andrew to undertake not to again seek to intentionally interfere with our contractual relations with two clients, setting out the issue in detail so that there is a proper record of the issue and of their inappropriate behaviour. In considering this note, that in the material produced by TCBS under the Notice to Produce is a table of matters in which the Given Form issue is noted and the fact that HC were Administrators is expressly stated along with the fact that from money to be received Etienne was to be paid. Nothing was hidden. Your views please."
The particulars to the pleading set out the facts that are said to found a conflict of interest that was allegedly concealed from Mr Salmon: [40]. The exact particulars, which are somewhat discursive, are not set out here but may be restated concisely in 10 points as follows: (1) Mr Brown was a creditor of Capital Finance and Capital Mortgage; (2) Capital Finance and Capital Mortgage were creditors of Given Form, to which in turn money was due to pay Capital Finance and Capital Mortgage; (3) in a three-way arrangement (allegedly made when Mr Albarran and Mr McDonald were administrators of Capital Finance and Capital Mortgage), Given Form and Capital Finance and Capital Mortgage agreed that Capital Finance's and Capital Mortgage's obligations to Mr Brown could be satisfied by Given Form paying some of the money owed directly to Mr Brown; (4) Given Form received the funds and paid Mr Brown, but was then placed in liquidation and Mr Wily was appointed its liquidator; (5) Hall Chadwick (presumably Albarran and Mr McDonald) received a letter alleging that certain payments made to Capital Finance and Capital Mortgage may be recoverable (presumably by the liquidator of Given Form) and they disputed the allegations; (6) in September 2006, Mr Wily's lawyers suggested to Mr Albarran that he should (i) retain a different lawyer other than Mr Brown; (ii) settle Given Form's claim against Capital Finance and Capital Mortgage, or (iii) face the prospect of the "Given Form issue" (meaning presumably Mr Albarran's authorisation of, and Mr Brown's alleged receipt of, money allegedly due from Given Form to Capital Finance and Capital Mortgage); (7) Mr Albarran disputed any wrongdoing in acting as a receiver and manager of Capital Finance and Capital Mortgage and in complying with the agreed direction to pay Mr Brown; (8) Mr Wily communicated with Mr Salmon's business partner (Mr John Myers), suggesting that a legal firm other than Mr Brown's firm should be retained, as the Given Form issue "when it comes to light would not be in [his] interests"; (9) Mr Brown sought advice about whether to write to Mr Wily to seek an undertaking that he not interfere with Mr Brown's contractual relations with its two clients, Capital Finance and Capital Mortgage and to record Mr Wily's "inappropriate behaviour; and (10) noting that documents produced by TCBS in the 2006 Supreme Court proceedings note the "given form issue", the fact that Hall Chadwick were administrators and that money to be received would be used to pay Mr Brown's firm.
The heart of this allegation in the particulars to the pleading is in item (6) above, that when he was administrator of Capital Finance and Capital Mortgage, Mr Albarran had diverted to Mr Brown money that was due from Given Form to Capital Finance and Capital Mortgage. It was an allegation of impropriety against Mr Albarran, Mr McDonald and Mr Brown.
Mr Salmon and TCBS did not have any dealings with Given Form: [41]. The plaintiffs were unaware of any evidence in the 2006 Supreme Court proceedings relating to Given Form, or of the contents of Mr Brown's email, or of any aspect of the Given Form issue: [42].
The plaintiffs allege that Mr Albarran and Mr McDonald were administrators of Given Form between 3 November 2004 and 6 January 2005 and were reappointed as administrators for another period ceasing on 23 June 2005: [43] and [43]. They retained Mr Brown in relation to this administration.
The Settlement. Young CJ in Eq (as his Honour then was) heard the 2006 Supreme Court proceedings on 17 and 18 September 2006, during which period a settlement was reached in principle between the parties to those proceedings: [46]. The settlement in principle included that TCBS would be paid within six months of 18 September 2006 the sum of $1,300,000 out of the monies ($6,500,000) that had been paid into the Federal Court of Australia. The proceedings were adjourned to 19 September 2006, to allow the deeds of settlement to be finalised and a series of drafts was prepared: [47] and [48].
The final draft deed settling the 2006 Supreme Court proceedings included a clause identifying a number of releases and indemnities, including a release and indemnity in respect of Given Form: [49]. The clause in question (clause 3.5) provided that: "The Liquidator [Mr Wiley] releases the BA Companies [being Capital Finance and Capital Mortgage (both with Receivers and Managers Appointed and In Liquidation)] in respect of the money paid to them jointly and severally by the Deed Administrator of Given Form [Mr Albarran]".
Mr Salmon and TCBS say that the release and indemnity, in relation to Given Form, had nothing to do with the 2006 Supreme Court proceedings, or with the controversy in relation to the TCBS charges, Mr Salmon, Capital Finance or Capital Mortgage: [49].
Mr Salmon and TCBS plead that the purpose of inserting the Given Form clause in the 19 September 2006 settlement was, as the pleading says, "as a mechanism of ensuring that the demand dated 12 October 2005 by Mr Wily against Given Form for $640,000 would not proceed, and if it did, to provide Given Form and the defendants [Mr Albarran and Mr McDonald] a mechanism to advance a complete defence against any proceedings brought by Mr Wily to recover those monies back in the liquidation of Capital Mortgage and Capital Finance": [50].
Mr Salmon, Mr Myers, Mr Wily and Mr Brown celebrated the resolution of the proceedings together: [51].
The balance of the factual part of the pleading, ([52] to [60]), is closely connected with the plaintiffs' allegations: (1) about the negotiations for the final deed of settlement, in which it is alleged Mr Wily and his associate Mr David Hurst contended that the proposed Given Form indemnity in the deed of settlement was unacceptable, but Mr Albarran and Mr Brown stipulated that they would not settle the proceedings without the deed dealing with Given Form; and (2) Mr Salmon's and TCBS's allegations of lack of knowledge of these negotiations or anything to do with Given Form. The precise terms on which these matters are alleged are potentially of importance, so they are set out here in full: "52. The plaintiffs plead that at no stage from the striking of the settlement orally on 18 September 2006 up to and including the draft Deed written by the third defendant was there ever any mention of Given Form. 53. On 19 September 2006, the Deed as drafted by the third defendant was provided to Mr. Wily and his associate, Mr. David Hurst. 54. Mr. Nikolaidis a solicitor representing Wily, Mr. Wily and Mr. Hurst all represented orally that the inclusion of Given Form in the Deed was unacceptable. 55. The plaintiffs plead that the first and third defendants represented orally on 19 September 2006 in a conference room in the Supreme Court of New South Wales to Mr. Nikolaidis, Mr. Wily and Mr. Hurst that they would not take Given Form out of the Deed, they would not settle the proceedings without Given Form having been included or words to that effect. 56. The plaintiffs further plead that Mr. Jim Byrnes who had assisted in negotiations was present during the entirety of the meeting. Mr. Salmon was outside of the room having been told by his legal representative to leave. 57. As a consequence of the first and third defendants insisting upon the indemnity and release in favour of Given Form being included in the Deed the matter did not resolve and the proceedings continued. 58. One of the charges was held to be invalid by his Honour Justice Young, the other charge was held to be valid. Particulars Judgment of his Honour Justice Young together with the Judgment on costs. 59. As a consequence of the Judgment of his Honour Justice Young the remaining charge was to be valued and further proceedings brought to assess the quantum. 60. The plaintiffs plead that the first and second defendants did not pursue the matter further."
(1) The Tort of Deceit. Mr Salmon and TCBS allege that Mr Albarran, Mr McDonald and Mr Brown represented (orally and by email) to them that it was Mr Wily who refused to execute the deed of settlement and was the sole cause of the settlement not proceeding: [61]. This representation was false, as it was not Mr Wily but Mr Albarran and the other defendants who had caused the settlement not to proceed: [62].
The plaintiffs also allege that Mr Albarran, Mr McDonald and Mr Brown failed to disclose to them that they were insisting that the benefit of a full release and indemnity, in respect of Given Form, was being stipulated for in the deed of settlement and that this stipulation was contrary to a demand which Mr Albarran, Mr McDonald and Mr Brown had concealed from the plaintiffs, namely the demand of 12 October 2005 for $640,000: [63]. The plaintiffs further plead that each of Mr Albarran, Mr McDonald and Mr Brown continuously maintained the representation that the sole cause of the settlement of the 2006 Supreme Court proceedings was the conduct of Mr Wily, a representation which they knew to be false: [64]. The representations were fraudulent, as they were false to the knowledge of Mr Albarran, Mr McDonald and Mr Brown: [65].
The plaintiffs plead that Mr Albarran, Mr McDonald, Mr Brown intended the plaintiffs to rely upon these representations, and the plaintiffs did rely upon the representations, by accepting that the 2006 Supreme Court proceedings had not settled and by instructing these three defendants to maintain the proceedings before Young CJ in Eq (as his Honour then was), who held that only one of the charges in favour of TCBS was valid: [66] and [67]. As a result of Mr Albarran, Mr McDonald and Mr Brown's conduct, the plaintiffs did not resolve the 2006 Supreme Court proceedings, but maintained them to the point that they were partially unsuccessful and suffered an order for costs that was ultimately enforced against them, whereby they sustained such substantial loss and damage, and they could not pursue the remaining valid charge: [68].
Mr Salmon and TCBS plead that had they known that the representations were false they would have: terminated Mr Brown's retainer; revoked the appointment of Mr Albarran and Mr McDonald as receivers and managers; and settled the 2006 Supreme Court proceedings independently of these persons with Mr Wily, pursuant to the settlement deed, Mr Wily had proffered on 18 September 2006 excising the clause indemnifying Given Form. But because they did not have an opportunity to do this, they have suffered loss and damage and will continue to do so: [69] and [70].
(2) Conspiracy to Injure by Unlawful Means. The plaintiffs allege that between the oral agreement to settle, the 2006 Supreme Court proceedings reached in principle on 18 September 2006, on terms excluding any reference to Given Form in the presence of Mr Salmon, and the later presentation of the proposed deed of settlement to Mr Wily, Mr Albarran, Mr McDonald and Mr Brown are alleged to have agreed and conspired to include in the deed of settlement a release and indemnity in respect of Given Form, notwithstanding that Given Form had no connection with Mr Salmon, Capital Finance or Capital Mortgage and was not a party to the 2006 Supreme Court proceedings: [79].
The alleged conspiracy included an agreement to conceal from Mr Salmon, the attempt to include the release and indemnity in respect of Given Form: [80]. And the agreement to conceal the stipulation for the release and indemnity in respect of Given Form was both unlawful and contained the use of unlawful means to attain the desired ends in that it was dishonest, gained a secret and ulterior benefit, was an abuse of process of the Supreme Court, and was in breach of the receivers and managers duties under Corporations Act, s 420, as it diverted the funds away from other creditors: [81].
Following the collapse of the settlement of the 2006 Supreme Court proceedings Mr Albarran, Mr McDonald and Mr Brown are alleged to have further conspired to deceive the plaintiffs by falsely and fraudulently representing to them that the reason the settlement had failed was because Mr Wily had refused to execute the deed, and, in so doing, they falsely represented to Mr Salmon that "the Deed Mr Wily had refused to execute contained no more than the terms apparently agreed to on the afternoon of 18 September 2006": [83].
The plaintiffs further allege that following the failure of the settlement of the 2006 Supreme Court proceedings, the three principal defendants agreed and conspired to injure the plaintiffs by taking steps to ensure that TCBS was driven into liquidation and Mr Salmon was made bankrupt, so they could never pursue the three principal defendants for their conduct in aborting the settlement of the 2006 Supreme Court proceedings for their own ends: [84]. This separate alleged conspiracy was pursued by the three principal defendants by their effectively "running dead" in the balance of the 2006 Supreme Court proceedings, by their not presenting a proper case to the Court, and by their not prosecuting subsequent proceedings for the assessment of the quantum of TCBS' losses (in respect of the charge Young CJ in Eq found to be valid) with appropriate dispatch: [85]. This meant that no funds were ever produced from the receivership of Capital Finance and Capital Mortgage for the benefit of the plaintiffs: [86]. This further conduct also involved the use of unlawful means in furtherance of the conspiracy to injure; namely dishonesty, the breach of Corporations Act, s 420 duties and the abuse of the processes of this Court: [87].
Ultimately, Mr Wily's administration of the liquidation of Capital Finance and Capital Mortgage continued, resulting in funds being available to pay Mr Wily's fees, and those of Mr Albarran and Mr McDonald, but nothing was left to pay the debts of TCBS or its related company: [88].
(3) Wilful Default or Wilful Neglect of Their Duties as Receivers. The plaintiffs further allege that the facts already pleaded also amount to the three principal defendants stating to the plaintiffs that Mr Wily was the sole cause of the 2006 Supreme Court proceedings not resolving, whereas, in truth, the proceedings did not resolve because Mr Albarran and Mr McDonald, as deed administrators, were involved in the payment relating to Given Form and they received the subsequent demand of 12 October 2005, whereby they engaged in conduct constituting wilful default under their Deed of Appointment dated 4 August 2006, and they are therefore not entitled to any indemnity or release under that Deed of Appointment: [89].
(4) Breach of Duty as a Receiver, Including Breach of Fiduciary Duty. The plaintiffs plead that Mr Albarran and Mr McDonald owed a fiduciary duty to the plaintiffs not to permit their personal interests to conflict with their duties to carry out the receivership of Capital Finance and Capital Mortgage in good faith, and they owed a duty to exercise their powers as receivers in good faith in the interests of the secured creditor who appointed them and otherwise in the interests of creditors and shareholders generally: [90].
Mr Albarran and Mr McDonald breached those duties by the conduct previously pleaded, including stipulating in the negotiations for the settlement of the 2006 Supreme Court proceedings for the Given Form release and indemnity, insisting upon the Given Form release and indemnity even though Mr Wily had refused to entertain it, misleading the plaintiffs about the cause of the settlement not proceeding, subsequently "running dead" in the 2006 Supreme Court proceedings and failing to prosecute consequential assessment of quantum proceedings for the valid charge and then charging fees in excess of $800,000 for their conduct of their receivership: [91].
The plaintiffs' plea of fraudulent concealment of these causes of action is set out in paragraphs [96] to [100] of the pleading. Those paragraphs of the pleading are reproduced here in full: "94. The third defendant continued to act as the solicitor for the first and second defendants in proceedings 4200/06 and, in the circumstances knew and/or was a party to the matters pleaded above, in particular to the conduct of the first and second defendants as pleaded in paragraphs 61 to 70 above, paragraphs 71 to 88 and paragraphs 90 to 92 above. 95. In the circumstances the third defendant, possessed actual or constructive knowledge of the actions of the first and second defendant in breach of their fiduciary duty to the plaintiffs and is thereby liable, equally with the first, second, fourth, fifth and sixth defendants to make restitution in the form of equitable compensation for the losses suffered by the plaintiffs by reason of the breaches of duty pleaded above. FRAUDULENT CONCEALMENT 96. If relevant, pursuant to s55(1)(a) of the Limitation Act 1969 (NSW) ("theAct) the plaintiffs plead that:- (a) The cause of action that they propound is a cause of action based on fraud or deceit. (b) That the fraud or deceit was based upon the fact that it was not until 8 November 2016 that the plaintiff was able to obtain a copy of the demand dated 12 October 2005 made upon Given Form and affecting the first, second and third defendants. (c) That the demand was not disclosed at any time to the plaintiffs nor the conflict of interest arising regarding Given Form. (d) That accordingly the fraud was concealed being the dishonest act of maintaining by representations made after 18 September 2006 both orally and in writing by email that it was Mr. Wily who stopped the settlement from proceeding when in truth and fact it was the first, second and third defendants seeking to protect their own interests by inserting an indemnity clause regarding Given Form to ensure that a claim of $640,000.00 would not be made against them or if it was that such a claim could be entirely defeated by virtue of an indemnity clause having been inserted into the Deed of Settlement proposed for proceedings numbered 4200/06 where Given Form played no role whatsoever in the controversy being heard before Justice Young in the Supreme Court of New South Wales, Equity Division. (e) That the plaintiffs only became aware of the specific fraud once the letter of 12 October 2005 was revealed on 8th November 2016 which provided the sole motive for the first, second and third defendants to maintain that the indemnity clause for Given Form should be inserted or else there would be no settlement whereas the contrary had been represented to the plaintiff namely that Mr. Wily was entirely to blame for the settlement not proceeding. 97. Accordingly, the plaintiffs plead that by virtue of s55(1 )(a) they are within time to maintain these proceedings against the first, second and third defendants either jointly or severally. 98. In the alternative, the plaintiffs plead pursuant to s55(1)(b) that as at 19 September 2006 the first, second and third defendants knew that:- (a) It was the demand on Given Form dated 12 October 2005 that was the sole reason for including the indemnity clause into the final Deed of Settlement. (b) That the Given Form demand had not been disclosed to the plaintiffs nor the conflict that had arisen and the true reason for the insertion of the Given Form indemnity. (c) That had it been disclosed the plaintiffs would have been entitled to terminate the retainer of the third defendant and revoke the appointment of the first and second defendants and if the first and second defendants resisted the revocation of their appointment would have been justified in bringing proceedings before the Supreme Court of New South Wales seeking an order for their immediate removal in order that the matter could proceed to a resolution of proceedings numbered 4200/06 upon the basis that the receivers were in breach of their obligations pursuant to the Corporations Act 2001 (Cth). (d) The first, second and third defendants concealed from the plaintiffs their right to bring immediate proceedings against the first and second defendants in the nature of urgent orders for their removal as receivers and managers of BACF and BACM or to consent to the orders as proposed by Mr. Wily in seeking the removal of the first and second defendants as receivers to BACM and BACF. 99. In the premises the plaintiffs plead that the cause of action as referred to herein had been fraudulently concealed upon the basis that the first and second defendants together with the third defendant continued to maintain that they had not done anything wrong but rather it was Mr. Wily who had stopped the matter from resolving such that pursuant to s 55(1 )(b) of the Limitation Act time did not run up until the time when the plaintiff discovered the truth on 8 November 2016, namely that in truth and fact all three defendants had been acting in a conflict of interest being an actual conflict of interest between protecting themselves from a claim against them for $640,000.00 as opposed to acting in the best interests of TCBS to pursue the charge, resolve the proceedings at the agreed sum and settle the matter. Accordingly, any time that accrued pursuant to the Act did not accrue until 8 November 2016 when the plaintiffs were first given a copy of the demand of 12 October 2005 on Given Form. 100. The plaintiffs plead pursuant to s 55(3)(a) of the Limitation Act that the first, second and third defendants were parties to the pleaded fraud, deceit and concealment. DAMAGE 101. The plaintiffs conducted a successful management, accounting and consulting business as at 2006 and say that as a consequence of the deceit undertaken by the first, second and third defendants' either jointly or severally the plaintiffs have:- (a) Lost the benefit of recovering the settlement moneys. (b) Suffered significant losses such that TCBS went into liquidation and Salmon was declared a Bankrupt. 102. The plaintiffs will serve upon the first, second and third defendants an expert report setting out the losses that had been sustained by TCBS, TCBSGH and Salmon upon the service of the plaintiffs evidentiary statement."
In consequence of these causes of action, the plaintiffs plead that their successful management, accounting and consulting business, being conducted in 2006, lost the benefit of recovering the settlement monies, suffered significant losses such that TCBS went into liquidation and Mr Salmon was declared bankrupt: [101]. The plaintiffs claim aggravated and exemplary damages: [103] and [104].
(5) Knowing Participation in Breach of Fiduciary Duty. This allegation solely relates to Mr Brown's conduct, and pleads against him actual, or constructive, knowledge of the alleged actions of Mr Albarran and Mr McDonald in the alleged breach of their fiduciary duty: [93] - [95]. Because the allegation is solely directed to Mr Brown, it can be put to one side on the present contest.

The Plaintiffs' Allegations are Contested

Mr Albarran, Mr McDonald and Mr Brown have made it clear that they strongly contest the plaintiffs allegations in these proceedings. The allegations set out at length in this judgment represent the plaintiffs' contentions in the proceedings. The Court's recounting of them is merely for the purposes of setting out in appropriate detail all of the plaintiffs' contentions. The Court is not adjudicating in this judgment upon the factual correctness or otherwise of those contentions, many of which amount to allegations of what would constitute serious professional misconduct either by an accountant or a solicitor. The evidence on the Motion shows that the allegations are strongly contested by all defendants.
It would only be at final hearing that the principal defendants would have the opportunity to contest the plaintiffs' allegations. The Court is not making any findings of fact in this judgment. But the Court is prepared to assume in the plaintiffs' favour the allegations they make at face value, to see whether they can possibly be made out. This approach is in accordance with legal principles governing summary judgment applications. It does not constitute a finding on the part of the Court that the allegations are in fact correct. This cautionary note should be borne in mind throughout this judgment.

Plaintiffs' Alleged Prior Knowledge of Allegedly Concealed Causes of Action

The applicants/defendants seek to distil the plaintiffs' various claims in these pleadings into three factual propositions. Upon doing so, they then contend on the Motion that each of those core propositions has been advanced, often vigorously, by the plaintiffs since at least 2007 and well prior to the relevant limitation date of December 2010 (namely six years prior to the commencement of these proceedings). It is necessary to first identify each of the three propositions, and then examine significant samples of the evidence which the applicants/defendants claim shows that Mr Salmon and TCBS were well aware of each of those propositions prior to their relevant limitation date of December 2010. The thrust of the applicants/defendants' case is that the plaintiffs have been asserting each of these three propositions since at least 2007.
The three propositions upon which the applicants/defendants say that the plaintiffs/respondents rely are the following: Proposition 1 Settlement of the 2006 Proceeding was cruelled on 19 September 2006 because Mr Albarran and Mr Brown insisted upon the inclusion of the Given Form release in the draft deed and Mr Wily would not agree to settle following this attempt. Proposition 2 Mr Albarran, Mr McDonald and Mr Brown were motivated to so act out of self-interest, because Mr Wily had threatened to sue them over a controversial Given Form transaction to which they had been parties. Proposition 3 After the failed settlement Mr Albarran, Mr McDonald and Mr Brown "ran dead'' in the TC Solutions litigation in order to drive TC Solutions into liquidation so as to "cover up"' the wrongdoing described above.

The applicants/defendants relied upon an extensive range of evidence to show the plaintiffs had advanced each of these propositions well prior to December 2010. These reasons do not attempt to set all of this evidence out. These reasons nevertheless collect and review in a mostly chronological order what may be said to be some of the most compelling pieces of such evidence in the defendants' case, avoiding unnecessary repetition where possible. The conclusion of the review is that there certainly is strong evidence that contradicts all three of the propositions on which the plaintiffs are said to rely.
The Review Evidence Commences in 2007. Within about 12 months of the abortive settlement discussions of the September 2006 proceedings, the evidence on the Motion shows that Mr Salmon was corresponding with Mr Albarran and Mr Brown in particular, about the issue of the failed settlement. His correspondence shows considerable knowledge of the substance of what had occurred in the failed negotiations. His correspondence initially produced few responses but the provision of information to him increased later. The best course is to examine this correspondence. He did not dispute that the emails were his or that he had received emails in reply. Rather, he took the position that the replies were uninformative or that the applicants had not taken the Court to all of the relevant materials. The parties took the Court to a considerable number of documents and one cannot do justice to what has been put on each side of this case without referring to many of these documents. This section of these reasons examines many of those documents in the form of a mostly chronological narrative covering the years 2007 to 2010.
On 13 November 2007, Mr Salmon wrote to Mr Albarran complaining about the lack of response to previous emails and saying the following [Exhibit A]: "Richard As you havnt replied/added to any of the recent emails between Steve, you and I, I am now formally requesting a response from Hall Chadwick. In September 2006 a settlement between the above mentioned parties was rejected due to unrelated indemnification matters appearing in the settlement deed. This was a complete breach of ethics and trust. The matter of 'given form' has never had anything to do with Terra Cresta yet was used in the deed and since that day has been referred to as the matter that stopped settlement. As you know I am more than aware that Mr Andrew Wily made a phone call to Jim Byrnes on this subject and requested Mr Byrnes deal with it on his behalf. Mr Byrnes then had a discreet and private discussion with Steve Brown. Given the content and tone of Mr Wilys conversation it doesn't take a genious to work out what was said and made Mr Brown add these self serving matters to the Terra Cresta deed. As Mr Brown refuses to act on the matter I am being forced down a path that I would rather not go. I therefore request that either Hall Chadwick force justice here or explain to me why unrelated matters appeared and prevented a settlement on 18 September 2006. Thanks Owen Salmon"
This email certainly shows a consciousness on Mr Salmon's part of the introduction of "unrelated indemnification matters" being put forward in the settlement then, and that these are related to "Given Form" but not "Terra Cresta". The reference to "Terra Cresta" is a reference to Mr Salmon's company, Terra Cresta Business Solutions Pty Limited (another name for TCBS), which had the benefit of the charges over Capital Finance and Capital Mortgage.
This email produced a general reply from Mr Albarran the same day, "I am happy to have a chat about this. As far as I am aware the only thing that stopped settlement was wily reluctance to settle. My firm has continued to find [fund] this matter with no assistance from you. Please explain what it is that you want or think I can do to speed up the process?"
The following day Mr Salmon wrote again to Mr Albarran. The 14 November 2007 email refers to Wiley's associate rejecting the settlement, due to Given Form. The email [Exhibit B] said as follows: "Richard An event occurred on or about September 18 last year. Wily wasn't even present in person and the settlement was rejected by David Hurst due to 'Given Form'. I refer to the event as blackmail. Steve can call it what he likes. I believe Steve acted improperly in this matter and prevented settlement occurring at the agreed 1.3M mark. I am certain you know of the matter. It appears Steve is stuck in this self preservation mode which, whilst I can appreciate, is not the right thing to do nor does it help my case. Had the blackmail or 'discussions' (if Steve needs to rephrase) been reported to ASIC or the police then Wily may well be in a far different position and I would've had my money. Both ASIC and police are aware of the matter. I am trying to get you to 'find' a way for Steve to report this matter. Failing that I have no choice but to pursue Steve on this which in effect is pursuing Hall Chadwick. I can't be any more clearer. Thanks Owen"
This provoked a similar reply to the last email. Mr Albarran responded very generally, "I still fail to understand your position. I am happy to talk to you further. If you think that you need to proceed another way than [then] that is your decision. I continue to advise the matter has not settled because of Willy (sic) reluctance. In conclusion the only person that is funded this matter is my firm." This shows all signs of Mr Albarran managing the correspondence diplomatically, but as giving little away.
Mr Salmon decided to bring a complaint against Mr Brown to the Office of the Legal Services Commissioner ("OLSC"). Although this was a complaint against Mr Brown, rather than Mr Albarran and Mr MacDonald, it nevertheless shows Mr Salmon's state of knowledge about the stipulation for the Given Form release and indemnity during the negotiations.
Mr Salmon completed in his own handwriting an OLSC complaint form on 20 November 2007, which in paragraphs 9(a) to (c) said, in answer to an OLSC question, "Please list the main issue you are complaining about" that it was, "(a) a negligent act preventing settlement" and "(b) professional misconduct" and "(c) unrelated matters used by solicitor to protect himself".
Then in answer to the OLSC's question 10 (which asked "Please tell us about the events that led to your complaint"), in his own handwriting Mr Salmon said: "My company Terra Cresta Business Solutions held charges over 2 companies in liquidation. I appointed Hall Chadwick Chartered Accountants as Receivers & Managers to protect my position as chargee on the companies BACM & BACF. After several weeks of meetings and court appearances a settlement was reached between my company and the liquidators. My solicitor Mr Steven Brown (who technically woks for the R & M) was requested by both sides to finalise a settlement agreement on or around 18/09/06. As the agreement was time critical it was agreed to complete and sign this off on the same day settlement was reached. The liquidator apparently found evidence of wrongdoing on a completely unrelated matter. It had a 3rd party advise Steven Brown that they were aware of this payment to him. Steven Brown then negligently raised these matters in my settlement as to indemnify himself personally on matters not pertaining to my case. It was a very stupid decision. The liquidators attended a meeting at the Supreme Court building to sign the agreement. They abruptly left citing they would not settle on these terms. They have since not legitimately returned to settle and the case still runs 14 mths later. The liquidators maintain they were prepared to settle had it not been for this unrelated matter. This is clearly a breach of the duty of care to me the client. I have met and emailed Steven Brown many times. He maintains he did nothing wrong. Since this he has run up bills exceeding $500,000."
Mr Salmon wrote two more letters to the OLSC in the course of the next seven months. On 5 December 2007, he wrote in response to a letter from a mediation and investigation officer at the OLSC asking questions about the 20 November form he had addressed to the OLSC. Those questions were the following: "Dear Salmon, Complaint about Mr Steven John Brown I refer to your complain: lodged with this Office on 21 November 2007, to your correspondence dated 28 November 2007 and to our telephone conversation yesterday. Whilst it appears that the main issue you are complaining about is that settlement of your matter failed as a result of Mr Brown's alleged con duct there are a number of aspects in your complaint that are not entirely cigar therefore require further details from you at this stage of the investigation in your complaint dated 20 November 2007 you allege that: The liquidator apparently found evidence of wrongdoing on a completely unrelated matter. It had a 3rd party advise Steven Brown that they were aware of this payment to him. Steven Brown then negligently raised these matters in my settlement as to indemnify himself personally on matters not pertaining to my case.... the liquidators attended a meeting at the Supreme Court building to sign the agreement. They abruptly left citing they would not settle on these terms. Please respond to the following questions: 1. What is the nature of the "evidence of wrongdoing on a completely unrelated matter" you state that the liquidator found? 2. What is the nature of the "payment made to Mr Brown"? 3. Did you attend the meeting with the liquidators that took place at the Supreme Court to sign the agreement? If so, please give details of the date, time and the circumstances in which this meeting took place; 4. Who else was present at that meeting? 5. Why did the liquidators "abruptly" leave "citing they would not settle these terms"? 6. What were the "forms" enumerated at 5 above? 7. Pursuant to your correspondence dated 28 November 2007: a. Why is "nearly $10M at stake now in this matter"? b. Why do you fear for your own wellbeing? c. Has the affidavit you already been sworn by Mr Wily? If so, can't you provide this Office with a copy of that affidavit? d. Why would the affidavit mean that this matter would be taken more seriously?"
He then responded to those seven questions as follows: "In response to your letter dated 30 November I reply as follows: 1. the unrelated matter was on a company called Given Form Pty Ltd which I understand was/is in liquidation. It was being alleged by the liquidator (Armstrong Wily's Andrew Wily) that both Steven Brown and the Receivers (Hall Chadwicks Richard Albarran) took payments that they new (sic) were preferential and then tried to hide the fact. 2. preferential (but deliberately so) (see my appendix A from previous letter). 3. on either 17th or 18th September 2006 I was present when the liquidators were asked to attend and sign the document. I was however asked to remain outside the room whilst this happened. The liquidator attended with his solicitor. This was in a private meeting room outside one of the courtrooms. 4. Steven Brown; (I believe Richard Albarran of Hall Chadwick); Leon Nicolaidis (solicitor for the liquidator) and David Hurst (liquidator); Anlrew Wily (liquidator was around but I am not sure initially in attendance a1 this meeting). 5. they stormed out of the meeting and I confronted them saying " is it all signed? Can I go home?" they said something to me along the lines of "ve're never going to sign an agreement with that crap in it. These guys are kidding themselves". When I questioned further they said something about a matter I now know as Given Form. Further investigation revealed that both Steven Brown and Richard Albarran were demanding that indemnities remain in the deed for this unrelated matter of Given Form. 6. the terms (and please refer to my appendix G last letter or deed attached to my complaint) included releasing Steven Brown and Richard Albarran from any further claims or actions regarding Given Form. 7. a. my economic losses as a direct result of the matter- not settling in September 06 are approaching S10M. Mr Brown new that the funds from settlement were to complete property developments and other business arrangements. We also subsequently had to abandon our company and business in November 06 due to the flow on effects of this court matter. b. I have been approached by a well known stand over man and a person the subject of both police murder inquiries and coroners inquiries;. The person (Jim Byrnes) has advised that he represents Geoff McDonald (the senior partner and joint receiver on my matter). Geoff is the associate of Richard Albarran. Steven Brown by law is appointed by Hall Chadwick on my matter and had a relationship with Chadwick somehow on the Given Form matter. My Byrnes has attempted to make me indemnify Hall Chadwick on the matter. He has hinted that I will be pursued if I do not play their game. Some of the conversation is extremely disturbing and implicates other parties. Given My Byrnes was jailed this year for ventures against a solicitor with a baseball bat….I should be justified in my fears and grateful they don't know where to find me yet. c. I have had discussion with both liquidators Andrew Wily and David Hurst. Both confirmed their understanding of the matter and confirmed they have the errant deeds in safe keeping. Both have agreed to testify in this matter and provide affidavits. Mr Andrew Wily has told me clearly that he does not want to provide this until I settle the litigation he has with my company. d. It would be taken more seriously because whilst I have the deeds it is effectively my word against that of 2 court appointed officers who will be defending their careers on this. The affidavits from Wily and Hurst are crucial as they were the other side who rejected the settlement. The documents/emails and affidavits together would be irrefutable evidence for both your commission, ASIC and any court in the land"
The applicants/defendants say that they told Mr Salmon and TCBS as early as 2008 that they had proposed the Given Form release and indemnity and that Mr Wily had refused to settle. This appears from Mr Brown's response to a complaint made to the OLSC dated 10 June 2008, and provided to Mr Salmon on 18 June 2008. In response to what has been called "Allegation 1" Mr Richard Gulley, the solicitor who was acting for Mr Brown, said the following to the OLSC: "Acting without instructions by inserting provisions into the draft Deed of Release that were unrelated to the matter and that caused the settlement to fail. The matter did not settle as the parties were not able to reach agreement, it had nothing to do with Given Form as in the later draft Given Form was not a party. Even without Given Form the Liquidator was not willing to settle. Given Form was added on the instructions of Richard Albarran who was one of the joint and several BA Receivers at the time. Given Form was a company that Mr Albarran was Administrator for and from Mr Brown's memory it was put to him and Mr Albarran by Mr Wily and Mr Burns that if a settlement was reached Mr Wily would seek to take action against Given Form. Whilst no real issue was seen to this it was thought better to remove and settle all matters rather than leave a matter at large to be dealt with latter if it were possible to resolve everything. The draft deeds of the 18th and 19th of September 2006 were prepared in the Supreme Court on Level 14 and in conference rooms while the Court case was being conducted. Those present during the drafting were, Steven Brown, Paul Davis, A Wily, Leon Nikolaidis, R Albarran and O Salmon. After discussions the Liquidator would not contemplate a settlement with Given Form as a party. As nothing would turn on it whilst not the best way of proceeding to reach a settlement a second draft was prepared on the day after 19 September 2006 without Given Form being included. As stated despite this the Liquidator did not agree to the proposed settlement. We note that prior to and following 18 September 2006 numerous attempts to settle the matter have been made these include direct attempts by Mr Salmon with the Liquidator directly. As an example those which we know of are:"
Mr Salmon's correspondence with OLSC continued over a number of years. He wrote again to OLSC on 11 July 2008, in which he said: "Yes the liquidator would not contemplate settlement with Given Form as a party. Mr Brown has already said in his evidence that they did not want to settle and it had nothing to do with Given Form? Which is it? Contradictions again. Clearly another draft after the case has been completed is a pointless exercise. Mr Brown and Mr Albarran ruined all chance of settlement at an acceptable commercial level. Comments re numerous other settlement attempts. Yes there were discussions all the way along but lets use their paragraph (g) as an example and attachment 14. The offer is now $700k due to the matter being completed in court. So in the space of a day Mr Brown and Mr Albarran lost their client TCBS $600k. The reality is there was 1 opportunity and they stuffed it with what was deliberate and premeditated negligence in complete breach of their duties to TCBS and the court."
Mr Salmon provided an affidavit, he swore on 21 July 2008, to the OLSC of his account of what he understood about the negotiations that he was criticising. It also shows fairly well-developed knowledge of the claim he now makes: "39. On 13 September 2006 I was sitting outside a Court room on level 7 of the Supreme Court waiting to be called for what I believed was a directions hearing relating to proceedings number 4200 of 2006. Jim Byrnes (Byrnes) a person who appeared to me from many meetings that I have had with Wily to be an associate Wily was present outside of Court sitting next to me. Byrnes took a mobile phone call whilst he was sitting next to me. Byrnes answered the call by flipping open his mobile and placed his handset about 4 or 5 inches away from his ear. I could hear Byrnes conversation with the person on the other line in words to the following effect: MALE: 'Ha Ha Ha we have got these guys fucked now.' BYRNES: 'What do you mean.' MALE: 'We found a pay off to Brown and Albarran where they took money from the company Given Form.' BYRNES: 'What do you want me to do?' MALE: 'I want you to go and fuck with them.' I recognised the voice coming from Byrnes' mobile to be that of Wily. I recognise his voice because I have spoken with Wily face to face and on the phone both on landline and mobile on numerous occasions and I am familiar with the sound of his voice. 40. After Byrnes finished with the phone call I observed Byrnes enter the Court room and say something to Steven Brown who was seated in Court. I could not hear what was said. I observed Steven Brown leaving the Court room with Byrnes where they proceeded to go into a conference room and shut the door. 41. I did not think much of this at the time because I did not know of the company Given Forma and it did not concern me as Given Form was not related to the Defendant and had nothing to do with the proceedings that were on foot. 42. On 18 September 2006 the first day of the hearing, settlement discussion took place where an agreement was reached between parties that Wily would pay $1.3M to Etienne Lawyers for distribution between the Defendant, Hall Chadwick and Etienne Lawyers (whose fees at that stage were $88,240.00 combines/excluding GST) and abandon all other claims. 43 Steven Brown solicitor for the Defendant and Hall Chadwick together with Albarran from Hall Chadwick agreed to write up deed to be signed next morning based on terms that were agreed. Steven Brown, Albarran, Wily, Byrnes, Leon Nikolaidis, John Myers and I all went and had lunch to level 14 of the Supreme Court to celebrate. 44. A deed was drafted by Steven Brown in a conference room at the Supreme Court that afternoon (the deed I recall seeing was purported to be an amended version of a deed dated 12 September 2006 which I read earlier and which reflected previous negotiations between the parties). The draft deed that I recall was being used in preparing the final version of the deed is behind Tab 16. The deed that I read in Court I believed was the final version of the deed the parties would execute. I was not provided with a copy of this deed. This version that I read did not have any reference to Given Form and this was the deed that I had consented to on behalf of the Defendant. 45. On 19 September 2006 and prior to the matter being called the parties arranged to meet and execute the deed. David Hurst, Leon Nikolaidis, Steven Brown, Richard Albarran and I attended a conference room. I was asked to leave the room which I did. 46. About 5 to 10 minutes later, I observed David Hurst and Leon Nikolaidis storm out of the conference room. I asked Leone Nikolaidis 'What happened?' and he said to me or using words to the following effect: 'We will never sign a deed with unrelated matters in it. They want us to sign a release on Given Form which we will just not do. Your lawyer and the receivers refuse to remove the reference to Given Form. 47. I subsequently found out that the deed that was presented David Hurst (Wily's joint liquidator) by Steven Brown and Hall Chadwick in the conference where I was asked to leave contained an indemnity clause relating to Given Form. I believed that the deed that was to be presented for execution was the deed that I read at the precincts of the Court as deposed to in paragraph 44''above. A copy of the second deed is behind Tab 17. An email was sent to the parties attaching the deed which contained references to Given Form at about 7.48pm the evening of 18 September 2006. I was unable to access the email that evening. I did not give my consent nor the consent of the Defendant to settle on the basis proposed in the deed at Tab 17. At all times I believed that settlement would occur on terms that were contained in the deed that I read on 18 September 2006 that we had discussed with Wily that day. At no stage did Steven Brown or Albarran inform me of the inclusion in the deed to references to Given Form or their significance to the proceedings or otherwise. 48. When Albarran and Brown came out of the conference room I asked Brown what was going on he said to me using words to the following effect: 'They don't want to settle'. 49. The matter proceeded after Justice Young was informed that the parties could not settle. 50. At Tab 17.1 is a deed that was given to me by Steven Brown on 20 September 2006 after Justice Young had already heard the matter. This deed did not contain any reference to Given Form. I believed that the terms of this deed were those that I had read and consented to on 18 September 2006 and referred to at paragraph 44 above. 51. For more than a year I have requested an explanation from Steve Brown, Richard Albarran and Wily as to why Given Form an unrelated company was being used in the compromise the indebtedness of BACF to the Defendant pursuant to a charge the Court held was valid. Steven Brown and Albarran deny any impropriety. At Tab 17.2 is a copy of an email from Steven Brown to Julian O'Sullivan of counsel dated 13 September 2006 relating to the matters I depose to at paragraph 40 to paragraph 51 inclusive of this affidavit. At Tab 17.3 is a letter from Albarran to the Defendant dated 14 November 2007 in which Albarran denies any knowledge of matters that occurred on 1. 52. I believed there was serious misconduct by Steven Brown and Hall Chadwick in their conduct of the settlement negotiations with Wily."
Importantly, in paragraph 51 of this affidavit, Mr Salmon describes the misconduct he alleges is partly a mystery to him "for more than a year I have requested an explanation from Steven Brown, Richard Barron and Wily as to why Given Form an unrelated company was being used in the compromise of the indebtedness of [Capital Finance] to the defendant pursuant to a charge the court held was valid." It seems that Mr Salmon did not know what he came to know later of the redirected payment from Given Form.
Mr Salmon's correspondence with the OLSC continued later in 2008. On 30 September 2008, TCBS wrote to an investigator at the OLSC (the letter was actually written by Mr John Myers on behalf of TCBS), and in that letter the following was said: "I agree that there were several discussions re settlement. I am however clear that settlement was only agreed by both parties on one occasion. I only attended one set of settlement discussions and thereafter attended lunch with the parties as discussed above. I have never seen the documents produced by Eakins with handwriting by Mr Brown. I cannot say when these were written. I can say though, that it was widely known by all involved (including Mssrs Brown and Albarran) and vocalised by Wily, Nikolaidis and Lazar that settlement did not go ahead because of the last minute unapproved changes inserted into the deed by Mr Brown and Mr Albarran relating to Given Form Pty Ltd that could only serve the purpose of providing Mr Brown and Mr Albarran with some form of advantage".
And then on 18 November 2009, Mr Salmon swore an affidavit in proceedings commenced in 2008 by Mr Wily, in the Equity division of this Court. The affidavit was sworn in the context of Mr Salmon seeking pro bono assistance through the Court's Pro Bono Assistance Program administered by the Registrar. In that affidavit, Mr Salmon swore the following: "11. On 4 August 2006, after identifying the liquidators of the BA companies appeared to be breaching their obligations I appointed Receivers and Managers to BACF and BACM to protect my companies secured creditor status. 12. On or around 13 September 2006 I was in the supreme court building when a number of events unfolded. At the time I believe there was an application by Wily against my company Terra Cresta. (4200 of 2006) Whilst sitting with a person by the name of Jim Byrnes, a person I believe could be referred to as a standover man, I was privy to a phone conversation from liquidator Mr Andrew Wily. I heard Mr Wily give clear instructions to Mr Byrnes to blackmail Mr Steven Brown, who at the time was my solicitor. This was over a matter I now know as Given Form. A matter which had no relationship to my matter. I watched Byrnes enter the courtroom and walk out with Mr Brown to a private room. Around the same time I later found out Mr Leon Nikolaidis (Wilys solicitor) attempted the same action with Richard Albarran (R&M) and Mr Wily also contacted my business partner. I understand it is an offence for Mr Nikolaidis to have interfered in this fashion and that he was found guilty of similar action in the same liquidation. (NPRT v BACM Andrew Hugh Jenner Wily v NPRT [2008] NSWSC 833). I have attached an email from Steven Brown to counsel telling him this action (blackmail) occurred. (See Appendix E) 13. A settlement in matter 4200 of 2006 was reached on 18 September 2006. Mr Steven Brown was given the task of finalising the deed for signing. On the morning of 19 September 2006 I attended a meeting room in the supreme court to sign the document. I was asked to leave the room. About 5 minutes after I left that room Mr Nikolaidis and liquidator David Hurst came out and told me that my solicitor and R&M would not remove self fulfilling clauses from my settlement deed. I later inspected the, deed to find unrelated matters that they appeared to be trying to get some indemnity from regarding 13 September blackmail. I heard Mr Brown and Mr Albarran refuse to remove their insertions. As a result settlement fell over and the matter went back to court. I have the deed showing this indemnity and alteration 14. Justice Young heard the matter on 19 September 2006 and invalidated 1 of my 2 company charges. He left the validated charge open and stated that I needed to prove further quantum to the liquidator. The $1.3M offer did not appear again after this failed settlement. The costs order from the subsequently run case helped the liquidators and R&M liquidate Terra Cresta 2 years later."
This affidavit, like many of Mr Salmon's letters, seemed as much concerned with Mr Wily's alleged conduct in conjunction with Mr Jim Byrnes, as it was with Mr Albarran's and Mr McDonald's alleged response to it. Once again, it is to be noted that neither Mr Wily nor Mr Byrnes has had any opportunity to answer any of these allegations. And that is all they are for present purposes, mere allegations. No doubt they would be contested at a hearing. But they provide part of the context for the case Mr Salmon is advancing.
But when it comes to the Given Form allegation, it is fairly clear from this 18 September 2009 affidavit that Mr Salmon then had some uncertainty as to why this indemnity was being sought: "I later inspected the deed to find unrelated matters that they appeared to be trying to get some indemnity from regarding 13 September blackmail".
This affidavit is at least some evidence in itself that Mr Salmon could infer that the Given Form indemnity was some kind of response to the allegation that Mr Wily was attempting to blackmail Mr Albarran and others. But the substance of the alleged blackmail, and the underlying reason for indemnity, are not particularly clear in the way that Mr Salmon is himself advancing his understanding in this affidavit.
Mr Salmon also lodged a formal complaint with ASIC against Mr Albarran and Mr McDonald in November 2007. That complaint continued to be dealt with by ASIC's Office of National Assessment and Action. In the course of his correspondence with ASIC, Mr Salmon makes the following assertions that go further than the previous matters covered and venture the hypothesis that it can be inferred from Mr Brown's correspondence that "he and Hall Chadwick shall knowingly be paying themselves monies for other matters out of funds owed to the creditors of Given Form". The text of the relevant parts of this email is as follows: "Adrienne Further to a matter that we last corresponded on in January 2008. I attach a further email from Steven Brown addressed to Ian Lazar from 23 Nov 2004. Please note on here (3rd page) a matter pertaining to the company Given Form of which Richard Albarran and Goeff Mcdonald of Hall Chadwick were receivers and managers on and in which Steven Brown was the solicitor acting for them. The email from Steven Brown is quite implicit that he and Hall Chadwick shall knowingly be paying themselves monies for other matters out of funds owed to the creditors of Given Form. This shows the premeditation in this matter. so now you have: * premeditated plan to take funds which they know are preferential and belong to creditors * confirmation they did take these funds * Mr Andrew Wily of Armstrong Wily finding this information and using it to blackmail Brown and Albarran in my matter Wily v Terra cresta * evidence from me witnessing Mr Wily giving phone instructions to Jim Byrnes to blackmail Brown and Albarran * a copy of my settlement deed showing where Brown tries to indemnify himself and Hall Chadwick from these payments * conversations that I have reported where Geoff Mcdonald of Hall Chadwick is trying to bribe me to drop these misconduct charges against his firm"
But these allegations to ASIC do not quantify the amount Hall Chadwick allegedly paid themselves and what were the monies owed to Given Form.
Mr Salmon lodged the 2007 complaint to ASIC electronically. A portion of the complaint is a response to a standard form ASIC document, in which Mr Salmon as the complainant is invited to "tell us what happened". He responded by setting out the events about which he is complaining, and about which he seeks an ASIC investigation, in the following words: "Hall Chadwick Chartered Accountants are the Receivers & Managers appointed by me to protect my companies position with regards to company charges that it has registered. My company is Terra Cresta Business Solutions. On or around the morning of September 18, 2006 my company reached a settlement with the liquidators representing the companies which we held company charges over. (Business Australia Capital Finance and Business Australia Capital Mortgage). The settlement was agreed at $1,300,000 and had been sealed with a handshake. Time was of the essence and it was agreed that my R&M would have the settlement agreement drawn up and signed that day. They agreed until late in the day when the agreement could be signed off by both parties. The solicitors and R&M had the agreement drawn up and requested the liquidator attend to sign off. They attended and not long after stormed out of the meeting room saying there was no way they were going to sign this agreement The R&M's solicitor had been caught out on an unrelated matter for allegedly taking a payment that he new was illegal. This had been raised with the solicitor behind closed doors by another party related to the liquidator. It was completely unrelated to my matter. The matter is referred to as 'Given Form* which I believe was another company in administration. Hall Chadwick and the solicitor Steven Brown of Etienne Legal had used my settlement to try and indemnify themselves on this matter with the liquidator Armstrong Wily Chartered Accountants. My settlement agreement presented for signing off had references to this unrelated 'Given Form' matter strewn through it The R&M's solicitor was trying to indemnify himself and prevent anyone notifying authorities about this matter. The liquidator rightly rejected this settlement and on their way out of the court told me they would not sign it. As the client I was unaware of the 'Given Form' matter and was not advised by solicitor or R&M that they were adding this to my agreement. As the settlement fell over the matter continued in court and now 14 months later is still ongoing. The R&M have run up another 500-600k of 'costs' solely due to running their own agenda. The liquidator has probably expended a lot more of creditors money. A few days after the abandonment of the settlement I was made fully aware of what had gone on. For the past 14 months I have requested the R&M and the solicitor Steve Brown rectify this damage by going to ASIC and the police. They refuse too knowing it would potentially be the end to their careers. They both continue to lie and manipulate their way forward knowing that they are responsible for settlement not occurring. They do not care about my position and are only worried about their big pay day. As a result I am out of pocket with other flow on damages between $4M and $7M. My life has been ruined because of 16 months in court. I am also lodging complaints with the Legal Service Commission. I am asking ASIC to investigate and charge the R&M Hall Chadwick Chartered Accountants".
The applicants/defendants rely in submissions upon statements made by Mr Salmon in this complaint, such as "I was made fully aware of what had gone on" as evidence that he was fully aware of everything that mattered in relation to the Given Form transaction. But even without testing, it is difficult to treat such statements other than cautiously made as they are without obvious legal advice and without full disclosure of documents. And Mr Salmon now says there is material he did not know, such as the letter of demand of 12 October 2005.
On 24 February 2009, Mr Brown responded to Mr Salmon's complaint to the OLSC through solicitors, Eakin McCaffery Cox. The response he gave to the complaint was full and was provided under the hand of Rosemary MacDougal, a consultant to that firm. Mr Brown's response took the complaint head on, explaining that there were legitimate commercial reasons for the stipulation for the Given Form release and indemnity during the negotiations. This is what Mr Brown's response said on that subject: "As advised previously, our client acted in accordance with the instruction of his clients Richard Albarran and Geoff McDonald. So much is confirmed by Mr McDonald's letter to you dated 9 July 2006. He confirms that should a settlement be reached with Mr Wily then he, Mr Wily would commence legal proceedings against the receivers and managers in regard to Given Form, that is against, Richard Albarran and Geoff McDonald. In that event, Richard Albarran and Geoff McDonald, in their capacity as receivers and managers of BACF/BACM would not have authorised the release of the settlement moneys to the complainant until such time as Mr Wily's action against the receivers and managers of Given Form had been completed. The reason for this is that the money paid to Given Form would form part to BACF/BACM funds for distribution. More costs would have been incurred by the receivers and manager, thereby reducing any eventual payment to the complainant's company. That is why Mr Albarran gave instructions that Given Form be included. Accordingly, the Given Form clause did pertain to issues in dispute between TCBS and BACF or BACM regarding the Supreme Court proceedings 4200 of 2006 and it was, in our submission, in the interest of the complainant to attempt to have this claim resolved in the settlement. When the clause was removed the next day Mr Wily still did not settle, in our submission, and in the writer's own experience over many years of practise, it is an extraordinary proposition that in a commercial dispute, a party refuses to settle when an unacceptable clause is removed from a deed within hours of it being included. The evidence is that Mr Wily did not wish in truth to settle. Mr Wily has never informed our client why he did not settle. In commercial situations often the reasons for a settlement or no settlement are never clearly expressed".
Mr Brown's response through Eakin McCaffery Cox takes issue with many of the factual contentions that would be necessary for Mr Salmon's claim ultimately to succeed. In particular, it takes issue with the cause of the basal assumption in Mr Salmon's case that Mr Wily was only refusing to settle because of the Given Form clause. Mr Brown, through this letter, contends that Mr Wily was not prepared to settle at all for reasons of his own that he, Mr Wily, never disclosed. The Eakin McCaffery Cox letter then methodically goes through much of the other correspondence that Mr Salmon had advanced as part of the complaint to the OLSC. It is not necessary to reproduce that analysis in these reasons.
Eakin McCaffery Cox make clear in this letter they also contest Mr Salmon's contentions that Mr Brown's firm was acting for him personally and owed him fiduciary duties. The only concession made was that Mr Brown acted for the receivers and managers. But they make no concession on Mr Brown's behalf that he was acting either for TCBS or Mr Salmon.
Subsequent parts of this correspondence allege that Mr Wily did not fail to settle, because of the request to include the Given Form clause in the draft deed. Eakin McCaffery Cox say that the reality was the draft deed was only put forward with that clause included for: "no more than a day" but the negotiations for settlement; "continued over many months". Mr Brown's, and no doubt Mr Albarran and Mr McDonald's characterisation of the matter, seems to be that Mr Wily only discussed the Given Form issue for a day; it was one of many issues; by early 2011 it had long since been dropped from consideration but settlement still stalled. This response gives a fairly clear indication of how the case would be defended, should it go to trial.
In subsequent litigation before Rein J in this Court on 16 December 2009, both Mr Brown and Mr Albarran gave evidence about the negotiations in which the Given Form release and indemnity was sought. It is not in contest that through the processes of the OLSC that this evidence, along with all the other documents given by other parties to the OLSC were provided by the OLSC to Mr Salmon.
Mr Albarran's December 2009 evidence was that Mr Brown suggested to Mr Albarran that a release in relation to Given Form be included in the settlement documentation being negotiated with Mr Wily (Rein J transcript 16 December 2009, T 39, line 45), but Mr Albarran regarded the Given Form issue being related to the 2006 Supreme Court proceedings in relation to Capital Finance and Capital Mortgage, because Mr Wily was suggesting "that Given Form may be sued for a preference in relation to [Capital Finance or Capital Mortgage]" (T 40, lines 6-9). Mr Albarran agreed that there was a dispute between Mr Wily and Mr Brown in relation to some fees Mr Brown had been paid concerning Given Form, and this was the subject of Mr Wily's allegation that it was Mr Brown who had received an alleged preference (T 40, lines 15-18). Mr Albarran asserted that he regarded Given Form as related to Capital Finance and Capital Mortgage "because Mr Wily had indicated he might make a claim at some stage for recovery of money against Mr Brown…[and Hall Chadwick]". But Mr Albarran agreed that the additional clause in relation to Given Form did not itself improve TCBS' position in the negotiations (T 41, lines 21-24).
But Mr Albarran was quite emphatic about the fact that the stipulation for the Given Form release and indemnity was withdrawn and that the negotiations collapsed anyway (T 41, lines 21 - T 42, line 32). This is what he said: "Q. So insofar as the handshake deal you had between Terra Cresta and Mr Wily, Given Form did not improve Terra Cresfa's position, correct? A. Sorry, can you repeat that? Q. It didn't make Terra Cresta any better or any worse to have a release the Given Form claim in the deal, did it? A. No, I don't believe so. Q. As receiver and manager of BACF and BACM you say with duties to Cresta as well, you can't identify any duty to Terra Cresta that you were performing in trying to extract a release for the Given Form claim, can you? A. No Q. What happened is it suited you and Mr Brown personally to see if yon settle up the Given Form claim so you tried to make it part of the deal? A. No. Q. And Mr Wily would not go along with that correct? A. No, it was withdrawn, then Mr Wily would not proceed to settle. Q. Step-by-step you think you had a handshake deal with Mr Wily? A. Yes. Q. Subject to documents drawn up by lawyers? A. Yes. Q. Document drawn up by your lawyer? A. Several documents drawn up. Q. The first drawn up was the Given Form release? A. The first document, correct. Q. That proposal was rejected by Mr Wily, correct? A. Yes, correct. Q. You then tried to resurrect the $1.3million deal and he would not be in it? A. No, because we were never going to execute the documents. Q. You say that? A. Absolutely. Q. How do you know that? A. Because that is what he did. Q. You say that you know for a fact that Mr Wily was never going to execute the documents? A. I don't believe he acted in good faith, that is my opinion. I am giving you my opinion. Q. I am trying to track this through step-by-step. It is right he would not have a bar of a proposal then Given Form release be part of the deal, that is correct? A. Yes. Q. You did then try and resurrect the $1.3 million deal? A. No, the $1.3 million deal was always there. The Given Form, it happened within a space of 24 hours, a new deed draft sent across, still not willing to settle. The reason why Mr Wily did an agreement, he didn't get in a witness box so we didn't cross-examine him in relation to things we had investigated. Q. That is your opinion? A. That is my opinion."
This makes clear that Mr Albarran's view of the 18-19 September 2006 negotiations was that the request for the Given Form release and indemnity led to no long term disadvantage for the plaintiffs.
In summary, the material reviewed shows ample support for a case contradicting the three propositions on which the plaintiffs are said to rely.

The Applicants/Defendants' Contentions

The applicants/defendants' contentions based upon this material may be shortly stated. The applicants/defendants' contend that it is ridiculous for the plaintiffs now to contend that they were unaware until November 2016 of the alleged underlying facts in respect of their claims in the pleading. The applicants say that it was quite clear Mr Salmon was threatening to sue Mr Albarran and Mr McDonald for damages for their conduct over the loss of the September 2006 settlement as long ago as 2007. The applicants say that this is an overwhelming body of evidence, much of which Mr Salmon created himself. That being so, the applicants contend that it is not possible to imagine any realistic scenario in which the assertion that the plaintiffs were not aware of the underlying facts of their various causes of action until November 2016 could ever be accepted by a Court. They say that Mr Salmon has not identified such a realistic scenario and that none can be identified. For that reason, the applicants contend that the plaintiffs' contention in the allegation in the pleading that they were "not aware of the fraud" until November 2016 does not give rise to a real issue that requires determination at a trial.
The applicants further contend that the sole document to which the plaintiffs point as having discovered by them in November 2016, the 12 October 2005 letter of demand from Mr Wily to Given Form, is not a discovery which enabled them to understand the true position for the first time, because it is obvious that they already fully understood the nature of the allegations they were proposing to make, as they were already making them and had been for some time.
Moreover, the applicants/defendants say that it is obvious from a review of the 12 October 2005 letter that it adds little or nothing to the plaintiffs' case and a trial is not needed to reach the conclusion that their awareness of this alleged fraud was in any way enhanced by the receipt of this letter. The applicants/defendants say that any assertion to the contrary is not seriously arguable, so there is no 'real' issue for trial. For these reasons, the applicants/defendants say that the fraudulent concealment claim that the plaintiffs make under Limitation Act, s 55 is not maintainable and should now be summarily dismissed. That being so, the claim should also otherwise be dismissed in its entirety as it is time barred.
The applicants also point out that, for a ten year period, Mr Salmon has been pursuing this issue and that they have been defending his claims and that in various proceedings, it is submitted no adverse findings have ever been made against the applicants, who are now being forced to continually defend themselves through the Courts and in other forums. The applicants/defendants submit that defending these allegations over a ten year period has been burdensome and taken a considerable toll upon them and that it is rational for this matter now to be summarily dismissed. The applicants say that this serves the overriding purpose of the Civil Procedure Act and the rules of Court to facilitate the 'just, quick and cheap' resolution of the real issues in the proceedings: Civil Procedure Act, s 56.
The applicants submit that this discrete issue of limitation of action can be determined summarily and in the applicants' favour, will bring this matter to a close and will avoid the unnecessary wastage of time and costs as a result.
The plaintiffs/respondents' contentions covered many matters not all of which the Court found to be useful or relevant. But some of those contentions were adopted in the Court's analysis. So these reasons take the approach of referring to the plaintiffs/respondents' submissions in the course of its analysis.

The Plaintiffs' Contentions and the Court's Analysis

Despite Mr Elliott's careful analysis of the facts and the law in relation to summary dismissal, the applicant's analysis does not really address the implications for the applicant's argument of one central aspect of the relief upon which the plaintiff is relying: alleged breach of fiduciary duty by Mr Albarran, Mr McDonald and (though not relevant for present purposes) Mr Brown.
The case advanced by Mr Salmon and TCBS expressly pleads breach of fiduciary duty arising out of a conflict of interest. The alleged conflict is that Messrs Albarran and McDonald and (though not relevant for present purposes) Mr Brown were in a position conflict of interest and duty with their "clients" TCBS and Mr Salmon in pursuing their own financial interests by stipulating for the Given Form release and indemnity to benefit themselves (by freeing themselves from a contingent liability), whilst at the same time putting at risk the fulfilment of their duty to their client, which was to secure a settlement of the 2006 Supreme Court proceedings on the best terms available to the client.
Even behind these contentions of breach of fiduciary duty there are many highly contestable assumptions, most of which are not presently in issue. They are not being deployed by the applicants at present because they are clearly matters for a contest a final hearing and could not assist in disposing of these proceedings under the principles of summary dismissal: it could never be said that there was no "real issue" about them such that summary dismissal was now apt because the players could never make them out.
Matters falling into this category are issues such as the following: whether indeed Messrs Albarran and McDonald were acting for and in a fiduciary relationship with Mr Salmon and TCBS; whether Messrs Albarran and McDonald's pursuit of the Given Form release and indemnity was in their own self-interest at all, or whether it was being pursued in their client's interests; whether the Given Form release and indemnity was pursued for any appreciable period of time at all; whether the pursuit of the Given Form release and indemnity had any adverse effect on the discharge of Messrs Albarran and McDonald's alleged fiduciary duties to the plaintiff; and whether the plaintiff suffered any loss at all from this alleged conflict. There may well be many other such issues. None of these matters is in present contest. By their nature, involving as they do complex issues of fact and law, they are only resolvable at a trial.
But the applicants' argument suggests that the plaintiffs' case of fraudulent concealment is in a different category and can be dealt with by summary dismissal because the evidence is overwhelming that the plaintiffs were well aware of any cause of action available to them at least six years before commencing this proceeding in November 2016.
But it is not in contest that the plaintiffs' allegations of fiduciary duty and conflict of interest and duty being made are understandable. And in my view they are sufficiently well pleaded clearly to raise these issues. But the nature of these allegations has important implications for the applicant's argument.
First, Mr Salmon argues that he has equitable causes of action available to him that are not subject to the Limitation Act and in substance stand outside ss 14 and 55. In my view, this argument is correct and is an important answer to the applicants/defendants' case.
The provisions of Limitation Act, s 14 which provide a limitation period of six years from the date on which the cause of action first accrues to the plaintiffs for a cause of action in contract, in tort, to enforce a recognizance, or to recover money by virtue of an enactment (including of the Commonwealth) is subject to a number of exceptions. One of them is Limitation Act, s 23 which provides as follows: "23. Equitable Relief Sections 14, 16, 17, 18, 20 and 21 do not apply, except so far as they may be applied by analogy, to a cause of action for specific performance of a contract or for an injunction or for other equitable relief."
Mr Salmon and TCBS' pleading a breach of duty as a receiver, including breach of fiduciary duty, are pleaded sufficiently clearly to raise a purely equitable claim for breach of fiduciary duty. The pleading also makes it quite clear that this purely equitable claim seeks restitution by way of equitable compensation for the losses allegedly suffered by the plaintiffs: the pleading [92].
Whilst there will no doubt be a contest in the proceedings whether the fiduciary duty exists (a matter not to be contested for present purposes for the sake of argument on the Motion), if a fiduciary duty is established it is arguable that it is not subject to the Limitation Act, s 14 and does not need to come within Limitation Act, s 55 in order to extend the limitation period using the statutory doctrine of concealed fraud.
This result follows from equity's longstanding treatment of persons who occupy fiduciary position that they are treated for the purposes of limitation as trustees and time does not run in their favour: see Burdick v Garrick (1870) LR5ChApp. 233, North American Land and Timber Co Ltd v Watkins [1904] 1 Ch 242. Historically, actions by beneficiaries against trustees (and by analogy fiduciaries), for example, for the misappropriation of trust property, have been excluded from the position of the arbitrary time limits imposed by Limitation Acts and instead the Courts and the legislature (subject to Limitation Act, ss 47 and 48) have treated trustees as bearing a special responsibility which should persist indefinitely unless in all the circumstances it would be inequitable to allow the beneficiary to enforce his rights: Nelson v Rye [1996] 2 All ER 186 ; [1996] 1 WLR 1378 at 1389C-E. This general principle was cited with approval in the judgment of the plurality of the High Court in Maguire & Tansey v Makaronis (1997) 188 CLR 449 ("Makaronis") at 463.
It is strongly arguable, in my view, that to the extent the plaintiffs rely upon an alleged breach of fiduciary duty in the execution of Mr Albarran's and Mr McDonald's powers under Corporations Act, s 420 that claim of breach is not subject to the limitation periods set by Limitation Act, s 14. Nor does it matter that the claim for a breach of fiduciary duty arises out of circumstances that also give rise to a claim in tort. A plaintiff is entitled to plead alternative causes of action in tort and contract and breach of trust or breach of fiduciary duty. The injured party cannot use the alternatives to receive duplicate relief but a plaintiff is entitled to field the alternative claims for relief to the plaintiff's best advantage, even if that means the avoidance of limitation periods: Nelson v Rye [1996] 2 All ER 186; [1996] 1 WLR 1378 at 1389A-C.
These principles are often invoked in circumstances where trustees are alleged to have misappropriated property. But the principle is arguably not so limited. Moreover, the relief in this very case may be able to be framed on the facts pleaded as a dealing with a property to which TCBS was entitled, although the facts are not sufficiently well known for that to be clear as yet. And there is no injustice in this result because the defences of laches and acquiescence are well available to the defendants.
Of course, the Limitation Act does impose a 12 year limitation period in respect of fraudulent breaches of trust: Limitation Act, s 47. But on any view of this case, even if that limitation period is applied, the plaintiffs' action has been commenced well within that time.
Of course Equity acts by analogy to the Common Law and will apply limitation statutes by analogy: JD Heydon, MJ Leeming and PG Turner, Meagher, Gummow & Lehane's Equity: Doctrines & Remedies (5th ed, 2014, LexisNexis Butterworths) para [36-075]. And Limitation Act, s 23 recognises this as well. But whether there is an analogy or not between a breach of fiduciary duty relied upon in this case and any common law action seems to me to be a highly arguable matter suitable for final hearing rather than for summary dismissal. The plaintiffs' equitable claim for relief is so interconnected with the other claims that they should also not be struck out.
Secondly, a helpful but odd feature of this Amended Statement of Claim is that it actually pleads fraudulent concealment. The conventional manner in which a Limitation Act, s 55 issue is raised is by way of reply in response to a plea by a defendant of the statute of limitations. Ordinarily, what would happen in a case such as this is that the defendants would put on a Defence pleading the statute of limitations and by way of reply the plaintiffs would plead circumstances that would raise Limitation Act, s 55. The plaintiffs here have taken the not unhelpful course of anticipating the defendants' Limitation Act defence and pleading fraudulent concealment. But the fact they have done this should not obscure the reality that in a more conventionally pleaded case that it is the defendants, not the plaintiffs, who bear the onus of establishing that the limitation period has expired. This is not something which the plaintiffs have to disprove. It is something which the defendants have to establish.
In the course of argument the plaintiffs referred the Court to a recent decision of Parker J in Kovarfi v BMT& Associates Pty Ltd (No. 3) [2017] NSWSC 710 ("Kovarfi"). Like the present proceedings, Kovarfi was an application for summary dismissal. A similar argument was put, that the plaintiffs were well out of time. But the defendant's summary judgment application was met by the plaintiff's argument that any applicable limitation periods for actions in tort had ceased to run under Limitation Act, s 55, which provide as follows: "55 Fraud and deceit (1) Subject to subsection (3) where: (a) there is a cause of action based on fraud or deceit, or (b) a cause of action or the identity of a person against whom a cause of action lies is fraudulently concealed, the time which elapses after a limitation period fixed by or under this Act for the cause of action commences to run and before the date on which a person having (either solely or with other persons) the cause of action first discovers, or may with reasonable diligence discover, the fraud deceit or concealment, as the case may be, does not count in the reckoning of the limitation period for an action on the cause of action by the person or by a person claiming through the person against a person answerable for the fraud deceit or concealment. (2) Subsection (1) has effect whether the limitation period for the cause of action would, but for this section, expire before or after the date mentioned in that subsection. (3) For the purposes of subsection (1), a person is answerable for fraud deceit or concealment if, but only if: (a) the person is a party to the fraud deceit or concealment, or (b) the person is, in relation to the cause of action, a successor of a party to the fraud deceit or concealment under a devolution from the party occurring after the date on which the fraud deceit or concealment first occurs. (4) Where property is, after the first occurrence of fraud deceit or concealment, purchased for valuable consideration by a person who is not a party to the fraud deceit or concealment and does not, at the time of the purchase, know or have reason to believe that the fraud deceit or concealment has occurred, subsection (1) does not, in relation to that fraud deceit or concealment, apply to a limitation period for a cause of action against the purchaser or a person claiming through the purchaser."
In dealing with this argument, Parker J made some observations (at [26] - [28]) which, in my view, are very apt for the present case: "[26] However, counsel argued that the section was clearly not engaged or alternatively that the alleged fraud was discoverable before September 2010 so that the present proceedings were out of time. There is a difficulty in evaluating these submissions. The onus of establishing that a claim is statute barred lies on the defendant. The limitation defence must be pleaded. Accordingly, in the ordinary course there is no obligation on the plaintiff to plead in the statement of claim grounds for extension or suspension of the limitation period. Rather, the plaintiff is entitled to plead the cause of action and no more. If the defendant wishes to raise a limitation defence then that must be pleaded and then the plaintiff can rely upon any extension by way of reply. Accordingly, the defendants are inviting me to determine that the case for an extension is hopeless in circumstances where the plaintiff, Mrs Kovarfi, has not been required formally and specifically to plead what that case is. [27] It seems to me that the question of whether proceedings involve a cause of action "based on fraud" may involve factual issues. No doubt it ought to be possible to determine from the statement of claim itself whether the cause of action is based on "deceit" because this is a tort which has well-established elements which must be pleaded in order to sustain it. But it is not clear to me what additional content is created by the reference to "fraud" as well as deceit. It may be that a cause of action could be "based on fraud" because of facts that could be asserted about the circumstances in which the cause of action arose, but which are not necessarily elements of that cause of action. Whether that be so or not, it is plain that an allegation of "fraudulent concealment" for the purpose of s 55(1)(b) involves factual allegations, as does the question of whether or when a person might with reasonable diligence discover such fraud. [28] I acknowledge that there may be cases where it is clear beyond argument, having regard to the case framed in the statement of claim, that the claim being made is statute barred and accordingly that there may be circumstances in which the Court can be persuaded to make an order for summary dismissal of proceedings without requiring the defendant to take the formal step of pleading a defence. However, I do not think that this is one of those cases."
In Kovarfi the plaintiff had done a somewhat similar thing to what has occurred here in anticipating the defence by pleading in the Statement of Claim circumstances that might bring the case within Limitation Act, s 55. His Honour then made an observation (at [30]) about that situation which in my view is also very apt for the present case: "[30] Whatever might be the case if Mrs Kovarfi were legally represented, I do not think that I should treat these pleadings as a considered and exhaustive statement of the case that she might potentially make under s 55. As a litigant in person, Mrs Kovarfi is not entitled to special treatment from the Court but she is entitled to expect that the Court will not cut any corners in dealing with an application to dispose of her proceedings summarily. Accordingly, I would not dismiss the proceedings summarily on the ground that the proceedings are hopeless."
In my view here, particularly because the Limitation Act, s 55 pleading has been fielded not in response to a pleaded Defence, but rather in anticipation of a defence, I too should not, at this point of the proceedings, regard it as an exhaustive statement of a case that these plaintiffs might potentially make under Limitation Act, s 55. Because of the strange inversion of the pleadings in this case, the Court should be very cautious about summary dismissal before these plaintiffs have had an opportunity to consider a properly and fully pleaded Defence by these defendants.
There is another reason to wait for the pleadings to be allowed take their conventional course in this case. An allegation of breach of fiduciary duty due to a conflict of interest, such as that alleged here, if made out to the prima facie level, throws upon the defendant the obligation to show by way of defence that the plaintiff had informed consent to the defendant acting with divided loyalty: Birtchnell v Equity Trustees Executors and Agency Co Ltd (1929) 42 CLR 384 at 398 ("Birtchnell") and Makaronis at 446.
What is required for a fully informed consent is a question of fact in all the circumstances of each case and there is no precise formula which will determine in all cases are fully informed consent has been given: Spellson v George (1992) 26 NSWLR 666, at 669-60, 673-675, and 680 ("Spellson"); and Makaronis at 466. The circumstances of the case will often include the importance of obtaining independent and skilled advice from a third party: Commonwealth Bank of Australia v Smith (1991) 42 FCR 390, at 393 ("Smith").
A breach fiduciary case should not be framed as one in which it must be established that the fiduciary has an obligation to obtain informed consent from the client. Rather the correct position is that the existence of an informed consent will go to negate what otherwise is a breach of duty: Makaronis at 467. The fiduciary bears the onus of showing the informed consent. Their claim should not be dismissed now.
In this case it appears that informed consent may well be in contest. If it is, then in fairness the plaintiffs should be entitled to see what is pleaded by the defendants as to informed consent before putting on their reply about fraudulent concealment and Limitation Act s55. It may be that the matters to which they are said to have given informed consent the plaintiffs will alleged were also not fully known to them and were concealed from them.
Thirdly, the way this application for summary dismissal has been argued, somewhat obscures an important issue addressed by the High Court in Wardley Australia Limited v State of Western Australia (1992) 175 CLR 514; [1992] HCA 55 at 533 that it is undesirable for limitation questions to be decided in interlocutory proceedings in advance of a hearing "except in the clearest of cases". The summary dismissal application in this matter has largely been centred around the arguability of the Limitation Act, s 55 contention by the plaintiff. But exactly when and how the plaintiffs are alleged to have suffered loss by reason of the alleged tortious conduct of fraudulent misrepresentation has not been so fully explored in argument that the Court could say that this was "the clearest of cases".
Indeed, the circumstances are far from it. When exactly the plaintiffs actually lost the opportunity they alleged to settle the proceedings on favourable terms by reason of the propounding of the Given Form release and indemnity is a highly contestable question. The date in question may be some time well after September 2006. This Court could not be confident to dismiss these proceedings on the basis that the primary limitation period commenced to run at that time.
An added complication in this case, as the plaintiffs point out, is that TCBS was deregistered for a period. The plaintiffs say that they wish to argue at final hearing that the limitation period does not run against TCBS during that period. In my view, such an argument could not be disposed of by way of summary dismissal.
Finally, as Parker J said in Kovarfi, fraudulent concealment may apply not just where fraud is an ingredient of the cause of action but where the cause of action is "based on fraud". The plaintiffs' action may involve concealed facts of which the plaintiffs are as yet unaware. Given the circumstances of this case, involving the alleged exclusion of the plaintiffs from the negotiations, there may be concealment implicit in the technique adopted in committing the tort: Beaman v Arts Ltd [1949] 1 All ER 465; [1949] 1 KB 550 at 560 per Lord Green MR.
The plaintiffs say they were not present at the critical moment when Messrs Albarran and McDonald allegedly stipulated for the Given Form release and indemnity. They say that they were not warned in advance that Messrs Albarran and McDonald were allegedly going to take this course. But until discovery takes place in this case the plaintiffs may not have a chance of relying upon that alleged concealment. It is all very well for the defendants to now say that the plaintiffs cannot point to any realistic scenario which would allow the limitation period to be extended. The plaintiffs may legitimately answer that by saying they do not yet have all the facts.
Finally, the pleading is clear and not embarrassing and there is no basis to strike it out pursuant to prayer 2 of the Motion.

Conclusions and Orders

The plaintiffs have been successful in resisting the relief sought in the Notice of Motion of 12 October 2017. The Motion should be dismissed. This means that the proceedings will need to continue to be prepared for trial. The first step in this direction will be for the defendants to file Defences. The Court will order the first, second and fourth to eighth defendants to file their Defences by 29 March 2019 and the proceedings will be listed before the Registrar for directions on 3 April 2019.
Mr Salmon has represented himself and TCBS in the proceedings. So far as the Court is aware, they have not incurred any legal costs associated with the Motion. But there may be some minor disbursements. And lawyers may have been engaged for limited purposes on aspects of the Motion. It would therefore still be appropriate to make an order for costs of the Motion. The appropriate order is that the costs of the Motion will be the plaintiffs' costs of the proceedings. If it ever comes to a contested assessment of costs of the Motion it can be noted that Mr Salmon appeared without legal representation for all the hearing dates of the Motion.
For these reasons, the Court makes the following orders and directions: 1. The Notice of Motion of the first, second and the fourth to the eighth defendants dated 12 October 2017 for summary dismissal and striking out of the plaintiffs' Amended Statement of Claim in these proceedings is dismissed. 2. Order that the plaintiffs' costs of the Motion, if any, will be the plaintiffs' costs in the proceedings. 3. Order the first, second, fourth, sixth, seventh and eighth defendants to file their Defences to the Amended Statement of Claim by 4pm on Friday, 29 March 2019. 4. Direct that the proceedings be listed before the Registrar in Equity for further directions at 9.00am on 3 April 2019.

Amendments 14 March 2019 - coversheet- parties DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 14 March 2019

Salmon v Albarran & Ors

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