Sword v Sword [2001] WASC 208

Callinan v West Australian Newspapers Ltd [1988] WAR 212

Chetty v Chetty [1916] 1 AC 603

Cigna Insurance ASA Pacific Ltd v Packer [2000] WASC 415

Laybutt v Amoco Australia Pty Ltd [1974] HCA 49; (1974) 132 CLR 57

1 MASTER SANDERSON: This is the return of the defendant's application for summary judgment. In the alternative, the defendant seeks to have the plaintiff's statement of claim struck out under O 20 r 19 as disclosing no reasonable cause of action. Leave is required in relation to both aspects of the application - each is outside the 21-day time limit prescribed by the Rules. The application was made nine days late.

2 Counsel for the plaintiff points out that in none of the affidavit material filed in support of the application is there any explanation for the delay in bringing the application. Counsel submitted that in the circumstances leave ought not be granted. It is the case, as counsel says, that there is nothing in the defendant's affidavit material to explain why this application was not brought within time. However, it is apparent from the affidavit material that the defendant is resident in Brisbane. Even allowing for sophisticated communications technology it is not perhaps surprising that delays have occurred. Given that the length of the delay is relatively short, I am prepared in the circumstances to grant leave as sought by the defendant. I will further consider the delay in bringing this application in the context of any application for costs.

3 The defendant's application is quite straight forward. The plaintiff, by her statement of claim, pleads that she is the executrix and trustee of the estate of her late father, David Alasdair Sword, who died on 21 September 1991. Probate of the deceased's will was granted to the plaintiff on 30 January 1995. By par 2 of the statement of claim the plaintiff pleads that the defendant has in his possession certain assets which belong to the deceased's estate. It is pleaded by par 3 that on 12 November 1999 the plaintiff's solicitors wrote to the defendant requiring him to account to the estate for this property. By par 4 it is pleaded that the defendant has refused to account to the estate and by the prayer for relief the plaintiff claims an account and further consequential orders.

4 The defendant says that the plaintiff's claim is statute-barred. It is said that on 8 October 1992 the plaintiff's then solicitors wrote to the defendant demanding that he account to the estate. It is said that time runs from the date of this demand even though at the date the demand was made the plaintiff had not been duly appointed as executrix of the estate. Even though a defence has not yet been filed which raises the limitation defence, the defendant says that all relevant evidence is available and it is plain that the plaintiff's action cannot succeed. In the circumstances the defendant says that he is entitled to summary judgment or that the claim should be struck out as an abuse of process.

5 Against those submissions counsel for the plaintiff puts three main arguments. First it is said that properly considered the letter of 8 October 1992 does not constitute a demand from which date time begins to run. Counsel submitted this was a question of fact which should await trial of the action. Secondly, it is said that a limitation defence is just that - a defence; it does not extinguish the plaintiff's right of action. It is said that unless and until the statute is pleaded it is not appropriate to determine whether or not the plaintiff's claim can succeed. Further, it is said, even if the statute of limitations is pleaded by way of defence it is not appropriate to determine on an interlocutory basis whether the defence will succeed but rather leave that question to trial of the action. Thirdly, it is said that there are matters of fact which cannot be resolved on a summary judgment application or a strike-out application and for that reason alone the action ought go to trial.

6 The demand relied upon by the defendant to found this application is to be found as annexure "TOC 1" to the affidavit of Timothy Oscar Coyle, sworn 3 May 2001 and filed in opposition to this application. Because of the importance of this letter I will quote it in full:

"8 October 1992

Mr M B Sword

2 Chisholm Court

MOUNT OMMANEY QLD 4074

Dear Sir

Estate of David Alasdair Sword deceased

We have been contacted by your sister Catriona in connection with the unsatisfactory situation which has arisen with regard to your late father's estate.

We are instructed that your late father died on 21 September 1991 and as you are aware we are still holding the original Will of your late father dated 10 June 1989 which appoints you and your sisters Karen and Catriona as executors. Your sister is concerned at the inability to obtain any information from you concerning what has happened to the assets of your late father's estate following his death.

We are instructed that the position is as follows:

(a) your late father owned land at Gingin which was sold by the mortgagee exercising its power of sale;

(b) Cheveley Investments Pty Ltd of which your late father and the estate of your late mother were the shareholders was the proprietor of plant and equipment used in connection with the property at Gingin and it appears that this plant and equipment was sold and moneys offset against personal debts of your father although those moneys belonged to Cheveley Investments Pty Ltd. If this is the case then your sister Catriona requires details of the following:

(i) what plant and equipment existed at your father's death?

(ii) who owned the plant and equipment (ie your father or Cheveley Investments Pty Ltd or otherwise)?

(iii) whether that plant and equipment was sold and if so for how much?

(iv) how the proceeds of sale were applied (ie to whom were the net proceeds paid and to whom were they distributed or paid and for what reason)?

(c) certain furniture is held in storage with Brambles; please supply details of what furniture is held in storage and to whom it belonged;

(d) whether your late father owned other furniture and assets and what has happened to that other furniture and assets; in this respect we are given to understand that you are holding certain furniture and paintings which you claim to be yours and taken in payment of moneys which are claimed by you to have been lent to your late father. If this is the case please advise how much was lent to your late father, when and on what terms and supply copies of all details relating to those alleged loans;

(e) we understand that you also claim that your late father gifted the furniture to you and if so please supply evidence to that effect;

(f) has there ever been a valuation of any of the furniture or paintings or other property of your late father and if so please supply a schedule of the furniture and paintings and the valuation.

We understand that Catriona has had several very unsatisfactory conversations with you concerning your father's estate and its administration and if the information requested is not forthcoming from you within 7 days from today's date Catriona may find it necessary to make an application to the Probate Court for a Grant of Probate of her late father's Will setting out in affidavit form the reasons why she is unable to supply details of the assets and liabilities or alternatively take action against you for an account with regard to your late father's estate.

Clearly it would be easier if this matter could be resolved amicably and we look forward to hearing from you with the information requested to which of course Catriona is entitled not only as an executrix of her late father's Will but also as a beneficiary.

Lastly Catriona has requested that you do not contact her direct but contact us.

Yours faithfully

FREEHILL HOLLINGDALE & PAGE

(Signature)

Timothy H Reinold"

7 The defendant responded to this letter by letter from his solicitors dated 22 October 1992 and faxed to the plaintiff's then solicitors. This letter appears as annexure "TOC 2" to the affidavit of Mr Coyle. Again, because of its importance, I will quote this letter in full:

"TO: FREEHILL HOLLINGDALE & PAGE

AUSTRALIA PLACE

15 WILLIAM STREET

PERTH WA

FAX NO: (09) 322 5954

FROM: PETER CARTER

NUMBER OF PAGES: 3 (including this page)

RE: ESTATE OF DAVID ALASDAIR SWORD (DECEASED)

This is to advise that we act for Malcolm Sword. We have been instructed to respond on his behalf to your letter to him of 8th instant.

We wish to record that at all times our client has offered clear explanations to your client in respect of all matters which are now the subject of your correspondence. In any event and in relation to your specific queries we advise as follows:-

1. The deceased was the owner of the agricultural property situated at GinGin which was subject to three (3) mortgages namely to the Commonwealth Development Bank of Australia, Kimberley NZI Finance Ltd and Commonwealth Bank of Australia. All mortgages were registered in 1986. The mortgages received the whole of the proceeds of the sale of that land.

2. Cheveley Investments Pty Ltd was a service company which operated the avocado growing business conducted by the deceased on the farm. In particular it owned or leased various items of plant and equipment situated at the farm. Particulars of those items are set out in the attached copy letter from McLaren & Stewart, Accountants dated 27 February 1992.

(b) The plant and equipment were sold by auction for approximately $19,400.00;

(c) The Commonwealth Development Bank received a surplus over and above the amount of $19,000.00. The said amount of $19,000.00 was applied firstly to meet unpaid trade creditors of the company and the balance was paid to meet testamentary expenses ($3,289.00 as per attached copy memorandum of fees from funeral directors) and to the deceased's children, namely Catriona, Karen and Malcolm. Each of those three received the amount of $4,210.00.

3. We enclose herewith a copy of the inventories prepared by Brambles (6 sheets) in relation to the furniture stored there.

4. Some of the furniture is currently in our client's possession in Brisbane. Part remains with Brambles in Perth, part is with your client and another part with Karen. Our client believes that the value of the items of furniture in your client's possession is $30,000.00 and that the furniture in Karen's possession is of a similar value. We are instructed that your client agreed to obtain a valuation of the items received by her and provide same to our client and we would be grateful if such valuation were to proceed as soon as possible. The furniture in his possession has been valued and we enclose herewith a copy of the valuation of Sotheby's dated November 1991. The value of the furniture with Brambles is in our client's opinion approximately $20,000.00.

5. All furniture including that currently in your client's possession and in the possession of Karen is owned by our client. The furniture had been gifted to him by the deceased some years ago. This was recorded in writing at the relevant time by the deceased but our client cannot now locate the relevant document. On our instructions however, the gift was disclosed by the deceased to a number of his advisers including his accountants.

6. At the date of his death, the deceased was indebted to our client for an amount in excess of $100,000.00. The debt arises through loans made by our client to the deceased since 1981. We enclose herewith a copy of a schedule of the various amounts advanced to the deceased. We are instructed that your firm was a party to at least one of the payments in that it acted for the deceased when on 15 December 1990 our client caused the amount of $40,000.00 to be forwarded to your trust account. Would you kindly check your records in that regard and advise whether you are able to confirm same.

Our client's position is that:-

A. In the first instance, the estate of the deceased was not solvent and therefore there were and are no funds for distribution.

B. The whole of the furniture was at all times our client's property.

C. The deceased was indebted to our client for a sum in excess of $100,000.00.

We trust this satisfies your client. We note that in your letter under reply, it seems that your client contests our client's ownership of the goods. Even if our client were held not to have full legal and beneficial ownership thereof, it seems clear that he is entitled to be satisfied out of those goods as to the extent of the deceased's indebtedness. Your client is therefore now in no worse position than if the deceased personally owned such goods. On the other hand, our client remains in a worse position relative to that of his sister's in that he has already incurred approximately $10,000.00 in having the majority of goods transported to Brisbane and will incur another $20,000.00 in having the goods transported to Melbourne for sale by Sotheby's and in payment of their commission.

The enclosures referred to above will be enclosed in the confirmation copy of this facsimile.

We look forward to receipt of your response in due course.

Yours faithfully,

CARTER CAPNER

8 When these two letters are read and compared I think it is open to question whether or not it can properly be said that the letter from the plaintiff's solicitors to the defendant of 8 October 1992 can be seen as a demand for an account and whether the reply of 22 October 1992 can properly be viewed as a refusal to account. What the authorities in this area show is that time begins to run when a plaintiff becomes aware that a cause of action exists and the defendant denies the existence of the plaintiff's rights.

9 The authorities in this area are somewhat limited. However, the decision of the English Court of Appeal in The Metropolitan Bank v Heiron (1880) 5 Ex D 319 well illustrates the principle. The facts, taken from the headnote, were as follows:

"An action was brought by a company in 1879 against a former director to recover 250 pounds, on the ground that the defendant had received it from a debtor to the company as a bribe, to induce him to use his influence to obtain favourable terms of compromise for the debtor. The allegations that this bribe had been given had in 1872 been brought before the directors at a board meeting, they had investigated it, and as it seemed came to the conclusion that the charge was unfounded, as no proceedings were taken, and it was not alleged that the other directors had been acting otherwise than bona fide in the matter."

10 At the date of this decision the Statute of Limitations in England did not by its terms apply to actions in equity. Equity applied the statute by analogy. All members of the court came to the conclusion that the plaintiff's action was time-barred. James LJ said (at 323 - 324):

"The ground of this suit is concealed fraud. If a man receives money by way of a bribe for misconduct against a company or a cestui que trust, or any person or body towards whom he stands in a fiduciary position, he is liable to have that money taken from him by his principal or cestui que trust. But it must be borne in mind that that liability is a debt only differing from ordinary debts in the fact that it is merely equitable, and in dealing with equitable debts of such a nature, Courts of Equity have always followed by analogy the provisions of the Statute of Limitations, in cases in which there is the same reason for making the length of time a bar as in the case of ordinary legal demands. In the case of a bribe received, or other profit made by a person in a fiduciary position, there is no doubt that the cestui que trust who is wronged is not barred by any length of time, so long as that wrong is concealed from him by the wrongdoer. But when the cestui que trust knows of the fact, or knows that the fact is charged, and investigates the case, it is for him to make up his mind whether he will bring proceedings, just as any other creditor has to make up his mind whether he will issue a writ or not, and if he allows six years to elapse after he has had full information and knowledge of the alleged wrong before he takes steps to enforce the redress for that wrong, then the person against whom he brings such a suit has, according to my view, a clear right to avail himself of the lapse of time against the claim as much as if it had been a mere legal demand."

Lord Justices Brett and Cotton came to the same conclusion.

11 In my view, it is by no means clear that, after the exchange of the above quoted correspondence, the plaintiff was fully aware of the rights she had as executrix of her late father's Will against the defendant. In Heiron the evidence of the concealed fraud was laid before the Board and a decision was taken not to initiate action. There is nothing in the report to indicate that any matters came to light at a later date which had not earlier been placed before the directors. In Heiron there was no suggestion that the alleged fraudster had put before the Board an explanation for his conduct which left the Board uncertain as to whether or not it had a right of action. In this case an investigation of the circumstances surrounding the exchange of correspondence will be necessary to establish whether or not when she received a copy of the letter from the defendant's solicitors the plaintiff was in possession of such information as allowed her to make a fully informed decision whether or not she had a right to proceed. That is not an issue which can be determined on summary judgment. For that reason alone the application ought to fail.

12 Having reached that conclusion, it is unnecessary for me to say anything further about the submissions put by the plaintiff. However, I am satisfied that, as the defendant's case relies upon the Statute of Limitations, it would be inappropriate to determine the application unless and until the Statute is pleaded. I appreciate there is authority to the effect that if a defendant provides evidence that the Statute will be pleaded, the Court can approach an application for judgment on that basis: see Riches v Director of Public Prosecutions [1973] 2 All ER 935; Ronex Properties Ltd v John Laing Constructions Ltd [1983] QB 397. However, both of these authorities must be approached with care: see Palmdale Insurance Co (In Liq) v L Grollo & Co Pty Ltd [1986] VicRp 41; [1986] VR 408 per Vincent J at 409. Furthermore, in Wardley Australia Ltd v The State of Western Australia [1992] HCA 55; (1992) 175 CLR 514, the High Court warned against attempting to determine questions of limitation in interlocutory proceedings (see page 533 - 534). It is the case that from time to time limitation questions are determined on a summary judgment application or an application to strike out a statement of claim, but that would only be in the clearest of cases: see The State of Western Australia & Anor v Rothmans of Pall Mall (Australia) Ltd [2001] WASCA 25. Even then, a determination is made only when the pleadings are closed and all available evidence is before the Court. That is not this case.

13 Furthermore, I am not entirely sure that it is proper to categorise the plaintiff's action as an action for account. It is certainly the case that the definition of "action" in the Limitation Act includes both legal or equitable liability to account. On that basis then it may be the plaintiff is precluded in the circumstances of this case from obtaining an order that the defendant account to her. However, she may have other remedies available. In Heiron, Cotton LJ, in the course of his judgment said (at 325):

"Where a trustee has a fund in his possession and wastes it either by neglect of duty, or by doing an act not justified, and the cestui que trust comes to recover his money, no time will bar his suit, for it is a claim by the cestui que trust against the trustee for money or property which was in the possession of the trustee, and must be considered as in the possession of the trustee for the benefit of the cestui que trust until the trustee duly discharges himself. To such a suit there is no bar by statute".

14 Here the defendant was named as a joint executor of the deceased's estate. True it is that no probate was granted in his favour. But it still may be arguable that at least until the grant of probate to the plaintiff the defendant, by dealing with the estate, was an executor de son tort. If that is the case, then even if the remedy of account is denied to the plaintiff, she may have a claim on behalf of the estate for equitable damages. I express no concluded view on this question, I simply make mention of the possibility as an additional ground for not granting summary judgment in the circumstances of this case.

15 The defendant's chamber summons will be dismissed. I will hear the parties as to costs.