[2000] HCA 41
Agius v New South Wales [2001] NSWCA 371
Agusta Pty Limited v Provident Capital Limited (2012) 16 BPR 30,397
[2012] NSWSCA 26
Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175
[2009] HCA 27
Banque Commerciale SA (in liq) v Akhil Holdings Ltd (1990) 169 CLR 279
[1990] HCA 11
Batistatos v Roads & Traffic Authority New South Wales (2006) 226 CLR 256
Source
Original judgment source is linked above.
Catchwords
[2000] HCA 41
Agius v New South Wales [2001] NSWCA 371
Agusta Pty Limited v Provident Capital Limited (2012) 16 BPR 30,397[2012] NSWSCA 26
Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175[2009] HCA 27
Banque Commerciale SA (in liq) v Akhil Holdings Ltd (1990) 169 CLR 279[1990] HCA 11
Batistatos v Roads & Traffic Authority New South Wales (2006) 226 CLR 256[2006] HCA 27
CGU Insurance Ltd v Blakeley (2016) 259 CLR 339
[2016] HCA 2
Dickens v New South Wales (No 3) [2018] NSWSC 485
General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125
[1964] HCA 69
Gould v Mount Oxide Mines Ltd (1916) 22 CLR 490
[2012] NSWCA 102
Simmons v New South Wales Trustee and Guardian (2014) 17 BPR 33,717
[2014] NSWCA 405
Spencer v Commonwealth (2010) 241 CLR 118
Judgment (17 paragraphs)
[1]
nd Cross-Claimant)
BSM Holdings Pty Ltd (Sixth Defendant)
Integrated Design Group Pty Ltd (First Cross-Defendant)
Bernie Cohen & Associates Pty Ltd trading as Essential Certifiers (Second Cross-Defendant)
Representation: Counsel:
C Mobellan (Plaintiff)
F Corsaro SC (Defendants/Cross-Claimants)
This is an application by notice of motion filed 21 June 2024 by the third defendant, Omaya Investments Pty Ltd, and the sixth defendant, BSM Holdings Pty Ltd, for summary dismissal under r 13.4 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) or alternatively the striking out of allegations made against Omaya Investments and BSM in the third amended technology and construction list statement filed 9 July 2024 in their entirety under r 14.28 of the UCPR. In support of the summary dismissal and strike out application, Omaya Investments also seeks leave to withdraw any admission made in the latest form of its list response and cross-claim.
The application arises in proceedings which concern alleged defective building works in the construction of a residential strata apartment building of 99 units located at Strathfield, New South Wales (Property). The proceedings have been brought by the plaintiff, The Owners - Strata Plan No. 82089 (Owners Corporation), in its capacity as the owner of the common property at the Property and as agent for the individual lot owners under the Strata Schemes Management Act 2015 (NSW).
Omaya Investments asserts that once I give leave for the withdrawal of the admissions, the allegations made against Omaya Investments and BSM should be summarily dismissed or struck out. The Owners Corporation opposes the application in all respects.
There is some urgency in the determination of the application as there is a reference in the proceedings commencing on 26 August 2024 in respect of part of the defect issues, with the remaining defect issues to be determined at the trial fixed for 11 to 15 November 2024.
For the reasons set out below, I have determined that:
1. the summary dismissal application by Omaya Investments and BSM should fail;
2. the strike out application by Omaya Investments should be upheld, whilst giving leave to the Owners Corporation to replead the allegations against Omaya Investments;
3. Omaya Investments should make a necessary amendment to its pleading to correct an obvious error; and
4. the application to withdraw alleged admissions by Omaya Investments should be dismissed.
[4]
Construction contract
It is common ground that the construction of the residential strata apartment building at the Property took place between 2009 and 2011 pursuant to a written Construction Contract dated 4 September 2009 between the first defendant, Omaya Holding Pty Ltd, as the principal and the second defendant, Arinson Pty Ltd, as the contractor. I will refer to the written Construction Contract to differentiate it from what is called the Building Contract in the list statement, which I understand to comprise elements beyond the written Construction Contract.
[5]
Omaya Group and the Bechara Family Trust
Each of Omaya Holding, Arinson, Omaya Investments and BSM (collectively the defendants) form part of the Omaya Group which undertakes various building development and investment activities. The Omaya Group is associated with Antoine Bechara and his wife, Georgette Bechara.
Mr Bechara is the sole director of Omaya Investments, BSM and Arinson. Mrs Bechara is the sole director of Omaya Holding and the sole shareholder of Omaya Investments and BSM. Omaya Holding is the sole shareholder of Arinson.
Arinson was the owner of the Property before it was developed as residential strata apartments.
Omaya Holding is the licensed builder within the Omaya Group and in that capacity entered into the Construction Contract with Arinson.
Omaya Investments was the trustee of the Bechara Family Trust established by the Deed of Trust dated 25 February 2002. The Deed of Trust relevantly provides:
1. Omaya Investments is the Trustee of the Trust Fund of the Bechara Family Trust (cll 1.12, 1.13 and the Schedule).
2. The Beneficiaries of the Bechara Family Trust include Mr and Mrs Bechara (who are each a Principal), their children, any relative and any company in which any of the Beneficiaries is a shareholder or director (cll 1.2, 1.9 and the Schedule).
3. The Bechara Family Trust is a discretionary trust in income and capital (cll 2, 3, 6 and 11.1).
4. The Trustee is entitled to be indemnified out of the Trust Fund against any liabilities, expenses, claims, or losses arising in connection with the Trust Fund (cl 11.3).
5. Mr Bechara as the Appointor has the power to remove the Trustee at any time (cll 1.1, 15 and the Schedule).
6. The Trustee may, with the consent of the Principal, revoke, add to or vary all or any of the provisions of the Deed of Trust (cl 14).
The Trust Fund of the Bechara Family Trust includes numerous properties located across Strathfield, Burwood and Mortlake (Trust Properties).
On 16 May 2019, Mr Bechara, Omaya Investments and BSM entered into the Deed of Removal & Appointment of Trustee for the Bechara Family Trust in which Mr Bechara removed Omaya Investments as the Trustee of the Bechara Family Trust and appointed BSM as the Trustee of the Bechara Family Trust in its place.
On 16 May 2019, all of the Trust Properties were transferred from Omaya Investments to BSM without monetary consideration to reflect the change of the Trustee of the Bechara Family Trust that day.
[6]
Allegations and responses in the proceedings
There have been multiple amendments to the form of the claims made by the Owners Corporation. They are now as stated in the third amended summons and list statement. In light of the list statement only recently having been filed (on 9 July 2024), no response has yet been made to it.
In summary, the Owners Corporation seeks damages against Omaya Holding, Arinson and Omaya Investments in respect of alleged breaches of warranties pursuant to s 18B of the Home Building Act 1989 (NSW) and/or breaches of the duty to exercise reasonable care to avoid economic loss caused by defects pursuant to s 37(1) of the Design and Building Practitioners Act 2020 (NSW) (Design Act). The Owners Corporation asserts that those breaches arise in respect of general building and fire safety defects resulting from defective work during the construction of the units on the Property. The Owners Corporation also seeks a declaration that BSM is required to indemnify Omaya Investments for the damages sought by the Owners Corporation out of the assets of the Bechara Family Trust.
The latest response of the defendants takes the form of the amended technology and construction list response filed 15 June 2021, which answered the amended technology and construction list statement filed 25 March 2021.
Arinson and Omaya Investments have brought a cross-claim against Integrated Design Group Pty Ltd (IDG) and Bernie Cohen & Associates Pty Ltd trading as Essential Certifiers in the amended technology and construction cross-claim list statement filed 15 June 2021.
Part C of the list statement and the cross-claim list statement set out the contentions and part C of the list response sets out the defendants' responses to those contentions. In this judgment, where I refer to any particular paragraphs in part C of the list statement, list response or cross-claim list statement, I have expressly identified them using the letter C (for example, [C10]). Similarly, I will refer to paragraphs in part A of the list statement, list response or cross-claim list statement by using the letter A (for example, [A10]).
The principal allegations which are the subject of challenge on this application are those against Omaya Investments and BSM.
[7]
The claims made against Omaya Investments
The fundamental allegation made against Omaya Investments is in [C12] of the list statement, which states:
[Omaya Holding] entered into a contract (Building Contract) with [Arinson] and [Omaya Investments], whereby [Omaya Holding], or in the alternative, [Omaya Investments], agreed to undertake works and provide goods and services for the construction of a building on the Land (the Works).
Particulars
Particulars of the Building Contract will be provided after discovery.
It is this allegation that the "Building Contract" was not only between Omaya Holding and Arinson but also with Omaya Investments that then forms the basis for claims made against Omaya Investments for breaches of statutory warranties under the Building Act (which appear in [C15], [C16], [C19] and [C20] of the list statement) and breaches of the duty to exercise care under the Design Act (which appear in [C20J]-[C20N] of the list statement).
In particular, it is alleged that the Works were carried out at the Property by Omaya Holding, or in the alternative, Omaya Investments ([C19] of the list statement) and Omaya Investments was a person who carried out construction work under the Design Act ([C20J] of the list statement).
No particulars of the Owners Corporation's allegations that Omaya Investments is a party to the Building Contract and carried out the Works have been provided. No particulars of the Owners Corporation's allegation that Omaya Investments carried out construction work have been provided.
During the hearing, the Owners Corporation acknowledged that particulars are lacking and should be provided in relation to the allegations against Omaya Investments relating to the Design Act (T15.22-24).
But the Owners Corporation resisted the notion that any particulars in relation to the allegation that Omaya Investments is a party to the Building Contract and carried out the Works need to be provided because it relies on what it says are admissions made by Omaya Investments in the list response and the cross-claim list statement. The Owners Corporation says that it has conducted these proceedings on the basis of these admissions and does not need to rely on the proof of any other facts to prove the central allegation.
[C12] of the list response responds to the fundamental allegation in [C12] of the list statement (quoted above), stating:
The defendants admit that [Omaya Holding] entered into a contract with [Arinson], whereby [Omaya Holding] agreed to undertake works and provide goods and services for the construction of the Building. The defendants otherwise deny the allegations in the paragraph.
[8]
The claims made against BSM
The relief sought against BSM in the amended summons is contained in prayer 4 which seeks:
… a declaration that [BSM] is required to indemnify [Omaya Investments], for the damages sought by the [Owners Corporation] in these proceedings, out of the assets of the Bechara Family Trust that include [the Trust Properties].
The allegations made in support of this relief are stated in [C11], [C11A], [C11B] and [C20O] of the list statement, which are in the following form:
11 [Omaya Investments]:
a) At all material times, is and was a corporation within the meaning of the Corporations Act 2001 (Cth) and is capable of being sued in its own name and style.
b) On or before 10 September 2019:
i. Was the trustee for the Bechara Family Trust.
ii. Was the registered proprietor of the Trust Properties.
c) From on around 10 September 2019, pursuant to a Deed of Removal and Appointment of Trustee entered into on or around 10 September 2019 (the Trustee Change Deed):
i. retired as the Trustee of the Bechara Family Trust; and
ii. transferred the Trust Properties to [BSM] (the 2019 Transfers).
d) At all material times, carried out the works pleaded as being the subject of these proceedings as the trustee for the Bechara Family Trust.
…
11A [BSM] is and was a corporation within the meaning of the Corporations Act 2001 (Cth) and is capable of being sued in its own name and style.
11B From around 10 September 2019, [BSM] pursuant to the Trustee Change Deed:
a. accepted appointment as the trustee of the Bechara Family Trust;
b. became the registered proprietor of the Trust Properties by reason of the 2019 Transfers;
c. incurred the liability to indemnify [Omaya Investments] out of the assets of the Bechara Family Trust pursuant to a right of indemnification for the damages sought by the [Owners Corporation] in these proceedings, such assets including but not limited to the Trust Properties; and
d. was required to reimburse [Omaya Investments] for liabilities that [Omaya Investments] incurred when acting as the trustee for the Bechara Family Trust.
20O By reason of the matters pleaded in paragraphs 11, 11A and 11B above, [BSM]:
a) incurred the liability to indemnify [Omaya Investments], out of the assets of the Bechara Family Trust, including but not limited to the Trust Properties, for the damages claimed by the [Owners Corporation] against [Omaya Investments].
b) is required to reimburse [Omaya Investments] for liabilities [Omaya Investments] incurred to the [Owners Corporation] when acting as the Trustee of the Bechara Family Trust.
[9]
ISSUE 1: AMENDMENT OF OBVIOUS ERROR IN LIST RESPONSE
There is an obvious error in [C18] of the list response where it refers to Omaya Investments rather than Arinson. I do not regard this obvious error as amounting to any form of admission, as the surrounding paragraphs make clear for the reasons I have stated above.
Section 64 of the Civil Procedure Act 2005 (NSW) (CPA) provides:
64 Amendment of documents generally
(1) At any stage of proceedings, the court may order -
(a) that any document in the proceedings be amended, or
(b) that leave be granted to a party to amend any document in the proceedings.
(2) Subject to section 58, all necessary amendments are to be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings, correcting any defect or error in the proceedings and avoiding multiplicity of proceedings.
(3) An order under this section may be made even if the amendment would have the effect of adding or substituting a cause of action that has arisen after the commencement of the proceedings but, in that case, the date of commencement of the proceedings, in relation to that cause of action, is, subject to section 65, taken to be the date on which the amendment is made.
(4) If there has been a mistake in the name of a party, this section applies to the person intended to be made a party as if he or she were a party.
…
The overriding purpose of the CPA and the UCPR in their application to proceedings in this court is to facilitate the just, quick and cheap resolution of the real issues in the proceedings: s 56(1) of the CPA. I must seek to give effect to that overriding purpose when I exercise any power in the CPA or the UCPR: s 56(2) of the CPA.
In seeking to give effect to the overriding purpose, I must have regard to the objects of the just determination of the proceedings, the efficient disposal of the business of the court, the efficient use of available judicial and administrative resources, and the timely disposal of the proceedings at a cost affordable by the respective parties: s 57(1) of the CPA.
The amendment power in s 64(2) is subject to s 58 of the CPA. Section 58(1) and (2) of the CPA require that in making any order for the amendment of a document I must seek to act in accordance with the dictates of justice, which include the matters stated in ss 56 and 57 of the CPA, and may have regard to the following matters to the extent I consider them to be relevant:
1. the degree of difficulty or complexity to which the issues in the proceedings give rise;
2. the degree of expedition with which the respective parties have approached the proceedings, including the degree to which they have been timely in their interlocutory activities;
3. the degree to which any lack of expedition in approaching the proceedings has arisen from circumstances beyond the control of the respective parties;
4. the degree to which the respective parties have fulfilled their duties under s 56(3) of the CPA;
5. the use that any party has made, or could have made, of any opportunity that has been available to the party in the course of the proceedings, whether under rules of court, the practice of the court or any direction of a procedural nature given in the proceedings;
6. the degree of injustice that would be suffered by the respective parties as a consequence of any order or direction; and
7. such other matters as the court considers relevant in the circumstances of the case.
[10]
Legal principles
The relevant principles concerning the withdrawal of admissions are conveniently collected in NM Rural Enterprises Pty Ltd v Rimanui Farms Limited [2010] NSWSC 969, by Harrison J (as the CJ at CL then was) at [9]-[13] as follows:
[9] UCPR 12.6 provides relevantly as follows:
12.6 Withdrawal of matter in defence or subsequent pleading
(1) A party raising any matter in a defence or subsequent pleading may withdraw the matter at any time.
(2) Despite subrule (1), a party may not withdraw any admission, or any other matter that operates for the benefit of another party, except with the consent of the other party or by leave of the court.
[10] This rule and some of the principles relating to formal admissions and their withdrawal in court proceedings are referred to in the judgment of Campbell JA in The Nominal Defendant v Gabriel [2007] NSWCA 52; (2007) 71 NSWLR 150 at [103]-[112]. At [110]-[111] his Honour said this:
[110] As it is the pleadings that define the issues for trial, if an admission is made in a defence, there is no issue at the trial about the truth of the fact admitted, and therefore no evidence may be led, or submission made, for the purpose of controverting that admitted fact. Similarly, an assumption that underlies the requirement for leave to withdraw a formal admission made in court proceedings by one of the means prescribed by the Rules, other than admission on the pleadings, is that, unless and until leave to withdraw that admission is given, the matter that is admitted cannot be controverted by other evidence in the case. However, pursuant to UCP Rule 17.6, such an admission operates only in favour of the party in whose favour it was made, and is taken to have been made for the purpose of those particular proceedings only.
[111] It is only because admissions made by a formal step in proceedings, of the various types I have just mentioned, prevent there being any issue in the proceedings about the correctness of the matter admitted that any question arises about such admissions being "withdrawn". Granting leave for such an admission to be withdrawn is, in effect, granting permission for an issue to be raised in litigation about the correctness of the matter that had been admitted.
[11] In Drabsch v Switzerland General Insurance Co Ltd (Supreme Court of New South Wales, Santow J, 16 October 1996, unreported), his Honour summarised the applicable principles at 7 as follows:
1. Where a party under no apparent disability makes a clear and distinct admission which is accepted by its opponent and acted upon, for reasons of policy and the due conduct of the business of the court, an application to withdraw the admission, especially at appeal, should not be freely granted; Coopers Brewery Ltd v Panfida Foods Ltd (1992) 26 NSWLR 738 per Rogers CJ Comm D, followed in IOL Petroleum Ltd v O'Neill per Young J (Young J, 17 November 1995, unreported) and Apex Pallett Hire Pty Ltd v Brambles Holdings Ltd (full Supreme Court of Victoria, 8 April 1988, unreported), and in that respect not following H Clark (Doncaster) Ltd v Wilkinson [1965] Ch 694 at 703.
2. The question is one for the reviewing judge to consider in the context of each particular appeal, with the general guideline being that the person seeking on a review to withdraw a concession made should provide some good reason why the judge should disturb what was previously common ground or conceded; IOL Petroleum Ltd v O'Neill (supra), in the context of withdrawing a concession made before the Registrar.
3. Where a court is satisfied that admissions have been made after consideration and advice such as from the parties' expert and after a full opportunity to consider its case and whether the admissions should be made, admissions so made with deliberateness and formality would ordinarily not be permitted to be withdrawn; Coopers Brewery Ltd v Panfida Foods Ltd (supra) at 745 and 748. Thus a court will not lend its approval to the withdrawal of admissions where, by analogy with the making of amendments, this is actuated by purely tactical reasons; compare Devae Prufcoat Pty Ltd v Altex Industrial Paints Ltd (Cole J, 15 March 1989, unreported).
4. It will usually be appropriate to grant leave to withdraw an admission where it is shown that the admission is contrary to the actual facts. Leave may also be appropriate where circumstances show that the admission was made inadvertently or without due consideration of material matters. Irrespective of whether the admission has or has not been formally made, leave may be refused if the other party has changed its position in reliance upon the admission; H Clark (Doncaster) Ltd v Wilkinson (supra), in that respect not doubted.
5. Following Cohen v McWilliam (1995) 38 NSWLR 476, a court is not obliged to give decisive weight to court efficiency, such that a party who wishes to defend its claim is entitled to a hearing on the merits, with cost orders being available as a means of compensating the other party for any costs thereby unnecessarily incurred or not fairly visited on the other party.
[12] In Maile v Rafiq [2005] NSWCA 410, Tobias JA adopted these principles and said this at [75]:
[75] In my opinion, there is no essential difference between the principles articulated by Master Harper in Wyer on the one hand, which were sourced in the decision of the Full Court in Celestino and that of Santow J in Drabsch, and the statement of principle by the primary judge on the other that the onus lay upon the claimant to place before the Court material not only to explain the circumstances which led to the situation in which the claimant had now found itself but also to satisfy the Court that, were relief to be granted, the opponent would not be prejudiced in obtaining a fair trial on the issue of breach of duty of care.
[13] At [58]-[63] and [78]-[91], Tobias JA discussed the issue of prejudice if an admission were withdrawn. A respondent carries no onus to establish actual prejudice and the court is entitled to take into account presumed prejudice, which arises from delay. His Honour continued at [95]:
[95] In these circumstances, the evidence must establish an adequate reason based on evidence or a sensible explanation of a solid and substantial character explaining the admission of a breach of duty of care in the Notice of Grounds of Defence filed on 11 May 2004 …
[11]
Application to the facts
For the reasons stated above, I do not consider that any of the alleged admissions in the list response or the cross-claim list statement are truly "admissions" to the allegations made in the list statement because they are only expressly made on the conditional basis of liability first being found against Omaya Investments on those allegations.
In other words, the way in which the alleged admissions are made is in the routine way in which a party pleads to allegations against it to the effect that "if I am liable to you on the allegations you make against me (which I deny), here is what I allege in my case against others." This is the manner in which the concurrent wrongdoer defence has been constructed in the list response and the cross-claim has been constructed in the cross-claim list statement. If the Owners Corporation has been proceeding on the basis that it did not need to prove the allegations in the list statement against Omaya Investments by leading any evidence then that is a matter for it.
If I had concluded that the alleged admissions were "admissions" then it would have been necessary for Omaya Investments to make a proper application under r 12.6 of the UCPR by first serving a notice of withdrawal identifying the admission and stating the extent of the withdrawal and to meet the requirements in the principles stated in NM Rural Enterprises. This was not done. Instead the entirely unsatisfactory approach was taken of seeking the following order in paragraph 4 of the notice of motion:
To the extent necessary to give effect to orders 2 or 3 above, leave be granted for the Third Defendant to withdraw any admission which the Court may consider was made in the Amended List Response or Amended Cross Claim dated 15 June 2021.
The defendants are required to identify clearly and precisely the admissions to be withdrawn. It is not a matter for the court to identify any admission made in the list response or the cross-claim statement. It is a matter for the defendants to do so by adhering to the requirements of r 12.6 of the UCPR. Nor is it a matter for the court to decide whether such withdrawal is required to the extent necessary for the summary dismissal or strike out application. The defendants must make their own strategic decisions on the way in which they seek to run their case. It is inappropriate for the court to enter the arena to make the sorts of decisions which are rolled up in the form of paragraph 4 of the notice of motion.
[12]
ISSUE 3: SUMMARY DISMISSAL AND STRIKE OUT
Omaya Investments and BSM each seek the summary dismissal or striking out of the claims against them in the list statement.
[13]
Legal principles
The court's power to summarily dismiss proceedings is contained in r 13.4 of the UCPR. Relevantly, rr 13.4(1) and (2) of the UCPR provide:
13.4 Frivolous and vexatious proceedings
(1) If in any proceedings it appears to the court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings -
(a) the proceedings are frivolous or vexatious, or
(b) no reasonable cause of action is disclosed, or
(c) the proceedings are an abuse of the process of the court,
the court may order that the proceedings be dismissed generally or in relation to that claim.
(2) The court may receive evidence on the hearing of an application for an order under subrule (1).
For many decades, the shorthand expression of the applicable principles for the determination of an application to summarily dismiss proceedings has been described as the "General Steel test", which derives from the decision in General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125 at 128-129; [1964] HCA 69, in which it was held by Barwick CJ 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. …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".
In Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41 at [57], Gaudron, McHugh, Gummow and Hayne JJ commented on the General Steel test in the following way (citation omitted):
… 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, 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.
[14]
Claim against Omaya Investments
Turning to the allegations made against Omaya Investments, it is abundantly clear that the allegations made in the list statement do not come remotely close to meeting the high degree of certainty I must have in applying the General Steel test that they are "so obviously untenable that [the claim] cannot possibly succeed"; "manifestly groundless"; "so manifestly faulty that it does not admit of argument"; "disclos[e] a case which the Court is satisfied cannot succeed"; "under no possibility can there be a good cause of action" and "be manifest that to allow them" (the pleadings) "to stand would involve useless expense". I am satisfied on the materials to which I have been taken that there is a genuine controversy over the question of whether Omaya Investments carried out design and construction work on the building at the Property and is liable for the alleged defective work.
It is alleged in [C12] of the list statement that Omaya Investments was a party to the Building Contract, which is a wider allegation than the Building Contract being the written Construction Contract alone, and in [C19] of the list statement that Omaya Investments carried out the Works at the Property. I have seen material on which these allegations could be properly made.
I do, however, consider that the allegations in the list statement against Omaya Investments meets the relevant criteria for being struck out because in their present form they are embarrassing - they are made at such a level of generality that Omaya Investments does not know in advance the case it has to meet. Omaya Investments should not be left to guess why it is alleged that it was a party to the Building Contract (in light of the fact that it was not a party to the written Construction Contract) or why it is alleged to have carried out the Works under it. The same is true of the generality of the allegation in [C20J] of the list statement that Omaya Investments carried out construction work within the meaning of the Design Act.
The defect from which the list statement suffers in relation to the case against Omaya Investments is that the allegations made against Omaya Investments should be fully stated. The Owners Corporation admits that it needs to properly particularise the claim made under the Design Act against Omaya Investments.
It is no part of the court's function to draft the list statement for the Owners Corporation. If the Owners Corporation wishes to rely on the facts proved from alleged admissions, documents or events then those facts should be fully and properly stated in support of the allegations against Omaya Investments that it was a party to the Building Contract and conducted the Works as alleged in [C12], [C19] and [C20J] of the list statement respectively.
[15]
Claim against BSM
In essence, the Owners Corporation claims to be entitled to obtain a declaration of the right of indemnity as between Omaya Investments (as the old trustee of the Bechara Family Trust) and BSM (as the current trustee of the Bechara Family Trust) from the Trust Properties. The Owners Corporation rests its claim on the principles discussed in CGU Insurance Ltd v Blakeley (2016) 259 CLR 339; [2016] HCA 2 at [51]-[58] and [68]-[69], albeit that this was decided in the context of a declaration of indemnity sought against an insurer.
The defendants submit that the right of indemnity of Omaya Investments as the former trustee of the Bechara Family Trust inures and BSM as the current trustee of the Bechara Family Trust is required by law to ensure that if there is any claim made against Omaya Investments which is successful, Omaya Investments has recourse to the Trust Properties. The defendants say that the transfer of the Trust Properties on 16 May 2019 from Omaya Investments to BSM did nothing to affect this right of indemnification. The defendants rely on Agusta Pty Limited v Provident Capital Limited (2012) 16 BPR 30,397; [2012] NSWSCA 26 at [37]-[45].
Turning first to Agusta, it was a case in which a father and son (the Ferellas) became the trustees of a unit trust known as the Cavallino Unit Trust by a deed of settlement in January 1995 and then purchased land in Kings Park which became trust property. In April 2005, Riva NSW Pty Ltd was then appointed as sole trustee in place of the Ferellas and in February 2006, Agusta Pty Ltd was appointed as sole trustee in place of Riva. The Kings Park property was not immediately transferred by the Ferrallas to Agusta.
In March 2006, Agusta then entered into a written contract of loan from Provident Capital Ltd under which Agusta agreed to pay certain fees to Provident. In June 2006, Provident brought proceedings to recover those fees and obtained judgment against Agusta for the fees, interest and costs. Two months later the Kings Park property was transferred by the Ferellas to Agusta.
In June 2009, Provident obtained the issue by the District Court of a writ for the levy of property (commonly known as a writ of execution) directed to Agusta; however, the Kings Park property was not sold by the Sheriff before the writ lapsed. Provident applied to the District Court for a new writ but it was not forthcoming.
[16]
ORDERS
For the reasons stated above, I propose to make the following orders:
1. Paragraph C18 of the amended technology and construction list response filed 15 June 2021 be amended by replacing the word "Investments" with the word "Arinson".
2. Paragraphs C12, C19 and C20J of the third amended technology and construction list statement filed 9 July 2024 be struck out insofar as they make allegations against the third defendant with leave granted to the plaintiff to replead them by serving a proposed draft fourth amended technology and construction list statement on the defendants within the next 7 days.
3. The notice of motion filed 21 June 2024 by the third defendant and the sixth defendant is otherwise dismissed.
I will make directions for hearing the parties before determining the issue of costs in chambers.
[17]
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Decision last updated: 09 August 2024
This response does not contain any form of admission that Omaya Investments was a party to the Building Contract. In fact, that allegation is clearly denied.
One of the alleged admissions from the list response on which the Owners Corporation relies is that in [C18]. [C18] of the list statement and [C18] of the list response are in the following form:
List statement - [C18]
By reason of the matters pleaded in paragraphs 12, 13, 14, and 17, the [Owners Corporation] is entitled to the benefit of the Statutory Warranties in respect of the Works and the defects in the common property as against [Arinson].
List response - [C18]
In answer to C18 of the List Statement, the defendants admit that the [Owners] Corporation is entitled to the benefit of Warranties against [Omaya] Investments by operation of section 18C of the Act. The defendants otherwise do not admit the allegations in the paragraph.
On its face, this response contains an obvious error by referring to Omaya Investments when the only allegation is directed at Arinson.
The fact that [C18] of the list response contains a clear error is made even more obvious when considering the allegations in the contentions in the list statement and responses in the surrounding paragraphs of the list response, which can be summarised as follows:
1. [C15]: The list statement alleges that the Building Contract implied warranties by Omaya Holding, or in the alternative, Omaya Investments, for the benefit of Arinson pursuant to s 18B of the Building Act. The list response answers by admitting that the Building Contract between Arinson and Omaya Holding included the statutory warranties in s 18B of the Building Act and otherwise does not admit the allegations.
2. [C16]: The list statement alleges that the Owners Corporation as the successor in title to Arinson is by virtue of s 18D of the Building Act entitled to the benefit of the statutory warranties against Omaya Holding or in the alternative, Omaya Investments. The list response answers by admitting that the Owners Corporation is entitled to the benefit of the statutory warranties by operation of s 18D of the Building Act (being those arising from the Building Contract between Arinson and Omaya Holding) and otherwise does not admit the allegations.
3. [C17]: The list statement alleges that Arinson is and at all material times was a developer within the meaning of s 3A of the Building Act. The list response answers by admitting that Arinson was a developer within the meaning of s 3A of the Building Act, but otherwise does not admit the allegations.
4. [C19]: The list statement alleges that between 16 September 2009 and 23 December 2010 the Works were carried out at the Property by Omaya Holding, or in the alternative, Omaya Investments. The list response answers by admitting that Omaya Holding carried out the works under the Building Contract, that Omaya Holding and Arinson entered into the Building Contract on or about 4 September 2009, the works under the Building Contract were carried out from about the date of the contract, Omaya Holding agreed to bring the works under the Building Contract to practical completion, the works did achieve practical completion as provided in the Building Contract and a practical completion certificate for the works was issued on 10 December 2010.
Except for the obvious error of the mistaken reference to Omaya Investments rather than Arinson in [C18] of the list response, the case made in the list response is that Omaya Investments was not a party to the Building Contract as alleged and did not carry out work under it.
The Owners Corporation also relies on alleged admissions in other parts of the contentions in the list response. These all arise in the part of the contentions in the list response where it is alleged that IDG and Essential Certifiers are concurrent wrongdoers as defined in s 34(2) of the Civil Liability Act 2000 (NSW). The parts of the list response said to contain these alleged admissions are:
1. [C36] which says:
In about 2007, [Omaya] Investments engaged IDG to provide it with architectural design and construction associated services in relation to the construction of the Building (IDG Agreement).
1. [C40] which says:
Between November 2007 and June 2009, IDG provided [Omaya] Investments with the IDG Architectural Services.
1. [C43] which says:
If it is found that any of the defendants' conduct breached the duty of care alleged to be owed under the [Design] Act (which is denied), IDG also breached the duty of care referred to in paragraph 39 above.
Particulars
…
(ii) failed to advise Arinson and/or [Omaya] Investments that if a building was constructed in accordance with IDG's designs, it would not comply with the [Building Code of Australia];
1. [C47] which says:
In about November 2009, [Omaya] Investments appointed Essential Certifiers as the principal certifying authority, and engaged it to provide certification services, in respect of the construction of the Building (the Certifier Agreement).
1. [C56] which says:
If it is found that any of the defendants' conduct breached the duty of care alleged to be owed under the [Design] Act (which is denied), Essential Certifiers also breached the duty of care referred to in paragraph 52 above.
All of these parts of the list response must be read in light of C34] and [C34(2)] of the list response which makes it clear that all of the allegations in [C35]-[C58] of the list response are only made to support the allegation that IDG and Essential Certifiers were concurrent wrongdoers and, in particular, are predicated on it being found in the proceedings that:
1. any of the defendants' conduct breached the duty of care alleged to be owed under the Design Act (which is denied); and
2. the Owners Corporation suffered loss or damage as a result (which is also denied).
The Owners Corporation also refers to paragraphs in the cross-claim list statement as giving rise to alleged admissions on which it has relied. These alleged admissions are said to reside in the following parts of the cross-claim list statement:
1. [A4], which says:
Arinson engaged Omaya Holding Pty Ltd (Omaya) and the Second Cross Claimant ([Omaya] Investments) to carry out certain residential building works at the Property.
1. [C22A], which says:
The salient features of the relationship between IDG, as the architect, and each of:
…
(b) [Omaya] Investments, as the party who engaged IDG to provide the IDG Architectural Services,
were that:
…
(d) IDG knew or ought to have known that:
…
(ii) Arinson had engaged [Omaya] Investments to carry out residential building work on the building at the Property;
…
(iv) Arinson and [Omaya] Investments would rely on IDG to prepare designs and specifications properly and competently for use in the construction of the building on the Property; and
(v) it was reasonably foreseeable that Arinson and/or [Omaya] Investments would suffer economic loss as a result of defects in or related to a building for which the construction work was done, arising from the IDG Architectural Services.
…
1. [C22B], which says:
By reason of the circumstances referred to above, in providing the IDG Architectural Services, IDG owed a duty of care to Arinson and/or [Omaya] Investments to exercise reasonable care to avoid economic loss caused by design defects in or related to a building for which the construction work was done.
1. [C35A], which says:
The salient features of the relationship between Essential Certifiers, as the principal certifying authority, and each of:
(a) Arinson, as the registered proprietor of the Property; and
(b) [Omaya] Investments, as the party who engaged Essential Certifiers to provide the Certifier Services,
were that:
(c) at all material times, Essential Certifiers held itself out to be a qualified certifier experienced in the certification of residential buildings;
(d) Essential Certifiers knew or ought to have known that:
(i) Arinson was the registered proprietor of the Property;
(ii) Arinson had engaged [Omaya] Investments to carry out residential building work on the building at the Property;
…
1. [C35B], which says:
By reason of the circumstances referred to above, in providing the Certifier Services, Essential Certifiers owed a duty of care to Arinson and/or [Omaya] Investments to exercise reasonable care to avoid economic loss caused by defects in or related to a building for which the construction work was done.
1. [C43A], which says:
In:
(a) providing Arinson and/or [Omaya] Investments with designs; and/or
(b) failing to inform Arinson and/or [Omaya] Investments that the designs that it had prepared did not comply with the [Building Code of Australia];
IDG represented that:
(c) such designs complied with the [Building Code of Australia] (Architect's First Representation); and
(d) if a building was constructed on the Property in accordance with such designs, it would result in a building that complied with the [Building Code of Australia] (Architect's Second Representation),
1. [C44A], which says:
In:
(a) issuing a construction certificate which permitted the building to be constructed in accordance with IDG's designs; and/or
(b) failing to inform Arinson and/or [Omaya] Investments that the designs that IDG had prepared did not comply with the [Building Code of Australia];
Essential Certifiers represented that:
(c) such designs complied with the [Building Code of Australia] (Certifier's First Representation); and
(d) if a building was constructed on the Property in accordance with such designs, it would result in a building that complied with the [Building Code of Australia] (Certifier's Second Representation),
1. [C47], which says:
Arinson and [Omaya] Investments relied on the Architect's Representations and the Certifier's Representations and:
(a) relying on the representations from both, constructed a building on the Property with an alleged effective height greater than 25 metres without those things identified in paragraph 26(a)(i) above; and
(B) relying on the Certifier's Representations, failed to detect and rectify the alleged defects pleaded in paragraph 38(b)(ii)-(xx) above in a timely manner.
But every paragraph of the cross-claim list statement has to be read in light of the following parts of it:
1. [A8], which says:
Arinson, Omaya [Holding] and [Omaya] Investments deny the Owners Corporation's allegations.
1. [A9], which says:
To the extent that Arinson and [Omaya] Investments have any liability to the Owners Corporation in relation to the alleged defects …
1. The particulars to [C12], which say:
Arinson and [Omaya] Investments repeat, without admission, the allegations made by the Owners Corporation in the List Statement filed 9 July 2018 as if set out herein seriatim.
1. [C13], which says:
Arinson, Omaya [Holding] and [Omaya Investments] deny any liability to the Owners Corporation in respect of the alleged breaches of the Statutory Warranties and damages claimed.
1. [C14], which says:
To the extent that Arinson and [Omaya] Investments (or either of them) are found to be liable to the Owners Corporation for the alleged defects in the Owners' Proceedings, Arinson and [Omaya] Investments seek damages from IDG and Essential Certifiers in respect of any such liability.
These parts of the cross-claim list statement make it clear that the allegations contained in it are entirely predicated on the allegations made in the list statement by the Owners Corporation against Arinson and Omaya Investments, which are expressly denied in the cross-claim list statement and repeated without admission, being accepted.
I cannot see any reason why the alleged admissions in the list response and the cross-claim list statement could have legitimately formed the entire basis on which the Owners Corporation has conducted its case against Omaya Investments that it was a party to the Building Contract and conducted the Works, as alleged in [C12] and [C19] of the list statement respectively. This is because those parts of the list response and the cross-claim list statement are only enlivened upon the Owners Corporation having succeeded in its claim against Arinson and Omaya Investments.
I was also taken to a number of documents which the Owners Corporation says it could rely upon if it is unable to rely on the alleged admissions to prove that Omaya Investments was substantively involved in the design and construction of the building on the Property covering the period from April 2003 to January 2011. The Owners Corporation says that these matters demonstrate that Omaya Investments was involved in each of the following:
1. construction and certification of fire safety measures in the building;
2. construction of streetscape works in and around the building; and
3. engagement of IDG and Essential Certifiers in matters directly and indirectly related to fire safety.
The Owners Corporation says that these works arguably fall within the extended meaning of residential building works under the Building Act as identified in Grygiel v Baine [2005] NSWCA 218 by Basten JA at [57].
In short, the Owners Corporation simply relies on the fact that BSM is now the Trustee of the Trust Properties for the Bechara Family Trust in place of Omaya Investments as the basis for the declaration of the indemnity.
In my view, the just, quick and cheap resolution of the real issues in these proceedings necessitates that the obvious error in [C18] of the list response be corrected now. To do otherwise would cause a significant injustice to Omaya Investments and the diversion of the parties' attention away from one of the real issues in the proceedings, which is whether Omaya Investments is a party to the Building Contract and performed the Works as alleged.
Sections 64(1) and (2) of the CPA empower me to make an amendment of my own motion for the purposes of determining the real questions in dispute between the parties: Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175; [2009] HCA 27, French CJ at [14]. To enable determination of the real questions in dispute between the parties in these proceedings, I propose to order the necessary amendment to [C18] of the list response by deleting the word "Investments" and replacing it with the word "Arinson".
The only "admission" I would be prepared to allow to be withdrawn is the inadvertent one made in error in [C18] of the list response, which I will order to be amended as stated above.
This expression of principle was endorsed in Batistatos v Roads & Traffic Authority New South Wales (2006) 226 CLR 256; [2006] HCA 27, Gleeson CJ, Gummow, Hayne and Crennan JJ at [46] (where it was also said that the General Steel test should not be given "canonical force") and Spencer v Commonwealth (2010) 241 CLR 118; [2010] HCA 28, by French CJ and Gummow J at [24].
In Shaw v State of New South Wales (2012) 219 IR 87; [2012] NSWCA 102, Barrett JA (with whom Beazley, McColl and Macfarlan JJA and McClellan CJ at CL agreed) at [32] elaborated on the General Steel test for summary dismissal as follows:
The question is ... whether the claims in question are so obviously untenable or groundless that there is "a high degree of certainty" that they will fail if allowed to go to trial; and whether this is one of the "clearest of cases" in which the court may accordingly intervene to prevent the claims being litigated.
This assessment is to be made by taking the party making the claim at its highest, meaning that the party applying for summary dismissal must accept the truth of all allegations in the claim and the ranges of meaning which assertions in the claim are capable of bearing: see Simmons v New South Wales Trustee and Guardian (2014) 17 BPR 33,717; [2014] NSWCA 405, Gleeson JA (with whom Beazley P and Barrett JA agreed) at [200], citing Penthouse Publications Ltd v McWilliam (Court of Appeal (NSW), Priestley and Meagher JJA and Wardell AJA, 15 March 1991, unrep); Agius v New South Wales [2001] NSWCA 371 at [24].
The recent Court of Appeal decision in GR v Secretary, Department of Communities and Justice [2023] NSWCA 239 similarly dealt with an interlocutory application for summary dismissal, with Adamson JA observing at [123]:
… A plaintiff is not obliged to substantiate the allegations made in support of the claim in order to resist summary dismissal of the proceedings. Issues of fact are pre-eminently matters for final hearing. Summary dismissal will be refused if there is a triable issue: Wickstead v Browne (1992) 30 NSWLR 1 at 11 (Handley and Cripps JJA); [1992] NSWCA 272.
The power of the court to strike out the whole or any part of a pleading is contained in r 14.28(1) of the UCPR, which provides:
The court may at any stage of the proceedings order that the whole or any part of a pleading be struck out if the pleading -
(a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading, or
(b) has a tendency to cause prejudice, embarrassment or delay in the proceedings, or
(c) is otherwise an abuse of the process of the court.
In relation to the power to strike out a pleading, the court must give consideration to the importance of pleadings for the conduct of a case, particularly to enable the opponent to know the case they have to meet. But the court does not treat them as rigid boundaries beyond which the parties may never stray.
In Gould v Mount Oxide Mines Ltd (1916) 22 CLR 490; [1916] HCA 81, Isaacs and Rich JJ at 517, wrote (reading past the gender inappropriate use of "man" from more than 100 years ago):
Undoubtedly, as a general rule of fair play, and one resting on the fundamental principle that no man ought to be put to loss without having a proper opportunity of meeting the case against him, pleadings should state with sufficient clearness the case of the party whose averments they are. That is their function. Their function is discharged when the case is presented with reasonable clearness. Any want of clearness can be cured by amendment or particulars. But pleadings are only a means to an end, and if the parties in fighting their legal battles choose to restrict them, or to enlarge them, or to disregard them and meet each other on issues fairly fought out, it is impossible for either of them to hark back to the pleadings and treat them as governing the area of contest.
These themes were emphasised in Banque Commerciale SA (in liq) v Akhil Holdings Ltd (1990) 169 CLR 279; [1990] HCA 11, Dawson J at 296-297, who stated (authorities omitted):
It is, of course, the purpose of pleadings to define the issues between the parties so that they may know the case which they have to meet and in order that the proceedings upon trial may be conducted in an orderly fashion by reference to those issues. The defined issues provide the basis upon which evidence may be ruled admissible or inadmissible upon the ground of relevance. But modern pleadings have never imposed so rigid a framework that if evidence which raises fresh issues is admitted without objection at trial, the case is to be decided upon a basis which does not embrace the real controversy between the parties. Special procedures apart, cases are determined on the evidence, not the pleadings. It is incumbent upon the trial judge to see that the pleadings or particulars are amended so that the record reflects the proceedings as they have been conducted, but his failure to do so will not result in the invalidity of those proceedings.
In Banque Commerciale, Brennan J added at 288:
When the pleadings bring the parties to the issue, the court's function is to determine that issue and to grant relief founded on the pleadings unless the parties are allowed to alter the issues at the trial without amendment of the pleadings …
Pleadings not only inform the opponent of the case to be met but also facilitate the just, quick and cheap determination of the real issues in the proceedings.
These matters were emphasised by Adamson J (as her Honour then was) in Dickens v New South Wales (No 3) [2018] NSWSC 485 at [36] and [38]-[39]:
[36] The importance of pleadings ought not be underestimated. A statement of claim serves a number of functions. It indicates, to the Court and to the defendant or defendants, the basis of the plaintiff's claim for relief. The statement of claim must set out, in numbered paragraphs, the material facts on which the plaintiff relies (UCPR rr 14.6 and 14.7). Where the rules require that certain matters be particularised (such as allegations of fraud or states of mind), the statement of claim must contain those particulars. It is an aspect of natural justice that the defendant be apprised of the case it has to meet by a properly pleaded statement of claim: Forrest v Australian Securities and Investments Commission (2012) 247 CLR 486; [2012] HCA 39 at [25] (French CJ, Gummow, Hayne and Kiefel JJ). Where unparticularised allegations of fraud and intention are made, there can be a tendency for the deficient pleading to amount to an abuse of process. Pleadings must be consistent, except where allegations are expressed to be in the alternative: UCPR 14.18. A pleading must not be "embarrassing" in any of the senses set out by Tamberlin J in Shelton v NRMA Ltd [2004] FCA 1393; 51 ACSR 278 at [18]:
'Embarrassment' in this context refers to a pleading that is susceptible to various meanings, or contains inconsistent allegations, or in which alternatives are confusingly intermixed, or in which irrelevant allegations are made that tend to increase expense.
…
[38] Where a statement of claim is deficient, in that it does not identify the connection between allegations of fact and causes of action alleged; contains a discursive narrative, the relevance of which can only be the subject of conjecture; and makes generalised allegations which could not sensibly be the subject of a response in the defence, it cannot be allowed to stand, if objection is taken. Although there are occasions where a defendant, for forensic reasons, might not take objection to a deficient pleading and prefer to conduct the proceedings on that basis, a defendant who approaches the Court to enforce its rules regarding a pleading is entitled to have the Court require compliance: Northam v Favelle Favco Holdings Pty Ltd (Unreported, Supreme Court of New South Wales, Bryson J, 7 March 1995).
[39] The matters to be taken into account in determining which order to make are set out in Part 6 of the Civil Procedure Act 2005 (NSW), the overriding purpose of which is "to facilitate the just, quick and cheap resolution of the real issues in the proceedings": s 56. A properly pleaded statement of claim is, in my view, a prerequisite for the just, quick and cheap resolution of the real issues in the proceedings.
The concept of whether a pleading is embarrassing has also been the subject of extensive judicial consideration, drawn together in McGuirk v The University of New South Wales [2009] NSWSC 1424, Johnson J at [32]-[35], as follows:
[32] A pleading may be embarrassing even though it contains allegations of material facts sufficient to constitute a cause of action, if the material facts alleged are couched in expressions which leave difficulties or doubts about recognising or piecing together what is referred to: Northam v Favelle Favco Holdings Pty Limited (Bryson J, 7 March 1995, BC9504276 at 5-6).
[33] Although the pleading of a conclusion may, in some circumstances constitute a material fact, nevertheless, the pleading will be embarrassing if allegations are made at such a level of generality that the defendant does not know in advance the case it has to meet: Charlie Carter Pty Limited v Shop Distributive and Allied Employees Association (1987) 13 FCR 413 at 417-418. In such a case, the appropriate remedy is to strike out the pleading rather than to order the provision of particulars, as it is not the function of particulars to take the place of the necessary averments in a pleading: Trade Practices Commission v David Jones (Aust) Pty Ltd (1985) 7 FCR 109 at 112-114.
[34] Rule 14.28 UCPR provides that pleadings that involve non-compliance are liable to be struck out as an embarrassment. However, generally the Courts recognise that a wide range of discretionary considerations arise where there is a failure to comply with the technical requirements of the pleading rules: Beach Petroleum NL v Johnson (1991) 105 ALR 456 at 466. In many instances, the appropriate order may be to strike out the offending pleading, but grant leave to amend: Rubenstein v Truth & Sportsman Ltd [1960] VR 473 at 476; H 1976 Nominees Pty Ltd v Galli (1979) 30 ALR 181 at 186.
[35] It is not the function of the Court to draw or settle a party's pleading. The Court is confined to the function of ensuring that pleadings are within the rules and fulfil the functions for which they exist. Objectionable matter that is so mingled with other matter may lead to the conclusion that the pleading as a whole would tend to embarrass the fair trial of the action ought be struck out: Turner v Bulletin Newspapers Co Pty Ltd (1974) 131 CLR 69 at 72 87-88 and 97-98; Gunns Limited v Marr at [57]-[58]; Fleet v Royal Society for the Prevention of Cruelty to Animals NSW [2005] NSWSC 926 at [55].
The court may receive evidence on the hearing of an application for a summary dismissal under r 13.4 of the UCPR or the strike out of a pleading under r 14.28 of the UCPR: r 13.4(2) and r 14.28(2) of the UCPR.
I consider that this is an appropriate case in which the central parts of the list statement which plead allegations against Omaya Investments should be struck out and leave given to the Owners Corporation to replead them. Those central parts are in [C12], [C19] and [C20J] of the list statement (the Owners Corporation having conceded that [C20J] has not been sufficiently particularised).
In June 2010, the daughter of the father applied to the Registrar-General to record Riva as the registered proprietor of the Kings Park property in place of Agusta.
In the proceedings at first instance, the trial judge held that Agusta's June 2010 transfer was made with the intent to defraud creditors and therefore put it beyond Provident's power to obtain a new writ of execution. The trial judge granted relief, including declarations that Agusta had a right of indemnity out of the assets of the Cavallino Unit Trust to satisfy the Provident judgment debt, interest and costs and that Agusta possessed an equitable lien over those trust assets to satisfy the debt.
On the appeal the issues arose (at [30]) as to whether Provident could or might have obtained satisfaction of its judgment out of the Kings Park property through a new writ of execution or some other process had Agusta remained the registered proprietor of it and whether any means of obtaining satisfaction by resort to the land was available to Provident after Riva became the registered proprietor of it.
In Agusta, Barrett JA (with whom Campbell JA and Sackville AJA agreed) at [37]-[45] said:
[37] By entering into the contract with Provident, Agusta became contractually bound to pay the agreed fees and thus indebted to Provident, so that Provident was entitled to maintain an action in debt against Agusta if payment was not duly made. But when it incurred the debt to Provident, Agusta was a trustee; and it acted as a trustee in incurring the debt to Provident. There is no suggestion that Agusta did not incur the debt in due exercise of trustee powers. It accordingly had a right to be indemnified out of the trust estate for the payment obligation so incurred.
[38] A trustee's right thus to be indemnified out of trust assets for all debts duly and properly incurred as trustee is a right exercisable prospectively by way of exoneration or retrospectively by way of reimbursement (see Re Blundell (1888) 40 Ch D 370 at 376-7). The right arises simply as an incident of the office of trustee (Worrall v Harford (1802) 8 Ves Jun 4; (1802) 32 ER 250) and is recognised and confirmed by s 59(4) of the Trustee Act :
"A trustee may reimburse himself or herself, or pay or discharge out of the trust property all expenses incurred in or about execution of the trustee's trusts or powers."
[39] Section 59 says nothing about the capacity of a provision of the trust instrument to displace the s 59(4) right. The s 59(3) specification allowing displacement refers only to s 59(1) and s 59(2). The reasoning in Moyes v J & L Developments Pty Ltd (No 2) [2007] SASC 261 therefore leads to the conclusion that any attempted displacement will be ineffective: see also JA Pty Ltd v Jonco Holdings Pty Ltd [2000] NSWSC 147; (2000) 33 ACSR 691.
[40] The Ferellas were predecessor trustees of the January 1995 settlement. From February 1995, the trust property held by them included the Kings Park land. When Agusta became trustee in succession to them (whether formally or as a trustee de son tort under a constructive trust), it came to occupy, in equity, the position in relation to the land that the Ferellas had originally occupied; and this was so even though Agusta did not become the registered proprietor of the land until a later time. Agusta's right to be indemnified out of trust property for the Provident debt, along with other debts properly incurred as trustee, subsisted in relation to the Kings Park land.
[41] The right of a trustee to be indemnified out of trust property is often described as a charge or lien: see, for example, Vacuum Oil Co Pty Ltd v Wiltshire [1945] HCA 37; (1945) 72 CLR 319; Octavo Investments Pty Ltd v Knight [1979] HCA 61; (1979) 144 CLR 360. In Chief Commissioner of Stamp Duties v Buckle [1998] HCA 4; (1998) 192 CLR 226, the High Court preferred to regard it as a proprietary right constituting a beneficial interest enjoying priority over the beneficial interests of the beneficiaries. It is anomalous to refer to a person having a charge or lien over property of which the person is the owner. And as was emphasised by the High Court subsequently in CPT Custodian Pty Ltd v Commissioner of State Revenue [2005] HCA 53; (2005) 224 CLR 98, the "trust fund" enjoyed by the beneficiaries cannot be identified or quantified until the trustee's superior beneficial interest has been quantified and satisfied. The trustee's right is inseparable from and co-extensive with the trustee's obligations, both those already discharged but not yet reimbursed and those incurred but not yet discharged.
[42] As the primary judge recognised at paragraphs [26] and [42] of his reasons, Agusta therefore had, at material times, a proprietary right to the Kings Park land constituting a beneficial interest in that land commensurate with the debts it had incurred, including the Provident debt - an interest, moreover, that enjoyed priority over the interests of the trust beneficiaries.
The effect of transfer to a new trustee
[43] It is necessary next to consider the consequences, as regards the trustee's preferred beneficial interest, of a transfer of trust property by the trustee to a new trustee.
[44] After such a transfer, the original trustee's preferred beneficial interest continues to subsist in the trust property in the new trustee's hands. This was recognised by Thomas JA, Shepherdson J and Jones J in Belar Pty Ltd v Mahaffey [1999] QCA 2; [2000] 1 Qd R 477 at [19] - [20]:
"A trustee's right to an indemnity against trust assets in respect of expenses properly incurred by the trustee in the conduct of the business of the trust is well recognised. In conducting the business of the trust, the trustee becomes personally liable for debts incurred.
However, he is entitled to be indemnified against those liabilities from the trust assets held by him and for the purpose of enforcing the indemnity the trustee possesses a charge or right of lien over those assets. [Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360, 367].
That is a reference to trust assets in the trustee's possession. When there is a change of trustee with the trust assets being vested in the new trustee, the former trustee no longer has direct access to such assets, and should make the necessary claim for indemnity against the trustee who represents the trust.
The trustee's right of indemnity out of the trust assets is in the nature of a charge or lien in favour of the trustee and as such takes preference or priority over claims by the cestuis que trust. But of course when the assets have passed out of a trustee's possession the necessary claim for a trustee's indemnity should be made against the new trustee. An unco-operative new trustee who declined to exercise the powers to recover trust property in the hands of the beneficiaries could be made a defendant, and orders could be made which would in effect permit the former trustee to exercise such powers by subrogation."
[45] This passage was approved by Spigelman CJ in Gatsios Holdings Pty Ltd v Nick Kritharas Holdings Pty Ltd [2002] NSWCA 29; (2002) ATPR 41-864 at [2]. The question whether an outgoing trustee may decline to transfer trust property to the new trustee until its preferred beneficial interest has been satisfied (recently regarded by Corboy J in Prior v Simeon (No 2) [2011] WASC 61 as unsettled) does not arise in this case.
Further passages from Agusta are also relevant, Barrett JA at [55] and [57] saying:
[55] These cases show that, as a matter of general principle, a creditor obtaining judgment against a trustee who, in the normal way, is entitled to be indemnified out of trust property for debts including the judgment debt may be restrained from enforcing the judgment by levy of execution against trust property. The trustee's preferred beneficial interest in the trust property which comes from the right of indemnity out of that property in respect of all debts incurred would be destroyed if creditors were able to levy execution against the trust property. In Lemery Holdings Pty Ltd v Reliance Financial Services Pty Ltd [2008] NSWSC 1344; (2008) 74 NSWLR 550 at [49], the unavailability of trust property to answer a writ of execution was said to be explicable on that basis.
…
[57] When execution against trust property is in contemplation, the preoccupation of equity is thus with preservation of the beneficial interest of the trustee referable to all debts the trustee has incurred and for which the trustee is entitled to be indemnified out of the trust assets. Because of the existence of that equitable interest in trust assets and the fact that seizure and sale of trust property under a writ of execution will destroy it, equity will not countenance such seizure and sale.
To similar effect, the nature of the interest of a former trustee to be indemnified from the trust assets for liabilities properly incurred in the course of a trusteeship and for any creditors of a former trustee to be able to enforce the indemnification by subrogation to the former trustee's rights were described in Jaken Properties Australia Pty Ltd v Naaman (2023) 12 NSWLR 318; [2023] NSWCA 214, by Bell CJ at [4], where his Honour set out the following well-established propositions:
a trustee has a right to be indemnified or exonerated out of trust assets for expenses and liabilities properly incurred in the course of the trusteeship: Carter Holt Harvey Woodproducts Australia Pty Limited v The Commonwealth of Australia (2019) 268 CLR 524; [2019] HCA 20 (Carter Holt) at [29];
that right comprises an equitable proprietary interest in the trust estate: Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 370; [1979] HCA 61 (Octavo); Carter Holt at [32]. This interest has been described as "the trustee's beneficial interest in the trust estate": Octavo at 371;
it is an interest that survives the trustee's retirement (Re Glenvine Pty Ltd (in liq) [2020] NSWSC 866 at [40] ff and the cases there cited) and insolvency, with trust creditors of an insolvent former trustee being able to enforce the power of exoneration by subrogation to the former trustee's rights: Vacuum Oil Co Pty Ltd v Wiltshire (1945) 72 CLR 319 at 335; [1945] HCA 37 (Vacuum Oil); Octavo at 367, 370;
the interest has been said to comprise or be in the nature of a 'charge or lien' which "arises endogenously as an incident of the office of trustee in respect of the trust assets": Carter Holt at [83], see also at [32];
the former trustee's interest is a "beneficial interest in" the trust's assets: Carter Holt at [80]-[84], [133]-[142]; see also Octavo at 371; Bruton Holdings Pty Limited (in liquidation) v Commissioner of Taxation (2009) 239 CLR 346; [2009] HCA 32 (Bruton) at [43];
it is an interest that takes priority over the interests of beneficiaries of the trust including their right to call in the trust assets in accordance with the rule in Saunders v Vautier: see Vacuum Oil at 335; Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226; [1998] HCA 4 (Buckle) at [47]-[48], citing Dodds v Tuke (1884) 25 ChD 617 at 619; Carter Holt at [83]; see also Kemtron Industries Pty Ltd v Commissioner of Stamp Duties [1984] 1 Qd R 576 at 587;
equity will grant relief to protect a former trustee to ensure that its successor does not take steps which will destroy, diminish or jeopardise the former trustee's right of security (to be fully exonerated), which subsists in the trust assets after their transfer to the new trustee: Lemery Holdings Pty Ltd v Reliance Financial Services Pty Ltd (2008) 74 NSWLR 550; [2008] NSWSC 1344 (Lemery) at [50].
Bell CJ was in dissent in Jaken Properties, with Leeming JA (with whom Kirk JA agreed) writing the majority judgment, but there was no difference between their Honours over the assistance that equity will give to a former trustee in aid of the right of indemnity, Leeming JA at [116] stating:
It was common ground that the former trustee had an entitlement to apply for judicial sale or the appointment of a receiver over trust assets in order to discharge its liability to a third party, in aid of its right of indemnity. It was common ground that, in aid of that entitlement, the former trustee could obtain interlocutory relief to prevent the transfer of trust assets, at least in some circumstances. This accorded with what had been said, after reference to the authorities, by Brereton J in Lemery Holdings at [50]:
[50] To my mind, then, it follows in principle that a former trustee does not have a right to retain, as against a new trustee, the trust assets as security for an accrued right of indemnity, though the former trustee is entitled to ensure the new trustee does not take steps which will destroy, diminish or jeopardise the old trustee's right of security, which subsists in the trust assets after their transfer to the new trustee. This view accords with the conclusions of Rolfe J and Barrett J in the New South Wales cases to which I have referred. It follows that I respectfully decline to follow the observations of the Full Court of Supreme Court of South Australia in Re Suco Gold …
The High Court has granted special leave to appeal the decision in Jaken Properties: Naaman v Jaken Properties Australia Pty Ltd [2024] HCASL 21. None of the propositions stated above are likely to be at issue in the appeal.
These passages of Agusta and Jaken Properties support the proposition that in the present case Omaya Investments (as the old trustee of the Bechara Family Trust) has a right of indemnity against the Trust Properties held by BSM (as the new trustee of the Bechara Family Trust) by way of equitable charge or lien, which claim should be made against BSM and takes priority over any claims to those assets of the beneficiaries of the Bechara Family Trust. They also make clear that Omaya Investments could seek a judicial sale of the Trust Properties and the appointment of a receiver to discharge any liability to the Owners Corporation which might be found in these proceedings and obtain an interlocutory injunction to prevent the transfer of the Trust Properties in the interim. While the Owners Corporation has no direct resort to the Trust Properties, if it obtains judgment against Omaya Investments it may assert a claim against BSM by way of subrogation of Omaya Investment's right of indemnity as the former trustee of the Bechara Family Trust.
In this way, the Owners Corporation has a real interest in the right of indemnification which Omaya Investments may exercise against BSM in respect of the Trust Properties. Adopting the types of considerations which are referred to in CGU Insurance at [68]-[69] (that the declaration would be binding as between the litigants and prevent relitigation), that gave a stranger to an insurance contract standing to seek a declaration of the right of indemnification under that contract as between the insurer and the insured, I do not think that the claim for a declaration of the right of indemnification of Omaya Investments against BSM in the summons and list statement can be regarded as having such a high degree of certainty that it falls within the General Steel test. It is not "so obviously untenable that it cannot possibly succeed"; "manifestly groundless"; "so manifestly faulty that it does not admit of argument". It does not "disclos[e] a case which the Court is satisfied cannot succeed". Nor is this a case where "under no possibility can there be a good cause of action" or where it is "manifest that to allow [the pleadings] to stand would involve useless expense".
It is also not a claim which should be struck out. The list statement contains the allegations of material facts with sufficient clarity to allow BSM to understand the claim which is made against it.
Whether the Owners Corporation is entitled to such a declaration is plainly an issue which should be decided after the trial of these proceedings.