Tomasetti v Brailey

Supreme Court of NSW|2010-07-01|Before: Hislop J

CITATION : Tomasetti v Brailey [2010] NSWSC 890

DECISION : (1) The notices of motion filed on 7 May 2010 and 20 May 2010 for the second and third defendants are dismissed. The second and third defendants are to pay the plaintiffs' costs of those notices of motion. (2) The notice of motion filed on 20 May 2010 for the first defendant is dismissed. The first defendant is to pay the plaintiffs' costs of that notice of motion. (3) Leave is granted to the plaintiffs to file and serve a second amended statement of claim in the form annexed to the plaintiffs' notice of motion filed on 13 May 2010. The plaintiffs are to pay the costs of that notice of motion. (4) The proceedings will be listed before the Registrar on 18 August 2010 for directions.

LEGISLATION CITED : Uniform Civil Procedure Rules Partnership Act 1892

Wardley Australia Limited v State of Western Australia (1992) 175 CLR 514 CASES CITED : Palindrome Holdings Pty Limited v Wass [2009] NSWSC 797 Wickstead v Browne (1992) 30 NSWLR 1 General Steel Industries Inc. v Commissioner for Railways (NSW) (1964) 112 CLR 125

TEXTS CITED : The Law of Partnership in Australia, 9th ed., Fletcher

Peter Charles Tomasetti (1st Plaintiff) Sandra Cordony (2nd Plaintiff) Tomasetti Investments Pty Limited ATF Tomasetti Superannuation Fund (3rd Plaintiff) PARTIES : Edmund Francis Brailey (1st Defendant) John Clifford Fenton (2nd Defendant) Christopher Campbell Lane (3rd Defendant) TJC Financial Planning Pty Limited (4th Defendant)

COUNSEL : I. Faulkner SC (Plaintiffs) J.N. West QC/J.B. Conomy (Defendants)

SOLICITORS : Heckenberg & Koops (Plaintiffs) Holman Webb (Defendants)

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

2009/297599 PETER CHARLES TOMASETTI & ORS v EDMUND FRANCIS BRAILEY & ORS

JUDGMENT 1 HIS HONOUR: The plaintiffs, by statement of claim filed on 15 June 2009 (and subsequently amended on 9 July 2009), seek damages, inter alia, from the first, second and third defendants. In short, the amended statement of claim alleges that the first defendant was a chartered accountant carrying on an accountancy partnership with the second and third defendants in the name of Brailey Fenton Lane & Co; the first and second plaintiffs, in or about December 1999, entered into an agreement with the first, second and third defendants to provide them, and the third plaintiff, with expert accounting, taxation, wealth management and financial planning advisory services; pursuant to that agreement the first defendant advised the plaintiffs to invest in certain projects; the plaintiffs acted on that advice; the investments resulted in significant losses to the plaintiffs; the losses were caused by the plaintiffs acting upon advice given negligently and in breach of retainer by the first, second and third defendants. 2 The first, second and third defendants deny liability to the plaintiffs. They moved the Court by notices of motion dated 7 May 2010 and 20 May 2010 for various interlocutory orders. Ultimately, the application for the following three orders was pressed:

(a) "the plaintiffs' claim for breach of contract as against the [first, second and third] defendant[s] pleaded in paragraph 45 of the amended statement of claim be dismissed pursuant to UCP Rules r 13.4 so far as it relates to any cause of action accruing on or before 15 June 2003."

This order was sought by the first, second and third defendants.

(b) "pursuant to UCP Rules r 13.4 the proceedings against the [second and third] defendant[s] be dismissed."

This order was sought by the second and third defendants.

Limitation 3 The defendants submitted that the plaintiffs had invested in a number of projects more than six years before the filing of the statement of claim. As the advice to invest in each project preceded the investment in the project, the contractual claims made by the plaintiffs in respect of those projects were statute barred and should be struck out. 4 The plaintiffs accepted that some of the contractual claims were statute barred "subject to anything that might arise in the evidence". 5 The plaintiffs submitted: "The appropriate time to determine whether there is any issue in respect of which the defendants might be prevented from pleading that limitation point will be when all the evidence is in, when interrogatories have concluded, when all discovery is concluded and all subpoenas have been issued and answered. There are many matters here which are entirely within the knowledge of the defendants. For the reasons we stated in our written outline of 7 June, that issue should remain, just for the time being. The defendants know our position in relation to it. We were entitled to plead contract. If they then plead limitations in response, then that is the end of that. But it should not be determined, on an application such as this, before all the evidence is in." 6 In Wardley Australia Limited v State of Western Australia (1992) 175 CLR 514 at 533 the High Court said: "We should, however, state in the plainest of terms that we regard it as undesirable that limitation questions of the kind under consideration should be decided in interlocutory proceedings in advance of the hearing of the action, except in the clearest of cases. Generally speaking, in such proceedings, insufficient is known of the damage sustained by the plaintiff and of the circumstances in which it was sustained to justify a confident answer to the question." 7 The plaintiffs rely on the same particulars for their claim in negligence as for the contractual claims. In these circumstances, the defendants will have to prepare the evidence which would be relevant to the contract counts in any event. The matter will proceed regardless of the contract counts. Accordingly, there is no prejudice to the defendants if the limitation issue remains undetermined at least until the matter has been fully prepared for hearing. 8 In some cases an application for summary dismissal based on limitation defences may be entertained, see eg Palindrome Holdings Pty Limited v Wass [2009] NSWSC 797 at [88]-[92]. However, having regard to the state of preparation of these proceedings as asserted by the plaintiffs, the general approach identified in Wardley and the absence of any prejudice to the defendants, it would, in my opinion, be inappropriate to summarily dismiss any of the contractual claims at this stage.

Parties 9 A partnership is the relation which exists between persons carrying on a business in common with a view to profit - Partnership Act 1892, s 1. 10 It was submitted that the second and third defendants should be dismissed from the proceedings. In support of that contention it was submitted that at all relevant times

(a) the plaintiffs' claim was in respect of negligence and breach of retainer in relation to wealth management and financial planning advice only;

(b) there was a partnership agreement dated 23 October 1991 whereby a partnership of Brailey & Fenton Pty Limited (of whom Brailey and Fenton were directors) and Lane agreed to carry on business as a partnership in the name of Brailey Fenton Lane & Co. but at no time did this partnership give any wealth management or financial planning advice;

(c) there was a second partnership agreement also dated 23 October 1991 whereby Brailey Fenton and Lane agreed to carry on practice under the style "Brailey Fenton Lane, Chartered Accountants". This partnership ceased to trade in 1994, four years before the plaintiffs met any of the defendants;

(d) the fourth defendant is a company which, at various times, was known as Desly Pty Limited and BFL Financial Planning Pty Limited. It traded under the business name "No Frills Financial Planning". The first defendant provided wealth management and financial planning advice on behalf of that company;

(e) the bulk of the documentary evidence before the Court confirmed the defendants' assertion that any wealth management and financial planning advice given to the plaintiffs was provided by the first defendant on behalf of the fourth defendant.

(f) The first plaintiff, in his affidavit at para 160, had said: "Throughout the years that I retained Mr Brailey, I received regular accounts for professional services rendered by Brailey Fenton Lane, Chartered Accountants for the cost of accounting services rendered to myself, the superannuation fund and Sassi. I also received invoices from No Frills Financial Services and later BFL Financial Planning for the cost of all financial planning work done on my family's behalf…I have examined some of the accounts…The bundle of documents are the ones that I have been able to locate and are not complete." 11 The plaintiffs rely upon the "partnership agreement" the parties to which were Brailey & Fenton Pty Limited and the first, second and third defendants. This agreement, it was submitted, accorded with minutes recording the purchase by the third defendant of the one-third share in the Brailey Fenton accounting practice. The sale and purchase included not only one-third of the practice operated by Brailey & Fenton Pty Limited but also one-third of Brailey & Fenton, Chartered Accountants and one-third of the brokerage trading as No Frills Financial Services. 12 The plaintiffs submitted it was arguable that the first, second and third defendants and Brailey & Fenton Pty Limited were all engaged in carrying on business in common with a view to profit as part of a wider overarching partnership. 13 In support of their submissions, the plaintiffs referred to various terms of the partnership agreement which required the first, second and third defendants to engage themselves fully and only in the accounting practice, prohibited employment elsewhere, required the punctual payment of debts by the first, second and third defendants and provided for annual leave of the first, second and third defendants etc. Reference was also made to the absence of any separate partnership agreement between Brailey & Lane Pty Limited and the third defendant. 14 The plaintiffs also relied upon various documents, which included the following:

(a) a letter signed by Mr Brailey as partner for Brailey Fenton Lane & Co. stating: "We have been approached by Mr Tomasetti with a view to being appointed as his Tax Agent, Accountant and Financial Advisor". The letter was written on the letterhead of Brailey Fenton Lane & Co. (which letterhead included the names of the first, second and third defendants);

(b) a compilation report signed under the name Brailey Fenton Lane & Co., Chartered Accountants, by the first defendant as "Partner" and similarly with statements of the assets and liabilities of the first plaintiff;

(c) compilation reports signed under the name Brailey Fenton Lane & Co., Chartered Accountants, by the second defendant as "Partner";

(d) a document headed "BFL Financial Planning" which stated that BFL Financial Planning Pty Limited was owned and operated by the partners of Brailey Fenton Lane & Co., Chartered Accountants, and that any complaints should be referred to Mr Brailey but if not satisfactorily resolved, John Fenton (a partner of Brailey Fenton Lane & Co., Chartered Accountants) should be contacted;

(e) the first defendant used the header "Brailey Fenton Lane & Co." when faxing information relating to the first plaintiff's investments;

(f) a letter dispensing with the services of a previous dealer was on the Brailey Fenton Lane & Co. letterhead. It was signed by Mr Brailey as partner. It referred to the decision to dispense with the dealer's services as being a decision of the partners;

(g) a letter signed by the first defendant in which he informed the first plaintiff he remained a partner at Brailey Fenton Lane & Co.;

(h) the taxation return for the years commencing 2002 to 2007 for Brailey & Fenton Pty Limited and the third defendant included entries for "Other expenses included but not allowed partner salary for [second and third defendants]";

(i) a memorandum of fees from Brailey Fenton Lane & Co. to the first plaintiff for preparation of the 2002 taxation return "and financial advice from time to time";

(j) a letter from a project promoter addressed to Mr Brailey of Brailey Fenton Lane & Co. 15 The plaintiffs submitted the question of whether there was a partnership was a question of fact. They referred to the text "The Law of Partnership in Australia" - 9th ed. - Fletcher where, at 2.15, it was said: "Whether a business is being conducted on behalf of the persons alleged to be partners is a difficult question of fact which can only be answered by a careful examination of all the circumstances surrounding the dealings between those persons in each particular case." 16 The Court on this application is concerned to determine only if there is a triable issue. In Wickstead v Browne (1992) 30 NSWLR 1 at 11 the Court of Appeal held: "…it seems to us that those submissions misconceived the nature of the court's jurisdiction to dismiss summarily a plaintiff's action. By launching such an application a defendant undertakes the burden of establishing that there is no triable issue. On such an application the defendant bears the onus of proof and where the facts are peculiarly within the defendant's knowledge the plaintiff's action should not be dismissed because of gaps in the case if the necessary evidence might be obtained as a result of discovery or interrogatories. … If the respondent would not be entitled to succeed on a no evidence point at the trial until all the evidence has been called, including that from other defendants, it is clear that there can be no such entitlement on an application by one of several defendants for summary dismissal."

See also General Steel Industries Inc. v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 128-9. 17 In my opinion, the evidence before the Court establishes that there is a triable issue as to whether the first, second and third defendants were all engaged in carrying on business in common with a view to profit as part of a wider overarching partnership liable to the plaintiffs in respect of their claims. The facts are peculiarly within the defendants' knowledge, the matter has not yet been fully prepared, and the fact that the first and second defendants did not give evidence on the application is of significance, particularly as the third defendant, who did give evidence, was only able to answer some questions by stating that that was something that the first defendant alone would know. Further, the first defendant was not a party to the application to dismiss the proceedings against the second and third defendants. 18 In my opinion, the application to summarily dismiss the proceedings against the second and third defendants should be refused.

Admissions 19 On 20 April 2010 the defendants' solicitors wrote to the plaintiffs' solicitors setting out, at length, their perception of the facts which facts, they submitted, rendered the claim against the second and third defendants unmaintainable. They requested the plaintiffs withdraw their claim against the second defendant. 20 The plaintiffs' solicitors by letter dated 3 May 2010 responded: "We have considered in detail the matters raised in your letter and the documents attached to it, the evidence as presently served upon you and, in particular, the documents relating to the issue in the evidence and in discovery, concerning the structure of the accounting partnership and the provision of financial services to the plaintiffs. Based upon our review of that material, and your clients' defence, it is our view that: (I) the proceedings against Mr Fenton should be discontinued with costs reserved; and (II) Brailey & Fenton Pty Limited should be joined as the fifth defendant. We consider it appropriate that these matters be attended to after the service of your clients' evidence on 11 June 2010 as presently ordered. Further, in light of the above, we do not consider it necessary for Mr Fenton to serve any evidence. Amendment We hereby notify you that the plaintiffs intend to amend the Amended Statement of Claim so as to correctly reflect the partnership structure…" 21 The plaintiffs did not take the steps foreshadowed in that letter. On 13 May 2010 the plaintiffs' solicitors wrote to the defendants' solicitors in the following terms: "Having reviewed further the 'Partnership Agreement' of October 1991 and the evidence of Mr Lane in conjunction with other documents regarding the provision of professional services by Messrs Brailey, Fenton & Lane, the plaintiffs do not intend to release Mr Fenton from the proceedings."

They contend that the second defendant is appropriately joined as a party to the proceedings. 22 The second defendant submitted the plaintiffs' solicitor's letter constituted an admission entitling him to judgment pursuant to UCPR 17.7. 23 UCPR 17.7(1) states: "If admissions are made by a party, whether by his or her pleadings or otherwise, the court may, on the application of any other party, give any judgment or make any order to which the other party is entitled on the admissions." 24 The alleged admission was not contained in the pleadings. It was not a formal admission. However it was, on the face of it, a considered response based upon the evidence and material then available to the plaintiffs' legal representatives and indicating a course of action which the plaintiffs proposed to take, arguably because they did not consider the case against the second defendant was worth pursuing. 25 Since the letter dated 3 May 2010 the plaintiffs have obtained additional materials, including the second agreement and the minutes of the first meeting, which confirm their present position. 26 The power to make an order pursuant to UCPR 17.7(1) is discretionary. The evidence before me has established a triable issue against the second defendant in circumstances where much of the information is peculiarly within the knowledge of the defendants. The first and second defendants did not give evidence on the applications. Those matters, the nature of the alleged admission, the fact that, if it was an admission, it was withdrawn within a short space of time in circumstances which did not prejudice the defendants cause me to conclude that the plaintiffs should be permitted to pursue the proceedings against the second defendant. Accordingly, I decline to make an order pursuant to UCPR 17.7(1).

Conclusion 27 The defendants' notices of motion should be dismissed for the reasons given. There was also before the Court a notice of motion filed by the plaintiffs on 13 May 2010 seeking leave to file and serve a second amended statement of claim. It was accepted by senior counsel for the defendants that if his clients were not successful on their applications, the Court should grant leave to the plaintiffs to file and serve the second amended statement of claim. It is appropriate to make that order.

Orders 28 1. The notices of motion filed on 7 May 2010 and 20 May 2010 for the second and third defendants are dismissed. The second and third defendants are to pay the plaintiffs' costs of those notices of motion.

The notice of motion filed on 20 May 2010 for the first defendant is dismissed. The first defendant is to pay the plaintiffs' costs of that notice of motion.

Leave is granted to the plaintiffs to file and serve a second amended statement of claim in the form annexed to the plaintiffs' notice of motion filed on 13 May 2010. The plaintiffs are to pay the costs of that notice of motion.

The proceedings will be listed before the Registrar on 18 August 2010 for directions. **********

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