Wade v Trnka

CATCHWORDS : TRUSTS: - constructive trust - property settlement on dissolution of marriage - breach of agreement - fraudulent disposal of land - proceeds of sale held in fiduciary capacity - limitation of action - postponement in case of fraud - what constitutes fraud within the limitation act - continuation of fraud - equitable compensation for breach of fiduciary obligation based on loss - not affected by limitation period - compensation assessed by value of assets at the date of restitution

LEGISLATION CITED : Limitation of Actions Act 1974 (Qld) ss 10, 27, 38 Limitation Act 1969 (NSW)

Catt v Marac Australia Limited (1987) NSWLR 639 Chittick v Maxwell (1993) 118 ALR 728 Gilmore v Gilmore (1968) 71 SR (NSW) 409 CASES CITED : Nocton v Lord Ashburton [1914] AC 932 Re Dawson (1966) 2 NSWLR 211 Seymour v Seymour (1996) 40 NSWLR 358 Williams v Williams [1979] 1 NSWLR 376

PARTIES : Dawn Florence Wade - Plaintiff Gunter Hugo Trnka - Defendant

COUNSEL : M S Willmott SC and C P Locke (barrister) - Plaintiff N/A - Defendant

SOLICITORS : Oliveri Lawyers - Plaintiff N/A - Defendant

• 6 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

EX TEMPORE JUDGMENT 1 HIS HONOUR: In 1969 the plaintiff and the defendant purchased 3 blocks of land in Brisbane. The defendant purchased lots 201 and 208 Barellan Pt in the name of Gunter Hugo Trnka. The plaintiff purchased lot 301 Barellan Pt in the name of Dawn Florence Wade. The plaintiff subsequently transferred Lot 301 to the defendant at his request.

2 The plaintiff and the defendant subsequently married in July 1970. In 1973 the marriage failed for reasons which are not presently relevant. By a written agreement bearing date 6 August 1973 between the plaintiff and the defendant the parties agreed, inter alia, that the plaintiff would receive the transfer of the unencumbered title of lot 201 Barellan Pt and the unencumbered title of lot 208 Barellan Pt and that the plaintiff would receive the sum of $5,000 within three years or upon the sale of lot 2, 12 Bevan Street, Port Moresby, whichever was the earlier. By an amendment to the agreement in writing the defendant also agreed to transfer lot 301 to the plaintiff. The plaintiff in return was to transfer shares in the defendant's company to the defendant and to resign as a director of the defendant's company, inter alia.

3 On 10 August 1973 the defendant filed a petition in the National Court of Papua New Guinea, in which country the parties were then resident, to dissolve the marriage. On 3 October 1974 the petition was heard. The plaintiff was not notified of the hearing date and the matter was determined in her absence. The court granted the decree and made consequential interim orders relating to the custody of the two sons of the marriage. The decree was made absolute on 18 October 1974. In 1975 a custody case was heard by Sir Sydney Frost, the then Chief Justice of the National Court of Papua New Guinea. During that hearing the defendant acknowledged that the parties had signed the property agreement which I have described and His Honour only dealt with the question of custody.

4 In about August 1981 the defendant, in breach of the agreement, fraudulently sold the 2 blocks of land, Lots 201 and 208 Barellan Pt, as well as lot 301. The plaintiff now seeks an order that the defendant account for the conversion of the 3 blocks of land and an order for the payment of five thousand dollars which was agreed to in the contract together with interest on that sum.

5 The first question which arises is under the limitation of actions provision. Because the land in question was in Queensland, it is probably the Limitation of Actions Act 1974 (Qld) which applies. That act largely mirrors the Limitation Act 1969 (NSW). Section 10 of the Limitations of Actions Act is in the usual form and fixes a limitation period of six years for commencement of an action to enforce a cause of action founded on a simple contract. Section 27 imposes a limitation period of six years in respect of fraud but s 38 postpones the limitation period in the case of a fraud so that that time shall not begin to run until the plaintiff has discovered the fraud. In the present case it seems that the plaintiff discovered the fraud in 1983. That would mean that the limitation period may have expired.

6 However, there is evidence that the fraud was continued because of threats that the defendant meted out to the plaintiff and which had the consequence of precluding her commencing proceedings in time. These threats began in 1977 when he threatened that if the plaintiff did not withdraw her property application he would send their sons to boarding school in Austria. Again, between 1976 and 1981, the defendant said to the plaintiff on a number of occasions: "If you ever try to have this property settlement heard I will take the children to Austria and you will never see them again." Between 1987 and 1994, after the lots were sold, there were a number of conversations during which the defendant said to the plaintiff: "If you ever try to have these property settlements heard I will disinherit these bastards", referring to the sons of the marriage. In late 1998 he said to the plaintiff: "If you ever file another property settlement application against me I will take these kids to Austria." In December 2003 the parties' grandchildren went to spend the Christmas period with the defendant on the condition they be back on 28 January 2004 to enable them to start school. However the children have not been returned and have not been seen since and the plaintiff has had no contact with either them or with the defendant.

7 The question arises as to whether these acts constitute fraud within the Limitation of Actions Act. In Seymour v Seymour (1996) 40 NSWLR 358, Mahoney A-CJ, with whom Meagher JA and Abadee J concurred, said in relation to the New South Wales provision (at 372): In my opinion, the section is not confined to simple common law fraud. It extends to conduct beyond that. ... In my opinion, there must be in what is involved a consciousness that what is being done is wrong or that to take advantage of the relevant situation involves wrongdoing. At least, this is so in the generality of cases. 8 In Nocton v Lord Ashburton [1914] AC 932, in the House of Lords, the Lord Chancellor Viscount Haldane, in a long and detailed judgment, described a person in a similar situation to the defendant here as "one who is in a fiduciary position". His Lordship said (at 953): In Chancery the term "fraud" thus came to be used to describe what fell short of deceit, but imported breach of a duty to which equity had attached its sanction.

And at 954: A man may misconceive the extent of the obligation which a Court of Equity imposes on him. His fault is that he has violated, however innocently because of his ignorance, an obligation which he must be taken by the Court to have known, and his conduct has in that sense always been called fraudulent, even in such a case as a technical fraud on a power.

9 In my view, in the light of these authorities, the conduct of the defendant to which I have referred is sufficient to bring it within the term fraud as used in the Act and amounts to the continuation of the fraud until at least December 2003 or early January 2004, so that the action is not affected by expiry of the limitation period.

10 In any event, since the remedy of specific performance is no longer available, the plaintiff's claim is one of equitable compensation and there is authority that the statute of limitations does not apply to such a claim: see again, Viscount Haldane in Nocton v Lord Ashburton, at 958. Also, in this Court in Catt v Marac Australia Limited (1987) NSWLR 639 Rodgers J held at 639 that: ...victims of breaches of fiduciary obligations are entitled to equitable compensation based on their loss as distinct from the gains of those breaching the obligations...

11 In Re Dawson (1966) 2 NSWLR 211 at 216, Street J, as he then was, held to a similar effect. In Chittick v Maxwell (1993) 118 ALR 728 Young J held that the statute of limitation defence failed where there is a pure equitable claim and, in particular, where a fiduciary is under an obligation to hand over a lump sum. In Re Dawson, to which I have referred, Street J went on to hold that if compensation was claimed in such a case, it is to be assessed by reference to the value of the assets at the date of restitution and not at the date of deprivation.

12 I am satisfied that at the time of the making of the agreement in the present case, and also at the time when the defendant sold the three lots, he held the title to the land in a fiduciary capacity; and after the sale held the proceeds of sale in a fiduciary capacity.

13 Accordingly, if I am wrong in holding that the present claim was brought within the limitation period, then the fact that the plaintiff also claims equitable compensation for breach of fiduciary duty means that the fiduciary obligation is not caught by the limitation period.

14 I accept that in this case the loss should be assessed by reference to the losses of the plaintiff rather than on any profit gained by the defendant. Accordingly, the plaintiff should receive a sum representing the present value of the 3 lots. Those properties have been valued as at July 2006 in respect of lot 201 at $195,000, lot 208 at $195,000 and lot 301 at $205,000.

15 It is appropriate that an order be made that the plaintiff be entitled to the total of that sum, being $595,000 together with interest from today. It also follows that the plaintiff is entitled to the sum of $5,000 referred to in the agreement together with interest on that sum to be calculated from three years after the date of the making of the agreement.

16 For completeness I should note that this court clearly has jurisdiction to deal with the matter: see Gilmore v Gilmore (1968) 71 SR (NSW) 409 and Williams v Williams [1979] 1 NSWLR 376.

17 Finally, I should note that the defendant has not appeared. I am satisfied, however, that there is evidence of service of the originating process upon him and that he has written notice of fact that these proceedings were set down for hearing today. I direct the plaintiff to bring in short minutes of order to give effect to this judgment. There should be an order for costs in favour of the plaintiff. The exhibits may be returned. I hereby certify that the preceding 17 paragraphs are a true copy of the reasons for judgment herein of the Honourable Mr Justice D H Lloyd.

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