3 The plaintiff's case, as originally pleaded, does not rely upon cl 2 of the 1983 agreement. It relies upon a variation agreement made on 15 February 1984. It is concerned to vary the terms of the partnership agreement by providing in cl 1 that each partner, the plaintiff and the defendant, is to assume control over and responsibility for the administration, development and disposal of the assets and interests of the partnership as set out in schedules to the agreement. Those schedules identify interests of each partner in partnership property over which that partner is to have sole control.

4 Central to the plaintiff's case as originally pleaded, is cl 4 of the 1984 agreement which gives to each partner the option, exercisable at any time during the continuation of the partnership, to require the transfer of the interests in the partnership property identified as being under the control of each of them to that partner.

5 The plaintiff pleads that one of its interests identified in the 1984 agreement was that described as the Rhodes Ridge Interest. It pleads that on 11 December 1997 and 28 June 2000, it gave notice to the defendant of its exercise of the option conferred by cl 4. It pleads however, that by letter dated 31 July 2000, the defendant declined to cooperate in the process by which a transfer of the Rhodes Ridge Interest to the plaintiff would be achieved.

6 The plaintiff pleads that upon the exercise of the option, and until by its cooperative effort the defendant assists the plaintiff to achieve the transfer contemplated, the Rhodes Ridge Interest of each partner and specifically the defendant, are held for the plaintiff (cl 21). This, I agree, is an assertion of a trust, but the action is one for breach of the contract constituted by the 1984 agreement and in particular cl 4, the breach being pleaded to have occurred on the refusal of the defendant to comply with the plaintiff's notices of exercise of the claimed option (statement of claim, cls 23 and 24). The prayer for relief in relation to this head of claim is, unsurprisingly, for a declaration that the plaintiff has validly exercised the option, a declaration that the Rhodes Ridge Interest remained identified with the plaintiff, a declaration that it was held on trust for the plaintiff and an order effectively for the specific performance of the contract - an order that the defendant take all necessary steps and execute all necessary documents to transfer the benefit of the Rhodes Ridge Interest to the plaintiff (statement of claim cls 25, 26, 27 and 28).

7 The defence raises no plea that that claim is statute barred. On 27 March I refused the defendant leave to amend its pleading to add such a plea: Wright Prospecting Pty Limited v Hancock Prospecting Pty Limited [2007] WASC 78. As I am informed, the defendant has sought leave to appeal from that judgment.

8 The defence to this claim by the plaintiff in its ultimately amended form, pleaded that for various reasons, including that it is void for uncertainty, that it has been discharged, and that it is void for illegality by reason of its inconsistency with the Rhodes Ridge Joint Venture Agreement and a State Agreement affecting the Rhodes Ridge Interest, the "option" conferred by cl 4 of the 1984 agreement is legally ineffectual and unenforceable.

9 By leave granted on 8 September 2006, I permitted amendment of the statement of claim to add a claim that if that defence should in any way be made out so as to strike down cl 4 of the 1984 agreement and the efficacy of the purported exercise of the option it granted, then it would be unconscionable for the defendant to take advantage of that outcome.

10 It is pleaded that by cl 7 of the 1983 agreement, the partners, the plaintiff and defendant, agreed that each partner would be just and faithful to the other in all transactions relating to the partnership business. Alternatively, it was pleaded, such a term would be implied in the partnership agreement by law. Then, putting the claim broadly, it is asserted that the purpose for which the partners entered into the 1984 agreement was their commonly held view that assets identified as being those to go to each partner, would be transferred in that way on either partner exercising the option conferred by cl 4.

11 It is pleaded that acting upon that, common assumption and belief, those acting for the partners, particularly Mr Lang Hancock until his death in 1992, Mr Peter Wright and his son Mr Michael Wright, so conducted themselves or permitted the other partner to conduct itself to deal with the assets of the partnership in ways which were consistent with the division of those assets sought to be effected under the 1984 agreement. Following the death of Mr Lang Hancock on 27 March 1992, the plaintiff pleads, the defendant has denied that the plaintiff is entitled to a transfer to it of the Rhodes Ridge Interest as one identified as going to it in the 1984 agreement. The defendant it is pleaded, has substantially benefited from such conduct but now is in breach of its duty to act justly and fairly towards the plaintiff. It would be unconscionable, if it were successful in its defences to the plaintiff's claim, for the plaintiff to be denied thereby the benefit of the transfer to it of the Rhodes Ridge Interest, an event which causes it to suffer loss.

12 Those amendments having been made by leave on 8 September 2006, by leave granted on 29 September 2006 an amended defence was filed on 6 October 2006 and consequentially the plaintiff's reply was further amended on 15 November 2006. The amendments to the defence made in October 2006 did not raise any limitation defence in respect of this claim. That was done by leave on 2 February 2007 when the pleadings were variously amended. Materially, cl 47 to cl 51 inclusive were added to the defence. Clause 47 pleaded that the unconscionability claim was barred by the operation of the Limitation Act 1935 (WA), s 47. Clause 48 added the further or alternative claim that by reason of the rule that equity applies statutes of limitation by analogy, the unconscionability claim was barred because it was in the nature of a claim for breach of contract or an action founded on a simple contract.

13 The thinking behind that pleading is clear enough. Leave was granted at that time to make consequential amendments to pleadings by way of a minute which was to be filed within seven days. The reply was not, under that order, further amended. As I observed in the judgment published as [2007] WASC 78 at [10] it was appropriate to rely upon the Limitation Act 1935 despite the repeal of that Act and its replacement by the Limitation Act 2005 (WA).

14 The plaintiff now applies for leave to amend its reply. It wishes to add par 25A, effectively in two parts. It is convenient to set out the proposed paragraph in full:

"25A In answer to the allegations in paragraphs 47 to 51:

25A.1 says there is no statutory limitation period applicable to the plaintiff's claim because it is a claim against a trustee for property held on an express trust or in respect of any breach of such trust within the meaning of section 25(2) of the Supreme Court Act (1935) WA;

25A.2 alternatively, says the Limitation Act (1935) WA ('Act') does not apply to the plaintiff's claim because:

25A.2.1 the claim is to recover trust property still retained by the trustee (Act section 47(1)), and/or

25A.2.2 the statute has not begun to run and will not begin to run until the interest of the plaintiff as beneficiary is an interest in possession (Act Section 47(1)(b)), and/or

The defendant retains the 25% interest in the Rhodes Ridge Joint Venture and refuses to transfer it to the plaintiff.

25A.2.3 the claim is founded upon a fraud or fraudulent beach of trust (Act Section 47(1)).

1. The facts and circumstances relied upon are the matters alleged in paragraphs 22D to 22M of the further Re-amended Statement of Claim.
2. The particulars of paragraph 25A2.2 are repeated.
3. The defendant has taken deliberate action to deprive the plaintiff as beneficiary of its property and is thus relevantly in fraudulent breach of trust."

15 It can be seen that the proposed pleading does not at all address the question whether, having regard to the nature of the plaintiff's unconscionability claim and the point of time at which the particular cause of action is alleged to accrue by reason of the loss suffered, the claim may be statute barred by, or by analogy to, the operation of s 47 of the Limitation Act. As at present advised, and not having heard argument, I am rather of the view that it would in any event be open for the plaintiff to argue those matters as a counter to this defence by reason of the operation of the Rules of the Supreme Court 1971 (WA), O 20r 15.

16 I would, subject to argument, rather take the view that if a counter to a defence is not expressly pleaded, even though there has been a reply generally, then there is no reply to that defence and there is an implied joinder of issue in that regard which would operate as a denial of every allegation of fact material to the establishment of the limitation defence. There is a qualification to that general statement in respect of the matter of fraud to which I shall come in due course.

17 The proposed pleading, generally speaking, again subject to the matter of fraud, seeks to raise matters of law. It is unnecessary to do so although, if necessary by leave, having regard to the loss of the entitlement to plead without leave, matters of law may be pleaded and it is often convenient to do so to signal to the other side the points of law which it is proposed to take: RSC O 20 r 12. Indeed, if the matter of law is alleged to make the claim or defence of the opposite party not maintainable, then the rule is that it must be pleaded: O 20 r 9(1); Jeans West Corporation Pty Ltd v Archer [2004] WASCA 132 per Heenan J at [12].

18 Order 20 r 9 specifically requires that fraud alleged to make a defence of the opposite party not maintainable be specifically pleaded. This reflects the long-standing rule that because of the seriousness of the allegation, the party against whom it is alleged is entitled to have it pleaded specifically and in detail. In Permanent Trustee Australia Ltd v FAI General Insurance Co Ltd (In Liq) [2003] HCA 25; (2003) 214 CLR 514 at 534 [38], Gummow and Hayne JJ put simply the proposition that, "An allegation of fraud should be clearly and distinctly pleaded and put". In Oldfield Knott Architects Pty Ltd v Ortiz Investments Pty Ltd [2000] WASCA 255 at [35] - [38], Ipp J observed that this rule in relation to the pleading of fraud was of considerable antiquity and grounded in the proposition that an allegation of any impropriety or misconduct needed to be specifically put before the party against whom the allegation is made, so that in fairness he knows the case which he must meet.

19 There would seem therefore to be two reasons under the rules why a pleading such as the proposed par 25A is required in reply if these matters are to be relied upon. In the first place, there are matters of law which are alleged to make the defence under the Limitation Act not maintainable and, secondly, it is proposed that the plaintiff's unconscionability claim is founded upon a fraud or fraudulent breach of trust.

20 As has been seen, the plaintiff originally had leave following the amendment of the defence to which I have referred to make consequential amendments to the reply within a period of seven days. Nothing was done, hence the current application for leave. The only explanation provided on affidavit is that of one of the plaintiff's solicitors who deposes that she has been informed by counsel that the necessity for specific reply when the amendment to the defence relying on the Limitation Act was made "was not immediately apparent". She says the requirement "came into focus" when counsel were researching submissions in relation to the defendant's appeal against my judgment to which I have referred above.

21 This is an explanation, but provides no basis to ameliorate the impact of the delay as a discretionary factor in respect of the grant of leave, given the fact that the trial has proceeded well beyond the point of hearing the plaintiff's witnesses as to the facts; witnesses the defendant says may have been cross-examined differently, particularly in relation to an allegation of fraud. I shall refer again later to this matter.

22 In my judgment subject to appeal, at [2007] WASC 78 [13]- [18], I set out the general tests in respect of the grant or refusal of leave to amend. I need not repeat them here, except to say that I am to look first to the question whether the matters sought to be raised by the amendment to the pleading are fairly arguable, given that they involve matters of law and if so, whether nonetheless leave to amend should be refused having regard to discretionary factors to be considered in the light of case management principles as enshrined in the rules but not giving undue weight to such considerations.

23 It is proposed to plead the effect of this subsection in par 25A.1. Section 25(2) of the Supreme Court Act was repealed with effect from 15 November 2005, the day upon which the repeal of the Limitation Act 1935 (WA) took effect and the Limitation Act 2005 (WA) came into operation. I mentioned those matters in relation to the continued application of the 1935 Limitation Act, in [2007] WASC 78 at [10]. The continued operation of the 1935 Act resulted directly from s 4(2) of the Limitation Legislation Amendment and Repeal Act 2005 (WA).

24 The repeal of s 25(2) of the Supreme Court Act was by s 17 of the Amendment and Repeal Act. There is no saving provision attached to that repeal although there are, as has already been seen, such provisions elsewhere in the Amendment and Repeal Act. Specifically in relation to the Supreme Court Act, s 18 of the Amendment and Repeal Act repealed s 29 but provided expressly for its continued application to causes of action that accrued before the commencement day. The parties accept that to be the case here in respect of the plaintiff's causes of action generally, although there is argument between them as to when particular causes of action accrued.

25 The question arises whether, despite the absence from s 17 of the Amendment and Repeal Act of a provision saving the continued operation of s 25(2) of the Supreme Court Act in relation to causes of action which accrued before 15 November 2005, the subsection would continue to have that operation by virtue of s 37(1) of the Interpretation Act 1984 (WA). I think it is arguable that the ordinary rule provided by s 37 of the Interpretation Act would apply. If on the accrual of the plaintiff's cause of action it was entitled to the benefit of a provision protecting it from the operation of limitation statutes in relation to the pursuit of its claim, then in my opinion s 37 would secure to the plaintiff the benefit of the continued operation of that provision in its terms. I note also in that regard, that by s 37(2) of the Interpretation Act:

"The inclusion in the repealing provisions of an enactment of any express saving with respect to the repeals effected thereby shall not be taken to prejudice the operation of this section with respect to the effect of those repeals."

26 Section 25(2) of the Supreme Court Act provided:

"... no claim of a cestui que trust against his trustee for any property held on an express trust, or in respect of any breach of such trust, shall be held to be barred by any statute of limitation."

The question therefore in respect of the application to plead s 25(2) in answer to the defendant's limitation plea as a defence to the plaintiff's unconscionability claim, is whether that is a claim to recover the interest held by the defendant in Rhodes Ridge on the basis that that interest is held on an express trust by the defendant in favour of the plaintiff or is a claim in respect of the breach by unconscionable conduct of such trust.

27 It seems to me that it is clear that there is, and can be, as the claim is formulated, no reliance upon an express trust within the meaning of s 25(2) of the Supreme Court Act, or for that matter s 47 of the Limitation Act 1935. Reference to the history of these two legislative provisions is a useful aid to understanding their interrelationship and effect and what went wrong in this State when in 1935 it seems that s 25(2) of the Supreme Court Act was proclaimed to come into force after, rather than before, the provisions of the Limitation Act 1935 including s 47(1).

28 There is a useful discussion of the matter by Buss JA in In de Braekt v Powell [2007] WASCA 55 at [22] - [25]. I need not enter into that discussion and analysis here, but I do observe that at [21] and [33](a) his Honour concluded, as I have done, that it is at least reasonably arguable that s 25(2) of the Supreme Court Act continues, potentially at least, to be available to be relied upon by the plaintiff in a case such as this.

29 It is sufficient however in respect of the potential application of s 25(2) to note the decision of the Full Court in Clay v Clay [1999] WASCA 8; (1999) 20 WAR 427 where a question arose whether in respect of the application of the Supreme Court Act s 25(2) and the Limitation Act s 47(1), s 10 of the Guardianship of Children Act 1972 (WA) created an express trust in respect of property held by a legal guardian for children. The Full Court so held, but that decision was reversed on appeal by the High Court: Clay v Clay [2001] HCA 9; (2001) 202 CLR 410. The error of the Full Court identified by the High Court was not in relation to its statement of the law as to the meaning of the term "express trust" in the context of s 25(2) of the Supreme Court Act.

30 As to that, at [91] the Full Court held that an express trust in this context was, "a trust expressed by writing or by word of mouth, but does not include a trust arising from acts of the parties or operation of law". It is accepted that the writing may be a statute. That was the view expressed by the High Court in its judgment at [31] - [35]. At [36] the High Court held that s 10 of the Guardianship Act, although creating a relationship of guardian of a child, did not render the guardian a trustee of property held, because there was by force of the section, no vesting of any property in the guardian to be held for the child as a beneficiary on the terms of any trust. It is in my opinion, abundantly clear that the plaintiff's unconscionability claim places no reliance upon any express trust. For that reason, the plaintiff should be refused leave to plead to proposed cl 25A.1 of the reply.

The proposed pleading relying on s 47(1) of the Limitation Act 1935

31 As I understand the position, the plea in answer to the plaintiff's unconscionability claim which is made in par 47 and 48 of the defence, is that to the extent that the plaintiff claims as the beneficiary against the defendant as a trustee, then the claim is statute barred by reason of the operation of s 47 or by the application of the rule that equity applies statutes of limitation by analogy. I do not here refer to the plaintiff's contractual claim arising out of its contention that there has been a valid exercise of the option provided by cl 4 of the 1984 agreement in respect of which the prayer for relief includes a claim in par 27 of the statement of claim for a declaration that so far as the defendant as a partner has an interest in Rhodes Ridge, it holds it upon trust for the plaintiff.

32 I have described that as a claim for an implied or resulting trust and it is not the trust relied upon by the plaintiff in respect of its unconscionability claim. The prayer for relief in that regard is made in the statement of claim par 25B which is a claim for:

"A declaration that if the exercise of the Option is invalid, unenforceable or illegal by reason of any one or more of the defences alleged then, if in consequence [the defendant] has a legal or equitable interest in the Rhodes Ridge Interest, then [the defendant] holds any such or all such interests, upon constructive trust for [the plaintiff]."

33 Section 47(1) of the Limitation Act 1935 is in the following terms:

"(1) In any action or other proceeding against a trustee or any person claiming through him, or in reference to any trust, except where the claim is founded upon any fraud or fraudulent breach of trust to which the trustee was a party or privy, or is to recover trust property or the proceeds thereof still retained by the trustee or previously received by the trustee and converted to his own use, the following provisions shall apply: -

(a) All rights and privileges conferred by this Act or any statute of limitations shall be enjoyed in the like manner and to the like extent as would have been the case if the trustee or person claiming through him had not been a trustee or person claiming through him.

(b) If the action or other proceeding is brought to recover money or other property and is one to which no existing statute of limitations applies, the trustee or person claiming through him shall be entitled to the benefit and be at liberty to plead the lapse of time as a bar to such action or other proceeding in the like manner and to the like extent as if the claim had been against him (otherwise than as a trustee or person claiming through a trustee) in an action of debt for money had and received; but so nevertheless that the statute or bar by lapse of time shall not begin to run against any beneficiary until the interest of such beneficiary is an interest in possession."

34 By s 47(3), the term "trustee" is given an extended meaning not to be found in s 25(2) of the Supreme Court Act. Not only does the term refer to an express trustee but it, "includes a trustee whose trust arises by construction or implication of law".

35 It will be seen that the plaintiff wishes to raise the exception to the operation of s 47(1), that its unconscionability claim is founded upon fraud, the exception that its claim is to recover trust property retained by the defendant as trustee and the qualification to the operation of s 47(1) that, if a six year limitation period applies, it will not commence to run against the plaintiff until its interest in Rhodes Ridge as a beneficiary is an interest in possession.

36 It is to be borne in mind that this head of claim is founded directly in the failure of the contractual claim and on the proposition that the exercise of the option conferred by cl 4 of the 1984 agreement was unenforceable or legally ineffectual so that the implied or resulting trust said to arise upon the defendant's alleged failure to comply with the plaintiff's request did not take effect. The assertion then is that a constructive trust arose in respect of the interest in Rhodes Ridge held by the defendant and the court is asked to declare that trust in favour of the plaintiff as its beneficiary. It would be necessary to determine when the trust arose on that view of the facts, but the constructive trust claimed by the plaintiff does not depend upon the court making a declaration of trust.

37 The discussion of the nature of a constructive trust as both an institution and a remedy as an application of equitable principle, by Deane J in Muschinski v Dodds (1985) 160 CLR 583 at 612 - 617 provides a helpful analysis of the concepts involved. In the course of the discussion his Honour made the point at 614 that a constructive trust may properly be described as a remedial institution imposed by equity, but not dependant upon curial declaration, regardless of actual or presumed agreement or intention, to preclude the retention of the beneficial ownership of property, where that would be contrary to equitable principle. That analysis was adopted by Mason CJ, Wilson and Deane JJ in the later case of Baumgartner v Baumgartner (1987) 164 CLR 137, leading their Honours to observe that, "the foundation for the imposition of a constructive trust in situations of the kind mentioned is that a refusal to recognise the existence of the equitable interest amounts to unconscionable conduct and that the trust is imposed as a remedy to circumvent that unconscionable conduct." (147).

38 Consistent with this analysis, I think, are the observations made by Millett LJ in Paragon Finance PLC v Thakerar & Co [1999] 1 All ER 400 at 407 - 410, drawing upon earlier authorities. The case arose out of an amendment to a statement of claim made after the standard limitation period had expired to allege a fraudulent breach of trust, in which case the relevant legislation provided that no period of limitation would apply. The plaintiffs were lenders on mortgage. The defendants were their solicitors and acted in the transactions in question for both the plaintiff and the borrowers who were, to the knowledge of the solicitors, in fact sub-purchasers, buying at prices significantly higher than those paid to the vendor.

39 In discussing the amendment in relation to the claimed fraudulent breach of trust, Millett LJ, with whose judgment the other members of the Court agreed, held that in truth this was not a claim for breach of trust at all, but a claim for a fraud not involving a constructive trust, or indeed any proprietary remedy, but was a claim which ought not to have been allowed to be added, being statute barred. The case was to be distinguished from those ordinarily described as involving a constructive trust where:

"... the plaintiff does not impugn the transaction by which the defendant obtained control of the property. He alleges that the circumstances in which the defendant obtained control make it unconscionable for him thereafter to assert a beneficial interest in the property." (409)

40 Broadly described, it is in that way that the plaintiff puts its unconscionability claim. It alleges that the parties as partners, owing the duties of partners to each other, entered into the 1984 agreement upon the common assumption and belief that the option conferred by cl 4 of that agreement was valid and legally effectual. They acted upon that assumption and behaved consistently with it, substantially for the benefit of the defendant, up until the death of Mr Hancock on 27 March 1992. Since then, however, the plaintiff pleads, the defendant has asserted that the purported exercise of the option by the plaintiff was without effect because the option itself is illegal and unenforceable. If that is right, nonetheless the plaintiff pleads, it would be unconscionable for the defendant to be allowed to retain any beneficial interest in Rhodes Ridge. It should be held, the plaintiff asserts, that the interest in Rhodes Ridge held by the defendant, is held on a constructive trust for the plaintiff.

41 That I think is, according to the analysis to which I have referred above, a claim for the declaration of a constructive trust properly so described. Turning to s 47, the defendant is in relation to this head of claim, asserted to be a trustee within the meaning of s 47(3). It is sued in that capacity in respect of the alleged trust property. Prima facie therefore, the Limitation Act applies. Of course, in this judgment I do not enter into any discussion as to whether the claim is indeed statute barred as pars 47 and 48 of the defence contend. I turn to a consideration of whether those matters, or any of them, which the plaintiff wishes to raise in its reply, par 25A.2, are fairly arguable. I will do so in the order in which the matters sought to be relied upon are mentioned in s 47(1).

42 By the proposed par 25A.2.3, the plaintiff seeks to assert that its unconscionability claim is founded upon a fraud or fraudulent breach of trust to which the defendant was a party. The particulars proposed to be pleaded rely simply upon the pleading of the unconscionability claim and the assertion that the defendant "has taken deliberate action to deprive the plaintiff as beneficiary of its property and is thus relevantly in fraudulent breach of trust". For the defendant it is put to me that in truth that is simply another way of saying that the defendant has relied upon its legal advice that it could act in no other way.

43 The plaintiff's proposed pleading that its claim is founded upon a fraud or fraudulent breach of trust, relies heavily upon the unreported decision of the New South Wales Court of Appeal, Akhil Holdings Ltd v Banque Commerciale SA (In liq), unreported; NSWCA; 15 November 1988. However, I think that the case provides no statement of general principle in relation to what is required to found an action upon fraud in this context because it was one in which the respondent bank was held to be implicated in a fraud which involved conscious wrongdoing. As it was put by the Court of Appeal in its judgment at page 68:

"The fraud asserted is the deliberate action of the trustee to deprive the beneficiary of its property. That is what occurred here."

Hence the third particular of the proposed pleading. But what is meant by "deliberate" in that context is clearly a reference to conscious wrongdoing. The short observation provides no authority for the proposition that a defendant who takes any deliberate action as a trustee which has the effect of depriving a beneficiary of its property, is guilty of equitable fraud; at first blush a surprising proposition.

44 Akhil went by special leave to the High Court, where the decision of the Court of Appeal was reversed, but on the ground that the Court of Appeal was not at liberty to find the bank guilty of fraud where (apparently by oversight) the plaintiff beneficiary had failed to allege fraud in reply to the bank's reliance in its defence upon the limitation statute. The case at that level turned on the pleading point which would of course, under our rules, be available here.

45 The decision of the High Court is reported as Banque Commerciale SA (In liq) v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279. In their joint judgment at 286, Mason CJ and Gaudron J, referring to the relevant limitation statute, said:

"The section itself does not disclose what is meant by those expressions ['fraud or fraudulent breach of trust']. But it would be surprising if the legislature had meant to exclude from the operation of s 69(1) breaches of trust which were not fraudulent in the ordinary sense of the word, that is, committed with dishonesty or at least some knowledge of the impropriety of the conduct involved."

46 With respect to their Honours, it is a somewhat enigmatic observation which may imply that the statutory reference to fraud in this context is to be taken to be wider than conduct involving some dishonesty or knowledge of impropriety. But on the other hand, their Honours may simply have intended to convey that equitable fraud, while it may be wider than the common law notion of fraud or deceit, must at least involve some knowledge of the impropriety of the conduct involved.

"It is not possible to distil from the statement of claim, whether in its original form or in its amended form, a claim in fraud or fraudulent breach of trust against the Bank. It is not a matter of whether the appropriate label was attached to the statement of claim. Nowhere in that pleading does the plaintiff set up a case of fraud or fraudulent breach of trust against the Bank. A conversion of property may occur without fraud; so too may a breach of trust. Indeed both s 69 of the Trustee Act and s 47 of the Limitation Act recognize a distinction by referring expressly to a fraudulent breach of trust. The original statement of claim alleged, so far as the Bank is concerned, an absence of authority, consent and knowledge on the part of Akhil Holdings. The amended statement of claim contained that allegation, adding no more than that the transfers of the shares were made in breach of trust. Neither pleading asserts on the part of the Bank bad faith, knowledge or intention to deceive the plaintiff - components that might be expected if the case against the Bank were one of fraud."

48 That is, with respect, clear, but obiter. What the case does make perfectly plain, is that it is necessary to plead fraud with particularity. But to do so does not require a particular formula which expressly refers to a "fraud", provided that the facts pleaded and their reference to the knowledge or state of mind, objectively speaking, of the party against whom the fraud is alleged, make it clear that what is alleged - the cause of action relied upon - is tantamount to an allegation of fraud so that it may be said that the claim is founded upon such fraud.

49 Here, the highest it was put for the plaintiff in argument was that the facts pleaded in support of the unconscionability claim did not allege, but might be held to involve a conscious understanding on the part of the defendant that its conduct impugned by the plaintiff, constituted a breach of its duty to be just and faithful to the plaintiff, a duty derived both from the general law of partnership and cl 7 of the 1983 partnership agreement. It was submitted that I might find that the defendant behaved as it did, knowing that it was doing the wrong thing, but in my view that is not the question. The question is whether the claim made in pars 22A to 22M of the statement of claim presents an unconscionability claim which is founded upon fraud in the sense that the claim necessarily involves an allegation of fraud, whether expressly made or not.

50 For the plaintiff I was referred to the textbook Principles of the Law of Trusts by Ford and Lee at [18260], where the learned authors discuss the concept of fraud in the context of the limitation statutes. Omitting the citation of authority they say:

"Fraud, or a fraudulent breach of trust ... does not have to amount to dishonesty in the defendant ...; but the words 'to which the trustee was a party or privy' do indicate some requirement of advertence or complicity ...; that is dishonesty or at least some knowledge of the impropriety of the conduct involved ... and an essential difference in the state of mind of the defendant is inherent in the principal distinction which is made between fraudulent and innocent breaches of trust."

51 It is clear I think, that the text is not asserting that the concept of fraud does not involve dishonesty or knowledge of the impropriety of the conduct involved. Quite the contrary. All that the authors are saying is that the defendant does not have to perform the fraudulent conduct itself if it is complicit in, or privy to, such conduct by a third party. That will be enough if the conduct is fraudulent in character and the plaintiff's claim against the defendant as a trustee is "founded upon" the fraud in the sense to which I have referred that the allegation is a necessary element of the cause of action: Beaman v ARTS Ltd [1949] 1 KB 550.

52 The plaintiff's best case is, I think, the decision of the English Court of Appeal in Kitchen v RAF Association [1958] 2 All ER 241 where at 249 Lord Evershed MR said in relation to the then English equivalent of s 47:

"It is now clear, however, that the word 'fraud' in s 26(b) of the Limitation Act, 1939, is by no means limited to common law fraud or deceit. Equally it is clear having regard to the decision in Beaman v ARTS Ltd [1949] 1 All ER 465, that no degree of moral turpitude is necessary to establish fraud within the section. What is covered by equitable fraud is a matter which Lord Hardwicke did not attempt to define two hundred years ago, and I certainly shall not attempt to do so now, but it is, I think, clear that the phrase covers conduct which, having regard to some special relationship between the two parties concerned, is an unconscionable thing for the one to do towards the other."

53 However, in Armitage v Nurse [1998] Ch 241 the English Court of Appeal did not refer to Kitchen, although the case was cited to it. One aspect Armitage was concerned with the meaning of the term "actual fraud" in a clause of a deed of settlement, but the provisions of the relevant limitation statute were also in issue and as to that, Millett LJ, delivering the principal reasons of the court, said that the provision of the relevant Limitation Act corresponding to s 47 of our Act was, "limited to cases of fraud or fraudulent breach of trust property so called, that is to say to cases involving dishonesty." (260).

54 So far as I am concerned, strong persuasive authority is provided by the decision of the New South Wales Court of Appeal in Seymour v Seymour (1996) 40 NSWLR 358. Speaking of the New South Wales section corresponding to s 47 of the Limitation Act of 1935, at 372, Mahoney ACJ said (omitting the citation of authority and other references):

"In my opinion, the section is not confined to simple common law fraud. It extends to conduct beyond that. On the other hand, it is not, I think, sufficient merely that for the defendant to take advantage of the statute of limitations would be unconscionable or inequitable in the wide sense of the these terms. Terms such as unconscionable and inequitable now are used to describe conduct which, in previous times, would not have fallen within them ... Nor, in my opinion, is 'fraudulently' wide enough to include everything which would fall within the description of 'equitable fraud'. Equitable fraud is a doctrine which depends, for this purpose, too much upon nice distinctions which have been drawn in other times ... 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. (There is in this as in many things, the problem of dealing with the person who 'closes his eyes to wrong' or is so lacking in conscience that he is not conscious of his own lack of proper standards)".

55 That decision was applied by Scott J in this Court in Honey v McLennan (1997) 18 WAR 384, 392. In my view that accurately states the law in relation to s 47(1) of the Limitation Act 1935. If dishonesty is required to constitute fraud or a fraudulent breach of trust within the meaning of s 47, then in relation to an omission to act such as is alleged in the unconscionability claim brought by the plaintiff against the defendant here, the word carries the meaning discussed by the High Court in the judgment of Kirby J in McCann v Switzerland Insurance Aust Ltd [2000] HCA 65; (2000) 203 CLR 579 at 596 [55] - [56].

56 There would need to be an allegation of some knowledge of the wrongness of the failure to act, in this case the failure to comply with the notice of the exercise of the option. For that to constitute fraud, in my opinion, involves more than the proposition that in the circumstances pleaded by the plaintiff it would be unconscionable for the defendant to retain the benefit of its interest in Rhodes Ridge. There needs to be some moral turpitude, some knowledge of wrongness, at least objectively. No such allegation is involved in the case pleaded by the plaintiff. It is not, in my opinion, fairly arguable that the plaintiff's claim against the defendant is one founded upon fraud or a fraudulent breach of trust. Leave to plead the proposed cl 25A.2.3 of the reply should be refused.

The recovery of trust property still retained by the trustee

57 This aspect of the application, reflected in the proposed par 25A.2.1, brooks little argument and indeed little was presented to me. The plaintiff contented itself with the observation that, "On any view [the defendant] retains the 25% interest in the Joint Venture which it alleges to be its interest, and over which it exercises control for its benefit". Certainly there is evidence about that already before the court, although of course at this stage, in relation to this application, it is not a matter of evidence but of pleading and the matter is pleaded in the statement of claim broadly in those terms.

58 The defendant argues that in relation to this head of claim there can be no trust property capable of retention until the curial declaration of trust which is sought is made. I have already held that in my view that is not an argument which may be accepted and the declaration of a constructive trust in the circumstances pleaded by the plaintiff would be effectively retrospective to the time beyond which it would be held to be unconscionable for the defendant to retain both its legal and beneficial interest in Rhodes Ridge.

59 The defendant also argues that s 47 will not apply because:

"the transaction said to give rise to the trust is the very one that the plaintiff says is unlawful; there is no antecedent trust and no trust property."

In Levi v Stirling Brass Founders Pty Ltd, unreported; FCt SCt of WA; Library No 970209; 9 May 1997, at page 17, the Full Court said:

"Where a trustee is a constructive trustee, s 47(1) does not apply unless he becomes a constructive trustee through some transaction antecedent to the transaction impeached and not through the latter transaction alone: ..."

60 In effect, I have already rejected that argument by holding that in my view, as pleaded, this is not a case where the claimed constructive trust has a purely remedial character, but it is a constructive trust of the classic kind arising at the point when it may be held to be unconscionable for the defendant to continue to hold its Rhodes Ridge Interest beneficially, rather than to recognise the beneficial interest imputed by the law in favour of the plaintiff. The plaintiff does, I think, arguably seek to recover as trust property the interest held by the defendant in Rhodes Ridge which the plaintiff asserts was intended to come to it and which it asserts it would be unconscionable for the defendant to continue to hold, both legally and beneficially.

61 Trust property is "retained" within the meaning of the section, in my view, when it is in some way held by or vested in the trustee, or at least where the trustee has or may exercise a power to deal with or dispose of the property in question. The word "still" in s 47(1) means, I think, that the property must be retained in that sense as at the time at which by the application of the section, it would be said that the cause of action relied upon by the plaintiff is statute barred. In effect, in this case, that would be the time in September 2006 when the statement of claim was amended to add the plaintiff's unconscionability claim. Sufficient authority for those propositions is to be found in the decision of the House of Lords in Thorne v Heard & Marsh [1895] AC 495, 503, 505 - 506.

62 It follows in my view, that it is fairly arguable that the plaintiff's claim is to recover trust property still retained by the defendant as trustee and I would grant leave to amend the reply in that regard, subject to discretionary considerations.

Is the plaintiff's claimed interest "in possession"?

63 It remains to consider the application of s 47(1) in the context of the pleading proposed by amendment of the reply to add cl 25A.2.2. The pleading depends upon the proposition that the interest in Rhodes Ridge claimed by the plaintiff will not be an interest in possession until transferred to the plaintiff. The proposed pleading refers to the concluding passage in s 47(1) which provides that the "bar by lapse of time shall not begin to run against any beneficiary until the interest of such beneficiary is an interest in possession". This is not I think properly part of subpar (b) of s 47(1), although the Act is printed in that way, but is in fact, a qualification upon the running of time upon the basis that s 47(1) applies to a plaintiff's claim so as to provide the defendant trustee with the benefit of a limitation period.

64 However that may be, the question really here is whether it is fairly arguable, if s 47(1) applies against the plaintiff in the circumstances pleaded, that its claim is not statute barred because it is not a beneficiary with an interest in possession in respect of any constructive trust which may have arisen. In Armitage the interest of the plaintiff was in remainder to land of which her mother was tenant for life. At 261 Millett LJ held that although the plaintiff had an interest as a beneficiary, it was merely a contingent or future interest under the trusts in question, conferring no present right to capital or income. The concept of an interest in possession under the section was contrasted with a future interest. It was held that the policy of the section was evidently that a beneficiary whose interest was limited to a future interest:

"... should not be compelled to litigate (at considerable personal expense) in respect of an injury to an interest which he may never live to enjoy. Similar reasoning would apply to exclude a person who is merely the object of a discretionary trust or power which may never be exercised in his favour."

65 It is arguable I think, that if it is right to say that the plaintiff has presently a beneficial interest under a constructive trust in respect of the defendant's interest in Rhodes Ridge, then having regard to the process of transfer and the approvals required to be obtained under the Joint Venture Agreement and the State agreement, the interest is not, at least in advance of the defendant doing all that is reasonably within its power to assist in the process of transfer, an interest which is vested in possession. Whether that is something that must be said at all stages before the completion of the process of transfer to the plaintiff so as to resolve the trust claimed, is also a matter for argument. I do not of course at this stage, venture a view on the basis that s 47 applies in terms of the defence as to whether or when time may have commenced to run against the plaintiff. It is sufficient that I consider that it is fairly arguable that time has not commenced to run, or that it has not done so so as to bar the plaintiff's claim.

66 In parting with this portion of the application, I should however I think, observe that in par 24(c) of his outline of submissions, senior counsel for the plaintiff observes that the plaintiff, "wishes to contend that it could not be a beneficiary in possession at the earliest before 1997 when the first notice under clause 4 was given". That is not the way the proposed pleading is formulated and if it was right to say that the plaintiff's cause of action in respect of its unconscionability claim accrued then and at the same time it became a beneficiary with an interest in possession, the claim not having been made until September 2006, it would be well out of time and on that basis leave would not be granted. Nonetheless, the point is I think, arguable in the manner to which I have referred above and, subject to discretionary factors, leave should be granted.

67 I have referred to the reason given for the delay in seeking to amend the reply in the manner the subject of this application. No sufficient reason is given for the delay and the defendant opposes the grant of leave upon the basis that it would necessitate the recall of at least some of the plaintiff's witnesses (in relation to the proposed allegation of fraud), will extend the time provided for the hearing and delay the conclusion of the trial. The defendant points out that we are, after all, virtually at the point of closure of the plaintiff's case after an extended hearing thus far. The proper application of case flow management principles it asserts, in those circumstances, precludes the grant of leave. It relies in that regard upon the decision of White J in Finamore v Slater & Gordon (1994) 11 WAR 250 at 253. There his Honour adverted to considerations of the sort advanced by the defendant in this case and held that in such a case, leave should not be granted unless to refuse it would constitute an injustice.

68 Had I been of the view that the application for leave in respect of the matter of fraud should be granted, I would have been of the view that nonetheless leave should be refused having regard to the matters affecting the exercise of the court's discretion relied upon by the defendant, to which I have referred above. But I have taken the view that leave might be granted to enable the plaintiff to raise two fairly arguable, but essentially limited matters concerning the application of s 47(1). Their ventilation will not do more than require further argument in respect of matters of law. There will not be a need for additional evidence. I see no reason to suppose that the duration of the trial will be materially affected and there appears to be no basis to conclude that the defendant will suffer any prejudice if the matters proposed are permitted to be raised.

69 I therefore grant leave to add to the reply par 25A in the following terms which I have taken from so much of the plaintiff's proposed paragraph as remains:

"25A In answer to the allegations in paragraphs 47 to 51 says the Limitation Act 1935 (WA) ('Act') does not apply to the plaintiff's claim because:

25A.1 the claim is to recover trust property still retained by the trustee (Act s 47(1)), and/or

25A.2 the statute has not begun to run and will not begin to run until the interest of the plaintiff as beneficiary is an interest in possession (Act s 47(1)(b)).

Particulars

The defendant retains the 25% interest in the Rhodes Ridge Joint Venture and refuses to transfer it to the plaintiff."