YIC Industrial Pty Ltd & Anor v SPA Investments Pty Ltd & Ors [2022] QCA 95

SUPREME COURT OF QUEENSLAND

CITATION: YIC Industrial Pty Ltd & Anor v SPA Investments Pty Ltd & Ors [2022] QCA 95

PARTIES: YIC INDUSTRIAL PTY LTD / ACN 139 276 627 / (first plaintiff/appellant) / RORY ANN QUINN / (second plaintiff/fourth respondent) / v / SPA INVESTMENTS PTY LTD / ACN 134 314 631 / (first defendant/respondent) / PIONEER AUSTRALIA PTY LTD / ACN 128 784 725 / (second defendant/respondent) / GALL STANDFIELD & SMITH SOLICITORS / (third defendant/respondent)

FILE NO/S: Appeal No 1279 of 2021 / SC No 5692 of 2020

DIVISION: Court of Appeal

PROCEEDING: Application for Extension of Time/General Civil Appeal

ORIGINATING COURT: Supreme Court at Brisbane - [2020] QSC 378 (Davis J)

DELIVERED ON: 27 May 2022

DELIVERED AT: Brisbane

HEARING DATE: 1 June 2021

JUDGES: Sofronoff P and Fraser JA and Flanagan J

ORDERS: Refuse the application for an extension of time within which to appeal.Dismiss the appeal, with costs.

CATCHWORDS: PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – JUDGMENTS AND ORDERS – AMENDING, VARYING AND SETTING ASIDE JUDGMENTS AND ORDERS – ACTIONS TO REVIEW OR SET ASIDE JUDGMENT OR ORDER – WHERE FRAUD, MISREPRESENTATION OR SUPPRESSION OF MATERIAL FACTS – where the appellants brought a claim against the respondents seeking an order that judgments ordered in antecedent proceedings by Bond J in 2019 be set aside on the ground that they were obtained by fraud – where at the hearing of the respondents’ application for summary judgment dismissing that claim, the appellants relied upon a proposed amended statement of claim, alleging two different frauds and where the same proposed pleading is relied upon in the appeal – whether the respondents acted fraudulently in relation to the variation of the ACN appearing after the name “Pioneer Australia” on the mortgage – whether the respondents fraudulently commenced and took carriage of the antecedent proceedings in the name of Pioneer Company 1, rather than Pioneer Company 2 / Corporations Act 2001 (Cth), s 127, s 601AD(1) / Federal Commissioner of Taxation v The Trustee for the Michael Hayes Family Trust (2019) 273 FCR 567; [2019] FCAFC 226, cited / Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85; [2016] HCA 47, cited

COUNSEL: A J H Morris QC, with K E Stoyle, for the appellant / M D Martin QC, with D V Ferraro, for the respondent

SOLICITORS: No appearance for the appellant / Gall Standfield & Smith for the respondent

1. SOFRONOFF P: I agree with the reasons of Fraser JA and with the orders proposed by his Honour.

2. FRASER JA: In May 2020, the appellants brought a claim against the respondents seeking an order that judgments ordered in antecedent proceedings by Bond J in 2019 be set aside on the ground that they were obtained by fraud. Other relief sought by the appellants could be granted only if the appellants succeeded in having the judgments set aside.

3. In December 2020, the primary judge, Davis J, ordered summary judgment for the respondents on the appellants’ claim. The ground upon which the primary judge found that the proceeding had no real prospect of success and there was no need for a trial was that there was no proper evidentiary basis identified from which the fraud alleged against the respondents could be inferred.

4. In these reasons I describe the unsuccessful plaintiffs as appellants, but they require an extension of time within which to appeal from the order made by the primary judge. They have given an acceptable explanation for their relatively short delay in commencing the appeal and their application for an extension is opposed only upon the ground that the proposed appeal lacks merit. If the appeal were meritorious, I would grant the extension of time.

5. I will first refer to the uncontroversial factual context in which the appellants commenced the subject claim. In October 2009, the first appellant (YIC) executed a “Security Deed”. That document includes a loan agreement, providing for a loan to YIC as “the Borrower” of $3,500,000.00 on security of a mortgage over land it owned. The Security Deed also includes a guarantee, by which the second appellant, Mrs Rory Quinn, and Mr John Quinn guaranteed YIC’s obligations under the loan agreement. The Security Deed described two lenders. The mortgage contemplated by that deed and granted by YIC describes those lenders as the mortgagees. The first respondent (SPA) is one of the lenders. A fact of particular significance for the appellants’ claim is that the transaction documents describe the other lender as “Pioneer Australia Pty Ltd ACN 073 498 905”.

6. That description combines the name of a company (“Pioneer Australia Pty Ltd”) with the ACN of a former company which at the time of the transaction had been deregistered for some 16 months:(a)A company was incorporated in April 1996 with the name Pioneer Australia Pty Ltd and the ACN 073 498 905. The primary judge described this company as “Pioneer Company 1”. Pioneer Company 1 changed its name to its ACN on 5 December 2007. It was deregistered in June 2008. Mr Stefanowicz was the sole director and the secretary of Pioneer Company for many years up until it was deregistered.(b)The second respondent, which the primary judge described as “Pioneer Company 2”, was registered under the name Pioneer Australia Pty Ltd with the ACN 128 784 725 on 5 December 2007, which was also the date upon which Pioneer Company I changed its name from “Pioneer Australia” to its ACN. Mr Stefanowicz was the sole director and secretary of Pioneer Company 2 upon registration and at all material times thereafter.

“Wrong ACN is on title for Pioneer (Company Search on the ACN currently on title shows the company is deregistered). BA/JQ to discuss and find a solution.”

“BA” refers to Mr Ahern and “JQ” refers to Mr Quinn.

14. Later on the same day, Mr Gall sent to Mr Ahern and Mr Quinn an email stating that GSS had been instructed by Pioneer Australia Pty Ltd and SPA that they were not prepared to sign any Deeds of Priority and YIC was not in breach of the mortgage, which was due for repayment on 21 October 2010.

15. In a second email Mr Gall sent to Mr Ahern and Mr Quinn on 26 March 2010, he referred to YIC and advised of instructions by Pioneer Australia Pty Ltd and SPA:

“1.There has been no variation to our client’s mortgage recorded against [the title reference number];

2.The mortgage secures an amount of $3,500,000.00;

3.Notice has been received that YIC Industrial Pty Ltd proposes to enter into a second mortgage with Angas Securities Ltd for $12,630,000.00;

4.Notice has been received that YIC Industrial Pty Ltd proposes to enter a third mortgage with Cardiff Capital Pty Ltd for $512,475.00.”

16. YIC did not repay the loan of $3,500,00.00 when it was due for repayment on 21 October 2010. On that date, YIC as borrower, and Mr and Mrs Quinn as guarantors, agreed that in consideration of Pioneer Company 2 (identified by its name and ACN) and SPA, as mortgagee and lender, agreeing to extend the period of the loan from 12 months to 18 months upon payment of $235,000.00 in accordance with the request of the borrowers, the due date in the registered mortgage was extended to 21 April 2011. That document was executed for YIC by Mrs Quinn. It was executed also by Mr and Mrs Quinn in their personal capacities.

17. On 26 October 2010, YIC by Mrs Quinn executed a document which, upon registration, amended the mortgage to Pioneer Company 2 (identified by its name and ACN) and SPA to give effect to the agreed extension of time. The document was executed by Pioneer Company 2 and SPA in November 2010.

18. YIC subsequently fell into default under the mortgage to Pioneer Company 2 and SPA. YIC, by Mrs Quinn, and Mr Quinn and Mrs Quinn in their personal capacities, executed a deed of compromise and contribution dated 5 February 2013 between them and Pioneer Company 2 and SPA. Under that deed, YIC was to pay Pioneer Company 2 (identified by its name and ACN) and SPA money in consideration for which those mortgagees agreed to forebear from taking recovery action under the mortgage and the loan agreement until 31 January 2014.

19. On 11 March 2014, Pioneer Company 2 and SPA exercised power of sale as mortgagees of the security property. After the deduction of the proceeds of sale from the outstanding debt there remained a shortfall owing under the loan agreement. GSS were instructed to commence proceedings for recovery of the outstanding debt against Mrs Quinn as guarantor (“the antecedent proceedings”). By this time Mr Quinn had made an arrangement with his creditors under Part X of the Bankruptcy Act 1966 (Cth).

20. SPA was one of two plaintiffs in the antecedent proceedings. A significant fact for the appellants’ claim the subject of this appeal is that the other plaintiff was described as “Pioneer Australia Pty Ltd ACN 073 498 905”, as it had been described in the original transaction documents.

21. After a trial, in March 2019 Bond J made orders in favour of the plaintiffs giving judgment against Mrs Quinn under her guarantee and indemnity in respect of the loan to YIC.¹ Bond J also ordered the dismissal of a counter-claim brought by Mrs Quinn and YIC against Pioneer Company 1 and SPA for damages of breach of duties owed by them when selling YIC’s land as mortgagee. After hearing argument about costs, in April 2019 Bond J ordered Mrs Quinn and YIC to pay the costs of the proceedings, to be assessed on the indemnity basis, of SPA and Pioneer Company 1.

Alleged fraud in correction of the ACN

24. The first alleged fraud concerns the correction to the ACN on the transaction documents. The essence of this part of the appellants’ pleaded case is as follows:(a)Mr Ahern had, by his email of 24 March 2010, informed Mr Gall, who therefore had “actual knowledge”, that Pioneer Company 1 was deregistered at all material times, yet Mr Gall did not tell YIC, Mrs Quinn, or Mr Quinn of that fact or of “the fact that [Pioneer Company 1] had purported to …enter into”³ the mortgage and the guarantee.(b)The statement in the request for correction of the ACN of the mortgagee in the registered mortgage that “the name of the Mortgagee be corrected from [Pioneer Company 1] to [Pioneer Company 2] in accordance with the evidence deposited herewith”⁴ and the statement in Mr Gall’s declaration that “[t]he information contained in item 4 of the Mortgage was shown incorrectly and the above Mortgagee [Pioneer Company 2] should have been stated as [Pioneer Company 2]”⁵ were false because Pioneer Company 2 was not a party to and had no interest in the mortgage and the loan agreement, and the information in item 4 of the mortgage “showing [Pioneer Company 1] as the mortgagee was not incorrect”.⁶(c)GSS Solicitors prepared and lodged the request for a correction and the declaration knowing them to be false, upon the instructions of Mr Anderson and/or Mr Stefanowicz who knew them to be false, and with the intention of inducing Mrs Quinn into believing that the advance was secured by the mortgage and her guarantee was granted to guarantee the advance on that footing.(d)Mr Gall’s statement in his email of 26 March 2010 to Mr Ahern, and copied to Mr Quinn, that there had been “no variation to our client’s mortgage” falsely represented to Mr Quinn that “no emendation of the Mortgage had occurred, whether by the Purported Correction or otherwise”.⁷(e)At the time when the correction was registered on the title, GSS, through Mr Gall, “was concerned to prevent any chance of the Mortgage losing priority to any mortgage registered in favour of Angus Securities Limited”.⁸

25. At the hearing of the summary judgment application, senior counsel for the appellants acknowledged that it was “no part of our case” that “it was deliberate to put the wrong number on the mortgage” and informed the primary judge that the appellants accepted that “putting the wrong number on the mortgage was a mistake”. Senior counsel endorsed the primary judge’s re-statement of the concession that the appellants accepted that the respondents made a mistake “in that they had identified the dead company rather than the …live company on the documents”.

“(a)It is obvious, and in fact now conceded by the plaintiffs, that the error in the description of Pioneer Company 2 as Pioneer Company 1 was an innocent mistake, clearly one under which all parties were labouring.

(b)The error was identified by Mr Ahern and the statutory declaration of Mr Gall is undoubtedly correct and truthful, namely that Pioneer Australia Pty Ltd should have been described by ACN 128 784 725. That is clearly so because that reflects the obvious mutual intention of the parties. The alternative is that YIC and Mr and Mrs Quinn intended to contract with a deregistered company which could not, as a matter of law, contract with them or advance YIC funds.

(c)The suggested motivation for the fraud, namely that it was feared that Spa and Pioneer Company 1 (in reality Pioneer Company 2) might lose their priority as mortgagees, is just baseless. The priority was not under threat. Mr Ahern pointed out the error to Mr Gall and it was remedied. Had the error been pointed out to YIC and Mr and Mrs Quinn and they had objected to the correction, rectification would have been ordered.

(d)The deed of priority was prepared identifying Pioneer Company 2 with its correct ACN. That document was sent to Mr Quinn.

(e)The two deeds of extension prepared by Mr Gall described Pioneer Company 2 by its correct ACN and those documents were sent by Mr Gall to Mr Quinn. Mr Gall made no attempt to hide the fact that the ACN on the loan, mortgage and guarantee was wrong.

(f)Mr Ahern sent the first 26 March email to Mr Quinn which clearly pointed out that the ACN on the mortgage document related to a deregistered company and that the issue was being sorted. The email contemplates Mr Ahern and Mr Quinn discussing the error and how to remedy it. Mr Quinn says that if he read that part of the email, he did not understand the significance of it. Importantly, though, the issue was being openly discussed between Mr Gall and Mr Ahern and Mr Ahern intended to speak to Mr Quinn about the error. Certainly, Mr Ahern did not think that it was a secret and neither did Mr Gall as he sent various documents to Mr Quinn thereafter all clearly showing the correct ACN for Pioneer Company 2.

(g)The second 26 March email is, in context, not false. Yes, it asserts that there has been no variation to the mortgage while in fact the register has been corrected. However, the email was one sent to Mr Ahern and cc' d to Mr Quinn. Mr Ahern knew that the register was being corrected. Mr Gall told him that on 25 March 2010. Mr Ahern is the agent for an incoming second mortgagee who is taking security behind Spa and Pioneer Company 2. Of course, Mr Ahern needs to know whether there have been any variations to the terms of the mortgage which takes priority over Angas's second mortgage. Obviously, as the email is properly understood, Mr Gall is telling Mr Ahern that there have been no variations to the terms. He is not pretending, contrary to his email the very day before, that the ACN has not been altered on the register.

(h)There is also nothing mysterious or sinister about Mr Gall not informing Ms Quinn of the correction to the register. The mistake with the ACN's was an obvious one, one of no moment, and Mr Gall was correcting it so that the advance from Angas could proceed.”¹⁴

29. This part of the appellants’ fraud case has no real prospect of success because, as I would hold, upon the proper construction of the security deed and the mortgage in their original forms Pioneer Company 2 is one of the two lenders and mortgagees described in those documents. It is submitted for the appellants that the primary judge did not decide the application for summary judgment upon this ground and we were reminded that the point was not the subject of a notice of contention, but the Court was not asked to refrain from deciding it. Nor was it submitted that resolution of the point might be affected by any evidence that was not before the primary judge.

30. The essence of the appellants’ argument upon this construction point is that there is no ambiguity in the transaction documents because they “accurately describe an entity which did exist, although it had gone out of existence.”¹⁵ Accepting that the ambiguity may be classified as latent, rather than patent, the description of the relevant lender and mortgagee in the transaction documents is undoubtedly ambiguous in so far as it includes both the name of the then extant Pioneer Company 2 and the ACN of the then deregistered Pioneer Company 1.

31. On the execution page of the security deed, Mr Stefanowicz’s signature appears above the text “Sole Director” and opposite the text, “Signed by” Pioneer Australia Pty Ltd CAN 073 498 905 in accordance with s 127 of the Corporations Act. The relevant provision is in s 127(1)(c) of the Corporations Act: “A company may execute a document without using a common seal if the document is signed by … for a proprietary company that has a sole director – that director, if: the director is also the sole company secretary ...” The execution clause conveys that the relevant party is an existing company of which Mr Stefanowicz is the sole director. It was in evidence before the primary judge and not contentious that Mr Stefanowicz was the sole director and the secretary of Pioneer Company 2. As is to be expected, the search of Pioneer Company 1, which was also in evidence before the primary judge and not contentious, shows that Mr Stefanowicz ceased to be a director and the secretary of that company in June 2008, when it was deregistered. That was to be expected because Pioneer Company 1 ceased to exist when it was deregistered: Corporations Act, s 601AD(1).

32. Any reasonable person in the position of the contracting parties must be taken to have intended the security deed and the mortgage to have legal effect. The inevitable conclusion is that the name of the registered Pioneer Company 2 on the security deed and mortgage accurately describes the relevant lender and mortgagee, and the use of the ACN of the non-existent Pioneer Company 1, rather than the ACN of Pioneer Company 2, is to be disregarded as a mere misnomer.

“34The correction of obvious errors by an application of the ordinary principles of construction is well known. As Dixon CJ and Fullagar J said in Fitzgerald v Masters (1956) 95 CLR 420 at 426-427:

Words may generally be supplied, omitted or corrected, in an instrument, where it is clearly necessary in order to avoid absurdity or inconsistency.

In that case, the word “inconsistent” was read as meaning “consistent” in a contract for sale.

35The principle is premised on absurdity and not ambiguity. Indeed, it is applicable even where the language is unambiguous: National Australia Bank Ltd v Clowes (2013) 8 BFRA 600 at [34]-[35] per Leeming JA, citing Westpac Banking Corporation v Tanzone Pty Ltd (2000) 9 BPR 17,521 at [21] per Priestley, Fitzgerald JJA and Foster AJA and Noon v Bondi Beach Astra Retirement Village Pty Ltd (2010) 15 BPR 28,221 at [46] per Giles JA (with whom Macfarlan JA agreed).

36Once again, I turn to Leeming JA for the most recent expression of the principle. In Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq) (2019) 99 NSWLR 317, his Honour said at [6]-[10]:

Rectification by construction.

At common law, if the error is clear, and it is also clear what a reasonable person would have understood the parties to have meant, then the mistake may be corrected as a matter of construction. This is old law. Lord St Leonards said in Wilson v Wilson (1854) 5 HL Cas 40 at 66-67; 10 ER 811 at 822:

“Now it is a great mistake if it is supposed that even a Court of Law cannot correct a mistake, or error, on the face of an instrument: there is no magic in words. If you find a clear mistake, and it admits of no other construction, a Court of Law, as well as a Court of Equity, without impugning any doctrine about correcting those things which can only be shown by parol evidence to be mistakes – without, I say, going into those cases at all, both Courts of Law and of Equity may correct an obvious mistake on the face of an instrument without the slightest difficulty.”

Examples may be found in linguistic errors, such as “inconsistent” being read as “consistent” in Fitzgerald v Masters (1956) 95 CLR 420; [1956] HCA 53, or conceptual errors, such as “lessor” being read as “lessee” in McHugh Holdings Pty Ltd v Newtown Colonial Hotel Pty Ltd (2008) 73 NSWLR 53; [2008] NSWSC 542. The language of a contract is not read like a computer program, such that any slip is fatal.

Two conditions are necessary in order to correct the contractual language in this manner: (a) that the literal meaning of the contractual words is an absurdity and (b) that it is self-evident what the objective intention is to be taken to have been: see Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633; [2014] NSWCA 184 at [117]-[119], approving National Australia Bank Ltd v Clowes [2013] NSWCA 179; 8 BFRA 600, where it was stated at [34]:

“Where both those elements are present ... ordinary processes of contractual construction displace an absurd literal meaning by a meaningful legal meaning.”

Likewise, in the United Kingdom, the court must be satisfied both as to the mistake and the nature of the correction: Pink Floyd Music Ltd v EMI Records Ltd [2010] EWCA Civ 1429; [2011] 1 WLR 770 at [21] (Lord Neuberger); Arnold v Britton [2015] AC 1619; [2015] UKSC 36 at [78] (Lord Hodge).

The court must be satisfied of those matters to a high level of conviction. To use the language of Dixon CJ and Fullagar J in Fitzgerald v Masters at 426-427, it must be “clearly necessary in order to avoid absurdity or inconsistency”. As this Court said in Miwa Pty Ltd v Siantan Properties Pte Ltd [2011] NSWCA 297 at [18], the test of absurdity is not easily satisfied. Any question of absurdity or inconsistency must be identified according to established principles, by reference to the text of the agreement as understood in its factual and legal context: Wyllie v Tarrison Pty Ltd [2007] NSWCA 184 at [46]; Newey v Westpac Banking Corporation [2014] NSWCA 319 at [85]. Courts which are asked to delete, insert or rewrite part of a contract because of what is said to be an obvious error should bear steadily in mind that imperfections and infelicities and ambiguities in contractual language commonly reflect the give and take of negotiations, or the parties’ appreciation that some obscurities are incapable of resolution. As Lord Hoffmann explained, the court does “not readily accept that people have made mistakes in formal documents”: Chartbrook Ltd v Persimmon Homes Ltd [2009] AC 1101; [2009] UKHL 38 at [23].

37I note the expression of the test as involving two conditions which must be satisfied, namely:

(1)that the literal meaning of the contractual words is an absurdity; and

(2)that it is self-evident what the objective intention is to be taken to have been.

The level of satisfaction about these matters must be “high”.

38See also Perpetual Limited v Myer Pty Ltd [2019] VSCA 98 at [122]-[127] per Whelan, Niall and Hargrave JJA and Tokio Marine & Nichido Fire Insurance Co Ltd v Hans Bo Kristian Holgersson [2019] WASCA 114 at [77] per Buss P, Beech and Pritchard JJA.

39The foregoing principle of construction has often been used when an instrument mistakenly refers to the wrong party or to a non-existent entity. In In re Fish; Ingham v Rayner [1894] 2 Ch 83 a testator left his residuary estate to his “niece Eliza Waterhouse”. He had no such niece. But his wife did have two grandnieces with that name (one of whom was illegitimate). The English Court of Appeal construed these words as referring to the legitimate grandniece. In F Goldsmith (Sicklesmere) Ltd v Baxter [1970] Ch 85, an agreement for the sale of land referred to a non-existent entity called “Goldsmith Coaches (Sicklesmere) Ltd”. Applying the “known facts”, Stamp J construed this “beyond peradventure” as “no more nor - less an inaccurate description of the plaintiff company, F. Goldsmith (Sicklesmere) Ltd” (at 91). Nittan (UK) Ltd v Solent Steel Fabrication Ltd [1981] 1 Lloyd’s Rep 633 was another case in which a company had been incorrectly identified in an insurance policy. Lord Denning MR said:

In this court we are very used to dealing with misnomers. We do not allow people to take advantage of a misnomer when everyone knows what was intended.

In my view, this Court should take the same approach.”

34. The appellants rely upon the entries in the company names register for their argument that they have been victims of fraud, but those entries are not confined to ACNs. Companies may also be identifiable by entries on the register of their names, and by other entries, including the names of company officers between specified dates. Reference to the register in this case makes abundantly clear the absurdity of treating the ACN on the transaction documents as an identification of Pioneer Company 1 as the lender and mortgagee. It is demonstrably clear that the parties’ objective intention must be taken to have been the name “Pioneer Australia Pty Ltd” identified as the lender and mortgagee the existing company, Pioneer Company 2, rather than a non-existent company, Pioneer Company 1.

35. Pioneer Company 2 was therefore one of the two lenders and mortgagees described in the security deed and the mortgage. The subsequent correction of the ACN on the amended mortgage and on other documents was merely a formality. It follows that, as the primary judge concluded, each of the statements described in [24] of these reasons which the appellants allege was false was accurate. For that reason, the appellants’ pleaded fraud claim could not succeed and summary judgment was rightly given in favour of the respondents.

36. Furthermore, summary judgment in the respondents’ favour was also justified by the absence of any real prospect of success or any need for a trial of the appellants’ claim that the respondents acted fraudulently in making the allegedly false statements.

37. The primary judge set out the presently relevant principles concerning what a plaintiff needs to plead and prove in a case of this kind:¹⁷

“In Wentworth v Rogers (No. 5), Kirby P identified six principles relevant to setting aside judgment on the basis of fraud. It is unnecessary to go to any but the first which was expressed by his Honour in these terms:

“First, the essence of the action is fraud. As in all actions based on fraud, particulars of the fraud claimed must be exactly given and the allegations must be established by the strict proof which such a charge requires: Jonesco v Beard [1930] AC 298 at 301; McHarg v Woods Radio Pty Ltd (at 497).”

In Clones Pty Ltd v Players Pty Ltd (in liq), a question before the High Court was whether “…the power of a court to set aside its perfected judgment extends to…misconduct by the party who succeeded at trial which does not amount to fraud”. In answering that question in the negative, the court held:

“55. The general power to set aside a judgment on the ground of fraud required actual fraud. The ‘essence of the action [was] fraud’. The general ground of fraud was not diluted to allow, for instance, the judgment to be set aside for misconduct, accident, surprise, or mistake. This point was made pellucidly in 1867 in Patch v Ward. In that case, as Lord Cairns LJ observed, the application was not brought on the basis of either category of the bill of review – either error of law or fresh evidence discovered since the decree. Rather, it was brought upon the basis that the decree was obtained by fraud. His Lordship explained that it was necessary that the fraud be ‘actual fraud…the person chargeable with it…acting in order to take an undue advantage of some other person for the purpose of actually and knowingly defrauding him’. Similarly, Sir John Rolt LJ, after observing that a particular ground of review in cases of foreclosure was inapplicable, remarked of the claim to set aside the order for fraud:

“I think, for the reasons which have been given by my learned brother, that the fraud must be actual positive fraud, a mediated and intentional contrivance to keep the parties and the Court in ignorance of the real facts of the case, and obtaining that decree by that contrivance*.* Mere constructive fraud not originating in actual contrivance, but consisting of acts tending possibly to deceive or mislead without any such intention or contrivance, would probably not be sufficient – at all events I think would not, after such delay as has occurred in this case, be deemed sufficient – to set aside the order which has been made. What, therefore, the Appellant has to do is satisfy the Court that the decree was obtained by the positive and actual fraud and contrivance of the party obtaining it.” (emphasis added).

And later:

“57. The narrow scope of the general power of a court to rescind a judgment for fraud was reiterated after the Supreme Court of Judicature Act in The Ampthill Peerage. In the course of considering whether a declaration of legitimacy could be set aside, Lord Wilberforce compared an application to a court to set aside its own judgment and said that equitable fraud or ‘lack of frankness’ would not suffice to set aside a judgment and that ‘only fraud in a strict legal sense will do’. Similarly, Lord Simon of Glaisdale said that ‘lack of frankness or an ulterior or oblique or indirect motive is insufficient’.” (emphasis added).”

38. The allegation quoted in [24](a) that Mr Gall had “actual knowledge” is apparently intended to be related to the pleaded conclusion that Pioneer Company 1 purported to enter into the mortgage and guarantee. The pleading appears to assume that the state of mind of the respondents must be regarded as having accorded with what the appellants allege are the correct conclusions. I have reached the opposite conclusion to that which is pleaded. If the conclusion I prefer is wrong, the pleaded conclusion is nevertheless at least contestable. Yet the pleading does not identify a ground for inferring that Mr Gall’s state of mind accorded with the pleaded conclusion. In my view, there is no sufficient basis for the allegations of dishonesty described in [24](c) in relation to the statements identified in [24](b) of these reasons.

39. As to the case described in [24](d) of these reasons:(a)Mr Gall’s reference in his email of 26 March 2010 to his firm’s client can sensibly be understood only as a reference to Pioneer Company 2:When Mr Gall sent that email, Pioneer Company 1 had been deregistered for some 20 months.The recipient to whom the email was addressed, Mr Ahern, then knew that company had been deregistered.Mr Ahern had recently drawn that fact to Mr Gall’s attention.Mr Gall had recently informed Mr Ahern that he would request a change of the ACN on the mortgage to the ACN of Pioneer Company 2.Mr Ahern had recently sent to Mr Gall a draft document identifying Pioneer 2 by its name and ACN.Mr Quinn, to whom Mr Gall’s email to Mr Ahern was copied, had recently sent to Mr Gall, and copied to Mr Ahern, an email which attached draft documents also identifying Pioneer Company 2.Mr Ahern had recently sent an email to Mr Quinn stating that the wrong ACN for Pioneer was on the title, that was the ACN of a deregistered company, and Mr Ahern and Mr Quinn were to discuss that issue and find a solution.(b)In those circumstances, Mr Gall’s statement that there had been “no variation” to GSS’s client’s mortgage does not convey that the ACN of “Pioneer Australia” on the mortgage was not or would not be changed to the ACN of Pioneer Company 2.

40. Furthermore, the proposed amended statement of claim does not allege that Mr Gall acted dishonestly in making that statement. A fundamental flaw in this part of the appellants’ case is the absence of any allegation, or any reasonable basis for an allegation, that Mr Gall used the expression “no variation to our client’s mortgage”¹⁸ intending to convey or believing those words would be understood to convey something that was inconsistent with his state of mind. There is, for example, no pleaded fact and no evidence capable of justifying an inference that Mr Gall did not think that the ACN was an obvious mistake which could and should be corrected to give effect to the parties’ common intention.

41. The appellants’ allegation described in [24](e) of these reasons describes a proper concern by a solicitor in Mr Gall’s position. It is innocuous in the absence of a viable case that Mr Gall dishonestly said or did something in connection with the alleged concern.

Alleged fraud in the naming of a plaintiff

45. The second fraud alleged to have been committed by the respondents concerns the commencement and carriage of the antecedent proceedings in the name of Pioneer Company 1, rather than Pioneer Company 2.

46. The essence of the appellants’ pleading of this claim is as follows:(a)In the antecedent proceedings, SPA as a plaintiff and Pioneer Company 1 as a plaintiff made various allegations, all of which were premised upon Pioneer Company 1 being the Pioneer Australia Company named as the lender and mortgagee in the transaction documents.(b)Those statements were false because, as a deregistered company, it had no lawful capacity to do any of the things it had purported to do.(c)Each of the alleged statements was known to be false by GSS, Mr Anderson, and Mr Stefanowicz (or one of them) at the time it was made.(d)The plaintiffs in the antecedent proceedings did not plead, disclose, tender, give evidence of, or mention the purported correction of the mortgage or the declaration by Mr Gall.(e)The conduct described in the above paragraphs was committed with the intent of inducing Mrs Quinn into believing that the advance was secured by the mortgage, a guarantee was granted to guarantee the advance on that footing, and Pioneer Company 1 or Pioneer Company 2 had standing to enforce the guarantee in the antecedent proceedings.

47. Mr Reynolds, a solicitor in the employ of Gall Standfield & Smith, swore an affidavit. He deposed that when he prepared the claim and statement of claim in the antecedent proceedings he mistakenly recorded the wrong ACN for Pioneer Australia Pty Ltd. He deposed that no issue was taken about this in that proceeding and the original loan agreement, guarantee and mortgage dated 21 October 2009 were admitted. Mr Gall had retired from practice before the antecedent proceedings were commenced.²²

48. The primary judge rejected this part of the claim for these reasons:(a)The alleged conspiracy was to enforce the security documents in the name of the deregistered Pioneer Company 1, and prosecute at trial and defend on appeal, proceedings in the name of that company to cover up the error in the description of the lender.(b)This alleged conspiracy was alleged to have been pursued despite the correspondence between Mr Ahern and Mr Gall openly discussing the error, notwithstanding that documents bearing the correct ACN had been prepared and sent to Mr Quinn, and despite the concession properly made by the appellants’ senior counsel that the inclusion of the wrong ACN in the security documents was a genuine error.(c)The fact, as had been submitted for the appellants, that Mr Reynolds did not explain how the error came about and there was no affidavit of Mr Gall, was not important. They did not need to explain the obvious, and it was now admitted by the appellants that Mr Gall had made a mistake in recording the ACN.(d)The alternate inference - that Mr Reynolds deliberately launched and prosecuted proceedings on behalf of a deregistered company which would result in any judgment being worthless - is absurd.(e)The omission of any disclosure in the Antecedent Proceedings of Mr Gall’s declaration and the request for correction of the mortgage was not significant because those documents were not obliged to be disclosed because they were not directly relevant to an issue in that proceeding.(f)In any event, the documents describing the ACN for Pioneer Company 2 (notably the deeds of extension) were disclosed and there was no evidence of a cover up.

Proposed orders

52. In light of my conclusions about the elements of falsity and dishonesty in each of the two categories of fraud alleged by the appellants, I do not find it necessary to discuss the further question whether the pleaded case could in any event be capable of making out a case of fraud which might justify an order setting aside the judgment in the anterior proceeding.

53. The respondents filed a notice of contention and argued that Mrs Quinn did not have standing to prosecute the fraud claim because it was commenced after she was declared bankrupt on 20 January 2020. As the respondents argued, upon bankruptcy Mrs Quinn’s property, which included any right to bring the claim to set aside the judgments in the antecedent proceeding, vested in her trustee in bankruptcy under s 58 of the Bankruptcy Act 1966 (Cth). The respondents also contended and argued that YIC’s claim to set aside the judgment in the antecedent proceeding should have been dismissed upon the additional ground that the fraud allegations were not relevant to the counter-claim it and Mrs Quinn brought against the plaintiffs.

54. The appellants’ argument addressed the second contention. The appellants did not identify a basis upon which Mrs Quinn could be regarded as having standing to prosecute the fraud claim despite her bankruptcy. I would accept that this is another ground upon which Mrs Quinn’s claim to set aside the judgment in the antecedent proceeding should be dismissed. It does not seem to me necessary to adjudicate upon the more complicated question whether YIC’s claim must fail upon the additional ground that its allegations of fraud are not relevant to the basis upon which its counter-claim was dismissed.

Proposed orders

55. I would refuse the application for an extension of time within which to appeal and dismiss the appeal, with costs.

56. FLANAGAN J: I agree with Fraser JA.

Footnotes

1. Pioneer Australia Pty Ltd & Anor v Quinn [2019] QSC 72. ↩

2. Quinn & Anor v Pioneer Australia Pty Ltd & Anor [2019] QCA 266. ↩

3. Proposed amended statement of claim, para 35C(b). ↩

4. Proposed amended statement of claim, para 37(c). ↩

5. Proposed amended statement of claim, para 38. ↩

6. Proposed amended statement of claim, paras 39 and 40. ↩

7. Proposed amended statement of claim, para 41A(c). ↩

8. Proposed amended statement of claim, para 41B(c). ↩

9. Transcript 12 August 2020 at 1-14, and to the same effect at 1-15. ↩

10. Transcript 12 August 2020 at 1-16. ↩

11. Reasons [55], citing Frederick E Rose (London) Ltd v William H Pim Junior & Co Ltd [1953] 2 QB 450 at 461; Hooker Town Developments Pty Ltd v Director of War Service Homes (1973) 47 ALJR 320 at 323-4; Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336; Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85. ↩

12. Transcript 1 June 2021 at p 1 - 12.