HBSY Pty Ltd v Lewis

These proceedings concern the estate of the late Marjorie Lewis (the Estate), who died on 15 August 2008 leaving a will dated 10 October 2006 (the Will). Without disrespect, I will refer to Marjorie and others in these reasons by their first names.

Other than a legacy of $5,000, the Estate fell into residue. There were five residuary beneficiaries under the Will: Marjorie’s brother (Allan) and his four sons (including Anthony and Geoffrey). The Will named Allan and Anthony as executors. However, they renounced their executorship before obtaining probate. Letters of administration have been granted to Geoffrey. These proceedings have their origin in Anthony’s alleged misconduct in relation to Estate funds during the months it is said he was purporting to act as executor, and his subsequent bankruptcy.

Geoffrey is the defendant and cross claimant in these proceedings. The plaintiff and cross defendant, HBSY Pty Ltd (HBSY), is the assignee of Anthony’s residuary share of the Estate. By his amended cross-claim filed on 14 December 2020, Geoffrey seeks declarations that HBSY is not entitled to be paid Anthony’s share of the Estate:

Geoffrey also seeks a declaration that HBSY does not have standing to bring the primary proceedings. The primary proceedings were commenced by statement of claim on 23 August 2019. By that statement of claim, HBSY sought to have Geoffrey removed and replaced as administrator of the Estate.

Geoffrey filed a notice of motion in the primary proceedings on 22 November 2019 seeking security for costs from HBSY in the sum of $75,000. That motion was successful before Lindsay J on 20 March 2020. HBSY failed to provide security for costs and on 24 April 2020, the primary proceedings were stayed until further order of the Court. As a result, this judgment concerns only the cross claim.

The issues before the Court can be summarised as:

The Court’s conclusions on those issues can be summarised as:

Mr D K Smith of Counsel appeared for HBSY. Mr P Menadue of Counsel appeared for Geoffrey.

The Court finds the facts to be as follows.

Marjorie died on 15 August 2008. At the time of her death, Marjorie was a resident of the Sir Moses Montefiore Jewish Home (Montefiore).

The value of the Estate identified in the Letters of Administration was $786,453.31. The Estate’s assets included a deposit of $551,084.93 held by Montefiore (the Montefiore Sum).

On the day of Marjorie’s death, Anthony rang Marjorie’s lawyers. His evidence was that he rang to ask whether they had any instructions about whether Marjorie wished to be buried or cremated. Following that conversation, Marjorie’s lawyers emailed a copy of the Will to Anthony.

On 25 August 2008, Anthony emailed Montefiore. His email attached the Deceased’s death certificate and included: “I am the executor of [the Will]. How do we commence action to get [the] Montefiore deposit back?”

Anthony was taken to that email in cross-examination (Tcpt, 2 August 2021, p 22(1–4)):

Montefiore responded to Anthony on the same day saying: “The bond will be sent back to [the Estate] and mailed to the person responsible for her accounts within two weeks of her passing.”

The next morning, on 26 August 2008, Anthony forwarded that email exchange to Geoffrey.

Anthony subsequently received a cheque for the Montefiore Sum payable to the “Estate of the Late Marjorie Lewis”. The cheque was dated 21 August 2008.

Anthony controlled and operated Lewis Securities Ltd (Lewis Securities) until 29 October 2008, when an administrator was appointed. He was the majority shareholder and a director at all relevant times.

Marjorie had invested with Lewis Securities since 1992. At the time of her death, the value of her portfolio with Lewis Securities was $305,606.

On or shortly before 2 September 2008, Anthony caused Lewis Securities to open an account in the name of “Anthony Lewis – Estate of Marjorie Lewis a/c” (the Estate Account).

On 2 September 2008, the Montefiore Sum was deposited into the Estate Account. On 9 September 2008, the Montefiore Sum was transferred into Lewis Securities’ general trading account (the Lewis Securities Account). On the same day, Lewis Securities transferred $20,000 (the Additional Sum) from Marjorie’s pre-existing account with Lewis Securities to the Lewis Securities Account.

On 29 October 2008, Lewis Securities went into voluntary administration.

On 14 December 2008, Allan renounced his executorship of the Estate. On 17 December 2008, Anthony also renounced his executorship of the Estate. Neither had ever been granted probate of the Will. On 13 January 2009, Geoffrey was granted letters of administration with the Will annexed.

On 27 January 2009, Geoffrey wrote to the administrators of Lewis Securities seeking repayment of the Montefiore Sum and the Additional Sum, which together totalled $571,084.93 (the Net Sum).

On 6 February 2009, Lewis Securities went into liquidation. It remains in liquidation.

On 24 March 2009, the liquidators’ solicitor responded to Geoffrey’s letter on 27 January 2009, stating:

On 2 April 2009, Anthony was declared bankrupt. Andrew Aravanis was appointed his trustee in bankruptcy.

On 18 August 2010, the Estate received a dividend from the liquidator of Lewis Securities of $57,108.49, being 10 per cent of the Net Sum.

On 5 November 2010, Geoffrey wrote to Mr Aravanis enclosing:

As at 31 May 2011, Avaranis Insolvency formally recorded a proof of debt for $300,000 by the Estate.

On 21 July 2011, Mr Aravanis entered into an asset sale agreement with HBSY. The “Purchase Price” was $275,000. The assets sold by that agreement included the “Estate Interest”, defined as “the Bankrupt’s interest (if any) in the estate of the late Marjorie Elizabeth Lewis.”

On 11 August 2011, Mr Aravanis notified Geoffrey of the assignment. On 17 August 2011, HBSY notified Geoffrey of the assignment.

On 3 April 2012, Anthony was discharged from bankruptcy.

On 1 May 2013, the Estate received a further dividend from Lewis Securities’ liquidator of $11,421.70.

On 9 November 2015, Anthony became the registered owner of all of HBSY’s share capital.

On 7 October 2020, the Estate received a further dividend from Lewis Securities’ liquidator of $17,132.55.

The three dividends paid to the Estate by the liquidator of Lewis Securities total $85,662.74. Mr Aravanis as Anthony’s trustee in bankruptcy declared a nil dividend and the Estate has not recovered any funds from Anthony.

The authors of S Janes, D Liebhold and P Studdert, Wills, Probate and Administration Law in NSW (Lawbook Co, 2nd ed, 2020) state at [PAA.40-170] (citations omitted):

In Re Abat [2020] VSC 560, McMillan J said (at [31]):

In Mulray v Ogilvie (1987) 9 NSWLR 1, Needham J observed (at 3):

Needham J did however conclude (at 6) that “…the trend of more modern cases is to take a more lenient view of acts of nominated executors”.

In Holder v Holder [1968] Ch 353 (Holder), three executors were nominated by a will. Before probate, they signed documents for the opening of an executor’s bank account, signed cheques and endorsed insurance policies. One executor sought to renounce and purchased property from the estate. At the hearing, it was conceded that his renunciation was ineffective because he was an executor de son tort. Each member of the Court of Appeal considered that concession to have been wrongly made (Harman LJ at 391 and 392, Danckwerts LJ at 397, Sachs LJ at 401).

In Gray v Hart [2012] NSWSC 1435 (Gray v Hart), White J (as his Honour then was) said:

All losses that flow from a trustee’s breach are recoverable. The Court of Appeal in O’Halloran v R T Thomas and Family Pty Ltd (1998) 45 NSWLR 262 said (at 275):

It is observed in J D Heydon, Meagher, Gummow and Lehane’s Equity Doctrines and Remedies (LexisNexis, 5th ed, 2015 at 23-175) that:

See also Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 212 CLR 484; [2003] HCA 15 at [69].

In Re Dacre; Whitaker v Dacre [1916] 1 Ch 344 (Re Dacre), Henry Dacre was appointed executor under the will of JG Womack. The will bequeathed a legacy of £2,000 to Henry’s wife, Alice. She died without having received that legacy. Henry was both the sole executor and beneficiary of her estate. Henry died insolvent, never having proved in Alice’s estate. It was discovered after his death that Henry had misappropriated £1,500 in his role as executor of JG Womack’s estate. Lord Cozens-Hardy MR said at 347:

This approach was endorsed by the Full Bench of the Victorian Supreme Court in Cumming v Austin (1903) 28 VLR 622 (at 628–9) per Holroyd J (Williams and Hodges JJ agreeing):

In Re Sewell; White v Sewell [1909] 1 Ch 806 (Re Sewell), trustees appointed under a will misappropriated funds from the estate. A composition was agreed with the defaulting trustees’ creditors which had the effect of extinguishing their liabilities. It was held that no sum could be impounded by the new trustees when monies became payable to the defaulting trustees under the will. Parker J said (at 808–9):

Re Sewell was applied by the Full Court of the Supreme Court of Tasmania in Re Hurburgh [1959] Tas SR 25 at 48 (Crawford and Green JJ agreeing).

In Morris v Livie (1842) 62 ER 934 (Morris v Livie), the elder Robert Livie bequeathed £4,000 under his will to his brother-in-law, Alexander Champion and his partner, Robert Livie the younger, to be held on trust by them for the sole benefit of his sister, Catherine Primrose (or, in the event of her death, her son). The funds were to be invested in stocks and the dividends paid to Catherine. Alexander Champion died and Robert Livie the younger sold the stocks for his own benefit. Approximately £2,200 of dividends owed to Catherine was unpaid. Robert Livie the younger had been bequeathed a £5,000 legacy under the will which, prior to selling the stock, he had assigned to another for valuable consideration. Catherine’s executors sought to reclaim what was owed out of Robert’s legacy.

It was held that a legacy given to a trustee was subject to a condition that the trustee would properly perform their duties. That condition “if existing, accompanied his legacy until its discharge, and applied to it as much after as before its assignment” (at [389]). If the trustee acted in breach of trust, the right to participate could not be exercised until the breach was remedied.

The principle was also stated by Isaacs J in Cock v Aitken (No 2) (1912) 15 CLR 373 (at 384); [1912] HCA 70:

The author of R Derham, The Law of Set-Off (Oxford University Press, 4th ed, 2010) interprets the principle in Morris v Livie in this way:

In Cherry v Boultbee (1839) 4 Myl & Cr 442; 41 ER 171 (Cherry v Boultbee), Thomas Boultbee became bankrupt. His sister, Catherine, was a creditor but she did not prove in his bankruptcy. Catherine died and bequeathed a legacy to Thomas which exceeded the sum he owed to her. Mr Cherry, the assignee of Thomas’ bankrupt estate, claimed the legacy. Catherine’s executors claimed a right to set off the amount owing by Thomas against the legacy. Lord Cottenham said (at 447):

In Re Akerman; Akerman v Akerman [1891] 3 Ch 212, the testator died leaving part of his residue to his sons. At the time of his death, three of his five sons were financially indebted to him. Kekewich J held at (219–20):

The rule was put in the following terms by Sargant J in Re Peruvian Railway Construction Co Ltd [1915] 2 Ch 144 at 150:

In Gray v Guardian Trust Australia [2002] NSWSC 1218, Austin J summarised at [108]:

A fund administrator may lose the right to apply the rule in Cherry v Boultbee if they elect to pursue a different remedy. Palmer J in Otis Elevator Co Pty Ltd v Guide Rails Pty Ltd (in liq) (2004) 49 ACSR 531; [2004] NSWSC 383 (Otis) said at [48]:

Section 86 of the BA provides:

In Gye v Mclntyre (1991) 171 CLR 609 at 618–9; [1991] HCA 60 (Gye v McIntyre), the High Court observed:

The High Court also said at 624 that:

The mutuality of parties’ debts or credits requires consideration of their equitable or beneficial interests in those debts or credits, rather than the “dry legal right” alone: Hiley v People’s Prudential Assurance Company Ltd (in liq) (1938) 60 CLR 468 at 497 per Dixon J.

As to whether a liquidated debt may arise, Bryson AJ held in Auto Group Ltd v England [2008] NSWSC 402 at [4] that:

The effect of discharge on a bankrupt’s debts is set out in s 153 of the BA, which provides:

The proper construction of s 153(2)(b) is a significant issue in the proceedings, including whether establishing fraud or a fraudulent breach of trust under s 153(2)(b) requires proof of the debtor’s state of mind. To consider this question it is necessary to consider the history and cases concerning this provision in some detail.

Prior to the 18th Century, discharge from bankruptcy could only be obtained by full satisfaction of any debts. That changed under Section VII of An Act to prevent frauds frequently committed by creditors (4 Anne I, c. 17) which allowed debtors to discharge their debts in circumstances where they fully co-operated with any inquiry. This was quickly amended in 1706 to require the consent of four-fifths of a bankrupt’s creditors before discharge could be obtained.

The purpose of discharge was primarily to protect creditors’ interests by persuading bankrupts to co-operate and to encourage risk-taking in commercial matters. To a lesser extent, it also recognised a distinction in circumstances where bankrupts had become so due to external events (such as war or shipwreck) as opposed to their own conduct (or misconduct).

The term fraud, as it was understood at that time, was both foreign and familiar to the present day:

Despite this development, the eighteenth century was a time in which bankrupts who did not co-operate with inquiries could face imprisonment or even, in a handful of cases, execution. Bankruptcy also remained involuntary for the debtor.

At the time Cherry v Boultbee was decided, the Bankruptcy Act 1825 (UK) ensured that bankruptcy was no longer wholly involuntary. It was, however, limited to persons who operated in some form of trade. Discharge from bankruptcy did not extend to circumstances in which a person engaged in making “false or fraudulent entries in any book of account or other document, with intent to defraud his creditors” (s CXXX, 6 George c. 16).

Creditor veto over discharge was limited under the Bankruptcy Act 1842 (UK) which is, coincidentally, the same year that Morris v Livie was decided. That statute maintained the exception to discharge where the debtor had acted with “intent to defraud his creditors” and, if found to have done so, was liable to imprisonment and hard labour (s XXXVI, 5 & 6 Victoria c. 122).

The first near equivalent to s 153(2)(b) made its appearance in the Bankruptcy Law Consolidation Act 1849 (UK) which stipulated that a discharge did not operate against “any debt which shall have been contracted wholly or in part by reason of any Manner of Fraud or Breach of Trust” (s CCXXI, 12 & 13 Victoria c. 106). That provision was overtaken by s 49 of the Bankruptcy Act 1869 (UK) (the 1869 Act) which was enacted with the related Debtors Act 1869 (UK). Section 49 relevantly provided that “an order of discharge shall not release the bankrupt from any debt or liability incurred by means of any fraud or breach of trust, nor from any debt or liability whereof he has obtained forbearance by any fraud”.

The Debtors Act 1869 (UK) abolished imprisonment for debtors except in a small number of circumstances. At the same time, the 1869 Act provided some comfort for debtors by removing both creditors’ power of veto over discharge and the restriction that discharge was only available to those operating in trade.

In the 1880 decision of Emma Silver Mining Company v Grant 17 Ch.D. 122 (Emma Silver Mining), Jessel MR was called upon to consider the expression "debt incurred by means of fraud or breach of trust" in s 49 of the 1869 Act. The defendant, Mr Grant, was the promoter of the plaintiff company. He took a secret commission from the vendor of an asset that was sold to the company. The company sued Mr Grant and recovered a judgment in respect of the secret profit he had made. Mr Grant presented what was known as a petition for liquidation and ultimately had the benefit of a scheme of arrangement approved by his creditors. The relevant question before the Court was whether the amount for which Mr Grant was subsequently sued by the company in respect of its judgment was a "debt or liability incurred by means of any fraud or breach of trust" so that his discharge did not provide a defence to the proceedings.

Jessel MR had no difficulty (at 127-128) in finding that what Mr Grant and another had done was "fraud":

His Lordship went on (at 128) to find Mr Grant's alleged state of mind to be irrelevant: "A man may commit a fraud without believing it to be a fraud, that is, without believing it to be a fraud for which he can be held responsible in law; though I am by no means convinced that even Mr Albert Grant could have treated this originally as an equitable or moral transaction".

Finally, while (at 128) his Lordship describes the point as "much more arguable, as one upon which there is much more difficulty it is not absolutely necessary for me now to decide the point", he goes on to consider whether Mr Grant's conduct was in breach of trust. He concluded (at 129) that it was:

On 19 March 1883, the Bankruptcy Bill 1883 (UK) was read for a second time in the House of Commons and was the first bill referred to the new Standing Committee on Trade. A contemporary bankruptcy text records that “The Grand Committee held nineteen sittings to consider the Bill and reported it to the House with numerous amendments. The House accepted the measure as it came from the hands of the Committee…It was introduced in the Lords on the 17th of August, and various amendments in matters of detail were there inserted. The Bill received the Royal Assent on the 25th of August.” (Chalmers, MD and Hough, E, The Bankruptcy Act 1883 (London, Waterlow and Sons Ltd, 1883) at vii) (Chalmers).

The timing is important because on 28 May 1883 - while the Bankruptcy Bill would have been in committee - the Court of Appeal (Brett MR, Lindley and Fry LJJ) delivered its decision in Cooper v Prichard 11 QBD 351 (Cooper) concerning s 49 of the 1869 Act.

Because the facts bear some similarity to the present case, I set them out from the report (at 351):

The firm went into liquidation, which was resolved by a scheme of arrangement that included granting the innocent Mr Prichard a discharge. He was then sued by the plaintiffs to recover the money that been received and misappropriated by Mr Turner, and for which he was alleged to be liable as partner. Mr Prichard contended that s 49 of the 1869 Act released him from all liability to the plaintiffs upon his discharge in the liquidation of the firm. Mr Prichard appealed the decision of Baron Pollock, who gave judgment against him for the plaintiffs notwithstanding his discharge.

The Court of Appeal held that the language of s 49 meant that where a debt had been incurred by one of several partners for which the partnership was liable and then went into liquidation under the 1869 Act, a partner who had been discharged was not released from that debt if it was incurred by fraud, even though he was himself innocent of that fraud. Brett MR described Mr Turner's conduct in this way (at 353-354):

His Lordship also made this observation (at 354) (emphasis added):

For his part, Lindley LJ (at 355) was of the view that "looking at Turner's conduct it would be very difficult to say that liability of the firm was not incurred both by fraud and some form of breach of trust" (emphasis added). Fry LJ (at 356) said that “the debt in this case was one clearly incurred by means of fraud", but did not find it necessary to decide whether it was also incurred by breach of trust".

It is in s 30(1) of the Bankruptcy Act 1883 (UK) that the term "fraudulent breach of trust" first appears in the concluding sentence of that sub-section:

Chalmers records (at 28) that the words "to which he was a party" were inserted to "override" the decision in Cooper. However, the learned authors offer no explanation as to why "fraudulent" was inserted before "breach of trust". My research, and that of those assisting me, has been unable to find any contemporary source which offers an explanation. However, to my mind, the fact that Cooper undoubtedly drew the attention of the House of Commons Grand Committee to the discharge provision suggests that "fraudulent" is likely to have been inserted before "breach of trust" under the influence of Lord Lindley's conclusion that Mr Turner's conduct was both fraud "and some form of breach of trust".

Returning to Brett MR’s observation set out in [84] above, this would suggest that a "fraudulent breach of trust" was any breach of trust that was not an honest one because "it was the foundation of the bankrupt laws that the bankruptcy is to be allowed and protected for only bankruptcies which had been incurred honestly". As I will develop further below, approaching the matter in this way is both consistent with equity's understanding of "fraud" being a wider concept than common law fraud requiring an actual dishonest intent and disposes of any debate about the need for dishonesty to be proven. A breach of trust will be fraudulent for the purposes of the expression "fraudulent breach of trust" if it is not honest or innocent but does not have to meet the high bar of actual dishonesty in the common law sense.

After his decision in Cooper, Lord Lindley would be given an opportunity to express his reaction to the expression "fraudulent breach of trust" a decade later in In Re Smith; Hands v Andrews [1893] 2 Ch 1 (Smith). Thomas Andrews and Peter Hooton were defaulting trustees under a will. While s 4(3) of the Debtor's Act 1869 (UK) had abolished imprisonment for debt, it made certain exceptions, including cases of "default by a trustee or person acting in a fiduciary capacity and ordered to pay by a Court of Equity any sum in his possession or under his control".

Upon accounts being taken, Mr Andrews and Mr Hooton were ordered to repay certain amounts to the estate. Neither of them obeyed the orders and leave was sought to issue writs of attachment against them for their contempt. In opposing the leave, Mr Andrews made an affidavit that he had left everything to Mr Hooton and that he believed that money received by Mr Hooton was duly applied by the latter for the purposes of a business being run for the benefit of the estate. Mr Hooton's evidence is recorded in the judgment (at 13) as “unsatisfactory” and that “his position was worse than that of” Mr Andrews.

In his judgment at first instance (at 10-11) Kekewich J said (emphases added):

His Lordship concluded in relation to Mr Andrews (at 12):

His Lordship ordered writs to issue against both defendants. They appealed to the Court of Appeal (Lord Esher MR, Lindley and Lopes LJJ) with the judgment read by Lord Lindley. The Court of Appeal compared the 1869 Act and its 1883 successor (at 16) (emphasis added):

The Court of Appeal dismissed Mr Hooton's appeal. However, while not expressly disapproving Kekewich J's general analysis of a fraudulent breach of trust, it disagreed with his Lordship's conclusion in relation to Mr Andrews, concluding (at 18):

While little of the wording of the relevant provisions has changed over time since the late 19th century bankruptcy legislation, the constraints upon bankrupts seeking discharge have lessened, especially with the introduction of automatic discharge in both the UK and Australia. As Michael Quilter writes:

Turning to the Australian cases, Emma Silver Mining was followed by Brinsden J in Barewa Oil and Mining NL (In liq) v Isim Mineral Development Pty Ltd (1981) 38 ALR 288 (Barewa Oil). The plaintiff company alleged that the third defendant had breached his duties as a director, or breached his fiduciary duties, to the plaintiff by using moneys from applicants for shares in the plaintiff company to purchase various mineral and petroleum assets. Mr Cornelius entered into a composition with his creditors and the question was whether s 240 of the BA discharged him from the debts or liabilities for which he was now being sued by the plaintiff.

One submission put on his behalf was that s 153(2)(b) of the BA only released a bankrupt from a debt incurred by means of common law fraud or "pure fraud". It was submitted that no part of the claim brought against by Mr Cornelius, including for money received or breach of fiduciary duty, had as an essential ingredient an allegation of fraud.

Brinsden J referred to both Cooper (noting Fry LJ’s observation that the words used in s 49 were very general) and the decision in Emma Silver Mining. Of the latter, his Honour said (at 296) that it "appears to be clearly against the proposition submitted on behalf of Cornelius. A consideration of the facts pleaded in this statement of claim show that, however the claim is put, there is clearly within the claim an allegation of fraud, and that, within the intendment of s 153 of the Act, the debt or liability has been incurred by means of fraud."

Mr Cornelius appealed: Cornelius v Barewa Oil & Mining (NL) (in liq) [1982] WAR 311; (1982) 42 ALR 83 (Cornelius v Barewa Oil). One of the grounds of contention was whether Brinsden J had erred in finding that constructive fraud fell within s 153(2)(b) as opposed to actual fraud. In dismissing the appeal, Burt CJ stated (at 313):

Wickham J, also dismissing the appeal, held that the issue of whether actual or constructive fraud was required to establish fraudulent breach of trust under s 153(2)(b) need not be decided because the facts demonstrated the defendant had been dishonest, which “coupled with the other facts pleaded is sufficient to propound a case of actual fraud” (at 317).

Kennedy J (agreeing with Burt CJ and Wickham J) added (at 319-320):

For a New South Wales judge the dispositive Australian case is Maxwell v Chittick [1994] NSWCA 196 (Maxwell). As I will explain below, in my respectful opinion I am bound by that decision to the effect that fraud in the extended or equitable sense will be a "fraud or fraudulent breach of trust" for the purposes of s 152(2)(b). However, before turning to the decision of the Court of Appeal, it is necessary to begin with the decision of Young J (as his Honour then was) at first instance in Chittick v Maxwell (1993) 118 ALR 728.

In 1979, the Chitticks and the Maxwells agreed that the Chitticks could build a home on the Maxwells’ land. It was agreed that the Chitticks could stay on the land as long as they liked and, if they moved, then the Maxwells would purchase their improvements. In 1982, the Chitticks and the Maxwells entered into a deed prepared by Mr Maxwell, who was a solicitor, in relation to the Chitticks’ occupation of the land for at least 15 years from the date of the deed. No caveat was lodged to protect the Chitticks' interests.

Other than once being told by Mr Maxwell that there was a "temporary loan" about which they need not worry, the Chitticks were unaware of any mortgages over the property. However, Mr Maxwell repeatedly mortgaged the land without disclosing the Chitticks' interest to the various mortgagees or to the Chitticks. As Young J recorded (at 732), "the amount borrowed against the property was increased from time to time by Mr Maxwell to support his own business dealings".

A mortgagee eventually sold the land and the Chitticks had to leave. Mr Maxwell ultimately entered into a composition with his creditors. The Chitticks sued Mr Maxwell and his then law partners. They alleged, among other things, breach of fiduciary duty. One of the questions before the Court was whether Mr Maxwell's debt owed to the Chitticks survived his composition with creditors as a debt incurred by "means of fraud or a fraudulent breach of trust".

While Young J dismissed the Chitticks’ case insofar as it alleged that certain representations Mr Maxwell had made were fraudulent, his Honour concluded (at 736) that Mr Maxwell was liable to the Chitticks for breach of fiduciary duty. Section 240 of the BA provided that a composition with creditors released the debtor from all provable debts other than those (if any) that would not be released by the debtor's discharge from bankruptcy. His Honour concluded (at 740) that were it not for s 153(2)(b) of the BA, he would have been of the view that s 240 would have released Mr Maxwell from the Chitticks’ claim. Having earlier noted the decision in Emma Silver Mining that receiving a secret commission is a fraud from which a bankrupt is not released under s 153(2)(b), his Honour's conclusions on the effect of a discharge in this case were briefly stated (at 740):

Young J's view of Mr Maxwell's conduct is further illuminated by his Honour's treatment of another aspect of the case. Mr Maxwell's professional insurer, LawCover, sought to rely on an exclusion for damages "brought about the dishonest or fraudulent act or omission of the assured …". His Honour felt himself bound by authorities which gave "dishonest" a wide interpretation. In any event, his Honour concluded (at 749):

The judgment of the Court of Appeal was delivered by Mahoney JA, with whom Priestley and Powell JJA agreed. In upholding the decision of Young J, his Honour analysed what Mr Maxwell had done with a precision which is important for the present case (emphases added):

His Honour also found Mr Maxwell acted in breach of fiduciary duties which existed, among other things, in the context of a trust relationship (at 10-11):

Finally, his Honour expressed the Court's conclusion in relation to s 153(2)(b) (at 13) (emphasis added):

For completeness, I will set out the current law in the United Kingdom, where the legislative equivalent to s 153(2)(b) is provided for by s 281(3) of the Insolvency Act 1986 (UK):

In Mander v Evans [2001] 1 WLR 2378 (Mander v Evans), Ms Mander sought to recover loans of £140,000 that she had made to Mr Evans, who had been made bankrupt and subsequently discharged. Ms Mander asserted that the discharge was not applicable to the debts because they had been accrued by undue influence exerted by Mr Evans. Ferris J rejected Ms Mander’s claim on the basis that s 281(3) concerned actual fraud and did not extend to constructive fraud. No allegation of fraudulent breach of trust was raised. Ferris J stated:

Fraudulent breach of trust under s 281(3) was dealt with in Woodland-Ferrari v UCL Group Retirement Benefits Scheme [2003] Ch. 115 (Woodland-Ferrari). That case involved an application to set aside a statutory demand for the sum of £877,883.03 for maladministration of a pension scheme by Mr Woodland. After the breaches of trust were committed, Mr Woodland had been made bankrupt and subsequently discharged from bankruptcy. He claimed that the discharge included his liability to make good his breaches of trust.

Ferris J specifically considered whether dishonesty was required for the purpose of a fraudulent breach of trust under s 281(3). In doing so, Ferris J set out much of the legislative history of s 281, tracing its origins to the bankruptcy statutes of 1883 and 1914. His Honour held that, as it appeared in those statutes, fraudulent breach of trust required “deliberate conduct involving an element of dishonesty” (at [32]). Ferris J concluded at [50] that fraudulent breach of trust in s 281(3) required dishonesty as “an essential ingredient”.

The wider availability of discharge referred to by Michael Quilter at [95] above was taken into account by Ferris J in Woodland-Ferrari and formed part of the basis for his Honour’s overall conclusion that dishonesty was a required element of fraudulent breach of trust.

The analysis in Mander and Woodland-Ferrari was expanded by HHJ Barker QC in Templeton Insurance Ltd v Brunswick & Ors [2012] EWCH 1522 (Ch), finding:

HHJ Barker QC also set out the law on whether dishonesty for fraudulent breaches of trust was subjective or objective in nature:

It was submitted for Geoffrey that:

Counsel for Geoffrey submitted that as a consequence of Anthony’s default, Anthony (and HBSY as his assignee), are barred from claiming Anthony’s share under the Will. Four grounds were relied on:

Counsel for HBSY submitted:

It was submitted for Geoffrey in reply that the four grounds set out [X] above also defeat any defences based on proving in Anthony’s bankruptcy or Anthony’s discharge from bankruptcy:

HBSY pleaded reliance on s 153 of the BA. Geoffrey’s reliance in reply on s 153(2)(b) was not pleaded. At the hearing before me, counsel for HBSY contended that Geoffrey was not entitled to rely on s 153(2)(b) because it entails an allegation of fraud which must be properly pleaded. Counsel for Geoffrey contended that his reliance on s 153(2)(b) was confined to equitable fraud and did not require proof of state of mind. On that limited basis, I invited the parties to provide further written submissions addressing s 153(2)(b).

It was submitted for Geoffrey that:

It was submitted for HBSY in reply that there is no support in principle or authority for a construction of “fraud or fraudulent breach of trust” which encompasses all equitable fraud:

Geoffrey submitted in reply:

The Court concludes that Anthony acted as an intermeddler in his conduct with the Estate when he obtained the Montefiore Sum. This is because he took actions while named as an executor but without obtaining probate for the management of the Estate.

There will be occasions, as was submitted by Mr Smith for HBSY, where the actions of an individual are too trivial to constitute intermeddling. Holder is an example of this. However, the acts of Anthony went beyond those of the executor in that case. In Holder, the executor’s actions were confined to opening an account and signing off on nine small liabilities and a few insurances, all of which occurred in concert with the other executors. Importantly, the executor in Holder was found to have acted under the instructions of another executor (Danckwerts LJ at 397). Anthony acted of his own volition when he dealt with the Montefiore Sum (an amount which was by no means trivial as it represented more than two thirds of the Estate’s overall value) and with the Additional Sum. The extent to which anyone else was involved in the matter was limited.

This conclusion is fortified by the fact that Anthony knew he was named as executor in the Will, explicitly represented himself to Montefiore and the bank as an executor and, by his own admission, understood himself to be acting in that capacity. He gave evidence in his affidavit sworn 30 July 2020 that the only reason he sought to revoke that position was because he believed he was about to become bankrupt, which would have prevented him from being the executor. Anthony had every intention to act in that capacity and cannot now resile from it.

The effect of this is that, at the time he transferred the Montefiore Sum and the Additional Sum to the Lewis Securities Account, Anthony had all of the obligations of an executor, including the obligation to avoid any conflict of interest, not to misappropriate the assets of the Estate, and to act in concert with the other trustee (his father, Allan). He failed in those obligations.

The Court is also satisfied that Anthony’s conduct in transferring the Net Sum to the Lewis Securities Account was in breach of his duties as trustee. His explanation for having done so was twofold. First, the money constituted a loan to Lewis Securities. No loan agreement was provided as evidence though he claimed to have a written agreement to this effect. Second, the interest rate offered by Lewis Securities was higher than the Estate Account.

Anthony was a director and majority shareholder of Lewis Securities, which created an obvious conflict of interest. As the authorities set out in [43] above make clear, any purported intention by Anthony to benefit the Estate by transferring the funds is irrelevant. What matters is that Anthony held a personal interest which stood in conflict with the interests of the Estate.

Anthony also claimed that he opened the bank account without Allan because “my father said he was very ill, was not interested and said to me to look after it all, so I did” (Tcpt, 2 August 2021, p 23(8-9)). Anthony gave evidence that his understanding was that Allan “had really effectively resigned in practice” and “he was not interested in looking after any of the affairs of the estate” (Tcpt, 2 August 2021, p 24(16-19)). This may be an understandable explanation for his opening the bank account without Allan’s input, but it fails to explain adequately why he then proceeded to transfer the Net Sum unilaterally. If, as claimed by Anthony, there was loan documentation between the Estate and Lewis Securities that had been provided to the liquidators, that documentation should have borne Allan’s signature. Instead, from the most benign perspective Anthony effectively gave himself a loan or, from the less indulgent perspective which should be applied to trustees, he misappropriated the Net Sum for his own benefit through his company Lewis Securities.

As an intermeddler, Anthony’s renunciation of his position as executor was ineffective and, if called upon, he would be liable to resume his duties. This is relevant to the question dealt with below at [142] of whether Anthony (or HBSY as his assignee) may participate in the Estate. However, it is of no relevance to the question of any breach of trust because the renunciation occurred after Anthony transferred the Net Sum to the Lewis Securities Account.

Having breached his obligations as trustee, Anthony is liable to account for the breach.

The Court has determined that mutual set-off under s 86 does not because a beneficial entitlement under a will is not a ‘dealing’ for the purposes of that provision.

Mr Smith on behalf of HBSY directed the Court’s attention to the joint judgment of the High Court in Gye v McIntyre where their Honours stated at 625:

While the provision refers to ‘mutual credits’ and ‘mutual debts’ these are to be properly understood as having arisen from dealings: Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (In liq) (Recrs and Mgrs Apptd) (2018) 53 WAR 325; [2018] WASCA 163 at [88] (Hammersley Iron v Forge Group Power). Where the dealings are themselves not of a business or commercial nature, it follows that the debts and credits they give rise to do not fall within the ambit of s 86. An entitlement to residue under a will is not, in any ordinary sense, of a business or commercial nature. It is a unilateral act – a gift – by one party to the benefit of another and cannot be considered a dealing. The equitable principles must be considered in this case in lieu of statutory set-off.

Each of the equitable principles relied on in this case by Geoffrey may be neatly summarised by the equitable maxim: those who seek equity must do equity.

To the extent the principles differ, Re Dacre and Morris v Livie deal with matters involving defaulting trustees. As a general observation, the rule in Cherry v Boultbee applies to ordinary debtors and not defaulting trustees. In Re Dacre, Lord Cozens-Hardy MR (Phillimore and Warrington LJJ agreeing) took the view that it was unnecessary to rely on Cherry v Boultbee in cases involving a defaulting trustee (at 347).

Equity may look upon a defaulting trustee who seeks to claim a beneficial entitlement more severely than a mere debtor. So much was accepted by HBSY in its written submissions. Regarding the equitable principles relating to defaulting trustees, Professor HG Hanbury QC in Modern Equity (Steven & Sons Limited, 8th ed, 1962 – the last edition under his editorship) stated (at 302-303):

Putting that difference aside for now, the effect of these principles on Anthony’s interest in the Estate is:

The principles dealing with defaulting trustees have wider application in respect of assignees than Cherry v Boultbee. They do not necessarily require notice but do require that the assignor was a trustee at the time of assignment (R Derham at [14.80]). As an intermeddler, Anthony’s revocation of his status as executor was ineffective. He has never truly ceased to be an executor and HBSY took the interest subject to the equitable principles. For the sake of completeness, the validity of the assignment was not contested in this case.

There are two critical bases on which HBSY claims that the equitable principles do not apply in this case:

Each of these objections is dealt with next.

It is clear that the rule in Cherry v Boultbee cannot be relied on where the creditor elects to obtain the debt through other means, most commonly where the creditor proves in the debtor’s bankruptcy (Otis at [120(3)] above). It is less apparent whether these restrictions apply to the principles affecting defaulting trustees (R Derham at [14.85] referred to above at [54]).

There is good reason why waiver should not be too strictly applied where the equitable principles operate, particularly with respect to defaulting trustees. The concern of the equitable principles is not so much to compel the debtor to repay but to prevent them from unconscionably obtaining a benefit. Professor Hanbury stated in relation to the rule in Cherry v Boultbee at 46:

This statement was referred to with approval by the NSW Court of Appeal in Gray v Gray [2004] NSWCA 408 at [98] (Young CJ in Eq; Sheller and Bryson JJA agreeing).

Palmer J in Otis (at [58]) adopted the following statement of Young CJ in Eq in Borda v Burgess [2003] NSWSC 1171 at [70]:

The necessary elements of an election were set out by Palmer J in Otis:

The rights as described by Palmer J were those arising out of a contract but are nevertheless of broad application.

Geoffrey sought to prove in Anthony’s bankruptcy but withheld the amount to which Anthony was beneficially entitled under the Will. Anthony’s bankrupt Estate declared a nil dividend and nothing was recovered. In the Court’s view, this is not an unequivocal communication that Geoffrey sought to prove in bankruptcy to the exclusion of the equitable principles. Rather, it seems to be a lay attempt at preserving it, but is nonetheless effective for that. On that basis, Geoffrey has not relinquished his right to rely upon the equitable principles.

However, the right to recover the debt from Anthony was waived to the extent the Estate sought to prove in Anthony’s bankruptcy (being $300,000.00) and the dividends already received from Lewis Securities (being $85,662.74). The remainder is still owing and is subject to the equitable principles.

Discharge by a bankrupt clearly extinguishes liability with respect to the rule in Cherry v Boultbee: Re Sewell at 808 (Parker J); Re Hurburgh at 47-9 (Crawford J). As with waiver discussed directly above, it is less certain whether discharge assists a defaulting trustee under Re Dacre and Morris v Livie. The rationale for this is stated by R Derham at [54] above. If that is so, then s 153(2)(b) is of no assistance to HBSY. However, the authorities above at [60] to [110] (and especially at [78]) make plain that the words “breach of trust” should be applied broadly and given their ordinary meaning. Equitable debts incurred by defaulting trustees would fall within the provision.

Because the Court is satisfied that s 153 operates against debts incurred by breach of trust, it falls to consider the meaning of “fraudulent breaches of trust” under s 153(2)(b).

Before turning to a wider discussion of the question of the construction of s 153(2)(b), it is convenient to set out what I understand to be the ratio of Maxwell which is binding upon me in this case and why I am satisfied that, applying Maxwell, Mr Lewis' conduct in this case gives rise to a debt incurred "by means of fraud or a fraudulent breach of trust" to which Mr Lewis was a party. In doing so, I accept Geoffrey’s submission that Maxwell is the authority which I should follow.

In my respectful view, the passages which I have emphasised in [108] and [110] above demonstrate that Maxwell is authority for the proposition that fraud in the equitable sense, i.e. not requiring the defendant to have an actual intention to defraud the plaintiff, will meet the description "fraud or a fraudulent breach of trust" for the purposes of s 153(2)(b). The fact Mahoney JA did not seek to draw a distinction between "fraud" and "fraudulent breach of trust" in terms does not detract from that conclusion and I consider myself bound by the reasoning and that result.

In the present case, there can be no doubt that Mr Lewis, as an executor de son tort, held both the Montefiore Sum and the Additional Sum as a trustee who owed duties to the Estate. As such, he was precluded from making his position a means of obtaining a personal profit or benefit or conferring such a benefit on a third party, including not to engage in transactions in relation to which there was a conflict between his personal interest and his duty to the Estate.

By his dealing with both the Montefiore Sum and the Additional Sum in depositing them into the Lewis Securities Account, being the account of a company which was in effect his, Mr Lewis breached those duties. As far as equity is concerned, it is irrelevant that he was unaware he was breaching his duties or that he hoped that there would be a benefit to the Estate. His subjective beliefs are irrelevant: Emma Silver Mining. If his state of mind were relevant, it would be determined by objective standards. He committed a further breach, in the nature of a deceit, by not informing his fellow executor of what he was doing, as I discuss further below. Nor is this conclusion affected by the fact that the funds were paid to Lewis Securities, which as a matter of law was a third party. What Mr Lewis did falls precisely within Kekewich J's description of "fraud" in a proposition which was not overturned by the Court of Appeal (Smith at 11):

In short, the Court has no difficulty in concluding that Mr Lewis, at the very least, speculated with money that was not his. As I have already observed, the fact that he may have subjectively seen nothing wrong with it or hoped that it would be to the benefit of the Estate is irrelevant. Mr Lewis thereby engaged in conduct which was fraudulent in the equitable sense, and applying Maxwell, the Court finds therefore gave rise to a debt to the Estate which was "incurred by means of fraud or a fraudulent breach of trust to which [Mr Lewis] was a party" for the purposes of s 153(2)(b).

Against the possibility this matter may go further, I should also record that I would have reached the same conclusion even if I were not bound by Maxwell. The Australian authorities set out at [96] to [110] above do not provide a neat answer. Kennedy J in Cornelius v Barewa Oil took the view that only actual fraud would enliven s 153(2)(b). In the same case, Burt CJ noted but did not decide the point and Wickham J did not consider it at all. In contrast, the joint judgment of the NSW Court of Appeal in Maxwell found an equitable fraud that satisfied s 153(2)(b) in the form of both deceit (not telling the mortagees of the Chitticks’ interest and vice versa) and by taking actions which privileged the trustee’s interests over those of the beneficiaries (by Mr Maxwell mortgaging the land for his own benefit).

The modern United Kingdom authorities are unequivocal that what is necessary for fraudulent breaches of trust is actual fraud by way of deliberate conduct involving dishonesty (at [115]-[116] above). This aligns with the rehabilitative purposes of that statute. The standard by which dishonesty is to be ascertained is largely based on the objective circumstances rather than the subjective belief of the defendant.

The discharge provisions of the Australian and United Kingdom bankruptcy laws are of common origin. The development of those provisions has, at least to some extent, been indicative of a more merciful approach to debtors over time (see Michael Quilter at [95] above). However, the Court is mindful that the words ‘fraud’ and ‘fraudulent’ as they appear in s 153(2)(b) have been given broad interpretation: Maxwell at [162] above. Fraudulent breaches of trust will include deceit which can be ascertained from the objective circumstances. It will not include breaches of trust that the Court is satisfied are totally innocent.

The Court accepts Mr Smith’s submission that some guidance can be found in the interpretation of similar provisions. Although s 69(1) of the Trustee Act 1925 (NSW) was repealed, I do not overlook the High Court’s obiter consideration of the term “fraud or fraudulent breach of trust” as it then appeared in that statute. In Banque Commercial SA v Akhil Holdings, Mason CJ and Gaudron J stated (at 286) (emphasis added):

However, with great respect, their Honours’ observation does not assist in determining on which side of the line a breach of trust should fall that was more than innocent and less than fraudulent (knowingly dishonest). That was not a matter they had to consider.

It is uncontroversial that a trustee who, believing they are acting for the benefit of the trust, may engage in an honest breach by making an unauthorised or improvident investment. The case is different where the investment was made in circumstances in which there was a clear conflict of interest. Anthony was the controlling mind of Lewis Securities. He appropriated the Net Sum by depositing it into the company’s account some six weeks before the company entered voluntary administration. He now says this was done pursuant to a written loan agreement between Lewis Securities and the Estate, but no documentary evidence was provided to the Court. Even if such a loan agreement existed, it would have been executed by Anthony or Allan.

Anthony attested to his state of mind at the time he made the transfer, claiming “I did not think [Lewis Securities] was at risk of insolvency”. He claimed that Marjorie had invested in Lewis Securities previously and the Will allowed for the funds of the Estate to be invested. However, Marjorie’s largest deposit was for an amount less than half the Net Sum which was made in 2004. Irrespective, Anthony had an obvious conflict of interest by investing the monies – an amount that constituted almost the whole of the Estate – in his own company.

It is the extent of that conflict and the element of personal benefit - like Mr Maxwell mortgaging the property in Maxwell - which convinces the Court that Anthony conducted himself in a manner that was a fraudulent breach of trust within the meaning of s 153(2)(b). The impropriety of his actions goes beyond mere innocent error or negligence. As I have already observed, on any ordinary view of what occurred, when Anthony transferred the money to his company this was tantamount to putting the money in his own pocket. His conduct (his state of mind or subjective beliefs being irrelevant) was plainly unconscionable so as to be fraudulent in equity.

This conclusion is fortified by the fact that Anthony failed to advise or include Allan, as his co-trustee, in the transaction. Geoffrey said that Allan (who is deceased) never knew about the deposit of the Net Sum into Lewis Securities’ account. He claimed Allan said words to him to the effect of:

Anthony stated that he did not “believe” such a conversation ever occurred between Geoffrey and Allan because Allan was not a savvy investor, implying that Allan’s understanding of investing was insufficient to make such a comment. He did not deny that he never included Allan in the transfer of the Net Sum nor sought his consent. The Court finds that Anthony never told Allan what he (Anthony) had done with the Net Sum.

The Court notes that Anthony claimed to have formed the impression that Allan did not want to be involved in the administration of the Estate (see: [132] above). However, his impression forms part of the broader picture in which Anthony unilaterally took the Estate funds for his own benefit. Had any written loan agreement existed (as was suggested by Anthony under cross-examination) that document should, at the very least, have borne Allan’s signature. In lieu of that, Anthony has taken advantage of his position as trustee and his father’s purported disinterest to misappropriate the funds for himself.

As I have observed, with the exception of the unequivocal requirement in the United Kingdom that dishonest intent must be proven because of the word “fraudulent”, consideration of the history of the section, the older English authorities and the Australian cases including Maxwell when taken together do not yield a completely clear or consistent answer on what "fraudulent" means in the expression "fraudulent breach of trust". All of the authorities that have dealt with the issue are consistent about one thing only, namely that it does not include conduct which is innocent or inadvertent.

One of the difficulties in this field of discourse is that in ordinary usage "dishonest" and its cognates are used as synonyms for "fraudulent' and its cognates. So much will become apparent from comparing the definitions of those words in any dictionary.

However, in engaging in the exercise of statutory construction to construe the words "fraud" or "fraudulent breach of trust" in s 153(2)(b), in my respectful view the starting point must be to recognise that fraud at common law and in equity can mean different things in different legal contexts. I respectfully adopt this convenient summary by Leeming JA (Beazley P agreeing) in Nadinic v Drinkwater (2017) 94 NSWLR 518; [2017] NSWCA 114:

The distinction must be taken to be settled law. For example, a unanimous High Court said (albeit in a statutory context) that establishing equitable fraud "does not require that an actual intention to cheat must always be proved": Polyaire Pty Ltd v K-Aire Pty Ltd (2005) 221 CLR 287; [2005] HCA 32 at [35]."

Furthermore, what may constitute fraud in equity and its consequences in terms of relief may be different depending upon the equitable doctrine that is invoked. This issue is touched upon in Phang, A, "Equitable Fraud - some personal reminisces and reflections", (2019) 13 J Eq 114.

With the greatest of respect, the position adopted in the United Kingdom leaves “fraudulent breach of trust” with no work to do. I accept Mr Menadue’s submission to that effect if the Court were to construe “fraudulent” as finding its meaning by reference to the earlier reference to “fraud”. As I next explain, it is to be understood by reference to “breach of trust”.

At the time of the 1849, 1869 and 1883 Bankruptcy Acts in the United Kingdom, and as is demonstrated by the 19th century decisions to which I have referred above, the distinction between common law and equity was well understood. In my respectful view, given its antecedents and as a matter of ordinary construction, s 153(2)(b) must be construed by giving effect to both the disjunctive “or” and the fact that “fraudulent” is part of the collocation “fraudulent breach of trust” where breach of trust is a creature of equity. As such, the fraud in “fraudulent breach of trust” must at least include fraud as understood in equity, otherwise it would add nothing to “fraud” (in the common law sense). As the cases demonstrate, there may be factual situations where the trustee’s conduct will constitute both fraud in its common law sense and in equity. However, in my opinion the proper construction of s 153(2)(b) compels the conclusion that the section comprehends breaches of trust that are “fraudulent” in the equitable sense but may not satisfy the common law definition of fraud.

In such cases, proof of the defendant's state of mind is irrelevant. This is such a case because Mr Menadue confined his case to equitable fraud that did not require proof of Anthony’s state of mind. Anthony was in a position of trust. He breached that trust. The Court is satisfied that his breach was not innocent or inadvertent. For example, Anthony did not make an impermissible investment with a reputable and substantial financial organisation unrelated to him acting on legal advice that he was entitled to do so. The element of conflict of interest and using money that was not his for potential personal benefit by being deposited with his own company are enough to constitute breach of trust that is fraudulent in the equitable sense. That conclusion is only fortified by his deceitful failure to inform his co-executor of what he was doing. On this analysis (which assumes that I am not bound by Maxwell) the Court also concludes that the debt owed by Anthony to the Estate survives his discharge from bankruptcy.

Anthony was not released from his debt to the Estate upon his discharge from bankruptcy. The cross-claim is upheld so that Anthony’s beneficial interest in the Estate is unable to be claimed by HBSY as assignee until repayment of the remainder of the debt.

That debt, still owing, attracts the intervention of the equitable principles. HBSY as assignee of Anthony’s interest is unable to receive any funds from the Estate until the breach is made good. That can be achieved either by the Estate receiving the Net Sum less Anthony’s entitlement or by repaying the entire Net Sum, at which time HBSY may acquire Anthony’s interest.

The parties will be given an opportunity to bring in orders to give effect to these reasons. Costs should follow the event, subject to any further application by either party. Furthermore, unless some reason is advanced against this, the stayed statement of claim should now be dismissed with costs.