Willcocks v Croft

1. [1]

   HER HONOUR: There are two notices of motion before the Court, one by each party.

2. [2]

   By notice of motion filed 12 November 2019, the plaintiff seeks an order that leave be granted to file a proposed second further amended statement of claim (“P2FASC”).

3. [3]

   By notice of motion filed 10 July 2020, the sixth and seventh defendants seek an order that the further amended statement of claim filed by the plaintiff on 24 April 2018 (“FASC”) be dismissed pursuant to r 13.4 of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) as against them, or in the alternative, that the FASC be struck out as against them pursuant to UCPR 14.28.

4. [4]

   The plaintiff is Mark Willcocks. The first defendant is Bernard Croft (“Croft”). The sixth defendant is Deloitte Tax Services Pty Ltd (“Deloitte”). The seventh defendant is Joshua Cardwell (“Cardwell”).

5. [5]

   The plaintiff has settled proceedings as against the first to fifth defendants. The parties relied on a joint court book of 9 volumes (“CB”) and lengthy submissions.

Summary judgment and summary dismissal

1. [6]

   In seeking summary dismissal, the defendants rely upon UCPR 13.4 and 14.28. They read:

2. [7]

   UCPR 14.28 enunciates grounds upon which a defective pleading may be struck out, while UCPR 13.4 focuses on the weakness of a party’s case rather than the defects of a pleading: Brimson v Rocla Concrete Pipes Ltd [1982] 2 NSWLR 937 (“Brimson”).

3. [8]

   Where the court is asked to summarily dismiss a plaintiffs case, the fundamental principle is that prima facie a plaintiff is entitled to have their case come to trial and that an application to deprive them of that right will succeed only in the clearest of cases: see Brimson at 944. Usually, a party is not to be denied the opportunity to place their case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. Therefore the defendants’ application needs to be approached upon the basis that the power to make such an order should be sparingly employed: Dey at [91]; General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129 (“General Steel”); Webster v Lampard (1993) 177 CLR 598 at 602-603 (“Webster”).

4. [9]

   The test to be applied by a court when considering summary dismissal is clear. It has been variously expressed as a claim being “so obviously untenable that it cannot possibly succeed”, “manifestly groundless”, or “so manifestly faulty that it does not admit of argument”: General Steel at 128-129. The test is not whether the plaintiff would probably fail in his action against the defendants, but whether the material before the Court demonstrates that the action should not be permitted to go to trial in the ordinary way because it is apparent that it must fail: Webster at 602.

5. [10]

   Consequently, for a summary dismissal application to succeed, a high degree of certainty is required about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way. See: Agar v Hyde (2000) 201 CLR 552 at 575-576 (“Agar”)). It must be a clear case with no real question of fact or law to be determined: Dixon J in Dey v Victorian Railway Commissioners (1949) 78 CLR 62 at 91 (“Dey”)

6. [11]

   The mere fact (if it be the case) that a plaintiff’s prospects of success might be characterised as slim would not be enough to strike out a pleading: Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241 at 271 (“Esanda”); Preston v Star City Pty Ltd [1999] NSWSC 1273 at [31] (“Preston”). The question for determination is whether a reasonable cause of action is disclosed, that is a cause of action which has some chance of success, or which could conceivably give the plaintiff a right to relief, or which, although weak, is properly debatable and has some apparent legitimate basis if the facts upon which it is alleged to be based are made good: Preston at [37].

7. [12]

   By bringing an application for summary dismissal, the defendants undertake the burden of establishing that there is no triable issue: Wickstead v Browne (1992) 30 NSWLR 1 at 11 (“Wickstead”).

8. [13]

   It is my view that I should take the plaintiff’s case at its highest. To do so the where there are discrepancies between the FASC and the P2FASC, the P2FASC is the pleading to which I will refer.

9. [14]

   The defendants submitted that the proceedings should be summarily dismissed as the claims advanced in the FASC were time barred when filed, and the new claims propounded in the P2FASC were also time barred. The defendants further submitted that none of the claims are assisted by operation s 55 of the Limitation Act 1969 (NSW) (“the Limitation Act”) as the information the plaintiff suggested was concealed was in his knowledge for at least 7 years.

10. [15]

    The defendants also submitted that this Court should exercise its discretion and not grant the plaintiff leave to file the P2FASC as it would cause them prejudice given the delay in bringing the claims and the lack of explanation for that delay.

11. [16]

    The plaintiff submitted there are three particular matters which make this case inappropriate for resolution on a summary dismissal basis.

12. [17]

    First, the questions about when the fraud/deceit and/or fraudulent concealment were reasonably discoverable involve questions of fact and law of some complexity.

13. [18]

    Secondly, the limitation periods in respect of the non-fraud claims is subject to s 55 of the Limitation Act and the question of fraudulent concealment, such that even if it could be concluded on a summary basis that loss was first suffered in relation to the non-fraud claims more than 6 years prior to commencement of the proceedings, the claims would necessarily still be in issue at the final hearing via the fraudulent concealment allegation.

14. [19]

    Thirdly, in any event, the question of when loss was first suffered in relation to the non-fraud claims is also attended by some difficulty and complexity both factually and legally.

The key evidence

1. [20]

   The plaintiff relies on the following affidavits to demonstrate there is an arguable cause of action premised by fraud, the tort of deceit, and breach of fiduciary duty against Cardwell and Deloitte:

   1. (1)

      affidavit of Mark Willcocks of 28 November 2018 (“Willcocks Aff 28/11/18”) (CB, Vol 3, p 2340);

   2. (2)

      affidavit of Bernard Croft of 18 February 2019 (“Croft Aff 18/2/19”) (CB, Vol 4, p 2907);

   3. (3)

      affidavit of Joshua Cardwell of 22 March 2013 ("Cardwell Federal Court Aff”) (CB, Vol 6, p 4270) 27 February 2019 (“Cardwell Aff 27/2/19”) (CB, Vol 5, p 3525) and;

   4. (4)

      expert reports of Scott McGill of 3 August 2017 (“McGill Report 3/8/17”) (CB, Vol 1, p 680) and 17 June 2019 (“McGill Report 17/6/19”) (CB, Vol 2, p 1169);

   5. (5)

      valuation of Active Group Holdings Pty Ltd (“AGC”) by Leadenhall dated 20 June 2019 (CB, Vol 9, p 6954); and

   6. (6)

      affidavit of Guy Moloney, the plaintiff’s solicitor, dated 14 October 2020 (“Moloney Aff 14/10/20”) (CB, Vol 5, p 3561).

2. [21]

   The defendants relied upon the following evidence:

   1. (1)

      affidavits of solicitor, Robert McGregor, affirmed 12 November 2019 (“McGregor Aff 12/12/19”) (CB, Vol 1, p 479), affirmed 17 March 2020 (“McGregor Aff 17/3/20”) (CB, Vol 1, p 483), and affirmed 20 November 2020 (“McGregor Aff 20/11/20”) (CB, Vol 1, p 503);

   2. (2)

      Moloney Aff 14/10/20

   3. (3)

      affidavit of Tara Phelan, the defendants’ current solicitor, sworn 10 July 2020 (“Phelan Aff 10/7/20”) (CB, Vol 1, p 518).

Factual Background

1. [22]

   I have largely adopted the plaintiff’s background some of which is uncontroversial. The reason for this approach is to take the plaintiff’s case at its highest. Over the two days of hearing of these notices of motion, I was taken to the particular portions of the relevant documents in evidence. I have referred to some relevant parts of them.

2. [23]

   These proceedings concern claims against the plaintiff’s former advisers in respect of a number of transactions involving Active Tree Services Pty Limited (“ATS”), which is, and at all material times has been, a valuable company which conducts an extensive and profitable commercial tree pruning business.

3. [24]

   One set of defendants (referred to as the ‘Croft defendants’) is comprised of the plaintiff’s personal accountant, Croft, and his associated partnerships and companies. The second set of defendants is comprised of a specialist tax adviser, Cardwell, and his employer, Deloitte.

4. [25]

   In February 2017, these proceedings in this Court were initially commenced against the Croft defendants. On or about 24 April 2018, Cardwell and Deloitte were joined to the proceedings under the FASC.

5. [26]

   As stated earlier, the plaintiff has since settled with the Croft defendants, so the only claims in issue are those against Cardwell and Deloitte.

6. [27]

   Prior to about mid-2004, the plaintiff beneficially owned all 10 of the shares on issue in ATS. He was the registered holder of 9 shares and the remaining share was held on trust for him by his father, Mr Richard Willcocks (“the plaintiff’s father”).

7. [28]

   The 9 shares which the plaintiff held directly were ‘pre-capital gains tax’ (“CGT”) assets. That is, because the plaintiff had acquired them prior to 20 September 1985, he could dispose of them - all other things being equal - without attracting capital gains tax. Given that ATS had grown since the issue of the shares and was expected to continue to grow, the shares’ pre-CGT status was very valuable to the plaintiff. The remaining share held on trust for the plaintiff by the plaintiff’s father was not a pre-CGT asset.

8. [29]

   On 27 March 2003, the plaintiff sought Croft’s advice in relation to the proposed separation of ATS’ residential business from its retail/government business (“proposed separation”).

9. [30]

   In May 2003, Croft contacted Cardwell seeking his advice in relation to the proposed separation. On 5 June 2003, a letter of engagement was sent from Cardwell to Willcocks. On 24 July 2003, a meeting between Croft and Cardwell took place. In July/August 2003, Cardwell provided written advice.

10. [31]

    On 15 September 2003, Cardwell and Cross spoke again (the “15 September 2003 Conversation”). There is no dispute as to whether the pair spoke on this date, however much of the content of their conversation is disputed.

11. [32]

    The plaintiff alleges that in the 15 September 2003 conversation:

    1. (1)

       he orally retained Cardwell/Deloitte (via Croft) to advise on how to restructure ATS by interposing a holding company between ATS and its shareholders (“the interposition”), to protect ATS’ assets from potential creditors and to preserve the pre-CGT status of the plaintiff’s ATS shares; and

    2. (2)

       Cardwell/Deloitte advised Croft that there were tax advantages to be obtained by the plaintiff electing to obtain rollover relief in accordance with s 124-G of the Income Tax Assessment Act 1997 (Cth) (“Tax Act 1997”) if a new company was created as part of an asset protection strategy.

12. [33]

    The plaintiff alleges that in this conversation, Cardwell/Deloitte negligently failed to advise Croft that a critical step in this process was to ensure that there was an issue of shares in the new company in return for the cancellation of the plaintiff’s shares in ATS.

13. [34]

    The defendants agree that Croft and Cardwell discussed ATS’ restructure, and in particular the interposition. However they deny that this discussion created a retainer, and suggest that it was merely a high level/conceptual discussion devoid of any detail.

14. [35]

    Although the precise nature and scope of the advice and assistance given by Cardwell and Deloitte is in issue, it is apparent that Croft had very limited knowledge and competence in relation to tax matters and structuring (as he admitted in a number of emails) and deferred to Cardwell as the expert in such matters.

15. [36]

    An interposition is a corporate restructure which places a new company between an asset rich trading company and potential future creditors in a tax neutral fashion. It involves the following steps:

    1. (1)

       The original shareholders of an asset rich company, X, want to protect their assets, so they establish a new company, Y, with a nominal shareholding. Y then acquires a small parcel of shares in X.

    2. (2)

       The original shareholders then exchange the pre-CGT shares they own in X for shares in Y.

    3. (3)

       X then cancels the original shares, and Y records a credit in its share capital account which is equivalent to the value of the shares in X which have been cancelled. This will usually involve a valuation of the shares in X.

    4. (4)

       The original shareholders seek rollover relief under s 122-A and s 124-G of the Tax Act 1997 when they file their next tax return in order to maintain the pre-CGT status of their investment.

16. [37]

    One of the benefits of an interposition from the plaintiff’s perspective was to provide a degree of asset protection in the event that claims for property damage or personal injury were brought against ATS. However, a critical objective was to ensure that the benefit of the existing CGT status attaching to the 9 ATS shares directly held by the plaintiff was not lost.

17. [38]

    As suggested above at [36](4), the CGT regime at the time provided “rollover relief” for such transactions whereby the benefit of the existing “pre-CGT” status could be preserved if certain requirements were met.

18. [39]

    In order to obtain rollover relief under subdivision 124-G of the Tax Act 1997, it was necessary for the following to be satisfied (see Tax Act 1997 s 124-370(1)):

    1. (1)

       the interposed company must acquire no more than 5 shares in the original company;

    2. (2)

       these must be the first shares that the interposed company acquires in the original company;

    3. (3)

       a member of the original company and at least one other entity (the exchanging members) must own all the remaining shares in the original company;

    4. (4)

       the original company must redeem or cancel those remaining shares; and

    5. (5)

       each exchanging member must receive shares (and nothing else) in the interposed company in return for their shares in the original company being redeemed or cancelled.

19. [40]

    Between September 2003 and March 2004, the plaintiff and Croft took a number of steps towards effecting the interposition. Cardwell says he heard nothing from the plaintiff or Croft during this period, which is disputed by the plaintiff.

20. [41]

    There is a degree of uncertainty about the precise dates on which particular steps occurred. This is because Croft admitted when giving evidence in the Federal Court that he had backdated at least some documents. It is not disputed that these backdated documents were signed by Mr Willcocks.

21. [42]

    The steps taken were:

    1. (1)

       on or about 25 September 2003, the plaintiff and Croft incorporated a new company, Actwill Holdings Group Pty Ltd (“AGH”) with 10 shares on issue at an issue price of $1 each. The plaintiff was issued 9 of those shares for $9, and the plaintiff’s father was issued 1 of those shares for $1;

    2. (2)

       on each of 16 December 2003, 5 and 7 January 2004, together with an unidentified date post 15 January 2004, the plaintiff says he executed various documents prepared by Croft pertaining to the interposition; and

    3. (3)

       on or about 5 January 2004:

    4. (4)

       on or about 29 January 2004, the plaintiff’s 9 shares in ATS were cancelled.

    5. (5)

       between 29 January 2004 and 9 February 2004, Croft corresponded with ASIC on the plaintiff’s behalf concerning the interposition.

    6. (6)

       ASIC forms recording the interposition were lodged with ASIC on various occasions (sometimes with incorrect details which were later corrected).

22. [43]

    This sequence of steps did not satisfy the requirement in s 124-370(1)(e) of the Tax Act 1997 that the plaintiff and his father receive their shares in AGH in return for the redemption or cancellation of their ATS shares. Instead, the plaintiff and his father received their shares in AGH in return for the $1 per share issue price.

23. [44]

    On the basis that ATS was valued at about $48.7 million at the time (which is the plaintiff’s evidence), in order for the interposition to have been correctly carried out, 48.7 million $1 shares in AGH should have been issued to the plaintiff and his father in consideration for the cancellation of their shares in ATS. This missing step never occurred. Instead, there were only ever 10 x $1 shares issued in AGH.

24. [45]

    There is a further issue with the interposition, which is referred to in the evidence, as to whether there were two exchanging entities so as to satisfy s 124-370(1)(c) of the Tax Act 1997. The issue was whether the plaintiff’s father was an ‘independent entity’ in circumstances where he held the share on trust for the plaintiff. The plaintiff’s case is that there were two exchanging entities and the expert evidence served by the plaintiff supports that proposition: see McGill Report 17/7/19 at [106]-[109].

25. [46]

    The plaintiff has provided a chronology and a helpful diagram showing the interposition as it was done and as it should have been done. See: CB Vol 9, Tab 29

26. [47]

    On 24 March 2004, Cardwell attended a meeting with Croft and the plaintiff (“24 March 2004 Meeting”). The plaintiff’s allegations concerning the 24 March 2004 Meeting are pleaded at [29] and [29A] of the FASC, where the plaintiff alleges that:

27. [48]

    Croft made a filenote of this meeting (“24 March 2004 Filenote”)(CB, Vol 5, p 3014).

28. [49]

    On 27 April 2004, Croft sent Cardwell a letter attaching documents pertaining to the interposition (“27 April 2004 Letter”). The letter reads:

29. [50]

    The attachments to the letter included an extract of subdivision 124-G of the Tax Act 1997. The requirements for rollover relief are set out at ss 124-370, 124-375 and 124-380. In the version sent to Cardwell in the 27 April 2004 letter, Croft had applied a handwritten tick to each of the requirements, including the requirement at 124-370(1)(e) that “each exchanging member receives shares (and nothing else) in the interposed company in return for their shares in the original company being redeemed or cancelled)” (“Legislation Extract with Ticks Only”) (CB, Vol 2, p 912). At that point, Croft’s state of mind is apparently that the requirements for rollover relief are satisfied.

30. [51]

    In the 2PFASC the plaintiff alleges that Croft did not receive a response to the 27 April 2004 letter and failed to pursue a response. This is disputed by the defendants who plead in their defence that Cardwell spoke to Croft on 5 May 2005 about the documents attached to the 27 April 2004 letter. The defendants say Cardwell made a note of his conversation with Croft some 7 days later on 5 May 2004 (“5 May 2004 Filenote”). The plaintiff disputes that the 5 May 2004 Filenote is a record of a conversation between Cardwell and Croft.

31. [52]

    On 5 May 2004, Croft lodged various forms and documents with ASIC, recording that the interposition had taken place in December 2003. There were numerous problems with these forms. The problems included, critically, that a declaration of trust (concerning the shares held by the plaintiff’s father) had been backdated, which the plaintiff says gave rise to a risk (about which he was not told), that:

    1. (1)

       the interposition would be seen by the Commissioner of Taxation (“the Commissioner”) as a divestment of the plaintiff’s interest in ATS, for which rollover relief would not apply, meaning that thereafter the plaintiff’s shares in AGH would (if sold) be subject to capital gains tax; and

    2. (2)

       the Commissioner would consider that the interposition, formation of the consolidated tax group and subsequent return of capital was one transaction and fell within the definition of a ‘scheme for obtaining a tax benefit’ within the meaning of s 45B of the Income Tax Assessment Act 1936 (Cth) (“Tax Act 1936”).

32. [53]

    On 5 May 2004, Cardwell reviewed the documents attached to the 27 April 2004 letter, including the Legislation Extract with Ticks Only, and made a filenote of his review (CB, Vol 3, p 1668).

33. [54]

    The 5 May 2004 Filenote reads:

34. [55]

    The 5 May 2004 Filenote describes the two concerns held by Cardwell on 5 May 2004 which he later described at [34] of the Cardwell Aff 27/2/19 being:

    1. (1)

       the contents of page 4 of 9 of the Form 484 prepared by Croft states that the 10 shares in ATS are cancelled with the consideration being $2, whereas the consideration needed to be shares in AGH; and

    2. (2)

       the problem that there was only 1 beneficial shareholder in ATS.

35. [56]

    I accept there is a dispute as to whether the 5 May 2004 Filenote is a record of the conversation with Croft which Cardwell refers to in Cardwell Aff 27/2/19 at [35]. The 5 May 2004 Filenote itself makes no reference to Croft and does not purport to be a record of a conversation. On its face, it records Cardwell’s notes of his review of the documents provided under cover of the 27 April 2004 letter. Further, Cardwell himself says only that the 5 May 2004 Filenote was a note of his review of the documents; he does not suggest it was a contemporaneous note of his conversation with Croft (Cardwell Aff 27/2/19, at [33] (CB, tab 4, p67)). The submissions for Cardwell and Deloitte assert a conclusion which is at odds with the evidence and, even if were not, would be a disputed question of fact which can only be resolved at trial.

36. [57]

    In the 2PFASC the plaintiff alleges that Cardwell’s next and final relevant involvement with the plaintiff/Croft occurred a year later in a meeting held on 27 May 2005 (“27 May 2005 Meeting”).

37. [58]

    The plaintiff’s allegations concerning the 27 May 2005 Meeting are:

    1. (1)

       prior to the 27 May 2005 Meeting, the plaintiff had asked Croft to consider whether a payment from AGH to the plaintiff as a return of capital was a good idea and had asked Croft to give the plaintiff advice on that subject;

    2. (2)

       during the 27 May 2005 Meeting, Cardwell/Deloitte and Croft each told the plaintiff that, once ATS and AGH had formed a consolidated tax group, ATS could pay a $48.7m dividend to AGH, following which AGH could pay the plaintiff $10m as a capital reduction which would not be subject to tax.

38. [59]

    The content of this discussion is disputed.

39. [60]

    On 27 May 2005, Croft sent an email (“27 May 2005 Email”) to Cardwell which again attached the Legislation Extract with Ticks Only and stated: (CB, Vol 2, p 966):

40. [61]

    This email indicated that Croft had a doubt as to whether the interposition had been correctly completed. However, his concern was actually the wrong one. There was no problem with the number of shares in ATS issued to AGH. Five is the maximum number of shares that AGH was permitted to acquire at the outset under s124-370(1)(a) of the Tax Act 1997. While further shares in ATS could be issued to AGH subsequently under s124-370(2), there was no requirement to do so. This email must be read together with Cardwell’s response.

41. [62]

    Cardwell replied to the 27 May 2005 email on 9 June 2005 (“9 June 2005 Email”), stating (CB, Vol 2, p 972):

42. [63]

    Attached to the 9 June 2005 Email, were various draft documents, including minutes of meetings for a return of capital. It is possible (but there is doubt about it) that a further attachment was a copy of the legislation extract with the ticks applied by Croft, but with an additional handwritten cross on the left hand side adjacent to s 124-370(e) of the Tax Act 1997, being the subparagraph requiring that shares in the interposed company be issued in exchange for the cancellation of shares in the original company (“Legislation Extract with Ticks and Cross”) (CB, Vol 2, p 976).

43. [64]

    On or about 30 June 2005, a second transaction occurred, namely an attempt by AGH to return capital to its shareholders in the sum of $1 million per share (“the Payment”). A return of capital, as distinct from a dividend, would not attract income tax.

44. [65]

    Croft approached Cardwell for advice and assistance in relation to the Payment. Again, the precise nature and scope of that advice and assistance is in dispute.

45. [66]

    Under ss 6 and 44 of the Tax Act 1936, the Payment would be characterised as a dividend and included in the plaintiff’s assessable income unless the amount distributed was “debited against an amount standing to the credit of the share capital account of AGH.”

46. [67]

    The plaintiff alleges that, had the interposition been correctly carried out, then the Payment would not have been taxable as a dividend subject to the anti-avoidance provision in s 45B of the Tax Act 1936. That is because had the additional 48.7 million $1 shares in AGH been issued in return for the cancellation of the ATS shares, that additional share capital properly could have been recorded in AGH’s share capital account. Instead, given the steps actually carried out, the only share capital that could be recorded in AGH’s share capital account was the 10 $1 shares initially issued in that company. In other words, as a result of the way the interposition was implemented, the maximum return of capital that AGH could make at the time without the shareholders being liable for income tax was $10.

47. [68]

    The plaintiff did not declare the $10 million Payment as part of his taxable income in 2005 and did not pay income tax on that amount.

48. [69]

    In about June 2008, the Australian Tax Office (“ATO”) commenced a review of the plaintiff’s tax affairs as part of an investigation into the tax affairs of wealthy individuals. That process resulted in assessments to the plaintiff’s income tax, plus penalty tax and interest in respect of the Payment on the basis that either the Payment was a dividend under ss 6 and 44 of the Tax Act 1936, or pursuant to s 45B of the same Act was deemed to have been a dividend.

49. [70]

    The plaintiff challenged the assessments in Federal Court proceedings NSD 1553/2012, which went to trial in 2014 (“the Federal Court proceedings”) (CB, Vol 5, p 3720).

50. [71]

    Both Croft and Cardwell had involvement throughout the ATO review process and both of them provided affidavit evidence for the trial. Croft was cross examined at trial, during which he admitted that he had backdated at least some of the documents which effected the interposition. After Croft made the admission of backdating documents, the plaintiff’s then legal advisors took the view that this conduct by Croft was likely to lead the Court to find that the interposition and Payment were part of a scheme to avoid paying tax such that the Payment would be deemed a dividend by reason of s 45B of the Tax Act 1936. They acted immediately to settle the proceedings.

51. [72]

    On 24 July 2014, the Commissioner and the plaintiff signed terms of settlement to conclude the Federal Court proceedings. Notwithstanding that the Federal Court proceedings concerned only income tax, penalties and interest on the Payment, the plaintiff says that the Commissioner was alive to the fact that the interposition did not satisfy the requirements for rollover relief in the manner described above.

52. [73]

    The settlement between the plaintiff and the Commissioner comprised of:

    1. (1)

       payment of the amount of primary income tax due in respect of the Payment, plus interest and penalties in agreed amounts; and

    2. (2)

       the setting of a cost base for the AGH shares held by the plaintiff and his father by reference to the then current value of those shares on the basis that the shares were CGT assets.

53. [74]

    On 24 August 2014, the plaintiff paid the sum of $4,860,397.32 to the ATO, in respect of tax, interest and penalties which were agreed to with the ATO as part of the Federal Court proceedings settlement.

54. [75]

    In about September 2012, Cardwell prepared a brief to Peter Fraser of counsel, who was to be (and was) the plaintiff’s counsel in the Federal Court proceedings to challenge the assessments that had been issued by the Commissioner in respect of the Payment (CB, Vol 5, p 3592).

55. [76]

    The plaintiff says that the brief to Mr Fraser made no reference to the failure to issue further shares in AGH to the plaintiff and his father in consideration for the cancellation of their shares in ATS.

56. [77]

    Instead the plaintiff says that Cardwell stated to Mr Fraser that “[t]he reason the issue of shares in AGH and the cancellation of shares in ATS did not take place at the same time was due to processing delays associated with the ASIC forms. The forms relating to the issue of 5 ATS shares to AGH and the cancellation of the Taxpayer’s shares in ATS were returned to the Taxpayer and had to be completed again, which lead to the delay” (CB, Vol 5, p 3595);

57. [78]

    The brief to Counsel also expressed as “our view” the view that the Payment was not a dividend under ss 66 and 44 of the Tax Act 1936 because the amount of the Payment was debited from the amount of $48.7 million shown in AGH’s financial statements, notwithstanding that those financial statements were produced some time after the interposition (CB, Vol 5, p 3597).

58. [79]

    The plaintiff contends that these statements knowingly conveyed a false impression. Cardwell Aff 27/2/19 at [34] now establishes that Cardwell knew that the only shares that were issued in AGH were the 10 shares issued upon its incorporation for $1 a share. The plaintiff contends that Cardwell knew that the problem was more fundamental than issues of timing and processing delays and he knew (actually or constructively) of the consequences that this more fundamental problem had for the characterisation of the Payment as a dividend. However, it appears that he did not know that Croft backdated the documents.

59. [80]

    On 22 March 2013, Cardwell affirmed an affidavit in the Federal Court proceedings (“Cardwell Federal Court Aff”) (CB, Vol 6, p 4270). Settlement occurred before Cardwell was to give evidence.

60. [81]

    The Cardwell Federal Court Aff relevantly deposes:

61. [82]

    At [2] Cardwell acknowledges that he was retained by, and provided services to, the plaintiff, and at [6] he acknowledges that he was aware the plaintiff was concerned to preserve the existing pre-CGT status of his shares.

62. [83]

    At [10] Cardwell describes being approached about a return of capital in AGH (being the newly interposed company) and expressed surprise that ATS had not immediately paid a dividend to AGH. It appears that at this point, which is prior to the Payment being made, Cardwell knew that the interposition had occurred.

63. [84]

    At [13] to [15] Cardwell suggests that he reviewed the documentation giving effect to the interposition and Payment and considered they were in order. The plaintiff says that this was a false narrative in light of the Cardwell Aff 27/2/19, at [34].

The new claims against Cardwell and Deloitte in the 2PFASC

1. [85]

   The plaintiff has already pleaded a claim against his accounting and tax advisers for failure to exercise reasonable care and skill in advising on and implementing the interposition and Payment (“the negligence claim”). As I understand the defendants’ submissions, their main complaint is that the negligence claim is statute barred and should be dismissed on that basis in this summary judgment application. For reasons given later in this judgment, it is not appropriate to resolve whether the negligence claim is statute barred on this summary judgment application.

2. [86]

   On 27 February 2019, Cardwell served the Cardwell Aff 27/2/19 in these current proceedings. The foundation of the plaintiff’s new claims for fraud and deceit in the P2FASC is found at [34] and [35] of this affidavit.

3. [87]

   At [34] Cardwell admitted that in May 2004, upon reviewing documents sent to him by Croft, he realised that the interposition may not satisfy the requirements for rollover relief because, “Croft had not followed the requirements of the steps under the Act by not issuing shares to Willcocks and his father, Richard Willcocks as consideration for the cancellation of the shares in ATS”.

4. [88]

   Cardwell also deposes in Cardwell Aff 27/2/19 at [35], that shortly after reviewing those documents he telephoned Croft and said:

5. [89]

   In Crofts affidavit evidence in these current proceedings (Croft Aff 18/2/19 at [45]-[62]), served a few days before the Cardwell Aff 27/2/19, he paints a picture that is entirely at odds with being told those matters by Cardwell.

6. [90]

   There are two options arising from the facts. They are:

   1. (1)

      Cardwell informed Croft of the problem with the interposition (the missing step) and Croft did not act on that advice; or

   2. (2)

      Cardwell did not inform Croft of, or otherwise act on, his realisation that the interposition had been carried out incorrectly and “may not” qualify for rollover relief.

7. [91]

   It is the plaintiff’s case against Cardwell and Deloitte that option (2) is correct. If summary judgment is not entered, the defendants may file a defence to contend option (1) is correct should the matter go to trial.

8. [92]

   The core of the case that the plaintiff seeks run at trial against Cardwell (aside from the negligence claim) falls into two areas, the first being the 2004-2005 fraud and deceit claim, and the second being that from 2005 and in particular throughout the period of 2009 to 2014 Cardwell actively concealed his fraud.

9. [93]

   The 2004-2005 fraud and deceit claim (“2004-2005 claim”) relates to the period up to and including 30 June 2005 when the Payment was made and is pleaded at paragraph [54] of the 2PFASC as follows:

   1. (1)

      In May 2004, Cardwell had actual knowledge that the interposition “may not” have satisfied the requirements for rollover relief because shares in AGH had not been issued “to Willcocks and his father, Richard Willcocks as consideration for the cancellation of the shares in ATS” as per Cardwell Aff 27/2/19 at [34];

   2. (2)

      Cardwell did not inform Croft of, or otherwise act on, his realisation, contrary to his assertion in Cardwell Aff 27/2/19, at [35];

   3. (3)

      When approached in relation to the Payment in mid-2005, and knowing at least by that point that the interposition had occurred, Cardwell still did not reveal his knowledge and instead put forward a false - and by reason of (1) a knowingly false - series of steps by which the interposition had occurred in the 9 June 2005 email;

   4. (4)

      As a result of that deliberate choice, the Payment proceeded and the plaintiff lost the opportunity to remedy the interposition so as to retain the benefit of the pre-CGT status and to carry out a return of capital of $10 million at a later stage in a way which was not a dividend or deemed dividend; and

   5. (5)

      Cardwell actually appreciated, or was willfully blind or recklessly indifferent as to, the tax consequences of the Payment proceeding.

10. [94]

    In regards to (4) above, the plaintiff relies on the expert evidence of Mr McGill, who provided a report following his review of Cardwell Aff 27/2/19. In the McGill Report 17/7/19 he opined that the Payment put an end to the opportunity which had existed to remedy the problem with the interposition. See: McGill Report 17/7/19 at [16]-[18] and [96]-[110]. Mr McGill’s evidence is to the effect that had the plaintiff approached the Commissioner after the interposition was incorrectly carried out but before the Payment was made, there was a good likelihood that the Commissioner would have permitted problems with the interposition to be rectified (for example, by the issue of the further 48.7 million AGH shares under a deed making it clear that such issue was in consideration for the cancellation of the ATS shares held by the plaintiff and his father). In contrast, once the Payment occurred, Mr McGill considers that the Commissioner would have viewed the interposition as part of an attempt to obtain a tax benefit and would not have agreed to any proposal to remedy it.

11. [95]

    The plaintiff’s case is that had such a rectification attempt occurred and been accepted by the Commissioner, then the plaintiff’s shares in AGH would be pre-CGT assets and AGH’s share capital account would have been properly credited to the amount of $48.7 million. The plaintiff contends he could later have carried out the Payment in a way that did not trigger the anti-avoidance provision in s 45B of the Tax Act 1936.

12. [96]

    The post 2005 fraud and deceit claim (“post 2005 claim”) relates to the period after the Payment occurred on 30 June 2005 through to, and including, the ATO’s review of the plaintiff’s tax affairs and the Federal Court proceedings in the period from 2009 to 2014. It is pleaded at paragraph [55] of P2ASC.

13. [97]

    The first strand of this claim is that given Cardwell’s actual knowledge that the interposition had not been completed correctly and his actual or constructive knowledge about the resulting tax consequences of the Payment, ordinary standards of honesty required Cardwell to inform the plaintiff of those matters; and that Cardwell and/or Croft had been aware of them prior to the Payment occurring.

14. [98]

    The plaintiff alleges that ongoing duty was given additional force by Cardwell giving advice and assistance in relation to the ATO’s review of the plaintiff’s tax affairs and focus on the Payment commencing in about 2009.

15. [99]

    The second strand of the claim is that throughout the period 2009 to 2014, Cardwell actively continued to conceal his fraud by preparing various documents, including the brief to counsel in relation to challenging the tax assessments and affirming the Cardwell Federal Court Aff.

16. [100]

    The plaintiff says that those documents positively conveyed a false picture as to Cardwell’s knowledge of the interposition and Payment.

17. [101]

    The post 30 June 2005 claim involves a continuing duty, with separate breaches each day, up to and at the Federal Court trial in 2014. The loss suffered by the plaintiff in that period is: the loss of the opportunity to pay the amount of the primary tax and either no or lesser amounts in respect of penalties, interest and costs; and/or the loss of the opportunity to sue Cardwell for negligence within time.

18. [102]

    The plaintiff submitted that another way of looking at the same facts is that Cardwell was a fiduciary who was in a position of conflict because it was in the plaintiff’s interest to be told about the problems with the transactions and Cardwell’s knowledge of them, notwithstanding that such disclosure could lead to a claim against Cardwell (which was not in Cardwell’s interest). This claim is pleaded at [59] of the 2PFASC.

Pleading Inadequacies in the 2PFASC

1. [103]

   At the hearing the defendants addressed nearly every new paragraph contained in the FASC and 2PFASC. They criticised them as being not properly pleaded, and illogical, and then drew attention to alleged pleading defects. The defendants have set out in detail the pleadings of both the FASC and the PFASC, but as I understand it in oral argument the defendants only object to the negligence allegations on the basis that they are statute barred (T26.39-45). I do not intend to set out the same history of the facts as has already been set out at length earlier in this judgment, but it is sufficient to acknowledge that the defendants dispute the facts as set out by the plaintiff. I have identified where that occurs throughout this judgment. Disputed factual matters can only be determined at trial not on a summary judgment or strike out application. As such, I will focus on the defendants’ main criticisms.

2. [104]

   I emphasise that mainly the function of pleadings is to state, with sufficient clarity, the case that has to be met by the defendant. In this way, pleadings serve to define the issues for decision and ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her: Banque Commerciale SA En Liquidation v Akhill Holdings Ltd [1990] HCA 11; 169 CLR 279 at 286-287 and 302-3.

3. [105]

   Rather than set out the defendants’ arguments in relation to new allegations in the pleadings in the 2PAFSC, I shall confine this analysis to one illustrative example, but will deal with the defendants’ other criticisms shortly.

4. [106]

   A regular criticism is that the plaintiff had not properly pleaded “knowledge”. The plaintiff pleads that Cardwell had “actual knowledge”.

5. [107]

   On the topic of knowledge, Senior Counsel for the defendants relied on Peter David and Ors v Halliday Financial Management Pty Ltd & Ors [2014] NSWSC 1371 (“Halliday”) Senior Counsel for the plaintiff relied upon Banks v Alphatise Pty Ltd [2014] NSWSC 1437 (“Alphatise”). In Hailliday at [8], Kunc J quoted the paragraphs from the proposed amended statement of claim that pleaded that the third defendant had actual knowledge that the representations made to the first to sixth defendants were untrue and had actual knowledge that there was no reasonable basis to make that representation.

6. [108]

   In Halliday, His Honour continued at [19]-[20]:

7. [109]

   In Alphatise at [7] and [17]-[20], Brereton JA stated:

8. [110]

   My view accords with the decision of Brereton JA in Alphatise on the basis that actual knowledge, or the state of the defendant’s mind, is something that is primarily in the knowledge of the defendants and they do not need particulars to know whether or not to plead actual knowledge. Their knowledge might ultimately be proven by documents elicited in the course of discovery or by admissions in cross examination, or inferred by other matters, but they are all matters of evidence which inform the material fact of actual knowledge. Therefore I reject the defendants’ submission that the plaintiff has not properly pleaded knowledge.

9. [111]

   After a careful reading of the allegations contained in the 2PFASC, I am satisfied that Cardwell and Deliotte know well the case they have to meet. They are in a position to be able to amend their defence to plead to the additional allegations. This submission fails.

The claims in the FASC

1. [112]

   In respect of the claims in the FASC, the plaintiff relies on s 14 of the Limitation Act 1969 (NSW), and s 82 of the Trade Practices Act 1974 (Cth) (“Trade Practices Act”). They relevantly read:

2. [113]

   The defendants submit that, pursuant to either of the above sections, the claims in the FASC are time barred.

3. [114]

   In order to determine when time begins to run under a limitation statute for these types of claims, it may be necessary to focus upon the precise interest which is infringed by the impugned conduct. This concept was identified by Gaudron J in Hawkins v Clayton (1988) 164 CLR 539 at 600 where her Honour commented as follows:

4. [115]

   In Wardley Australia Ltd v the State of Western Australia (1992) 175 CLR 514 (“Wardley”) the plurality, adopting Gaudron J’s approach, stated:

5. [116]

   The defendant refers to a passage in Peter Cane, Tort Law and Economic Interests, (1991, Oxford University Press), referred to in Wardley that has been relied upon for setting out the types of economic interests protected by the law of negligence, and it bears repeating (at pp 16-17):

6. [117]

   When identifying the date at which a plaintiff first suffers ‘any actual damage which is not negligible’, the defendant says that the Court should not be distracted by the plaintiff’s pleaded heads of damage. Rather the focus needs to be on the plaintiff’s cause of action. This concept (and the rationale behind it) is helpfully explained by Leeming JA (sitting in common law) in Loulach Developments Pty Ltd v Roads and Maritime Services [2019] NSWSC 438 (“Loulach Developments”) at [212]-[217]:

7. [118]

   The causes of action against Cardwell/Deloitte in the FASC each had a 6 year period in which to commence proceedings, whether under s 14 of the Limitation Act or s 82 of the Trade Practices Act.

8. [119]

   Pursuant to UCPR 6.28, proceedings against Cardwell/Deloitte were taken to have commenced on the date on which the order was made joining them to the proceedings (9 April 2018).

9. [120]

   It must be uncontroversial that the contract claims against Cardwell/Deloitte pleaded in the FASC were time barred on 9 April 2018. The contractual breaches were said to have occurred on or around 15 September 2003 and 27 May 2005, and it is trite that a cause of action in contract first accrues upon breach. The contract claims require no further consideration.

10. [121]

    The tort and the Trade Practices Act causes of action were similarly extinguished prior to 9 April 2018. To make good this point, the defendants submitted a number of propositions as to when time begins to run for pure economic loss claims.

11. [122]

    First, a plaintiff cannot sue for damages in negligence until each element of duty, breach and damage is present. Ordinarily, it will be at the time that measurable damage caused by the breach first occurs that the cause of action accrues, irrespective of whether there is further damage: see Argyropoulos v Layton [2002] NSWCA 183 at [5] per Handley JA (with whom Hodgson JA agreed).

12. [123]

    Secondly, absent reliance upon a special statutory provision, time may run for these types of claims before the plaintiff is aware or even could on reasonable enquiry have discovered that damage had been sustained: See Christie v Purves [2007] NSWCA 182 (“Christie”) at [36] per Ipp JA (with whom Bezley and Campbell JJA agreed).

13. [124]

    Thirdly, while prospective loss, alone, is not enough, a cause of action in negligence will accrue when the plaintiff first suffers any actual damage which is not negligible - even if most of the plaintiff's damages are prospective: See Christie at [40].

14. [125]

    Fourthly, the principles applicable to negligence claims are also applicable to cases which seek damages for misleading or deceptive conduct under the Trade Practices Act: See Christie at [41].

15. [126]

    Fifthly, in order to determine when time begins to run under a limitation statute for these types of claims, it may be necessary to focus upon the precise interest which is infringed by the impugned conduct.

16. [127]

    Finally, when identifying the date at which a plaintiff first suffers 'any actual damage which is not negligible', the Court should not be distracted by the plaintiff's pleaded heads of damage. Rather the focus needs to be on the plaintiff's cause of action.

17. [128]

    Application of these principles to the allegations against Cardwell/Deloitte in the FASC leads to the inexorable conclusion that both the negligence and Trade Practices Act claims were extinguished well before 9 April 2018.

18. [129]

    If the plaintiff's claim pertaining to the 15 September 2003 Conversation is accepted in full, then:

    1. (1)

       The plaintiff lost the benefit of holding his shares in ATS as a pre-CGT asset. Although the plaintiff has not finally crystallised that loss because he has not disposed of his AGH shares, it is uncontroversial that the loss of this status reduces the value of the plaintiff's asset.

    2. (2)

       To use Gaudron J's terminology, the economic interest which was infringed was the value of one of the plaintiff's existing assets, being his shares in ATS.

    3. (3)

       The plaintiff alleges that the restructure of ATS (said to be the imperfect interposition) took place either in December 2003 or the early months of 2004. Irrespective of in which month it occurred, the plaintiff alleges that on 5 May 2004 various forms were filed with ASIC which recorded that his shares in ATS had already been cancelled.

19. [130]

    It is irrelevant that in June 2004 the plaintiff's FY05 tax return had not been lodged and the Commissioner's position was not yet known. The plaintiff’s economic interest was infringed, because he lost the benefit of the pre-CGT asset when the shares in ATS were cancelled. His asset was in fact worth less than it had been before the restructure. Moreover, this was not a prospective or contingent loss. At the time that the interposition was effected, the plaintiff exchanged one asset for another asset of lesser value. The analysis by Bathurst CJ in D'Agostino v Anderson [2012] NSWCA 443 at [7] to [24] (with whom McCall and McFarlan JJA agreed) is entirely apposite here.

20. [131]

    If the plaintiff succeeds on this claim, then it is because he first started to suffer loss in June 2004, more than 12 years before he commenced proceedings against Cardwell/Deloitte.

21. [132]

    If the plaintiff's claim pertaining to the 27 May 2005 Conversation is accepted in full, then the plaintiff effected a return of capital in other than a tax effective fashion. This gave rise to both:

    1. (1)

       the plaintiff incurring the costs and expenses associated with the ATO investigation and subsequent Federal Court proceedings; and

    2. (2)

       the obligation to pay the Commissioner $4,607,500 in income tax, plus penalties and interest.

22. [133]

    Again taking the plaintiff's claim at its highest, he first started to incur measurable loss in either June 2009, when the plaintiff says that he retained Greenwood & Freehills for reward to perform work in responding to the ATO audit, or December 2009 when Cardwell sent an invoice to Croft which Croft sent to the plaintiff to pay, or July 2010 when Greenwood & Freehills performed substantial work for the plaintiff in responding to the audit, or even January/February 2011 when Greenwood & Freehills prepared a response to the ATO Audit Position paper for the plaintiff. As explained by the Court of Appeal in Christie at [59], in such a case the loss starts to accrue when the work was requested and performed and not when the plaintiff received or paid the relevant invoice.

23. [134]

    Whilst the Commissioner issued the plaintiff with an amended assessment for FY05 on 16 August 2011 (which obliged the plaintiff to pay $4,607,500 in income tax, plus a $1,151,875 penalty by 9 September 2011, with interest continuing to accrue) by this date he had already suffered measurable loss.

24. [135]

    It is irrelevant that in the FASC the plaintiff does not claim as a head of his damages the costs which he incurred in responding to the audit, for the reasons explained by Leeming J in Loulach Developments.

25. [136]

    The effect of the matters set out above is:

    1. (1)

       on 9 April 2018 when leave was granted to join Cardwell/Deloitte to the proceeding the claims pleaded against Cardwell/Deloitte in the FASC were time barred under s 14 of the Limitation Act and extinguished by operation of s 82 of the Trade Practices Act;

    2. (2)

       the FASC ought be summarily dismissed; and

    3. (3)

       the plaintiff's application to amend by filing the P2FASC does not fall to be considered under s 65 of the Civil Procedure Act 2005 (NSW) (“Civil Procedure Act”). This is because s 65 applies to amendments sought to be made to proceedings commenced "before the expiration of the relevant limitation period". These are amendments sought to be made to a proceeding which was in fact commenced after the expiration of the relevant limitation period. The plaintiff's application needs to be considered by reference to the Court's power in s 64 of the Civil Procedure Act.

26. [137]

    Cardwell and Deloitte contend that the plaintiff necessarily first suffered loss in relation to the interposition when that transaction occurred because it is "uncontroversial that the loss of this status [pre-CGT status] reduces the value of the plaintiff’s asset": defendants’ submissions, [51(a)]. This proposition is disputed by the plaintiff. According to Cardwell and Deloitte, the loss is not a prospective or contingent one. This proposition is also disputed by the plaintiff.

27. [138]

    Contrary to the submission put by Cardwell/Deloitte, the above propositions are not "uncontroversial". The label "pre-CGT status" is a convenient short hand, but it is apt to mislead in this context. What is meant by the label is that because the asset was acquired or created before a certain date, the CGT regime does not generally apply to transactions involving that asset. There is no impairment or alteration of the asset itself or any proprietary rights in it. The question of when the plaintiff suffered economic loss by reason of the interposition not satisfying the requirements for rollover relief is attended by some complexity. First, it is only upon the occurrence of a CGT event that the statutory provisions are engaged. Secondly, even if there is a CGT event, capital gains tax is only payable if and to the extent that the value of the asset at that time exceeds its cost base in respect of the relevant CGT event. It is simply not correct to say that immediately upon the interposition, the plaintiff's asset was worth less than it had been (defendants’ submissions , [521]).

28. [139]

    The plaintiff has served the McGill Report 17/7/19 which addresses the current value of AGH and of the AGH shares. Cardwell and Deloitte have not responded. Accordingly, it cannot be said that there is no dispute even as to the current value of the AGH shares, let alone when the value of the AGH shares exceeded the cost base allocated under the settlement of the Federal Court proceedings. It follows that there is no "uncontroversial" position as to when the value of the plaintiff's AGH shares exceeded the cost base and therefore no "uncontroversial" position that a disposition of those shares more than 6 years ago would necessarily have triggered capital gains tax.

29. [140]

    The plaintiff has not yet put on his lay evidence addressing the counterfactual and the quantification of his claim for economic loss. It is anticipated that the evidence the plaintiff will give will include:

    1. (1)

       The plaintiff's intention was to hold his shares in ATS (and subsequently AGH) at least until he retired, after which time he would decide either to sell his shares or continue to hold them in a passive role;

    2. (2)

       The plaintiff had no intention of retiring before 65 years of age (which he reached on 7 February 2018);

    3. (3)

       Had he been properly advised as pleaded, he would have not carried out the interposition unless the problem was fixed or alternatively taken advice about correcting the interposition and followed that advice;

    4. (4)

       In the period since turning 65, the plaintiff has given consideration to whether to sell his AGH shares and has, to date, decided against doing so. One of the factors which the plaintiff has taken into account is that following the settlement of the Federal Court proceedings in 2014, the AGH shares are now CGT assets with a cost base, such that a sale would attract substantial capital gains tax.

30. [141]

    Depending on whether and to what extent that evidence is accepted, there are a number of ways in which questions of what economic interest was infringed and when loss was first suffered might be answered.

31. [142]

    First, it might be concluded that the position is similar to that considered in Commonwealth v Cornwell (2007) 229 CLR 519, namely that the plaintiff's loss is the lesser benefit which he would obtain on his retirement, being the difference between disposal at that time of his ownership of AGH/ATS with and without attracting capital gains tax.

32. [143]

    Secondly, it might be concluded that the plaintiff has lost a valuable opportunity to dispose of his shares upon retirement without attracting capital gains tax, which opportunity first arose on 7 February 2018.

33. [144]

    Thirdly, it may emerge at trial that but for the breaches of duty and misleading conduct alleged, there was a chance that plaintiff may have acted earlier to dispose of his shares. If so, further questions will arise, including whether that chance was sufficiently concrete and whether the value of the shares at that time exceeded the cost base, such that there was in truth a valuable opportunity that was lost.

34. [145]

    In this respect, it is important to keep in mind that there is a significant difference between loss of a chance and chance of a loss: see Segal v Fleming [2002] NSWCA 42 at [24] per Howie J. The former, if it is has commercial value, is actual damage; the latter is prospective loss only.

35. [146]

    A fourth possibility is that the Court may find that no measurable loss has been suffered by the plaintiff in respect of the interposition because (assuming it remains the case) he has not sold his shares so as to crystallise the loss.

36. [147]

    The resolution of which of these possibilities is correct should be left to final hearing, rather than determined on this application.

37. [148]

    A final point should be made regarding the interposition claims. The plaintiff's case is that the flaw in the interposition was directly linked to the Payment being taxable as a dividend. Cardwell and Deloitte have not admitted that contention. It is currently a matter to be determined at hearing. Accordingly, at trial it is possible that the Court could find that Cardwell breached his duties or engaged in misleading conduct in relation to the interposition as alleged, but that this had no consequences for the Payment. Accordingly, the Court cannot conclude on this application that loss was suffered in relation to the (non-fraud) interposition breaches at the same time as loss was suffered in respect of the Payment.

38. [149]

    Cardwell and Deloitte submit that loss was suffered in relation to the breaches of duty regarding the Payment in the form of a liability to Cardwell for the work done commencing 2009 in responding to the ATO audit: defendants’ submissions, [55].

39. [150]

    Four points should be made in response. First, the plaintiff does not claim those costs. It is one thing to conclude at a final hearing, as Leeming JA did in Loulach at [212]-[217], that there must inevitably have been wasted costs by reason of a particular representation, such that a limitation period was engaged. It is another to seek to apply such reasoning on a summary dismissal basis. For one thing, it would be inappropriate to have a mini-trial on this application to determine if and when costs were incurred which exceeded what would have been incurred had Cardwell acted differently and not breached his duties. Further, a statement by a single Judge at first instance does not constitute a proposition of law sufficiently established to be applied to dismiss summarily a cause of action for breach of limitation periods.

40. [151]

    Secondly, the plaintiff alleges that this cause of action was fraudulently concealed. Accordingly, the cause of action cannot be dismissed or struck out at this point even if the Court were to consider that it was otherwise statute barred.

41. [152]

    Thirdly, the work done by Cardwell from 2009 to 2014 itself is the subject of claims by the plaintiff for failing to disclose Cardwell's knowledge of the problems with the interposition and Payment (P2FASC, [40A]-[46D], [52A] and [55]). It is almost perverse to contend that the liability to pay fees in respect of work done by Cardwell which the plaintiff says continued the deceit and/or fraudulent concealment, and was itself negligent or misleading, is necessarily the suffering of loss in respect of the earlier payment breaches so as to render those earlier breaches statute barred without substantive hearing.

42. [153]

    Fourthly, the plaintiff's claims in respect of the period 2009 to 2014 are for continuing breaches of duty (as distinct from a once and for all breach: see Larking v Great Western (Nepean) Gravel Ltd (in liq) [1940] HCA 37; 64 CLR 221. Accordingly, limitation periods in respect of those claims did not necessarily expire until mid-2020, well after the plaintiff commenced proceedings against Cardwell and Deloitte and filed his notice of motion to amend.

43. [154]

    Cardwell and Deloitte also submit in respect of the Payment that loss was necessarily suffered for limitation purposes when the amended assessment was issued on 11 August 2011: defendants’ submissions [56].

44. [155]

    That is certainly one possibility. As a general proposition, the issue of an amended assessment creates a debt, and the Commissioner is permitted to enforce that debt. However, Pt IVC of the Taxation Administration Act 1953 (Cth) creates a parallel regime for challenging the validity of the assessment issued. That regime was enlivened by the plaintiff and the Commissioner took no steps to enforce the amended assessments prior to the resolution of that process. During the Federal Court hearing to determine the validity of the amended assessments, the plaintiff and Commissioner reached a settlement. It was that event which created the liability which the plaintiff ultimately paid in 2014.

45. [156]

    The question is whether loss was suffered at an earlier stage by reason of the issue of the amended assessment notwithstanding the challenge under Pt IVC.

46. [157]

    The plaintiff is not aware of any case on point which has considered facts close to, or on all fours with, the present where the taxpayer initiated, and then prosecuted, Pt IVC proceedings to dispute the amended assessment. Further, the ATO did not seek to enforce the amended assessment as a debt during the pendency of the Pt IVC proceedings. The evidence is presently silent as to whether the Commissioner and the taxpayer entered into an agreed deferment of a Payment under s 255-10 of the Tax Act 1997, or agreed to a stay of enforcement of the amended assessment, whether formally or informally: see Hall v Poolman (2007) 65 ACSR 123 at [109]; see also Clifton v Keyy J Investments Pty Ltd tlas Clenergy [2020] FCAFC 5; 379 ALR 593 at [533].

47. [158]

    In Pech v Tilgals (1994) 94 ATC 4206, there was no challenge to the amended assessment under the regime prescribed by Pt IVC. In BCI Finances Pty Ltd (in liq) v Binetter (No 4) (2016) 117 ACSR 18, Gleeson J accepted that loss was suffered upon the issue of revised assessments (at [332] and [336]). Later in the judgment, her Honour referred to the fact that Pt IVC challenges to the revised assessments had been made but later withdrawn (at [445]-[449]). Her Honour did not consider the operation of Pt IVC in relation to the question of when loss was suffered for limitation purposes or the relevance of the fact that the Pt IVC proceedings were withdrawn. Here, as indicated above, the Pt IVC proceedings were settled and it was that contractual settlement which gave rise to the liability which the plaintiff paid.

48. [159]

    In accordance with Wardley, these issues should be determined at final hearing and not on this application.

49. [160]

    Further, the plaintiff alleges that this cause of action was fraudulently concealed. Accordingly, it cannot be struck out at this point even if the Court were to consider that it was otherwise statute barred.

50. [161]

    The non-fraud claims pleaded in the FASC raise issues in relation to limitation periods that turn on complex questions of fact and law that can only be resolved at trial.

51. [162]

    There are a number of points when the plaintiff can be said to have suffered loss. For instance at the time of the interposition in late 2003 to early 2004 when he lost the benefit of holding his shares in ATS as a pre-CGT asset, or when the amended assessment was issued in August 2011 and he became liable to pay the Commissioner $4,607,500 in income tax, plus penalties and interest. It could also be argued that the plaintiff is yet to suffer any loss until the occurrence of some future CGT event which crystallises his loss, or even that the plaintiff’s loss is the loss of a chance to dispose of the shares at some earlier date.

52. [163]

    Accordingly, the question of when loss was suffered in relation to the non-fraud claims is not straight forward. Its resolution is a matter for trial rather than on application for summary dismissal.

The new claims in the P2FASC

1. [164]

   In regards to the new claims in the P2FASC the plaintiff relies on s 55 of the Limitation Act which relevantly reads:

2. [165]

   The two distinct branches of s 55(1) were described by Bryson JA in Lee v Travers [2009] NSWSC 398 at [43]:

3. [166]

   Accordingly, each branch of s 55(1) raises its own considerations.

4. [167]

   McLelland J (as His Honour then was) considered s 55 in Hamilton v Kaljo (1987) 17 NSWLR 381 (“Hamilton”). His Honour held that the expression "fraudulently" in s 55(1)(b) applied to conduct involving some form of dishonesty or moral turpitude. In Blazai Pty Ltd & Ors v John Palasty [2009] NSWSC 50 at [57], Smart AJ held that "[a] corresponding meaning should be applied to the word ''fraud" in s 55(1)(a)".

5. [168]

   The Court of Appeal in Seymour v Seymour (1996) 40 NSWLR 358 (“Seymour”) applied Hamilton. Mahoney ACJ (Meagher JA and Abadee AJA agreeing) at 371-2 expanded upon McLelland J's observations as follows:

6. [169]

   Relevantly, Simpson J in Ag-Exports (Australia) Pty Ltd & Anor v Export Finance and Insurance Corporation [2003] NSWSC 175 at [69]-[70] explained as follows:

7. [170]

   A person can be said to have relevantly discovered a fraud if they know the facts capable of proving a prima facie case. As Wigney J held in Clurname Pty Limited v McGraw-Hill Financial, Inc [2017] FCA 1319 at [78]-[79]:

8. [171]

   The reason for the plaintiff’s proposed amendments to the FASC is said to be the combination of inferences drawn from the following 6 documents:

   1. (1)

      the 27 April 2004 Letter;

   2. (2)

      the 5 May 2004 Filenote;

   3. (3)

      the 27 May 2005 Email;

   4. (4)

      the 9 June 2005 Email;

   5. (5)

      the statement made in Cardwell Aff 27/2/19 at [34]; and

   6. (6)

      two invoices issued by Deloitte to the plaintiff on 26 May 2004 and 18 November 2005.

9. [172]

   Given the claims in the FASC are out of time, the plaintiff's only way to propound his claims is in reliance upon s 55(1) of the Limitation Act. The way that the plaintiff frames his reliance upon s 55 is found at [56] of the P2FASC.

10. [173]

    Cardwell/Deloitte have long contended that the information in the 6 Documents:

    1. (1)

       is information which was within the direct knowledge of the plaintiff and or his lawyers, since at least April 2013. Even if there was some minor information not within the plaintiff's direct knowledge, it was information which, with reasonable diligence, could have readily been learnt by the plaintiff or his solicitors at that time; and

    2. (2)

       in any event was within the knowledge of the plaintiff's agent (Croft) since 2004 and 2005.

11. [174]

    The 27 April 2005 Letter, together with its annotated annexures, has been in the plaintiff’s possession since well prior to the commencement of the proceedings.

12. [175]

    In April 2004, it was sent by Croft, as agent of the plaintiff, to Cardwell/Deloitte

13. [176]

    In September 2012, it was sent by Croft to the plaintiff’s then solicitors TressCox.

14. [177]

    On 15 March 2013, it was included in an exhibit to an affidavit sworn by Croft which was served on behalf of the plaintiff in the Federal Court proceedings.

15. [178]

    On 19 April 2013, it was produced to the Federal Court by Deloitte in answer to a subpoena issued by the Commissioner. A further copy of it was contained in the supplementary tender bundle in the Federal Court proceedings. It was the subject of extensive oral evidence on 22 July 2014 and 23 July 2014 during the Federal Court proceedings.

16. [179]

    The same document was, of course, also referred to in the statement of claim filed in this proceeding on 8 February 2017 and was annexed to the plaintiff’s affidavit sworn on 28 November 2018.

17. [180]

    The 5 May 2004 Filenote was available to the plaintiff’s solicitors and in the custody of his barrister in 2013 and 2014. The evidence of this is as follows.

18. [181]

    On 19 April 2013, a copy of the 5 May 2004 Filenote was produced by Deloitte to the Federal Court in the Federal Court proceedings in answer to a subpoena issued by the Commissioner.

19. [182]

    On 22 July 2014, Fraser (the plaintiff’s then barrister) uplifted the documents produced by Deloitte during the Federal Court proceedings, at which time he had a copy of the 5 May 2004 Filenote.

20. [183]

    The content of the 5 May 2004 Filenote was clearly relevant to the matters at issue in the Federal Court proceeding, as recognized by Mr Moloney. It was also a document to which he had access.

21. [184]

    In May 2005, the email was sent by Croft, as agent of the plaintiff, to Cardwell/Deloitte.

22. [185]

    In September 2012, Croft provided the plaintiff’s then solicitors, TressCox, with a copy of the 27 May 2005 Email.

23. [186]

    In April 2013, Cardwell produced a copy of the 27 May 2005 Email with the legislation extract with ticks is referred to in the email to the Federal Court in answer to a subpoena issued by the Commissioner.

24. [187]

    On 16 May 2013, the plaintiff included the 27 May 2005 Email in his list of discovered documents in the Federal Court proceedings.

25. [188]

    On 23 July 2014, the 27 May 2005 Email was tendered as part of Exhibit K in the Federal Court proceedings

26. [189]

    On 9 June 2005, the email was sent by Cardwell to Croft, as agent of the plaintiff

27. [190]

    In September 2012, the 9 June 2005 email was sent by Croft to the plaintiff’s then solicitors.

28. [191]

    On 19 April 2013, Deloitte produced a copy of the 9 June 2005 email to the Federal Court in answer to a subpoena issued by the Commissioner.

29. [192]

    On 16 May 2013, the plaintiff included the 9 June 2005 email in his list of discovered documents in the Federal Court proceedings.

30. [193]

    On 23 July 2014, the 9 June 2005 email was tendered as part of Exhibit K in the Federal Court proceedings.

31. [194]

    Immediately after Cardwell formed the view described at [34] of Cardwell Aff 27/2/19, Cardwell spoke to Croft, who was plaintiff’s agent. Cardwell’s disclosure to Croft was a disclosure to the plaintiff.

32. [195]

    From at least 19 April 2013, the plaintiff had the 5 May 2004 Filenote, which was Cardwell’s record of the disclosure to Croft. From at least that date, the plaintiff, with reasonable diligence, could have learned about Cardwell’s concern about the interposition documents.

33. [196]

    Cardwell/Deloitte’s defence, filed on 2 July 2018, says at [30A] that on 5 May 2004, Cardwell telephoned Croft to discuss the documents attached to the 27 April 2005 Letter and “noted that there was a risk that rollover relief was not available”. No particulars or detail of that statement were ever sought.

34. [197]

    As recognised by Mr Moloney in 2014, part of the Federal Court Proceedings concerned the very same question addressed in [34] of Cardwell Aff 27/2/19 – i.e. whether rollover relief was available because amongst other things the plaintiff and his father had not received their AGH shares in return for the cancellation of their ATS shares. The very realisation which Cardwell averted to in [34] of Cardwell Aff 27/2/19 was directly addressed in submissions in the Federal Court by the plaintiff’s counsel.

35. [198]

    There can be no doubt that the plaintiff had all of the information relevant to the contents of [34] of Cardwell Aff 27/2/19. Moreover, the Court could be comfortably satisfied that a solicitor acting with even less than reasonable diligence who had asked Cardwell a simple question, would have been told about his internal thoughts. After all, Cardwell assisted the plaintiff with the audit and the Federal Court proceedings from 2009 to 2014. He spoke to the plaintiff’s solicitors and prepared an affidavit for the Federal Court proceedings. There is simply no evidence that Cardwell concealed the existence of a concern that the plaintiff may not have been eligible for rollover relief.

36. [199]

    Both invoices were sent to Croft, the plaintiff’s agent, in 2004 and 2005. As the plaintiff made clear in [26] of his affidavit filed in the Federal Court proceedings, the usual practice at that time was for Deloitte to send documents to Croft, and for Croft to send them to the plaintiff and also keep a copy. The plaintiff did not necessarily retain documents, because he was readily able to obtain copies from Croft.

37. [200]

    In any event, the 26 May 2004 invoice was available to the plaintiff’s solicitor and in the custody of his barrister in 2013 and 2014:

    1. (1)

       On 19 April 2013, it was produced to the Federal Court by Deloitte in answer to a subpoena issued by the Commissioner.

    2. (2)

       On 22 July 2014, Fraser (the plaintiff’s then counsel) uplifted the documents produced by Deloitte during the Federal Court proceedings.

38. [201]

    In conclusion, given the above the Court can comfortably conclude that even without turning to the question of agency, the plaintiff had access to the information in the 6 Documents by no later than April 2013.

39. [202]

    If, as the plaintiff contends, his solicitors representing him in a tax prosecution during 2013 and 2014, failed to appreciate the relevance of emails and documents in their possession, that cannot sustain a contention of fraudulent concealment. A fortiori when, as here, the relevant accountants were in fact assisting the plaintiff, were repeatedly interviewed by the plaintiff’s lawyers, met with the plaintiff and his barristers and prepared evidence to assist the plaintiff defend the prosecution.

40. [203]

    There can be no real doubt that, if the plaintiff has a basis to contend that Cardwell/Deloitte engaged in a fraud or fraudulent concealment, that by no later than April 2013, the plaintiff possessed every ‘piece of the puzzle’, such that time began to run from at least that date.

41. [204]

    The only two aspects of the 6 documents (at [117] of this Judgment) which could potentially suggest that Cardwell was actually aware, prior to 30 June 2005, that rollover relief "may not" be available because the shares in AGH had not been issued "to Willcocks and his father, Richard Willcocks as consideration for the cancellation of the shares in ATS" are:

    1. (1)

       Point 2 of the 5 May 2005 Filenote; and

    2. (2)

       The Legislation Extract with Ticks and Cross.

42. [205]

    The other documents are either neutral or, in the case of the 9 June Email and Cardwell's brief to advise and affidavit in the Federal Court proceedings, positively suggest no awareness of the problem.

43. [206]

    Even taken in isolation, the above two documents are not "capable of proving a prima facie case" of fraud against Cardwell. In the language of the statute, the Court could not conclude on this application that the fraud, deceit or concealment which the defendants allege was reasonably discoverable upon obtaining and reviewing those two documents. They are simply too opaque for that. Their character is rather that when read in light of the admission in the Cardwell Aff 27/2/19, the documents tend to corroborate the admission and ultimately the fraud, deceit or concealment alleged.

44. [207]

    Further, the two documents cannot be assessed in isolation. They must be must be assessed in light of the context and circumstances as a whole that existed when the documents were available to the possession of the plaintiff.

45. [208]

    The 5 May 2005 Filenote was first obtained in about April 2013 as part of the documents produced on subpoena in the Federal Court proceedings by Deloitte (CB. Vol 6, p 4646). It does not appear to have been produced by Cardwell under his subpoena in the Federal Court proceedings.

46. [209]

    The Legislation Extract with Ticks and Cross and the 9 June 2005 Email were also first obtained by the plaintiff in about April 2013 (along with the 27 April Letter and the 27 May Email, via various subpoenas issued to Cardwell and/or Deloitte (Moloney Aff 14/10/20 at [49]).

47. [210]

    The following points are to be made. First, the Legislation Extract with Ticks and Cross:

    1. (1)

       Was not in the documents produced by Deloitte on subpoena in the Federal Court proceedings in about April 2013. The version of the 9 June Email in those documents had an attachments line which suggests that the Legislation Extract with Ticks and Cross was not an annexure to that email (Moloney Aff 14/10/20 at [49](c)(1));

    2. (2)

       Was in the documents produced by Cardwell on subpoena in the Federal Court proceedings in about April 2013 and immediately followed a version of 9 June email which had no attachments line (Moloney Aff 14/10/20 at [49](c)(2));

    3. (3)

       Was not in the documents discovered by the plaintiff in the Federal Court proceedings (Moloney Aff 14/10/20 at [49](c)(3)).

48. [211]

    The only evidence that suggests that the Legislation Extract with Ticks and Cross was an attachment to the 9 June 2005 Email (notwithstanding the absence of any reference to it in the attachments line of the version produced by Deloitte) is in the verified discovery lists given by Croft and Cardwell in these proceedings in September and October 2018: McGregor Aff 17/3/20 at [44]-[46].

49. [212]

    In other words, it was only from about September or October 2018, when Cardwell took ownership of the Legislation Extract with Ticks and Cross, that there existed an evidential foundation to conclude that Cardwell had applied the handwritten cross.

50. [213]

    A reasonable reader of the Legislation Extract with Ticks and Cross and 5 May 2004 Filenote in light of the 9 June 2005 Email would conclude that, whatever was the reference to consideration at point 2 of the 5 May 2004 Filenote and whatever the presence of both a handwritten cross and handwritten tick adjacent to s124-370(e) of the Tax Act 1997 may suggest, by 9 June 2005, Cardwell had no issues with how the interposition was implemented. If such a reasonable reader noticed the handwritten cross on the Legislation Extract with Ticks and Cross, he or she would not necessarily conclude it was made by Cardwell, much less that it conveyed a state of mind wholly at odds with the text of the 9 June 2005 Email itself.

51. [214]

    The reasonable reader of those documents would also consider them in light of Cardwell's affidavit in the Federal Court proceedings affirmed on March 2013, which reveals apparent satisfaction on the part of Cardwell with the implementation of the interposition.

52. [215]

    Ultimately, whether the above submissions are accepted, and indeed, whether the Legislation Extract with Ticks and Cross even was an annexure to the 9 June 2005 Email, are matters to be explored at trial. What matters for present purposes is that the Court cannot conclude on these interlocutory applications that the limitation period for the fraud claims has necessarily expired.

53. [216]

    Cardwell and Deloitte submit that there is no explanation from Mr Moloney as to why the 9 June 2005 Email was not included in the Cardwell Federal Court Aff, or why he appears not to have asked Cardwell any questions about its contents: defendants’ submissions, [147]. The question of why a document was not included in Cardwell's affidavit is more appropriately directed at the deponent; it was his affidavit after all. In relation to whether, and if so why, Mr Moloney did not ask Cardwell questions about the contents of the email, these are matters for final hearing. The prospect of questioning of witnesses in cross­examination in respect of disputed questions of fact along those lines highlights that triable issues are in play.

54. [217]

    Even if the Court were to conclude that review of the 5 May 2004 Filenote and Legislation Extract with Ticks and Cross would have resulted in a reasonable person discovering Cardwell's fraud (which the plaintiff does not accept), the result would be that time began to run from about April 2013. Cardwell and Deloitte were joined to the proceedings in April 2018, only 5 years after time began to run. If the new amendments arise from the same or substantially the same facts as claims brought within time, then under s 65 of the Civil Procedure Act, unless the Court orders otherwise, the amendments will take effect from the date of commencement of the proceedings against Cardwell and Deloitte (April 2018). Whether or not there are existing claims within time and whether or not the amendments arise from substantially the same facts are matters of some complexity which are appropriately dealt with at trial.

55. [218]

    As the phrase "fraudulently concealed" indicates, in order for a limitation period to be suspended on this basis, it is necessary to establish that a cause of action is concealed in circumstances where there is a consciousness that what is being done is wrong or that to take advantage of the situation would involve wrongdoing: Seymour at 372; Gerace v Auzhair Supplies Pty Ltd (in liq) (2014) 87 NSWLR 435 (“Auzhair Supplies”) at [75]- [76].

56. [219]

    Thus, a case may fall into one of at least three categories: no concealment of the cause of action, concealment which does not involve dishonesty in the relevant sense and "fraudulent concealment": see Anthony v Morton [2018] NSWSC 1884 (“Morton”) at [677]-[698] per Ward CJ in Eq.

57. [220]

    A further issue may arise as to whether fraud after the limitation period has otherwise begun to run will suspend the running of time: Ward CJ in Eq raised this issue but did not decide the issue in Morton at [699]­ [706].

58. [221]

    Here, there is some novelty to the issue of fraudulent concealment. Obviously, Cardwell did not conceal the facts which lead to the interposition not satisfying the requirements for rollover relief and the Payment attracting income tax. This is because an ASIC search or examination of the share register would reveal that further shares (beyond the original 10 shares issued for $1 each) were never issued in AGH such that the interposition did not satisfy the rollover requirements and there was an insufficient amount credited to AGH's share capital account to permit the debiting of the amount of the Payment. One might infer from that fact that negligence was involved in advising on and implementing those transactions and, depending on what Cardwell's role was, that it was his negligence.

59. [222]

    However, the case which now emerges as a result of Cardwell Aff 27/2/19 at [34] is that Cardwell actually knew of the problem with the interposition prior to the Payment occurring. Mr McGill gives evidence as to the steps which a competent tax adviser ought to have taken in that situation: McGill Report 17/6/19, [96]-[145]. Cardwell did not take those steps. The plaintiff says that it was this negligence that was concealed by Cardwell not disclosing his knowledge to the plaintiff in the circumstances.

60. [223]

    The fact that a more generic claim for negligence was discoverable (and indeed brought in the initial pleading against Cardwell and Deloitte) does not preclude the prospect of concealment of the claims now sought to be brought. Whether causes of action were concealed, and concealed fraudulently, is a matter for trial.

61. [224]

    The fiduciary duty claim is not directly subject to the statutory limitation provisions and the question is whether, and if so how, those provisions are to be applied by analogy and whether the plaintiff has an answer to the application of any limitation period by analogy premised on the unconscionable conduct of the defendant: see Lewis Securities v Carter (2018) 355 ALR 703 at [212]; Auzhair Supplies at [70] and Sze Tu v Lowe (2014) 89 NSWLR 317 at [365]. These matters cannot be determined on this application.

62. [225]

    It is arguable that it was only in September or October 2019, when Cardwell took ownership of the Legislation extract with the Ticks and Cross, that there was evidentiary foundation to allegedly conclude that Cardwell had applied the handwritten cross.

63. [226]

    It is certainly not a foregone conclusion that being in possession of the documents to which the defendants refer, the plaintiff himself, of by extension of his agent Croft (if he is to be so regarded), was in possession of factual evidence which would have enabled him to prove a prima facie case of fraud if he had exercised reasonable diligence. The question of what information, if any, may have put the plaintiff on notice, or raised a suspicion of fraud is also not obvious.

64. [227]

    Hence it is arguable that time under the Limitation Act began to run from October 2018, at the latest. These proceedings were commenced on 8 February 2017.

65. [228]

    The elements in a deceit claim are sufficiently identified for present purposes in the following passages from the judgment of Gleeson CJ in Magill v Magill (2006) 226 CLR 551 at [37]-[38]:

66. [229]

    His Lordship’s reference to “mere silence” contemplates, by way of contrast, the possibility of a case where there is a legal or equitable duty to speak and disclose the true facts.

67. [230]

    The questions for hearing will include whether by his conduct, including sending the 9 June 2005 email and “assisting” in relation to the audit and subsequent Federal Court proceedings, and otherwise remaining silent, Cardwell made representations about the interposition which were false, to the knowledge (actual of constructive) of Cardwell and with the intention that the representations be relied upon by the plaintiff. Once again, each of those matters, are triable issues for determination at the final hearing.

68. [231]

    Something should be said here about the position of Deloitte. Cardwell was employed by Deloitte up to May 2007. Whether Deloitte can be made liable for the conduct of Cardwell for the pre-2005 fraud case will depend on the application of principles of vicarious liability and engagement in conduct by a corporation.

69. [232]

    In relation to the post-2005 fraud case, by the time he prepared the brief to Counsel in 2012 and swore his affidavit in the Federal Court proceedings in 2013, Cardwell no longer worked for Deloitte. It is unlikely that Deloitte would be liable for those actions per se. However, the plaintiff’s case is broader than that. The plaintiff’s post-2005 case starts from 30 June 2005. There is a triable case that Deloitte had Cardwell’s knowledge on and from that date. The plaintiff says that in those circumstances Deloitte was under an ongoing duty to warn the plaintiff of the problems with the interposition and Payment and that Cardwell/Deloitte knew of those problems prior to the Payment occurring. Whether such a duty was imposed and, if so, for how long it continued after 30 June 2005 are matters for trial.

70. [233]

    At trial the plaintiff has indicated that he will rely on s 65 of the Civil Procedure Act which states that at any time after the expiration of the relevant limitation period, the plaintiff in any such proceedings may, with the leave of the Court under s 64(1)(b), amend the originating process so far as to add or substitute a new cause of action, together with a claim for relief on the new cause of action, being a new cause of action that, in the court’s opinion, arises from the same (or substantially the same) facts as those giving rise to an existing cause of action and claim for relief set out in the originating process.

71. [234]

    The plaintiff will argue that the new amendments arise out of the same or substantially the same facts as the claims brought in time, so the amendments will take effect from the date of the commencement of proceedings.

72. [235]

    If the plaintiff’s version of events are accepted at trial and s 65 of the Civil Procedure Act is found to be applicable, the proceedings are filed within time.

73. [236]

    The defendants submitted that s 65 of the Civil Procedure Act is not applicable, and rather the correct section is s 64 of the Civil Procedure Act as the limitation periods of the pleaded claims have expired. If this is accepted at trial, then the date of commencement of the proceedings, will be, subject to section 65, taken to be the date on which the amendment is made: s64(3) of the Civil Procedure Act.

74. [237]

    The question of the date from which the amendments are to take effect is not for resolution on application for summary dismissal and should be reserved to trial.

75. [238]

    It is not appropriate to resolve the factual disputes as to the signature and the ticks and crosses on the copies of the documents nor when the alleged fraud was discoverable in a summary judgment application. As the plaintiff points out, this dispute can only be resolved when the facts and circumstances are ascertained at trial.

Agency

1. [239]

   The defendants allege, as part of their argument about when the alleged fraud/fraudulent concealment was discoverable, that Croft was the plaintiff’s agent so his knowledge is imputed to the plaintiff. Both parties made submissions on this point.

2. [240]

   There is a presumption that knowledge of an agent is imputed to the principal as actual knowledge where there is a legal duty on the agent to disclose information to the principal. Such a duty exists in respect of information gained by the agent “in the course of, and which is material to, a transaction in which the agent is employed on behalf of the principal”.

3. [241]

   The scope of an agent’s actual or ostensible authority will dictate what knowledge is imputed to the principal. The point was put in this way by Robb J in Almona Pty Ltd v Parklea Corporation Pty Ltd [2019] NSWSC 1868 at [722]:

4. [242]

   As to circumstances in which an agent acts fraudulently in furtherance of their own interests, the comments of Spigelman CJ, Sheller and Stein JJA in Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1 (“Beach Petroleum”) at [473] are pertinent:

5. [243]

   In Beach Petroleum the plaintiff company alleged that its solicitors, Abbott Tout had, breached their fiduciary duties, their retainer, and had been negligent. The claims arose in the context of a scheme devised by some of the plaintiff’s directors to benefit other members of the corporate group at the expense of the plaintiff. An issue that arose, and led to the paragraph quoted above, was whether the plaintiff gave fully informed consent to Abbott Tout acting for other members of the corporate group in circumstances where a conflict might emerge. The question was whether fully informed consent could be inferred from the knowledge of the directors (imputed to the plaintiff), notwithstanding the fact that the directors were engaged in breaches of their duties. The Court considered at [476] that “[t]he position of conflict of duty and duty on the part of Abbott Tout was not so integral a part of the fraud being perpetrated by the directors, as to suggest that the company ought not be bound by their conduct in this respect.” The Court noted that Abbott Tout had no knowledge of the fraud (see [477]).

6. [244]

   In respect of third parties relying upon the apparent authority of a fraudulent agent, in Mercedes-Benz (NSW) Pty Ltd v ANZ (unreported, NSWSC, 5 May 1992) Palmer J observed that:

7. [245]

   Where an agent/principle relationship exists, the agent has a legal duty to disclose information gained in the course of any transaction in which they are engaged on behalf of the principal, there is a presumption that the agent’s knowledge is imputed to the principal as actual knowledge.

8. [246]

   As Croft was the plaintiff’s agent, there is no reason for the Court to act contrary to the presumption that Croft's knowledge of: Cardwell's conversation with Croft on 5 May 2004 when Croft spoke to Cardwell (recorded in the 5 May 2004 Filenote), the 27 May 2005 Email, and the 9 June 2005 Email was information obtained by Croft at those dates as agent for the plaintiff, such that the plaintiff had actual knowledge of the content of those documents in 2004 and 2005.

9. [247]

   The plaintiff does not allege that Croft was acting outside the scope of his authority in his dealings with Cardwell on the above dates, moreover, such an allegation would be inconsistent with [29E] to [30I], [30L] and [33F] to [34] of the P2FASC. Nor does the plaintiff allege any conduct by Croft in 2004 which would engage the "fraud exception" to the presumption.

10. [248]

    The defendants submit that the knowledge of Croft, as the plaintiff's agent, is to be attributed to the plaintiff and that therefore Croft's knowledge of the conversation "recorded in" the 5 May 2004 Filenote, the 27 May 2005 Email, and the 9 June 2005 Email should be attributed to the plaintiff.

11. [249]

    First, Cardwell and Deloitte mischaracterise those documents and make assertions as to what are in truth at best triable issues. Taking each document in turn:

    1. (1)

       It is not Cardwell's evidence that the 5 May 2004 Filenote records a conversation he had with Croft: Cardwell Aff 27/2/19 at [33]. The Filenote in terms records "Review Rollover Docs + Trust Deeds". Moreover the 5 May 2004 Filenote is oblique at best. At hearing, there will be a contest between Cardwell and Croft as to whether the conversation asserted at [35] of the Cardwell Aff 27/2/19 occurred. The defendants cannot simply assert that it occurred;

    2. (2)

       The 27 May 2005 Email asks for Cardwell's review of the documents that effected the interposition. It demonstrates that Croft had a concern, but that concern was misplaced;

    3. (3)

       The plaintiff says that the 9 June 2005 Email concealed the true state of Cardwell's knowledge and was in fact a part of the fraud. Again whether that contention is accepted is a matter for final hearing.

12. [250]

    Secondly, even if Croft had certain knowledge, there will be an issue at trial as to the extent to which that knowledge is to be imputed to the plaintiff. The statement that there is "no reason for the Court to act contrary to the presumption" that Croft's knowledge of the three documents is to be imputed to the plaintiff is a non-sequitur and bare assertion.

13. [251]

    The plaintiff does not allege conduct by Croft in 2004 that would engage the "fraud exception" because the assertion made in DS [154] has not yet been pleaded by the defendants. If and when it is, the plaintiff will respond. The plaintiff disputes the propositions of fact which Cardwell/Deloitte contend in their submissions at [154]). They are matters for trial. There is no proper basis for the assumption made by Cardwell/Deloitte that each of the disputes matters of fact at defendant’s submissions at [154] would be determined favourably to them.

The Retainer

1. [252]

   The plaintiff pleads the existence of a retainer in P2FASC that is said to be either a general advisory retainer from 15 September 2003 for the whole of the relevant period (“General Retainer”), or a series of 5 separate retainers, the first in September 2003, the second in March 2004, the third in March/April 2004, the fourth in May 2005 and the fifth between 2009 and 2014.

2. [253]

   It appears that this retainer is said to have remained on foot until late 2014 when the Federal Court proceedings settled.

3. [254]

   The plaintiff's primary case in the P2FASC thus rests on the contention that each of Cardwell and Deloitte:

   1. (1)

      owed the plaintiff ongoing obligations in tort and contract from 2003 until the latter part of 2014;

   2. (2)

      acted negligently and in breach of contract both during 2003 and 2005 (which is consistent with the allegations in the FASC) and engaged in additional acts of neglect in 2004 and again between 2005 and 2014; and

   3. (3)

      between 2005 and 2014, intentionally made implied fraudulent representations to the plaintiff by silence. These allegations are made in order to trigger s 55 of the Limitation Act.

4. [255]

   There are two immediate and obvious difficulties with the allegation of a General Retainer.

5. [256]

   First, the plaintiff has not pleaded what he says are the terms of the General Retainer. This is not a minor matter, noting that this is a retainer of Cardwell/Deloitte which is alleged to spring up as and when Croft made further requests of Cardwell. It is said to extend until 2014, notwithstanding that Cardwell retired from the partnership of Deloitte in 2007. Each of Croft and the plaintiff have served their evidence in the case, and there is no evidence in either affidavit which is consistent with a General Retainer. The plaintiff has also conceded that he does not know the terms of the retainer.

6. [257]

   Secondly, the plaintiff is alleging that Croft, acting as the plaintiff's agent, engaged Cardwell/Deloitte during the 15 September 2003 Conversation, with that engagement continuing "as and when Croft made further requests of Cardwell". Despite correspondence in which Cardwell/Deloitte have sought particulars, the plaintiff has not, however, pleaded (or confirmed through correspondence) the nature of the agency relationship.

7. [258]

   As such, there is no identification as to how the particular agency relationship was constituted, i.e the origins or scope of the agency. This is not a minor pleading issue, it is critical. Moreover, the P2FASC does not make plain whether Croft is said to be acting within or outside the scope of his actual or ostensible authority when he communicated with Cardwell in 2004 and 2005.

8. [259]

   To the extent an agency relationship is relied upon, it needs to be expressly pleaded. A pleading of agency cannot simply be inferred. This was noted in AJG Pty Ltd v Mobile Communications Systems Pty Ltd [2015] VSCA 231, per Warren CJ and Hansen JA at [34]:

9. [260]

   The necessity for the plaintiff to fully plead the agency relationship is particularly acute in this case, where the following matters are reasonably uncontroversial: there are no written retainers; the plaintiff's affidavit served in this case does not give any evidence either about Croft's authority or the alleged general retainer; and Cardwell communicated almost exclusively with Croft and only occasionally spoke with the plaintiff. Consistently with that fact, the plaintiff says that Croft was ordinarily responsible for paying Cardwell/Deloitte's invoices.

10. [261]

    In the alternative to the General Retainer, the plaintiff alleges that he and Cardwell/Deloitte entered into 5 separate retainers:

    1. (1)

       First Retainer in September 2003 to assist and provide advice to Croft in relation to the interposition and related matters as requested.

    2. (2)

       Second Retainer in March 2004 to advise about the tax implications of and timing issues surrounding a potential return of capital.

    3. (3)

       Third Retainer in March/April 2004 to review the interposition documents and advise Croft both as to their effectiveness and whether they contained any anomalies in the way that they recorded the interposition.

    4. (4)

       Fourth Retainer in May 2005 to review the whole interposition and confirm whether it had been effected in a way which satisfied the requirements for CGT rollover relief, and also to advise the plaintiff about his proposed $10m return of capital.

    5. (5)

       Fifth Retainer between 2009 and 2014, pursuant to which Cardwell (but presumably not Deloitte) was engaged to assist the plaintiff with the ATO audit, the amended assessment and the Federal Court proceedings.

11. [262]

    It is immediately apparent that the First Retainer in the P2FASC is far broader than what was pleaded in the FASC as the plaintiff now wants to allege that Cardwell/Deloitte had an ongoing contractual obligation from September 2003 to assist Croft and provide him with advice on the interposition and related matters.

12. [263]

    The terms of the retainer are not pleaded, nor are the terms of Croft's authority as agent, nor is there identification of when Croft is said to have been acting within or outside his authority. Cardwell & Deloitte assume that there is thus no period of time (when Croft communicated with Cardwell/Deloitte) that he is said to have been acting outside the scope of his agency.

13. [264]

    In the evidence served in support of the motion, the plaintiff's explanation for this late expansion of his case is somehow suggested to be inter-party correspondence between September 2019 and January 2020.

14. [265]

    That statement is demonstrably incorrect for two reasons. Firstly, the plaintiff included this new expanded First Retainer in a draft pleading which was circulated on 30 August 2019. Secondly, when pressed for particulars about the First Retainer, the plaintiff, in the letter from his solicitors HWL Ebsworth to Thomson Geer dated 1 November 2021 (CB, Vol 2, p 1257) conceded that the amendment was not generated in response to any action by any of the defendants, with the plaintiff stating:

15. [266]

    The P2FASC makes a number of allegations concerning the 24 March 2004 Meeting. Firstly, that the plaintiff attended the 24 March 2004 Meeting and retained Cardwell to advise him about the tax implications and timing issues surrounding a potential return of capital; secondly, that during the 24 March 2004 Meeting Cardwell learnt that the interposition had recently been completed; thirdly, that Cardwell agreed during the 24 March 2004 Meeting to review "the documents effecting the interposition"; and finally, in breach of his retainer and duty to the plaintiff, during the 24 March 2004 Meeting, Cardwell failed to properly explain to the plaintiff the implications of the warnings which he in fact gave about the risks associated with s 45B of the Tax Act 1936.

16. [267]

    The amendment is the foundation for the first of the plaintiff's new fraud claims. This is because the plaintiff alleges that on 24 March 2004, Cardwell learnt that the interposition had occurred. This is a fundamental shift in the plaintiff's case, which was first floated in a draft of the P2FASC circulated on 9 December 2019.

17. [268]

    The reason that this is such a critical allegation and a fundamental shift in the plaintiff's case is because on 5 May 2004, Cardwell reviewed the 27 April 2004 Letter. The 27 April Letter attached unsigned documents for the interposition. Upon reviewing the documents, Cardwell had concerns about whether Croft had followed the requirements under the Tax Act 1936, following which Cardwell called Croft and alerted him to those problems. With the plaintiff now saying that on 5 May 2004 Cardwell knew that the interposition had in fact already occurred (notwithstanding that Cardwell was sent draft/unsigned documents), the plaintiff uses that allegation as a springboard to contend that Cardwell knew that the interposition was ineffective (from a tax perspective) and that thereafter Cardwell deliberately concealed the vices in the documentation from the plaintiff.

18. [269]

    The plaintiff says that Cardwell's knowledge that the interposition had in fact already occurred and been completed "is to be inferred from the discussion at the meeting" of 24 March 2004. The P2FASC then refers to 24 March 2004 Filenote of the meeting and Cardwell's evidence at [29] of the Cardwell Aff 27/2/19. However, these documents do not support the allegation. The 24 March 2004 Filenote is directly inconsistent with the proposed inference because it lists the steps that Croft still needed to take for the interposition to occur, in particular a valuation. Cardwell's evidence at [29] of the Cardwell Aff 27/2/19 is also directly inconsistent with the inference sought. Cardwell recalls Croft stating "I've tried to do the steps for the restructure, but the numbers don't add up" and Cardwell replies "I'm happy to have a look at it if you send me the documents".

19. [270]

    Because of the importance of this amendment, and the absence of any real particulars of knowledge, it is also worth noting that the inference sought by the plaintiff (that on 24 March 2004, Cardwell knew that the interposition had already occurred) is also directly contradicted by all other evidence which has already been served in this case:

    1. (1)

       It is not supported by the plaintiff's affidavit of 28 November 2018 served in the proceedings (CB, Vol 3, p 2340). The plaintiff was at the 24 March 2004 Meeting, but his evidence does not support the inference sought.

    2. (2)

       It is not supported by the plaintiff's affidavit served on 15 March 2013 in the Federal Court proceedings (CB, Vol 5, p 3729).

    3. (3)

       It is not supported by the Croft Aff 18/2/19, in which Croft records (at [39]) that he said to Cardwell at the 24 March 2004 Meeting "I will provide you with all documents in relation to the interposition prepared so far for your review".

    4. (4)

       It is not supported by the attachments to the 27 April 2004 Letter which were unsigned documents.

20. [271]

    The Third Retainer in the P2FASC is to the effect that in March/April 2004 the plaintiff retained Cardwell/Deloitte to: review the interposition documents; advise Croft as to the effectiveness of the interposition documents; and advise Croft whether the interposition documents contained any anomalies in the way that they recorded the interposition.

21. [272]

    The plaintiff alleges that, in purporting to carry out his obligations under the Third Retainer, on 5 May 2004 Cardwell reviewed the 27 April 2004 Letter, and understood that Croft had not yet undertaken the valuation of ATS, being a necessary step in order to determine the amount which could be credited to AGH's share capital account when the ATS shares owned by the plaintiff and his father were cancelled.

22. [273]

    The plaintiff then combines Cardwell's alleged knowledge gained on 24 March 2004 that the interposition had occurred with his understanding gained on 5 May 2004 (that the valuation had not been undertaken), to allege that on and from 5 May 2004, Cardwell knew or was willfully blind or recklessly indifferent to, inter alia:

    1. (1)

       whether the plaintiff or Croft had taken each of the necessary steps in order to effect the interposition in a tax effective manner and keep the pre-CGT status of the plaintiff's shares;

    2. (2)

       whether or not the interposition was likely to satisfy the rollover requirements under subdivision 124-G of the Tax Act 1997, so as to maintain the pre-CGT status of the plaintiff's shares;

    3. (3)

       the fact that unless steps were taken to rectify the vices in the interposition documents, it was likely that any subsequent capital reduction in AGH would:

23. [274]

    Cardwell and Deloitte's alleged failure to advise the plaintiff about the anomalies in the interposition documentation is said to amount to an intentional breach of the Third Retainer and negligence.

24. [275]

    The P2FASC alleges that in May 2005 Cardwell/Deloitte was engaged by the plaintiff to review all of the interposition documents; to provide advice on whether the interposition documents had been prepared and executed in a fashion which satisfied the requirements for CGT rollover relief under 124-G of the Tax Act 1997; and to provide advice and assistance in relation to the proposed return of capital, in light of the interposition having occurred.

25. [276]

    This is a radically different allegation from that made in the FASC concerning the 27 May 2005 Meeting.

26. [277]

    The plaintiff contends that in breach of their obligations under the Fourth Retainer, on 9 June 2005 Cardwell/Deloitte prepared and sent Croft the 9 June 2005 email, knowing that the contents of the email were false.

27. [278]

    Teasing out this allegation, the plaintiff is alleging is that by reason of the 27 May 2005 and the 9 June 2005 emails Cardwell/Deloitte knew, or were willfully blind or recklessly indifferent to, the interposition matters.

28. [279]

    The plaintiff alleges that, knowing about each of the interposition matters, Cardwell/Deloitte failed to pass that information to the plaintiff. Finally, the plaintiff says that, had the plaintiff been told about the interposition matters, the Interposition could have been rectified prior to making the Payment on 30 June 2005.

29. [280]

    The plaintiff's explanation for this late amendment is said to be [34] in Cardwell Aff 27/2/19, together with the 27 May 2005 Email and the 9 June 2005 email. This is again information which has been in the plaintiff's possession since 2013, and does not explain the reason that the plaintiff is now advancing this amendment with the vices described above.

30. [281]

    The plaintiff alleges that, from shortly after 30 June 2005, Cardwell/Deloitte "actually knew that the Payment had occurred or were willfully blind or recklessly indifferent to whether it had occurred or not".

31. [282]

    This allegation, like the allegation that in March 2004 Cardwell knew that the interposition had occurred, is the foundation for the plaintiff's subsequent contention that during the Fifth Retainer Cardwell/Deloitte fraudulently concealed matters from the plaintiff between (at least) 2005 and 2014.

32. [283]

    Again, no particulars have been provided of this allegation. It is not consistent with other documents discovered by the plaintiff in the proceeding. The plaintiff's evidence on the amendment application does not explain why this allegation is made at this time.

33. [284]

    The plaintiff alleges that between 2009 and 2014, he retained Cardwell and Greenwood & Freehills to assist him with his dispute with the ATO.

34. [285]

    The plaintiff alleges that when providing those services:

    1. (1)

       in 2009 (if not before) Cardwell and therefore Deloitte (notwithstanding that Cardwell was no longer a Deloitte's employee) knew that the Payment had occurred;

    2. (2)

       in 2012 Cardwell intentionally prepared a misleading brief to the barrister retained to act for the plaintiff (“Mr Fraser”), so as to mislead Mr Fraser about the tax effectiveness of the interposition. The specific acts said to have been intentionally misleading are:

    3. (3)

       Cardwell is said to have known when preparing the observations in 2012 that each of those statements was false because, on 5 May 2004, he had read the 27 April 2004 Letter and realised that the AGH shares had not been issued in exchange for the cancellation of the ATS shares.

    4. (4)

       Cardwell was obliged to (but did not) tell the plaintiff of the interposition Matters at all times between 2009 and 2014.

35. [286]

    It is difficult to see how the brief to Counsel, a copy of which was in the plaintiff's possession from at least 2012 explains this late amendment.

36. [287]

    Moreover, the two impugned statements from the brief were repeatedly made by the plaintiff and his various agents on numerous occasions between 2005 and 2014 in documents discovered by the plaintiff in this proceeding in 2018 including:

    1. (1)

       on 6 October 2011, by the plaintiff in his notice of objection against the amended assessment dated 16 August 2011;

    2. (2)

       on 14 December 2012, by Croft as agent of the plaintiff in his submission to the Commissioner;

    3. (3)

       on 15 March 2013, by the Commissioner when summarising his understanding of the plaintiffs position set out in his notice of objection;

    4. (4)

       by Croft in a note annexed to his affidavit from the Federal Court proceedings, which according to that affidavit had been made in November 2003;

    5. (5)

       by the plaintiff in his affidavit in the Federal Court proceedings where he deposed to signing the letter of 6 November 2003; and

    6. (6)

       on 22 and 23 July 2014 by Croft during his evidence in the Federal Court proceedings.

37. [288]

    The defendants complain about the adequacy of the pleading of the retainer between Cardwell/Deloitte and the plaintiff in the P2FASC.

38. [289]

    The plaintiff says that the pleading is adequate in the circumstances. In the Federal Court Aff, Cardwell accepted that he was retained by the plaintiff from time to time and provided advice and services in respect of the interposition and Payment. The possibilities are that there was either a general overarching retainer or individual retainers each time Cardwell was asked to do work or provide advice. Which of those possibilities is correct is a matter for trial.

39. [290]

    As to the pleading of terms of the retainer, the relevant term is the one that is pleaded, namely an implied term to exercise reasonable care and skill. The plaintiff is not required exhaustively to plead each and every term of a retainer when no breach of those terms is alleged.

40. [291]

    As to the complaint about agency not being expressly pleaded, that is a distraction. Cardwell accepts that he was retained by the plaintiff. There is no issue about that matter. As a practical matter, it was Croft that made requests of Cardwell rather than the plaintiff directly. The pleading simply acknowledges that the legal explanation for the creation of the retainer in those circumstances is likely that Croft was acting as the plaintiff's agent. There is no particular matter which if not pleaded could take the defendant by surprise.

41. [292]

    These criticisms are not sufficient to justify refusal of leave to amend.

42. [293]

    The defendants take issue with the pleading that Cardwell knew that the interposition had already occurred by 5 May 2004. Whether the allegation is made out or not, and whether the 24 March 2004 Filenote particularised by the plaintiff is to be construed as supporting or undermining the allegation, are matters for hearing.

43. [294]

    In any event, what is more significant is that Cardwell knew that the interposition had occurred in May/June 2005, before the Payment occurred. The Federal Court Aff at [120]-[121] indicates that this was so.

44. [295]

    In the Federal Court proceedings, it is my view that it is arguable that Cardwell accepted that he was retained by the plaintiff from time to time and provided advice and services concerning the interposition and the Payment. As to the issue of whether this was a general retainer or specific retainers each time that the plaintiff engaged the defendants to provide advice, there is a dispute between the parties, and the retainer or retainers included oral conversations. It is not appropriate to resolve disputed facts and circumstances in a summary judgment application.

45. [296]

    As to the position of Deloitte in relation to the retainer, Cardwell is sued personally. The issues concerning Deloitte and the plaintiff’s employment there until 2007 do not detract from Cardwell’s personal liability.

46. [297]

    It appears that both parties accept that there was an agent/principal relationship between Croft and the plaintiff. In regards to whether, as the plaintiff’s agent, Croft’s knowledge should be imputed to the plaintiff, I accept that where an agent has a legal duty to disclose information to the principal it is to be presumed that the agent’s knowledge is imputed to the principal. However the extent to which Croft’s knowledge is to be imputed to the plaintiff, exactly what information can be said to have been in Croft’s knowledge, and whether and at what time Croft (and by relationship of agent/principal the plaintiff) had sufficient facts to relevantly have been capable of discovering a fraud, are issues for resolution at trial.

Discretion

1. [298]

   The defendants advanced arguments as to why this Court should exercise its discretion to refuse to the plaintiff’s amendments in the P2FASC

2. [299]

   Even if there was utility in allowing the amendment, the plaintiff's application is a very late amendment which is contrary to the case management principles set out in s.56 and following of the CPA and the principles articulated in Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175.

3. [300]

   Ward CJ in Eq, addressed these issues in the matter of ACN 092 745 330 Pty Ltd [2018] NSWSC 1185 at [56] and following, stating:

4. [301]

   There are a number of factors which weigh heavily against exercising the discretion to allow the plaintiff to file the P2FASC. The underlying events occurred between 2003 and 2005, predominately in conversations. The plaintiff, Croft and Cardwell's memories of those conversations will have already deteriorated significantly. Furthermore, Deloitte no longer has any original documents pertaining to the plaintiff (by reason of standard document retention policies). The only documents that it has are copies of documents which it produced in answer to subpoenas in 2013. Accordingly, Deloitte is hampered in its ability to locate any documents which may assist it to investigate or defend the new allegations. Greenwood & Freehills appears to no longer have any documents pertaining to the plaintiff, which will hamper Cardwell's ability to investigate and defend the new allegations.

5. [302]

   The plaintiff, having appropriately retreated from the explanation that the new case could not have been identified until late 2018 / early 2019, now has no explanation for why the allegations in the P2FASC were not made years earlier, other than the fact that: the plaintiff's previous solicitors did not appear to provide all of the documents to the plaintiff's current solicitors; or the solicitors retained to act for the plaintiff, who had access to the relevant documents and materials, did not particularly turn their minds to advancing the current allegations.

6. [303]

   All of the lay evidence in support of and in response to the FASC was served by February 2019. The plaintiff served expert evidence in August 2017 (and a refresher report in June 2019) and the defendants served expert evidence in February 2020. Verified lists of documents were served in September 2018 and discovery has occurred, although the plaintiff has recently produced further documents.

7. [304]

   Subject to the service of any reply evidence, based on the current pleadings, the case is ready to proceed to trial – and has been ready to proceed to trial for 2 years. The P2FASC raises also a belated and serious colourable allegation of fraud.

8. [305]

   If the plaintiff is now allowed to amend the plaintiff will presumably wish to serve further evidence, concerning the events of 2003-2005, but also concerning 2009-2014. Further discovery will be required from all parties, most especially dealing with the events of 2009-2014. Such discovery is likely to give rise to complicated privilege issues which will cause further delay and expense, noting that each of Croft and Cardwell were witnesses for the plaintiff in the Federal Court proceedings and attended conferences with the plaintiff's lawyers. Further subpoenas may be necessary - most obviously for documents which may still be in the possession of Greenwood & Freehills. Further investigations and evidence will be needed on behalf of Cardwell/Deloitte, including from other employees of Greenwood & Freehills. Cardwell will also have the stress and uncertainty associated with litigation for another year or 18 months.

9. [306]

   The amendments sought to be made are reasonably arguable and are not necessarily precluded by the expiry of applicable limitation periods. That itself a powerful factor in favour of granting leave to amend bearing in mind the overarching requirement of s 56 of the Civil Procedure Act.

10. [307]

    Cardwell and Deloitte point to the fact that the underlying events occurred between 2003 and 2005 and that memories have faded and original documents are no longer available. This is certainly sub-optimal. However, it ought not preclude the amendments sought for at least the following reasons.

11. [308]

    First, on the plaintiff's case, that state of affairs has arisen because of Cardwell's conduct in fraudulently concealing his knowledge. It is not in the interests of justice for the plaintiff to be prevented from running a fraud case by reason of the effluxion of time resulting from that very fraud.

12. [309]

    Secondly, this prejudice is put in very general terms. There is no suggestion, for example, of specific documents which Cardwell can recall but which are no longer available.

13. [310]

    Thirdly, this is not a case where documents are alleged to have been fraudulently tampered with, such that the absence of original documents is problematic.

14. [311]

    Fourthly, the evidence discloses that Deloitte had destroyed its documents in accordance with its document retention policies prior to 2013 (Cardwell Aff 22/03/13 at [5]). Whatever problems exist as a result, they are problems that existed when the proceedings were first commenced. They are not new problems that arise on this amendment application.

15. [312]

    Finally, the lack of documents is more likely to prejudice the plaintiff than Cardwell. The plaintiff’s direct involvement in the transactions was minimal. He relied on his advisors. As such, he has had to frame his entire case based on what documents are available and the affidavit evidence of Cardwell and Croft. In contrast, Cardwell was a central participant along with Croft. Although his recollection may have dimmed over the years, at least he has a recollection from which to start.

16. [313]

    Cardwell and Deloitte next point to the delay in making in advancing the amended case: defendants’ submissions, [165(d)]. As to delay, the period prior to the service of the Cardwell 27/2/19 Aff is easily explicable. The fraud claims against Cardwell were not reasonably discoverable until Cardwell served the Cardwell Aff 27/2/19. Further, Mr McGregor's evidence is that he did not in fact begin to appreciate the basis for the fraud claims until he reviewed Cardwell's affidavit: McGregor Aff 20/11/20, [18]-[24].

17. [314]

    The next relevant period to consider delay is the period between service of Cardwell Aff 27/2/19 in these proceedings on or about 27 February 2019 and service of the first iteration of the proposed amended pleading on 30 August 2019. The sequence of events was that counsel were briefed with copies of the affidavits of Cardwell and Croft in these proceedings, the further expert report from Mr McGill was obtained and solicitors and counsel gave consideration to the serious step of pleading fraud: see McGregor Aff 17/3/20 at [53]-[59].

18. [315]

    The final relevant period to consider is the period since service of the first iteration of the proposed amended pleading on 30 August 2019. A large part of that period has been occupied by various rounds of criticisms and requests for particulars by solicitors for Cardwell and Deloitte, and responses and updated proposed pleadings from solicitors for the plaintiff to meet those criticisms and requests as well as to deal with the settlement with the Croft parties. Both the plaintiff and Cardwell/Deloitte have, not unnaturally, spent the balance of the period awaiting the resolution of the present motions. See: McGregor Aff 17/3/20 at [59]-[81], and McGregor Aff 20/11/20 at [25]-[52] and [60]-[62].

19. [316]

    The above evidence adequately explains the time taken to bring the amendment application insofar as that issue is relevant to the exercise of discretion.

20. [317]

    Next, Cardwell and Deloitte point to the fact that various steps in the proceedings were taken some time ago (e.g discovery and service of affidavits): defendants’ submissions, [165(e)-(i)]. However, those very steps revealed what the plaintiff says is Cardwell's fraud/deceit. This does not provide a sound basis to refuse the amendments. The plaintiff does not accept that the fraud claim is "colourable" and to the extent it is "belated", it is only so because Cardwell finally revealed the fraud on 27 February 2019.

21. [318]

    Finally, the plaintiff served a proposed amended pleading on 30 August 2019 and filed his amendment motion on 12 November 2019. Cardwell and Deloitte could have consented to the amendments at that point; the decision refuse consent and instead seek summary dismissal has delayed the proceedings by almost 2 years already. This is leaving aside any further delays arising from appeals (or applications for leave to appeal) from the Court's resolution of the present interlocutory applications.

22. [319]

    In relation to discretionary factors, the defendants submitted that this very late application will cause significant prejudice to Cardwell/Deloitte. There is no evidence by Cardwell/Deloitte to support that they will suffer actual prejudice at trial. I do take into account that there may be some presumptive prejudice occasioned by the substantial delay of some 16 years since the events occurred and some 11 years since the hearing in the Federal Court. Having regard to the application of s 55(1)(a) of the Limitation Act, the claim pleaded by the plaintiff may not be statute barred if it is established at trial that the defendants’ conduct was the cause of the delay. The latest allegations of fraud and deceit are very serious ones. The plaintiff’s solicitor has explained the various periods of delay especially the circumstances giving rise to these allegations and in particular the documents with ticks and one cross. Then the plaintiff’s legal representative rightly took time to investigate and consider whether these serious claims could be made out and they obtained an expert report. While Deloitte destroyed its documents (I make no criticism of that), the plaintiff Cardwell and the witnesses are available to give evidence. There are contemporaneous documentary evidence including filenotes after emails sent in 2004 and 2005 and further evidence and statements in 2012 which were marshaled for the Federal Court proceedings. It is my view that the plaintiff has satisfactorily explained the various periods of delay. In the exercise of my discretion, taking these circumstances into account, the amendments are arguable and raise real issues in dispute. Justice is best served if the amendments are allowed to be made.

23. [320]

    So far as delay is concerned it is my view that the plaintiff has provided a satisfactory explanation for the delay, as the alleged fraudulent concealment was only discovered in February 2019. I accept that the lengthy delay will cause presumed prejudice but there are filenotes, and statements as to the events in 2012, 2014 and 2015. It is my view that both parties can have a fair trial. The demands of justice dictate that the plaintiff should be granted leave to file the P2FASC.

Final Resolution

1. [321]

   In summary, the plaintiff sought leave to file the P2FASC. The defendants sought summary dismissal of the proceedings on the basis of futility as the claims currently advanced in the FASC were time barred when filed, and the new claims propounded in the P2FASC were also time barred. In this regard the defendants submitted that the new claims were not assisted by operation of s 55 of the Limitation Act as the information the plaintiff suggests was concealed was in his knowledge for at least 7 years. Further the defendants submitted that this Court should exercise its discretion and not grant the plaintiff leave to file the P2FASC as it would cause the defendants prejudice given the delay in bringing the claims and the lack of explanation for that delay.

2. [322]

   The limitation issues turn on complex question of fact and law that can only be resolved at trial. The question of when damage or loss was suffered for the purpose of the non-fraud claims is one fraught with difficulty. There are a number of ostensibly reasonable answers, and which is correct is a matter for trial.

3. [323]

   There is also a genuine dispute as to whether the fraud and deceit was reasonably discoverable from the documents in the plaintiff’s possession from about 2013 or whether it only became reasonably discoverable following receipt of Cardwell Aff 27/2/19. It is my view that the plaintiff’s claim under s 55 of the Limitation Act is arguable that there is a cause of action based on fraud and deceit and the cause of action against the plaintiff is fraudulently concealed.

4. [324]

   This is therefore a difficult case with disputed facts and complex legal issues, which contains much contested factual material that can only be resolved at trial, not in a summary judgment application.

5. [325]

   As to the issue of delay it needs to be recalled that the genesis for the amendment application arises as a result of the affidavit evidence of Cardwell and Croft in February 2019. In large part, it stems from the contention that the fraud was only raised by Cardwell Aff 27/2/19. The timing of the amendment application has therefore, in my opinion, been adequately explained.

6. [326]

   The plaintiff is therefore granted leave to file the 2PFASC.

Result

1. [327]

   For the reasons set out earlier, it is my view that the plaintiff’s case is arguable. The defendants’ notice of motion dated 10 July 2020 seeking summary dismissal is dismissed. The plaintiff’s notice of motion dated 12 November 2019 seeking to file the P2FASC is granted. The 2PFASC is to be filed and served within 14 days. The question of the date from which the amendments are to take effect should be reserved to trial.

Costs

1. [328]

   As to costs, the sixth and seventh defendants should pay the plaintiff’s costs of their notice of motion filed 10 July 2020 and, the plaintiff should pay the sixth and sevenths defendants’ costs thrown away by reason of the amendments made in the P2FASC. Otherwise, the costs of the plaintiff’s notice of motion filed 12 November 2019 are reserved.

   1. (1)

      The defendants’ notice of motion dated 10 July 2020 seeking summary dismissal is dismissed.

   2. (2)

      The plaintiff’s notice of motion dated 12 November 2019 seeking to file the proposed second further amended statement of claim is granted.

   3. (3)

      The second further amended statement of claim is to be filed and served within 14 days (24 December 2021).

   4. (4)

      The sixth and seventh defendants are to pay the plaintiff’s costs of their notice of motion filed 10 July 2020 and, the plaintiff should pay the defendants’ costs thrown away by reason of the amendments.