Hitchcock v Pratt Group Holdings Pty Ltd as trustee for the Pratt Family Holdings Trust [2024] NSWSC 1292

Supreme Court New South Wales

Medium Neutral Citation: Hitchcock v Pratt Group Holdings Pty Ltd as trustee for the Pratt Family Holdings Trust [2024] NSWSC 1292 Hearing dates: 16 February, 26 June 2024 Date of orders: 16 October 2024 Decision date: 16 October 2024 Jurisdiction: Equity Before: Meek J Decision: Leave to amend the Plaintiff's amended statement of claim given in part, with limited leave also given to re-plead certain aspects of the claim in the ways specified by the Court. Leave to amend reply refused and part of existing reply struck out. Catchwords: CIVIL PROCEDURE — Pleadings — Competing applications for amendment and strike out of parts of amended statement of claim and reply — Plaintiff alleges that she is a discretionary object of the family trust, despite the fact that the Trustee executed a deed of exclusion by which it purported to exercise its power of exclusion under the trust deed to exclude her as a general beneficiary, and that she has suffered loss by reason of the Trustee failing to appoint income to her over a number of years since her purported exclusion — By her proposed pleadings, the Plaintiff seeks to impugn the validity of the purported exclusion by alleging that, in purporting to exclude her, the Trustee (a) acted under the dictation of the remaining beneficiaries (the "Siblings"), (b) failed to consider whether the purported exclusion was a reasonable and proper exercise of its power, or (c) exercised its power for an improper purpose — Alternatively, the Plaintiff seeks to allege that she is still a discretionary object because, by reason of certain payments made to her by the Trustee after her purported exclusion, (a) the Trustee had determined that the purported exclusion was of no effect or the power of exclusion had not been exercised, or (b) the Trustee acknowledged and affirmed the Plaintiff's status as a general beneficiary and/or waived its right to rely upon the purported exclusion — Leave to amend given in part, with limited leave also given to re-plead certain aspects of the claim in the ways specified — Leave to plead certain claims refused CIVIL PROCEDURE — Pleadings — Amendment — Discussion of principles of pleading, particulars and amendment CIVIL PROCEDURE — Pleadings — Primary facts and inferences — Discussion of requirements for pleading facts based on inferences from primary facts — Approach adopted similar to that which is taken in cases of conspiracy, as in this case the Plaintiff's pleading is advanced on the basis she has limited knowledge of the events the subject of her claim CIVIL PROCEDURE — Pleadings — Striking out — Uniform Civil Procedure Rules 2005 (NSW), r 14.28 — Discussion of principles of striking out — Discussion of meaning of "no reasonable cause of action" threshold and impact of overriding purpose in s 56 Civil Procedure Act 2005 (NSW) — Doubt expressed that s 56 has made the test under r 14.28 less strict than previously, in the sense of reducing the conditions for the engagement of the power, as opposed to limiting the circumstances in which the Court, satisfied that the power is available, might be inclined to refuse relief on discretionary grounds CIVIL PROCEDURE — Pleadings — Fraud or dishonesty — Trustee raises by way of defence an exemption clause which precludes its responsibility for (inter alia) any breach of duty or trust unless it was committed in "personal conscious and fraudulent bad faith" by the Trustee, as well as a limitation defence, in response to the allegations that it failed to appoint income to the Plaintiff — Discussion of meaning of "personal conscious and fraudulent bad faith" for the purposes of an exemption clause and "fraudulent breach of trust" for the purposes of limitation provisions — Held that both notions involve dishonesty (although for the latter it may be sufficient that there is at least some knowledge of the impropriety of the conduct involved) CIVIL PROCEDURE — Pleadings — Fraud or dishonesty — Plaintiff by her proposed amended reply seeks to allege that the conduct and alleged breaches by the Trustee in failing to appoint income set out in her proposed further amended statement of claim were committed in personal conscious and fraudulent bad faith and are claims in respect of a fraudulent breach of trust for limitation purposes — Discussion of requirements for pleading dishonesty — Discussion of whether it is necessary to plead facts which tilt the balance to support an inference of dishonesty — Considered that, if the facts, circumstances and relevant context as pleaded might, if established by the evidence, rise to the level of dishonesty, the pleading is sufficient — Held that, while the Trustee's conduct in relation to the purported exclusion might rise to the level of dishonesty, its alleged subsequent breaches in failing to appoint income to the Plaintiff did not — Held that the allegations made in the reply relating to fraud ought to be struck out CIVIL PROCEDURE — Pleadings — Allegations of knowledge — Whether particulars of knowledge necessary when actual knowledge is alleged — On the basis that the Plaintiff's case is expressly stated to be one of actual knowledge, and that such knowledge was held by the directors identified, held that the pleaded allegations of knowledge are sufficient PROPER PURPOSE RULE — Discussion of powers generally and the scope of the proper purpose rule — Purpose and motive distinguished — Good faith and proper purpose distinguished — Discussion of possible purposes of a power of exclusion in a trust deed — Whether the Plaintiff is required to plead a proper purpose(s) for the exercise of the Trustee's power of exclusion — Held that the Plaintiff's omission of a pleading which states for what purpose or purposes the power of exclusion may properly be exercised does not mean that no complete cause of action is pleaded or that the pleading of the improper purpose is otherwise defective EQUITY — Trusts and trustees — Construction of trust deed — Whether the Plaintiff's new construction claim that she is a specified beneficiary, having regard to the definition in the trust deed, is arguable — Discussion of meaning of "child" and "parent" in trust deed — Held that proposed construction claim is arguable and leave given to plead it EQUITY — Trusts and trustees — Breaches of trust — Failure to exercise discretion upon real and genuine consideration — Whether the Trustee's failure to consider results in the exercise of power being void or voidable at the instance of the beneficiary who is adversely affected — Leave given to re-plead the exercise (failure to consider) case such that the purported exclusion is voidable and should be set aside EQUITY — Trusts and trustees — Acknowledgement, affirmation and waiver — Whether the Plaintiff's alternative case based upon acknowledgement, affirmation and/or waiver by the Trustee is arguable — Leave to plead alternative case refused EQUITY — Trusts and trustees — Breaches of trust — Remedies — Whether the Plaintiff's claim for equitable compensation as a result of "loss" from the Trustee's failure to appoint income to her over numerous years is arguable — Held that on the Plaintiff's proposed pleadings, having regard to the discretionary nature of the Trust and the Trustee's power to appoint income, the claim is not arguable — Leave to plead equitable compensation claim refused Legislation Cited: Choice of Law (Limitation Periods) Act 1993 (NSW) Civil Procedure Act 2005 (NSW) Federal Court of Australia Act 1976 (Cth) Limitation Act 1969 (NSW) Limitation of Actions Act 1958 (Vic) Rules of the Supreme Court 1883 (UK) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: AA as Executor of the Estate of BB v XX (No 2) [2024] WASC 39 Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41 Ag-Exports (Australia) Pty Ltd v Export Finance and Insurance Group [2006] NSWSC 467 Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; [2008] HCA 57 Allianz Australia Insurance Ltd v Delor Vue Apartments CTS 39788 (2022) 277 CLR 445; [2022] HCA 38 Alpert v Commonwealth (Department of Defence) [2024] FCA 447 Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd (2018) 265 CLR 1; [2018] HCA 43 Andrianakis v Uber Technologies (Ruling No 1) [2019] VSC 850 Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27 Armitage v Nurse [1998] Ch 241 Arthur Yates & Co Pty Ltd v Vegetable Seeds Committee (1945) 72 CLR 37; [1945] HCA 55 Australian Metropolitan Life Assurance Company Ltd v Ure (1923) 33 CLR 199; [1923] HCA 29 Baba v Sheehan [2021] NSWCA 58; (2021) 151 ACSR 462 Banks v Alphatise Pty Ltd [2014] NSWSC 1437 Banque Commerciale SA (en liq) v Akhil Holdings Ltd (1990) 169 CLR 279; [1990] HCA 11 Bott v Carter [2012] NSWCA 89 Brambles Holdings Ltd v Carey (1976) 15 SASR 270 British American Tobacco Australia Ltd v Gordon (No 3) [2009] VSC 618 Brougham v Edwards [2024] SASCA 59 Bruce v Odhams Press Ltd [1936] 1 KB 697 Burgess v Beethoven Electric Equipment Ltd [1943] KB 96 Campbell v T. L. Clacher No. 2 Pty Ltd [2019] QSC 218 Cardaci v Cardaci [2023] WASCA 158 Carr v Baker (1936) 36 SR (NSW) 301 Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 203 CLR 194; [2000] HCA 47 Colombini v De Berigny [2021] NSWSC 374 Commonwealth Bank of Australia v ZYX Learning Centres Ltd [2014] NSWSC 1676; (2014) 103 ACSR 476 Commonwealth of Australia v Griffiths [2007] NSWCA 370 Commonwealth v Verwayen (1990) 170 CLR 394; [1990] HCA 39 Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd [2017] FCAFC 50 Cooper v The Owners — Strata Plan No 58068 (2020) 103 NSWLR 160; [2020] NSWCA 250 Cowan v Scargill [1985] Ch 270 Croc's Franchising Pty Ltd v Alamdo Holdings Pty Ltd [2023] NSWCA 256 Curwen v Vanbreck Pty Ltd [2008] VSC 338 Curwen v Vanbreck Pty Ltd (as trustee for W S and N R Harvey Family Trust) (2009) 26 VR 335; [2009] VSCA 284 Davis v Halliday Financial Management Pty Ltd [2014] NSWSC 1371 De Lorenzo v De Lorenzo (2020) 104 NSWLR 155; [2020] NSWCA 351 Dey v Victorian Railways Commissioners (1949) 78 CLR 62; [1949] HCA 1 Di Liristi v Matautia Developments Pty Ltd (No 2) [2020] NSWSC 862 Drake v Wood Marshall Williams Solicitors [2015] NSWSC 1091 Duke of Portland v Topham (1864) 11 HLC 32 Eclairs Group Ltd v JKX Oil & Gas plc [2015] UKSC 71 Empire Shipping Co Inc v Owners of the Ship "Shin Kobe Maru" (1991) 32 FCR 78; [1991] FCA 641 Ex Parte Brown, In Re Smith (1886) 17 QBD 488 Fattal v Walbrook Trustees (Jersey) Ltd [2010] EWHC 2767 (Ch) Feeney v Rix [1968] Ch 693 Finance & Guarantee Company Pty Ltd v Auswild (No 2) [2016] VSC 559 Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) [2001] FCA 1628; (2001) 188 ALR 566 Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) [2002] FCAFC 285 General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; [1964] HCA 69 Goldsmith v Sandilands [2002] HCA 31; (2002) 190 ALR 370 Grand View Private Trust Co Ltd v Wong [2022] UKPC 47 Haigh v Haddad [2024] NSWSC 904 Hancock v Rinehart [2015] NSWSC 646; (2015) 13 ASTLR 1 Harris v Ashdown (1985) 3 NSWLR 193 Hasler v Singtel Optus Pty Ltd (2014) 87 NSWLR 609; [2014] NSWCA 266 Hookey v Manthey (2020) 4 QR 371; [2020] QSC 125 Horton v Jones (No 2) (1939) 39 SR (NSW) 305 Hoxton Park Residents Action Group Inc v Liverpool City Council [2012] NSWSC 1026 HSBC International Trustee Ltd v Poon (No 2) [2014] JRC 254A; 18 ITELR 355 Human Appeal International Australia v Beyond Bank Australia Ltd [2023] NSWSC 382 Hunt v National & General Insurance Co Ltd [1974] Qd R 157 I Cook Foods Pty Ltd v State of Victoria [2022] VSC 649 Idoport Pty Ltd v National Australia Bank Ltd [2000] NSWSC 599 In de Braekt v Powell (2007) 33 WAR 389; [2007] WASCA 55 Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653; [2008] NSWCA 206 JSC Bank of Moscow v Kekhman (No 2) [2015] EWHC 3073 (Comm) Karger v Paul [1984] VR 161 Katsoulas v Kritikakis; Katsoulas v Apostolatos [2024] NSWSC 67 Kosmas as Administrator of the Estate of George v Cherote (Supreme Court (NSW), Simos J, 14 March 1996, unrep) Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563; [1995] HCA 68 KTC v David [2022] FCAFC 60 Lock v Australian Securities and Investments Commission (2016) 248 FCR 547; [2016] FCA 31 Lyons v Kern Konstructions (Townsville) Pty Ltd (1983) 70 FLR 135 Mandie v Memart Nominees Pty Ltd [2018] VSC 719 Mandie v Memart Nominees Pty Ltd (2020) 62 VR 528; [2020] VSCA 281 Maybury v Plowman (1913) 16 CLR 468; [1913] HCA 43 McDonald v Grech; Bank of Western Australia Ltd v McDonald [2012] NSWSC 717 Meckiff v Simpson [1968] VR 62 Mercanti v Mercanti [2017] HCA 1; (2017) 340 ALR 225 Mercanti v Mercanti (2016) 50 WAR 495; [2016] WASCA 206 National Australia Bank Ltd v Charlton; Charlton v The General Manager, NSW Rural Assistance Authority [2018] NSWSC 157 New South Wales v Williams [2014] NSWCA 177 O'Shanassy v AIA Australia Limited (previously The Colonial Mutual Life Assurance Society Limited t/as CommInsure) [2022] NSWSC 677 O'Sullivan v Schubert [1963] VR 143 Owies v JJE Nominees Pty Ltd (in its capacity as the trustee for the Owies Family Trust) [2022] VSCA 142 Pamplin v Irwin [2024] NSWCA 213 Perera v Genworth Financial Mortgage Insurance Pty Ltd (2017) 94 NSWLR 83; [2017] NSWCA 19 Persons Identified in Schedule 1 v Standard Chartered plc [2024] EWCA Civ 674 Pharm-a-Care Laboratories Pty Ltd v Commonwealth of Australia (No 3) [2010] FCA 361; (2010) 267 ALR 494 Pinson v Lloyds and National Provincial Foreign Bank Ltd [1941] 2 KB 72 Pitt v Holt [2013] 2 AC 108 Plaintiff M83 v Morrison (No 2) [2020] FCA 1198 Polar Aviation Pty Ltd v Civil Aviation Safety Authority (No 4) (2011) 203 FCR 293; [2011] FCA 1126 R v Associated Northern Collieries (1910) 11 CLR 738; [1910] HCA 61 Re Owies Family Trust (No 3) [2021] VSC 114 Re the C Trust [2012] JRC 086B Remmington v Scoles [1897] 2 Ch 1 Roadchef (Employee Benefits Trustees) Ltd v Hill [2014] EWHC 109 (Ch) Roseland Capital Pty Ltd v Neometals Ltd [2022] WASC 132 Seiwa Australia Pty Ltd v Seeto Financial Services Pty Ltd [2008] NSWSC 1260 Seltsam Pty Ltd v McGuiness (2000) 49 NSWLR 262; [2000] NSWCA 29 Shaw v New South Wales [2012] NSWCA 102 Simmons v Henwood [2013] NSWCA 184 Simmons v New South Wales Trustee and Guardian [2014] NSWCA 405 Simmons v NSW Trustee and Guardian [2013] NSWSC 1688 Simmons v Protective Commissioner of NSW [2012] NSWSC 455 Simmons v Ross [2018] VSC 306 Sir Ralph Bovey's Case (1672) 1 Vent 217; 86 ER 146 Sofer v Swissindependent Trustees SA [2020] EWCA Civ 699 Sondakh v Herliman [2021] NSWSC 1144 Soulos v Pagones [2023] NSWCA 243 Spencer v Commonwealth of Australia (2010) 241 CLR 118; [2010] HCA 28 Spencer v Spencer [2014] 2 NZLR 190 Spiliotopoulos v National Australia Bank Limited [2017] NSWSC 971 Streeter v Western Areas Exploration Pty Ltd (No 2) [2011] WASCA 17; (2011) 278 ALR 291 Three Rivers District Council v Bank of England (No 3) [2003] 2 AC 1 Turner v Turner [1984] Ch 100 Uber Australia Pty Ltd v Andrianakis (2020) 61 VR 580; [2020] VSCA 186 Vatcher v Paull [1915] AC 372 Walker v Stones [2001] QB 902 Wilden Pty Ltd v Green (2009) 38 WAR 429; [2009] WASCA 38 Willcocks v Croft [2021] NSWSC 1610 Texts Cited: Carter, J W, Contract Law in Australia (7th ed, 2018, LexisNexis Butterworths) Casson, D B, and I H Dennis, Odgers' Principles of Pleading and Practice in Civil Actions in the High Court of Justice (22nd ed, 1981, Stevens & Sons) Chapman, Chris, "Pleading allegations of dishonesty" (2006) 1 NZLJ 13 Dal Pont, G E, Law of Limitation (2nd ed, 2021, LexisNexis) Encyclopaedic Australian Legal Dictionary, online ed Halsbury's Laws of Australia Heydon, J D, M J Leeming and P G Turner, Meagher, Gummow & Lehane's Equity Doctrines & Remedies (5th ed, 2015, LexisNexis Butterworths) Hudson, Jessica, "The Proper Purpose Rule: Preventing Law's Intentional Abuse" (Paper), Supreme Court of NSW Annual Conference, 2024 Macquarie Dictionary, online ed Mitchell, Charles et al, Underhill and Hayton: Law of Trusts and Trustees (20th ed, 2022, LexisNexis) Ritchie's Uniform Civil Procedure NSW Thomas, Geraint, Thomas on Powers (2nd ed, 2012, Oxford University Press) Tucker, Lynton, Nicholas Le Poidevin and James Brightwell, Lewin on Trusts (20th ed, 2020, Sweet & Maxwell) Category: Procedural rulings Parties: Paula Sarah Hitchcock (Plaintiff / Applicant on Amendment Application) Pratt Group Holdings Pty Ltd (First Defendant / Applicant on Strike Out Application) Anthony Joseph Pratt (Second Defendant) Heloise Waislitz (Third Defendant) Fiona Geminder (Fourth Defendant) Representation: Counsel: C H Withers SC with S Puttick and (on 16 February 2024) K Lindeman (Plaintiff / Applicant on Amendment Application) A J Myers KC with J Carney (First Defendant / Applicant on Strike Out Application) J Sheahan KC with A Smith (Second to Fourth Defendants)