PICCARDI v CALDEKIA PTY LIMITED SUPREME COURT OF NEW SOUTH WALES — COURT OF APPEAL CLARKE JA, HANDLEY JA and CoLe JA 23 September 1996 [1996] NSWCA 428 ALLEGATION of conspiracy to injure — knowledge of illegal method or purpose maybe inferred from facts — fraud allegation struck out as not particularised — Rajski v Bainton (1990) 22 NSWLR 125 referred to. Cole JA. This is an appeal from a decision of Brownie J upholding a decision of Master Macready refusing leave to file an amended statement of claim alleging conspiracy in circumstances where the amended statement of claim did not particularise asserted knowledge in the defendants that they knew their acts were 'wrong and unlawful', nor was it accompanied by an affidavit setting forth evidence which might establish that knowledge. Brownie J said: In any event it seems to me that the learned Master was correct and that the judgment of the Court of Appeal in Rajski's case means that one may not lawfully plead a conspiracy such as the conspiracy sought to be pleaded here, without either giving particulars of the knowledge in question, that is, in this case knowledge that what was to be done in the form of paying out money, was improperly done. It seems to me that Rajski's case establishes that one may not simply allege that the inference is available or that it is a strong inference. The pleader must give particulars of the supposed knowledge of the impropriety."Before reaching the conclusion which I have quoted, his Honour took a passage from the judgment of Mahoney JA in Rajski v Bainton' and transposed it to the circumstances of this case. His Honour said: Transposing those notions to this case, at the time that the supposed conspiracy was said to have come in to existence, the supposed conspirators might have misunderstood the law, or the facts, or have been wrong-headed. They might have believed that what they were doing was correct. It may be that the supposed deficiencies now pointed to by the plaintiffs only became apparent to them later, or had not become apparent at all. It may be that the proposed conspirators had failed properly to analyse the transaction at the time it was brought about. They may have been inadequately advised. It is to be observed that the passage which his Honour transposed from the judgment of Mahoney JA was dealing with the question whether Mr Bainton, counsel for Tectran, pursued on behalf of his client a case against Mr Rajski knowing that Tectran did not have a case. It was in that context that Mahoney JA said: For the purpose of this argument I am prepared to accept that a proceeding which is sufficiently baseless and unlikely to succeed may constitute an abuse of process and therefore be appropriate to be dismissed. It does not follow that a proceeding which lacks sufficient basis in that regard is to be inferred to have been brought for a collateral and illegitimate purpose. The plaintiff may bring it, not to achieve such a purpose, but because, for example, of his failure to understand the law or the facts or because, as it has been said, he is simply wrong-headed. He may have no appropriately arguable case 1. (1990) 22 NSWLR 125 at 143. 2 UNREPORTED JUDGMENTS but he may not have a collateral purpose. He may, when he commenced the proceeding, have believed it would or could be won: the defects in it may have become apparent only later. And there is a distinction between a case originally brought for an acceptable purpose which — because facts may emerge while it is pending which show it has no chance of success — may be thereafter maintained for a collateral purpose. Mahoney JA was addressing the question when a case could be held to be brought with bona fides: his Honour was not addressing the ingredients necessary to be pleaded to sustain a statement of claim alleging conspiracy. In a previous passage?, Mahoney JA had said: It is not necessary in this proceeding to examine exhaustively the nature of the conspiracy or, in particular, the way in which it may be proved: see generally Williams v Hursey (1959) 103 CLR 30; Little v Law Institute of Victoria (1989) Aust Tort Reports 80-250; Ansett Transport Industries (Operations) Pty Ltd v Australian Federation of Air Pilots (1989) Aust Torts Reports 80-303; and Lonrho Ltd v Shell Petroleum Co Ltd (No 2) [1982] AC 173. It is sufficient to say that in the sense here relevant a conspiracy may be shown to exist either by showing the making of an actual agreement or agreements between conspirators, made at one or more times; or by showing acts done by them pursuant to a common purpose or with a common end from which the making of the agreement is to be inferred: see, eg, R v Associated Northern Collieries (1911) 14 CLR 387 at 400 and Williams v Hursey (1959) 103 CLR 30 at 107. Here the appellant contends that, from the facts pleaded in the proposed amended statement of claim, one can infer the agreement constituting the conspiracy flowing from acts done pursuant to a common purpose or with a common objective. To consider whether that is so it is necessary to have regard to the background circumstances and the proposed pleading. A deed constituting a discretionary trust was executed on 25 May 1981. The settlor was Mr R W Perry, an accountant. The trustee was a company, Caldekia Pty Limited. There were two appointors, the appellant Kurt Piccardi who was the appointor on behalf of the 'Kurt Piccardi Family Group', and one of the respondents Peter James Evans on behalf of the 'Peter Evans Family Group'. Each so-called family group was defined in clause 1(f). The defining provisions were identical for each in that in respect of each family group there was nominated the appointor, his children, spouse, child of a spouse, grandchildren of the appointor, parent of the appointor and: (vii) The trustees of any trust in which any one or more of the persons referred to in the preceding paragraphs (i)-(vi) is included as a beneficiary or potential beneficiary by whatever name, provided however that such trust must vest no later than the date referred to in clause 1(k)(ii) of this Deed. The second schedule to the trust deed specified the provisions as to the capital of the trust fund. Clause 4.1 dealt with the trust capital held on behalf of the Kurt Piccardi Family Group which was described as the "Kurt Piccardi Family Group's Share of the Trust Fund'. Clause 4.2 similarly dealt with the 'Peter Evans Family Group's Share of the Trust Fund'. Clause 4.1(a) and 4.2(a) made clear that the trustee held 50% of the trust fund on behalf of each of those two family groups. Clause 4.1(a) and (b), and 4.2(a) and (b) were each subject to the provisions of subclause (c) of the respective clauses. By subclause (a) of each clause the trustee was to hold the 50% held on behalf of each family group to be distributed to those nominated by the trustee surviving the vesting date. By subclause (b) of 2. 22 NSWLR 125 at 140. URJ PICCARDI v CALDEKIA PTY LIMITED (Cole JA) 3 each clause there were default provisions dealing with disposition of the 50% of capital held for the family group specifying the manner in which the fund was to be so held subject to any appointment made by the trustees pursuant to subclause (a). Subclause (c), identical in each of clauses 4.1 and 4.2, provided: (c) Notwithstanding anything herein contained the Trustee may at any time and from time to time prior to the Vesting Date in his absolute discretion appropriate any part of the Kurt Piccardi Family Group's share of the trust fund and hold the same upon trust for any of the Kurt Piccardi Family Group who or which shall be living or in existence at the date of such an appropriation and thereupon such appropriated capital shall cease to be part of the trust fund. The Trustee may pay transfer or convey such appropriated capital to any such Beneficiary at such time and in such manner as he may in his absolute discretion determine. In clause 4.2(c) in lieu of "Kurt Piccardi Family Group' there was provided for "Peter Evans Family Group'. It is thus apparent that the trust deed intended 50% of the assets of the trust fund to be held on behalf of each of the 'Kurt Piccardi Family Group' and the 'Peter Evans Family Group', as defined. It appears that Mr and Mrs Piccardi and Mr and Mrs Evans conducted various property development projects using the vehicle of the Caldekia Trust, and otherwise. Each of Mr Piccardi and Mr Evans became the directors of Caldekia. Disputes arose between the two groups. The Evans asserted that the Piccardis owed them money. On 25 June 1992 Messrs Allen Allen & Hemsley on behalf of Mr and Mrs Evans wrote a letter to Mr Piccardi in the following terms: We act for Mr and Mrs Evans, who have consulted us in relation to the winding up of various trusts and partnerships in which both your family and theirs have interests. We are instructed that you have agreed that there is a final balance owing to Mr Evans and his family: we understand, however, that you have not reached agreement as to what the ultimate balance is. Thus, we understand that you have agreed that of sums which will shortly be available for distribution under the Piccardi-Evans Family Trust, the Evans family ought equitably to receive a larger share than your family, but not the whole of the sums available for distribution. Mr Evans believes, on the other hand, that if an account is taken of contributions to and results of all the various trusts and partnerships in which you have been associated, his family is justly entitled to an amount greater than that available for distribution from the family trust: he also believes that the same result follows from agreements reached with you in 1987 and steps taken by him subsequently on the faith of those agreements. We are instructed that Mr Evans and his family reserve all rights they have against you and members of your family. We are instructed also, however, to inform you that: (a) it is proposed that there will be executed, before 30 June a trust deed between Ronald William Perry as settlor and Comtech Holdings Pty Limited as trustee, the effect of which will be that the first $390,000 of the trust fund under that deed should be paid to Mr Evans or members of his family: and that any balance will be available, as to both income and capital, for appointment among members of the Evans family and members of your family (in accordance with what we understand to be your wishes, it is proposed that your children, but not you or your wife, JOBNAME: No Job Name PAGE: 4 SESS: 1 OUTPUT: Mon Feb 25 18:20:51 2008 /reports/caseml]/case/urj/9607907 UNREPORTED JUDGMENTS (b) (c) will be named as potential beneficiaries under the deed). We understand that Mr Perry will send you directly a copy of the proposed deed. The trustee of that deed will, as you will appreciate, be a beneficiary, both of the Piccardi group and of the Evans group, under the trust deed for the Piccardi-Evans Trust. Mr Evans will before 30 June arrange for the appointment of Ronald William Perry as a director of Caldekia Pty Ltd: Mr Evans and his wife will then resign as directors. It will then be for Caldekia Pty Ltd, through its directors, to determine what appointment should be made in relation to the funds held subject to the Piccardi/Evans Family trust. That will, of course, be a matter for those directors as to which we believe they intend to take separate and independent advice.'3 It is apparent from that letter that at that time there was no agreement between the Evans and the Piccardis as to the sum, if any, due from the latter to the former, nor was there agreement that any sum which might be due could be appropriated from any share of capital or income which might be available to the Piccardi family pursuant to the Caldekia Trust. As contemplated by the letter of 25 June 1992, on 29 June 1992 the settlor of the Caldekia Trust, Mr R W Perry, became the settlor of a second trust, which I shall call the Comtech trust. It recited the prior Caldekia trust, called 'The Piccardi/Evans Family Trust', and the intention that the Piccardi and Evans families should share profits and losses equally, and contribute equally. It asserted that there had not been such equal contributions, it recited arrangements which were said to have been agreed between Evans and Piccardi but in respect of which it asserted Mr Piccardi had declined to execute documents to effect them, and recited that a statement of account had been prepared in respect of various trusts and partnerships involving the two families and said to show 'an ultimate balance due by Piccardi to Evans'. It then stated in clause 4(n): That funds are not available in the trusts and partnerships sufficient to discharge in full that ultimate balance; that in recent discussions between Piccardi and Evans Piccardi has accepted that there is a balance due by Piccardi to Evans; but that Piccardi does not accept that the balance is as stated in Schedule 10. Schedule 10 was said to be the statement of account. Clause 6 then provided: The settlor wishes to establish this trust with the intention that if funds become available to the trustee they may be applied so as in effect to discharge, to an extent which is equitable between Evans and Piccardi, the balance stated in Schedule 10 and any surplus appointed to the Beneficiaries as defined in this Deed. The Principal Beneficiary under the Comtech deed was Mr and Mrs Evans. Other beneficiaries were the children of Mr and Mrs Piccardi, the Evans" children, the grandchildren of Mr and Mrs Piccardi and Mr and Mrs Evans, and any spouse of any children of the Evans. The persons who could remove the trustee were Mr and Mrs Evans. By making the 3. Appeal Book, pp11-12. URJ PICCARDI v CALDEKIA PTY LIMITED (Cole JA) 5 children of the Piccardi's beneficiaries under the Comtech trust, the trust fell within the description of the 'Kurt Piccardi Family Group' in the Caldekia Trust, and thus became a permissible object or beneficiary under that former trust. On 29 June 1992 at a purported meeting of Caldekia, Mr Perry became a director, Mr and Mrs Evans resigned as directors and Mrs Piccardi was removed as secretary. Mr N A Hill was appointed chairman. The directors, Messrs Hill and Perry, then purported to resolve that: The sum of $390,000 being part of the Kurt Piccardi Family Share of the Trust Fund be appropriated to Comtech Pty Limited Discretionary Trust No. 2 pursuant to clause 4.1(c) of the Trust Deed. It was similarly resolved that $390,000 being part of the Peter Evans Family share of the trust fund be similarly appropriated. The appellant alleges that on 30 June 1992 at a meeting of Comtech it was requested to and did agree to receive those two sums from Caldekia. Having done so it is alleged that Messrs Hill and McKinsey, the directors of Comtech, resolved to pay $390,000 to Mr and Mrs Evans and a further $388,000 to Mrs Evans. The appellant alleges such sums were paid on that date. Against that background the appellants allege, in clause 10 of the proposed amended statement of claim, that Messrs Hill and Perry and Mr and Mrs Evans, by the acts which I have detailed, made available for distribution to the Evans Family group 'such part of the capital of the trust fund which was held in trust by Caldekia for the Kurt Piccardi family group' and which otherwise would not have been available for distribution to the Evans Family Group under the provisions of the Caldekia trust deed. It alleges that the acts were performed by each of them 'with the intent and for the purpose so that their particular act would contribute and form part of the accumulative effect of those acts to enable the distribution of portion of the trust fund to be made as alleged'. It particularised that, from those acts could be inferred that the defendants co-operated 'for the common purpose of bringing about the result referred to in paragraph 10(a)'. Clause 10 alleges that: On or about June 1992, the defendants, Neville Amos Hill, Roland William Perry, Peter James Evans and Suzanne Eileen Evans wrongfully conspired and combined amongst themselves to defraud and to injure the plaintiffs.""'Clause 12 asserts the acts relied on were those commencing with the letter of 25 June 1992 and concluding with the payments to Mr and Mrs Evans of the monies derived from the Piccardi Family trust share. Clause 14 alleges: The plaintiffs say that the acts referred to in paragraph 5,6,7,8,9 and 10 herein have no other purpose or no other discernible purpose than to allow monies to be paid to Peter James Evans and Suzanne Eileen Evans when all the defendants knew that such payment was contrary to provisions of the 'deed' and was wrong and unlawful.' JOBNAME: No Job Name PAGE: 6 SESS: 1 OUTPUT: Mon Feb 25 18:20:51 2008 /reports/caseml]/case/urj/9607907 UNREPORTED JUDGMENTS In substance, each of Master Macready and Brownie J though that the appellants must particularise or put on affidavit evidence of knowledge of the respondents that their various acts were unlawful. In my opinion that is not so. As Mahoney JA said in Rajski the conspiracy may be able to be established "by showing acts done by them pursuant to a common purpose or with a common end from which the making of the agreement is to be inferred'. Further, in Williams v Hursey+ Menzies J said: If two or more persons agree to effect an unlawful purpose, whether as an end or a means to an end, and in the carrying out of that agreement damage is caused to another, then those who have agreed are parties to a tortous conspiracy. It seems to me to be clear, indeed the solicitor's letter and the terms of the Comtech deed make it abundantly clear, that the purpose of the acts of the various. defendants was, by means of the establishment of the Comtech Trust, to transfer monies from the Caldekia Trust, which otherwise could be paid only to the Piccardi family, into a vehicle where they could be transferred to the Evans family in circumstances where the Evans family claimed, but Mr Piccardi did not accept, that in respect of various transactions, not all related to the trust, there were monies due from the Piccardi group to the Evans group. Shortly put, the documents make clear that it was intended to transfer monies available only to the Piccardi group to the Evans group, without the Piccardi group's consent. The method used was to create a second discretionary trust, which the Evans controlled, and by the device of making the children of the Piccardi's a possible beneficiary, purportedly transfer Piccardi assets in the Caldekia trust into the control of the Evans family by placing them in the second trust and then distributing them to the Evans — and all without Piccardi consent. From the acts themselves it will be open to a tribunal of fact to infer not only that the means of effecting that end was unlawful, but that the end itself was known to be unlawful, because it was aimed at and did deprive a person of assets otherwise unavailable to the alleged creditor in circumstances where the debt was disputed and the person entitled to the assets did not consent to the transfer. Whether that inference would be drawn would be a matter for the trial court. It is sufficient, however, that the facts pleaded would permit the drawing of that inference to result in it being appropriate that the appellant be granted leave to file the amended statement of claim. In paragraph 11 of the statement of claim, however, there are the words 'to defraud and'. The rules of court make it clear that where an allegation of fraud is alleged, it must be particularised (see Part 16, rule 2). There are no particulars with the proposed amended statement of claim, and in my opinion, the words 'to defraud and' in paragraph 11 should be struck out from the amended statement of claim, with the appellants having leave, if they wish to avail of it, to seek to further 4. (1959) 103 CLR 30 at 122. URJ PICCARDI v CALDEKIA PTY LIMITED (Clarke JA) 7 amend the statement of claim to re-include those words, if and when they particularise the fraud alleged. Certain respondents sought to file notices of contention supporting the judgment on other grounds. Those notices of contention are out of time. In my opinion they should not be permitted to be filed. I would propose that the appeal be upheld, the orders of Master Macready and Brownie J relating to proposed amendments of the statement of claim in respect of conspiracy be set aside and that in lieu thereof the appellant be granted leave within seven days to file an amended statement of claim in the form contained in the appeal book but omitting the words 'to defraud and' in paragraph 11, subject to the rider to which I have already referred. The respondents should pay the costs of the appellants of the proceedings before Master Macready and before Brownie J, and on appeal, but should have, in respect of the appeal, a certificate under the Suitors Fund Act, if qualified. Clarke JA. I agree and I would only add that the notices of contention do not in my opinion raise matters which go to the heart of the appellants" complaint, or which provide any answer to the claim made by the appellants in this appeal. Handley JA. I agree with Mr Justice Clarke, and subject to his comments, I agree with Mr Justice Cole. However, I will add some brief comments of my own. I have been unable to understand what forensic advantage the plaintiffs hope to gain by adding a claim in tort to their claims for breach of trust. Equity had its own remedies for breach of trust, where they were instigated by third parties, or where third parties profited from them. If those rules differ in any way from the common law rules governing the tort of conspiracy, then it seems to me, as at present advised, that the rules of equity will prevail over the rules of law by virtue of s 5 of the Law Reform (Law and Equity) Act 1972. The plaintiffs were objects of the relevant discretionary trust, but there were many other such objects. The plaintiffs sue for damages for conspiracy, but an award of damages will not restore the capital of the trust fund, because the plaintiffs had no entitlement under the trust deed to capital. Proof of the plaintiffs" damages, assuming this is possible at all, where their rights are purely equitable, will be limited to the direct financial benefits they would have received, or might have received, but for the breaches of trust. There are some difficulties with this claim for some of the period, while the plaintiffs remained bankrupt. Equity, of course, bypassed such questions, where thetrust continued, because it granted what in substance was specific relief, directing the restoration of the trust fund, either from the proceeds of tracing or where this was not possible, by an award of compensation, payable to the trustees of the trust fund, if necessary, those newly appointed for that purpose. The Court has not heard argument on these questions, so I will say no more about them, except that insistence in what appears to me to be an unnecessary claim for conspiracy may later justify a special order as to the additional costs occasioned thereby. Clarke JA. The orders of the Court will be as Mr Justice Cole has said, but for the sake of specificity, I would indicate that the appellant be granted leave within seven days to file an amended statement of claim in the form contained in pages 113 to 125 inclusive of the Appeal Book subject to the proviso that the 8 UNREPORTED JUDGMENTS words 'to defraud and' will be deleted from paragraph 11. Otherwise the orders will be as Mr Justice Cole has indicated. DEMPSEY: Your Honours, might I raise one matter? The Court has made an order for the suitors fund restricted to the appeal to this Court. I presently, having looked at that briefly, am not sure whether it is proper before this Court or before the Equity Division to seek a similar order in respect of the appeal to his Honour. CLARKE JA: You are seeking such an order? I have never seen it done here. What are the provisions of the suitors fund? DEMPSEY: It's in volume 2—7,228. Your Honours I'm not really in a position to persuade your Honours one way or the other. It may be that the Court — your Honours may content to note that the respondents may make such an application in the Equity Division. CLARKE JA It just struck me that that's expending extra costs. DEMPSEY: Section 6.1(a), I note that the definition — Handley JA. Special provisions have been made in relation to costs in the High Court, because the High Court cannot be given this power, so you come along to a judge in chambers and you get the certificate in respect of the costs in the High Court, but is there a provision dealing with multiple appeals within the State jurisdiction? DEMPSEY: Not that I am aware of your Honour. I note the definition of Supreme Court means the Court or a judge thereof, but I'm not aware of a provision that specifically applies to — Clarke JA. So that in section 6.1(a), it reads really to a judge does it? DEMPSEY: Court means the Supreme Court or a judge thereof. There's also a reference to a definition of sequence of appeals, but I'm afraid your Honours I've not found where that's picked up. CLARKE JA: Perhaps the best way of dealing with it Mr Dempsey is if you wish to pursue this, you might put in written submissions to this Court within seven days. DEMPSEY: Yes your Honour. CLARKE JA: That applies to you also — Handley JA. The sequence of appeals is in 4(a), the new paragraph which doesn't have a number, where the appeal or later appeals form a sequence of appeals and the indemnity certificate has not been vacated, that concerns a situation where a single judge grants an indemnity certificate and the matter goes on appeal to this Court. Clarke JA. That applies to you also Mr Lever-Naylor. You didn't wish to be heard on that question did you? LEVER-NAYLOR: No. CLARKE JA: They are the orders the Court will make and we reserve liberty to the respondents to put in written submissions within seven days on the question of any application for a suitors fund certificate in respect of the costs before Mr Justice Brownie. Orders accordingly. Counsel for the appellant: J H Tuckfield QC/M Doyle Solicitors for the appellant: O'Sullivan Borthwick URJ PICCARDI v CALDEKIA PTY LIMITED (Clarke JA) Counsel for the respondent 1-4: P Lever-Naylor Counsel for the respondents 5-6: M Dempsey Solicitors for the respondents 1-4: N J Papallo and Co Solicitors for the respondents 5-6: Dunhill Madden Butler