New South Wales Supreme Court CITATION : Page v McKensey & Ors [2003] NSWSC 759 HEARING DATE(S) : 29/07/2003, 30/07/2003 JUDGMENT DATE : 2 September 2003 JUDGMENT OF : Gzell J DECISION : Appeal dismissed with costs. CATCHWORDS : PROCEDURE - Supreme Court procedure - Dispute between partners of terminated partnership - Appeal from Master refusing leave to file further amended statement of claim, striking out amended statement of claim and dismissing proceedings - Issues decided in other proceedings between co-partners to which appellant not party - Whether an abuse of process - Whether subject to res judicata estoppel as privy - Whether appellant bound by findings as to partnership in earlier proceedings - Claim to set aside judgment on basis of fraud - Whether the evidence was newly found - Whether likely to result in changed judgment - Whether appropriate in proceedings against five co-partners when allegations of fraud limited to two co-partners Fair Trading Act 1987 Securities Exchange Act of 1934 (US) LEGISLATION CITED : Supreme Court Rules 1970 Supreme Court Act 1970 Partnership Act 1892 Hunter v Chief Constable of West Midlands Police [1982] AC 529 Sea Culture International Pty Ltd v Scoles (1991) 32 FCR 275 Reichel v Magrath (1889) 14 App Cas 665 R v Balfour; ex parte Parkes Rural Distributions Pty Ltd (1987) 17 FCR 26 Haines v Australian Broadcasting Corporation (1995) 43 NSWLR 404 Partridge v McIntosh & Sons Ltd (1933) 49 CLR 453 Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2) [1967] 1 AC 853 Gleeson v J Wippell & Co Ltd [1977] 1 WLR 510 Shiels v Blakeley [1986] 2 NZLR 262 Colonial Acquisition Partnership v Colonial at Lynnfield Inc 697 F Supp 714 (SDNY 1988) Executor Trustee and Agency Co of South Australia Ltd v Deputy Federal Commissioner of Taxes (SA) (1939) 62 CLR 545 Do Carmo v Ford Excavations Pty Ltd [1981] 1 NSWLR 409 Morrison v Judd (unreported, 10 October 1995, NSWCA) House v The King (1936) 55 CLR 499 CASES CITED : Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 Birtchnell v Equity Trustees, Executors and Agency Co Ltd (1929) 42 CLR 384 Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 Jonesco v Beard [1930] AC 298 McDonald v McDonald (1965) 113 CLR 529 Spies v Commonwealth Bank of Australia (1991) 24 NSWLR 691 Duchess of Kingston's Case (1776) 1 Leach 146 (168 ER 175) Banque Commerciale SA en liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 Monroe Schneider Associates (Inc) v No 1 Raberem Pty Ltd (1992) 37 FCR 234 Toubia v Schwenke (2002) 54 NSWLR 46 Wentworth v Rogers (No 5) (1986) 6 NSWLR 534 Cababe, The Principles of Estoppel, Maxwell, London, 1888 Spencer Bower, Turner and Handley, The Doctrine of Res Judicata, 3rd ed, Butterworths, London, 1996 Lindley & Banks on Partnership, 17th ed, Sweet & Maxwell, London, 1995 Joske, The Law of Partnership in Australia and New Zealand, 2nd ed, Butterworths, Sydney, 1966 Higgins and Fletcher, The Law of Partnership in Australia and New Zealand, 8th ed, LBC Information Services, Sydney, 2001 Geoffrey Francis Page - Appellant Hugh Stanley McKensey - 1st Respondent PARTIES : Victor John Lewis - 2nd Respondent Philip Anthony Nelson - 3rd Respondent Peter Hicks - 4th Respondent Christopher Hewitt - 5th Respondent FILE NUMBER(S) : SC 1595/96 M B Duncan - Appellant COUNSEL : C D Wood - 1st, 2nd and 4th Respondents P A Nelson - In person Shaw McDonald Pty Ltd Solicitors - Appellant SOLICITORS : Bowen-Thomas & Barlow - 1st and 2nd Respondents Hewitts Commercial Lawyers - 4th and 5th Respondents LOWER COURT Supreme Court (Master) JURISDICTION : LOWER COURT 1595/96 FILE NUMBER(S) : LOWER COURT Master McLaughlin JUDICIAL OFFICER : IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION GZELL J 2 SEPTEMBER 2003 1595/96 GEOFFREY FRANCIS PAGE v HUGH STANLEY McKENSEY & ORS JUDGMENT 1 The current proceedings are another step in a saga that began with proceedings between the same parties in 1992. The present action was commenced on 15 March 1996. On 25 June 2002, Master McLaughlin refused the plaintiff leave to file a further amended statement of claim, struck out an amended statement of claim and dismissed the proceedings. From those decisions the plaintiff appeals to the Court. 2 The appellant and the five respondents were the partners of a Newcastle accounting firm called Forsythes. It was dissolved on 30 June 1992. In action numbered 4206 of 1992 ("First Action") the appellant claimed entitlement to payment for his share of the assets of the partnership upon its dissolution including his share of its goodwill. 3 On 27 May 1993, Windeyer J delivered a judgment in the First Action dealing principally with the liability of the appellant to account to the partnership for certain moneys. On 17 December 1993, having determined the level of goodwill of the partnership, Windeyer J determined that $21,348 was payable by the appellant to the respondents. 4 The appellant challenged his Honour's acceptance of evidence of the value of the goodwill of the partnership at $150,000. On appeal ("First Appeal"), he sought to substitute for it another valuation at $2,523,126. On 28 February 1995, the Court of Appeal dismissed the appeal. On 29 January 1996, Priestley JA refused an application by the appellant to re-open the appeal. 5 In proceedings numbered 1585 of 1995 ("Second Action") to which the appellant was not a party, the first, second and fourth respondents sued the third and fifth respondents who lodged cross claims. The five protagonists in those proceedings had entered into partnership on 1 July 1992 following the dissolution of the partnership of which the appellant was a member. A principal issue in those proceedings concerned alleged representations made by the first and second respondents to the third respondent and later to the fifth respondent prior to their joining the partnership with the appellant. 6 The first and second respondents had been partners in the firm of chartered accountants, Deloitte, Haskins and Sells ("Deloittes"). That firm decided to cease to practise in the Newcastle area. The first and second respondents established Forsythes and entered into a retirement agreement with Deloittes. 7 The retirement agreement provided for Forsythes to take over the clients of Deloittes with no specific payment for goodwill. Forsythes were at liberty to take over employed staff and were given permission to print on their letterhead that they were a correspondent firm of Deloittes. The new partnership acquired from Deloittes the business name Forsythes, McKensey & Co at no specific charge. Forsythes were to enter into a "friendly firm" agreement with Deloittes providing terms on which the new partnership would be entitled to have access to technical material. The final clause of the retirement agreement was in the following terms: "(14) In consideration of the foregoing, the new firm will pay an annual fee of $30,000 for a period of ten years." 8 On 15 October 1997 in the Second Action, Einstein J found that the first and second respondents failed to advise the third and fifth respondents that the payments to Deloittes were in part consideration for benefits personally obtained by the first and second respondents. His Honour went on to find that the first and second respondents were under a fiduciary duty to the third and fifth respondents and they were in breach of that duty by failing to disclose the true nature of the agreement with Deloittes. 9 On 3 December 1999, the Court of Appeal overturned the decision of Einstein J ("Second Appeal"). The annual payment of $30,000 was consideration for all benefits under the retirement agreement including the taking over of the practice of Deloittes in Newcastle. That did not give rise to a benefit personal to the first and second respondents. The clients were a partnership asset and the $30,000 annual fee was a partnership liability. There was no fiduciary duty to disclose the true nature of the payments under the retirement agreement. 10 The statement of claim in the current proceedings ("Third Action") was prepared by the appellant without the aid of legal advice. It was filed on 15 March 1996. The relief sought was an order that the judgment of Windeyer J be set aside on the basis that it was fraudulently obtained. It was alleged that the retirement agreement with Deloittes was not revealed to the appellant before he purchased his share of the Forsythes practice. It was alleged that under the retirement agreement certain benefits were obtained by the first and second respondents. 11 On 9 August 1996, the appellant filed an amended statement of claim in the Third Action. An order that the first and second respondents account for amounts allegedly paid by the partnerships as service charges or consultancy fees was claimed. The appellant also sought an account of the profit made on sale of furniture and equipment and an account of the profits of the partnerships. 12 On 23 August 1996, Master McLaughlin dismissed an application by the appellant for relief from costs orders in the First Action and in the First Appeal. 13 On 10 September 1997, the appellant filed a statement of claim in proceedings numbered 3947 of 1997 ("Fourth Action") between the same parties seeking an order that the judgment of Windeyer J in the First Action be set aside on the grounds that the respondents represented to the Court that there was no agreement as to the steps to be taken in valuing the share of any partner and the compensation to such partner upon leaving the partnership with the appellant. 14 On 24 November 2000, Windeyer J gave leave to the appellant to file a notice of discontinuance in the Fourth Action and ordered him to pay the respondents' costs. 15 The further amended statement of claim in the current proceedings, for which leave to file was refused by Master McLaughlin, sought an order setting aside the judgment of Windeyer J in the First Action. It was alleged that the first and second respondents induced the appellant to consent to a valuation of the partnership's assets as at 30 June 1992 in the proceedings by fraudulent misrepresentation or misleading and deceptive conduct. An order that the first and second respondents account to the appellant for benefits received as a result of the partnership assuming the liability of the first and second respondents was sought, as was an order that the first and second respondents account to the appellant for his share of the profit made on sale of furniture and equipment and an order for a proper accounting of the partnership to be taken by a Master. 16 The pleading alleged that during the hearing of the First Action the first and second respondents did not disclose that they made a profit of $85,381.90 by selling to the National Australia Bank furniture and fittings they had bought from Deloittes for lease to the partnership. It was alleged that a liability, said to be that of the partnership arising from the $30,000 per annum payable under the retirement agreement, was a liability of the partnership and of the first and second respondents. It was alleged that there was no restrictive covenant as between the first and second respondents and Deloittes. And it was alleged that the loan of $387,500 due by the appellant to the partnership for his purchase of a 30% interest therein was excessive. The pleading alleged that the appellant first became aware of the nature of the retirement agreement on 15 April 1995. 17 The pleading alleged that the representations made in the First Action by the first and second respondents as to the level of assets and liabilities of the partnership were knowingly untrue or made recklessly, not caring whether they were true or false. The pleading alleged that by reason of the representations, the appellant agreed to a valuation of the assets and liabilities of the partnership excluding goodwill and, in consequence, was entitled to have the orders of Windeyer J set aside. 18 The pleading also alleged that in failing to disclose to the appellant the terms of the retirement agreement, the conduct of the first and second respondents was misleading and deceptive or likely to mislead and deceive within the meaning of the Fair Trading Act 1987, s 42. It was alleged that the retirement agreement was for the purchase by the first and second respondents of the practice of Deloittes in Newcastle, contained no restrictive covenant, contained no obligation upon Deloittes to refer work to the partnership and the liability under it was contingent upon the provision of services, referral of clients or the use of educational material. 19 In addition to the representations alleged to have been made in the First Action, the appellant alleged that representations were made to him by the first and second respondents before he entered into partnership with them. The pleading alleged that they represented that the $30,000 per annum payable under the retirement agreement was for ongoing services to be provided by Deloittes and an obligation on them to refer additional work to the partnership and a representation that a friendly firm agreement had been entered into with Deloittes that contained a restrictive covenant prohibiting Deloittes from practising or competing for business in the Newcastle area. 20 In addition, the pleading alleged that prior to entering the partnership, the first and second respondents represented to the appellant that they had agreed to purchase furniture and equipment from Deloittes at a price to be determined on a valuation based on a going concern basis. The representation was also that the partnership with the appellant would sublease the furniture and equipment from a company that would fund the purchase, together with the purchase of furniture and equipment from the former practice of the appellant, by lease financed from National Australia Bank. 21 The pleading also alleged that the first and second respondents represented that they had acquired the Newcastle practice of Deloittes for consideration; that the practice was profitable and the retirement agreement created a contingent liability only, arising upon the provision of services, the referral of clients, or the use of educational material. It was also alleged that it was represented to the appellant that the goodwill attaching to gross fees of the previous Deloittes practice in Newcastle was worth $0.70 in the dollar of turnover. 22 The pleading alleged that the failure by the first and second respondents to advise the appellant of the true nature of the payments made to Deloittes constituted a breach of fiduciary duty owed to him. 23 Master McLaughlin pointed out that the claim that the $30,000 per annum payment under the retirement agreement was not a partnership liability and the claim that there had been a breach of fiduciary duty could not stand in light of the decision of the Court of Appeal in the Second Appeal. While the appellant was not a party to those proceedings, Master McLaughlin concluded that an attempted re-litigation of an issue already determined after contested proceedings constituted an abuse of process of the Court. 24 The Master relied particularly on Hunter v Chief Constable of West Midlands Police [1982] AC 529 and Sea Culture International Pty Ltd v Scoles (1991) 32 FCR 275 in a line of authority cited to him on behalf of the respondents. I do not think the Master was correct in relying on those authorities. 25 The former case concerned the "Birmingham Bombers." The appellants were convicted of murder following explosions in two Birmingham hotels. At trial they alleged they had been beaten while in police custody and their confessions were forced from them. The jury convicted them. The appellants sued for damages for assault based on the same allegations they had made at their criminal trial. The House of Lords concluded that it was an abuse of process to initiate a collateral attack on a final decision made by a Court of competent jurisdiction. 26 The difference in the instant circumstances is that the appellant was not a party to the Second Action so that the Third Action is not a collateral attack by him on a final decision against him by a Court of competent jurisdiction. 27 Similar considerations apply to Sea Culture. There it was alleged that the same party had raised inconsistent contentions in an action before the Federal Court and in proceedings before the Western Australian Industrial Relations Commission. 28 It is a common feature of this line of authority that the same party seeks to raise the same or inconsistent allegations in other proceedings. See, for example, Reichel v Magrath (1889) 14 App Cas 665, R v Balfour; ex parte Parkes Rural Distributions Pty Ltd (1987) 17 FCR 26, Haines v Australian Broadcasting Corporation (1995) 43 NSWLR 404. 29 In my view, the appropriate basis for refusing to allow the appellant to re-litigate issues decided in the Second Action and in the Second Appeal is res judicata. It was submitted on behalf of the appellant that res judicata estoppel did not arise because the appellant was not a party to the Second Action. But the estoppel not only binds the parties, it binds their privies as well. 30 In Partridge v McIntosh & Sons Ltd (1933) 49 CLR 453 at 463, Starke J cited Cababe, Principles of Estoppel, (1888) at 111-113 in explanation of this principle: "…But although the estoppel is only a personal matter between the particular parties, yet to really give the parties the benefit of it, and subject them to the burden of it, it is essential that not they only, but those of whom it can be predicated, that they are their 'representatives in interest' should likewise have the benefit of and be subject to the burden of the admission. Upon any one, therefore, upon whom all the rights and obligations of any legal entity devolve, such as an executor, administrator, or trustee in bankruptcy, there will devolve, as one of such rights and obligations, the right to exact, or the obligation to be subjected to the admission; and so, too, upon any one, upon whom the rights and obligations arising out of the particular transaction that give rise to the estoppel devolve, as, for example, a purchaser or assignee, that will also devolve this right and this obligation." 31 In Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2) [1967] 1 AC 853 at 910, Lord Reid observed that it had always been said that there must be privity of blood, title or interest and that for privity of interest to arise, it is essential that the person to be estopped from defending himself must have had some kind of interest in the previous litigation or its subject matter. 32 In Gleeson v J Wippell & Co Ltd [1977] 1 WLR 510 at 515, Megarry VC said that a privy need not be the alter ego of the party but there must be a sufficient degree of identification between the two to make it just to hold that the decision to which one was party should be binding in proceedings to which the other is party. He gave as an example in relation to trust property, the relationship between the trustees and their beneficiaries. 33 In Shiels v Blakeley [1986] 2 NZLR 262 it was held that a member of a union was bound as privy by a decision in proceedings brought by the trade union against the trustees of a superannuation fund. Echoing Sir Robert Megarry, the New Zealand Court of Appeal said at 268: "We conclude that there must be shown such a union or nexus, such a community or mutuality of interest, such an identity between a party to the first proceeding and the person claimed to be estopped in the subsequent proceeding, that to estop the latter will produce a fair and just result having regard to the purposes of the doctrine of estoppel and its effect on the party estopped." 34 In my view, there is a sufficient identity between the appellant and the parties to the Second Action and to the Second Appeal to render him a privy for the purposes of res judicata estoppel. The true nature of the retirement agreement and the lack of fiduciary duty of disclosure of it amongst the partners are issues which not only prescribe the relationship inter se the parties to the Second Action, but also the relationship inter se the appellant and the respondents. 35 While I confess that my researches have not revealed any direct authority that a partner is privy of co-partners, no doubt because proceedings are unlikely to exclude a partner as a party, some support is to be found in Colonial Acquisition Partnership v Colonial at Lynnfield Inc 697 F Supp 714 (SDNY 1988). 36 Colonial Associates, itself a partnership, was the sole general partner of the plaintiff limited partnership. It had entered into an agreement with the defendant to contribute capital to a limited partnership, Colonial Hotel, of which the defendant would be the sole general partner. The defendant was to contribute its interest in its hotel to Colonial Hotel. Thus, Colonial Hotel would own the hotel, the defendant would be its sole general partner and the plaintiff would be its sole limited partner. 37 In order to raise the capital, Colonial Associates sought to market limited partnership interests in the plaintiff. It was unsuccessful. The defendant sued the general partners of Colonial Associates. They cross claimed for breach of contract, breach of fiduciary duty and deceptive business practices. The cross claims were summarily dismissed. The agreement did not constitute a joint venture or a partnership and no fiduciary obligations were owed. Following a trial of the claim, judgment was entered in favour of the defendant. 38 The plaintiff's subsequent action was for breach of the Securities Exchange Act of 1934 (US), breach of contract in delaying and interfering with the plaintiff's opportunity to underwrite the sale of the limited partnership securities, fraud in inducement against individual defendants and interference with business opportunity against other defendants. 39 It was held that the doctrine of res judicata applied. There had been a valid final judgment on the merits that was a bar to the subsequent action by the same parties or those in privity with them. The earlier judgment precluded the subsequent litigation both as to issues actually decided and as to issues that could have been raised in the adjudication of the earlier claim. 40 Since all the general partners of Colonial Associates were sued in the first action and Colonial Associates was the sole general partner of the plaintiff in the subsequent action, sufficient identity of parties existed. 41 If I be wrong in my view that res judicata estoppel applies to the appellant, there is another basis upon which the Master's decision that it was an abuse of process to raise the issues canvassed in the Second Action and the Second Appeal is justified. As noted in Spencer Bower, Turner and Handley, The Doctrine of Res judicata, 3rd ed, Butterworths, London, 1996, at par 230 there are circumstances in which a person, not a party to proceedings, is affected by the litigation, not as the result of estoppel, but as a consequence of being compelled to accept facts. 42 Thus, in Executor Trustee and Agency Co of South Australia Ltd v Deputy Federal Commissioner of Taxes (SA) (1939) 62 CLR 545 the Full Court of the Supreme Court of South Australia, in proceedings to which the Commissioner was not a party, declared that the appellant was empowered in the exercise of its discretion as trustee of a certain trust, to pay from time to time surplus income equally amongst all the annuitants per stirpes. 43 It was held that the Commissioner was obliged to give effect to the order of the Supreme Court. At 562-563 Latham CJ said: "The Commissioner of Taxation who takes moneys from a taxpayer as a contribution to the revenue cannot be described as a privy in estate to the taxpayer where rights have been determined in a proceeding to which the commissioner was not a party. But when, in duly constituted proceedings before a competent court, the rights of a cestui que trust against a trustee and the corresponding duty of the trustee towards the cestui que trust have been defined, there is no means whereby those rights can be otherwise defined, because each party is conclusively bound by the order of the court. If the right in question is a right of the cestui que trust to receive money, such as income, from the trustee, the order necessarily and in the nature of the case finally determines, so far as it goes, the nature and extent of the right of the cestui que trust . When the revenue authorities come to impose a tax in relation to such rights, they must, in my opinion, take them as they in fact actually exist between the parties. Thus, although the commissioner cannot be said to be "bound" by the order of the Supreme Court as res judicata or in any other way, he has no option but to assess the trustee or the cestuis que trust upon the basis of their duties and rights as declared by the order." 44 In the Second Appeal, the nature of the payments under the retirement agreement and the lack of a fiduciary obligation with respect to disclosure of it were defined with respect to the partnership of which the appellant was a member. In those circumstances, it is not open to the appellant to seek re-definition of the rights and obligations inter se the respondents with respect to those issues. 45 In my opinion, the Master was correct in refusing to allow these issues to be raised in the further amended statement of claim. 46 The Master went on to say that even if the appellant did not become aware of the contents of certain affidavits referred to in the reasons for judgment of Einstein J in the Second Action until early 2002, the appellant sought relief of the nature sought in the present proceedings in the Fourth Action and, if it were a matter for the exercise of his discretion, Master McLaughlin would have exercised it against allowing the further amended statement of claim. The Master took the view that the Fourth Action, as well as the Third Action, was an abuse of process because the central issue had been determined in the Second Appeal. 47 Since it was found in the Second Appeal that the $30,000 annual fee under the retirement agreement was a partnership liability, the Master took the view that the claim under the Fair Trading Act 1987 was doomed. It was also out of time. Section 68(2) required the action to be instituted within three years from the date upon which the cause of action accrued. 48 The amended notice of appeal claimed that the Master erred in holding that the triable issues in the proceedings before him had been wholly determined in the Second Action and that the claim of the appellant was identical to the cross claim by the third and fifth respondents in those proceedings. It was claimed that the Master erred in holding that the amended statement of claim and the further amended statement of claim disclosed no reasonable cause of action; that they were or were capable of constituting an abuse of process and in the circumstances the Master's exercise of discretion to refuse leave to file the further amended stated of claim had miscarried. It was claimed that the Master erred in striking out the amended statement of claim without giving leave to replead issues that had not previously been litigated in the First Action. It was further claimed that the Master erred in refusing to admit into evidence certain affidavit material upon which the appellant sought to rely that raised issues not determined in the First Action. 49 The appeal lies to the Court under the Supreme Court Rules 1970, Pt 60 r 10. The Supreme Court Act 1970, s 75A(5) provides that the appeal is by way of rehearing. It has been held, however, that where the Master's decision involves an exercise of discretion, the same principles apply to the appeal as apply to an appeal from a single judge to the Court of Appeal (Do Carmo v Ford Excavations Pty Ltd [1981] 1 NSWLR 409; Morrison v Judd, unreported, 10 October 1995, NSWCA). The appellant must show that the Master acted on a wrong principle such as failing to take into account a material consideration (House v The King (1936) 55 CLR 499 at 505). 50 Mr Duncan, who now appears for the appellant, conceded that Master McLaughlin was entitled to strike out the amended statement of claim and refuse leave to file the further amended statement of claim. His complaint was that the Master did not give the appellant the opportunity to further amend his pleading. Mr Duncan relied upon a proposed second further amended statement of claim that was not before the Master. 51 In my view, the consequence of these concessions is that the appeal from the Master must fail. Notwithstanding that the appellant was unrepresented, the Master could not be expected to consider granting leave to replead to raise an allegation of fraud when that matter was not raised in the proceedings before him. Nor could he be expected to consider granting leave to file a second further amended statement of claim when the document was not before him. The appellant has failed to establish that the Master acted upon some error of principle or that his exercise of discretion was erroneous. 52 If I be wrong in this approach and it is open to me to set aside the Master's order dismissing the proceedings and give leave to file the second further amended statement of claim, I would not do so. 53 In that document it is pleaded that prior to the appellant's entering the partnership and thereafter, the first and second respondents represented that the annual fee of $30,000 payable to Deloittes was a service fee contingent upon the provision of the use of the name Deloittes as a correspondent firm on the partnership's letterhead, the use of technical material and education of staff and at no time did the first or second respondent disclose to the plaintiff that the payments were for the goodwill and clientele of Deloittes. 54 It is further pleaded that the first and second respondents represented both prior to the formation of the partnership and thereafter that the goodwill of Deloittes was wholly owned by the first and second respondents without any attached liability; it was worth $1,050,000, there existed a restraint of trade covenant within the "friendly firm" agreement restraining Deloittes from competing with the partnership in the Newcastle and Hunter Valley areas, there existed restraint of trade covenants with other prior Newcastle Deloittes partners and Deloittes would continue to refer clients to the partnership. 55 It is alleged that the appellant did not become aware of the absence of restrictive covenants until early 2001. 56 It is alleged that the representations were fraudulent and false and made to induce the appellant to join the partnership and pay $387,500 for his share. 57 It is alleged that the failure to disclose the true nature of the payments to Deloittes was in breach of the first and second respondents' obligations pursuant to the Partnership Act 1892, s 28 to render full information and true accounts, was in breach of fiduciary duty to deal frankly and fairly, constituted a misrepresentation by silence in breach of the Fair Trading Act 1987, s 42 and was in breach of an alleged duty of care owed by the first and second respondents to the appellant to ensure that they did not misstate or misrepresent the true nature of the retirement agreement. 58 The pleading alleges that the appellant and Windeyer J were under the mutual assumption that the amount in the appellant's loan account was an accurate reflection of the value of his interest in the partnership as represented by the first and second respondents, that the payments to Deloittes were for services rendered and not goodwill and there was an extant restrictive covenant. It is pleaded that the mutual assumption led to the adoption of accounts in the First Action that did not reflect the true position because, had he known of it at the time, the appellant would not have joined the partnership or would have paid considerably less than $387,500. The pleading alleges that the appellant's consent to agreed accounts in the First Action was procured by the first and second respondents' continuing misrepresentation by silence as to the true nature of the retirement agreement and the absence of restrictive covenants. 59 As to the allegation that there was a failure to disclose the true nature of the annual payments under the retirement agreement, it was alleged in the further amended statement of claim, for which the Master refused leave to file, that the appellant first became aware of the nature of this liability on or about 15 April 1995. 60 However, there was before me an affidavit of the appellant sworn in the First Action on 18 May 1993 in which he identified the retirement agreement as one of the documents inspected by him on 17 February 1993 in the course of discovery in that action. The appellant said he had a limited opportunity to inspect the documents and he was not allowed to take copies. He was supported in this contention by the third respondent who made submissions in support of the appellant in the proceedings before me. 61 Whether he then realised the full import of the retirement agreement or not, the appellant then had the means by which to determine the nature of the annual fee of $30,000 payable to Deloittes and he should have been put on notice that any representations that the payments were contingent service fees was erroneous. That issue could and should have been raised in the First Action (Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589). 62 Furthermore, the nature of the $30,000 annual payments was determined in the Second Appeal on 3 December 1999. If, contrary to my view, the matter need not have been raised in the First Action it could and should have been raised in the Fourth Action which sought an order that the judgment of Windeyer J in the First Action be set aside. There was no explanation of the failure to raise this matter in those proceedings. They were not discontinued until 24 November 2000. 63 In the Second Appeal it was found that there was no fiduciary duty to disclose the true nature of the payments under the retirement agreement and the claim by the second and fifth respondents that there had been a failure to advise them of the true nature of the payments under the retirement agreement was dismissed. For the reasons already indicated, I am of the view that that decision binds the appellant or he is obliged to accept those findings. The claim that the failure to disclose the true nature of the payments under the retirement agreement was in breach of fiduciary duty cannot stand in light of the decision in the Second Appeal. 64 The Partnership Act 1892, s 28 provides that partners are bound to render true accounts and full information of all things affecting the partnership to any partner or the partner's legal representatives. This statutory obligation is not new law. It existed before statutory codification. It is a recognition of the fiduciary obligation of disclosure between partners (Lindley & Banks on Partnership, 17th ed, Sweet & Maxwell, London, 1995, 16-02-16-05, Joske, The Law of Partnership in Australia and New Zealand, 2nd ed, Butterworths, Sydney, 1966 at 59-60, Higgins and Fletcher, The Law of Partnership in Australia and New Zealand, 8th ed, LBC Information Services, Sydney, 2001 at 120-121). Thus in Birtchnell v Equity Trustees, Executors and Agency Co Ltd (1929) 42 CLR 384 where a partner, without disclosing the agreement to his co-partners, shared in the profits made by a customer of the partnership who bought and sold land, it was held that the transaction was within the scope of the fiduciary relationship arising from the partnership and his executors were obliged to account to the partnership for the appropriate share of the profits. 65 The Second Appeal established that there was no fiduciary duty of disclosure of the retirement agreement. The Newcastle clients were, in a practical sense, a partnership asset in just the same way as all the other benefits from the retirement agreement and the annual fee was, in a practical sense, a partnership liability. As between the partners, they became entitled to the benefit of the assets and became obliged to bear the burden of the liability and there was no need to explain to the appellant the source of the liability or that they were contributing to meeting it. 66 In my opinion, in the absence of a fiduciary duty of disclosure, there was no breach of the Partnership Act 1892, s 28. It could not be said that any failure to disclose information between partners gives rise to a breach of statute. In a large and busy partnership, individual partners are privy to client information that is unknown to their co-partners. It would be an intolerable burden if the statute were given a literal interpretation requiring disclosure of all information. In my view, the statutory requirement is to be understood as codifying the pre-existing law and as being brought into play when a fiduciary duty of disclosure arises. On that basis, the claim under s 28 cannot stand. 67 Similar considerations apply to the claim that the failure to disclose the true nature of the payments under the retirement agreement constituted a misrepresentation by silence and misleading or deceptive conduct for the purposes of the Fair Trading Act 1987, s 42. If the first and second respondents were under no obligation to disclose the true nature of the payments under the retirement agreement, their silence could not amount to a misrepresentation. 68 The pleading of a continuing misrepresentation by silence does not, in my opinion, overcome the time bar to which the Master referred. The Fair Trading Act 1987, s 68(2) required action to be initiated within three years from the date the cause of action accrued. If loss or damage flowed from the alleged misrepresentation by silence, it flowed because the appellant entered the partnership. If time did not begin to run under s 68(2) until that loss or damage was ascertained or ascertainable (Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 527), the loss or damage was ascertainable in February 1993 when the retirement agreement was inspected by the appellant and the Third Action was not instituted until March 1996. 69 The claim that the failure of disclosure was in breach of a duty of care owed to the appellant was not explained. If there was no contractual duty of disclosure, no fiduciary duty and no statutory duty, on what possible basis could there be said to be a duty of care? 70 The claim of mutual assumption and consent to agreed accounts procured by the first and second respondents' continuing misrepresentation by silence as to the true nature of the retirement agreement must also fail. If there was no obligation of disclosure of the retirement agreement, there could be no misrepresentation by silence and there could be no procurement. 71 For the above reasons, I am of the view that the appellant's complaint in the second further amended statement of claim that he was misinformed as to the true nature of the payments under the retirement agreement cannot stand. 72 The pleading of fraud is made against the first and second respondents only. It is alleged that at all material times both prior to the formation of the partnership and thereafter, the representations as to ownership of goodwill, its value, the existence of restraint of trade covenants and continuing referral by Deloittes were false and fraudulent. It is this allegation that is said to ground an entitlement to have the judgment of Windeyer J in the First Action set aside. 73 The appropriate method of impeaching a completed judgment on the ground of fraud is by separate action (Jonesco v Beard [1930] AC 298, McDonald v McDonald (1965) 113 CLR 529, Spies v Commonwealth Bank of Australia (1991) 24 NSWLR 691). In such proceedings, questions of issue estoppel are not relevant (Duchess of Kingston's Case (1776) 1 Leach 146 (168 ER 175)). 74 The fraud must be pleaded with specificity and particularity (Banque Commerciale SA en liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 at 285). Objection is taken, in my view correctly, that the second further amended statement of claim fails in this respect. A pleading of fraudulent misrepresentation "at all material times" both prior to the formation of the partnership and thereafter cannot satisfy this requirement. 75 In Monroe Schneider Associates (Inc) v No 1 Raberem Pty Ltd (1992) 37 FCR 234 a Full Court of the Federal Court concluded that a judgment would not be set aside for fraud unless the fraud was proved by evidence that was newly discovered since trial, that could not have been discovered at trial by the exercise of reasonable diligence and that was so material that its production at trial would probably have affected the outcome. 76 The Court of Appeal in this State in Toubia v Schwenke (2002) 54 NSWLR 46 took a different view with respect to due diligence. It pointed out that the observations in Monroe Schneider were obiter dicta and it concluded that lack of due diligence was not a defence. A plaintiff must prove deception but need not prove diligence. This must be done by showing that the truth has been discovered since the trial. 77 In Wentworth v Rogers (No 5) (1986) 6 NSWLR 534 at 538 it was said that what must be established is a new discovery of something material in the sense that fresh facts have been found that by themselves or in combination with previously known facts would provide a reason for setting aside the judgment. The rationale for the requirements was the public interest in finality of litigation. Parties ought not, by proceeding to set aside a judgment, be permitted to re-litigate matters that were the subject of the earlier proceedings. Particularly is this so if what is relied on is nothing more than the evidence upon which the plaintiff had previously failed. If there is evidence of fraud that may taint a judgment, a plaintiff should not collude in such a consequence by refraining from raising the objection at trial and keeping the complaint in reserve. It is the responsibility of a plaintiff to ensure that the taint of fraud is avoided and the integrity of the Court's process is preserved. 78 The fresh evidence upon which the allegation of fraud is based in the instant circumstances, was the discovery by the appellant in April 2001 that there was no friendly firm agreement and there were no restrictive covenants. 79 There is considerable doubt in my mind that this requirement is met. The documents inspected by the appellant on 17 February 1993 showed that there was no friendly firm agreement. I am not satisfied that the appellant was ignorant of this fact at that time, albeit that the full import of this omission was not brought home to him until early 2001. 80 Furthermore, the lack of a friendly firm agreement and the absence of restrictive covenants does not bear upon the alleged fraudulent misrepresentations that the first and second respondent wholly owned the Deloittes' goodwill with no attached liability nor the alleged misrepresentation that Deloittes would continue to refer clients to the partnership. 81 Nor is it clear to me in what way the alleged misrepresentation as to the existence of restrictive covenants and the alleged misrepresentation that Deloittes' goodwill was worth $1,050,000 might have led to a different judgment in the First Action. Those proceedings concerned the appellant's entitlement to assets of the partnership, including goodwill, upon its termination. The alleged fraudulent misrepresentations may have affected the price at which the appellant was prepared to buy into the partnership but his liability for that purchase price does not seem to me to have been in issue in the First Action. 82 There is also the question whether the setting aside of the judgment in the First Action should be raised in these proceedings. No allegations are made against the third, fourth and fifth respondents and, in my view, it is inappropriate that they should be parties to such proceedings. 83 There is also a claim that by reason of the fraudulent misrepresentations the appellant suffered loss and a claim for damages is made. Again, I am of the view that it is inappropriate to claim damages for fraud, limited to the first and second respondents, in these proceedings. 84 There is public interest in the finality of proceedings. In light of the history of the contentions between the appellant and the first and second respondents, public interest, in my view, far outweighs leave being granted to the appellant to file the second further amended statement claim or any other amended pleading in these proceedings. 85 I dismiss the appeal from Master McLaughlin. I will hear the parties on costs. *********** Last Modified: 09/05/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.