New South Wales Court of Appeal CITATION: Brown v. State of New South Wales [2007] NSWCA 165 HEARING DATE(S): 4 July 2007 JUDGMENT OF: Hodgson JA at 1; Tobias JA at 8 EX TEMPORE JUDGMENT DATE: 4 July 2007 DECISION: 1. Leave to appeal granted. 2. Costs of the application for leave to be costs in the appeal. 3. Notice of appeal to be filed within fourteen days. CATCHWORDS: EQUITY - Fiduciary duty - Whether arguable that compensation for personal injuries recoverable on the basis of breach of fiduciary duty - Application of limitation provisions - Laches Breen v Williams (1996) 186 CLR 71 Cubillo v. Commonwealth (2001) 112 FCR 455 CASES CITED: KH v HM (1992) 96 DLR 4298 Paramasivam v. Flynn (1998) 90 FCR 489 Webber v State of New South Wales [2003] NSWSC 1263 PARTIES: Michael John Brown - claimant State of New South Wales - opponent FILE NUMBER(S): CA 40022/07 COUNSEL: Mr. B. Hull for claimant Mr. M. Elkaim SC with Ms. L. Boyd for opponent SOLICITORS: Care of claimant's address. I.V. Knight, Crown Solicitor for opponent LOWER COURT JURISDICTION: Supreme Court - Common Law Division LOWER COURT FILE NUMBER(S): ED 6216/03 LOWER COURT JUDICIAL OFFICER: Macready AsJ LOWER COURT DATE OF DECISION: 20 September 2006 IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40022/07 HODGSON JA TOBIAS JA Wednesday 4 July 2007 BROWN V. STATE OF NEW SOUTH WALES Judgment 1 HODGSON JA: The claimant in this application for leave faces formidable difficulties in any appeal that might be brought. Firstly, in showing that there can be a claim for breach of fiduciary duty in the circumstances of this case, notwithstanding the decision of Webber v State of New South Wales [2003] NSWSC 1263 and the cases relied on in that case, in particular two decisions of the full Federal Court. Secondly, in showing that the State as a fiduciary could be liable for the acts of its servants. Thirdly, in showing that limitation problems could be overcome. This third question would involve issues as to whether the tort limitation would be applied by analogy; if so, whether the extension provisions would also apply by analogy, and if so, again, whether the decision of Judge Sidis would foreclose that question. Another sub-issue under the limitation problem would be whether laches would apply, and again, whether issues raised and determined by Judge Sidis would be decisive on questions of laches. 2 However, I have come to the view that these difficulties may not be absolutely insuperable. It seems to me that the two decisions of the full Federal Court are not conclusive on the issue. The case of Cubillo v. Commonwealth (2001) 112 FCR 455 was dealing with an entirely different situation, not of a person in the care of a fiduciary being injured because of breach of fiduciary duty, but rather a claim that the person had been taken from parents. The case of Paramasivam v. Flynn (1998) 90 FCR 489 is closer to the circumstances of this case but in that case there was no final decision on the question, merely that the course of case law made a decision in favour of the plaintiff unlikely. 3 Another matter that weighs with me is that it does seem that the decision of Breen v Williams (1996) 186 CLR 71 does not necessarily reduce a fiduciary obligations to circumstances concerning economic interests. It seems to me that the focus of that case was on the point that a claim for breach of fiduciary duty must relate to the subject matter of the fiduciary relationship, and does not extend to any breaches of duty that might occur between persons who are, in some respects, in a fiduciary relationship. 4 In principle, it seems possible that there may be fiduciary obligations where one person is obliged to act in another person's interests, not merely in relation to economic matters but also in relation to matters concerning other interests of the person such as personal interests. It does not seem to me that the nature of a fiduciary relationship must be such that the only unauthorised benefits to which regard can be had our economic benefits. 5 An example might be given of a psychiatrist treating a patient for mental problems, having sexual relationship with that patient. That could be considered as, in a sense, taking an unauthorised benefit giving rise to a remedy which is independent of any remedy that might arise on any other legal basis. 6 It does seem to me that the decision of the Supreme Court of Canada in KH v HM (1992) 96 DLR 4298 is a matter that might carry some weight. It seems to me also that the limitation problems may not be altogether insuperable. 7 In any event, it seems to me that these are significant questions that make it appropriate to grant leave to appeal. 8 TOBIAS JA: I agree and would add the following. True it is that this is a case in which the appeal is against the summary dismissal of the claimant's Statement of Claim so that this Court, if leave is granted, will be required to determine the appeal on the basis of the General Steel principle as to whether or not the claimant's case was unarguable. Accordingly, a final decision on the merits of the claim will not be made. 9 Nevertheless, it is important, I think, that in their submissions on the appeal, and by that I mean their written submissions, the parties should address each of the issues identified by the presiding judge, and in particular the following. 10 First, whether the relationship between the parties gave rise to a fiduciary relationship and, if so, by whom was that fiduciary duty owed? Was it, for instance, only the relevant employees of the State who allegedly sexually assaulted the claimant? 11 Second, to what extent does the doctrine of vicarious responsibility apply in a non-tortious situation such as where fiduciary obligations are owed by the employees of the party who is sought to be made vicariously liable to the plaintiff? Alternatively, can it be said that the State, as the employer, is in a fiduciary relationship with the claimant and, therefore, owes the fiduciary duties to him? Or, if the fiduciary duties are only owed by the relevant employees, is it necessary before the State can be found liable, that it must have some knowledge of the relationship between its employee the claimant and/or any breach of those duties? This question may give rise to Barnes v Addy considerations. 12 Third, it will be necessary for the parties to address what Justices Dawson and Toohey said in Breen v Williams and what Justices Gaudron and McHugh said in the same case in the passages from Breen v Williams quoted by the Full Court of the Federal Court in Cubillo 185 ALR 249 at 369 at para.[464]. 13 Fourth, as the presiding judge indicated, there are the provisions of s.23 of the Limitation Act to be considered. Is it appropriate that there should be some analogous application of the limitation period there provided, a matter addressed by the Supreme Court of Canada in KH v. HM. 14 Fifth, what part should laches play given the fact that there has been no appeal from Judge Sidis' decision in which she found that at the time of her decision the State would be prejudiced in obtaining a fair trial, there being no evidence to suggest that that position has changed? 15 These are all interwoven issues which will need to be extracted and addressed by both parties if this Court is to provide a judgment that resolves the issues to which reference has been made and which will or may bear upon the ultimate outcome of the litigation. Because there are a number of issues of principle which seem to me not to have been wholly determined by decisions of the High Court which bind this Court, in my view this case is an appropriate vehicle to determine those issues thus justifying a grant of leave to appeal. It is for the foregoing reasons that I join in the orders proposed by the presiding judge. 16 HODGSON JA: The orders of the court are: 1. Leave to appeal granted. 2. Costs of the application for leave to be costs in the appeal. 3. Notice of appeal to be filed within fourteen days. ********** 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.