Allen v Hoare [2006] QSC 408

State Reporting Bureau [koo6j <asc 4ofr~ I & Queensland Government Department of Justice and Attorney-General Transcript of Proceedings Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Director, State Reporting Bureau. SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION ATKINSON J Claim No 198 of 2005 MARY-ELLEN ALLEN and CLEARY HOARE (a Partnership) CAIRNS ..DATE 16/11/2006 JUDGMENT REVISED COPIES ISSUED State Reporting Bureau Date: 20 November, 2006 Plaintiff Defendant /ARNING : The publication of information or details likely to lead to the identification of persons in some proceedings is a criminal ffence. This is so particularly in relation to the identification of children who are involved in criminal proceedings or proceedings for leir protection under the Child Protection Act 1999, and complainants in criminal sexual offences, but is not limited to those ategories. You may wish to seek legal advice before giving others access to the details of any person named in these proceedings. 1 1 Floor, The Law Courts, George Street, Brisbane, Q. 4000 Telephone: (07) 3247 4360 Fax: (07) 3247 5532 -- 1 of 8 -- HER HONOUR: The plaintiff seeks to strike out various parts of the defence. The defendant has taken the point that each impugned passage in the defence is part of the defendant's direct explanation for the defendant's belief that the allegation answered in the respective paragraphs of the defence is untrue as required by rule 166(4). Rule 171 is the rule relating to striking out pleadings. Its. terms are as follows: "(1) This rule applies if a pleading or part of a pleading (a) discloses no reasonable cause of action or defence; or (b) has a tendency to prejudice or delay the fair trial of the proceedings; or (c) is unnecessary or scandalous; or (d) is frivolous or vexatious; or (e) is otherwise an abuse of process of the Court." The argument made by the defendant is that the explanation given as required by rule 166(4) is not part of the pleading because it otherwise might fall foul of the requirement in rule 149(1) (b) not to contain the evidence by which the facts are to be proved. However, "pleading" is defined in the schedule 4 to the Uniform Civil Procedure Rules which contains the dictionary. It defines "pleading" relevantly for a defendant as the defence stated in the notice of intention to defend or a defence. It clearly means the whole of the document which is the defence, and as such, rule 171 in its terms applies to the whole of that document. 16112006 D.l T7-11/JFG(CNS) M/T CNS1/2006 (Atkinson J) ' 1 10 20 30 40 50 2 JUDGMENT 60 -- 2 of 8 -- 1 The Court is given power under rule 171 to strike out the whole of the pleading or any part of that pleading, and to my mind that clearly includes the direct explanation for the party's belief that the allegation is untrue or cannot be admitted which was required to be pleaded in the defence by rule 166(4). 16112006 D.l T7-11/JFG(CNS) M/T CNS1/2006 (Atkinson J) 10 HER HONOUR: The applicant plaintiff seeks to strike out 20 paragraphs 9(a) (iii) and 17B of the defence on the basis that the explanations given therein raise matters which are irrelevant and could not be proved by admissible evidence. Whether or not they could be proved by admissible evidence 30 depends on whether or not the fact as pleaded has a common characteristic with the matter under dispute which is the significant one for the purpose of the inquiry at hand. See D F Lyons Pty Ltd v. Commonwealth Bank of Australia (1991) 28 FCR 597 at 605 per Gummow J. 40 Paragraph 9A(iii) is the response to paragraph 10 of the further amended statement of claim and in particular to the pleading of reliance. Paragraph 10 pleads that the plaintiff and her husband relying on the defendant, took certain steps 50 in respect of the retained profits. The defence denies that reliance and says that the plaintiff and Mr Allen were determined not to pay income tax as a 3 JUDGMENT 60 -- 3 of 8 -- 16112006 D.l T7-11/JFG(CNS) M/T CNS1/2006 (Atkinson J) consequence of any dealings with the company's retained surplus, wanted to obtain access to the money represented by the company's retained surplus immediately, knew of the risks involved in the steps proposed by the defendant and were nevertheless determined to and did proceed with the alleged steps. The impugned paragraph alleges that they had previously adopted tax planning measures involving their income tax liability or that of the company. That does not raise a common characteristic which is a significant one for the purpose of the inquiry at hand which is the question of reliance. Whether or not they previously used tax planning measures does not prove or disprove whether or not they relied on the advice they got from the defendant and so could not be the subject of admissible evidence as presently pleaded and ought be struck out. The situation with paragraph 17B of the defence is however, quite different. It is a response to a pleading by the plaintiff in the following terms: had the defendant not breached its duty to the plaintiff, as referred to in paragraph 15 of the further amended statement of claim, the plaintiff would have likely caused the retained profits to be paid to herself (and Mr Allen) as dividends from the company in the financial year ending 30 June 2000. The defendant denies those allegations and says that they are untrue because there was no breach of duty to the plaintiff and : 1 10 20 30 40 50 4 JUDGMENT 60 -- 4 of 8 -- 16112006 D.l T7-11/JFG(CNS) M/T CNS1/2006 (Atkinson J) " (b) it is unlikely the plaintiff would have done anything other than enter into the DSA, despite the risk (whether the risk was as pleaded by the plaintiff or the defendant) . The plaintiff had previously used an employee welfare fund to reduce the company's income tax for the year ended 30 June 1988 and, as a consequence, the company's then retained surplus (which to the defendant's knowledge thus far had gone unchallenged by the ATO) ." There, the defence squarely raises the common characteristic which was entering into a tax scheme despite the risk and so falls within a pleading which is capable of being proved by admissible evidence and so there is no reason to strike it out . HER HONOUR: The plaintiff requested of the defendant particulars of paragraph 9A(i) of the defence which is part of that part of the defence to which I have referred previously which has not been struck out. The particulars requested were all the facts and circumstances relied upon to allege that the plaintiff and Mr Allen were determined not to pay income tax as a consequence of any dealings with the company's retained surplus. Particulars have been given in response to that request and it appears to me they are proper particulars in answer to that request. They do refer to the plaintiff's earlier transfer of the particular moneys into a superannuation fund which was called "The use of the employee welfare fund strategy" which evidenced a desire to minimise income tax liabilities, and it 5 JUDGMENT -- 5 of 8 -- 16112006 D.l T7-11/JFG(CNS) M/T CNS1/2006 (Atkinson J) is those very funds which, as the particulars plead them, then came to be the subject of advice. It seems to me that the particulars being responsive and relevant to the request, they ought not be struck out. 6 JUDGMENT -- 6 of 8 -- The plaintiff has requested particulars of the discussion about the distributable surplus process alleged to have taken place between Mr Hart and Mr Humphrey on 9 March 1999. That is relevant because in paragraph 6 the plaintiff pleads the circumstances from which the retainer of the solicitor towards them can be deduced which includes a referral by their accountant, Mr Humphrey, to the defendant, Mr Hart, in response to their request for general advice as to how to deal with the retained profits. In paragraph 3(c) of the defence, a conversation between Mr Humphrey and Mr Hart, which took place on the 9th of March is referred to, to deny that there was a request for general advice as to how to deal with the retained profits. It appears to me that the particular terms of that conversation between Mr Humphrey and Mr Hart, which might be referred to as "the referral conversation" are certainly relevant to determining the terms of the retainer. It may assist the plaintiff's case, it may assist the defendant's case, but it certainly appears to me to be relevant and the request should be answered. 16112006 D.l T14/CG( CNS ) M/T CNS2/2006 (Atkinson J) 7 JUDGEMENT -- 7 of 8 -- HER HONOUR: I give the defendant leave to withdraw the admission made in paragraph 3 (a) of the defence and give leave to otherwise replead to paragraph 6 of the further amended statement of claim. The defendant is also ordered to provide further and better particulars of paragraph 7 (a) of the defence in accordance with paragraph 4(a) of the request for further and better particulars . 16112006 D.l T14/CG(CNS) M/T CNS2/2006 (Atkinson J) JUDGEMENT -- 8 of 8 --