Limitation periods in equity

Port Ballidu Pty Ltd v Frews Lawyers & Ors [2017] QSC 19

Applegarth J

The application for summary judgment raised whether in equity the limitation period had also expired by reference to analogous statutory period.

Background

In 2006 one of the plaintiff’s then directors mortgaged the plaintiff’s land in favour of J Wright Enterprises Pty Ltd without its consent. To effect the transactions, the director used his signature and a purported power of attorney. Relevantly, the words “its duly constituted attorney under power of attorney No 709812208” were handwritten under the director’s typed name.

The firm for the lender was alleged to have knowledge of the director’s misconduct by way of one of its solicitors who had purportedly inserted the handwritten words after the rogue director signed the mortgage.

In 2010 the present Court found that the solicitor’s handwritten words amounted to statutory fraud, invalidating the mortgage. However, the Court concluded that no fraud could be sheeted to J Wright resulting in the plaintiff’s inability to claim the fraud exception to indefeasibility under the Land Title Act 1994 (Qld).

Because of this, the plaintiff claimed equitable and statutory compensation from the solicitor and its firm for their knowing involvement in the director’s breach of duty and, damages for negligence. The defendants claimed that the equitable compensation claim is time barred by virtue of the statutory claim being time-barred. Accordingly, the defendants sought summary judgment.

Consideration

Finding that the statutory time limitation can be applied to an analogous equitable claim in this case, Applegarth J found:

[7] No statutory limitation period directly applies to that claim for equitable relief.  However, such a claim may be subject to a statutory bar by analogy.  This will be the case where there is a sufficient correspondence between the remedy in equity and the remedy at law.  What is regarded by courts of equity as a sufficiently close similarity for this purpose involves a question of degree.

[12] … Equity will not permit a defendant to rely upon a statutory bar by analogy where there has been fraudulent concealment.

[34] … the facts underlying the claim for breach of fiduciary duty by O’Rourke and the first and second defendants’ knowing involvement in it closely resemble the time-barred statutory cause of action for compensation in respect of the breach of director’s duty by O’Rourke, and the first and second defendants being “knowingly concerned” in it…

[35] … Civil claims for compensation in respect of a contravention, and being knowingly involved in such a contravention, are subject to the statutory limitation period of six years contained in s 1317K of the Corporations Act. That six year statutory limitation period would run from the date of the contravention. That six year time-bar should be applied by analogy unless there exists a ground which makes it unconscionable to permit the first and second defendants to rely on the time limitation.

[38] … the fact that a claim for equitable compensation for breach of fiduciary duty and a corresponding claim for compensation under statute have different elements in law does not lead to the conclusion that the claims do not closely resemble each other. Were it otherwise, it would never be possible to establish that a claim for compensation pursuant to statute closely resembles a claim for equitable compensation.

As to whether it would be unconscionable for the defendants to rely on the statutory limitation periods, his Honour said:

[42] The fact that the various claims which are closely analogous arise as a result of dishonest conduct on the part of one or more of the relevant actors does not make it unconscientious for the first and second defendants to rely upon a limitation defence by way of analogy.  This is because the conduct of O’Rourke and the conduct of the first and second defendants was known to the plaintiff by 2008 at the latest.  The plaintiff knew of the relevant conduct and its character and pleaded it in the J Wright proceeding in 2008.

[49] In my view, it is not unconscionable for the first and second defendants to rely upon those statutes in the circumstance in which there is no case of fraudulent concealment, and the plaintiff knew in 2008 of the facts upon which the relief it currently pursues is founded.

His Honour found that the relevant loss was suffered no later than by 2008, six years prior to the commencement of the present proceedings in July 2015. Further, Applegarth J found, at [63] – [80], that s 27(1)(a) of the Limitations of Actions Act 1974 (Qld), regarding beneficiaries under a trust, did not apply to the plaintiff’s case.

In conclusion, Applegarth J found that the plaintiff’s causes of action were time-barred and granted the defendant’s application for summary judgement.

David Cormack – Brisbane Barrister & Mediator

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