Supreme Court of WA|2005-06-29|Before: Mr P, Hasluck J

Aaa v Bbb & Anor [2005] WASC 139 (29 June 2005)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : AAA -v- BBB & ANOR [2005] WASC 139

Negligence - Duty of care - Medical practitioner - Practitioner providing marital counselling services - Practitioner retained by plaintiff's wife to provide marriage counselling services - Whether practitioner owed duty of care to his patient's husband - Whether sufficient facts and matters pleaded to disclose a reasonable cause of action - Application to strike out statement of claim

First Defendant : Mr K J Martin QC & Mr P D Quinlan

Baillieu Knight Frank NSW Pty Ltd v Ted Manny Real Estate Pty Ltd (1992) 30 NSWLR 359

Baltic Shipping Co v Dillon [1993] HCA 4; (1993) 176 CLR 344

Bell v State of Western Australia [2004] WASCA 205; (2004) 28 WAR 555

Caparo Industries plc v Dickman [1990] UKHL 2; [1990] 2 AC 605

Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225

Esanda Finance Corp Ltd v Peat Marwick Hungerfords (Reg) [1997] HCA 8; (1997) 188 CLR 241

General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125

Hill (T/as R F Hill & Associates) v Van Erp (1997) 188 CLR 159

Inkhorn Pty Ltd v Herbert [2000] WASCA 333

Midland Bank Trust Co Ltd v Hett Stubbs & Kemp (a firm) [1979] Ch 384

New South Wales v Lepore; Samin v Queensland; Rich v Queensland [2003] HCA 4; (2003) 212 CLR 511

Olympic Holdings Pty Ltd v Lochel [2004] WASC 61

Perre v Apand Pty Ltd [1999] HCA 36; (1999) 198 CLR 180

Quancorp Pty Ltd v Macdonald [1999] WASCA 101

Re Wilcox; Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151

Ross v Caunters [1980] Ch 297

SDS Corporation Ltd v Pasdonnay Pty Ltd [2004] WASC 26(S2)

State of Queensland v J L Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146

Sullivan v Moody (2001) 207 CLR 562

Tony Sadler Pty Ltd v McLeod Nominees Pty Ltd (1994) 13 WAR 323

Voli v Inglewood Shire Council [1963] HCA 15; (1963) 110 CLR 74

Watts v Public Trustee for Western Australia (1980) WAR 97

Attest Pty Ltd v Donnachie, unreported; SCt of WA; Library No 8577; 6 November 1990

Avenhouse v Council of the Shire of Hornsby [1998) 44 NSWLR 1

Bill Acceptance Corporation Ltd v GWA Ltd [1983] FCA 269; (1983) 78 FLR 171

Bruce v Odhams Press Ltd [1936] 1 KB 697

Byrne & Frew v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410

Campbelltown City Council v Mackay (1989) 15 NSWLR 501

Cattanach v Melchior [2003] HCA 38; (2003) 215 CLR 1

Charlies Carter Pty Ltd v SDAEA (Western Australia) (1987) 13 FCR 413

Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337

Con-Stan Industries v Norwich Witherhur Insurance Ltd [1986] HCA 14; (1986) 160 CLR 226

Conley v Mineham [1999] NSWCA 432

Coulls v Bagot's Executor and Trustee Co [1967] HCA 3; (1967) 119 CLR 460

Coulls v Bagot's Executor and Trustee Company Limited & Ors [1967] HCA 3; (1967) 119 CLR 460

De Gregory v General Medical Council [1961] AC 957

Edith Cowan University Student Guild v R&I Bank of Western Australia Ltd, unreported; SCt of WA; Library No 930145; 19 March 1993

Esso Petroleum Co Ltd v Mardon [1976] EWCA Civ 4; [1976] QB 801

Fuller v Hodgson, unreported; SCt of NSW; Library No 5887; 12 September 1995

Gomm Holdings Pty Ltd v Blythman & Ors, unreported; SCt of WA; Library No 951146; 28 August 1995

Hall Chadwick Finance (WA) Pty Ltd v Axiom Properties Ltd [2002] WASC 179

Health Care Complaints Commission v Litchfield [1997] NSWSC 297; (1997) 41 NSWLR 630

Hedley Byrne & Co Ltd v Heller & Partners Ltd [1963] UKHL 4; [1964] AC 465

Hines v Commonwealth of Australia (1995) A Tort Rep 81-338

Hunt Contracting Co Pty Ltd v Roebuck Resources NL [1992] FCA 401; (1992) 110 ALR 183

Khalaf Agaiby v Darlington Commodities (1985) ATPR 40-535

Knowles v Roberts [1888] 38 Ch D 263

Lee v Sheard [1956] 1 QB 192

Medical Board of Queensland v Martin [1998] QSC 230

Millington v Loring [1880] 6 QBD 190

Morgan v Banning (1999) 20 WAR 474

Mummery v Irvings Pty Ltd [1956] HCA 45; (1956) 96 CLR 99

National Starch Co v Robert Harper & Co Pty Ltd [1906] VicLawRp 2; [1906] VLR 8

New South Wales Country Press Co-operative Co Ltd v Stewart [1911] HCA 12; (1911) 12 CLR 481

Newman & Ors v Financial Wisdom Ltd & Anor; Newman & Ors v Hold Pty Ltd & Anor [2004] VSC 216

Nominal Defendant v Gardikiotis [1996] HCA 53; (1996) 186 CLR 49

Norris v Sibberas [1990] VicRp 15; [1990] VR 161

PD v Harvey [2003] NSWSC 487

Prudential Assurance Co Ltd v Newman Ltd (No 2) [1982] 1 Ch 204

Re Medical Practitioner [1995] Qd R 154

Robe River Mining Co Pty Ltd v J E Hofmann Engineering Pty Ltd [2003] WASC 65

State of Western Australia v Bond Corporation Holdings Ltd [1990] FCA 522; (1990) 99 ALR 125

Tame v State of New South Wales [2002] HCA 35; (2002) 211 CLR 317

Taroporewalla v Berkery [1983] 3 NSWLR 28

Ward v Newalls Insulation Ltd [1998] EWCA Civ 287; [1998] 2 All ER 690

Wardley Australia Ltd v State of Western Australia [1992] HCA 55; (1992) 175 CLR 514

Zoneff v Elcom Credit Union Ltd (1990) 94 ALR 445

1 HASLUCK J: The plaintiff is pursuing a claim for professional negligence against a medical practitioner who is said to have provided marital counselling services to the plaintiff's former wife. A question has arisen as to whether the statement of claim discloses a reasonable cause of action.

2 A suppression order has been made with the result that, in the manner allowed for by the order, I will refer to the plaintiff's former wife as "Mrs AAA". The first defendant is a medical practitioner who is said to have been employed by the third defendant at a medical practice situated in the suburbs of Perth. For ease of reference I will refer to the business being conducted by the second defendant as "the subject medical practice".

3 The plaintiff is described in the statement of claim as the managing director and principal shareholder of a group of companies involved in property development and other activities. He is said to be a high net worth individual.

4 The plaintiff alleges that during 2001 his former wife (Mrs AAA) retained the first defendant to provide professional counselling to her in respect of relationship difficulties between her and the plaintiff. It is said that the first defendant commenced a sexual relationship with Mrs AAA which led to the breakdown of the plaintiff's marriage as a result of which the plaintiff has suffered loss and damage including loss flowing from the fact that he was distracted from his role as managing director of the subject group of companies.

5 The plaintiff seeks to recover damages from the first defendant as the person allegedly responsible for his loss and from the second defendant upon the basis that the subject medical practice is vicariously liable for the conduct of its employee.

6 I must begin by referring to the procedural history of the matter in order to identify the matters presently in issue before me with greater particularity.

7 The plaintiff issued a writ of summons on 13 May 2003. The statement of claim attached to the writ of summons described the parties and alleged that the first defendant was retained by the plaintiff to provide general medical services to each member of the plaintiff's family. This so-called "general retainer" was said to be subject to certain implied terms including that the first defendant would exercise reasonable professional care, skill and diligence in providing services and would conduct himself in a professional manner.

8 The first defendant was said to have breached a professional duty of care arising out of the general retainer and a further so-called "marital counselling retainer". The second defendant was said to be liable pursuant to principles of vicarious liability and upon the basis that it was responsible for misleading or deceptive representations as to the services being provided by the subject medical practice pursuant to certain provisions of the Fair Trading Act 1987 (WA) ("the FTA").

9 The defendants challenged the plaintiff's pleading. This led eventually to the filing of a minute of amended statement of claim dated 1 April 2004 pursuant to an order made by Master Newnes. I will not traverse the entirety of the amended statement of claim. However, in essence, the amended claim continued to assert that liability was referable to the so-called general retainer and to the so-called marital counselling retainer. The plaintiff continued to place reliance also upon certain provisions of the FTA as a basis for obtaining relief.

10 The defendants applied to strike out the plaintiff's minute of amended statement of claim. The parties proceeded to file lengthy written submissions directed to the application to strike out and the sufficiency of the plaintiff's minute of amended statement of claim. The defendants contended that various portions of the statement of claim should be struck out on the basis that they failed to disclose a reasonable cause of action and/or that they might prejudice, embarrass or delay the fair action of the trial or were vexatious.

11 I note in passing that the application to strike out was to have been heard before Jenkins J at a special appointment on 29 September 2004. However, in the event, Jenkins J was obliged to disqualify herself due to a conflict of interest with the result that the hearing of the matter was adjourned. Many months later it was listed for hearing before me.

12 Shortly before the matter was brought on for hearing before me, the plaintiff filed and served a chamber summons dated 3 June 2005 for leave to amend the statement of claim in terms of a substituted minute of amended statement of claim dated 2 June 2005.

13 I will look at the terms of the substituted minute of claim in more detail shortly. However, broadly described, it reflected a profound transformation of the plaintiff's case. The plaintiff now sought to rely simply upon a claim in tort or, putting it another way, a duty of care arising as a matter of law from the facts and matters set out in the pleading. The substituted minute of claim does not seek to rely upon any contractual relationship between the plaintiff and the defendants. It is silent as to the presence of any so-called general retainer or marital counselling retainer. The plaintiff does not seek to obtain relief pursuant to provisions of the FTA. This meant that most of the written submissions filed and served by the parties had now been rendered superfluous because they were directed to a claim based upon the retainers and the statutory provisions.

14 The stance adopted by the defendants at the hearing before me was that the plaintiff's revised claim (that is, the claim reflected in the substituted minute of claim) was still flawed. They contended that this weighed against the grant of leave to amend in terms of the substituted minute. They contended that, in the event of leave to amend being refused, the plaintiff would be left simply with a statement of claim in the form attached to the writ of summons. This should be struck out because it was defective for all the reasons previously advanced by the defendants. Further, as a claim in that form was not relied upon by the plaintiff any longer (as evidenced by the plaintiff's wish to rely simply upon the claim in tort set out in the substituted minute of claim) it should be struck out.

15 The defendants argued in the alternative that the plaintiff's application for leave to amend should be adjourned pending the filing of particulars setting out all the facts, matters and circumstances asserted in support of the alleged retainer as between Mrs AAA and the first defendant plus an affidavit by the plaintiff personally verifying such facts and matters.

16 The defendants' stance is reflected in a minute of proposed orders dated 7 June 2005. I note in passing that notwithstanding the short notice afforded to counsel for the defendants they had come prepared to debate the merits of the minute of substituted claim, and thus I heard a full argument on both sides concerning the matters in issue. Counsel for the plaintiff seems to accept that leave to amend in the manner proposed should not be allowed unless the Court was persuaded that the minute of substituted claim pleaded the plaintiffs' case in a way that disclosed a reasonable cause of action and conformed to the requirement of the rules concerning pleadings.

17 It followed from all of this that, in real terms, the matter in issue before me is whether the plaintiff's minute of substituted claim discloses a reasonable cause of action and is presented in a form which is not embarrassing, or not likely to delay or prejudice the fair trial of the action.

18 I digress briefly to note that the plaintiff, in its chambers summons, sought orders also that the time for service of the document be abridged and that the requirements of O 59 r 9 of the Rules of the Supreme Court 1971 as to conferral be waived. In the circumstances of this case, bearing in mind that the parties were represented by experienced counsel and were in a position to deal with the central issue, I was persuaded to make these ancillary orders so that the matter could proceed expeditiously. I was conscious also that there had been a lengthy period of exchanges and conferral between the parties as to whether the claim was sufficient.

19 Against this background, let me now turn to the plaintiff's substituted minute of claim dated 2 June 2005.

20 The plaintiff begins by describing the parties and the nature of the services being offered by the defendants. It is said in par 2 that the first defendant was a medical practitioner and offered his services for reward as a specialist in providing professional counselling in relation to relationship difficulties between married persons. Paragraph 4 sets out the claim against the first defendant in these terms:

"During 2001 the first defendant was retained by Mrs AAA to provide professional counselling to Mrs AAA in respect of relationship difficulties between her and the plaintiff, including issues of conflict and intimacy between her and the plaintiff in their marriage and as such he held a position of special advantage in relation to both the plaintiff and Mrs AAA by reason of the trust and confidence placed in him."

21 It is material to note that on this occasion the first defendant is not said to have been retained by the plaintiff. He was retained by Mrs AAA to provide services to her. A crucial question is how this can be said to give rise to a duty of care not only to her but also to her husband (the plaintiff).

22 The par 4 description of the retainer is followed by an allegation in par 5 that the first defendant in providing the professional marital counselling services to Mrs AAA owed various duties of care to the plaintiff including that he would exercise all due professional care, diligence and skill in providing the said services (par 5.1); he would conduct himself in a professional manner (par 5.2); he would not allow conflict to arise between his professional duties to the plaintiff and Mrs AAA and his personal interests (par 5.3); he would not use his position of special advantage to promote his own interests or to harm the marriage of the plaintiff and Mrs AAA (par 5.4); he would use his best endeavours to promote the continuation of that marriage and to improve the relationship between the plaintiff and Mrs AAA (par 5.5).

23 The plaintiff then pleads that the first defendant breached the duty of care pleaded in par 5 in that he failed to act in a professional manner and allowed a conflict of duty to arise in that during the course of providing the subject services he encouraged, induced and then commenced a sexual relationship with Mrs AAA.

24 The plaintiff goes on to plead that the first defendant knew that the plaintiff was a managing director and a high net worth individual (par 7). It was reasonably foreseeable that if he encouraged, induced and then commenced a sexual relationship with Mrs AAA and otherwise failed to act in accordance with the par 5 duties of care he would destroy or adversely affect any opportunity for Mrs AAA and the plaintiff to overcome any marital difficulties (par 8.1); this would distract the plaintiff from his business activities (par 8.4); it would cause stress and anxiety to the plaintiff (par 8.5).

25 The plaintiff said in par 9 that the first defendant's breaches of duty "caused or substantially contributed to" the breakdown of the plaintiff's marriage (par 9.1); the separation of Mrs AAA and the plaintiff (par 9.2); the commencement of Family Court proceedings by Mrs AAA seeking a property settlement (par 9.3). It is said that the plaintiff has suffered loss and damage in that he has incurred various expenses resulting from the separation. He has been subjected to Family Court orders effecting a property settlement, and the value of the group of companies he administers has been diminished as a result of the plaintiff being greatly distracted from his role as managing director.

26 Paragraph 10 of the substituted minute of claim contains an allegation that the subject medical centre, as second defendant, is vicariously liable to the plaintiff for damage caused to the plaintiff by the conduct of the first defendant.

27 It will be useful now to look briefly at the legal principles bearing upon the matters in issue before me.

28 A statement of claim must fulfil two pleading functions. It must allege the facts the plaintiff claims confer a cause of action, and second, it must claim the relief sought in respect of the wrong done by the defendants. To reveal a cause of action, the claim must set out the fact or combination of facts which give rise to a right to sue and show a connection between the plaintiff, the acts alleged and the relief sought. All the material facts essential to the cause of action must be stated in summary form and with sufficient particularity to make the defendant aware of the case made against him: Cairns: "Australian Civil Procedure" (3rd ed) at 197.

29 In Dare v Pulham [1982] HCA 70; (1982) 148 CLR 658 it was noted at 664 that pleadings and particulars must furnish a statement of the case sufficiently clear to allow the other party a fair opportunity to meet it. They define the issue for decision in the litigation and thereby enable the relevance and admissibility of evidence to be determined at the trial. They give a defendant an understanding of a plaintiff's claim in aid of the defendant's right to make a payment into court. Order 20 rule 13(4) of the Rules of the Supreme Court provide that where a party alleges as a fact that a person had knowledge or notice of some fact, matter or thing, then, the court may, on such terms as it thinks just, order that party to serve on any other party particulars of the facts on which he relies.

30 The principles to be applied in considering an application under O 20 r 19 to strike out a statement of claim as not disclosing a reasonable cause of action are well-known. In regard to such an application, not only must all the facts alleged in the statement of claim be accepted as true, but it must be taken for granted that on all other points the pleading is unassailable.

31 The rule is intended to apply only to cases which are really not arguable and not to cases where under the previous practice demurrer would have been the proper course. However, great care must be exercised to ensure that a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal. The court at first instance should be careful not to risk stifling the development of the law by summarily rejecting a claim where there is a reasonable possibility that, as the law develops, it will be found that a cause of action will lie.

32 Nonetheless, the power to strike out can be exercised where argument, even extensive argument, demonstrates that the plaintiff's case on the pleadings is so clearly untenable that it cannot possibly succeed: Inkhorn Pty Ltd v Herbert [2000] WASCA 333 at par 19; General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at 130.

33 In cases where the breach of a duty of care is alleged the statement of claim must plead the elements essential to the existence of the duty of care upon which the plaintiff relies. For example, in Esanda Finance Corp Ltd v Peat Marwick Hungerfords (Reg) [1997] HCA 8; (1997) 188 CLR 241 a claim by a financier against the auditors of a borrower corporation was held not to disclose a cause of action in negligence because in a case of pure economic loss it was not enough to plead only foreseeability of harm. Facts or matters had to be set out establishing that there was a special relationship or relationship of proximity between the parties.

34 A pleading can be struck out as prejudicial, embarrassing or delaying if it pleads irrelevant matter, raises false issues or the opponent is left in doubt about what is alleged: Cairns (supra) at 196.

35 The grant or refusal of leave to amend a pleading is a matter of discretion which may be made at any stage of the proceedings with a view to ensuring that the merits of the controversy and all matters in controversy between the parties are brought before the Court for resolution. However, in the exercise of that discretion account must be taken of case management principles: Tony Sadler Pty Ltd v McLeod Nominees Pty Ltd (1994) 13 WAR 323; State of Queensland v J L Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146.

36 Until comparatively recently, the mutual rights and duties of a professional person (such as a medical practitioner or solicitor) and the client were regarded as regulated exclusively by the express and implied terms of the relevant retainer. However, the law has now evolved to the conclusion that concurrent liabilities in both contract and tort may arise in cases of professional negligence. Prima facie, a plaintiff may sue a professional person in either contract or tort or both. Where concurrent liability in tort and contract exists, the plaintiff has the right to assert the cause of action that appears to be the most advantageous to him in respect of any particular legal consequences: Astley v Austrust Ltd (1999) 197 CLR 1 at 20.

37 Where a professional provides a service to a client, in the absence of an express term to the contrary, an implied term of the contract under which the service is supplied is that the professional will exercise reasonable care and skill in providing the service. Where there is a contract, the extent of the professional's liability to the client may depend upon or be affected by the terms of the contract. The terms may confine or exclude the existence of a duty of care owed by one party to the other: see generally, Walmsley, Abadee & Zipser: "Professional Liability in Australia" at par 1.38 at par 1.320.

38 In Midland Bank Trust Co Ltd v Hett Stubbs & Kemp (a firm) [1979] Ch 384 Oliver J noted at 402 that there is no such thing as a general retainer. The extent of the professional person's duty (in that case a solicitor) depends upon the terms and limits of the retainer in question and any duty of care to be implied must be related to what he is instructed to do.

39 Until recently, the decided cases suggested that where the loss is purely economic loss, it is necessary to establish that a relationship of proximity existed between the claimant and the professional person arising from known reliance on advice or the assumption of responsibility by one party to the other. This must now be read subject to later decisions of the High Court which suggest that the notion of proximity in addition to foreseeability is of limited use. The circumstances that call a duty of care into existence will arguably be determined on an incremental basis by reference to various discrete categories of liability apparent from the previously decided cases.

40 For example, in the category of negligent misstatement, factors such as an assumption of responsibility or known reliance of the word of an adviser will attract a duty of care: Esanda Finance v Peat Marwick Hungerfords (supra).

41 Further, when a person is in a position to control the exercise of legal rights by another that is a factor similar to proximity that may give rise to a duty of care: Perre v Apand Pty Ltd [1999] HCA 36; (1999) 198 CLR 180.

42 It is material to note, however, as one reviews the various judgments in Perre (supra), that actual or constructive knowledge of an individual or an ascertainable class of persons likely to be affected by negligent conduct, and therefore vulnerable, was thought by several members of the court to be a significant factor in establishing a duty of care. McHugh J said at par 131 that knowledge, actual or constructive, of the defendant that its act will harm the plaintiff is "virtually a prerequisite of a duty of care in cases of pure economic loss" because negligence at common law is still a fault-based system. He added: "It would offend current community standards to impose liability on a defendant for acts or omissions which he or she could not apprehend would damage the interests of another".

43 It emerges, then, that in many cases what is required when it comes to pleading a claim for negligence for pure economic loss against an adviser is an allegation (and eventually proof) that the defendant knew or ought reasonably to have known that the information or advice would be communicated to the plaintiff for a purpose likely to lead the plaintiff to take some step or to enter into a transaction of the kind entered into, such entry being likely to be due to reliance on the information or advice. Thus, in such a case, it was not sufficient to plead that it was reasonably foreseeable by an auditor that creditors and financiers or a corporation "might" rely on the audited accounts: Esanda Finance v Peat Marwick Hungerfords (supra). The decision in Esanda (supra) suggests that if an assumption of responsibility by the defendant is to be relied upon as an element additional to foreseeability there must be an assumption of responsibility to the plaintiff.

44 If a duty of care exists, the basic rule is that a professional is required to exercise the care and skill of the ordinary skilled professional within the same profession or within a field of special skill: Voli v Inglewood Shire Council [1963] HCA 15; (1963) 110 CLR 74 at 84; Rogers v Whitaker [1992] HCA 58; (1992) 175 CLR 479.

45 This review of the relevant principles in general terms brings me now to some particular cases including two recent decisions of the High Court which were said to be of particular relevance to the matters in issue before me, namely, Hill (T/as R F Hill & Associates) v Van Erp (1997) 188 CLR 159 (relied on by the plaintiff) and Sullivan v Moody (2001) 207 CLR 562 (relied on by the defendants).

46 In Watts v Public Trustee for Western Australia (1980) WAR 97 the Public Trustee prepared and arranged for the execution of a Will but allowed the Will to be signed in the presence of the prospective beneficiary's wife with the result that the gift to the plaintiff failed. Burt CJ held that the Public Trustee was liable to the plaintiff in negligence on the grounds that a solicitor who was instructed by his client to draw a Will conferring a benefit on an identified third party owes a duty of care to that third party in carrying out the instructions not to cause him loss, even though the loss is purely financial. Part of the duty is the duty to take reasonable care to see that the Will has been properly executed. In arriving at this conclusion his Honour gave weight to the decision of Megarry VC in Ross v Caunters [1980] Ch 297.

47 The Full Court came to a different conclusion in Seale v Perry [1982] VicRp 19; [1982] VR 193. This was an action by intended beneficiaries under a Will against a solicitor for negligence in failing to ensure that the Will was properly executed. It was held that the solicitor owed no duty of care to the intended beneficiaries and, in any event, no damage recognisable at law had been suffered by them.

48 Lush J acknowledged that the defendant owed a duty of care to the testator by reason of his contract of retainer, and possibly in tort. It was also beyond doubt that the defendant must have appreciated that his failure to carry out the testator's instructions effectively would have the result of depriving the plaintiffs of the gift proposed to be made to them. However, having regard to the state of the law at that time, he identified various factors which led to the conclusion that the defendant owed no duty to the plaintiffs.

49 Such factors included the notion that the testator himself owed no duty to the plaintiffs either to make the gift or to make a valid Will and this suggested that a solicitor acting on the testator's behalf ought not be subject to a duty of which the testator himself was free. Further, the content of the defendant's duty were entirely within the control of the testator. Change in instructions, or waiver of a breach of instructions would have the effect of destroying any duties to the plaintiffs to act in accordance with the original instructions and reinforced the earlier proposition that the defendant was under no separate duty to the plaintiffs distinct from any duty incumbent on the testator.

50 Further, there were serious difficulties involved in the concept that a solicitor may owe a duty of care to any person other than his client in the discharge of his client's instructions because this could give rise to conflicting duties. In addition, there was nothing in the circumstances pointing to any assumption by the defendant of a duty to the plaintiffs.

51 His Honour went on to observe at 200 that a duty cannot exist by itself. There must be a correlative right in the plaintiff. He surmised that it was the problem of identifying the right which the plaintiff is entitled to have protected which underlay the difficulties of allowing actions to be brought in cases where the plaintiff has suffered economic loss only. In the case before him there was nothing in the position of the plaintiffs on which a right could be founded. They had no form of right at law, by contract or otherwise, to the benefaction, and there was nothing which could be treated as analogous to the enjoyment of a service provided to them. It was essential that some right or protected interest of the plaintiff should be infringed by the defendant.

52 The reasoning of the High Court in Hawkins v Clayton (1988) 164 CLR 539 suggests that circumstances might arise in which a beneficiary could assert a claim for loss flowing from a failure by solicitors to disclose the existence of a Will containing an entitlement. For example, Deane J observed at 99 that in such a case the assumption of responsibility by the solicitor, the unavoidable dependence for information of the beneficiary and the foreseeability of economic loss to the beneficiary in his personal capacity could well combine to give rise to a relevant duty of care owed directly to the beneficiary. However, he noted that the case before him was not such a case.

53 In Hill v Van Erp (supra) a solicitor prepared a Will that was to include a testamentary disposition to a friend of the client. Attestation by the husband of the intended beneficiary negated the disposition. A majority of the High Court held that the solicitor was in breach of a duty of care owed to the intended beneficiary and was liable in damages for the value of the intended disposition. The High Court approved Watts v Public Trustee (supra) and overruled Seale v Perry (supra). Brennan CJ observed at 164 that there are conceptual difficulties in the way of allowing a remedy to a disappointed beneficiary because as a general rule a solicitor acting on behalf of a client owes a duty of care only to his client. The relationship between a solicitor and his client is nearly always contractual and the scope of the solicitor's duties will be set by the terms of his retainer. Further, no claim will lie in tort for damages in respect of a mere loss of an expectation, as opposed to damages in respect of damage to an existing right or interest of the plaintiff. He noted that the conceptual difficulties led a majority of the Supreme Court of Victoria to deny a remedy in Seale v Perry (supra).

54 Brennan CJ then went on to address the conceptual difficulties and expressed the view at 166 that the existence of a contractual duty owed solely to the client does not necessarily negate a duty of care owed to a third party in tort. He then said at 167 that generally speaking a solicitor's duty is owed solely to the client subject to the rules and standards of the profession. That is because the solicitor's duty is to exercise professional knowledge and skill in the lawful protection and advancement of the client's interests in the transaction in which the solicitor is retained and that duty cannot be tempered by the existence of a duty to any third person whose interests in the transaction are not coincident with the interests of the client. But the interests of a client who retains a solicitor to carry out the client's testamentary instructions and the interests of an intended beneficiary are coincident.

55 His Honour the Chief Justice concluded that if the solicitors' carelessness results in the loss of a testamentary gift intended to be given to a beneficiary it is fair, just and reasonable that the solicitor should be liable in damages to the intended beneficiary. Not only is the remedy of damages effective to compensate the beneficiary, it is necessary to enforce the duty owed to the client. Otherwise there is no sanction in respect of the solicitor's breach in his professional duty. He observed at 170 that it was erroneous to require that damage be done to an existing right or interest. A benefit that a plaintiff would have received but for the negligence of the defendant is a loss, whether or not the benefit would have been gratuitous. This is economic loss of which the law of tort now takes cognisance. He therefore concluded that the principal conceptual difficulties in the way of allowing the claim of an intended but disappointed beneficiary are without substance.

56 Dawson J observed at 178 that reasonable foreseeability of harm does not, of itself, always give rise to a duty to take care. Something more is required according to the category of the case in question, and that something more is called proximity. Where a new category is suggested, regard should be had in the first place to the established categories which may be helpful by way of analogy in determining whether to recognise a duty of care. That is how incremental development takes place. The process is affected by relevant policy considerations, such as the need to avoid indeterminate liability or the placing of impediments in the way of ordinary commercial activity. Contrary to the reasoning in Seale v Perry (supra) Dawson J was of the view that there is no rule preventing recovery of damages in tort for loss of an expectation bearing in mind that general damages are routinely awarded in tort for loss of future earnings or profits which are no more than lost expectations.

57 Dawson J observed at 180 that in the case before him no question of competitive advantage arose although in some cases that might be a relevant consideration, for a duty to take reasonable care to avoid causing mere economic loss (as distinct from physical injury to a person or injury to property) may be inconsistent with community standards in relation to what is ordinarily legitimate in the pursuit of personal advantage. In this case, the solicitor's negligence had nothing to do with her obtaining a commercial or competitive advantage and the recognition of a duty of care would not impede the legitimate pursuit of financial gain.

58 Further, the recognition of a duty of care would not supplant or supplement remedies available in other areas and would not disturb any general body of rules constituting a coherent body of law.

"The contract may give rise to an obligation to perform a task but the performance of the task may, in all the circumstances, give rise to a duty of care to perform it so as not to cause damage, whether of a physical or economic kind to another. Even if one party to a contract can exclude liability to the other party for negligence in the performance of the contract but cannot to do so with respect to someone who is not a party to the contract, that is no reason to deny the existence of the duty of care to that third party. A party to a contract is able to negotiate with respect to the protection of his interests whereas a third party is not in a position to do so."

"In my view, the relationship between the solicitor, Mrs Hill, and the intended beneficiary, Mrs Van Erp, was one of proximity which did give rise to a duty of care on the part of Mrs Hill towards Mrs Van Erp. No single factor, such as an assumption of responsibility by the solicitor, leads me to that conclusion. The relevant circumstances are more complex than that."

61 Dawson J went on to observe that in the instant case there was both an assumption of responsibility of a kind, and reliance of a kind, which at least on grounds of policy suggest that a relationship of proximity might be recognised even though neither is in a form which would suffice in cases where those elements are crucial to a relationship of proximity. He then said at 185:

"Thus, when a solicitor accepts responsibility for carrying out a client's testamentary intentions, he or she cannot, in my view, be regarded as being devoid of any responsibility to an intended beneficiary. The responsibility is not contractual but arises from the solicitor's undertaking the duty of ensuring that the testator's intention of conferring a benefit upon a beneficiary is realised. In a factual, if not a legal sense, that may be seen as assuming a responsibility not only to the testatrix but also to the intended beneficiary."

62 It is apparent from the further observations of Dawson J at 186 that he gave weight to the fact that the intended beneficiary's interests are totally and unavoidably dependent upon the proper performance of a function within the sole province of the solicitor. The solicitor knows of the beneficiary's dependence and in that respect may be regarded as having assumed responsibility towards the intended beneficiary. Further, the solicitor's mistake is not ordinarily discoverable by anyone other than the solicitor. Moreover, the solicitor's error only becomes apparent after the death of the client. In this respect, the intended beneficiary is particularly vulnerable. These circumstances distinguish the present case from others in which a solicitor has been held to owe no duty to anyone other than his client.

63 It emerges, then, that Dawson J was of the view that the duty of care to a beneficiary arises from special considerations involving testamentary dispositions. He went on to say at 187 that there is nothing in what he had said which is intended to convey the view that whenever a person's performance of a contractual obligation may, if performed negligently, injure a third party's economic interests, that person owes the third party a duty of care. Nor did he intend to convey the view that, other than in a case of the present kind, a solicitor owes a duty of care to persons other than his client whose interests may be affected by the solicitor's performance of his or her duties to the client.

64 I must now turn to a number of cases relied upon by counsel for the defendants. It will be useful to begin by looking at Breen v Williams (1996) 186 CLR 71. In that case the High Court examined at some length the nature of the relationship between doctor and patient and concluded that the complainant patient had no proprietary right or interest in the information contained in the medical records created by her doctor. Dawson and Toohey JJ observed that there can be no proprietorship in information as information because, once imparted by one person to another, it belongs equally to both of them. They observed that the obligation of the doctor under the contract between him and the patient was to use reasonable skill and care in treating and advising the patient.

65 Gaudron and McHugh JJ observed that a doctor does not impliedly promise that he or she will always act in the "best interests" of the patient. The primary duty that a doctor owes a patient is the duty to exercise reasonable care and skill in the provision of professional advice and treatment Rogers v Whitaker (supra) followed. They said at 282 that a supposed duty to act in the "best interests" of a patient, if such a term was implied into a contract, would be inconsistent with the existing contractual and tortious duty to exercise reasonable care and skill in the provision of professional advice and treatment.

66 In Sullivan v Moody (2001) 207 CLR 562 the fathers of children who had been examined for evidence of sexual abuse by medical practitioners and social workers sued those persons and the State of South Australia for damages in negligence in the conduct of examinations which resulted in reports that the children had been sexually abused. The plaintiffs alleged that as a result of the negligent examination and reporting they had suffered shock and consequential personal and financial loss. In each case the action was struck out as not disclosing a cause of action. The High Court held that it would be inconsistent with the proper and effective discharge of the professional or statutory responsibilities of those involved in investigating and reporting upon allegations of sexual abuse for them to be subject to a legal duty to take care to protect persons who were suspected of being the sources of the harm.

67 The High Court noted at 575, in the course of summarising the reasoning of the Court below, that there were various factors weighing against the plaintiff's claim. The relationship between the plaintiff and the medical practitioners, if there was one, was difficult to define, and not analogous to any existing relationship in which a similar duty of care was found to exist; that as a general rule, professionals such as doctors and social workers owe a duty to those for whom and to whom they make their services available, and in whose interest they act; that the plaintiff had a potentially adverse interest to the children, whose welfare was the primary concern of the defendants; and that there is a potential for indeterminate liability, there being no reason in principle to restrict any duty of care to family members.

68 The High Court went on to observe at par 42 that a defendant will only be liable, in negligence, for failure to take reasonable care to prevent a certain kind of foreseeable harm to a plaintiff, in circumstances where the law imposes a duty to take such care. They noted that the notion of a relationship being sufficiently proximate to give rise to a duty of care can be regarded as a convenient shorthand method of formulating the ultimate question but it provides no assistance in determining whether a duty of care exists. They said that what has been described as the three-stage approach of Lord Bridge of Harwick in Caparo Industries plc v Dickman [1990] UKHL 2; [1990] 2 AC 605 at 617 does not represent the law in Australia.

69 The High Court touched on a particular difficulty in respect of the case in hand (at par 54) in that a successful claim would allow a recovery of damages for publishing statements to the discredit of a person where the law of defamation would not (in that the statements seemed to have been made on a privileged occasion).

70 The Court then made these observations at par 60:

"The circumstance that a defendant owes a duty of care to a third party, or is subject to statutory obligations which constrain the manner in which powers or discretions may be exercised, does not of itself rule out the possibility that a duty of care is owed to a plaintiff. People may be subject to a number of duties, at least provided they are not irreconcilable. A medical practitioner who examines and reports upon the condition of, an individual, might owe a duty of care to more than one person. But if a suggested duty of care would give rise to inconsistent obligations, that would ordinarily be a reason for denying that the duty exists. Similarly, when public authorities, or their officers, are charged with the responsibility of conducting investigations, or exercising powers, in the public interest, or in the interests of a specified class of persons, the law would not ordinarily subject them to a duty to have regard to the interests of another class of persons where that would impose upon them conflicting claims or obligations."

71 The Court went on to refer at par 66 to the further question as to the extent, and potential indeterminacy, of liability. In the case of a medical practitioner, the range of people who might foreseeably suffer some kind of harm as a consequence of careless diagnosis or treatment of a patient is extensive.

72 Let me now apply the reasoning in these decided cases to the circumstances of the present case.

73 Prima facie, the damages sought to be recovered in the present case are in respect of economic loss allegedly suffered as a consequence of breaches of the duties of care detailed in par 5 of the minute of substituted claim. For the moment, I will put to one side the plaintiff's allegation that as a consequence of the first defendant's breaches of duty he has suffered emotional distress.

74 It is apparent from par 4 of the claim that the first defendant was retained by Mrs AAA to provide professional counselling to Mrs AAA. Thus, at first sight, having regard to the nature of the retainer, the medical practitioner's primary duty was to exercise reasonable care and skill in the provision of professional advice and treatment to Mrs AAA as the patient seeking treatment. It follows from Breen v Williams (supra) that the doctor cannot be thought to have impliedly promised that he would act in the "best interests" of the patient. His duty was to act on his patient's behalf in the provision of professional counselling for her benefit.

75 At a first glance, then, there was nothing in the contractual relationship comprising the retainer which obliged him to give consideration to the position of Mrs AAA's husband (the plaintiff). I note in passing that par 4 of the claim does not purport to identify any feature of the retainer which specifically obliged the first defendant to consider the plaintiff's position. It alleges only (being an allegation directed not to a normative obligation but to a matter of fact) that the first defendant was in a position of "special advantage" in relation to his patient (Mrs AAA) and the plaintiff.

76 The claim proceeds from the premise that the first defendant knew and it was reasonably foreseeable that if he commenced a sexual relationship with Mrs AAA or acted improperly as alleged then this would harm the marriage of Mrs AAA and the plaintiff and cause loss. However, it is clear from the decided cases that where the only damage that the defendant has caused to the plaintiff is economic loss, reasonable foresight of the risk of that damage occurring is a necessary but not a sufficient condition for imposing liability on the defendant. Proximity, of itself, is not sufficient. The plaintiff must be able to identify facts and matters which, when added to foreseeability, are sufficient to establish the existence of a duty of care and other duties of the kind contended for by the plaintiff in the present case.

77 I noted in earlier discussion that the plaintiff seeks to support its case by reference to the reasoning in Hill v Van Erp (supra). However, I am not persuaded that the reasoning there has direct application to the circumstances of the present case, notwithstanding that a third party, not in any direct relationship with the professional adviser, was able to obtain relief in that case. First, for all the reasons identified by Dawson J, the duty of care that was said to be owed by a solicitor to the prospective beneficiary appears to be a special category within the decided cases. It is a situation in which, quite clearly, the duty owed by the solicitor to the client coincides with the supposed duty of care to the intended beneficiary. Furthermore, it is a case in which the solicitor has a degree of control over whether the third party will obtain the benefit in question, and the third party can therefore be regarded as being in a position of special vulnerability.

78 However, in the present case, it seems to me that the duty owed by the medical practitioner to his patient cannot readily be regarded as coincidental with duties owed to the plaintiff of the kind contended for in the minute of substituted claim. In the performance of his primary duty to exercise reasonable care and skill in the provision of advice to the patient as to her matrimonial situation (accepting for the moment that the retainer was to provide marital counselling services as alleged) the first defendant might properly have felt obliged to express views about the plaintiff's conduct in the marriage as described to him by the patient that were likely to have an adverse effect upon the continuance of the marriage.

79 Further, there is nothing in the claim as presently formulated which states expressly that there was an acceptance of responsibility by the first defendant to guard against loss to the plaintiff. Nor is there anything to suggest (on the case presently pleaded) that the first defendant had reason to belief that either Mrs AAA or the plaintiff would act upon his diagnosis or recommendations concerning the marriage. Moreover, unlike the notional relationship between a solicitor and a prospective beneficiary, it cannot be said with respect to the present claim as formulated, that the first defendant was in a position of control.

80 I pause here to remind myself that par 4 of the claim contains a plea that the first defendant, as a consequence of the retainer, held a position of "special advantage in relation to both the plaintiff and Mrs AAA by reason of the trust and confidence placed in him". It might possibly be said in a certain type of case that confidential information imparted to the medical practitioner which served to explain the marital difficulties might be thought to vest in the medical practitioner a form of control and, simultaneously, place the claimant third party in a situation of vulnerability, so that the circumstances begin to resemble that category of case in which a solicitor is thought to owe a duty of care to a prospective beneficiary who is dependent upon the solicitor's integrity in order to enforce his rights. However, I do not see sufficient in the pleading as presently formulated to substantiate that line of argument.

81 Further, and in any event, this does not overcome the crucial objection I touched on earlier, namely, that the duty to exercise reasonable care in advising the patient cannot be said to coincide with duties of the kind that are said to be owed to the plaintiff. To my mind, the same objection serves to distinguish the present case from BT v Oei [1999] NSWSC 1082 being a case upon which counsel for the plaintiff placed reliance. A medical practitioner treating a patient in respect of a sexually transmissible disease might conceivably be liable to a sexual partner of the patient if such a person is foreseeably at risk of injury but that would be because there is no conflict between the duty owed to the patient and the obligation to the person at risk.

82 Put shortly, the plaintiff's case appears to proceed from the premise that the role of the first defendant was to endeavour to save the marriage. However, to my mind, that is a misconception. His obligation was limited to exercising reasonable care and skill in the provision of professional advice to Mrs AAA as the party who had consulted him. On the plaintiff's pleaded case (at par 4) the first defendant was to provide "professional counselling to Mrs AAA in respect of relationship difficulties" between her and the plaintiff. Thus, for example, the plea in par 5.5 that the first defendant owed a duty to the plaintiff to use his best endeavours to promote the continuation of the marriage and to improve the relationship between the plaintiff and Mrs AAA does not stand up to scrutiny. The claim does not contain a plea that such a duty formed part of Mrs AAA's instructions to the first defendant and, unlike the situation of a beneficiary, there is no obvious reason why such a duty should be regarded as coincidental with the duties owed to Mrs AAA.

83 In my view, the present case is closer to Sullivan v Moody (supra) in that there in providing advice to Mrs AAA as to her marital situation the first defendant might have to identify the plaintiff as the source of her concerns. There was nothing in the retainer (on the case as pleaded) which brought with it an acceptance of responsibility to the plaintiff, even if it be thought that the knowledge acquired by the first defendant placed him in a position of "special advantage".

84 In earlier discussion I put to one side the question of whether the plaintiff's claim for loss allegedly due to suffering emotional distress should be treated differently in respect to his claim for pecuniary loss.

85 Pain and suffering is a well-known common law head of damage recoverable in actions for damages for personal injury. It seems that in certain special circumstances a plaintiff can recover damages for injury to his or her feelings based upon a breach of contract, as in Baltic Shipping Co v Dillon [1993] HCA 4; (1993) 176 CLR 344, or based on principles concerning tortious conduct including negligence by a professional adviser, as in Olympic Holdings Pty Ltd v Lochel [2004] WASC 61. Further, I acknowledge that in the case of an injury of this kind a duty of care may be found to exist upon the basis that a risk of injury was foreseeable in circumstances in which there was a degree of proximity between the parties. However, I am of the view that considerations of the kind just mentioned are not sufficient to displace the conclusion I arrived at pursuant to my earlier line of reasoning; that is, in circumstances where the duties owed by the professional adviser to the patient in his care (in this case Mrs AAA) are not necessarily of the same kind and coincidental with the duties said to be owed to the third party (in this case Mrs AAA's husband, the plaintiff) a duty of care to the third party does not arise.

86 The professional adviser might be required to give his patient some forthright and rather blunt advice as to what the source of her difficulties in the marriage are thought to be. Blunt advice of this kind might well be unwelcome to the husband and possibly hurtful to his feelings but such advice might be required if the problems of the patient are to be solved. Thus, in the end, in the circumstances of the present case (having regard to the way in which the plaintiff's case is pleaded) the facts and matters underlying the plaintiff's claim for relief in respect of an alleged emotional distress do not disclose a reasonable cause of action as against the first defendant.

87 This brings me to the position of the second defendant. I noted in earlier discussion that the relevant plea is reflected in par 10 of the substituted minute of claim where it is said that by reason of the facts and matters alleged against the first defendant, and the fact that at all relevant times the first defendant was acting within the scope of his employment or agency, the second defendant is "vicariously liable" to the plaintiff for damage caused to the plaintiff by the conduct of the first defendant.

88 There are differences of opinion as to the jurisprudential basis for the imposition of vicarious liability. One theory, called the "master tort theory" is that the employer is liable because of his own negligence in selecting and employing careless employees or by failing to prevent employees from acting negligently or because of an implied command by the employer. However, it seems that the master tort theory is now generally rejected as an explanation for vicarious liability. The generally accepted view is that an employer's vicarious liability is not based on breach of any person or duty but on the employee's tort being imputed to the employer: New South Wales v Lepore; Samin v Queensland; Rich v Queensland [2003] HCA 4; (2003) 212 CLR 511; Bell v State of Western Australia [2004] WASCA 205; (2004) 28 WAR 555.

89 Accordingly, I am of the view that if the facts and matters relied upon by the plaintiff in his pleading do not disclose a reasonable cause of action as against the first defendant for the reasons I have given, it must follow that a claim against the subject medical practice cannot be sustained, because the claim against the subject medical practice depends upon a tort of the employee being imputed to the employer.

90 For all these reasons, I consider that the claim reflected in the minute of substituted claim does not disclose a reasonable cause of action against the defendants with the result that leave to amend in the terms proposed in the plaintiff's substituted minute of claim should not be granted.

91 The consequence of the ruling I have made (whereby leave will not be granted to amend in the terms proposed by the plaintiff) is that the versions of the statement of claim previously contended for by the plaintiff might be thought to fall away. In other words, in pressing for leave to amend in terms of the substituted minute of claim the plaintiff, by implication, could be thought to have abandoned the statement of claim attached to the writ of summons and the various refinements of that claim that were brought forward as the proceedings ran on. It was for this reason, as reflected in the first paragraph of the first defendant's minute of proposed orders dated 7 June 2005, that the first defendant sought an order that the plaintiff's statement of claim endorsed to its writ of 13 May 2003 be struck out.

92 Counsel for the plaintiff opposed such an order. He submitted that it was common place for parties to litigation to amend their pleadings from time to time. He said that an application to amend seldom leads to the making of formal orders for the striking out of the predecessor pleadings. Those predecessor pleadings are simply superseded by the fact of the amendment if the amendment be allowed. Counsel submitted further that the earlier versions of the plaintiff's claim were not necessarily bad in law. The plaintiff did not in any sense concede that the earlier versions of the claim, which gave weight to the contract between the parties, could not be sustained. The plaintiff, as evidenced by its substituted minute of claim, had simply decided to focus upon the claim in tort. Nonetheless, counsel for the plaintiff did not suggest that the plaintiff would revert to the earlier versions of the statement of claim if the amendment presently contended for were not allowed.

93 I am conscious that no ruling has been made upon the adequacy of the earlier versions of the claim, notwithstanding that lengthy written submissions were filed on both sides concerning the merits of the predecessor pleadings. Accordingly, I consider that it would not be appropriate for me to strike out the statement of claim attached to the writ of summons, even though it seems that the plaintiff will not seek to press a claim in those terms. I consider that the more appropriate course may be to allow the plaintiff a prescribed time within which to replead the statement of claim. I will hear from the parties as to what is the appropriate order and time limit (if any) in that respect.

94 However, when it comes to ruling upon the various questions of costs that have arisen I consider that I am entitled to take account of the fact that the plaintiff has ceased to pursue a claim in the form reflected in the earlier versions of the statement of claim. The reality is that both parties have been put to expense in preparing arguments bearing upon an issue that was raised by the plaintiff (that is, the plaintiff's contention that the earlier versions of the claim were sufficient) being an issue that ultimately was not brought before the Court because of the plaintiff's decision not to pursue a claim in the earlier form. I note in passing that counsel for the respective parties were allowed an opportunity to debate the question of costs at the hearing before me.

95 It appears from the first defendant's minute of proposed orders dated 7 June 2005 that an order was sought requiring the plaintiff to pay to the first and second defendants forthwith their costs taxed on an indemnity basis in respect of the following matters:

(a) The strike out applications of the first and second defendants in respect of the original statement of claim of 13 May 2003 which was endorsed on the writ.

(b) The defendant's applications to Court in opposition to the plaintiffs' minute of amended writ of summons (with amended statement of claim) dated 22 October 2003.

(d) The defendants' applications to Court in opposition to the plaintiff's minute of statement of claim filed on 26 February 2004.

(e) The defendants' applications to Court in opposition to the plaintiff's further minute of amended statement of claim of 2 April 2004.

(f) The (vacated) special appointment before Jenkins J of 29 September 2004.

96 The defendants contended at the hearing before me also that, if the plaintiff failed in its attempt to obtain leave to amend in terms of the substituted minute of claim, the plaintiff should pay to the first and second defendants the costs of and incidental to that hearing upon the basis referred to above.

97 I received in evidence the affidavit of Morag Donaldson Smith sworn 7 June 2005 referring to events subsequent to the filing of a writ of summons at the Supreme Court by the plaintiff on 13 May 2003. The deponent said that on or about 18 June 2003 the first defendant applied to the Case Management Registrar for orders to strike out the original statement of claim that is dated 13 May 2003. On or about 22 October 2003 the plaintiff served a minute of amended writ of summons and amended statement of claim. On 4 December 2003 the parties appeared before Master Newnes who ordered, inter alia, that the plaintiff do file and serve a minute of amended statement of claim incorporating all particulars of the statement of claim on or before 13 February 2004.

98 The deponent went on to say that the plaintiff filed a minute of amended statement of claim pursuant to the orders of Master Newnes on or about 26 February 2004. The first defendant maintained his application to strike out the plaintiff's minute of amended statement of claim and the parties were to appear before Jenkins J on 29 September 2004, however, that hearing was vacated. Reference was then made to correspondence bearing upon alleged consultations between the parties.

99 I note in passing that the hearing before Jenkins J was vacated not due to any default on either side but because Her Honour felt obliged to disqualify herself due to a conflict of interest. However, I consider that the party entitled to costs is entitled to recover the costs of preparatory work. This will be a matter for the taxing officer to resolve.

100 The general rule is that the successful party to an application before the Court is allowed to recover his or her costs: Seaman: "Civil Procedure" par 66.1.1. Accordingly, in the circumstances of the present case, where it has now become apparent that the plaintiff, after a considerable period of disputation as evidenced by the affidavit just mentioned, has been unsuccessful in sustaining the various versions of the statement of claim he has sought to place before the Court, I consider that, prima facie, orders should be made requiring the plaintiff, as the unsuccessful party, to pay to the first and second defendants the costs referable to the various matters just mentioned.

101 However, this leaves outstanding the question as to whether costs should be allowed to the defendants on an indemnity basis and as to whether an order should be made for the costs to be payable forthwith.

102 The circumstances under which indemnity costs will be ordered have been discussed in many cases. It is well established that the starting point for any consideration of an application for indemnity costs is that in the ordinary case costs will follow the event and the Court will order the unsuccessful party to pay the costs of the successful party, on a party and party basis, a basis which may fall short of complete indemnity. Nevertheless, the Court has an absolute and unfettered jurisdiction in awarding costs, although that discretion must be exercised judicially. Indemnity costs may properly be awarded where there is some special or unusual feature in the case justifying the Court exercising its discretion in that way: Re Wilcox; Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151 at 735.

103 In SDS Corporation Ltd v Pasdonnay Pty Ltd [2004] WASC 26 (S2) Roberts-Smith J undertook a comprehensive review of recent cases bearing upon indemnity costs. He noted that it is appropriate to consider awarding "solicitor and client" or "indemnity" costs whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law. The learned author of Seaman: "Civil Procedure" (supra) points out at 66.1.16(a) the judicial discretion to award indemnity costs is not confined by reference to the categories of case in which such an order has been made up to the present time but it is confined to some form of delinquency in the conduct of the proceedings.

104 His Honour referred with approval to certain remarks made by Wheeler J in Quancorp Pty Ltd v Macdonald [1999] WASCA 101 to the effect that there are two competing principles. On the one hand, a party should not be discouraged, by the prospect of an unusual cost order, from persisting in an action where its success is not certain. Uncertainty is inherent in many areas of law, and the law changes with changing circumstances. It is inappropriate that a case be too readily characterised as "hopeless" so as to justify an award of indemnity costs to the successful parties. However, where a party has by its conduct unnecessarily increased the costs of litigation, it is appropriate that the parties so acting should bear that increased cost. Persisting in a case which can be characterised as "hopeless" is an example of the type of conduct which may lead the Court to a view that the party whose conduct gave rise to the costs should bear them in full.

105 Thus, in the case before me, as in SDS v Pasdonnay (supra) it comes down to the question of whether the successful parties, in this case the defendants, have been put to additional costs by reason of the unreasonableness or some form of delinquency in the conduct of the litigation by the opposing party. In other words, a special costs order of this nature will only be made in exceptional circumstances: Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225. An abuse of process or some form of delinquency is capable of constituting special circumstances in the relevant sense and provides a sufficient foundation on which costs could be ordered on an indemnity basis: Baillieu Knight Frank NSW Pty Ltd v Ted Manny Real Estate Pty Ltd (1992) 30 NSWLR 359.

106 When I apply this reasoning to the circumstances of the present case, I am not persuaded that an order for indemnity costs should be made. To my mind, this was not a case where the plaintiff, properly advised, could be said to have been conscious that his case was manifestly unarguable with no chance of success. The law concerning professional negligence is in a state of flux, both as to the question of whether the claim should be proceeded with in contract or in tort, and as to whether a duty of care of the kind contended for by the plaintiff in its most recent pleading can be said to have arisen from the circumstances of the case. It emerges from my review of the decided cases bearing upon the application for leave to amend before me that there is a line of authority including Hill v Van Erp (supra) which could be said to support the plaintiff's contention.

107 Accordingly, notwithstanding that the plaintiff has failed in his application for leave to amend I do not consider that his claim can be characterised as manifestly unarguable with no chance of success, and nor do I consider that the plaintiff can be said to have acted in a delinquent manner in making several attempts to refine his claim and present it in the most effective manner.

108 Accordingly, I am not prepared to make an order for indemnity costs of the kind sought by the defendants. I will hear further from the parties as to whether an order should be made for payments of the costs forthwith and as to the precise terms of the order for costs.

109 The plaintiff's application for leave to amend in terms of the substituted minute of claim will be dismissed. I will make no order as to the defendants' application to strike out the statement of claim attached to the writ of summons. The plaintiff is to pay to the first and second defendants the costs of and incidental to the application for leave to amend and certain related costs in any event. I will hear further from the parties as to whether the plaintiff is to be allowed leave to replead and otherwise as to the exact form of the orders to be made in order to carry these rulings into effect.

Aaa v Bbb & Anor [2005] WASC 139

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Aaa v Bbb & Anor [2005] WASC 139 (29 June 2005)

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Cases Cited (40)