Adamson v Liu & Ors

CATCHWORDS : PRACTICE AND PROCEDURE - rights of set-off under section 21 of the Civil Procedure Act - Statement of Claim in unsatisfactory state - leave to amend granted on terms.

Civil Procedure Act 2005 (NSW) LEGISLATION CITED : Legal Profession Act 1987 (NSW) Supreme Court Act 1970 (NSW)

Dey v Victorian Railways Commissioners (1949) 78 CLR 62 CASES CITED : General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 Re Devy; Ex parte BBC Hardware Ltd (formerly Burns Philp Hardware Ltd) (1996) 149 ALR 128

Christopher Michael Adamson PARTIES : Adeline Marie Liu Kenneth John Ede

COUNSEL : Plaintiff-in person Defendant-R.Horsley

LOWER COURT JURISDICTION : Supreme Court (Associate Judge)

LOWER COURT DATE OF DECISION : 20/02/09 and 27/02/09

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

5312/2004 CHRISTOPHER MICHAEL ADAMSON v ADELINE MARIE LIU AND KENNETH JOHN EDE JUDGMENT 1 HIS HONOUR: By his Notice of Motion filed on 24 March 2009 the plaintiff seeks to set aside certain of the orders made by Associate Justice Macready on 27 February 2009 and, in the event that the orders are not otherwise set aside, the plaintiff appeals from those orders. 2 Soon after the commencement of the hearing, it became clear that what the plaintiff in fact wished to do was not to proceed with his application to set aside any of his Honour's orders, but to appeal from orders 1 and 2 of the orders made by his Honour on 20 February 2009 and from orders 1, 2 and 3 of the orders made by his Honour on 27 February 2009. Over the objection of the defendant, I gave leave to the plaintiff to amend his Notice of Motion accordingly and I made orders extending the time within which those amendments were to be made. 3 With those preliminaries having been attended to, I proceeded to hear the plaintiff's appeal, as so amended.

Issues before Associate Justice Macready 4 His Honour had before him two Notices of Motion. In a motion filed by the defendants, they sought an order that the third Further Amended Statement of Claim, alleged to have been filed irregularly on 8 January 2007, be removed from the file and set aside, or alternatively that the proceedings be dismissed. 5 The other Notice of Motion was filed by the plaintiff, seeking leave to file a proposed Fourth Further Amended Statement of Claim ("FFASC"), and it was on that Notice of Motion and on the proposed FFASC that the debate before his Honour centred. 6 In his principal judgment delivered on 20 February 2009, his Honour summarised the three basic claims contained in the FFASC. The first claim, pleaded in paragraphs 8-13 of the FFASC and headed "The First Bill of Costs", is based on a bill of costs delivered by the plaintiff, who is a solicitor, to a number of his clients and in respect of which bill of costs he alleges that there is still an amount of $154,279 plus interest owing. The first defendant was one of the clients to whom the said bill of costs was delivered. 7 The second claim, which is alleged in paragraphs 14-26 of the FFASC, is based on claims for breach of warranty of authority. The plaintiff was successful in relation to that claim in the sense that he has been found to be entitled to bring it forward. There is no appeal or cross appeal from that order, and accordingly, his Honour's decision on that claim is not before me. 8 The third claim is to be found in paragraphs 32-35 of the FFASC, and is headed "Assignment to Second Defendant". The actual wording of those paragraphs is far from satisfactory and requires substantial review and correction. However, as I understand it, those paragraphs are intended to establish the foundation for a declaration that the plaintiff is entitled to set off any amount that he may recover from the first defendant in these proceedings against a judgment in the sum of $109,861.24 entered against him in favour of the second defendant in the District Court, pursuant to a purported assignment by the first defendant to the second defendant of the first defendant's rights in certain certificates of determination of costs. The First Claim 9 I return then to the first claim contained in the FFASC. As his Honour recorded, the plaintiff's claim is based on a bill of costs dated 13 March 2000, which was delivered to certain of his clients, namely the first defendant and various other persons and companies. The plaintiff alleges that the said bill was for part of the work performed under an agreement dated 13 March 1998 between the plaintiff as solicitor and each of the clients named in the agreement. The pleading is in a less than satisfactory form, in that on its face, it does not make it clear whether the claim is based on the bill of costs itself, or on the terms of an indemnity contained within the subject agreement, by which the first defendant agreed to indemnify the plaintiff in relation to any loss or damage or claim made by or on behalf of any person as a result of certain specified conduct on the part of the plaintiff. 10 It is far from obvious how this indemnity could be relied upon in any event as a means of recovering from the first defendant amounts that the other parties to the agreement are unable to pay by reason of their respective insolvency. However, keeping that to one side, his Honour noted that at the time of the delivery of the said bill of costs, section 182 of the Legal Profession Act, 1987 ("LPA") provided as follows: "182 Effect of non-disclosure of matters related to basis of costs

(1) If a barrister or solicitor fails to make a disclosure to a client in accordance with this Division of the matters required to be disclosed by section 175 in relation to costs, the client need not pay the costs of the legal services unless the costs have been assessed under Division 6.

(2) A barrister or solicitor who fails to make a disclosure in accordance with this Division of the matters required to be disclosed by section 175 or 176 in relation to costs may not maintain proceedings for the recovery of the costs unless the costs have been assessed under Division 6.

(3) The costs of any assessment referred to in this section (including the costs of the costs assessor) are payable by the barrister or solicitor seeking to recover costs.

(4) Any failure referred to in this section does not of itself amount to a breach of this Act. However, the failure is capable of being unsatisfactory professional conduct or professional misconduct." 11 I should interpolate that it seems to me that the relevant time at which the provisions of the Legal Profession Act 1987 ought to have been considered is not at the time that the bill was delivered but rather at the time that the agreement for the work was entered into: see section 178 of the LPA. However, in the present case, this appears to make no difference, given that as far as I can see, the relevant parts of the legislation did not change between the date of the agreement and the date on which the bill was delivered. 12 After setting out the terms of section 182 of the LPA his Honour's judgment continued as follows: "14. It is plain that the pleading does not make any allegation of either a full disclosure in accordance with s 175 of the Act as it then was or, alternatively, the assessment of costs under division 6 of the Act. [Emphasis mine]

15. In the evidence before me there was no suggestion that there had been either an assessment or proper disclosure. The submissions were on the basis that, as he was claiming an indemnity, the plaintiff was entitled to claim damages notwithstanding that the recovery of costs against the client cannot be maintained under s 182." 13 It would certainly appear from the transcript before his Honour that the last sentence in paragraph 15 is an accurate description of how the plaintiff put his case before his Honour. 14 His Honour found that the submission so put on behalf of the plaintiff was untenable and concluded at paragraph 21 in the following terms: "21. In my view, this claim is not maintainable without pleading the appropriate conditions precedent". 15 Undoubtedly because of the way the plaintiff put his submissions, his Honour's attention was not drawn to paragraph 11 of the FFASC, in which the plaintiff alleged as follows: "11. The First Bill was for part of the work performed under the Agreement for each of "the clients" named in the Agreement and the work was done by the plaintiff in pursuance of instructions received from Peter Miller and the first defendant pursuant to their purported authority to do so under the Agreement. Prior to the Agreement, disclosure was made to the Client's (sic) charged in the Bill in compliance with the Legal Profession Act 1984 " [Emphasis mine] . 16 In light of the contents of the last sentence of paragraph 11 of the FFASC, in my opinion his Honour erred in his finding at paragraph 14 of his judgment. It follows that his Honour's conclusion, as recorded in paragraph 21 of his judgment was flawed, having regard to the fact that it was based on the finding recorded in paragraph 14 of his judgment. 17 It seems to me that insofar as the plaintiff now wishes to base his claim not on the indemnity, but rather on the bill of costs itself, relying upon the alleged disclosure as constituting compliance with the requirements of the LPA, I do not consider that the authorities referred to by his Honour, namely Dey v Victorian Railways Commissioners (1949) 78 CLR 62 and General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 would justify refusing leave to the plaintiff to bring forth his claim based upon the bill itself. 18 It is true that in its present form, the allegation contained in paragraph 11 of the FFASC is inadequately particularised, and is liable to be struck out for that reason alone. However, I consider that the plaintiff should be permitted to bring forth that claim provided it is adequately particularised in accordance with the Civil Procedure Act and the rules thereunder. The Third Claim 19 The third claim, titled "Assignment to Second Defendant" is pleaded by the plaintiff in paragraphs 32 to 35 of the FFASC in the following terms: "32. On or about 1 November 2007 by Deed of Assignment, the first defendant purported to assign to the second defendant all of her right, title and interest in the causes of actions (sic), debt, judgment debt and any other right that the first defendant has against the plaintiff arsing (sic) out of matters referred to in the recitals of that Deed which will be referred to at the hearing.

33. The said Deed of Assignment included all of the plaintiff's (sic) interest in the certificates of determination of costs in assessment file 91247 of 2004 to the second cross (sic) defendant.

34. The said certificates were subsequently entered as a judgment in the District Court held at Sydney in the sum of $109,861.24 and costs of $69.00.

35. The assignment is subject to the plaintiff's equity to set off any monetary judgment given to the plaintiff against the judgment debt assigned to the second cross defendant". 20 In the course of oral submissions, Mr Adamson, who appeared for himself, indicated that the said pleadings require correction in (at least) the following respects: (a) In paragraph 33, the reference to the "plaintiff's interest" is intended to be a reference to the "first defendant's interest"; and

(b) In both paragraphs 33 and 35 the reference to the "second cross defendant" is intended to be a reference to "the second defendant". 21 His Honour dealt with this third claim in the context of the way that the plaintiff put his case in respect of his first claim. As I have already noted, the plaintiff based his claim not on the bill of costs itself, but rather on the indemnity contained in clause 3 of the above mentioned Agreement dated 13 March 1998. In the circumstances, his Honour found that the claim was not maintainable. 22 As I have also noted above, the plaintiff was however successful in relation to his second claim, the one based on claims for breach of warranty of authority, but that was the only claim in respect of which a set-off could possibly be claimed. That claim, being clearly an unliquidated claim, was incapable of constituting a set-off either under section 21 of the Civil Procedure Act 2005 (which applied only to mutual debts, an unliquidated claim not being a debt), nor could there be a set-off in equity given the absence of the necessary close relationship required for equitable set-offs between the judgment debt entered against the plaintiff and the plaintiff's claim for unliquidated damages for breach of warranty of authority. 23 Having regard to the conclusion that I have reached in relation to the plaintiff's first claim, the position now appears to have changed. The plaintiff's claim, based on the bill of costs (rather than on the indemnity) is a liquidated claim for the amount contained in the bill of costs; see Re Devy; Ex parte. BBC Hardware Ltd (formely Burns Philp Hardware Ltd) (1996) 149 ALR 128 at 130. That being the case, the issue that arises is whether a claim by the plaintiff, based on the bill of costs, being a liquidated claim, would be a "debt" within the meaning of section 21 of the Civil Procedure Act 2005 and whether the said section assisted the plaintiff in relation to his third claim. 24 Section 21 of the Civil Procedure Act 2005 is in the following terms:

(1) If there are mutual debts between a plaintiff and a defendant in any proceedings, the defendant may, by way of defence, set off against the plaintiff's claim any debt that is owed by the plaintiff to the defendant and that was due and payable at the time the defence of set-off was filed, whether or not the mutual debts are different in nature.

(2) This section extends to civil proceedings in which one or more of the mutual debts is owed by or to a deceased person who is represented by a legal personal representative.

(3) This section does not apply to the extent to which the plaintiff and defendant have agreed that debts (whether generally or as to specific debts) may not be set off against each other.

(4) This section does not affect any other rights or obligations of a debtor or creditor in respect of mutual debts, whether arising in equity or otherwise.

(5) This section is subject to section 120 of the Industrial Relations Act 1996.

(6) In this section, debt means any liquidated claim". 25 At that point, both Mr Adamson and Mr Horsley sought to have an opportunity to consider their positions and to provide further submissions in writing. This they did, and I have left their respective submissions with the papers. 26 It seems to me that the disputes between various parties are in something of a procedural morass from which they should be rescued, if at all possible. If I understand the allegations and submissions correctly, the first defendant obtained certain certificates of determination of costs against the plaintiff based on orders for costs made against the plaintiff in earlier proceedings between them. By a Deed of Assignment made on or about 1 November 2007 the first defendant purported to assign to the second defendant inter alia the first defendant's interest in those certificates of determination of costs. Thereafter, based on said certificates, a judgment has been entered in the District Court in favour of the second defendant against the plaintiff. 27 Again, if I understand it correctly, what the plaintiff in fact wishes to achieve by means of this third claim is to be able to utilise the claim he brings in these proceedings as a means of defending himself from any attempt by the second defendant to enforce the District Court judgment against him. To do that, he will of course need first to make good the claim he brings in these proceedings against the first defendant, and then either to challenge the efficacy of the purported assignment by the first defendant to the second defendant of the subject certificates of determination of costs or to establish that such assignment was subject to whatever rights of set-off the plaintiff had and that those rights of set-off were equally available against the judgment entered in favour of the second defendant pursuant to the said certificates of determination of costs. 28 If that is indeed what the plaintiff seeks to achieve then I agree with the submissions made by Mr Horsley to the effect that the relief as presently sought by the plaintiff in the FFASC is neither appropriate nor does it flow from the allegations made in paragraphs 32 to 35 of the FFASC. Certainly in the manner in which the third claim is presently pleaded, I agree with his Honour's conclusion that the third claim as pleaded, cannot be made out. 29 However, as this appeal is by way of a rehearing (Supreme Court Act 1970 section 75A(5) and Uniform Civil Procedure Rules Part 49 Rule 49.4) and as it is open to me to grant the relief sought by the plaintiff on terms, I am obliged under section 56(2) of the Civil Procedure Act 2005 to give effect the overriding purpose of that Act, namely to facilitate the just, quick and cheap resolution of the real issues in the proceedings and also to avoid multiplicity of proceedings. 30 It is of course not necessary for me to decide, and I do not decide, whether the plaintiff is entitled to succeed on the claims that I understand he seeks to propound, but again I do not consider that the plaintiff should be refused leave to bring forth the third claim, having regard to the authorities to which I have referred in paragraph 17 above. 31 Accordingly, I propose to set aside certain of the orders made by his Honour on 27 February 2009 upon the terms which I set out below. 32 So far as costs are concerned, it seems to me that both parties were partly successful and partly unsuccessful on this appeal. The plaintiff substantially succeeded in respect of the first claim but would have failed in respect of the third claim having regard to the way that the claim was pleaded by him. In all the circumstances, I consider that the appropriate course is to make the costs of this appeal and the costs of the application before his Honour costs in the proceedings. 33 The orders I propose to make are as follows: 1. Order 1 of the orders made by Macready AsJ on 20 February 2009 be set aside.

2. Orders 1, 2, 3, 6 and 8 of the orders made by Macready AsJ on 27 February 2009 be set aside.

3. The plaintiff have leave to file a Further Amended Statement of Claim within 21 days in the form of the draft Fourth Further Amended Statement of Claim annexed to the affidavit of the plaintiff affirmed on 5 October 2008, but varied in the following respects:

(a) paragraphs 8 to 13 to be amended so as to conform with the principles expressed in this judgment;

(b) the allegation of disclosure presently appearing in paragraph 11 to be particularised in the document itself;

(c) paragraphs 14 to 26 to be amended so as to conform with the principles expressed in the judgment of Macready AsJ of 20 February 2009;

(i) in the manner set out in paragraph 20 of this judgment; and

(ii) otherwise to conform with the principles expressed in this judgment; (e) prayers for relief numbered 4 to 7 to be deleted and that the following prayers for relief be substituted in their place: (i) a declaration that the plaintiff if entitled to set off any judgment which may be entered in these proceedings in his favour against the judgment entered against him and in favour of the second defendant in District Court proceedings 1157/08;

(iv) such further or other relief as the court may consider appropriate; and (f) prayer for relief numbered 8 to be amended by adding at the end thereof the words "until the final determination of these proceedings or until further order";

4. The plaintiff pay any costs of the defendants thrown away by the filing of the Fourth Further Amended Statement of Claim;

5. Save as aforesaid, and save as is provided in orders 4 and 5 made by Macready AsJ on 27 February 2009, the costs of the plaintiff's notices of motion filed respectively on 5 November 2008 and 24 March 2009, as well as the costs of the applications before Macready AsJ and myself, all be costs in the proceedings. 34 As the parties have not yet had an opportunity to address the form of the orders I propose to make, I will give them an opportunity to do so, in writing, within seven days from today. I should make it clear that I am not inviting further submissions at large; such submissions as may be made should be restricted to the form of the orders, having regard to the substance of my reasons. I will review any submissions received within the seven day period, and will thereafter make my final orders. **********

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