Advice Central Professional Wealth Management Pty Ltd v HNW Planning Pty Ltd

Background and history of the proceedings

1. The Court is now dealing with two motions ("Motions"), one filed by the Plaintiff, Advice Central Professional Wealth Management Pty Ltd ("Advice Central") and the other by the Defendant, HNW Planning Pty Ltd ("HNW") in these proceedings. Before turning to the Motions, I should say something about the history of the proceedings.
2. First, and regrettably, the proceedings have been on foot since at least 23 January 2020, over four and a half years ago, when the Plaintiff filed a Statement of Claim then quantifying the amount claimed in the proceedings as $56,856.18. It will immediately be apparent that the proceedings should not have continued for that length of time, quite apart from the difficulty that the amount then claimed in them was significantly below the amount which would ordinarily be dealt with in proceedings in this Court and also, very likely, too low to allow the proceedings to be conducted in a cost-effective way for either of the parties to them. I will return to that question below, although I recognise that Mr Secivanovic, who appeared for HNW, fairly recognised that the amount now claimed by Advice Central may be somewhat larger than the amount originally claimed, although still of a magnitude that raises real questions as to whether these proceedings could be conducted cost effectively, having regard to the potential disproportion between the amount claimed and the cost of conducting them.
3. By an Amended Statement of Claim filed on 26 July 2023, Advice Central now presses a claim that HNW pay a quantified amount of $4,510, together with damages for breach of contract, and a claim under s 236 of the Competition and Consumer Act 2010 (Cth), and for other relief. There follows a pleading of some 32 pages, which highlights the complexity of the issues in dispute. The Amended Defence, filed by HNW on 24 August 2023, largely put Advice Central's claims and the matters underlying them in issue.
4. The next fundamental difficulty which has arisen in the proceedings, beyond any lack of proportion between the amount claimed in them and the complexity of the issues raised in them, is the fact that, for a considerable time, Advice Central has not been represented by solicitors in the proceedings. For an equally long period, the Registrar has been raising that difficulty with Advice Central, and had accepted assurances from Mr MacDonald that he was retaining solicitors. I will refer return below to the evidence of Mr MacDonald, the director of Advice Central, that he did not understand that matter when it was raised with him.
5. Now, by Notice of Motion filed on 2 May 2024, Advice Central, represented by its director Mr MacDonald, seeks an order that he be added as another Plaintiff in the proceedings. HNW, by Notice of Motion filed on 7 May 2024, in turn seeks an order, pursuant to r 12.7 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"), that the proceedings be dismissed.
6. Before turning to the evidence on which the parties rely in the proceedings, I should address the applicable rules. Plainly, both Advice Central's Notice of Motion, and HNW's Notice of Motion, are directed to the issue raised by rr 7.1 and 7.2 of the UCPR. Rule 7.1 relevantly provides that a company within the meaning of the Corporations Act 2001 (Cth), such as Advice Central, may commence and carry on proceedings by a solicitor or by a director of the company. However, r 7.1(3) qualifies that position, in respect of proceedings in this Court, so that a company many commence proceedings by a director in this Court only if the director is also a plaintiff in the proceedings. It is plain enough that Mr MacDonald's motion is directed to seeking to bring Advice Central within that exception, by joining him as a Plaintiff in the proceedings. Rule 7.2 in turn establishes additional requirements, in respect of authority to commence and carry on the proceedings, but is only applicable where the proceedings may properly be carried out under r 7.1.
7. Rule 12.7 of the UCPR, on which HNW relies in its application to dismiss the proceedings, in turn provides that the Court may dismiss proceedings if a plaintiff does not prosecute them with due dispatch, or make such other order as it seeks fit. Plainly, a conclusion that the proceedings have not been conducted with due dispatch is open here, where they have been on foot for four and a half years without reaching a hearing. However, the Court is not in a position to find, and I do not find, whether that was exclusively or primarily the fault of the Plaintiff, as distinct from the fault of both parties, although a delay of that kind plainly should not have occurred. I will return below to the authorities which deal with the circumstances in which the Court should dispense with the relevant rules, to permit a director to represent a company in proceedings.

Affidavit evidence

1. I turn now to the applicable affidavit evidence. Advice Central, by Mr MacDonald, first reads his affidavit dated 3 April 2024, which appears to have been directed to an earlier dispute in the proceedings, where it was filed before the relevant motions were filed. Mr MacDonald there seeks to explain delays in filing and serving the Plaintiff's reply evidence, and raises a significant number of complaints as to the scope of the Defendant's evidence. Mr MacDonald also there addresses the question of legal representation for Advice Central, referring to communications with a previous legal representative, and also indicating that Advice Central and Mr MacDonald had not requested leave for Mr MacDonald to represent Advice Central. I pause to note that that proposition was odd, in circumstances that Mr MacDonald had, in fact, apparently been representing Advice Central for a considerable time, although he goes on to say that he had "only recently been handling the basics". Mr MacDonald there stated that Advice Central was in the process of "changing to a new legal representative", although difficulties subsequently appear to have arisen in that respect. He also refers to difficulties which have arisen with previous legal representatives for Advice Central.
2. Mr MacDonald there refers, possibly inconsistent with the claim that Advice Central did not seek to be represented by him as a director, that a request for self-representation had previously been rejected by Registrar Walton, and refers to the Registrar's earlier statement, apparently clear in its terms, that: "The Court will not accept the documents as you cannot represent the Plaintiff under the rules."
3. Mr MacDonald there expresses puzzlement as to why the Court had permitted him to continue to represent Advice Central, where he was not permitted to do so under the UCPR. However, the Registrar had informed Mr MacDonald, clearly, that he could not represent Advice Central under the UCPR, although, as I noted above, it appears that she accepted his assurances that he was obtaining legal representation and permitted him to appear on Advice Central's behalf pending their appearance.
4. Mr MacDonald also there claimed that, notwithstanding the reference to the Registrar's earlier statement, he and Advice Central were not aware, until 2 April 2024, that Advice Central could only conduct the proceedings if it was legally represented, at least unless the Court dispensed with the applicable rules. He also referred to the time which he (and possibly a solicitor) had spent in preparing reply evidence, which appears to have been disproportionate to the amount that should have been required in order to address evidence that was properly in reply, and also observed that: "I'd like the Court to also note how I have not slept, since receiving the Court's order to complete this urgent affidavit, so that it is filed and served in time, as ordered." That observation highlights another difficulty with a suggestion that Mr MacDonald should be permitted to represent Advice Central in the proceedings, where it is apparent that his doing so may be imposing unreasonable burdens upon him.
5. Advice Central also reads Mr McDonald's affidavit dated 2 May 2024 in support of its Motion of that date, which refers to UCPR r 7.1 and seeks, without further explanation of any claim available to him, to have himself added as a plaintiff in the proceedings.
6. HNW in turn relies on the affidavit dated 6 May 2024 of its solicitor, Mr Secivanovic, which provides a detailed chronology of the occasions on which the issue of representation of Advice Central by solicitors had been raised, since at least September 2022, a matter to which I referred above. In his evidence and in submissions, Mr MacDonald refers to having not understood those matters, although I bear in mind that the evidence suggests that, throughout the whole of the period, Advice Central, through Mr MacDonald, was advising the Registrar that, first, it was seeking to retain legal representation and, second, at times, that legal representation had been obtained, but legal representatives required further time to take particular steps, although it does not appear that any legal representative filed a notice of appearance in that period. There are references in that time, including in March 2024, to, for example, "Advice Central's new legal representative", and to a new costs agreement with that new legal representative. There are also communications from Mr MacDonald with the Registrar indicating the work which had been done by Mr MacDonald, and his solicitor, in respect of affidavit evidence. All of that material involved a representation that Advice Central had then obtained a solicitor, although it appears that a difficulty subsequently arose in that respect.
7. Mr Secivanovic also refers to a communication between him, and the new solicitor who had been identified by Mr MacDonald as acting for Advice Central, which at least raises the possibility that the new solicitor had been engaged on a limited basis, to assist Advice Central or Mr MacDonald, as distinct from appearing in the proceedings. Mr Secivanovic also refers to the circumstances on which the lack of legal representation was again raised, in communications with the Registrar which appear to have prompted the motions that are now to be determined.
8. I proceed on the basis, emerging from the evidence of Mr Secivanovic and the correspondence which is annexed to it, that Registrar Walton had plainly raised the need for Advice Central to be represented by solicitors, and the fact that Mr MacDonald could not represent Advice Central under the UCPR, although I accept that, as Mr MacDonald points out, the Registrar had not identified the applicable rules. Nothing turns on that proposition, where the Registrar's comments as to that matter were plainly correct. I leave open the question whether Mr MacDonald had misunderstood what he was being told. I also note that Mr MacDonald's evidence and his submissions are not entirely consistent, and his correspondence with the Registrar was also not entirely consistent, as to whether the position has been, throughout, that Advice Central proposed to be represented by a solicitor, although it has not achieved that result in recent times, or that it sought to have Mr MacDonald rather than a solicitor represent it.
9. By further affidavit dated 8 May 2024, Mr MacDonald addresses the question whether comments made by Deputy Registrar Gerritsen had made the position clear to him, but it seems to me that little turns on that matter, where that position was clear enough from Registrar Walton's previous communications to Advice Central. Mr MacDonald there accepts that, at least from 30 April 2024, he understood the matters that Registrar Walton had drawn to his attention, as to the limitations on the circumstances in which Advice Central could be represented by its director. I will note, below, that that appears to have prompted Advice Central's application to join Mr MacDonald as a Plaintiff, so as to seek to avoid the limitation under UCPR r 7.1 on who could represent Advice Central in the proceedings. Mr MacDonald also there relied on the fact that he had been permitted to appear for Advice Central, from September 2022 until April 2024, as a source of "confusion" as to its representation, and I have addressed that matter above. Mr MacDonald also takes issue with aspects of Mr Secivanovic's affidavit evidence, but it is not necessary to address the dispute as to that evidence in order to determine the issues arising in these applications.
10. I should note, for completeness, that when the matter was first listed before me on 7 May 2024, there was discussion as to the scope of the orders that the Court could make, including orders short of an order dismissing the proceedings, which was the primary relief sought by HNW. HNW there made an offer, which I noted in the orders made on that date, that it would consent to orders that Advice Central's application for Mr MacDonald to be joined as party to the proceedings be dismissed; that Mr MacDonald be directed to cause a notice of appearance of a solicitor to be filed within two weeks; and reserving the costs of the motions. Mr MacDonald subsequently indicated that he rejected that proposal, although he did not indicate whether he did so because he sought to represent Advice Central in the proceedings, or instead wished to retain a solicitor for Advice Central but had concerns, which might have been justified, that a two-week period to retain that solicitor may be too short in the relevant circumstances.

Case management principles

1. I now turn to the determination of the motions. I bear in mind that, in determining both applications, I must act in accordance with ss 56-60 of the Civil Procedure Act 2005 (NSW) ("CPA"), and specifically the overriding purpose and the objectives of case management. Section 56 relevantly provides that the overriding purpose of the CPA and the rules of Court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in dispute in the proceedings. The Court is required to give effect to the overriding purpose when it exercises any power given to it by the CPA and by the rules of Court. I also have regard to ss 57-58 of the CPA, in that respect.

Advice Central's Motion

1. The position in respect Advice Central's application to join Mr MacDonald as a Plaintiff in the proceedings is straightforward. First, it is not apparent from Advice Central's pleaded claim that Mr MacDonald, personally, has any claim against HNW. The arrangement in issue was structured as an arrangement between two companies, Advice Central on the one hand and HNW on the other. No doubt, it could have been structured differently, with Mr MacDonald as a party to it in his personal capacity, but the parties here chose to deal through companies, obtaining the benefit of limited liability. In those circumstances, the corporate parties to the arrangement, not their directors or shareholders, have relevant contractual and other claims arising from any breach of the arrangement. Putting aside that general proposition, nothing in the Amended Statement of Claim articulates any arguable claim that can be brought by Mr MacDonald against HNW, as distinct from a claim by Advice Central, or seeks any relief that is available to Mr MacDonald as distinct from Advice Central against HNW. It is trite that, where a party brings no arguable claim in proceedings, then it should not be joined as a party to the proceedings.
2. Mr MacDonald's response to those propositions is that, first, he and Advice Central are the same. It is understandable that Mr MacDonald has that misunderstanding, given his lack of legal qualifications, but that again indicates the difficulty that his lack of legal knowledge raises for his conducting the proceedings for Advice Central. Company law has, at least since the late 19th century, recognised the distinction between a company on the one hand and its directors and shareholders on the other, which is central to the concept of limited liability and only subject to narrow exceptions, none of which could apply here. Second, Mr MacDonald indicates that his Notice of Motion was filed when Advice Central faced the risk of dismissal of the proceedings, because it was not represented by a solicitor. That, regrettably, raises a second difficulty with the Notice of Motion, that, having regard to Mr MacDonald's affidavit in support of it, it likely constituted an abuse of process. It is apparent, from Mr MacDonald's affidavit dated 2 May 2024, that the attempted joinder of Mr MacDonald as a party was an artifice, seeking to access the exception in UCPR r 7.1 that would allow Advice Central to be represented by Mr MacDonald as director if he was also a Plaintiff to the proceedings, and to avoid the consequence of not being represented by a solicitor. That is not a proper basis on which to join a party to proceedings.
3. That Notice of Motion must be dismissed, and Advice Central must pay HNW's costs of and incidental to that motion.

Whether the proceedings should now be dismissed because Advice Central is not represented by a solicitor

1. The position in respect of HNW's Notice of Motion dated 7 May 2024 is more complex. As I noted above, HNW's primary position is that the proceedings should be dismissed. It is understandable that, where proceedings have continued for four and a half years without reaching a hearing, HNW should be concerned about the lapse of time and the costs that have been incurred, given the risk that those costs are, and indeed the likelihood that those costs are, by now entirely disproportionate to the amounts in issue in the proceedings. HNW's application raises, essentially, two issues. The first is whether the Court should dispense with the application of the relevant rules, in order to permit Mr MacDonald to represent Advice Central in the proceedings. I should pause to note that I deal with that matter for more abundant caution, because it is still not entirely apparent whether Mr MacDonald seeks that order. However, it is preferable that I deal with that possibility now, to avoid further delays, where the issue has been sufficiently raised in the evidence and submissions.
2. I should here refer to the applicable case law. I first note the decision of the Court of Appeal in Damjanovic v Malley (2002) 55 NSWLR 149; [2002] NSWCA 230, although that decision dealt with the somewhat different question of whether one natural person should be permitted to represent another natural person in proceedings. That position is distinguishable, because the position of a company is dealt with in UCPR r 7.1, and a company may only appear by a director in the circumstances there noted, which are not satisfied here, or if the Court dispenses with that rule. Having said that, Stein JA there noted (at [69]ff) relevant matters including the complexity of the case; difficulties of the unrepresented party, which are less relevant in respect of an entity such as a company which could never appear other than by a natural person; the unavailability of disciplinary sanctions and the absence of a duty owed to the Court by lay advocates; protection of the client and the opponent; and the interests of justice. Those matters are, it seems to me, relevant here.
3. Here, the case has a degree of complexity, likely to be disproportionate to the amounts in issue, and that is more rather than less reason that the parties should be represented by legal practitioners. There is a real risk that Advice Central and its creditors would be placed at risk if Mr MacDonald represented it, where his avoiding incurring legal costs for a solicitor acting for Advice Central would not avoid, and may well increase, the risk that Advice Central is held liable for HNW's costs if the proceedings were ultimately dismissed. The unavailability of disciplinary measures and a lack of a duty owed to the Court by Mr MacDonald are significant matters, particularly where issues of proportionality exist in the proceedings, and there are obvious difficulties in respect of a proceeding that has continued as long as this one, in respect of amounts that likely do not justify its continuance for that time. The question of protection of Advice Central and the opponent, HNW, is also significant, and there should be added to that the interests of justice and the protection of the community. As I will note below, the retention of a solicitor by a company allows it access to independent advice, and independent advice is more important where issues of delay and lack of proportionality arise in the proceedings. There is here a real risk to the company that Mr MacDonald may be too close to the matters in issue and may not recognise the fundamental difficulties which arise where the costs that are being incurred in the proceedings are likely disproportionate to the amounts claimed. That, in turn, raises a real risk of oppression for HNW, which is exposed to those costs, and may ultimately be unable to recover them against either Advice Central, or Mr MacDonald, if it is successful in its defence of the proceedings.
4. Several cases have dealt with the applicable principles in respect of UCPR rr 7.1 and 7.2. Those decisions include JSBG Developments Pty Ltd v Kozlowski (2009) 75 NSWLR 745; [2009] NSWSC 1128; DP Mahaffy and Associates Pty Ltd v Mahaffy [2011] NSWSC 673 and Re DB Mahaffy and Associates Pty Ltd [2012] NSWSC 776. In Business Innovation Pty Ltd v Madison Morgan and Bailey Pty Ltd [2018] NSWSC 1523, Parker J considered those authorities and emphasised the importance of a legal practitioner's professional obligations in considering whether to dispense with the application of those rules. I declined to dispense with those rules, in several applications in an insolvency context, including Boss Constructions (NSW) Pty Ltd v Deputy Commissioner of Taxation (14 December 2018), Re Australian Tailings Group Pty Ltd (14 March 2019) and Re Horizons (Asia) Pty Ltd (31 January 2022). Stevenson J again addressed the relevant principles in Re ENA Development Pty Ltd (in liq) [2022] NSWSC 919, although he there allowed a director to make written submissions. I again addressed the applicable principle and declined to dispense with the relevant rules, in Clark v Premier Energy Resources Pty Ltd (15 April 2024).
5. I am satisfied, here, that I should not dispense with the application of UCPR rr 7.1 and 7.2 in the relevant circumstances, if Advice Central, or Mr MacDonald, was seeking me to have me do so. I bear in mind the factors noted in the case law to which I have referred above. Here, there have been repeated reference by Mr MacDonald, in affidavit evidence and in submissions, to his having difficulty understanding the issues raised by the Registrar, and the issues raised in this application, without the benefit of legal advice, and those matters tend against an order dispensing with the applicable rules. A real difficulty also arises from the apparent lack of proportionality between the amount in issue and the complexity of the issues and the time taken to conduct these proceedings, and it seems to me that it is essential that the parties have access to independent legal advice, to seek to mitigate, to the extent that it is possible to do so, what is now a very substantial difficulty.
6. I have not neglected the fact that there is a potential adverse consequence for Advice Central in my declining to dispense with the applicable rules. I recognise that there is a real possibility that Advice Central will ultimately be unable to obtain legal representation. It is implicit in the comments which I have made above that any legal representative that Advice Central seeks to retain may be concerned that the costs of conducting the balance of these proceedings will be substantial, and may well require Advice Central to pay funds into trust to secure its costs and disbursements. Mr MacDonald's evidence suggests that the latest legal representative that Mr MacDonald retained or sought to retain for Advice Central may have been concerned with issues of that character, and provided an estimate of costs that was not acceptable to Mr MacDonald. It is therefore possible that, if the Court does not dispense with the relevant rules and does not now dismiss the proceedings, but instead allows a further opportunity for Advice Central to cause a legal representative to file a notice of appearance, Advice Central will still be unable to retain legal representation, or at least unwilling to pay the reasonable costs of such representation. I recognise all of those matters. If that occurs, the history of these proceedings is such that the proper order is then likely to be that the proceedings be dismissed, not that they be further adjourned to allow Advice Central any further opportunity, after four and a half years, to obtain legal representation that may never be obtained. All of those consequences may be adverse to Advice Central, in one sense, although I will point below to the more adverse consequences that would potentially follow from dispensing with the relevant rules.
7. Recognising all of those matters, they must be weighed against other issues. The first is that there is a real risk to HNW and the community in the present position continuing. HNW, in particular, is exposed to further legal costs as the delay in the proceedings continues, and is unable to mitigate those costs by obtaining any determination of the proceedings on their merits, while Advice Central is not represented by a solicitor and does not move the proceedings forward. The community is also at risk in that respect, so far as Court time is wasted, and the community funds the Court as a public resource. Advice Central itself is exposed to substantial risk by that course, namely the risk that, without it having access to qualified and independent representation, The proceedings will ultimately fail and Advice Central will be ordered to pay substantially greater costs than those to which it is already potentially exposed, in six months or 12 months or two years' time, when the matter finally reaches a hearing. That risk is increased if, as appears from Mr MacDonald's evidence and the conduct of this application, Mr MacDonald does not have, with no criticism of him, an adequate understanding of the matters in issue. The Court would do no favour to Advice Central, or indeed to Mr MacDonald, in allowing it the opportunity to maximise the risk of and amount of an adverse costs order against it that will likely be made if it continues the proceedings and fails. For these reasons, I would not dispense with UCPR rr 7.1 - 7.2 to permit Mr MacDonald to represent Advice Central in the proceedings.
8. It remains to deal with the relief sought by HNM in its motion. As I noted above, HNW's primary position was that the proceedings should be dismissed. I can understand why that submission is put and I accept that HNW will inevitably have been put to significant wasted costs through this process, both by delay, and in this application. Having said that, it seems to me that the order sought by HNW should not be made without allowing Advice Central a last, and final, opportunity again to retain legal representation in the proceedings. I recognise that, whatever the difficulties of the past, the Court's focus should be on bringing about the just, quick and cheap resolution of the proceedings from where we stand. That can be addressed, it seems to me, by allowing Advice Central a last and final opportunity to retain legal representation and by actively managing the proceedings going forward, so that the delays which have been experienced to date are not repeated.
9. I will therefore not dismiss the proceedings but will make orders that allow Advice Central that last and final opportunity to retain legal representation, and cause a notice of appearance to be filed by that legal representative. I will stay the proceedings during the period in which that occurs, so that neither party is exposed to the risk of incurring further costs, and I will limit the parties' ability to file further interlocutory applications in the interim, so that no party is exposed to the costs of dealing with those applications while these steps are taken. I should emphasise, in this respect, that what will be required for Advice Central to comply with these orders is the filing of a notice of appearance by a solicitor, in accordance with the applicable rules, and it will not be sufficient for Mr MacDonald to say, at some point in the future, as he has so often said in the past, that he is in the process of retaining a solicitor, or he is having discussions with a solicitor, or has executed a costs agreement with a solicitor, or that a solicitor will be appointed shortly, if no notice of appearance is filed. Whether a notice of appearance is filed is an objective matter; it is capable of ready determination and, after four and a half years, it seems to me that Advice Central has no basis to complain if the proceedings are dismissed when, having been allowed that last and final opportunity to cause a notice of appearance to be filed, it fails to do so.
10. I should also note, first, that when the matter is next listed before me, I will not permit Mr MacDonald to appear on Advice Central's behalf. Either there will be an appearance from a solicitor who has filed a notice of appearance for Advice Central or it will not be heard, where I have declined to dispense with the applicable rules and Mr MacDonald can no longer be heard on Advice Central's behalf. Second, whether a notice of appearance has then been filed and the proceedings are to continue, or it has not and the proceedings are likely to be dismissed, it is then likely to be necessary to deal with the costs of this application. Third, if a notice of appearance has then been filed and the proceedings are then continuing, they will remain in the Corporations List and they will be judge-managed and the parties should expect that they will reach a hearing within the second half of this year.

Orders

1. Accordingly, I make the following orders:
2. The Notice of Motion filed by the Plaintiff ("Advice Central") on 2 May 2024 be dismissed, Advice Central to pay the Defendant's costs of that Motion as agreed or assessed.
3. Direct that Advice Central cause to be filed a notice of appearance of a solicitor on its behalf by 4pm on 7 June 2024.
4. Pending the filing of the notice of appearance of a solicitor acting for Advice Central, the proceedings be stayed.
5. Relist the matter to determine whether a notice of appearance has been filed and, if not, with a view to dismissal of proceedings, before Black J at 9.15am on 13 June 2024.
6. Reserve the question of costs.
7. No application (other than any appeal or application for leave to appeal from these orders) to be brought in respect of any matter arising in or in connection to these proceedings, other than by leave of Black J or, in his absence, the Equity Duty Judge.

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