Practice and procedure - Application to strike out paragraph of statement of claim - Turns on own facts

Trade Practices Act 1974 (Cth)

Alpine Holdings Pty Ltd v Warwick Entertainment Centre Pty Ltd [2003] WASC 53

Buyquick.com Ltd v Foxgold Pty Ltd [2000] WASC 216

D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12

Giannarelli v Wraith [1988] HCA 52; (1988) 165 CLR 543

Keefe v Marks (1989) 16 NSWLR 713

May v Mijatovic [2002] WASC 151

Rees v Sinclair [1974] 1 NZLR 180

Cleary v Jeans [2006] NSWCA 9

Rippon v Chilcotin Pty Ltd [2001] NSWCA 142; (2001) 53 NSWLR 198

Rogers v The Queen (1994) 181 CLR 251

VACC Insurance Ltd v BP Australia Ltd [1999] NSWCA 427; (1999) 47 NSWLR 716

West & Ors v Jackson McDonald (a firm) [2001] WASC 198

1 MASTER SANDERSON: This is a pleading summons. It is in two parts. The second part seeks to strike out certain paragraphs of the statement of claim based upon what is generally referred to as "advocate's immunity". This controversial area of the law is close to the heart of all barristers and not a few solicitors.

2 Before dealing with matters which are the substance of this application which the plaintiffs say preclude the application being brought at all, I need to outline the history of the matter.

3 On 22 April 2005 the plaintiffs served the writ of summons (which was filed 4 January 2005) and the statement of claim. The defendant filed an appearance on 9 May 2005. On 18 May 2005 the defendant's then solicitor (Mr Staffa) wrote to the plaintiffs' solicitors setting out extensive objections to the statement of claim. The plaintiffs' solicitors responded by letter dated 23 May 2005 (annexure AM1 to the affidavit of Arthur Metaxas sworn 15 June 2005 and filed in opposition to this application).

4 On 23 May 2005 Registrar Rimmer ordered that the plaintiffs have leave to file and serve an amended statement of claim by 27 May 2005. On 25 May 2005 the plaintiffs' solicitors forwarded to Mr Staffa (AM3), for the purpose of conferral, a minute of proposed amended statement of claim. A further proposed amended pleading was forwarded by email on 30 May 2005. On 1 June 2005 Mr Staffa forwarded a facsimile to the plaintiffs' solicitors (AM4) which, in the view of the plaintiffs' solicitors, failed to address the substance of the issues. Further correspondence followed.

5 Finally, the plaintiffs brought an application for leave to file and serve an amended statement of claim out of time limited by the order made on 23 May 2005. That application was filed on 15 June 2005. It must be acknowledged that the various communications between the solicitors make it plain that the plaintiffs' solicitors had at all times been prepared to amend the pleading to accommodate the objections raised on behalf of the defendant. The plaintiffs' solicitors were of the view that the objections were as to form and not as to substance. A reading of the correspondence seems to bear out that view.

6 On 11 July 2005 the defendant filed an application seeking orders to strike out parts of the statement of claim. On 14 July 2005 the plaintiffs' solicitors filed an outline of submissions contending that the application should be adjourned and the Court should require conferral at the offices of the plaintiffs' solicitors in an endeavour to resolve the disputed pleading. On 18 July 2005 Registrar Rimmer made that order. The parties conferred. All outstanding matters were resolved - or at least so the plaintiffs' solicitors thought.

7 On 28 September 2005 the defendant's solicitors wrote to the plaintiffs' solicitors foreshadowing a further application to strike out. The plaintiffs' solicitors responded by a letter of 11 October 2005 reminding the defendant's solicitors that the pleading was, in effect, in agreed terms. The defendant's present solicitors came on record on 12 December 2005 together with this application. They were given leave to file the application by the Registrar conditional upon the defendant paying all costs thrown away. That has been done. But the plaintiffs' solicitors say that despite the leave given by the Registrar, this application ought be dismissed.

8 The plaintiffs' solicitors' argument is based on O 59 r 9. They say that to preserve the integrity of the process of conferral mandated by the rule, it should not be open to a party who has conferred and reached agreement to then go behind the conferral and reopen the matters. To allow that, they say, would be completely at odds with the purpose and intent of the conferral required by the rules. In support of that proposition, they refer to the decision of Templeman J in Buyquick.com Ltd v Foxgold Pty Ltd [2000] WASC 216.

9 There is a great deal of force in the plaintiffs' argument. Observing both the spirit and the letter of O 59 r 9 ensures that wherever possible matters which can be resolved by discussion do not come before the courts. However, in this case, the plaintiffs' submissions run into two insurmountable difficulties. First, the Registrar granted leave to the defendant to bring this application. This is not an appeal against the Registrar's decision. In the circumstances, then, the defendant is doing nothing more than taking advantage of an already existing right. To put the defendant out of court on the basis of events which took place before the leave was granted would not, in my view, be appropriate.

10 The second and lesser concern is the nature of the defendant's application. As will become apparent below, the defendant has raised two points of importance. In my view, they are sufficient to strike out parts of the statement of claim. In the end, it is in no one's interest to allow a claim to be pursued when the pleaded case cannot succeed. Rather than have the pleadings amended at trial as so often happens, it is far better that matters be dealt with at an early stage. This second reason for allowing the application to proceed is nowhere near as important as the first - but it is a valid reason nonetheless.

11 It is unnecessary for me to deal to any significant extent with the facts of this case; the briefest of summaries will be sufficient. In about 1992 the plaintiffs entered into an agreement with Warwick Entertainment Centre Pty Ltd ("Warwick") to lease certain premises as a café. During the course of the negotiations, the plaintiffs allege that certain representations were made to them by Warwick. The café venture was unsuccessful. The plaintiffs then sued Warwick alleging, among other things, misleading and deceptive conduct contrary to the Trade Practices Act 1974 (Cth). The action was heard by Roberts-Smith J. His Honour found in favour of the plaintiffs and awarded them damages of over one million dollars: see Alpine Holdings Pty Ltd v Warwick Entertainment Centre Pty Ltd [2003] WASC 53. Warwick appealed from that decision. Subsequent to the trial but prior to the appeal, Warwick offered to settle the plaintiffs' claim in an amount of approximately $576,000. On advice from the defendant that offer was refused. On appeal, the damages in favour of the plaintiffs were reduced to just over $100,000. It is the plaintiffs' position that the defendant was negligent in his handling of the case before Roberts-Smith J and in advising the plaintiffs not to accept the offer of settlement prior to the appeal. As I have said, this is but the briefest of summaries of the nature of the plaintiffs' case against the defendant. The statement of claim itself runs to 40 pages and is a detailed document.

12 The first of the defendant's complaints relate to par 7A and par 30.4 of the amended statement of claim. Paragraph 7A is in the following terms:

"In 1992 and 1993 the first plaintiff owned and operated 'Egon's Coffee & Patisserie' and 'Carillon Beverages' ('Businesses') in Perth which businesses were sold to finance the establishment and ongoing trading of the Café."

13 By par 30.4 the plaintiffs claim as part of their damages against the defendant profits which they allege would have been generated from the businesses had they not entered into the agreement with Warwick. It is said this was a head of damage which should have been raised by the plaintiffs in the action against Warwick and was not raised because of the negligence of the defendant. In effect, par 30.4 is consequent upon par 7A surviving the defendant's challenge.

14 In the course of his judgment, Roberts-Smith J said (at [261]):

"Mr Dillon [counsel for Warwick] relied upon the fact that the Konigs contracted for the sale of Egon's Café and Patisserie in mid-August 1992, as indicating they had already made up their minds to take the lease for the Beverley Hills Café. I do not accept that. I am satisfied the Konigs had decided to sell Egon's Café and Patisserie in any event as part of their general intention to restructure and relocate their business activities, at a time when they had made no firm decision on exactly what form that would take. Indeed, at that early stage Mr Konig was still toying with the possibility of establishing a coffee shop at Whitford City."

15 In my view, in the light of the finding by his Honour - a finding of fact not disturbed on appeal - it is not open to the plaintiffs to now plead in terms of par 7A. It is true, as was submitted by counsel for the plaintiffs, that there is no issue estoppel or res judicata on this point as between the plaintiffs and defendant. The defendant was not a party to the action against Warwick. But that is not the point. Evidence was given on behalf of the plaintiffs during the Warwick action and a finding of fact was made. Such a finding cannot be challenged. That is the very point of the High Court decision in Walton v Gardiner (1992) 177 CLR 378.

16 The position may have been different were the plaintiffs to allege that evidence which would have led to a different conclusion by his Honour was available but was not led. It is somewhat difficult to see how that could be the case but, as I intend to allow the plaintiffs leave to replead, I should indicate that a pleading which alleges a failure to lead evidence would not be objectionable on the grounds that the present paragraph is objectionable. That is not to say the paragraph will survive challenge on other grounds. But it is possible to see how the plea might be framed.

17 For the present, I am satisfied that par 7A and par 30.4 cannot stand. They ought be struck out.

18 The defendant's second complaint relates to pars 30, 30A, 31, 31A, 31B, 31C, 32, 33, 49, 49A, 51 and 52. This objection raises squarely the question of advocate's immunity. It is not necessary for me to detail each of these paragraphs. The nature of the defendant's complaint can be seen by reference to par 30. Paragraph 30 is in the following terms (the marking up has been omitted):

"30. As the defendant knew or should have known from instructions given to him or which he should have obtained from the plaintiffs in February of 1997 and at all times thereafter the plaintiffs' damages recoverable from WEC were:

30.1 the first plaintiff's trading losses suffered by the first plaintiff from 1993 to 1997 in the conduct of the Café of $169,786;

30.2 the income the second and third plaintiffs should reasonably have earned in the period 1993 to 1997 as employees of the first plaintiff had the Café been profitable for a total of $125,166 or which they would have earned in the operation of the Businesses over the same period had they not been sold;

30.3 the first plaintiff's expenditure of $168,436 to set-up the Café which expenditure was wasted on the abandonment of the Premises;

30.4 profits which the first plaintiff would have generated from the conduct of the Businesses of about $95,000 pa or $380,000 in total for the period 1993 to 1997 on the basis that the first plaintiff would have continued to operate the Businesses but for the misleading and deceptive conduct of WEC; and

30.5 interest on the amounts in 30.1, 30.2, 30.3 and 30.4 above

if damages were assessed on the tortious measure with the intention of restoring the plaintiffs to their respective positions if WEC had not engaged in misleading and deceptive conduct and the first plaintiff had not entered into the lease for the Premises."

19 During the course of the hearing most of the relevant cases dealing with advocate's immunity were referred to, and discussed at some length. These cases begin with the decision in Rees v Sinclair [1974] 1 NZLR 180, Giannarelli v Wraith [1988] HCA 52; (1988) 165 CLR 543, Keefe v Marks (1989) 16 NSWLR 713 and conclude with D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12. From these decisions counsel for the defendant distilled three principles. He submitted first that it was not open to the plaintiffs to plead against the defendant on the grounds that claims were made in the action against Warwick which should not have been made. Second, that claims for damages against Warwick were not made which should have been made. Third, it was not open to the plaintiffs to argue that the defendant should have advised them not to resist the appeal against the trial Judge's award of damages.

20 On behalf of the plaintiffs it was argued that what was alleged against the defendant was a failure in his capacity as a solicitor - not a barrister - to ensure that the plaintiffs' case was properly formulated when it was put before the Court.

21 Precisely when a solicitor is entitled to rely upon advocate's immunity is not finally settled, and must depend upon the facts in a particular case. However, it does seem that the authorities have adopted the views of McCarthy P as expressed in Rees v Sinclair (supra) that if the lawyer's advice on a feature of a case was intimately connected with the manner in which the case was to be conducted at trial and the tactics used at trial, then the lawyer was entitled to claim immunity. In Keefe v Marks (supra) Gleeson CJ and Meagher JA said that examples of out of court work that would be intimately connected with the conduct of the cause included:

"interviewing the plaintiff and any other potential witnesses, giving advice and making decisions about what witnesses to call and not to call, working up any necessary legal arguments, giving consideration to the adequacy of the pleadings and, if appropriate, causing any necessary steps to be undertaken to have the pleadings amended."

22 That, with respect, is a broad formulation of the principle. The width of the immunity is confirmed by what was said by McHugh J in D'Orta-Ekenaike v Victoria Legal Aid (supra) (at [168]):

"Accordingly, the immunity should extend to any work, which, if the subject of a claim of negligence, would require the impugning of a final decision of a court or the re-litigation of matters already finally determined by a court. On that basis, no distinction should be drawn between the role of a solicitor and a barrister in the context of advising a client regarding the entering of a plea in criminal proceedings. If the immunity were applicable to the barrister and not the solicitor in the present case, it would not serve the public policy purpose of preventing the rehearing of the applicant's charge."

23 In my view, that is the position with respect to the plaintiffs' pleading in this case. Properly analysed, what the plaintiffs are saying in par 30 is that based upon instructions given by the plaintiffs to the defendant the defendant ought to have pleaded and, consequently, run the case differently from the way in which the case was in fact pleaded and run. In my view, there could be no question but that such a plea is not open to the plaintiffs.

24 Counsel for the plaintiffs relied upon the decision of Hasluck J in May v Mijatovic [2002] WASC 151. In that case, his Honour found against a solicitor on the basis the solicitor had failed to warn his client that his then proposed claim was doomed to fail for want of admissible evidence. But that is not this case - or at least not the way this case is pleaded. In my view, this decision does not assist the plaintiffs.

25 There are two other matters about which I should make specific mention. In par 32.1 of the statement of claim reference is made to par 30.4, a paragraph which I have already indicated should be struck out. Whatever other failing might be found in par 32.1, the reference to par 30.4 cannot stand and should be struck out.

26 The second point relates to the plea of negligence put against the defendant in relation to the alleged failure of the defendant to advise the plaintiffs to accept an offer of settlement subsequent to trial and prior to the appeal. Counsel for the defendant conceded that he could conceive of a situation where an allegation of failure to advise in relation to the appeal might properly be pleaded so as not to fall within the ambit of advocate's immunity. However, counsel submitted that par 33 as presently pleaded is not sufficient. With respect, I agree with that submission. The failure to advise as to the plaintiffs' position may fall within negligence of the type found by Hasluck J in May v Mijatovic (supra). But as it stands at present, par 33 is not a sufficient plea and it should be struck out.

27 Finally, there is the question of whether or not, given the uncertain nature of the extent of advocate's immunity as it applies to solicitors, paragraphs in this statement of claim ought be struck out on a pleading summons. Counsel for the plaintiffs submitted that this was an area of law shrouded in uncertainty and dependant upon the findings of fact made in each case. He therefore submitted that the pleading ought be allowed to stand. There is strength in that submission. However, on balance, I am satisfied that the way in which the paragraphs complained of are pleaded fall so clearly within the advocate's immunity principle that they ought be struck out. I will, however, give unrestricted leave to replead. Of course, any repleading must take account of these reasons and not simply put the same plea in slightly different words. But, in the circumstances, I think it would be inappropriate to restrict in any way the plaintiffs' right to reformulate their statement of claim.

28 The order then will be that the paragraphs of the statement of claim complained of by the defendant will be struck out. In relation to costs, the plaintiffs submitted that given the history of this matter, no matter what the outcome of the application, costs should be awarded to the plaintiffs. It was their submission that this would give an indication that O 59 r 9 had not been observed and the defendant could not simply bring an application such as this so late in the day. I will hear further from counsel in relation to costs in the light of these reasons.