Bailey v Bailey

Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27 CASES CITED : Dennis v Australian Broadcasting Corporation [2008] NSWCA 37 Zisis v Knighton [2008] NSWCA 42

Bruce Clyde Bailey (First Plaintiff) Janet Beatrice Shafik Bailey (Second Plaintiff) PARTIES : Arnold Neil Bailey (First Defendant) Glenice Margaret Bailey (Second Defendant) Annette Mavis Bailey (Third Defendant)

COUNSEL : D Grieve QC, C Bevan (First and Second Plaintiffs) M Pesman (Second and Third Defendants)

SOLICITORS : Turner Freeman (First and Second Plaintiffs) Australegal (Second and Third Defendants)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

Date of Hearing: 2 September 2009 Date of Judgment: 8 September 2009

2313/02 Bruce Clyde Bailey and anor v Arnold Neil Bailey and ors JUDGMENT 1 REIN J: By a notice of motion the plaintiffs seek leave to file a Fourth Further Amended Statement of Claim ("4FASOC"). The proposed pleading abandons a number of the paragraphs of the Third Further Amended Statement of Claim ("3FASOC"), but it also introduces some new matters. The defendants do not consent to the filing of the 4FASOC, but only because of the inclusion of the underlined words in the following paragraph: "55. The complaints and allegations foreshadowed by the defendants (referred to in paragraph 46B above) were wholly without substance in fact or at law and were ultimately abandoned by the defendants on 23 November 2007 when they consented to the making of orders in proceedings numbered 5315 of 1997 in this Division of the Court by which all of the money standing to the credit of the accounts referred to in paragraph 46I above were beneficially paid to the first plaintiff or to the plaintiffs together ." 2 The reason for the objection relates to what has previously transpired in the matter. In my judgment of 23 June 2009, which dealt with an application by the second and third defendants to file an amended cross claim, I endeavoured to set out the nature of the proceedings: see [2009] NSWSC 598. The plaintiff Bruce and his sister Janet (I erroneously referred, in that judgment, to Janet Bailey as Bruce's wife) claim that the insistence of the defendants that the plaintiffs enter into a Contingency Fund Agreement ("CFA") in July 1996 was a breach of the mediation agreement entered into by them and the defendants in 1995 and as amended in 1996. They claim that the failure of the defendants to pay monies due to the plaintiffs resulted in them being unable to purchase a water licence which has caused them loss and damage. There is also a claim that the defendants owed and breached a fiduciary duty to the plaintiffs. That fiduciary claim is not the subject of any proposed amendment. 3 The plaintiffs, in the 3FASOC, claimed that their entry into the CFA was brought about by coercion. That claim has been abandoned in the proposed 4FASOC. The plaintiffs now allege that the defendants were in breach of the mediation agreement in not paying the monies due to the plaintiffs and that the plaintiffs' entry into the CFA was brought about by the defendants making allegations and complaints against them. 4 The plaintiffs assert that the allegations and complaints, which were made and which they assert led to them entering into the CFA, were baseless and were known by the defendants to be baseless. They also assert that there was no consideration given by the defendants for the plaintiffs' entry into the CFA. 5 To support the contention that the defendants abandoned claims that were, and were known to be, baseless the plaintiffs wish to rely on the fact that the defendants entered into consent orders on 23 November 2007 ("the 2007 consent orders"). 6 Mr Pesman, of counsel, on behalf of the second and third defendants, submits that the plaintiffs ought not be permitted to mount such an argument. He relies on the following matters: (1) the plaintiffs in the 3FASOC pleaded a case (paragraphs 74A - 74D of 3FASOC) that sought to assert that the 2007 consent orders constituted an admission or alternately founded an estoppel against the defendants;

(2) the defendants had foreshadowed in March/April this year a cross claim in which they asserted that the 2007 consent orders were obtained in circumstances that entitled the defendants to relief under ss 7 and 8 of the Contracts Review Act 1980 ;

(3) the solicitors for the plaintiffs in correspondence and Mr Bevan of counsel in submissions to the Court had asserted that if the defendants' claims in relation to the 2007 consent orders were maintained Mr Bevan, Mr Young of counsel who appeared with him, and his solicitors would be witnesses in the case and could no longer act in the proceedings. There was even an allegation on behalf of the plaintiffs that the proposed cross claim was designed to have that effect;

(4) the defendants, however, indicated to the Court and confirmed that if the plaintiffs abandoned their claims in respect of the 2007 consent orders and as set out in in paragraphs 74A - 74D of the 3FASOC, they would not press on with that aspect of the cross claim. This was reflected in an agreement noted in short minutes of order filed in Court on 15 April 2009 (" the 2009 consent orders "):

"The plaintiffs formally withdraw their pleadings in relation to the consent orders made by Windeyer J on 23 November 2007 in proceedings no. 5315 of 1997 (the consent orders) in paragraphs [74A] - [74D] of the third further amended statement of claim in consideration for a promise made by the second and third defendants not to bring a cross claim in these proceedings in relation to the consent orders."

(5) the defendants sought leave to file a cross claim which contained three claims (see [8] of my judgment of 23 June 2009: [2009] NSWSC 598): the properties issue, the first rectification issue and the second rectification issue. I refused leave to the defendants to file the cross claim on several bases, including:

"the fact that the cross claimants have agreed not to advance claims "in relation to the consent orders" and that one, at least, of the rectification claims does meet that description": see [19];

(6) the parties had agreed not to make any claims in relation to the 2007 consent orders and the plaintiffs had, in effect, sought to enforce that agreement in resisting the defendants' cross claim. 7 Mr Grieve QC, who appeared with Mr Bevan for the plaintiffs on this motion, challenged none of these matters. He said that the position that Mr Bevan and his solicitors had taken in March/April 2009 was based on a misapprehension and that he (Mr Grieve) had advised them that they would not have to cease acting in the matter. He accepted that if paragraph 55 of the 4FASOC were allowed to be included then the defendants would be entitled to leave to file its cross claim, including the rectification claims, and for it to be heard in November this year, when the matter is set down for hearing. Mr Grieve, in oral submissions, explained the purpose of paragraph 55: "But basically what we are saying at the core of our case was the defendants were contractually bound to permit the plaintiff's share to be paid to them forthwith, and that in breach of that contractual obligation on the strength of certain complaints and allegations they caused the plaintiff's share to be withheld.

It is perhaps being a little elaborate but we simply say the complaints and allegations that underpinned the contractual or the demand that the funds be withheld in breach of contract were without substance. It is there for more abundant caution more than anything else, and it is up to the defendants, we submit, to respond to that pleading to say, "No, we did have a legitimate basis upon which to demand the withholding of the funds and this is it." They have never propounded their complaints and allegations in anything other than the terms in which they were expressed in the correspondence at the time. And we say those complaints and allegations ex facie were without substance and therefore the demand was in breach of the contractual obligations and therefore the money should have been paid without delay. That is the way in which we put it your Honour, there is nothing more or less to it than that." See T9.5 - .22 (1 September 2009).

8 The disputed paragraph 55 does not expressly assert that the entry into the 2007 consent orders was an admission, but that is the effect of the pleading. If the plaintiffs can establish that the complaints and allegations of the defendants were without substance they do not need to rely on the entry by the defendants into the 2007 consent orders and paragraph 55 is quite unnecessary, as Mr Grieve's submissions that I have set out above seem to recognise. If the paragraph does add anything it can only be that the entry into the 2007 consent orders is a form of admission. 9 No argument was advanced that the obligation imposed on the plaintiffs, by the express terms of the 2009 consent orders, was any less onerous than those imposed on the defendants. 10 The fact that the plaintiffs' counsel has erroneously asserted that the consequence of a particular pleading being pursued would be that counsel and solicitor could not act in the matter (if indeed that was an erroneous assertion) and the consequences which flowed from that are not expunged merely because subsequently a different view has been taken. 11 In my view the plaintiffs are precluded from relying on paragraph 55 by virtue of the agreement contained in the 2009 consent orders first because what is pleaded is to the effect that the entry into the 2007 consent orders is an admission, and second because as a matter of construction I think it was intended by the parties that all claims by either side based on the 2007 consent orders were to be excluded from the proceedings. For these reasons leave to amend should be refused. 12 Mr Pesman maintained an alternate argument to the effect that the failure of the plaintiffs to articulate the current form of pleading has caused a prejudice to the defendants. The prejudice he asserted is that had the plaintiffs articulated the current form of pleading in June this year it would have lead to the defendants being granted leave to file their proposed cross claim. That is one way of viewing the matter but another is that if the present articulation had been presented in the 3FASOC then the 2009 consent orders would, in all likelihood, have been framed to exclude any reliance by the plaintiffs on it. I think the defendants were, in April this year, entitled to assume the only claims which the plaintiffs wanted to advance in respect of the 2007 consent orders was in the form detailed in paragraphs 74A - 74D of the 3FASOC. 13 The Civil Procedure Act 2005, by ss 56 - 61 has laid emphasis upon the importance of the Court, in deciding whether to make orders in relation to the amendment of a document (inter alia), acting in accordance with the dictates of justice which requires consideration of the provisions of ss 56 and 57 of the Act, and see Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27 at [97] - [103], Dennis v Australian Broadcasting Corporation [2008] NSWCA 37 and Zisis v Knighton [2008] NSWCA 42. 14 The interests of justice do not require the plaintiffs be permitted to now plead a case that, even if not expressly caught by the agreement in the 2009 consent orders, is so closely allied to a case that they have specifically abandoned in return for consideration provided by the defendants. This view is reinforced by the reliance on the 2009 consent orders by the plaintiffs to block the cross claim advanced by the defendants and the fact that the Statement of Claim was already, in April this year, in its fourth iteration. 15 Accordingly it follows that leave should be granted only for the filing of the 4FASOC without the underlined words in paragraph 55 (see [1]) and it follows that the second and third defendants have been successful in resisting the filing of the 4FASOC in its present form and that the plaintiffs should pay their costs of the motion.

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