//
© 2026 Zoe. All rights reserved.
Zoe is a legal information platform. Always consult the Federal Register of Legislation for authoritative text.
[2014] NSWSC 569
Supreme Court of NSW
2014-05-08
Original judgment source is linked above.
Judgment 1This is a motion to strike out a statement of claim or, alternatively, for the plaintiff to provide security for costs. $50,000 is suggested. The proceedings are unusual, and before dealing with the actual motion, I need to give a considerable amount of background detail. 2In 2010 the first plaintiff, Burrell Solicitors Pty Ltd (BSL), was conducting the legal practice of Burrell Solicitors at Kogarah. Mr JL Burrell, the second plaintiff, was the controller and, seemingly, the sole shareholder of BSL. The statement of claim eventually pleads in paragraph 5: On about 2 February 2010 the first four defendants retained BSL to commence and conduct Land and Environment Court class 1 proceedings, appealing against the refusal by Lismore City Council (LCC) of development application 2008/233 relating to a proposed extension of an existing quarry. 3Paragraph 7 pleads: On or about 18 March 2010 the first four defendants retained BSL to commence and conduct an appeal in the Land and Environment Court against the deemed refusal by LCC of an application made under s 96 of the Environmental Planning and Assessment Act 1979 to modify the existing consent under development application 2005/999. 4I will refer to the litigation referred to in paragraph 5 as case A and that in paragraph 7 as case B. 5The first, second and fifth defendants are all companies controlled by the third defendant, Mr Jeff F Champion (JFC), or by his wife Diana (DC). 6Mr Burrell says that he spoke to JFC about Mr Champion's companies' problems on 2 February 2010. Cost disclosure statements were given by BSL in February, March and June 2010. In connection with case A, the costs were estimated at $12,650 or less and, in case B, $7,700 or less. However, in fact case A ran for I think 22 days and case B, for three or four days, and the costs were considerably more. 7Mr Burrell says that when he gave his estimates of costs, it was on the basis that JFC had represented, inter alia, that case A was a "walk in the park". It was put that LCC had refused consent for political reasons despite the recommendations of its officers and there were only insignificant environmental issues, and that the LCC was itself in financial difficulties and would not put up much of a fight. 8In fact there were a number of objectors, problems with roads, problems with nuisance aspects from the operation of the quarry, problems with aquifers leaking dams and, significantly, objections by the Aboriginal community which involved anthropological evidence, a matter which itself took a large number of days. Case B was also complex. Both cases were litigated in full: both cases failed. 9BSL submitted bills of costs. The defendants objected. A cost assessor certified that the proper costs were $349,302.42 and, counsel's fees of $185,400.86. JFC says that these costs were in addition to the $350,000 his companies had already paid. BSL registered the certificates and obtained judgments for these amounts on 22 August 2013. 10The first to fifth defendants then sued the present plaintiffs in proceedings in this Court 2011/365912. Those proceedings were in the Equity Division because they had been commenced by the plaintiffs in respect of a matter that is no longer relevant, and indeed the claims have been dismissed by consent because they have been overtaken by subsequent events. However, the cross-claim is still current. Although the cross-claim only puts forward purely common law claims, it remains in the Equity Division. I will call these proceedings "the 2011 proceedings". 11The cross-claim of the first to fifth defendants was for $1,246,676.13 for damages under three heads: (i) wasted legal costs, which the defendants had paid or were ordered to pay to the plaintiffs; (ii) wasted money paid to experts in the Land and Environment Court litigation; and (iii) costs paid to the LCC in that litigation. The causes of action were breach of contract (virtually contractual negligence) and under the Trade Practices Act and related statutes for false and misleading representations in trade and commerce. The basic allegations were that the estimates of costs were fanciful and gave no guidance at all to the clients as to the complexity of the cases and the likely duration of the cases. 12A notice of motion was filed in the 2011 proceedings to stay the costs judgments. On 25 November 2013 Lindsay J, in an extempore judgment as duty judge, stayed those judgments provided that $72,000 was paid into court. He gave liberty to apply. 13Mr Burrell says that as a direct result of his being involved in cases A and B, he took no other work and because his capacity was fully occupied by the defendants' litigation. He says he did that in the light of repeated promises by the defendants, made by Mr Champion, he says, on behalf of them all, that they had the ability to pay and that they would pay. He says that on these representations, which he now says are false and misleading, he commenced a development project at Kogarah, and for this purpose he obtained a mortgage from Tanilba Beach Pty Ltd. The mortgagors were actually Mr Burrell and a company controlled by him, JR & JB Pty Ltd, now in liquidation. Mr Burrell says because of the false and misleading representations and non-payment of his costs, he defaulted on his mortgage, he lost his home and is now still being pursued for what was owing on the mortgage. 14Actually, the first to fifth defendants have acquired the mortgage or the judgment debt obtained by the former mortgagee and on 13 December 2013 issued a bankruptcy notice against Mr Burrell. Mr Burrell moved to set it aside and that is due to be heard in the Federal Circuit Court of Australia next Monday, 12 May. Although it is odd, no application has actually been made to terminate the stay that was filed before the bankruptcy notice was issued and which of course is one of the reasons why Mr Burrell cannot pay any debt to the mortgagees. 15In the statement of claim in the present case the plaintiffs plead a number of causes of action, namely, (a) false and misleading conduct under the Trade Practices Act on behalf of the five defendants; (b) unconscionable conduct under the Trade Practices Act; (c) breach of contract; (d) equitable estoppel resulting in equitable compensation; (e) declaration that there is a conventional estoppel and its consequences; (f) claim for injunction against the issuing of the bankruptcy notice and the continuance of the 2011 proceedings. 16The key paragraphs of the statement of claim are 29 to 34, which contain details of repeated representations by JFC on behalf of the defendants to pay the fees, and 42 to 43. 43 contains 32 allegations of alleged failures of the defendants to tell the plaintiffs the truth about the Land and Environment Court cases when they retained the plaintiffs to proceed for them. The 32 allegations cannot be dealt with separately; they have to be taken as a complete package. The most significant of the matters referred to in paragraph 43 are (and I will use the letter which designates each of them): (a) there was no survey plan fixing the position and extent of the two new proposed extraction areas and these have never been pegged or marked on the ground; (e) no stormwater management analysis had been undertaken for one of the two proposed new extraction areas; (j) the development proposed that the intersections at each end of Ferry Road be widened without any detailed survey or engineering plans and without any requisite application having been made under the roads legislation for work on a public road; (k) road levy s 94 contribution rates were a significant issue in the refusal by Council of the development application; (m) the development impacted on land alleged to be sacred to local Aboriginal persons and was strongly opposed by Mr John Roberts, a leading local Bundjalung elder and field officer for the local Aboriginal Land Council; (n) local Aboriginal opposition to the development and the support of Ms Inge Riebe, an anthropologist expert in Bundjalung affairs, and also the support of the Environmental Defenders Office in Lismore; (o) there had been no anthropological investigation of Aboriginal heritage issues; (p) no noise modelling had been undertaken for one of the two proposed new extraction areas; (s) the development application did not contain any specific or detailed proposal for noise attenuation to achieve guideline levels; (aa) the quarry plans were too vague and imprecise. 17Although things may have been unclear at the time of the initial conversation on 2 February 2010 and probably for some time thereafter, it is fairly clear to me that by sometime in 2010 both parties were aware of the problems. The more that Mr Burrell looked into the case, the more he must have become aware that there were far more complications, and one would have expected that he would have notified the defendants of the vastly increased costs over his estimate. On the other hand, the material in Mr Burrell's affidavit of March 2014 filed in these proceedings shows that the defendants were obviously aware that the costs were more than what was estimated because they paid Mr Burrell $10,000 per month and they were constantly getting claims for further fees. So that despite what their initial position was, they were all in the loop, it could be said, by June to August 2010. However, at that stage it is fairly clear that both sides were locked into the arrangement. 18On a strike-out application, I do not determine facts but accept the material before me unless it is quite clear that there has been an error or that the facts are otherwise, from the documentation, than what a party is putting forward. There are some parts of Mr Burrell's affidavit of 6 March which are relevant and which do not appear to be contradicted at this stage. I will set out, at least in summary, paras 10, 11 and 272: 10. Then came the initial discussion between Jeff Champion and myself on 2 February 2010 that led to me being instructed by him to act on behalf of himself and his wife and their companies... 11. At no time during or after that initial discussion on 2 February 2010 or at any time during the course of acting for Mr and Mrs Champion and their companies up until September 2011 do I recall advising Mr Champion (or anyone else on their part) that I conducted my legal practice through an incorporated legal practice called Burrell Solicitors P/L or that "Burrell Solicitors" was a business name owned by Burrell Solicitors P/L. 272. In about September 2010, Mr and Mrs Champion stayed with me at my home at Kurnell while on a visit to Sydney relating to their legal matters. At that time I told Jeff Champion words to this effect: 'I borrowed money from Bruce Webster for a development in 2003. A massive amount of interest has accrued which I can't repay. If the house is sold as is, he will only recover the principal and a small amount of interest. I believe I can get a DA approved to subdivide the house from the rest of the property. This would allow most of the land, about 2,400m2, to be sold as a development site with development consent. I would like to sell it or develop it in a syndicate and keep the house on a small lot of about 800m2. I put this idea to Bruce and asked him to release his mortgage over the new big development...but he said no. His response doesn't make sense to me commercially, can you talk to him for me about it, see if something can be sorted out.' 19Although JFC said he could not help, the material that I have quoted is significant to show some evidence that the defendants knew what the plaintiffs' financial position was and how it would be affected by them not paying the full amount of his fees. Unfortunately, there is no actual statement in the pleading to that effect. 20Having given that background, I now turn to the motion. I heard the motion this morning. Ms V McWilliam appeared for the defendants and Mr L Livingston appeared for the plaintiffs. There were two prongs to the motion: (a)That the whole proceedings should be struck out; (b)As a backup, that security for costs should be ordered. However, other issues were discussed this morning: (c)The significance of the bankruptcy notice; (d)Defects in the statement of claim; (e)Whether the 2011 proceedings and the present proceedings should be consolidated. 21I will briefly refer to each of those matters in due course and then deal under heading F with the result of the motion.
A. Should proceedings be struck out? 22The applicable law on a strike-out motion is clear. Ms McWilliam actually said in her submissions in paras 15 and 17 that an application for summary dismissal must clear a high bar and that the statement of claim should only be dismissed if it is "beyond saving by legitimate amendment". That is quite right. The attack which she made on the claim was twofold. 23First, as regard to the fifth defendant, she puts that there is no case made out against the fifth defendant in the pleading because it never became involved in any contractual relations with the plaintiffs until at least June 2010, yet the representations relied on were made from February 2010. Mr Livingston says that the fact that the fifth defendant only became involved in contractual relations with the plaintiff from June is quite immaterial. He says the fifth defendant, as well as the first and second defendants, are companies controlled by JFC and DC. They all appear to be involved with the projects the subject of the Land and Environment Court litigation. The statement of claim alleges that JFC made the representations and, at least impliedly, that he made those representations on behalf of all five defendants and all five knew of them. If this is wrong in fact, that can be denied in a defence. But that does not mean that the allegation should be struck out. I do not consider that there is sufficient material to show that there is not an arguable claim as against the fifth defendant. 24As to the defendants generally, Ms McWilliam's main point was that the proceedings are an abuse of process. She says this is just an attempt by a solicitor to get paid twice. The corporate solicitor already has a judgment and is now seeking to be paid again under this present claim. There are at least two answers to this submission. (i) The present claim is not for fees but for damages for loss caused by the representations, including the loss of reputation and the inability to obtain other paying work while taking the present retainer on the promise that payment would be made. (ii) Ms McWilliam's submissions that there is a res judicata or issue estoppel because of the judgment following the cost assessor's determination cannot be correct. As to res judicata, there is no common cause of action. And as to issue estoppel, there is no identifiable fact which the present proceedings need and which has already been decided. 25It was then at least faintly put that the proceedings were merely an attempt to stave off bankruptcy, but there is no sufficient material to establish this. In reality, these proceedings are a counter to the cross-claim in the 2011 proceedings. 26Now, it is quite clear that the claim in the present case is novel and perhaps there is some validity in Ms McWilliam's submissions that this claim, if established, opens up new ways of the legal profession to be able to sue clients for wasting their time and not giving them proper instructions. But, as has been said for centuries, novelty is no reason to strike proceedings out. One must analyse the proceedings and see whether there is an arguable case or a fairly arguable case, and the mere fact that one cannot find the exact case in the precedent book is quite immaterial. 27It seems to me that although I have some doubts as to whether some of the damages claimed might be too remote, I cannot say that the case is unarguable. 28Ms McWilliam says that the main claim is for $1 million for the losses brought about by the development project at Kogarah and that these are clearly too remote. As I said, I have some doubts as to whether some of those claims are too remote. But it would seem to me that this only goes to the quantum of damages and that if the claim is made out, some damage would flow to the plaintiffs, even if the $1 million was not allowed. 29Ms McWilliam referred me to the decision of McDougall J in Ballard v Multiplex Ltd [2008] NSWSC 1019 to say that this sort of case, where one can see that some part or some significant part of the damages are too remote, should be struck out. I am not at all sure that that is right. It may be. But if it is, then it is merely a matter of striking out part of the claim, not the whole claim, and that is not part of the motion that is before me. Ms McWilliam's riposte to that was that she should have leave to amend the motion. I think that that is a very sensible application. However, Mr Livingston opposed it, saying that he came here today to meet a two-pronged motion and that matters of striking out part of a statement of claim with leave to replead was not within the ambit. 30I need to bear in mind ss 56 and following of the Civil Procedure Act, which impose a duty on the Court to try and get to the real issues between the parties with the least complications. It seems to me that the way forward is to grant the leave to amend; however, to do it on condition that no later than 13 May 2014 the applicants indicate to the plaintiffs and to the Court the complete list of perceived defects in the pleading and also file an amended notice of motion. The plaintiffs may then have 14 days to consider whether they wish to amend the statement of claim, and the amended notice of motion can be listed before me on, say, 29 May at 9.30 or such other time as is convenient to counsel.
B. Should security for costs be ordered? 31The backup claim is for security for costs. There is evidence that $50,000 could be justified. It seems to me, even on the details that I have been given, a little bit high. Ms McWilliam put that there are five defendants and that is $10,000 each. But, with great respect, that is the wrong way of looking at it. When one is acting for more than one client, one does not charge each client the full amount of costs. 32But the real question is whether any security for costs should be ordered at all at this stage. Now, it is clear on the authorities that where a person cannot show that he or she can fund the litigation and the prime reason for that is the defendants' conduct and that the action would be stultified if security for costs were ordered, the Court does not order security for costs. In the present case, the prime reason why the plaintiffs have liquidity problems to fund the litigation is because the defendants have gained a stay of the judgments that BSL has already obtained for over $500,000. It seems to me that it is an a fortiori case of the principle that I have just set out. Accordingly, at least at this stage, I do not grant any security for costs. 33Accordingly, the present notice of motion should be dismissed with costs. However, as it is to be amended, the proper order must be that the claims made in the notice of motion are dismissed and that the defendants pay the costs to date, with further costs reserved. 34I will now briefly deal with what I called the subsidiary issues earlier.
C. Bankruptcy 35I have mentioned that the application to set aside the bankruptcy notice is before the Federal Circuit Court next Monday. If that bankruptcy notice is not set aside and if a petition is presented and in due course Mr Burrell made bankrupt, then probably ss 58 to 60 of the Bankruptcy Act 1966 (Cth) will mean that both these proceedings and the 2011 proceedings will be stayed, and it will be a matter for the trustee in bankruptcy to work out on proofs of debt et cetera as to what happens. If, on the other hand, the bankruptcy notice is stayed at least until these proceedings are finished, then these proceedings must be tried either here or possibly in the Common Law Division. I would say the Common Law Division were it not for the fact that there are claims for equitable compensation and injunctions in the present proceedings.
D. Defects in the Statement of Claim 36As to the defects in the statement of claim, despite Mr Livingston's assertion that he thinks it is okay at the moment, I am not as convinced. However, these matters can be dealt with in the way that I have indicated, that is, that we have a list of perceived defects, we have an answer to that or, alternatively, an amendment to cure them; so that the issues are very much defined before the Court considers any amendments that cannot be dealt with by consent.
E. Consolidation of 2011 proceedings and the present proceedings 37This would seem sensible, or at least that the two be heard together. The better course may be for the two to be heard together because the technical problem with consolidation is that the present proceedings would become a statement of claim and the cross-claim would remain a cross-claim. But perhaps it is best for the parties to talk that out, if at all possible, and it could be mentioned before me on 29 May or whatever date is convenient to counsel.
Orders 38The orders, accordingly, are: (1)The claims made in the notice of motion filed by the defendants on 21 May 2014 are dismissed. (2)The defendants are to pay the costs of the notice of motion to date. Further costs are reserved. (3)Leave to discontinue against the sixth defendant. Note that it was never served. (4)Leave to amend the notice of motion provided (a) it is filed and served no later than 13 May 2014 and (b) that a complete list of perceived defects in the statement of claim is served on the defendant, with a copy to my associate, no later than 13 May 2014. (5)Stand the matter over for mention before me at 9.30 on 29 May 2014.
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 12 May 2014
Burrell Solicitors Pty Limited
Reavill Farm Pty Limited