I am dealing deal with a notice of motion for a stay of proceedings. The proceedings sought to be stayed are, it is common ground between the parties, proceedings which are a precursor to enforcement of a judgment rather than a step in enforcement itself. The legal position in that regard has been summarised in the helpful written submission of Mr Anderson of Counsel who appears for the respondent. Mr Lovas of Counsel for the plaintiff accepts that those submissions in this regard are correct: see McLeary v Swift [2013] NSWSC 1674 at [10].
I have dealt with some interlocutory matters already this morning where I set out the background to the application: see [2017] NSWSC 1426 and [2017] NSWSC 1427. I will briefly restate it.
The judgment was obtained by the filing in the registry of a certificate of outcome of a costs assessment. The applicant is a former client of the respondent solicitors. He instructed them to assume the conduct of proceedings arising out of a building contract. The proceedings brought by the builder in respect of the balance due under the contract in the District Court were removed to this Court and consolidated with proceedings brought by the applicant for damages for breach of the building contract. Although upon his affidavit, which is not at this time challenged, the applicant says that he was advised pre-trial to reject certain offers of settlement made by the builder, that advice changed during the running of the case before the Honourable Hammerschlag J in the Equity Division. He has now commenced proceedings in the Common Law Division seeking damages for economic loss against the solicitors relying upon both breach of retainer and professional negligence.
The assessment of the costs assessor, upheld on review, is in the amount of $356,067. After taking into account amounts previously paid, the outstanding balance at the time the judgment was obtained was $233,909.64. By application of a further amount of $155,000 held in the solicitor's trust account on account of costs, the amount outstanding is said to be $78,909.64.
The solicitor has issued an examination notice under r 38.1 UCPR and the applicant seeks to stay the proceedings in that regard and also any step in enforcement of the judgment otherwise taken.
His proceedings for professional negligence, as I will call them, were not commenced until 3 July 2017, two and a half months after the date of the decision of the costs review panel. As Mr Lovas of Counsel points out, he could hardly have raised that matter in the assessment process, but there is no explanation, it might be said, as to why proceedings were not taken earlier. The settlement of the building case occurred on 19 October 2015.
The applicant relies upon the general power under s 67 Civil Procedure Act 2005 (NSW) and also upon what might be referred to as a specific power under s 135. He also relies upon the decision of Sheppards and Co v Wilkinson and Jarvis (1889) 6 TLR 13, CA where Lord Esher MR thought it appropriate, applying a definite rule of practice that was current at that time, to stay steps towards enforcement if a genuine counter-claim exceeded the amount of a judgment obtained summarily or in default of a defence.
The following points do not seem to be in issue: first, that the plaintiff's claim for professional negligence is fairly arguable; and secondly, that if successful, the damages are likely to exceed the amount of the total judgment for solicitor and client costs. Mr Lovas also points out that the principles discussed in Sheppards' case have continuing vitality notwithstanding the enactment of the Civil Procedure Act 2005 inasmuch as they seem to be reflected in r 13.2. Although that rule is not in terms applicable to this case, he invokes it as analogous and submits that it demonstrates that the approach taken in Sheppards' case still has application notwithstanding the changed approach to matters of practice and procedure identified by the High Court of Australia in its analysis in Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 258 ALR 14.
Mr Anderson relies upon Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 at 693-695. Learned Counsel acknowledges that that matter really applies to the question of whether a stay of a first instance judgment ought to be granted during the pendency of an appeal. But he too argues that the principles there discussed have application by analogy in the present situation. In particular, he emphasises that a stay is an exception to the important general rule that a successful litigant is entitled to the fruits of the judgment. Although special or exceptional circumstances are not necessary, it is a requirement of a favourable exercise of the discretion that the stay is shown to be in the interests of justice.
Normally, when one is considering whether to grant a stay on appeal, the focus is upon, first, whether the appeal can be seen to have at first blush some merit and, secondly, whether the refusal of a stay will render the statutory right of appeal nugatory if the appeal is successful. Mr Anderson submits that applying that analogy, even if it can be said that the applicant's professional negligence proceedings are fairly arguable, it cannot be said that the solicitors would not be in a position to make immediate restitution of any sum paid under the judgment. The solicitors are a very large, well established solicitors' corporation and, according to the evidence before me, have a turnover each year figured in the tens of millions of dollars.
In the circumstances, he submits that given the importance of the principle that the successful litigant is entitled to the fruits of the litigation and the consideration that the respondent is manifestly good for the money, if I may put it that way, no case has been made out for a stay.
Neither Counsel was able to provide me with authority directly applicable to the present circumstances, but I accept the cases they have referred to provide relevant guidance as to the applicable principle.
It is necessary to say a little more about Mr Lovas's argument. Learned Counsel was not content to rely upon the simplicity of the approach enshrined in Sheppards' case and the comparison with r 13.2. With respect, he went further and argued that the steps taken by the respondent toward enforcement really should be understood by me as an attempt to stultify the professional negligence case. That arose from a combination of factors to which he referred.
The first of those factors is that the applicant says in his affidavit, by way of general assertion only, that he is impecunious. Given that circumstance, Counsel argued that it ought to be understood, then, that even if the solicitors had no present intention to proceed to bankruptcy, once his impecuniosity was established to their satisfaction by way of the examination process they have initiated they would inevitably do so to obtain the benefit of s 60 Bankruptcy Act 1966 (Cth) staying the professional negligence proceedings.
I interpolate, there was some discussion about whether those proceedings were covered by the exception stated in s 60(4) of the Act relating to "personal injury or wrong". This matter was first raised during argument and I am not satisfied that proceedings seeking damages for economic loss for professional negligence in handling a building case do fall within the exception of "personal injury or wrong" in the context of the Bankruptcy Act 1966.
Counsel advanced the argument by reference to two other factors. He said that these steps, the step of issuing the examination notice, were not taken until after the professional negligence proceedings were commenced and that since they have been commenced the respondent has obstructed their progress. The matter of obstruction relied upon was alleged to be the respondent's non co-operative attitude, as it was put at its mildest, towards identifying the members of the firm at all material times relevant to the case prior to the incorporation of the practice as a solicitors' corporation.
I will not go through all of the ways in which this argument was advanced. Mr Lovas took me through the relevant correspondence but I am not satisfied that he has demonstrated, with respect, that there is any obstructionist approach to the identification of the appropriate defendants. Indeed, it seems to me that the respondent has made what I would regard as bona fide attempts to assist the plaintiff in arriving at the correct constitution of the proceedings. In particular I regard the letter of 1 August 2017 as a genuine attempt to do so.
I accept that the applicant's solicitors have pointed out issues with what was said in that letter, but it seems to me that those issues have been taken on board by the respondent, and indeed as at 5 October 2017 the respondent wrote to the applicant's solicitors saying "we are still to obtain instructions on identity of the defendants". I infer from that that the respondent is attempting to cooperate and indeed is genuinely seeking to deal with the issues raised by the applicant and are genuinely seeking instructions on the proper identity of the defendants.
The professional negligence matter has gone over to 3 November, and I am not persuaded that some cynical, or worse, approach is being taken by the respondent to the proper constitution of the proceedings. Some criticism was made of Mr Harkin's approach that in a perhaps off-handed way he said his understanding from what his colleague Mr Moran told him was that the plaintiff was "still working out who to sue." In one sense, that is correct. They are still working out who the proper defendants are, but on the other hand I am, as I have said, of the view that the respondent is still genuinely seeking to assist in that regard. I decline to draw the inference that the respondent is seeking to deliberately stultify the professional negligence proceedings and I will not rely upon that as a factor in my determination.
Mr Anderson also argued by reference to Advanced Building Systems Pty Ltd v Ramset Fasteners (Aust) Pty Ltd (1997) 71 ALJR 814 at 816 and Challenge Charter Pty Ltd & Anor v Curtain Bros (Qld) Pty Ltd & Ors [2004] VCSA 66 at [17] that even if I were satisfied that the threat of stultification through bankruptcy was a real one, the central question was what weight to give to it in the circumstances of the particular case. It should not be treated as decisive in every case, and in any event, it was not irrelevant for me to consider that the trustee in bankruptcy may still pursue the professional negligence proceedings if he or she objectively considered that those proceedings were worthwhile. I take those matters into account.
In my judgment, there is force in the argument that the type of principles referred to in Sheppards' case are more applicable to the present circumstances than the principles discussed in the context of an appeal in Alexander v Cambridge Credit. It does seem to me that is there is no dispute, as I have said already, that the professional negligence proceedings are fairly arguable, and it does seem to me, perhaps self-evidently, that if those proceedings are made good the damages recoverable are likely to exceed the amount due to the solicitors under the terms of the judgment they have obtained, particularly given that the amount presently outstanding is just short of $80,000. The damages in the professional negligence proceeding if recovered will include the costs payable to the successful builder and, of course, what I take to be in the context of a building case the not inconsiderable costs incurred for expert opinion, which Mr Lovas tells me was paid for direct rather than through the solicitors.
In coming to this conclusion, I have also taken into account that the general rule related to finality of litigation favouring the successful litigant is perhaps not as obvious in a case where the judgment of this Court was obtained not after contested litigation but rather by way of registration of a certificate of the outcome of administrative proceedings not involving an exercise of judicial power.
In the circumstances, I make the following order, that the execution notice and any step in enforcement of the judgment obtained on 1 December 2016 is stayed until either further order of this Court or the determination of the professional negligence proceedings in matter number 2017/200864, whichever is the earlier.
Mr Lovas applies for costs on the basis that they should follow the event. Mr Anderson does not disagree, however he says that there should be no costs of two parts of the application. The first is that there was an unsuccessful application this morning before the commencement of the application proper to cross-examine Mr Harkin on his affidavit, and second, there was the preparation of a fairly extensive tender bundle running to sixty-six pages, which was tendered perhaps in defiance of a direction by the Registrar that no further affidavit material was to be filed.
I think it difficult to separate out the costs of the application to cross-examine Mr Harkin. The party is entitled to require him for cross-examination, but subject to the court's discretion. It seems to me difficult to divide that matter or separate it out from the costs of the motion generally.
I am prepared to indicate, however, that the applicant should have no costs of the preparation of the tender bundle which was admitted as Exhibit B. Not only was that material tendered, as it were, in contravention of the Registrar's order, but the argument which it founded was unsuccessful. Otherwise, the applicant should have his costs on the usual basis.
The respondent is to pay the applicant's costs of the motion except the costs of preparing Exhibit B.
[2]
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Decision last updated: 23 October 2017
Parties
Applicant/Plaintiff:
Colin Biggers & Paisley Pty Limited t/as Colin Biggers and Paisley