Dawn Wade & Anor v Reynolds & Company Pty Limited & Ors

Judgment 1In these proceedings, the First, Second and Third Defendants (together "Reynolds") seek orders that these proceedings be stayed under UCPR r 12.4 until the costs of proceedings 4712/2008 ("Earlier Proceedings") are paid. The Plaintiffs have also filed several motions seeking various orders to which I refer below. 2By way of background, the Plaintiffs claim equitable compensation against Reynolds, which carried on the business of a securities broker and was a participant in Australian Securities Exchange Limited, apparently referrable to the loss of shares in Carpenter Pacific Resources Limited ("CPR") owned by Chasetown Enterprises Ltd ("Chasetown"), a company incorporated in the Republic of Ireland. The Plaintiffs contend that, in September 2009, Chasetown assigned its interests to another company, Agit Enterprises Pty Limited which in turn assigned its chose in action against Reynolds with respect to the loss claimed by Chasetown to the Plaintiffs. Although the pleadings are not entirely clear, it appears that the alleged loss results from either the transfer of 1,800,000 shares in CPR to a third party or third parties, or the sale of those shares and the payment of the proceeds to a third party or third parties, which is alleged not to have been authorised by Chasetown. The Plaintiffs also advance allegations of breach of fiduciary duty and allegations of knowing involvement in a breach of trust as against the Second and Third Defendants. The Plaintiffs also advance allegations in respect of the sale of shares held in respect of Ronald Firns (Senior) and Sangro Holdings Limited, although the pleadings are also not entirely clear in this regard. 3It appears that the Earlier Proceedings were filed on 12 November 2009 and discontinued by consent on 8 July 2010 on terms that the Plaintiffs pay the Defendants' costs as agreed or as assessed. These proceedings were commenced in November 2010. There is a very substantial overlap between the pleading in the Earlier Proceedings and the pleading in these proceedings, with large parts of the two pleadings being virtually identical. The Plaintiffs' motions 4It is convenient to deal first with the motions filed by the Plaintiffs. 5First, the Plaintiffs seek an order that these proceedings be placed in the Expedition List. The Expedition List is created to serve the needs of the community in respect of matters with particular urgency, and the question whether any one matter should be placed in the Expedition List needs to be determined having regard to the urgency of that matter but also the needs of other litigants with other urgent matters. I am not satisfied that this matter is a proper matter for the Expedition List. The claim relates to events which are alleged to have taken place between 1996 and 1998 but proceedings were not commenced until 2010, some 12 years later. Although the Plaintiffs explain this delay by reason of, inter alia, the extent of inquiries which they needed to make prior to the commencement of the proceedings, it remains that the extent of the delay in commencing the proceedings is, on any view, substantial. There is little attraction in a proposition that, because the commencement of proceedings was long delayed, those proceedings should be expedited in a way which prioritises them over proceedings which have been brought promptly. 6The history of the proceedings, involving the discontinuance of the Earlier Proceedings, the commencement of these proceedings and several prolonged interlocutory disputes does not provide any particular comfort that the proceedings could be prepared for hearing with the expedition that is required by the Expedition List. Even in the absence of expedition, if the proceedings are genuinely ready for a hearing (as the Plaintiffs contend), the Court may well be able to allocate them a hearing date in the first half of 2012, which does not involve substantial further delay. To the extent there is further delay in the allocation of a hearing date, the Plaintiffs would be entitled to interest on any money amount awarded to them if they are ultimately successful in the proceedings. In my view, it would be unfair to other litigants and not in the public interest to list this matter in the Expedition List, where the listing of this matter in that list may mean that a hearing which would otherwise be available to another expedited matter with greater urgency may be delayed. 7Second, the Plaintiffs seek an order that the evidence filed by the Plaintiffs in the Earlier Proceedings be evidence in these proceedings. There is a difficulty with the form of that order, which does not reflect the need to consider the admissibility of such evidence in these proceedings. I also consider that it would be preferable that the Plaintiffs review that evidence to confirm its continued currency and relevance, particularly where it appears that further events may have occurred since that evidence was filed in the Earlier Proceedings. To the extent that evidence remains relevant, there should be no particular difficulty for the Plaintiffs filing evidence in substantially the same form. Accordingly, I will not grant that order. 8Third, by a Further Amended Notice of Motion originally filed in the Earlier Proceedings and treated, by consent, as filed in these proceedings, the Plaintiffs seek declarations that Reynolds are not entitled to claim the costs of legal work carried out relating to an alleged "agreement to enter into undertakings" between 16 July 2009 and 25 September 2009 and orders including that Reynolds pay the Plaintiffs' legal costs in relation to the breached agreement as assessed or agreed. I will assume, without deciding, that it is possible to seek declaratory relief by motion, since this matter was not argued before me and it will be in the interests of the just, quick and cheap resolution of the matters in dispute to decide this application on its merits. 9The alleged agreement is said to arise between an exchange of letters between Reynolds' solicitors, Colin Biggers & Paisley ("CBP") and the Plaintiffs' former solicitor, Mr Emanuel Oliveri ("Oliveri") dated 13 and 25 August 2009. It appears that Oliveri raised an objection to Colin Biggers & Paisley acting for Reynolds in the Earlier Proceedings by reason that they were acting in another matter. By letter dated 13 August 2009, Colin Biggers & Paisley wrote to Oliveri contending that there was no real risk of breach of their duties arising in respect of the two matters and offering to provide an undertaking to the effect proposed by Einstein J in Worth Recycling Pty Ltd v Waste Recycling & Processing Pty Ltd [2009] NSWSC 356. The Plaintiff contends that: On the 25th August 2009, the plaintiffs' solicitor Emanuel Oliveri answered the defendants['] letter of intent accepting the defendants intentions and requested that the defendants submit the undertakings (the agreement). 10The declarations sought in the Further Amended Notice of Motion depend on the proposition that an offer made by Reynolds in CBP's letter dated 13 August 2009 was accepted by the Defendants in Oliveri's letter dated 25 August 2009 giving rise to an agreement which was subsequently breached when no undertakings were provided. That proposition must fail, not least because, rather than accepting any offer made in CBP's letter dated 13 August, Oliveri responded by letter dated 25 August 2009 indicating a continuing concern with CBP acting; requesting additional terms and acknowledgements in any undertaking; indicating that "[s]uch undertaking may to some extent alleviate any concerns our clients have about your continuing to act in the Reynolds proceedings"; referring to case law indicating reservations as to a lawyer's undertakings; and inviting a draft undertaking "so that we can in consultation with our clients consider the terms of such undertaking." This was not an acceptance of the terms proposed by CBP in their letter dated 13 August 2009; it was not a counter-offer, because it was not capable of acceptance by Reynolds; it was, in my view, at best an invitation to treat on different terms which did not progress further to give rise to any binding agreement between the parties. For this reason alone, the Plaintiffs' claim to the declarations and orders sought in the Further Amended Notice of Motion must fail. 11Second, it is by no means clear that either party had any intention to be bound by any agreement until the terms of the relevant undertakings were agreed and, in my view, even if an agreement had been formed by the exchange of letters, it would be likely to fail for uncertainty. 12Third, Ms Wade gives evidence of a conversation in about September 2009 where a CBP solicitor made clear that CBP had been instructed not to give the requested undertakings. The partner who was and is responsible for the matter at Colin Biggers & Paisley, Mr Creighton, swore an affidavit in the proceedings and was, by leave, cross-examined. Mr Creighton presented as an honest and helpful witness who gave frank and direct answers to the questions he was asked. Mr Creighton gave evidence that, as a result of the manner in which the proceedings were conducted after the earlier exchange of correspondence, Reynolds and CBP formed the view that the undertakings they had originally offered should not be given and communicated that position to Counsel who was then appearing for the Plaintiffs at a directions hearing who indicated that the issue was not pressed by the Plaintiffs. I accept Mr Creighton's evidence. That evidence would likely establish a waiver or estoppel and the declarations and orders sought in the Further Amended Notice of Motion would also likely not be available on that basis. 13Fourth, even if I had not found against the Plaintiffs on this basis, the Plaintiffs have identified no reason why any breach of an agreement in respect of any undertakings should be a bar to the recovery of costs as a matter of law. If (contrary to the finding I have made) such an agreement existed and it was breached, that may be a matter which should be taken into account by a costs assessor in the proper performance of his or her role, but it is not clear why it would deprive Reynolds of an entitlement to its costs as agreed or as assessed in respect of any particular period, particularly where CBP's position as to the undertakings had been made clear from September 2009, nearly 9 months before the Plaintiffs consented to the making of orders that they pay the costs of the Earlier Proceedings as agreed or as assessed. In my view, the matters which the Plaintiffs now assert do not impeach Reynolds' right to costs arising under those orders. 14Accordingly, the Plaintiffs' claim to the declarations and orders sought in the Further Amended Notice of Motion fails. 15For completeness, I should note that the Plaintiffs did not pursue an order which had previously been sought in the Earlier Proceedings that the Earlier Proceedings by reopened under UCPR r 36.15. The Plaintiffs also did not pursue an application for an order that the costs payable by reason of the order made on 8 July 2010 in the Earlier Proceedings be set-off against the amount claimed by the Plaintiffs by way of equitable compensation against Reynolds in these proceedings. I should note, for completeness, that such an order would have faced the difficulty that Reynolds' entitlement for costs is a present entitlement, whereas the Plaintiffs' claim for equitable compensation in these proceedings is a potential recovery which may or may not be realised, and such an order would have exposed Reynolds to the risk that, if the Plaintiffs failed to make good their claim to equitable compensation, Reynolds would not then be paid the costs of the Earlier Proceedings. Reynolds' application for a stay of the proceedings 16As noted above, Reynolds applies for a stay of the proceedings under UCPR r 12.4 until Reynolds' costs of the Earlier Proceedings are paid. UCPR r 12.4 relevantly provides that: "12.4 If: (a) as a consequence of the discontinuance of proceedings, a plaintiff is liable to pay the costs of another party in relation to those proceedings, and (b) before payment of the costs, the plaintiff commences further proceedings against that other party on the same or substantially the same cause of action as that on which the former proceedings were commenced, the court may stay the further proceedings until those costs are paid and may make such consequential orders as it thinks fit. 17The commentary in Ritchie's Uniform Civil Procedure Rules NSW at [12.4.5] notes that: "[a]s a general rule, the court will grant a stay where the circumstances are within this rule ... However, the matter is discretionary and the court may consider the defendant sufficiently protected by a right to set-off the costs of the earlier proceedings ..." 18There did not seem to be any substantial contest before me that the jurisdictional requirements of r 12.4 were satisfied in that the Plaintiffs were liable to pay Reynolds' costs of the Earlier Proceedings by reason of the orders made on 8 July 2010; these proceedings were commenced before payment of those costs, which are still unpaid; the proceedings are against Reynolds in each case and substantially the same cause of action is pleaded in each case. There also appears to be both identity of issues and the alleged breaches are alleged to have arisen from the same facts and Counsel who appeared for the Plaintiffs did not contend the contrary. Indeed, as I noted above, the pleading in the present proceedings is in large parts virtually identical to the pleading in the Earlier Proceedings. 19The real matter in contest before me was whether the Court's discretion should be exercised in favour of a stay or against such a stay. That question has to be approached by reference to the factors identified in the case law. In Rogers v The Queen (1994) 181 CLR 251 at 286-288, McHugh J pointed to the Court's inherent power to prevent its procedures being abused, including where the "use of the court's procedures is unjustifiably oppressive to one of the parties". In Idoport Pty Ltd v National Australia Bank Ltd [2006] NSWCA 202 at [104]ff, Beazley JA (with whom Mason P and Ipp JA agreed) referred to Bowen v Hickey (1958) 78 WN (NSW) 820 in respect of the Court's inherent jurisdiction to stay "a second action in the same cause and against the same defendant until the costs of the first action are paid". In that case, her Honour pointed to the identity of issues and the unsatisfied previous costs order against Idoport and observed that "it would be both unjustifiably oppressive to the respondents for the appellant to be permitted to prosecute the present proceedings as well as bringing the administration of justice into disrepute" (at [110]). Although the Idoport proceedings involved particular issues arising from the scale of those proceedings, the demands which they would have placed on the parties to them and the Court time which had been consumed in them and the present proceedings are much narrower in scope, I do not consider that the demands that these proceedings will have placed on the parties to them and the extent of Court resources which have been consumed by them are insignificant. 20In Phillip Morris Ltd v Attorney-General (Vic) [2006] VSCA 21 at [146], Ormiston JA summarised the relevant principles and noted that the principle that second proceedings may not be commenced where costs are unpaid may be relaxed in appropriate circumstances. 21The Plaintiffs submit that a stay should not be granted for several reasons. The first is based on the manner in which Reynolds have approached the provision of information in respect of costs and the assessment process. Ms Wade's evidence is that the Plaintiffs were willing to discontinue the Earlier Proceedings on the basis of an estimate of the Defendants' costs provided by CBP of $72,000. The Plaintiffs take issue with the fact that Reynolds subsequently claimed a larger amount although that claim is no longer pressed. The chronology of events is as follows: By letter dated 6 July 2010 to Oliveri, CBP had advised that "our costs to date are approximately $62,000 and counsel's fees are approximately $10,000". By letter dated 30 September 2010 to Oliveri, CBP advised a claim for costs in the amount of $106,661.60 including GST and provided copies of supporting invoices. By letter dated 6 December 2010, CBP provided a copy of that letter to Ms Wade who had requested it be sent directly to her. The amount claimed by Reynolds appears to have included a lesser claim for professional fees of CBP (excluding GST) than estimated in July 2010, a marginally higher claim for disbursements (excluding GST), a claim for costs of Reynolds' former solicitors in the proceedings of nearly $25,000 excluding GST (which had apparently not been included in the earlier estimate provided by CBP in July 2010) and a claim for GST. Ms Wade requested an itemised bill on 21 December 2010. By letter dated 20 January 2011, CBP provided further information to Ms Wade including the time spent by individual solicitors working on the matter, the hourly rates charged in respect of those individual solicitors, and a broad narrative of the nature of the work done. (I should note that it was perhaps not unreasonable for CPB to be reluctant to provide a detailed description of each item of work done which would almost inevitably contain information subject to claims for legal professional privilege, where the Plaintiffs had by then commenced these proceedings in substantially the same terms as the Earlier Proceedings). The Plaintiffs did not then write to CBP requesting greater detail than that provided in CBP's letter dated 20 January 2011 until 16 June 2011, and during that period filed other motions in the proceedings directed to other issues. On 20 April 2011 Reynolds offered to accept $72,000 in full payment of its claim for costs, and Ms Wade again requested an itemised bill. (So far as the Plaintiffs had a justifiable complaint that the amount claimed in December 2010 (albeit including the costs of Reynolds' former solicitors) were substantially greater than the amount estimated in July 2010 (excluding the costs of those former solicitors), that difficulty appears to have been mitigated by this offer). On 29 June 2011, Ms Wade offered Reynolds a charge or caveat on "real property valued at well in excess of $72,000 pending the taxing of your legal bill" and contended that Reynolds should withdraw the motion to stay these proceedings. Ms Wade did not then provide further information as to the location or ownership of the property or any evidence of its value to Reynolds. Reynolds provided the Plaintiffs with an itemised bill of costs totalling $78,941.63 on 2 July 2011, which is marginally greater than the amount estimated on 6 July 2010 and substantially less than the amount claimed in December 2010. A costs assessment subsequently occurred and it appears that assessment has now been completed and is available for release to the parties, subject to payment of the costs of the assessment. 22The Plaintiffs contend that CBP were required to provide a full itemised bill within 21 days after 21 December 2010 by s 332A(2) of the Legal Profession Act 2004 (NSW) and failed to do so. That submission assumed that s 332A of the Legal Profession Act applied to the letter dated 6 December 2010 on the basis that it was a "lump sum bill" rendered to the Plaintiffs but no substantive submissions were made by the Plaintiffs before me to support that assumption. It is by no means self-evident that a letter advising of the total costs incurred, as part of the process contemplated by the orders of 8 July 2010 by which costs would be agreed or assessed, constitutes a "lump sum bill". The question whether a claim for party-party costs was within the scope of s 332A of the Legal Profession Act was left open in Jeray v Blue Mountains City Council [2009] NSWCA 415 and the result for which the Plaintiffs contend has the potential to defeat any costs savings which would otherwise be available by seeking to reaching agreement prior to the assessment process. In these circumstances, I am not satisfied that the Plaintiffs have made good their assumption that s 332A of the Legal Profession Act is applicable in these circumstances, and I do not consider that I could or should find that there has been a contravention of that section. The Plaintiffs contend that CBP's delay in providing an itemised bill should be taken into account in determining the stay application and I do so. However, I am not satisfied that the Plaintiffs have suffered any substantive prejudice by reason of that delay. 23The Plaintiffs also contend that it was unreasonable for Reynolds to press the stay application by reason of the offer of security which Ms Wade made on 29 June 2011 and that this is another reason why a stay should be refused. The Plaintiffs' submissions before me indicate that the property as to which security was offered was situated in the Northern Territory and was owned by one of Ms Wade's sons who is not party to the proceedings; there is no evidence before me that the value of the property was in excess of $72,000; and it appears the property was subsequently sold. I am not satisfied that it was unreasonable for Reynolds to insist that the costs of the Earlier Proceedings be paid (as the orders previously made by the Court required) rather than accepting security over land as to which they had been provided no detailed information, where acceptance of such security would have given rise to the potential for delay in negotiating its terms and possible difficulty in agreeing the circumstances in which it could be enforced. The position would have been a fortiori if Reynolds had also been advised that the offer of security was over a family member's land, in circumstances that there was no obvious economic benefit to Ms Wade's son in granting such security. 24The Plaintiffs also rely on Sywak v Visnic [No 2] [2010] NSWSC 374 at [11] as authority that there cannot be failure on their part to honour existing costs orders until they are quantified or assessed. That case concerned an application for security for costs against a natural person and not an application for a stay under UCPR r 12.4, and Slattery J there noted that costs had not been quantified, let alone assessed, which had the consequence that the plaintiff had no opportunity to pay them. Here, the claim for costs has been quantified for a long period although the Plaintiffs have, as they are entitled to do, required that they be assessed. There has not been any "failure" on the part of the Plaintiffs to pay the relevant costs, since they are not obliged to do so until that assessment is completed. Nonetheless, those costs have not been paid and that is a matter which is relevant to the exercise of my discretion. 25There is no evidence before me to indicate that the Plaintiffs would be unable to pay the costs ordered against them in the Earlier Proceedings, once they had been assessed. I should not make any assumption to that effect, particularly where the Plaintiffs had consented to an order which contemplated that those costs would be paid. Accordingly, there is no basis to assume that an order for a stay would prevent the continuance of these proceedings, since it will only have effect until those costs are paid. 26I have considered whether the preferable course was to defer making any orders for a stay until the result of the assessment was known. I have concluded that that course is not desirable, for two reasons. First, it appears that the release of the result of the assessment is imminent, so that deferral would require the parties to incur additional costs in relisting a matter which has been fully argued before me, and does not appear to me to be consistent with the just, quick and cheap resolution of the matters in dispute. Second, it is clear from Ms Wade's evidence and the Plaintiffs' submissions before me that Ms Wade is already giving consideration to seeking a review of the costs assessment, so that a deferral runs the risk of prolonging uncertainty or exposing the Defendants to the costs of conduct of the proceedings while that review process continues. 27In these circumstances, I consider that the interest of justice will be best served by the grant of a stay pending payment of the costs of the Earlier Proceedings. In my view, that course is consistent with the public interest in the administration of justice, since it gives proper weight to the orders which have been previously made by the Court for the payment of costs; it is consistent with Reynolds' interests, so far as it protects them against incurring costs in defending these proceedings, where the Earlier Proceedings were discontinued on the basis that their costs would be paid by the Plaintiffs and this has not yet occurred; and, as noted above, there is no evidence before me that such an order will stultify the proceedings by reason of any inability of the Plaintiffs to meet the costs which they were ordered to pay. 28Reynolds has been substantially successful in respect of its motion and the Plaintiffs' motions and the Plaintiffs should jointly and severally pay the costs of and incidental to the motions heard before me on 28 October 2011. 29I therefore order that: