DJZ Constructions Pty Ltd v Paul Pritchard trading as Pritchard Law Group

Supreme Court of NSW|2009-03-10|Before: Schmidt AJ, Mr AJ

CITATION : DJZ Constructions Pty Ltd v Paul Pritchard trading as Pritchard Law Group [2009] NSWSC 151

HEARING DATE(S) : 10 March 2009, 11 March 2009, 12 March 2009, 13 March 2009 JUDGMENT OF : Schmidt AJ

CATCHWORDS : PROFESSIONAL NEGLIGENCE - complaint against plaintiff's former solicitor - amendments to pleadings - amendment of defence following amendment of statement of claim - whether defendant requires Court's leave to amend defence - section 64 of the Civil Procedures Act 2005 - dictates of justice require that leave to amend defence and statement of claim be granted

LEGISLATION CITED : Civil Procedure Act 2005 Supreme Court Rules

Dennis v Australian Broadcasting Corporation [2008] NSWCA CASES CITED : Demasi and Anor v Linfox Transport (Aust) Pty (unreported, NSWSC, 14 June 1995) James & Ors v Surf Road Nominees Pty Ltd & Ors [2004] NSWCA 475 Surf Road Nominees Pty Ltd & Ors v Tass James & Ors [2004] NSWSC 61

PARTIES : Plaintiff - DJZ Constructions Pty Ltd Defendant - Paul Pritchard t/as Pritchard Law Group

COUNSEL : Plaintiff - Mr MP Cleary, counsel Defendant - Mr AJ McInerney, counsel

SOLICITORS : Plaintiff - Giles Payne & Co Defendant - Yeldham Price O'Brien Lusk

6 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION PROFESSIONAL NEGLIGENCE LIST

020209/05 DJZ CONSTRUCTIONS PTY LTD v PAUL PRITCHARD TRADING AS PRITCHARD LAW GROUP

EX-TEMPORE JUDGMENT 1 HER HONOUR: These proceedings were commenced in June 2005. An amended statement of claim was filed in February 2006 and a defence in May 2006. There were attempts at mediation and on 3 March 2009 a motion was filed by the plaintiff, seeking leave to file a further amended statement of claim. On the first day of the hearing, 10 March, after discussions between the parties, there was an adjournment, it appearing that even further amendments were necessary to the pleadings. On resumption of the hearing on Wednesday 11 March, those further amendments were not pursued and, there being no objection, leave to proceed on the further amended summons was given and the hearing proceeded, with a direction that the defendant file an amended defence, before Mr Palmieri's evidence was completed. Mr Palmieri is a director of the plaintiff and its controlling mind. 2 Mr Palmieri's cross examination continued throughout Wednesday. On commencement on Thursday, senior counsel for the plaintiff Mr McGovern announced that an amended defence had just been served, which had caught the plaintiff by surprise and which it believed went considerably beyond answering the amendments made the previous day in the further amended statement of claim. The new defence raised the possibility that both he and his instructing solicitors, Giles Payne & Co could no longer act and that the further amended statement of claim would have to be even further amended. 3 By consent, I granted an adjournment so that what was raised by the amended defence could be considered and granted leave for instructions to be sought from Mr Palmieri, while he was part way through his cross examination. 4 On resumption at 2pm, Mr McGovern appeared as a courtesy to the Court to announce that he vehemently denied certain allegations made, but that as a matter of professional responsibility, he had returned his brief. Thereupon Mr McGovern was granted leave to withdraw. Junior counsel, Mr Cleary, continued his appearance for the plaintiff. 5 Mr McInerny of counsel, appearing for the defendant, then filed in court the defence to the further amended statement of claim. There was a contest between the parties as to whether leave to rely on this defence was required and whether, in any event, the defendant ought to be permitted to rely upon it, having regard to the provisions of the Civil Procedure Act 2005. 6 It is convenient to observe, at this point, that the plaintiff's claims in these proceedings relate to alleged professional negligence on the part of the defendant, Mr Pritchard, the plaintiff's former solicitor. Two broad complaints have been advanced. The first in relation to advice given by Mr Pritchard in 1999 about the terms of a July 1999 Deed, under which the plaintiff invested in a real estate business, known as Chris Burke Real Estate, by acquiring units in a unit trust known as the Surf Road Unit Trust and shares in the trustee company, of which Mr Palmieri became a director. 7 The second complaint related to advice given by Mr Pritchard as to the basis upon which the plaintiff sold its interest in the business in 2003 and settled certain disputes with the purchasers and related entities. The second claim raised what had transpired in proceedings brought by the plaintiff in the Supreme Court. These claims were decided in favour of the plaintiff by Justice Einstein in Surf Road Nominees Pty Ltd & Ors v Tass James & Ors [2004] NSWSC 61. There was, however, a successful appeal brought from that decision, decided by the Court of Appeal in James & Ors v Surf Road Nominees Pty Ltd & Ors [2004] NSWCA 475. The plaintiff's complaint was that the result of Mr Pritchard's negligence was that it lost the opportunity to sue a Mr and Mrs James (both defendants in the Supreme Court proceedings), on certain guarantees which they had given under the July 1999 Deed. 8 What the amendments made in the further amended statement of claim did, was to introduce particulars of loss and damage of a sum of $419,850, being the costs which the plaintiff paid Mr and Mrs James in respect of the Court of Appeal and Supreme Court proceedings and, in addition, the costs which the plaintiff had itself incurred in those proceedings. While the plaintiff argued that this part of the amended statement of claim was merely a particularisation of a claim earlier made, in my view a fair reading of the pleadings and the particulars of the claim sought and provided, does not lead to that conclusion. 9 By way of defence to this claim, as well as some of the other claims of loss and damage advanced by the plaintiff, including lost preferential distributions from the real estate business of $120,888.60 and repayment of bank loans of $203,116.62, the defendant claimed in the amended defence, that no loss had flowed to the plaintiff in 2003 from the sale agreement. This was because there had been an earlier breach of an implied covenant to maintain certain securities, by reason of a deed entered by the plaintiff in February 2001. 10 This February 2001 deed had been dealt with by the Court of Appeal in its judgement. It was a proposal to amend the plaintiff's statement of claim, which sought to make a complaint about this deed, which had led to the adjournment of the hearing on Tuesday. That amendment had finally not been pursued by the plaintiff, but the deed still came to feature in the pleadings, when the defendant filed its amended defence. 11 The amended defence also raised a similar claim in relation to another deed, entered by the plaintiff in August 2003. 12 In addition, the new defence alleged that Gyles Payne & Co and Mr McGovern had advised the plaintiff at the same time as the defendant was acting for it, in relation to these deeds and the proceedings in the Supreme Court and the Court of Appeal. It was claimed that their advice had been to similar effect to the advice which the defendant had given the plaintiff and that they too, had not advised the plaintiff that the proceedings in the Supreme Court and Court of Appeal would fail, for the reasons upon which the Court of Appeal came to uphold the appeal. It was also claimed that the plaintiff had acted on the advice given by Gyles Payne & Co and not that of the defendant.

The parties' arguments 13 The defendant argued that it did not require the Court's leave to rely on its amended defence and that if it did, that leave would be granted. It was not until the beginning of February 2009, that the plaintiff had advised that it proposed to amend its claim, to seek damages in relation to the costs it had been ordered to pay Mr and Mrs James. It was not until the evening before the hearing, that advice was given that damages in relation to the costs which the plaintiff had incurred in the proceedings in the Supreme Court and Court of Appeal would also be claimed. It was not until the morning that the hearing commenced, that documents had been served by the plaintiff, upon which those new damages claims were to be advanced. 14 The defendant was entitled to defend those new damages claims, by seeking to establish that at the same time as being advised by the plaintiff in relation to those proceedings, it was also being advised by Gyles Payne & Co and Mr McGovern. There was also evidence available to show that they were giving similar advice to that being given by the defendant. This evidence was relevant to various issues in the proceedings, including causation. Even if leave to amend the defence were not granted, the conflict now identified by Gyles Payne & Co and Mr McGovern would still exist. That conflict was not of the defendant's making and existed even if leave to amend the defence were refused, In any event, whether or not leave were granted, Mr Palmieri would be cross examined as to his understanding of what the defendant had done and had been advised and by whom, in relation to the proceedings in the Court of Appeal and the Supreme Court. 15 For the plaintiff it was argued that leave to amend was required, given the terms of s 64 of the Civil Procedure Act 2005. The requirements of s 58 and 56 of the Act, also meant that in the circumstances here before the Court, the leave sought would be refused. 16 The amendment to the defence went beyond answering the additions to the amended statement of claim. They introduced new matters of which the defendant had long been aware. Both delay and prejudice arose to be considered. The result of granting the leave was not only that there would need to be an adjournment to permit instructions to be sought, new solicitors and counsel would have to be instructed, new evidence would need to be put on and further discovery sought. Very significant costs which had already been incurred would have to be thrown away and even further costs incurred, in a case where security for costs had already had to be provided by the plaintiff. 17 Given how the defence raised the February 2001 and August 2003 deeds, the plaintiff would, in fairness, have to be granted leave to revisit the question of amending his claim, to raise the allegations of negligence which it had been decided on Wednesday not to pursue, in order to ensure that the trial could proceed. Amendment of the defence would inevitably mean the proceedings would have to adjourn. Justice would require that the plaintiff would not be denied the opportunity to amend the statement of claim, to rely on these deeds. 18 It was also not conceded that the conflict identified would arise, even if the leave to amend the defence was not granted. That would depend on what was asked in cross examination.

Consideration 19 I am satisfied that, regrettable as it is, justice demands that leave to amend the defence must be granted, given the very unusual circumstances in which the application comes forward. 20 The amendment of a statement of claim and the defence, in relation to matters about which both parties have long been aware is one thing. The consequence for the plaintiff of the loss of both its senior counsel and instructing solicitors may not have been an anticipated consequence of the recent amendment to the statement of claim. Nevertheless, if there be any basis for the defence which the defendant now seeks to advance in relation to the plaintiff's amended claims, the possibility of such a conflict arising, must have been apparent to the plaintiff for a considerable time. Those amendments, after all, concern what transpired between 2001 and 2003.

21 I am satisfied that in order to ensure that justice is done between the parties in this situation, that leave to amend the defence must be granted, but on the basis that the plaintiff must also be given leave to amend the statement of claim, to rely on the deeds of February 2001 and August 2003 which have been raised in the amended defence. So much was conceded for the defendant. Any other course would permit the curious and unsatisfactory outcome that a claim of negligence could be defended on the basis that there had been earlier negligence, about which no complaint could be made by the plaintiff. 22 It must be observed that this is an entirely unfortunate situation. Not only do these proceedings concern events which occurred between 1999 and 2003, they are events which have been the subject of a rigorous investigation in proceedings before the Supreme Court and the Court of Appeal. That it is only in 2009, at the commencement of a trial, that new claims are advanced about matters which the Court of Appeal expressly dealt with in its judgment in 2004 seems quite remarkable, especially when it is considered that these proceedings ought to have been conducted in accordance with this Court's standard professional negligence list directions, which required both parties to engage in a process whereby they identified what truly was in issue between them before the trial. The directions required that:

Schedules of Loss and Damage The plaintiff should provide a summary of the heads of damage. The defendant should respond to this document, noting agreement or disagreement on the heads of damage or the amount claimed. Where there is disagreement, the defendant should indicate the basis of the disagreement and state what amount, if any, it considers appropriate and why. Note that it is expected that the Part 15 statement will contain details of the plaintiff's claim. This Schedule is a summary only. The plaintiff's summary should be served no less than 2 months before the trial. The defendant's summary should be served no less than 1 month before the trial.

Plaintiff's Chronology The plaintiff should prepare a chronology of material facts. There should be 3 columns: 1) DATE

The third column should be left blank. The plaintiff's chronology should be served no less than 2 months before the trial.

Agreed Chronology The defendant should complete the plaintiff's chronology noting in the 3rd column whether a fact is agreed to or is in dispute. The defendant may also include in the chronology additional material facts, to be indicated by underlining, and should serve the completed document no less than one month before trial. Where the defendant does include additional facts, the plaintiff should indicate in the third column whether such additional facts are agreed or disputed and should then re-serve the document no less than one week before trial.

Defendant's Statement of Facts and Issues in Dispute The defendant should list the matters of fact and issues in dispute from the defendant's perspective. This should be served no less than 1 month before trial.

Plaintiff's List of Questions for the Trial Judge The plaintiff should prepare a list of questions for the trial judge. This should include questions directed to any disputed issues of fact (derived from the defendant's chronology) and any other issues in dispute (derived from the defendant's statement of facts and issues in dispute).

The list of questions should include disputed issues of breach of duty, causation and damages.

The list of questions should be served no less than 2 weeks before trial.

The defendant may serve a response no less than one week before trial, including additional questions not expressed in the plaintiff's list and comment on the plaintiff's list of questions.

Glossary of Technical Terms The defendant should prepare a glossary of technical terms to be served no less than 2 weeks before the hearing.

Amendments to Pleadings Any amendments to the pleadings should be made not less than 2 weeks before the hearing. It is anticipated that with all witness statements and expert reports served any amendments would be to regularise the pleadings to accord with the evidence rather than to raise new allegations and defences.

Tender Bundles The parties should agree on a list of documents to be included in their respective tender bundles. The objective is to not duplicate documents. All tender bundles should be paginated. Agreed Tender Bundle The Agreed Tender Bundle should include

defendant's statement of facts and issues in dispute

The plaintiff should prepare one copy of the agreed tender bundle for the trial judge and one copy for each of the parties.

Each of the parties should prepare their own bundle of documents which they intend to rely on at the trial. Each party should send the other an index for their individual tender bundle. The index should be served no less than 3 working days before the trial.

Each party should prepare a copy of their tender bundle for the trial judge.

The Individual Tender Bundle should include (but is not limited to) that party's

23 Had those directions been complied with, it is likely that this late skirmish about pleadings and its consequences, could have been avoided. The practice direction is intended to ensure that there is not litigation by ambush or suprise and that costs are minimised. Unless relieved from the practice direction or aspects of what it requires, all parties to whom the practice direction applies, should adhere scrupulously to its terms. 24 In Demasi and Anor v Linfox Transport (Aust) Pty (unreported, NSWSC, 14 June 1995) McLelland CJ in Eq observed: In substance, those principles involve the proposition that ordinarily, where injustice would otherwise occur, an amendment of a defence following amendment of the statement of claim should be confined to amendments which relate only to those allegations or contentions which are introduced or altered by the amendments to the statement of claim or, in short, which are consequential upon the amendments to the statement of claim. I think the correct analysis of the New South Wales Rule is that the defendant is entitled to file an amended defence in such terms as it may be advised, subject to the power of the Court under Pt20 R3 to disallow the amendment by the application of the principles to which I have referred. As I have said, were it not for the amendment to the statement of claim, I would not permit any of the proposed amendments to stand or be allowed, so that the question really comes down to whether any of the proposed amendments relate to matters arising from the amendments to the statement of claim.

25 Amendment is now governed by s 64 of the Civil Procedure Act and Part 19 of the Supreme Court Rules. Section 64(1)(b) permits the Court to grant leave to amend any document in the proceedings. Section 64(2) provides:

(2) Subject to section 58, all necessary amendments are to be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings, correcting any defect or error in the proceedings and avoiding multiplicity of proceedings. 26 Section 58 requires the Court to follow the dictates of justice. It provides: 58 Court to follow dictates of justice (1) In deciding: (a) whether to make any order or direction for the management of proceedings, including:

(i) any order for the amendment of a document, and (ii) any order granting an adjournment or stay of proceedings, and (iii) any other order of a procedural nature, and (iv) any direction under Division 2, and

(b) the terms in which any such order or direction is to be made, the court must seek to act in accordance with the dictates of justice. (2) For the purpose of determining what are the dictates of justice in a particular case, the court: (a) must have regard to the provisions of sections 56 and 57, and (b) may have regard to the following matters to the extent to which it considers them relevant:

(i) the degree of difficulty or complexity to which the issues in the proceedings give rise, (ii) the degree of expedition with which the respective parties have approached the proceedings, including the degree to which they have been timely in their interlocutory activities, (iii) the degree to which any lack of expedition in approaching the proceedings has arisen from circumstances beyond the control of the respective parties, (iv) the degree to which the respective parties have fulfilled their duties under section 56 (3), (v) the use that any party has made, or could have made, of any opportunity that has been available to the party in the course of the proceedings, whether under rules of court, the practice of the court or any direction of a procedural nature given in the proceedings, (vi) the degree of injustice that would be suffered by the respective parties as a consequence of any order or direction, (vii) such other matters as the court considers relevant in the circumstances of the case. 27 This application must also be considered in the context of the requirement in s 56 of the Act, that the Court must facilitate the just, quick and cheap resolution of the real issues in the proceedings, in order to ensure that the dictates of justice are adhered to and that the requirements of s 57 must also be observed, consistently with binding authority such as that of the Court of Appeal in Dennis v Australian Broadcasting Corporation [2008] NSWCA. 28 The plaintiff particularly relied on the prejudice which would flow to it from the necessity of engaging new solicitors and counsel and the costs incurred thereby, at this late stage of the proceedings. These are not insignificant considerations I accept, but what also cannot be overlooked is the part which the plaintiff and its legal advisers played in that situation arising. Justice must be done to both parties. Refusing the leave sought by the defendant, can not ensure that the difficulties about which the plaintiff complains will be overcome or avoided. Given the course which Mr Palmieri's cross examination will, it appears, inevitably take in the circumstances which have been revealed, that difficulty and the conflict which it has raised, will not go away. While it is complained that the defendant ought to have raised these matters earlier, because the evidence on which he wishes to rely has long been known to him and his legal advisers, it must be remembered that this information and what transpired between 2001 and 2003, which has only recently been raised in the further amended statement of claim as giving rise to damages, has also been long known to the plaintiff. It appears that the matters on which the defendant relies were raised only in response to the late amendments to the statement of claim. 29 Granting both parties the leave I have indicated, now that it is known that an important part of the defendant's resistance of the plaintiff's claims is that the plaintiff's current solicitors and counsel gave it the same advice as it received from him, in relation to the matters about which the plaintiff claims the defendant was negligent, is the only way to ensure that all of the real questions raised in these proceedings are before the Court at trial. 30 The delay and additional cost which will result before the case can be brought to a conclusion is very regrettable, but cannot be decisive in this peculiar situation, if justice is to be done between these parties.

Orders 31 For these reasons, orders in terms agreed by the parties were made, granting leave to amend the statement of claim and defence; fixing a timetable for further preparation of the matter for hearing and adjourning the hearing to 10am on 4 May 2009.

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.

At a glance

Court

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Before

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Judgment (39 paragraphs)

Parties

Cases Cited (2)

Cited By (1)