Drake v Wight & Strickland Lawyers

Supreme Court of NSW|2015-06-10

Solicitors: L Drake & J Drake (First and Second Plaintiffs in person) Mullane & Lindsay (Defendant) File Number(s): 2014/370202

Background

For the purposes of this application only, I have taken the Drakes' case at its highest and I will take what they have pleaded as being correct.
By amended statement of claim filed 1 April 2015 ("ASC"), the Drakes' claim against Wight & Strickland arises from a retainer entered into between the parties in March 2008 for the provision of legal services. Those legal services involved Wight & Strickland advising the Drakes in respect of a claim being made against them by Ms Dorothy Badman ("Ms Badman") and acting on their behalf in proceedings issued by Ms Badman in the Equity division of this Court (see Badman v Drake [2008] NSWSC 1366). The Drakes allege that Wight & Strickland advised them to defend the proceedings and advised them that they had good prospects of success.
Prior to those proceedings being commenced, there was a transaction on 4 February 2008 in which a mortgage over a property at Rouse Hill was discharged and the property was transferred to the Drakes. Paragraphs [4] and [5] of the ASC refer to this underlying transaction, that gives rise to these current proceedings. It is as follows: (i) In January and February 2008, Wight & Strickland acted on behalf of Armond Shoostovian ("Mr Shoostovian") in a transaction for the discharge of a mortgage over the property at Rouse Hill. Mr Shoostovian was a director of AS Group Nominees Pty Ltd, the owner and mortgagee of the Rouse Hill property. (However, in the Badman judgment there is no reference to the involvement of Wight & Strickland in the underlying transaction. Rather, Wood Marshall Williams acted for AS Group Nominees Pty Limited in the underlying transaction.) (ii) Following the discharge of the mortgage, the property was transferred to the Drakes. (iii) The sum of $378,623.19, required to discharge the mortgage and pay fees associated with the transaction, was supplied by Ms Badman. (iv) The discharge of the mortgage and settlement of the transfer occurred on 4 February 2008 at the offices of Wood Marshall Williams. (v) Neither the Drakes or Ms Badman were independently legally represented in respect of the transaction.

Badman v Drake

In Badman, Ms Badman commenced proceedings against the Drakes. The hearing before Young CJ in Eq was the hearing of a preliminary question. At some point, Wight & Strickland, as well as Peter Zacharatos, a partner of Wight & Strickland, were joined to the proceedings by Ms Badman as the third and fourth defendants. However, Wight & Strickland continued to represent the Drakes. Wight & Strickland were represented by counsel but appeared to take little part in the hearing. Apparently, Wight & Strickland and Mr Zacharatos were joined by Ms Badman as defendants as she alleged that they assisted the Drakes in their "dishonest and fraudulent design, with knowledge of their breach of trust" by acting as their solicitors (see Badman at [97]).
On 19 December 2008, Young CJ in Eq held that the transaction should be set aside due to equitable fraud and undue influence. His Honour determined that the appropriate order was that the Drakes pay equitable compensation to Ms Badman in the sum of $378,623.19 plus interest.

The pleading in the current amended statement of claim

The Drakes allege in the ASC that: (i) Wight & Strickland gave incorrect advice as to which party had the burden of establishing that Ms Badman did not enter into the transaction voluntarily [7]. (ii) Wight & Strickland sought to defend the action brought by Ms Badman on "incorrect legal grounds" [8]. (iii) Wight & Strickland were negligent in failing to advise the Drakes that they did not have a reasonable defence to the proceedings brought by Ms Badman [10]. (iv) Costs were wasted or thrown away by Wight & Strickland, being the legal fees of $110,635.36, by running a case that should not have been run [12]. (v) Had Wight & Strickland acted with proper care, skill and diligence, the matter would not have been defended, it would have settled or consent judgment been entered, and the legal costs incurred would have been vastly reduced [13]. (vi) They have suffered direct financial loss as a result of the negligent actions of Wight & Strickland [14].

Summary dismissal

UCPR 13.4(1) provides that the Court may dismiss proceedings generally, or in relation to any claim for relief, in three circumstances. These are, if the proceedings are frivolous or vexatious, if no reasonable cause of action is disclosed or if the proceedings are an abuse of the process of the court.
UCPR 14.28(1) provides that the Court may at any stage of the proceedings order that the whole or any part of a pleading be struck out if the pleading firstly, discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading, secondly, has a tendency to cause prejudice, embarrassment or delay in the proceedings, or thirdly, is otherwise an abuse of the process of the court.
UCPR 14.28(2) provides that the court may receive evidence on the hearing of an application for an order under subrule (1).
In O'Brien v Bank of Western Australia Ltd [2013] NSWCA 71, the Court of Appeal applied the High Court decision of Spencer v Commonwealth [2010] HCA 28; (2010) 241 CLR 118. In Spencer, the High Court was concerned with s 31A(2) of the Federal Court Act 1976 (Cth), but the following principles are of general application (O'Brien at [3]): 1. On a summary judgment application, the real issue is whether there is an underlying cause of action or defence, not simply whether one is pleaded (at [23]). 2. The critical question can be expressed as whether there is more than a "fanciful" prospect of success (at [25]) per French CJ and Gummow J) or whether the outcome is so certain that it would be an abuse of the process of the court to allow the action to go forward (at [54] in the judgment of the plurality). Demonstration of the outcome of the litigation is required, not an assessment of the prospect of its success. 3. Powers to summarily terminate proceedings must be exercised with exceptional caution (French CJ at [55] and Gummow J at [24]).
See also General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125, in which Barwick CJ comments that a lack of a cause of action must be "clearly demonstrated" in terms that the case is untenable and cannot possibly succeed (at 128-129).
Recent decisions of this Court and the Court of Appeal demonstrate that the impact of s 56 of the Civil Procedure Act 2005 (NSW) is such as to expand the circumstances where an order for dismissal under UCPR 13.4 may be made.
In Simmons v Protective Commissioner of NSW [2012] NSWSC 455 at [28], Hammerschlag J expressed support for the proposition that the combination of the words in UCPR 13.4(1)(b) and s 56 of the Civil Procedure Act lead to a result that: "…it is not incumbent on an applicant under this particular rule to establish certainty of outcome, but rather that the applicable test is whether a defendant has demonstrated that a plaintiffs case has no reasonable prospects of success."
Simmons was subsequently cited by Ward J in McDonald v Grech; Bank of WA v McDonald [2012] NSWSC 717 at [32]-[33].
In Bott v Carter [2012] NSWCA 89, also a dismissal application involving a defence of advocate's immunity, Basten JA observed that while s 56 of the Civil Procedure Act may not reduce the conditions for the engagement of the power to dismiss proceedings under UCPR 13.4, it limits the circumstances in which the court, satisfied that the power is available, might be inclined to refuse relief on discretionary grounds (at [14]).
Wight & Strickland contends that it is entitled to the orders sought, on the basis that the Drakes' claim is doomed to fail for three reasons. They are: (a) As a result of the Drakes being declared bankrupt, their property, including the right to bring proceedings in respect of that property, vested in the trustee in bankruptcy. This right did not divest from the trustee and revest in the Drakes on their discharge from bankruptcy. (b) The defence of advocate's immunity. (c) The claims are statute barred.

(a) Bankruptcy

On 30 January 2009, the Drakes were declared bankrupt. On 31 January 2012, they were each discharged from bankruptcy. The Drakes have been discharged from bankruptcy for over three years.
Section 58 of the Bankruptcy Act 1966 (Cth) provides: "Vesting of property upon bankruptcy - general rule (1) Subject to this Act, where a debtor becomes a bankrupt: (a) the property of the bankrupt, not being after-acquired property, vests forthwith in the Official Trustee or, if, at the time when the debtor becomes a bankrupt, a registered trustee becomes the trustee of the estate of the bankrupt by virtue of section 156A, in that registered trustee; and (b) after-acquired property of the bankrupt vests, as soon as it is acquired by, or devolves on, the bankrupt, in the Official Trustee or, if a registered trustee is the trustee of the estate of the bankrupt, in that registered trustee."
"Property" is defined in s 5 of the Bankruptcy Act as: "real or personal property of every description, whether situate in Australia or elsewhere, and includes any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident to any such real or personal property".
Section 58 of the Bankruptcy Act provides that when a debtor becomes bankrupt, the property of the bankrupt vests forthwith in the trustee. That property includes any rights and powers in relation to that property that would have been exercisable by the bankrupt if he or she had not become a bankrupt.
A bare right to sue in respect of alleged property and economic losses is property of the bankrupt which will vest in the trustee pursuant to s 58: see Campbell J in Kovarfi v BMT & Associates Pty Ltd (No 2) [2014] NSWSC 100 at [27]. The exceptions to s 58, as set out in s 116(2)(g) of the Bankruptcy Act, are not applicable to these current proceedings.
The issue as to whether a cause of action such as this divests from the trustee and revests in the (former) bankrupt was expressly considered by Campbell J in Kovarfi (No 2). Kovarfi (No 2) also involved an application to dismiss a statement of claim. In those proceedings, the plaintiffs became bankrupt in 2005 and were discharged from bankruptcy in 2008. They subsequently commenced proceedings in respect of losses allegedly suffered in 2004.
As stated by Campbell J in Kovarfi (No 2), the issue above was "settled beyond argument" by the decision of the Court of Appeal in Daemar v Industrial Commission of NSW (No 2) (1990) 22 NSWLR 178. In Kovarfi (No 2) at [35] his Honour continued: "[35] The next question then is whether, upon discharge from bankruptcy, the cause of action divested from the trustee and re-vested in the first and second plaintiffs. The answer to this question is settled beyond argument in New South Wales by the decision of the Court of Appeal in Daemar v Industrial Commission of New South Wales (No 2) (1990) 22 NSWLR 178. The judgment of Kirby P, as his Honour then was, Clarke JA and Meagher JA agreeing, depends upon the language of s 152 of the Act in particular. That provision is in the following terms: A discharged bankrupt must, even though discharged, give such assistance as the trustee reasonably requires in the realization and distribution of such of his or her property as is vested in the trustee. Having noted some differences of opinion in early English and Australian cases, Kirby P referred with approval to the decision of Needham J in Pegler v Dale (1975) 1 NSWLR 265 and said: [S 152], as Needham J pointed out, assumes that property vested in a trustee at the time of sequestration remains vested in that trustee, even after the discharge of the bankrupt. There is nothing in the section which specifically revests in the discharged bankrupt the property which was, by the sequestration order, vested in the trustee. That property includes shows as inaction, not only as Needham J construction is attentive to the language of section 152, it is appropriate to the scheme of the Bankruptcy Act. Under that act, it is the function of the trustee to gather in for the benefit of the creditors the property of the bankrupt at the time of sequestration. Save as exceptions provided by the act, such property is to be then available for distribution to the creditors. The property includes shows as an action. It thus includes the 'actions' which a bankrupt may have commenced at the time of the sequestration order. The act exempts certain personal actions. But for reasons which given at the original stay proceedings, the claimant's action against the Industrial Commission and Mr Sheath is not in that class."
Following the judgment in Daemar, Campbell J in Kovarfi (No 2) held that the cause of action did not divest upon discharge (at [40]): "[40] ...the proceedings brought by the first and second plaintiffs, whether depending upon a cause of action in negligence, under the Trade Practices Act, or one which may have been pleadable in fraud, are not competently commenced for the simple reason that if such an action arose on 27th October 2004, it vested in the trustee, by dint of s 58 of the Act, and remained vested in the trustee even after discharge by force of s 152 of the Act, according to the reasoning in Daemar."
On that basis, Campbell J ordered that the statement of claim in those proceedings be summarily dismissed.

The position of the Trustee

The Drakes sought permission from their trustee in bankruptcy to "revest the Drakes' right of action" so that these current proceedings may continue.
Christopher Drake and his father depose to a number of conversations and there are emails by Christopher Drake addressed to Mr Mark Marlow ("Mr Marlow") of Jones & Partners, the trustee in bankruptcy (Aff, Christopher Drake 29/7/15). There is also evidence of correspondence between Mr Marlow and the solicitor for Wight & Strickland (Aff, Morgan Moroney 28/7/15). As any assignment given by the trustee has to be in writing, I shall refer to what the trustee has said in writing.
On 27 July 2015 at 11.42 am, Mr Marlow emailed Christopher Drake and stated: "I refer to your recent enquiries regarding your parent's action (Lawrence & Judith Drake) against both Wight & Strickland & Wood Marshall Williams and your parents affidavit dated 20 July 2015. I note that the trustee does not grant permission as per your affidavit at paragraph 3. It is for the court to determine whether this action can proceed."
On 27 July 2015 at 12.09 pm, Mr Marlow emailed Christopher Drake in the following terms: "I refute that any such permission was ever given I do note we had some discussions in regards to your parents request and any conclusion was left open pending further review."
On 27 July 2015 at 1.24 pm, Mr Marlow emailed Christopher Drake as follows: "I make no further comment other than to say I have taken advice on behalf of the trustee and non-response is not approval."
On 27 July 2015, Ms Moroney, the solicitor acting for Wight & Strickland, also wrote to Mr Marlow stating: "… we would be grateful if you would: (a) confirm that you have given your permission to Mr and Mrs Drake for them to pursue the actions; (b) advise whether or not any further arrangements have been made between you and Mr and Mrs Drake in relation to the actions (including whether or not you have assigned any rights to Mr and Mrs Drake); (c) provide copies of any communications (including any agreements or transactional documents) between you and Mr or Mrs Drake in relation to the proceedings (limited to documents created in 2015). …"
On 27 July 2015 at 11.32 am, Mr Marlow replied to Ms Moroney: "I refer to your letter dated 27 July 2015 and note the following A) The trustee had not granted permission for the bankrupts to pursue the actions B) No rights or other arrangements have been made C) Unsure of what this means noting no written arrangements have been entered into with the plaintiffs."
From this correspondence, it is clear that the trustee has not assigned this cause of action or show in action to the Drakes. Any cause of action remains vested in the trustee.
However, the Drakes submitted that the trustee has denied them the right to appeal or otherwise review the decision, despite their requests, and that in that manner, the trustee divested himself of the specific property of the Drakes that he had been vested with, being a claim against Wight & Strickland. Therefore, the Drakes say that the general proposition that the property vested in the trustee and remained with him does not apply in this case. They submitted that the case ought to be differentiated from the authorities referred to by Wight & Strickland.
In support of this proposition, the Drakes referred to Ersh v The Greek Orthodox Parish and Community of Burwood and District Saint Nectarios Limited [2015] NSWSC 331. Ersh was an appeal from a decision of a Local Court Magistrate. In those proceedings, it was common ground that on 18 October 2005, Ms Ersh was declared bankrupt. She was discharged from bankruptcy on 18 October 2008. She had not disclosed to the trustee the debt said to be owed by her to the Greek Orthodox Parish and Community of Burwood and District Saint Nectarios Limited ("the Greek Orthodox Parish"). On 14 February 2014, the trustee subrogated and assigned the debt to Ms Ersh for the purposes of authorising her absolutely to continue on in taking any and all such recovery action or proceedings with respect to the amount against the Greek Orthodox Church as she deemed fit.
The Drakes submitted that in these current proceedings, consent operates in the same way as a rejected vested interest would, in the sense that the interest is returned to them. I do not agree. In these current proceedings, unlike what occurred in Ersh, the trustee has not assigned the cause of action to them.
The Drakes also drew this Court's attention to Windsurf Holdings Pty Ltd v Leonard; Carlson v Leonard; Wyvill v Leonard [2009] NSWCA 6. That was an appeal from a decision I made in relation to applications to extend limitation periods pursuant to the Limitation of Actions Act 1974 (Qld). In the appeal, counsel for the plaintiffs submitted at [73]: "[73] The notice of contention filed on behalf of Ms Leonard covered a second argument relied on by Mr Butcher. He submitted that if Ms Leonard had failed to file a statement of claim in accordance with the requirements of the UCPR, the failure was to be treated as an "irregularity" under s 63(2)(a) of the Civil Procedure Act. The effect of s 63(2)(b), so Mr Butcher argued, was that any such irregularity did not invalidate the step taken. He contended that the Court should order that Ms Leonard's application to join Windsurf and Mr Wyvill be treated as the commencement of proceedings against them."
This argument was rejected by the Court of Appeal (at [24] and [114]). Hence, s 63 of the Civil Procedure Act does not overcome the lack of assignment of the cause of action by the trustee.
The Drakes also referred to s 56 of the Limitation Act 1969 (NSW) and ss 56 and 58 of the Civil Procedure Act as a means of overcoming s 58 of the Bankruptcy Act. Section 56 of the Limitation Act concerns an action based on mistake rather than a "mistake" made in the commencement of proceedings. Sections 56 and 58 of the Civil Procedure Act also do not assist the Drakes to overcome their bankruptcy problem.
It is my view that the right to sue Wight & Strickland for damages in negligence vested in the trustee in bankruptcy. On discharge from bankruptcy, that right did not divest from the trustee and revest in the Drakes. There has been no assignment by the trustee of the cause of action. The Drakes' current pleading is incompetent.
This is not a matter where I would exercise my discretion to permit the Drakes to replead their claim, because the flaw is a fatal one. It cannot be overcome by a repleading of the ASC. As these current proceedings have not been competently commenced they are dismissed.
I shall briefly address the two other grounds that Wight & Strickland rely upon as the bases for having the proceedings dismissed.

(b) Advocate's immunity

On this topic, the Drakes say that Wight & Strickland provided advice that caused the litigation to continue and that they must have filed documentation stating that there was a reasonable defence. The Drakes submitted that to provide negligent advice which caused the litigation, and then to hide behind advocate's immunity, is a complete misuse of the purpose of the immunity.
The Drakes also submitted that their case is not about how Wight & Strickland conducted their defence, but is that Wight & Strickland gave advice that their case should be defended when it should not have been. They say this advice falls outside the advocate's immunity. The Drakes further submitted that Wight & Strickland encouraged, manipulated and coerced them (to the point of encouraging them to mortgage their property in order to pay for a fundamentally doomed defence) and that all of the cases referred to by Wight & Strickland are different to this case.
In Donnellan v Woodland [2012] NSWCA 433 at [263], Basten JA stated that "principle requires that this Court address the availability of immunity first".
In Donnellan, Beazley JA appears to accept that there may be exceptions to this rule. At [7] her Honour stated: "If the correct position is that the immunity should be determined prior to the determination of the question of negligence, an immunity claim ought properly be able to be dealt with on the pleadings by way of a strike out application pursuant to the Uniform Civil Procedure Rules 2005 (UCPR), r 13.4 or r 14.28. This was the view of this Court in Bott v Carter (2012) NSWCA 89. especially at [11]. Bott v Carter itself involved an application to strike out the statement of claim."
In Bott, Basten JA stated at [11]: "The question to be determined by the Court is purely one of law, namely whether any of the allegations, if proved, would be capable of supporting a relevant cause of action."
Wight & Strickland submitted that consistent with the above Court of Appeal authorities, the application for dismissal or strike out on the basis of advocate's immunity can properly be dealt with on the pleadings.
The common law immunity afforded to advocates was established in Rondel v Worseley [1969] 1 AC 191; [1967] 3 All ER 993 and is said to extend to "work done out of the court which leads to a decision affecting the conduct of the case in court" (see Giannarelli v Wraith [1988] HCA 52; (1988) 165 CLR 543 at 560 per Mason CJ). The protection offered by the immunity is said to exist "only where the particular work is so intimately connected with the conduct of the case in Court that it can fairly be said to be a preliminary decision affecting the way that cause is to be conducted when it comes to hearing": Rees v Sinclair [1974] 1 NZLR 180 at 187 per McCarthy P. Rees v Sinclair was referred to with approval by the High Court in Giannarelli at 560 and by the Court of Appeal per Beazley P (with whom Basten, Barrett, Hoeben JJA and Sackville AJA agreed) in Donnellan at [169].
The High Court revisited the issue in D'Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1; [2005] HCA 12, holding that the tests outlined above do not differ from each other in a substantial way and that both reflect the current common law position. The joint judgment articulated that "where a legal practitioner… gives advice which leads to a decision… which affects the conduct of a case in court, the practitioner cannot be sued for negligence on that account" (at [91]).
In Young v Hones [2014] NSWCA 337, Ward JA (with whom Bathurst CJ and Emmett JA agreed) helpfully set out some of the salient features of the advocate's immunity and surveyed the relevant authorities at [188]-[190]: "[188] The advocate's immunity from suit extends to advice, or work, done out of court which leads to a decision affecting the conduct of a case in court (Giannarelli v Wraith at 560; D'Orta at [91]; Donnellan at [172]). In Keefe v Marks at 719-20, Gleeson CJ adopted the language of McCarthy P in Rees v Sinclair [1974] 1 NZLR 180 at 187 that pre-trial work 'so intimately connected with the conduct of the cause in court that it can fairly be said to be a preliminary decision affecting the way that cause (was) to be conducted when it (came) to a hearing'. Both tests were referred to by Giles JA in Symonds v Vass at [14]. [189] In D'Orta, the plurality did not see any significant difference between the test as expressed in Giannarelli and the formulation in Keefe v Marks as to 'work intimately connected with' work in court ([86]). Their Honours emphasised that it is necessary to identify the nature of the complaint made by a disappointed client seeking to sue the advocate ([65]). [190] The kind of matters that, in Keefe v Marks, Gleeson CJ contemplated would fall within the immunity from suit (and that would ordinarily be under active consideration, as required, not only prior to the commencement of the hearing but also throughout the hearing up until the conclusion of the proceedings) were (at 718): ... interviewing the plaintiff and any other potential witnesses, giving advice and making decisions about what witnesses to call and not to call, working up any necessary legal arguments, giving consideration to the adequacy of the pleadings and, if appropriate, causing any necessary steps to be undertaken to have the pleadings amended."
At [216]-[217], Ward JA stated: "[216] The rationale for advocate's immunity was clearly stated in D'Orta. It rests largely, though not solely, in the public interest in the finality of litigation. The present case, where hundreds of thousands of dollars and much time and resources (both of the litigants and of the various courts involved) have been devoted to the attempt by Ms Young to resolve her initial dispute as to the building works and to change the result achieved by way of settlement of proceedings commenced and disposed of a decade ago, is a prime illustration of why such a defence is in the public interest. [217] Here, the core of Ms Young's complaint is that the settlement that she reached was inadequate to achieve the outcome she desired. The fact that it can be cast as a complaint relating to non-joinder of a necessary party or the like does not detract from the fact that in substance she complains that the solution achieved in the settlement was illusory. Her claim against the lawyer respondents necessarily involves re-opening the settlement and determining issues (such as the nature of the unauthorised works and their impact) that were resolved by the settlement of the proceedings. To do so would offend the underlying rationale of the immunity invoked by the lawyer respondents."
It has sometimes proved to be difficult to draw the line between work intimately connected with the conduct of a case in court and work which is remote from the conduct of a case in court.
The essence of the Drakes' complaints appears to be that as a result of Wight & Strickland's allegedly negligent advice, the Drakes defended the action brought by Ms Badman, culminating in the hearing and determination by Young CJ in Eq.
Wight & Strickland submitted that the advice sought to be impugned is advice which is said to have directly affected the conduct of the case in court, as it was this advice that caused them to run the case in court. The Drakes' say they would not have defended the action at all, but for the advice given by Wight & Strickland to do so.
Counsel for Wight & Strickland argued that the facts therefore strike at the very heart of one of the key policies behind advocate's immunity, being the principle of finality and the avoidance of a relitigation of the controversy: see D'Orta-Ekenaide at [34] and [43], referred to by Beazley JA in Donnellan at [163]-[165].
In my view, the advice allegedly given by Wight &Strickland to defend Ms Badman's claim involved court proceedings already commenced against the Drakes. The advice given led to a decision affecting the conduct of the case in court. The alleged negligent advice falls within the scope of advocate's immunity.
So far as the Drakes' claim for wasted costs is concerned, the application of advocate's immunity is also attracted by the nature of the claim, being for wasted costs. In Attard v James Legal [2010] NSWCA 311 Giles JA at [27] stated that recovery of wasted costs, "would not be permitted at all." In Nikolaidis v Satouris [2014] NSWCA 448, the Court of Appeal also acknowledged that a claim for wasted costs comes within the immunity. This part of the Drakes' claim, together with Wight & Strickland's work in running the defence, clearly falls within advocate's immunity (at [48]).
It is my view that the Drakes' pleading cannot succeed due to advocate's immunity. It is a complete defence to the Drakes' claim, and once again, it cannot be overcome by repleading.

Wight & Strickland submitted that the Drakes' claims are largely time barred.
The Drakes accepted that the cause of action did not arise until the case was lost. That is on 19 December 2008, when judgment was delivered in Badman. However, they submitted that in some cases, extensions to the limitation period should be granted, and that this is such a case given the gross negligence of Wight & Strickland and the difficult circumstances faced by them (the Drakes). The Drakes argued that defending the Badman proceedings brought about their bankruptcy and that even now (they are in their eighties) have been unable to pay for the services of a solicitor and have been forced to bring their case unrepresented.
The Drakes submitted that much time has been wasted by them attempting to secure the services of a solicitor (they have visted 16 different firms) to help with their case, but to no avail, and that it would be unjust to now deny them the right to be heard.
Section 14 of the Limitation Act relevantly provides that a cause of action founded on tort is subject to a limitation period of six years running from when the cause of action first accrues to the plaintiff. These proceedings were issued on 17 December 2014. Therefore, the action cannot succeed if the cause of action accrued prior to 17 December 2008.
A cause of action accrues once damage is suffered. The authorities have consistently stated that the exercise, as regards the relevant damage in a case for economic loss, is to identify the harm to a plaintiff's economic interest: see for example Hawkins v Clayton [1988] HCA 15; (1988) 164 CLR 539; Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd [2013] HCA 10; (2013) 247 CLR 613.
Counsel for Wight & Strickland submitted that the Court of Appeal decision in Christie v Purves [2007] NSWCA 182 demonstrates that a cause of action can accrue irrespective of whether the plaintiff is aware of having suffered a loss. In Christie, Ipp JA noted the following principles (at [35], [36] and [40]): 1. plaintiff cannot sue for damages in negligence until the cause of action accrues. However, once it accrues, time commences to run: see Commonwealth of Australia v Cornwell (2007) 229 CLR 519; [2007] HCA 16 at [5]-[6]. 2. Time may run before a plaintiff discovers, or could have on reasonable inquiry have discovered, that damage has been sustained. 3. For economic loss to be sustained there must be some actual, measurable damage that is beyond what can be regarded as negligible. A plaintiff's cause of action can accrue even if some of their damages are prospective.
The Drakes' claim is in respect of the costs paid to Wight & Strickland in the defence of the action. It is alleged that that defence flowed from flawed legal advice provided by Wight & Strickland. Wight & Strickland submitted that it follows that the relevant losses occurred when the costs were paid, this being the time when such costs were "thrown away" or wasted. Therefore, the cause of action accrued when the costs were paid: see Christie.
The legal costs sought to be claimed by the Drakes were largely incurred before 17 December 2008, but not all of the costs were incurred prior to 17 December 2008. (Aff, Cavanagh [14] and the solicitors' ledger at p 31).
Limitation questions should not be decided in interlocutory proceedings except in the "clearest of cases". The limitation defence of the sort pleaded by Wight & Strickland in relation to wasted costs is inappropriate for summary determination. There is a portion of those costs which do not fall within the limitation period, and so it is not clear when the cause of action has crystallised: see Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514 at 533 and 534.
To ascertain whether or not the claims in relation to legal costs are statute barred will depend on a finding as to when the harm to the Drakes' economic interest occurred, and then as to the date upon which the cause of action crystallised.
I would decline to summarily dismiss the Drakes proceedings on the basis of the expiration of the limitation period.

Conclusion

The overall result is that the Drakes' proceeding should be dismissed. The ASC should be dismissed. The right of action did not divest from the trustee in bankruptcy and revest in the Drakes on their discharge from bankruptcy and the proceedings are incompetent. Further, the proceedings are subject to advocate's immunity.
The effect of bankruptcy and advocate's immunity cannot be cured by repleading the ASC. In these circumstances, the ASC and the proceedings are dismissed.
Costs are discretionary. Costs usually follow the event. The plaintiffs are to pay the defendant's costs of the proceedings. The Court orders that: (1) The amended statement of claim filed 1 April 2015 is dismissed. (2) The proceedings are dismissed. (3) The plaintiffs are to pay the defendant's costs of the proceedings on an ordinary basis as agreed or assessed.

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: 06 August 2015

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