These proceedings were listed for hearing for two days commencing 23 August 2016.
On that day, I granted leave to the plaintiff to file in Court a Notice of Motion dated 23 August 2016, and ordered that the Motion be returnable immediately on that day. Having heard extensive submissions on the Motion, I ordered that the hearing which was fixed for 23 and 24 August 2016 be vacated, and indicated that I would give reasons in due course. Having ordered that the hearing of the proceedings be vacated, I then made directions for the further conduct of this matter.
These are my reasons for ordering that the hearing dates be vacated.
[2]
Factual Background
Mrs Vicki Elphick is the registered proprietor of a waterfront property in Cronulla ("the Cronulla property"). She purchased that property in December 2013. She did so because one of the defendants, Nichols Constructions Pty Ltd ("Nichols Constructions"), loaned Mrs Elphick $4.2M to enable her to acquire the property.
At all relevant times, Mrs Elphick was married to Mr Kenneth Elphick. They lived in the Cronulla property with their two adult daughters.
The terms of the loan to Mrs Elphick were contained in a Deed dated 17 December 2013. Nichols Constructions was the lender, Mrs Elphick was the borrower, and Mr Elphick was the guarantor of the borrower's obligations. The loan was secured by a registered first mortgage over the Cronulla property.
The loan fell into default because Mrs Elphick made no payments in accordance with its terms and, on 11 November 2014, Nichols Constructions filed a Statement of Claim which became proceedings 2014/333687 ("the 2014 proceedings") against Mrs Elphick seeking an order for possession of the Cronulla property.
On 31 July 2015, Mrs Elphick filed her Defence in the 2014 proceedings and, on 17 August 2015, a cross-claim contending, amongst other things, that there was an additional term in the loan agreement to the effect that loan repayments would only be made to Nichols Constructions when the lots in a large development in Queensland called the "Laidley Development" were sold and construction contracts were entered into.
On 23 November 2015, McCallum J ordered, on application by Nichols Constructions, that the issues raised by Mrs Elphick's cross-claim be decided separately from and after all other issues in the proceedings.
In February 2016, the parties were ordered by the Court to attend mediation. That mediation took place on 16 February 2016, and resulted in an agreement to resolve the 2014 proceedings in their entirety, which agreement was encapsulated in a Settlement Deed. It is appropriate to record that as part of the settlement agreement, Mr Elphick, although not a party to the proceedings, gave an undertaking to the Court that he would not make any claim to any interest in the Cronulla property, nor would he lodge any further caveat over the property.
On 23 March 2016, Mr Elphick commenced proceedings. He was the first plaintiff. Point Corp (Australia) Pty Ltd ("Point Corp") was the second plaintiff. His wife, Mrs Vicki Elphick, as well as Mr Lesley Nichols, Mrs Judelle Nichols and Nichols Constructions Pty Ltd, were named as defendants. This suit became proceedings 2016/90702 ("the 2016 proceedings").
In his Statement of Claim, Mr Elphick sought various orders, including that the Court set aside the Deed of Settlement dated 16 February 2016, and that he be released from the undertakings which he gave to the Court with respect to making any claim to an interest in the Cronulla property. He sought a declaration that his wife held the legal title to the Cronulla property on trust for either or both of Mr Elphick and Point Corp. He sought an interlocutory order restraining Nichols Constructions from proceeding to take possession of the Cronulla property or taking any further steps to enforce any Writ of Possession. He sought damages and specific monetary payments.
Without doing any disservice to the very lengthy pleadings, it is fair to say that Mr Elphick sought to advance a case which linked the loan to Mrs Elphick enabling her to purchase the Cronulla property, with the progress of the Laidley Development. It was pleaded that Mr Elphick was contractually entitled to a significant share of the proceeds of sale of a number of blocks to be subdivided in the Laidley Development and sold by Nichols Constructions ("the Laidley Agreement"). It was said in the pleading that Nichols Constructions had breached the Laidley Agreement and that Mr Elphick was entitled to damages.
As well, Mr Elphick contended that the Deed of Settlement and the undertakings provided by him constituted an unjust contract within the meaning of the Contracts Review Act 1980, and that the Court should on that basis set aside the settlement.
On 8 April 2016, for reasons which are not obvious, Nichols Constructions filed a Notice of Motion (which was amended on 21 April 2016) seeking an order that the 2014 and 2016 proceedings be transferred to the Equity Division and heard together, an order that the 2016 proceedings be struck out, dismissed or stayed, an order that judgment for possession of the Cronulla property be entered, an order that Nichols Constructions have leave to issue a Writ of Possession forthwith and, finally, in the alternative, an order that the Court determine as a separate question Mr Elphick's claim to be released from the undertaking he gave to the Court and to have the Settlement Deed set aside "… on an urgent basis with an estimate of 1 day".
Stevenson J declined to transfer the proceedings to the Equity Division. The parties were directed to arrange for an urgent hearing date by contacting the List Manager. A final hearing was fixed to take place on 23 and 24 August 2016.
The matter next came before McCallum J on 27 April 2016. Her Honour gave judgment for possession of the Cronulla property and granted Nichols Constructions leave to issue a Writ of Possession forthwith. Her Honour ordered that the Writ lie in the office until 9 May 2016 to permit Mr Elphick to be heard as to whether there should be a further stay of execution of the Writ.
For various reasons, the application by Mr Elphick for a further stay of the execution of the Writ was not heard until 16 June 2016. On 20 June 2016, for the reasons which she then expressed: see Nichols Constructions Pty Ltd v Elphick (No.3) [2016] NSWSC 818, McCallum J dismissed Mr Elphick's application, concluding that, at least insofar as orders were sought in the 2016 proceedings dealing with the Cronulla property, the proceedings were commenced in breach of the undertaking which Mr Elphick had given to the Court. Her Honour refused to release Mr Elphick from his undertaking. Her Honour refused the application for a further stay of the Writ of Possession and granted Nichols Constructions leave to schedule a date for the execution of the Writ no sooner than 4 July 2016.
As her Honour noted, by that time the Court had fixed the Notice of Motion filed by Nichols Constructions on 8 April 2016 (in its amended form), and the 2016 proceedings commenced by Mr Elphick, for an expedited hearing on 23 August 2016.
[3]
Adjournment Application
On 23 August 2016, both the 2014 proceedings and the 2016 proceedings came before the Court. There was no appearance by Mrs Elphick. Counsel appeared for the other parties.
At the commencement of the proceedings, counsel for Mr Elphick sought to file a Notice of Motion containing orders seeking leave to amend the Statement of Claim in the 2016 proceedings, and seeking an adjournment of the expedited hearing.
Both parties informed the Court that although the 2014 proceedings were listed for hearing, in light of the judgment of McCallum J on 20 June 2016, there was nothing remaining in the 2014 proceedings which needed to be determined by the Court. Accordingly, the hearing continued only in respect of the 2016 proceedings, and this judgment relates solely to the 2016 proceedings.
Counsel for Mr Elphick read, and principally relied upon, parts of an affidavit of his client sworn 22 August 2016. The affidavit was not in admissible form, but I accepted it as, in effect, a submission, although there were some facts which were obviously not in issue to which I had regard. Mr Elphick made it plain that in light of the judgment of McCallum J, there were aspects of the 2016 proceedings which he did not press. He noted that on 31 July 2016, he had provided the solicitors for Nichols Constructions with a proposed Amended Statement of Claim. This document comprised the pleading with many paragraphs, or parts of paragraphs, being ruled through. It was very difficult to follow.
In his affidavit, Mr Elphick made it plain that the principal claims which he had sought to press in the 2016 proceedings arose out of the asserted breach by Nichols Constructions of the Laidley Agreement. It is to be recalled that at least some of these issues were raised by Mrs Elphick in her cross-claim in the 2014 proceedings which was ordered to be tried separately. Because the 2014 proceedings had been determined, those separate issues raised in Mrs Elphick's cross-claim have not been the subject of a contested trial. Whether or not those issues were properly brought forward in the 2014 proceedings by way of a cross-claim by Mrs Elphick need not be presently determined.
Mr Elphick then went on to provide a description of significant difficulties which he had encountered in commencing the 2016 proceedings and readying the proceedings for trial. The principal difficulty Mr Elphick highlighted was that, on or around 25 July 2016, his solicitors, Hall Partners, had ceased acting for him as a consequence of correspondence they had received from the solicitors for Nichols Constructions. This assertion of the consequences of these events was challenged by Nichols Constructions, which contended that Mr Hall had indicated prior to that correspondence that he intended to cease to act for Mr Elphick.
The correspondence from the solicitor for Nichols Constructions was an open letter addressed to Mr Hall and dated 20 July 2016. The letter called attention to the existence of the 2016 proceedings, and the various orders and judgments of McCallum J in the 2014 proceedings. The letter continued:
"Having regard to the effect of the First Judgment of 17 February 2016, the Second Judgment of 27 April 2016 and the Third Judgment of 20 June 2016, we wish to make clear to you that our clients' position is that the allegations pleaded in the statement of claim filed in the 2016 Proceedings are untenable, manifestly hopeless, and bound to fail."
The letter went on to set out the contents of various documents that had been reviewed. It proceeded with further paragraphs similar to those set out in [26]:
"Having regard to the matters established by the documents produced under subpoena by Licardy & Company and HWL Ebworth Lawyers, we wish to make clear to you that our clients' position is that the allegations pleaded in the statement of claim filed in the 2016 Proceedings are untenable, manifestly hopeless, and bound to fail.
Further, we wish to advise you that our clients' position is that, having regard to the evidence served by the Elphick Parties in the 2016 Proceedings, the Elphick Parties have no realistic prospects of establishing the matters pleaded in the statement of claimed filed in the 2016 Proceedings, and for that further reason we consider that the 2016 Proceedings are manifestly hopeless, and bound to fail."
In light of those forceful assertions, the letter made an offer of settlement in these terms:
"We request that the Elphick Parties confirm within seven days that they consent to the following orders in the 2016 Proceedings:
1. Judgment in favour of the First, Second, Third and Fourth Defendants;
2. No order as to costs (with the intent that each party pay his, her or its own costs of the 2016 Proceedings)."
That offer was accompanied by what counsel for Mr Elphick submitted was a forceful threat in these terms:
"We advise that in the event that the Elphick Parties do not consent to the orders set out above, Mr Nichols and Nichols Constructions will be seeking orders from the Court in due course to the following effect:
(a) Mr Elphick, Point Corp and Mrs Elphick is to pay the costs of Mr Nichols and Nichols Constructions of the 2016 Proceedings;
(b) The costs the subject of (a) above are to be paid on an indemnity basis;
(c) The costs the subject of (a) above should be assessed by the Court pursuant to s 98(4) of the Civil Procedure Act 2005 (NSW);
(d) Mr Trevor Hall, solicitor, is to pay the costs of Mr Nichols and Nichols Constructions of the 2016 Proceedings;
(e) The costs the subject of (d) above are to be paid on an indemnity basis;
(f) The costs the subject of (d) above should be assessed by the Court pursuant to s 98(4) of the Civil Procedure Act 2005 (NSW).
We advise that the application for costs directed to Mr Trevor Hall will be made pursuant to s 98(1) and s 99(1) of the Civil Procedure Act 2005 (NSW)."
On 21 July 2015, Mr Hall responded to the letter via email. In relevant part he said:
"Thirdly, what the letter does is, and I submit intentionally, is that it sets up a clear wedge or point of differentiation of interests between my clients interests, and those of my Firm - in that it makes the application for costs against me conditional upon my client, (about to be my former client), doing something, (or not doing something). It can never be a proper basis to set up a costs application against a solicitor to say tell your client to settle on these terms, or the solicitor is in the gun for what we next intend to do to him. That is a most serious abuse of the personal costs order provisions. It also has hallmarks of being a contempt of court.
It has hallmarks of being a contempt of court because what the letter is effectively saying is that you, Mr Hall, will procure a settlement of this claim by your client, or you Mr Hall, will be made subject of the Court's jurisdiction as to personal costs orders because you could not no, did not, or would not, force your client into a position of settlement on the terms contained in our letter. That is to invoke the jurisdiction of the Court or to threaten to invoke it, for a wholly foreign purpose."
The email confirmed that Mr Hall ceased to act for Mr Elphick, and Mr Elphick remained unrepresented until the day prior to the hearing before the Court.
Another matter to which the affidavit referred was that Mr Elphick was having some difficulties in obtaining all the necessary documents and marshalling all the relevant witnesses to support his claim.
Finally, Mr Elphick in his affidavit made a series of factual allegations which had not appeared in the previous material that had been filed. Those factual allegations, although not necessarily presented in admissible form, were sufficient to enable Nichols Constructions to understand the nature of the claim which he proposes to make.
[4]
Plaintiff's Submissions
Counsel appeared for Mr Elphick at the hearing. He had only recently been briefed and made plain his limited understanding of the details of his client's claim. He sought an adjournment and leave to file an Amended Statement of Claim, although he did not have a settled form of that proposed pleading. He accepted that the pleading amended by hand by Mr Elphick was not an adequate one with which to go forward.
He submitted that the need to amend the Statement of Claim arose directly as a result of the judgment of McCallum J of 20 June 2016, which necessitated the excision from the 2016 Statement of Claim of anything to do with the 2014 proceedings. He also indicated that it was necessary to reformulate that claim to properly plead Mr Elphick's claim for damages for breach of the Laidley Agreement.
Counsel for Mr Elphick drew attention to the material contained in Mr Elphick's affidavit as setting out the basis of an explanation for the lateness of the application to amend, and the necessity for an adjournment. Counsel drew attention to the procedural history, and in particular that the 2016 proceedings had been expedited because of the inclusion in them of the relief sought with respect to the Cronulla property, due to Mr Elphick's application to be released from his February 2016 undertaking.
During the exploration of that history, the Court was informed by senior counsel for Nichols Constructions that application had been made for an expedited hearing because the existence of the 2016 proceedings affected Nichols Constructions entitlement to enforce the judgment and Writ of Possession which it had obtained in the 2014 proceedings. Senior counsel accepted that the urgency meriting expedition of the 2016 proceedings related only to the effect upon his client's entitlement to enforce the judgment with respect to the Cronulla property.
Counsel for Mr Elphick also submitted that the amendments which he would seek to make to the Statement of Claim were intended to ensure that Mr Elphick's claim in the 2016 proceedings was framed in a way which avoided any suggestion that claims were being made inconsistently with the judgment of McCallum J of 20 June 2016, and in a way which properly propounded his claim arising from the Laidley Agreement.
Counsel for Mr Elphick also pointed to the correspondence between the solicitor for Nichols Constructions and the solicitor for Mr Elphick, referred to above at [26] to [30]. Counsel for Mr Elphick submitted that the consequence, whether intended or not, of the letter from the solicitor for Nichols Constructions was that Mr Elphick's solicitor was obliged to cease acting for him, leaving him without legal representation.
[5]
Submissions for Nichols Constructions
Senior counsel for Nichols Constructions drew attention to what he submitted was the inherent difficulty in Mr Elphick proving his claim with respect to the Laidley Agreement and, in particular, the absence of documentation proving the basic facts set out in the pleading.
Senior Counsel also submitted that Mr Elphick and Point Corp were, in effect, estopped from bringing the 2016 proceedings, because the relief sought in those proceedings was the same in substance as the relief sought by Mrs Elphick in her cross-claim in the 2014 proceedings. Those proceedings had been dismissed by consent. Senior counsel submitted that if Mr Elphick and Point Corp were the true proponents of the cross-claim, then they should have been included as parties to the cross-claim in the 2014 proceedings and should have advanced their claims at that time. He submitted that his clients ought not be made to face a second claim in substantially similar terms to one which had already been dismissed by consent.
Next, senior counsel submitted that even with the amendments proposed by Mr Elphick, the pleadings taken at their highest did not disclose a rational claim against the individuals Mr Les Nichols and Mrs Judelle Nichols. He submitted that the Court ought not permit any adjournment or amendment which adversely affected those parties who were entitled, he submitted, to succeed in having the 2016 proceedings dismissed as against them.
Further, senior counsel submitted that there was inevitable prejudice to his clients if the proceedings were not heard to finality on the days fixed for their final hearing.
Finally, senior counsel for Nichols Constructions submitted that, having regard to the procedural history of both the 2014 and 2016 proceedings, there had been many breaches by Mr Elphick of timetables, requirements for the service of affidavits, and other steps necessary to prepare the matter for hearing. Accordingly, the case management provisions of the Civil Procedure Act 2005 would provide a sufficient basis for the Court to dismiss the proceedings. He acknowledged that this would enable the plaintiffs to start again. He acknowledged that the Court could make as a condition of such orders that his clients not take any limitation point, but pointed to the fact that a costs order could be made which would need to be satisfied before fresh proceedings could be commenced.
[6]
Discernment
In considering the application, the Court is being asked to make interlocutory orders in the proceedings.
In so doing, s 56 of the Civil Procedure Act obliges the Court to give effect to the overriding purpose, namely "… to facilitate the just, quick and cheap resolution of the real issues in the proceedings".
In particular, s 58 of the Civil Procedure Act requires the Court to act in accordance with the dictates of justice. Section 58(2) requires the Court to have regard to the provisions of ss 56 and 57 of the Act, and further provides that the Court may have regard to a number of other matters.
In Aon Risk Services Australia Ltd v ANU [2009] HCA 27; (2009) 239 CLR 175 at [35], French CJ said:
"It is true that a punitive response to the substance of a late amendment application is not appropriate. But neither is a party to be rewarded by weighing in its favour the disruptive consequences of its own application."
At [98], Gummow, Hayne, Crennan, Kiefel and Bell JJ said:
"Of course, a just resolution of proceedings remains the paramount purpose of r 21; but what is a "just resolution"? It is to be understood in light of the purposes and objectives stated. Speed and efficiency, in the sense of minimum delay and expense, are seen as essential to a just resolution of proceedings. This should not detract from a proper opportunity being given to the parties to plead their case, but it suggests that limits may be placed upon re-pleading, when delay and cost are taken into account. The Rule's reference to the need to minimise costs implies that an order for costs may not always provide sufficient compensation and therefore achieve a just resolution. It cannot therefore be said that a just resolution requires that a party be permitted to raise any arguable case at any point in the proceedings, on payment of costs."
The 2016 proceedings were expedited by the Court on the application of Nichols Constructions because of the interaction between the relief being sought in those proceedings and the 2014 proceedings which affected the rights of Nichols Constructions with respect to the Cronulla property. There was no other basis for expedition. The claims now being sought to be propounded relate to the breach of a contract. There is no urgency for those claims to be heard and no reason, standing alone, why the ordinary interlocutory processes for the preparation of those claims ought to be truncated.
The preparation by Mr Elphick of the cause of action for breach of the Laidley Agreement was disrupted by the fact that his solicitor ceased to act for him, leaving him without legal assistance until shortly before the hearing. I am well satisfied that this occurred in significant part as a consequence of the letter sent to Mr Hall by the solicitor for Nichols Constructions on 20 July 2016. Insofar as it contained a forceful threat to seek a personal indemnity costs order against Mr Hall, the letter was quite inappropriate. It had the result, whether intended or not, of separating Mr Hall's interests in advancing his client's case from his own personal interests. That letter having been written, Mr Hall had no alternative but to cease to act for Mr Elphick.
Mr Hall's decision to cease acting for Mr Elphick was the obvious and foreseeable consequence of the terms of the letter he received from the solicitor for Nichols Constructions. I deprecate, at the particular interlocutory stage of the proceedings in question, threats of that kind being made in correspondence between solicitors.
On the state of the pleadings as they presently stand, the cause of action which Mr Elphick wishes to articulate is, it must be said, complex and somewhat obscure. Even if one were to excise reference in the pleadings to any relief relating to the Cronulla property, there is nevertheless a lack of clarity in the pleadings that remain.
This notwithstanding, I am not prepared to hold that a properly pleaded action for breach of the Laidley Agreement cannot be achieved by Mr Elphick. Clearly, the current Statement of Claim does not suffice to articulate that cause of action. As well, the state of the evidence currently available to Mr Elphick is not sufficient to enable him to properly prove his claim.
I do not overlook the submission of Nichols Constructions that Mr Elphick is the architect of his own misfortune. He could have, but did not, make greater attempts to obtain the evidence. So much can be accepted. But, on the other hand, I am not prepared to say on the material before me that he has no prospect of mounting a properly pleaded claim. I express no view as to whether any properly pleaded claim may be able to be substantiated by evidence, because I am not in a position so to do.
There will inevitably be delay if the matter is adjourned and leave is granted to amend the Statement of Claim. Delay brings with it additional cost and expense. To the extent that the amendment will require further pleading by Nichols Constructions, it will be put not just to further expense but to wasted time. But, on the other hand, if the amended pleading removes parties which are not necessary to the ongoing claim which is being made by Mr Elphick, then that will be to the benefit of those parties.
Ultimately, the question is what the interests of justice require having regard to the overriding purpose upon which the Court is obliged to act.
In my view, Mr Elphick should have an adjournment and an opportunity to amend his Statement of Claim with the assistance of counsel. The claim which Mr Elphick proposes to make is not insubstantial. The damages claimed run into the millions of dollars. The circumstances surrounding those claims are commercial in nature, and the claims arise from an asserted commercial agreement related to property development in Queensland.
I accept that had Mr Elphick complied with the Court's orders he ought to have been in a position to proceed with the claim on 23 August 2016. However, I am not persuaded that Mr Elphick's failure to comply with the Court's orders was wholly his fault, and was not contributed to by the defendant's conduct in writing the letter about which I have earlier made remarks.
In all of the circumstances, I am satisfied that the interests of justice require Mr Elphick to have an opportunity to properly plead a case, and as a consequence the proceedings should be adjourned.
[7]
Costs
Mr Elphick should pay the costs of and occasioned by any amendment to the Statement of Claim.
It is too early to tell whether the costs of the adjournment ought be borne by Mr Elphick or by Nichols Constructions. Much will depend upon what happens in the principal proceedings. For those reasons the preferable order is that the costs of and relating to the adjournment of the proceedings be reserved to the trial Judge.
[8]
Orders
For these reasons, on 23 August 2016 the Court ordered the hearing of the proceedings on 23 and 24 August 2016 be vacated. The Court also made orders for the further case management of the proceedings. It is necessary for the Court to now make further orders with respect to costs.
I make the following orders:
1. Order the plaintiff to pay the defendant's costs of and occasioned by the filing and service of any Amended Statement of Claim;
2. Reserve to the trial Judge the costs of and occasioned by the adjournment of the proceedings including the costs of 23 and 24 August 2016.
[9]
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: 25 November 2016